<PAGE> PAGE 1
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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 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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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 15
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<PAGE> PAGE 16
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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
Shareholders and Board of Trustees of
Kayne Anderson Mutual Funds
Los Angeles, California
In planning and performing our audit of the financial statements of Kayne
Anderson Mutual Funds (comprising, respectively, the Rising Dividends Fund,
the Small 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, 1998, we considered its internal
control, including control activities 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 internal control.
The management of the Fund is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits and related costs
of controls. Generally, controls that are relevant to an audit pertain to
the entity's objective or preparing financial statements for external
purposes that are fairly presented in conformity with generally accepted
accounting principles. Those controls include the safeguarding of assets
against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, error or fraud may
occur and not be detected. Also, projection of any evaluation of internal
control 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 internal control would not necessarily disclose all
matters in the internal control 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 one or more of the internal control components does not reduce
to a relatively low level the risk that misstatements caused by error or
fraud 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 internal control,
including controls for safeguarding securities, that we consider to be
material weaknesses, as defined above, as of December 31, 1998.
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
Philadelphia, Pennsylvania
January 22, 1999
