CONSECO FUND GROUP
497, 1999-04-28
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March 12, 1999

                                             -----------------------------------
                                                         Prospectus
                                             -----------------------------------
                                                         CLASS A, B AND C SHARES
                                                    As with any mutual fund, the
                                        Securities and Exchange Commission (SEC)
                             has not approved or disapproved of these securities
                  or determined whether this prospectus is accurate or complete.
                       Any representation to the contrary is a criminal offense.


Conseco Fund Group




<PAGE>
- -------------------------------------------
     Table of Contents
- -------------------------------------------

The Funds
     General Information About the Funds ...............................  3
     Conseco Fixed Income Fund .........................................  4
     Conseco High Yield Fund ...........................................  6
     Conseco Convertible Securities Fund ...............................  8
     Conseco Balanced Fund ............................................. 10
     Conseco Equity Fund ............................................... 12
     Conseco 20 Fund ................................................... 14

Primary Risk Considerations ............................................ 16

Fees and Expenses ...................................................... 18

Management ............................................................. 23

Your Account

     Choosing a Share Class ............................................ 26
     Determining Share Price ........................................... 30
     Buying Shares ..................................................... 31
     Selling Shares .................................................... 34
     Additional Shareholder Services ................................... 36
     Dividends and Distributions ....................................... 37
     Tax Considerations ................................................ 38
     Distribution and Service Plans .................................... 39
     Administrative Fees ............................................... 40

Financial Highlights ................................................... 41


   2

<PAGE>


- ---------------------------------------------
     The Adviser's Integrated Approach
     To Money Management
- ---------------------------------------------

We believe that combining the knowledge and experience of both fixed income and
equity analysts leads to better security selection over time.

Whether selecting fixed income or equity securities, our analysts look for
companies with:

o Proven management teams
o Leading edge products 
o Dominant market share positions

They then conduct a rigorous financial analysis of these companies, focusing on
such indicators as:

o Cost of capital 
o Financial strength 
o Spending plans

This analysis is used to select those securities deemed by the Adviser to be
most appropriate for each Fund's investment objective.

Because of the Adviser's active management style, our Funds generally have a
higher portfolio turnover rate than other funds and, therefore, may have higher
taxable distributions and increased trading costs which may impact performance.

There is no assurance that the Funds will achieve their investment objectives.
All of the Funds have the ability to change their investment objectives without
shareholder approval, although they do not currently intend to do so. In
addition, the value of your investment in any Fund will fluctuate, which means
that you may lose money.

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   PLEASE NOTE: DEFINITIONS FOR BOLD-FACED WORDS WITHIN THE TEXT CAN BE FOUND
   DIRECTLY FOLLOWING EACH FUND'S PRIMARY RISK CONSIDERATIONS.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

> A Word About The Adviser
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Conseco Capital Management, Inc. (CCM), or the "Adviser," provides investment
advice and management to each Fund. CCM manages more than $35.3 billion in
assets for an array of foundations, endowments, corporations, government and
union clients (as of 12/31/98).


                                                                               3

<PAGE>

- ---------------------------------------------
     Conseco Fixed Income Fund
- ---------------------------------------------


Our fixed income fund offers investors a strong complement to traditional
savings accounts. The Fund provides a way to earn income from a portfolio of
bonds and other debt instruments. However, unlike traditional savings accounts,
the principal value of an investment in the Fund will fluctuate.

> Investment Objective

The Fund seeks to provide the highest level of income as is consistent with the
preservation of capital.

> Adviser's Strategy

The Fund invests primarily in INVESTMENT-GRADE DEBT SECURITIES.

The Adviser actively manages the portfolio to generate income, reduce risk, and
preserve or enhance total return.

Adhering to a strict buy/sell discipline, the Adviser seeks to enhance total
return by: 
o Purchasing securities it believes are undervalued 
o Selling securities it believes are overvalued or fully priced

To select securities, the Adviser utilizes:
o Independent FUNDAMENTAL ANALYSIS to evaluate the issuer of a security
o An analysis of the specific structure of the security

In an effort to achieve the Fund's investment objective, the Adviser may invest
in debt securities issued by:
o Publicly or privately held companies in the U.S.
o Publicly or privately held companies overseas (primarily in YANKEE BONDS) 
o The U.S. government, its agencies and instrumentalities 
o States and their political subdivisions issuing taxable MUNICIPAL SECURITIES 
o Foreign governments, their agencies and instrumentalities

The Fund may also invest in:
o Mortgage-backed debt securities
o Asset-backed debt securities
o RESTRICTED SECURITIES

In addition, the Fund may invest up to 15% of its assets in the following: 
o Common and PREFERRED STOCKS 
o Convertible bonds 
o Debt securities carrying warrants to purchase equity securities

Up to 10% of Fund assets may be invested in BELOW INVESTMENT GRADE SECURITIES,
commonly known as high-yield or "junk" bonds, which tend to fluctuate in price
to a greater extent than investment grade debt securities.

While the Fund may purchase debt securities of any MATURITY, it is anticipated
that the AVERAGE LIFE of the portfolio will be in the intermediate range --
between seven and 15 years -- but may be shorter or longer depending on market
conditions.


4

<PAGE>

Investment-Grade Debt Securities
Considered especially creditworthy, these debt securities are either (i)
normally rated AAA to BBB- by Standard and Poor's Corporation or Aaa to Baa3 by
Moody's Investors Services, Inc., or (ii) if unrated, are deemed by the Adviser
to be of comparable credit quality.

Fundamental Analysis
A research technique that looks at a company's financial condition,
creditworthiness, management, and place in its industry to determine the
intrinsic value of the company's securities.

Yankee Bonds
Dollar-denominated bonds issued in the U.S. by foreign banks and corporations.

Municipal Securities
Bonds and other debt obligations issued by state and local governments. The
interest on the municipal securities in which the Fund invests typically is NOT
exempt from federal income tax.

Restricted Securities
Securities that are not registered with the Securities and Exchange Commission,
some of which may qualify to be sold directly to institutional investors
pursuant to Rule 144A under the Securities Act of 1933. Restricted securities
are generally illiquid; however, the Adviser focuses on those that are liquid,
i.e., easily convertible into cash.

Preferred Stock
Shares of a company that ordinarily do not have voting rights but do have a
stated dividend payment, as opposed to common stocks which ordinarily do have
voting rights but do not have a stated dividend payment.

Below Investment Grade Securities
These securities offer higher return potential in exchange for assuming greater
risk. Normally, they are rated BB+ or lower by Standard & Poor's Corporation or
Ba1 or lower by Moody's Investors Services, Inc. or, if unrated, deemed by the
Adviser to be comparable credit.

Maturity
When the principal, or face value of a bond, must be repaid.

Average Life
The average number of years that each principal dollar will be outstanding
before it is repaid.
 ...............................................................................

> Primary Risks
  . . . . . . .
  Credit risk

  Interest rate risk

  Market risk

  Prepayment risk

  Restricted
  Securities risk

  Municipal Market risk

  Foreign risk
  . . . . . . .

See Primary Risk
Considerations
at page 18 for a
detailed discussion
of the Fund's risks.


How Has The Fund Performed?

The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the performance of the Fund's Class A
shares has varied from year to year. The table compares the Fund's performance
over time to that of a broad measure of market performance. When you consider
this information, please remember that the Fund's past performance is not
necessarily an indication of how it will perform in the future.

Year-By-Year Total Return
(as of 12/31/98) - Class A

 1997      1998
 8.66%     7.57%

Best Quarter   2Q97   3.21%
Worst Quarter  1Q97   0.19%

CLASS A TOTAL RETURN IS SHOWN WITHOUT THE APPLICABLE SALES LOAD. IF THE SALES
LOAD WAS INCLUDED, TOTAL RETURN WOULD HAVE BEEN LOWER.

Average Annual Total
Return (as of 12/31/98)*

                                        Since
                         1 year       Inception
Class A **
(Inception 1/2/97)       2.19%         11.00%
 . . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Bros.
Aggregate
Bond Index               8.69%         19.19%
 . . .  . . . . . . . . . . . . . . . . . . . . . .

 * BECAUSE CLASS B AND CLASS C SHARES DO NOT HAVE ANNUAL RETURNS FOR A FULL
   CALENDAR YEAR, CLASS B AND CLASS C PERFORMANCE IS NOT PRESENTED HERE.

** CLASS A SHARE PERFORMANCE REFLECTS THE DEDUCTION OF THE MAXIMUM SALES LOAD.


                                                                               5

<PAGE>

- ---------------------------------------------
     Conseco High Yield Fund
- ---------------------------------------------

Our high yield fund offers investors who can tolerate a greater degree of share
price volatility, the potential to receive a higher level of income than would
normally be earned from a portfolio of investment-grade debt securities.

> Investment Objective

The Fund seeks to provide high level of current income with a secondary
objective of capital appreciation.

> Adviser's Strategy

Normally, the Adviser invests at least 65% of the Fund's assets in BELOW
INVESTMENT GRADE SECURITIES (those rated BB+/Ba1 or lower by independent rating
agencies).

Adhering to a strict buy/sell discipline, the Adviser seeks to enhance total
return by: 
o Purchasing securities it believes are undervalued 
o Selling securities it believes are overvalued or fully priced

To select securities, the Adviser utilizes: 
o Independent FUNDAMENTAL ANALYSIS to evaluate the issuer of a security 
o An analysis of the specific structure of the security

In an effort to achieve its investment objective, the Fund may invest in any or
all of the following: 
o Corporate debt securities and PREFERRED STOCK 
o ZERO COUPON BONDS and other deferred interest securities 
o Mortgage-backed securities
o Asset-backed securities 
o Convertible securities 
o RESTRICTED SECURITIES 
o Taxable MUNICIPAL SECURITIES issued by states and their political subdivisions

The Fund may also invest in:
o Cash or cash equivalents
o Money market instruments
o Securities issued or guaranteed by the U.S. government, its agencies,
  and instrumentalities

In addition, the Fund may  invest in the following:
o Common stocks and other equity securities
o Equity and debt securities of foreign issuers, including issuers
  in emerging markets

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   FOR DEFENSIVE PURPOSES OR PENDING INVESTMENT, THE FUND MAY TEMPORARILY DEPART
   FROM ITS OBJECTIVE AND HOLD AN UNLIMITED AMOUNT OF CASH OR MONEY MARKET
   INSTRUMENTS. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN LOST
   OPPORTUNITIES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


6

<PAGE>

Below Investment Grade Securities
See page 5.

Fundamental Analysis
See page 5.

Preferred Stock
See page 5.

Zero Coupon Bonds

Bonds that are sold at a deep discount and do not pay periodic interest to
investors; instead, investors receive, at maturity, the difference between the
discounted price and the maturity value of the bond.

Restricted Securities
See page 5.

Municipal Securities
See page 5.


> Primary Risks
  . . . . . . .
  Credit risk

  Interest rate risk

  Market risk

  Restricted
  Securities risk

  Prepayment risk

  Foreign risk
  . . . . . . .

See Primary Risk
Considerations
at page 18 for a
detailed discussion
of the Fund's risks.



> How Has The Fund Performed?
The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the performance of the Fund's Class A
shares has varied from year to year. The table compares the Fund's performance
over time to that of a broad measure of market performance. WHEN YOU CONSIDER
THIS INFORMATION, PLEASE REMEMBER THAT THE FUND'S PAST PERFORMANCE IS NOT
NECESSARILY AN INDICATION OF HOW IT WILL PERFORM IN THE FUTURE. 

Year-By-Year Total Return
(as of 12/31/98) - Class A

       1998
       6.56%

Best Quarter   1Q98   8.17%
Worst Quarter  3Q98  -5.56%

CLASS A TOTAL RETURN IS SHOWN WITHOUT THE APPLICABLE SALES LOAD. IF THE SALES
LOAD WAS INCLUDED, TOTAL RETURN WOULD HAVE BEEN LOWER.


Average Annual
Total Return (as of 12/31/98)*

                              Since
                            Inception
Class A**
(Inception 1/1/98)             0.43%
 . . .  . . . . . . . . . . . . . . . .
Merrill Lynch High
Yield Index                    3.66%

 * BECAUSE CLASS B AND CLASS C SHARES DO NOT HAVE ANNUAL RETURNS FOR A FULL
   CALENDAR YEAR, CLASS B AND CLASS C PERFORMANCE IS NOT PRESENTED HERE.

** CLASS A SHARE PERFORMANCE REFLECTS THE DEDUCTION OF THE MAXIMUM SALES LOAD.


                                                                               7

<PAGE>

- ---------------------------------------------
     Conseco Convertible Securities Fund
- ---------------------------------------------

Our convertible securities fund offers investors a way to pursue the benefits of
income and capital appreciation through a portfolio of fixed income securities
that are convertible into common stock.

> Investment Objective

The Fund seeks high total return through a combination of current income and
capital appreciation by investing primarily in convertible securities.

> Adviser's Strategy

Normally, the Adviser invests at least 65% of the Fund's assets in CONVERTIBLE
SECURITIES. These are often of lower grade investment quality than other types
of investments. Therefore, at any given time, over 50% of the Fund's assets may
be invested in BELOW INVESTMENT GRADE SECURITIES.

Adhering to a strict buy/sell discipline, the Adviser seeks to enhance total
return by: 
o Purchasing securities it believes are undervalued 
o Selling securities it believes are overvalued or fully priced

To select securities, the Adviser utilizes:
o Independent FUNDAMENTAL ANALYSIS to evaluate the issuer of a security
o An analysis of the specific structure of the security

In an effort to achieve its investment objective, the Fund may also invest in: 
o Common stock 
o Other securities convertible other than at the option of the holder 
o Equity and debt securities of foreign issuers, including issuers based
  in emerging markets

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   FOR DEFENSIVE PURPOSES, THE FUND MAY TEMPORARILY DEPART FROM ITS INVESTMENT
   OBJECTIVE AND INVEST WITHOUT LIMITATION IN PREFERRED STOCKS AND INVESTMENT
   GRADE DEBT SECURITIES. THIS COULD HELP THE FUND AVOID LOSSES, BUT MAY MEAN
   LOST OPPORTUNITIES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


8

<PAGE>

Convertible Securities

Bonds, debentures, notes or preferred stock that are convertible into common
stock. Convertible securities have some unique return characteristics relative
to market fluctuations:

   o When equity markets go up, they tend to rise in price
   o When equity markets decline, they tend to decline relatively less in price
     than stocks 

Convertible securities have both an equity and a fixed income component.
Therefore,
   o While the equity component is subject to fluctuations in value due to
     activities of the issuing companies, and general market and economic 
     conditions;

   o The fixed income component will be impacted by shifting interest rates and
     changes in credit quality of the issuers.

Below Investment Grade Securities
See page 5.

Fundamental Analysis
See page 5.


> Primary Risks
  .  . . . . . . . . .
  Credit risk

  Interest rate risk

  Market risk

  Restricted
  Securities risk

  Foreign risk

  Leverage risk

   See Primary Risk Considerations at page 18 for a detailed discussion of the
   Fund's risks.

> How Has The Fund Performed?

Because the Fund is new it does not have performance to report.



                                                                               9

<PAGE>

- ---------------------------------------------
     Conseco Balanced Fund
- ---------------------------------------------

Our balanced fund offers investors the growth potential of stocks and the income
potential of bonds in one blended portfolio.

> Investment Objective

The Fund seeks high total investment return, consistent with the preservation of
capital and prudent investment risk.

> Adviser's Strategy

Normally, the Fund invests approximately 50-65% of its assets in equity
securities, and the remainder in a combination of fixed income securities, cash,
or cash equivalents.

This balance may change:

o   A much higher percentage of assets may be invested in equity securities, if
    the Adviser considers conditions in the stock market to be substantially
    more favorable than in the bond market.
o   Conversely, if the Adviser considers conditions in the bond market to be
    substantially more favorable than in the equity market, a much higher
    percentage of assets may be invested in fixed income securities.

> The Equity Portion Of The Portfolio

The Fund may invest in equity securities of domestic and foreign issuers. These
may include common and PREFERRED STOCKS, CONVERTIBLE SECURITIES and WARRANTS.

The Adviser intends for the equity portion of the Fund to be widely diversified
by size of company and industry.

The Adviser looks for securities that will provide the two elements of total 
return:
o   Price appreciation
o   Income from dividends

In selecting equity securities, the Adviser considers the following factors: 
o Growth trends of the stock -- and its industry 
o Significant purchases or sales of the stock by corporate insiders 
o Recent changes in earnings per share and their deviations from analysts'
  expectations 
o Relative price-earnings ratios, as compared to industry peers and earnings
  growth potential 
o The stock's price movement

> The Fixed Income Portion Of The Portfolio

Normally, the Fund will maintain at least 25% of the value of its assets in a
wide range of domestic and foreign debt securities, including non-U.S. dollar
denominated securities. The majority of foreign investments will be in YANKEE
BONDS.

The Adviser anticipates that bonds will be invested primarily in intermediate-
and/or long-term domestic debt securities.

The Fund may also invest up to 25% of total assets in BELOW INVESTMENT GRADE
SECURITIES, which are not believed to involve undue risk to income or principal.
In general, however, these types of securities are issued by companies without
long track records of sales and earnings, or by those companies with
questionable credit strength. The lowest rating categories in which the Fund
will invest are CCC/Caa.

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   FOR DEFENSIVE PURPOSES, THE FUND MAY TEMPORARILY DEPART FROM ITS INVESTMENT
   OBJECTIVE AND INVEST WITHOUT LIMITATION IN MONEY MARKET INSTRUMENTS. THIS
   COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


10

<PAGE>

Preferred Stock
See page 5.

Convertible Security
See page 9.

Warrants
Contracts that allow the bearer to purchase shares for a specified price at a
future date.

Yankee Bonds
See page 5.

Below Investment Grade Securities
See page 5.

Primary Risks
 . . . . . . . 
Market risk
Credit risk
Interest rate risk
Foreign risk
Leverage risk
 . . . . . . .
See Primary Risk Consideration at page 18 for a detailed discussion of the
Fund's risks.


Anticipating A Stock's Growth Potential

Analysts employ two common measurements, earnings per share and price-earnings
ratio (P/E), to help them determine how much they may be paying for a company's
future earnings power. For example, the higher the P/E, the greater the
expectations are for a company's earnings to grow.

Interest Rates And Bond Maturities

Bonds with longer maturities will be more affected by interest rate changes than
intermediate-term bonds. For example, if interest rates go down, the price of
long-term bonds will increase more rapidly than the price of intermediate-term
bonds.

> How Has The Fund Performed?

The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the performance of the Fund's Class A
shares has varied from year to year. The table compares the Fund's performance
over time to that of a broad measure of market performance. WHEN YOU CONSIDER
THIS INFORMATION, PLEASE REMEMBER THAT THE FUND'S PAST PERFORMANCE IS NOT
NECESSARILY AN INDICATION OF HOW IT WILL PERFORM IN THE FUTURE.


Year-By-Year Total Return
(as of 12/31/98) - Class A

   1997        1998
  17.19%      12.45%

Best Quarter   3Q97   13.89%
Worst Quarter  3Q98  -11.71%

CLASS A TOTAL RETURN IS SHOWN WITHOUT THE APPLICABLE SALES LOAD. IF THE SALES
LOAD WAS INCLUDED, TOTAL RETURN WOULD HAVE BEEN LOWER.


Average Annual
Total Return (as of 12/31/98)*

                                            Since
                           1 year         Inception
Class A**
(Inception 1/2/97)          5.98%           24.20%
 . . .  . . . . . . . . . . . . . . . . . . . . . . . .
Lehman Bros.
Aggregate
Bond Index                  8.69%           19.19%
 . . .  . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor's
Midcap 400 Index           19.11%           57.54%
 . . .  . . . . . . . . . . . . . . . . . . . . . . . .

* BECAUSE CLASS B AND CLASS C SHARES DO NOT HAVE ANNUAL RETURNS FOR A FULL
  CALENDAR YEAR, CLASS B AND CLASS C PERFORMANCE IS NOT PRESENTED HERE.

** CLASS A SHARE PERFORMANCE REFLECTS THE DEDUCTION OF THE MAXIMUM SALES LOAD.


                                                                              11

<PAGE>

- ---------------------------------------------
     Conseco Equity Fund
- ---------------------------------------------

Our equity fund offers investors an opportunity to participate in the growth of
a variety of corporations by investing in a portfolio of common stocks.

> Investment Objective

The Fund seeks to provide a high equity total return, consistent with
preservation of capital and a prudent level of risk.

> Adviser's Strategy

The Fund primarily invests in common stocks and other U.S. and foreign
securities with similaaar characteristics, including CONVERTIBLE SECURITIES and
WARRANTS.

Normally, the Fund will be widely diversified by industry and company, but will
focus on SMALL- AND MID-CAP COMPANIES.

The Adviser looks for securities that will provide the two elements of total
return:
o Price appreciation
o Income from dividends

In selecting equity securities, the Adviser considers the following factors: 
o Growth trends of the stock's issuer and the industry it represents
o Significant purchases and sales of the stock by corporate insiders 
o Recent changes in earnings per share and their deviations from analysts'
  expectations 
o Relative price-earnings ratios, as compared to industry peers and earnings
  growth potential 
o The stock's price movement

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   FOR DEFENSIVE PURPOSES, THE FUND MAY TEMPORARILY DEPART FROM ITS INVESTMENT
   OBJECTIVE AND INVEST WITHOUT LIMITATION IN MONEY MARKET INSTRUMENTS. THIS
   COULD HELP THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


12

<PAGE>

Convertible Securities
See page 9.

Warrants
See page 11.

Small- and Mid-Cap Companies

Generally refers to companies in the earlier period of their growth
expectations, from start-ups to better established firms. While these companies
have potential for attractive long-term returns, their securities may involve
greater risks, and more volatility, than investments in larger companies with a
stronger competitive advantage. The Adviser's extensive research efforts can
play a greater role in selecting securities from this sector than from larger
companies.


> Primary Risks
  .  . . . . . . . . .
  Credit risk

  Interest rate risk

  Liquidity and
  Valuation risk

  Small Company risk

  See Primary Risk Considerations at page 18 for a detailed discussion of the
  Fund's risks.


> How Has The Fund Performed?

The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the performance of the Fund's Class A
shares has varied from year to year. The table compares the Fund's performance
over time to that of a broad measure of market performance. WHEN YOU CONSIDER
THIS INFORMATION, PLEASE REMEMBER THAT THE FUND'S PAST PERFORMANCE IS NOT
NECESSARILY AN INDICATION OF HOW IT WILL PERFORM IN THE FUTURE. 


Year-By-Year Total Return
(as of 12/31/98) - Class A

   1997        1998
  22.90%      16.11%

Best Quarter   4Q98   28.09%
Worst Quarter  3Q98  -20.52%

CLASS A TOTAL RETURN IS SHOWN WITHOUT THE APPLICABLE SALES LOAD. IF THE SALES
LOAD WAS INCLUDED, TOTAL RETURN WOULD HAVE BEEN LOWER.


Average Annual Total Return
(as of 12/31/98)*

                                             Since
                             1 year        Inception
                             ------        ---------
Class A**
(Inception 1/2/97)          9.43%           34.50%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor's
500 Index                  28.57%           71.46%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor's
Midcap 400 Index           19.11%           57.54%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .

*  BECAUSE CLASS B AND CLASS C SHARES DO NOT HAVE ANNUAL RETURNS FOR A FULL
   CALENDAR YEAR, CLASS B AND CLASS C PERFORMANCE IS NOT PRESENTED HERE.

** CLASS A SHARE PERFORMANCE REFLECTS THE DEDUCTION OF THE MAXIMUM SALES LOAD.

                                                                              13

<PAGE>

- ----------------------------------------
     Conseco 20 Fund
- ----------------------------------------

This focus Fund offers investors a way to capitalize on those equity selections
that the Adviser believes are the best through one concentrated portfolio.

> Investment Objective
The Fund seeks capital appreciation.

> Adviser's Strategy

Normally, the Fund will invest at least 65% of its assets in common stocks of
companies that the Adviser believes have above-average growth prospects.

The Fund is NON-DIVERSIFIED and will normally concentrate its investments in a
core position of approximately 20 to 30 common stocks. While the Fund invests in
securities issued by large-cap companies, a substantial portion of these
securities may be issued by SMALL- AND MID-CAP COMPANIES.

The Adviser looks for companies that demonstrate strong growth potential,
preferring: 
o Companies whose earnings appear likely to continue in an upward direction 
o Companies that demonstrate the ability to consistently grow their earnings at
  a faster rate than their peer group
o Companies whose stocks appear to the Adviser to be undervalued in the 
  marketplace

In selecting equity securities, the Adviser considers the following factors: 
o High return on invested capital 
o Sound financial policies and a strong balance sheet 
o Competitive advantages (including innovative products and services) 
o Effective research, product development and marketing 
o Stable, capable management

The Adviser may also invest in any or all of the following:
o   PREFERRED STOCK
O   CONVERTIBLE SECURITIES
O   WARRANTS
o   Fixed Income Securities (when the Adviser believes they are more attractive
    than stocks on a long-term basis)

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   IF THE ADVISER BELIEVES THAT MARKET CONDITIONS WARRANT A DEFENSIVE POSITION,
   THE FUND MAY TEMPORARILY DEPART FROM ITS INVESTMENT OBJECTIVE AND INVEST
   WITHOUT LIMITATION IN CASH AND SHORT-TERM DEBT SECURITIES. THIS COULD HELP
   THE FUND AVOID LOSSES BUT MAY MEAN LOST OPPORTUNITIES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


14

<PAGE>

Non-Diversified

A Fund is considered non-diversified if it is not limited by the percentage of
assets it may invest in any one issuer. The success or failure of one issuer
will cause the Fund to fluctuate more than it would in a diversified fund.

Small- and Mid-Cap Companies
See page 13.

Preferred Stock
See page 5.

Convertible Securities
See page 9.

Warrants
See page 11.

> Primary Risks
  .  . . . . . . . . .
  Concentration risk

  Market risk
  
  Small Company risk

  Liquidity and
  Valuation risk
  Foreign risk

  See Primary Risk Considerations at page 18 for a detailed discussion of the
  Fund's risks.

> How Has The Fund Performed?

The chart and table below give an indication of the Fund's risks and
performance. The chart shows you how the performance of the Fund's Class A
shares has varied from year to year. The table compares the Fund's performance
over time to that of a broad measure of market performance. WHEN YOU CONSIDER
THIS INFORMATION, PLEASE REMEMBER THAT THE FUND'S PAST PERFORMANCE IS NOT
NECESSARILY AN INDICATION OF HOW IT WILL PERFORM IN THE FUTURE. 



Year-By-Year Total Return
(as of 12/31/98) - Class A

        1998
       28.00%

Best Quarter   4Q98   26.69%
Worst Quarter  3Q98  -17.13%

CLASS A TOTAL RETURN IS SHOWN WITHOUT THE APPLICABLE SALES LOAD. IF THE SALES
LOAD WAS INCLUDED, TOTAL RETURN WOULD HAVE BEEN LOWER.


Average Annual Total Return
(as of 12/31/98)*


                                        Since
                                      Inception 
Class A**
(Inception 1/1/98)                     20.64%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor's
500 Index                              28.57%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .
Standard & Poor's
Midcap 400 Index                       19.11%
 . .  . . . . . . . . . . . . . . . . . . . . . . . .


 * BECAUSE CLASS B AND CLASS C SHARES DO NOT HAVE ANNUAL RETURNS FOR A FULL
   CALENDAR YEAR, CLASS B AND CLASS C PERFORMANCE IS NOT PRESENTED HERE.

** CLASS A SHARE PERFORMANCE REFLECTS THE DEDUCTION OF THE MAXIMUM SALES LOAD.


                                                                              15

<PAGE>

- --------------------------------------------------
     Primary Risk Considerations
- --------------------------------------------------

All Fund investments are subject to risk and may decline in value. The principal
risks of investing in the Funds are described below. Each Fund's exposure
depends upon its specific investment profile. The amount and types of risk vary
depending on: 
o The Fund's investment objective 
o The Fund's ability to achieve its objective 
o The markets in which the Fund invests 
o The investments the Fund makes in those markets 
o Prevailing economic conditions over the period of an investment

> Concentration Risk

The risk that if a Fund has most of its investments in a few securities or a
single sector, its portfolio will be more susceptible to factors adversely
affecting issuers within that sector than would a more diversified portfolio of
securities.

> Credit Risk

The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise be unable to honor a financial obligation. Securities rated
below investment grade are especially susceptible to this risk.

> Foreign Risk

The risk that foreign issuers may be subject to foreign political and economic
instability, the imposition or tightening of exchange controls or other
limitations on repatriation of foreign capital. In addition, there may be
changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of investors'
assets. Investments in issuers located or doing business in emerging or
developing markets are especially susceptible to these risks.

> Interest Rate Risk

The risk that changing interest rates may adversely affect the value of an
investment. With fixed income securities, an increase in interest rates
typically causes the value of those securities to fall, while a decline in
interest rates may produce an increase in the market value of those securities.
Because of this risk, an investment in a Fund that invests in fixed income
securities is subject to risk even if all the fixed income securities in the
Fund's portfolio are paid in full at maturity. Changes in interest rates will
affect the value of longer-term fixed income securities more than shorter-term
securities.

> Leverage Risk

The risk that borrowing, or some derivative investments, such as forward
commitment transactions, may multiply smaller market movements into large
changes in value.

> Liquidity And Valuation Risks

The risk that securities that were liquid when purchased by a Fund may become
temporarily illiquid (i.e., not be sold readily) and hard to value, especially
in declining markets.

16

<PAGE>


> Market Risk

The risk that the market value of a Fund's investments will fluctuate as the
stock and bond markets fluctuate. Market risk may affect a single issuer,
industry or section of the economy or may affect the market as a whole.

> Municipal Market Risk

The risk that special factors may negatively affect the value of municipal
securities, and, as a result, a Fund's share price. These factors include
political or legislative changes, uncertainties related to the tax status of the
securities or the rights of investors in the securities. A Fund may invest in
municipal obligations that are related in such a way that an economic, business
or political development or change affecting one of these obligations would also
affect the other obligations.

> Prepayment Risk

The risk that issuers will prepay fixed rate obligations when interest rates
fall, forcing the Fund to re-invest in obligations with lower interest rates
than the original obligations.

> Restricted Securities Risk

The risk that a buyer will be difficult to come by and selling price will need
to be less than originally anticipated because these restricted securities may
only be sold in privately negotiated transactions.

> Small Company Risk

The risk that investments in smaller companies may be more volatile than
investments in larger companies. Smaller companies generally experience higher
growth rates and higher failure rates than do larger companies. The trading
volume of the securities of smaller companies is normally lower than that of
larger companies. The tendency of short-term changes in the demand for the
securities of smaller companies generally has a disproportionate effect on their
market price, tending to make prices rise more in response to buying demand and
fall more in response to selling pressure.

Year 2000

The Funds could be adversely affected by problems relating to the inability of
computer systems used by the Adviser and the Funds' other service providers to
recognize the year 2000. While year 2000-related computer problems could have a
negative effect on the Funds, the Adviser is working to avoid these problems in
its own computer systems and to obtain assurances from service providers that
they are taking similar steps.

Euro Conversion

The Funds also could be adversely affected by the conversion of European
currencies into the Euro beginning January 1, 1999. This conversion will not be
complete until 2002, and its full implementation may be delayed. Difficulties
with the conversion and potential delays may significantly impact European
capital markets and could increase volatility in world capital markets.

It is impossible to know whether the problems associated with both Year 2000 and
Euro conversion, which could disrupt operations of investments if uncorrected,
have been adequately addressed until the dates in question arrive.

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   PLEASE NOTE THAT THERE ARE OTHER CIRCUMSTANCES NOT DESCRIBED HERE WHICH COULD
   ADVERSELY AFFECT YOUR INVESTMENT AND POTENTIALLY PREVENT A FUND FROM
   ACHIEVING ITS OBJECTIVES.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


                                                                              17

<PAGE>

FEE AND EXPENSES

- -----------------------------------------
     Fees and Expenses
- -----------------------------------------

The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Funds. These expenses are deducted from the Funds' assets.

> Shareholder Fees
(fees paid directly from your investment)

- --------------------------------------------------------------------------------
                                        Conseco Fixed    Conseco High
                                         Income Fund      Yield Fund
- --------------------------------------------------------------------------------
   Maximum Front-End
   Sales Charge (Load)
   Imposed on Purchases: Class A            5.75%            5.75% 
- --------------------------------------------------------------------------
   Maximum Front-End Sales
   Charge (Load) Imposed on
   Purchases: Class B and C                 None              None  
- --------------------------------------------------------------------------
   Maximum Deferred Sales
   Charge load: Class A                     None              None  
- --------------------------------------------------------------------------
   Maximum Deferred Sales
   Charge load: Class B*                    5.00%            5.00% 
- --------------------------------------------------------------------------
   Maximum Deferred Sales
   Charge load: Class C**                   1.00%            1.00% 
- --------------------------------------------------------------------------


<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------------
                              Conseco Convertible         Conseco            Conseco           Conseco
                                 Securities Fund         Balanced Fund       Equity Fund         20 Fund
- -----------------------------------------------------------------------------------------------------------------
<S>                                   <C>                    <C>                 <C>               <C>  
   Maximum Front-End             
   Sales Charge (Load)           
   Imposed on Purchases: Class A      5.75%                  5.75%               5.75%             5.75%
- -----------------------------------------------------------------------------------------------------------------
   Maximum Front-End Sales       
   Charge (Load) Imposed on      
   Purchases: Class B and C           None                   None                None              None
- -----------------------------------------------------------------------------------------------------------------
   Maximum Deferred Sales        
   Charge load: Class A               None                   None                None              None
- -----------------------------------------------------------------------------------------------------------------
   Maximum Deferred Sales        
   Charge load: Class B*              5.00%                  5.00%               5.00%             5.00%
- -----------------------------------------------------------------------------------------------------------------
   Maximum Deferred Sales        
   Charge load: Class C**             1.00%                  1.00%               1.00%             1.00%
- -----------------------------------------------------------------------------------------------------------------

</TABLE>


THE FUNDS DO NOT CHARGE ANY FEES FOR REINVESTING DIVIDENDS, OR REDEEMING OR
EXCHANGING FUND SHARES.

*  THE MAXIMUM 5% CONTINGENT DEFERRED SALES CHARGE APPLIES TO SALE OF CLASS B
   SHARES DURING THE FIRST YEAR AFTER PURCHASE. THE CHARGE GENERALLY DECLINES
   ANNUALLY, REACHING ZERO AFTER SIX YEARS.

** THE 1% CONTINGENT DEFERRED SALES CHARGE APPLIES ONLY IF AN INVESTOR SELLS
   CLASS C SHARES WITHIN THE FIRST YEAR AFTER PURCHASE.


18

<PAGE>

Annual Fund Operating Expenses
(expenses that are deducted from each Fund's assets) as a % of average daily 
net assets

CLASS A SHARES

                                      
                                      
- --------------------------------------------------------------------------------
                                        Conseco Fixed    Conseco High
                                         Income Fund      Yield Fund
 -------------------------------------------------------------------------------
   Management and
   Administrative Fees                      0.65%            0.90%
- --------------------------------------------------------------------------------
   Distribution
   (12b-1) Fees                             0.65%            0.50%
- --------------------------------------------------------------------------------
   Other Expenses                           0.64%            0.72%
                                            -----            -----
- --------------------------------------------------------------------------------
   Equals: Total Annual
   Fund Operating Expenses                  1.94%            2.12% 
- --------------------------------------------------------------------------------
   Less: Fee Waiver and/or
   Expense Reimbursement*                   0.69%            0.72% 
                                            -----            -----
- --------------------------------------------------------------------------------
   Equals: Net Expenses                     1.25%            1.40% 
                                            =====            =====
- --------------------------------------------------------------------------------


<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
                          Conseco Convertible         Conseco            Conseco           Conseco
                           Securities Fund         Balanced Fund       Equity Fund         20 Fund
 ---------------------------------------------------------------------------------------------------------
<S>                            <C>                    <C>                 <C>               <C>  
   Management and         
   Administrative Fees         1.05%                  0.90%               0.90%             0.90%
- ----------------------------------------------------------------------------------------------------------
   Distribution           
   (12b-1) Fees                0.50%                  0.50%               0.50%             0.50%
- ----------------------------------------------------------------------------------------------------------
   Other Expenses              0.57%                  0.86%               0.70%             0.75%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
   Equals: Total Annual   
   Fund Operating Expenses     2.12%                  2.26%               2.10%             2.15%
- ----------------------------------------------------------------------------------------------------------
   Less: Fee Waiver and/or
   Expense Reimbursement*      0.57%                  0.76%               0.60%             0.40%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
      
   Equals: Net Expenses        1.55%                  1.50%               1.50%             1.75%
                               =====                  =====               =====             =====
- ----------------------------------------------------------------------------------------------------------

</TABLE>


* PURSUANT TO A CONTRACTUAL ARRANGEMENT WITH THE FUND, THE ADVISER, DISTRIBUTOR
  AND ADMINISTRATOR HAVE AGREED TO WAIVE FEES AND/OR REIMBURSE FUND EXPENSES
  THROUGH 4/30/00, SO THAT THE TOTAL ANNUAL OPERATING EXPENSES OF EACH FUND ARE
  LIMITED TO THE NET EXPENSES FOR EACH RESPECTIVE FUND, AS SET FORTH ABOVE. THIS
  ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE COMMISSIONS, AND
  EXTRAORDINARY EXPENSES.



                                                                              19


<PAGE>

FEES AND EXPENSES

- -----------------------------------------
     Fees and Expenses
- -----------------------------------------


CLASS B SHARES

- --------------------------------------------------------------------------------
                                        Conseco Fixed    Conseco High
                                         Income Fund      Yield Fund
- --------------------------------------------------------------------------------
    Management and
    Administrative Fees                      0.65%           0.90% 
- --------------------------------------------------------------------------------
   Distribution
   (12b-1) Fees                              1.00%           1.00%
- --------------------------------------------------------------------------------
   Other Expenses                            1.12%           0.85%
                                             -----           -----
- --------------------------------------------------------------------------------
   Equals: Total Annual
   Fund Operating Expenses                   2.77%           2.75%
- --------------------------------------------------------------------------------
   Less: Fee Waiver and/or
   Expense Reimbursement*                    1.17%           0.85%
                                             -----           -----
- --------------------------------------------------------------------------------
   Equals: Net Expenses                      1.60%           1.90%
                                             =====           =====
- --------------------------------------------------------------------------------


<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
                          Conseco Convertible         Conseco            Conseco           Conseco
                           Securities Fund         Balanced Fund       Equity Fund         20 Fund
- ----------------------------------------------------------------------------------------------------------
<S>                            <C>                    <C>                 <C>               <C>  
    Management and        
    Administrative Fees        1.05%                  0.90%               0.90%             0.90%
- ----------------------------------------------------------------------------------------------------------
   Distribution           
   (12b-1) Fees                1.00%                  1.00%               1.00%             1.00%
- ----------------------------------------------------------------------------------------------------------
   Other Expenses              1.75%+                 2.03%               2.95%             0.83%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
   Equals: Total Annual   
   Fund Operating Expenses
- --------------------------     3.80%                  3.93%               4.85%             2.73%
   Less: Fee Waiver and/or--------------------------------------------------------------------------------
   Expense Reimbursement*      1.75%                  1.93%               2.85%             0.48%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
   Equals: Net Expenses        2.05%                  2.00%               2.00%             2.25%
                               =====                  =====               =====             =====
- ----------------------------------------------------------------------------------------------------------

</TABLE>


20


<PAGE>


CLASS C SHARES


- --------------------------------------------------------------------------------
                                        Conseco Fixed    Conseco High
                                         Income Fund      Yield Fund
- --------------------------------------------------------------------------------
   Management and
   Administrative Fees                       0.65%           0.90%
- --------------------------------------------------------------------------------
   Distribution
   (12b-1) Fees                              1.00%           1.00%
- --------------------------------------------------------------------------------
   Other Expenses                            4.26%           1.13%
                                             -----           -----
- --------------------------------------------------------------------------------
   Equals: Total Annual
   Fund Operating Expenses                   5.91%           3.03%
- --------------------------------------------------------------------------------
   Less: Fee Waiver and/or
   Expense Reimbursement*                    4.31%           1.13%
                                             -----           -----
- --------------------------------------------------------------------------------
   Equals: Net Expenses                      1.60%           1.90%
                                             =====           =====
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
                          Conseco Convertible         Conseco            Conseco           Conseco
                           Securities Fund         Balanced Fund       Equity Fund         20 Fund
- ----------------------------------------------------------------------------------------------------------
<S>                            <C>                    <C>                 <C>               <C>  
   Management and         
   Administrative Fees         1.05%                  0.90%               0.90%             0.90%
- ----------------------------------------------------------------------------------------------------------
   Distribution           
   (12b-1) Fees                1.00%                  1.00%               1.00%             1.00%
- ----------------------------------------------------------------------------------------------------------
   Other Expenses              1.75%+                 1.50%               6.61%             0.82%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
   Equals: Total Annual   
   Fund Operating Expenses     3.80%                  3.40%               8.51%             2.72%
- ----------------------------------------------------------------------------------------------------------
   Less: Fee Waiver and/or
   Expense Reimbursement*      1.75%                  1.40%               6.51%             0.47%
                               -----                  -----               -----             -----
- ----------------------------------------------------------------------------------------------------------
   Equals: Net Expenses        2.05%                  2.00%               2.00%             2.25%
                               =====                  =====               =====             =====
- ----------------------------------------------------------------------------------------------------------

</TABLE>


*  PURSUANT TO A CONTRACTUAL ARRANGEMENT WITH THE FUND, THE ADVISER, DISTRIBUTOR
   AND ADMINISTRATOR HAVE AGREED TO WAIVE FEES AND/OR REIMBURSE FUND EXPENSES
   THROUGH 4/30/00, SO THAT THE TOTAL ANNUAL OPERATING EXPENSES OF EACH FUND ARE
   LIMITED TO THE NET EXPENSES FOR EACH RESPECTIVE FUND, AS SET FORTH ABOVE.
   THIS ARRANGEMENT DOES NOT COVER INTEREST, TAXES, BROKERAGE COMMISSIONS, AND
   EXTRAORDINARY EXPENSES.

+  BECAUSE THE FUND HAS NOT COMPLETED A FULL FISCAL YEAR, OTHER EXPENSES ARE
   ESTIMATED
                                                                              21


<PAGE>

FEES AND EXPENSES

> Expense Example

This example will help you compare the cost of investing in the Conseco Fund
Group to the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in a Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs and the return on your investment
may be higher or lower, based on these assumptions your costs would be:


CLASS A SHARES
- --------------------------------------------------------------------------------
                              1 Year      3 Years*     5 Years*   10 Years*
- --------------------------------------------------------------------------------

   Conseco
   Fixed Income Fund           $62          $101         $143       $262
- --------------------------------------------------------------------------------
   Conseco High Yield Fund     $71          $113         $158       $286
- --------------------------------------------------------------------------------
   Conseco Convertible
   Securities Fund             $72          $114         $159       $286
- --------------------------------------------------------------------------------
   Conseco Balanced Fund       $72          $117         $165       $300
- --------------------------------------------------------------------------------
   Conseco Equity Fund         $72          $113         $158       $284
- --------------------------------------------------------------------------------
   Conseco 20 Fund             $74          $117         $162       $289
- --------------------------------------------------------------------------------

* The examples for 3, 5 and 10 years do not take into account the expense
  waiver/reimbursement described above. Under the reimbursement arrangement,
  your cost for the 3, 5 and 10 year periods would be lower.

CLASS B SHARES
- --------------------------------------------------------------------------------
                              1 Year      3 Years*     5 Years*   10 Years*
- --------------------------------------------------------------------------------

   Conseco
   Fixed Income Fund           $66          $104         $157       $279
- --------------------------------------------------------------------------------
   Conseco High Yield Fund     $69          $107         $158       $284
- --------------------------------------------------------------------------------
   Conseco Convertible
   Securities Fund             $71          $130         $204       $353
- --------------------------------------------------------------------------------
   Conseco Balanced Fund       $70          $132         $209       $368
- --------------------------------------------------------------------------------
   Conseco Equity Fund         $70          $151         $249       $423
- --------------------------------------------------------------------------------
   Conseco 20 Fund             $73          $109         $159       $283
- --------------------------------------------------------------------------------

* The examples for 3, 5 and 10 years do not take into account the expense
  waiver/reimbursement described above. Under the reimbursement arrangement,
  your cost for the 3, 5 and 10 year periods would be lower.

CLASS C SHARES
- --------------------------------------------------------------------------------
                              1 Year      3 Years*     5 Years*   10 Years*
- --------------------------------------------------------------------------------

   Conseco
   Fixed Income Fund           $26          $140         $273       $647
- --------------------------------------------------------------------------------
   Conseco High Yield Fund     $29          $82          $150       $338
- --------------------------------------------------------------------------------
   Conseco Convertible
   Securities Fund             $31          $100         $184       $417
- --------------------------------------------------------------------------------
   Conseco Balanced Fund       $30          $91          $167       $376
- --------------------------------------------------------------------------------
   Conseco Equity Fund         $30          $198         $387       $910
- --------------------------------------------------------------------------------
   Conseco 20 Fund             $33          $79          $139       $304
- --------------------------------------------------------------------------------

*   The examples for 3, 5 and 10 years do not take into account the expense
    waiver/reimbursement described above. Under the reimbursement arrangement,
    your cost for the 3, 5 and 10 year periods would be lower.

22

<PAGE>

MANAGEMENT

- -----------------------------------------
    Management
- -----------------------------------------

> Adviser
  Conseco Capital Management, Inc. (CCM) is a wholly owned subsidiary of
  Conseco, Inc., a publicly owned financial services company that provides
  specialized annuity, life and health insurance products. CCM serves as the
  "Adviser" to each of the Funds and as adviser to other registered investment
  companies. In addition to managing the invested assets of Conseco, Inc., CCM
  manages foundations, endowments, corporations, government and union clients.
  As of December 31, 1998, CCM managed over $35.3 billion.

> Advisory Fees
  For the fiscal year ended 12/31/98, the advisory fee paid to the Adviser by
  each Fund was as follows:

- --------------------------------------------------------------------------------
    Fund Name                                     Advisory Fees Paid
- --------------------------------------------------------------------------------
                                          (expressed as a percentage of average
                                                   daily net assets)
   Conseco Fixed Income Fund                            0.00%
- --------------------------------------------------------------------------------
   Conseco High Yield Fund                              0.00%
- --------------------------------------------------------------------------------
   Conseco Convertible Securities Fund                  0.06%
- --------------------------------------------------------------------------------
   Conseco Balanced Fund                                0.00%
- --------------------------------------------------------------------------------
   Conseco Equity Fund                                  0.18%
- --------------------------------------------------------------------------------
   Conseco 20 Fund                                      0.15%
- --------------------------------------------------------------------------------

> Conseco Capital
  Management, Inc.
  11825 N. Pennsylvania Street
  Carmel, IN  46032


                                                                              23


<PAGE>

MANAGEMENT

- -------------------------------------------------------
    Portfolio Managers of the Conseco Fund Group
- -------------------------------------------------------

> Conseco Fixed Income Fund

  GREGORY J. HAHN, CFA, SENIOR VICE PRESIDENT, PORTFOLIO ANALYTICS, CONSECO
  CAPITAL MANAGEMENT, INC.

  At CCM, Mr. Hahn is also responsible for the portfolio analysis and management
  of the institutional client accounts and analytical support for taxable
  portfolios. In addition, he is responsible for SEC registered investment
  products, investments in the insurance industry and is portfolio manager of
  other affiliated investment companies. Mr. Hahn joined the Adviser as Vice
  President and portfolio manager in 1989.

  G. NOLAN SMITH, CFA, VICE PRESIDENT, PORTFOLIO ANALYTICS, CONSECO CAPITAL
  MANAGEMENT, INC.

  At CCM, Mr. Smith is also responsible for taxable and tax-exempt fixed income
  and institutional client accounts. He is also a portfolio manager of other
  affiliated investment companies. Prior to joining the Adviser in 1995, Mr.
  Smith was a portfolio manager at Strong Capital Management, where he managed
  the Strong Municipal Money Market, Short-Term and Municipal Bond Funds.

> Conseco High Yield Fund

  PETER C. ANDERSEN, CFA, VICE PRESIDENT, PORTFOLIO ANALYTICS, CONSECO CAPITAL
  MANAGEMENT, INC.

  At CCM, Mr. Andersen is responsible for managing below investment grade fixed
  income portfolios for institutional client accounts and is the portfolio
  manager of other affiliated investment companies. Prior to joining the Adviser
  in 1997, he was a portfolio manager for Colonial Management Associates, where
  he managed over $650 million in high-yield, tax-free mutual funds.

  WILLIAM F. FICCA, VICE PRESIDENT AND DIRECTOR OF RESEARCH, CONSECO CAPITAL
  MANAGEMENT, INC.

  At CCM, Mr. Ficca also oversees the Adviser's research efforts and is the
  portfolio manager of other investment products managed by the Adviser. Mr.
  Ficca joined the Adviser as Assistant Vice President in 1991.

> Conseco Convertible Securities Fund

  ANDREW S. CHOW, CFA, FLMI, VICE PRESIDENT, CONSECO CAPITAL MANAGEMENT, INC.

  At CCM, Mr. Chow is also responsible for trading mortgage-backed securities,
  exchange and over-the-counter derivatives and convertible securities.
  Additionally, he is portfolio manager for fixed income institutional client
  accounts. He joined the Adviser as Assistant Vice President in 1991.


24


<PAGE>


> Conseco Balanced Fund

  Gregory J. Hahn, CFA, Senior Vice President, Portfolio Analytics,
  Conseco Capital Management, Inc.

  Mr. Hahn is the portfolio manager of the fixed income portion of the Fund. See
  Conseco Fixed Income Fund for Mr. Hahn's complete biography.

  THOMAS J. PENCE, CFA, SENIOR VICE PRESIDENT,
  CONSECO CAPITAL MANAGEMENT, INC.

  Mr. Pence is portfolio manager of the equity portion of the Fund. Since
  joining the Adviser in 1992, Mr. Pence has been responsible for the management
  of all of the Adviser's equity portfolios and for the oversight of the equity
  investment process. Additionally, he is portfolio manager of other affiliated
  investment companies.

> Conseco Equity Fund

  THOMAS J. PENCE, CFA, SENIOR VICE PRESIDENT,
  CONSECO CAPITAL MANAGEMENT, INC.

  See Conseco Balanced Fund for Mr. Pence's complete biography.

> Conseco 20 Fund

  THOMAS J. PENCE, CFA, SENIOR VICE PRESIDENT,
  CONSECO CAPITAL MANAGEMENT, INC.

  See Conseco Balanced Fund for Mr. Pence's complete biography.

  ERIK J. VOSS, ASSISTANT VICE PRESIDENT, SENIOR SECURITIES ANALYST,
  CONSECO CAPITAL MANAGEMENT, INC.

  At CCM, Mr. Voss is also responsible for assisting in the research and
  portfolio management efforts for all of the Adviser's equity portfolios. Prior
  to joining the Adviser in 1996, Mr. Voss worked as an equity analyst for
  Gardner Lewis Asset Management for over three years.


                                                                              25


<PAGE>


YOUR ACCOUNT


- -------------------------------------------------------
    Choosing A Share Class
- -------------------------------------------------------

The distributor, Conseco Equity Sales, Inc., offers three classes of Conseco
Fund Group shares in this prospectus: A, B and C. Each class has its own expense
structure. This allows you to choose the one that best meets your investment
needs.

The primary differences between the classes of shares is the initial sales
charge and contingent deferred sales charge (CDSC) structures and the ongoing
annual expenses. How should you determine which share class is best for you?
Considerations generally include:

 o The amount you wish to invest

 o Your investment time horizon

 o The Fund's expenses and charges

Ask your financial adviser for assistance in determining your most appropriate
pricing option.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
   Class A                                Class B                         Class C
- ---------------------------------------------------------------------------------------------------------
<S>                                       <C>                             <C>
   Initial sales charge of 5.75%          No initial sales charge         No initial sales charge
   or less for all Funds - except
   Conseco Fixed Income Fund
   (5.00% or less)
   SEE SCHEDULES ON PAGE 31
- ---------------------------------------------------------------------------------------------------------

   Lower sales charges for               Contingent deferred sales        Deferred sales charge of 1%,
   larger investments available          charge of 5% or less on          paid if you sell shares within
   SEE SCHEDULES ON PAGE 31              shares sold within six years     one year of purchase
                                         SEE SCHEDULE ON PAGE 33
- ---------------------------------------------------------------------------------------------------------

                                         Automatic conversion to
                                         Class A shares at net asset
                                         value in the eighth year
- ---------------------------------------------------------------------------------------------------------

   Please consult your financial         Please consult your financial intermediary or the SAI for a
   intermediary or the SAI for a         complete list of CDSC waivers
   complete list of sales load waivers
- ---------------------------------------------------------------------------------------------------------
</TABLE>
   FOR ACTUAL PAST EXPENSES OF CLASS A, B AND C SHARES, SEE THE ANNUAL FUND
   OPERATING EXPENSE TABLE INFORMATION EARLIER IN THIS PROSPECTUS.

   In addition to Class A, B and C shares, Conseco Fund Group also offers Class
   Y shares to qualifying individual investors, or to institutional investors,
   including:

    o Tax-qualified plans with at least $10 million in assets or 250 plan
      eligible employees 

    o Banks and insurance companies investing for their own
      accounts

    o Investment companies unaffiliated with the Adviser

    o Tax-qualified retirement plans of the Adviser or qualified financial
      intermediaries who have a contract with the Distributor

    o Endowments, foundations and other charitable organizations

    o Wrap fee accounts or asset allocation programs where the shareholder pays
      an asset-based fee


26


<PAGE>


> Purchase of Class A Shares

  The public offering price of Class A shares is the Fund's net asset value
  (NAV) per share, plus an initial sales charge that may vary depending on the
  amount invested.

The sales charge for Class A shares:

<TABLE>
<CAPTION>

CLASS A SALES CHARGE -- ALL FUNDS EXCEPT CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------
                                   As a % of Public        As a % of Net           Dealer Reallowance
   On Purchases of:                 Offering Price        Amount Invested       As a % of Offering Price
- ---------------------------------------------------------------------------------------------------------
<S>                                   <C>                     <C>                    <C>  
   Less than $50,000                   5.75%                   6.10%                  5.00%
- ---------------------------------------------------------------------------------------------------------
   $50,000 to $99,999                  4.50%                   4.71%                  3.75%
- ---------------------------------------------------------------------------------------------------------
   $100,000 to $249,999                3.50%                   3.63%                  2.75%
- ---------------------------------------------------------------------------------------------------------
   $250,000 to $499,999                2.50%                   2.56%                  2.00%
- ---------------------------------------------------------------------------------------------------------
   $500,000 or over                    None                    None                   1.00%
- ---------------------------------------------------------------------------------------------------------


<CAPTION>

CLASS A SALES CHARGE -- CONSECO FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------
                                   As a % of Public        As a % of Net           Dealer Reallowance
   On Purchases of:                 Offering Price        Amount Invested       As a % of Offering Price
- ---------------------------------------------------------------------------------------------------------
<S>                                   <C>                     <C>                    <C>  
   Less than $50,000                   5.00%                   5.56%                  4.50%
- ---------------------------------------------------------------------------------------------------------
   $50,000 to $99,999                  4.50%                   4.71%                  3.75%
- ---------------------------------------------------------------------------------------------------------
   $100,000 to $249,999                3.50%                   3.63%                  2.75%
- ---------------------------------------------------------------------------------------------------------
   $250,000 to $499,999                2.50%                   2.56%                  2.00%
- ---------------------------------------------------------------------------------------------------------
   $500,000 or over                    None                    None                   1.00%
- ---------------------------------------------------------------------------------------------------------
</TABLE>

Although you may pay an initial sales charge when you buy Class A shares, the
ongoing expenses of this class are lower than those of Class B or C.


> Net Asset Value (NAV) The market value of a
  fund's securities and
  other assets less
  its liabilities divided
  by total number of
  outstanding shares.


                                                                              27


<PAGE>


YOUR ACCOUNT


- -------------------------------------------------------
    Choosing A Share Class (cont.)
- -------------------------------------------------------


> Reducing Your Sales Charges for Class A Share Purchases

  You may be eligible to buy Class A shares with a reduced sales charge in one
  or more of the following ways:

  Rights Of Accumulation

  Allows you to include the value of your existing Conseco Fund Group
  investments together with the value of any shares you hold in a Federated
  Money Market Fund (FMMF) to your current investment to determine the
  applicable sales charge.

  Combined Purchases

  Allows you to include the cumulative value of all of your Conseco Fund Group
  investments with the value of investments made by other qualifying persons to
  determine the amount of reduction in sales charge. Qualifying persons include
  trustees or other fiduciaries, as well as qualified employee benefit plans of
  a single corporation or of corporations affiliated with each other in
  accordance with the 1940 Act (see Statement of Additional Information [SAI]
  for specific information).

  In addition, if you own a Conseco Variable Insurance Company variable annuity
  contract, the current cash value of the contract will be aggregated with your
  shares to determine your sales charge.

  You or your financial intermediary must provide documentation to the Transfer
  Agent each time a purchase that qualifies for a reduced sales charge is made.

  Letter Of Intent

  Allows you to commit to invest a certain amount in Class A shares of any or
  all of the Funds over a 13-month period and receive the same sales charge as
  if all shares had been purchased at once. You may also include your existing
  Conseco Fund Group investments to further reduce your sales charge.

  See the SAI and the application for further details on how you can take
  advantage of these cost-reduction programs.

>  Federated Money Market Fund
   You may also purchase shares of this money market fund, currently managed by
   Federated Management through a separate prospectus. That prospectus is
   available upon request by calling 800-986-3384.


28


<PAGE>


> Purchase Of Class B Shares

  Class B shares are offered at their net asset value per share without any
  initial sales charge. Your entire purchase amount is immediately invested.

  However, a contingent deferred sales charge (CDSC) is imposed upon Class B
  shares redeemed within six years of their purchase. The CDSC is based on the
  number of shares you are selling and on the lessor of:

  o   The NAV of shares at the time of purchase
  
  o   The NAV of shares at the time of redemption

  The longer the time between the purchase and the sale of shares, the lower the
  rate of the CDSC. A Class B share purchase may not exceed $500,000.

<TABLE>
<CAPTION>
DETERMINING THE CDSC
- -----------------------------------------------------------------------------------------------------------
   Redemption During                       Contingent Deferred Sales charge
- -----------------------------------------------------------------------------------------------------------
<S>                                                     <C>
   1st year since purchase                              5%
- -----------------------------------------------------------------------------------------------------------
   2nd year since purchase                              4%
- -----------------------------------------------------------------------------------------------------------
   3rd year since purchase                              3%
- -----------------------------------------------------------------------------------------------------------
   4th year since purchase                              3%
- -----------------------------------------------------------------------------------------------------------
   5th year since purchase                              2%
- -----------------------------------------------------------------------------------------------------------
   6th year since purchase                              1%
- -----------------------------------------------------------------------------------------------------------
   7th year since purchase                              0%
- -----------------------------------------------------------------------------------------------------------
   8th year since purchase                              0% (Converts to Class A shares of equal dollar
                                                        value; Class A shares have lower ongoing
                                                        expenses than Class B shares)
- -----------------------------------------------------------------------------------------------------------
</TABLE>

  For purposes of this CDSC, purchases made on any day during the calendar month
  are counted as having been made on the first day of that month.

  To keep your CDSC as low as possible, each time you place a request to sell
  shares we will first sell any shares in your account that carry no CDSC (those
  acquired through reinvestments of dividends or capital gains distributions).
  The CDSC, if any, payable on shares acquired through an exchange between
  Conseco Funds will be calculated based on the original purchase date of the
  Class B shares exchanged.

> Purchase Of Class C Shares

  With Class C shares, you pay no sales charge when you invest, but you are
  charged a contingent deferred sales charge (CDSC) when you sell shares you
  have held for one year or less. In this case, shares are subject to a CDSC on
  redemptions equal to 1% of the lower of:

  o The NAV of shares at the time of purchase

  o The NAV of shares at the time of redemption

  Class C shares held one year or longer are not subject to this CDSC.

  The ongoing expenses of Class C shares are higher than those of Class A
  shares. Class C shares never convert to any other class of shares.

  The CDSC also will not apply to shares acquired by the reinvestment of
  dividends or capital gains distributions. The order in which Class C shares
  are redeemed will be determined as described for Class B shares (see "Purchase
  of Class B Shares").


                                                                              29


<PAGE>


YOUR ACCOUNT


- -------------------------------------------------------
    Determining Shared Price
- -------------------------------------------------------


        A Fund's share price is the total market value of its assets minus its
        liabilities, called net asset value, divided by the total number of
        shares outstanding. Because the value of each Fund's securities changes
        every business day, the Fund's share price usually changes as well.

        Each Fund calculates its net asset value (NAV) per share on each
        business day that the New York Stock Exchange (NYSE) is open.

        For each of the Funds, NAV is calculated at the close of regular trading
        on the NYSE (normally 4:00 p.m., Eastern Time). The NAV is generally
        based on the market price of the securities held in a Fund.

        Under the direction of the Board, the Funds may use a practice known as
        fair value pricing under the following circumstances:

        o Securities and assets for which market quotations are not readily
          available

        o Events that occur after an exchange closes are likely to affect the
          value of the security

        o Fund management strongly believes a market price is not reflective of
          the security's appropriate value





30


<PAGE>


- ------------------------------------
    Buying Shares
- ------------------------------------


> Opening A New Account Is Easy

  The Funds are open for business each day the New York Stock Exchange (NYSE) is
  open for business. The Funds are closed for business on:

  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
     Saturday                          Presidents' Day         Labor Day
     Sunday                            Good Friday             Thanksgiving Day
     New Year's Day                    Memorial Day            Christmas Day
     Martin Luther King, Jr. Day       Independence Day
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

When placing purchase orders, investors should specify whether the order is for
Class A, Class B or Class C shares. There are three convenient ways to begin
your Conseco Fund Group investment program.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
   Through Financial                 
   Intermediaries                    By Bank Wire                      By Mail
- -------------------------------------------------------------------------------------------------------------
<S>                                  <C>                               <C>
   Shares of the Funds may           Wire your investment to:          Simply complete and sign an
   be purchased through              ABA#011000028                     application to begin the process.
   authorized broker-dealers,        State Street Bank
   financial institutions and        Boston, MA                        Make your check payable
   service organizations with        Account #9905-244-1               to the Fund of your choice.*
   whom the distributor has          Reference your customer
   a selling agreement.              name, fund name and               If you are adding to your
                                     fund account number               existing account, indicate
   Important note: Each institution                                    your Fund account number
   may have its own procedures       For NEW accounts, please          directly on the check.
   and requirements for buying       promptly complete and mail
   and selling shares and may        the account application form      Mail your application
   charge fees. Contact your         to the Funds at the address       and check to:
   financial professional for        given under "By Mail."            Conseco Fund Group
   more information                                                    P.O. Box 8017
                                     The Funds currently do not        Boston, Massachusetts
                                     charge for wire transfers,        02266-8017
                                     although your bank may.
</TABLE>

  *No third-party checks are accepted.

  Payment for the shares purchased through a financial institution is due on
  settlement date. The settlement date is normally three business days after the
  order has been executed. When making payment for confirmed purchases via
  Federal Funds wire, you must reference the confirmation number to ensure
  timely credit.

  It is the responsibility of the broker, dealer, or other financial
  intermediary to forward customer orders received prior to the close of the
  NYSE to the Transfer Agent prior to its close of business that same day
  (normally 4:00 p.m., Eastern Time). Check with your investment professional to
  find out if they have an internal deadline for receiving your order to ensure
  processing that day.

  Shares are purchased at the next share price calculation after your investment
  is received. The Funds reserve the right to reject any purchase order.

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   PLEASE INDICATE WHETHER YOU WOULD LIKE THE ABILITY TO REDEEM OR EXCHANGE
   SHARES BY TELEPHONE OR WIRE WHEN YOU COMPLETE YOUR APPLICATION.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 


                                                                              31


<PAGE>

YOUR ACCOUNT


- ------------------------------------
    Buying Shares
- ------------------------------------

> Choose Your Investment Amount

Conseco Fund Group offers a flexible range of minimum investment amounts to
initiate -- or add to -- your investment program.

- --------------------------------------------------------------------------------
   Minimum Investments Per Fund
- --------------------------------------------------------------------------------

   To open an account                                                    $250
- --------------------------------------------------------------------------------
   To make a subsequent investment                                        $50
- --------------------------------------------------------------------------------
   To open a pre-authorized investment plan to
   transfer assets from bank account to Fund                              $50
- --------------------------------------------------------------------------------
   To open a retirement account through salary reduction                  $10
- --------------------------------------------------------------------------------
   Initiate a Dollar Cost Averaging (DCA) Plan
   through Federated Money Market Fund account                         $5,000
- --------------------------------------------------------------------------------
   Transfer assets from DCA Plan to Fund                      $250 each month
- --------------------------------------------------------------------------------


These requirements may be changed or waived at any time at the discretion of the
Funds' officers.


> Dollar Cost Averaging: A Convenient Option

  Through our dollar cost averaging (DCA) program, you can transfer equal
  amounts of money on a regular basis from our Federated Money Market Fund to
  another investment choice.

  If you have at least $5,000 invested in the money market fund, you can
  transfer a minimum of $250 a month into a Conseco Fund. This investment plan
  helps you buy more shares when the market is low and fewer shares when the
  market is high. When you make regular investments of a given amount, you will
  end up investing at different share prices over time. Over time, this can help
  lower the average price you pay per share.

  Of course, dollar cost averaging cannot assure a profit or protect against a
  loss. Additionally, since such a plan involves continuous investment in
  securities regardless of fluctuating price levels, investors should consider
  the financial ability required to continue purchases through periods of low
  price levels.



32


<PAGE>


> Purchases By Check

  To avoid fees and delays, all checks should be drawn only on U.S. banks in
  U.S. funds. A charge may be imposed if any check submitted for investment does
  not clear. Third-party checks will not be accepted. When you purchase shares
  by check, you will not be allowed to redeem the shares until your investment
  has been in the account for 15 business days. The Fund reserves the right to
  cancel any purchase order for which payment has not been received by the third
  business day following placement of the order.

> Electronic Transfers Through Automated Clearing House

  Electronic transfers through Automated Clearing House ("ACH") allow you to
  initiate a purchase or redemption for as little as $50 or as much as $50,000
  between your bank account and Fund account using the ACH network. Initial
  purchase minimums apply.

  You must complete the "ACH" section of the application for this privilege to
  be applicable.

> Pre-Authorized Investment Plan

  You can establish a pre-authorized investment plan where your personal bank
  account is automatically debited and your Fund account is automatically
  credited with additional full and fractional shares ($50 minimum monthly
  investment). For further information on this process, please contact the
  Transfer Agent at 800-986-3384. The minimum investment requirements may be
  waived by the Funds for purchases made using certain programs such as payroll
  deduction plans and retirement plans.





                                                                              33



<PAGE>


YOUR ACCOUNT


- ------------------------------------
    Selling Shares
- ------------------------------------



  Redemption requests should be accompanied by your account number, the exact
  name of your account and your Social Security or taxpayer identification
  number. The Fund will mail a check to your account address or, if you have
  elected the wire redemption privilege, the Fund will wire the proceeds to your
  bank on the following business day.

  You may sell, or redeem, some or all of your shares on any business day by
  doing one of the following.

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
   Through Financial Intermediary    By Telephone                      By Mail
- ----------------------------------------------------------------------------------------------------------
<S>                                 <C>                               <C>
   If you bought your shares         Individual investors may          Financial intermediaries, as well
   through a broker/dealer or        communicate redemption            as institutional and individual
   other financial intermediary,     orders by telephone.              investors, may sell shares by
   you may redeem your shares                                          writing the Funds at the
   by calling them directly.                                           following address:

   Financial intermediaries                                            Conseco Fund Group
   may communicate                                                     P.O. Box 8017
   redemption orders                                                   Boston, Massachusetts
   by wire and telephone.                                              02266-8017

   Important note: Each                                                Redemption certifications
   institution may have                                                and signature guarantees may
   its own procedures and                                              be required.
   requirements for buying
   and selling shares and may
   charge fees. Contact your
   financial professional for
   more information.
</TABLE>

  Redemption orders placed through a financial intermediary will receive the
  next calculated net asset value after the order has been accepted, minus any
  applicable contingent deferred sales charge.

  It is the responsibility of the financial intermediary to forward customer
  redemption orders received prior to the close of the NYSE to the Transfer
  Agent prior to its close of business that same day (normally 4:00 p.m.,
  Eastern Time).

  > More about selling your shares

  Your shares will be sold at the next NAV calculated after your order is
  accepted. Your order will be processed promptly and you will generally receive
  the proceeds within seven business days.

  A Fund may delay payment up to 15 days or longer in the event the check you
  used to purchase shares has not cleared. To shorten this delay, consider
  purchasing your shares by bank wire through Federal Funds.

  Under certain extraordinary circumstances, where the law allows additional
  time, a Fund may suspend the right to redeem shares.



34

<PAGE>


>  Redeeming Class B and C Shares

   Shares acquired through reinvestment of dividends and capital gains
   distributions will be redeemed first, followed by shares held for the longest
   period of time.

   Upon redemption of Class B shares acquired through an exchange, the
   contingent deferred sales charge, if any, will be calculated based on the
   original purchase date of the shares exchanges.

   Upon redemption of Class C shares acquired through an exchange and held less
   than one year, the contingent deferred sales charge, if any, will also be
   calculated based on the original purchase date of the shares exchanged.

   Redemptions By Mail

   Redemption certification is provided on the application. A signature
   guarantee is required for redemptions of $50,000 or more. A signature
   guarantee may be obtained from most banks, brokers and dealers, credit
   unions, savings associations and financial institutions, but not from a
   notary public.

   Redemptions By Wire Or Telephone

   Financial intermediaries may charge for their services in connection with
   your redemption request but neither the Funds nor the Distributor impose any
   such charges.

   Although the Funds and the Transfer Agent will not be responsible for the
   authenticity of telephone instructions, the following procedures have been
   established to confirm that instructions communicated by telephone are
   genuine:

   o Recording telephone instructions for exchanges and expedited redemptions

   o Requiring the caller to give certain specific identifying information

   o Providing written confirmations to shareholders not later than five days
     following a telephone transaction

   If the Funds and the Transfer Agent do not employ these procedures, they may
   be liable for any losses due to unauthorized or fraudulent telephone
   instructions.

   Certain financial intermediaries may be authorized to accept redemption
   orders on behalf of the Funds. A Fund will be deemed to have received a
   redemption order when such a financial intermediary accepts the order.

   Expedited Redemptions

   You may have the payment of redemption requests (of $250 or more) wired or
   mailed directly to a designated domestic commercial bank account. Normally,
   such payments will be transmitted on the second business day following
   receipt of the request.

   For telephone redemptions, call the Transfer Agent at (800) 986-3384. You
   must complete the "Expedited Redemptions" section of the application for this
   privilege to be applicable.


                                                                              35


<PAGE>


YOUR ACCOUNT



- --------------------------------------------
    Additional Shareholder Services
- --------------------------------------------



>  Systematic Withdrawal Plan

   This plan may be used for routine payments to you or a designated party.

   If you reinvest your distributions, you can have regular monthly or quarterly
   payments withdrawn, at no charge, in excess of $50, as long as the account
   has a value of at least $5,000.

   To elect this plan, simply complete the appropriate section on the
   application. Redemptions are normally processed on or about the 25th day of
   each month or quarter. Checks are then mailed on or about the first of the
   following month.

   Changing or terminating your plan is easy. Simply give written notice to the
   Transfer Agent.

>  Exchange Privilege

   You may exchange shares of one Conseco Fund for shares of the same class of
   any other Fund, or for shares of the Federated Money Market Fund, without
   paying an additional sales charge.

   The value of shares to be exchanged must meet the fund's minimum investment
   requirement.

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
   CLASS A SHARES An initial sales charge for Class A shares, if applicable,
   will be made on exchanges from the Federated Money Market Fund to a Fund's
   Class A shares.

   CLASS B AND C SHARES Although a contingent deferred sales charge (CDSC) is
   not charged upon an exchange to another fund or Federated Money Market Fund
   within the same class of shares, a CDSC may be applied on redemptions from
   the Federated Money Market Fund based on the original purchase date of the
   Class B or Class C shares exchanged.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

   Shares from the Federated Money Market Fund may be exchanged back to the
   originating Class f shares without any additional charges. In the case of
   Class B and C shares, a contingent deferred sales charge (CDSC) may be
   applied on subsequent redemptions from any fund based on the original
   purchase date of the shares.

   Normally, exchanges can be completed on the same business day.

   Reinstatement Privilege

   You may reinstate your investment by reinvesting any or all of your
   redemption proceeds within 180 calendar days.

   o  Reinvest redemptions from Class A shares at net asset value without any
      initial sales charge.

   o  Reinvest redemptions from your Class B or Class C shares and you will be
      reimbursed pro rata for the contingent deferred sales charge paid

   The reinstatement privilege may be utilized only once per Fund investment and
   may be subject to other restrictions.

   > Record-Keeping Made Easy

   You will receive a confirmation of each new transaction in your account. You
   may rely on these confirmations in lieu of certificates, which will not be
   issued, as evidence of your ownership.


36


<PAGE>


- --------------------------------------------
    Dividends and Distributions
- --------------------------------------------


   Each Fund distributes at least 90% of its net investment income to
   shareholders.

   Net investment income for all of the Funds consists of all dividends and
   interest received, less expenses (including fees payable to the Adviser and
   its affiliates).

   Dividends from net investment income are declared, and paid, by each Fund
   according to the schedule below. The Trustees may elect to change dividend
   distribution intervals.

SCHEDULE OF DIVIDEND PAYMENTS
- --------------------------------------------------------------------------------
   Fund                                                 Declared and Paid
- --------------------------------------------------------------------------------

   Conseco Fixed Income Fund                            Monthly
- --------------------------------------------------------------------------------
   Conseco High Yield Fund                              Monthly
- --------------------------------------------------------------------------------
   Conseco Convertible Securities Fund                  Monthly
- --------------------------------------------------------------------------------
   Conseco Balanced Fund                                Quarterly
- --------------------------------------------------------------------------------
   Conseco Equity Fund                                  Quarterly
- --------------------------------------------------------------------------------
   Conseco 20 Fund                                      Quarterly
- --------------------------------------------------------------------------------

   Any capital gains are generally declared and distributed to shareholders
   annually after the close of the Fund's fiscal year. These include net capital
   gains (the excess of net long-term capital gain over net short-term capital
   loss), net short-term capital gains, and net realized gains from foreign
   currency transactions.

   Dividends and other distributions paid on each class of shares of a Fund are
   calculated at the same time and in the same manner. Dividends on each class
   might be affected differently by the allocation of other class-specific
   expenses.

>  Choose How To Use Your Distributions

   Conseco Fund Group offers you a number of ways to receive your distributions.
   When you open your account, simply specify on your application any one of the
   options that meets your needs.

   Keep in mind, all Fund distributions are reinvested for retirement accounts
   unless specific circumstances are met. Call the Funds at 800-986-3384 for
   further information.

>  Here Are Your Options

   o  REINVEST ALL DISTRIBUTIONS in additional Fund shares.

   o  REINVEST ONLY INCOME DIVIDENDS in additional Fund shares. Receive other
      distributions in cash.

   o  REINVEST ONLY OTHER DISTRIBUTIONS in additional Fund shares. Receive
      income dividends in cash.

   o  RECEIVE ALL DISTRIBUTIONS IN CASH. Distributions can be sent via check
      to you, or by wire to your bank account.


                                                                              37


<PAGE>

YOUR ACCOUNT



- --------------------------------------------
    Tax Considerations
- --------------------------------------------


   Your investment in a Fund has tax consequences that you need to consider. The
   amount you will owe in taxes will vary depending on many factors, such as
   your tax bracket, how long you held your shares, and whether you owe
   alternative minimum tax. Some of the more common federal tax consequences are
   described here, but you should consult your tax adviser about your own
   situation. (See the Statement of Additional Information for more
   information.)

   Taxable Distributions

   You will generally have to pay federal income tax on all Fund distributions.

   Except for tax-advantaged retirement accounts, dividends from the Funds'
   taxable income generally will be taxable to you as ordinary income, whether
   paid in cash or reinvested in additional shares.

   Capital gains distributions, whether paid in cash or reinvested in additional
   shares, will be taxable to you, regardless of how long you have held your
   Fund shares. When designated as such, short-term gains are treated as
   ordinary income. Long-term gains are taxed as long-term capital gains
   regardless of how long the fund shares have been held.

   Income distributions and short-term capital gain distributions are generally
   taxed as ordinary income. Distributions of other capital gains are generally
   taxed as long-term capital gains. The tax treatment of capital gain
   distributions depends on how long the Fund held the securities it sold, not
   when you bought your shares of the fund, or whether you reinvested your
   distributions.

   Taxes on Sales or Exchanges

   Selling your shares may result in a taxable gain or loss to you, depending on
   whether you receive more or less than what the shares cost you.

   Share exchanges, from one Fund to another within the same share class,
   generally will have the same tax consequences as if those shares had been
   sold.

   No gain or loss will be triggered as a result of the automatic conversion of
   Class B shares into Class A shares.

   Backup Withholding

   When sending in your application, it's important to provide your Social
   Security or other taxpayer ID number. If we don't have this number, or if the
   IRS informs us that you are subject to backup withholding, the IRS requires
   the Fund to withhold 31% of all money you receive from the Fund, whether from
   selling your shares or from distributions.


38


<PAGE>


- --------------------------------------------
    Distribution And Service Plans
- --------------------------------------------

   The Funds have adopted Distribution and Service Plans (12b-1 Plan) for Class
   A, B and C shares to compensate the Distributor, Conseco Equity Sales, Inc.,
   for distributing the shares and servicing the accounts of shareholders of
   each such class. The following chart provides the fees paid for the
   respective share classes. Because these distributions and service fees are
   paid out of each share Class' assets on an ongoing basis, over time these
   fees will increase the cost of your investment and may cost you more than
   paying other types of sales charges.

<TABLE>
<CAPTION>

- ----------------------------------------------------------------------------------------------------------
   Class A Shares                                         Class B and Class C Shares
- ----------------------------------------------------------------------------------------------------------
<S>                                                      <C>
   For all the Funds, excluding the Conseco               Fees paid to the Distributor may not be more
   Fixed Income Fund, fees paid to the                    than 1.00% annually of each Fund's average
   Distributor may be no more than 0.50%                  daily net assets attributable to these classes.
   annually of the average daily net assets
   attributable to Class A shares.

   For the Conseco Fixed Income Fund, fees
   paid to the Distributor may be no more than
   0.65% annually of the average daily net
   assets attributable to Class A shares.
</TABLE>

   Payments also may be made by the Distributor to brokers, dealers and other
   financial intermediaries for providing shareholder services and for
   promotional and other sales-related costs for each of the share classes.
   However, the portion of these payments for shareholder servicing may not
   exceed an annual rate of .25% of the average daily net asset value
   attributable to the class of shares owned by the financial intermediary's
   clients.

<TABLE>
<CAPTION>
   PAYMENTS TO FINANCIAL INTERMEDIARIES
- ---------------------------------------------------------------------------------------------------------
   Class A Shares                    Class B Shares                    Class C Shares
- ---------------------------------------------------------------------------------------------------------
<S>       `                         <C>                               <C>
   The sales charge you pay on       Since these shares are            Since these shares are
   the purchase of Class A shares    sold without sales charges,       sold without sales charges,
   may be retained by the selling    the Distributor provides          the Distributor provides
   broker, dealer or financial       compensation to brokers,          compensation to brokers,
   intermediary.                     dealers and financial             dealers and financial
                                     intermediaries from               intermediaries from
                                     its own assets.                   its own assets.

                                     This compensation is equal        This compensation is equal
                                     to 4% of the purchase             to 1% of the purchase
                                     amount.                           amount.

                                     The proceeds from the 
                                     contingent deferred sales
                                     charge and the 12b-1 fee,
                                     in part, are used to
                                     defray these expenses.
</TABLE>



                                                                              39


<PAGE>


YOUR ACCOUNT



- --------------------------------------------
    Administrative Fees
- --------------------------------------------


   The following chart provides an explanation of services provided by Conseco
   Services, LLC (the Funds' "Administrator") and the fees paid for such
   services.


   -----------------------------------------------------------------------------
   All Funds
   -----------------------------------------------------------------------------

       Services provided include:

       o  Supervising the preparation and filing of all documents required for
          Fund compliance

       o  Supervising the maintenance of books and records

       o  Other general and administrative responsibilities


   For such services, the Administrator receives a fee of .20% annually of each
   Fund's average daily net assets.






40



<PAGE>


FINANCIAL HIGHLIGHTS



- --------------------------------------------
    Financial Highlights
- --------------------------------------------


      The financial highlights table is intended to help you understand a Fund's
      financial performance for the past five years (or, if shorter, the period
      of the Fund's operations). Certain information reflects financial results
      for a single Fund share. The total returns in the table represent the rate
      that an investor would have earned (or lost) on an investment in each Fund
      (assuming reinvestment of all dividends and distributions). This
      information has been audited by PricewaterhouseCoopers, LLC, whose report,
      along with the Funds' financial statements, is included in the Funds'
      annual report, which is available upon request.





                                                                              41


<PAGE>


FINANCIAL HIGHLIGHTS

Class A Shares

Financial Highlights December 31, 1998

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                          Conseco                   Conseco                  Conseco
                                                       Fixed Income                High Yield               Convertible
                                                           Fund                      Fund                 Securities Fund
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                              For the
                                                                                                            period from
                                                                                                            commencement
                                                                                                           of operations
                                                                                                        (September 28, 1998
                                                         Year Ended                Year Ended                  through
CLASS A SHARES                                       1998           1997              1998               December 31, 1998)
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<S>                                             <C>             <C>               <C>                       <C>                  
Net asset value per share, beginning of period   $  10.13        $  10.00          $  10.00                  $  10.00
Income from investment operations (a):
     Net investment income (loss)                    0.55            0.66              0.76                      0.10
     Net realized gains (losses) and change in
          unrealized appreciation (depreciation)
          on investments                             0.20            0.18             (0.10)                     1.00
- --------------------------------------------------------------------------------------------------------------------------------
     Total income from investment operations         0.75            0.84              0.66                      1.10
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:
- --------------------------------------------------------------------------------------------------------------------------------
     Dividends from net investment income           (0.55)          (0.58)            (0.66)                    (0.10)

     Distribution of net capital gains              (0.12)          (0.13)               --                        --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions                                 (0.67)          (0.71)            (0.66)                    (0.10)
- --------------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period    $  10.21        $  10.13          $  10.00                  $  11.00
=================================================================================================================================
Total return (b) (c)                                 7.57%           8.66%             6.56%                    11.04% (d)
=================================================================================================================================
Ratios/supplemental data:
     Net assets (dollars in thousands),
          end of period                          $ 30,684        $    153          $ 28,199                  $ 27,611
     Ratio of expenses to average ner assets (b)     1.25%           1.25%             1.40%                     1.55%
     Ratio of net investment income (loss)
        to average net assets (annualized) (b)       5.28%           5.51%             7.76%                     3.80%
</TABLE>



(a) PER SHARE AMOUNTS PRESENTED ARE BASED ON AN AVERAGE OF MONTHLY SHARES
    OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

(a) THE ADVISOR, ADMINISTRATOR AND DISTRIBUTOR HAVE VOLUNTARILY AGREED TO WAIVE
    THEIR FEES AND/OR REIMBURSE FUND EXPENSES TO THE EXTENT THAT THE RATIO OF
    EXPENSES TO AVERAGE NET ASSETS EXCEEDS ON AN ANNUAL BASIS 1.25% FOR THE
    CONSECO FIXED INCOME, 1.40% FOR THE CONSECO HIGH YIELD, 1.55% FOR THE
    CONSECO CONVERTIBLE SECURITIES, 1.50% FOR THE CONSECO BALANCED AND CONSECO
    EQUITY AND 1.75% FOR THE CONSECO 20 FUNDS. THESE LIMITS MAY BE DISCONTINUED
    BY THE ADVISOR, ADMINISTRATOR AND DISTRIBUTOR AT ANY TIME AFTER APRIL 30,
    1999. IF THE AFOREMENTIONED AGREEMENTS HAD NOT BEEN IN EFFECT DURING THE
    PERIOD, THE ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
    BEEN 1.94% FOR THE CONSECO FIXED INCOME, 2.12% FOR THE CONSECO HIGH YIELD,
    2.12% FOR THE CONSECO CONVERTIBLE SECURITIES, 2.26% FOR THE CONSECO
    BALANCED, 2.10% FOR THE CONSECO EQUITY AND 2.15% FOR THE CONSECO 20 FUNDS.
    IF THE AFOREMENTIONED AGREEMENTS HAD NOT BEEN IN EFFECT FOR THE YEAR ENDED
    DECEMBER 31, 1997, THE ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS
    WOULD HAVE BEEN 13.67 % FOR THE CONSECO FIXED INCOME, 12.44 % FOR THE
    CONSECO BALANCED AND 4.85 % FOR THE CONSECO EQUITY FUNDS.

(c) TOTAL RETURN FIGURES DO NOT INCLUDE SALES LOADS; RESULTS WOULD BE LOWER IF
    SALES CHARGES WERE INCLUDED.

(d) NOT ANNUALIZED



42


<PAGE>

Financial Highlights December 31, 1998 (Cont.)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                          Conseco                       Conseco                        Conseco
                                                          Balanced                      Equity                           20
                                                           Fund                          Fund                           Fund
- --------------------------------------------------------------------------------------------------------------------------------
                                                         Year Ended                     Year Ended                   Year Ended
CLASS A SHARES                                      1998           1997            1998          1997                   1998
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . .
<S>                                             <C>             <C>            <C>             <C>                  <C>     
Net asset value per share, beginning of period   $  10.73        $  10.00       $ 11.07         $ 10.00              $  10.00
Income from investment operations (a):
     Net investment income (loss)                    0.30            0.28            --           (0.04)                (0.02)
     Net realized gains (losses) and change in
          unrealized appreciation (depreciation)
          on investments                             1.03            1.43          1.79            2.33                  2.82
- --------------------------------------------------------------------------------------------------------------------------------
     Total income from investment operations         1.33            1.71          1.79            2.29                  2.80
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:

     Dividends from net investment income           (0.24))         (0.27)        (0.01)             --                    --

     Distribution of net capital gains              (0.13)          (0.71)        (0.30)          (1.22)                   --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions                                 (0.37)          (0.98)        (0.31)          (1.22)                   --
- --------------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period    $  11.69        $  10.73       $ 12.55         $ 11.07              $  12.80
================================================================================================================================
Total return (b) (c)                                12.45%          17.19%        16.11%          22.90%                28.00%
================================================================================================================================
Ratios/supplemental data:
     Net assets (dollars in thousands),
          end of period                           $26,064          $1,076      $ 26,203         $ 4,877              $ 33,845
     Ratio of expenses to average ner assets (b)     1.55%           1.50%         1.50%           1.50%                 1.75%
     Ratio of net investment income (loss)
         to average net assets (annualized) (b)      2.66%           2.50%           --           (0.35%)               (0.22%)

</TABLE>


                                                                              43


<PAGE>

FINANCIAL HIGHLIGHTS


- ------------------------------------------------
    Class B Shares
- ------------------------------------------------


Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
                                                       Conseco              Conseco                    Conseco
                                                    Fixed Income           High Yield                Convertible
                                                        Fund                  Fund                  Securities Fund
- ----------------------------------------------------------------------------------------------------------------------------
                                                 For the period from   For the period from       For the period from
                                                    commencement          commencement               commencement
                                                    of operations         of operations             of operations
                                                 (March 20, 1998)       (February 19, 1998)     (September 28, 1998)
                                                      through                through                   through
CLASS B SHARES                                    December 31, 1998     December 31, 1998         December 31, 1998
<S>                                                 <C>                   <C>                       <C>  
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 
Net asset value per share, beginning of period      $   10.24             $   10.44                 $   10.00

Income from investment operations (a):
 
    Net investment income (loss)                         0.36                  0.60                      0.08

     Net realized gains (losses) and change in
       unrealized appreciation (depreciation)
       on investments                                    0.14                 (0.48)                     1.00
- ----------------------------------------------------------------------------------------------------------------------------
     Total income from investment operations             0.50                  0.12                      1.08
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:

     Dividends from net investment income               (0.45)                (0.59)                    (0.08)

     Distribution of net capital gains                  (0.10)                  --                         --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions                                     (0.55)                (0.59)                    (0.08)
- ----------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period       $   10.19             $    9.97                 $   11.00
============================================================================================================================
Total return (b) (c) (d)                                 4.97%                 1.12%                    10.89%
============================================================================================================================
Ratios/supplemental data:
     Net assets (dollars in thousands),
       end of period                                $   2,619              $ 11,271                  $      1
     Ratio of expenses to average net assets (b)         1.60%                 1.90%                     2.05%
     Ratio of net investment income (loss)
       to average net assets (annualized) (b)            4.83%                 7.27%                     3.02%
</TABLE>



(a) PER SHARE AMOUNTS PRESENTED ARE BASED ON AN AVERAGE OF MONTHLY SHARES
    OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

(b) THE ADVISOR, ADMINISTRATOR AND DISTRIBUTOR HAVE VOLUNTARILY AGREED TO WAIVE
    THEIR FEES AND/OR REIMBURSE FUND EXPENSES TO THE EXTENT THAT THE RATIO OF
    EXPENSES TO AVERAGE NET ASSETS EXCEEDS ON AN ANNUAL BASIS 1.60% FOR THE
    CONSECO FIXED INCOME, 1.90% FOR THE CONSECO HIGH YIELD, 2.05% FOR THE
    CONSECO CONVERTIBLE SECURITIES, 2.00% FOR THE CONSECO BALANCED AND CONSECO
    EQUITY AND 2.25% FOR THE CONSECO 20 FUNDS. THESE LIMITS MAY BE DISCONTINUED
    BY THE ADVISOR, ADMINISTRATOR AND DISTRIBUTOR AT ANY TIME AFTER APRIL 30,
    1999. IF THE AFOREMENTIONED AGREEMENTS HAD NOT BEEN IN EFFECT DURING THE
    PERIOD, THE ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE
    BEEN 2.77% FOR THE CONSECO FIXED INCOME, 2.75% FOR THE CONSECO HIGH YIELD,
    154.76% FOR THE CONSECO CONVERTIBLE SECURITIES, 3.93% FOR THE CONSECO
    BALANCED, 4.85% FOR THE CONSECO EQUITY AND 2.73% FOR THE CONSECO 20 FUNDS.

(c) TOTAL RETURN FIGURES DO NOT INCLUDE SALES LOADS; RESULTS WOULD BE LOWER IF
    SALES CHARGES WERE INCLUDED.

(d) NOT ANNUALIZED.


44


<PAGE>


Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                       Conseco                    Conseco                  Conseco
                                                       Balanced                    Equity                     20
                                                         Fund                       Fund                     Fund
- --------------------------------------------------------------------------------------------------------------------------------
                                                  For the period from         For the period from     For the period from
                                                     commencement                commencement            commencement
                                                     of operations               of operations           of operations
                                                  (February 10, 1998)         (January 28, 1998)      (February 18, 1998)
                                                        through                     through                 through
CLASS B SHARES                                     December 31, 1998           December 31, 1998       December 31, 1998
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . .
<S>                                                 <C>                         <C>                      <C>     
Net asset value per share, beginning of period       $   11.20                   $   11.09                $  11.21

Income from investment operations (a):

     Net investment income (loss)                         0.19                       (0.06)                  (0.07)

     Net realized gains (losses) and change in
       unrealized appreciation (depreciation)
       on investments                                     0.57                        1.75                    1.57
- --------------------------------------------------------------------------------------------------------------------------------
     Total income from investment operations              0.76                        1.69                    1.50
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:

     Dividends from net investment income                (0.22)                      (0.01)                     --

     Distribution of net capital gains                   (0.13)                      (0.30)                     --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions                                      (0.35)                      (0.31)                     --
- --------------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period        $   11.61                   $   12.47                $  12.71
================================================================================================================================
Total return (b) (c) (d)                                  6.83%                      15.20%                  13.38%
================================================================================================================================
Ratios/supplemental data:

     Net assets (dollars in thousands),
          end of period                              $   1,301                    $   1,634                $ 7,270
     Ratio of expenses to average net assets (b)          2.00%                        2.00%                  2.25%

     Ratio of net investment income (loss)
          to average net assets (annualized) (b)          2.09%                       (0.60%)                (0.78%)

</TABLE>

45


<PAGE>

FINANCIAL HIGHLIGHTS


- ---------------------------------------------------
    Class C Shares
- ---------------------------------------------------

Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
                                                      Conseco                 Conseco                    Conseco
                                                    Fixed Income             High Yield                Convertible
                                                        Fund                    Fund                       Fund
- ----------------------------------------------------------------------------------------------------------------------------
                                                   For the period from     For the period from      For the period from
                                                      commencement            commencement             commencement
                                                    of operations           of operations            of operations
                                                    (March 5, 1998)       (February 19, 1998)    (September 28, 1998)
                                                        through                 through                  through
CLASS C SHARES                                      December 31, 1998       December 31, 1998        December 31, 1998
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 
<S>                                                  <C>                     <C>                       <C>
Net asset value per share, beginning of period        $   10.13               $   10.44                 $  10.00

Income from investment operations (a):

     Net investment income (loss)                          0.38                    0.59                     0.08

     Net realized gains (losses) and change in
       unrealized appreciation (depreciation)
       on investments                                      0.26                   (0.50)                    1.00
- ----------------------------------------------------------------------------------------------------------------------------
       Total income from investment operations             0.64                    0.09                     1.08
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:

     Dividends from net investment income                 (0.44)                  (0.58)                   (0.08)

     Distribution of net capital gains                    (0.10)                    --                        --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions                                       (0.54)                  (0.58)                   (0.08)
- ----------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period         $   10.23               $    9.95                 $  11.00
============================================================================================================================
Total return (b) (c) (d)                                   6.44%                   0.88%                   10.89%
============================================================================================================================
Ratios/supplemental data:

     Net assets (dollars in thousands),
       end of period                                 $      539               $   3,685                 $      1

     Ratio of expenses to average net assets (b)           1.60%                   1.90%                    2.05%

     Ratio of net investment income (loss)
       to average net assets (annualized) (b)              4.98%                   7.22%                    3.02%
</TABLE>




FOR INFORMATION ON THE CONSECO INTERNATIONAL FUND, PLEASE REFER TO PAGES 54, 55

(a) PER SHARE AMOUNTS PRESENTED ARE BASED ON AN AVERAGE OF MONTHLY SHARES
OUTSTANDING THROUGHOUT THE PERIODS INDICATED.

(b) THE ADVISOR, ADMINISTRATOR AND DISTRIBUTOR HAVE VOLUNTARILY AGREED TO WAIVE
THEIR FEES AND/OR REIMBURSE FUND EXPENSES TO THE EXTENT THAT THE RATIO OF
EXPENSES TO AVERAGE NET ASSETS EXCEEDS ON AN ANNUAL BASIS 1.60% FOR THE CONSECO
FIXED INCOME, 1.90% FOR THE CONSECO HIGH YIELD, 2.05% FOR THE CONSECO
CONVERTIBLE SECURITIES, 2.00% FOR THE CONSECO BALANCED AND CONSECO EQUITY AND
2.25% FOR THE CONSECO 20 FUNDS. THESE LIMITS MAY BE DISCONTINUED BY THE ADVISOR,
ADMINISTRATOR AND DISTRIBUTOR AT ANY TIME AFTER APRIL 30, 1999. IF THE
AFOREMENTIONED AGREEMENTS HAD NOT BEEN IN EFFECT DURING THE PERIOD, THE
ANNUALIZED RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD HAVE BEEN 5.91% FOR THE
CONSECO FIXED INCOME, 3.03% FOR THE CONSECO HIGH YIELD, 154.76% FOR THE CONSECO
CONVERTIBLE SECURITIES, 3.40% FOR THE CONSECO BALANCED, 8.51% FOR THE CONSECO
EQUITY AND 2.72% FOR THE CONSECO 20 FUNDS.

(c) TOTAL RETURN FIGURES DO NOT INCLUDE SALES LOADS; RESULTS WOULD BE LOWER IF
SALES CHARGES WERE INCLUDED.

(d) NOT ANNUALIZED.


46


<PAGE>


Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                     Conseco                  Conseco                Conseco
                                                     Balanced                  Equity                   20
                                                       Fund                     Fund                   Fund
- --------------------------------------------------------------------------------------------------------------------------------
                                                For the period from      For the period from    For the period from
                                                   commencement             commencement           commencement
                                                   of operations            of operations         of operations
                                                (February 13, 1998)      (February 19, 1998)     (March 10, 1998)
                                                      through                  through                through
CLASS C SHARES                                   December 31, 1998        December 31, 1998      December 31, 1998
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 
<S>                                             <C>                     <C>                       <C>

Net asset value per share, beginning of period   $     11.31             $      11.98            $     11.82

Income from investment operations (a):

     Net investment income (loss)                       0.20                    (0.06)                 (0.07)

     Net realized gains (losses) and change in
       unrealized appreciation (depreciation)
       on investments                                   0.48                     0.93                   1.00
- --------------------------------------------------------------------------------------------------------------------------------
     Total income from investment operations            0.68                     0.87                   0.93
- --------------------------------------------------------------------------------------------------------------------------------
Distributions:

     Dividends from net investment income              (0.20)                   (0.01)                    --

     Distribution of net capital gains                 (0.13)                   (0.30)                    --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions                                    (0.33)                   (0.31)                    --
- --------------------------------------------------------------------------------------------------------------------------------
     Net asset value per share, end of period    $     11.66             $      12.54            $     12.75
================================================================================================================================
Total return (b) (c) (d)                                6.10%                    7.21%                  7.87%
================================================================================================================================
Ratios/supplemental data:

     Net assets (dollars in thousands),
         end of period                           $      1,197            $        616            $     2,982

     Ratio of expenses to average net assets (b)        2.00%                    2.00%                  2.25%
 
    Ratio of net investment income (loss)
       to average net assets (annualized) (b)           2.08%                   (0.68%)                (0.81%)
</TABLE>


                                                                              47
                                                                               
                                                                               
<PAGE>

FINANCIAL HIGHLIGHTS


- ---------------------------------------------------
    Class A, B and C Shares
- ---------------------------------------------------

Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
                                                           Conseco                  Conseco             Conseco
                                                        Fixed Income              High Yield          Convertible
                                                           Fund                      Fund           Securities Fund
- ---------------------------------------------------------------------------------------------------------------------
                                                          Year Ended               Year Ended        Period Ended
SUPPLEMENTAL DATA FOR ALL CLASSES                      1998       1997                1998              1998(a)
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .  . . . . . . . . . . . 
<S>                                             <C>             <C>               <C>                <C>

Net asset value (dollars in thousands),
     end of period                               $  48,245      $  22,029          $ 44,392           $ 27,614

Portfolio turnover rate                             420.83%        367.82%           432.08%             12.95%
</TABLE>





(a) FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS (SEPTEMBER 28, 1998) THROUGH
DECEMBER 31, 1998.




48

<PAGE>

Financial Highlights December 31, 1998 (cont.)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
                                                         Conseco                       Conseco                        Conseco
                                                         Balanced                       Equity                           20
                                                           Fund                          Fund                           Fund
- --------------------------------------------------------------------------------------------------------------------------------
                                                         Year Ended                    Year Ended                    Year Ended
                                                    1998           1997            1998          1997                   1998
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<S>                                             <C>            <C>             <C>            <C>                     <C>
Net asset value (dollars in thousands),
     end of period                               $  32,700      $  13,113       $89,270        $65,211                 $44,269
Portfolio turnover rate                            341.20%         506.64%       350.13%        199.12%                 411.71%


</TABLE>




                                                                              49



<PAGE>

CONSECO FUND GROUP




                       This page intentionally left blank.

<PAGE>

New Account Application
Class A, B & C Shares

Conseco Fixed Income Fund                                      [LOGO]
Conseco High Yield Fund                                      CONSECO(R)
Conseco Convertible Securities Fund                          Step up.(TM)
Conseco Balanced Fund
Conseco Equity Fund
Conseco 20 Fund
- --------------------------------------------------------------------------------
1 REGISTRATION     [  ] Individual Account

                   [  ] Joint Tenant With Rights of Survivorship - WILL BE
                        REGISTERED IN CASE OF TWO OR MORE SHAREHOLDERS UNLESS
                        OTHERWISE SPECIFIED.

                   [  ] Tenants in Common - WILL BE REGISTERED IN CASE OF TWO OR
                        MORE SHAREHOLDERS WHEN THE SHAREHOLDER RESIDES IN LA,
                        TX, OR TN UNLESS OTHERWISE SPECIFIED.

                   [  ] Uniform Transfers or Gifts to Minors Acts (UTMA or
                        UGMA)-USE THE NAME OF THE ADULT CUSTODIAN ON THE
                        SHAREHOLDER LINE AND THE NAME OF THE CHILD ON THE
                        CO-SHAREHOLDER LINE. USE THE CHILDS SOCIAL SECURITY
                        NUMBER IN SECTION 3.

                   [  ] Trust Accounts - PLEASE INDICATE THE NAME(S) OF THE
                        TRUSTEE(S) AUTHORIZED TO ACT ON BEHALF OF THE TRUST ON
                        THE SHAREHOLDER LINE AND THE NAME OF THE TRUST AND DATE
                        OF THE TRUST ON THE CO-SHAREHOLDER LINE. (IF MORE THAN
                        ONE TRUSTEE IS NAMED, ALL MUST ACT UNLESS OTHERWISE
                        INDICATED.)

                   [  ] Corporations, Businesses, or Other Entities - PLEASE
                        INDICATE THE NAME OF THE ORGANIZATION ON THE SHAREHOLDER
                        LINE.

                   [  ] Retirement Plans - PLEASE INDICATED THE NAME(S) OF THE
                        TRUSTEE(S) ON THE SHAREHOLDER LINE AND THE NAME OF THE
                        RETIREMENT PLAN ON THE CO-SHAREHOLDER LINE. (IF MORE
                        THAN ONE TRUSTEE IS NAMED, ALL MUST ACT UNLESS OTHERWISE
                        INDICATED.)
<TABLE>
<CAPTION>
                   --------------------------------------------------------------------------------------------------------
                   Shareholder Name (First, MI, Last)                Date of Birth (Month/Day/Year)
<S>                <C> 
                   --------------------------------------------------------------------------------------------------------
                   Co-Shareholder Name (First, MI, Last)             Date of Birth (Month/Day/Year)
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2   MAILING
    ADDRESS        --------------------------------------------------------------------------------------------------------
                   Street Address

                   --------------------------------------------------------------------------------------------------------
                   City                                        State                            Zip Code

                   --------------------------------------------------------------------------------------------------------
                   Daytime Telephone Number                          Fax Number
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3   TAXPAYER               --            --                                                         --
    ID NUMBER      --------------------------------------------------------------------------------------------------------
                   Social Security Number                                              Tax Payer Identification Number

                  If the account has more than one name, provide the social security number of the actual owner of the
                  account, or, if a joint account, the first person listed. For custodial accounts, provide the social
                  security number of the minor.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
                                                               Initial                                         Initial
4  PURCHASE       Minimum initial investment        Shares    Investment                            Shares    Investment
   OF SHARES      per fund: $250                  A    B    C   Amount                            A    B    C   Amount
                  Conseco Fixed Income Fund      [  ] [  ] [  ] $______  Conseco Equity Fund     [  ] [  ] [  ] $______
                                                 0513 0586 0589                                  0511 0079 0574

                  Conseco High Yield Fund        [  ] [  ] [  ] $______  Conseco 20 Fund         [  ] [  ] [  ] $______
                                                 0428 0429 0430                                  0592 0593 0595

                  Conseco Convertible            [  ] [  ] [  ] $______  Federated Money         [  ]           $______
                  Securities Fund                0425 0426 0439          Market Fund             0514

                  Conseco Balanced Fund          [  ] [  ] [  ] $______ 
                                                 0512 0579 0582
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                 I understand that through accumulated investments I can reduce my sales charges on Class A shares. I
                 plan to invest over a 13- month period in Class A shares of one or more of the portfolios of the
                 Conseco Fund Group in an aggregate amount of at least:

5 LETTER OF      [  ] $50,000         [  ] $100,000         [  ] $250,000         [  ] $500,000
INTENT/          Part of my shares will be held in escrow. If I do not invest the amount indicated, you can redeem the
RIGHT OF         escrowed shares to satisfy the sales charge.
ACCUMULATION     I own class A shares of one or more portfolios in the Conseco Fund Group or a Conseco Variable Insurance
OPTION           Company variable annuity contract, which may entitle me to a reduced sales charge.

                 ----------------------------------------------------------------------------------------------------------
                 Account or Contract Number
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>              <C>
6 EXCHANGE/      You can use the telephone to purchase, exchange, or redeem fund shares among identically registered
  PURCHASE/      accounts unless you indicate otherwise below:
  REDEMPTION     [  ] I do not want telephone exchange, purchase or redemption privileges.
  OF SHARES
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 DISTRIBUTION   Your dividends and capital gains WILL BE REINVESTED in their respective funds. If you wish to receive 
  OPTIONS        them in cash, please check the appropriate box(es):

                                                 Dividends  Capital Gains                              Dividends   Capital Gains
                 Conseco Fixed Income Fund       [  ]       [  ]           Conseco Balanced Fund       [  ]        [  ]
                 Conseco High Yield Fund         [  ]       [  ]           Conseco Equity Fund         [  ]        [  ]
                 Conseco Convertible             [  ]       [  ]           Conseco 20 Fund             [  ]        [  ]
                 Securities Fund

 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 WIRE/
  ELECTRONIC     You may purchase or redeem fund shares by simply calling a Conseco Fund Group service representative.
  TRANSFER       Your transaction will be processed by electronically moving money between your bank and mutual fund
  OPTIONS        accounts. Transfers can only be made when you initiate them and are made through the Automatic Clearing
                 House (ACH) network or by wire. To initiate transfers by phone, please be sure that you do not decline
                 the phone redemption service in Section 6.

                 [  ] I authorize this service, and have attached a voided check or deposit slip.

                 Any co-owner of your bank account who is NOT a co-owner of your fund account must sign below to authorize
                 this service.

                 ----------------------------------------------------    --------------------------------------------------
                 Signature of Co-Owner                                    Signature of Co-Owner
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 AUTOMATIC      You may begin your initial investment program into a portfolio with a minimum automatic investment of
 INVESTMENT      $50 per fund per month.
 PROGRAM (ACH)   Transfer $______________  from my bank account to _________________________________________(fund name)
                 [  ] monthly, [  ] quarterly, [  ] semi-annually, or [  ] annually, to my Conseco account as set forth
                 in the prospectus, starting in (month) on the day of each month (must be between 3rd and 28th).

                 [  ] I authorize this service, and have attached a voided check or deposit slip.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 SYSTEMATIC    Please withdraw ($50 minimum per withdrawal) $______________  [  ] monthly, [  ] quarterly, [  ] semi-annually, or
   WITHDRAWAL/   [  ] annually, from my Conseco account as set forth in the prospectus, starting in __________ (month). The
   EXCHANGE PLAN value of the account must be at least $5,000 at the time the plan is established.

                 Send all proceeds to q another Conseco Fund, Account # ______________, [  ] address of record,
                 [  ] bank account as referenced in attached voided check or deposit slip, OR [  ] the following individual/
                 location:

                 ----------------------------------------------------------------------------------------------------------
                 Name or Location                                        Address

                 [  ] I authorize this service, and have attached a voided check or deposit slip if needed.
 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 Broker/
   Dealer        ----------------------------------------------------    --------------------------------------------------
   Information   Dealer                                                  Rep Name/Number

                 ----------------------------------------------------------------------------------------------------------
                 Office                                                  Authorized Signature

By signing this form, I certify that I have received, read and agree to the terms of the prospectus for the Fund(s) in
which I am investing. I have the authority and legal capacity to purchase mutual fund shares, am of legal age in my
state, and believe each investment is suitable for me.

I authorize Conseco Fund Group and their affiliates and agents to act on any instructions believed to be genuine for any
service authorized on this form, including telephone purchase, redemption and exchange. Conseco Fund Group uses
reasonable procedures (including shareholder identity verification) to confirm that instructions given by telephone are
genuine. If these procedures are not followed, it is the opinion of certain regulatory agencies that Conseco Fund Group
may not be liable for any loss that may result from acting on instructions given. I understand that anyone can make
phone purchase, redemptions, or exchanges on my behalf and that redemption checks will be sent to the owner(s) shown in
Section 1 at the address shown in Section 2.

Conseco Fund Group can redeem shares from my account(s) to reimburse a Fund for any loss due to nonpayment or other
indebtedness.

Under penalty of perjury, I am NOT currently subject to IRS backup withholding because (1) I have not been notified or
(2) notification has been revoked. (Cross out "NOT" if you are currently subject to IRS backup withholding.)

Under penalty of perjury, the Social Security or Tax Identification number(s) given are correct. If I fail to give the
correct number or sign this form, Conseco Fund Group may reject, restrict or redeem my investment. If I fail to give the
correct number or sign this form, I may be subject to an IRS backup withholding of 31% of all distributions and
redemptions, and I may be subject to a $50.00 IRS penalty.

By selecting the electronic transfer service in Section 8, I hereby authorize Conseco Fund Group to initiate credit and
debit entries to my (our) account at the Financial Institution indicated and for the Financial Institution to credit or
debit the same to such account through the Automated Clearing House (ACH) system, subject to the rules of the Financial
Institution, ACH and the Conseco Fund Group. Conseco Fund Group may correct any transaction error with a debit or credit
to my account and/or Conseco Fund Group account. This authorization, including any credit or debit entries initiated
thereunder, is in full force and effect until I notify Conseco Fund Group of its revocation by telephone or in writing
and has had sufficient time to act on it.

THE FEDERATED MONEY MARKET FUND IS MANAGED BY FEDERATED INVESTMENTS.

- ---------------------------------------------------------------------------------------------------------------------------
Signature of Owner                                  Date           Signature of Co-Owner                        Date


                           CONSECO FUND GROUP P.O. BOX 8017 BOSTON, MA 02266-8017 800-986-3384

</TABLE>

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<PAGE>


FOR MORE INFORMATION




- --------------------------------------------
    For More Information
- --------------------------------------------



    More information on the Conseco Fund Group is available free upon request:

>   Shareholder Reports

    Additional information about the Funds' investments is available in the
    Funds' annual and semi-annual reports to shareholders. In the Funds' annual
    report, you will find a discussion of the market conditions and investment
    strategies that significantly affected the Funds' performance during their
    most recent fiscal year.

>   Statement Of Additional Information (SAI)

    The SAI is on file with the Securities and Exchange Commission (SEC) and is
    incorporated by reference into (is legally considered part of) this
    prospectus. The SAI provides more details about each Fund and its policies.

>   TO OBTAIN A SHAREHOLDER REPORT, SAI, OR OTHER INFORMATION:

   BY TELEPHONE
   Call 800-986-3384

   BY MAIL
   Conseco Fund Group

   Attn: Administrative Offices
   11815 N. Pennsylvania Street, BIC
   Carmel, IN 46032


   BY EMAIL
   [email protected]


   ON THE INTERNET

   Text-only versions of the prospectuses and other documents pertaining to the
   Funds can be viewed online or downloaded from:

   SEC
   http://www.sec.gov

   Conseco Fund Group
   http://www.consecofunds.com

Information about the Funds (including the SAI) can also be reviewed and copied
at the SEC's public reference room in Washington, DC (phone 800-SEC-0330). Or,
you can obtain copies of this information by sending a request, along with a
duplicating fee, to the SEC's Public Reference Section, Washington, DC
20549-6009.

Registration Number: 811-07839

<PAGE>


                       STATEMENT OF ADDITIONAL INFORMATION

                               CONSECO FUND GROUP

    CONSECO FIXED INCOME FUND                     CONSECO BALANCED FUND

     CONSECO HIGH YIELD FUND                       CONSECO EQUITY FUND

CONSECO CONVERTIBLE SECURITIES FUND                   CONSECO 20 FUND


                             CLASS A, B AND C SHARES

                                 MARCH 12, 1999

This  Statement  of  Additional  Information  ("SAI")  is not a  prospectus.  It
contains  additional  information about the Conseco Fund Group (the "Trust") and
the seven series of the Trust:  Conseco  Fixed  Income Fund,  Conseco High Yield
Fund, Conseco Convertible Securities Fund, Conseco Balanced Fund, Conseco Equity
Fund and Conseco 20 Fund (each a "Fund" and collectively the "Funds"). It should
be read in  conjunction  with  the  Funds'  Class A, B,  and C  prospectus  (the
"Prospectus"),  dated March 12, 1999.  You may obtain a copy by  contacting  the
Trust's  Administrative  Office, 11815 N. Pennsylvania Street,  Carmel,  Indiana
46032 or by phoning 800-986-3384.







<PAGE>


                                TABLE OF CONTENTS

GENERAL INFORMATION...........................................................3

INVESTMENT RESTRICTIONS.......................................................3

INVESTMENT STRATEGIES.........................................................7

TEMPORARY DEFENSIVE POSTIONS.................................................11

PORTFOLIO TURNOVER...........................................................11

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES..........................12

INVESTMENT PERFORMANCE.......................................................36

SECURITIES TRANSACTIONS......................................................40

MANAGEMENT...................................................................42

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................48

FUND EXPENSES................................................................53

DISTRIBUTION ARRANGEMENTS....................................................53

PURCHASE, REDEMPTION AND PRICING OF SHARES...................................56

INFORMATION ON CAPITALIZATION AND OTHER MATTERS..............................62

TAXES........................................................................63

FINANCIAL STATEMENTS.........................................................69

APPENDIX A SECURITIES RATINGS................................................70


<PAGE>


GENERAL INFORMATION


The Trust was organized as a Massachusetts business trust on September 24, 1996.
The Trust is an  open-end  management  investment  company  registered  with the
Securities and Exchange  Commission  ("SEC") under the Investment Company Act of
1940 (the "1940 Act").  The Trust is a "series" type of mutual fund which issues
seven separate series of shares,  each of which represents a separate  portfolio
of investments. Each Fund offers four classes of shares. This SAI relates solely
to Class A  shares,  Class B shares  and Class C shares  of the  Funds.  Class Y
shares are offered to certain institutional  investors and qualifying individual
investors  through a separate  prospectus and SAI. Each class may have different
expenses,  which may affect performance.  Conseco Capital Management,  Inc. (the
"Adviser") serves as the Trust's investment adviser.


Prior to August 4, 1998,  the  Conseco  Balanced  Fund was known as the  Conseco
Asset Allocation Fund.


There  is no  assurance  that  any of the  Funds  will  achieve  its  investment
objective. The various Funds may be used independently or in combination.


INVESTMENT RESTRICTIONS


The Trust has adopted the  following  policies  relating  to the  investment  of
assets of the Funds, and their  activities.  These are fundamental  policies and
may not be changed  without the approval of the holders of a  "majority"  of the
outstanding  shares of the affected Fund. Under the 1940 Act, the vote of such a
"majority"  means the vote of the holders of the lesser of (i) 67 percent of the
shares or  interests  represented  at a meeting at which more than 50 percent of
the outstanding shares or interests are represented or (ii) more than 50 percent
of the outstanding  shares or interests.  A change in policy  affecting only one
Fund may be  effected  with the  approval  of the  holders of a majority  of the
outstanding  shares of the Fund.  Except for the  limitation on  borrowing,  any
investment policy or limitation that involves a maximum percentage of securities
or assets will not be considered to be violated unless the percentage limitation
is exceeded immediately after, and because of, a transaction by a Fund.



CONSECO EQUITY, CONSECO BALANCED AND CONSECO FIXED INCOME FUNDS


The Conseco  Equity,  Conseco  Balanced  and Conseco  Fixed Income Funds may not
(except as noted):


1.       Purchase   securities   on  margin,   except  that  Funds   engaged  in
         transactions  in  options,  futures,  and  options on futures  may make
         margin deposits in connection with those transactions,  and except that
         effecting  short sales against the box will not be deemed to constitute
         a purchase of securities on margin;


                                       3


<PAGE>


2.       Purchase or sell  commodities or commodity  contracts  (which,  for the
         purpose of this restriction, shall not include foreign currency futures
         or  forward  currency  contracts),  except:  (a) any Fund may engage in
         interest rate futures contracts, stock index futures, futures contracts
         based on other  financial  instruments,  and  options  on such  futures
         contracts;  and  (b)  Conseco  Balanced  Fund  may  engage  in  futures
         contracts on gold;


3.       Borrow money or pledge,  mortgage, or assign assets, except that a Fund
         may:  (a)  borrow  from  banks,  but  only if  immediately  after  each
         borrowing and  continuing  thereafter it will have an asset coverage of
         at least 300  percent;  (b) enter into reverse  repurchase  agreements,
         options,  futures,  options  on  futures  contracts,  foreign  currency
         futures  contracts and forward  currency  contracts as described in the
         Prospectus  and in this  SAI.  (The  deposit  of  assets  in  escrow in
         connection  with the  writing of covered  put and call  options and the
         purchase of securities on a when-issued  or delayed  delivery basis and
         collateral  arrangements  with respect to initial or  variation  margin
         deposits for future  contracts,  and options on futures  contracts  and
         foreign  currency  futures and forward  currency  contracts will not be
         deemed to be pledges of a Fund's assets);


4.       Underwrite securities of other issuers;


5.       With  respect to 75% of a Fund's total  assets,  invest more than 5% of
         the  value  of its  assets  in the  securities  of any  one  issuer  if
         thereafter  the Fund in question  would have more than 5% of its assets
         in the  securities  of any  issuer  or would  own more  than 10% of the
         outstanding voting securities of such issuer; this restriction does not
         apply to U.S. Government securities (as defined in the Prospectus);


6.       Invest in securities of a company for the purpose of exercising control
         or management;


7.       Write, purchase or sell puts, calls or any combination thereof,  except
         that the Funds may write listed  covered or secured  calls and puts and
         enter into closing purchase transactions with respect to such calls and
         puts if,  after  writing any such call or put, not more than 25% of the
         assets of the Fund are  subject to  covered or secured  calls and puts,
         and except that the Funds may  purchase  calls and puts with a value of
         up to 5% of each such Fund's net assets;


8.       Participate on a joint or a joint and several basis in any trading
         account in securities;


9.       Invest in the  securities  of issuers in any one industry if thereafter
         more than 25% of the assets of the Fund in  question  would be invested
         in  securities  of issuers in that  industry;  investing in cash items,
         U.S.  Government   securities  (as  defined  in  the  Prospectus),   or
         repurchase  agreements as to these securities,  shall not be considered
         investments in an industry;


10.      Purchase or sell real estate,  except that it may  purchase  marketable
         securities which are issued by companies which invest in real estate or
         interests therein;


                                       4


<PAGE>


11.      Make loans of its  assets,  except the Funds may enter into  repurchase
         agreements and lend portfolio securities in an amount not to exceed 15%
         of  the  value  of a  Fund's  total  assets.  Any  loans  of  portfolio
         securities will be made according to guidelines  established by the SEC
         and the Board of Trustees; or


12.      Issue any senior  security (as such term is defined in Section 18(f) of
         the 1940 Act), except as permitted herein and in Investment Restriction
         Nos.  1, 2 and 3.  Obligations  under  interest  rate swaps will not be
         treated as senior  securities for purposes of this  restriction so long
         as  they  are  covered  in  accordance   with   applicable   regulatory
         requirements.   Other  good  faith  hedging  transactions  and  similar
         investment strategies will also not be treated as senior securities for
         purposes of this  restriction so long as they are covered in accordance
         with applicable  regulatory  requirements and are structured consistent
         with current SEC interpretations.


CONSECO HIGH YIELD, CONSECO CONVERTIBLE SECURITIES AND CONSECO 20 FUNDS


The Conseco High Yield, Conseco Convertible  Securities and Conseco 20 Funds may
not (except as noted):

1.       Purchase or sell commodities or commodity  contracts except that a Fund
         may purchase or sell options, futures contracts, and options on futures
         contracts  and  may  engage  in  interest  rate  and  foreign  currency
         transactions;

2.       Borrow  money,  except that a Fund may: (a) borrow from banks,  and (b)
         enter into reverse repurchase agreements,  provided that (a) and (b) in
         combination  do not  exceed  33-1/3%  of the value of its total  assets
         (including   the  amount   borrowed)  less   liabilities   (other  than
         borrowings); and except that a Fund may borrow from any person up to 5%
         of its total assets (not  including the amount  borrowed) for temporary
         purposes (but not for leverage or the purchase of investments);

3.       Underwrite securities of other issuers except to the extent that a Fund
         may be deemed an  underwriter  under  the  Securities  Act of 1933 (the
         "1933  Act") in  connection  with  the  purchase  or sale of  portfolio
         securities;

4.       With  respect  to  75%  of the  Conseco  High  Yield  and  the  Conseco
         Convertible Securities Fund's total assets,  purchase the securities of
         any issuer if (a) more than 5% of Fund's total assets would be invested
         in the  securities  of that  issuer or (b) the Fund would own more than
         10%  of  the  outstanding  voting  securities  of  that  issuer;   this
         restriction does not apply to U.S. Government securities (as defined in
         the Prospectus);

5.       Purchase any security if thereafter  25% or more of the total assets of
         the Fund  would be  invested  in  securities  of issuers  having  their
         principal  business  activities in the same industry;  this restriction
         does  not  apply  to U.S.  Government  securities  (as  defined  in the
         Prospectus);


                                       5


<PAGE>


6.       Purchase  or  sell  real  estate,  except  that  a  Fund  may  purchase
         securities which are issued by companies which invest in real estate or
         which are secured by real estate or interests therein;

7.       Make  loans of its  assets  if, as a result,  more than  33-1/3% of the
         Fund's total assets would be lent to other parties  except  through (a)
         entering  into   repurchase   agreements   and  (b)   purchasing   debt
         instruments; or

8.       Issue any senior security, except as permitted under the 1940 Act.


NONFUNDAMENTAL INVESTMENT RESTRICTIONS


The following  restrictions are designated as nonfundamental with respect to the
Conseco  Equity and Conseco Fixed Income Funds and may be changed by the Trust's
Board of Trustees ("Board") without shareholder approval.


The CONSECO EQUITY AND CONSECO FIXED INCOME FUNDS may not (except as noted):


1.       With respect to in excess of 15% of a Fund's  assets,  sell  securities
         short,  except  that each Fund may,  without  limit,  make short  sales
         against the box.


2.       Purchase any below  investment  grade security if as a result more than
         35% of the Fund's  assets would be invested in below  investment  grade
         securities.


The following restrictions are designated as non-fundamental with respect to the
Conseco  Balanced  Fund and may be  changed  by the  Board  without  shareholder
approval.





The CONSECO BALANCED FUND may not:

1.       With respect to in excess of 15% of the Fund's assets,  sell securities
         short,  except  that the Fund may,  without  limit,  make  short  sales
         against the box.

2.       Purchase any below  investment  grade security if as a result more than
         35% of the Fund's  assets would be invested in below  investment  grade
         securities.

3.       Invest less than 25% of the Fund's assets in debt securities.


The following  restrictions are designated as nonfundamental with respect to the
Conseco High Yield, Conseco Convertible  Securities and Conseco 20 Funds and may
be changed by the Board without shareholder approval.


The CONSECO HIGH YIELD, CONSECO CONVERTIBLE  SECURITIES AND CONSECO 20 FUNDS may
not (except as noted):


                                       6


<PAGE>


1.       Sell securities short in an amount exceeding 15% of its assets,  except
         that a Fund may,  without  limit,  make short  sales  against  the box.
         Transactions  in  options,   futures,  options  on  futures  and  other
         derivative instruments shall not constitute selling securities short;

2.       Purchase  securities  on margin,  except  that a Fund may  obtain  such
         short-term  credits as are  necessary  for the  clearance of securities
         transactions  and  except  that  margin  deposits  in  connection  with
         transactions  in  options,   futures,  options  on  futures  and  other
         derivative instruments shall not constitute a purchase of securities on
         margin; or

3.       Make loans of its assets,  except that a Fund may enter into repurchase
         agreements   and  purchase  debt   instruments  as  set  forth  in  its
         fundamental  policy on lending and may lend portfolio  securities in an
         amount not to exceed 33 1/3% of the value of the Fund's total assets.


INVESTMENT STRATEGIES


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description of Securities and Investment  Techniques," the CONSECO FIXED INCOME
FUND may:

o    Invest in debt securities  which the Adviser  believes offer higher capital
     appreciation  potential.  Such  investments  would be in  addition  to that
     portion of the Fund which may be invested in common  stocks and other types
     of equity securities.

o    Use  various   investment   strategies  and  techniques  when  the  Adviser
     determines  that such use is  appropriate  in an effort to meet the  Fund's
     investment  objective.  Such strategies and techniques include, but are not
     limited to,  writing  listed  "covered"  call and "secured" put options and
     purchasing options;  purchasing and selling, for hedging purposes, interest
     rate and other futures  contracts,  and purchasing  options on such futures
     contracts;  borrowing  from  banks to  purchase  securities;  investing  in
     securities  of  other  investment   companies;   entering  into  repurchase
     agreements and reverse repurchase  agreements;  investing in when-issued or
     delayed delivery securities; and selling securities short. See "Description
     of Securities and Investment Techniques" below for further information.


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description  of Securities and Investment  Techniques,"  the CONSECO HIGH YIELD
FUND may:

o    Invest in below investment  grade  securities which include  corporate debt
     securities  and  preferred  stock,  convertible  securities,   zero  coupon
     securities, other deferred interest securities,  mortgage-backed securities
     and asset-backed securities. The Fund may invest in securities rated as low
     as C by Moody's  Investors  Service,  Inc.  ("Moody's")  or D by Standard &
     Poor's ("S&P"), securities comparably rated by another national statistical
     rating organization ("NRSRO"), or unrated securities of equivalent quality.
     Such obligations are highly  speculative and may be in default or in danger
     of default as to principal and interest.


                                       7


<PAGE>


o    Invest in high yield  municipal  securities.  The interest on the municipal
     securities  in which the Fund invests  typically is not exempt from federal
     income tax. The Fund's  remaining  assets may be held in cash, money market
     instruments, or securities issued or guaranteed by the U.S. Government, its
     agencies,  authorities or  instrumentalities,  or may be invested in common
     stocks and other  equity  securities  when these types of  investments  are
     consistent  with the  objectives  of the Fund or are  acquired as part of a
     unit  consisting of a  combination  of fixed income  securities  and equity
     investments. Such remaining assets may also be invested in investment grade
     debt securities, including municipal securities.

o    Invest in zero coupon securities and payment-in-kind securities.

o    Invest in equity and debt securities of foreign issuers,  including issuers
     based in emerging markets. As a non-fundamental policy, the Fund may invest
     up to 50% of its  total  assets  (measured  at the time of  investment)  in
     foreign securities;  however,  the Fund presently does not intend to invest
     more than 25% of its total assets in such securities. In addition, the Fund
     presently intends to invest in foreign  securities only through  depositary
     receipts. See "Foreign Securities" below for further information.

o    Invest in private placements, securities traded pursuant to Rule 144A under
     the 1933 Act (Rule 144A  permits  qualified  institutional  buyers to trade
     certain securities even though they are not registered under the 1933 Act),
     or  securities  which,  though not  registered at the time of their initial
     sale, are issued with registration  rights. Some of these securities may be
     deemed by the Adviser to be liquid under  guidelines  adopted by the Board.
     As a matter of fundamental  policy,  the Fund will not (1) invest more than
     5% of its  total  assets  in any one  issuer,  except  for U.S.  Government
     securities  or (2) invest 25% or more of its total assets in  securities of
     issuers having their principal business activities in the same industry.

o    Use  various   investment   strategies  and  techniques  when  the  Adviser
     determines  that such use is  appropriate  in an effort to meet the  Fund's
     investment objectives.  Such strategies and techniques include, but are not
     limited to,  writing  listed  "covered"  call and "secured" put options and
     purchasing options;  purchasing and selling, for hedging purposes, interest
     rate and other futures  contracts,  and purchasing  options on such futures
     contracts;  entering  into  foreign  currency  futures  contracts,  forward
     foreign  currency  contracts  ("forward  contracts") and options on foreign
     currencies;  borrowing  from banks to  purchase  securities;  investing  in
     securities  of  other  investment   companies;   entering  into  repurchase
     agreements,  reverse repurchase  agreements and dollar rolls;  investing in
     when-issued or delayed delivery  securities;  selling securities short; and
     entering into swaps and other interest rate transactions.  See "Description
     of Securities and Investment Techniques" below for further information.


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description of Securities and Investment  Techniques," the CONSECO  CONVERTIBLE
SECURITIES FUND may:


o    Invest  in  securities  rated  as  low  as  CCC/Caa.  See  "Description  of
     Securities  and  Investment  Techniques"  below.  The  Appendix to this SAI
     describes Moody's and S&P's rating categories.


                                       8


<PAGE>


o    Invest in zero coupon securities and payment-in-kind securities.

o    As a non-fundamental policy, invest up to 50% of its total assets (measured
     at the  time of  investment)  in  foreign  securities;  however,  the  Fund
     presently  does not intend to invest  more than 25% of its total  assets in
     such  securities.  Investments  in foreign  securities may involve risks in
     addition to those of U.S.  investments.  See "Foreign Securities" below for
     further information.

o    Invest in private placements, securities traded pursuant to Rule 144A under
     the 1933 Act (Rule 144A  permits  qualified  institutional  buyers to trade
     certain securities even though they are not registered under the 1933 Act),
     or  securities  which,  though not  registered at the time of their initial
     sale, are issued with registration  rights. Some of these securities may be
     deemed by the Adviser to be liquid under guidelines adopted by the Board.

o    Use investment  strategies and techniques when the Adviser  determines that
     such  use is  appropriate  in an  effort  to  meet  the  Fund's  investment
     objective.  Such strategies and techniques include, but are not limited to,
     writing  call  and put  options  and  purchasing  options;  purchasing  and
     selling,  for hedging purposes,  interest rate and other futures contracts,
     and purchasing and writing options on such futures contracts; entering into
     foreign  currency  futures  contracts,  forward  contracts  and  options on
     foreign currencies;  borrowing from banks to purchase securities; investing
     in  securities of other  investment  companies;  entering  into  repurchase
     agreements,  reverse repurchase  agreements and dollar rolls;  investing in
     when-issued or delayed delivery  securities;  selling securities short, and
     entering into swaps and other interest rate transactions.  See "Description
     of Securities and Investment Techniques" below for further information.


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description of Securities and Investment Techniques," the CONSECO BALANCED FUND
may:

o    Invest in U.S.  Government  securities,  intermediate  and  long-term  debt
     securities and equity securities of domestic and foreign issuers, including
     common and preferred stocks,  convertible debt securities, and warrants. As
     a non-fundamental  policy,  the Fund maintains at least 25% of the value of
     its assets in debt securities.

o    Invest up to 10% of its total assets in the equity  securities of companies
     exploring,  mining,  developing,  producing,  or distributing gold or other
     precious  metals,  if the Adviser  believes that  inflationary  or monetary
     conditions  warrant a  significant  investment  in  companies  involved  in
     precious metals.

o    Invest in high yield, high risk below investment grade securities which are
     not  believed  to involve  undue risk to income or  principal.  The Conseco
     Balanced  Fund does not intend to invest more than 25% of its total  assets
     (measured at the time of investment) in below investment grade  securities.
     The lowest  rating  categories  in which the Fund will invest are  CCC/Caa.
     Securities in those  categories  are  considered to be of poor standing and
     are predominantly  speculative.  For information about the risks associated
     with below investment


                                       9


<PAGE>


     grade securities, see "Description of Securities and Investment Techniques"
     below. The Fund may also invest in investment grade debt securities.

o    Invest in zero coupon securities and payment-in-kind securities.

o    Invest in equity and debt securities of foreign issuers, including non-U.S.
     dollar-denominated securities, Eurodollar securities and securities issued,
     assumed or guaranteed by foreign  governments or political  subdivisions or
     instrumentalities  thereof. As a non-fundamental operating policy, the Fund
     will not invest more than 50% of its total assets  (measured at the time of
     investment)  in foreign  securities.  See  "Description  of Securities  and
     Investment Techniques" below for further information.

o    Use  various   investment   strategies  and  techniques  when  the  Adviser
     determines  that such use is  appropriate  in an effort to meet the  Fund's
     investment  objective,   including  but  not  limited  to:  writing  listed
     "covered"  call and  "secured"  put  options,  including  options  on stock
     indices,  and purchasing such options;  purchasing and selling, for hedging
     purposes,  stock index,  interest rate, gold, and other futures  contracts,
     and purchasing options on such futures contracts;  purchasing  warrants and
     preferred and convertible preferred stocks;  purchasing foreign securities;
     entering into foreign currency  futures  contracts,  forward  contracts and
     options on foreign currencies; borrowing from banks to purchase securities;
     purchasing  securities  of  other  investment   companies;   entering  into
     repurchase  agreements  and  reverse  repurchase   agreements;   purchasing
     restricted  securities;   investing  in  when-issued  or  delayed  delivery
     securities;  and selling  securities  short. See "Description of Securities
     and Investment Techniques" below for further information.


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description of Securities and Investment  Techniques,"  the CONSECO EQUITY FUND
may:

o    Use a variety of investment  techniques  and  strategies  including but not
     limited to:  writing  listed  "covered"  call and  "secured"  put  options,
     including options on stock indices, and purchasing options;  purchasing and
     selling,  for hedging  purposes,  stock  index,  interest  rate,  and other
     futures  contracts,  and  purchasing  options  on such  futures  contracts;
     purchasing  warrants  and  preferred  and  convertible   preferred  stocks;
     borrowing from banks to purchase securities;  purchasing foreign securities
     in the form of American Depository Receipts ("ADRs"); purchasing securities
     of other  investment  companies;  entering into  repurchase  agreements and
     reverse repurchase agreements;  purchasing restricted securities; investing
     in  when-issued  or delayed  delivery  securities;  and selling  securities
     short.  See  "Description  of Securities and Investment  Techniques"  below
     further information.

o    Invest up to 5% of its assets in below  investment  grade  securities.  The
     Fund will not invest in rated fixed income securities which are rated below
     CCC/Caa.  See  "Appendix  A" to this SAI for further  discussion  regarding
     securities  ratings.  For information about the risks associated with below
     investment grade securities,  see "Description of Securities and Investment
     Techniques" below.


                                       10


<PAGE>


In addition to the  investment  strategies  described in the  Prospectus  and in
"Description of Securities and Investment  Techniques," the CONSECO 20 FUND may:

o    Invest in preferred stocks,  convertible  securities,  and warrants, and in
     debt  obligations  when the Adviser  believes that they are more attractive
     than stocks on a long-term  basis. The debt obligations in which it invests
     will  be  primarily  investment  grade  debt  securities,  U.S.  Government
     securities, or short-term debt securities.  However, the Fund may invest up
     to 5% of its total assets in below investment grade securities.

o    Invest up to 25% of its  total  assets in  equity  and debt  securities  of
     foreign issuers. The Fund presently intends to invest in foreign securities
     only through depositary  receipts.  See "Foreign Securities" below for more
     information.

o    Use a variety of investment  techniques and  strategies,  including but not
     limited to:  writing  listed  "covered"  call and  "secured"  put  options,
     including options on stock indices, and purchasing options;  purchasing and
     selling,  for hedging  purposes,  stock  index,  interest  rate,  and other
     futures  contracts,  and  purchasing  options  on such  futures  contracts;
     entering into foreign currency  futures  contracts,  forward  contracts and
     options on foreign currencies; borrowing from banks to purchase securities;
     purchasing  securities  of  other  investment   companies;   entering  into
     repurchase  agreements  and reverse  repurchase  agreements;  investing  in
     when-issued or delayed delivery  securities;  and selling securities short.
     See "Description of Securities and Investment Techniques" below for further
     information.


TEMPORARY DEFENSIVE POSTIONS

When unusual market or other conditions  warrant,  a Fund may temporarily depart
from its investment objective.  In assuming a temporary defensive position, each
Fund may make investments as follow:

Conseco High Yield Fund may invest in money market instruments without limit.

Conseco Balanced Fund may invest in money market instruments without limit.


Conseco Equity Fund may invest in money market instruments without limit.


Conseco 20 Fund may invest without limit in short-term  debt securities and cash
and money market instruments.


PORTFOLIO TURNOVER


The Funds do not have a  predetermined  rate of  portfolio  turnover  since such
turnover will be incidental to transactions taken with a view to achieving their
respective  objectives.  Because of the Adviser's active  management  style, our
Funds generally have a higher portfolio turnover than other funds and therefore,
may have higher  taxable  distributions  and  increased  trading costs which may
impact  performance.  The following is a list of the Funds'  portfolio  turnover
rates for the fiscal year ended December 31, 1997 and 1998:


                                       11


<PAGE>


         -----------------------------------------------------------------------

                                                           YEAR ENDED
         -----------------------------------------------------------------------

         FUND NAME:                                  1997              1998
         -----------------------------------------------------------------------

         Conseco Fixed Income Fund                 367.82%           420.83%
         -----------------------------------------------------------------------

         Conseco High Yield Fund*                    n/a             432.08%
         -----------------------------------------------------------------------

         Conseco Convertible Securities Fund*        n/a              12.95%
         -----------------------------------------------------------------------

         Conseco Balanced Fund                     506.64%           341.20%
         -----------------------------------------------------------------------

         Conseco Equity Fund                       199.12%           350.13%
         -----------------------------------------------------------------------

         Conseco 20 Fund*                            n/a             411.71%
         -----------------------------------------------------------------------




         *Because  these  Funds'  inception  dates  were in  1998,  there  is no
portfolio turnover rate for 1997.


Turnover rates in excess of 100% generally  result in higher  transaction  costs
and a possible increase in realized short-term capital gains or losses.


DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES


The different  types of securities  and investment  techniques  common to one or
more  Funds all have  attendant  risks of varying  degrees.  For  example,  with
respect to equity securities,  there can be no assurance of capital appreciation
and there is a  substantial  risk of decline.  With respect to debt  securities,
there can be no  assurance  that the issuer of such  securities  will be able to
meet its  obligations on interest or principal  payments in a timely manner.  In
addition, the value of debt instruments generally rises and falls inversely with
interest rates. The investments and investment  techniques common to one or more
Funds and their risks are described in greater detail below.


The  investment  objectives  of the Funds are not  fundamental.  All  investment
policies and practices  described in this SAI are not fundamental,  meaning that
the Trust's  Board of Trustees  ("Board")  may change them  without  shareholder
approval.


The  following  discussion  describes  in  greater  detail  different  types  of
securities and  investment  techniques  used by the Funds,  as well as the risks
associated with such securities and techniques.


                                       12


<PAGE>


SMALL AND MEDIUM CAPITALIZATION COMPANIES


The Conseco 20 Fund may invest a substantial portion of its assets in securities
issued by small- and  mid-cap  companies.  The Conseco  Convertible  Securities,
Conseco  Balanced and Conseco Equity Funds also may invest in small- and mid-cap
companies.  While these  companies  generally  have  potential for rapid growth,
investments in such companies  often involve  greater risks than  investments in
larger, more established companies because small- and mid-cap companies may lack
the management experience,  financial resources,  product  diversification,  and
competitive  strengths  of  companies  with larger  market  capitalizations.  In
addition,  in many instances the securities of small- and mid-cap  companies are
traded  only  over-the-counter  or on a regional  securities  exchange,  and the
frequency and volume of their trading is  substantially  less than is typical of
larger companies. Therefore, these securities may be subject to greater and more
abrupt price  fluctuations.  When making  large  sales,  a Fund may have to sell
portfolio  holdings at discounts from quoted prices or may have to make a series
of small  sales over an  extended  period of time due to the  trading  volume of
small- and mid-cap  company  securities.  As a result,  an  investment in any of
these Funds may be subject to greater price fluctuations than an investment in a
fund that invests primarily in larger, more established companies. The Adviser's
research efforts may also play a greater role in selecting  securities for these
Funds than in a fund that invests in larger, more established companies.


PREFERRED STOCK


Preferred  stock pays dividends at a specified rate and generally has preference
over  common  stock in the  payment  of  dividends  and the  liquidation  of the
issuer's assets but is junior to the debt securities of the issuer in those same
respects.  Unlike interest  payments on debt securities,  dividends on preferred
stock  are  generally  payable  at the  discretion  of  the  issuer's  board  of
directors,  and  shareholders  may suffer a loss of value if  dividends  are not
paid. Preferred shareholders generally have no legal recourse against the issuer
if dividends are not paid. The market prices of preferred  stocks are subject to
changes in  interest  rates and are more  sensitive  to changes in the  issuer's
creditworthiness  than  are  the  prices  of  debt  securities.  Under  ordinary
circumstances, preferred stock does not carry voting rights.


U.S. GOVERNMENT SECURITIES AND SECURITIES OF INTERNATIONAL ORGANIZATIONS


U.S.  Government  securities are issued or guaranteed by the U.S.  Government or
its agencies, authorities or instrumentalities.


Securities  issued  by  international  organizations,   such  as  Inter-American
Development Bank, the Asian-American Development Bank and the International Bank
for Reconstruction  and Development (the "World Bank"), are not U.S.  Government
securities.  These  international  organizations,   while  not  U.S.  Government
agencies or instrumentalities, have the ability to borrow from member countries,
including the United States.


                                       13


<PAGE>


DEBT SECURITIES


The Funds may invest in U.S.  dollar-denominated  corporate  debt  securities of
domestic issuers, and all of the Funds except the Conseco Equity Fund may invest
in  debt   securities   of  foreign   issuers  that  may  or  may  not  be  U.S.
dollar-denominated.


The investment  return on a corporate debt security  reflects  interest earnings
and changes in the market value of the  security.  The market value of corporate
debt  obligations may be expected to rise and fall inversely with interest rates
generally. There also exists the risk that the issuers of the securities may not
be able to meet their obligations on interest or principal  payments at the time
called  for by an  instrument.  Debt  securities  rated  BBB or Baa,  which  are
considered  medium-grade  debt  securities,   generally  have  some  speculative
characteristics.  A debt  security  will be placed in this rating  category when
interest  payments and principal  security appear adequate for the present,  but
economic characteristics that provide longer term protection may be lacking. Any
debt  security,  and  particularly  those  rated BBB or Baa (or  below),  may be
susceptible to changing  conditions,  particularly to economic downturns,  which
could lead to a weakened capacity to pay interest and principal.


Corporate  debt  securities  may pay fixed or  variable  rates of  interest,  or
interest at a rate contingent upon some other factor,  such as the price of some
commodity.  These  securities may be convertible  into preferred or common stock
(see  "Convertible  Securities"  below),  or may be  bought  as  part  of a unit
containing  common  stock.  A debt  security may be subject to redemption at the
option of the issuer at a price set in the security's governing instrument.


In selecting  corporate debt  securities for the Funds,  the Adviser reviews and
monitors  the  creditworthiness  of each  issuer and  issue.  The  Adviser  also
analyzes  interest rate trends and specific  developments  which it believes may
affect individual issuers.


BELOW INVESTMENT GRADE SECURITIES


         IN GENERAL.  The Funds may invest in below investment grade securities.
Below investment grade securities (also referred to as "high yield  securities")
are securities rated BB+ or lower by S&P or Ba1 or lower by Moody's,  securities
comparably rated by another NRSRO, or unrated securities of equivalent  quality.
Below  investment  grade  securities  are  deemed by the rating  agencies  to be
predominantly  speculative with respect to the issuer's capacity to pay interest
and repay principal. Below investment grade securities, while generally offering
higher yields than investment grade securities with similar maturities,  involve
greater risks,  including the possibility of default or bankruptcy.  The special
risk  considerations  in connection  with  investments  in these  securities are
discussed below.


Below  investment  grade  securities  generally  offer a higher  yield than that
available from higher-rated issues with similar maturities,  as compensation for
holding a  security  that is subject to greater  risk.  Below  investment  grade
securities are deemed by rating agencies to be  predominately  speculative  with
respect to the issuer's  capacity to pay interest  and repay  principal  and may
involve  major risk or exposure to adverse  conditions.  Lower-rated  securities
involve higher risks in that they are especially  subject to (1) adverse changes
in general  economic


                                       14


<PAGE>


conditions and in the  industries in which the issuers are engaged,  (2) adverse
changes in the  financial  condition of the issuers,  (3) price  fluctuation  in
response to changes in interest  rates and (4) limited  liquidity  and secondary
market support.


Subsequent to purchase by a Fund (except the Conseco High Yield Fund),  an issue
of debt  securities may cease to be rated or its rating may be reduced,  so that
the securities  would no longer be eligible for purchase by that Fund. In such a
case,  the  Fund  will  engage  in an  orderly  disposition  of  the  downgraded
securities to the extent necessary to ensure that its holdings do not exceed the
permissible amount as set forth in the Prospectus and this SAI.


         EFFECT OF INTEREST  RATES AND ECONOMIC  CHANGES.  All  interest-bearing
securities  typically  experience  appreciation  when interest rates decline and
depreciation  when interest  rates rise.  The market values of below  investment
grade securities tend to reflect individual corporate  developments to a greater
extent than do higher rated securities, which react primarily to fluctuations in
the general level of interest rates. Below investment grade securities also tend
to be more sensitive to economic conditions than are higher-rated securities. As
a result,  they  generally  involve  more credit  risks than  securities  in the
higher-rated  categories.  During an economic  downturn or a sustained period of
rising  interest  rates,  highly  leveraged  issuers of below  investment  grade
securities  may  experience  financial  stress which may adversely  affect their
ability to service their debt  obligations,  meet projected  business goals, and
obtain additional  financing.  Periods of economic uncertainty and changes would
also  generally  result in increased  volatility  in the market  prices of these
securities and thus in a Fund's net asset value.


         PAYMENT  EXPECTATIONS.  Below  investment  grade securities may contain
redemption,  call or  prepayment  provisions  which  permit  the  issuer of such
securities  to, at its  discretion,  redeem the  securities.  During  periods of
falling  interest  rates,  issuers of these  securities  are likely to redeem or
prepay the  securities  and  refinance  them with debt  securities  with a lower
interest rate. To the extent an issuer is able to refinance the  securities,  or
otherwise  redeem them, a Fund may have to replace the  securities  with a lower
yielding security, which would result in a lower return.


         CREDIT  RATINGS.  Credit ratings issued by  credit-rating  agencies are
designed to evaluate  the safety of  principal  and  interest  payments of rated
securities.   They  do  not,   however,   evaluate  the  market  value  risk  of
lower-quality  securities and, therefore,  may not fully reflect the risks of an
investment.  In  addition,  credit  rating  agencies  may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of the
issuer  that  affect  the  market  value  of the  security.  With  regard  to an
investment in below  investment  grade  securities,  the achievement of a Fund's
investment  objective may be more dependent on the Adviser's own credit analysis
than is the case for higher rated  securities.  Although  the Adviser  considers
security ratings when making  investment  decisions,  it does not rely solely on
the  ratings  assigned by the rating  services.  Rather,  the  Adviser  performs
research and independently  assesses the value of particular securities relative
to the market. The Adviser's analysis may include  consideration of the issuer's
experience and managerial  strength,  changing  financial  condition,  borrowing
requirements  or debt maturity  schedules,  and the issuer's  responsiveness  to
changes in business  conditions and interest rates.  It also considers  relative
values based on  anticipated  cash flow,  interest or dividend  coverage,  asset
coverage and earnings prospects.


                                       15


<PAGE>


The  Adviser  buys and sells debt  securities  principally  in  response  to its
evaluation  of an  issuer's  continuing  ability  to meet its  obligations,  the
availability of better investment  opportunities,  and its assessment of changes
in business conditions and interest rates.


         LIQUIDITY AND VALUATION.  Below investment grade securities may lack an
established  retail  secondary  market,  and to the extent a  secondary  trading
market does exist,  it may be less liquid than the  secondary  market for higher
rated securities.  The lack of a liquid secondary market may negatively impact a
Fund's  ability  to  dispose  of  particular  securities.  The  lack of a liquid
secondary  market for certain  securities  may also make it more difficult for a
Fund to obtain  accurate  market  quotations  for purposes of valuing the Fund's
portfolio. In addition,  adverse publicity and investor perceptions,  whether or
not based on  fundamental  analysis,  may decrease  the values and  liquidity of
below investment grade securities, especially in a thinly traded market.


Because  of the many risks  involved  in  investing  in below  investment  grade
securities,  the  success  of such  investments  is  dependent  upon the  credit
analysis  of the  Adviser.  Although  the  market  for  below  investment  grade
securities  is not  new,  and  the  market  has  previously  weathered  economic
downturns,  the past performance of the market for such securities may not be an
accurate  indication  of its  performance  during future  economic  downturns or
periods of rising  interest  rates.  Differing  yields on debt securities of the
same  maturity  are a  function  of  several  factors,  including  the  relative
financial strength of the issuers.


CONVERTIBLE SECURITIES


A convertible  security is a bond,  debenture,  note,  preferred  stock or other
security  that may be  converted  into or exchanged  for a prescribed  amount of
common stock of the same or a different  issuer  within a  particular  period of
time at a specified price or formula. A convertible security entitles the holder
to receive  interest  paid or accrued on debt or the dividend  paid on preferred
stock  until the  convertible  security  matures or is  redeemed,  converted  or
exchanged. Before conversion, convertible securities ordinarily provide a stable
stream of income with generally higher yields than those of common stocks of the
same or  similar  issuers,  but lower  than the yield on  non-convertible  debt.
Convertible    securities   are   usually    subordinated   to   comparable-tier
non-convertible  securities  but rank senior to common stock in a  corporation's
capital structure.


The value of a convertible security is a function of (1) its yield in comparison
with the yields of other  securities of comparable  maturity and quality that do
not have a conversion privilege and (2) its worth, at market value, if converted
into the underlying common stock. Convertible securities are typically issued by
smaller capitalized companies,  whose stock prices may be volatile. The price of
a  convertible  security  often  reflects  such  variations  in the price of the
underlying  common  stock  in a  way  that  non-convertible  debt  does  not.  A
convertible security may be subject to redemption at the option of the issuer at
a price established in the convertible  security's governing  instrument,  which
could have an adverse  effect on a Fund's  ability  to  achieve  its  investment
objective.


ASSET-BACKED SECURITIES


                                       16


<PAGE>


Asset-backed  securities  represent  fractional  interests  in pools of  leases,
retail  installment  loans and revolving  credit  receivables,  both secured and
unsecured. These assets are generally held by a trust. Payments of principal and
interest or interest only are passed through to  certificate  holders and may be
guaranteed  up to certain  amounts by  letters of credit  issued by a  financial
institution  affiliated  or  unaffiliated  with the trustee or originator of the
trust.


Underlying  automobile sales contracts or credit card receivables are subject to
prepayment,  which  may  reduce  the  overall  return  to  certificate  holders.
Nevertheless,  principal  repayment  rates  tend not to vary much with  interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the  prepayment  level.  Certificate
holders may experience delays in payment on the certificates if the full amounts
due on underlying  sales  contracts or receivables are not realized by the trust
because  of  unanticipated  legal  or  administrative  costs  of  enforcing  the
contracts  or  because  of  depreciation  or damage to the  collateral  (usually
automobiles)  securing certain contracts,  or other factors.  Other asset-backed
securities may be developed in the future.


MORTGAGE-BACKED SECURITIES


The Funds may invest in mortgage-backed  securities.  Mortgage-backed securities
are  interests  in "pools" of mortgage  loans made to  residential  home buyers,
including  mortgage  loans  made by  savings  and  loan  institutions,  mortgage
bankers,  commercial banks and others.  Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private  organizations (see "Mortgage  Pass-Through  Securities,"  below). These
Funds may also  invest in debt  securities  which are  secured  with  collateral
consisting  of   mortgage-backed   securities  (see   "Collateralized   Mortgage
Obligations,"  below), and in other types of  mortgage-related  securities.  The
Conseco 20 Fund  presently  does not intend to invest more than 5% of its assets
in mortgage-backed securities.


         MORTGAGE  PASS-THROUGH  SECURITIES.  These are securities  representing
interests in pools of mortgages in which periodic  payments of both interest and
principal on the securities are made by "passing through" periodic payments made
by the individual  borrowers on the residential  mortgage loans  underlying such
securities  (net of fees paid to the issuer or guarantor of the  securities  and
possibly  other costs).  Early  repayment of principal on mortgage  pass-through
securities  (arising from prepayments of principal due to sale of the underlying
property,  refinancing,  or  foreclosure,  net of fees and  costs  which  may be
incurred)  may  expose a Fund to a lower  rate of return  upon  reinvestment  of
principal.  Payment of  principal  and  interest on some  mortgage  pass-through
securities may be guaranteed by the full faith and credit of the U.S. Government
(in the  case of  securities  guaranteed  by the  Government  National  Mortgage
Association  ("GNMA")),  or guaranteed by agencies or  instrumentalities  of the
U.S. Government (in the case of securities  guaranteed by Fannie Mae ("FNMA") or
Freddie   Mac   ("FHLMC")).   Mortgage   pass-through   securities   created  by
non-governmental   issuers   (such  as  commercial   banks,   savings  and  loan
institutions,  private mortgage insurance companies, mortgage bankers, and other
secondary  market issuers) may be uninsured or may be supported by various forms
of insurance or guarantees,  including  individual loan,  title, pool and hazard
insurance,  and letters of credit, which may be issued by governmental entities,
private insurers, or the mortgage poolers.


                                       17


<PAGE>


         GNMA  CERTIFICATES.  GNMA certificates are  mortgage-backed  securities
representing  part ownership of a pool of mortgage loans on which timely payment
of interest and principal is guaranteed by the full faith and credit of the U.S.
Government.  As a result, GNMA certificates are considered to have a low risk of
default,  although they are subject to the same market risk as  comparable  debt
securities.  GNMA  certificates  differ from typical bonds because  principal is
repaid  monthly over the term of the loan rather than  returned in a lump sum at
maturity.  Although the mortgage loans in the pool will have maturities of up to
30 years,  the actual  average life of the GNMA  certificates  typically will be
substantially  less because the  mortgages may be purchased at any time prior to
maturity, will be subject to normal principal  amortization,  and may be prepaid
prior to  maturity.  Reinvestment  of  prepayments  may occur at higher or lower
rates than the original yield on the certificates.


         FNMA AND FHLMC MORTGAGE-BACKED OBLIGATIONS. FNMA, a federally chartered
and privately owned corporation,  issues  pass-through  securities  representing
interests in pools of conventional  mortgage  loans.  FNMA guarantees the timely
payment of principal and interest,  but this guarantee is not backed by the full
faith and credit of the U.S.  Government.  FNMA also issues REMIC  certificates,
which  represent  interests  in a trust  funded  with FNMA  certificates.  REMIC
certificates  are guaranteed by FNMA and not by the full faith and credit of the
U.S. Government.


FHLMC, a corporate instrumentality of the U.S. Government,  issues participation
certificates which represent interests in pools of conventional  mortgage loans.
FHLMC  guarantees the timely payment of interest and the ultimate  collection of
principal,  and  maintains  reserves to protect  holders  against  losses due to
default, but these securities are not backed by the full faith and credit of the
U.S. Government.


As is the case with GNMA certificates, the actual maturity of and realized yield
on  particular  FNMA and FHLMC  pass-through  securities  will vary based on the
prepayment experience of the underlying pool of mortgages.


         COLLATERALIZED   MORTGAGE   OBLIGATIONS  AND   MORTGAGE-BACKED   BONDS.
Mortgage-backed  securities  may be issued  by  financial  institutions  such as
commercial banks, savings and loan associations,  mortgage banks, and securities
broker-dealers  (or affiliates of such  institutions  established to issue these
securities) in the form of either  collateralized  mortgage obligations ("CMOs")
or mortgage-backed bonds. CMOs are obligations fully collateralized  directly or
indirectly  by a pool of mortgages on which  payments of principal  and interest
are  dedicated  to payment of principal  and interest on the CMOs.  Payments are
passed  through  to the  holders  on the same  schedule  as they  are  received,
although not necessarily on a pro rata basis.  Mortgage-backed bonds are general
obligations of the issuer fully collateralized  directly or indirectly by a pool
of  mortgages.  The  mortgages  serve as  collateral  for the  issuer's  payment
obligations  on the bonds but interest and  principal  payments on the mortgages
are not passed through either directly (as with GNMA  certificates  and FNMA and
FHLMC  pass-through   securities)  or  on  a  modified  basis  (as  with  CMOs).
Accordingly,  a change in the rate of prepayments on the pool of mortgages could
change the effective  maturity of a CMO but not that of a  mortgage-backed  bond
(although, like many bonds,  mortgage-backed bonds may be callable by the issuer
prior to


                                       18


<PAGE>


maturity).  Although the mortgage-related  securities securing these obligations
may be subject to a government  guarantee or third-party support, the obligation
itself  is  not  so  guaranteed.  Therefore,  if  the  collateral  securing  the
obligation  is  insufficient  to make  payment on the  obligation,  a Fund could
sustain a loss. If new types of  mortgage-related  securities  are developed and
offered to investors, investments in such securities will be considered.


         STRIPPED  MORTGAGE-BACKED  SECURITIES.  The Conseco High Yield Fund may
invest in stripped mortgage-backed  securities,  which are derivative securities
usually  structured with two classes that receive  different  proportions of the
interest and principal distributions from an underlying pool of mortgage assets.
The Fund may purchase securities  representing only the interest payment portion
of the  underlying  mortgage pools  (commonly  referred to as "IOs") or only the
principal  portion of the  underlying  mortgage pools  (commonly  referred to as
"POs").  Stripped  mortgage-backed  securities  are more sensitive to changes in
prepayment and interest rates and the market for such  securities is less liquid
than is the case for traditional debt securities and mortgage-backed securities.
The  yield  on IOs is  extremely  sensitive  to the rate of  principal  payments
(including  prepayments) on the underlying  mortgage assets, and a rapid rate of
repayment  may have a  material  adverse  effect  on such  securities'  yield to
maturity.  If the underlying mortgage assets experience greater than anticipated
prepayments  of  principal,  the Fund  will fail to  recoup  fully  its  initial
investment in these  securities,  even if they are rated high quality.  Most IOs
and POs are  regarded  as illiquid  and will be included in the Fund's  limit on
illiquid securities.


         RISKS OF MORTGAGE-BACKED SECURITIES.  Mortgage pass-through securities,
such as GNMA  certificates  or FNMA and FHLMC  mortgage-backed  obligations,  or
modified  pass-through  securities,  such as CMOs  issued by  various  financial
institutions  and IOs and POs,  are  subject  to early  repayment  of  principal
arising from  prepayments of principal on the underlying  mortgage loans (due to
the  sale  of  the  underlying  property,   the  refinancing  of  the  loan,  or
foreclosure).  Prepayment  rates vary  widely and may be  affected by changes in
market  interest  rates and other  economic  trends and  factors.  In periods of
falling  interest  rates,  the rate of  prepayment  tends to  increase,  thereby
shortening the actual average life of the mortgage-backed security.  Conversely,
when  interest  rates are  rising,  the rate of  prepayment  tends to  decrease,
thereby  lengthening  the actual average life of the  mortgage-backed  security.
Accordingly,  it is not  possible to  accurately  predict the average  life of a
particular pool.  Reinvestment of prepayments may occur at higher or lower rates
than the original yield on the  securities.  Therefore,  the actual maturity and
realized  yield  on  pass-through  or  modified   pass-through   mortgage-backed
securities will vary based upon the prepayment experience of the underlying pool
of mortgages.


ZERO COUPON BONDS


The Conseco High Yield,  Conseco  Convertible  Securities,  Conseco Balanced and
Conseco 20 Funds may invest in zero coupon  securities.  Zero  coupon  bonds are
debt obligations which make no fixed interest payments but instead are issued at
a significant  discount from face value. Like other debt securities,  the market
price can  reflect a premium or  discount,  in addition  to the  original  issue
discount,  reflecting the market's judgment as to the issuer's creditworthiness,
the


                                       19


<PAGE>


interest rate or other similar factors. The original issue discount approximates
the total amount of interest the bonds will accrue and compound  over the period
until  maturity  (or the  first  interest  payment  date) at a rate of  interest
reflecting the market rate at the time of issuance. Because zero coupon bonds do
not make  periodic  interest  payments,  their prices can be very  volatile when
market interest rates change.


The  original  issue  discount on zero coupon bonds must be included in a Fund's
income  ratably as it accrues.  Accordingly,  to qualify for tax  treatment as a
regulated  investment  company and to avoid a certain  excise tax, a Fund may be
required to  distribute  as a dividend an amount that is greater  than the total
amount of cash it actually receives.  These  distributions must be made from the
Fund's cash assets or, if  necessary,  from the  proceeds of sales of  portfolio
securities. Such sales could occur at a time which would be disadvantageous to a
Fund and when the Fund would not otherwise choose to dispose of the assets.


PAY-IN-KIND BONDS


The Conseco High Yield,  Conseco  Convertible  Securities  and Conseco  Balanced
Funds may invest in pay-in-kind  bonds.  These bonds pay "interest"  through the
issuance of additional bonds, thereby adding debt to the issuer's balance sheet.
The  market  prices of these  securities  are  likely to  respond  to changes in
interest rates to a greater degree than the prices of securities paying interest
currently.  Pay-in-kind  bonds carry additional risk in that,  unlike bonds that
pay  interest  throughout  the period to  maturity,  a Fund will realize no cash
until  the cash  payment  date and the Fund may  obtain  no return at all on its
investment if the issuer defaults.


The  holder of a  pay-in-kind  bond must  accrue  income  with  respect to these
securities prior to the receipt of cash payments thereon. To avoid liability for
federal  income  and  excise  taxes,  a Fund most  likely  will be  required  to
distribute income accrued with respect to these securities, even though the Fund
has not  received  that  income  in cash,  and may be  required  to  dispose  of
portfolio  securities under  disadvantageous  circumstances in order to generate
cash to satisfy these distribution requirements.


TRUST ORIGINATED PREFERRED SECURITIES


The Conseco High Yield and Conseco  Convertible  Securities  Funds may invest in
trust originated preferred securities,  a relatively new type of security issued
by  financial  institutions  such as banks  and  insurance  companies  and other
issuers.  Trust originated  preferred  securities represent interests in a trust
formed by the issuer.  The trust sells preferred shares and invests the proceeds
in  notes  issued  by the same  entity.  These  notes  may be  subordinated  and
unsecured.  Distributions on the trust originated preferred securities match the
interest  payments on the notes; if no interest is paid on the notes,  the trust
will not make current payments on its preferred securities. Issuers of the notes
currently enjoy favorable tax treatment.  If the tax  characterization  of these
securities  were to change  adversely,  they could be redeemed  by the  issuers,
which  could  result in a loss to a Fund.  In  addition,  some trust  originated
preferred securities are available only to qualified  institutional buyers under
Rule 144A.


                                       20


<PAGE>


LOAN PARTICIPATIONS AND ASSIGNMENTS


The Conseco High Yield and Conseco  Convertible  Securities  Funds may invest in
loan  participations  or  assignments.  In  purchasing a loan  participation  or
assignment,  a Fund  acquires  some or all of the  interest  of a bank or  other
lending institution in a loan to a corporate borrower. Both the lending bank and
the borrower may be deemed to be  "issuers" of a loan  participation.  Many such
loans are secured and most impose restrictive covenants which must be met by the
borrower and which are generally more stringent than the covenants  available in
publicly  traded debt  securities.  However,  interests in some loans may not be
secured,  and a Fund will be exposed to a risk of loss if the borrower defaults.
There is no assurance that the collateral can be liquidated in particular cases,
or that its  liquidation  value  will be equal to the  value of the  debt.  Loan
participations  may also be  purchased by a Fund when the  borrowing  company is
already  in  default.  Borrowers  that  are in  bankruptcy  may pay only a small
portion  of the  amount  owed,  if they  are  able  to pay at all.  Where a Fund
purchases a loan through an  assignment,  there is a  possibility  that the Fund
will,  in the event the borrower is unable to pay the loan,  become the owner of
the collateral. This involves certain risks to the Fund as a property owner.


In purchasing a loan  participation,  a Fund may have less protection  under the
federal  securities  laws  than  it  has  in  purchasing  traditional  types  of
securities. Loans are often administered by a lead bank, which acts as agent for
the  lenders in dealing  with the  borrower.  In  asserting  rights  against the
borrower,  a Fund may be dependent on the willingness of the lead bank to assert
these rights, or upon a vote of all the lenders to authorize the action.  Assets
held by the lead bank for the  benefit  of the Fund may be  subject to claims of
the lead bank's  creditors.  A Fund's  ability to assert its rights  against the
borrower will also depend on the particular  terms of the loan  agreement  among
the parties. Many of the interests in loans purchased by a Fund will be illiquid
and therefore subject to the Fund's limit on illiquid investments.


EURODOLLAR AND YANKEEDOLLAR OBLIGATIONS

Eurodollar  obligations  are U.S. dollar  obligations  issued outside the United
States by domestic or foreign entities,  while Yankeedollar obligations are U.S.
dollar obligations issued inside the United States by foreign entities. There is
generally less publicly  available  information  about foreign issuers and there
may be less governmental  regulation and supervision of foreign stock exchanges,
brokers and listed companies.  Foreign issuers may use different  accounting and
financial standards,  and the addition of foreign governmental  restrictions may
affect  adversely the payment of principal and interest on foreign  investments.
In addition,  not all foreign  branches of United States banks are supervised or
examined by regulatory authorities as are United States banks, and such branches
may not be subject to reserve requirements.

COLLATERALIZED BOND OBLIGATIONS


A  collateralized  bond obligation  ("CBO") is a type of asset-backed  security.
Specifically, a CBO is an investment grade bond which is backed by a diversified
pool of high risk,  high yield fixed income  securities.  The pool of high yield
securities is separated into "tiers"  representing  different  degrees of credit
quality.  The top  tier of CBOs is  backed  by the  pooled  securities  with the
highest degree of credit quality and pays the lowest  interest rate.  Lower-tier
CBOs represent


                                       21


<PAGE>


lower degrees of credit quality and pay higher  interest rates to compensate for
the attendant  risk.  The bottom tier typically  receives the residual  interest
payments  (I.E.  money that is left over after the higher  tiers have been paid)
rather  than a fixed  interest  rate.  The return on the bottom  tier of CBOs is
especially sensitive to the rate of defaults in the collateral pool.


FOREIGN SECURITIES


These securities may be U.S. dollar denominated or non-U.S.  dollar denominated.
Foreign securities  include securities issued,  assumed or guaranteed by foreign
governments or political subdivisions or instrumentalities thereof.


Investments in foreign  securities may offer unique  potential  benefits such as
substantial  growth in industries not yet developed in the  particular  country.
Such investments also permit a Fund to invest in foreign countries with economic
policies or business  cycles  different from those of the United  States,  or to
reduce fluctuations in portfolio value by taking advantage of foreign securities
markets that may not move in a manner parallel to U.S. markets.


Investments  in  securities  of  foreign   issuers  involve  certain  risks  not
ordinarily  associated with investments in securities of domestic issuers.  Such
risks  include   fluctuations  in  foreign  exchange  rates,  and  the  possible
imposition  of  exchange   controls  or  other  foreign   governmental  laws  or
restrictions on foreign  investments or  repatriation  of capital.  In addition,
with respect to certain  countries,  there is the possibility of nationalization
or  expropriation  of  assets;  confiscatory  taxation;   political,  social  or
financial  instability;  and war or other  diplomatic  developments  that  could
adversely  affect  investments  in those  countries.  Since a Fund may invest in
securities  denominated  or quoted in  currencies  other  than the U.S.  dollar,
changes in foreign  currency  exchange rates will affect the value of securities
held by the Fund and the unrealized  appreciation or depreciation of investments
so far as U.S.  investors are  concerned.  A Fund  generally will incur costs in
connection with conversion between various currencies.


There may be less publicly  available  information  about a foreign company than
about a U.S.  company,  and foreign  companies may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to or as
uniform  as  those to which  U.S.  companies  are  subject.  Foreign  securities
markets,  while growing in volume,  have, for the most part,  substantially less
volume than U.S.  markets.  Securities of many foreign companies are less liquid
and their prices more volatile than  securities  of comparable  U.S.  companies.
Transaction  costs,  custodial fees and management costs in non-U.S.  securities
markets are generally higher than in U.S. securities markets. There is generally
less government  supervision and regulation of exchanges,  brokers,  and issuers
than there is in the United States. A Fund might have greater  difficulty taking
appropriate legal action with respect to foreign investments in non-U.S.  courts
than with respect to domestic issuers in U.S. courts. In addition,  transactions
in  foreign  securities  may  involve  longer  time  from the trade  date  until
settlement  than  domestic  securities  transactions  and  involve  the  risk of
possible  losses  through the holding of securities by custodians and securities
depositories in foreign countries.


All of the foregoing risks may be intensified in emerging markets.


                                       22


<PAGE>


Dividend  and  interest  income  from  foreign  securities  may  be  subject  to
withholding  taxes by the  country in which the issuer is located and may not be
recoverable by a Fund or its investors in all cases.


ADRs are  certificates  issued by a U.S. bank or trust company  representing  an
interest in securities of a foreign issuer deposited in a foreign  subsidiary or
branch or a correspondent of that bank. Generally,  ADRs are designed for use in
U.S.  securities  markets and may offer U.S.  investors  more liquidity than the
underlying securities.  The Funds may invest in unsponsored ADRs. The issuers of
unsponsored  ADRs are not  obligated  to disclose  material  information  in the
United  States  and,  therefore,  there may not be a  correlation  between  such
information  and the market  value of such ADRs.  European  Depositary  Receipts
("EDRs") are certificates  issued by a European bank or trust company evidencing
its ownership of the underlying foreign securities. EDRs are designed for use in
European securities markets.


RESTRICTED SECURITIES, RULE 144A SECURITIES AND ILLIQUID SECURITIES


The Funds may invest in restricted securities,  such as private placements,  and
in Rule 144A securities.  Once acquired,  restricted securities may be sold by a
Fund only in privately  negotiated  transactions  or in a public  offering  with
respect to which a  registration  statement  is in effect under the 1933 Act. If
sold in a privately negotiated transaction, a Fund may have difficulty finding a
buyer  and  may be  required  to  sell  at a  price  that  is  less  than it had
anticipated.  Where registration is required, a Fund may be obligated to pay all
or part of the  registration  expenses  and a  considerable  period  may  elapse
between the time of the  decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement.  If, during such a
period,  adverse market conditions were to develop, the Fund might obtain a less
favorable  price than prevailed when it decided to sell.  Restricted  securities
are generally considered illiquid.


Rule 144A  securities,  although  not  registered,  may be  resold to  qualified
institutional  buyers  in  accordance  with Rule  144A  under the 1933 Act.  The
Adviser,  acting pursuant to guidelines  established by the Board, may determine
that some Rule 144A securities are liquid.


A Fund may not  invest in any  security  if,  as a result,  more than 15% of the
Fund's net assets would be invested in illiquid securities, which are securities
that cannot be expected to be sold within seven days at approximately  the price
at which they are valued.


WHEN-ISSUED AND DELAYED DELIVERY SECURITIES


New issues of certain debt  securities  are often  offered on a  when-issued  or
delayed  delivery basis;  that is, the payment  obligation and the interest rate
are fixed at the time the buyer  enters into the  commitment,  but  delivery and
payment for the  securities  normally take place after the customary  settlement
time. The settlement  dates of these  transactions  may be a month or more after
entering into the  transaction.  A Fund bears the risk that,  on the  settlement
date, the market value of the securities may be lower than the purchase price. A
sale of a when-issued  security also involves the risk that the other party will
be  unable  to  settle  the  transaction.  Dollar  rolls  are a type of  forward
commitment  transaction.  At the  time a Fund  makes a  commitment  to  purchase
securities  on a  when-issued  or delayed  delivery  basis,  it will  record the
transaction and reflect the


                                       23


<PAGE>


value of such  securities  each day in  determining  the Fund's net asset value.
However,  a Fund  will  not  accrue  any  income  on these  securities  prior to
delivery.  There are no fees or other  expenses  associated  with these types of
transactions  other than normal  transaction costs. To the extent a Fund engages
in when-issued and delayed delivery transactions,  it will do so for the purpose
of acquiring  instruments  consistent with its investment objective and policies
and not for the purpose of investment  leverage or to speculate on interest rate
changes. When effecting when-issued and delayed delivery  transactions,  cash or
liquid securities in an amount sufficient to make payment for the obligations to
be  purchased  will be  segregated  at the trade date and  maintained  until the
transaction has been settled.  A Fund may dispose of these securities before the
issuance  thereof.  However,  absent  extraordinary  circumstances not presently
foreseen,  it is each Fund's policy not to divest itself of its right to acquire
these securities prior to the settlement date thereof.


VARIABLE AND FLOATING RATE SECURITIES


Variable rate securities  provide for automatic  establishment of a new interest
rate at fixed intervals (i.e., daily,  monthly,  semi-annually,  etc.). Floating
rate securities  provide for automatic  adjustment of the interest rate whenever
some  specified  interest rate index  changes.  The interest rate on variable or
floating  rate  securities  is  ordinarily  determined  by reference to, or is a
percentage of, a bank's prime rate, the 90-day U.S. Treasury bill rate, the rate
of return on  commercial  paper or bank  certificates  of  deposit,  an index of
short-term interest rates, or some other objective measure.


Variable  or  floating  rate  securities  frequently  include  a demand  feature
entitling the holder to sell the securities to the issuer at par value.  In many
cases, the demand feature can be exercised at any time on seven days' notice; in
other cases, the demand feature is exercisable at any time on 30 days' notice or
on similar notice at intervals of not more than one year.


BANKING AND SAVINGS INDUSTRY OBLIGATIONS


Such  obligations  include  certificates  of deposit,  time  deposits,  bankers'
acceptances,  and other short-term debt  obligations  issued by commercial banks
and savings and loan associations ("S&Ls"). Certificates of deposit are receipts
from a bank or an S&L for funds  deposited  for a specified  period of time at a
specified rate of return.  Time deposits in banks or S&Ls are generally  similar
to certificates of deposit,  but are  uncertificated.  Bankers'  acceptances are
time drafts drawn on commercial  banks by borrowers,  usually in connection with
international commercial transactions.  The Funds may each invest in obligations
of foreign branches of domestic  commercial  banks and foreign banks;  provided,
however,  that the Conseco  Equity and Conseco  Fixed Income Funds may invest in
these types of  instruments  so long as they are U.S.  dollar  denominated.  See
"Foreign   Securities"  in  the  Prospectus  for  information   regarding  risks
associated with investments in foreign securities.


The Funds  will not invest in  obligations  issued by a  commercial  bank or S&L
unless:

1.   The bank or S&L has total assets of at least $1 billion,  or the equivalent
     in other currencies, and the institution has outstanding securities rated A
     or better by  Moody's or S&P,  or, if the


                                       24


<PAGE>



     institution has no outstanding  securities rated by Moody's or S&P, it has,
     in  the  determination  of  the  Adviser,   similar   creditworthiness   to
     institutions having outstanding securities so rated;

2.   In the case of a U.S. bank or S&L, its deposits are federally insured; and

3.   In the case of a foreign bank, the security is, in the determination of the
     Adviser,  of an investment  quality  comparable  with other debt securities
     which may be  purchased  by the Fund.  These  limitations  do not  prohibit
     investments  in  securities  issued  by  foreign  branches  of U.S.  banks,
     provided such U.S. banks meet the foregoing requirements.


COMMERCIAL PAPER


Commercial paper refers to promissory notes  representing an unsecured debt of a
corporation or finance company with a fixed maturity of no more than 270 days. A
variable  amount  master  demand  note  (which  is a type of  commercial  paper)
represents a direct borrowing  arrangement  involving  periodically  fluctuating
rates of interest under a letter agreement between a commercial paper issuer and
an  institutional  lender  pursuant to which the lender may  determine to invest
varying amounts.


REPURCHASE AGREEMENTS


Repurchase  agreements permit a Fund to maintain  liquidity and earn income over
periods of time as short as overnight.  In these transactions,  a Fund purchases
securities (the "underlying  securities") from a broker or bank, which agrees to
repurchase  the  underlying  securities  on a certain date or on demand and at a
fixed price calculated to produce a previously agreed upon return. If the broker
or  bank  were to  default  on its  repurchase  obligation  and  the  underlying
securities  were  sold  for a lesser  amount,  the Fund  would  realize  a loss.
However, to minimize this risk, the Funds will enter into repurchase  agreements
only  with  financial  institutions  which are  deemed  to be of good  financial
standing and which have been approved by the Board. No more than 15% of a Fund's
assets may be subject to repurchase agreements maturing in more than seven days.


A repurchase  transaction  will be subject to guidelines  approved by the Board.
These guidelines  require monitoring the  creditworthiness  of counterparties to
repurchase  transactions,  obtaining  collateral  at least equal in value to the
repurchase  obligation,  and marking the  collateral to market on a daily basis.
Repurchase  agreements  maturing  in more  than  seven  days  may be  considered
illiquid and may be subject to each Fund's  limitation on investment in illiquid
securities.


REVERSE REPURCHASE AGREEMENTS AND MORTGAGE DOLLAR ROLLS


A reverse  repurchase  agreement  involves the temporary sale of a security by a
Fund and its agreement to  repurchase  the  instrument at a specified  time at a
higher price. Such agreements are short-term in nature. During the period before
repurchase, the Fund continues to receive principal and interest payments on the
securities.


                                       25


<PAGE>


In a mortgage  dollar roll, a Fund sells a fixed income security for delivery in
the current month and  simultaneously  contracts to  repurchase a  substantially
similar  security (same type,  coupon and maturity) on a specified  future date.
During the roll period,  the Fund would forego  principal  and interest  paid on
such  securities.  The Fund would be compensated  by the difference  between the
current sales price and the forward price for the future purchase, as well as by
any interest earned on the proceeds of the initial sale.


In accordance with regulatory requirements, a Fund will segregate cash or liquid
securities  whenever it enters into reverse  repurchase  agreements  or mortgage
dollar rolls.  Such transactions may be considered to be borrowings for purposes
of the Funds' fundamental policies concerning borrowings.


WARRANTS


The holder of a warrant has the right to purchase a given  number of shares of a
security of a particular  issuer at a specified  price until  expiration  of the
warrant.  Such  investments  provide greater  potential for profit than a direct
purchase  of the same  amount  of the  securities.  Prices  of  warrants  do not
necessarily  move in tandem with the prices of the  underlying  securities,  and
warrants are  considered  speculative  investments.  They pay no  dividends  and
confer no rights other than a purchase option.  If a warrant is not exercised by
the date of its  expiration,  a Fund would lose its  entire  investment  in such
warrant.


INTEREST RATE TRANSACTIONS


Each of these  Funds  may seek to  protect  the  value of its  investments  from
interest rate fluctuations by entering into various hedging  transactions,  such
as interest  rate swaps and the purchase or sale of interest  rate caps,  floors
and  collars.  A Fund  expects  to enter into these  transactions  primarily  to
preserve  a return  or spread  on a  particular  investment  or  portion  of its
portfolio.  A Fund may also enter into these  transactions to protect against an
increase in the price of  securities a Fund  anticipates  purchasing  at a later
date.  Each  Fund  intends  to use  these  transactions  as a  hedge  and not as
speculative investments.


Interest  rate swaps  involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate  payments for fixed rate  payments.  The  purchase of an interest  rate cap
entitles  the  purchaser,  to  the  extent  that a  specified  index  exceeds  a
predetermined  interest rate, to receive payments on a notional principal amount
from the party  selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined  interest  rate,  to receive  payments  of  interest on a notional
principal  amount from the party selling such  interest rate floor.  An interest
rate collar combines elements of buying a cap and selling a floor.


A Fund may enter into interest rate swaps,  caps,  floors, and collars on either
an asset-based or  liability-based  basis depending on whether it is hedging its
assets or its liabilities,  and will only enter into such  transactions on a net
basis,  i.e.,  the two payment  streams are netted out, with a Fund receiving or
paying, as the case may be, only the net amount of the two payments.  The amount
of the  excess,  if any,  of a Fund's  obligations  over its  entitlements  with
respect to each


                                       26


<PAGE>


interest rate swap,  cap,  floor, or collar will be accrued on a daily basis and
an amount of cash or liquid  securities having an aggregate value at least equal
to the  accrued  excess  will  be  maintained  in a  segregated  account  by the
custodian.


A Fund will not enter into any interest  rate  transaction  unless the unsecured
senior debt or the claims-paying  ability of the other party thereto is rated in
the highest  rating  category of at least one NRSRO at the time of entering into
such transaction.  If there is a default by the other party to such transaction,
a Fund will have contractual  remedies pursuant to the agreements related to the
transaction.  The swap  market has grown  substantially  in recent  years with a
large number of banks and investment banking firms acting both as principals and
agents. As a result,  the swap market has become well established and provides a
degree of liquidity.
Caps,  floors and  collars  are more  recent  innovations  which tend to be less
liquid than swaps.


STEP DOWN PREFERRED SECURITIES


Step down perpetual preferred  securities are issued by a real estate investment
trust ("REIT")  making a mortgage loan to a single  borrower.  The dividend rate
paid by these securities is initially  relatively high, but declines yearly. The
securities are subject to call if the REIT suffers an unfavorable tax event, and
to tender by the issuer's  equity holder in the tenth year; both events could be
on terms  unfavorable  to the holder of the preferred  securities.  The value of
these  securities  will be  affected  by changes in the value of the  underlying
mortgage  loan.  The REIT is not  diversified,  and the  value of the  mortgaged
property may not cover its obligations. Step down perpetual preferred securities
are considered restricted securities under the 1933 Act.


FUTURES CONTRACTS


Each of these  Funds may  purchase  and sell  futures  contracts  solely for the
purpose of hedging against the effect that changes in general market conditions,
interest rates, and conditions affecting  particular  industries may have on the
values of securities held by a Fund or which a Fund intends to purchase, and not
for purposes of speculation.  For  information  about foreign  currency  futures
contracts, see "Foreign Currency Transactions" below.


         GENERAL  DESCRIPTION OF FUTURES CONTRACTS.  A futures contract provides
for the future sale by one party and  purchase  by another  party of a specified
amount of a particular  financial  instrument (debt security) or commodity for a
specified  price  at a  designated  date,  time,  and  place.  Although  futures
contracts by their terms require  actual future  delivery of and payment for the
underlying financial  instruments,  such contracts are usually closed out before
the delivery date.  Closing out an open futures contract position is effected by
entering  into  an  offsetting  sale or  purchase,  respectively,  for the  same
aggregate  amount of the same  financial  instrument on the same delivery  date.
Where a Fund has sold a futures  contract,  if the offsetting price is more than
the original futures contract purchase price, the Fund realizes a gain; if it is
less, the Fund realizes a loss.


         INTEREST RATE FUTURES  CONTRACTS.  An interest rate futures contract is
an  obligation  traded  on an  exchange  or  board of trade  that  requires  the
purchaser to accept  delivery,  and the


                                       27


<PAGE>



seller to make delivery,  of a specified  quantity of the  underlying  financial
instrument, such as U.S. Treasury bills and bonds, in a stated delivery month at
a price fixed in the contract.


The Funds may purchase and sell interest rate futures as a hedge against changes
in interest rates that would adversely  impact the value of debt instruments and
other  interest  rate  sensitive  securities  being held or to be purchased by a
Fund.  A Fund  might  employ a hedging  strategy  whereby it would  purchase  an
interest  rate  futures  contract  when it intends to invest in  long-term  debt
securities  but wishes to defer their  purchase  until it can orderly  invest in
such securities or because  short-term  yields are higher than long-term yields.
Such a  purchase  would  enable  the Fund to earn  the  income  on a  short-term
security  while at the same  time  minimizing  the  effect  of all or part of an
increase  in the market  price of the  long-term  debt  security  which the Fund
intends to  purchase in the future.  A rise in the price of the  long-term  debt
security  prior to its  purchase  either  would be offset by an  increase in the
value of the  futures  contract  purchased  by the  Fund or  avoided  by  taking
delivery of the debt securities under the futures contract.


A Fund would sell an interest  rate futures  contract to continue to receive the
income from a long-term debt security, while endeavoring to avoid part or all of
the decline in market value of that security  which would  accompany an increase
in interest  rates.  If interest  rates rise, a decline in the value of the debt
security  held by the Fund would be  substantially  offset by the ability of the
Fund  to  repurchase  at a  lower  price  the  interest  rate  futures  contract
previously  sold.  While the Fund could sell the  long-term  debt  security  and
invest in a short-term security, this would ordinarily cause the Fund to give up
income on its investment since long-term rates normally exceed short-term rates.


         STOCK INDEX FUTURES CONTRACTS (CONSECO CONVERTIBLE SECURITIES,  CONSECO
BALANCED,  CONSECO EQUITY AND CONSECO 20 FUNDS). A stock index (for example, the
Standard & Poor's 500 Composite Stock Price Index or the New York Stock Exchange
Composite  Index) assigns  relative  values to the common stocks included in the
index and fluctuates  with changes in the market values of such stocks.  A stock
index  futures  contract is a  bilateral  agreement  to accept or make  payment,
depending on whether a contract is purchased or sold, of an amount of cash equal
to a specified  dollar  amount  multiplied by the  difference  between the stock
index value at the close of the last  trading day of the  contract and the price
at which the futures contract was originally purchased or sold.


To the extent  that  changes in the value of a Fund  correspond  to changes in a
given stock index,  the sale of futures  contracts on that index ("short hedge")
would  substantially  reduce the risk to the Fund of a market decline and, by so
doing,  provide an alternative to a liquidation of securities  positions,  which
may be  difficult  to  accomplish  in a rapid and orderly  fashion.  Stock index
futures contracts might also be sold:

I.       When a sale  of  Fund  securities  at  that  time  would  appear  to be
         disadvantageous in the long-term because such liquidation would:

         A.    Forego possible appreciation,

         B.    Create a situation in which the securities would be difficult  to
               repurchase, or


                                       28


<PAGE>


         C.    Create substantial brokerage commissions;

II.      When a liquidation of part of the investment portfolio has commenced or
         is  contemplated,  but  there  is, in the  Adviser's  determination,  a
         substantial  risk of a major price decline  before  liquidation  can be
         completed; or

III.     To close out stock index futures purchase transactions.


Where the Adviser anticipates a significant market or market sector advance, the
purchase  of a stock  index  futures  contract  ("long  hedge")  affords a hedge
against the  possibility of not  participating  in such advance at a time when a
Fund is not fully invested. Such purchases would serve as a temporary substitute
for the purchase of individual stocks, which may then be purchased in an orderly
fashion.  As purchases of stock are made, an amount of index  futures  contracts
which is  comparable  to the amount of stock  purchased  would be  terminated by
offsetting  closing  sales  transactions.  Stock  index  futures  might  also be
purchased:

1.       If the Fund is attempting to purchase equity  positions in issues which
         it may have or is having difficulty  purchasing at prices considered by
         the  Adviser to be fair value  based upon the price of the stock at the
         time it qualified for inclusion in the investment portfolio, or

2.       To close out stock index futures sales transactions.


         GOLD FUTURES  CONTRACTS.  Conseco  Balanced Fund may enter into futures
contracts on gold. A gold futures  contract is a standardized  contract which is
traded on a regulated  commodity  futures  exchange  and which  provides for the
future  delivery of a specified  amount of gold at a specified  date,  time, and
price.  When the Fund  purchases a gold contract,  it becomes  obligated to take
delivery  and pay for the gold from the seller in  accordance  with the terms of
the contract.  When the Fund sells a gold futures contract, it becomes obligated
to make delivery of the gold to the  purchaser in  accordance  with the terms of
the  contract.  The Fund will enter  into gold  futures  contracts  only for the
purpose of hedging its holdings or intended  holdings of gold  stocks.  The Fund
will not engage in these  contracts for  speculation or for achieving  leverage.
The hedging  activities may include  purchases of futures contracts as an offset
against  the effect of  anticipated  increases  in the price of gold or sales of
futures contracts as an offset against the effect of anticipated declines in the
price of gold.


         OPTIONS ON FUTURES CONTRACTS. Each of the Funds may purchase options on
futures contracts. Conseco Convertible Securities Fund may also write options on
such contracts.  When a Fund purchases a futures option,  it acquires the right,
in return for the  premium  paid,  to assume a long  position  (in the case of a
call)  or  short  position  (in the case of a put) in a  futures  contract  at a
specified exercise price prior to the expiration of the option. Upon exercise of
a call option,  the purchaser  acquires a long position in the futures  contract
and the writer of the option is assigned the  opposite  short  position.  In the
case of a put option, the converse is true. In most cases, however, a Fund would
close out its position before expiration by an offsetting purchase or sale.


                                       29


<PAGE>


The Funds may enter into options on futures  contracts  only in connection  with
hedging strategies. Generally, these strategies would be employed under the same
market  conditions  in  which a Fund  would  use put and  call  options  on debt
securities, as described in "Options on Securities" below.


         RISKS  ASSOCIATED WITH FUTURES AND FUTURES  OPTIONS.  There are several
risks  associated  with the use of  futures  and  futures  options  for  hedging
purposes.  While  hedging  transactions  may  protect  a  Fund  against  adverse
movements in the general level of interest rates and economic  conditions,  such
transactions  could also preclude the Fund from the  opportunity to benefit from
favorable movements in the underlying securities. There can be no guarantee that
the anticipated  correlation  between price movements in the hedging vehicle and
in the portfolio  securities  being hedged will occur. An incorrect  correlation
could result in a loss on both the hedged  securities and the hedging vehicle so
that the Fund's return might have been better if hedging had not been attempted.
The degree of  imperfection  of  correlation  depends on  circumstances  such as
variations  in  speculative  market  demand for  futures  and  futures  options,
including  technical  influences  in futures and futures  options  trading,  and
differences  between the financial  instruments being hedged and the instruments
underlying  the standard  contracts  available  for trading in such  respects as
interest rate levels, maturities, and creditworthiness of issuers. A decision as
to whether,  when,  and how to hedge involves the exercise of skill and judgment
and even a  well-conceived  hedge may be  unsuccessful to some degree because of
unexpected market behavior or interest rate trends.


There can be no assurance  that a liquid market will exist at a time when a Fund
seeks to close out a futures contract or a futures option position. Most futures
exchanges  and boards of trade  limit the  amount of  fluctuation  permitted  in
futures  contract  prices  during a single  day.  Once the daily  limit has been
reached  on a  particular  contract,  no trades  may be made that day at a price
beyond  that  limit.  The daily  limit  governs  only price  movements  during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures  prices  have  occasionally   moved  to  the  daily  limit  for  several
consecutive  trading days with little or no trading,  thereby  preventing prompt
liquidation  of positions and  subjecting  some holders of futures  contracts to
substantial losses. In addition, certain of these instruments are relatively new
and  without a  significant  trading  history.  Lack of a liquid  market for any
reason may prevent a Fund from liquidating an unfavorable  position and the Fund
would remain obligated to meet margin  requirements and continue to incur losses
until the position is closed.


To the extent  that a fund  enters into  futures  contracts,  options on futures
contracts and options on foreign currencies traded on a cftc-regulated exchange,
in each case that is not for bona  fide  hedging  purposes  (as  defined  by the
cftc),  the aggregate  initial margin and premiums  required to establish  these
positions  (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the fund's portfolio,
after  taking  into  account  unrealized  profits and  unrealized  losses on any
contracts the fund has entered into.


                                       30


<PAGE>


OPTIONS ON SECURITIES AND SECURITIES INDICES


The Funds may purchase put and call options on  securities,  and (except for the
Conseco Fixed Income and Conseco High Yield Funds) put and call options on stock
indices,  at such times as the Adviser deems  appropriate  and consistent with a
Fund's investment  objective.  The Conseco Convertible  Securities Fund also may
write  call and put  options,  and each of the  other  Funds  may  write  listed
"covered"  call and  "secured"  put  options.  Each Fund may enter into  closing
transactions  in order to  terminate  its  obligations  either  as a writer or a
purchaser of an option prior to the expiration of the option.


         PURCHASING OPTIONS ON SECURITIES. An option on a security is a contract
that gives the  purchaser  of the option,  in return for the premium  paid,  the
right to buy a specified  security  (in the case of a call  option) or to sell a
specified  security  (in  the  case  of a put  option)  from  or to  the  seller
("writer") of the option at a designated  price during the term of the option. A
Fund may purchase put options on securities to protect holdings in an underlying
or related  security against a substantial  decline in market value.  Securities
are  considered  related if their price  movements  generally  correlate  to one
another.  For example,  the purchase of put options on debt securities held by a
Fund would enable a Fund to protect,  at least partially,  an unrealized gain in
an appreciated security without actually selling the security. In addition,  the
Fund would continue to receive interest income on such security.


A Fund may purchase call options on securities  to protect  against  substantial
increases in prices of securities which the Fund intends to purchase pending its
ability to invest in such securities in an orderly  manner.  A Fund may sell put
or call options it has previously purchased, which could result in a net gain or
loss  depending on whether the amount  realized on the sale is more or less than
the premium and transactional costs paid on the option which is sold.


         WRITING CALL AND PUT OPTIONS. In order to earn additional income on its
portfolio  securities or to protect  partially  against declines in the value of
such securities,  each Fund may write call options. The exercise price of a call
option  may be  below,  equal  to,  or above  the  current  market  value of the
underlying security at the time the option is written. During the option period,
a call option writer may be assigned an exercise notice  requiring the writer to
deliver the underlying  security  against  payment of the exercise  price.  This
obligation  is  terminated  upon the  expiration of the option period or at such
earlier time in which the writer effects a closing purchase transaction. Closing
purchase  transactions  will  ordinarily  be  effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to
permit the sale of the underlying security, or to enable a Fund to write another
call option on the underlying security with either a different exercise price or
expiration date or both.


In order to earn additional  income or to protect partially against increases in
the value of securities to be purchased, the Funds may write put options. During
the option period, the writer of a put option may be assigned an exercise notice
requiring the writer to purchase the underlying security at the exercise price.


The Funds (except Conseco  Convertible  Securities Fund) may write a call or put
option only if the call option is  "covered"  or the put option is  "secured" by
the Fund. Under a covered call


                                       31


<PAGE>


option,  the  Fund  is  obligated,  as the  writer  of the  option,  to own  the
underlying  securities subject to the option or hold a call at an equal or lower
exercise price, for the same exercise period,  and on the same securities as the
written call. Under a secured put option, a Fund must maintain,  in a segregated
account  with the  Trust's  custodian,  cash or liquid  securities  with a value
sufficient  to meet its  obligation  as writer of the option.  A put may also be
secured if the Fund holds a put on the same  underlying  security at an equal or
greater exercise price. Prior to exercise or expiration, an option may be closed
out by an offsetting purchase or sale of an option by the same Fund. The Conseco
Convertible  Securities  Fund  may  write  call  and put  options  that  are not
"covered" or "secured."


         OPTIONS ON  SECURITIES  INDICES.  Call and put  options  on  securities
indices  would be  purchased  or written by a Fund for the same  purposes as the
purchase or sale of options on  securities.  Options on  securities  indices are
similar to options on securities,  except that the exercise of securities  index
options  requires cash payment and does not involve the actual  purchase or sale
of  securities.  In addition,  securities  index options are designed to reflect
price  fluctuations in a group of securities or segment of the securities market
rather  than price  fluctuations  in a single  security.  The  purchase  of such
options may not enable a Fund to hedge effectively  against stock market risk if
they are not highly correlated with the value of its securities.  Moreover,  the
ability to hedge  effectively  depends upon the ability to predict  movements in
the stock market, which cannot be done accurately in all cases.


         RISKS OF OPTIONS  TRANSACTIONS.  The  purchase  and  writing of options
involves certain risks.  During the option period,  the covered call writer has,
in return for the premium on the option, given up the opportunity to profit from
a price increase in the underlying  securities above the exercise price, and, as
long as its obligation as a writer  continues,  has retained the risk of loss if
the price of the underlying  security  declines.  The writer of an option has no
control  over the time when it may be required to fulfill  its  obligation  as a
writer of the option.  Once an option writer has received an exercise notice, it
cannot  effect  a  closing  purchase  transaction  in  order  to  terminate  its
obligation  under  the  option  and must  deliver  or  purchase  the  underlying
securities at the exercise price. If a put or call option purchased by a Fund is
not sold when it has remaining  value, and if the market price of the underlying
security,  in the case of a put,  remains  equal to or greater than the exercise
price or,  in the case of a call,  remains  less  than or equal to the  exercise
price, the Fund will lose its entire investment in the option. Also, where a put
or call option on a  particular  security is purchased  to hedge  against  price
movements  in a related  security,  the price of the put or call option may move
more or less than the price of the related security.


There can be no assurance  that a liquid  market will exist when a Fund seeks to
close out an option position. If a Fund cannot effect a closing transaction,  it
will not be able to sell the  underlying  security or securities in a segregated
account while the previously written option remains outstanding,  even though it
might otherwise be advantageous to do so. Possible  reasons for the absence of a
liquid  secondary  market  on a  national  securities  exchange  could  include:
insufficient  trading  interest,  restrictions  imposed by  national  securities
exchanges,  trading  halts or  suspensions  with  respect  to  options  or their
underlying  securities,  inadequacy  of the  facilities  of national  securities
exchanges or The Options  Clearing  Corporation  due to a high trading


                                       32


<PAGE>


volume  or other  events,  and a  decision  by one or more  national  securities
exchanges to  discontinue  the trading of options or to impose  restrictions  on
certain types of orders.


There  also  can be no  assurance  that a Fund  would  be able to  liquidate  an
over-the-counter ("OTC") option at any time prior to expiration.  In contrast to
exchange-traded  options  where the clearing  organization  affiliated  with the
particular  exchange  on  which  the  option  is  listed  in  effect  guarantees
completion of every exchange-traded  option, OTC options are contracts between a
Fund and a counter-party,  with no clearing organization guarantee. Thus, when a
Fund purchases an OTC option,  it generally will be able to close out the option
prior to its  expiration  only by entering into a closing  transaction  with the
dealer from whom the Fund originally purchased the option.


Since  option  premiums  paid or received by a Fund are small in relation to the
market value of underlying investments,  buying and selling put and call options
offer large  amounts of  leverage.  Thus,  trading in options  could result in a
Fund's  net asset  value  being  more  sensitive  to changes in the value of the
underlying securities.


FOREIGN CURRENCY TRANSACTIONS (ALL FUNDS EXCEPT CONSECO FIXED INCOME AND CONSECO
EQUITY FUNDS)


A foreign currency  futures  contract is a standardized  contract for the future
delivery  of a  specified  amount of a foreign  currency,  at a future date at a
price  set at the  time of the  contract.  A  forward  currency  contract  is an
obligation to purchase or sell a currency  against another  currency at a future
date at a price  agreed upon by the  parties.  A Fund may either  accept or make
delivery of the  currency at the maturity of the contract or, prior to maturity,
enter into a closing transaction involving the purchase or sale of an offsetting
contract.  A Fund will purchase and sell such contracts for hedging purposes and
not as an investment.  A Fund will engage in foreign currency futures  contracts
and  forward  currency  transactions  in  anticipation  of or to protect  itself
against fluctuations in currency exchange rates.


Except for the Conseco  Convertible  Securities Fund, a Fund will not (1) commit
more than 15 percent of its total assets computed at market value at the time of
commitment to foreign  currency futures or forward  currency  contracts,  or (2)
enter into a foreign currency contract with a term of greater than one year. The
Conseco Convertible  Securities Fund will not commit more than 15 percent of its
total  assets  computed  at market  value at the time of  commitment  to foreign
currency futures or forward currency contracts,  but it may enter into a foreign
currency contract with a term of greater than one year.


Forward currency  contracts are not traded on regulated  commodities  exchanges.
When a Fund  enters  into a forward  currency  contract,  it incurs  the risk of
default by the counter-party to the transaction.


There can be no assurance  that a liquid  market will exist when a Fund seeks to
close out a foreign currency futures or forward currency  position.  While these
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged  currency,  at the same time, they tend to limit any potential gain which
might result should the value of such currency increase.


                                       33


<PAGE>


Although each Fund values its assets daily in U.S.  dollars,  it does not intend
physically to convert its holdings of foreign  currencies into U.S. dollars on a
daily basis. A Fund will do so from time to time, thereby incurring the costs of
currency  conversion.  Although foreign exchange dealers do not charge a fee for
conversion,  they do realize a profit  based on the  difference  (the  "spread")
between  the prices at which they are buying  and  selling  various  currencies.
Thus,  a dealer  may offer to sell a foreign  currency  to the Fund at one rate,
while  offering a lesser  rate of  exchange  if the Fund  desires to resell that
currency to the dealer.


OPTIONS  ON  FOREIGN  CURRENCIES   (CONSECO  HIGH  YIELD,   CONSECO  CONVERTIBLE
SECURITIES, CONSECO BALANCED AND CONSECO 20 FUNDS)


Each of these Funds may invest in call and put options on foreign currencies.  A
Fund may purchase call and put options on foreign  currencies as a hedge against
changes in the value of the U.S.  dollar (or another  currency) in relation to a
foreign currency in which portfolio securities of the Fund may be denominated. A
call option on a foreign  currency  gives the  purchaser the right to buy, and a
put  option  the  right to sell,  a  certain  amount of  foreign  currency  at a
specified  price  during a fixed  period of time.  A Fund may enter into closing
sale transactions with respect to such options, exercise them, or permit them to
expire.


A Fund may employ hedging  strategies with options on currencies before the Fund
purchases a foreign  security  denominated  in the hedged  currency,  during the
period the Fund holds a foreign security,  or between the day a foreign security
is purchased or sold and the date on which payment therefor is made or received.
Hedging  against a change in the value of a foreign  currency  in the  foregoing
manner does not eliminate  fluctuations in the prices of portfolio securities or
prevent  losses if the  prices of such  securities  decline.  Furthermore,  such
hedging transactions reduce or preclude the opportunity for gain if the value of
the  hedged  currency  increases  relative  to the U.S.  dollar.  The Funds will
purchase  options on foreign  currencies only for hedging  purposes and will not
speculate in options on foreign  currencies.  The Funds may invest in options on
foreign  currency which are either listed on a domestic  securities  exchange or
traded on a recognized foreign exchange.


An option  position on a foreign  currency may be closed out only on an exchange
which provides a secondary market for an option of the same series. Although the
Funds will purchase only exchange-traded  options,  there is no assurance that a
liquid secondary market on an exchange will exist for any particular  option, or
at any particular time. In the event no liquid secondary market exists, it might
not be possible to effect closing  transactions in particular options. If a Fund
cannot  close out an  exchange-traded  option  which it holds,  it would have to
exercise its option in order to realize any profit and would incur transactional
costs on the purchase or sale of the underlying assets.


SEGREGATION AND COVER FOR OPTIONS, FUTURES AND OTHER FINANCIAL INSTRUMENTS


The use of the  financial  instruments  discussed  above,  I.E.,  interest  rate
transactions  (including swaps,  caps, floors and collars),  futures  contracts,
options on future contacts,  options on securities and securities  indices,  and
forward contracts  (collectively,  "Financial  Instruments"),


                                       34


<PAGE>


may be subject to applicable  regulations of the SEC, the several exchanges upon
which they are traded, and/or the Commodity Futures Trading Commission ("CFTC").


Each Fund is  required  to  maintain  assets  as  "cover,"  maintain  segregated
accounts  or  make  margin   payments  when  it  takes  positions  in  Financial
Instruments involving obligations to third parties (I.E.,  Financial Instruments
other than purchased options).  No Fund will enter into such transactions unless
it owns either (1) an offsetting ("covered") position in securities,  currencies
or other options, futures contracts or forward contracts, or (2) cash and liquid
assets with a value,  marked-to-market  daily, sufficient to cover its potential
obligations  to the extent not covered as provided in (1) above.  Each Fund will
comply with SEC guidelines  regarding  cover for these  instruments and will, if
the  guidelines  so  require,  set aside cash or liquid  assets in a  segregated
account with its custodian in the prescribed amount as determined daily.


SECURITIES LENDING


The Funds may lend securities to broker-dealers or other institutional investors
pursuant to agreements  requiring that the loans be continuously  secured by any
combination of cash, U.S.  Government  securities,  and approved bank letters of
credit that at all times  equal at least 100% of the market  value of the loaned
securities.  The Conseco High Yield, Conseco Convertible  Securities and Conseco
20 Funds will not make such loans if, as a result,  the aggregate  amount of all
outstanding securities loans would exceed 33 1/3% of the Fund's total assets. As
a  fundamental  policy of the Conseco  Fixed  Income,  Conseco  Equity,  and the
Conseco  Balanced  Funds,  such  loans  will not be made if,  as a  result,  the
aggregate  amount of all outstanding  securities  loans would exceed 15% of each
Fund's total  assets.  A Fund  continues to receive  interest on the  securities
loaned and  simultaneously  earns either  interest on the investment of the cash
collateral  or fee income if the loan is  otherwise  collateralized.  Should the
borrower  of the  securities  fail  financially,  there  is a risk of  delay  in
recovery of the securities loaned or loss of rights in the collateral.  However,
the Funds seek to minimize this risk by making loans only to borrowers which are
deemed  by the  Adviser  to be of good  financial  standing  and that  have been
approved by the Board.


BORROWING


A Fund may borrow  money from a bank,  but only if  immediately  after each such
borrowing and  continuing  thereafter  the Fund would have asset coverage of 300
percent.  Leveraging  by means of borrowing  will  exaggerate  the effect of any
increase or decrease in the value of portfolio  securities on a Fund's net asset
value.  Leverage also creates  interest  expenses;  if those expenses exceed the
return on the transactions that the borrowings  facilitate,  a Fund will be in a
worse position than if it had not borrowed. The use of borrowing tends to result
in a faster  than  average  movement,  up or down,  in the net asset  value of a
Fund's shares.  A Fund also may be required to maintain minimum average balances
in  connection  with  such  borrowing  or to pay a  commitment  or other  fee to
maintain a line of credit;  either of these requirements would increase the cost
of borrowing over the stated interest rate. The use of derivatives in connection
with  leverage may create the potential for  significant  losses.  The Funds may
pledge assets in


                                       35


<PAGE>


connection  with permitted  borrowings.  Each Fund may borrow an amount up to 33
1/3 % of its assets.


INVESTMENT IN SECURITIES OF OTHER INVESTMENT COMPANIES


Securities of other investment  companies have the potential to appreciate as do
any other securities, but tend to present less risk because their value is based
on a diversified portfolio of investments. The 1940 Act expressly permits mutual
funds to invest in other investment companies within prescribed limitations.  An
investment company generally may invest in other investment  companies if at the
time of such  investment  (1) it does not own more than 3 percent  of the voting
securities  of any one  investment  company,  (2) it does not invest more than 5
percent of its assets in any single investment  company,  and (3) its investment
in all investment companies does not exceed 10 percent of assets.


Some of the  countries  in  which  a Fund  may  invest  may  not  permit  direct
investment  by outside  investors.  Investments  in such  countries  may only be
permitted through foreign government approved or authorized investment vehicles,
which may  include  other  investment  companies.  In  addition,  it may be less
expensive  and more  expedient  for the Fund to invest  in a foreign  investment
company in a country which permits direct foreign investment.


Investment  companies  in  which  the  Funds  may  invest  charge  advisory  and
administrative  fees and may also assess a sales load and/or  distribution fees.
Therefore,  investors in a Fund that invests in other investment companies would
indirectly  bear costs  associated  with those  investments as well as the costs
associated  with  investing in the Fund. The  percentage  limitations  described
above  significantly  limit the costs a Fund may incur in  connection  with such
investments.


SHORT SALES


The Funds may effect short sales.  A short sale is a transaction in which a Fund
sells a security in  anticipation  that the market  price of the  security  will
decline.  A Fund may  effect  short  sales  (i) as a form of  hedging  to offset
potential  declines  in long  positions  in  securities  it owns or  anticipates
acquiring,  or in similar  securities,  and (ii) to maintain  flexibility in its
holdings.  In a short sale  "against the box," at the time of sale the Fund owns
the security it has sold short or has the immediate and  unconditional  right to
acquire  at  no  additional  cost  the  identical  security.   Under  applicable
guidelines  of the SEC staff,  if a Fund  engages in a short sale  (other than a
short sale against-the-box), it must put an appropriate amount of cash or liquid
securities in a segregated account (not with the broker).


The effect of short  selling  on a Fund is  similar  to the effect of  leverage.
Short  selling may  exaggerate  changes in a Fund's NAV.  Short selling may also
produce  higher than normal  portfolio  turnover,  which may result in increased
transaction costs to a Fund.


                                       36


<PAGE>


INVESTMENT PERFORMANCE


STANDARDIZED YIELD QUOTATIONS.  Each class of the Funds may advertise investment
performance  figures,  including  yield.  Each class' yield will be based upon a
stated 30-day period and will be computed by dividing the net investment  income
per share earned  during the period by the maximum  offering  price per share on
the last day of the period, according to the following formula:

YIELD = 2 [((A-B)/CD)+1)6-1]

Where:
A = the  dividends  and  interest  earned  during the period.  
B = the  expenses accrued for the period (net of reimbursements, if any).
C = the average daily number of shares  outstanding  during the period that were
entitled to receive dividends.
D = the maximum  offering  price (which is the net asset value plus, for Class A
shares only, the maximum  initial sales charge) per share on the last day of the
period.

Based on the 30-day period ended  December 31, 1998, the average yield for Class
A of the Conseco Fixed Income Fund was 4.46%; Class B was 4.34%; and Class C was
4.36%.

Based on the 30-day period ended  December 31, 1998, the average yield for Class
A of the Conseco High Yield Fund was 8.42%;  Class B was 8.30%;  and Class C was
8.12%.


STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. Each class of the Funds may
advertise its total return and its  cumulative  total  return.  The total return
will be based upon a stated  period and will be  computed by finding the average
annual  compounded  rate of return over the stated  period that would  equate an
initial  amount  invested  to the  ending  redeemable  value  of the  investment
(assuming  reinvestment  of  all  distributions),  according  to  the  following
formula:


P (1+T)n=ERV


Where:
P = a  hypothetical  initial  payment of $1,000.
T = the average  annual  total return.
n = the number of years.
ERV = the ending redeemable value at the end of the stated period of a
      hypothetical  $1,000  payment made at the beginning of the stated period.


The total  return  for Class B and Class C shares of each Fund will  assume  the
maximum applicable contingent deferred sales charge is deducted at the times, in
the  amounts,  and under the  terms  disclosed  in the  Fund's  Prospectus.  The
cumulative  total return will be based upon a stated period and will be computed
by dividing the ending redeemable value (i.e., after deduction


                                       37


<PAGE>


of any applicable  sales  charges) of a hypothetical  investment by the value of
the initial investment (assuming reinvestment of all distributions).


Each investment  performance  figure will be carried to the nearest hundredth of
one percent.

                          AVERAGE ANNUAL TOTAL RETURNS
                         PERIODS ENDED DECEMBER 31,1998

<TABLE>
<CAPTION>
============================================================================================================
                      FUND                               ONE YEAR               PERIOD FROM INCEPTION
============================================================================================================
             <S>                                          <C>                        <C>                    
              Conseco Fixed Income
                    Class A                                2.19%                       11.00%
                    Class B                                 N/A                        -0.22%
                    Class C                                 N/A                         5.38%
- ------------------------------------------------------------------------------------------------------------
               Conseco High Yield
                    Class A                                 N/A                         0.43%
                    Class B                                 N/A                        -3.92%
                    Class C                                 N/A                        -0.12%
- ------------------------------------------------------------------------------------------------------------
        Conseco Convertible Securities*
                    Class A                                 N/A                          N/A
                    Class B
                    Class C
- ------------------------------------------------------------------------------------------------------------
                Conseco Balanced
                    Class A                                5.98%                       24.20%
                    Class B                                 N/A                         1.52%
                    Class C                                 N/A                         5.04%
- ------------------------------------------------------------------------------------------------------------
                 Conseco Equity
                    Class A                                9.43%                       34.50%
                    Class B                                 N/A                         9.44%
                    Class C                                 N/A                         6.14%
- ------------------------------------------------------------------------------------------------------------
                   Conseco 20
                    Class A                                 N/A                        20.64%
                    Class B                                 N/A                         7.71%
                    Class C                                 N/A                         2.76%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*Because the Fund is new it does not have performance to report.


NON-STANDARDIZED PERFORMANCE. In addition, in order to more completely represent
a Fund's  performance  or more  accurately  compare  such  performance  to other
measures of investment return, a Fund also may include in advertisements,  sales
literature  and  shareholder   reports  other  total  return   performance  data
("Non-Standardized Return").  Non-Standardized Return may be quoted for the same
or different  periods as those for which  Standardized  Return is required to be
quoted;  it may consist of an aggregate  or average  annual  percentage  rate of
return,  actual year-by-year rates or any combination thereof.  Non-Standardized
Return  for  Class A, B and C  shares  may or may not take  sales  charges  into
account; performance data calculated without taking the effect of sales charges,
if any,  into  account  may be higher  than data  including  the  effect of such


                                       38


<PAGE>


charges.  All  non-standardized  performance  will  be  advertised  only  if the
standard  performance  data for the  same  period,  as well as for the  required
periods, is also presented.


GENERAL  INFORMATION.   From  time  to  time,  the  Funds  may  advertise  their
performance  compared to similar  funds or types of  investments  using  certain
unmanaged indices, reporting services and publications.  Descriptions of some of
the indices which may be used are listed below.


The Standard & Poor's 500 Composite Stock Price Index is a well diversified list
of 500 companies representing the U.S. stock market.


The  Standard  & Poor's  MidCap 400 Index  consists  of 400  domestic  stocks of
companies whose market capitalizations range from $201 million to $14.4 billion,
with a median market capitalization of $2.1 billion.


The NASDAQ  Composite OTC Price Index is a market  value-weighted  and unmanaged
index showing the changes in the aggregate market value of  approximately  5,510
stocks listed on the NASDAQ Stock Market.


The Lehman  Government Bond Index is a measure of the market value of all public
obligations of the U.S.  Treasury;  all publicly  issued debt of all agencies of
the U.S. Government and all quasi-federal  corporations;  and all corporate debt
guaranteed  by the  U.S.  Government.  Mortgage-backed  securities  and  foreign
targeted issues are not included in the Lehman Government Bond Index.


The Lehman  Government/Corporate  Bond Index is a measure of the market value of
approximately  5,900  bonds  with a face  value  currently  in  excess  of  $3.5
trillion. To be included in the Lehman Government/Corporate Index, an issue must
have amounts  outstanding  in excess of $100 million,  have at least one year to
maturity and be rated "BBB/Baa" or higher ("investment grade") by an NRSRO.


The  Lehman  Brothers  Aggregate  Bond  Index  is an  index  consisting  of  the
securities listed in Lehman Brothers Government/Corporate Bond Index, the Lehman
Brothers Mortgage-Backed  Securities Index, and the Lehman Brothers Asset-Backed
Securities  Index. The  Government/Corporate  Bond Index is described above. The
Mortgage-Backed   Securities  Index  consists  of  15  and  30-year  fixed  rate
securities backed by mortgage pools of GNMA, FHLMC and FNMA (excluding buydowns,
manufactured homes and graduated equity mortgages).  The Asset-Backed Securities
Index  consists  of  credit  card,   auto  and  home  equity  loans   (excluding
subordinated tranches) with an average life of one year.


The Morgan Stanley Capital  International Europe,  Australasia,  Far East Index,
also known as the EAFE Index,  is an  unmanaged  index of common stock prices of
more than 1,100  companies  from Europe,  Australia and the Far East  translated
into U.S. dollars.


The  Merrill  Lynch  Convertible  Securities  Index is a  market  capitalization
weighted  index  of  over  450  non-mandatory   domestic  corporate  convertible
securities, representing approximately 95% of the total outstanding market value
of U.S. convertible securities. To be included in the index,


                                       39


<PAGE>


bonds and preferred  stocks must be convertible  only to common stock and have a
market value or original par value of at least $500 million.


The Boston  Convertible  Securities  Index is a market  capitalization  weighted
index of over 250 convertible  bonds and preferred  stocks rated B- or above. To
be included in the index,  convertible  bonds must have an original par value of
at least $50 million and preferred  stocks must have a minimum of 500,000 shares
outstanding. The index also includes U.S. dollar-denominated Eurobonds that have
been  issued by U.S.  domiciled  companies,  are rated B- or above,  and have an
original par value of at least $100 million.


Each  index  includes  income  and  distributions  but  does not  reflect  fees,
brokerage commissions or other expenses of investing.


In  addition,  from  time  to  time  in  reports  and  promotions  (1) a  Fund's
performance  may be compared  to other  groups of mutual  funds  tracked by: (a)
Lipper  Analytical  Services  and  Morningstar,  Inc.,  widely used  independent
research  firms  which  rank  mutual  funds by overall  performance,  investment
objectives, and assets; or (b) other financial or business publications, such as
Business  Week,  Money  Magazine,  Forbes and  Barron's  which  provide  similar
information; (2) the Consumer Price Index (measure for inflation) may be used to
assess  the  real  rate of  return  from an  investment  in a  Fund;  (3)  other
statistics  such  as  GNP  and  net  import  and  export  figures  derived  from
governmental  publications,  e.g., The Survey of Current  Business or statistics
derived by other independent  parties,  e.g., the Investment  Company Institute,
may be  used  to  illustrate  investment  attributes  of a Fund  or the  general
economic,  business,  investment,  or  financial  environment  in  which  a Fund
operates;  (4) various  financial,  economic and market statistics  developed by
brokers, dealers and other persons may be used to illustrate aspects of a Fund's
performance;  and (5) the sectors or  industries  in which a Fund invests may be
compared to relevant indices or surveys (e.g., S&P Industry Surveys) in order to
evaluate the Fund's  historical  performance or current or potential  value with
respect to the particular industry or sector.


SECURITIES TRANSACTIONS


The Adviser is  responsible  for decisions to buy and sell  securities for these
Funds,  broker-dealer  selection, and negotiation of brokerage commission rates.
The Adviser's primary  consideration in effecting a securities  transaction will
be execution at the most  favorable  price.  A substantial  majority of a Fund's
portfolio  transactions  in fixed  income  securities  will be  transacted  with
primary  market  makers  acting as principal  on a net basis,  with no brokerage
commissions  being paid by a Fund.  In certain  instances,  the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.


In selecting a broker-dealer  to execute a particular  transaction,  the Adviser
will take the following into  consideration:  the best net price available;  the
reliability, integrity and financial condition of the broker-dealer; the size of
the order and the difficulty of execution;  and the size of  contribution of the
broker-dealer  to the investment  performance  of a Fund on a continuing  basis.
Broker-dealers may be selected who provide brokerage and/or research services to
these


                                       40


<PAGE>


Funds  and/or  other  accounts  over  which  the  Adviser  exercises  investment
discretion.  Such services may include furnishing advice concerning the value of
securities  (including providing quotations as to securities),  the advisability
of investing  in,  purchasing or selling  securities,  and the  availability  of
securities or the purchasers or sellers of securities;  furnishing  analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio  strategy  and  performance  of  accounts;  and  effecting  securities
transactions and performing  functions  incidental  thereto,  such as clearance,
settlement and custody, or required in connection therewith.


Subject  to the  Conduct  Rules of the NASD and to  obtaining  best  prices  and
executions,  the  Adviser  may select  brokers  who  provide  research  or other
services or who sell shares of the Funds to effect portfolio  transactions.  The
Adviser may also select an  affiliated  broker to execute  transactions  for the
Funds,  provided that the commissions,  fees or other  remuneration paid to such
affiliated  broker  are  reasonable  and  fair  as  compared  to  that  paid  to
non-affiliated brokers for comparable transactions.


The Adviser  shall not be deemed to have acted  unlawfully,  or to have breached
any duty created by a Fund's Investment Advisory Agreement or otherwise,  solely
by reason of its having  caused the Fund to pay a  broker-dealer  that  provides
brokerage  and  research  services  an  amount of  commission  for  effecting  a
portfolio  investment  transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction,  if the Adviser
determines  in good  faith  that such  amount of  commission  is  reasonable  in
relation to the value of the  brokerage and research  services  provided by such
broker-dealer,  viewed in terms of either  that  particular  transaction  or the
Adviser's  overall  responsibilities  with  respect  to the  Fund.  The  Adviser
allocates  orders  placed  by it on behalf of these  Funds in such  amounts  and
proportions  as the Adviser shall  determine and the Adviser will report on said
allocations  regularly  to a Fund  indicating  the  broker-dealers  to whom such
allocations have been made and the basis therefor.


The  receipt of  research  from  broker-dealers  may be useful to the Adviser in
rendering  investment  management  services to these Funds and/or the  Adviser's
other  clients;  conversely,  information  provided by  broker-dealers  who have
executed  transaction  orders on behalf  of other  clients  may be useful to the
Adviser in carrying  out its  obligations  to these  Funds.  The receipt of such
research will not be substituted for the independent research of the Adviser. It
does enable the Adviser to reduce costs to less than those which would have been
required to develop  comparable  information  through its own staff.  The use of
broker-dealers  who  supply  research  may  result  in  the  payment  of  higher
commissions than those available from other  broker-dealers who provide only the
execution of portfolio transactions.


For the fiscal years ended December 31, 1997 and 1998,  the following  brokerage
commissions were paid by the Funds:


FUND                                          1997                  1998
- ----                                          ----                  ----

Conseco Fixed Income                          $0                    $0


                                       41


<PAGE>


Conseco High Yield*                           N/A                   $0

Conseco Balanced                              $  37,658             $107,448

Conseco Equity                                $215,359              $624,839

Conseco 20*                                   N/A                   $255,305

Conseco Convertible Securities +              N/A                   $  8,567

* The Conseco High Yield and Conseco 20 Funds commenced operations on January 1,
1998.


 + The Conseco Convertible Securities Fund commenced operations on September 28,
1998. The amount listed is for the fiscal period beginning September 28, 1998.


During the fiscal year ended  December 31, 1997 and  December 31, 1998,  no Fund
paid commissions to any affiliated brokers.


During the fiscal year ended December 31, 1998,  the Fixed Income,  Balanced and
Convertible  Securities Funds acquired the securities of its "regular brokers or
dealers"  (as  defined  in the 1940 Act)  ("Regular  B/Ds") as  follows:  Lehman
Brothers Holdings,  Inc., Paine Webber Group, Salomon,  Smith Barney, Inc., J.P.
Morgan Securities, and Merrill Lynch.


Additionally,  at December 31, 1998, the following  Funds held the securities of
its Regular B/Ds with an aggregate value as follows:


         Conseco Fixed Income:

         Lehman Brothers Holdings, Inc.              $1,297,098

         Paine Webber Group                          $  215,576

         Salomon, Smith Barney Inc.                  $  102,455

         J.P. Morgan Securities                      $  426,234



         Conseco Balanced:

         Lehman Brothers Holdings, Inc.              $  629,177



         Conseco Convertible Securities:

         Merrill Lynch                               $1,142,500


                                       42


<PAGE>


Orders on behalf of these  Funds may be bunched  with  orders on behalf of other
clients  of the  Adviser.  It is  the  Adviser's  policy  that,  to  the  extent
practicable,  all clients with similar  investment  objectives and guidelines be
treated fairly and equitably in the allocation of securities trades.


The Board periodically reviews the Adviser's performance of its responsibilities
in  connection  with the  placement of portfolio  transactions  on behalf of the
Trust.


MANAGEMENT


THE ADVISER


The Adviser provides  investment advice and, in general,  supervises the Trust's
management and investment program,  furnishes office space, prepares reports for
the Funds,  and pays all  compensation of officers and Trustees of the Trust who
are  affiliated  persons  of the  Adviser.  Each Fund  pays all  other  expenses
incurred  in  the  operation  of  the  Fund,  including  fees  and  expenses  of
unaffiliated Trustees of the Trust.


The  Adviser is a wholly  owned  subsidiary  of  Conseco,  Inc.  ("Conseco"),  a
publicly-owned financial services company, the principal operations of which are
in development,  marketing and administration of specialized  annuity,  life and
health  insurance   products.   Conseco's   offices  are  located  at  11825  N.
Pennsylvania  Street,  Carmel,  Indiana 46032. The Adviser manages and serves as
sub-adviser to other  registered  investment  companies and manages the invested
assets of Conseco,  which owns or manages  several life insurance  subsidiaries,
and provides  investment  and servicing  functions to the Conseco  companies and
affiliates.  The  Adviser  also  manages  foundations,  endowments,  public  and
corporate  pension plans, and private client accounts.  As of December 31, 1998,
the Adviser managed in excess of $35.3 billion in assets.


The Investment  Advisory  Agreements,  dated March 28, 1997, between the Adviser
and the Conseco  Equity Fund,  Conseco  Balanced  Fund and Conseco  Fixed Income
Fund, and the Investment  Advisory Agreement dated December 31, 1997 between the
Adviser and the Conseco High Yield Fund, Conseco Convertible Securities Fund and
Conseco  20 Fund  (the  agreement  was  approved  with  respect  to the  Conseco
Convertible Securities Fund on May 14, 1997), provide that the Adviser shall not
be liable for any error in judgment  or mistake of law or for any loss  suffered
by a Fund in connection  with any  investment  policy or the  purchase,  sale or
redemption  of  any  securities  on the  recommendations  of  the  Adviser.  The
Agreements  provide that the Adviser is not protected against any liability to a
Fund or its security holders for which the Adviser shall otherwise be subject by
reason  of  willful  misfeasance,  bad  faith,  gross  negligence,  or  reckless
disregard of the duties  imposed upon it by the  Agreements  or the violation of
any applicable law.


Under  the  terms  of  the  Investment  Advisory  Agreements,  the  Adviser  has
contracted  to receive an  investment  advisory  fee equal to an annual  rate of
0.70% of the average daily net asset value of the Conseco Equity Fund,  0.70% of


                                       43


<PAGE>


the average  daily net asset value of the Conseco  Balanced  Fund,  0.45% of the
average  daily net asset value of the Conseco  Fixed Income  Fund,  0.70% of the
average  daily net asset  value of the  Conseco  High Yield  Fund,  0.70% of the
average  daily net asset  value of the  Conseco 20 Fund and 0.85% of the average
daily net asset value of the Conseco Convertible Securities Fund.


Pursuant to a contractual  arrangement with the Trust,  the Adviser,  along with
the Funds'  Administrator  and  Distributor,  has  agreed to waive  fees  and/or
reimburse  expenses through April 30, 2000, so that annual operating expenses of
the Funds are limited to the following net expenses:


                                  NET EXPENSES


             FUND                      CLASS A SHARES       CLASS B AND C SHARES
             ----                      --------------       --------------------
Conseco Fixed Income                         1.25%                 1.60%
Conseco High Yield                           1.40%                 1.90%
Conseco Convertible Securities               1.55%                 2.05%
Conseco Balanced                             1.50%                 2.00%
Conseco Equity                               1.50%                 2.00%
Conseco 20                                   1.75%                 2.25%

This  contractual   arrangement  does  not  cover  interest,   taxes,  brokerage
commissions, and extraordinary expenses.


<TABLE>
<CAPTION>
                                            ADVISORY FEES ACCRUED                AMOUNT REIMBURSED/WAIVED
                   FUND                       FISCAL YEAR ENDED                      FISCAL YEAR ENDED
                                                DECEMBER 31*                           DECEMBER 31*
                                                ------------                           ------------
                                    1997                       1998        1997                      1998
                                    -----                      ----        -----                     ----
<S>                                 <C>                    <C>            <C>                   <C>     
Conseco Fixed Income                $58,632                $146,274        $38,405               $146,274
Conseco High Yield                  N/A                    $145,966        N/A                   $145,966
Conseco Convertible Securities+     N/A                    $ 55,482        N/A                   $ 38,398
Conseco Balanced                    $ 63,605               $166,164        $49,074               $166,164
Conseco Equity                      $286,410               $534,249        $66,061               $375,909
Conseco 20                          N/A                    $166,646        N/A                   $ 98,505
</TABLE>

+The Convertible Securities Fund commenced operations on September 28, 1998.


Each Fund may receive  credits from its custodian based on cash held by the Fund
at the  custodian.  These credits may be used to reduce the custody fees payable
by the Fund. In that case, the Adviser's (and, other  affiliates')  agreement to
waive fees or reimburse  expenses will be applied only after the Fund's  custody
fees have been reduced or eliminated by the use of such credits.


                                       44


<PAGE>


OTHER SERVICE PROVIDERS


THE ADMINISTRATOR. Conseco Services, LLC (the "Administrator") is a wholly owned
subsidiary of Conseco,  and receives  compensation from the Trust pursuant to an
Administration  Agreement  dated January 2, 1997 and amended  December 31, 1997.
The   Administration   Agreement  was  approved  with  respect  to  the  Conseco
Convertible  Securities  Fund  on  May  14,  1998.  Under  that  agreement,  the
Administrator   supervises  the  overall  administration  of  the  Funds.  These
administrative  services  include  supervising the preparation and filing of all
documents  required  for  compliance  by the  Funds  with  applicable  laws  and
regulations, supervising the maintenance of books and records, and other general
and administrative responsibilities


For providing these services,  the Administrator receives a fee from each of the
Funds of .20%  per  annum of its  average  daily  net  assets.  Pursuant  to the
Administration  Agreement, the Administrator reserves the right to employ one or
more  sub-administrators to perform  administrative  services for the Funds. The
Bank of New York performs certain administrative services for each of the Funds,
pursuant to agreements with the Administrator. See "The Adviser" above regarding
the Administrator's  contractual  arrangement to waive its fees and/or reimburse
Fund expenses.


For the fiscal year ended December 31, 1998, the following  administration  fees
were accrued:

         --------------------------------------------------------------------
                               FUND                              FEES PAID
         --------------------------------------------------------------------

         Conseco Fixed Income                               $  65,007
         --------------------------------------------------------------------

         Conseco High Yield                                 $  41,707
         --------------------------------------------------------------------

         Conseco Convertible Securities                     $  13,055
         --------------------------------------------------------------------

         Conseco Balanced                                   $  47,477
         --------------------------------------------------------------------

         Conseco Equity                                     $ 152,515
         --------------------------------------------------------------------

         Conseco 20                                         $  47,614
         --------------------------------------------------------------------




CUSTODIAN. The Bank of New York, 90 Washington Street, 22nd Floor, New York, New
York 10826, serves as custodian of the assets of each Fund.


TRANSFER  AGENCY  SERVICES.  State Street Bank and Trust Company is the transfer
agent for each Fund.


INDEPENDENT ACCOUNTANTS/AUDITORS.  PricewaterhouseCoopers LLP, 2900 One American
Square,  Box  82002,  Indianapolis,  Indiana  46282-0002  serves as the  Trust's
independent accountant.


                                       45


<PAGE>


TRUSTEES AND OFFICERS OF THE TRUST


The Trustees of the Trust  decide upon matters of general  policy for the Trust.
In  addition,  the Trustees  review the actions of the Adviser,  as set forth in
"Management."  The Trust's officers  supervise the daily business  operations of
the Trust. The Trustees and officers of the Trust, their  affiliations,  if any,
with the Adviser and their principal occupations are set forth below.

<TABLE>
<CAPTION>
                 NAME, ADDRESS                         POSITION HELD                    PRINCIPAL OCCUPATION(S)
                    AND AGE                             WITH TRUST                        DURING PAST 5 YEARS
                ---------------                         ----------                        -------------------
<S>                                              <C>                      <C>
William P. Daves, Jr. (73)                        Chairman of the          Consultant to insurance and healthcare
5723 Trail Meadow                                 Board, Trustee           industries. Director, President and Chief
Dallas, TX 75230                                                           Executive Officer, FFG Insurance Co. Chairman of
                                                                           the Board and Trustee of  other mutual funds
                                                                           managed by the Adviser.

Maxwell E. Bublitz* (43)                          President and            Chartered Financial Analyst. President and
11825 N. Pennsylvania St.                         Trustee                  Director, Adviser. Previously,
Carmel, IN 46032                                                           Senior Vice President, Adviser. President and
                                                                           Trustee of other mutual funds managed by the Adviser.

Gregory J. Hahn* (38)                             Vice President for       Chartered Financial Analyst. Senior Vice
11825 N. Pennsylvania St.                         Investments and          President, Adviser. Portfolio Manager of the
Carmel, IN 46032                                  Trustee                  fixed income portion of Balanced and Fixed Income
                                                                           Funds.  Trustee and portfolio manager of other
                                                                           mutual funds managed by the Adviser.

Harold W. Hartley (75)                            Trustee                  Retired. Chartered Financial Analyst. Previously,
317 Peppard Drive, S.W.                                                    Executive Vice President, Tenneco Financial
Ft. Myers Beach, Fl 33913                                                  Services, Inc.  Trustee of other mutual funds
                                                                           managed by the Adviser. Director, Ennis Business
                                                                           Forms, Inc.


Dr. R. Jan LeCroy (68)                            Trustee                  Retired.  President, Dallas Citizens Council.
841 Liberty                                                                Trustee of other mutual funds managed by the
Dallas, TX 75204                                                           Adviser.  Director, Southwest Securities Group,
                                                                           Inc.
</TABLE>


                                       46


<PAGE>

<TABLE>
<CAPTION>
                 NAME, ADDRESS                         POSITION HELD                    PRINCIPAL OCCUPATION(S)
                    AND AGE                             WITH TRUST                        DURING PAST 5 YEARS
                ---------------                         ----------                        -------------------
<S>                                              <C>                      <C>
Dr. Jesse H. Parrish (71)                         Trustee                  Former President, Midland College. Higher
2805 Sentinel                                                              Education Consultant.  Trustee of other mutual
Midland, TX 79701                                                          funds managed by the Adviser.


William P. Kovacs (53)                            Vice President and       Vice President, Senior Counsel, Secretary, Chief
11825 N. Pennsylvania St.                         Secretary                Compliance Officer and Director of Adviser.  Vice
Carmel, IN 46032                                                           President, Senior Counsel, Secretary and
                                                                           Director, Conseco Equity Sales, Inc. Vice
                                                                           President and Secretary of other mutual funds
                                                                           managed by the Adviser.  Previously, Associate
                                                                           Counsel, Vice President and Assistant Secretary,
                                                                           Kemper Financial Services, Inc. (1989-1996);
                                                                           previous to Of Counsel, Rudnick & Wolfe
                                                                           (1997-1998); previous to Of Counsel, Shefsky &
                                                                           Froelich (1998).


James S. Adams (39)                               Treasurer                Senior Vice President, Bankers National, Great
11815 N. Pennsylvania St.                                                  American Reserve.  Senior Vice President,
Carmel, IN 46032                                                           Treasurer, and Director, Conseco Equity Sales,
                                                                           Inc. Senior Vice President and Treasurer, Conseco
                                                                           Services, LLC.  Treasurer of other mutual funds
                                                                           managed by the Adviser.

 William T. Devanney, Jr. (43)                    Vice President           Senior Vice President, Corporate Taxes,
 11815 N. Pennsylvania St.                        Corporate Taxes          Bankers National and Great American
 Carmel, IN 46032                                                          Reserve.  Senior Vice President,
                                                                           Corporate Taxes, Conseco Equity Sales,
                                                                           Inc. and Conseco Services LLC.  Vice
                                                                           President of other mutual funds
                                                                           managed by the Adviser.

 David N. Walthall (53)                           Trustee                  Principal, Walthall Asset Management. Former President,
 13355 Noel Road, Suite 1050                                               chief  Executive Officer and Director of Lyrick 
 Dallas, TX 75240                                                          Corporation. Formerly, President and CEO, Heritage Media 
                                                                           Corporation. Formerly, Director, Eagle National Bank. 
                                                                           Trustee of other mutual funds managed by the Adviser.

</TABLE>

                                       47


<PAGE>


- ------------------
*    The Trustee so indicated is an "interested  person," as defined in the 1940
     Act, of the Trust due to the positions  indicated  with the Adviser and its
     affiliates.


The following table shows the compensation of each disinterested Trustee for the
fiscal year ending December 31, 1998.


                               COMPENSATION TABLE
<TABLE>
<CAPTION>
                                       AGGREGATE                      TOTAL COMPENSATION FROM 
                                     COMPENSATION               INVESTMENT COMPANIES IN THE TRUST
NAME OF PERSON, POSITION            FROM THE TRUST                    COMPLEX PAID TO TRUSTEES
- ------------------------            --------------                    ------------------------
<S>                                     <C>                       <C>
William P. Daves, Jr.                   $9,000                               $26,000
                                                                  (1 other investment company)

Harold W. Hartley                       $9,000                               $26,000
                                                                  (1 other investment company)

Dr. R. Jan LeCroy                       $9,000                               $26,000
                                                                  (1 other investment company)

Dr. Jesse H. Parrish                    $9,000                               $26,000
                                                                  (1 other investment company)

David N. Walthall                       $6,000                               $8,000
                                                                  (1 other investment company)
</TABLE>

- ------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES


As of February 1, 1999,  the  following  shareholders  owned of record,  or were
known by a Fund to own  beneficially,  five  percent or more of the  outstanding
shares of the Class A, Class B and Class C shares of each Fund.


<TABLE>
<CAPTION>
FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                      <C>                                                      <C>    
Conseco Fixed Income Fund                 Conseco Senior Health Insurance                          10.08%
Class A                                   Company (formerly, American 
                                          Travellers Life Insurance Co.)
                                          11815 North Pennsylvania St.
                                          Carmel, Indiana 46032-4555
</TABLE>



                                       48


<PAGE>

<TABLE>
<CAPTION>
FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                       <C>                                                     <C>    
                                          National Fidelity Life Insurance Company                  5.05%
                                          11815 North Pennsylvania St.
                                          Carmel, Indiana 46032-4555

                                          Philadelphia Life Insurance Co.                           5.05%
                                          11815 North Pennsylvania St.
                                          Carmel, Indiana 46032-4555

                                          Capitol American Life Insurance Co.                      47.10%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Merrill Lynch, Pierce, Fenner & Smith                    17.59%
                                          4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484
Conseco Fixed Income Fund                 Merrill Lynch, Pierce, Fenner & Smith                    90.09%
Class B                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484

Conseco Fixed Income Fund                 Merrill Lynch, Pierce, Fenner & Smith                    83.69%
Class C                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484
                                          Legg Mason Wood Walker Inc.                              12.30%
                                          P.O. Box 1476
                                          Baltimore, MD 21203-1476

Conseco High Yield Fund                   Conseco Life Insurance Company                            6.00%
Class A                                   11815 North Pennsylvania St.
                                          Carmel, IN  46032-4555
                                          National Fidelity Life Insurance Company                 63.62%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Merrill Lynch, Pierce, Fenner & Smith                    17.33%
                                          4800 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484
</TABLE>


                                       49


<PAGE>

<TABLE>
<CAPTION>
FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                      <C>                                                      <C>    
Conseco High Yield Fund                   Merrill Lynch, Pierce, Fenner & Smith                    76.77%
Class B                                   4800 Deer Lake Dr. East
                                          Jacksonville, FL  32246-6486
Conseco High Yield Fund                   Merrill Lynch, Pierce, Fenner & Smith                    84.75%
Class C                                   4800 Deer Lake Dr. East
                                          Jacksonville, FL  32246-6486
Conseco Convertible Securities            Bankers Life and Casualty Company                        99.93%
Fund                                      11815 North Pennsylvania St.
Class A                                   Carmel, IN 46032-4555

Conseco Convertible Securities            Conseco Capital Management, Inc.                         17.04%
Fund                                      11825 North Pennsylvania St.
Class B                                   Carmel, IN 46032-4555

                                          Merrill Lynch, Pierce, Fenner & Smith                    80.36%
                                          4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484

Conseco Convertible Securities            Merrill Lynch, Pierce, Fenner & Smith                    81.71%
Fund                                      4800 Deer Lake Dr. E
Class C                                   Jacksonville, FL  32246-6484

                                          Conseco Capital Management, Inc.                         15.87%
                                          11825 North Pennsylvania St.
                                          Carmel, IN 46032-4555



                                       50


<PAGE>


<CAPTION>

FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                      <C>                                                      <C>    
Conseco Balanced Fund                     Conseco Senior Health Insurance Co. (formerly,           13.37%
Class A                                   American Travellers Life Insurance Co.)
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Bankers Life and Casualty Company                         6.68%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Philadelphia Life Insurance Company                       6.68%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Charles Schwab & Co. Inc.                                47.70%
                                          101 Montgomery St.
                                          San Francisco, CA 94104-4122





                                       51


<PAGE>

<CAPTION>

FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                      <C>                                                      <C>    
Conseco Balanced Fund                     Merrill Lynch, Pierce, Fenner & Smith                    65.50%
Class B                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484

                                          State Street Bank & Trust Co. Cus.                        5.30%
                                          2575 S. Bayshore Drive #118
                                          Miami, FL 33133-4745

Conseco Balanced Fund                     Merrill Lynch, Pierce, Fenner & Smith                    56.42%
Class C                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484
                                          Lucila G. Whisenant Cust.                                 5.87%
                                          Kristina Kalle Whisenant
                                          4511 Pinfish Ln.
                                          Palmetto, FL  34221-5626
                                          Mitchell M. Nunes                                         8.04%
                                          8216 Mays Ave
                                          Riverview, FL 33569-4428

                                          State Street Bank & Trust Co.                             7.78%
                                          Cust. For the IRA of
                                          R. Evelyn Golding
                                          410 Dewolf Rd.
                                          Brandon, FL 33511-6807

Conseco Equity Fund                       Conseco Senior Health Insurance Co.                      14.41%
Class A                                   (formerly, American Travellers Life
                                          Insurance Co.) 
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Bankers Life and Casualty Company                         7.24%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Philadelphia Life Insurance Company                       7.24%
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555


                                       52


<PAGE>



<CAPTION>

FUND NAME                                 NAME AND ADDRESS                                  PERCENT OWNED
<S>                                      <C>                                                      <C>    
                                          Charles Schwab & Co. Inc.                                31.96%
                                          101 Montgomery St.
                                          San Francisco, CA 94104-4122

Conseco Equity Fund                       Merrill Lynch, Pierce, Fenner & Smith                    71.29%
Class B                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484

Conseco Equity Fund                       Merrill Lynch, Pierce, Fenner & Smith                    86.60%
Class C                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484

Conseco 20 Fund                           Conseco Life Insurance Company                           40.66%
Class A                                   11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555


                                          Conseco Health Insurance Company (formerly,              42.57%
                                          Capitol American Life Insurance Co.)
                                          11815 North Pennsylvania St.
                                          Carmel, IN 46032-4555

                                          Merrill Lynch, Pierce, Fenner & Smith                     5.37%
                                          48000 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484

Conseco 20 Fund                           Merrill Lynch, Pierce, Fenner & Smith                    72.09%
Class B                                   48000 Deer Lake Dr. E
                                          Jacksonville, FL 32246-6484

Conseco 20 Fund                           Merrill Lynch, Pierce, Fenner & Smith                    69.96%
Class C                                   4800 Deer Lake Dr. E
                                          Jacksonville, FL  32246-6484
</TABLE>


The  Trustees and  officers of the Trust,  as a group,  own less than 1% of each
Fund's  outstanding  shares. A shareholder owning of record or beneficially more
than 25% of a Fund's outstanding shares may be considered a controlling  person.
That  shareholder's  vote  could  have  a more  significant  effect  on  matters
presented at a shareholders' meeting than votes of other shareholders.


                                       53


<PAGE>


FUND EXPENSES


Each  Fund  pays  its  own   expenses   including,   without   limitation:   (i)
organizational  and  offering  expenses  of the Fund and  expenses  incurred  in
connection  with the issuance of shares of the Fund;  (ii) fees of its custodian
and  transfer  agent;   (iii)   expenditures  in  connection  with  meetings  of
shareholders  and Trustees;  (iv)  compensation and expenses of Trustees who are
not  interested   persons  of  the  Trust;  (v)  the  costs  of  any  liability,
uncollectible  items of deposit and other  insurance or fidelity bond;  (vi) the
cost of preparing,  printing,  and  distributing  prospectuses and statements of
additional information,  any supplements thereto, proxy statements,  and reports
for existing  shareholders;  (vii) legal,  auditing, and accounting fees; (viii)
trade  association  dues;  (ix) filing  fees and  expenses  of  registering  and
maintaining  registration  of shares of the Fund under  applicable  federal  and
state  securities laws; (x) brokerage  commissions;  (xi) taxes and governmental
fees; and (xii) extraordinary and non-recurring expenses.


DISTRIBUTION ARRANGEMENTS


Conseco  Equity  Sales,  Inc.  (the  "Distributor")   serves  as  the  principal
underwriter for each Fund pursuant to an Underwriting  Agreement,  dated January
2, 1997 as amended  December 31, 1997. The  Underwriting  Agreement was approved
with respect to the Conseco  Convertible  Securities  Fund on May 14, 1998.  The
Distributor is a registered broker-dealer and member of the National Association
of Securities Dealers,  Inc. ("NASD").  Shares of each Fund will be continuously
offered and will be sold by brokers,  dealers or other financial  intermediaries
who have  executed  selling  agreements  with the  Distributor.  Subject  to the
compensation arrangement discussed below, the Distributor bears all the expenses
of providing  services  pursuant to the  Underwriting  Agreement,  including the
payment of the expenses  relating to the  distribution of Prospectuses for sales
purposes and any advertising or sales  literature.  The  Underwriting  Agreement
continues  in effect  for two years from  initial  approval  and for  successive
one-year periods thereafter, provided that each such continuance is specifically
approved  (i) by the vote of a majority  of the  Trustees of the Trust or by the
vote of a majority of the outstanding  voting securities of a Fund and (ii) by a
majority of the Trustees who are not "interested  persons" of the Trust (as that
term is defined in the 1940 Act).  The  Distributor is not obligated to sell any
specific amount of shares of any Fund.


For the fiscal  year ended  December  31,  1997,  the  Distributor  received  as
compensation  for the sale of Conseco  Balanced Fund A shares $20,746,  of which
amount it  retained  $2,338 and  reallowed  $18,407.  For the fiscal  year ended
December 31, 1997,  the  Distributor  received as  compensation  for the sale of
Conseco  Equity Fund A shares  $37,114,  of which amount it retained  $3,566 and
reallowed $33,547.  For the fiscal year ended December 31, 1997, the Distributor
received  as  compensation  for the sale of Conseco  Fixed  Income Fund A shares
$4,196, of which amount it retained $452 and reallowed $3,743.


Following is information about the compensation received by the Distributor with
respect to each Fund for the fiscal year ended December 31, 1998:


                                       54


<PAGE>

<TABLE>
<CAPTION>

======================================================================================================================
FUND AND CLASS                  COMPENSATION                 AMOUNT RETAINED BY           AMOUNT REALLOWED BY
                                RECEIVED BY                  DISTRIBUTOR                  DISTRIBUTOR
                                DISTRIBUTOR
======================================================================================================================
<S>                             <C>                           <C>                            <C>
 Conseco Fixed Income
 Class A                         $  37,877                     $    4,140                     $   33,747
 Class B                           160,726                           0                           160,726
 Class C                                0                            0                              0
- ----------------------------------------------------------------------------------------------------------------------
 Conseco High Yield
 Class A                         $199,926                       $  29,862                     $  170,064
 Class B                          678,167                            0                           678,167
 Class C                           59,575                            0                            59,575
- ----------------------------------------------------------------------------------------------------------------------
 Conseco Convertible
 Securities*
 Class A                                0                            0                               0
 Class B                                0                            0                               0
 Class C                               57                            0                                57
- ----------------------------------------------------------------------------------------------------------------------
 Conseco Balanced
 Class A                        $  24,595                      $    3,544                    $    21,051
 Class B                           67,034                            0                            67,034
 Class C                            9,685                            0                             9,685
- ----------------------------------------------------------------------------------------------------------------------
 Conseco Equity
 Class A                         $ 21,660                      $    2,785                    $    18,875
 Class B                           68,290                            0                            68,290
 Class C                            7,275                            0                             7,275
- ----------------------------------------------------------------------------------------------------------------------
 Conseco 20
 Class A                         $160,829                      $   23,116                    $   137,713
 Class B                          338,900                            0                           338,900
 Class C                           28,359                            0                            28,359
- ----------------------------------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------------------------------
</TABLE>


*The Conseco Convertible  Securities Fund commenced  operations on September 28,
1998.  The  information  with  respect  to that  Fund is  shown  for the  period
beginning September 28, 1998.


The Distributor's  principal address is 11815 N.  Pennsylvania  Street,  Carmel,
Indiana 46032.


DISTRIBUTION AND SERVICE PLAN


The Trust has adopted  distribution  and service plans dated March 28, 1997 with
respect to the Class A shares of the Conseco Equity Fund,  Conseco Balanced Fund
and Conseco Fixed Income Fund,  and dated December 31, 1997 with respect to each
other class of Fund shares (and approved with respect to the Conseco Convertible
Securities  Fund  on May  14,  1998)  (the


                                       55


<PAGE>


"Plans"),  in accordance with the  requirements of Rule 12b-1 under the 1940 Act
and the requirements of the applicable  rules of the NASD regarding  asset-based
sales charges.


Pursuant  to the  Plans,  each  Fund  may  compensate  the  Distributor  for its
expenditures in financing any activity  primarily intended to result in the sale
of each such  class of Fund  shares and for  maintenance  and  personal  service
provided to existing shareholders of that class. The Plans authorize payments to
the  Distributor  up to 0.50%  annually of each  Fund's  (except for the Conseco
Fixed  Income  Fund's)  average  daily net  assets  attributable  to its Class A
shares.  The  Conseco  Fixed  Income  Fund's  Plan  authorizes  payments  to the
Distributor  up to 0.65%  annually  of that  Fund's  average  daily  net  assets
attributable  to its  Class  A  shares.  The  Plans  authorize  payments  to the
Distributor  up to 1.00%  annually  of each  Fund's  average  daily  net  assets
attributable  to its  Class  B  shares.  The  Plans  authorize  payments  to the
Distributor  up to 1.00%  annually  of each  Fund's  average  daily  net  assets
attributable  to its  Class C  shares.  See  "Management  - The  Adviser"  above
regarding  the  Distributor's  contractual  arrangement  waive  its fees  and/or
reimburse Fund expenses.


For the fiscal year ended  December 31,  1997,  the 12b-1 fees  attributable  to
Class A shares of the Conseco Equity Fund, Conseco Balanced Fund and the Conseco
Fixed Income Fund were $9,508, $2,149 and $1,984, respectively.


For the fiscal year ended December 31, 1998, the 12b-1 fees attributable to each
class of shares is as follows:

- --------------------------------------------------------------------------------
FUND                         CLASS A            CLASS B           CLASS C
- --------------------------------------------------------------------------------
Conseco Fixed Income      $   111,004       $     6,784       $      1,484

- --------------------------------------------------------------------------------
Conseco High Yield             79,032            36,435             10,411

- --------------------------------------------------------------------------------
Conseco Convertible            32,632                3                   3
Securities*

- --------------------------------------------------------------------------------
Conseco Balanced              78,752             3,716               6,355

- --------------------------------------------------------------------------------
Conseco Equity                85,658             6,090               1,706

- --------------------------------------------------------------------------------
Conseco 20                    99,488            26,070              12,542
- --------------------------------------------------------------------------------

The Plans further  provide for periodic  payments by the Distributor to brokers,
dealers and other financial  intermediaries for providing  shareholder  services
and for  promotional  and other sales related costs.  The portion of payments by
Class A, Class B or Class C of a Fund for  shareholder  servicing may not exceed
an annual  rate of .25% of the  average  daily net asset value of Fund shares of
that class owned by clients of such broker, dealer or financial intermediary.


In  accordance  with the terms of the Plans,  the  Distributor  provides to each
Fund,  for review by the  Trustees,  a quarterly  written  report of the amounts
expended under the Plan and the purpose


                                       56


<PAGE>


for which such expenditures were made. In the Trustees'  quarterly review of the
Plans,  they  will  review  the  level of  compensation  the  Plans  provide  in
considering the continued appropriateness of the Plans.


The  Plans  were  adopted  by a  majority  vote of the  Trustees  of the  Trust,
including  at least a majority of Trustees who are not, and were not at the time
they  voted,  interested  persons  of the  Trust and do not and did not have any
direct or indirect  financial  interest in the  operation of the Plans,  cast in
person at a meeting called for the purpose of voting on the Plans.  The Trustees
believe that there is a reasonable  likelihood  that the Plans will benefit each
Fund and its current and future shareholders. Among the anticipated benefits are
higher levels of sales and lower levels of  redemptions  of Class A, Class B and
Class C shares of each Fund,  economies  of scale,  reduced  expense  ratios and
greater portfolio diversification.


Under their terms,  the Plans remain in effect from year to year  provided  such
continuance is approved annually by vote of the Trustees in the manner described
above.  The Plans may not be amended  to  increase  materially  the amount to be
spent under the Plans without approval of the shareholders of the affected Fund,
and material  amendments to the Plans must also be approved by the Trustees in a
manner described above. The Plans may be terminated at any time, without payment
of any penalty,  by vote of the majority of the Trustees who are not  interested
persons of the Trust and have no direct or  indirect  financial  interest in the
operations of the Plans,  or by a vote of a majority of the  outstanding  voting
securities of the Fund affected thereby. The Plans will automatically  terminate
in the event of their assignment.


PURCHASE, REDEMPTION AND PRICING OF SHARES


SHARE PRICES AND NET ASSET VALUE


Each  Fund's  shares  are bought or sold at a price that is the Fund's net asset
value (NAV) per share.  The NAV per share is determined for each class of shares
for each Fund as of the close of regular  trading on the New York Stock Exchange
(normally 4:00 p.m.  Eastern Time) on each business day by dividing the value of
the Fund's net assets attributable to a class (the class's pro rata share of the
value of the Fund's  assets minus the class's pro rata share of the value of the
Fund's liabilities) by the number of shares of that class outstanding.


For each of the Funds the assets of the Fund are valued as  follows:  Securities
that are traded on stock  exchanges  are valued at the last sale price as of the
close of business on the day the  securities  are being  valued or,  lacking any
sales, at the mean between the closing bid and asked prices.  Securities  traded
in the over-the-counter  market are valued at the mean between the bid and asked
prices  or yield  equivalent  as  obtained  from one or more  dealers  that make
markets  in the  securities.  Fund  securities  which  are  traded  both  in the
over-the-counter  market and on a stock  exchange  are valued  according  to the
broadest  and  most  representative  market,  and it is  expected  that for debt
securities this ordinarily will be the over-the-counter  market.  Securities and
assets for which market  quotations are not readily available are valued at fair
value as  determined  in good  faith by or under  the  direction  of the  Board.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from


                                       57


<PAGE>


the  local  currency  into U.S.  dollars  using  current  exchange  rates.  Debt
securities  with  maturities  of sixty (60) days or less are valued at amortized
cost.


REDUCTIONS AND WAIVERS OF SALES CHARGES


REDUCTION OF CLASS A SALES CHARGE


RIGHTS OF ACCUMULATION.  Each Fund offers to all qualifying  investors rights of
accumulation  under which  investors are permitted to purchase Class A shares of
any Fund at the price  applicable  to the total of (a) the  dollar  amount  then
being  purchased plus (b) an amount equal to the then current net asset value of
the  purchaser's  holdings of shares of the Funds, or shares of the money market
fund  currently  managed by Federated  Management  (derived from the exchange of
Fund  shares on which an  initial  sales  charge was  paid).  Acceptance  of the
purchase  order is  subject  to  confirmation  of  qualification.  The rights of
accumulation  may  be  amended  or  terminated  at  any  time  as to  subsequent
purchases.


LETTER OF INTENT.  Any  shareholder  may qualify for a reduced  sales  charge on
purchases of Class A shares made within a 13-month  period  pursuant to a Letter
of  Intent  (LOI).   Class  A  shares  acquired   through  the  reinvestment  of
distributions  do not  constitute  purchases  for purposes of the LOI. A Class A
shareholder  may include,  as an  accumulation  credit towards the completion of
such  LOI,  the  value of all  shares  of all  Funds of the  Trust  owned by the
shareholder.  Such value is determined  based on the net asset value on the date
of the LOI. During the term of an LOI, Boston Financial Data Services  ("BFDS"),
the Trust's transfer agent,  will hold shares in escrow to secure payment of the
higher sales charge  applicable for shares  actually  purchased if the indicated
amount on the LOI is not purchased.  Dividends and capital gains will be paid on
all escrowed shares and these shares will be released when the amount  indicated
on the LOI has been  purchased.  A LOI does not  obligate the investor to buy or
the Fund to sell the  indicated  amount  of the  LOI.  If a Class A  shareholder
exceeds  the  specified  amount of the LOI and  reaches  an amount  which  would
qualify for a further quantity discount,  a retroactive price adjustment will be
made at the time of the  expiration  of the LOI.  The  resulting  difference  in
offering  price will purchase  additional  Class A shares for the  shareholder's
account at the applicable  offering price. If the specified amount of the LOI is
not  purchased,  the  shareholder  shall  remit to BFDS an  amount  equal to the
difference  between the sales  charge paid and the sales  charge that would have
been paid had the aggregate purchases been made at a single time. If the Class A
shareholder  does not  within 20 days  after a written  request by BFDS pay such
difference in sales charge,  BFDS will redeem an appropriate  number of escrowed
shares in order to realize such  difference.  Additional  information  about the
terms of the LOI are  available  from your  broker,  dealer  or other  financial
intermediary or from BFDS at (800) 986-3384.


SYSTEMATIC  WITHDRAWAL PLAN. The Systematic  Withdrawal Plan ("SWP") is designed
to provide a convenient  method of receiving fixed payments at regular intervals
from Class A, Class B and Class C shares of a Fund  deposited  by the  applicant
under this SWP. The applicant must deposit or purchase for deposit shares of the
Fund having a total  value of not less than  $5,000.  Periodic  checks of $50 or
more will be sent to the applicant,  or any person designated by him, monthly or
quarterly.  Redemptions  of Class B or Class C shares  under the SWP will not be


                                       58


<PAGE>


subject to any contingent  deferred  sales charge so long as a shareholder  does
not withdraw annually more than 12% of the SWP account.


Any income dividends or capital gain  distributions on shares under the SWP will
be credited to the SWP account on the payment date in full and fractional shares
at the net asset value per share in effect on the record date.


SWP payments are made from the proceeds of the redemption of shares deposited in
a SWP account.  Redemptions  are taxable  transactions to  shareholders.  To the
extent that such  redemptions  for periodic  withdrawals  exceed dividend income
reinvested in the SWP account,  such  redemptions will reduce and may ultimately
exhaust the number of shares  deposited  in the SWP account.  In  addition,  the
amounts  received by a  shareholder  cannot be  considered as an actual yield or
income on his or her investment because part of such payments may be a return of
his or her capital.


The SWP may be terminated at any time (1) by written  notice to the Fund or from
the  Fund to the  shareholder;  (2)  upon  receipt  by the  Fund of  appropriate
evidence of the  shareholder's  death; or (3) when all shares under the SWP have
been redeemed. The fees of the Fund for maintaining SWPs are paid by the Fund.


WAIVER OF CLASS A INITIAL SALES CHARGE


         No sales  charge  is  imposed  on sales  of Class A shares  to  certain
investors.  However,  in order for the  following  sales  charge  waivers  to be
effective,  the Transfer  Agent must be notified of the waiver when the purchase
order is placed.  The Transfer Agent may require evidence of your  qualification
for the waiver. No sales charge is imposed on the following investments:

o    by current or retired officers, directors and employees (and their parents,
     grandparents,  spouse,  and minor  children) of the Trust,  Conseco and its
     affiliates and the Transfer Agent;

o    by any participant in (i) a tax qualified retirement plan provided that the
     initial amount  invested by the plan totals  $500,000 or more, the plan has
     50 or more employees  eligible to  participate at the time of purchase,  or
     the plan  certifies  that it will have projected  annual  contributions  of
     $200,000  or  more;  or (ii) by one of a group  of tax  qualified  employee
     benefit plans that purchase  through an omnibus account  relationship  with
     the Funds maintained by a single service provider, provided that such plans
     make an aggregated initial investment of $500,000 or more;

o    by an omnibus account  established by a sponsor for tax-qualified  employee
     benefit  plans where the sponsor  provides  recordkeeping  services for the
     plans, and has entered into an agreement with the Distributor in connection
     with such account;

o    by brokers, dealers, and other financial intermediaries that have a selling
     agreement  with the  Distributor,  if they  purchase  shares  for their own
     accounts or for retirement plans for their employees;


                                       59


<PAGE>


o    by  employees   and   registered   representatives   (and  their   parents,
     grandparents,  spouses and minor children) of brokers,  dealers,  and other
     financial intermediaries described above; the purchaser must certify to the
     Distributor  at the  time of the  purchase  that  the  purchase  is for the
     purchaser's  own account (or for the  benefit of such  employee's  parents,
     grandparents, spouse or minor children);

o    by   any   charitable   organization,   state,   county,   city,   or   any
     instrumentality,   department,   authority  or  agency  thereof  which  has
     determined  that Class A is a legally  permissible  investment and which is
     prohibited  by  applicable  investment  law from  paying a sales  charge or
     commission  in  connection  with the  purchase of shares of any  registered
     management investment company;

o    by one or more  members of a group of at least 100 persons (and persons who
     are retirees  from such group)  engaged in a common  business,  profession,
     civic or charitable  endeavor or other activity,  and the spouses and minor
     children  of such  persons,  pursuant to a  marketing  program  between the
     Distributor and such group;

o    (i)  through  an  investment  adviser  who makes such  purchases  through a
     broker,  dealer, or other financial  intermediary (each of which may impose
     transaction fees on the purchase), or (ii) by an investment adviser for its
     own account or for a bona fide advisory  account over which the  investment
     adviser has investment discretion;

o    through a broker, dealer or other financial  intermediary which maintains a
     net asset value purchase  program that enables the Funds to realize certain
     economies of scale;

o    through bank trust  departments  or trust  companies on behalf of bona fide
     trust or fiduciary  accounts by  notifying  the  Distributor  in advance of
     purchase; a bona fide advisory,  trust or fiduciary account is one which is
     charged an asset-based fee and whose purpose is other than purchase of Fund
     shares at net asset value;

o    by purchasers in connection with investments related to a bona fide medical
     savings account; or

o    by an  account  established  under a wrap fee or asset  allocation  program
     where the accountholder pays the sponsor an asset-based fee.


         Additionally,  no sales charge is imposed on shares that are (a) issued
in plans of  reorganization,  such as mergers,  asset  acquisitions and exchange
offers,  to which a Fund is a party,  (b) purchased by the  reinvestment of loan
repayments  by   participants  in  retirement   plans,   (c)  purchased  by  the
reinvestment of dividends or other  distributions  from a Fund, or (d) purchased
and paid for with the  proceeds  of shares  redeemed in the prior 60 days from a
mutual fund on which an initial sales charge or contingent deferred sales charge
was paid (other than a


                                       60


<PAGE>


fund  managed  by the  Adviser or any of its  affiliates  that is subject to the
exchange  privilege   described  below);  the  purchaser  must  certify  to  the
Distributor at the time of purchase that the purchaser is a prior load investor.


WAIVERS OF CONTINGENT DEFERRED SALES CHARGE FOR CLASS B AND CLASS C


         To obtain a waiver of the contingent  deferred  sales charge,  you must
notify the Transfer Agent, who may require evidence of your  qualification.  The
contingent deferred sales charge will not apply to:

o    any  partial or  complete  redemption  in  connection  with a  distribution
     without federal tax income penalty under a tax-qualified  retirement  plan,
     upon separation from service and attaining age 55;

o    any partial or complete  redemption in connection with a qualifying loan or
     hardship  withdrawal from a  tax-qualified  retirement  plan,  eligible 457
     plan, or 403(b)(7) plan;

o    any  complete   redemption  in  connection  with  a  distribution   from  a
     tax-qualified  retirement  plan,  eligible 457 plan,  or 403(b)(7)  plan in
     connection with  termination of employment or termination of the employer's
     plan;

o    redemptions   from  an  omnibus  account   established  by  a  sponsor  for
     tax-qualified   employee   benefit   plans  where  the   sponsor   provides
     recordkeeping  services  for the plans,  and has entered  into an agreement
     with the Distributor in connection with such account;

o    any redemption  resulting from a tax-free return of an excess  contribution
     from a tax-qualified retirement plan, IRA, savings incentive match plan for
     employees ("SIMPLE" plan), eligible 457 plan, or 403(b)(7) plan;

o    mandated  minimum  distributions from a tax-qualified retirement plan, IRA,
     SIMPLE plan, eligible 457 plan, or 403(b) plan;

o    substantially  equal periodic payments as  defined in  Section 72(t) of the
     Code;

o    any partial or  complete  redemption  following  death or  disability  of a
     shareholder  (including  one who owns the shares as joint  tenant  with his
     spouse),  provided the redemption is requested within one year of the death
     or initial  determination of disability (as defined in Section 72(m) of the
     Code);

o    redemptions  under a Fund's  Systematic  Withdrawal Plan (investors may not
     withdraw  annually  more than 12% of the value of their  account  under the
     Systematic Withdrawal Plan);


                                       61


<PAGE>


o    redemptions  in  connection  with  distributions  from a Roth  IRA or  Roth
     Conversion IRA that are qualified distributions under the Code;

o    redemptions in connection with distributions from an Education IRA that are
     used for qualified  higher  education  expenses under the Code or which are
     required by the Code to be distributed;

o    redemptions in connection  with investments  related to a bona fide medical
     savings account; and

o    redemptions  from  an  account  established  under  a  wrap  fee  or  asset
     allocation  program where the accountholder pays the sponsor an asset-based
     fee.


REDEMPTIONS IN KIND


Each Fund is obligated to redeem shares for any  shareholder for cash during any
90-day  period up to $250,000 or 1% of the net assets of the Fund,  whichever is
less. Any  redemptions  beyond this amount also will be in cash unless the Board
determines  that further cash  payments will have a material  adverse  effect on
remaining  shareholders.  In such a case,  the Fund will pay all or a portion of
the remainder of the  redemptions in portfolio  instruments,  valued in the same
way as the Fund determines net asset value.  The portfolio  instruments  will be
selected in a manner that the Board deems fair and  equitable.  A redemption  in
kind is not as liquid as a cash  redemption.  If a redemption is made in kind, a
shareholder  receiving  portfolio  instruments  could incur certain  transaction
costs.


SUSPENSION OF REDEMPTIONS


A Fund may not suspend a shareholder's right of redemption,  or postpone payment
for a redemption  for more than seven days,  unless the NYSE is closed for other
than customary weekends or holidays;  trading on the NYSE is restricted; for any
period during which an emergency  exists as a result of which (1) disposition by
a Fund of securities owned by it is not reasonably practicable, or (2) it is not
reasonably  practicable for a Fund to fairly  determine the value of its assets;
or for such other periods as the SEC may permit for the protection of investors.


RETIREMENT PLANS AND MEDICAL SAVINGS ACCOUNTS


Class A, Class B and Class C shares are  available  for  purchase  by  qualified
retirement plans of both corporations and self-employed  individuals.  The Trust
has  available  prototype  IRA  plans  (for  both  individuals  and  employers),
Simplified Employee Pension ("SEP") plans, and savings incentive match plans for
employees ("SIMPLE" plans) as well as Section 403(b)(7) Tax-Sheltered Retirement
Plans which are designed for employees of public  educational  institutions  and
certain  non-profit,  tax-exempt  organizations.  The Trust also has information
concerning  prototype Medical Savings Accounts.  For information,  call or write
the Distributor.


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<PAGE>


INFORMATION ON CAPITALIZATION AND OTHER MATTERS


All shares of  beneficial  interest of the Trust are  entitled to one vote,  and
votes are  generally  on an  aggregate  basis.  However,  on  matters  where the
interests  of the Funds (or  classes of a Fund)  differ  (such as approval of an
investment advisory agreement or a change in fundamental  investment  policies),
the voting is on a Fund-by-Fund  (or  class-by-class)  basis. The Trust does not
hold routine annual shareholders'  meetings.  The shares of each Fund issued are
fully paid and  non-assessable,  have no preference or similar  rights,  and are
freely transferable.  In addition,  each issued and outstanding share in a class
of a Fund is entitled to  participate  equally in  dividends  and  distributions
declared by that class.


The Trustees  themselves  have the power to alter the number and terms of office
of the Trustees, and they may at any time lengthen their own terms or make their
terms of unlimited duration (subject to certain removal  procedures) and appoint
their own  successors,  provided that always at least a majority of the Trustees
have been  elected  by the  shareholders  of the  Trust.  The  voting  rights of
shareholders are not cumulative,  so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected,  while the
holders of the remaining shares would be unable to elect any Trustees. The Trust
is  not  required  to  hold  annual  meetings  of  shareholders  for  action  by
shareholders'  vote except as may be required by the 1940 Act or the Declaration
of Trust.  The  Declaration  of Trust  provides  that  shareholders  can  remove
Trustees by a vote of  two-thirds  of the vote of the  outstanding  shares.  The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the  written  request  of the  holders  of 10% of the  Trust's  shares.  In
addition,  10 or more  shareholders  meeting certain  conditions and holding the
lesser of $25,000  worth or 1% of the Trust's  shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting  a meeting to remove a Trustee.  The  Trustees  will then either give
those  shareholders  access to the  shareholder  list or, if  requested by those
shareholders,  mail at the shareholders' expense the shareholders' communication
to all other shareholders.


Each  issued  and  outstanding  share  of each  class of a Fund is  entitled  to
participate equally in dividends and other distributions of the respective class
of the Fund and,  upon  liquidation  or  dissolution,  in the net assets of that
class remaining after  satisfaction  of outstanding  liabilities.  The shares of
each Fund have no  preference,  preemptive  or  similar  rights,  and are freely
transferable. The exchange privilege for each class and the conversion rights of
Class B shares are described in the Prospectus.


Under Rule 18f-2 under the 1940 Act, as to any investment  company which has two
or more series (such as the Funds)  outstanding and as to any matter required to
be  submitted  to  shareholder  vote,  such  matter  is not  deemed to have been
effectively  acted upon  unless  approved  by the  holders of a majority  of the
outstanding  voting  securities  of each series  affected  by the  matter.  Such
separate  voting  requirements  do not apply to the  election of  Trustees,  the
ratification of the contract with the principal  underwriter or the ratification
of the selection of accountants.  The rule contains special provisions for cases
in which an advisory contract is approved by one or more, but not all, series. A
change in  investment  policy may go into effect as to one or more series  whose
holders so approve the change even though the  required  vote is not


                                       63


<PAGE>


obtained as to the holders of other affected series.  Under Rule 18f-3 under the
1940  Act,  each  class  of a  Fund  shall  have  a  different  arrangement  for
shareholder services or the distribution of securities or both and shall pay all
of the expenses of that  arrangement,  shall have exclusive voting rights on any
matters  submitted to  shareholders  that relate  solely to a particular  class'
arrangement,  and shall have separate voting rights on any matters  submitted to
shareholders  in which the  interests of one class differ from the  interests of
any other class.


Under   Massachusetts  law,   shareholders  of  the  Trust  may,  under  certain
circumstances,  be held personally liable as partners for the obligations of the
Trust.  The  Declaration of Trust,  however,  contains an express  disclaimer of
shareholder  liability  for acts or  obligations  of the Trust and requires that
notice of such disclaimer be given in each  agreement,  obligation or instrument
entered into or executed by the Trust or its Trustees.  The Declaration of Trust
provides for indemnification and reimbursement of expenses out of Trust property
for any shareholder held personally liable for its obligations.  The Declaration
of Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any  shareholder  for any act or  obligation of the Trust
and  satisfy any  judgment  thereon.  Thus,  while  Massachusetts  law permits a
shareholder of the Trust to be held personally liable as a partner under certain
circumstances,  the risk of a shareholder's  incurring financial loss on account
of  shareholder  liability is highly  unlikely and is limited to the  relatively
remote circumstances in which the Trust would be unable to meet its obligations.


The  Declaration of Trust further  provides that the Trustees will not be liable
for  errors  of  judgment  or  mistakes  of  fact  or law,  but  nothing  in the
Declaration of Trust protects a Trustee  against any liability to which he would
otherwise  be  subject  by reason  of  willful  misfeasance,  bad  faith,  gross
negligence,  or reckless  disregard of the duties involved in the conduct of his
office.


The Trust and the Adviser have Codes of Ethics governing the personal securities
transactions  of officers and employees.  These codes require prior approval for
certain  transactions and prohibit  transactions which may be deemed to conflict
with the securities trading of the Adviser's clients.


TAXES


GENERAL


To qualify or  continue  to qualify  for  treatment  as a  regulated  investment
company  ("RIC") under the Internal  Revenue Code of 1986, as amended  ("Code"),
each Fund -- which is treated as a separate  corporation  for these  purposes --
must  distribute to its  shareholders  for each taxable year at least 90% of its
investment  company  taxable  income  (consisting  generally  of net  investment
income,  net short-term capital gain and net gains from certain foreign currency
transactions)  ("Distribution  Requirement")  and must meet  several  additional
requirements.  For each Fund, these requirements include the following:  (1) the
Fund  must  derive  at least  90% of its gross  income  each  taxable  year from
dividends,  interest,  payments with respect to securities  loans and gains from
the sale or other  disposition  of  securities or foreign  currencies,  or other
income (including gains from options, futures or forward contracts) derived with
respect to its business


                                       64


<PAGE>


of investing in securities or those currencies ("Income  Requirement");  and (2)
at the close of each quarter of the Fund's taxable year, (i) at least 50% of the
value of its total  assets  must be  represented  by cash and cash  items,  U.S.
Government securities, securities of other RICs and other securities limited, in
respect of any one issuer,  to an amount that does not exceed 5% of the value of
the  Fund's  total  assets  and that  does not  represent  more  than 10% of the
issuer's outstanding voting securities,  and (ii) not more than 25% of the value
of its total assets may be invested in  securities  (other than U.S.  Government
securities or the securities of other RICs) of any one issuer.


If Fund shares are sold at a loss after  being held for six months or less,  the
loss will be treated as long-term,  instead of  short-term,  capital loss to the
extent of any capital gain distributions received on those shares.


Distributions, if any, in excess of a Fund's current or accumulated earnings and
profits,  as computed for federal income tax purposes,  will constitute a return
of  capital,  which first will  reduce a  shareholder's  tax basis in the Fund's
shares and then (after such basis is reduced to zero)  generally  will give rise
to capital gains.  Under the Taxpayer Relief Act of 1997 ("Tax Act"),  different
maximum  tax rates apply to a  non-corporate  taxpayer's  net capital  gain (the
excess of net long-term capital gain over net short-term capital loss) depending
on the  taxpayer's  holding  period and marginal  rate of federal  income tax --
generally, 28% for gain recognized on capital assets held for more than one year
but not more than 18 months and 20% (10% for  taxpayers  in the 15% marginal tax
bracket) for gain recognized on capital assets held for more than 18 months.


Shareholders  electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the amount of cash they would have received had they elected to receive
the distributions in cash, divided by the number of shares received.


At the time of an  investor's  purchase  of shares of a Fund,  a portion  of the
purchase price is often  attributable  to unrealized  appreciation in the Fund's
portfolio   or   undistributed   taxable   income.   Consequently,    subsequent
distributions from that appreciation (when realized) or income may be taxable to
the  investor  even if the net asset  value of the  investor's  shares  is, as a
result of the  distributions,  reduced below the investor's  cost for the shares
and the distributions in reality represent a return of a portion of the purchase
price.


Each Fund will be subject to a  nondeductible  4%  federal  excise tax  ("Excise
Tax") on  certain  amounts  not  distributed  (and not  treated  as having  been
distributed)  on a timely basis in accordance  with annual minimum  distribution
requirements.  Each Fund intends under normal  circumstances  to avoid liability
for such tax by satisfying those distribution requirements.


                                       65


<PAGE>


INCOME FROM FOREIGN SECURITIES


Dividends and interest  received by a Fund, and gains realized  thereby,  may be
subject to income,  withholding or other taxes imposed by foreign  countries and
U.S.  possessions  ("foreign  taxes")  that would  reduce the yield and/or total
return on its  securities.  Tax conventions  between  certain  countries and the
United States may reduce or eliminate foreign taxes,  however,  and many foreign
countries  do not impose  taxes on capital  gains in respect of  investments  by
foreign investors.  Pursuant to that election,  the Fund would treat its foreign
taxes as  dividends  paid to its  shareholders,  and each  shareholder  would be
required  to (1)  include  in  gross  income,  and  treat  as paid  by him,  his
proportionate share of the Fund's foreign taxes, and (2) either deduct the taxes
deemed paid by him in computing his taxable  income or,  alternatively,  use the
foregoing  information in calculating the foreign tax credit against his federal
income tax. The Fund will report to its shareholders  shortly after each taxable
year their respective shares of the Fund's foreign taxes and income from sources
within  foreign  countries  and  U.S.  possessions  if it makes  this  election.
Individuals who have no more than $300 ($600 for married persons filing jointly)
of  creditable  foreign  taxes  included on Forms 1099 and all of whose  foreign
source  income is  "qualified  passive  income" may elect each year to be exempt
from the extremely complicated foreign tax credit limitation and will be able to
claim a foreign tax credit  without  having to file the detailed  Form 1116 that
otherwise is required.


Each Fund may  invest in the stock of  "passive  foreign  investment  companies"
("PFICs").  A PFIC is a foreign  corporation -- other than a "controlled foreign
corporation"  (I.E.,  a foreign  corporation  in which,  on any day  during  its
taxable  year,  more  than 50% of the total  voting  power of all  voting  stock
therein or the total value of all stock therein is owned, directly,  indirectly,
or  constructively,  by  "U.S.  shareholders,"  defined  as  U.S.  persons  that
individually own, directly, indirectly, or constructively,  at least 10% of that
voting  power) as to which a Fund is a U.S.  shareholder  -- that,  in  general,
meets  either of the  following  tests:  (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain  circumstances,  a Fund will be
subject to federal income tax on a part of any "excess distribution" received by
it on the stock of a PFIC or of any gain on the Fund's  disposition of the stock
(collectively  "PFIC  income"),   plus  interest  thereon,   even  if  the  Fund
distributes  the PFIC  income as a taxable  dividend  to its  shareholders.  The
balance of the PFIC income will be  included  in the Fund's  investment  company
taxable  income and,  accordingly,  will not be taxable to it to the extent that
income is distributed to its shareholders.


If a Fund  invests  in a PFIC  and  elects  to treat  the  PFIC as a  "qualified
electing  fund"  ("QEF"),  then  in  lieu  of the  foregoing  tax  and  interest
obligation,  the Fund,  would be required to include in income each year its pro
rata share of the QEF's annual  ordinary  earnings and net capital gain -- which
likely  would have to be  distributed  by the Fund to satisfy  the  Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not distributed  thereto by the QEF. In most instances it will be very
difficult,  if  not  impossible,  to  make  this  election  because  of  certain
requirements thereof.


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<PAGE>


Each   Fund  may   elect  to  "mark  to   market"   its   stock  in  any   PFIC.
"Marking-to-market,"  in this context,  means  including in ordinary income each
taxable  year the excess,  if any, of the fair market  value of the PFIC's stock
over the  adjusted  basis  therein as of the end of that year.  Pursuant  to the
election,  a Fund also will be allowed to deduct (as an  ordinary,  not capital,
loss) the  excess,  if any,  of its  adjusted  basis in PFIC stock over the fair
market value thereof as of the taxable  year-end,  but only to the extent of any
net mark-to-market gains with respect to that stock included in income for prior
taxable  years.  The  adjusted  basis in each PFIC's stock with respect to which
this election is made will be adjusted to reflect the amounts of income included
and deductions taken under the election.


Foreign  exchange gains and losses realized by a Fund in connection with certain
transactions  involving foreign  currency-denominated  debt securities,  certain
foreign currency futures and options, foreign currency positions and payables or
receivables (e.g.,  dividends or interest  receivable)  denominated in a foreign
currency are subject to section 988 of the Code,  which  generally  causes those
gains and losses to be treated as ordinary  income and losses and may affect the
amount,  timing and character of distributions  to shareholders.  Any gains from
the disposition of foreign currencies could, under future Treasury  regulations,
produce income that is not "qualifying income" under the Income Requirement.



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<PAGE>


INVESTMENTS IN DEBT SECURITIES


If a Fund invests in zero coupon securities,  payment-in-kind  securities and/or
certain deferred interest securities (and, in general, any other securities with
original  issue  discount  or with  market  discount  if an  election is made to
include  market  discount in income  currently),  it must accrue income on those
investments prior to the receipt of cash payments or interest thereon.  However,
each  Fund  must  distribute  to its  shareholders,  at least  annually,  all or
substantially  all of its  investment  company  taxable  income,  including such
accrued  discount  and  other  non-cash  income,  to  satisfy  the  Distribution
Requirement and avoid imposition of the Excise Tax.  Therefore,  a Fund may have
to dispose of its portfolio  securities under  disadvantageous  circumstances to
generate cash, or may have to leverage itself by borrowing the cash, to make the
necessary distributions.


Investment  in debt  obligations  that  are at risk  of or in  default  presents
special tax issues for any Fund that holds such  obligations.  Tax rules are not
entirely  clear about  issues such as when a Fund may cease to accrue  interest,
original issue discount or market discount,  when and to what extent  deductions
may be taken for bad debts or worthless  securities,  how  payments  received on
obligations in default  should be allocated  between  principal and income,  and
whether  exchanges of debt  obligations in a workout context are taxable.  These
and other issues will be addressed  by any Fund that holds such  obligations  in
order to seek to reduce the risk of distributing  insufficient income to qualify
for  treatment  as a RIC and of  becoming  subject to federal  income tax or the
Excise Tax.


HEDGING STRATEGIES


The use of hedging strategies,  such as writing (selling) and purchasing options
and futures  contracts and entering  into forward  contracts,  involves  complex
rules that will  determine  for income tax  purposes the amount,  character  and
timing of  recognition  of the gains and losses a Fund  realizes  in  connection
therewith.  Gains from options,  futures and forward contracts derived by a Fund
with respect to its business of investing in securities or foreign currencies --
and as noted above,  gains from the  disposition of foreign  currencies  (except
certain  gains that may be excluded by future  regulations)  -- will  qualify as
permissible income under the Income Requirement.


Certain  futures and foreign  currency  contracts  in which the Funds may invest
will be "section 1256  contracts."  Section 1256 contracts held by a Fund at the
end of each taxable year,  other than section 1256  contracts that are part of a
"mixed  straddle"  with respect to which a Fund has made an election not to have
the following rules apply,  must be  marked-to-market  (that is, treated as sold
for their fair market value) for federal  income tax  purposes,  with the result
that  unrealized  gains or losses will be treated as though they were  realized.
Sixty percent of any net gain or loss recognized on these deemed sales,  and 60%
of any net  realized  gain  or loss  from  any  actual  sales  of  section  1256
contracts,  will be treated as long-term  capital gain or loss,  and the balance
will be treated as short-term  capital gain or loss.  These rules may operate to
increase  the amount that a Fund must  distribute  to satisfy  the  Distribution
Requirement,  which will be taxable to the shareholders as ordinary income,  and
to increase the net capital gain recognized by the


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<PAGE>


Fund,  without in either case  increasing the case available to the Fund. A Fund
may elect to exclude  certain  transactions  from the operation of section 1256,
although doing so may have the effect of increasing  the relative  proportion of
net short-term  capital gain (taxable as ordinary income) and/or  increasing the
amount  of  dividends  that  must  be  distributed  to  meet  the   Distribution
Requirement and avoid  imposition of the Excise Tax. Section 1256 contracts also
may be marked-to-market for purposes of the Excise Tax.


Code  section  1092  (dealing  with  straddles)  also may affect the taxation of
options  and  futures  contracts  in which the Funds may  invest.  Section  1092
defines a "straddle" as offsetting  positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Section
1092  generally  provides that any loss from the  disposition of a position in a
straddle may be deducted only to the extent the loss exceeds the unrealized gain
on the  offsetting  position(s)  of the  straddle.  Section  1092 also  provides
certain "wash sale" rules,  which apply to transactions where a position is sold
at a loss and a new offsetting  position is acquired within a prescribed period,
and  "short  sale"  rules  applicable  to  straddles.  If a Fund  makes  certain
elections,  the amount,  character and timing of recognition of gains and losses
from the affected  straddle  positions would be determined under rules that vary
according  to  the  elections  made.  Because  only  a few  of  the  regulations
implementing the straddle rules have been  promulgated,  the tax consequences to
the Funds of straddle transactions are not entirely clear.


If a Fund has an  "appreciated  financial  position" --  generally,  an interest
(including an interest through an option,  futures or forward contract, or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership  interest the fair market value of which exceeds its adjusted  basis
- -- and enters into a "constructive  sale" of the same or  substantially  similar
property,  the Fund will be treated as having made an actual sale thereof,  with
the result  that gain will be  recognized  at that  time.  A  constructive  sale
generally consists of a short sale, an offsetting notional principal contract or
futures or forward  contract  entered  into by a Fund or a related  person  with
respect to the same or  substantially  similar  property.  In  addition,  if the
appreciated  financial  position  is  itself  a short  sale or such a  contract,
acquisition of the underlying property or substantially similar property will be
deemed a  constructive  sale.  The  foregoing  will not apply,  however,  to any
transaction  during  any  taxable  year that  otherwise  would be  treated  as a
constructive  sale if the  transaction is closed within 30 days after the end of
that year and the Fund holds the appreciated  financial position unhedged for 60
days after that  closing  (i.e.,  at no time during  that  60-day  period is the
Fund's  risk of loss  regarding  that  position  reduced  by reason  of  certain
specified   transactions  with  respect  to  substantially  similar  or  related
property,  such as having an option to sell,  being  contractually  obligated to
sell, making a short sale, or granting an option to buy substantially  identical
stock or securities).


The  foregoing  discussion  relates  solely to U.S.  federal  income  tax law as
applicable to U.S. persons (i.e.,  U.S. citizens and residents and U.S. domestic
corporations,  partnerships,  trusts and estates) subject to tax under that law.
The discussion does not address special tax rules  applicable to certain classes
of investors,  such as tax-exempt  entities,  insurance  companies and financial
institutions.  Dividends,  capital gain  distributions and ownership of or gains
realized on the  redemption  (including an exchange) of the shares of a Fund may
also be subject to state and local taxes.  Shareholders should consult their own
tax advisers as to the federal,  state or local tax


                                       69


<PAGE>


consequences of ownership of shares of, and receipt of  distributions  from, the
Funds in their particular circumstances..


FINANCIAL STATEMENTS


Audited  financial  statements  for the Conseco Fixed Income Fund,  Conseco High
Yield Fund, Conseco Convertible  Securities Fund, Conseco Balanced Fund, Conseco
Equity Fund and Conseco 20 Fund the for the fiscal year ended  December 31, 1998
are incorporated by reference from the Trust's annual report to shareholders.






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<PAGE>


APPENDIX A SECURITIES RATINGS


DESCRIPTION OF CORPORATE BOND RATINGS


MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:


Aaa - Bonds which are rated Aaa by Moody's Investors Service,  Inc.  ("Moody's")
are judged to be the best  quality and carry the smallest  degree of  investment
risk.  Interest payments are protected by a large or by an exceptionally  stable
margin,  and  principal  is secure.  While the various  protective  elements are
likely to change,  such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.


Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group,  they  comprise  what are  generally  known as high
grade  bonds.  They are rated  lower  than the best  bonds  because  margins  of
protection may not be as large as in Aaa securities or fluctuation of protective
elements  may be of greater  amplitude  or there may be other  elements  present
which make the long term risks appear somewhat larger than in Aaa securities.


A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade  obligations.  Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.


Baa - Bonds  which are rated Baa are  considered  as medium  grade  obligations;
i.e., they are neither highly  protected nor poorly secured.  Interest  payments
and principal  security appear  adequate for the present but certain  protective
elements may be lacking or may be  characteristically  unreliable over any great
period of time. Such bonds lack outstanding  investment  characteristics  and in
fact have speculative characteristics as well.


Ba - Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and  principal  payments may be very  moderate and thereby not well  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.


B - Bonds  which are  rated B  generally  lack  characteristics  of a  desirable
investment.  Assurance of interest and principal  payments or of  maintenance of
other terms of the contract over any long period of time may be small.


Caa - Bonds  which are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.


Ca - Bonds which are rated Ca represent  obligations  which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.


C - Bonds which are rated C are the lowest rated class of bonds. Such issues can
be  regarded as having  extremely  poor  prospects  of ever  attaining  any real
investment standing.


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<PAGE>


STANDARD & POOR'S  CORPORATE BOND RATINGS:


AAA - This is the highest rating assigned by Standard & Poor's ("S&P") to a debt
obligation  and  indicates an extremely  strong  capacity to pay  principal  and
interest.


AA - Bonds rated AA also qualify as high-quality debt  obligations.  Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.


A - Bonds rated A have a strong capacity to pay principal and interest, although
they are  somewhat  more  susceptible  to the  adverse  effects  of  changes  in
circumstances and economic conditions.


BBB - Bonds  rated  BBB are  regarded  as  having an  adequate  capacity  to pay
principal  and  interest.  Whereas they  normally  exhibit  adequate  protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to weakened  capacity to pay  principal and interest for bonds in
this category than for bonds in the A category.


BB/B/CCC/CC  - Bonds  rated BB, B, CCC,  and CC are  regarded,  on  balance,  as
predominantly  speculative with respect to the issuer's capacity to pay interest
and  repay  principal  in  accordance  with  the  terms of the  obligation.+  BB
indicates  the  lowest  degree  of  speculation  and CC the  highest  degree  of
speculation.  While such bonds will  likely  have some  quality  and  protective
characteristics,  these are  outweighed  by large  uncertainties  or major  risk
exposure to adverse conditions.


CI - The rating CI is  reserved  for income  bonds on which no interest is being
paid.


D - Debt rated D is in  default,  and payment of interest  and/or  repayment  of
principal is in arrears.


Plus (+) or Minus (-):  The ratings from AA to B may be modified by the addition
of a plus or minus  sign to show  relative  standing  within  the  major  rating
categories.


PREFERRED STOCK RATINGS:


Both Moody's and S&P use the same  designations  for corporate  bonds as they do
for preferred stock, except that in the case of Moody's preferred stock ratings,
the  initial  letter  rating  is not  capitalized.  While the  descriptions  are
tailored for preferred stocks and relative quality,  distinctions are comparable
to those described above for corporate bonds.



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