SCHEDULE 14C INFORMATION
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Securities Exchange Act of 1934
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TRANSAMERICA FUNDS
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TRANSAMERICA FUNDS
Transamerica Large Growth
1801 California Street, Suite 5200
Denver, CO 80202
January 14, 2020
Thank you for being a valued Transamerica shareholder.
We are reaching out to provide you with additional information regarding a newsub-adviser for Transamerica Large Growth, a series of Transamerica Funds (the “Fund”).No action is required on your part. We do, however, ask that you review the enclosed Information Statement, which contains information about the newsub-adviser for your Fund. We encourage you to store this document with your Transamerica investment information.
The Board unanimously approved the Fund’s newsub-adviser, Morgan Stanley Investment Management Inc. (“Morgan Stanley”), who replaced Jennison Associates LLC as thesub-adviser to a portion of the Fund’s assets on October 18, 2019. The Fund has twosub-advisers. In addition to the portion of the Fund’s assets nowsub-advised by Morgan Stanley, Wellington Management LLP continues to act as asub-adviser to a separate portion of the Fund’s assets. Transamerica Asset Management, Inc. (“TAM”) continues to serve as the Fund’s investment manager. Based on the information provided by TAM and Morgan Stanley, the Board concluded that the change insub-adviser was in the best interests of the Fund and its shareholders.
If you have any questions, please call the following number between 8 a.m. and 5 p.m., Eastern Time, Monday through Friday:1-888-233-4339.
Thank you, again, for your continued business.
Sincerely, |
/s/ Marijn P. Smit |
Marijn P. Smit Chairman, President and Chief Executive Officer |
Information Statement
TRANSAMERICA FUNDS
Transamerica Large Growth
January 14, 2020
Summary
This Information Statement (“Information Statement”) is being furnished by the Board of Trustees (the “Board” or “Board Members”) of Transamerica Funds (the “Trust”) to the shareholders of Transamerica Large Growth (the “Fund”), a series of the Trust. The Trust is organized as a Delaware statutory trust.
This Information Statement provides information regarding the approval by the Board of a replacement for one of the twosub-advisers for the Fund. A portion of the Fund’s assets is nowsub-advised by Morgan Stanley Investment Management Inc. (“Morgan Stanley” or the“Sub-Adviser”). Wellington Management Company LLP (“WMC”) continues to act as asub-adviser for a separate portion of the Fund’s assets. Thesub-adviserssub-advise the Fund’s assets pursuant to two respectivesub-advisory agreements – one between Transamerica Asset Management, Inc. (“TAM”) and Morgan Stanley (the “Morgan StanleySub-Advisory Agreement”), and the other between TAM and WMC. A copy of the Morgan StanleySub-Advisory Agreement is attached hereto asExhibit A.
Morgan Stanley begansub-advising a portion of the Fund’s assets on October 18, 2019. Prior to that date, Jennison Associates LLC (“Jennison”) served assub-adviser to that portion of the Fund’s assets. In connection with the change insub-adviser, and as discussed in the supplement to the Prospectus, Summary Prospectus and Statement of Additional Information for the Fund dated August 2, 2019, and also reflected in the Fund’s Summary Prospectus dated March 1, 2019, as revised as of October 18, 2019, changes were made to the Fund, including: revisions to the Fund’s investment objective, principal investment strategies, principal risks andsub-advisory fee schedule; the removal of the Fund’s secondary benchmark; and the extension of the contractual expense limit on all classes of the Fund until March 1, 2021. TAM continues to serve as the Fund’s investment manager.
This Information Statement is provided in lieu of a proxy statement to the Fund’s shareholders as of October 18, 2019 (the “Record Date”), pursuant to the terms of an exemptive order (the “Order”) issued by the U.S. Securities and Exchange Commission (the “SEC”) on August 5, 1998. The Order permits TAM to enter into and materially amendsub-advisory agreements (withnon-affiliated entities) subject to the approval of the Board, including a majority of Board Members who are not parties to the agreement and are not interested persons, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), of the parties to the agreement (the “Independent Board Members”), without obtaining shareholder approval. Pursuant to the Order, however, the Fund is required to provide certain information about a newsub-advisory agreement to its shareholders.
A Notice of Internet Availability of the Information Statement is being mailed on or about January 14, 2020. The Fund will bear the costs associated with preparing and distributing this Information Statement and the Notice of Internet Availability of the Information Statement to its shareholders.
The annual report of the Fund is sent to shareholders of record following the Fund’s fiscal year end. The fiscal year end of the Fund is October 31. The Fund will furnish, without charge, a copy of its most recent annual andsemi-annual report to a shareholder upon request. Such requests should be directed to the Fund by calling toll free1-888-233-4339, or writing to the Fund at 1801 California Street, Suite 5200, Denver, CO 80202. Copies of the most recent annual and semi-annual report of the Fund are also available on the EDGAR Database on the SEC’s Internet site atwww.sec.gov.
The enclosed material is for your information only. It is not a proxy statement and you are not being asked to vote. Please note that only one copy of the Notice of Internet Availability or this Information Statement, as applicable, may be delivered to two or more shareholders who share an address, unless the Fund has received instructions to the contrary. Please contact the Fund at the address and phone number set forth above if you have any questions.
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We Are Not Asking You For a Proxy and You Are Requested Not To Send Us a Proxy.
The Information Statement will be available on the Transamerica website until at least July 14, 2020 athttps://www.transamerica.com/media/tf-jennison-to-morgan-stanley-info-statement.pdf. A paper or email copy of the Information Statement may be obtained, without charge, by contacting the Fund at1-888-233-4339.
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TRANSAMERICA FUNDS
Transamerica Large Growth
QUESTIONS AND ANSWERS
Q. | Why am I receiving this Information Statement? |
A. | This Information Statement is being furnished by the Board to provide information to shareholders of the Fund of the recent change in one of the twosub-advisers to the Fund. The Board, upon the recommendation of TAM, has approved a newsub-advisory agreement between TAM and Morgan Stanley with respect to a portion of the Fund. The Fund’s existingsub-adviser, WMC, continues to act assub-adviser for the other portion of the Fund. |
The Fund has obtained exemptive relief from the SEC that permits TAM to enter into newsub-advisory agreements, subject to Board approval and without shareholder approval under certain circumstances. Pursuant to the exemptive order, the Fund has agreed to provide certain information regarding the newsub-advisory agreements.
Q. | Am I being asked to vote on anything? |
A. | No. This Information Statement is being provided to the Fund’s shareholders in lieu of a proxy statement pursuant to the terms of the exemptive order. You are not being asked to vote on the hiring of the newsub-adviser, but you are encouraged to review this Information Statement. |
Q. | What is TAM’s role as a manager of managers? |
A. | TAM acts as a “manager of managers” for the Fund. TAM recommended to the Board the hiring of Morgan Stanley and has entered into the Morgan StanleySub-Advisory Agreement with respect to the Fund. In acting as a manager of managers, TAM provides investment management services that include, without limitation, selection, proactive oversight and monitoring of thesub-advisers, daily monitoring of thesub-advisers’ buying and selling of securities for the Fund, and regular review and evaluation of thesub-advisers’ performance and adherence to investment style and process. |
Q. | Why was Morgan Stanley appointed as the newSub-Adviser? |
A. | Following their review and consideration, the Board approved the appointment of Morgan Stanley as theSub-Adviser to a portion of the Fund in replacement of the priorsub-adviser of that portion of the Fund. Among other things, the Board reviewed and evaluated the performance of the previoussub-adviser and Morgan Stanley’s potential to provide the Fund with improved investment performance. The key factors considered by the Board are discussed later in the “Evaluation by the Board” section of this Information Statement. |
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INFORMATION STATEMENT
This Information Statement describes Morgan Stanley and the terms of the Morgan StanleySub-Advisory Agreement.
THE FUND AND ITS MANAGEMENT AGREEMENT
TAM, a Florida corporation located at 1801 California Street, Suite 5200, Denver, CO 80202, manages the assets of the Fund pursuant to the Management Agreement (the “Management Agreement”), dated March 1, 2016, which was last approved by the Board, including a majority of the Independent Board Members, on June19-20, 2019. TAM is directly owned by Transamerica Premier Life Insurance Company (“TPLIC”) (77%) and AUSA Holding, LLC (“AUSA”) (23%), both of which are indirect, wholly owned subsidiaries of Aegon NV. TPLIC is owned by Commonwealth General Corporation (“Commonwealth”). Commonwealth and AUSA are wholly owned by Transamerica Corporation (DE). Transamerica Corporation (DE) is wholly owned by The Aegon Trust, which is wholly owned by Aegon International B.V., which is wholly owned by Aegon NV, a Netherlands corporation and a publicly traded international insurance group.
Subject to the terms of the Management Agreement, TAM, among other things: (i) regularly provides the Fund with investment management services, including management, supervision and investment research and advice, (ii) furnishes a continuous investment program for the Fund’s portfolio of securities and other investments consistent with the Fund’s investment objectives, policies and restrictions, as stated in the Fund’s current registration statement, (iii) provides supervisory, compliance and administrative services to the Fund, and (iv) provides any additional services incidental to the foregoing services. TAM is permitted to enter into contracts withsub-advisers, subject to the Board’s approval. The services that TAM provides to the Fund under the Management Agreement are not expected to change in light of the change insub-adviser for the Fund.
No officer or Board Member of the Fund is a director, officer or employee of Morgan Stanley. No officer or Board Member of the Fund, through the ownership of securities or otherwise, has any other material direct or indirect interest in Morgan Stanley or any other person controlling, controlled by or under common control with Morgan Stanley. Since the Record Date, none of the Board Members of the Fund have had any material interest, direct or indirect, in any material transactions, or in any material proposed transactions, to which Morgan Stanley or any of its affiliates was or is to be a party.
TERMS OF THE PRIORSUB-ADVISORY AGREEMENT
From November 11, 2016 to October 17, 2019, Jennison served assub-adviser to the Fund. Jennison is located at 466 Lexington Avenue, New York, NY 10017.
Jennison providedsub-advisory services to the Fund pursuant to thesub-advisory agreement between TAM and Jennison with respect to the Fund (the “JennisonSub-Advisory Agreement”). Assub-adviser to the Fund, Jennison was responsible forsub-advising assets of a portion of the Fund in a manner consistent with the terms of the JennisonSub-Advisory Agreement and the investment objective, strategies and policies of the Fund. The JennisonSub-Advisory Agreement was dated November 11, 2016 and was last approved by the Board, including a majority of the Independent Board Members, on June19-20, 2019. The JennisonSub-Advisory Agreement was initially approved by the Board, including a majority of the Independent Board Members, at a meeting held on June8-9, 2016. The JennisonSub-Advisory Agreement was first approved by the Fund’s initial shareholder prior to the Fund’s launch.
COMPARISON OF THESUB-ADVISORY AGREEMENTS
Descriptions of thesub-advisory fee rates payable by TAM to Morgan Stanley under the Morgan StanleySub-Advisory Agreement and thesub-advisory fees paid by TAM to Jennison under the JennisonSub-Advisory Agreement appear below under the caption“Sub-Advisory Fees.”
As discussed below under the caption “Evaluation by the Board,” the Morgan StanleySub-Advisory Agreement was approved by the Board at a meeting held on July17-18, 2019, and was effective as of October 18, 2019. The Morgan StanleySub-Advisory Agreement has an initial term of two years from its effective date (unless sooner
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terminated in accordance with its terms). Thereafter, continuance of the Morgan StanleySub-Advisory Agreement is subject to the specific approval, at least annually, by vote of a majority of the Independent Board Members, at a meeting called for the purpose of voting on such approval, and by either the Board or an affirmative vote of the majority of outstanding voting securities (as that term is defined in the 1940 Act) of the Fund.
The terms of the JennisonSub-Advisory Agreement and those of the Morgan StanleySub-Advisory Agreement are similar. Thesub-advisory fee rates payable by TAM to Morgan Stanley under the Morgan StanleySub-Advisory Agreement have decreased from thesub-advisory fee rates paid by TAM to Jennison under the JennisonSub-Advisory Agreement. In addition, effective August 2, 2019, a lowersub-advisory fee schedule for the WMCsub-advised portion of the Fund and management fee schedule payable by the Fund to TAM went into effect. Descriptions of the new management fee schedule andsub-advisory fee rates appear below under the captions “TAM Management Fees” and“Sub-Advisory Fees,” respectively.
Under the terms of the Morgan Stanley Sub-Advisory Agreement, Morgan Stanley will manage the investment and reinvestment of the portion of the Fund’s assets for which it is responsible, consistent with the Fund’s investment objectives, policies and restrictions, as stated in the Fund’s current Prospectus, Summary Prospectuses and Statement of Additional Information, and subject to such other restrictions and limitations as directed by the officers of TAM or the Trust by reasonable notice in writing to Morgan Stanley. The JennisonSub-Advisory Agreement contained similar provisions.
The Morgan StanleySub-Advisory Agreement provides that Morgan Stanley will place orders for the execution of portfolio transactions with or through such brokers, dealers or banks as it may select including affiliates of the Sub-Adviser (as permitted under applicable law) and, complying with Section 28(e) of the Securities Exchange Act of 1934, as amended. The Morgan StanleySub-Advisory Agreement also provides that, subject to such policies and procedures as may be adopted by the Board and officers of the Fund, Morgan Stanley may pay a broker or dealer an amount of commission for effecting a securities transaction in excess of the amount of commission another broker or dealer would have charged. The JennisonSub-Advisory Agreement contained similar provisions.
The Morgan StanleySub-Advisory Agreement provides that it: (i) may be terminated with respect to the Fund at any time, without penalty, either by vote of the Board or by vote of a majority of the outstanding voting securities of the Fund, or per the terms of the exemptive order – Release No. 23379 – under section 6(c) of the Act from section 15(a) and rule18f-2 under the Act, upon 60 days’ prior written notice to Morgan Stanley; (ii) may be terminated by Morgan Stanley upon 90 days’ prior written notice to TAM; and (iii) will terminate automatically and immediately in the event of its assignment (within the meaning of the 1940 Act). The JennisonSub-Advisory Agreement contained similar provisions, but provided that it may be terminated by Jennison upon 60 days’ prior notice to TAM.
The Morgan Stanley Sub-Advisory Agreement requires that Morgan Stanley supply the Board and TAM with regular reports as mutually agreed upon by Morgan Stanley and TAM concerning Morgan Stanley’s investment activities on behalf of the Fund. The JennisonSub-Advisory Agreement contained a similar provision.
The Morgan StanleySub-Advisory Agreement states that, absent willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties, Morgan Stanley will not be liable for any act or omission in the course of, or connected with, rendering services pursuant to the Morgan StanleySub-Advisory Agreement or for any loss sustained in the purchase, holding or sale of any security. The JennisonSub-Advisory Agreement contained a similar provision.
The Morgan StanleySub-Advisory Agreement requires Morgan Stanley to make certain representations and covenants, including concerning Morgan Stanley’s review of the Fund’s registration statement, the registration statement disclosure being consistent with the manner in which Morgan Stanley is managing the Fund, and Morgan Stanley’s commitment to promptly notify TAM and the Trust in the event the registration statement disclosure becomes inaccurate or incomplete. The JennisonSub-Advisory Agreement contained similar provisions.
The Morgan StanleySub-Advisory Agreement provides that it shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of New York. The JennisonSub-Advisory Agreement provided that it would be construed and the provisions thereof interpreted under and in accordance with the laws of the Commonwealth of Massachusetts and the 1940 Act.
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Shareholders should refer toExhibit A attached hereto for the complete terms of the Morgan StanleySub-Advisory Agreement. The summary of the Morgan StanleySub-Advisory Agreement set forth herein is qualified in its entirety by provisions of the Morgan Stanley Sub-Advisory Agreement as set forth inExhibit A.
TAM MANAGEMENT FEES
As of August 2, 2019, the management fee rate payable by the Fund to TAM was reduced. Under the Management Agreement, the Fund currently pays TAM on an annual basis the following management fee based on its average daily net assets:
First $1 billion | 0.65 | % | ||
Over $1 billion up to $1.5 billion | 0.635 | % | ||
Over $1.5 billion up to $2 billion | 0.615 | % | ||
Over $2 billion up to $3 billion | 0.605 | % | ||
Over $3 billion up to $4 billion | 0.59 | % | ||
Over $4 billion up to $5 billion | 0.575 | % | ||
In excess of $5 billion | 0.57 | % |
Prior to August 2, 2019, the Fund paid TAM a management fee of 0.65% of the first $2 billion, and 0.64% over $2 billion up to $3 billion; 0.63% over $3 billion up to $4 billion; and 0.61% in excess of $4 billion in average daily net assets.
Management fees are accrued daily and paid by the Fund monthly. As of October 31, 2019, the net assets of the Fund were $794,549,758.
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SUB-ADVISORY FEES
Under the Morgan StanleySub-Advisory Agreement, TAM (not the Fund) pays Morgan Stanley the followingsub-advisory fees for its services with respect to the Fund’s average daily net assets on an annual basis:
First $1.5 billion | 0.27 | % | ||
Over $1.5 billion up to $3 billion | 0.23 | % | ||
Over $3 billion up to $5 billion | 0.22 | % | ||
In excess of $5 billion | 0.20 | % |
Prior to October 18, 2019, TAM (not the Fund) paid Jennison 0.40% of the first $300 million, 0.35% over $300 million up to $500 million, 0.25% over $500 million up to $1 billion; and 0.22% in excess of $1 billion with respect to the Fund’s average daily net assets on an annual basis.
Also, effective August 2, 2019, TAM (not the Fund) pays Wellington Management Company LLP 0.18% of the first $500 million; 0.17% over $500 million up to $1 billion; 0.16% over $1 billion up to $2 billion; and 0.15% in excess of $2 billion in average daily net assets. Prior to August 2, 2019 TAM (not the Fund) paid Wellington Management Company LLP 0.25% of the first $150 million; 0.22% over $150 million up to $650 million; 0.20% over $650 million up to $1.15 billion; and 0.175% in excess of $1.15 billion in average daily net assets.
The following chart compares thesub-advisory fees that would have been paid by TAM to Jennison for the fiscal year ended October 31, 2019 under the JennisonSub-Advisory Agreement to thesub-advisory fees that would have been paid by TAM to Morgan Stanley for the same period under the Morgan StanleySub-Advisory Agreement, and also shows the percentage difference between these values.
Sub-Advisory Fees Payable by TAM to Jennison from November 1, 2018 through October 31, 2019 under Jennison Sub- Advisory Agreement | Sub-Advisory Fees Payable by TAM to Morgan Stanley from November 1, 2018 through October 31, 2019 under Morgan Stanley Sub-Advisory Agreement | Percent Difference | ||||||||
$ | 1,063,998 | $ | 1,003,945 | 5.64 | % |
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INFORMATION REGARDING THESUB-ADVISER
Morgan Stanley Investment Management Inc., a subsidiary of Morgan Stanley, has been a registered investment adviser since 1981. As of September 30, 2019, Morgan Stanley Investment Management Inc. had approximately $507.1 billion in total assets under management. Morgan Stanley Investment Management Inc.’s principal business address is 522 Fifth Avenue, New York, NY 10036.
Portfolio Managers Name | Sub-Adviser | Positions Over Past Five Years | ||
Dennis P. Lynch | Morgan Stanley Investment Management Inc. | Lead Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 1998; Managing Director; Team leader for the Growth team | ||
Sam G. Chainani, CFA | Morgan Stanley Investment Management Inc. | Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 1996; Managing Director; Investor on the Growth team | ||
Jason C. Yeung, CFA | Morgan Stanley Investment Management Inc. | Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 2002; Managing Director; Investor on the Growth team | ||
David S. Cohen | Morgan Stanley Investment Management Inc. | Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 1993; Managing Director; Investor on the Growth team | ||
Armistead B. Nash | Morgan Stanley Investment Management Inc. | Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 2002; Managing Director; Investor on the Growth team | ||
Alexander T. Norton | Morgan Stanley Investment Management Inc. | Portfolio Manager of the Fund since 2019; associated with Morgan Stanley Investment Management Inc. in an investment management capacity since 2000; Executive Director; Investor on the Growth team |
Management and Governance.Listed below are the names, positions and principal occupations of the directors and principal executive officers of Morgan Stanley as of October 7, 2019. The principal address of each individual as it relates to his or her duties at Morgan Stanley is the same as that of Morgan Stanley.
Name | Position with Morgan Stanley Investment Management Inc. | |
Dan Simkowitz | Managing Director and President | |
John Hagarty | Managing Director and Director | |
Anton Kuzmanov | Managing Director and Director | |
Tatiana Segal | Managing Director and Director | |
Mary Alice Dunne | Managing Director and Director | |
Stefanie Chang Yu | Stefanie Chang Yu - General Counsel, Managing Director and Secretary | |
Jeannine Ali | Managing Director and Chief Financial Officer | |
Anita Rios | Executive Director and Treasurer | |
Timothy Kneirim | Managing Director and Chief Compliance Officer |
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Morgan Stanley Investment Management Inc. acts as adviser orsub-adviser, as indicated, for the following registered investment companies, or series of a registered investment company with investment objectives similar to the Fund:
Comparable fund for which Morgan Stanley Investment Management Inc. serves as Adviser or Sub-Adviser | Assets Managed by Morgan Stanley Investment Management Inc. (as of September 30, 2019) | Advisory or Sub-Advisory Fee Paid to Morgan | ||||
Morgan Stanley Institutional Fund, Inc. – Growth Portfolio | $ | 6,772,435,891 | 0.50% of the portion of the daily net assets not exceeding $1 billion; 0.45% of the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% of the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.35% of the portion of the daily net assets exceeding $3 billion | |||
Morgan Stanley Variable Insurance Fund, Inc. – Growth Portfolio | $ | 562,480,011 | 0.50% of the portion of the daily net assets not exceeding $1 billion; 0.45% of the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% of the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.35% of the daily net assets exceeding $3 billion | |||
Transamerica Funds – Transamerica Capital Growth | $ | 1,876,885,283 | 0.27% of the first $1.5 billion; 0.23% over $1.5 billion up to $3 billion; 0.22% over $3 billion up to $5 billion; 0.20% in excess of $5 billion
The average daily net assets for the purpose of calculatingsub-advisory fees will be determined on the basis of the combined assets of TF - Transamerica Capital Growth, TST - Transamerica Morgan Stanley Capital Growth VP, Morgan Stanley Investment Management Inc. (“Morgan Stanley”) managed assets for Transamerica Large Growth, and Morgan Stanley Growth Retirement Option, a separately managed account of Transamerica Life Insurance that is alsosub-advised by Morgan Stanley Investment Management Inc. | |||
Transamerica Series Trust – Transamerica Morgan Stanley Capital Growth VP | $ | 473,009,471 | 0.27% of the first $1.5 billion; 0.23% over $1.5 billion up to $3 billion; 0.22% over $3 billion up to $5 billion; 0.20% in excess of $5 billion
The average daily net assets for the purpose of calculatingsub-advisory fees will be determined on the basis of the combined assets of TF - Transamerica Capital Growth, TST - Transamerica Morgan Stanley Capital Growth VP, Morgan Stanley Investment Management Inc. (“Morgan Stanley”) managed assets for Transamerica Large Growth, and Morgan Stanley Growth Retirement Option, a separately managed account of Transamerica Life Insurance that is alsosub-advised by Morgan Stanley Investment Management Inc. |
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EVALUATION BY THE BOARD
At a meeting of the Board held on July17-18, 2019, the Board considered the termination of Jennison as asub-adviser for the Fund and the approval of Morgan Stanley as a replacementsub-adviser. Following their review and consideration, the Board Members determined that the terms of the Morgan StanleySub-Advisory Agreement were reasonable, and that the termination of the existingsub-advisory agreement between TAM and Jennison with respect to the Fund and the approval of the Morgan StanleySub-Advisory Agreement was in the best interests of the Fund and its shareholders. The Board, including the Independent Board Members, unanimously approved the Morgan StanleySub-Advisory Agreement and authorized TAM to terminate the JennisonSub-Advisory Agreement.
To assist the Board Members in their consideration of the Morgan StanleySub-Advisory Agreement, the Board Members requested and received from TAM certain materials and information in advance of the meeting. They then reviewed such information as they deemed reasonably necessary to evaluate the Morgan StanleySub-Advisory Agreement, including information previously obtained from TAM and Morgan Stanley in connection with the Board’s annual 15(c) approvals for other Transamerica fundssub-advised by Morgan Stanley. In addition, the Independent Board Members consulted with counsel, including independent legal counsel, discussing, among other things, the legal standards and certain other considerations relevant to the Independent Board Members’ deliberations.
Among other matters, the Board Members considered:
(a) | that the appointment of Morgan Stanley is not expected to result in any diminution in the nature, extent and quality of services provided to the Fund and its shareholders, including compliance services; |
(b) | that Morgan Stanley is an experienced and respected asset management firm and TAM believes that Morgan Stanley has the capabilities, resources and personnel necessary to providesub-advisory services to the Fund based on an assessment of Morgan Stanley’s organization, investment personnel and experience managing the same proposed investment strategy for Transamerica Capital Growth; |
(c) | that the proposed management fee rate payable to TAM by the Fund would be the same at current asset levels and that the fee payable to Morgan Stanley is fair and reasonable in light of thesub-advisory services to be provided; |
(d) | the fact that thesub-advisory fees payable to Morgan Stanley would be paid by TAM and not the Fund; |
(e) | the proposed responsibilities of Morgan Stanley and thesub-advisory services it is expected to provide to the Fund; and |
(f) | that TAM recommended to the Board Members that Morgan Stanley be appointed as asub-adviser based on, among other things, Morgan Stanley’s experiencesub-advising the proposed investment strategy for Transamerica Capital Growth. |
In their deliberations, the Board Members evaluated and weighed a number of considerations that they believed to be relevant, in light of the legal advice furnished to them by counsel, including independent legal counsel, and made a decision in the exercise of their own business judgment. The Board Members based their decisions on the considerations discussed below, among others, although they did not identify any particular consideration or item of information that was controlling of their decisions, and each Board Member may have attributed different weights to the various factors.
Nature, Extent and Quality of the Services to be Provided. In evaluating the nature, extent and quality of the services to be provided by Morgan Stanley under the Morgan StanleySub-Advisory Agreement, the Board Members considered, among other things, information provided by TAM regarding the operations, facilities, organization and personnel of Morgan Stanley, the anticipated ability of Morgan Stanley to perform its duties under the Morgan StanleySub-Advisory Agreement, and the proposed changes to the Fund’s current investment program and other practices of the Fund. The Board Members further considered that Morgan Stanley is an experienced asset
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management firm and that TAM believes that Morgan Stanley has the capabilities, resources and personnel necessary to providesub-advisory services to the Fund based on their assessment of Morgan Stanley’s organization, investment talent and experiencesub-advising other Transamerica funds. The Board Members also considered the proposed changes to the Fund’s investment objective and principal investment strategies.
Based on their review of the materials provided and the information they had received from TAM and other information reviewed in connection with the Board’s annual 15(c) approvals of other Transamerica fundssub-advised by Morgan Stanley, the Board Members determined that Morgan Stanley can providesub-advisory services that are appropriate in scope and extent in light of the proposed investment program for the Fund and that Morgan Stanley’s appointment is not expected to adversely affect the nature, extent and quality of services provided to the Fund.
Investment Performance. The Board Members considered Morgan Stanley’s past performance, investment management experience, capabilities and resources. The Board Members reviewed the performance of the Fund, including, as compared to its primary benchmark, its peer group and Transamerica Capital Growth, which is currentlysub-advised by Morgan Stanley and employs the same investment strategy that will be used by the Fund (the “Morgan Stanley Strategy”), among other comparisons. They noted that the performance of the Morgan Stanley Strategy outperformed the Fund and its benchmark and peer group median for the pastone-, three- and five-year periods ended March 31, 2019. On the basis of this information and the Board Members’ assessment of the nature, extent and quality of the services to be provided by Morgan Stanley, the Board Members concluded that Morgan Stanley is capable of generating a level of investment performance that is appropriate in light of the Fund’s proposed new investment objective and principal investment strategies.
Management andSub-Advisory Fees, Cost of Services to be Provided and Profitability. The Board Members considered the proposed management andsub-advisory fee schedules. The Board Members noted that the proposedsub-advisory fee rate payable by TAM to Morgan Stanley is lower at current asset levels than the currentsub-advisory fee rate for Jennison. The Board Members also considered that the proposed management fee would be lower at certain asset levels and would be equal to the applicable Morningstar and Broadridge peer group medians, and that TAM considered the proposed management fee to be reasonable compensation for its services. On the basis of these considerations, together with the other information they considered, the Board Members determined that the management fee to be received by TAM and thesub-advisory fee to be received by Morgan Stanley under the Morgan StanleySub-Advisory Agreement are reasonable in light of the services to be provided.
With respect to Morgan Stanley’s costs and profitability in providingsub-advisory services to the Fund, the Board Members noted that the proposedsub-advisory fee schedule is the product ofarm’s-length negotiation between TAM and Morgan Stanley. As a result, the Board Members did not consider Morgan Stanley’s anticipated profitability to be material to its decision to approve the Morgan StanleySub-Advisory Agreement. The Board also reviewed pro forma estimated profitability information provided by TAM, noting that there was expected to be an increase in the net management fees retained by TAM due to the reducedsub-advisory fees. The Board Members considered that TAM believes that the proposed net management fee would allow TAM to be reasonably compensated for its services.
Economies of Scale. In evaluating the extent to which the proposedsub-advisory fees payable under the Morgan StanleySub-Advisory Agreement reflected economies of scale or would permit economies of scale to be realized in the future, the Board Members considered the existence of breakpoints in both the management andsub-advisory fee schedules. The Board Members considered that the appointment of Morgan Stanley has the potential to attract additional assets due to Morgan Stanley’s established asset management capabilities. The Board Members concluded that they would have the opportunity to periodically reexamine the appropriateness of the management fees payable by the Fund to TAM, and thesub-advisory fees payable by TAM to Morgan Stanley, in light of any economies of scale experienced in the future.
Fall-Out Benefits. The Board Members considered any other benefits expected to be derived by Morgan Stanley from its relationship with the Fund. The Board Members noted that, although TAM would not receive benefits from research obtained with commissions paid to broker-dealers for portfolio transactions (“soft dollars”) as a result of its relationship with Morgan Stanley or the Fund, Morgan Stanley may engage in soft dollar arrangements and receive such benefits, consistent with applicable law and “best execution” requirements.
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Conclusion. After consideration of the factors described above, as well as other factors, the Board Members, including all of the Independent Board Members, concluded that the approval of the revised management fee schedule and the Morgan StanleySub-Advisory Agreement is in the best interests of the Fund and its shareholders and unanimously approved the revised management fee schedule and the Morgan StanleySub-Advisory Agreement.
BROKERAGE INFORMATION
With respect to the Fund, there were no brokerage commissions incurred on security transactions placed with affiliates of TAM or Morgan Stanley for the fiscal year ended October 31, 2019.
ADDITIONAL INFORMATION
TAM, the Fund’s investment manager, Transamerica Fund Services, Inc., the Fund’s transfer agent, and Transamerica Capital, Inc., the Trust’s principal underwriter, are each located at 1801 California Street, Suite 5200, Denver, CO 80202.
As of October 31, 2019, the Board Members and officers of the Fund, individually and as a group, owned beneficially less than 1% of the outstanding shares of the Fund.
As of October 31, 2019, the following persons owned of record 5% or more of the outstanding shares of the class identified of the Fund:
Name & Address | Portfolio Name | Class | Shares | Percent | ||||||||
State Street Bank & Trust Co Ttee Various Retirement Plans Trs Class I3 Series 440 Mamaroneck Ave Harrison NY 10528-2418 | Transamerica Large Growth | I3 | 48,907,041.430 | 100.00 | % | |||||||
State Street Bank & Trust Co Ttee Various Retirement Plans Trs Class R Series 440 Mamaroneck Ave Harrison NY 10528-2418 | Transamerica Large Growth | R | 8,195,892.112 | 89.96 | % | |||||||
Charles Schwab & Co 211 Main St San Francisco CA 94105-1905 | Transamerica Large Growth | R | 914,360.112 | 10.04 | % | |||||||
State Street Bank & Trust Co Ttee Various Retirement Plans Trs Class R4 Series 440 Mamaroneck Ave Harrison NY 10528-2418 | Transamerica Large Growth | R4 | 2,749,359.328 | 100.00 | % |
Any shareholder who holds beneficially 25% or more of a Fund may be deemed to control the Fund until such time as such shareholder holds beneficially less than 25% of the outstanding common shares of the Fund. Any shareholder controlling a Fund may be able to determine the outcome of issues that are submitted to shareholders for vote and may be able to take action regarding the Fund without the consent or approval of other shareholders.
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As of October 31, 2019, the following shareholder owned of record 25% or more of the outstanding shares of the Fund:
Name & Address | Fund Name | Shares | Percentage of Fund Owned | |||||||
State Street Bank & Trust Co Ttee Various Retirement Plans Trs Class I3 Series 440 Mamaroneck Ave Harrison NY 10528-2418 | Transamerica Large Growth | 48,907,041.430 | 80.57 | % |
The Trust is a Delaware statutory trust and as such is not required to hold annual meetings of shareholders, although special meetings may be called for the Fund, or for the Trust as a whole, for purposes such as electing or removing Board Members, changing fundamental policies or approving an advisory contract. Shareholder proposals to be presented at any subsequent meeting of shareholders must be received by the Trust at the Trust’s office within a reasonable time before the proxy solicitation is made.
By Order of the Board of Trustees, |
Transamerica Funds |
/s/ Erin D Nelson |
Chief Legal Officer and Secretary |
January 14, 2020
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EXHIBIT A
AMENDMENT TOSUB-ADVISORY AGREEMENT BETWEEN
TRANSAMERICA ASSET MANAGEMENT, INC. AND MORGAN
STANLEY INVESTMENT MANAGEMENT INC.
THIS AMENDMENTis made as of October 18, 2019 to the Sub Advisory Agreement dated as of June, 23 2004, as amended, between Transamerica Asset Management, Inc. and Morgan Stanley Investment Management Inc. In consideration of the mutual covenants contained herein, the parties agree as follows:
1. | Schedule Ato the Agreement is hereby deleted and replaced in its entirety with the attached revised Schedule A, and all references in the Agreement to Schedule A shall be deemed to refer to the attached Schedule A. |
In all other respects, theSub-Advisory Agreement dated as of June 23, 2004, as amended, is confirmed and remains in full force and effect.
The parties hereto have caused this amendment to be executed as of October 18, 2019.
TRANSAMERICA ASSET MANAGEMENT, INC. | ||
By: | /s/ Christopher A. Staples | |
Name: | Christopher A. Staples | |
Title: | Senior Vice President | |
MORGAN STANLEY INVESTMENT MANAGEMENT INC. | ||
By: | /s/ Maryalice Dunne | |
Name: | Maryalice Dunne | |
Title: | Managing Director |
A-1
SCHEDULE A
as of October 18, 2019
FUNDS | SUB-ADVISER COMPENSATION* | |
Transamerica Capital Growth** | 0.27% of the first $1.5 billion; | |
0.23% over $1.5 billion up to $3 billion; | ||
0.22% over $3 billion up to$5 billion; and | ||
0.20% in excess of over$5 billion | ||
Transamerica Large Growth•• | 0.27% of the first $1.5 billion; | |
0.23% over $1.5 billion up to $3 billion; | ||
0.22% over $3 billion up to$5 billion; and | ||
0.20% in excess of over$5 billion |
* | As a percentage of average daily net assets on an annual basis. |
** | The average daily net assets for the purpose of calculatingsub-advisory fees will be determined on the basis of the combined assets of Transamerica Capital Growth, Transamerica Morgan Stanley Capital Growth VP, Morgan Stanley Investment Management Inc. (“Morgan Stanley”) managed assets for Transamerica Large Growth, and Morgan Stanley Growth Retirement Option, a separately managed account of Transamerica Life Insurance that is also advised by Morgan Stanley. |
TRANSAMERICA FUNDS
Transamerica Large Growth
1801 California Street, Suite 5200
Denver, CO 80202
Telephone:1-888-233-4339
IMPORTANT NOTICE OF INTERNET AVAILABILITY OF INFORMATION STATEMENT
This communication presents only an overview of the more complete Information Statement that is available to you on the internet relating to Transamerica Large Growth, a series of Transamerica Funds (the “Fund”). We encourage you to access and review all of the important information contained in the Information Statement.
The following material is available for view:Information Statement
The full Information Statement details a recentsub-adviser change relating to the Fund. Specifically, the Board of Trustees of the Trust has approved a newsub-advisory agreement between Transamerica Asset Management, Inc. (“TAM”) and Morgan Stanley Investment Management Inc. (“Morgan Stanley”) with respect to a portion of the Fund’s assets. The Fund has twosub-advisers. Morgan Stanley begansub-advising a portion of the Fund’s assets on October 18, 2019, replacing Jennison Associates LLC. The Funds’ existingsub-adviser, Wellington Management Company LLP (“WMC”), continues to act as asub-adviser for a separate portion of the Fund’s assets. In connection with the change insub-adviser, and as discussed in the supplement to the Prospectus, Summary Prospectus and Statement of Additional Information for the Fund dated August 2, 2019, and also reflected in the Fund’s Summary Prospectus dated March 1, 2019, as revised as of October 18, 2019, certain changes were made to the Fund, including: revisions to the Fund’s investment objective, principal investment strategies, principal risks andsub-advisory fee schedule; the removal of the Fund’s secondary benchmark; and the extension of the contractual expense limit on all classes of the Fund until March 1, 2021. TAM continues to serve as the Fund’s investment manager.
The Trust and TAM have received an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission that permits TAM to enter into and materially amendsub-advisory agreements (withnon-affiliated entities) with the approval of the Board of Trustees, including a majority of Board Members who are not parties to the agreement and are not interested persons, as defined in the Investment Company Act of 1940, as amended, of the parties to the agreement, without obtaining shareholder approval. The Order instead requires that an information statement be sent to you. In lieu of physical delivery of the Information Statement, the Trust will make the Information Statement available to you online.
The full Information Statement will be available on the Transamerica website until at least July 14, 2020 athttps://www.transamerica.com/media/tf-jennison-to-morgan-stanley-info-statement.pdf. A paper or email copy of the Information Statement may be obtained, without charge, by contacting the Fund at1-888-233-4339.
If you want to receive a paper ore-mail copy of the Information Statement, you must request one. There is no charge to you for requesting a copy.