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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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<PAGE> PAGE 12
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<PAGE> PAGE 13
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<PAGE> PAGE 14
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<PAGE> PAGE 16
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<PAGE> PAGE 17
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<PAGE> PAGE 18
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<PAGE> PAGE 19
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<PAGE> PAGE 20
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SIGNATURE RITA DAM
TITLE ASSISTANT TREASURER
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON INTERNAL CONTROL STRUCTURE
Board of Trustees
Kayne Anderson Mutual Funds
Los Angeles, California
In planning and performing our audits of the financial statements of Kayne
Anderson Mutual Funds (comprising, respectively, the Rising Dividends Fund,
the Small-Mid Cap Rising Dividends Fund, the International Rising Dividends
Fund, the Intermediate Total Return Bond Fund, and the Intermediate Tax-
Free Bond Fund) for the year ended December 31, 1997, we considered their
internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the purpose
of expressing our opinion on the financial statements and to comply with
the requirements of Form N-SAR, not to provide assurance on the internal
control structure.
The management of the Trust is responsible for establishing and maintaining
an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets
are safeguarded against loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in
conformity with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that
it may become inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a condition in
which the design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation to the
financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the internal
control structure, including procedures for safeguarding securities, that
we consider to be material weaknesses, as defined above, as of December 31,
1997.
This report is intended solely for the information and use of management
and the Securities and Exchange Commission, and should not be used for any
other purpose.
/s/Briggs, Bunting & Dougherty, LLP
Briggs, Bunting & Dougherty, LLP
Philadelphia, Pennsylvania
January 27, 1998
SUB-ITEM 77K: Changes in registrant's certifying accountant.
Effective August 7, 1997, the Registrant's Board of Trustees selected the
accounting firm of Briggs, Bunting & Dougherty, LLP to serve as the
Registrant's independent certified public accountants for the fiscal year
ended December 31, 1997 subject to the resignation of Tait, Weller & Baker
accordance with Section 32(a)(2) of the Investment Company Act of 1940.
Tait, Weller & Baker resigned as the Registrant's independent certified
public accountants on September 12, 1997. Tait, Weller & Baker had served as
the Registrant's independent certified public accountants for the
Registrant's initial fiscal year ended December 31, 1996. Tait, Weller &
Baker's report on the financial statements of the Registrant for the fiscal
year ended December 31, 1996 did not contain an adverse opinion or disclaimer
of opinion or was not qualified or modified as to uncertainty, audit scope or
accounting principles. There were no disagreements with Tait, Weller & Baker
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure during the fiscal year ended
December 31, 1996 or for the interim period from January 1, 1997 through the
date of their resignation.
The Registrant represents that it had not consulted with Briggs, Bunting &
Dougherty, LLP at any time prior to their engagement with respect to the
application of accounting principles to a specified transaction, either
completed or proposed; or to the type of audit opinion that might be rendered
on the Registrant's financial statements.
February 25, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Re: Kayne Anderson Mutual Funds
File No. 811-7705
Dear Sir or Madam:
We have read item 77K of the Form N-SAR of Kayne Anderson Mutual Funds for
the period ended December 31, 1997, and agree with the statements contained
therein.
Very truly yours,
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
