KAYNE ANDERSON MUTUAL FUNDS


                       Supplement dated September 22, 1998
                         to Prospectus dated May 1, 1998



For shareholders and prospective shareholders of the
      Kayne Anderson Small-Mid Cap Rising Dividends Fund only:

         Beginning  September 22, 1998,  this Fund changed its name to the Kayne
Anderson Small Cap Rising  Dividends Fund. This Fund's  investment  objective of
long-term   capital   appreciation,   with   dividend   income  as  a  secondary
consideration,  has not changed. The Adviser will continue to follow its "rising
dividends" philosophy for the Fund.

         Under normal  market  conditions,  the Fund will now seek to maintain a
weighted average market capitalization within the range for small capitalization
companies,  but typically at the very highest segment of the range. As stated in
the prospectus,  the Adviser currently considers small cap companies to be those
companies having market capitalizations up to approximately $1 billion.

         Because the Fund will seek to maintain an average market capitalization
for its portfolio  companies of  approximately  $1 billion,  fluctuations in the
market value for some of those portfolio companies may cause this Fund to exceed
(or fall below)  that target  temporarily.  The Fund  remains  able to invest in
companies  having  market  capitalizations  of up to $3 billion  (at the time of
investment) while being mindful of its target portfolio average of approximately
$1 billion.