KAYNE ANDERSON MUTUAL FUNDS

                        Supplement dated November 8, 1999
                         to Prospectus dated May 5, 1999


TO SHAREHOLDERS OF THE KAYNE ANDERSON CALIFORNIA TAX-FREE BOND FUND
(FORMERLY, THE KAYNE ANDERSON INTERMEDIATE TAX-FREE BOND FUND)

On  November 4, 1999,  the  shareholders  of this Fund  approved a change to its
fundamental investment objective to seek current income exempt from both federal
and California  personal income taxes by investing primarily in investment-grade
municipal bonds.

Instead of investing its assets in investment-grade municipal bonds and notes of
any state, the Fund invests primarily in investment-grade  California  municipal
bonds and notes. Even though the Fund will continue to invest its assets so that
at least 80% of its assets will generate  income exempt from federal  income tax
and the federal  alternative  minimum tax, it will in addition to that  strategy
invest at least 65% of its total assets in California municipal securities.  The
quality of the bonds and notes to be purchased,  however,  will not change.  The
Fund will  continue  to invest  at least 90% of its  assets in  investment-grade
securities.

You should purchase shares of a California municipal bond fund only if you are a
California  resident or are otherwise  subject to California  income tax so that
you may fully benefit from the tax-free nature of the income.

Also,  you  should  understand  that  the  Fund's  concentration  in  California
municipal bonds may expose  shareholders to additional  risks compared to a fund
that invests in municipal bonds from many states.  In particular,  the Fund will
be  vulnerable to any  development  in  California's  economy that may weaken or
jeopardize the ability of California  municipal-bond issuers to pay interest and
principal on their bonds.  The Fund's objective is to provide income exempt from
federal and California  State personal income taxes,  but some of its income may
be subject to the alternative minimum tax.

Additional risks associated with the Fund's change of investment  objective to a
California tax-free fund and its related change to a non-diversified mutual fund
include the following:

CREDIT RISK: Although the Fund invests primarily in investment-grade securities,
these  securities may have some credit risk.  Some issuers may not make payments
on the municipal or other debt securities held by the Fund. For example,  Orange
County  declared   bankruptcy  in  December  1994.  Or,  an  issuer  may  suffer
deterioration in its financial  condition that could lower the credit quality of
a security,  leading to greater  volatility  in the price of the security and in
shares of the Fund.  As further  examples,  several  regions of  California  are
highly vulnerable to earthquakes, which could strike and create financial stress
for a  municipality.  California's  economic  dependence  on trade with weakened
Asian countries could also result in municipal financial problems. A decrease in
the quality  rating of a bond can affect the bond's  liquidity  and make it more
difficult  for the Fund to sell the bond at what the Adviser  believes is a fair
price.

POLITICAL RISK: There are special factors that may affect the value of municipal
securities  and, as a result,  the Fund's share  price.  These  factors  include
political or legislative changes, uncertainties related to the tax status of the
securities or the rights of investors in the securities.  California has several
Constitutional and statutory limits on municipal taxing powers that can restrict
the ability of municipal  authorities to generate revenue to pay interest due on
bonds.

LACK OF DIVERSIFICATION:  The Fund is not diversified, which means it may invest
a  relatively  high  percentage  of its assets in the  obligations  of a limited
number of issuers.  As a result,  the Fund may be more susceptible to any single
economic,  political or  regulatory  occurrence.  The Fund is also  particularly
susceptible to events affecting issuers in California.  In particular,  the Fund
will be vulnerable to any development in California's economy that may weaken or
jeopardize the ability of California  municipal-bond issuers to pay interest and
principal on their bonds.  As a result,  the Fund's  shares may  fluctuate  more
widely in value than those of a fund investing in municipal  bonds from a number
of  different  states.  You should  consider  the greater risk of investing in a
single state fund compared to more diversified mutual funds.

The Fund will not be available  for sale in the following  states:  Connecticut,
Montana, North Dakota, Nebraska and Rhode Island.