KEYSTONE OMEGA FUND, N14AE24, 1996-01-26

KEYSTONE OMEGA FUND
N14AE24, 1996-01-26

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DRAFT
1/24/96

As filed with the Securities and Exchange Commission on January 26, 1996.

Registration No. 2-28183
811-1600

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-14

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre - Effective Amendment No. ____

Post - Effective Amendment No. 26

KEYSTONE OMEGA FUND
(formerly named Keystone America Omega Fund)
(Exact Name of Registrant as Specified in Charter)

200 BERKELEY STREET, BOSTON, MASSACHUSETTS 02116
(Address of Principal Executive Offices)

617-338-3200
(Area Code and Telephone Number)

Rosemary D. Van Antwerp, Esq.
Keystone Investments, Inc.
200 Berkeley Street
Boston, Massachusetts 02116

(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective.

The Registrant has registered an indefinite amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940; accordingly, no fee is payable herewith. Registrant's Rule 24f-2
Notice for the fiscal year ended December 31, 1995 was filed with the Securities
and Exchange Commission on January 25, 1996.

It is proposed that this filing will become effective on February 25,
1996 pursuant to Rule 488.

#101606d8

<PAGE>

KEYSTONE OMEGA FUND

CONTENTS OF REGISTRATION STATEMENT

This Registration Statement contains the following pages and documents:

Front Cover

Contents Page

The Cross-Reference Sheet

PART A
------

Letter to Shareholders

Notice of Special Meeting of Shareholders

Prospectus/Proxy Statement

PART B
------

Statement of Additional Information

Part C
------

Other Information

Indemnification

List of Exhibits

Undertakings

Signatures

Exhibits

<PAGE>

KEYSTONE OMEGA FUND

CROSS REFERENCE SHEET

Pursuant to Rule 481(a) under the Securities Act of 1933

Prospectus/Proxy Statement
Form N-14 Item No. Caption
- ------------------ ---------------------------
Part A

1 Beginning of Registration Cross-Reference Sheet; Front
Statement and Outside Front Cover
Cover Page of Prospectus

2 Beginning and Outside Back Table of Contents
Cover Page of Prospectus

3 Fee Table, Synopsis Synopsis; Principal Risk
Information and Risk Factors; The Reorganization
Factors

4 Information About the Synopsis; The Reorganization
Transaction

5 Information About the Information About the Funds;
Registrant Additional Information About
the Funds

6 Information About the Information About the Funds;
Company Being Acquired Additional Information About
the Funds

7 Voting Information Inside Front Cover Page; The
Reorganization; Information
About the Funds

8 Interest of Certain Additional Information About
Persons and Experts the Funds

9 Additional Information Not Applicable
Required for Reoffering
by Persons Deemed to be
Underwriters

<PAGE>

Statement of Additional Information
Form N-14 Item No. Caption
- ------------------ -----------------------------------
Part B

10 Cover Page Cover Page

11 Table of Contents Cover Page

12 Additional Information Cover Page; Statement of
About the Registrant Additional Information of
Registrant

13 Additional Information Not Applicable
About the Company Being
Acquired

14 Financial Statements Financial Information

Other Information
Form N-14 Item No. Caption
- ------------------ ------------------
Part C

15 Indemnification Indemnification

16 Exhibits Exhibits

17 Undertakings Undertakings

<PAGE>

PART A

<PAGE>

March 1996

Dear Shareholder:

We are writing to you, as a loyal shareholder of Keystone Hartwell Growth Fund,
to explain an important proposal for the Fund and to ask for your support.

Despite a successful long-term record, achieved by following a disciplined
strategy of growth stock investing, the Fund has not grown sufficiently to
achieve the economies of scale that increasingly are necessary for successful
mutual funds. As a result, the Fund's Board of Trustees unanimously has endorsed
a proposal that the Fund be acquired by, and effectively merged with, Keystone
Omega Fund. This would be a tax-free transaction under the Internal Revenue
Code.

Keystone Omega Fund also has established a successful long-term record by
following a disciplined style in investing in stocks of growth companies.1 Since
Keystone assumed responsibility for the Omega Fund in 1989, the Fund's portfolio
manager has been Maureen Cullinane, a Senior Vice President and leader of
Keystone's Growth Stock Team.

Because we think it is important that you understand this proposal, we have
included in this package the most recent Prospectus and Annual Report for Omega
Fund. The Prospectus explains the Fund's objective, risks and fees, while the
Annual Report includes a thorough discussion of the Fund's investment discipline
and record, which should be helpful to you in evaluating the proposal. The
proposal itself is described in detail in the accompanying Proxy Statement.

It is extremely important that you vote, no matter how many shares that you own.
This is an opportunity to voice your opinion on a matter that affects your Fund.
Voting promptly also helps to reduce the cost of additional mailings.

The Fund's Trustees have scheduled a shareholder meeting on Thursday, April 25,
1996, at 200 Berkeley Street, Boston. You are welcome at this meeting. However,
if you are unable attend, you should vote by proxy well in advance. You may vote
by completing the enclosed proxy card and returning it in the postage-paid
envelope which has been provided. We encourage you to exercise your rights as a
shareholder by voting promptly.

If you have any questions about this proposal, please call Keystone Shareholder
Services at 1- 800-343-2898. Our representatives are available Monday through
Friday from 8 a.m. to 6 p.m.
Eastern time, and would be happy to answer your questions.

Sincerely,

- --------
1 For information on the performance records of Keystone Hartwell Growth Fund
and of Keystone Omega Fund, see p. -- of the accompanying Proxy statement.

<PAGE>

KEYSTONE HARTWELL GROWTH FUND
200 Berkeley Street
Boston, Massachusetts 02116
Telephone Number (800) 343-2898 or (617) 621-6100

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on April 25, 1996

To the Shareholders:

A meeting of the shareholders of Keystone Hartwell Growth Fund ("KHGF")
will be held at the offices of Keystone Investment Management Company, 200
Berkeley Street, Boston, Massachusetts, on the 26th Floor, on Thursday, April
25, 1996 at 2:00 p.m. Eastern time for the following purposes:

1. To approve an Agreement and Plan of Reorganization whereby Keystone Omega
Fund ("KOF") will acquire all of the assets of KHGF in exchange for Shares of
KOF and will assume the liabilities of KHGF, as described in the accompanying
Prospectus/Proxy Statement.

2. To transact such other business as may properly come before
the meeting and any adjournments thereof.

Shareholders of record at the close of business as of February 26, 1996
are entitled to notice of and to vote at this meeting and any adjournments
thereof.

BY ORDER OF THE BOARD OF TRUSTEES,

Rosemary D. Van Antwerp
Secretary

March 4, 1996

Please complete, date and sign your proxy-NOW-and mail it-TODAY- in the stamped
envelope enclosed for your convenience. In order to avoid unnecessary expense or
delay, we ask your cooperation in mailing in your proxy. Thank you.

<PAGE>

PROSPECTUS/PROXY STATEMENT
February 26, 1996

Acquisition of the Assets of

KEYSTONE HARTWELL GROWTH FUND
200 Berkeley Street, Boston, Massachusetts 02116
Telephone Number (800) 343-2898 or (617) 621-6100

By and in exchange for Shares of

KEYSTONE OMEGA FUND
200 Berkeley Street, Boston, Massachusetts 02116
Telephone Number (800) 343-2898 or (617) 621-6100

This Prospectus/Proxy Statement is being furnished to the shareholders
of Keystone Hartwell Growth Fund ("KHGF") in connection with a proposal for the
tax-free reorganization of the Fund into Keystone Omega Fund. It is proposed
that Keystone Omega Fund ("KOF") acquire all of the assets of KHGF in exchange
for Shares of KOF and assume the liabilities of KHGF. Immediately following this
transfer, Shares of KOF will be distributed to the shareholders of KHGF in place
of their Shares of KHGF, and KHGF will be terminated and its Shares cancelled.
As a result of the proposed transaction, each shareholder of KHGF will receive
that number of full and fractional Shares of the corresponding class of KOF
having a total net asset value, on the effective date of the proposed
transaction, equal to the total net asset value of that shareholder's Shares in
KHGF.

KOF and KHGF (individually, a "Fund," and collectively, the
"Funds") are open-end, management investment companies. KOF is
diversified and KHGF is non-diversified. Keystone Management,
Inc. manages KOF and Keystone Investment Management Company
advises both Funds. KOF seeks maximum growth of capital and KHGF
seeks capital appreciation.

This Prospectus/Proxy Statement sets forth concisely the information
about KOF that a prospective investor should know before investing and should be
retained for future reference. This Prospectus/Proxy Statement is accompanied by
the Prospectus of KOF dated April 28, 1995, as supplemented June 1, 1995, which
has been filed with the Securities and Exchange Commission (the "Commission"),
is incorporated by reference herein and a copy of which accompanies this
Prospectus/Proxy Statement. Additional information about KOF is contained in a
Statement of Additional Information ("SAI") dated April 28, 1995, as
supplemented June 1,

<PAGE>

1995, and in a SAI dated February 26, 1996, relating to the Reorganization, each
of which has been filed with the Commission and is incorporated by reference
herein. Copies of these SAIs may be obtained without charge by writing to KOF at
the address or by calling the telephone numbers listed above. KOF's most recent
Annual Report, which has been filed with the Commission, is incorporated by
reference herein and a copy of which accompanies this Prospectus/Proxy
Statement.

A Prospectus and SAI containing additional information about KHGF, each
dated January 30, 1996, have been filed with the Commission and are incorporated
by reference herein. Copies of such Prospectus and SAI may be obtained without
charge by writing to KHGF at the address listed above or by calling the
telephone numbers listed above.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

KEYSTONE HARTWELL GROWTH FUND
200 Berkeley Street
Boston, Massachusetts 02116

Special Meeting of Shareholders
To be Held April 25, 1996

This Prospectus/Proxy Statement is furnished to shareholders of
Keystone Hartwell Growth Fund ("KHGF") in connection with the solicitation of
proxies by the Board of Trustees to be used at a meeting of the shareholders
(the "Meeting") to be held at the offices of Keystone Investment Management
Company, 200 Berkeley Street, Boston, Massachusetts, on the 26th Floor, on
Thursday, April 25, 1996, at 2:00 p.m. Eastern time.

Any proxy that is properly executed and returned in time to be voted at
the Meeting, the KHGF Shares represented thereby will be voted in accordance
with the instructions thereon. In the absence of such instructions, the proxy
will be voted in favor of the approval of the Agreement and Plan of
Reorganization (the "Reorganization Agreement") and the transaction described
therein, whereby Keystone Omega Fund ("KOF") will acquire all of the assets of
KHGF in exchange for Shares of KOF and assume the liabilities of KHGF. The
individuals duly appointed as Proxies ("Proxies") may, in their discretion, vote
upon such other matters as may come before the meeting or any adjournments
thereof. Any shareholder may revoke his or her proxy at any time before it is
voted by delivering written notice of revocation or by executing and delivering
a later-dated proxy to Rosemary D. Van Antwerp, Keystone Investment Management
Company, 200 Berkeley Street, Boston, Massachusetts 02116, or by appearing in
person at the meeting to vote his or her Shares. Proxy material is expected to
be mailed to KHGF shareholders on or about March 4, 1996.

When voting proxies on a proposal to adjourn, the Proxies will consider
what is in the best interest of all shareholders at that time. Each shareholder
will be entitled to one vote for each Share and a fractional vote for each
fractional Share held by such shareholder. Shareholders of KHGF of record at the
close of business on February 26, 1996 (the "Record Date") will be entitled to
notice of and to vote at the Meeting or any adjournment thereof. On the Record
Date, there were ____________ Shares of KHGF outstanding.

Vote Required

Approval of the Reorganization Agreement will require the affirmative
vote of the holders of (i) 67% of the Shares represented at the Meeting, if the
holders of more than 50% of the outstanding Shares of KHGF are represented, or
(ii) more than

<PAGE>

50% of KHGF's outstanding Shares, whichever is less. Shareholders of KOF will
not be voting on the approval of the Reorganization Agreement since their
approval is not required.

IMPORTANT DEFINITIONS

"12b-1 Plan" A distribution plan adopted pursuant
to Rule 12b-1 under the Investment
Company Act of 1940, as amended.

"1933 Act" The Securities Act of 1933, as
amended.

"1934 Act" The Securities Exchange Act of 1934,
as amended.

"1940 Act" The Investment Company Act of 1940,
as amended.

"Effective Date" The effective date of the
Reorganization contemplated by the
Reorganization Agreement.

"Independent Trustees" Those members of the
Board of Trustees of KHGF or
KOF who are not "interested
persons" of such Funds, as said
term is defined in the 1940
Act.

"Hartwell" J.M. Hartwell Limited Partnership,
515 Madison Avenue, New York, New
York 10022, a majority-owned
subsidiary of JMH Management
corporation. Keystone has retained
Hartwell to provide subadvisory
services to KHGF.

"Keystone" Keystone Investment Management
Company (formerly named Keystone
Custodian Funds, Inc.), 200 Berkeley
Street, Boston, Massachusetts 02116,
a wholly-owned subsidiary of Keystone
Investments. Keystone is the
investment adviser of KHGF and KOF
and of each of the other Keystone
Investments Funds.

"Keystone America Fund A group of 16 mutual funds with
Family" different investment objectives and
policies that hold themselves out to

<PAGE>

investors as being related for
purposes of investments, investor
services and exchange privileges.

"Keystone Investments A family of mutual funds with varying
Funds" investment objectives and policies,
managed, advised or
administered by Keystone and/or
an affiliate of Keystone.
Currently, there are more than
30 Keystone Investments Funds,
including KHGF and KOF.

"Keystone Investments" Keystone Investments, Inc. (formerly
named Keystone Group, Inc.), 200
Berkeley Street, Boston,
Massachusetts 02116. Keystone
Investments owns all of the
outstanding shares of Keystone.
Keystone Investments is owned by an
investor group composed of current
and former members of management and
certain employees of Keystone
Investments and its affiliates.

"Keystone Management" Keystone Management, Inc., 200
Berkeley Street, Boston,
Massachusetts 02116, a wholly-owned
subsidiary of Keystone. Keystone
Management is the investment manager
of 20 Keystone Investments Funds,
including KHGF and KOF.

"KHGF" Keystone Hartwell Growth Fund, 200
Berkeley Street, Boston,
Massachusetts 02116.

"KIRC" Keystone Investor Resource Center,
Inc., 101 Main Street, Cambridge,
Massachusetts 02142, a wholly-owned
subsidiary of Keystone. KIRC is the
transfer agent and dividend
disbursing agent for each of the
Keystone Investments Funds, including
KHGF and KOF.

"KOF" Keystone Omega Fund, 200 Berkeley
Street, Boston, Massachusetts 02116.

"Meeting" The Special Meeting of KHGF
Shareholders to be held on Thursday,
April 25, 1996.

<PAGE>

"Principal Underwriter" Keystone Investment Distributors
Company (formerly named Keystone
Distributors, Inc.), 200 Berkeley
Street, Boston, Massachusetts 02116,
a wholly-owned subsidiary of
Keystone. The Principal Underwriter
is the principal underwriter of KHGF
and KOF and of each of the other
Keystone Investments Funds.

"Reorganization" The proposed transaction contemplated
by the Reorganization Agreement.

"Reorganization Agreement" The Agreement and Plan of
Reorganization between KHGF and KOF,
dated January 16, 1996, pursuant to
which KOF will acquire all of the
assets of KHGF in exchange for Shares
of KOF and will assume the
liabilities of KHGF.

"Shares" The Shares of beneficial interest of
KOF, KHGF and the other Keystone
Investments Funds.

SYNOPSIS

Description of the Proposed Transaction

The Board of Trustees of each Fund, including each Fund's Independent
Trustees, have unanimously approved the Reorganization Agreement, which provides
for the transfer of all of the assets of KHGF to KOF in exchange for Shares of
KOF as well as the assumption of KHGF's liabilities by KOF. (The proposed
transaction is hereinafter referred to as the "Reorganization".)

The aggregate net asset value of KOF Shares to be issued in exchange
for the assets of KHGF will be equal to the net asset value of KHGF on the
effective date of the Reorganization (the "Effective Date") (as defined in "The
Reorganization--Agreement on Transfer of Assets"). Immediately following the
transfer of assets and liabilities of KHGF to KOF, Shares of KOF will be
distributed to the shareholders of KHGF, then KHGF will be dissolved. KHGF
Shares will be cancelled, and KHGF will be terminated. Each shareholder in KHGF
will receive that percentage of the total number of the corresponding class of
KOF Shares received by KHGF equal in amount to that shareholder's percentage
interest in KHGF on the Effective Date.

<PAGE>

The Reorganization will effectively combine the two nearly identical
Funds, each of which currently issues three classes of Shares, into a single
fund offering three classes of Shares.

For the reasons set forth below in "The Reorganization--Reasons for the
Proposed Transaction", the Board of Trustees of KHGF, including the Independent
Trustees, has concluded that the Reorganization would be in the best interests
of the shareholders of KHGF and has further determined that the interests of the
existing shareholders of KHGF will not be diluted as a result of the
Reorganization. Accordingly, the Board recommends A VOTE FOR the approval of the
Reorganization.

COMPARISON OF THE FUNDS

Fee Table

The fee table set out below shows the current fees for each Fund and
pro forma fees for KOF after giving effect to the proposed transaction. The
purpose of the fee table is to assist shareholders in understanding the costs
and expenses that he or she is expected to bear directly or in directly in KOF
after giving effect to the proposed transaction.

<PAGE>

Keystone Omega Fund
<TABLE>
<CAPTION>

Class A Shares Class B Shares Class C Shares
Front End Back End Level
SHAREHOLDER TRANSACTION EXPENSES Load Option Load Option(1) Load Option(2)
-------------- -------------- --------------
<S> <C> <C> <C>
Sales Charge . . . . . . . . . . . . . . 5.75%(3) None None
(as a percentage of offering price)
Contingent Deferred Sales Charge . . . . 0.00%(4) 5.00% in the first 1.00% in the
(as a percentage of the lesser of year declining to first year and
cost or market value of shares 1.00% in the sixth 0.00% thereafter
redeemed) year and 0.00%
thereafter

Exchange Fee (per exchange)
(per exchange)(5) $10.00 $10.00 $10.00

<FN>

- --------
1 Class B shares purchased on or after June 1, 1995 convert
tax free to Class A shares after eight years. See "Class
B Shares" for more information.

2 Class C shares are available only through dealers who have entered into
special distribution agreements with Keystone Investment Distributors
Company, the Fund's principal underwriter.

3 The sales charge applied to purchases of Class A shares
declines as the amount invested increases. See "Class A
Shares".

4 Purchases of Class A shares in the amount of $1,000,000
or more and/or purchases made by certain qualifying
retirement or other plans are not subject to a sales
charge, but may be subject to a contingent deferred sales
charge. See the "Class A Shares" and "Contingent
Deferred Sales Charge and Waiver of Sales Charges"
sections of the prospectus for each of KOF and KHGF for
an explanation of the charge.

5 There is no fee for exchange orders received by the Fund
directly from a shareholder over the Keystone Automated
Response Line ("KARL"). (For a description of KARL, see
"Shareholder Services.")

</FN>
</TABLE>
6

<PAGE>

Annual Fund Operating Expenses(6)
(as a percentage of average net assets)
Management Fees. . . . . . . . . . . . . 0.75% 0.75% 0.75%
12b-1 Fees . . . . . . . . . . . . . . . 0.13% 1.00%7 1.00%(7)
Other Expenses . . . . . . . . . . . . . 0.50% 0.54% 0.55%
----- ----- -----
Total Fund Operating Expenses. . . . . . 1.38% 2.29% 2.30%
===== ===== =====

Examples(8) 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption
at the end of each period:
Class A . . . . . . . . . . . . $71 $ 99 $129 $214
Class B . . . . . . . . . . . . $73 $102 $143 N/A
Class C . . . . . . . . . . . . $33 $ 72 $123 $264
You would pay the following expenses
on a $1,000 investment, assuming no
redemption at the end of each period:
Class A . . . . . . . . . . . . $71 $ 99 $129 $219
Class B . . . . . . . . . . . . $23 $ 72 $123 N/A
Class C . . . . . . . . . . . . $23 $ 72 $123 $264

</TABLE>

Keystone Hartwell Growth Fund
<TABLE>
<CAPTION>

Class A Shares Class B Shares Class C Shares
Front End Back End Level Load
SHAREHOLDER TRANSACTION EXPENSES Load Option Load Option(1) Option(2)
-------------- -------------- ---------------
<S> <C> <C> <C>
Sales Charge . . . . . . . . . . . . . . 5.75%(3) None None
(as a percentage of offering price)
Contingent Deferred Sales Charge . . . . 0.00%(4) 5.00% in the first 1.00% in the
(as a percentage of the lesser of year declining to first year and
cost or market value of shares 1.00% in the sixth 0.00% thereafter
redeemed) year and 0.00%
thereafter

Exchange Fee (per exchange) $10.00 $10.00 $10.00
(per exchange)(5)

<FN>

- --------
6 Expense ratios for KOF and KHGF are for the most recent fiscal years
ended December 31, 1995 and September 30, 1995, respectively.

7 Long term shareholders may pay more than the equivalent of the maximum
front end sales charges permitted by the National Association of
Securities Dealers, Inc. ("NASD").

8 The Securities and Exchange Commission requires use of a 5% annual
return figure for purposes of this example. Actual return for the Fund
may be greater or less than 5%.

</FN>
</TABLE>

<PAGE>

<TABLE>

<S> <C> <C> <C> <C>
Annual Fund Operating Expenses(6)
(as a percentage of average net assets)
Management Fees(9) . . . . . . . . . . . 0.78% 0.78% 0.78%
12b-1 Fees . . . . . . . . . . . . . . . 0.09% 1.00%(7) 1.00%(7)
Other Expenses . . . . . . . . . . . . . 0.98% 1.00% 1.00%
----- ----- -----
Total Fund Operating Expenses. . . . . . 1.85% 2.78% 2.78%
===== ===== =====

Examples(8) 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption
at the end of each period:
Class A . . . . . . . . . . . . $75 $112 $152 $262
Class B . . . . . . . . . . . . $78 $116 $167 N/A
Class C . . . . . . . . . . . . $38 $ 86 $147 $311
You would pay the following expenses
on a $1,000 investment, assuming no
redemption at the end of each period:
Class A . . . . . . . . . . . . $75 $112 $152 $262
Class B . . . . . . . . . . . . $28 $ 86 $147 N/A
Class C . . . . . . . . . . . . $28 $ 86 $147 $311

</TABLE>

Keystone Omega Fund Pro Forma
<TABLE>
<CAPTION>

Exchange Fee (per exchange) $10.00 $10.00 $10.00
(per exchange)(5)

Annual Fund Operating Expenses(6)
(as a percentage of average net assets)
Management Fees. . . . . . . . . . . . . 0.75% 0.75% 0.75%
12b-1 Fees . . . . . . . . . . . . . . . 0.12% 1.00%(7) 1.00%(7)
Other Expenses . . . . . . . . . . . . . 0.51% 0.51% 0.51%
----- ----- -----
Total Fund Operating Expenses. . . . . . 1.38% 2.26% 2.26%
===== ===== =====

<FN>
- --------
9 KHGF pays a basic advisory fee which is subject to
adjustment up or down by up to 1/2 of 1% of the average
daily net asset value during the latest 12 months
depending upon the performance of the Fund relative to
the Standard and Poor's Index of 500 Stocks. See "Fund
Management and Expenses."

</FN>
</TABLE>

<PAGE>

Class A . . . . . . . . . . . . $71 $ 99 $129 $214
Class B . . . . . . . . . . . . $73 $101 $141 N/A
Class C . . . . . . . . . . . . $33 $ 71 $121 $260
You would pay the following expenses on a $1,000 investment, assuming no
redemption at the end of each period:
Class A . . . . . . . . . . . . $71 $99 $129 $214
Class B . . . . . . . . . . . . $23 $71 $121 N/A
Class C . . . . . . . . . . . . $23 $71 $121 $260
</TABLE>

Amounts shown in the example should not be considered a representation
of future expenses; actual expenses may be greater or less than those shown.

Investment Objectives and Policies

Each Fund's investment objective does not materially differ. KOF seeks
maximum capital growth and KHGF seeks capital appreciation. Their policies do
not materially differ except that KOF is a diversified fund and KHGF is a
non-diversified fund. Their investment restrictions do not materially differ
except to the extent that KOF is diversified and KHGF is non-diversified. Each
Fund invests primarily in equity securities selected for growth potential and
showing good earnings momentum. Each Fund may invest up to 25% of its assets in
foreign securities. In addition, in furtherance of its investment objective, KOF
may engage in futures and options transactions. In summary, both Funds are
authorized to invest in the same kinds of securities and to use substantially
the same types of investment techniques. For further discussion of the Funds'
investment objectives, policies, restrictions, permitted investments and
investment techniques, see "Information About the Funds" and the Prospectuses of
KOF and KHGF.

Performance Information

Discussions of the manner of calculation of total return and yield
quotations are contained in each Fund's Prospectus and Statement of additional
Information.

Keystone Omega Fund

The Class A cumulative total return figures for the one, five and ten
year periods ended December 31, 1995 were 29.07% (including applicable sales
charge), 133.46% and 319.63%, respectively. The Class A 5-year and 10-year
average annual total returns were 18.48% and 15.42%, respectively. The total
return figures do not reflect expense subsidies by International Heritage Corp.,
the Fund's previous adviser, or Keystone. Effective April 19, 1989, Keystone
became investment adviser to the Fund. Total return figures are included for
historical purposes.

<PAGE>

The Class B cumulative total return figure for the one year ended
December 31, 1995 was 31.70% (including contingent deferred sales charge). The
Class B average annual total return figure since August 2, 1993 (date of initial
public offering) until December 31, 1995 was 13.31% (including contingent
deferred sales charge).

The Class C cumulative total return for the one year ended December 31,
1995 was 35.62% (including contingent deferred sales charge). The Class C
average annual total return figure since August 2, 1993 (date of initial public
offering) until December 31, 1995 was 14.41%.

Keystone Hartwell Growth Fund

The cumulative total returns of Class A shares of the Fund for the five
and ten year periods ended September 30, 1995 were 98.19% and 300.34%,
respectively. The compounded average annual rates of return for Class A shares
of the Fund for the one, five and ten year periods ended September 30, 1995 were
16.19%, 14.66% and 14.88%, respectively.

The cumulative total returns for Class B shares of the Fund for the
period since commencement of operations (August 2, 1993) through September 30,
1995 ("Life of the Class") was 15.00%. The compounded average annual rates of
return for Class B shares of the Fund for the one year period ended September
30, 1995 and the Life of the Fund were 18.01% and 6.67%, respectively, including
contingent deferred sales charge.

The cumulative total returns for Class C shares of the Fund for the
period since commencement of operations (August 2, 1993) until September 30,
1995 ("Life of the Class") was 17.29%. The compounded average annual rates of
return for Class C shares of the Fund for the one year period ended September
30, 1995 and the Life of the Fund were 22.04% and 7.65%, respectively.

Investment Advisory and Management Fees

Keystone Management serves as the investment manager to KOF. As
compensation for investment management and other services and facilities
provided by Keystone Management, KOF pays Keystone Management a fee at the
annual rate set forth below:

Aggregate Net Asset Value
Management Fee of the Shares of KOF
- -------------- -------------------------
0.75% of the first $ 250,000,000, plus
0.675% of the next $ 250,000,000, plus
0.60% of the next $ 500,000,000, plus
0.50% of amounts over $1,000,000,000.

<PAGE>

computed as of the close of business on each business day and
payable daily.

Keystone serves as the investment adviser to each of the Funds. As
compensation for its investment advisory and other services in respect of KOF,
Keystone receives a fee which is 85% of the management fee received by Keystone
Management under the Management Agreement.

During the fiscal year ended December 31, 1995, KOF paid or accrued to
Keystone Management investment management and administrative services fees of
$1,280,436, which amount represented 0.75% of KOF's average net assets. Of the
amount paid to Keystone Management, $1,088,371 was paid to Keystone for
investment advisory services rendered pursuant to the Advisory Agreement.

As compensation for its services to KHGF, KHGF pays Keystone a basic
monthly fee at the following annual rates of KHGF's average daily net asset
value during the latest 12 months (a moving average method): 1% of such net
assets up to and including $100,000,000, .90% of such net assets over
$100,000,000 up to and including $200,000,000, .80% of such net assets over
$200,000,000 up to and including $300,000,000, 70% of such net assets over
$300,000 up to and including $400,000,000, and .65% of such net assets over
$400,000.

The basic management fee is subject to an incentive adjustment, by
which the basic fee may be increased or decreased by up to 1/2 of 1% of the
average daily net asset value of KHGF during the latest 12 months (a moving
average method) of KHGF, depending on the performance of KHGF relative to the
Standard and Poor's Index of 500 Stocks ("S&P").

During the fiscal year ended September 30, 1995, KHGF paid or accrued
to Hartwell Keystone Advisers, Inc. ("Hartwell Keystone"), which served as
KHGF's investment adviser prior to January 30, 1995, $92,468 in management fees;
and KHGF paid or accrued to Keystone, which has served as KHGF's investment
adviser since January 31, 1995, $68,301 in management fees, which in the
aggregate represented 0.78% of KHGF's average net assets.

J.M. Hartwell Limited Partnership ("Hartwell"), serves as the
subadviser to KHGF. As compensation for its services for each calendar month,
Hartwell receives from Keystone, after calculation of the monthly fee due
Keystone, 40% of Keystone's basic monthly management fee as described above on
all assets and 60% of Keystone's incentive adjustment as described above on all
assets, provided that Hartwell's total fee will always equal at least 25% of the
combined total fee paid by KHGF. KHGF has no responsibility to pay Hartwell's
fee.

<PAGE>

During the fiscal year ended September 30, 1995: Hartwell Keystone paid
or accrued to Hartwell Management Company, Inc., the former subadviser under the
then existing subadvisory Agreement, $33,449 for the period from October 1, 1994
through January 30, 1995; and Keystone paid Hartwell $34,981 for the period from
January 31, 1995 through September 30, 1995 for its services as subadviser under
the now existing Subadvisory Agreement.

These investment advisory and investment management fees are
separate from and do not include the costs of custody, transfer
agency and other expenses paid by each Fund. See "Other
Significant Fees and Expenses" below.

Other Significant Fees and Expenses

In addition to the investment advisory and management fees described
above, the principal expenses of each Fund include, but are not limited to, (i)
expenses of its transfer agent, custodian and independent auditors; (ii)
expenses under its 12b-1 Plan; (iii) fees of its Independent Trustees; (iv) fees
payable to government agencies; (v) expenses of preparing, printing and mailing
Fund prospectuses, notices, reports and proxy material; and (vi) certain
extraordinary expenses. In addition to such expenses, each Fund pays its
brokerage commissions, interest charges and taxes.

On the second page of each Fund's Prospectus is a Fee Table that
summarizes the costs and expenses associated with an investment in the Fund.

Expense Ratios

For the fiscal year ended September 30, 1995, KHGF's Class A, Class B
and Class C shares paid 1.85%, 2.78% and 2.78%, respectively, of their average
daily net class assets in expenses. For the fiscal year ended December 31, 1995,
KOF's Class A, Class B and Class C shares paid 1.38%, 2.29% and 2.30%,
respectively, of their average daily net class assets in expenses.

At asset levels as of the close of fiscal 1995, the combination of KHGF
and KOF would reduce KHGF's and KOF's nondistribution expenses by approximately
50 basis points and 4 basis points, respectively. Distribution expenses of the
combined fund will vary in accordance with sales activity. See "Distribution
Procedures and Payments" below.

Purchase and Redemption Procedures, Deferred Sales Charges and
Exchange Rights

Generally, each Fund offers three classes of shares:

<PAGE>

Class A Shares - Front End Load Option

Class A shares are sold with a sales charge at the time of purchase.
Class A shares are not subject to a deferred sales charge when they are redeemed
with certain exceptions.

Class B Shares - Back End Load Option

Class B shares are sold without a sales charge at the time of purchase,
but are, with certain exceptions, subject to a contingent deferred sales charge
if they are redeemed. Class B shares purchased on or after June 1, 1995 are
subject to a deferred sales charge upon redemption during the 72 month period
following the month of purchase at rates ranging from a maximum of 5% of amounts
redeemed during the first 12 month period following the month of purchase to 1%
of amounts redeemed during the sixth twelve month period following the month of
purchase. Class B shares purchased prior to June 1, 1995 are subject to a
deferred sales charge upon redemption during the four calendar years following
purchase at rates ranging from a maximum of 3% of amounts redeemed during the
same calendar year of purchase to 1% of amounts redeemed during the third
calendar year after the year of purchase.

Class C Shares - Level Load Option

Class C shares are sold without a sales charge at the time of purchase,
but are subject to a deferred sales charge if they are redeemed within one year
after the date of purchase. Class C shares are available only through dealers
who have entered into special distribution agreements with the Principal
Underwriter.

In respect of Class B and Class C shares, no deferred sales charge is
imposed on amounts redeemed after the above described periods or on shares
purchased through reinvestment of dividends and distributions. If imposed, the
contingent deferred sales charge is deducted from the redemption proceeds
otherwise payable to the shareholder.

Shares of KHGF and of KOF may be purchased in exactly the same manner.
See "How to Buy Shares" in the accompanying KOF Prospectus.

KOF Shares received by KHGF shareholders as a result of the
Reorganization will not be subject to a deferred sales charge.

No front-end or deferred sales charge will be imposed on KOF Shares
issued pursuant to the Reorganization that replace KHGF Shares. For purposes of
any future contingent deferred sales charge on KOF Shares issued pursuant to the
Reorganization, the date of the purchase of those KOF Shares will be assumed to
be the date the KOF Shares issued pursuant to the Reorganization

<PAGE>

were originally purchased. Redemptions for both Funds may be made by submitting
a redemption request to KIRC or the shareholder's broker-dealer. See "How to
Redeem Shares" in the accompanying KOF Prospectus.

KHGF Shares and KOF Shares have the same exchange rights. Such Shares
may be exchanged for Shares of any of the other funds of the same class in the
Keystone America Fund Family, on the basis of their respective net asset values.
See "Shareholder Services" in the accompanying KOF Prospectus.

Distribution Procedures and Payments

KHGF and KOF have adopted substantially similar 12b-1 Distribution
Plans in respect of their respective Class A, Class B and Class C shares,
pursuant to which they incur certain distribution related expenses. Each Fund's
Class A Distribution Plan provides for expenditures by the Fund, currently
limited to 0.25% annually of the average daily net asset value of its Class A
shares to pay distribution costs for sales of its Class A shares and to pay
shareholder service fees. Each Fund's Class B Distribution Plan provides for
expenditures by the Fund at an annual rate of up to 1.00% of the average daily
net asset value of its Class B shares to pay distribution costs for sales of its
Class B shares and to pay shareholder service fees. Each Fund's Class C
Distribution Plan provides for expenditures by the Fund at an annual rate of up
to 1.00% of the average daily net asset value of its Class C shares to pay
distribution expenses for sales of its Class C shares and to pay shareholder
service fees. A NASD rule limits such annual expenditures to 1.00%, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder service fees. The aggregate amount that each Fund may pay for such
distribution costs is limited to 6.25% of gross share sales since the inception
of the Fund's Distribution Plans, plus interest at the prime rate plus 1.00% on
such amounts (less any contingent deferred sales charges paid by shareholders to
the Principal Underwriter) remaining unpaid from time to time.

Payments under each Fund's Distribution Plans are currently made to the
Principal Underwriter, (which may reallow all or part to others, such as
dealers), (1) as commissions for Fund shares sold, and (2) as shareholder
service fees in respect of shares maintained by the recipients outstanding on
each of the Fund's books for specified periods. Amounts paid or accrued to the
Principal Underwriter under (1) and (2) in the aggregate may not exceed the
annual limitation referred to above. The Principal Underwriter generally
reallows to brokers or others a commission in the amount of 4.00% of the price
paid for each Class B share sold plus the first year's service fee in advance in
the amount of 0.25% of the price paid for each Class B share sold. The Principal
Underwriter generally reallows to brokers or others a

<PAGE>

commission in the amount of 0.75% of the price paid for each Class C share sold
plus the first year's service fee in advance in the amount of 0.25% of the price
paid for each Class C share sold.

After the Reorganization, it is anticipated that the commissions that
the Principal Underwriter will pay brokers or others for Fund share sales and
the shareholder service fees will remain the same. See "Distribution Plans" in
the accompanying KOF Prospectus.

Dividends and Distributions

Each shareholder of KHGF who becomes a shareholder of KOF will be
entitled to dividends and distributions of KOF. Each Fund makes distributions
from its net investment income, and net capital gains, if any, at least
annually.

Distributions are payable in shares of the relevant Fund, or, at the
shareholder's option (which must be exercised before the record date for the
distribution) in cash. Fund distributions in the form of additional shares are
made at net asset value without the imposition of a sales charge. Unless a KHGF
shareholder instructs or has instructed otherwise, any distributions paid after
the Effective Date on the KOF Shares he receives in the Reorganization will be
made in the same manner that the shareholder receives dividends and
distributions on his KHGF Shares. After the Reorganization, shareholders may
elect, at any time, to change the manner in which their dividends and
distributions are paid. See "Dividends and Taxes" in the accompanying KOF
Prospectus.

Tax Consequences

In the opinion of Sullivan & Worcester, legal counsel to KHGF, the
Reorganization will constitute a tax free reorganization pursuant to Section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"). No gain or loss will be recognized by KHGF or its shareholders
as a result of the Reorganization. The tax basis and holding period of the KOF
Shares received by KHGF shareholders will be the same as the tax basis and
holding period of the KHGF Shares surrendered therefor. In addition, the tax
basis and holding period of the assets of KHGF in the hands of KOF will be the
same as the tax basis and holding period of such assets in the hands of KHGF
prior to the Reorganization. See "The Reorganization--Federal Income Tax
Consequences."

Principal Risk Factors

As discussed above in the synopsis, the investment
objectives, policies and strategies of KHGF and KOF do not differ

<PAGE>

materially, except that KHGF is non-diversified and KOF is diversified.
Accordingly, the investment risks for both Funds are substantially the same. The
principal risk factor of investing in either KHGF or KOF is that the net asset
value upon which the value of Shares is based will fluctuate in response to
changes in economic conditions, interest rates and the market's perception of
the underlying portfolio securities of the Fund. In addition, investing in KHGF,
a non-diversified fund, as opposed to KOF, a diversified fund, may result in a
greater degree of exposure to the economic movement of the particular market
sector in which KHGF invests.

Both Funds invest in equity securities selected for growth potential
and showing good earnings momentum. Both Funds may also invest up to 25% of
their assets in foreign securities issued by issuers located in developed
countries as well as emerging markets countries, including, in the case of KOF,
certain formerly communist countries. In addition, while both Funds may enter
into repurchase agreements, KOF may also enter into reverse repurchase
agreements, invest in master demand notes, lend portfolio securities, purchase
and sell securities and currencies on a when issued and delayed delivery basis
and purchase or sell securities on a forward commitment basis, write covered
call and put options and purchase call and put options to close out existing
positions and may employ new investment techniques with respect to such options.
The Fund may also enter into currency and other financial futures contracts and
related options transactions for hedging purposes and not for speculation, and
may employ new investment techniques with respect to such futures contracts and
related options. Finally, both Funds may invest in restricted securities,
including securities eligible for resale pursuant to Rule 144A under the 1933
Act. Each of these investment techniques involve certain investment risks. Each
Fund's Prospectus contains a discussion of the Fund's investment risks in the
section entitled "Risk Factors". See also the "Additional Investment
Information" section at the back of the KOF Prospectus.

THE REORGANIZATION

Reasons for the Proposed Transaction

The Board of Trustees of KHGF, including all of the Fund's Independent
Trustees, has determined that the tax-free Reorganization would be in the best
interests of the Fund, would not dilute the interests of the Fund's
shareholders, and would not impose an unfair burden on the Fund.

The Board of Trustees has proposed the transaction in the
interest of providing a cost effective investment alternative for

<PAGE>

KHGF shareholders. As KOF shareholders, KHGF shareholders can pursue maximum
capital growth by investing in companies with accelerating earnings momentum. As
KOF shareholders, KHGF shareholders will enjoy the investment management
services of Keystone. Continuity of all other investor services (including
exchange privileges with the other funds in the Keystone America Fund Family)
currently provided to KHGF will be maintained.

The combination of the two Funds should permit KHGF shareholders, as
shareholders of KOF, to pursue a similar investment objective in a larger, more
diversified fund with the following resulting advantages (although no assurance
can be given that these benefits will be obtained):

1. Economies of scale -- The proposed reorganization is expected to
reduce operating expenses for KHGF. Investment management and custodial fees are
reduced as the asset base reaches certain levels, thus decreasing as assets
increase. Fixed expenses such as accounting, legal and printing costs will be
spread over a larger asset base resulting in per share expense reductions or
economies of scale.

As of December 31, 1995, KHGF's net assets were approximately $21
million and KOF's net assets were approximately $221 million.

2. Increased investment opportunities -- It is expected that the
combined Fund will be more easily and efficiently managed. A larger single asset
base reduces transaction costs, might result in reduced portfolio turnover and
provides the opportunity to obtain a wider variety of investments.

3. Facilitate marketing and distribution efforts -- It is expected that
the combined Fund will facilitate marketing and distribution efforts with a view
toward increasing the asset base which in turn will benefit shareholders as
described in (1) and (2) above.

The Board of Trustees of KHGF based their decision to recommend the
Reorganization on a number of factors, including the following:

1. projected expense ratios and information regarding fees
and expenses of KHGF and KOF;

2. the terms and conditions of the Reorganization and
whether it would result in dilution of the interests of
KHGF shareholders;

3. the compatibility of KHGF, its investment objective,
policies and restrictions with those of KOF;

<PAGE>

4. the costs to KHGF of the Reorganization;

5. the tax consequences to KHGF and its shareholders
resulting from the Reorganization;

6. the availability to KOF shareholders of shareholder
services identical to those available to KHGF
shareholders; and

7. the possible investment benefits to be gained from a
single larger, diversified fund.

Agreement on Transfer of Assets

The terms and conditions under which the Reorganization may be
consummated are set forth in the Reorganization Agreement. Significant
provisions of the Reorganization Agreement are summarized below. This summary,
however, is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached hereto as Exhibit A.

The Reorganization Agreement provides that all of the assets of KHGF
will be transferred to KOF in exchange for Shares of KOF and the liabilities of
KHGF will be assumed by KOF on the Effective Date (the later of (i) receipt of
all necessary regulatory approvals, (ii) final adjournment of the meeting of the
shareholders of KHGF at which the Reorganization Agreement will be considered so
long as the Reorganization Agreement is approved by the shareholders, or (iii)
such later date as the parties to the Reorganization Agreement may mutually
agree upon).

The number of full and fractional KOF Shares to be delivered to KHGF
shareholders will be determined on the basis of the relative net asset values of
KOF and KHGF as of the close of business on the New York Stock Exchange on the
Effective Date. The net asset value of a KOF Class A, Class B and Class C Share
will be determined in the manner set forth in KOF's Prospectus, a copy of which
accompanies this Prospectus/Proxy Statement, except that such computation will
be made to the nearest thousandth of a cent. The valuation practices of KOF are
described under "Pricing Shares" in KOF's Prospectus. The assets and liabilities
of KHGF will be valued in the same manner as that used with respect to the
valuation of the assets and liabilities of KOF. The valuation procedures of both
Funds are substantially identical. The value of the Class A, Class B and Class C
Shares of KHGF will be computed to the nearest thousandth of a cent.

Under the Reorganization Agreement, (i) all of the assets and
liabilities of KHGF will be exchanged for Shares of KOF; (ii) KOF Shares will be
distributed to the shareholders of KHGF as of the close of business on the
Effective Date; and (iii) KHGF will be liquidated. The distribution of KOF Class
A, Class B and Class

<PAGE>

C Shares will be accomplished by the establishment of open accounts on the
records of KOF in the name of each shareholder of KHGF representing the
respective pro rata number of Shares of the appropriate class of KOF due such
shareholder. Fractional Shares of KOF will be carried to the third decimal
place. After the Effective Date, KOF Share certificates will be issued only upon
written request, and such requests must be accompanied by any Share certificates
issued for KHGF Shares held by the investor.

The Board of Trustees of KHGF, including all of the Independent
Trustees, has determined that the interests of the existing shareholders of KHGF
will not be diluted as a result of the Reorganization, and that the
Reorganization is in the best interests of KHGF shareholders. The Board of
Trustees of KOF, including all of the Independent Trustees, has made the same
determinations with respect to the interests of the existing shareholders of
KOF.

The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Agreement. The Reorganization
Agreement may be terminated and the Reorganization abandoned at any time, before
or after approval by the shareholders of KHGF, prior to the Effective Date by
either KHGF or KOF.

KOF will pay the expenses (consisting primarily of legal, accounting,
custodian and transfer agents fees, as well as printing and mailing and other
expenses in connection with the registration of KOF Shares under the 1933 Act)
incurred by it in connection with the Reorganization. KHGF will pay the expenses
of printing and mailing this Prospectus/Proxy Statement and other material to
KHGF shareholders and conducting proxy solicitations.

Description of the Securities to be Issued

KOF is an open-end, diversified management investment company,
organized as a Massachusetts business trust. KOF currently issues three classes
of shares, which participate in dividends and distributions and have equal
voting, liquidation and other rights, including rights of appraisal, except that
(1) expenses related to the distribution of each series or class of shares or
other expenses that the Board of Trustees may designate as series or class
expenses from time to time, are borne solely by each series or class; (2) each
series or class of shares has exclusive voting rights with respect to its
Distribution Plan; (3) each series or class has different exchange privileges;
and (4) each series or class generally has a different designation. When issued
and paid for, the shares will be fully paid and nonassessable by the Fund. KOF
Shares may be exchanged for Shares of any of the other funds in the Keystone
America Fund Family, but will have no other preference, conversion, exchange or
preemptive rights. Shares are redeemable, transferable and freely

<PAGE>

assignable as collateral. KOF is authorized to issue additional
series or classes of shares.

Under Massachusetts law it is possible that a Fund shareholder may be
held personally liable for the Fund's obligations. The Fund's Declaration of
Trust provides, however, that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.

Important financial information relating to KOF is contained in KOF's
Financial Highlights, attached hereto as Exhibit B. Important information about
KOF is also contained in Management's Discussion of KOF's Performance, attached
hereto as Exhibit C. This financial information appears in KOF's most recent
Annual Report.

Federal Income Tax Consequences

The completion of the Reorganization is contingent upon the receipt by
KHGF of an opinion from Sullivan & Worcester that, on the basis of the existing
provisions of the Internal Revenue Code, Treasury regulations, current
administrative rules, and court decisions, for federal income tax purposes: (i)
no gain or loss will be recognized by KHGF or KOF as a result of the
Reorganization; (ii) the basis of the assets of KHGF in the hands of KOF will be
the same as the basis of those assets in the hands of KHGF immediately prior to
the Reorganization; (iii) the holding period of KHGF's assets in the hands of
KOF will include the period during which the assets were held by KHGF; (iv) no
gain or loss will be recognized by shareholders of KHGF as a result of the
Reorganization; (v) the basis of KOF Shares received by KHGF shareholders will
be the same as the basis of KHGF Shares surrendered therefor; and (vi) the
holding period of KOF Shares received by KHGF shareholders will include the
holding period during which KHGF Shares surrendered in exchange therefor were
held, provided that such Shares were held as a capital asset in the hands of
KHGF shareholders on the date of the Reorganization.

<PAGE>

KHGF shareholders should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the federal income
tax consequences of the Reorganization, shareholders of KHGF should also consult
their tax advisers as to the state and local tax consequences, if any, of the
Reorganization.

Capitalization

The following table shows the capitalization of KOF and KHGF as of
December 29, 1995 and on a pro forma basis as of that date after giving effect
to the proposed acquisition of assets of KHGF at the then net asset value per
Share:

<TABLE>
<CAPTION>
Pro Forma
KOF KHGF Combined
<S> <C> <C> <C>
Total Net
Assets $220,678,390 $21,106,643 $241,785,033

Net Asset Value
per Share
Class A $19.56 $19.44 $19.56
Class B $19.10 $18.97 $19.10
Class C $19.13 $18.85 $19.13

Total Shares
Outstanding
Class A 6,907,644 997,722 7,899,379
Class B 3,751,051 64,079 3,814,683
Class C 730,073 26,147 755,841
</TABLE>

INFORMATION ABOUT THE FUNDS

Keystone Omega Fund

Information about KOF is included in its Prospectus dated April 28,
1995, as supplemented June 1, 1995, and its most recent Annual Report, each of
which is incorporated by reference herein and copies of which accompany this
Prospectus/Proxy Statement. Additional information about KOF is included in its
SAI dated April 28, 1995, as supplemented June 1, 1995, and in the SAI dated
February 26, 1996, relating to the Reorganization, each of which is incorporated
by reference herein. Copies of KOF's SAIs and Annual Report may be obtained
without charge by writing to KOF at the address listed at the front of this
Prospectus/Proxy Statement or by calling KOF at (800) 343-2898 or (617)
621-6100.

<PAGE>

Keystone Hartwell Growth Fund

Information about KHGF is included in its Prospectus and SAI each dated
January 30, 1996, each of which is incorporated by reference herein. Copies of
KHGF's Prospectus and SAI may be obtained without charge by writing to KHGF at
the address listed at the front of this Prospectus/Proxy Statement or by calling
KHGF at (800) 343-2898 or (617) 621-6100.

ADDITIONAL INFORMATION ABOUT THE FUNDS

Both KOF and KHGF are subject to the informational requirements of the
1934 Act and the 1940 Act, and, in accordance therewith, file reports, proxy
material and other information with the Commission.

Such reports, proxy material and other information can be inspected and
copied at the Public Reference Facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.

Supplementary Solicitation

Supplementary solicitation will generally be made by mail, telephone,
facsimile, telegram or in person by officers of KOF and KHGF and by officers or
employees of KIRC, Keystone, Keystone Investments, the Principal Underwriter or
any of their subsidiaries.

The Fund may also arrange to have votes recorded by telephone. The
telephone voting procedure is designated to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions and to confirm that their instructions have
been properly recorded. The Fund has been advised by counsel that these
procedures are consistent with the requirements of applicable law. If these
procedures were subject to a successful legal challenge, such votes would not be
counted at the meeting. The Fund is unaware of any such challenge at this time.
Shareholders voting by telephone will be called at the phone numbers KIRC has in
its records for accounts, will be asked to verify certain criteria specific to
their accounts intended to ensure the identity of the shareholder, and will be
given an opportunity to authorize proxies to vote their shares at the meeting in
accordance with their instructions. To ensure that shareholders' instructions
have been recorded correctly, shareholders will receive a confirmation of their
instructions in

<PAGE>

the mail. A toll-free number will be available in case the information contained
in the confirmation is incorrect. Although shareholders' votes may be taken by
telephone, each shareholder will receive a copy of this Prospectus/Proxy
Statement and may vote by mail using the enclosed proxy card.

Substantial Shareholders

As of December 29, 1995, to the best knowledge of KOF, there were no
shareholders who owned of record 5% or more of the outstanding Class A Shares of
KOF:

As of December 29, 1995, to the best knowledge of KOF, the following
shareholder owned of record 5% or more of the outstanding Class B Shares of KOF:

Shareholder Percentage Interest
- ----------- -------------------
Merrill Lynch Pierce Fenner & Smith 11.06%
Attn: Book Entry
4800 Deer Lake Dr. E, 3rd FL
Jacksonville, FL 32246-6484

As of December 29, 1995, to the best knowledge of KOF, the following
shareholder owned of record 5% or more of the outstanding Class C Shares of KOF:

Shareholder Percentage Interest
- ----------- -------------------
Merrill Lynch Pierce Fenner & Smith 34.23%
Attn: Book Entry
4800 Deer Lake Dr. E, 3rd FL
Jacksonville, FL 32246-6484

On that date, the Trustees and officers of KOF, as a group,
beneficially owned less than 1% of the outstanding Shares of KOF.

As of December 29, 1995, to the best knowledge of KHGF, there were no
shareholders who owned of record 5% or more of the outstanding Class A Shares of
KHGF.

As of December 29, 1995, to the best knowledge of KHGF, the following
shareholders owned of record 5% or more of the outstanding Class B Shares of
KHGF:

Shareholder Percentage Interest
- ----------- -------------------
Merrill Lynch Pierce Fenner & Smith 17.93%
Attn: Book Entry
4800 Deer Lake Dr. E, 3rd FL
Jacksonville, FL 32246-6484

<PAGE>

Kenneth S White 6.03%
c/o Alan White
506 W. Mt. Pleasant Ave
Philadelphia, PA 19119-2929

As of December 29, 1995, to the best knowledge of KHGF, the following
shareholders owned of record 5% or more of the outstanding Class C Shares of
KHGF:

Shareholder Percentage Interest
- ----------- -------------------
NFSC FEBO # AEJ-103772 24.04%
Luben Christoff
320 Seaview Ct # 2002
Marco Island, FL 33937-2950

Merrill Lynch Pierce Fenner & Smith 23.61%
Attn: Book Entry
4800 Deer Lake Dr. E, 3rd FL
Jacksonville, FL 32246-6484

On that date, the Trustees and officers of KHGF, as a group,
beneficially owned less than 1% of the outstanding Shares of KHGF.

Interest of Certain Persons

The following entities receive payments from KOF for services rendered
pursuant to contractual arrangements with KOF: Keystone Management, as
investment manager to KOF, receives payments for its investment management
services provided to KOF, as described in the section above entitled "Investment
Advisory and Management Fees"; Keystone, as investment adviser to both Funds,
receives payments for its investment advisory services provided to both Funds,
also as described in the section above entitled "Investment Advisory and
Management Fees"; the Principal Underwriter receives payments pursuant to the
12b-1 Plans described in the section above entitled "Distribution Procedures and
Payments" as well as certain payments in respect of contingent deferred sales
charges; and KIRC is compensated for acting as the transfer and dividend
disbursing agent.

March 4, 1996

<PAGE>

EXHIBIT A

AGREEMENT AND PLAN OF REORGANIZATION

This Agreement and Plan of Reorganization (the "Agreement") is entered
into as of January 16, 1996, by and between Keystone Omega Fund ("KOF"), a
Massachusetts business trust, and Keystone Hartwell Growth Fund ("KHGF"), a
Massachusetts business trust (each, a "Fund," and together, the "Funds"), each
Fund having its principal place of business at 200 Berkeley Street, Boston,
Massachusetts 02116.

WITNESSETH:

Whereas, each of KOF and KHGF is a diversified, open-end management
company registered under the Investment Company Act of 1940 (the "1940 Act") and
issues shares of beneficial interest;

Whereas, KOF and KHGF have agreed, subject to the receipt of the
approvals described in Section 3 below, to transfer all of the assets of KHGF to
KOF in exchange for shares of KOF with KOF assuming the liabilities of KHGF to
the extent provided herein;

Whereas, following the reorganization, shares of KOF will be
distributed to the shareholders of KHGF in liquidation of KHGF, and KHGF will be
terminated;

Whereas, the reorganization described in this Agreement is intended to
be a reorganization within the meaning of Section 368 (a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"); and

Whereas, the respective Boards of Trustees of KHGF and KOF, including
each Fund's Independent Trustees, have determined that participating in the
transactions contemplated by this Agreement is in the best interests of the
Funds;

Now Therefore, in consideration of the premises set forth above and the
mutual covenants and agreements set forth below, the parties hereto agree as
follows:

SECTION 1.
EXCHANGE OF ASSETS FOR SHARES

1.1 Terms of Exchange.

(a) Upon the Effective Date (as defined in Subsection 1.2 below), KHGF
will sell, transfer, and deliver to KOF good and marketable title to all of the
then existing assets of KHGF free and clear of all liens, claims, charges,
options, and encumbrances.

<PAGE>

(b) KOF will assume and pay, to the extent that they exist on the
Effective Date, all the liabilities of KHGF, whether absolute, accrued,
contingent, or otherwise.

(c) KOF will deliver to KHGF that number of full and fractional shares
of KOF having an aggregate net asset value equal to the aggregate net asset
value of KHGF, all determined as provided in Section 1.1(d) below.

(d) The following provisions shall apply to the determination of the
number of shares of KOF to be delivered:

(i) The net asset value per share of KOF shall be determined
as of the close of business on the New York Stock Exchange on the
Effective Date.

(ii) The net value of the assets and liabilities of KHGF shall be
determined as of the close of business on the New York Stock Exchange
on the Effective Date.

(iii) The net asset value per share of KHGF shall be determined as
of the close of business on the New York Stock Exchange on the
Effective Date.

(iv) The net asset value of KOF shall be computed in the manner set
forth in KOF's current Registration Statement under the Securities Act
of 1933 ("1933 Act") and the 1940 Act, except that such computation
shall be made to the nearest one-hundredth of a cent.

(v) The assets and liabilities of KHGF shall be valued in the same
manner as that used with respect to the valuation of the assets and
liabilities of KOF in the computation of the net asset value per share
of KOF.

(vi) The net asset value per share of KHGF shall be computed by
dividing the net value of the assets and liabilities of KHGF,
determined as provided in (ii) and (v) above, by the number of shares
of KHGF outstanding as of the close of business on the New York Stock
Exchange (the "Exchange") on the Effective Date; and such computation
shall be made to the nearest one-hundredth of a cent.

(vii) The net asset value per share of KHGF determined as provided
in (vi) above shall be divided by the net asset value per share of KOF
determined as provided in (i) and (iv) above; and the result of such
division shall be calculated to six decimal places (the "Conversion
Ratio").

(viii) The number of shares of KHGF outstanding at the
close of business on the New York Stock Exchange on the

<PAGE>

Effective Date shall be multiplied by the Conversion Ratio to determine
the number of shares of KOF to be delivered.

(ix) KPMG Peat Marwick LLP shall provide a written report to each
of KOF and KHGF on procedures they will have performed to determine the
accuracy of the computations required by this Section 1.1(d).

1.2 Closing and Effective Date. The closing shall be held at the
offices of Keystone Investment Management Company, investment adviser to KOF,
located at 200 Berkeley Street, Boston, Massachusetts 02116, and shall occur on
the later of (a) receipt of all necessary regulatory approvals; (b) the final
adjournment of the meeting of the shareholders of KHGF at which this Agreement
will be considered so long as this Agreement and the transaction set forth
herein are approved by the shareholders of KHGF at the meeting; or (c) such
later date as the parties may mutually agree (the "Effective Date").

1.3 KHGF Share Sales and Transfers. KHGF shall not issue, sell, or
transfer any of its shares after the Effective Date.

1.4 Transfer Books; Redemptions. The stock transfer books of KHGF will
be permanently closed as of the close of business on the Effective Date and only
redemption requests relating to KHGF received in proper form on or prior to the
close of trading on the New York Stock Exchange on the Effective Date shall be
accepted by KHGF. Redemption requests relating to KHGF thereafter received shall
be deemed to be redemption requests for shares of KOF to be distributed to the
shareholders of KHGF under this Agreement.

1.5 Treasury Shares. Any shares of KHGF held in the treasury of KHGF
immediately prior to the Effective Date shall be cancelled upon the Effective
Date without conversion into shares of KOF.

1.6 Transfer Taxes. Any transfer taxes payable upon issuance of shares
of KOF in a name other than the registered shareholder of KHGF entitled to
receive the same shall be paid by the person to whom such shares are to be
issued as a condition of such transfer.

1.7 Contingent Deferred Sales Charge. In respect of its Class B shares
purchased on or after June 1, 1995, KHGF, with certain exceptions, imposes a
deferred sales charge at rates ranging from a maximum of 5% of amounts redeemed
during the first 12 month period following the month of purchase to 1% of
amounts redeemed during the sixth 12 month period following the month of
purchase. In respect of its Class B shares purchased prior to June 1, 1995, KHGF
imposes a deferred sales charge at rates ranging from a maximum of 3% of amounts
redeemed during the same

<PAGE>

calendar year of purchase to 1% of amounts redeemed during the third calendar
year after the year of purchase. In addition, certain Class A shares purchased
without a front-end sales charge are subject to a contingent deferred sales
charge upon redemption during a period of up to 24 months following the date of
purchase. With certain exceptions, the Fund imposes a deferred sales charge of
1.00% on Class C shares redeemed within one year after the date of purchase. No
contingent deferred sales charge is imposed on amounts redeemed thereafter. If
imposed, the contingent deferred sales charge is imposed on amounts redeemed
thereafter. If imposed, the contingent deferred sales charge is deducted from
the redemption proceeds otherwise payable to the shareholder. The shareholders
of KHGF may be subject to such deferred sales charge with respect to those
shares of KOF received by them under this Agreement in exchange for their shares
of KHGF if their shares of KHGF were subject to such deferred sales charge.

SECTION 2.
LIQUIDATION OF Keystone Hartwell Growth Fund

2.1 Plan of Liquidation. As soon as practicable after the Effective
Date, KHGF will distribute pro rata to its shareholders of record as of the
close of business on the Effective Date, KOF shares received by KHGF pursuant to
Section 1 above. KOF will establish an open account on its share records in the
name of each shareholder of KHGF representing the respective number of shares of
KOF due such shareholder. Fractional KOF shares will be carried to the third
decimal place. No certificates representing KOF shares will be issued.
Simultaneously with such crediting of KOF shares to the shareholders of record
of KHGF, the shares of KHGF held by such shareholders shall be cancelled.

2.2 Further Actions to Complete Dissolution. As soon as practicable
after the Effective Date, KHGF shall take, in accordance with its Declaration of
Trust, Massachusetts law, and the rules and regulations of the Securities and
Exchange Commission (the "Commission"), all such other steps as shall be
necessary and proper to effect a complete liquidation and dissolution of KHGF.

SECTION 3.
APPROVAL OF TRANSACTIONS

3.1 Trustees of KOF. A duly constituted meeting of the Board of
Trustees of KOF was held on December 13, 1995, at which meeting this Agreement
and the transactions set forth herein were duly approved by the Trustees of KOF.

3.2 Trustees of KHGF. A duly constituted meeting of the Trustees of
KHGF was held on December 13, 1995, at which meeting this Agreement and the
transactions set forth herein were duly

<PAGE>

approved by the Trustees of KHGF, subject to the approval of the shareholders of
KHGF as set forth in Subsection 3.3 below.

3.3 Approval by Shareholders of KHGF. A meeting of the shareholders of
KHGF shall be called and held for the purpose of having the KHGF shareholders
act upon this Agreement and the transactions set forth herein. KOF shall furnish
to KHGF such data and information relating to KOF as shall be reasonably
requested by the Trustees and officers of KHGF for inclusion in the information
to be furnished to the shareholders in connection with such meeting.

SECTION 4.
REPRESENTATIONS AND WARRANTIES
OF KEYSTONE OMEGA FUND

4.1 Organization, Existence, etc. KOF is a business trust, duly
organized, validly existing, and in good standing under the laws of The
Commonwealth of Massachusetts and has the requisite power to carry on its
business as it is now being conducted. KOF has all necessary federal, state, and
local authorization to own all of its properties and assets and to carry on its
business as now being conducted.

4.2 Registration as Investment Company. KOF is registered under the
1940 Act as an open-end, diversified investment company of the management type,
and such registration has not been revoked or rescinded and is in full force and
effect.

4.3 Financial Statements. The financial statements of KOF for the
fiscal year ended December 31, 1995, previously delivered to KHGF, fairly
present the financial position of KOF as of December 31, 1995, and the results
of its operations and changes in its net assets for the year then ended.

4.4 Shares to be Issued. The shares of KOF to be issued in exchange for
the assets of KHGF have been duly authorized and when delivered pursuant to this
Agreement will be validly issued, fully paid, and nonassessable by KOF.

4.5 Authority Relative to this Agreement. KOF has the power to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by the Board of Trustees of KOF
and no other proceedings by KOF are necessary to authorize KOF's officers to
effectuate this Agreement and the transactions contemplated herein. KOF is not a
party to, or obligated under, any charter, by-law, indenture, or contract
provision or any other commitment or obligation or subject to any order or
decree that would be violated by its executing and carrying out this Agreement.

<PAGE>

4.6 Liabilities. There are no liabilities of KOF, whether or not
determined or determinable, other than liabilities disclosed or provided for in
its financial statements for the fiscal year ended December 31, 1995, previously
delivered as set forth in Subsection 4.3, and liabilities incurred in the
ordinary course of business subsequent to December 31, 1995 or otherwise
previously disclosed to KHGF, none of which has been materially adverse to the
business, assets, or results of operations of KOF.

4.7 Litigation. There are no claims, actions, suits, or proceedings
pending or, to the knowledge of KOF, threatened that would materially adversely
affect KOF or its assets or business or prevent or hinder consummation of the
transactions contemplated hereby.

4.8 Contracts. Except for contracts and agreements previously disclosed
to KHGF, under which no default exists, KOF is not a party to or subject to any
material contract, debt, instrument, plan, lease, franchise, license, or permit
of any kind or nature whatsoever.

4.9 Taxes. The federal income tax returns of KOF have been filed for
all taxable years prior to and including December 31, 1994, and all taxes
payable pursuant to such returns have been paid. KOF has qualified as a
regulated investment company under the Code in respect to each taxable year of
KOF since commencement of its operations.

4.10 Registration/Proxy Statement. KOF shall file with the Commission a
Registration/Proxy Statement (the "Registration/Proxy Statement") under the 1933
Act relating to the shares of KOF issuable hereunder. At the time the
Registration/Proxy Statement becomes effective, the Registration/Proxy Statement
(a) will comply in all material respects with the provisions of the 1933 Act and
the regulations of the Commission thereunder, and (b) will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading. In
addition, at the time the Registration/Proxy Statement becomes effective, at the
time of the meeting of the shareholders of KHGF referred to in Subsection 3.3,
and on the Effective Date, the proxy statement (the "Proxy Statement"), the
prospectus (the "Prospectus"), and statement of additional information (the
"Statement of Additional Information") included in the Registration/Proxy
Statement, as amended or supplemented by any amendments or supplements filed by
KOF, will not contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that none of the representations and warranties in this Subsection shall apply
to statements in or omissions from the Registration/Proxy Statement

<PAGE>

or Proxy Statement, Prospectus, and Statement of Additional Information made in
reliance upon and in conformity with information furnished by KHGF for use in
the Registration/Proxy Statement, as provided in Subsection 5.10.

4.11 Capitalization. On December 31, 1995, 11,388,768 shares of KOF
were duly and validly issued and outstanding, fully-paid and non-assessable by
KOF. KOF does not have any outstanding options, warrants, or other rights to
subscribe for or purchase any of its shares nor is there outstanding any
security convertible into any of its shares.

4.12 Prospectus. The prospectus and statement of additional information
of KOF each dated April 28, 1995, as supplemented June 1, 1995, ("KOF
Prospectus"), which have previously been furnished to KHGF, did not contain as
of such date and do not as of this date contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.

SECTION 5.
REPRESENTATIONS AND WARRANTIES
OF Keystone Hartwell Growth Fund

5.1 Organization, Existence etc. KHGF is a business trust, duly
organized, validly existing, and in good standing under the laws of The
Commonwealth of Massachusetts and has the requisite power to carry on its
business as it is now being conducted. KHGF has all necessary federal, state,
and local authorization to own all of its properties and assets and to carry on
its business as now being conducted.

5.2 Registration as Investment Company. KHGF is registered under the
1940 Act as an open-end, diversified investment company of the management type
and such registration has not been revoked or rescinded and is in full force and
effect.

5.3 Financial Statements. The financial statements of KHGF for the year
ended September 30, 1995, previously delivered to KOF, fairly present the
financial position of KHGF as of September 30, 1995, and the results of its
operations and changes in its net assets for the year then ended.

5.4 Authority Relative to this Agreement. KHGF has the requisite power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by the Board of
Trustees of KHGF, and, except for the requisite approval by the shareholders of
KHGF, no other proceedings on behalf of KHGF are necessary to authorize KHGF's
officers to effectuate this Agreement and the

<PAGE>

transactions contemplated herein. KHGF is not a party to or obligated under any
charter, by-law, indenture, or contract provisions or any other commitment or
obligation or subject to any order or decree that would be violated by its
executing and carrying out this Agreement.

5.5 Liabilities. There are no liabilities of KHGF, whether or not
determined or determinable, other than liabilities disclosed or provided for in
the financial statements of KHGF with respect to the year ended September 30,
1995, previously delivered as set forth in Subsection 5.3, and liabilities
incurred in the ordinary course of business subsequent to September 30, 1995 or
otherwise previously disclosed to KOF, none of which has been materially adverse
to the business assets or results of operations of KHGF.

5.6 Litigation. There are no claims, actions, suits or proceedings
pending or, to the knowledge of KHGF, threatened that would materially adversely
affect KHGF or its assets or business or prevent or hinder consummation of the
transactions contemplated hereby.

5.7 Contracts. Except for contracts and agreements previously disclosed
to KOF, under which no default exists (all of which will be terminated as of the
Effective Date), KHGF is not a party to or subject to any material contract,
debt, instrument, plan, lease, franchise, license, or permit of any kind or
nature whatsoever.

5.8 Portfolio Securities. All securities and other assets held as
investments by KHGF as of the Effective Date will be owned by KHGF free and
clear of any liens, claims, charges, options, and encumbrances, except as
otherwise indicated in a schedule to be delivered to KOF prior to the Effective
Date. The assets of KHGF do not include any assets not permitted under the KHGF
Prospectus (as hereinafter defined). Except as disclosed to KOF prior to the
Effective Date, none of such securities or other assets is, or, after the
completion of the transactions contemplated by this Agreement, will be subject
to any restrictions, legal or contractual, on the disposition thereof (including
restrictions as to the public offering or sale thereof under the 1933 Act), and
all such securities and other assets are or will be readily marketable.

5.9 Taxes. The federal income tax returns of KHGF have been filed for
all taxable years prior to and including September 30, 1994, and all taxes
payable pursuant to such returns have been paid. KHGF has qualified as a
regulated investment company under the Code in respect to each taxable year of
KHGF since commencement of its operations.

<PAGE>

5.10 Registration/Proxy Statement. In connection with the
Registration/Proxy Statement, KHGF will cooperate with KOF in the preparation of
the proxy statement portion of the Registration/Proxy Statement, and will
furnish to KOF the information relating to KHGF required by the 1933 Act and the
regulations thereunder to be set forth in the Registration/Proxy Statement
(including the Proxy Statement, Prospectus, and Statement of Additional
Information). At the time the Registration/Proxy Statement becomes effective,
the Registration/ Proxy Statement, insofar as it relates to KHGF (a) will comply
in all material respects with the provisions of the 1933 Act and the regulations
thereunder, and (b) will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. In addition, at the time the
Registration/Proxy Statement becomes effective, at the time of the meeting of
the shareholders of KHGF referred to in Subsection 3.3, and on the Effective
Date, the Proxy Statement, the Prospectus, and Statement of Additional
Information, as amended or supplemented by any amendments or supplements filed
by KOF insofar as they relate to KHGF, will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

5.11 Capitalization. On December 31, 1995, 1,087,948 shares of KHGF
were duly and validly issued and outstanding, fully-paid, and non-assessable by
KHGF. KHGF does not have any outstanding options, warrants, or other rights to
subscribe for or purchase any shares of KHGF, nor is there outstanding any
security convertible into any shares of KHGF.

5.12 Prospectus. The prospectus and statement of additional information
of KHGF each dated January 30, 1996, ("KHGF Prospectus"), which have previously
been furnished to KOF, did not contain as of such date and do not as of this
date contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.

SECTION 6.
CONDITIONS TO OBLIGATIONS
OF Keystone Hartwell Growth Fund

The obligations of KHGF hereunder with respect to the consummation of
the exchange of assets of KHGF for shares of KOF are subject to the satisfaction
of the conditions set forth below in this Section.

6.1 Shareholder Approval. This Agreement and the
transactions set forth herein with respect to KHGF shall have
been approved by the affirmative vote of the holders of a

<PAGE>

majority (as defined in the 1940 Act) of the outstanding voting
shares of KHGF.

6.2 Representations, Warranties and Agreements. KOF shall have complied
with each of its agreements contained herein, each of the representations and
warranties of KOF contained herein shall be true in all material respects as of
the Effective Date, and, except as otherwise indicated in any financial
statements of KOF audited or certified by the Treasurer of KOF, which may be
delivered to KHGF on or prior to the last business day preceding the Effective
Date, as of the Effective Date, there shall have been no material adverse change
in the financial condition, results of operations, business, properties or
assets of KOF since December 31, 1995. KHGF shall have received a certificate of
the President of KOF satisfactory in form and substance to KHGF so stating;
provided, however, that a decline in net asset value shall not constitute a
material adverse change.

6.3 Regulatory Approval. The Registration/Proxy Statement shall have
been declared effective by the Commission and no stop order under the 1933 Act
pertaining thereto shall have been issued, and all approvals, registrations, and
exemptions under federal and state laws considered to be necessary shall have
been obtained.

6.4 Dividends. KOF will declare to its shareholders of record on or
prior to the Effective Date a dividend or dividends, which, together with all
previous such dividends, shall have the effect of distributing to such
shareholders as of the Effective Date, that portion of KOF's investment company
taxable income (computed without regard to any deduction for dividends paid) and
that portion of KOF's net realized capital gains which would have the effect of
materially diluting the value of shares held by shareholders of either fund.

6.5 Opinion of Counsel. KHGF shall have received the opinion of
Rosemary D. Van Antwerp, General Counsel of Keystone Custodian Funds, Inc.,
dated the Effective Date, addressed to and in form and substance satisfactory to
KHGF, to the effect that (a) KOF is a business trust duly organized and existing
and in good standing under the laws of The Commonwealth of Massachusetts; (b)
KOF is an open-end, diversified investment company of the management type
registered under the 1940 Act; (c) this Agreement, the transactions provided for
herein and the execution of this Agreement have been duly authorized and
approved by all requisite action of KOF, and this Agreement has been duly
executed and delivered by KOF and is a valid and binding obligation of KOF; (d)
the Registration/Proxy Statement has been declared effective by the Commission
and no stop order under the 1933 Act pertaining thereto has been issued, and all
approvals, registrations and exemptions under federal and state laws considered
to be necessary shall have been obtained; and (e)

<PAGE>

the shares of KOF to be issued in exchange for the assets of KHGF shall have
been duly authorized and upon issuance thereof in accordance with this Agreement
will be validly issued, fully paid and nonassessable.

6.6(a) Secretary's Certificate. KHGF shall have received copies of the
resolutions adopted by the Board of Trustees of KOF authorizing the execution of
this Agreement by KOF and the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of KOF.

(b) KHGF shall have received a certificate of the Secretary or an
Assistant Secretary of KOF as to the signatures and incumbency of its officers
who executed this Agreement on behalf of KOF and any other documents delivered
in connection with the transactions contemplated hereby on behalf of KOF.

6.7 Treasurer's Certificate. KOF shall have furnished to KHGF a
statement of KOF's assets and liabilities with values determined as provided in
Section 1.1(d) of this Agreement, together with a list of the respective tax
cost of the assets certified by KOF's Treasurer.

6.8(a) Officer's Certificate. KHGF shall have received a certificate of
an appropriate officer of KOF as to the fulfillment of all agreements and
conditions on its part to be fulfilled hereunder on or prior to the Effective
Date, and to the effect that the representations and warranties of KOF are true
and correct in all material respects at and as of the Effective Date as if made
at and as of such date.

(b) KHGF shall have received a certificate of an appropriate officer
of KOF that (i) material relating to KOF included in the Proxy Statement and in
the KOF Prospectus that accompanied such Proxy Statement, taken together, is
complete and correct and contained, as of the date of the Proxy Statement and as
of the Effective Date, no untrue statement of a material fact and omitted no
statement of a material fact required to be stated therein or necessary to make
the statements contained therein not misleading; (ii) the Registration/Proxy
Statement insofar as it relates to KOF complied otherwise with the regulations
of the Commission applicable to the solicitation of proxies by registered
investment companies; and (iii) KOF's Prospectus and Statement of Additional
Information dated April 28, 1995 complied with the requirements of the 1933 Act
and the rules and regulations of the Commission thereunder.

6.9 Opinion of Tax Counsel. KHGF shall have received an opinion of
Sullivan & Worcester that for federal income tax purposes (a) no gain or loss
will be recognized by KHGF or KOF upon receipt by KOF of the assets transferred
pursuant to this Agreement; (b) the basis to KOF of the assets will be the same
as

<PAGE>

the basis of the assets in the hands of KHGF immediately before the exchange;
and (c) KOF's holding periods with respect to the assets will include the
respective periods for which the assets were held by KHGF.

6.10 KPMG Peat Marwick LLP Letter. KHGF shall have received a letter
from KPMG Peat Marwick LLP reporting on procedures performed by them to
determine the accuracy of the computations required by Section 1.1(d) above.

SECTION 7.
CONDITIONS TO OBLIGATIONS OF Keystone Omega Fund.

The obligations of KOF hereunder with respect to the consummation of
the exchange of its shares for the assets and liabilities of KHGF are subject to
the satisfaction of the conditions set forth below in this Section.

7.1 Shareholder Approval. This Agreement and the transactions set forth
herein with respect to KHGF shall have been approved by the affirmative vote of
the holders of a majority (as defined in the Act) of the outstanding voting
shares of KHGF.

7.2 Representations, Warranties and Agreements. KHGF shall have
complied with each of its agreements contained herein, each of the
representations and warranties of KHGF contained herein shall be true in all
material respects as of the Effective Date, and, except as otherwise indicated
in any financial statements of KHGF audited or certified by the Treasurer of
KHGF, which may be delivered to KHGF on or prior to the last business day
preceding the Effective Date, as of the Effective Date, there shall have been no
material adverse change in the financial condition, results of operations,
business, properties, or assets of KHGF since September 30, 1995. KOF shall have
received a certificate of the President of KHGF satisfactory in form and
substance to KOF so stating; provided, however, that a decline in net asset
value shall not constitute a material adverse change.

7.3 Regulatory Approval. The Registration/Proxy Statement shall have
been declared effective by the Commission and no stop order under the 1933 Act
pertaining thereto shall have been issued, and all approvals, registrations, and
exemptions under federal and state laws considered to be necessary shall have
been obtained.

7.4 Dividends. KHGF will declare to its shareholders of record on or
prior to the Effective Date a dividend or dividends, which, together with all
previous such dividends, shall have the effect of distributing to such
shareholders, as of the Effective Date, that portion of KHGF's investment
company taxable income (computed without regard to any deduction for dividends
paid) and

<PAGE>

that portion of KHGF's net realized capital gains which would have the effect of
materially diluting the value of shares held by shareholders of either Fund.

7.5 Opinion of Counsel. KOF shall have received the opinion of Rosemary
D. Van Antwerp, General Counsel of Keystone Custodian Funds, Inc., dated the
Effective Date, addressed to and in form and substance satisfactory to KOF, to
the effect that (a) KHGF is a business trust duly organized and existing and in
good standing under the laws of The Commonwealth of Massachusetts; (b) KHGF is
an open-end diversified investment company of the management type registered
under the 1940 Act; (c) all approvals, registrations and exemptions under
federal and state laws considered to be necessary have been obtained; and (d)
this Agreement, the transactions provided for herein and the execution of this
Agreement have been duly authorized and approved by all requisite action of
KHGF, and this Agreement has been duly executed and delivered by KHGF and is a
valid and binding obligation of KHGF.

7.6(a) Secretary's Certificate. KOF shall have received copies of the
resolutions adopted by the Board of Trustees of KHGF and its shareholders
authorizing the execution of this Agreement on behalf of KHGF and the
transactions contemplated hereby, each certified by the Secretary or an
Assistant Secretary of KHGF.

(b) KOF shall have received a certificate of the Secretary or an
Assistant Secretary of KHGF as to the signatures and incumbency of its officers
who executed this Agreement on behalf of KHGF and any other documents delivered
in connection with the transactions contemplated thereby on behalf of KHGF.

7.7 Treasurer's Certificate. KHGF shall have furnished to KOF a
statement of KHGF's assets and liabilities with values determined as provided in
Section 1.1(d) of this Agreement, together with a list of the respective tax
cost of the assets certified by KHGF's Treasurer.

7.8(a) Officer's Certificate. KOF shall have received a certificate of
an appropriate officer of KHGF as to the fulfillment of all agreements and
conditions on its part to be fulfilled hereunder on or prior to the Effective
Date, and to the effect that the representations and warranties of KHGF are true
and correct in all material respects at and as of the Effective Date as if made
at and as of such date.

(b) KOF shall have received such other documents, including an
opinion of Rosemary D. Van Antwerp, General Counsel to Keystone Custodian Funds,
Inc., as KOF may reasonably request to show fulfillment of the purposes and
conditions of this Agreement.

<PAGE>

7.9 Opinion of Tax Counsel. KOF shall have received an opinion of
Sullivan & Worcester that for federal income tax purposes (a) no gain or loss
will be recognized by KHGF or KOF upon receipt by KOF of the assets transferred
pursuant to this Agreement; (b) the basis to KOF of the assets will be the same
as the basis of the assets in the hands of KHGF immediately before the exchange;
and (c) KOF's holding periods with respect to the assets will include the
respective periods for which the assets were held by KHGF.

7.10 KPMG Peat Marwick LLP Letter. KOF shall have received a letter
from KPMG Peat Marwick LLP reporting on procedures performed by them to
determine the accuracy of the computations required by Section 1.1(d) above.

7.11 Other Acts. KHGF will, from time to time, as and when requested by
KOF, execute and deliver or cause to be executed and delivered, all such
assignments and other instruments, and will take and cause to be taken such
further action, as KOF may deem necessary or desirable in order to vest in and
confirm to KOF title to and possession of all the assets to be sold, assigned,
transferred, and delivered hereunder and otherwise to carry out the intent and
purpose of this Agreement.

SECTION 8.
AMENDMENT.

By agreement in writing authorized by the Trustees of KHGF and KOF, the
parties hereto may amend this Agreement at any time before or after approval
hereof by the shareholders of KHGF; provided, however, that after such approval
by the shareholders, no amendment shall be made that substantially changes the
terms hereof.

SECTION 9.
TERMINATION OF AGREEMENT.

This Agreement may be terminated at any time prior to the Effective
Date by either party hereto by written notice given to the other party hereto,
without liability on the part of either party hereto or its respective Trustees,
officers, or shareholders. In addition, unless the term of this Agreement is
extended by mutual consent of the parties hereto, this Agreement shall be
terminated without liability on the part of any of the foregoing as of the close
of business on September 30, 1996, if the Effective Date is not on or prior to
such date.

SECTION 10.
WAIVER OF REPRESENTATIONS AND CONDITIONS.

At any time prior to the Effective Date, either of the
parties may by written instrument signed by it (a) waive any

<PAGE>

inaccuracies in the representations and warranties made to it contained herein;
and (b) waive compliance with any of the covenants or conditions made for its
benefit contained herein; but after approval by the shareholders, no waiver
shall be made that substantially impacts the transactions contemplated hereby.

SECTION 11.
EXPENSES.

(a) KOF will pay or cause to be paid all fees and expenses that it
incurs in connection with the transaction contemplated by this Agreement,
including, but not limited to, legal, accounting, custodian and transfer agents
fees, as well as printing, mailing and other expenses in connection with the
registration of its shares under the 1933 Act, and additional audit fees.

(b) KHGF will pay or cause to be paid (i) all the costs of printing and
mailing the Prospectus/Proxy Statement and other materials to KHGF shareholders
and conducting proxy solicitations; and (ii) all other fees and expenses that it
incurs in connection with the transaction contemplated by this Agreement,
including, but not limited to, legal, accounting, custodian and transfer agents
fees, and additional audit fees.

SECTION 12.
INDEMNIFICATION.

(a) KOF agrees to indemnify and hold harmless KHGF, its Trustees and
officers against any and all claims, to the extent such claims are based upon,
arise out of or relate to any untruthful or inaccurate representation, any
omission of a material fact necessary to make a statement not misleading or any
breach of any warranty or any failure to perform or comply with any of its
covenants, conditions, or agreements set forth in this Agreement and any
obligation or liability of KHGF specifically assumed by KOF pursuant to Section
1.1(a);

(b) KHGF agrees to indemnify and hold harmless KOF, its Trustees and
officers against any and all claims, to the extent such claims are based upon,
arise out of or relate to any untruthful or inaccurate representation, any
omission of a material fact necessary to make a statement not misleading or any
breach of any warranty or any failure to perform or comply with any of its
covenants, conditions or agreements set forth in this Agreement and any
obligation or liability of KHGF (other than obligations and liabilities
specifically assumed by KOF pursuant to the provisions of Section 1.1(a))
accruing on or prior to, or existing on the Effective Date or thereafter
accrued.

(c) Any claim for indemnification under paragraphs (a) and (b) based
upon any untruthful or inaccurate representation or any breach of any warranty
must be asserted within three years from

<PAGE>

the Effective Date. As used in this section, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands, claims,
penalties, assessments, judgments, actions, proceedings, and suits of whatever
kind and nature and all costs and expenses (including, without limitation,
reasonable attorneys' fees).

SECTION 13.
SURVIVAL OF REPRESENTATIONS, ETC.

The representations, warranties, covenants, and indemnifications
provided for in this Agreement shall survive the Effective Date.

SECTION 14.
GENERAL.

14.1 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed to have been delivered when deposited in the United
States mail, postage pre-paid, registered or certified mail, return receipt
requested addressed to the parties as set forth below:

To KHGF: Albert H. Elfner, III
Chairman, President and Chief
Executive Officer
c/o Keystone Investments, Inc.
200 Berkeley Street
Boston, MA 02116

With a copy to: Rosemary D. Van Antwerp
Senior Vice President and Secretary
c/o Keystone Investments, Inc.
200 Berkeley Street
Boston, MA 02116

To KOF: Albert H. Elfner, III
Chairman, President and Chief
Executive Officer
c/o Keystone Investments, Inc.
200 Berkeley Street
Boston, MA 02116

With a copy to: Rosemary D. Van Antwerp
Senior Vice President and Secretary
c/o Keystone Investments, Inc.
200 Berkeley Street
Boston, MA 02116

The address of any of the foregoing may be changed by notice given to
the other party in accordance with this Subsection.

<PAGE>

14.2 Recourse Limited. Each of KHGF and KOF is a Massachusetts business
trust established under a Declaration of Trust, as amended from time to time.
The obligations of each of KHGF and KOF are not personally binding upon, nor
shall recourse be had against the private property of any of its Trustees,
shareholders, officers, employees, or agents, but only property of KHGF or KOF,
as the case may be, shall be bound.

14.3 Entire Agreement. This Agreement supersedes all prior agreements
between the parties whether written or oral, is intended as a complete and
exclusive statement of the terms of the Agreement between the parties, and may
not be changed or terminated orally.

14.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been executed on
behalf of KHGF and KOF and delivered to each of the parties hereto.

14.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

14.6 No Third Party Rights. Nothing in this Agreement expressed or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement. In addition, the parties hereto represent
and warrant that they have not employed any broker, finder, or intermediary in
connection with this transaction who might be entitled to a finder's fee or
other similar fee or commission.

14.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of The Commonwealth of
Massachusetts.

[THIS REST OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

KEYSTONE HARTWELL GROWTH FUND

ATTEST:
By:-------------------------
Albert H. Elfner, III
Chief Executive Officer and
President
- ------------------------

KEYSTONE OMEGA FUND

ATTEST:
By:--------------------------
Albert H. Elfner, III
Chief Executive Officer and
President
- ------------------------

<PAGE>

EXHIBIT B

FINANCIAL HIGHLIGHTS

Keystone Omega Fund
(For a Share outstanding throughout the year)

The following table contains important financial information relating
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report, which will be made available upon request and without charge.

FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)

Keystone Omega Fund

FINANCIAL HIGHLIGHTS ---- CLASS A SHARES
(For a share outstanding throughout each year)

(Restubbed Table)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1995 1994 1993 1992(b) 1991
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net asset value beginning of year $15.54 $17.11 $15.84 $17.68 $13.37
- ---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 0.04 (0.07) 0.00 (0.04)
Net realized and unrealized gains (losses)
on investments 5.58 (1.00) 3.07 0.39 6.92
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations 5.58 (0.96) 3.00 0.39 6.88
- ---------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income 0.00 0.00 0.00 0.00 (0.02)
In excess of net investment income 0.00 0.00 0.00 0.00 (0.05)
Capital gains (1.56) (0.61) (1.73) (2.23) (2.50)
- ---------------------------------------------------------------------------------------------------------------
Total distributions (1.56) (0.61) (1.73) (2.23) (2.57)
- ---------------------------------------------------------------------------------------------------------------
Net asset value end of year $19.56 $15.54 $17.11 $15.84 $17.68
- ---------------------------------------------------------------------------------------------------------------

Total return(a) 36.94% (5.66%) 19.33% 4.00% 54.49%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.38%(c) 1.41% 1.51% 1.52% 1.57%
Net investment income (loss) 0.00% 0.27% (0.48%) (0.01%) (0.31%)
Portfolio turnover rate 159% 137% 162% 176% 115%
- ---------------------------------------------------------------------------------------------------------------
Net assets end of year (thousands) $135,079 $99,569 $90,404 $73,144 $58,671
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excluding applicable sales charges.
(b) Calculated on average shares outstanding
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended December 31, 1995. Excluding indirectly paid expenses, the expense
ratio would have been 1.37%.
(d) Includes $0.17 per share relating to a special non-recurring distribution
from Inco Limited.

<TABLE>
<CAPTION>
Year Ended December 31,
1990 1989 1988 1987 1986
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value beginning of year $16.03 $13.66 $12.08 $13.44 $14.12
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.11 0.17 0.30 (d) 0.02 0.23
Net realized and unrealized gains (losses)
on investments (0.39) 4.30 1.40 1.11 1.49
- -----------------------------------------------------------------------------------------------------
Total from investment operations (0.28) 4.47 1.70 1.13 1.72
- -----------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.25) (0.20) (0.12) (0.24) (0.28)
In excess of net investment income (0.04) 0.00 0.00 0.00 0.00
Capital gains (2.09) (1.90) 0.00 (2.25) (2.12)
- -----------------------------------------------------------------------------------------------------
Total distributions (2.38) (2.10) (0.12) (2.49) (2.40)
- -----------------------------------------------------------------------------------------------------
Net asset value end of year $13.37 $16.03 $13.66 $12.08 $13.44
- -----------------------------------------------------------------------------------------------------

Total return(a) (2.38%) 33.05% 14.05% 8.27% 12.07%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 1.73% 1.84% 1.78% 1.99% 1.47%
Net investment income (loss) 0.70% 1.03% 2.22% 0.13% 1.60%
Portfolio turnover rate 108% 77% 84% 106% 178%
- -----------------------------------------------------------------------------------------------------
Net assets end of year (thousands) $38,531 $39,682 $33,951 $30,246 $31,812
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) Excluding applicable sales charges.
(b) Calculated on average shares outstanding
(c) The annualized expense ratio includes indirectly paid expenses for the year
ended December 31, 1995. Excluding indirectly paid expenses, the expense
ratio would have been 1.37%.
(d) Includes $0.17 per share relating to a special non-recurring distribution
from Inco Limited.

See Notes to Financial Statements.

<PAGE>

Keystone Omega Fund

FINANCIAL HIGHLIGHTS ---- CLASS B SHARES
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
August 2, 1993
(Date of Initial
Year Ended December 31, Public Offering) to
1995 1994 December 31, 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value beginning of year $15.34 $17.06 $17.29
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.09) (0.06) (0.05)
Net realized and unrealized gains (losses) on investments 5.41 (1.05) 1.55
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.32 (1.11) 1.50
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Capital gains (1.56) (0.61) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (1.56) (0.61) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value end of year $19.10 $15.34 $17.06
- -----------------------------------------------------------------------------------------------------------------------------

Total return(b) 35.70% (6.57%) 9.02%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.29%(c) 2.30% 2.57%(a)
Net investment loss (0.94%) (0.58%) (1.73%)(a)
Portfolio turnover rate 159% 137% 162%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets end of year (thousands) $71,636 $32,266 $7,423
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charge.
(c) The annualized expense ratio includes indirectly paid expenses for the
year ended December 31, 1995. Excluding indirectly paid expenses, the
expense ratio would have been 2.27%.

See Notes to Financial Statements.
<PAGE>

Keystone Omega Fund

FINANCIAL HIGHLIGHTS ---- CLASS C SHARES
(For a share outstanding throughout each year)
<TABLE>
<CAPTION>
August 2, 1993
(Date of Initial
Year Ended December 31, Public Offering) to
1995 1994 December 31, 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value beginning of year $15.37 $17.09 $17.29
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.13) (0.07) (0.06)
Net realized and unrealized gains (losses) on investments 5.45 (1.04) 1.59
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.32 (1.11) 1.53
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Capital gains (1.56) (0.61) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (1.56) (0.61) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value end of year $19.13 $15.37 $17.09
- -----------------------------------------------------------------------------------------------------------------------------

Total return(b) 35.62% (6.56%) 9.20%
Ratios/supplemental data
Ratios to average net assets:
Total expenses 2.30%(c) 2.30% 2.48%(a)
Net investment loss (0.91%) (0.63%) (1.64%)(a)
Portfolio turnover rate 159% 137% 162%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets end of year (thousands) $13,963 $9,900 $3,620
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The annualized expense ratio includes indirectly paid expenses for the
year ended December 31, 1995. Excluding indirectly paid expenses, the
expense ratio would have been 2.29%.

See Notes to Financial Statements.

<PAGE>

PART B

<PAGE>

Part B

INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

KEYSTONE OMEGA FUND

Statement of Additional Information

February 26, 1996

This Statement of Additional Information contains or incorporates by
reference material which may be of interest to investors but which is not
included in the Prospectus/Proxy Statement ("Prospectus") of Keystone Omega Fund
dated April 28, 1995, as supplemented June 1, 1995. This Statement is not a
Prospectus and is authorized for distribution only when it accompanies or
follows delivery of the above-referenced Prospectus. This Statement should be
read in conjunction with the Prospectus. Copies of the Prospectus can be
obtained by writing to Keystone Omega Fund, 200 Berkeley Street, Boston,
Massachusetts 02116-5034, or calling (800) 343-2898.

TABLE OF CONTENTS

This Statement of Additional Information contains or incorporates by
reference the following:

I. Statement of Additional Information of Keystone Omega Fund
dated April 28, 1995, as supplemented June 1, 1995, which is
hereby incorporated by reference herein.

II. Annual Report of Keystone Omega Fund for the fiscal year
ended December 31, 1995, which is hereby incorporated by
reference herein.

III. Statement of Additional Information of Keystone Hartwell
Growth Fund dated January 30, 1996, which is hereby
incorporated by reference herein.

IV. Annual Report of Keystone Hartwell Growth Fund for the
fiscal year ended September 30, 1995, which is hereby
incorporated by reference herein.

V. Pro Forma Combined Statement of Assets and Liabilities of Keystone
Hartwell Growth Fund and Keystone Omega Fund as of December 31, 1995
and the Combined Statement of Operations for the fiscal year ended
December 31, 1995.

<PAGE>

PART C

<PAGE>

Part C

OTHER INFORMATION

Item 15. Indemnification
---------------
Provisions for the indemnification of the Registrant's
Trustees and officers are contained in Article VIII of
Registrant's form of Declaration of Trust, a copy of which was
filed with Post-Effective Amendment No. 24 to Registration
Statement No. 2-28183/811-1600 as Exhibit 24(b)(1) and is
incorporated by reference herein.

Provisions for the indemnification of Keystone Investment Distributors
Company, the Registrant's Principal Underwriter, are contained in Section 9 of
the Principal Underwriting Agreement between Registrant and Keystone Investment
Distributors Company, a copy of the form of which was filed with Post-Effective
Amendment No. 24 to Registration Statement No. 2-28183/811-1600 as Exhibit
24(b)(6)(A) and is incorporated by reference herein.

Provisions for the indemnification of Keystone Management, Inc. and
Keystone Investment Management Company, Registrant's investment manager and
adviser, respectively, are contained in Section 6 of the Investment Management
Agreement between Registrant and Keystone Management, Inc., a copy of the form
of which was filed with Post-Effective Amendment No. 24 to Registration
Statement No. 2-28183/811-1600 and is incorporated by reference herein.

Item 16. Exhibits
--------
1. A copy of Registrant's form of Declaration of Trust was
filed with Post-Effective Amendment No. 24 to
Registration Statement No. 2-28183/811-1600 and is
incorporated by reference herein.

2. A copy of Registrant's By-Laws was filed with Post-
Effective Amendment No. 24 to Registration Statement
No. 2-28183/811-1600 and is incorporated by reference
herein.

3. Not applicable.

4. Agreement and Plan of Reorganization constitutes
Exhibit A included in Part A hereof.

5. (a) Registrant's Prospectus and Statement of Additional
Information was filed with Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 2-
28183/811-1600 in Part A and is incorporated by
reference herein.

<PAGE>

Item 16. Exhibits (continued)
--------

(b) Registrant's Declaration of Trust, Articles III, V, and
VI.

6. (a) A copy of the Investment Management Agreement between
Registrant and Keystone Management, Inc. was filed with
Post-Effective Amendment No. 24 to Registration
Statement No. 2-28183/811-1600 and is incorporated by
reference herein.

(b) A copy of the Investment Advisory Agreement, between
Keystone Management, Inc. and Keystone Investment
Management Company (formerly Keystone Custodian Funds,
Inc.) was filed with Post-Effective Amendment No. 24 to
Registration Statement No. 2-28183/811-1600 and is
incorporated by reference herein.

7. (a) A copy of the form of Principal Underwriting Agreement
between Registrant and Keystone Investment Distributors
Company (formerly Keystone Distributors, Inc.) was
filed with Post-Effective Amendment No. 24 to
Registration Statement No. 2-28183/811-1600 as Exhibit
24(b)(6)(A) and is incorporated by reference herein.

(b) A copy of the form of Dealer Agreement used by Keystone
Investment Distributors Company was filed with Post-
Effective Amendment No. 20 to Registration Statement
No. 2-28183/811-1600 as Exhibit 24(b)(6)(B) and is
incorporated by reference herein.

8. Not applicable.

9. A copy of the form of Custodian, Fund Accounting and
Recordkeeping Agreement between Registrant and State
Street Bank and Trust Company was filed with Post-
Effective Amendment No. 24 to Registration Statement
No. 2-28183/811-1600 as Exhibit 24(b)(8) and is
incorporated by reference herein.

10. A copy of the Registrant's Class A, B, and C
Distribution Plans adopted pursuant to Rule 12b-1 were
filed with Post-Effective Amendment No. 24 to
Registration Statement No. 2-28183/811-1600 as part of
Exhibit 24(b)(15) is incorporated by reference herein.

11. An Opinion and Consent of Counsel as to the legality of
the securities registered by Registrant is filed
herewith as Exhibit 11.

<PAGE>

Item 16. Exhibits (continued)
--------

12. Opinion and Consent of Counsel as to tax matters and
consequences to shareholders is filed herewith as
Exhibit 12.

13. Not applicable.

14. Consent of Independent Auditors is filed herewith as
Exhibit 14.

15. Not applicable.

16. Powers of Attorney are filed herewith as Exhibit 16.

17. a. Copies of Registrant's Declaration under Rule
24f-2 and an opinion and consent of counsel dated
January 27, 1995 as to the legality of shares
being registered are filed herewith as Exhibit
17(a).

b. Form of Proxy Card is filed herewith as Exhibit
17(b).

c. Registrant's prospectus dated April 28, 1995, as
supplemented June 1, 1995, is filed herewith as
Exhibit 17(c).

d. Registrant's most recent Annual Report is filed
herewith as Exhibit 17(d).

Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through
the use of a prospectus which is part of this
registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule
145(c) of the Securities Act of 1933, the reoffering
prospectus will contain the information called for by
the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to
the information called for by the other items of the
applicable form.

(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as a part of an amendment to the registration statement
and will not be used until the amendment is effective,
and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to
be a new registration statement for the securities
offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide
offering of them.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on behalf of the Registrant, by the
undersigned, thereunto duly authorized, in the City of Boston, in The
Commonwealth of Massachusetts, on the 26th day of January, 1996.

KEYSTONE OMEGA FUND

By:/s/ Rosemary D. Van Antwerp
---------------------------
Rosemary D. Van Antwerp
Senior Vice President, General
Counsel and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 26th day of January, 1996.

SIGNATURES TITLE
- ---------- -----

/s/ George S. Bissell Chairman of the Board and Trustee
- -------------------------
George S. Bissell*

/s/ Albert H. Elfner, III Chief Executive Officer, President
- ------------------------- and Trustee
Albert H. Elfner, III*

/s/ J. Kevin Kenely Treasurer (Principal Financial
- ------------------------- and Accounting Officer)
J. Kevin Kenely*

*By:/s/ Melina M.T. Murphy
----------------------
Melina M.T. Murphy**
Attorney-in-Fact

<PAGE>

SIGNATURES TITLE

/s/ Frederick Amling
- ------------------------- Trustee
Frederick Amling*

/s/ Charles A. Austin, III
- ------------------------- Trustee
Charles A. Austin, III*

/s/ Edwin D. Campbell
- ------------------------- Trustee
Edwin D. Campbell*

/s/ Charles F. Chapin
- ------------------------- Trustee
Charles F. Chapin*

/s/ K. Dun Gifford
- ------------------------- Trustee
K. Dun Gifford*

/s/ Leroy Keith, Jr.
- ------------------------- Trustee
Leroy Keith, Jr.*

/s/ F. Ray Keyser, Jr.
- ------------------------- Trustee
F. Ray Keyser, Jr.*

/s/ David M. Richardson
- ------------------------- Trustee
David M. Richardson*

/s/ Richard J. Shima
- ------------------------- Trustee
Richard J. Shima*

/s/ Andrew J. Simons
- ------------------------- Trustee
Andrew J. Simons*

*By:/s/ Melina M.T. Murphy
-------------------------
Melina M.T. Murphy**
Attorney-in-Fact

** Melina M.T. Murphy, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and attached hereto as Exhibit 24(b)(16).

<PAGE>

SIGNATURES
----------

KEYSTONE OMEGA FUND

By:
-------------------------------
Rosemary D. Van Antwerp*
Senior Vice President, General
Counsel and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 26th day of January, 1996.

SIGNATURES TITLE

/s/ George S. Bissell Chairman of the Board and Trustee
- -------------------------
George S. Bissell*

/s/ Albert H. Elfner, III Chief Executive Officer, President
- ------------------------- and Trustee
Albert H. Elfner, III*

/s/ J. Kevin Kenely Treasurer (Principal Financial
- ------------------------- and Accounting Officer)
J. Kevin Kenely*

*By:---------------------------------
Melina M.T. Murphy**
Attorney-in-Fact

<PAGE>

SIGNATURES TITLE
- ---------- -----

/s/ Frederick Amling Trustee
- -------------------------
Frederick Amling*

/s/ Charles A. Austin, III Trustee
- -------------------------
Charles A. Austin, III*

/s/ Edwin D. Campbell Trustee
- -------------------------
Edwin D. Campbell*

/s/ Charles F. Chapin Trustee
- -------------------------
Charles F. Chapin*

/s/ K. Dun Gifford Trustee
- -------------------------
K. Dun Gifford*

/s/ Leroy Keith, Jr. Trustee
- -------------------------
Leroy Keith, Jr.*

/s/ F. Ray Keyser, Jr. Trustee
- -------------------------
F. Ray Keyser, Jr.*

/s/ David M. Richardson Trustee
- -------------------------
David M. Richardson*

/s/ Richard J. Shima Trustee
- -------------------------
Richard J. Shima*

/s/ Andrew J. Simons Trustee
- -------------------------
Andrew J. Simons*

*By:
-----------------------
Melina M.T. Murphy**
Attorney-in-Fact

<PAGE>

KEYSTONE OMEGA FUND

KEYSTONE HARTWELL GROWTH FUND

PRO FORMA COMBINED FINANCIALS

1. STATEMENT OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1995

2. STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995 AND RELATED NOTES TO FINANCIALS

<PAGE>
<TABLE>
<CAPTION>
KEYSTONE OMEGA FUND
KEYSTONE HARTWELL GROWTH FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES--DECEMBER 31, 1995 (Unaudited)
Keystone Keystone Hartwell Proforma
Omega Fund Growth Fund Combined
- ----------------------------------------------------------------------- ------------- --------------- -------------
<S> <C> <C> <C>
Assets:
Investments at market value (a) $219,696,775 $21,047,319 $240,744,094
- ----------------------------------------------------------------------- ------------- --------------- -------------
Total investments and foreign currency holdings 219,696,775 21,047,319 240,744,094
- ----------------------------------------------------------------------- ------------- --------------- -------------
Cash 134 769 903
Receivable for:
Investments sold 1,145,278 0 1,145,278
Dividends and interest 165,605 21,961 187,566
Fund shares sold 880,289 14,474 894,763
Prepaid expenses and other assets 61,235 35,442 96,677
- ----------------------------------------------------------------------- ------------- --------------- -------------
Total assets 221,949,316 21,119,965 243,069,281
- ----------------------------------------------------------------------- ------------- --------------- -------------
Liabilities:
Payable for:
Investments purchased 1,215,722 0 1,215,722
Fund shares redeemed 52,687 13,322 66,009
Other liabilities 2,517 0 2,517
- ----------------------------------------------------------------------- ------------- --------------- -------------
Total liabilities 1,270,926 13,322 1,284,248
- ----------------------------------------------------------------------- ------------- --------------- -------------
Net assets $220,678,390 $21,106,643 $241,785,033
======================================================================= ============= =============== =============
Net assets represented by:
Paid-in capital $177,670,527 $16,961,985 $194,632,512
Accumulated distributions in excess of net investment income 0 (659,310) (659,310)
Accumulated net realized gains (losses) on investment transactions 4,625,602 (3,290,894) 1,334,708
Net unrealized appreciation (depreciation) on investments
and other assets and liabilities 38,382,261 8,094,862 46,477,123
- ----------------------------------------------------------------------- ------------- --------------- -------------
Total net assets (b) $220,678,390 $21,106,643 $241,785,033
======================================================================= ============= =============== =============

Net asset value and redemption price per share:
Class A Shares ($19.56, $19.44 and $19.56 on 6,907,644, 997,722 and
7,899,379 shares outstanding, respectively) (c) $135,078,994 $19,398,331 $154,477,325
Class B Shares ($19.10, $18.97 and $19.10 on 3,751,051, 64,079 and
3,814,683 shares outstanding, respectively) (c) 71,635,998 1,215,375 72,851,373
Class C Shares ($19.13, $18.85 and $19.13 on 730,073, 26,147 and
755,841 shares outstanding, respectively) (c) 13,963,398 492,937 14,456,335
- ----------------------------------------------------------------------- ------------- --------------- -------------
$220,678,390 $21,106,643 $241,785,033
======================================================================= ============= =============== =============

Offering price per share:
Class A Shares (including sales charges of 5.75%) $20.75 $20.63 $20.75
======================================================================= ============= =============== =============
Class B Shares $19.10 18.97 $19.10
======================================================================= ============= =============== =============
Class C Shares $19.13 18.85 $19.13
======================================================================= ============= =============== =============

(a) Identified Cost of Investments: (b) Class A shares after merger:
Keystone Omega Fund $181,314,514 (KHGF net assets / KOF nav) + (KOF shares o/s)
Keystone Hartwell Growth Fund 12,952,457
-----------
Total Identified Cost of Investments $194,266,971 (KHGF net assets / KOF nav )
============ $19,398,331 / $19.56 = 991,735
add KOF shares outstanding 6,907,644
---------
7,899,379
=========
Class B shares after merger:
(KHGF net assets / KOF nav) + (KOF shares o/s)

(KHGF net assets / KOF nav )
$1,215,375 / $19.10 = 63,632
add KOF shares outstanding 3,751,051
---------
3,814,683
=========
Class C shares after merger:
(KHGF net assets / KOF nav) + (KOF shares o/s)

(KHGF net assets / KOF nav )
$492,937 / $19.13 = 25,768
add KOF shares outstanding 730,073
---------
755,841
=========
</TABLE>
<PAGE>
KEYSTONE OMEGA FUND
KEYSTONE HARTWELL GROWTH FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS--Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>

Keystone Keystone Hartwell Annualized Annualized
Omega Fund Growth Fund Proforma Proforma
Annualized Annualized Adjustments Combined
- ------------------------------------------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Investment income
Interest $695,345 $28,938 N/A $724,283
Dividends 1,626,337 106,767 N/A 1,733,104
- ------------------------------------------------- ---------- ------------- ---------- -----------
2,321,682 135,705 2,457,387
Expenses (Notes 1 and 3):
Management fee 1,280,436 138,532 (5,328) 1,413,640
Transfer agent fees 565,768 83,684 (24,865) 624,587
Accounting 15,027 9,506 (9,506) 15,027
Auditing and legal 36,881 23,867 (23,000) 37,748
Custodian fees 103,716 21,876 0 125,592
Printing expenses 24,434 24,241 (20,000) 28,675
Trustees' fee and expenses 7,179 0 0 7,179
Distribution Plan expenses 745,640 27,441 0 773,081
Registration fees 82,006 44,383 0 126,389
- ------------------------------------------------- ---------- ------------- ---------- -----------
Miscellaneous expenses 32,192 2,049 (10,000) 24,241
- ------------------------------------------------- ---------- ------------- ---------- -----------
Total expenses 2,893,279 375,579 (92,699) 3,176,159
- ------------------------------------------------- ---------- ------------- ---------- -----------
Less: Expenses paid indirectly (22,735) (2,174) (24,909)
- ------------------------------------------------- ---------- ------------- -----------
Net expenses 2,870,544 373,405 3,151,250
- ------------------------------------------------- ---------- ------------- -----------
Net investment income ($548,862) ($237,700) ($693,863)
- ------------------------------------------------- ---------- ------------- -----------
</TABLE>
<PAGE>

KEYSTONE HARTWELL GROWTH FUND ("KHGF")
PROPOSED MERGER WITH
KEYSTONE OMEGA FUND ("KOF")

NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS (Unaudited)

1. Basis of Combination. On January 26, 1996 , KHGF and KOF entered into an
Agreement and Plan of Reorganization ("Agreement") whereby, subject to approval
by the shareholders of KHGF, KOF will acquire the assets and assume the
liabilities of the HGF. This merger of the funds will be accounted for by the
pooling-of-interests method of accounting. The pro forma combined statement of
assets and liabilities reflects the financial position of KOF and KHGF
at December 31, 1995 as though the merger occurred as of that date. The pro
forma combined statement of operations reflects the results of operations of
KOF and the KHGF for the year ended December 31, 1995 as though the merger
occurred at the beginning of period presented.

The pro forma combined financial statements reflect the estimated expenses of
both funds in carrying out their obligations under the Agreement. They consist
of management's estimates of accounting fees, printing costs and mailing charges
related to the proposed merger.

2. Capital Shares. The number of additional shares of the Classes issued was
calculated by dividing the net asset value of the Share Classes of KHGF at
December 31, 1995 by the net asset value per share of the Classes of KOF at
December 31, 1995 of $19.56, $19.10 and $19.13 respectively. The pro forma
combined number of Class A shares outstanding of 7,899,379 consists of the
991,735 shares issuable to the KHGF pursuant to the Agreement and the
6,907,644 Class A shares of the KOF outstanding at December 31, 1995.
The pro forma combined number of Class B shares outstanding of 3,814,683
consists of the 63,632 shares issuable to the KHGF pursuant to the
Agreement, and the 3,751,051 Class B shares of the KOF outstanding at
December 31, 1995. The pro forma combined number of Class C shares
outstanding of 755,841 consists of the 25,768 shares issuable to the KHGF
pursuant to the Agreement and the 730,073 Class C shares of the KOF outstanding
at December 31,1995.

3. Pro forma operating expenses. Certain expenses have been adjusted in the pro
forma statement of operations to reflect the expenses of the combined entity
more closely. Pro forma operating expenses include the actual expenses of the
KOF and the KHGF, adjusted for certain items which are factually supportable.
These adjustments relate to management fees and other operating expense which
have been recomputed using the rates and the combined average net asset values
of the funds existing during the year. The pro forma combined expenses are
subject to Blue Sky state expense limitations. No adjustment has been made for
possible limitations during the period presented.

EXHIBIT 11

Legal Opinion

<PAGE>

January 26, 1996

Keystone Omega Fund
200 Berkeley Street
Boston, MA 02116-5034

Gentlemen:

I am a Senior Vice President of and General Counsel to Keystone
Investment Management Company (formerly named Keystone Custodian Funds, Inc.),
investment adviser to Keystone Omega Fund (the "Fund"), a Massachusetts business
trust. I have been asked to render an opinion with respect to the issuance of
certain shares of beneficial interest, without par value, of the Fund (the
"Shares") in connection with the proposed acquisition by the Fund of
substantially all of the assets of Keystone Hartwell Growth Fund (the
"Reorganization"). The offering of the Shares pursuant to the Reorganization is
the subject of a certain registration statement (the "Registration Statement")
on Form N-14, which is being filed by the Fund with the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purposes of this opinion.

Based upon the foregoing, I am of the opinion that the Shares, when
issued and sold in accordance with the terms of the Registration Statement, will
be legally issued, fully paid and non-assessable by the Fund.

I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Sincerely yours,

Rosemary D. Van Antwerp
Senior Vice President and

General Counsel

EXHIBIT 12
Sullivan & Worcester Tax Opinion

<PAGE>

January 24, 1996

Keystone Omega Fund
Keystone Hartwell Growth Fund
200 Berkeley Street
Boston, Massachusetts 02116

Re: Acquisition of Assets of Keystone Hartwell Growth Fund

Ladies and Gentlemen:

You have asked for our opinion as to certain tax consequences of the
proposed acquisition of assets of Keystone Omega Fund ("Selling Fund"), a
Massachusetts business trust, by Keystone Hartwell Growth Fund ("Acquiring
Fund"), also a Massachusetts business trust, in exchange for voting shares of
Acquiring Fund (the "Reorganization").

In rendering our opinion, we have reviewed and relied upon the draft
Prospectus/Proxy Statement dated January 17, 1996 and the Agreement and Plan of
Reorganization dated as of January 16, 1996 (the "Reorganization Agreement"). We
have relied, without independent verification, upon the factual statements made
therein, and assume that there will be no change in material facts disclosed
therein between the date of this letter and the date of closing of the
Reorganization. We further assume that the Reorganization will be carried out in
accordance with the Reorganization Agreement. We have also relied upon the
following representations, each of which has been made to us by officers of
Acquiring Fund or of Selling Fund:

A. The Reorganization will be consummated substantially as described in
the Reorganization Agreement.

B. Acquiring Fund will acquire from Selling Fund at least 90% of the
fair market value of the net assets and at least 70% of the fair market value of
the gross assets held by Selling Fund immediately prior to the Reorganization.
For purposes of this representation, assets of Selling Fund used to pay
reorganization expenses, cash retained to pay liabilities, and redemptions and

<PAGE>

Keystone Omega Fund
Keystone Hartwell Growth Fund
January 24, 1996
Page 2

distributions (except for regular and normal distributions) made by Selling Fund
immediately preceding the transfer which are part of the plan of reorganization,
will be considered as assets held by Selling Fund immediately prior to the
transfer.

C. To the best of the knowledge of management of Selling Fund, there is
no plan or intention on the part of the shareholders of Selling Fund to sell,
exchange, or otherwise dispose of a number of Acquiring Fund shares received in
the Reorganization that would reduce the former Selling Fund shareholders'
ownership of Acquiring Fund shares to a number of shares having a value, as of
the date of the Reorganization (the "Closing Date"), of less than 50 percent of
the value of all of the formerly outstanding shares of Selling Fund as of the
same date. For purposes of this representation, Selling Fund shares exchanged
for cash or other property will be treated as outstanding Selling Fund shares on
the Closing Date. There are no dissenters' rights in the Reorganization, and no
cash will be exchanged for Selling Fund shares in lieu of fractional shares of
Acquiring Fund. Moreover, shares of Selling Fund and shares of Acquiring Fund
held by Selling Fund shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the Reorganization will be considered in making this
representation, except for shares of Selling Fund or Acquiring Fund redeemed in
the ordinary course of business of Selling Fund or Acquiring Fund in accordance
with the requirements of section 22(e) of the Investment Company Act of 1940.

D. Selling Fund has not redeemed and will not redeem the shares of any
of its shareholders in connection with the Reorganization except to the extent
necessary to comply with its legal obligation to redeem its shares.

E. The management of Acquiring Fund has no plan or intention to redeem
or reacquire any of the Acquiring Fund shares to be received by Selling Fund
shareholders in connection with the Reorganization, except to the extent
necessary to comply with its legal obligation to redeem its shares.

F. The management of Acquiring Fund has no plan or intention to sell or
dispose of any of the assets of Selling Fund which will be acquired by Acquiring
Fund in the Reorganization, except for dispositions made in the ordinary course
of business, and to the extent necessary to enable Acquiring Fund to comply with
its legal obligation to redeem its shares.

<PAGE>

Keystone Omega Fund
Keystone Hartwell Growth Fund
January 24, 1996
Page 3

G. Following the Reorganization, Acquiring Fund will continue the
historic business of Selling Fund in a substantially unchanged manner as part of
the regulated investment company business of Acquiring Fund, or will use a
significant portion of Selling Fund's historic business assets in a business.

H. There is no intercorporate indebtedness between Acquiring Fund and
Selling Fund.

I. Acquiring Fund does not own, directly or indirectly, and has not
owned in the last five years, directly or indirectly, any shares of Selling
Fund. Acquiring Fund will not acquire any shares of Selling Fund prior to the
Closing Date.

J. Acquiring Fund will not make any payment of cash or of property
other than shares to Selling Fund or to any shareholder of Selling Fund in
connection with the Reorganization.

K. Pursuant to the Reorganization Agreement, the shareholders of
Selling Fund will receive solely Acquiring Fund voting shares in exchange for
their voting shares of Selling Fund.

L. The fair market value of the Acquiring Fund shares to be received by
the Selling Fund shareholders will be approximately equal to the fair market
value of the Selling Fund shares surrendered in exchange therefor.

M. Subsequent to the transfer of Selling Fund's assets to Acquiring
Fund pursuant to the Reorganization Agreement, Selling Fund will distribute the
shares of Acquiring Fund, together with other assets it may have, in final
liquidation as expeditiously as possible.

N. Selling Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of ss. 368(a)(3)(A) of the Internal Revenue
Code of 1986, as amended (the "Code").

O. Selling Fund is treated as a corporation for federal income tax
purposes and at all times in its existence has qualified as a regulated
investment company, as defined in ss. 851 of the Code.

P. Acquiring Fund is treated as a corporation for federal income tax
purposes and at all times in its existence hasqualified as a regulated
investment company, as defined in ss. 851 of the Code.

<PAGE>

Keystone Omega Fund
Keystone Hartwell Growth Fund
January 24, 1996
Page 4

Q. The sum of the liabilities of Selling Fund to be assumed by
Acquiring Fund and the expenses of the Reorganization does not exceed twenty
percent of the fair market value of the assets of Selling Fund.

R. The foregoing representations are true on the date of this letter
and will be true on the date of closing of the Reorganization.

Based on and subject to the foregoing, and our examination of the legal
authority we have deemed to be relevant, it is our opinion that for federal
income tax purposes:

1. The acquisition by Acquiring Fund of substantially all of the assets
of Selling Fund solely in exchange for voting shares of Acquiring Fund followed
by the distribution by Selling Fund of said Acquiring Fund shares to the
shareholders of Selling Fund in exchange for their Selling Fund shares will
constitute a reorganization within the meaning of ss. 368(a)(1)(C) of the Code,
and Acquiring Fund and Selling Fund will each be "a party to a reorganization"
within the meaning of ss. 368(b) of the Code.

2. No gain or loss will be recognized to Selling Fund upon the transfer
of substantially all of its assets to Acquiring Fund solely in exchange for
Acquiring Fund voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund, or upon the distribution of such
Acquiring Fund voting shares to the shareholders of Selling Fund in exchange for
all of their Selling Fund shares.

3. No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Selling Fund (including any cash retained initially by
Selling Fund to pay liabilities but later transferred) solely in exchange for
Acquiring Fund voting shares and assumption by Acquiring Fund of certain
identified liabilities of Selling Fund.

4. The basis of the assets of Selling Fund acquired by Acquiring Fund
will be the same as the basis of those assets in the hands of Selling Fund
immediately prior to the transfer, and the holding period of the assets of
Selling Fund in the hands of Acquiring Fund will include the period during which
those assets were held by Selling Fund.

<PAGE>

Keystone Omega Fund
Keystone Hartwell Growth Fund
January 24, 1996
Page 5

5. The shareholders of Selling Fund will recognize no gain or loss upon
the exchange of all of their Selling Fund shares solely for Acquiring Fund
voting shares. Gain, if any, will be realized by Selling Fund shareholders who
in exchange for their Selling Fund shares receive other property or money in
addition to Acquiring Fund shares, and will be recognized, but not in excess of
the amount of cash and the value of such other property received. If the
exchange has the effect of the distribution of a dividend, then the amount of
gain recognized that is not in excess of the ratable share of undistributed
earnings and profits of Selling Fund will be treated as a dividend.

6. The basis of the Acquiring Fund voting shares to be received by the
Selling Fund shareholders will be the same as the basis of the Selling Fund
shares surrendered in exchange therefor.

7. The holding period of the Acquiring Fund voting shares to be
received by the Selling Fund shareholders will include the period during which
the Selling Fund shares surrendered in exchange therefor were held, provided the
Selling Fund shares were held as a capital asset on the date of the exchange.

This opinion letter is delivered to you in satisfaction of the
requirements of Paragraphs 6.9 and 7.9 of the Reorganization Agreement. We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement on Form N-14 and to use of our name and any reference to our firm in
the Registration Statement or in the Prospectus/Proxy Statement constituting a
part thereof. In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.

Very truly yours,

SULLIVAN & WORCESTER
A Registered Limited Liability Partnership

EXHIBIT 14
Independent Auditor's Consent

<PAGE>

Exhibit 14

CONSENT OF INDEPENDENT AUDITORS

The Trustees
Keystone Hartwell Growth Fund
Keystone Omega Fund

We consent to the use of our reports on the financial statements of
Keystone Hartwell Growth Fund, as of and for the year ended September 30, 1995,
dated October 27, 1995, and the financial statements of Keystone Omega Fund, as
of and for the year ended December 31, 1995, dated January 23, 1996,
incorporated by reference herein into the statement of additional information.

KPMG Peat Marwick LLP

January 26, 1996
Boston, Massachusetts

EXHIBIT 16
Powers of Attorney

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chairman of the Board and Chief
Executive Officer and for which Keystone Custodian Funds, Inc. serves as Adviser
or Manager and registering from time to time the shares of such companies, and
generally to do all such things in my name and in my behalf to enable such
investment companies to comply with the provisions of the Securities Act of
1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.

/s/George S. Bissell
George S. Bissell
Director/Trustee,
Chairman of the Board

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and/or Chief Executive Officer and for
which Keystone Custodian Funds, Inc. serves as Adviser or Manager and
registering from time to time the shares of such companies, and generally to do
all such things in my name and in my behalf to enable such investment companies
to comply with the provisions of the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission thereunder, hereby ratifying and
confirming my signature as it may be signed by my said attorneys to any and all
registration statements and amendments thereto.

/s/ Albert H. Elfner, III
Albert H. Elfner, III
Director/Trustee,
President and Chief
Executive Officer

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director, Trustee or officer and for which Keystone
Custodian Funds, Inc. serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and in my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ J. Kevin Kenely
J. Kevin Kenely
Treasurer

Dated: December 15, 1995

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Frederick Amling
Frederick Amling
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Charles A. Austin III
Charles A. Austin III
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Edwin D. Campbell
Edwin D. Campbell
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Charles F. Chapin
Charles F. Chapin
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ K. Dun Gifford
K. Dun Gifford
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Leroy Keith, Jr.
Leroy Keith, Jr.
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ F. Ray Keyser,Jr.
F. Ray Keyser, Jr.
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ David M. Richardson
David M. Richardson
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/ Richard J. Shima
Richard J. Shima
Director/Trustee

Dated: December 14, 1994

<PAGE>

POWER OF ATTORNEY

I, the undersigned, hereby constitute Roger T. Wickers, Rosemary D. Van
Antwerp, Jean S. Loewenberg, Dorothy E. Bourassa, James M. Wall and Melina M. T.
Murphy, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-1 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Custodian
Funds, Inc. serves as Adviser or Manager and registering from time to time the
shares of such companies, and generally to do all such things in my name and in
my behalf to enable such investment companies to comply with the provisions of
the Securities Act of 1933, as amended, the Investment Company Act of 1940, as
amended, and all requirements and regulations of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my signature as it may be
signed by my said attorneys to any and all registration statements and
amendments thereto.

/s/Andrew J. Simons
Andrew J. Simons
Director/Trustee

Dated: December 14, 1994

EXHIBIT 17(a)
24f-2 Notice

<PAGE>

As filed with the Securities and Exchange Commission Feb. 27, 1995.

File Nos. 33-28183
811-1600

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.
Post-Effective Amendment No. 24 X

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 28 X

KEYSTONE AMERICA OMEGA FUND
(Exact Name of Registrant as Specified in Charter)

200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code:
(617) 338-3200

Rosemary D. Van Antwerp, Esq., 200 Berkeley Street,
Boston, MA 02116-5034
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) of Rule 485

on (date) pursuant to paragraph (b) of Rule 485

X 60 days after filing pursuant to paragraph (a)(i) of Rule 485
- ---

on (date) pursuant to paragraph (a)(i) of Rule 485

75 days after filing pursuant to paragraph (a)(ii) of Rule 485

on (date) pursuant to paragraph (a)(ii) of Rule 485

The Registrant has elected to register an indefinite number of shares
of its common stock pursuant to Rule 24f-2 under the

<PAGE>

Investment Company Act of 1940. A Rule 24f-2 Notice for Registrant's most recent
fiscal year was filed on January 26, 1995.

By this Post-Effective Amendment Keystone America Omega Fund (the
"Trust") expressly adopts as its own the Registration Statement (as
appropriately modified) under the Securities Act of 1933 (the "1933 Act") of
Keystone America Omega Fund, Inc. (the "Company"), the Trust's predecessor
registrant, for purposes of the 1933 Act and the Securities Exchange Act of
1934, and the Trust also adopts as its own the Company's notification and
Registration Statement under the Investment Company Act of 1940 (as
appropriately modified).

<PAGE>

January 25, 1996

Keystone Omega Fund
200 Berkeley Street
Boston, Massachusetts 02116-5034

Re: Notice Pursuant to Rule 24f-2 under the Investment
Company Act of 1940 ("1940 Act")

Gentlemen:

I am a Senior Vice President of and General Counsel to Keystone Investment
Management Company (formerly named Custodian Funds, Inc.), investment adviser to
Keystone Omega Fund (the "Fund"). You have asked for my opinion with respect to
the issuance of 2,232,747 additional shares of the Fund under the Fund's
Declaration of Trust and pursuant to the Fund's indefinite registration of such
shares under Rule 24f-2 under the 1940 Act. The Fund is filing its Rule 24f-2
Notice to which this opinion is appended to make the issuance of such shares
definite in number for its fiscal year ended December 31, 1995.

To my knowledge, a Prospectus is on file with the Securities and
Exchange Commission as part of Post-Effective Amendment No. 25 to the Fund's
Registration Statement covering the public offering and sale of the Fund's
shares for the period during which such shares were issued.

In my opinion, such shares, if issued and sold in accordance with the
Fund's Declaration of Trust, By-Laws, as amended ("ByLaws"), and offering
Prospectus, were legally issued, fully paid, and nonassessable by the Fund,
entitling the holders thereof to the rights set forth in the Articles of
Incorporation and By-Laws and subject to the limitations stated therein.

My opinion is based upon my examination of the Declaration of Trust; a
review of the minutes of the Fund's Board of Trustees authorizing the
registration of shares pursuant to Rule 24f-2 under the 1940 Act and the
issuance of such additional shares; and the Fund's Prospectus. In my examination
of such documents, I have assumed the genuineness of all signatures and the
conformity of copies to originals.

<PAGE>

Securities and Exchange Commission
January 25, 1996
Page 2

I hereby consent to the use of this opinion in connection with the Fund's
Rule 24f-2 Notice making definite the number of such additional shares issued.

Sincerely yours,

Rosemary D. Van Antwerp
Senior Vice President and
General Counsel

EXHIBIT 17(b)
Proxy Card

<PAGE>

KEYSTONE HARTWELL GROWTH FUND

PROXY FOR THE MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 1996

The undersigned, revoking all Proxies heretofore given, hereby appoints
Albert H. Elfner, III, Rosemary D. Van Antwerp and Melina M.T. Murphy or any of
them as Proxies of the undersigned, with full power of substitution, to vote on
behalf of the undersigned all shares of Keystone Hartwell Growth Fund ("KHGF")
that the undersigned is entitled to vote at the meeting of shareholders of KHGF
to be held at 2:00 p.m. on Thursday, April 25, 1996 at the offices of Keystone
Investment Management Company, 26th Floor, 200 Berkeley Street, Boston,
Massachusetts 02116 and at any adjournments thereof, as fully as the undersigned
would be entitled to vote if personally present, as follows:

To approve an Agreement and Plan of Reorganization whereby Keystone
Omega Fund ("KOF") will acquire all of the assets of KHGF in exchange for Shares
of KOF and will assume the liabilities of KHGF, as described in the accompanying
Prospectus/Proxy Statement.

____________ FOR ___________ AGAINST _________ ABSTAIN

<PAGE>

PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF KHGF.

THE BOARD OF TRUSTEES OF KHGF RECOMMENDS A VOTE FOR THE PROPOSAL.

THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSAL IF
NO CHOICE IS INDICATED.

THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
THEREOF.

NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR ON THIS CARD.

Dated: ____________________, 1996

Signature(s):_______________________________

Signature (of joint
owner, if any):_________________________

NOTE: When signing as attorney, executor, administrator, trustee, guardian, or
as custodian for a minor, please sign your name and give your full title as
such. If signing on behalf of a corporation, please sign full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners should
each sign this proxy. Please sign, date and return.

EXHIBIT 17(c)
KOF's Prospectus dated April 28, 1995,
as supplemented June 1, 1995

<PAGE>

KEYSTONE OMEGA FUND
PROSPECTUS APRIL 28, 1995
AS SUPPLEMENTED JUNE 1, 1995

Keystone Omega Fund (formerly named Keystone America Omega Fund, Inc.) (the
"Fund") is a mutual fund that seeks maximum capital growth by investing in a
varied portfolio consisting primarily of common stocks and securities
convertible into common stocks.

Generally, the Fund offers three classes of shares. Information on share
classes and their fee and sales charge structures may be found in the Fund's fee
table, "Alternative Sales Options," "Contingent Deferred Sales Charge and Waiver
of Sales Charges," "Distribution Plans" and "Fund Shares."

This prospectus concisely states information about the Fund that you should
know before investing. Please read it and retain it for future reference.

Additional information about the Fund is contained in a statement of
additional information dated April 28, 1995, as supplemented June 1, 1995, which
has been filed with the Securities and Exchange Commission and is incorporated
by reference into this prospectus. For a free copy, or for other information
about the Fund, write to the address or call the telephone number provided on
this page.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

KEYSTONE OMEGA FUND
200 BERKELEY STREET
BOSTON, MASSACHUSETTS 02116-5034
CALL TOLL FREE 1-800-343-2898

TABLE OF CONTENTS
Page
Fee Table 2
Financial Highlights 3
The Fund 6
Investment Objective and Policies 6
Investment Restrictions 7
Risk Factors 8
Pricing Shares 9
Dividends and Taxes 9
Fund Management and Expenses 10
How to Buy Shares 12
Alternative Sales Options 13
Contingent Deferred Sales Charge and
Waiver of Sales Charges 17
Distribution Plans 18
How to Redeem Shares 19
Shareholder Services 21
Performance Data 23
Fund Shares 23
Additional Information 24

FEE TABLE
KEYSTONE OMEGA FUND
The purpose of this fee table is to assist investors in understanding the
costs and expenses that an investor in each class will bear directly or
indirectly. For more complete descriptions of the various costs and expenses,
see the following sections of this prospectus: "Fund Management and Expenses";
"How to Buy Shares"; "Distribution Plans" and "Shareholder Services."

CLASS A SHARES CLASS B SHARES CLASS C SHARES
FRONT END BACK END LEVEL LOAD
LOAD OPTION LOAD OPTION<F1> OPTION<F2>
SHAREHOLDER TRANSACTION EXPENSES --------- --------- ---------
<S> <C> <C> <C>
Sales Charge ...................................... 5.75%<F3> None None
(as a percentage of offering price)
Contingent Deferred Sales Charge .................. 0.00%<F4> 5.00% in the first year 1.00% in the first
(as a percentage of the lesser of cost or market declining to 1.00% in year and 0.00%
value of shares redeemed) the sixth year and thereafter
0.00% thereafter
Exchange Fee (per $10.00 $10.00 $10.00
exchange)<F5> ..........

ANNUAL FUND OPERATING EXPENSES<F6>
(as a percentage of average net assets)
Management Fees ................................... 0.75% 0.75% 0.75%
12b-1 Fees ........................................ 0.11% 1.00%<F7> 1.00%<F7>
Other Expenses .................................... 0.55% 0.55% 0.55%
---- ---- ----
Total Fund Operating Expenses ..................... 1.41% 2.30% 2.30%
==== ==== ====

EXAMPLES<F8> 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each period:

Class A ................................................. $ 71.00 $100.00 $130.00 $217.00
Class B ................................................. $ 73.00 $102.00 $143.00 N/A
Class C ................................................. $ 33.00 $ 72.00 $123.00 $264.00
You would pay the following expenses on a $1,000 investment,
assuming no redemption at the end of each period:
Class A ................................................. $ 71.00 $100.00 $130.00 $217.00
Class B ................................................. $ 23.00 $ 72.00 $123.00 N/A
Class C ................................................. $ 23.00 $ 72.00 $123.00 $264.00
AMOUNTS SHOWN IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
- ---------
<FN>
<F1> Class B shares purchased on or after June 1, 1995 convert tax free to Class A shares after eight years. See "Class B Shares"
for more information.
<F2> Class C shares are available only through dealers who have entered into special distribution agreements with Keystone
Investment Distributors Company, the Fund's principal underwriter.
<F3> The sales charge applied to purchases of Class A shares declines as the amount invested increases. See "Class A Shares".
<F4> Purchases of Class A shares in the amount of $1,000,000 or more and/or purchases made by certain qualifying retirement or
other plans are not subject to a sales charge, but may be subject to a contingent deferred sales charge. See the "Class A
Shares" and "Contingent Deferred Sales Charge and Waiver of Sales Charges" sections of this prospectus for an explanation of
the charge.
<F5> There is no fee for exchange orders received by the Fund directly from a shareholder over the Keystone Automated Response
Line ("KARL"). (For a description of KARL, see "Shareholder Services.")
<F6> Expense ratios are for the Fund's fiscal year ended December 31, 1994.
<F7> Long term shareholders may pay more than the equivalent of the maximum front end sales charges permitted by the National
Association of Securities Dealers, Inc. ("NASD").
<F8> The Securities and Exchange Commission requires use of a 5% annual return figure for purposes of this example. Actual return
for the Fund may be greater or less than 5%.
</FN>
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)
The following table contains significant financial information with respect
to the Fund and the information in years 1989 to 1994 has been audited by KPMG
Peat Marwick LLP, the Fund's independent auditors. The financial highlights for
the years ended December 31, 1985 to 1988 were audited by other auditors. The
table appears in the Fund's Annual Report and should be read in conjunction with
the Fund's financial statements and related notes, which also appear, together
with the independent auditors' report, in the Fund's Annual Report. The Fund's
financial statements, related notes, and independent auditors' report are
included in the statement of additional information. Additional information
about the Fund's performance is contained in its Annual Report, which will be
made available upon request and without charge.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1994 1993 1992(C) 1991 1990 1989 1988 1987 1986 1985
---- ---- ------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR ... $17.11 $15.84 $17.68 $13.37 $16.03 $13.66 $12.08 $13.44 $14.12 $10.78
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations
Investment income
(loss)--net ......... 0.04 (0.07) 0.00 (0.04) 0.11 0.17 0.30<F4> 0.02 0.23 0.28
Net gains (losses) on
investments ......... (1.00) 3.07 0.39 6.92 (0.39) 4.30 1.40 1.11 1.49 3.18
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ (0.96) 3.00 0.39 6.88 (0.28) 4.47 1.70 1.13 1.72 3.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions
Dividends from
investment income--
net ................. 0.00 0.00 0.00 (0.02) (0.25) (0.20) (0.12) (0.24) (0.28) (0.12)
Distribution in excess
of investment
income--net<F1> ..... 0.00 0.00 0.00 (0.05) (0.04) 0.00 0.00 0.00 0.00 0.00
Distribution from
capital gains ....... (0.61) (1.73) (2.23) (2.50) (2.09) (1.90) 0.00 (2.25) (2.12) 0.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.61) (1.73) (2.23) (2.57) (2.38) (2.10) (0.12) (2.49) (2.40) (0.12)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
YEAR ................. $15.54 $17.11 $15.84 $17.68 $13.37 $16.03 $13.66 $12.08 $13.44 $14.12
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN<F2> ...... (5.66%) 19.33% 4.00% 54.49% (2.38%) 33.05% 14.05% 8.27% 12.07% 33.29%
RATIOS/SUPPLEMENTAL DATA Ratios to average net assets:
Operating and
management expenses 1.41% 1.51% 1.52% 1.57% 1.73% 1.84% 1.78% 1.99% 1.47% 1.65%
Investment income
(loss) -- net ..... 0.27% (0.48%) (0.01%) (0.31%) 0.70% 1.03% 2.22% 0.13% 1.60% 2.26%
Portfolio turnover rate 137% 162% 176% 115% 108% 77% 84% 106% 178% 188%
Net assets, end of year
(thousands) ......... $99,569 $90,404 $73,144 $58,671 $38,531 $39,682 $33,951<F3> $30,246<F3> $31,812<F3> $31,036<F3>
- ---------
<FN>
<F1> Effective January 1, 1993, the Fund adopted Statement of Position 93-2: "Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by Investment Companies". As a result, distribution
amounts exceeding book basis net investment income (or tax basis net income on a temporary basis) are presented as
distributions in excess of investment income -- net. Similarly, capital gain distributions in excess of book basis capital
gains (or tax basis capital gains on a temporary basis) are presented as "Distributions in excess of capital gains". For the
fiscal years ended December 31, 1992, 1991, and 1990, distributions, if any, in excess of book basis net income were charged
to paid-in capital.
<F2> Excluding applicable sales charges.
<F3> Calculated on average shares outstanding.
<F4> Includes $0.17 per share relating to a special non-recurring distribution from INCO Limited.
</FN>
</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

The following table contains significant financial information with respect
to the Fund and has been audited by KPMG Peat Marwick LLP, the Fund's
independent auditors. The table appears in the Fund's Annual Report and should
be read in conjunction with the Fund's financial statements and related notes,
which also appear, together with the independent auditors' report, in the Fund's
Annual Report. The Fund's financial statements, related notes and independent
auditors' report are included in the statement of additional information.
Additional information about the Fund's performance is contained in its Annual
Report which will be made available upon request and without charge.

<TABLE>
<CAPTION>
AUGUST 2, 1993
YEAR (DATE OF INITIAL
ENDED PUBLIC OFFERING) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ....... $17.06 $17.29
------ ------
Income from investment operations
Investment income (loss)--net .............. (0.06) (0.05)
Net gains (losses) on investments .......... (1.05) 1.55
------ ------
Total from investment operations ......... (1.11) 1.50
------ ------
Less distributions
Distributions from capital gains ........... (0.61) (1.73)
------ ------
Total distributions ...................... (0.61) (1.73)
------ ------
NET ASSET VALUE, END OF PERIOD ............. $15.34 $17.06
====== ======
TOTAL RETURN<F2> ........................... (6.57%) 9.02%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ........ 2.30% 2.57%<F1>
Investment income (loss)--net ............ (0.58%) (1.73%)<F1>
Portfolio turnover rate .................... 137% 162%
Net assets, end of period (thousands) ...... $32,266 $7,423

<FN>
<F1> Annualized.
<F2> Excluding applicable sales charges.
</FN>
</TABLE>
<PAGE>

FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR)

<TABLE>
<CAPTION>
AUGUST 2, 1993
YEAR (DATE OF INITIAL
ENDED PUBLIC OFFERING) TO
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $17.09 $17.29
------ ------
Income from investment operations
Investment income (loss)--net ............... (0.07) (0.06)
Net gains (losses) on investments ........... (1.04) 1.59
------ ------
Total from investment operations .......... (1.11) 1.53
------ ------
Less distributions
Distributions from capital gains ............ (0.61) (1.73)
------ ------
Total distributions ....................... (0.61) (1.73)
------ ------
NET ASSET VALUE, END OF PERIOD .............. $15.37 $17.09
====== ======
TOTAL RETURN<F2> ............................ (6.56%) 9.20%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets:
Operating and management expenses ......... 2.30% 2.48%<F1>
Investment income (loss)--net ............. (0.63%) (1.64%)<F1>
Portfolio turnover rate ..................... 137% 162%
Net assets, end of period (thousands) ....... $9,900 $3,620
<FN>
<F1> Annualized.
<F2> Excluding applicable sales charges.
</FN>
</TABLE>
<PAGE>

THE FUND

The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. The Fund is a Massachusetts business trust. Originally
the Fund had been incorporated in Massachusetts on February 8, 1968. The Fund is
one of twenty funds managed by Keystone Management, Inc. ("Keystone
Management"), the Fund's investment manager, and one of thirty funds advised by
Keystone Investment Management Company (formerly named Keystone Custodian Funds,
Inc.) ("Keystone"), the Fund's investment adviser. Keystone and Keystone
Management are, from time to time, collectively referred to as "Keystone."

INVESTMENT OBJECTIVE AND POLICIES

PRINCIPAL INVESTMENTS
The Fund's investment objective is to seek maximum capital growth by investing
in a varied portfolio consisting primarily of common stocks and securities
convertible into common stocks.

The Fund pursues its objective by employing the techniques of the fully-
managed investment concept, meaning that Keystone will continuously review both
individual securities and relevant general conditions. Whenever, in the opinion
of Keystone, a security no longer seems to have the required characteristics, an
anticipated level of performance has been achieved, or other securities present
relatively greater opportunities for realizing the Fund's objective, appropriate
changes will be made in the Fund's portfolio. The Fund's equity position will be
changed as Keystone changes its evaluation of trends in general securities price
levels. Portfolio turnover rate will not be considered a limiting factor in the
execution of investment decisions.

In pursuing its objective, the Fund may also invest in foreign securities
issued by issuers located in developed countries as well as emerging markets
countries, including certain formerly communist countries. For this purpose,
countries with emerging markets are generally those where the per capita income
is in the low to middle ranges, as determined by the International Bank for
Reconstruction and Development ("World Bank").

OTHER ELIGIBLE SECURITIES
When Keystone deems it advisable, the Fund may, for temporary defensive
purposes, invest without limit in investment grade bonds or debentures rated by
Moody's Investors Service, Inc. ("Moody's") as BAA or better or by Standard &
Poor's Corporation ("S&P") as BBB or better or those having at least similar
quality in Keystone's judgment. Bonds that are rated BAA by Moody's are
considered to be 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 length of time. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well. Debt rated BBB by S&P is regarded as having an adequate capacity to pay
interest and repay principal. While it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Under circumstances where
the Fund is investing for defensive purposes, it will not be pursuing its
investment objective.

The Fund also may invest in non-convertible preferred stocks of companies
considered credit-worthy and able to sustain dividend payments; and short-term
money market instruments maturing in one year or less. Such money market
instruments may be United States ("U.S.") government securities; certificates of
deposit in banks considered credit-worthy; or commercial paper of companies, the
bonds or debentures of which are investment grade. While these securities are
not without risk of price fluctuation or default, they are generally less
volatile than common stock.

The Fund may enter into repurchase and reverse repurchase agreements, invest
in master demand notes, lend portfolio securities, purchase and sell securities
and currencies on a when issued and delayed delivery basis and purchase or sell
securities on a forward commitment basis, write covered call and put options and
purchase call and put options to close out existing positions and may employ new
investment techniques with respect to such options. The Fund may also enter into
currency and other financial futures contracts and related options transactions
for hedging purposes and not for speculation, and may employ new investment
techniques with respect to such futures contracts and related options.

The Fund intends to follow policies of the Securities and Exchange Commission
as they are adopted from time to time with respect to illiquid securities,
including, at this time, (1) treating as illiquid securities that may not be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued such securities on its
books and (2) limiting its holdings of such securities to 15% of net assets.

The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under the 1933 Act. Generally, Rule 144A
establishes a safe harbor from the registration requirements of the 1933 Act for
resales by large institutional investors of securities not publicly traded in
the U.S. The Fund may purchase Rule 144A securities when such securities present
an attractive investment opportunity and otherwise meet the Fund's selection
criteria. Keystone determines the liquidity of the Fund's Rule 144A securities
in accordance with guidelines adopted by the Board of Trustees.

At the present time, the Fund cannot accurately predict exactly how the market
for Rule 144A securities will develop. A Rule 144A security that was readily
marketable upon purchase may subsequently become illiquid. In such an event, the
Board of Trustees will consider what action, if any, is appropriate.

For further information about the types of investments and investment
techniques available to the Fund, including the risks associated therewith see
the sections of this prospectus entitled "Risk Factors" and "Additional
Investment Information" and the statement of additional information.

Of course, there can be no assurance that the Fund will achieve its investment
objective since there is uncertainty in every investment.

NONFUNDAMENTAL NATURE OF INVESTMENT OBJECTIVE

The Fund's investment objective is nonfundamental and may be changed without
the vote of a majority (as defined in the Investment Company Act of 1940 ("1940
Act")) of the Fund's outstanding shares. If the investment objective is changed
and a shareholder determines that the Fund is no longer an appropriate
investment, the shareholder may redeem his or her shares, but may be subject to
a contingent deferred sales charge upon redemption.

INVESTMENT RESTRICTIONS

The Fund has adopted the fundamental investment restrictions set forth below,
which may not be changed without the vote of a majority (as defined in the 1940
Act) of the Fund's outstanding shares. These restrictions and certain other
fundamental restrictions are set forth in the statement of additional
information.

The Fund may not do the following: (1) invest more than 10% of its total
assets in the securities of any one issuer, (2) borrow, unless, immediately
after any such borrowing, such borrowing and all other such borrowings and other
liabilities do not exceed one-third of the value of the Fund's total assets; and
(3) concentrate its investments in any particular industry.

As a diversified investment company, the Fund has undertaken not to purchase a
security if, as a result, more than 10% of the outstanding voting securities of
any single issuer would be held by the Fund or more than 5% of its total assets
would be invested in securities of any one issuer.

RISK FACTORS

Investing in the Fund involves the risk inherent in any investment in a
security, i.e., the net asset value of a share of the Fund can increase or
decrease in response to changes in economic conditions, interest rates and the
market's perception of the underlying securities of the Fund.

Investing in common stocks, particularly those having growth characteristics,
frequently involves greater risks (and possibly greater rewards) than investing
in other types of securities. Common stock prices tend to be more volatile and
companies having growth characteristics may sometimes be unproven.

By itself, the Fund does not constitute a balanced investment plan. The Fund
stresses providing growth of capital by investing primarily in common stocks and
rights and warrants. The yield of the Fund's portfolio securities will fluctuate
with changing market conditions. The Fund makes most sense for those investors
who can afford to ride out changes in the stock market because it invests a
substantial portion of its assets in common stocks.

Investing in securities of foreign issuers generally involves more risk than
investing in securities of domestic issuers for the following reasons: (1) there
may be less public information available about foreign companies than is
available about U.S. companies; (2) foreign companies are not generally subject
to the uniform accounting, auditing and financial reporting standards and
practices applicable to U.S. companies; (3) foreign stock markets have less
volume than the U.S. market, and the securities of some foreign companies are
much less liquid and much more volatile than the securities of comparable U.S.
companies; (4) foreign securities transactions may involve higher brokerage
commissions; (5) there may be less government regulation of stock markets,
brokers, listed companies and banks in foreign countries than in the U.S.; (6)
the Fund may incur fees on currency exchanges when it changes investments from
one country to another; (7) the Fund's foreign investments could be affected by
expropriation, confiscatory taxation, nationalization, establishment of currency
exchange controls, political or social instability or diplomatic developments;
(8) fluctuations in foreign exchange rates will affect the value of the Fund's
investments, the value of dividends and interest earned, gains and losses
realized on the sale of securities, net investment income and unrealized
appreciation or depreciation of investments; and (9) interest and dividends on
foreign securities may be subject to withholding taxes in a foreign country that
could result in a reduction of net investment income available for distribution.

Investing in securities of issuers in emerging market countries involves
exposure to economic systems that are generally less mature and political
systems that are generally less stable than those of developed countries. In
addition, investing in companies in emerging market countries may also involve
exposure to national policies that may restrict investment by foreigners and
undeveloped legal systems governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies in emerging markets countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities. Furthermore, investing in
securities of companies in the formerly communist countries of Eastern Europe
and the People's Republic of China involves additional risks to those associated
with investments in companies in non-formerly communist emerging markets
countries. Specifically, those countries could convert back to a single economic
system, and the claims of property owners prior to the expropriation by the
communist regime could be settled in favor of the former property owners, in
which case the Fund could lose its entire investment in those countries.

If and when the Fund invests in zero coupon bonds, the Fund does not expect to
have enough zero coupon bonds to have a material effect on dividends. The Fund
has undertaken to a state securities authority to disclose that zero coupon
securities pay no interest to holders prior to maturity, and the interest on
these securities is reported as income to the Fund and distributed to its
shareholders. These distributions must be made from the Fund's cash assets or,
if necessary, from the proceeds of sales of portfolio securities. The Fund will
not be able to purchase additional income producing securities with cash used to
make such distributions, and its current income ultimately may be reduced as a
result.

Past performance should not be considered representative of results for any
future period of time. Moreover, should many shareholders change from this Fund
to some other investment at about the same time, the Fund might have to sell
portfolio securities at a time when it would be disadvantageous to do so and at
a lower price than if such securities were held to maturity or until an
investment decision is made to dispose of them.

For additional information regarding the Fund's investments in Rule 144A
securities, see "Investment Objective and Policies". For further information
about the types of investments and investment techniques available to the Fund,
including the associated risks, see "Additional Investment Information" and the
statement of additional information.

PRICING SHARES

The net asset value of a Fund share is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (currently 4:00 p.m. Eastern time for the purpose of pricing fund
shares) except on days when changes in the value of the Fund's portfolio
securities do not affect the current net asset value of its shares. The Exchange
currently is closed on weekends, New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the Fund is arrived at by determining the value
of the Fund's assets, subtracting its liabilities and dividing the result by the
number of its shares outstanding.

For the purposes of calculating the net asset value of a Fund share on any
given day, securities traded on national securities exchanges or reported on the
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") National Market are valued at the last sale price. If there were no
transactions on that day, securities will be valued at the mean of the closing
bid and asked prices or at such other value as shall be determined in good
faith, by or under the direction of the Fund's Board of Trustees, to be the fair
market value of such securities. Commercial paper is generally valued at cost,
which approximates market.

Other securities, including unlisted securities, are valued at the last
reported bid price if such prices are available. Prices for such securities are
considered to be unavailable if, for example, the securities are restricted
securities, or if there exists a "thin market" in the securities. In such
situations, the value is determined in good faith by or under the direction of
the Fund's Board of Trustees.

DIVIDENDS AND TAXES

The Fund has qualified and intends to qualify in the future as a regulated
investment company under the Internal Revenue Code (the "Code"). The Fund
qualifies if, among other things, it distributes to its shareholders at least
90% of its net investment income for its fiscal year. The Fund also intends to
make timely distributions, if necessary, sufficient in amount to avoid the
nondeductible 4% excise tax imposed on a regulated investment company to the
extent that it fails to distribute, with respect to each calendar year, at least
98% of its ordinary income for such calendar year and 98% of its net capital
gains for the one-year period ending October 31 of such calendar year. Any
taxable dividend declared in October, November or December to shareholders of
record in such month and paid by the following January 31 will be includable in
the taxable income of the shareholder as if paid on December 31 of the year in
which the dividend was declared. If the Fund qualifies and if it distributes all
of its net investment income and net capital gains, if any, to shareholders, it
will be relieved of any federal income tax liability. The Fund will make
distributions from its net investment income and net capital gains, if any, at
least annually. Because Class A shares bear most of the costs of distribution of
such shares through payment of a front end sales charge, while Class B and Class
C shares bear such expenses through a higher annual distribution fee, expenses
attributable to Class B shares and Class C shares will generally be higher, and
income distributions paid by the Fund with respect to Class A shares will
generally be greater than those paid with respect to Class B and Class C shares.

Shareholders receive Fund distributions in the form of additional shares of
that class of shares upon which the distribution is based or, at the
shareholder's option, in cash. Fund distributions in the form of additional
shares are made at net asset value without the imposition of a sales charge.
Dividends and distributions are taxable whether they are received in cash or in
shares. Income dividends and net short-term gains dividends are taxable as
ordinary income, and net long-term gains dividends are taxable as capital gains
regardless of how long the Fund's shares are held. If Fund shares held for less
than six months are sold at a loss, however, such loss will be treated for tax
purposes as a long-term capital loss to the extent of any long-term capital
gains dividends received. The Fund advises its shareholders annually as to the
federal tax status of all distributions made during the year.

FUND MANAGEMENT AND EXPENSES

BOARD OF TRUSTEES
Under Massachusetts law, the Fund's Board of Trustees has absolute and
exclusive control over the management and disposition of all assets of the Fund.
Subject to the authority of the Fund's Board of Trustees, Keystone, the Fund's
investment adviser, provides investment advice, management and administrative
services to the Fund.

INVESTMENT MANAGER
Subject to the authority of the Fund's Board of Trustees, Keystone Management,
located at 200 Berkeley Street, Boston, Massachusetts 02116-5034, serves as
investment manager to the Fund and is responsible for the overall management of
the Fund's business and affairs.

Keystone Management, the Fund's investment manager, organized in 1989, is a
wholly-owned subsidiary of Keystone. Its directors and principal executive
officers have been affiliated with Keystone, a seasoned investment adviser, for
a number of years. Keystone Management also serves as investment manager to most
of the other Keystone America Funds and certain other Funds in the Keystone
Investments Family of Funds.

Pursuant to its Investment Management Agreement with the Fund (the "Management
Agreement"), Keystone Management has delegated its investment management
functions, except for certain administrative and management services to
Keystone. Keystone Management has entered into an Investment Advisory Agreement
with Keystone (the "Advisory Agreement") under which Keystone provides
investment advisory and management services to the Fund. Services performed by
Keystone Management include (1) performing research and planning with respect to
(a) the Fund's qualification as a regulated investment company under Subchapter
M of the Internal Revenue Code, (b) tax treatment of the Fund's portfolio
investments, (c) tax treatment of special corporate actions (such as
reorganizations), (d) state tax matters affecting the Fund, and (e) the Fund's
distributions of income and capital gains; (2) preparing the Fund's federal and
state tax returns; (3) providing services to the Fund's shareholders in
connection with federal and state taxation and distributions of income and
capital gains; and (4) storing documents relating to the Fund's activities.

The Fund pays Keystone Management a fee for its services at the annual rate
set forth below:

Aggregate Net Asset
Management Value of the Shares
Fee of the Fund
- ------------------------------------------------------------------------------
0.75% of the first $ 250,000,000, plus
0.675% of the next $ 250,000,000, plus
0.60% of the next $ 500,000,000, plus
0.50% of amounts over $1,000,000,000

computed as of the close of business on each business day and payable daily.

During the fiscal year ended December 31, 1994, the Fund paid or accrued to
Keystone Management investment management and administrative services fees of
$924,625, which amount represented 0.75% of the Fund's average net assets. Of
the amount paid to Keystone Management, $785,931 was paid to Keystone for
investment advisory services rendered pursuant to the Advisory Agreement.

To the extent the Fund's management fee equals 0.75%, the fee would be higher
than that paid by most mutual funds, but would not necessarily be higher than
that paid by funds with similar objectives.

INVESTMENT ADVISER
Keystone, the Fund's investment adviser, has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone is a wholly-owned subsidiary of Keystone
Investments, Inc. ("Keystone Investments"), both located at 200 Berkeley
Street, Boston, Massachusetts 02116-5034.

Keystone Investments is a corporation privately owned by current and former
members of management and certain employees of Keystone and its affiliates. The
shares of Keystone Investments common stock beneficially owned by management are
held in a number of voting trusts, the trustees of which are George S. Bissell,
Albert H. Elfner, III, Edward F. Godfrey and Ralph J. Spuehler, Jr. Keystone
Investments provides accounting, bookkeeping, legal, personnel and general
corporate services to Keystone Management, Keystone, their affiliates and the
Keystone Investments Family of Funds.

Pursuant to the Advisory Agreement, Keystone receives for its services an
annual fee representing 85% of the management fee received by Keystone
Management under the Management Agreement.

The Management Agreement and Advisory Agreement continue in effect from year
to year only so long as such continuance is specifically approved at least
annually by the Fund's Board of Trustees or by vote of a majority of the
outstanding shares of the Fund. In either case, the terms of the Management
Agreement and the Advisory Agreement and continuance thereof must be approved by
the vote of a majority of Independent Trustees in person at a meeting called for
the purpose of voting on such approval. The Management Agreement and the
Advisory Agreement may be terminated, without penalty, on 60 days' written
notice by the Fund, Keystone Management or Keystone or terminated by a vote of
the Fund's shareholders. The Management Agreement and the Advisory Agreement
will terminate automatically upon assignment.

The Fund has adopted a Code of Ethics incorporating policies on personal
securities trading as recommended by the Investment Company Institute.

PORTFOLIO MANAGER

Maureen E. Cullinane has been the Fund's portfolio manager since 1989. She is
a Keystone Senior Vice President and Group Head, and has more than 18 years of
investment experience.

FUND EXPENSES

The Fund will pay all of its expenses. In addition to the investment advisory
and management fees discussed above, the principal expenses that the Fund is
expected to pay include expenses of certain of its Trustees; transfer, dividend
disbursing and shareholder servicing agent expenses; custodian expenses; fees of
its independent auditors and legal counsel to its Trustees; fees payable to
government agencies, including registration and qualification fees of the Fund
and its shares under federal and state securities laws; and certain
extraordinary expenses. In addition, each class will pay all of the expenses
attributable to it. Such expenses are currently limited to Distribution Plan
expenses. The Fund also pays its brokerage commissions, interest charges and
taxes.

For the fiscal year ended December 31, 1994, the Fund's Class A, Class B and
Class C shares paid 1.41%, 2.30% and 2.30%, respectively, of their respective
average class net assets in expenses.

During the fiscal year ended December 31, 1994, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer and
dividend disbursing agent, and Keystone Investments $16,827 for certain
accounting and printing services and $480,953 for shareholder services. KIRC is
a wholly-owned subsidiary of Keystone.

SECURITIES TRANSACTIONS

Under policies established by the Board of Trustees, Keystone selects
broker-dealers to execute transactions subject to the receipt of best execution.
When selecting broker-dealers to execute portfolio transactions for the Fund,
Keystone may consider as a factor the number of shares of the Fund sold by such
broker-dealer. In addition, broker-dealers executing portfolio transactions may,
from time to time, be affiliated with the Fund, Keystone Management, Keystone,
the Fund's principal underwriter or their affiliates.

The Fund may pay higher commissions to broker-dealers that provide research
services. Keystone may use these services in advising the Fund as well as in
advising its other clients.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rates for the fiscal years ended December 31,
1993 and 1994 were 162% and 137%, respectively. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Fund, as well as additional realized
gains and/or losses to shareholders. For further information about brokerage and
distributions, see the statement of additional information.

HOW TO BUY SHARES

You may purchase shares of the Fund from any broker-dealer that has a selling
agreement with Keystone Investment Distributors Company (formerly named Keystone
Distributors, Inc.) (the "Principal Underwriter"), the Fund's principal
underwriter. The Principal Underwriter, a wholly-owned subsidiary of Keystone,
is located at 200 Berkeley Street, Boston, Massachusetts 02116-5034.

In addition, you may open an account for the purchase of shares of the Fund by
mailing to the Fund c/o Keystone Investor Resource Center, Inc., P.O. Box 2121,
Boston, Massachusetts 02106-2121, a completed account application and a check
payable to the Fund, or you may telephone 1-800-343-2898 to obtain the number of
an account to which you can wire or electronically transfer funds and then send
in a completed account application. Subsequent investments in any amount may be
made by check, by wiring Federal funds or by an electronic funds transfer
("EFT").

Orders for the purchase of shares of the Fund will be confirmed at an offering
price equal to the net asset value per share next determined after receipt of
the order in proper form by the Principal Underwriter (generally as of the close
of the Exchange on that day) plus, in the case of Class A shares, the front end
sales charge. Orders received by dealers or other firms prior to the close of
the Exchange and received by the Principal Underwriter prior to the close of its
business day will be confirmed at the offering price effective as of the close
of the Exchange on that day. The Fund reserves the right to determine the net
asset value more frequently than once a day if deemed desirable. Dealers and
other financial services firms are obligated to transmit orders promptly.

Orders for shares received by broker-dealers prior to that day's close of
trading on the Exchange and transmitted to the Fund prior to its close of
business that day will receive the offering price equal to the net asset value
per share computed at the close of trading on the Exchange on the same day plus,
in the case of Class A shares, the front end sales charge. Orders received by
broker-dealers after that day's close of trading on the Exchange and transmitted
to the Fund prior to the close of business on the next business day will receive
the next business day's offering price.

Orders for shares received directly by the Fund from you will receive the
offering price equal to the net asset value per share next computed after the
Fund receives the purchase order plus, in the case of Class A shares, the front
end sales charge.

The initial purchase must be at least $1,000. There is no minimum amount for
subsequent purchases.

The Fund reserves the right to withdraw all or any part of the offering made
by this prospectus and to reject purchase orders.

Shareholder inquiries should be directed to KIRC by calling toll free 1-800-
343-2898 or writing to KIRC or to the firm from which you received this
prospectus.

ALTERNATIVE SALES OPTIONS

Generally, the Fund offers three classes of shares:

CLASS A SHARES -- FRONT END LOAD OPTION

Class A shares are sold with a sales charge at the time of purchase. Class A
shares are not subject to a deferred sales charge when they are redeemed except
as follows: Class A shares purchased on or after April 10, 1995 (1) in an amount
equal to or exceeding $1,000,000 or (2) by a corporate qualified retirement plan
or a non-qualified deferred compensation plan sponsored by a corporation having
100 or more eligible employees (a "Qualifying Plan"), in either case without a
front end sales charge, will be subject to a contingent deferred sales charge
for the 24 month period following the date of purchase. Certain Class A shares
purchased prior to April 10, 1995 may be subject to a deferred sales charge upon
redemption during the one year period following the date of purchase.

CLASS B SHARES -- BACK END LOAD OPTION

Class B shares are sold without a sales charge at the time of purchase, but
are, with certain exceptions, subject to a contingent deferred sales charge if
they are redeemed. Class B shares purchased on or after June 1, 1995 are subject
to a deferred sales charge upon redemption during the 72 month period following
the month of purchase. Class B shares purchased prior to June 1, 1995 are
subject to a deferred sales charge upon redemption during the four calendar
years following purchase. Class B shares purchased on or after June 1, 1995 that
have been outstanding for eight years following the month of purchase will
automatically convert to Class A shares without the imposition of a front-end
sales charge or exchange fee. Class B shares purchased prior to June 1, 1995
will retain their existing conversion rights.

CLASS C SHARES -- LEVEL LOAD OPTION
Class C shares are sold without a sales charge at the time of purchase, but
are subject to a deferred sales charge if they are redeemed within one year
after the date of purchase. Class C shares are available only through dealers
who have entered into special distribution agreements with the Principal
Underwriter.

Each class of shares, pursuant to its Distribution Plan or other plan, pays an
annual service fee of 0.25% of the Fund's average daily net assets attributable
to that class. In addition to the 0.25% service fee, the Class B and C
Distribution Plans provide for the payment of an annual distribution fee of up
to 0.75% of the average net assets attributable to their respective classes. As
a result, income distributions paid by the Fund with respect to Class B and
Class C shares will generally be less than those paid with respect to Class A
shares.

Investors who would rather pay the entire cost of distribution at the time of
investment, rather than spreading such cost over time, might consider Class A
shares. Other investors might consider Class B or Class C shares, in which case
100% of the purchase price is invested immediately, depending on the amount of
the purchase and the intended length of investment. The Fund will not normally
accept any purchase of Class B shares in the amount of $250,000 or more and will
not normally accept any purchase of Class C shares in the amount of $1,000,000
or more.

- ---------------------------------------
CLASS A SHARES

Class A shares are offered at net asset value plus an initial sales charge as
follows:

<TABLE>
<CAPTION>
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED<F1> OFFERING PRICE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 ...................... 5.75% 6.10% 5.25%
$50,000 but less than $100,000 ......... 4.75% 4.99% 4.25%
$100,000 but less than $250,000 ........ 3.75% 3.90% 3.25%
$250,000 but less than $500,000 ........ 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 ...... 1.50% 1.52% 1.50%
- ---------
<FN>
<F1> Rounded to the nearest one-hundredth percent.
</FN>
</TABLE>
---------------------------------------

Purchases of the Fund's Class A shares in the amount of $1 million or more
and/or purchases of Class A shares made by a Qualifying Plan will be at net
asset value without the imposition of a front-end sales charge (each such
purchase, an "NAV Purchase").

With respect to NAV Purchases, the Principal Underwriter will pay broker/
dealers or others concessions based on (1) the investor's cumulative purchases
during the one-year period beginning with the date of the initial NAV Purchase
and (2) the investor's cumulative purchases during each subsequent one-year
period beginning with the first NAV Purchase following the end of the prior
period. For such purchases, concessions will be paid at the following rate:
1.00% of the investment amount up to $2,999,999; plus 0.50% of the investment
amount between $3,000,000 and $4,999,999; plus 0.25% of the investment amount
over $4,999,999.

Class A shares acquired on or after April 10, 1995 in an NAV Purchase are
subject to a contingent deferred sales charge of 1.00% upon redemption during
the 24 month period commencing on the date the shares were originally purchased.
Certain Class A shares purchased without a front-end sales charge prior to April
10, 1995 are subject to a contingent deferred sales charge of 0.25% upon
redemption during the one year period commencing on the date such shares were
originally purchased.

The sales charge is paid to the Principal Underwriter, which in turn normally
reallows a portion to your broker-dealer. In addition, your broker-dealer
currently will be paid periodic service fees at an annual rate of up to 0.25% of
the average daily net asset value of Class A shares maintained by such recipient
outstanding on the books of the Fund for specified periods.

Upon written notice to dealers with whom it has dealer agreements, the
Principal Underwriter may reallow up to the full applicable sales charge.

Initial sales charges may be eliminated for persons purchasing Class A shares
which are included in a broker-dealer managed fee based program (a "wrap
account") with broker dealers who have entered into special agreements with the
Principal Underwriter. Initial sales charges may be reduced or eliminated for
persons or organizations purchasing Class A shares of the Fund alone or in
combination with Class A shares of other Keystone America Funds.
See Exhibit A to this prospectus.

Upon prior notification to the Principal Underwriter, Class A shares may be
purchased at net asset value by clients of registered representatives within six
months after a change in the registered representative's employment, where the
amount invested represents redemption proceeds from a registered open-end
management investment company not distributed or managed by Keystone or its
affiliates; and the shareholder either (1) paid a front end sales charge, or (2)
was at some time subject to, but did not actually pay, a contingent deferred
sales charge with respect to the redemption proceeds.

Since January 1, 1995 through December 31, 1995 and upon prior notification to
the Principal Underwriter, Class A shares may be purchased at net asset value by
clients of registered representatives within six months after the redemption of
shares of any registered open-end investment company not distributed or managed
by Keystone or its affiliates, where the amount invested represents redemption
proceeds from such unrelated registered open-end investment company, and the
shareholder either (1) paid a front end sales charge, or (2) was at some time
subject to, but did not actually pay, a contingent deferred sales charge with
respect to the redemption proceeds.

CLASS A DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class A shares
(the "Class A Distribution Plan") that provides for expenditures by the Fund,
currently limited to 0.25% annually of the average daily net asset value of
Class A shares, in connection with the distribution of Class A shares. Payments
under the Class A Distribution Plan are currently made to the Principal
Underwriter (which may reallow all or part to others, such as dealers), as
service fees at an annual rate of up to 0.25% of the average daily net asset
value of Class A shares maintained by the recipients outstanding on the books of
the Fund for specified periods.

CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge.

With respect to Class B shares purchased on or after June 1, 1995, the Fund,
with certain exceptions, imposes a deferred sales charge in accordance with the
following schedule:

DEFERRED
SALES
CHARGE
REDEMPTION TIMING IMPOSED
- ----------------- -------

First twelve month period following month of
purchase ................................... 5.00%
Second twelve month period following month of
purchase ................................... 4.00%
Third twelve month period following month of
purchase ................................... 3.00%
Fourth twelve month period following month of
purchase ................................... 3.00%
Fifth twelve month period following month of
purchase ................................... 2.00%
Sixth twelve month period following month of
purchase ................................... 1.00%

No deferred sales charge is imposed on amounts redeemed thereafter.

With respect to Class B shares sold prior to June 1, 1995, the Fund, with
certain exceptions, imposes a deferred sales charge of 3.00% on shares redeemed
during the calendar year of purchase and the first calendar year after the year
of purchase; 2.00% on shares redeemed during the second calendar year after the
year of purchase; and 1.00% on shares redeemed during the third calendar year
after the year of purchase. No deferred sales charge is imposed on amounts
redeemed thereafter.

When imposed, the deferred sales charge is deducted from the redemption
proceeds otherwise payable to you. The deferred sales charge is retained by the
Principal Underwriter. Amounts received by the Principal Underwriter under the
Class B Distribution Plans are reduced by deferred sales charges retained by the
Principal Underwriter. See "Contingent Deferred Sales Charges and Waiver of
Sales Charges" below.

Class B shares purchased on or after June 1, 1995 that have been outstanding
for eight years following the month of purchase will automatically convert to
Class A shares (which are subject to a lower Distribution Plan charge) without
imposition of a front-end sales charge or exchange fee. Class B shares purchased
prior to June 1, 1995 will similarly convert to Class A shares at the end of
seven calendar years after the year of purchase. (Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificates to KIRC.) The Class B shares so converted will no longer be subject
to the higher expenses borne by Class B shares. Because the net asset value per
share of the Class A shares may be higher or lower than that of the Class B
shares at the time of conversion, although the dollar value will be the same, a
shareholder may receive more or fewer Class A shares than the number of Class B
shares converted. Under current law, it is the Fund's opinion that such a
conversion will not constitute a taxable event under federal income tax law. In
the event that this ceases to be the case, the Board of Trustees will consider
what action, if any, is appropriate and in the best interests of the Class B
shareholders.

CLASS B DISTRIBUTION PLANS
The Fund has adopted Distribution Plans with respect to its Class B shares
(the "Class B Distribution Plans") that provide for expenditures by the Fund at
an annual rate of up to 1.00% of the average daily net asset value of Class B
shares to pay expenses of the distribution of Class B shares. Payments under the
Class B Distribution Plans are currently made to the Principal Underwriter
(which may reallow all or part to others, such as dealers) (1) as commissions
for Class B shares sold and (2) as shareholder service fees. Amounts paid or
accrued to the Principal Underwriter under (1) and (2) in the aggregate may not
exceed the annual limitation referred to above.

The Principal Underwriter generally reallows to brokers or others a commission
equal to 4.00% of the price paid for each Class B share sold plus the first
year's service fee in advance in the amount of 0.25% of the price paid for each
Class B share sold. Beginning approximately 15 months after the purchase of a
Class B share, the broker or other party will receive service fees at an annual
rate of 0.25% of the average daily net asset value of such Class B share
maintained by the recipient outstanding on the books of the Fund for specified
periods. See "Distribution Plans" below.

With respect to the Fund's Class B shares only, for the period June 1, 1995 to
August 31, 1995, the Principal Underwriter will reallow an increased commission
equal to 4.75% of the price paid for each Class B share sold to those
broker/dealers or others who allow their individual selling representatives to
participate in the additional 0.75% commission.

CLASS C SHARES
Class C shares are offered only through dealers who have special distribution
agreements with the Principal Underwriter. Class C shares are offered at net
asset value, without an initial sales charge. With certain exceptions, the Fund
imposes a deferred sales charge of 1.00% on shares redeemed within one year
after the date of purchase. No deferred sales charge is imposed on amounts
redeemed thereafter. If imposed, the deferred sales charge is deducted from the
redemption proceeds otherwise payable to you. The deferred sales charge is
retained by the Principal Underwriter. See "Contingent Deferred Sales Charges
and Waiver of Sales Charges" below.

CLASS C DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan with respect to its Class C shares
(the "Class C Distribution Plan") that provides for expenditures by the Fund at
an annual rate of up to 1.00% of the average daily net asset value of Class C
shares to pay expenses of the distribution of Class C shares. Payments under the
Class C Distribution Plan are currently made to the Principal Underwriter (which
may reallow all or part to others, such as dealers) (1) as commissions for Class
C shares sold and (2) as shareholder service fees. Amounts paid or accrued to
the Principal Underwriter under (1) and (2) in the aggregate may not exceed the
annual limitation referred to above.

The Principal Underwriter generally reallows to brokers or others a commission
in the amount of 0.75% of the price paid for each Class C share sold, plus the
first year's service fee in advance in the amount of 0.25% of the price paid for
each Class C share sold, and, beginning approximately fifteen months after
purchase, a commission at an annual rate of 0.75% (subject to NASD rules -- see
"Distribution Plans") plus service fees, which are paid at the annual rate of
0.25%, respectively, of the average daily net asset value of each Class C share
maintained by the recipients outstanding on the books of the Fund for specified
periods. See "Distribution Plans" below.

CONTINGENT DEFERRED SALES CHARGE
AND WAIVER OF SALES CHARGES
Any contingent deferred sales charge imposed upon the redemption of Class A,
Class B or Class C shares is a percentage of the lesser of (1) the net asset
value of the shares redeemed or (2) the net asset value at the time of purchase
of such shares. No contingent deferred sales charge is imposed when you redeem
amounts derived from (1) increases in the value of your account above the net
cost of such shares due to increases in the net asset value per share of such
shares; (2) certain shares with respect to which the Fund did not pay a
commission on issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions; (3) certain Class A shares held
for more than one or two years, as the case may be, from the date of purchase;
(4) Class B shares held more than four consecutive calendar years or more than
72 months after the month of purchase, as the case may be; or (5) Class C shares
held for more than one year from the date of purchase. Upon request for
redemption, shares not subject to the contingent deferred sales charge will be
redeemed first. Thereafter, shares held the longest will be the first to be
redeemed.

The Fund may also sell Class A, Class B or Class C shares at net asset value
without any initial sales charge or a contingent deferred sales charge to
certain Directors, Trustees, officers and employees of the Fund and Keystone and
certain of their affiliates, to registered representatives of firms with dealer
agreements with the Principal Underwriter and to a bank or trust company acting
as a trustee for a single account.

With respect to Class A shares purchased by a Qualifying Plan at net asset
value or Class C shares purchased by a Qualifying Plan, no contingent deferred
sales charge will be imposed on any redemptions made specifically by an
individual participant in the Qualifying Plan. This waiver is not available in
the event a Qualifying Plan (as a whole) redeems substantially all of its
assets.

In addition, no contingent deferred sales charge is imposed on a redemption of
shares of the Fund in the event of (1) death or disability of the shareholder;
(2) a lump-sum distribution from a 401(k) plan or other benefit plan qualified
under the Employee Retirement Income Security Act of 1974 ("ERISA"); (3)
automatic withdrawals from ERISA plans if the shareholder is at least 59 1/2
years old; (4) involuntary redemptions of accounts having an aggregate net asset
value of less than $1,000; (5) automatic withdrawals under an automatic
withdrawal plan of up to 1 1/2% per month of the shareholder's initial account
balance; (6) withdrawals consisting of loan proceeds to a retirement plan
participant; (7) financial hardship withdrawals made by a retirement plan
participant; or (8) withdrawals consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan participant.

ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
The Principal Underwriter may, from time to time, provide promotional
incentives, including reallowance of up to the entire sales charge, to certain
dealers whose representatives have sold or are expected to sell significant
amounts of Fund shares. In addition, dealers may, from time to time, receive
additional cash payments. The Principal Underwriter may also provide written
information to dealers with whom it has dealer agreements that relates to sales
incentive campaigns conducted by such dealers for their representatives as well
as financial assistance in connection with pre-approved seminars, conferences
and advertising. No such programs or additional compensation will be offered to
the extent they are prohibited by the laws of any state or any self-regulatory
agency such as the NASD. Dealers to whom substantially the entire sales charge
on Class A shares is reallowed may be deemed to be underwriters as that term is
defined under the 1933 Act.

The Principal Underwriter may, at its own expense, pay concessions in addition
to those described above to dealers which satisfy certain criteria established
from time to time by the Principal Underwriter. These conditions relate to
increasing sales of shares of the Keystone funds over specified periods and
certain other factors. Such payments may, depending on the dealer's satisfaction
of the required conditions, be periodic and may be up to 0.25% of the value of
shares sold by such dealer.

The Principal Underwriter may also pay a transaction fee (up to the level of
payments allowed to dealers for the sale of shares, as described above) to banks
and other financial services firms that facilitate transactions in shares of the
Fund for their clients.

The Glass-Steagall Act currently limits the ability of a depository
institution (such as a commercial bank or a savings and loan association) to
become an underwriter or distributor of securities. In the event the Glass-
Steagall Act is deemed to prohibit depository institutions from accepting
payments under the arrangement described above, or should Congress relax current
restrictions on depository institutions, the Board of Trustees will consider
what action, if any, is appropriate.

In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.

DISTRIBUTION PLANS

As discussed above, the Fund bears some of the costs of selling its shares
under Distribution Plans adopted with respect to its Class A, Class B and Class
C shares pursuant to Rule 12b-1 under the 1940 Act.

The NASD limits the amount that a Fund may pay annually in distribution costs
for the sale of its shares and shareholder service fees. The NASD limits annual
expenditures to 1% of the aggregate average daily net asset value of its shares,
of which 0.75% may be used to pay such distribution costs and 0.25% may be used
to pay shareholder service fees. The NASD also limits the aggregate amount that
the Fund may pay for such distribution costs to 6.25% of gross share sales since
the inception of the 12b-1 Distribution Plan, plus interest at the prime rate
plus 1% on such amounts (less any deferred sales charges paid by shareholders to
the Principal Underwriter), remaining unpaid from time to time.

The Principal Underwriter intends, but is not obligated, to continue to pay or
accrue distribution charges incurred in connection with the Class B Distribution
Plans that exceed current annual payments permitted to be received by the
Principal Underwriter from the Fund. The Principal Underwriter intends to seek
full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus one percent) at such time in the future as, and
to the extent that, payment thereof by the Fund would be within the permitted
limits.

If the Fund's Independent Trustees authorize such payments, the effect would
be to extend the period of time during which the Fund incurs the maximum amount
of costs allowed by a Distribution Plan. If a Distribution Plan is terminated,
the Principal Underwriter will ask the Independent Trustees to take whatever
action they deem appropriate under the circumstances with respect to payment of
such amounts.

In connection with financing its distribution costs, including commission
advances to dealers and others, the Principal Underwriter has sold to a
financial institution substantially all of its 12b-1 fee collection rights and
contingent deferred sales charge collection rights in respect of Class B shares
sold during the two-year period commencing approximately June 1, 1995. The Fund
has agreed not to reduce the rate of payment of 12b-1 fees in respect of such
Class B shares, unless it terminates such shares' Distribution Plan completely.
If it terminates such Distribution Plan, the Fund may be subject to possible
adverse distribution consequences.

Each of the Distribution Plans may be terminated at any time by vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class. Unpaid distribution costs at fiscal year end for Class
B and Class C shares were $2,015,349 (6.25% of Class B net assets) and $637,742
(6.44% of Class C net assets), respectively.

For the year ended December 31, 1994, the Fund paid the Principal Underwriter
$103,680, $204,876, and $73,554 pursuant to its Class A, Class B and Class C
Distribution Plans, respectively. The Fund makes no payments in connection with
the sale of its shares other than the fee paid to its Principal Underwriter.

Dealers or others may receive different levels of compensation depending on
which class of shares they sell. Payments pursuant to a Distribution Plan are
included in the operating expenses of the class.

HOW TO REDEEM SHARES

You may redeem Fund shares for cash at their net asset value upon written
order to the Fund c/o KIRC, and presentation to the Fund of a properly endorsed
share certificate (if certificates have been issued). Your signature (s) on the
written order and certificates must be guaranteed as described below. In order
to redeem by telephone or to engage in telephone transactions generally, you
must complete the authorization in your account application. Proceeds for shares
redeemed on telephonic order will be deposited by wire or EFT only to the bank
account designated in your account application.

The redemption value equals the net asset value per share then determined and
may be more or less than your cost depending upon changes in the value of the
Fund's portfolio securities between purchase and redemption.

If imposed, the deferred sales charge is deducted from the redemption proceeds
otherwise payable to you.

REDEMPTION OF SHARES IN GENERAL

At various times, the Fund may be requested to redeem shares for which it has
not yet received good payment. In such a case, the Fund will mail the redemption
proceeds upon clearance of the purchase check, which may take 15 days or more.
Any delay may be avoided by purchasing shares either with a certified check or
by Federal Reserve or bank wire of funds or by EFT. Although the mailing of a
redemption check or the wiring or EFT of redemption proceeds may be delayed, the
redemption value will be determined and the redemption processed in the ordinary
course of business upon receipt of proper documentation. In such a case, after
the redemption and prior to the release of the proceeds, no appreciation or
depreciation will occur in the value of the redeemed shares, and no interest
will be paid on the redemption proceeds. If the payment of a redemption has been
delayed, the check will be mailed or the proceeds wired or sent EFT promptly
after good payment has been collected.

The Fund computes the amount due you at the close of the Exchange at the end
of the day on which it has received all proper documentation from you. Payment
of the amount due on redemption, less any applicable contingent deferred sales
charge (as described above), will be made within seven days thereafter except as
discussed herein.

You may also redeem your shares through broker-dealers. The Principal
Underwriter, acting as agent for the Fund, stands ready to repurchase Fund
shares upon orders from dealers and will calculate the net asset value on the
same terms as those orders for the purchase of shares received from
broker-dealers and described under "How to Buy Shares." If the Principal
Underwriter has received proper documentation, it will pay the redemption
proceeds, less any applicable deferred sales charge, to the broker-dealer
placing the order within seven days thereafter. The Principal Underwriter
charges no fee for this service. Your broker-dealer, however, may charge a
service fee.

For your protection, SIGNATURES ON CERTIFICATES, STOCK POWERS AND ALL WRITTEN
ORDERS OR AUTHORIZATIONS MUST BE GUARANTEED BY A U.S. STOCK EXCHANGE MEMBER, A
BANK OR OTHER PERSONS ELIGIBLE TO GUARANTEE SIGNATURES UNDER THE SECURITIES
EXCHANGE ACT OF 1934 AND KIRC'S POLICIES. The Fund or KIRC may waive this
requirement, but also may require additional documents in certain cases.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less when the account address of record has been the
same for a minimum period of 30 days. The Fund and KIRC reserve the right to
withdraw this waiver at any time.

If the Fund receives a redemption order, but you have not clearly indicated
the amount of money or number of shares involved, the Fund cannot execute the
order. In such cases, the Fund will request the missing information from you and
process the order on the day such information is received.

TELEPHONE
Under ordinary circumstances, you may redeem up to $50,000 from your account
by telephone by calling toll free 1-800-343-2898. You must complete the
Telephone Redemptions section of the application to enjoy telephone redemption
privileges.

In order to insure that instructions received by KIRC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation of
your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if the
address and bank account of record have been the same for a minimum period of 30
days.

If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent by EFT to your
previously designated bank account as you direct. If you do not specify how you
wish your redemption proceeds to be sent, they will be mailed by check.

If you cannot reach the Fund by telephone, you should follow the procedures
for redeeming by mail or through a broker as set forth herein.

SMALL ACCOUNTS
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem your account if its value has fallen below $1,000, the current
minimum investment level, as a result of your redemptions (but not as a result
of market action). You will be notified in writing and allowed 60 days to
increase the value of your account to the minimum investment level. No deferred
sales charges are applied to such redemptions.

REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Fund to pay for all
redemptions in cash, the Fund may authorize payment to be made in portfolio
securities or other property. The Fund has obligated itself, however, under the
1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to the lesser of $250,000 or 1% of the Fund's net assets in any
90-day period. Securities delivered in payment of redemptions would be valued at
the same value assigned to them in computing the net asset value per share and
would, to the extent permitted by law, be readily marketable. Shareholders
receiving such securities would incur brokerage costs upon the securities' sale.

GENERAL
The Fund reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees.

Except as otherwise noted, neither the Fund, KIRC nor the Principal
Underwriter assumes responsibility for the authenticity of any instructions
received by any of them from a shareholder in writing, over the Keystone
Automated Response Line ("KARL") or by telephone. KIRC will employ reasonable
procedures to confirm that instructions received over KARL or by telephone are
genuine. Neither the Fund, KIRC nor the Principal Underwriter will be liable
when following instructions received over KARL or by telephone that KIRC
reasonably believes to be genuine.

The Fund may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Fund
cannot dispose of its investments or fairly determine their value; or (4) the
Securities and Exchange Commission so orders.

SHAREHOLDER SERVICES

Details on all shareholder services may be obtained from KIRC by writing or by
calling toll free 1-800-343-2898.

KEYSTONE AUTOMATED RESPONSE LINE
KARL offers you specific fund account information and price and yield
quotations as well as the ability to do account transactions, including
investments, exchanges and redemptions. You may access KARL by dialing toll free
1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a week.

EXCHANGES

A shareholder who has obtained the appropriate prospectus may exchange shares
of the Fund for shares of certain other Keystone America Funds and Keystone
Liquid Trust ("KLT") as follows:

Class A shares may be exchanged for Class A shares of other Keystone America
Funds and Class A shares of KLT;

Class B shares may be exchanged for the same type of Class B shares of other
Keystone America Funds and the same type of Class B shares of KLT; and

Class C shares may be exchanged for Class C shares of other Keystone America
Funds and Class C shares of KLT.

The exchange of Class B shares and Class C shares will not be subject to a
contingent deferred sales charge. However, if the shares being tendered for
exchange are

(i) Class A shares acquired in an NAV Purchase or otherwise without a front
end sales charge,

(ii) Class B shares that have been held for less than 72 months or four years,
as the case may be, or

(iii) Class C shares that have been held for less than one year,

and are still subject to a deferred sales charge, such charge will carry over to
the shares being acquired in the exchange transaction.

You may exchange shares for another Keystone fund for a $10 fee by calling or
writing to Keystone. The exchange fee is waived for individual investors who
make an exchange using KARL. Shares purchased by check are eligible for exchange
after 15 days. If the shares being tendered for exchange are still subject to a
deferred sales charge, such charge will carry over to the shares being acquired
in the exchange transaction. The Fund reserves the right, after providing the
required notice to shareholders, to terminate this exchange offer or to change
its terms, including the right to change the fee for any exchange.

Orders to exchange a certain class of shares of the Fund for the corresponding
class of shares of KLT will be executed by redeeming the shares of the Fund and
purchasing the corresponding class of shares of KLT at the net asset value of
such shares next determined after the proceeds from such redemption become
available, which may be up to seven days after such redemption. In all other
cases, orders for exchanges received by the Fund prior to 4:00 p.m. on any day
the Fund is open for business will be executed at the respective net asset
values determined as of the close of business that day. Orders for exchanges
received after 4:00 p.m. on any business day will be executed at the respective
net asset values determined at the close of the next business day.

An excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the funds in a year or three in a calendar
quarter.

An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
the fund being acquired. An exchange constitutes a sale for federal income tax
purposes.

The exchange privilege is available only in states where shares of the fund
being acquired may legally be sold.

KEYSTONE AMERICA MONEY LINE
Keystone America Money Line eliminates the delay of mailing a check or the
expense of wiring funds. You must request the service on your application.
Keystone America Money Line allows you to authorize electronic transfers of
money to purchase shares in any amount and to redeem up to $50,000 worth of
shares. You can use Keystone America Money Line like an "electronic check" to
move money between your bank account and your account in the Fund with one
telephone call. You must allow two business days after the call for the transfer
to take place. For money recently invested, you must allow normal check clearing
time before redemption proceeds are sent to your bank.

You may also arrange for systematic monthly or quarterly investments in your
Keystone America account. Once proper authorization is given, your bank account
will be debited to purchase shares in the Fund. You will receive confirmation
from the Principal Underwriter for every transaction.

To change the amount of a Keystone America Money Line or to terminate the
service (which could take up to 30 days), you must write to KIRC and include
account numbers.

RETIREMENT PLANS
The Fund has various pension and profit-sharing plans available to you,
including Individual Retirement Accounts ("IRAs"); Rollover IRAs; Simplified
Employee Pension Plans ("SEPs"), Tax Sheltered Annuity Plans ("TSAs"), 401(k)
Plans; Keogh Plans; Corporate Profit-Sharing Plans, Pension and Target Benefit
Plans; Money Purchase Plans and Salary-Reduction Plans. For details, including
fees and application forms, call toll free 1-800-247-4075 or write to KIRC.

AUTOMATIC WITHDRAWAL PLAN
Under an Automatic Withdrawal Plan, if your account has a value of at least
$10,000, you may arrange for regular monthly or quarterly fixed withdrawal
payments. Each payment must be at least $100 and may be as much as 1.5% per
month or 4.5% per quarter of the total net asset value of the Fund shares in
your account when the Automatic Withdrawal Plan is opened. Fixed withdrawal
payments are not subject to a deferred sales charge. Excessive withdrawals may
decrease or deplete the value of your account. Moreover, because of the effect
of the applicable sales charge, a Class A investor should not make continuous
purchases of the Fund's shares while participating in the Automatic Withdrawal
Plan.

DOLLAR COST AVERAGING
Through dollar cost averaging you can invest a fixed dollar amount each month
or each quarter in any Keystone America Fund. This results in more shares being
purchased when the selected fund's net asset value is relatively low and fewer
shares being purchased when the fund's net asset value is relatively high and
may result in a lower average cost per share than a less systematic investment
approach.

Prior to participating in dollar cost averaging, you must establish an account
in a Keystone America Fund or a money market fund managed or advised by
Keystone. You should designate on the application (1) the dollar amount of each
monthly or quarterly investment (minimum $100) you wish to make and (2) the fund
in which the investment is to be made. Thereafter, on the first day of the
designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund. If you are a Class A investor and paid a sales
charge on your initial purchase, the shares purchased will be eligible for
Rights of Accumulation and the sales charge applicable to the purchase will be
determined accordingly. In addition, the value of shares purchased will be
included in the total amount required to fulfill a Letter of Intent. If a sales
charge was not paid on the initial purchase, a sales charge will be imposed at
the time of subsequent purchases, and the value of shares purchased will become
eligible for Rights of Accumulation and Letters of Intent.

TWO DIMENSIONAL INVESTING

You may elect to have income and capital gains distributions from any class of
Keystone America Fund shares you may own automatically invested to purchase the
same class of shares of any other Keystone America Fund. You may select this
service on your application and indicate the Keystone America Fund (s) into
which distributions are to be invested. The value of shares purchased will be
ineligible for Rights of Accumulation and Letters of Intent.

OTHER SERVICES

Under certain circumstances, you may, within 30 days after a redemption,
reinstate your account in the same class of shares that you redeemed at current
net asset value.

PERFORMANCE DATA

From time to time the Fund may advertise "total return" and "current yield".
ALL DATA IS BASED ON HISTORICAL EARNINGS AND IS NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. Total return and current yield are computed separately for each
class of shares of the Fund. Total return refers to average annual compounded
rates of return over specified periods determined by comparing the initial
amount invested in a particular class to the ending redeemable value of that
amount. The resulting equation assumes reinvestment of all dividends and
distributions and deduction of the maximum sales charge or applicable contingent
deferred sales charge and all recurring charges, if any, applicable to all
shareholder accounts. The exchange fee is not included in the calculation.

Current yield quotations represent the yield on an investment for a stated
30-day period computed by dividing net investment income earned per share during
the base period by the maximum offering price per share on the last day of the
base period.

The Fund may also include comparative performance data for each class of
shares in advertising or marketing the Fund's shares, such as data from Lipper
Analytical Services, Inc., Morningstar, Inc., Standard & Poor's Corporation,
Ibbotson Associates or other industry publications.

FUND SHARES

Generally, the Fund currently issues three classes of shares which participate
in dividends and distributions and have equal voting, liquidation and other
rights except that (1) expenses related to the distribution of each series or
class of shares or other expenses that the Board of Directors may designate as
series or class expenses from time to time, are borne solely by each series or
class; (2) each series or class of shares has exclusive voting rights with
respect to its Distribution Plan; (3) each series or class has different
exchange privileges; and (4) each series or class generally has a different
designation. When issued and paid for, the shares will be fully paid and
nonassessable by the Fund. Shares may be exchanged as explained under
"Shareholder Services," but will have no other preference, conversion, exchange
or preemptive rights. Shares are redeemable, transferable and freely assignable
as collateral. The Fund is authorized to issue additional series or classes of
shares.

Shareholders are entitled to one vote for each full share owned and fractional
votes for fractional shares. Shares of the Fund vote together except when
required by law to vote separately by series or class. The Fund does not have
annual meetings. The Fund will have special meetings, from time to time, as
required under its Declaration of Trust and under the 1940 Act. As provided in
the Fund's Declaration of Trust, shareholders have the right to remove Trustees
by an affirmative vote of two-thirds of the outstanding shares. A special
meeting of the shareholders will be held when 10% of the outstanding shares
request a meeting for the purpose of removing a Trustee. The Fund is prepared to
assist shareholders in communications with one another for the purpose of
convening such a meeting as presecribed by Section 16(c) of the 1940 Act.

Under Massachusetts law, it is possible that a Fund shareholder may be held
personally liable for the Fund's obligations. The Fund's Declaration of Trust
provides, however, that shareholders shall not be subject to any personal
liability for the Fund's obligations and provides indemnification from Fund
assets for any shareholder held personally liable for the Fund's obligations.
Disclaimers of such liability are included in each Fund agreement.

ADDITIONAL INFORMATION

KIRC, located at 101 Main Street, Cambridge, Massachusetts 02142-1519, is a
wholly-owned subsidiary of Keystone and serves as the Fund's transfer agent and
dividend disbursing agent.

When the Fund determines from its records that more than one account in the
Fund is registered in the name of a shareholder or shareholders having the same
address, upon notice to those shareholders, the Fund intends, when an annual
report or a semi-annual report of the Fund is required to be furnished, to mail
one copy of such report to that address.

Except as otherwise stated in this prospectus or required by law, the Fund
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
<PAGE>

ADDITIONAL INVESTMENT INFORMATION

The Fund may engage in the following investment practices to the extent
described in the prospectus and the statement of additional information.

OBLIGATIONS OF FOREIGN BRANCHES OF UNITED STATES BANKS

The obligations of foreign branches of U.S. banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by government regulation. Payment of interest
and principal upon these obligations may also be affected by governmental action
in the country of domicile of the branch (generally referred to as sovereign
risk). In addition, evidences of ownership of such securities may be held
outside the U.S. and the Fund may be subject to the risks associated with the
holding of such property overseas. Various provisions of federal law governing
domestic branches do not apply to foreign branches of domestic banks.

OBLIGATIONS OF UNITED STATES BRANCHES OF FOREIGN BANKS
Obligations of U.S. branches of foreign banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. In addition, there may be less publicly available information about a
U.S. branch of a foreign bank than about a domestic bank.

MASTER DEMAND NOTES
Master demand notes are unsecured obligations that permit the investment of
fluctuating amounts by the Fund at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the issuer as borrower. The Fund
has the right to increase the amount under the note at any time up to the full
amount provided by the note agreement, or to decrease the amount. The borrower
may repay up to the full amount of the note without penalty. Notes acquired by
the Fund permit the Fund to demand payment of principal and accrued interest at
any time (on not more than seven days' notice). Notes acquired by the Fund may
have maturities of more than one year, provided that (1) the Fund is entitled to
payment of principal and accrued interest upon not more than seven days notice,
and (2) the rate of interest on such notes is adjusted automatically at periodic
intervals which normally will not exceed 31 days but may extend up to one year.
The notes will be deemed to have a maturity equal to the longer of the period
remaining to the next interest rate adjustment or the demand notice period.
Because these types of notes are direct lending arrangements between the lender
and borrower, such instruments are not normally traded and there is no secondary
market for these notes, although they are redeemable and thus repayable by the
borrower at face value plus accrued interest at any time. Accordingly, the
Fund's right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. In connection with master demand note
arrangements, Keystone considers, under standards established by the Board of
Trustees, earning power, cash flow and other liquidity ratios of the borrower
and will monitor the ability of the borrower to pay principal and interest on
demand. These notes are not typically rated by credit rating agencies. Unless
rated, the Fund may invest in them only if at the time of an investment the
issuer meets the criteria established for commercial paper.

REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements; i.e., the Fund purchases a
security subject to its obligation to resell and the seller's obligation to
repurchase that security at an agreed upon price and date, such date usually
being not more than seven days from the date of purchase. The resale price is
based on the purchase price plus an agreed upon market rate of interest that is
unrelated to the coupon rate or maturity of the purchased security. A repurchase
agreement imposes an obligation on the seller to pay the agreed upon price,
which obligation is in effect secured by the value of the underlying security.
The value of the underlying security is at least equal to the amount of the
agreed upon resale price and marked to market daily. The Fund may enter into
such agreements only with respect to U.S. government securities. Whether a
repurchase agreement is the purchase and sale of a security or a collateralized
loan has not been definitively established. This might become an issue in the
event of the bankruptcy of the other party to the transaction. It does not
presently appear possible to eliminate all risks involved in repurchase
agreements. These risks include the possibility of a decline in the market value
of the underlying securities, as well as delay and costs to the Fund in
connection with bankruptcy proceedings. Therefore, it is the policy of the Fund
to enter into repurchase agreements only with large, well-capitalized banks that
are members of the Federal Reserve System and with primary dealers in U.S.
government securities (as designated by the Federal Reserve Board) whose
creditworthiness has been reviewed and found satisfactory by Keystone.

REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund would sell securities and agree
to repurchase them at a mutually agreed upon date and price. The Fund intends to
enter into reverse repurchase agreements to avoid otherwise having to sell
securities during unfavorable market conditions in order to meet redemptions. At
the time the Fund enters into a reverse repurchase agreement, it will establish
a segregated account with the Fund's custodian containing liquid assets such as
U.S. government securities or other high grade debt securities having a value
not less than the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure such value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
that the Fund is obligated to repurchase may decline below the repurchase price.
Borrowing and reverse repurchase agreements magnify the potential for gain or
loss on the portfolio securities of the Fund and, therefore, increase the
possibility of fluctuation in the Fund's net asset value. Such practices may
constitute leveraging. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Fund's obligation to repurchase the securities and the Fund's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such determination. The staff of the SEC has taken the position that the
Investment Company Act of 1940 treats reverse repurchase agreements as being
included in the percentage limit on borrowings imposed on a Fund.

FOREIGN SECURITIES

The Fund may invest up to 25% of its assets in securities principally traded
in securities markets outside the United States. While investment in foreign
securities is intended to reduce risk by providing further diversification, such
investments involve sovereign risk in addition to the credit and market risks
normally associated with domestic securities. Foreign investments may be
affected favorably or unfavorably by changes in currency rates and exchange
control regulations. 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 those applicable to U.S. companies. Securities of
some foreign companies are less liquid or more volatile than securities of U.S.
companies, and foreign brokerage commissions and custodian fees are generally
higher than in the United States. Investments in foreign securities may also be
subject to other risks different from those affecting U.S. investments,
including local political or economic developments, expropriation or
nationalization of assets, imposition of withholding taxes on dividend or
interest payments and currency blockage (which would prevent cash from being
brought back to the United States). These risks are carefully considered by
Keystone prior to the purchase of these securities.

"WHEN ISSUED" SECURITIES
The Fund may also purchase and sell securities and currencies on a when issued
and delayed delivery basis. When issued or delayed delivery transactions arise
when securities or currencies are purchased or sold by the Fund with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous price and yield to the Fund at the time of entering into the
transaction. When the Fund engages in when issued and delayed delivery
transactions, the Fund relies on the buyer or seller, as the case may be, to
consummate the sale. Failure to do so may result in the Fund missing the
opportunity to obtain a price or yield considered to be advantageous. When
issued and delayed delivery transactions may be expected to occur a month or
more before delivery is due. However, no payment or delivery is made by the Fund
until it receives payment or delivery from the other party to the transaction. A
separate account of liquid assets equal to the value of such purchase
commitments will be maintained until payment is made. When issued and delayed
delivery agreements are subject to risks from changes in value based upon
changes in the level of interest rates, currency rates and other market factors,
both before and after delivery. The Fund does not accrue any income on such
securities or currencies prior to their delivery. To the extent the Fund engages
in when issued and delayed delivery transactions, it will do so consistent with
its investment objective and policies and not for the purpose of investment
leverage.

SHORT SALES
The Fund may make short sales of securities "against the box." A short sale
involves the borrowing of a security, which must eventually be returned to the
lender. A short sale is "against the box" if, at all times when the short
position is open, the Fund owns the securities sold short or owns an equal
amount of securities convertible into, or exchangeable without further
consideration for, securities identical to the securities sold short. Short
sales against the box are used to defer recognition of gains or losses or in
order to receive a portion of the interest earned by the executing broker from
the proceeds of such sale. The proceeds of a short sale are held by the broker
until the settlement date when the Fund delivers the security or convertible
security to close out its short position. Although prior to such delivery the
Fund will have to pay an amount equal to any dividends paid on the securities
sold short, the Fund will receive the dividends from the securities convertible
into the securities sold short plus a portion of the interest earned from the
proceeds of the short sale. The Fund will not make short sales of securities
subject to outstanding call options written by it. The Fund will segregate the
securities sold short or appropriate convertible securities in a special account
with the Fund's custodian in connection with its short sales "against the box."

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities. These securities, which include
bonds, debentures, corporate notes, preferred stocks and other securities, are
securities that the holder can convert into common stock. Convertible securities
rank senior to common stock in a corporation's capital structure and, therefore,
entail less risk than a corporation's common stock. The value of a convertible
security is a function of its investment value (its market worth without a
conversion privilege) and its conversion value (its market worth if exchanged).
If a convertible security's investment value is greater than its conversion
value, its price primarily will reflect its investment value and will tend to
vary inversely with interest rates (the issuer's creditworthiness and other
factors also may affect its value). If a convertible security's conversion value
is greater than its investment value, its price will tend to be higher than its
conversion value and it will tend to fluctuate directly with the price of the
underlying equity security.

DERIVATIVES

The Fund may use derivatives in furtherance of its investment objective.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities, interest rates,
currency exchange rates, bond indices and stock indices. Derivatives can be used
to earn income or protect against risk, or both. For example, one party with
unwanted risk may agree to pass that risk to another party who is willing to
accept the risk, the second party being motivated, for example, by the desire
either to earn income in the form of a fee or premium from the first party, or
to reduce its own unwanted risk by attempting to pass all or part of that risk
to the first party.

Derivatives can be used by investors such as the Fund to earn income and
enhance returns, to hedge or adjust the risk profile of the portfolio, and
either in place of more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. The Fund is permitted to use derivatives for one
or more of these purposes, although the Fund generally uses derivatives
primarily as direct investments in order to enhance yields and broaden portfolio
diversification. Each of these uses entails greater risk than if derivatives
were used solely for hedging purposes. The Fund uses futures contracts and
related options for hedging purposes. Derivatives are a valuable tool which,
when used properly, can provide significant benefit to Fund shareholders.
Keystone is not an aggressive user of derivatives with respect to the Fund.
However, the Fund may take positions in those derivatives that are within its
investment policies if, in Keystone's judgement, this represents an effective
response to current or anticipated market conditions. Keystone's use of
derivatives is subject to continuous risk assessment and control from the
standpoint of the Fund's investment objectives and policies.

Derivatives may be (1) standardized, exchange-traded contracts or (2)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.

There are four principal types of derivative instruments -- options, futures,
forwards and swaps -- from which virtually any type of derivative transaction
can be created. Further information regarding options and futures, is provided
later in this section and is provided in the Fund's statement of additional
information. The Fund does not presently engage in the use of swaps.

While the judicious use of derivatives by experienced investment managers such
as Keystone can be beneficial, derivatives also involve risks different from,
and, in certain cases, greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk factors and
issues concerning the use of derivatives that investors should understand before
investing in the Fund.

* Market Risk -- This is the general risk attendant to all investments that the
value of a particular investment will decline or otherwise change in a way
detrimental to the Fund's interest.

* Management Risk -- Derivative products are highly specialized instruments that
require investment techniques and risk analyses different from those
associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument, but also of the
derivative itself, without the benefit of observing the performance of the
derivative under all possible market conditions. In particular, the use and
complexity of derivatives require the maintenance of adequate controls to
monitor the transactions entered into, the ability to assess the risk that a
derivative adds to the Fund's portfolio and the ability to forecast price,
interest rate or currency exchange rate movements correctly.

* Credit Risk -- This is the risk that a loss may be sustained by the Fund as a
result of the failure of another party to a derivative (usually referred to as
a "counterparty") to comply with the terms of the derivative contract. The
credit risk for exchange traded derivatives is generally less than for
privately negotiated derivatives, since the clearing house, which is the
issuer or counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily payment
system (i.e., margin requirements) operated by the clearing house in order to
reduce overall credit risk. For privately negotiated derivatives, there is no
similar clearing agency guarantee. Therefore, the Fund considers the
creditworthiness of each counterparty to a privately negotiated derivative in
evaluating potential credit risk.

* Liquidity Risk -- Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many
privately negotiated derivatives), it may not be possible to initiate a
transaction or liquidate a position at an advantageous price.

OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and put
options. No more than 25% of its net assets will be subject to covered options.
By writing a call option, the Fund becomes obligated during the term of the
option to deliver the securities underlying the option upon payment of the
exercise price. By writing a put option, the Fund becomes obligated during the
term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised.

The Fund may only write "covered" options. This means that so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills. If
the Fund has written options against all of its securities eligible for writing
options, the Fund may be unable to write additional options unless it sells a
portion of its portfolio holdings to obtain new securities against which it can
write options. If this were to occur, higher portfolio turnover and,
correspondingly, greater brokerage commissions and other transaction costs may
result. The Fund does not expect, however, that this will occur.

The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits and
maintains liquid assets having a value equal to or greater than the exercise
price of the option with its custodian in a segregated account.

The principal reason for writing call or put options is to obtain, through a
receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Fund receives a premium from writing a call or
put option, which it retains whether or not the option is exercised. By writing
a call option, the Fund might lose the potential for gain on the underlying
security while the option is open. By writing a put option, the Fund might
become obligated to purchase the underlying security for more than its current
market price upon exercise.

PURCHASING OPTIONS. The Fund may purchase call and put options.

The Fund would normally purchase call options to hedge against an increase in
the market value of its securities. The Fund will not engage in such
transactions for speculation. The purchase of a call option would entitle the
Fund, in return for the premium paid, to purchase specified securities at a
specified price upon exercise of the option during the option period. The Fund
would ordinarily realize a gain if, during the option period, the value of such
securities exceeds the sum of the exercise price, the premium paid and
transaction costs. Otherwise, the Fund would realize a loss on the purchase of
the call option.

The Fund may purchase put or call options, including purchasing put or call
options for the purpose of offsetting previously written put or call options of
the same series. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying securities until the options expire or are exercised.

The Fund would normally purchase put options to hedge against a decline in the
market value of securities in its portfolio (protective puts) or securities of
the type in which it is permitted to invest. The purchase of a put option would
entitle the Fund, in exchange for the premium paid, to sell specified securities
at a specified price during the option period. The purchase of protective puts
is designed to offset or hedge against a decline in the market value of the
Fund's securities. Gains and losses on the purchase of protective put options
would tend to be offset by countervailing changes in the value of underlying
portfolio securities. Put options may also be purchased by the Fund for the
purpose of affirmatively benefitting from a decline in the price of securities
that the Fund does not own. The Fund would ordinarily realize a gain if, during
the option period, the value of the underlying securities declined below the
exercise price sufficiently to cover the premium and transaction costs.
Otherwise, the Fund would realize a loss on the purchase of the put option.

The Fund may purchase put and call options on securities indices for the same
purposes as the purchase of options on securities. Options on securities indices
are similar to options on securities, except that the exercise of securities
index options requires cash payments 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.

Options on some securities are relatively new, and it is impossible to predict
the amount of trading interest that will exist in such options. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objective.

OPTIONS TRADING MARKETS. Options which the Fund will trade are generally
listed on national securities exchanges. Exchanges on which such options
currently are traded are the Chicago Board Options Exchange and the New York,
American, Pacific and Philadelphia Stock Exchanges.

FUTURES TRANSACTIONS
The Fund may enter into futures contracts for the purchase or sale of
securities or currency or futures contracts based on stock indices and write
options on such contracts. The Fund intends to enter into such contracts and
related options for hedging purposes. The Fund may enter into other types of
futures contracts that may become available and relate to the securities held by
the Fund. The Fund will enter into futures contracts in order to hedge against
changes in securities prices. A futures contract is an agreement to buy or sell
securities or currencies at a specified price during a designated month. The
Fund does not make payment or deliver securities upon entering into a futures
contract. Instead, it puts down a margin deposit, which is adjusted to reflect
changes in the value of the contract and continues until the contract is
terminated.

The Fund may sell or purchase futures contracts. When a futures contract is
sold by the Fund, the value of the contract will tend to rise when the value of
the underlying securities or currencies declines and to fall when the value of
such securities or currencies increases. Thus, the Fund would sell futures
contracts in order to offset a possible decline in the value of its securities
or currencies. If a futures contract were purchased by the Fund, the value of
the contract would tend to rise when the value of the underlying securities
increased and to fall when the value of such securities declined. The Fund
intends to purchase futures contracts in order to fix what is believed by
Keystone to be a favorable price and rate of return for securities or favorable
exchange rate for currencies the Fund intends to purchase.

The Fund may also purchase put and call options on securities and currency
futures contracts for hedging purposes. A put option purchased by the Fund would
give it the right to assume a position as the seller of a futures contract. A
call option purchased by the Fund would give it the right to assume a position
as the purchaser of a futures contract. The purchase of an option on a futures
contract requires the Fund to pay a premium. In exchange for the premium, the
Fund becomes entitled to exercise the benefits, if any, provided by the futures
contract, but is not required to take any action under the contract. If the
option cannot be exercised profitably before it expires, the Fund's loss will be
limited to the amount of the premium and any transaction costs.

The Fund may write (sell) put and call options on futures contracts for
hedging purposes. The writing of a put option on a futures contract generates a
premium, which may partially offset an increase in the price of securities that
the Fund intends to purchase. However, the Fund becomes obligated to purchase a
futures contract, which may have a value lower than the exercise price.
Conversely, the writing of a call option on a futures contract generates a
premium which may partially offset a decline in the value of the Fund's assets.
By writing a call option, the Fund becomes obligated, in exchange for the
premium, to sell a futures contract, which may have a value higher than the
exercise price.

The Fund may enter into closing purchase and sale transactions in order to
terminate a futures contract and may sell put and call options for the purpose
of closing out its options positions. The Fund's ability to enter into closing
transactions depends on the development and maintenance of a liquid secondary
market. There is no assurance that a liquid secondary market will exist for any
particular contract or at any particular time. As a result, there can be no
assurance that the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time. If the Fund is not
able to enter into an offsetting transaction, the Fund will continue to be
required to maintain the margin deposits on the contract and to complete the
contract according to its terms, in which case it would continue to bear market
risk on the transaction.

Although futures and options transactions are intended to enable the Fund to
manage market risk, unanticipated changes in market prices could result in
poorer performance than if it had not entered into these transactions. Even if
Keystone correctly predicts market price movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its investments. This lack of correlation
between the Fund's futures and securities positions may be caused by differences
between the futures and securities markets or by differences between the
securities underlying the Fund's futures position and the securities held by or
to be purchased for the Fund. Keystone will attempt to minimize these risks
through careful selection and monitoring of the Fund's futures and options
positions.

The Fund does not intend to use futures transactions for speculation. The Fund
may not purchase or sell futures contracts or options on futures, except for
closing purchase or sale transactions, if immediately thereafter the sum of
margin deposits on the Fund's outstanding futures and options positions and
premiums paid for outstanding options on futures would exceed 5% of the market
value of the Fund's total assets. These transactions involve brokerage costs,
require margin deposits and, in the case of contracts and options obligating the
Fund to purchase securities, require the Fund to segregate assets to cover such
contracts and options. In addition, the Fund's activities in futures contracts
may be limited by the requirements of the Internal Revenue Code for
qualification as a regulated investment company.

FOREIGN CURRENCY TRANSACTIONS
As discussed above, the Fund may invest in securities of foreign issuers. When
the Fund invests in foreign securities they usually will be denominated in
foreign currencies, and the Fund temporarily may hold funds in foreign
currencies. Thus, the value of Fund shares will be affected by changes in
exchange rates.

As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund intends to use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if the Fund expects a decrease in the value of the
currency in which the foreign security is denominated. Although the Fund will
attempt to benefit from using forward contracts, the success of its hedging
strategy will depend on Keystone's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar. The value of the
Fund's investments denominated in foreign currencies will depend on the relative
strength of those currencies and the U.S. dollar, and the Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the dollar. Changes in foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by the Fund. The
Fund may also purchase and sell options related to foreign currencies in
connection with hedging strategies.

LOANS OF SECURITIES
The Fund may lend its securities to brokers and dealers or other institutional
borrowers for use in connection with their short sales, arbitrages or other
securities transactions. Such loan transactions afford the Fund an opportunity
to continue to earn income on the securities loaned and at the same time to earn
income on the collateral held by it to secure the loan. Loans of portfolio
securities will be made (if at all) in strict conformity with applicable federal
and state rules and regulations. There may be delays in recovery of loaned
securities or even a loss of rights in collateral should the borrower fail
financially. Therefore, loans will be made only to firms deemed by Keystone to
be of good standing and will not be made unless, in the judgment of Keystone,
the consideration to be earned from such loans justifies the risk.

The Fund understands that it is the current view of the staff of the
Securities and Exchange Commission that it is permitted to engage in loan
transactions only if it meets the following conditions: (1) the Fund must
receive 100% collateral in the form of cash or cash equivalents, e.g., U.S.
Treasury bills or notes, from the borrower; (2) the borrower must increase the
collateral whenever the market value of the securities (determined on a daily
basis) exceeds the value of the collateral; (3) the Fund must be able to
terminate the loan, after notice, at any time; (4) the Fund must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest or other distributions on the
securities loaned and any increase in the securities' market values; (5) the
Fund may pay only reasonable custodian fees in connection with the loan; and (6)
voting rights on the securities loaned may pass to the borrower; however, if a
material event affecting the securities occurs, the Fund must be able to
terminate the loan and vote proxies or enter into an alternative arrangement
with the borrower to enable the Fund to vote proxies. Excluding Items (1) and
(2), these procedures may be amended from time to time, as regulatory policies
may permit, by the Fund's Board of Trustees without shareholder approval. Such
loans may not exceed 25% of the Fund's total assets.

<PAGE>
EXHIBIT A

REDUCED SALES CHARGES

Initial sales charges may be reduced or eliminated for persons or
organizations purchasing Class A shares of the Fund alone or in combination with
Class A shares of other Keystone America Funds.

For purposes of qualifying for reduced sales charges on purchases made
pursuant to Rights of Accumulation or Letters of Intent, the term "Purchaser"
includes the following persons: an individual; an individual, his or her spouse
and children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account established for their benefit; an
organization exempt from federal income tax under Section 501 (c)(3) or (13) of
the Internal Revenue Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Internal Revenue Code; or
other organized groups of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some purpose
other than the purchase of redeemable securities of a registered investment
company at a discount. In order to qualify for a lower sales charge, all orders
from an organized group will have to be placed through a single investment
dealer or other firm and identified as originating from a qualifying purchaser.

CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of Class A shares of two or more of the "Eligible
Funds," as defined below. For example, if a Purchaser concurrently invested
$75,000 in one of the other "Eligible Funds" and $75,000 in the Fund, the sales
charge would be that applicable to a $150,000 purchase, i.e., 3.75% of the
offering price, as indicated in the Sales Charge Schedule in the Prospectus.

RIGHT OF ACCUMULATION
In calculating the sales charge applicable to current purchases of the Fund's
Class A shares, a Purchaser is entitled to accumulate current purchases with the
current value of previously purchased Class A shares of the Fund and Class A
shares of certain other eligible funds that are still held in (or exchanged for
shares of and are still held in) the same or another eligible fund ("Eligible
Fund(s)"). The Eligible Funds are the Keystone America Funds and Keystone Liquid
Trust.

For example, if a Purchaser held shares valued at $99,999 and purchased an
additional $5,000, the sales charge for the $5,000 purchase would be at the next
lower sales charge of 3.75% of the offering price as indicated in the Sales
Charge schedule. KIRC must be notified at the time of purchase that the
Purchaser is entitled to a reduced sales charge, which reduction will be granted
subject to confirmation of the Purchaser's holdings. The Right of Accumulation
may be modified or discontinued at any time.

LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Class A
shares of the Fund alone or in combination with purchases of Class A shares of
any of the other Eligible Funds by completing the Letter of Intent section of
the application. By so doing, the Purchaser agrees to invest within a
thirteen-month period a specified amount which, if invested at one time, would
qualify for a reduced sales charge. Each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount specified
on the application, as described in this prospectus. The Letter of Intent does
not obligate the Purchaser to purchase, nor the Fund to sell, the amount
indicated.

After the Letter of Intent is received by KIRC, each investment made will be
entitled to the sales charge applicable to the level of investment indicated on
the application. The Letter of Intent may be back-dated up to ninety days so
that any investments made in any of the Eligible Funds during the preceding
ninety-day period, valued at the Purchaser's cost, can be applied toward
fulfillment of the Letter of Intent. However, there will be no refund of sales
charges already paid during the ninety-day period. No retroactive adjustment
will be made if purchases exceed the amount specified in the Letter of Intent.
Income and capital gains distributions taken in additional shares will not apply
toward completion of the Letter of Intent.

If total purchases made pursuant to the Letter of Intent are less than the
amount specified, the Purchaser will be required to remit an amount equal to the
difference between the sales charge paid and the sales charge applicable to
purchases actually made. Out of the initial purchase (or subsequent purchases,
if necessary) 5% of the dollar amount specified on the application will be held
in escrow by KIRC in the form of shares registered in the Purchaser's name. The
escrowed shares will not be available for redemption, transfer or encumbrance by
the Purchaser until the Letter of Intent is completed or the higher sales charge
paid. All income and capital gains distributions on escrowed shares will be paid
to the Purchaser or his order.

When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen-month period), the Purchaser will
be notified and the escrowed shares will be released. If the intended investment
is not completed, the Purchaser will be asked to remit to the Principal
Underwriter any difference between the sales charge on the amount specified and
on the amount actually attained. If the Purchaser does not within 20 days after
written request by the Principal Underwriter or his dealer pay such difference
in sales charge, KIRC will redeem an appropriate number of the escrowed shares
in order to realize such difference. Shares remaining after any such redemption
will be released by KIRC. Any redemptions made by the Purchaser during the
thirteen-month period will be subtracted from the amount of the purchases for
purposes of determining whether the Letter of Intent has been completed. In the
event of a total redemption of the account prior to completion of the Letter of
Intent, the additional sales charge due will be deducted from the proceeds of
the redemption and the balance will be forwarded to the Purchaser.

By signing the application, the Purchaser irre-
vocably constitutes and appoints KIRC his attorney to surrender for redemption
any or all escrowed shares with full power of substitution.

The Purchaser or his dealer must inform the Principal Underwriter or KIRC that
a Letter of Intent is in effect each time a purchase is made.
<PAGE>

KEYSTONE AMERICA
FUND FAMILY

Capital Preservation and Income Fund
Government Securities Fund
Intermediate Term Bond Fund
Strategic Income Fund
World Bond Fund
Tax Free Income Fund
California Insured Tax Free Fund
Florida Tax Free Fund
Massachusetts Tax Free Fund
Missouri Tax Free Fund
New York Insured Tax Free Fund
Pennsylvania Tax Free Fund
Texas Tax Free Fund
Fund for Total Return
Global Opportunities Fund
Hartwell Emerging Growth Fund, Inc.
Hartwell Growth Fund
Omega Fund
Fund of the Americas
Strategic Development Fund

[Logo] KEYSTONE
INVESTMENT

Keystone Investment Distributors Company
200 Berkeley Street
Boston, Massachusetts 02116-5034

OF-P 6/95
22M
[recycle logo]

KEYSTONE

[Photo: Forest]

OMEGA
FUND

[Logo]

PROSPECTUS AND
APPLICATION

EXHIBIT 17(d)
KOF's most recent Annual Report

<PAGE>
PAGE 1
- ---------------------------------

Keystone Omega Fund
Seeks maximum capital growth from common stocks.

Dear Shareholder:

We are writing to report to you on the performance of Keystone Omega Fund for
the twelve-month period which ended December 31, 1995.

Performance

For the twelve months which ended December 31, 1995, your Fund produced the
following total returns.

Class A shares returned 36.94%.

Class B shares returned 35.70%.

Class C shares returned 35.62%.

The Standard & Poor's 500 Index--a widely recognized benchmark of stock
price performance--returned 37.58% for the same period. Keystone Omega Fund
maintained a **** (four-star) rating from Morningstar for its risk-adjusted
performance as of December 31, 1995.(1)

Your Fund's excellent performance reflected the strong bull market during
the year, which was fueled by moderate economic growth, declining interest
rates and low inflation. Continued strong earnings and an improved
international position for many U.S. companies helped sustain the year-long
stock market rally. In this environment, your Fund benefited from our
emphasis on stable growth companies and companies benefiting from
productivity enhancement. These holdings produced strong performance,
particularly as the year progressed.

Portfolio strategy

In early 1995 our strategy was generally cautious and designed to minimize
the impact of a possible market correction. In retrospect, we may have been
overly cautious. As a result of our defensive positioning, Omega Fund got off
to a slow start during the first few months of the year, although it caught
up quickly. During the second half of the year, holdings in the technology,
finance and healthcare sectors performed very well, contributing to your
Fund's strong performance.

Two dominant investment themes

We maintained our emphasis on two key investment themes throughout the year:
productivity enhancement and stable growth. This led us to invest in
electronics, telecommunications and software companies, because we believed
they would provide the productivity tools to help U.S. corporations compete
more effectively in a global economy. In the second half of the year, we
trimmed back our technology holdings and increased holdings in
healthcare-related industries, including biotechnology and drug companies. We
believed there were good opportunities in these stable growth companies
because they historically have provided solid returns regardless of economic
conditions.

(continued)

(1) Source: Morningstar, Inc. Morningstar's proprietary ratings reflect the
Fund's historical risk-adjusted performance as of December 31, 1995.
Ratings are subject to change monthly. They are calculated based on the
Fund's 3-, 5- and 10-year average annual return in excess or below the
90-day Treasury bill return. Ratings are not adjusted for sales charges,
but are adjusted for other fees. The top 10% of the funds in an
investment category receive 5 stars, the next 22.5% receive 4 stars, the
next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom
10% receive 1 star. In the equity category, the Fund received a 3-star
rating for the 3-year and 5-year periods and a 4-star rating for the
10-year period. There were 1397 funds in the 3-year, 951 funds in the
5-year, and 508 funds in the 10-year equity category. Past performance is
no guarantee of future results.

<PAGE>

PAGE 2
- ---------------------------------
Keystone Omega Fund

In addition, the stocks we select for Keystone Omega Fund must meet our
requirements for accelerating earnings, attractive valuations and low debt
levels. As a result, the portfolio's holdings included a variety of small-,
mid- and large-cap stocks. We believe this diversification by company size
has the potential to smooth out price fluctuations as different sectors of
the market rise and fall over time. We believe it has also contributed to the
Fund's attractive long-term performance.

Looking Ahead

The favorable economic fundamentals of 1995--slow growth, low interest rates
and low inflation--should remain intact as we enter 1996. We anticipate that
this favorable environment should continue to be positive for stocks, but we
would not be surprised if some companies reported more modest earnings in
1996. If the market does experience a normal correction, we would view it as
an opportunity to invest in selected stocks at lower prices. Overall, we
continue to believe that the outlook remains healthy for stocks, although we
believe returns for 1996 may be lower than those experienced in 1995.

After a year of strong performance, short-term expectations often rise. We
encourage you to maintain a long-term perspective on the performance of
Keystone Omega Fund and view it as a means of pursuing your long-term
financial goals. Thank you for your continued support of Keystone Omega Fund.
If you have any questions about your Keystone investment, please feel free to
write to us.

Sincerely,

[photo of Albert H. Elfner, III]

Albert H. Elfner, III
Chairman and President
Keystone Investments, Inc.

[photo of George S. Bissell]

George S. Bissell
Chairman of the Board
Keystone Funds

February 1996

<PAGE>

PAGE 3
- ---------------------------------

A Discussion With
Your Fund Manager

[photo of Maureen E. Cullinane]

Maureen E. Cullinane is senior portfolio
manager of your Fund and leads Keystone's
growth stock team. A Chartered Financial
Analyst, Ms. Cullinane has over 20 years of
investment experience. She received BA and
MA degrees from Emmanuel College with
post-graduate study at the Universite de
Paris. She holds an MBA from Boston
University. Together with Margery C. Parker,
portfolio manager of Keystone Mid-Cap Growth
Fund (S-3), the team focuses on selecting
companies with growing earnings.

Q How did market conditions in 1995 affect the Fund?

A 1995 was a very good year for the stock market. The Dow Jones Industrial
Average passed two major milestones during the year, breaking 4000 in
February and 5000 in November. While we were positioned conservatively at the
beginning of the year, our strategy of investing in a combination of
productivity enhancement and stable growth stocks paid off. We sold our oil
holdings early in the year and reinvested the profits in technology stocks.
This worked out well, in our opinion, because technology companies led the
market rally for most of the year. Toward the end of the year we pared back
our technology holdings and increased our exposure to finance and healthcare-
related stocks. Both of these sectors produced strong fourth quarter returns.
We also benefited from diversification among small-, mid- and
large-capitalization stocks, because each of those sectors surged at
different times during the year.

Q What percentage of the Fund's holdings were invested in technology stocks?

A We were well-represented in technology stocks because they fit our theme of
productivity enhancement. The percentage of technology holdings varied
throughout the year, from a high of about 33% to a low of 20% of net assets.
As of year-end, technology-related companies comprised 25% of net assets.
During the first part of the year holdings included a full range of
telecommunications, software and electronics companies. Late in 1995, we took
some profits when we felt that stock prices fully reflected earnings growth.
Toward year-end we scaled back on electronics manufacturing companies and
increased our emphasis on software companies. Going forward, we believe
technology stock prices may experience periodic corrections, but we think
they should continue to provide strong growth opportunities.

Fund Profile

Objective: Seeks maximum capital growth from common stocks.
Number of stocks: 71
Net assets: $221 million
Commencement of investment operations: February 8, 1968
Newspaper listing: Omeg

<PAGE>

PAGE 4
- ---------------------------------
Keystone Omega Fund

The Omega Investment Discipline

Management carefully selects growth stocks which meet
Omega's specific investment criteria:
(bullet) Earnings growth rates which exceed the S&P 500
(bullet) Strong management
(bullet) Industry leadership
(bullet) New products or services that are believed to provide a competitive
advantage

Q Parametric Technology was the Fund's largest software holding. How does it
fit in with the productivity enhancement theme?

A Parametric Technology develops software products to automate the industrial
design process. Parametric's CAD/CAM system allows automotive or aeronautical
engineers to design new cars or planes on the computer rather than building
expensive mockups of new product designs. This enables companies to design
products more quickly and cost-effectively. While we have reduced our
holdings somewhat since the end of the period, Parametric Technology was an
important contributor to the Fund's positive performance during the
twelve-month period.

Q What about the Fund's health care holdings?

A Regardless of economic conditions, people still need basic services,
particularly medical services. Healthcare and pharmaceutical stocks accounted
for about 20% of net assets. Medaphis, the Fund's fifth-largest holding,
provides management services for physicians' offices, including billing and
insurance administration. St. Jude Medical, the third-largest holding, is a
leader in cardiovascular devices primarily heart valves and pacemakers. The
Fund's top two holdings are the pharmaceutical companies SmithKline Beecham
and Warner Lambert. We think these holdings contributed to our stable growth
theme.

Q What are some other examples of stable growth holdings?

A Other stable growth holdings included CUC International which provides
consumers with discounted travel and restaurant dining, and Thermo Electron,
whose diversified subsidiaries have contributed to a steady 17% growth over
the past five years. We also owned shares of Gillette, a leading provider of
personal care products, and the new offering of Estee Lauder. We believe that
Estee Lauder's strong marketing and distribution network position it well for
growth both domestically and abroad.

Q What other types of industries are represented in the portfolio?

A We held several finance-related companies which benefited from declining
interest rates and industry consolidation. Bank holdings included Bank of
Boston, which announced its intention to acquire BayBanks, and BankAmerica.
We also owned Progressive Corp. of

Top 5 Industries
as of December 31, 1995

Industry Percentage of
net assets
---------------------------------------
Drugs 13.4
---------------------------------------
Software services 9.8
---------------------------------------
Finance 9.1
---------------------------------------
Health care 7.4
---------------------------------------
Telecommunications 6.1
---------------------------------------

<PAGE>

PAGE 5
- ---------------------------------

Ohio, an automobile insurance company and MBIA, an insurer of municipal
bonds.

What is your outlook for 1996?

Our outlook remains cautiously optimistic. We believe moderate economic
growth, low inflation and relatively strong corporate earnings should create
an attractive environment for the growth stocks in your Fund's portfolio. We
think stock prices may rise over the next six to twelve months, but we do not
expect them to duplicate the impressive gains they made in 1995. We are also
alert to the possibility of earnings disappointments, which could have a
negative impact on selected stocks. In addition, concerns about the federal
budget and the political rhetoric of an election year may have an effect on
market conditions. We believe your Fund's flexible investment approach and
its emphasis on companies with above-average growth rates give it the
potential to generate above-average returns over the long term.

Top 10 Stock Holdings
as of December 31, 1995

Percentage of
Company Industry net assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Warner Lambert Drugs 3.5
- ---------------------------------------------------------------------------------------------
SmithKline Beecham Drugs 3.0
- ---------------------------------------------------------------------------------------------
St. Jude Medical Health care 2.9
- ---------------------------------------------------------------------------------------------
Parametric Technology Software services 2.3
- ---------------------------------------------------------------------------------------------
Medaphis Health care 2.3
- ---------------------------------------------------------------------------------------------
Gilead Sciences Biotechnology 2.1
- ---------------------------------------------------------------------------------------------
Gillette Consumer goods 2.0
- ---------------------------------------------------------------------------------------------
Winstar Communication Telecommunications 2.0
- ---------------------------------------------------------------------------------------------
Apple South Restaurants 1.9
- ---------------------------------------------------------------------------------------------
Potash Corp. of Saskatchewan Chemicals 1.9
- ---------------------------------------------------------------------------------------------
</TABLE>

[diamond]
This column is intended to answer
questions about your Fund. If you have a question
you would like answered, please write to:
Keystone Investments, Inc. Attn: Shareholder Communications
200 Berkeley Street, 22nd Floor,
Boston, Massachusetts 02116-5034

<PAGE>

PAGE 6
- ---------------------------------
Keystone Omega Fund

Your Fund's Performance

Growth of an investment in
Keystone Omega Fund Class A

Initial Reinvested
Investment Distributions
12/85 9425 9425
8971 10563
12/87 8064 11437
9118 13044
12/89 10700 17354
8925 16941
12/91 11802 26173
10573 27221
12/93 11421 32482
10373 30643
12/95 13057 41964

A $10,000 investment in Keystone Omega Fund Class A made on December 31, 1985
with all distributions reinvested was worth $41,963 on December 31, 1995.
Past performance is no guarantee of future results.

Twelve-Month Performance as of December 31, 1995

Class A Class B Class C
Total returns* 36.94% 35.70% 35.62%
Net asset value 12/31/94 $15.54 $15.34 $15.37
12/31/95 $19.56 $19.10 $19.13
Dividends None None None
Capital gains $ 1.56 $ 1.56 $ 1.56

* Before deduction of front-end or contingent deferred sales charge (CDSC).

Historical Record as of December 31, 1995

Cumulative Total Returns Class A Class B Class C
1-year w/o sales charge 36.94% 35.70% 35.62%
1-year 29.07% 31.70% 35.62%
5-year 133.46% -- --
10-year 319.63% -- --
Life of Class -- 35.21% 38.39%
Average annual returns
1-year w/o sales charge 36.94% 35.70% 35.62%
1-year 29.07% 31.70% 35.62%
5-year 18.48% -- --
10-year 15.42% -- --
Life of Class -- 13.31% 14.41%

Class A shares were initially offered on April 14, 1987. Performance is
reported at the current maximum front-end sales charge of 5.75%.

Class B shares were initially offered on August 2, 1993. Shares purchased
after June 1, 1995 are subject to a contingent deferred sales charge (CDSC)
that declines from 5% to 1% over six years from the month purchased.
Performance assumes that shares were redeemed after the end of a one-year
holding period and reflects the deduction of a 4% CDSC.

Class C shares were initially offered on August 2, 1993. Performance
reflects the return you would have received for holding shares for one year
and redeeming after the end of the period.

The investment return and principal value will fluctuate so that your
shares, when redeemed, may be worth more or less than the original cost.
Performance for each class will differ.

You may exchange your shares for another Keystone fund by phone or in
writing for a $10 fee. The exchange fee is waived for individual investors
who make an exchange using Keystone's Automated Response Line (KARL). The
Fund reserves the right to change or terminate the exchange offer.

<PAGE>

PAGE 7
- ---------------------------------

Growth of an Investment

Comparison of change in value of a $10,000 investment in Keystone Omega Fund,
the Standard & Poor's 500 Index and the Consumer Price Index.

Fund Average Total Return
-------------------------------------------------------
1 Year 5 Year 10 Year
Class A 29.07% 18.48% 15.42%
Class B 31.70% -- 13.31%*
Class C 35.62% -- 14.41%*

Class A S&P 500 CPI

12/85 9425 10000 10000
10563 11831 10110
12/87 11437 12439 10558
13044 14493 11025
12/89 17354 19012 11537
16941 18386 12241
12/91 26173 23998 12617
27221 25832 12983
12/93 32482 28436 13339
30643 28813 13696
12/95 41964 39640 14053

Past performance is no guarantee of future results. The performance of Class
B or Class C shares will be greater or less than the line shown based on
differences in loads and fees paid by the shareholder investing in the
different classes. *Class B and Class C shares were introduced August 2,
1993; performance is for life of Class. The Consumer Price Index is through
November 30, 1995.

This chart graphically compares your Fund's total return performance to
certain investment indexes. It is the result of fund performance guidelines
issued by the Securities and Exchange Commission. The intent is to provide
investors with more information about their investment.

Components of the Chart

The chart is composed of several lines that represent the accumulated value
of an initial $10,000 investment for the period indicated. The lines
illustrate a hypothetical investment in:

1. Keystone Omega Fund Class A

The Fund seeks maximum capital growth from common stocks. The return is
quoted after deducting sales charges (if applicable), fund expenses and
transaction costs and assumes reinvestment of all distributions.

2. Standard & Poor's 500 Index (S&P 500)

The S&P 500 is a broad-based unmanaged index of common stock prices. It is
comprised of stocks of the largest U.S. companies. These stocks are selected
and compiled by Standard & Poor's Corporation according to criteria that may
be unrelated to your Fund's investment objective.

3. Consumer Price Index (CPI)

This index is a widely recognized measure of the cost of goods and services
produced in the U.S. The index contains factors such as prices of services,
housing, food, transportation and electricity which are compiled by the U.S.
Bureau of Labor Statistics. The CPI is generally considered a valuable
benchmark for investors who seek to outperform increases in the cost of
living.

These indexes do not include transaction costs associated with buying and
selling securities, and do not hold cash to meet redemptions. It would be
difficult for most individual investors to duplicate these indexes.

Understanding What the Chart Means

The chart demonstrates your Fund's total return performance in relation to a
well known investment index and to increases in the cost of living. It is
important to understand what the chart shows and does not show.

This illustration is useful because it charts Fund and index performance over
the same time frame and over a long period. Long-term performance is a more
reliable and useful measure of performance than measurements of short-term
returns or temporary swings in the market. Your financial adviser can help
you evaluate fund performance in conjunction with the

<PAGE>

PAGE 8
- ---------------------------------
Keystone Omega Fund

other important financial considerations such as safety, stability and
consistency.

Limitations of the Chart

The chart, however, limits the evaluation of Fund performance in several
ways. Because the measurement is based on total returns over an extended
period of time, the comparison often favors those funds which emphasize
capital appreciation when the market is rising. Likewise, when the market is
declining, the comparison usually favors those funds which take less risk.

Performance Can Be Distorted

Funds which are more conservative in their orientation and which place an
emphasis on capital preservation will tend to compare less favorably when the
market is rising. In addition, funds which have income as one of their
objectives also will tend to compare less favorably to relevant indexes.
Indexes may also reflect the performance of some securities which a fund may
be prohibited from buying. A bond fund, for example, may be limited to
investments in only high quality bonds, or a stock fund may only be able to
buy stocks that have been traded on a stock exchange for a minimum number of
years or of a certain company size. Indexes usually do not have the same
investment restrictions as your Fund.

Indexes Do Not Include Costs of Investing

The comparison is further limited in its utility because the index does not
take into account any deductions for sales charges, transaction costs or
other fund expenses. Your Fund's performance figures do reflect such
deductions. Sales charges--whether up-front or deferred--pay for the cost of
the investment advice of your financial adviser. Transaction costs pay for
the costs of buying and selling securities for your Fund's portfolio. Fund
expenses pay for the costs of investment management and various shareholder
services. None of these costs are reflected in index total returns. The
comparison is not completely realistic because an index cannot be duplicated
by an investor--even an unmanaged index--without incurring some charges and
expenses.

One of Several Measures

The chart is one of several tools you can use to understand your investment.
It should be read in conjunction with the Fund's prospectus, and annual and
semiannual reports. Also, your financial adviser, who understands your
personal financial situation, can best explain the features of your Keystone
fund and how it applies to your financial needs.

Future Returns May Be Different

Shareholders also should be mindful that the long-run performance of either
the Fund or the indexes is not representative of what shareholders should
expect to receive from their Fund investment in the future; it is presented
to illustrate only past performance and is not a guarantee of future returns.

<PAGE>

Keystone Omega Fund

SCHEDULE OF INVESTMENTS -- December 31, 1995
<TABLE>
<CAPTION>
Number Market
of Shares Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.1%)
Advertising & Publishing (1.6%)
Clear Channel Communications, Inc. (a) 80,000 $3,530,000
- -----------------------------------------------------------------------------------------------

Aerospace (1.8%)
Boeing Co. 51,100 4,004,963
- -----------------------------------------------------------------------------------------------

Amusements (2.5%)
HFS Inc. (a) 35,000 2,861,250
La Quinta Inns, Inc. 100,000 2,737,500
- -----------------------------------------------------------------------------------------------

5,598,750
- -----------------------------------------------------------------------------------------------

Building Materials (2.9%)
Mohawk Industries, Inc. (a) 240,000 3,675,000
Sherwin-Williams Co. 65,000 2,648,750
- -----------------------------------------------------------------------------------------------

6,323,750
- -----------------------------------------------------------------------------------------------

Business Services (5.8%)
Molten Metal Technology, Inc. (a) 76,500 2,495,813
Peak Technologies Group, Inc. (a) 89,500 2,774,500
Thermo Electron Corp. (a) 80,000 4,160,000
US Filter Corp. (a) 130,000 3,461,250
- -----------------------------------------------------------------------------------------------

12,891,563
- -----------------------------------------------------------------------------------------------

Capital Goods (4.3%)
AGCO Corp. 56,800 2,896,800
General Electric Co. 50,000 3,600,000
Idex Corp. 75,000 3,056,250
- -----------------------------------------------------------------------------------------------

9,553,050
- -----------------------------------------------------------------------------------------------

Chemicals (2.5%)
Potash Corp. of Saskatchewan, Inc. 60,000 4,252,500
Praxair, Inc. 41,600 1,398,800
- -----------------------------------------------------------------------------------------------
5,651,300
- -----------------------------------------------------------------------------------------------

Consumer Goods (4.8%)
CUC International, Inc. (a) 100,000 3,412,500
Gillette Co. (The) 85,000 4,430,625
Estee Lauder Companies, Inc. (The) (a) 78,500 2,737,688
- -----------------------------------------------------------------------------------------------

10,580,813
- -----------------------------------------------------------------------------------------------

Drugs (13.4%)
Agouron Pharmaceuticals, Inc. (a) 43,900 1,454,188
Amylin Pharmaceuticals, Inc. (a) 100,000 937,500
Centocor, Inc. (a) 9,300 288,300
Genzyme Corp. (a) 40,000 2,490,000
Gilead Sciences, Inc. (a) 142,300 4,589,175
Human Genome Sciences, Inc. (a) 43,400 1,654,625
Merck & Co., Inc. 55,000 3,616,250
SmithKline Beecham PLC, ADR 120,000 6,660,000
Warner-Lambert Co. 80,000 7,770,000
- -----------------------------------------------------------------------------------------------

29,460,038
- -----------------------------------------------------------------------------------------------

Electronics Products (5.7%)
Analog Devices, Inc. (a) 55,000 1,945,625
Maxim Integrated Products, Inc. (a) 86,600 3,334,100
Microchip Technology, Inc. (a) 63,000 2,307,375
Solectron Corp. (a) 50,000 2,206,250
Teradyne, Inc. (a) 115,000 2,875,000
- -----------------------------------------------------------------------------------------------

12,668,350
- -----------------------------------------------------------------------------------------------

Finance (9.1%)
BISYS Group, Inc. (The) (a) 80,000 2,440,000
Bank of Boston Corp. 32,000 1,480,000
BankAmerica Corp. 51,400 3,328,150
Fleet Financial Group, Inc. 75,000 3,056,250
Greenpoint Financial Corp. 110,700 2,947,388
Merrill Lynch & Co., Inc. 32,500 1,657,500
Standard Federal Bancorporation, Inc. 75,000 2,953,125
Washington Mutual, Inc. 80,600 2,317,250
- -----------------------------------------------------------------------------------------------

20,179,663
- -----------------------------------------------------------------------------------------------

Foods (1.2%)
Sara Lee Corp. 80,000 2,550,000
- -----------------------------------------------------------------------------------------------

Health Care (7.4%)
Boston Scientific Corp. (a) 60,000 2,940,000
Idexx Labs Inc. (a) 40,700 1,902,725
Medaphis Corp. (a) 135,000 5,011,875
St. Jude Medical, Inc. (a) 150,000 6,431,250
- -----------------------------------------------------------------------------------------------

16,285,850
- -----------------------------------------------------------------------------------------------

Insurance (3.1%)
MBIA, Inc. 46,000 3,450,000
Progressive Corp. 50,000 2,443,750
UnionAmerica Holdings PLC, ADR (a) 55,000 935,000
- -----------------------------------------------------------------------------------------------

6,828,750
- -----------------------------------------------------------------------------------------------

Natural Gas (4.7%)
Anadarko Petroleum Corp. 65,000 3,518,125
Louisiana Land & Exploration Co. 80,000 3,430,000
Nuevo Energy Corp. (a) 150,000 3,356,250
- -----------------------------------------------------------------------------------------------

10,304,375
- -----------------------------------------------------------------------------------------------

Office & Business Equipment (1.1%)
Compaq Computer Corp. (a) 50,300 2,414,400
- -----------------------------------------------------------------------------------------------

Oil (0.9%)
Mobil Corp. 17,300 1,937,600
- -----------------------------------------------------------------------------------------------

Oil Services (3.0%)
ENSCO International, Inc. (a) 150,000 3,450,000
Tidewater, Inc. 100,000 3,150,000
- -----------------------------------------------------------------------------------------------

6,600,000
- -----------------------------------------------------------------------------------------------

Restaurants (1.9%)
Apple South, Inc. 200,000 4,275,000
- -----------------------------------------------------------------------------------------------

Retail (3.4%)
Barnes & Noble, Inc.(a) 105,000 3,045,000
Staples, Inc. (a) 108,000 2,646,000
Sunglass Hut International, Inc. (a) 74,000 1,748,250
- -----------------------------------------------------------------------------------------------

7,439,250
- -----------------------------------------------------------------------------------------------

Software Services (9.8%)
Adobe Systems, Inc. 25,000 1,553,125
America On-Line, Inc. (a) 100,000 3,731,250
BMC Software, Inc. (a) 75,000 3,196,875
Davidson & Association, Inc. (a) 45,500 989,625
Epic Design Technology, Inc. (a) 105,200 2,209,200
Parametric Technology Corp. (a) 85,600 5,681,700
Project Software & Development, Inc. (a) 44,800 1,570,800
System Software Associates, Inc. 127,500 2,757,188
- -----------------------------------------------------------------------------------------------

21,689,763
- -----------------------------------------------------------------------------------------------

Telecommunications (6.2%)
Cisco Systems, Inc. (a) 50,000 3,734,375
DSC Communications Corp. (a) 42,400 1,568,800
Netmanage, Inc. (a) 170,000 3,931,250
Winstar Communications, Inc. (a) 250,000 4,328,122
- -----------------------------------------------------------------------------------------------

13,562,547
- -----------------------------------------------------------------------------------------------

TOTAL COMMON STOCKS (Cost - $175,947,514) 214,329,775
- -----------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------
Maturity
Value
SHORT-TERM INVESTMENTS (2.4%)
Repurchase Agreements (2.4%)
Investments in repurchase agreements in a joint trading account ,
purchased 12/29/95, 5.909%, maturing 01/02/96
(Cost $5,367,000)(b) $5,370,476 5,367,000
- -----------------------------------------------------------------------------------------------

TOTAL INVESTMENTS (Cost - $181,314,514)(c) 219,696,775

OTHER ASSETS AND LIABILITIES (0.5%) 981,615
- -----------------------------------------------------------------------------------------------

NET ASSETS (100.0%) $220,678,390
- -----------------------------------------------------------------------------------------------

NOTES TO SCHEDULE OF INVESTMENTS:

(a) Non-income-producing security.
(b) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations
based on market prices at December 31, 1995.
(c) The cost of investments for federal income tax purposes is $181,501,023. Gross unrealized
appreciation and depreciation of investments, based on identified tax cost, at December 31, 1995 are
as follows:
Gross unrealized appreciation $40,815,344
Gross unrealized depreciation (2,619,592)
------------
Net unrealized appreciation $38,195,752
============
</TABLE>
See Notes to Financial Statements.

Keystone Omega Fund

FINANCIAL HIGHLIGHTS ---- CLASS A SHARES
(For a share outstanding throughout each year)

See Notes to Financial Statements.
<PAGE>

Keystone Omega Fund

See Notes to Financial Statements.
<PAGE>

Keystone Omega Fund

See Notes to Financial Statements.

<PAGE>
<TABLE>
<CAPTION>
Keystone Omega Fund

STATEMENT OF ASSETS AND LIABILITIES ----
December 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments at market value (identified $181,314,514 ) (Note 1) $219,696,775
Cash 134
Receivable for:
Fund shares sold 880,289
Investments sold 1,145,278
Dividends and interest 165,605
Prepaid expenses and other assets 61,235
- --------------------------------------------------------------------------------------------------------
Total assets 221,949,316
- --------------------------------------------------------------------------------------------------------
Liabilities:
Payable for:
Investments purchased 1,215,722
Fund shares redeemed 52,687
Other liabilities 2,517
- --------------------------------------------------------------------------------------------------------
Total liabilities 1,270,926
- --------------------------------------------------------------------------------------------------------
Net assets $220,678,390
- --------------------------------------------------------------------------------------------------------
Net assets represented by (Notes 1 and 3):
Paid-in-capital $177,670,527
Accumulated net realized gain (loss) on investment transactions 4,625,602
Net unrealized appreciation (depreciation) on investments
and other assets and liabilities 38,382,261
- --------------------------------------------------------------------------------------------------------
Total net assets $220,678,390
- --------------------------------------------------------------------------------------------------------
Net asset value per share (Notes 1 and 2):
Class A Shares
Net assets $135,078,994 / 6,907,644 shares outstanding $19.56
Offering price per share ($19.56 / 0.9425) (based on sales charge
of 5.75% of the offering price at December 31, 1995) $20.75
Class B Shares
Net assets $71,635,998 / 3,751,051 shares outstanding $19.10
Class C Shares
Net assets $13,963,398 / 730,073 shares outstanding $19.13
- --------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements
<PAGE>

Keystone Omega Fund

STATEMENT OF OPERATIONS ----
Year Ended December 31, 1995
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income (Note 1):
Dividends (net of foreign withholding tax of $2,930) $1,626,337
Interest 695,345
- --------------------------------------------------------------------------------------------------------------------
Total income 2,321,682
- --------------------------------------------------------------------------------------------------------------------
Expenses (Notes 2, 4, and 5):
Management fee $1,280,436
Shareholder services 565,768
Accounting 15,027
Auditing and legal 36,881
Custodian fees 103,716
Printing 24,434
Trustees' fees and expenses 7,179
Distribution Plan expenses 745,640
Registration fees 82,006
Miscellaneous expenses 32,192
- --------------------------------------------------------------------------------------------------------------------
Total expenses 2,893,279
Less: Expenses paid indirectly (Note 4) (22,735)
- --------------------------------------------------------------------------------------------------------------------
Net expenses 2,870,544
- --------------------------------------------------------------------------------------------------------------------
Net investment income (548,862)
- --------------------------------------------------------------------------------------------------------------------
Net Realized and unrealized gain (loss) on investments (Notes 1 and 3):
Net realized gain on investments 24,020,841
Net change in unrealized appreciation or depreciation on investments 30,134,778
- --------------------------------------------------------------------------------------------------------------------
Net gain on investments 54,155,619
- --------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $53,606,757
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements
<PAGE>

Keystone Omega Fund

STATEMENTS OF CHANGES IN NET ASSETS ----
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ($548,862) $79,708
Net realized gain on investments 24,020,841 (2,218,472)
Net change in unrealized appreciation or depreciation on investments 30,134,778 (4,649,148)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 53,606,757 (6,787,912)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from (Notes 1 and 5):
Net realized gain on investment transactions:
Class A Shares (9,531,332) (3,782,055)
Class B Shares (4,676,811) (984,992)
Class C Shares (973,850) (322,709)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (15,181,993) (5,089,756)
- ------------------------------------------------------------------------------------------------------------------------------
Capital share transactions (Note 2):
Proceeds from shares sold:
Class A Shares 21,425,010 25,532,191
Class B Shares 33,563,718 30,415,780
Class C Shares 4,723,834 8,044,614
Payments for shares redeemed:
Class A Shares (20,370,219) (10,802,653)
Class B Shares (8,682,058) (4,383,078)
Class C Shares (4,086,346) (1,273,016)
Net asset value of shares issued in reinvestment of dividends and distributions:
Class A Shares 8,685,153 3,419,022
Class B Shares 4,332,038 909,009
Class C Shares 927,300 303,801
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital share transactions 40,518,430 52,165,670
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 78,943,194 40,288,002
Net assets:
Beginning of year 141,735,196 101,447,194
- ------------------------------------------------------------------------------------------------------------------------------
End of year $220,678,390 $141,735,196
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements

<PAGE>

NOTES TO FINANCIAL STATEMENTS

1.) Significant Accounting Policies

Keystone Omega Fund (formerly Keystone America Omega Fund, Inc.)
(the "Fund") is an open-end diversified management investment
company incorporated in Massachusetts on February 8, 1968.
Keystone Management, Inc. ("KMI") is the Investment Manager and
Keystone Investment Management Company (formerly Keystone Custodian
Funds, Inc.) ("Keystone") is the Investment Adviser. It is
registered under the Investment Company Act of 1940 as a
diversified open-end management investment company. The Fund seeks
maximum capital growth by investing in a varied portfolio
consisting primarily of common stocks and securities convertible
into common stocks.

The Fund currently issues three classes of shares. Class A
shares are sold subject to a maximum sales charge of 5.75% payable
at the time of purchase. Class B shares are sold subject to a
contingent deferred sales charge which varies depending on when the
shares were purchased and how long the shares have been held.
Class C shares are sold subject to a contingent deferred sales
charge payable upon redemption within one year after purchase.
Class C shares are available only through dealers who have entered
into special distribution agreements with Keystone Investment
Distributors Company (formerly Keystone Distributors, Inc.)
("KIDC"), the Fund's principal underwriter.

Keystone is a wholly-owned subsidiary of Keystone Investments,
Inc. (formerly Keystone Group, Inc.) ("KII"), a Delaware
corporation. KII is privately owned by an investor group
consisting of current and former members of management of Keystone.
Keystone Management, Inc. ("KMI") is a wholly-owned subsidiary of
Keystone. Keystone Investor Resource Center, Inc. ("KIRC"), a
wholly-owned subsidiary of Keystone, is the Fund's transfer agent.

The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with
generally accepted accounting principles.

A. Investments, including American Depository Receipts ("ADRs"),
are usually valued at the closing sales price, or in the absence of
sales and for over-the-counter securities, the mean of bid and
asked quotations. Management values the following securities at
prices it deems in good faith to be fair: (a) securities (including
restricted securities) for which complete quotations are not
readily available and (b) listed securities if, in the opinion of
management, the last sales price does not reflect a current value,
or if no sale occurred. ADRs, which are certificates representing
shares of foreign securities deposited in domestic and foreign
banks, are traded and valued in United States dollars.

<PAGE>

Short-term investments which are purchased with maturities of
sixty days or less are valued at amortized cost (original purchase
cost as adjusted for amortization of premium or accretion of
discount) which when combined with accrued interest approximates
market. Short-term investments maturing in more than sixty days
for which market quotations are readily available are valued at
current market value. Short-term investments maturing in more than
sixty days when purchased which are held on the sixtieth day prior
to maturity are valued at amortized cost (market value on the
sixtieth day adjusted for amortization of premium or accretion of
discount) which when combined with accrued interest approximates
market.

B. Securities transactions are accounted for on the day after the
trade date. Realized gains and losses are computed on the
identified cost basis. Interest income is recorded on the accrual
basis and dividend income is recorded on the ex-dividend date.
Distributions to the shareholders are recorded by the Fund at the
close of business on the ex-dividend date.

C. The Fund has qualified and intends to qualify in the future as
a regulated investment company under the Internal Revenue Code of
1986, as amended ("Internal Revenue Code"). Thus, the Fund is
relieved of any federal income tax liability by distributing all of
its net taxable investment income and net taxable capital gains, if
any, to its shareholders. The Fund intends to avoid excise tax
liability by making the required distributions under the Internal
Revenue Code.

D. When the Fund enters into a repurchase agreement (a purchase of
securities whereby the seller agrees to repurchase the securities
at a mutually agreed upon date and price) the repurchase price of
the securities will generally equal the amount paid by the Fund
plus a negotiated interest amount. The seller under the repurchase
agreement will be required to provide securities ("collateral") to
the Fund whose value will be maintained at an amount not less than
the repurchase price, and which generally will be maintained at
101% of the repurchase price. The Fund monitors the value of
collateral on a daily basis, and if the value of the collateral
falls below required levels, the Fund intends to seek additional
collateral from the seller or terminate the repurchase agreement.
If the seller defaults, the Fund would suffer a loss to the extent
that the proceeds from the sale of the underlying securities were
less than the repurchase price. Any loss would be increased by any
cost incurred on disposing of such securities. If bankruptcy
proceedings are commenced against the seller under the repurchase
agreement, the realization on the collateral may be delayed or
limited. Repurchase agreements entered into by the Fund will be
limited to transactions with dealers or domestic banks believed to
present minimal credit risks, and the Fund will take constructive
receipt of all securities underlying repurchase agreements until
such agreements expire.

<PAGE>

Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the Fund, along with certain other Keystone
funds, may transfer uninvested cash balances into a joint trading
account. These balances are invested in one or more repurchase
agreements that are fully collateralized by U.S. Treasury and/or
Federal Agency obligations.

E. In connection with portfolio purchases and sales of securities
denominated in a foreign currency, the Fund may enter into forward
foreign currency exchange contracts ("contracts") to hedge certain
foreign currency assets. Contracts are recorded at market value
and marked-to-market daily. Realized gains and losses arising from
such transactions are included in net realized gain (loss) on
foreign currency related transactions. The Fund is subject to the
credit risk that the other party will not complete the obligations
of the contract.

F. The Fund distributes net income to shareholders quarterly and
net capital gains, if any, annually. Distributions are determined
from taxable net investment income and net capital gains and can
differ from book basis net investment income and net capital gains.

The significant differences between financial statement
amounts available for distribution and distributions made in
accordance with income tax regulations are due to the differing
treatment of net operating losses and short-term capital gains for
financial statement and federal income tax purposes.

G. The preparation of financial statements in conformity with
generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

(2.) Capital Share Transactions

Two hundred million shares of the Fund with a par value of $1.00
are authorized for issuance. Transactions in shares of the Fund
were as follows:
Class A Shares
-------------------------------
Year Ended December 31,
1995 1994
-------------------------------
Shares sold 1,178,460 1,577,169
Shares redeemed (1,161,391) (668,733)
Shares issued in
reinvestment of dividends
and distributions 482,356 216,943
--------- ----------
Net increase 499,425 1,125,379
========= ==========
<PAGE>

Class B Shares
-------------------------------
Year Ended December 31,
1995 1994
-------------------------------
Shares sold 1,902,255 1,881,751
Shares redeemed (499,966) (271,676)
Shares issued in
reinvestment of dividends
and distributions 245,291 58,195
--------- ----------
Net increase 1,647,580 1,668,270
========= ==========

Class C Shares
-------------------------------
Year Ended December 31,
1995 1994
-------------------------------
Shares sold 273,387 493,899
Shares redeemed (240,110) (80,825)
Shares issued in
reinvestment of dividends
and distributions 52,465 19,425
--------- ----------
Net increase 85,742 432,499
========= ==========
`

The Fund bears some of the costs of selling its shares under
Distribution Plans adopted with respect to its Class A, Class B and
Class C shares pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ("1940 Act").

The Class A Distribution Plan provides for payments which are
currently limited to 0.25% annually of the average daily net asset
value of Class A shares to pay expenses of the distribution of
Class A shares. Amounts paid by the Fund to KIDC under the Class
A Distribution Plan are currently used to pay others such as
dealers, service fees at an annual rate of up to 0.25% of the
average net asset value of the shares sold by such others and
remaining outstanding on the books of the Fund for specified
periods.

The Class B Distribution Plan provides payment at an annual
rate of 1.00% of the average daily net asset value of Class B
shares to pay expenses of the distribution of Class B shares.
Amounts paid by the Fund under the Class B Distribution Plan are
currently used to pay others (dealers) a commission at the time of
purchase normally equal to 4.00% of the price paid for each Class
B share sold plus the first year's service fee in advance in the
amount of 0.25% of the price paid for each Class B share sold.
Beginning approximately 12 months after the purchase of a Class B
share, the dealer or other party will receive service fees at an
annual rate of 0.25% of the average daily net asset value of such
Class B shares maintained by such others and remaining outstanding
on the Fund's books for specified periods. A contingent deferred
sales charge will be imposed, if applicable, on Class B shares
purchased on or after June 1, 1995 at rates ranging from a maximum
of 5.00% of amounts redeemed during the first 12 months following
the date of purchase to 1.00% of amounts redeemed during the sixth
twelve month period following the date of purchase. Class B shares

<PAGE>

purchased on or after June 1, 1995 that have been outstanding for
eight years following the month of purchase will automatically
convert to Class A shares without a front end sales charge or
exchange fee. Class B shares purchased prior to June 1, 1995 will
retain their existing conversion rights.

The Class C Distribution Plan provides for payments at an
annual rate of up to 1.00% of the average daily net asset value of
Class C shares to pay expenses for the distribution of Class C
shares. Amounts paid by the Fund under the Class C Distribution
Plan are currently used to pay others (dealers) a commission at the
time of purchase in the amount of 0.75% of the price paid for each
Class C share sold, plus the first year's service fee in advance in
the amount of 0.25% of the price paid for each Class C share.
Beginning approximately 15 months after purchase, the dealer or
other party will receive a commission at an annual rate of 0.75%
(subject to applicable limitations imposed by a rule of the
National Association of Securities Dealers, Inc.) ("NASD Rule")
plus service fees at the annual rate of 0.25%, of the average net
asset value of each Class C share maintained by such others and
remaining outstanding on the Fund's books for specified periods.

Each of the Distribution Plans may be terminated at any time
by vote of the Independent Trustees or by vote of a majority of the
outstanding voting shares of the respective class. However, after
the termination of any Distribution Plan, at the discretion of the
Board of Trustees, payments to KIDC may continue as compensation
for its services which had been earned while the Distribution Plan
was in effect.

For the year ended December 31, 1995, the Fund paid KIDC
$152,234 under its Class A Distribution Plan. The Fund paid KIDC
$422,149 for Class B shares sold prior to June 1, 1995, and $57,588
for Class B shares sold on or after June 1, 1995. The Fund paid
KIDC $113,669 under its Class C Distribution Plan.

Under the NASD Rule, the maximum uncollected amounts for which
KIDC may seek payment from the Fund under its Class B Distribution
Plans $2,337,905 for Class B shares purchased prior to June 1,
1995, and $1,219,354 for Class B shares purchased on or after June
1, 1995. The maximum uncollected amounts for which KIDC may seek
payment from the Fund under its Class C Distribution Plan $829,901
as of December 31, 1995.

(3.) Securities Transactions

Cost of purchases and proceeds from sales of investment securities
excluding short-term securities, during the year ended December 31,
1995, were $ 297,238,175 and $ 253,812,150, respectively.

(4.) Investment Management and Transactions with Affiliates

Under the terms of the Investment Management Agreement between KMI
and the Fund, KMI provides investment management and administrative

<PAGE>

services to the Fund. In return, KMI is paid a management fee
computed and paid daily. The management fee is determined by
applying percentage rates, starting at 0.75% and declining as net
assets increase, to 0.50% per annum, to the net asset value of the
Fund. KMI has entered into an Investment Advisory Agreement with
Keystone, under which Keystone provides investment advisory and
management services to the Fund and receives for its services an
annual fee representing 85% of the management fee received by KMI.
During the year ended December 31, 1995, the Fund paid or accrued
to KMI investment management and administrative services fees of
$1,280,436, which represented 0.75% of the Fund's average net
assets on an annualized basis. Of such amounts paid to KMI,
$1,088,371 was paid to Keystone for its services to the Fund.

During the year ended December 31, 1995, the Fund paid or
accrued to KII $39,461 as reimbursement for the cost of accounting
and printing services provided to the Fund and $565,768 was paid or
accrued to KIRC for transfer agent fees.

The Fund is subject to certain state annual expense limits,
the most restrictive of which is as follows: 2.5% of the first $30
million of the Fund average net assets and 2.0% the next $70
million of the Fund average net assets; and 1.5% of the Fund
average net assets over $100 million.

Keystone has agreed to reimburse the Fund annually for certain
operating expenses incurred by the Fund in excess of the applicable
state expense limit. However, Keystone is not required to make
such reimbursement to an extent which would result in the Fund's
inability to qualify as a Regulated Investment Company and
provisions of the Internal Revenue Code.

The Fund has entered into an expense offset arrangement with
its custodian. For the year ended December 31, 1995, the Fund paid
custody fees in the amount of $80,981 and received a credit of
$22,735 pursuant to the expense offset arrangement, resulting in a
total expense of $103,716. The assets deposited with the custodian
under the expense offset arrangement could have been invested in
income-producing assets.

Certain officers and/or Directors of Keystone are also
officers and/or Trustees of the Fund. Officers of Keystone and
affiliated Trustees receive no compensation directly from the Fund.
Currently the Independent Trustees, receive no compensation for
their service.

(5.) Distributions to Shareholders

The Fund intends to distribute to its shareholders dividends from
net investment income, and all net taxable realized long-term
capital gains, if any, annually. Any distribution which is declared
in December and paid before the next February 1 will be taxable to
shareholders in the year declared.

<PAGE>

(6.) Class Level Expenses

Presently, the Fund's class-specific expenses are limited to
expenses incurred by a class of shares pursuant to its respective
Distribution Plan. For the year ended December 31, 1995, the total
amount of expenses incurred by each class' Distribution Plan is set
forth in Note (2.) "Capital Share Transactions."

(7.) Shareholder Meeting (Unaudited)

A special Meeting of Shareholders was held on April 21, 1995. The
following is a brief description of the matters which were
submitted to shareholders, and certain information about how
shareholders voted:

1. Proposal 1 was to approve the reorganization of the Fund
as a Massachusetts business trust, pursuant to which the existing
Board of Directors would become the Board of Trustees of the new
entity, and the present investment manager and investment adviser
to the Fund would remain the same. Action on this Proposal was
postponed and the meeting adjourned until May 30, 1995. The May
30, 1995 meeting was postponed and adjourned until June 30, 1995,
at which time the following vote was received and the proposal was
approved.

FOR AGAINST ABSTAIN
6,155,612.347 300,564.114 519,525.686

2. Proposal 2 was to select KPMG Peat Marwick LLP as the
independent public accountant of the Fund for the 1995 fiscal year.

FOR AGAINST ABSTAIN
6,159,296.725 95,860.769 334,863.015

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

Federal Tax Status - Fiscal 1995 Distributions (Unaudited)

The per-share distributions paid to you for fiscal 1995, whether
taken in shares or cash, are as follows:

Short-term Long-term Totals
Gains Gains
- ----------------------------------------------------------------
Class A shares $0.86 $0.70 $1.56
- ----------------------------------------------------------------
Class B shares $0.86 $0.70 $1.56
- ----------------------------------------------------------------
Class C shares $0.86 $0.70 $1.56
- ----------------------------------------------------------------

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Trustees and Shareholders
Keystone Omega Fund

We have audited the accompanying statement of assets and
liabilities of Keystone Omega Fund (formerly Keystone America Omega
Fund, Inc.), including the schedule of investments, as of December
31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial
highlights for each of the years in the seven-year period ended
December 31, 1995 for Class A shares and for each of the years in
the two-year period ended December 31, 1995 and the period from
August 2, 1993 (Date of Initial Public Offering) to December 31,
1993 for Class B and Class C shares. These financial statements
and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
The financial highlights for Class A Shares for each of the years
in the three-year period ended December 31, 1988 were audited by
other auditors whose report, dated February 3, 1989, expressed an
unqualified opinion thereon.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of December 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Keystone Omega Fund as of
December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each
of the years or periods subsequent to 1988 specified in the first
paragraph above in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Boston, Massachusetts
January 23, 1995

<PAGE>

KEYSTONE

[photo of blossoming tree]

OMEGA
FUND

[Keystone logo]

ANNUAL REPORT
DECEMBER 31, 1995

KEYSTONE AMERICA
FAMILY OF FUNDS

[diamond]

Capital Preservation and Income Fund
Government Securities Fund
Intermediate Term Bond Fund
Strategic Income Fund
World Bond Fund
Tax Free Income Fund
California Insured Tax Free Fund
Florida Tax Free Fund
Massachusetts Tax Free Fund
Missouri Tax Free Fund
New York Insured Tax Free Fund
Pennsylvania Tax Free Fund
Fund for Total Return
Global Opportunities Fund
Hartwell Emerging Growth Fund, Inc.
Omega Fund
Fund of the Americas
Strategic Development Fund

This report was prepared primarily for the information of the Fund's
shareholders. It is authorized for distribution if preceded or accompanied by
the Fund's current prospectus. The prospectus contains important information
about the Fund iuncluding fees and expenses. Read it carefully before you
invest or send money. For a free prospectus on other Keystone funds, contact
your financial adviser or call Keystone.

[Keystone logo] KEYSTONE
I N V E S T M E N T S

P.O. Box 2121
Boston, Massachusetts 02106-2121

OFI-AR-2/96
18.1M [recycle logo]