KEYSTONE FUND OF THE AMERICAS, 497, 1996-09-24

KEYSTONE FUND OF THE AMERICAS
497, 1996-09-24

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<PAGE>

KEYSTONE FUND OF THE AMERICAS
PROSPECTUS FEBRUARY 27, 1996
AS SUPPLEMENTED SEPTEMBER 24, 1996

Keystone Fund of the Americas (the "Fund") is a mutual fund whose primary
objective is long term growth of capital through investments in equity and debt
securities in North America (the United States and Canada) and Latin America
(Mexico and countries in South and Central America). As a secondary objective
the Fund seeks current income.

Under normal circumstances, the Fund invests at least 65% of its assets in
securities of issuers in Latin America. The Fund normally intends to invest a
majority of its total assets in equity securities. While the Fund focuses on
equity securities, the Fund may invest a portion of its assets in debt
securities issued by Latin American or North American public or private issuers
with any rating or that are unrated.

THE FUND MAY INVEST UP TO 49% OF ITS ASSETS IN EITHER OR BOTH OF (I) LOWER
RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS"; AND (II) BONDS ISSUED BY FOREIGN
ISSUERS RATED BELOW INVESTMENT GRADE; BOTH OF WHICH ENTAIL GREATER RISKS,
INCLUDING DEFAULT RISKS, UNTIMELY INTEREST AND PRINCIPAL PAYMENTS AND PRICE
VOLATILITY, THAN THOSE FOUND IN HIGHER RATED SECURITIES, AND MAY PRESENT
PROBLEMS OF LIQUIDITY AND VALUATION. INVESTORS SHOULD CAREFULLY CONSIDER THESE
RISKS BEFORE INVESTING. SEE "INVESTMENT OBJECTIVE AND POLICIES," PAGE 6; "RISK
FACTORS," PAGE 8.

The Fund offers Class A, B, and C shares. Information on share classes and
their fee and sales charge structures may be found in the 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 in- vesting. Please read it and retain it for future reference.

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

Additional information about the Fund is contained in a statement of
additional information dated February 27, 1996, which has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
prospectus. For a free copy, 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 SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

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 11
Dividends and Taxes 12
Fund Management and Expenses 12
How to Buy Shares 14
Alternative Sales Options 15
Contingent Deferred Sales Charge and Waiver of Sales Charges 19
Distribution Plans 20
How to Redeem Shares 21
Shareholder Services 23
Performance Data 25
Fund Shares 25
Additional Information 26
Additional Investment Information (i)
Exhibit A A-1

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>

FEE TABLE
KEYSTONE FUND OF THE AMERICAS

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."

<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 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)(5) ....................................
ANNUAL FUND OPERATING EXPENSES(6)
(as a percentage of average net assets)
Management Fees ................................... 0.75% 0.75% 0.75%
12b-1 Fees ........................................ 0.25% 1.00%(7) 1.00%(7)
Other Expenses .................................... 0.86% 0.86% 0.86%
---- ---- ----
Total Fund Operating Expenses ..................... 1.86% 2.61% 2.61%
==== ==== ====
<CAPTION>
EXAMPLES8 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
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 .................................................................. $75.00 $113.00 $152.00 $263.00
Class B .................................................................. $76.00 $111.00 $159.00 N/A
Class C .................................................................. $36.00 $ 81.00 $139.00 $294.00
You would pay the following expenses on a $1,000 investment, assuming no
redemption at the end of each period:
Class A .................................................................. $75.00 $113.00 $152.00 $263.00
Class B .................................................................. $26.00 $ 81.00 $139.00 N/A
Class C .................................................................. $26.00 $ 81.00 $139.00 $294.00
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.
- ----------
(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 of 0.25%. See
"Class A Shares" and "Contingent Deferred Sales Charge and Waiver of Sales Charges" 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.")
(6) Expense ratios are for the Fund's fiscal year ended October 31, 1995. Total Fund Operating Expenses include indirectly
paid expenses.
(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%.
</TABLE>

<PAGE>
FINANCIAL HIGHLIGHTS
KEYSTONE FUND OF THE AMERICAS

CLASS A SHARES

(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.

YEAR ENDED OCTOBER 31,
-----------------------
1995 1994
------- -------
NET ASSET VALUE, BEGINNING OF YEAR ................ $10.550 $10.000
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.443 0.212
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions .................................... (0.813) 0.498
------- -------
Total income from investment operations ....... (0.370) 0.710
------- -------
LESS DISTRIBUTIONS:
Net investment income ............................. (0.299) (0.102)
In excess of net investment income ................ 0.000 (0.009)
Tax basis return of capital ....................... (0.021) (0.049)
------- -------
Total distributions ........................... (0.320) (0.160)
------- -------
NET ASSET VALUE, END OF YEAR ...................... $ 9.860 $10.550
======= =======
TOTAL RETURN (a) .................................. (3.35%) 7.21%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses .................................. 1.86%(b) 1.79%
Net investment income ........................... 4.02% 2.45%
Portfolio turnover rate ........................... 57% 104%
NET ASSETS, END OF YEAR (THOUSANDS) ............... $14,333 $23,880

CLASS B SHARES

(For a share outstanding throughout the year)

YEAR ENDED OCTOBER 31,
------------------------
1995 1994
------- ---------
NET ASSET VALUE, BEGINNING OF YEAR ............... $10.490 $ 10.000
------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................ 0.319 0.144
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions ................................... (0.753) 0.494
------- ---------
Total income from investment operations ...... (0.434) 0.638
------- ---------
LESS DISTRIBUTIONS:
Net investment income ............................ (0.275) (0.090)
In excess of net investment income ............... 0.000 (0.009)
Tax basis return of capital ...................... (0.021) (0.049)
------- ---------
Total distributions .......................... (0.296) (0.148)
------- ---------
NET ASSET VALUE, END OF YEAR ..................... $ 9.760 $ 10.490
======= =========
TOTAL RETURN (a) ................................. (4.00%) 6.48%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses ................................. 2.61%(b) 2.54%
Net investment income .......................... 3.27% 1.70%
Portfolio turnover rate .......................... 57% 104%
NET ASSETS, END OF YEAR (THOUSANDS) .............. $97,165 $148,769

CLASS C SHARES

(For a share outstanding throughout the year)

YEAR ENDED OCTOBER 31,
-----------------------
1995 1994
------- -------
NET ASSET VALUE, BEGINNING OF YEAR ................ $10.500 $10.000
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................. 0.316 0.142
Net realized and unrealized gains (losses) on
investment and foreign currency related
transactions .................................... (0.750) 0.506
------- -------
Total income from investment operations ....... (0.434) 0.648
------- -------
LESS DISTRIBUTIONS:
Net investment income ............................. (0.275) (0.090)
In excess of net investment income ................ 0.000 (0.009)
Tax basis return of capital ....................... (0.021) (0.049)
------- -------
Total distributions ........................... (0.296) (0.148)
------- -------
NET ASSET VALUE, END OF YEAR ...................... $ 9.770 $10.500
======= =======
TOTAL RETURN (a) .................................. (4.00%) 6.58%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses .................................. 2.61%(b) 2.54%
Net investment income ........................... 3.27% 1.74%
Portfolio turnover rate ........................... 57% 104%
NET ASSETS, END OF YEAR (THOUSANDS) ............... $11,242 $17,740

(a) Excluding applicable sales charges.
(b) The expense ratio includes indirectly paid expenses for the year ended
October 31, 1995. Excluding indirectly paid expenses, the expense ratio
would have been 2.59% for the year then ended.
<PAGE>
THE FUND
The Fund is an open-end, diversified management investment company, commonly
known as a mutual fund. The Fund was formed as a Massachusetts business trust
on June 16, 1993. The Fund is one of more than 30 funds managed or advised by
Keystone Investment Management Company ("Keystone"), the Fund's investment
adviser.

INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's primary objective is long term growth of capital through
investments in equity and fixed income securities of North America (the United
States and Canada) and Latin America (Mexico and countries in South and
Central America.) As a secondary objective, the Fund seeks current income.

The Fund's investment objective is fundamental and may not be changed
without the vote of a majority of the Fund's outstanding shares (as defined in
the Investment Company Act of 1940 ("1940 Act")).

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

PRINCIPAL INVESTMENTS
Under normal circumstances, the Fund invests at least 65% of its assets in
securities of issuers in Latin America. The Fund normally intends to invest a
majority of its total assets in equity securities. The Fund ordinarily
maintains investments in at least three Latin American countries. For this
purpose, an issuer is deemed to be in Latin America if it is organized under
the laws of a country within that region; its principal securities trading
market is in that region; it derives at least 50% of its revenues or profits
from goods produced or sold, investments made, or services performed in that
region; or it has at least 50% of its assets located in the region. Latin
America includes Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa
Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Uruguay and Venezuela.

Under normal circumstances, the Fund invests at least 20% of its assets in
securities of issuers in the United States ("U.S.") and Canada. Such
investments will be chosen on the basis of their fundamental investment merits
and because of their ability to benefit from increasing real economic growth
in Latin America. Such selections will be made from among companies that (1)
have manufacturing/marketing operations in Latin America; (2) export to Latin
America; (3) manufacture intermediate goods that are then used in final
products that are exported to or sold in Latin America; (4) have a direct
investment in a Latin American company; and/or (5) may benefit from increasing
Latin American standards of living and freer trade as evidenced by increased
tourism to the U.S. (such as members of the airline, hotel and entertainment
industries).

The equity securities in which the Fund may invest include common stock,
preferred stock (convertible or non-convertible), warrants or rights
convertible into common or preferred stock and partly paid stock.

While the Fund focuses on equity securities, the Fund may invest a portion
of its assets in debt securities issued by Latin American or North American
public or private issuers with any rating or that are unrated. The Fund has
authority to invest up to 49% of its total assets in below
investment grade debt securities, i.e., BBB or lower by S&P or Baa or lower by
Moody's. The Fund may also purchase Brady Bonds, which are bonds issued in
exchange for restructured sovereign debt of certain Latin American countries
and collateralized by U.S. government securities and denominated in U.S.
dollars.

OTHER ELIGIBLE INVESTMENTS
When market conditions warrant, the Fund may adopt a defensive position by
investing, without limit, in securities of foreign and domestic public or
private issuers in any industry or money market instruments issued by foreign or
domestic public or private issuers. Such money market instruments, which must
mature within one year of their purchase, consist of short-term debt obligations
issued by foreign corporations, partnerships, or governments or any of their
political subdivisions, agencies or instrumentalities; U.S. government
securities; instruments, including certificates of deposit, demand and time
deposits and bankers' acceptances, of banks that are members of the Federal
Deposit Insurance Corporation and have at least $1 billion in assets as of the
date of their most recently published financial statements, including U.S.
branches of foreign banks and foreign branches of U.S. banks; and prime
commercial paper, including master demand notes.

The Fund may invest in a variety of short-term instruments, including
repurchase agreements, for the purpose of investing cash balances held by the
Fund. The Fund may purchase or sell foreign currency, purchase options on
currency and purchase or sell forward foreign currency exchange contracts to
manage currency exposure. In addition, the Fund may write covered call and put
options on any security in which the Fund may invest. The Fund may, for
hedging purposes, purchase and sell futures contracts and put and call options
on futures contracts. The Fund may purchase securities on a when-issued,
partly paid, or forward commitment basis and may engage in the lending of
portfolio securities.

The Fund is authorized to enter into forward currency exchange contracts if,
as a result, no more than 75% of the value of the investing portfolio would be
committed to the consummation of such contracts; provided, however, that the
Fund has satisfied the requirements imposed by the Securities and Exchange
Commission under the 1940 Act.

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 total
assets.

The Fund may invest in restricted securities, including securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933 (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. The Board of Trustees has
adopted guidelines and procedures pursuant to which Keystone determines the
liquidity of the Fund's Rule 144A securities. The Board of Trustees monitors
Keystone's implementation of such guidelines and procedures.

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 associated risks, see the
sections of this prospectus entitled "Risk Factors" and "Additional Investment
Information" and the statement of additional information.

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

Generally, the Fund may not do the following: (1) invest more than 5% of its
total assets in the securities of any one issuer (other than U.S. government
securities), provided that up to 25% of its total assets may be invested in
securities issued or guaranteed by any single foreign government and up to 10%
of its total assets in securities issued or guaranteed by any single
multinational agency limited in the aggregate to 25% of its total assets; (2)
borrow money except from banks for temporary or emergency purposes in
aggregate amounts up to one-third of the value of its total assets; and (3)
concentrate its investments in any particular industry.

RISK FACTORS
Like any investment, your investment in the Fund involves an element of
risk. Before you invest in the Fund, you should carefully evaluate your
ability to assume the risks your investment in the Fund poses. YOU CAN LOSE
MONEY BY INVESTING IN THE FUND. YOUR INVESTMENT IS NOT GUARANTEED. A DECREASE
IN THE VALUE OF THE FUND'S PORTFOLIO SECURITIES CAN RESULT IN A DECREASE IN
THE VALUE OF YOUR INVESTMENT.

Certain risks related to the Fund are discussed below. To the extent not
discussed in this section, specific risks attendant to individual securities
or investment practices are discussed in "Additional Investment Information"
and in the statement of additional information.

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 long term growth of capital by investing principally in
equity and debt securities of issuers located in North and Latin America. The
yield of the Fund's 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.

FOREIGN RISK IN GENERAL. 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 controls, political or social
instability or diplomatic developments; (8) foreign governments may withhold
income on investments; and (9) 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.

EMERGING MARKETS. Investing in securities of issuers in emerging markets
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 markets 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.

BELOW INVESTMENT GRADE BONDS. The Fund seeks to maximize investment return
to its shareholders over time from a combination of many factors, including
high current income and capital appreciation from investing in high yielding,
high risk bonds and other similar securities commonly referred to as "junk
bonds." Realizing this objective involves risks that are greater than the
risks of investing in higher quality debt securities and may result in greater
upward and downward movements in the net asset value per share of the Fund.
These risks should be carefully considered by investors. These risks are
discussed in greater detail below and include risks from interest rate
fluctuations; changes in credit status, including weaker overall credit
condition of issuers and risks of default; industry, market and economic risk;
volatility of price resulting from broad and rapid changes in the value of
underlying securities; and greater price variability and credit risks of
certain high yield, high risk securities such as zero coupon bonds and PIKs.

While investment in the Fund provides opportunities to maximize return over
time, investors should be aware of the following risks associated with below
investment grade bonds:

(1) Securities rated BB or lower by S&P or BA or lower by Moody's are
considered predominantly speculative with respect to the ability of the issuer
to meet principal and interest payments.

(2) The lower ratings of certain securities held by the Fund reflect a
greater possibility that adverse changes in the financial condition of the
issuer or in general economic conditions, or both, or an unanticipated rise in
interest rates may impair the ability of the issuer to make payments of
interest and principal, especially if the issuer is highly leveraged. Such
issuer's ability to meet its debt obligations may also be adversely affected
by specific corporate developments, the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
Also, an economic downturn or an increase in interest rates may increase the
potential for default by the issuers of these securities.

(3) The value of certain securities held by the Fund may be more susceptible
to real or perceived adverse economic, company or industry conditions and
publicity than is the case for higher quality securities.

(4) The values of certain securities, like those of other fixed income
securities, fluctuate in response to changes in interest rates. When interest
rates decline, the value of a portfolio invested in bonds can be expected to
rise. Conversely, when interest rates rise, the value of a portfolio invested
in bonds can be expected to decline. For example, in the case of an investment
in a fixed-income security, if interest rates increase after the security is
purchased, the security, if sold prior to maturity, may return less than its
cost. The prices of below investment grade bonds, however, are generally less
sensitive to interest rate changes than the prices of higher-rated bonds;
below investment grade bonds are more sensitive to adverse or positive
economic changes or individual corporate developments.

(5) The secondary market for certain securities held by the Fund may be less
liquid at certain times than the secondary market for higher quality debt
securities, which may have an adverse effect on market price and the Fund's
ability to dispose of particular issues and may also make it more difficult
for the Fund to obtain accurate market quotations for purposes of valuing its
assets.

(6) Zero coupon bonds and PIKs involve additional special considerations.
Zero coupon bonds do not require the periodic payment of interest. PIK bonds
are debt obligations that provide that the issuer may, at its option, pay
interest on such bonds in cash or in the form of additional debt obligations.
Such investments may experience greater fluctuation in value due to changes in
interest rates than debt obligations that pay interest currently. Even though
these investments do not pay current interest in cash, the Fund is nonetheless
required by tax laws to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, the Fund
could be required at times to liquidate investments in order to fulfill its
intention to distribute substantially all of its net income as dividends.

The generous income sought by the Fund is ordinarily associated with
securities in the lower rating categories of the recognized rating agencies or
with securities that are unrated. Such securities are generally rated BB or
lower by S&P or BA or lower by Moody's. The Fund may invest in securities that
are rated as low as D by S&P and C- by Moody's. For a description of these
rating categories see "Additional Investment Information." The Fund intends to
invest in D rated debt only in cases when, in Keystone's judgment, there is a
distinct prospect of improvement in the issuer's financial position as a
result of the completion of reorganization or otherwise. The Fund may also
invest in unrated securities which, in Keystone's judgment, offer comparable
yields and risks to those of securities that are rated, as well as in non-
investment quality zero coupon bonds or PIK securities.

Since the Fund takes an aggressive approach to investing, Keystone tries to
maximize the return by controlling risk through diversification, credit
analysis, review of sector and industry trends, interest rate forecasts and
economic analysis. Keystone's analysis of securities focuses on factors such
as interest or dividend coverage, asset values, earnings prospects and the
quality of management of the company. In making investment recommendations,
Keystone also considers current income, potential for capital appreciation,
maturity structure, quality guidelines, coupon structure, average yield,
percentage of zeros and PIKs, percentage of non-accruing items and yield to
maturity. Keystone considers the ratings of Moody's and S&P assigned to
various securities, but does not rely solely on such ratings because (1)
Moody's and S&P assigned ratings are based largely on historical financial
data and may not accurately reflect the current financial outlook of
companies, and (2) there can be large differences among the current financial
conditions of issuers within the same rating category.

Income and yields on high yield, high risk securities, as on all securities,
will fluctuate over time.

The following table shows the weighted average percentages of the Fund's
assets invested at the end of each month from November 1, 1994 until fiscal
year ended October 31, 1995 in securities assigned to the various rating
categories by S&P and in unrated securities determined by Keystone to be of
comparable quality. Since the percentages in this table are based on month-end
averages throughout the Fund's fiscal year, they do not reflect the Fund's
holdings at any one point in time. The percentages in each category may be
higher or lower on any day than those shown in the table.

*UNRATED SECURITIES
RATED OF COMPARABLE
SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
- ---- ----------------- -------------------

AAA 0% 0%
AA 0% 0%
A 0% 0%
BBB 0% 0%
BB 14.95% 3.54%
B 0% 16.46%
CCC 0% 0%
CC 0% 0%
C 0% 0%
CA 0% 0%
Unrated* 20.00%
U.S. governments,
cash, equities
and others 65.05%
-------
TOTAL 100.00%
-------

GENERAL. 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.

PRICING SHARES
The net asset value of a share of the Fund 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 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.

Current values for the Fund's North American securities are determined as
follows:

1. securities that are traded on a national securities exchange or on the
over-the-counter National Market System ("NMS") are valued on the basis of
the last sales price on the exchange where primarily traded or NMS prior to
the time of the valuation, provided that a sale has occurred and that this
price reflects current market value according to procedures established by
the Board of Trustees;

2. securities traded in the over-the-counter market, other than NMS, for
which market quotations are readily available, are valued at the mean of the
bid and asked prices at the time of valuation;

3. instruments having maturities of more than sixty days for which market
quotations are readily available are valued at current market value; where
market quotations are not available, such instruments are valued at fair
value as determined by the Board of Trustees;

4. instruments that are purchased with maturities of sixty days or less
(including all master demand notes) 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;
instruments 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; and that in either case reflects fair value as determined by the
Fund's Board of Trustees; and

5. the following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Trustees: (a) securities,
including restricted securities, for which complete quotations are not
readily available, (b) listed securities or those on NMS if, in the Fund's
opinion, the last sales price does not reflect a current market value or if
no sale occurred, and (c) other assets.

Each Latin American country in whose equity securities the Fund invests has
at least one stock exchange. Many of the equity securities in which the Fund
invests are traded on these exchanges and have readily available market
quotations. The Fund may participate in direct purchases from a Latin American
government of equity securities resulting from the privatization of government
owned entities. In such purchases, the government accepts the highest bid from
a group of purchasers (including the Fund) for the entire interest in the
entity. The initial value of the Fund's investment is its pro rata share of
the successful bid; thereafter, market quotations may not be readily
available.

Foreign securities for which market quotations are not readily available are
valued on the basis of valuations provided by a pricing service, approved by
the Fund's Board of Trustees, which uses information with respect to
transactions in such securities, quotations from broker-dealers, market
transactions in comparable securities and various relationships between
securities and yield to maturity in determining value.

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.
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.

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.

The Fund will make distributions from its net investment income quarterly,
and net capital gains, if any, 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
than those attributable to Class A shares, 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.

If more than 50% of the value of the Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and the Fund
elects to make foreign tax credits available to its shareholders, a
shareholder will be required to include in his gross income both actual
dividends and the amount the Fund advises him is his pro rata portion of
income taxes withheld by foreign governments from interest and dividends paid
on the Fund's investments. The shareholder will be entitled, however, to take
the amount of his share of such foreign taxes withheld as a credit against his
United States income tax, or to treat his share of the foreign tax withheld as
an itemized deduction from his gross income, if that should be to his
advantage. In substance, this policy enables the shareholder to benefit from
the same foreign tax credit or deduction that he would have received if he had
been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the above described tax credit and deductions
are subject to certain limitations.

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 ADVISER
Keystone, located at 200 Berkeley Street, Boston, Massachusetts 02116-5034,
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"), located at
200 Berkeley Street, Boston, Massachusetts 02116-5034.

Keystone Investments is a private corporation predominantly owned by current
and former members of management 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, Ralph J. Spuehler, Jr. and Rosemary D. Van
Antwerp. Keystone Investments provides accounting, bookkeeping, legal,
personnel and general corporate services to Keystone, its affiliates and the
Keystone Investments Family of Funds.

Pursuant to its Investment Advisory and Management Agreement with the Fund
(the "Advisory Agreement"), Keystone manages the investment and reinvestment of
the Fund's assets, supervises the operation of the Fund, provides all necessary
office space, facilities, equipment and personnel and arranges, at the request
of the Fund, for its em- ployees to serve as officers or agents of the Fund.

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

Aggregate Net Asset
Management Value of the Shares
Fee of the Fund
- ------------------------------------------------------------------------------
0.75% of the first $200,000,000, plus
0.65% of the next $200,000,000, plus
0.55% of the next $200,000,000, plus
0.45% of amounts over $600,000,000

Keystone's fee is computed as of the close of business on each business day
and payable daily.

For the year ended October 31, 1995, the Fund paid or accrued to Keystone
investment management and administrative services fees of $1,099,920, which
represented 0.75% of the Fund's average net assets.

A management fee of 0.75% is higher than that paid by most other investment
companies. However, the Fund's fee structure is comparable to that of other
global and international funds subject to the higher costs involved in
managing a portfolio of predominantly international securities.

The Advisory Agreement continues 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 Advisory Agreement and continuance
thereof must be approved by the vote of a majority of Independent Trustees
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement may be terminated, without penalty, on 60 days' written
notice by the Fund or Keystone. The Advisory Agreement will terminate
automatically upon its assignment.

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

PORTFOLIO MANAGER
Gilman C. Gunn is the Fund's portfolio manager. Mr. Gunn is a Keystone Senior
Vice President and Senior Portfolio Manager and head of Keystone's International
Group. He has more than 23 years investment experience.

FUND EXPENSES
The Fund will pay all of its expenses. In addition to the investment advisory
and management fees discussed herein, the principal expenses the Fund is
expected to pay include, but are not limited to, its pro rata portion of certain
Trustees' fees; the Fund's transfer, dividend disbursing and shareholder
servicing agent expenses; the Fund's custodian expenses; fees of the Fund's
independent auditors; fees of legal counsel to the Fund's Independent Trustees;
fees payable to government agencies, including registration and qualification
fees attributable to 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 October 31, 1995, including indirectly paid
expenses, the Fund's Class A, Class B and Class C shares paid 1.86%, 2.61% and
2.61%, respectively, of their respective average class net assets in expenses.

During the fiscal year ended October 31, 1995, the Fund paid or accrued to
Keystone Investor Resource Center, Inc. ("KIRC"), the Fund's transfer and
dividend disbursing agent and Keystone Investments, $19,208 for certain
accounting and printing services and $656,071 for shareholder services,
respectively. KIRC is a wholly-owned subsidiary of Keystone.

SECURITIES TRANSACTIONS
Under policies established by the Fund's Board of Trustees, the Fund's
advisers select broker-dealers to execute transactions subject to the receipt
of best execution. When selecting broker-dealers to execute portfolio
transactions, the Fund's advisers 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, 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 rate for the fiscal years ended October 31,
1994 and 1995 were 104% and 57%, respectively. High portfolio turnover may
involve correspondingly greater brokerage commissions and other transaction
costs, which would be borne directly by the Fund, as well as additional 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 (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, by direct deposit 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 applicable 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.

Orders for shares received, other than as stated above, will receive the
offering price equal to the net asset value per share next determined
(generally the next business day's offering price) plus, in the case of Class
A shares, the sales charge.

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.

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
The Fund offers Class A, B, and C 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 or certain
other qualified retirement plan or a non-qualified deferred compensation plan
or a Title I tax sheltered annuity or TSA plan sponsored by an organization
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.

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
from and including 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:
AS A % OF CONCESSION TO
AS A % OF NET AMOUNT DEALERS AS A % OF
AMOUNT OF PURCHASE OFFERING PRICE INVESTED* OFFERING PRICE
- ------------------------------------------------------------------------------
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%
- ----------
*Rounded to the nearest one-hundredth percent.
----------------------------------------------
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 or a TSA plan
sponsored by a public educational organization having 5,000 or more eligible
employees (an "Educational TSA 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.

With the exception of Class A shares acquired by an Educational TSA Plan in
an NAV Purchase, as described above, 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. Class A shares acquired by an Educational
TSA Plan in an NAV Purchase are not subject to a contingent deferred sales
charge.

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 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 that are offered in connection with certain fee based programs, such as
wrap accounts sponsored or managed by broker-dealers, investment advisers or
others 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 when
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.

In addition, 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 when 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. This special net asset value purchase is currently
offered only on a calendar month by month basis and may be modified or
terminated in the future.

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 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 .................... 5.00%
Second twelve month period ................... 4.00%
Third twelve month period .................... 3.00%
Fourth twelve month period ................... 3.00%
Fifth twelve month period .................... 2.00%
Sixth twelve month period .................... 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 Charge and Waiver
of Sales Charges" below.

Class B shares purchased on or after June 1, 1995 that have been outstanding
for eight years from and including 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 12 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 on the books of the Fund for
specified periods. See "Distribution Plans" below.

Such payments will be made to those dealers and others selling such shares
who pay to their registered representatives making such sales a portion of the
additional amount payable under this special dealer offer, determined in
accordance with their regular payment arrangements with such persons for sales
not made under a special dealer offer.

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 Charge 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 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; (4)
Class B shares held more than four consecutive calendar years or more than 72
months, as the case may be; or (5) Class C shares held for more than one year.
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 that 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. For Class B shares sold prior to June 1, 1995,
unreimbursed distribution expenses at October 31, 1995 were $7,781,573 (8.00%
of such Class B net assets at October 31, 1995). For Class B shares sold on or
after June 1, 1995, unreimbursed distribution expenses at October 31, 1995
were $102,704 (0.11% of such Class B net assets at October 31, 1995).
Unreimbursed distribution expenses at October 31, 1995 for Class C shares were
$1,135,932 (10.10% of Class C net assets at October 31, 1995).

For the fiscal year ended October 31, 1995, the Fund paid the Principal
Underwriter $44,881, $1,151,149 ($1,147,012 with respect to Class B shares
sold prior to June 1, 1995 and $4,137 with respect to Class B shares sold on
or after June 1, 1995) and $136,477 pursuant to its Class A, Class B and Class
C Distribution Plans, respectively.

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 up to
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, except as noted below, 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.

Class B shares purchased on or after June 1, 1995 cannot be exchanged for
Class B shares of Keystone Capital Preservation and Income Fund during the 24
month period commencing with and including the month of purchase.

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

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

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

(3) 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. eastern time 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. eastern time
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.

AUTOMATIC INVESTMENT PLAN
With a Keystone Automatic Investment Plan, you can automatically transfer as
little as $100 per month or quarter from your bank account or KLT to the
Keystone fund of your choice. Your bank account will be debited for each
transfer. You will receive confirmatiion with your next account statement.

To establish or terminate an Automatic Investment Plan or to change the
amount or schedule of your automatic investments, you may write to or call
Keystone. Please include your account numbers. Termination may take up to 30
days.

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); Salary Reduction Plans (SARSEPs); Tax Sheltered
Annuity Plans (TSAs); 403(b) (7) Plans; 401(k) Plans; Keogh Plans; Corporate
Profit-Sharing Plans; and Money Purchase Plans. For details, including fees
and application forms, call toll free 1-800-247-4075 or write to KIRC.

SYSTEMATIC INCOME PLAN
Under a Systematic Income 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 Systematic Income 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 Systematic Income
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
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 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
The Fund issues Class A, B, and C shares, which participate proportionately
based on their relative net asset values 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 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 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 Declaration of Trust of the Fund, 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. As
prescribed by Section 16(c) of the 1940 Act, shareholders may be eligible for
shareholder communication assistance in connection with the special meeting.

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.

CORPORATE BOND RATINGS
Higher yields are usually available on securities that are lower rated or
that are unrated. Bonds rated Baa by Moody's are considered as medium grade
obligations which are neither highly protected nor poorly secured. Debt rated
BBB by S&P is regarded as having an adequate capacity to pay interest and
repay principal, although adverse economic conditions 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. Lower rated securities are usually
defined as Baa or lower by Moody's or BBB or lower by S&P. The Fund may
purchase unrated securities, which are not necessarily of lower quality than
rated securities but may not be attractive to as many buyers. Debt rated BB,
B, CCC, CC and C by S&P is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay principal in accordance
with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposure to adverse conditions. Debt rated C1 by S&P is debt
(income bonds) on which no interest is being paid. Debt rated D by S&P is in
default and payment of interest and/or repayment of principal is in arrears.
The Fund intends to invest in D-rated debt only in cases where in Keystone's
judgment there is a distinct prospect of improvement in the issuer's financial
position as a result of the completion of reorganization or otherwise. Bonds
which are rated Caa by Moody's are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest. Bonds which are rated Ca by Moody's represent obligations which
are speculative in a high degree. Such issues are often in default or have
other market shortcomings. Bonds which are rated C by Moody's are the lowest
rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.

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. Examples of
governmental actions would be the imposition of currency controls, interest
limitations, withholding taxes, seizure of assets or the declaration of a
moratorium. 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.
Master demand notes may permit daily fluctuations in the interest rate and
daily changes in the amounts borrowed. 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 purchased by the Fund permit the
Fund to demand payment of principal and accrued interest at any time (on not
more than seven days notice) and to resell the note at any time to a third
party. 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 are 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 will 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 the Fund's 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 current market
rate of interest that (for purposes of the transaction) is generally 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 to cover such amount. The
Fund may enter into such agreements only with respect to U.S. government and
foreign government securities, which may be denominated in U.S. or foreign
currencies. The Fund may enter into such repurchase agreements with foreign
banks and securities dealers approved in advance by the Fund's Trustees.
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 an increase in
the market value of the underlying securities or inability of the repurchaser
to perform its obligation to repurchase coupled with an uncovered decline in
the market value of the collateral, including the underlying securities, as
well as delay and costs to the Fund in connection with enforcement or
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 the Fund's advisers.

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 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 Securities and Exchange Commission has taken
the position that a full secured or collateralized reverse repurchase is not
subject to the percentage limit on borrowings imposed under Section 18 of the
1940 Act.

FOREIGN SECURITIES
The Fund may invest 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,
particularly emerging market country companies, 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).

ZERO COUPON BONDS
A zero coupon (interest) "stripped" bond represents ownership in serially
maturing interest or principal payments on specific underlying notes and
bonds, including coupons relating to such notes and bonds. The interest and
principal payments are direct obligations of the issuer. These bonds mature on
the payment dates of the interest or principal which they represent. Each zero
coupon bond entitles the holder to receive a single payment at maturity. There
are no periodic interest payments on a zero coupon bond. Zero coupon bonds are
offered at discounts from their face amounts.

In general, owners of zero coupon bonds have substantially all the rights
and privileges of owners of the underlying coupon obligations or principal
obligations. Owners of zero coupon bonds have the right upon default on the
underlying coupon obligations or principal obligations to proceed directly and
individally against the issuer and are not required to act in concert with
other holders of zero coupon bonds.

For federal income tax purposes, a purchaser of principal zero coupon bonds
(either initially or in the secondary market) is treated as if the buyer had
purchased a corporate obligation issued on the purchase date with an original
issue discount equal to the excess of the amount payable at maturity over the
purchase price. The purchaser is required to take into income each year as
ordinary income an allocaable portion of such discounts determined on a
"constant yield" method. Any such income increases the holder's tax basis for
the zero coupon bond, and any gain or loss on a sale of the zero coupon bonds
relative to the holder's basis, as so adjusted, is a capital gain or loss. If
the holder owns zero coupon bonds representing separate interests in the
coupon (interest) payments and the principal payments from the same underlying
issue of securities, a special basis allocation rule (requiring the aggregate
basis to be allocated among the items sold and retained based on their
relative fair market values at the time of sale) may apply to determine the
gain or loss on a sale of any such zero coupon bonds.

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 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."

PAYMENT-IN-KIND SECURITIES
Payment-in-kind securities pay interest in either cash or additional
securities, at the issuer's option, for a specified period. The issuer's
option to pay in additional securities typically ranges from one to six years
compared to an average maturity for all PIK securities of eleven years. Call
protection and sinking fund features are comparable to those offered on
traditional debt issues.

PIKs, like zero coupon bonds, are designed to give the issuer flexibility in
managing cash flow. Several PIKs are senior debt. In other cases, where PIKs
are subordinated, most senior lenders view them as equity equivalents.

An advantage of PIKs for the issuer -- as with zero coupon securities -- is
that interest payments are automatically compounded (reinvested) at the stated
coupon rate, which is not the case with cash-paying securities. However, PIKs
are gaining popularity over zeros since interest payments in additional
securities can be monetized and are more tangible than accretion of a
discount.

As a group, PIK bonds trade flat (i.e., without accrued interest). Their
price is expected to reflect an amount representing accreted interest since
the last payment. PIKs generally trade at higher yields than comparable cash-
paying securities of the same issuer. Their premium yield is the result of the
lesser desirability of non-cash interest, the more limited audience for non-
cash paying securities, and the fact that many PIKs have been issued to equity
investors who do not normally own or hold such securities.

Calculating the true yield on a PIK security requires a discounted cash flow
analysis if the security (ex interest) is trading at a premium or a discount
because the realizable value of additional payments is equal to the current
market value of the underlying security, not par.

Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their
most costly form of capital.

CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. These securities, which
include bonds, debentures, corporate notes, preferred stocks and other
securities, are securities which 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 that 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.

LOANS OF SECURITIES
The Fund may lend its securities to broker-dealers or other institutional
borrowers for use in connection with such borrowers' 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 the Fund's advisers to be of good standing and will not be made
unless, in the judgment of the advisers, 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 SEC
that the Fund 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.

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.

* Leverage Risk -- Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is
related to a notional principal amount, even if the parties have not made
any initial investment. Certain derivatives have the potential for unlimited
loss, regardless of the size of the initial investment.

* Other Risk -- Other risks in using derivatives include the risk of
mispricing or improper valuation and the inability of derivatives to
correlate perfectly with underlying assets, rates and indices. Many
derivatives; in particular, privately negotiated derivatives, are complex
and often valued subjectively. Improper valuations can result in increased
cash payment requirements to counterparties or a loss of value to a Fund.
Derivatives do not always perfectly or even highly correlate or track the
value of the assets, rates or indices they are designed to closely track.
Consequently, the Fund's use of derivatives may not always be an effective
means of, and sometimes could be counterproductive to, furthering the Fund's
investment objective.

OPTIONS TRANSACTIONS
WRITING COVERED OPTIONS. The Fund may write (i.e., sell) covered call and
put options. No more than 25% of the Fund's 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 which are
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 the Fund's 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, and 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 or put options for the
purpose of offsetting previously written put or call options of the same
series.

The Fund would normally purchase call options to hedge against an increase
in the market value of the Fund's securities. 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). The Fund
will not engage in such transactions for speculation. The purchase of a put
option would entitle the Fund, in exchange for the premium paid, to sell
specified securities at a specified price, upon exercise of the option, during
the option period. 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. 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. Currently, only
options on stock indices are traded and only on national exchanges. 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. The Fund's purchases of securities index options is
subject to the risk that the value of its portfolio securities may not change
as much as an index because the Fund's investments generally cannot match
exactly the composition of an index.

An option position may be closed out only in a secondary market for an
option of the same series. Although the Fund will generally write only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option
at any particular time, and for some options no secondary market may exist. In
such event it might not be possible to effect a closing transaction in a
particular option.

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 in which the Fund will trade are generally listed on national
securities exchanges. Exchanges on which such options currently are traded
include the Chicago Board Options Exchange and the New York, American, Pacific
and Philadelphia Stock Exchanges. Options on some securities may not be listed
on any Exchange but traded in the over-the-counter market. Options traded in
the over-the-counter market involve the additional risk that securities
dealers participating in such transactions could fail to meet their
obligations to the Fund. The use of options traded in the over-the-counter
market may be subject to limitations imposed by certain state securities
authorities.

The staff of the Securities and Exchange Commission is of the view that the
premiums which the Fund pays for the purchase of unlisted options and the
value of securities used to cover unlisted options written by the Fund are
considered to be invested in illiquid securities or assets for the purpose of
calculating whether the Fund is in compliance with its fundamental investment
restriction prohibiting it from investing more than 10% of its total assets in
any combination of illiquid assets and securities. The Fund currently complies
with the position taken by the Securities and Exchange Commission staff that
the premiums which the Fund pays for the purchase of unlisted options and the
value of securities used to cover unlisted options written by the Fund are
considered to be invested in illiquid securities or assets.

FUTURES TRANSACTIONS
The Fund may enter into futures contracts for the purchase or sale of
securities or currencies or futures contracts based on securities indices and
may 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. 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 which 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 or
currencies increased and to fall when the value of such securities or
currencies declined. The Fund intends to purchase futures contracts in order
to fix what is believed by its advisers to be a favorable price and rate of
return for securities or favorable exchange rate for currencies the Fund
intends to purchase.

The Fund also may 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.

In addition, 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, interest rate or exchange rate risk, unanticipated changes in
interest rates, exchange rates or market prices could result in poorer
performance than if it had not entered into these transactions. Even if the
Fund's advisers correctly predict interest or exchange rate 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 or currencies positions
may be caused by differences between the futures and securities or currencies
markets or by differences between the securities or currencies underlying the
Fund's futures position and the securities or currencies held by or to be
purchased for the Fund. In addition, futures contracts transactions involve
the remote risk that a party participating in a transaction will not be able
to fulfill its obligations and the amount of the obligation will exceed the
ability of the clearing broker to satisfy. The advisers 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 or
leverage. 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. The Fund will not
change these policies without supplementing the information contained in its
prospectus and statement of additional information.

FOREIGN CURRENCY TRANSACTIONS
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 and 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 its advisers'
abilities 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.

"WHEN ISSUED" AND "FORWARD COMMITMENT" TRANSACTIONS
The Fund may purchase newly issued securities on a when issued and delayed
delivery basis and may purchase or sell securities on a forward commitment
basis. When issued or delayed delivery transactions arise when securities are
purchased 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. A forward commitment
transaction is an agreement by the Fund to purchase or sell securities at a
specified future date. When the Fund engages in these 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 and forward commitment 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
purchase commitments will be maintained until payment is made.
<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. Only Class A shares
subject to an initial or deferred sales charge are eligible for inclusion in
the reduced sales charge program.

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>
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KEYSTONE AMERICA
FUND FAMILY

Balanced Fund II
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
Global Resources and Development Fund
Small Company Growth Fund II

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[Logo] KEYSTONE
INVESTMENTS

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

FOA-P Sup 9/96 [Recycle Logo]
8M

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KEYSTONE

FUND OF THE
AMERICAS

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PROSPECTUS AND
APPLICATION