CORNERCAP GROUP OF FUNDS /VA/, 485APOS, 1996-09-13

CORNERCAP GROUP OF FUNDS /VA/
485APOS, 1996-09-13

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<PAGE>

File Numbers: 33-3149 AND 811-4581

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Post-Effective Amendment No.:12 X

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No.:14 X

(Check appropriate box or boxes)

THE CORNERCAP GROUP OF FUNDS
----------------------------
(Exact Name of Registration as Specified in Charter)

100 Northcreek, Suite 250, 3715 Northside Parkway, NW, Atlanta, GA 30327
-------------------------------------------------------------------------
(Address of Principal Executive Offices)

(404)240-0666
-------------
(Registrant's Telephone Number, including Area Code)

Thomas E. Quinn
100 Northcreek, Suite 250, 3715 Northside Parkway, NW, Atlanta, GA 30327
-------------------------------------------------------------------------
(Name and Address of Agent of Service)

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.

It is proposed that this filing will become effective(check appropriate line).

immediately upon filing pursuant to paragraph (b)
- ----------
on July 29, 1996 pursuant to paragraph (b)
- ----------
60 days after filing pursuant to paragraph (a)
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on pursuant to paragraph (a) of Rule 485.
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X 75 days after filing pursuant to paragraph (a)(2)
- ----------
on (date) pursuant to paragraph (a)(2) of rule 485
- ----------

Registrant registered an indefinite number of securities pursuant to Rule 24f-2
under the Securities Act of 1933. The Registrant will file the Rule 24f-2
Notice for its fiscal year ended March 31, 1997 on or about May 30, 1997.

- --------------------------------------------------------------------------------

Please send copies of communications to:

Reinaldo Pascual, Esq.
Kilpatrick & Cody, L.L.P.
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530

- --------------------------------------------------------------------------------
<PAGE>

PART A

CORNERCAP GROWTH FUND
of
The CornerCapGroup of Funds
A "Series" Investment Company

Shareholder Services Questions Investment Objectives Questions

Voice: (800) 628-4077 Voice: (800) 728-0670
Fax: (804) 285-8018 Fax: (404) 240-0144

The investment objective of the CornerCap Growth
Fund (the "Fund"), a series of the CornerCap Group
of Funds, is to obtain long term capital
appreciation. Income from dividends or interest on
portfolio securities is a secondary objective.
There is no assurance that the Fund will achieve
its objective.

This Prospectus sets forth concisely the
information about the Fund that you should know
before investing in the Fund. You should read it
and keep it for future reference. A Statement of
Additional Information ("SAI") dated July 29, 1996
as may be amended from time to time, containing
additional information about the Fund has been
filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference in this
Prospectus in its entirety. You may obtain a copy
of the SAI without charge by calling (800) 728-0670
or writing the Fund at the following address:
Cornerstone Capital Corp., 100 Northcreek, Suite
250, Atlanta GA, 30327.

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.

The date of this Prospectus is July 29, 1996

<PAGE>

PROSPECTUS SUMMARY

The Fund...............The Fund is a diversified open-end management investment
company (see page 7). The shares of the Fund are offered
without sales or redemption charges (see page 3).

Investment Objective...The Fund's investment objective is to obtain long-term
capital appreciation. The Fund will attempt to achieve
its objective by investing in equity securities of
domestic and foreign issuers. There can be no assurance
that the Fund will achieve its investment objective
(see page 7).

Investment Policies....The Fund will invest in common stocks, preferred stocks,
and convertible securities selected by Cornerstone
Capital Corp. (the "Advisor") from among 1500 issues
ranked according to fundamental factors, such as relative
price/earnings ratio, earnings growth rate, and cash flow
(see page 8).

Investment Advisor.....Cornerstone Capital acts as the investment advisor to the
Fund. In that capacity, it selects the portfolio
holdings. (see page 9).

Custodian.............The Trust Department of Wachovia Bank of N.C. (the
"Custodian") holds the Fund's assets.

Administration........Funds Services, Inc. is the Transfer Agent (see page 10),
Commonwealth Fund Accounting, Inc. calculates the daily
net asset value (see page 11), and Cornerstone Capital
Corp. provides certain administrative, record keeping
and shareholder servicing services (see page 10).

Dividends &
Distributions.....The Fund currently intends to make at least one
distribution of any net income or capital gains during each
calendar year (see page 15).

Minimum Purchase.....The minimum initial investment is $2,000 and the minimum
subsequent investment in the Fund is $250 (see page 12).

Redemption...........Shares of the Fund may be redeemed at the next determined
net asset value, without charge (see page 12).

<PAGE>

Summary of Fund Expenses

The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder
will bear directly or indirectly in connection with an investment
in the Fund.

Shareholder Transaction Expenses
- --------------------------------

Maximum sales charge on purchases . . . . . . . . . . . None

Maximum sales charge imposed on reinvested dividends . None

Deferred sales charge . . . . . . . . . . . . . . . . . None

Redemption Fee . . . . . . . . . . . . . . . . . . . . None

Exchange fee . . . . . . . . . . . . . . . . . . . . . None

Estimated Annual Fund Operating Expenses
(as a percentage of average daily net
assets) <F1>
- -----------------------------------------

Management Fee (F1) . . . . . . . . . . . . . . . . . 0.40%

12b-1 Fee (F2) . . . . . . . . . . . . . . . . . . . 0.0%

Other Expenses (F3) . . . . . . . . . . . . . . . . . 1.35%

Total Fund Operating Expenses (F3) . . . . . . . . . 1.75%

(F1) The Fund's investment advisory agreement with the Advisor
provides for compensation to the Advisor at the annual rate
of 1.0% of average daily net assets. The Advisor has
voluntarily agreed to waive all or such portion of its fee as
may be necessary to cause total Fund operating expenses not
to exceed 2.0% of average net assets. For the year ended
March 31, 1996, the Advisor waived .60% of its 1% management
fee.

(F2) The Fund has adopted a Distribution Plan pursuant to which
it may reimburse the Distributor and Advisor for certain
distribution related expenses of the Fund up to an annual
amount of 0.25% of average daily net assets. No
reimbursements have been made under this plan since its
inception.

(F3) "Other expenses" include fees paid to the Fund's
independent accountant, independent trustees, legal counsel,
transfer agent, administrator, custodian and accounting
services agent. "Other expenses" also include s costs
associated with registration fees, reports to shareholders,
and other miscellaneous expenses. The Advisor has
voluntarily agreed to waive its advisory fee and to reimburse
the Fund for certain of its operating expenses to the extent
and for as long as may be necessary to cause total Fund
operating expenses not to exceed 2.0% of average net assets.
In absence of such waiver and reimbursement, total Fund
operating expenses for the year ended March 31, 1996 were
2.35%.

<PAGE>

<TABLE>
<CAPTION>
Hypothetical Example of Fund Expenses 1 Year 3 Years 5 Years 10 Years
------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $18 $55 $95 $206
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period.
</TABLE>

The purpose of this example is to assist investors in
understanding the various costs and expenses which stockholders of
the Fund bear directly and indirectly. The 5% return is
hypothetical and this example should not be considered a
representation of the Fund's past or future performance. The actual
expenses may be greater or less than those shown.

<PAGE>

Financial Highlights
For a share outstanding throughout each period indicated.

The following selected per share data and ratios for each of the five
years in the period ended March 31, 1996 have been examined by Tait,
Weller and Baker, independent Certified Public Accountants, whose report
thereon appears in the Fund's 1996 Annual Report to Shareholders, and is
incorporated by reference into this Prospectus. The selected per share
data and ratios for periods prior to April 1, 1990 were examined by other
auditors whose report dated April 19, 1990 expressed an unqualified
opinion of such per share data and ratios. Total return amounts are not
covered by auditors' reports.

<TABLE>
<CAPTION>
Period Ending March 31, 1996
----------------------------

1996 1995 1994 1993 1992(F2) 1991(F2) 1990(F2) 1989(F1) 1988(F1) 1987(F1)(F3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period $8.61 $7.69 $7.58 $7.60 $6.45 $6.96 $7.37 $6.57 $9.92 $9.20

Income From Investment
Operations .04 0.05 0.02 0.23 (0.08) (0.27) 0.09 (0.06) 0.06 0.02
Net investment income
(loss)
Net Gains or Losses on 1.22 0.89 0.11 (0.25) 1.23 (0.10) (0.50) 0.92 (2.94) 0.70
Securities
(both realized and
unrealized)
Total From Investment 1.26 0.94 0.13 (0.02) 1.15 (0.37) (0.41) 0.86 (2.88) 0.72
Operations

Less Distributions
- ------------------
Dividends (from net investment (0.06) (0.02) (0.02) 0.00 0.00 (0.14) 0.00 (0.06) (0.01) 0.00
income)
Distribution (from capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.46) 0.00
-----------
gains)
-----
Total Distributions (0.06) (0.02) (0.02) 0.00 0.00 (0.14) 0.00 (0.06) (0.47) 0.00

Net Asset Value, End of period $9.81 $8.61 $7.69 $7.58 $7.60 $6.45 $6.96 $7.37 $6.57 $9.92
- -----------------------------

Total Return 14.64% 12.25% 1.71 (0.26)% 15.33% (5.54)% (5.56)% 13.09% (29.13) 11.12%

Ratios/Supplemental Data
- ------------------------

Net Assets, End of Period $8,371 $7,299 $4,229 $3,042 $1,088 $1,107 $1,814 $3,011 $3,737 $6,081
(x1,000)
Ratio of Expenses to Average Net
Assets: 2.35% 2.69% 3.00% 6.49% 6.26% 8.77% 3.49% 4.44% 4.54% 3.51%
Before Expense Reimbursement
After Expense Reimbursement 1.75% 1.87% 2.00% 2.00% 2.14% 7.77% 2.49% 3.44% 3.54% 2.51%
Ratio of Net Income to Average
Net Assets: (0.11)% (0.70) (0.67)% (4.10)% (4.41)% (4.80)% (0.09)% (1.93)% (0.10)% (0.86)%
Before Expense Reimbursement
After Expense Reimbursement .49% 0.12% 0.13% 0.36% (0.29)% (3.80)% 0.91% (0.93)% 0.90% 0.14%

Portfolio Turnover Rate 40.83% 55.12% 35.58% 83.40% 91.62% 125.24% 127.45% 145.70% 151.80% 118.90%
</TABLE>

<PAGE>

NOTES:
(F1) The per share and capital change information represents
performance of Wealth Monitors, Inc., the Fund's Investment Advisor
from March 1986 to August 1990.
(F2) The per share and capital change information represents
performance of Dorado/IDS Corporation, the Fund's Investment Advisor
from August 1990 to August 1992. Cornerstone Capital became the
advisor for the Fund in August 1992.
(F3) For the period July 17, 1986 (inception) to March 31, 1987.
The total return, expense, and net investment income ratios for this
period have been annualized.
7

<PAGE>

PERFORMANCE CHARTS

FUND PERFORMANCE UNDER CORNERSTONE CAPITAL CORP.

Comparison of Change in Value of a $10,000 investment
in the CornerCap Growth Fund, the Value Line Index,
& the S&P Index

[chart appears here]
<TABLE>
<CAPTION>
CGF Value Line S&P 500
------ ---------- -------
<S> <C> <C> <C>
9/92 10,000 10,000 10,000
12/92 10,771 10,857 10,507
3/93 11,019 11,454 10,961
6/93 11,063 11,436 11,009
9/93 11,048 11,882 11,303
12/93 11,354 12,244 11,566
3/94 11,223 11,882 11,118
6/94 11,485 11,500 11,156
9/94 11,909 12,096 11,711
12/94 12,275 11,713 11,707
3/95 12,597 12,380 12,850
6/95 12,899 13,247 14,058
9/95 13,183 14,148 15,197
12/95 13,473 14,205 16,109
3/96 14,449 14,858 16,678

</TABLE>

FUND PERFORMANCE SINCE INCEPTION WITH PRIOR MANAGEMENT INCLUDED

Comparison of Change in Value of $10,000 investment in the CornerCap
Growth Fund, the Value Line Index, & the S&P 500 Index

[chart appears here]
<TABLE>
<CAPTION>
CGF Value Line S&P 500
------- ------- -------
<S> <C> <C> <C>
9/30/86 10,000 10,000 10,000
3/31/87 11,112 11,286 12,577
3/31/88 7,875 9,858 11,530
3/31/89 8,906 10,883 13,593
3/31/90 8,411 11,036 16,195
3/31/91 7,963 11,027 18,524
3/31/92 9,383 12,205 20,583
3/31/93 9,359 13,556 23,724
3/31/94 9,579 14,039 24,063
3/31/95 10,138 14,651 27,800
3/31/96 11,743 17,567 36,696
</TABLE>

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

CornerCap Growth Fund invests in small- and mid-capitalization companies
characterized as attractive by a ranking of 1,500 publicly traded stocks.
Our model screens for companies with relatively low price/earnings
ratios, above average cash flows, and above average returns on equity
that are exhibiting renewed earnings momentum. Under Cornerstone
Capital's management (9/30/92 - 3/31/96), the Fund returned, on an annual
basis, 11.03% vs. 11.9% for the Value Line Index and 16.2% for the S&P
500 Index. The annual report contains additional information on the
Fund's performance, and a copy is available free from the Fund's advisor.
Also, investors should realize that past performance is not predictive of
future performance.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The CornerCap Growth Fund (the "Fund") is the only series of
the CornerCap Group of Funds, a diversified, open-end
management investment company registered with the SEC as
required under the Investment Company Act of 1940 (the "1940 Act").
Shares of the Fund may be purchased at their net asset value, without
sales load, as next determined after an account application is received
in proper form.

The Fund's investment objective is to obtain long-term capital
appreciation. Income from dividends or interest on portfolio securities
is a secondary objective. The Fund will attempt to achieve its objective
by investing in equity securities of domestic and foreign issuers.

In selecting portfolio securities for purchase by the Fund, the Fund's
investment advisor, Cornerstone Capital Corp. (the "Advisor'') ranks
approximately 1,500 common stocks according to fundamental factors. The
three key criteria are relative price/earnings ratio, earnings growth
rate, and cash flows that are in excess of capital expenditures.
Purchases are made from the most attractive securities based on
diversification and risk, and will be made only if they can be made at
prices which, in the judgment of the Advisor, create the possibility of
additional growth in capital. There can be no assurance that the Fund
will achieve its objective.

The Fund will invest at least a minimum of 65% of its assets in equity
securities having the characteristics described above; however, it is
expected that under normal circumstances the Fund will be over 90%
invested in equity securities. The remainder of the portfolio may be
invested in short-term U.S. Government obligations such as U.S. Treasury
Bills or cash equivalent instruments. In addition, the Fund may invest
part of its assets temporarily in debt obligations pending the investment
of the proceeds of sales of shares of the Fund or of portfolio
securities.

INVESTMENT RISKS - As a fund investing in equity securities, the Fund is
subject to market risk--i.e., the possibility that stock prices will
decline over short or even extended periods when stock prices generally
rise and periods when prices generally decline. The market for equity
securities in the United States tends to be cyclical, with periods when
the prices of securities generally rise and periods when they generally
decline. All equity securities are usually influenced to some extent by
price movements in the equities market. Because of the risks associated
with investments in equity securities, the Fund is intended to be a long-
term investment vehicle and is not designed to provide investors with a
means of speculating on short-term stock market movements. As the Fund
will have a large percentage of its assets invested in stocks, it is not
suitable for investors who are unable or unwilling to assume the risk of
loss inherent in equity investments. Investors should consider the Fund
as a vehicle with which to balance their total investment program risks.

FOREIGN SECURITIES - The Fund may, using the criteria set forth
above, invest up to 20% of its assets in securities of foreign
issuers. The Advisor anticipates that such investments will be
made in U.S. dollar denominated securities in the form of (i)
American Depository Receipts (ADRs) issued against the
securities of foreign issuers, or (ii) other securities of
foreign issuers that are traded on U.S. national securities
exchanges or in the U.S. over-the-counter market.

<PAGE>

There are risks associated with investments in securities of foreign
issuers. Such risks include changes in currency rates, greater difficulty
in commencing lawsuits, differences between U.S. and foreign economies,
and U.S. Government policy with respect to certain investments abroad.
Foreign companies are frequently not subject to the accounting and
financial reporting standards applicable to U.S. companies, and there may
be less information available about foreign issuers. Securities of
foreign issuers are generally less liquid and more volatile than those of
comparable U.S. issuers. There is often less government regulation of
issuers than in the U.S. There is also the possibility of expropriation
or confiscatory taxation, political or social instability or diplomatic
developments that could adversely affect the value of those investments.

=========================================================================

PRINCIPAL INVESTMENT RESTRICTIONS

The Fund is subject to certain investment restrictions which are
fundamental policies that cannot be changed without the Principal
approval of the holders of a majority (as defined in the 1940 Investment
Act) of the Fund's outstanding securities. The Fund's investment
objective is such a policy. Among its other fundamental policies, the
Fund may not (i) invest more than 5% of the value of its total assets in
securities of any one issuer (other than securities of the U.S.
Government, its agencies and instrumentalities); or (ii) invest 25% or
more of the value of its total assets in securities of issuers in any one
industry. Additional information about the Fund's investment restrictions
is contained in the SAI.

It is the position of the staff of the SEC (and an operating although not
a fundamental policy of the Fund) that open-end investment companies,
such as the Fund, should not make certain investments if thereafter more
than 10% of the value of their net assets would be invested in illiquid
assets. The investments included in this 10% limit are (i) those which
are restricted, i.e., those which are subject to restriction as to
disposition under Federal securities laws (which the Fund does not expect
to own), (ii) fixed time deposits subject to withdrawal penalties
(other than overnight deposits), (iii) repurchase agreements having a
maturity of more than seven days, and (iv) investments which
are not readily marketable. This 10% limit does not include
obligations payable at principal amount plus accrued interest
within seven days after purchase.

=========================================================================

MANAGEMENT

The Fund's Board of Trustees decides on matters of general
policy and reviews the activities of the Fund's Advisor and
officers, and reviews the business operations of the Fund.

THE ADVISOR - Cornerstone Capital Corp., 100 NorthCreek, Suite 250, 3715
Northside Parkway, NW, Atlanta, GA 30327, acts as investment advisor to
the Fund, subject to the control of the Fund's Board of Trustees, and
supervises and arranges the purchase and sale of securities held in the
portfolio of the Fund. The Advisor is a Georgia corporation organized in
1989. It was registered with the SEC as an investment advisor in 1989.
The Advisor is controlled by Thomas E. Quinn and Gene A. Hoots, the
Advisor's majority shareholders.

Mr. Quinn is the portfolio manager for the Fund. He has worked in
investment management and financial analysis for 22 years, the last seven

<PAGE>

years as a principal of Cornerstone Capital Corp. His primary
responsibilities are portfolio management, investment strategy and
research. Previously, Mr. Quinn was Chief Investment Officer for RJR
Investment Management, Inc. where he managed over $600 million in
primarily equity assets. He is a Chartered Financial Analyst and a
Certified Public Accountant. His graduate degrees include an MBA from
the University of North Carolina at Greensboro and an MS in Operations
Research from Ohio University.

Mr. Hoots has worked in investment management and financial analysis for
over 26 years, the last seven years as a principal of Cornerstone Capital
Corp. His primary responsibilities are portfolio management, client
service and investment policy. Previously, Mr. Hoots was Vice President
of Reich & Tang and President of RJR Investment Management, Inc. He has
an MBA from the University of North Carolina at Chapel Hill and a BS in
Engineering from N.C. State University.

The Fund has retained the Advisor under an Investment Advisory Agreement
(the "Agreement'') dated September 9, 1992, which remains in effect from
year to year if approved annually by the Board of Trustees. The Fund pays
the Advisor a fee, computed daily and payable monthly, at an annual rate
of 1% of the Fund's average daily net assets. This rate of fee is higher
than the investment advisory fees paid by most management investment
companies.

The Agreement contains provisions relating to the selection of
broker-dealers ("brokers'') for the Fund's portfolio
transactions. One of such provisions states that the Advisor,
subject to all other provisions of the Agreement on the subject, may
consider sales of shares of the Fund and/or of any other investment
companies for which the Advisor acts as investment advisor as a factor in
the selection of brokers to execute brokerage and principal transactions,
subject to the requirements of "best execution,'' as defined in the
Agreement. See the SAI for additional information as to brokerage.

The Fund is subject to the expense limitation set by applicable
regulations of the various state securities commissions relating to
expenses. Currently, the most restrictive applicable expense limitation
is 2.5% of the first $30 million of a fund's average net assets, 2.0% of
the next $70 million of average net assets, and 1.5% of average net
assets in excess of $100 million. The Agreement provides that the Advisor
will reduce its fee in any fiscal year to the extent that the expenses of
the Fund exceed applicable state limitations, up to the full amount of
the fee. In addition, the Advisor has voluntarily agreed to reimburse the
Fund for certain of its operating expenses to the extent and for so long
as may be necessary to cause the total operating expenses not to exceed
2.0% of average net assets. In the absence of this limitation, total
Fund operating expenses were 2.35% for fiscal year ended March 31,1996.

ADMINISTRATOR - Cornerstone Capital Corp. serves as the Fund's
Administrator pursuant to an Administration Agreement. The Administrator
provides certain record-keeping and shareholder servicing functions
required of registered investment companies, and will assist the Fund in
preparing and filing certain financial and other reports, and performs
certain daily functions required for ongoing operations.

The Administration Agreement provides that the Administrator will be paid
at the annual rate of .20% of the Funds average daily assets, up to a
maximum of $4,000 a month. The Administrator will be reimbursed for
certain out-of-pocket expenses, and they may sub-contract with other
responsible companies for some of its duties. The address of the
Administrator is 100 NorthCreek, Suite 250, 3715 Northside Parkway,
Atlanta, GA 30327.

<PAGE>

See the SAI for more information regarding the Fund's Trustees and
Officers.

========================================================================

NET ASSET VALUE

The Fund's net asset value per share is determined as of 4:15 PM on each
day that the New York Stock Exchange is open for trading. The net asset
value per share is the value of the Fund's assets, less its liabilities,
divided by the number of shares of the Fund outstanding. The value of the
Fund's portfolio securities is, in general, the market value of such
securities. See the SAI for further information.

======================================================================

DISTRIBUTION PLAN

A shareholders' meeting was held September 9, 1992, at which time the
shareholders of the Fund adopted a Distribution Plan (the "Distribution
Plan"), dated September 14, 1992, pursuant to Section 12b-1 of the 1940
Act. The Distribution Plan is in effect for one year, and year to year
thereafter if approved by the Board of Trustees, including a majority of
the Trustees who are not interested persons of the Fund and who have no
direct or financial interest in the operation of the Distribution Plan.
In approving the Distribution Plan, the Trustees determined, in the
exercise of their business judgment and in light of their fiduciary
duties, that there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.

Pursuant to the Distribution Plan, the Advisor or Attkisson, Carter &
Akers, Inc., One Buckhead Plaza, Suite 1475, 3060 Peachtree Road, N.W.,
Atlanta, GA, 30305 (the "Distributor"), the Fund's distributor and
principal underwriter, are authorized to purchase advertising, sales
literature, and other promotional material and to pay affiliated sales
people of the Distributor. The annual expenditure limit under the Fund's
Distribution Plan is .25% of 1%. No such reimbursement may be made for
expenditures or fees for fiscal years prior to the current fiscal year
or in contemplation of future fees or expenditures. Any reimbursement
paid pursuant to the Distribution Plan is in addition to the investment
advisory fee.

The Fund did not pay any amount under the Distribution Plan for the
fiscal year ended March 31,1996. However, it is possible that the Fund
may pay out some amounts under the Distribution Plan during the current
fiscal year. See Distribution Plan in the SAI.

The Fund has also entered into a separate Distribution Agreement with the
Distributor pursuant to which the Distributor acts as agent upon the
receipt of purchase orders from investors.

Shares of the Fund may be purchased at the Net Asset Value next
determined after receipt of an account application in proper form; see
"Net Asset Value".

<PAGE>

HOW TO PURCHASE SHARES

The minimum initial investment is $2,000 and the minimum subsequent
investment in the Fund is $250. The Fund reserves the right to reject any
account application.

INVESTING BY MAIL - To purchase shares of the Fund, investors should mail
a completed account application with a check payable to CornerCap Growth
Fund, Fund Services, Inc., P.O. Box 26305, Richmond, VA 23260. No
certificates will be issued unless specifically requested. If the
purchase being made is a subsequent investment, the shareholder should
send a stub from a confirmation previously sent by the Transfer Agent in
lieu of the account application. If no such stub is available, a brief
letter giving the registration of the account and the account number
should accompany the check. In addition, the shareholder's account number
should be written on the check. Checks do not need to be certified but
are accepted subject to face value in U.S. dollars and must be drawn on a
U.S. bank.

INVESTING BY WIRE - You may purchase shares by requesting your bank to
transmit "Federal Funds" by wire directly to the Transfer Agent. To
invest by wire please call the Transfer Agent at 1-800-628-4077 for
instructions, then notify the Distributor by calling 1-800-848-9555.
Your bank may charge you a small fee for this service. The Account
Application which accompanies this Prospectus should be completed and
promptly forwarded to the Transfer Agent. This application is required
to complete the Fund's records in order to allow you access to your
shares. Once your account is opened by mail or by wire, additional
investments may be made at any time through the wire procedure described
above. Be sure to include your name and account number in the wire
instructions you provide your bank.

========================================================================

HOW TO REDEEM SHARES

The Fund will redeem for cash all of its full and fractional shares at
the net asset value per share next determined after receipt of a
redemption request in proper form, as described below.

A shareholder wishing to redeem shares may do so at any time by writing
or calling CornerCap Growth Fund, Fund Services, Inc., P.O. Box 26305,
Richmond, VA 23260 (800/628-4077). The instructions should specify the
number of shares to be redeemed and be signed by all registered owners
exactly as the account is registered. It will not be accepted unless it
contains all required documents in proper form, as described below.

In addition to written instructions, if any shares being
redeemed or repurchased are represented by stock certificates,
the certificates must be surrendered. The certificates must
either be endorsed or accompanied by a stock power signed by
the registered owners, exactly as the certificates are registered.
Additional documents may be required from corporations or other
organizations, fiduciaries or anyone other than the shareholder of
record.

The Fund does not issue share certificates unless specifically requested.
Maintaining shares in uncertificated form minimizes the risk of loss or
theft of a share certificate. A lost, stolen or destroyed certificate can
only be replaced upon obtaining a sufficient indemnity bond. The cost of
such a bond, which is borne by the shareholder, can be 2% or more of the
value of the missing certificate. To resolve questions concerning
documents, contact the Transfer Agent at 1-800-628-4077.

<PAGE>

Payment for shares tendered will be made within seven days after receipt
by the transfer agent of instructions, certificates, if any, and other
documents, all in proper form. However, payment may be delayed under
unusual circumstances, as specified in the 1940 Act or as determined by
the SEC. Payment may also be delayed for any shares purchased by check
for a reasonable time (not to exceed 15 days) necessary to determine that
the purchase check will be honored. Payment will be sent only to
shareholders at the address of record. A signature guarantee is required
if the shareholder requests that the check be mailed anywhere other than
to the shareholder's address of record.

If the Board of Trustees determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
wholly or partly in cash, the Fund may pay the redemption price in whole
or in part by a distribution in kind of securities from the portfolio of
the Fund, in lieu of cash, in conformity with applicable rules of the
SEC. The Fund, however, has elected to be governed by Rule 18f-1 under
the 1940 Act pursuant to which the Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or one percent of the net
asset value of the Fund during any 90 day period for any one shareholder.
Should redemptions by any shareholder exceed such limitation, the Fund
will have the option of redeeming the excess in cash or in kind. If
shares are redeemed in kind, the redeeming shareholder would incur
brokerage costs in converting the assets into cash.

The Board of Trustees may, in order to reduce the expenses of the Fund,
redeem all of the shares of any shareholder (other than a qualified
retirement plan) whose account has declined to a net asset value of less
than $2,000, as a result of a transfer or redemption, at the net asset
value determined as of the close of business on the business day
preceding the sending of notice of such redemption.

The Fund would give shareholders whose shares were being
redeemed 60 days prior written notice in which to purchase
sufficient shares to avoid such redemption.

=======================================================================

TELEPHONE PURCHASES AND REDEMPTIONS FOR SECURITIES FIRMS

The following purchase and redemption telphone procedures have been
established by the Fund for investors who purchase Fund shares through
member firms of the National Association of Securities Dealers, Inc. (the
NASD ) who have accounts with the Fund for the benefit of their clients.
Telephone purchases and redemptions will be effected by the Fund only
through such NASD members, who in turn will be responsible for crediting
the investor's account at the NASD member with the amount of any purchase
or redemption pursuant to its account agreement with the investors
instruction to purchase or redeem Fund shares.

NASD member firms may charge a reasonable handling fee for providing this
service. Such fees are established by each NASD member acting
independently from the Fund and neither the Fund nor the Distributor
receives any part of such fees. Such handling fees may be avoided by
investing directly with the Fund through the Distributor, but investors
doing so will not be able to avail themselves of the Fund s telephone
privileges.

Member firms of the NASD may telephone the Distributor at (800) 628-4077
and place purchase and redemption orders on behalf of investors who carry
their Fund investments through the member s account with the Fund.

<PAGE>

PURCHASE BY TELEPHONE. Shares shall be purchased at the next determined
net asset value. Payment for shares purchased must be received from the
NASD member firm by the Fund by wire no later than the third business day
following the purchase order. If payment for any purchase order is not
received on or before the third business day, the order is subject to
cancellation by the Fund and the NASD member firm s account with the Fund
will immediately be charged for any loss.

REDEMPTION BY TELEPHONE. The redemption price is the net asset value
next determined after the receipt of the redemption request by the Fund.
Shares purchased by telephone may not be redeemed until after the Fund
has received good payment.

By electing telephone purchase and redemption privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the
Fund, the Distributor nor the Transfer Agent shall be liable for
following instructions communicated by telephone and reasonably believed
to be genuine. The Fund and its agents provide written confirmation of
transactions initiated by telephone as a procedure designed to confirm
that telephone instructions are genuine. In addition, all telephone
transactions are recorded. As a result of these and other policies, the
NASD member firm may bear the risk of any loss in the event of such a
transaction. If the Fund fails to employ this and other established
procederes, it may be liable. The Fund reserves the right to modify or
terminate these telephone privileges at any time.

=======================================================================

DIVIDENDS AND TAX STATUS

The Fund currently intends to make at least one distribution of any net
income or capital gains during each calendar year. The distribution will
be made following the Fund's fiscal year and end, March 31, and any
additional distributions will be declared by December 31 of each year
with respect to any additional undistributed capital gains earned during
the one year period ended October 31 of such calendar year and with
respect to any undistributed income for such calendar year. The amount
and frequency of distributions by the Fund are not guaranteed and are
subject to the discretion of the Fund's Board of Trustees.

The Fund has qualified and elected to be treated as a "regulated
investment company'' under Subchapter M of the Code during its previous
fiscal periods and intends to continue to do so in the future. By
distributing all of its net investment income and net capital gains to
its shareholders for a fiscal year in accordance with the timing
requirements of the Code and by meeting other requirements of the Code
relating to the sources of income and diversification of its assets, the
Fund will not be subject to Federal income or excise taxes.

All dividends from net investment income together with those derived from
the excess of net short-term capital gain over net long-term capital loss
(collectively, "income dividends''), will be taxable as ordinary income
to shareholders whether or not paid in additional shares. Any
distributions derived from the excess of net long-term capital gain over
net short-term capital loss ("capital gains distributions'') are taxable
as long-term capital gains to shareholders regardless of the length of
time a shareholder has owned his shares. Any loss realized upon the
redemption of shares within six months after the date of their purchase
will be treated as a long-term capital loss to the extent of amounts
treated as distributions of net long-term capital gain during such six-
month period. The Fund had a net capital loss carryforward of $783,074 as
of March 31,1996. A net capital loss carryforward is treated as net

<PAGE>

short-term capital loss for purposes of calculating taxable net capital
gain. A net capital loss carryforward may be carried over for a period
of up to eight taxable years succeeding the loss year. Of the Fund's net
capital loss carryforward, $316,444will expire in 1997 and $466,630 will
expire in 1998.

Income dividends and capital gains distributions are taxed in the manner
described above, regardless of whether they are received in cash or
reinvested in additional shares. For the convenience of investors, all
income dividends and capital gains distributions are reinvested in full
and fractional shares of the Fund based on the net asset value per share
at the close of business on the record date, unless the shareholder has
given prior written notice to the transfer agent that the payment should
be made in cash. Shareholders will receive information annually on Form
1099 with respect to the amount and nature of income and gains to assist
them in reporting the prior calendar year's distributions on their
Federal income tax return.

Distributions which are declared in October, November, or December but
which are not paid to shareholders until the following January will be
treated for tax purposes as if received on December 31 of the year in
which they were declared.

Under the Code, the Fund may be required to impose backup withholding at
a rate of 31% on income dividends and capital gains distributions, and
payment of redemption proceeds to individuals and other non-exempt
shareholders, if such shareholders have not provided a correct taxpayer
identification number and made the certifications required by the
Internal Revenue Service on the account application. A shareholder may
also be subject to backup withholding if the Internal Revenue Service or
a broker notifies the Fund that the shareholder is subject to backup
withholding.

The Fund may liquidate the account of any shareholder who fails to
furnish its certificate of taxpayer identification number within 30 days
after date the account was opened.

Shareholders should consult their tax advisors with respect to applicable
foreign, state and local taxes.
========================================================================

PERFORMANCE INFORMATION

From time to time, the Fund may publish its total return in
advertisements and communications to investors. Total return information
will include the Fund's average annual compounded rate of return over the
most recent four calendarion quarters and over the period from the Fund's
inception of operations. The Fund may also advertise aggregate and
average total return information over different periods of time. The
Fund's total return will be based upon the value of the shares acquired
through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of such shares at the end of the
period, assuming reinvestment of all distributions at net asset value.
Total return figures will reflect all recurring charges against the
Fund's income.

Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for
any period should not be considered as a representation of what an
investor's total return may be in any future period. For further
information, including the formula and an example of the total return
calculation, see the SAI.

<PAGE>

In reports or other communications to shareholders and in advertising
material, the Fund may compare performance with that of other mutual
funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. and similar independent services that monitor the performance of
mutual funds, or unmanaged indices of securities of the type in which the
Fund invests.
=========================================================================

GENERAL INFORMATION

The Fund was organized on January 6, 1986, as a Massachusetts business
trust. Prior to August 13, 1990 the Fund was known as Wealth Monitors
Fund. Between August 13, on 1990 and September 25, 1992, the Fund was
known as the Sunshine Growth Trust. From September 25, 1992until July
28, 1995, the Fund was known as the Cornerstone Growth Fund. The Fund is
currently the only series of the CornerCap Group of Funds. The
Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in
the conduct of his office. In addition, the Declaration of Trust
contains an express disclaimer of Shareholder liability for acts or
obligations of the Fund.

The Declaration of Trust provides that the Fund's shareholders
have the right, upon the declaration in writing or vote of more
than two-thirds of its outstanding shares, to remove a Trustee.
The Trustees will call a meeting of shareholders to vote on the
removal of a trustee upon the written request of the record
holders of ten percent of its shares. In addition, ten shareholders
holding the lesser of $25,000 worth or one percent of Fund shares may
advise the Trustees in writing that they wish to communicate with other
shareholders for the purpose of requesting a meeting to remove a Trustee.
The Trustees will then, if requested by the applicants, mail at the
applicants' expense the applicants' communications to all other
shareholders. Except for a change in the name of the Fund, no amendment
may be made to the Declaration of Trust without the affirmative vote of
the holders of more than 50% of its outstanding shares. The holders of
shares have no pre-emptive or conversion rights. Shares when issued are
fully paid and non-assessable, except as set forth above. The Fund may be
terminated upon the sale of its assets to another issuer, if such sale is
approved by the vote of the holders of more than 50% of the outstanding
shares of each series, or upon liquidation and distribution of its
assets, if so approved. If not so terminated, the Fund will continue
indefinitely.

With respect to the purchase and sale of Fund shares, certain
broker/dealers other than the Distributor may charge a fee to Fund
investors for executing transactions on the investor's behalf. Such
transactions may be executed on the investor's behalf directly through
the Fund's Transfer Agent without payment of such a fee. See the section
entitled "How to Purchase Shares" in the Prospectus.

<PAGE>

The Advisor will sell portfolio securities whenever it is appropriate,
regardless of how long the securities have been held by the Fund. The
Advisor will change the Fund's investments whenever it believes doing so
furthers the Fund's investment objective. Portfolio turnover involves
some expense to the Fund, including brokerage commissions and other
transaction costs and reinvestment in other securities. Portfolio
turnover may also result in the recognition of capital gains which may be
distributed to shareholders. Tax considerations may limit the Fund's
portfolio turnover. The Fund's annual rate on portfolio turnover is
anticipated to be between 30% and 70%. For the year ended March 31, 1996,
the portfolio turnover rate was 40.83%. Tait, Weller & Baker serves as
the certified public accountants of the Fund. Funds Services, Inc. serves
as the Fund's Transfer Agent. Commonwealth Fund Accounting provides the
daily pricing for the Fund. The Trust Department of Wachovia Bank of
N.C. is the custodian of the Fund's assets. Kilpatrick & Cody serves as
legal counsel for the Fund. Shareholder inquiries related to the
administration of shareholder accounts should be directed to the Transfer
Agent, and inquiries related to the investment objectives of the Fund
should be directed to the Advisor.

<PAGE>

CORNERCAP GROWTH FUND
NEW ACCOUNT APPLICATION FORM

Please complete items 1, 2 and 3.

1. NAME
Individual__________________________________________________________
First Middle Last

Joint Owner_________________________________________________________
First Middle Last

Gift to Minors____________________as custodian for________________
Name of Custodian Name of Minor

under the (State)____________________Uniform Gifts to Minors Act
(show minor's Soc. Sec. # Below)

Other_______________________________________________________________
Name of Corporation, Partnership or other Organization.
(If Trust, include names of Trustee and date of trust
instrument. NOTE: These accounts require additional
forms. Please call Transfer Agent at 1-800-628-4077.)

ADDRESS

__________________________________________________(_____)_______________
Street Area Code Daytime
Telephone

_________________________________________________________________________
City State Zip

SOCIAL SECURITY or TAX IDENTIFICATION NUMBER__________________

2. INITIAL INVESTMENT (Minimum $2,000) $_______________(Please make
check payable to CornerCap Growth Fund and mail your investment to
the address shown below.).

3. SIGNATURE(S)
The undersigned warrant(s) that I (we) have full authority to make
this application, am (are) of legal age, and have received and read
a current Prospectus and agree to be bound by its terms. I (we)
understand that all shares will be held in uncertificated form.
Share certificates may be requested, but Telephone Privileges will
not then be available (see other side).

This application is not effective until it is received and accepted
by the Fund. Under the penalties of perjury I (we) certify that the
Social Security or Tax Identification Number shown on this form is

<PAGE>

correct, and that I am (we are) not subject to backup withholding as
a result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified me that I am (we are) no
longer subject to backup withholding.

SIGN HERE:
___________________________________ DATE:______________19_____
Signature of Individual (or Custodian)

____________________________________ DATE:______________19_____
Signature of Joint Registrant, if any

TRANSFER AGENT: For Account Information, wire instructions,
or redemptions, call the Fund Services,
Inc., Toll Free at 1-800-628-4077, or write to:
P.O. Box 26305, Richmond, VA 23260.

DISTRIBUTOR: Attisson, Carter & Akers, Inc., 3060 Peachtree Rd.,
SW, Suite 1475
Atlanta, GA 30305 404-364-2070

<PAGE>

CORNERCAP GROWTH FUND
OPTIONAL FEATURES

You may select any or all of these additional services

4. DISTRIBUTION OPTION:

Income dividends and capital gains are automatically
reinvested, unless you elect otherwise:

____ Yes, please reinvest my distributions in additional shares
(at no charge)

____ No, please make distributions as follows:

____ All distributions in cash.

____ Dividends in cash. Capital gains reinvested in
shares.

5. TELEPHONE PRIVILEGES:

To use the telephone to authorize the transactions below,
please check the appropriate box(es):

_____ I (we) hereby authorize Fund Services, Inc. to honor
telephone instructions for my (our) account. Neither the Fund
nor Fund Services, Inc. will be liable for properly acting upon
telephone instructions believed to be genuine. I (we)
understand that redemptions authorized by telephone are paid by
check and are mailed to me (us).

6. AUTOMATIC INVESTMENT PLAN:

To make automatic monthly investments from you bank account,
check the box below (Minimum monthly investment amount is
$250.00).

______ This Plan allows me(us) to make automatic monthly
investments from my(our) bank account. Fund Services, Inc.
will transfer money from my(our) bank account into the Fund.
There is no charge, and I may cancel at any time.
Invest $_______________________into my(our) account on the 15th
day of each month by transfer from my(our) bank account.
(Please include a voided check.)

7. AUTOMATIC WITHDRAWAL PLAN:

Automatic withdrawals are available for CornerCap Growth Fund
accounts of $10,000 or more. The minimum withdrawal per month

<PAGE>

is $100 and will be withdrawn on the 25th of each month.
Please call the Transfer Agent at 1-800-628-4077 for further
instructions.

_____ Please send me additional information on IRA (Individual
Retirement Account.)

PLEASE SEND YOUR COMPLETED APPLICATION AND CHECK, MADE PAYABLE TO
CORNERCAP GROWTH FUND TO: FUND SERVICES, INC., P.O. BOX 26305,
RICHMOND, VA 23260
____________________________________________________________________
Registered Rep. Name Rep. Number Branch Wire Code
_________________________________________________(___)______________
Branch Address Area Code Telephone Number

CORRESPONDENT FIRM IDENTIFICATION
____________________________________________________________________
Firm Name and Address
___________________________________________________________________
Authorized Signature

<PAGE>

PART B

Statement of Additional Information

Dated July 29, 1996

The CornerCap Growth Fund (the "Fund") is currently the only series of
the CornerCap Group of Funds, a diversified open-end management
investment company registered with the Securities and Exchange Commission
(the "SEC") as required by the Investment Company Act of 1940 (the "1940
Act").

This Statement of Additional Information is not a prospectus, and it
should be read in conjunction with the Prospectus of the Fund dated July
29, 1996, as may be amended from time to time (the Prospectus"); copies
of the Prospectus may be obtained from the Fund, c/o Cornerstone Capital
Corp., 100 NorthCreek, Suite 250, Atlanta, GA, 30327. Cornerstone
Capital Corp. (the "Advisor") is the Fund's investment advisor.

TABLE OF CONTENTS

Page

Investment Objectives and Policies . . . . . . . . . 2
Portfolio Turnover . . . . . . . . . . . . . . . . . 2
Investment Restrictions . . . . . . . . . . . . . . . 2
Management . . . . . . . . . . . . . . . . . . . . . 4
The Advisor . . . . . . . . . . . . . . . . . . . . . 5
Accounting & Administrative Services . . . . . . . . 6
Portfolio Transactions and Brokerage . . . . . . . . 6
Distribution Plan . . . . . . . . . . . . . . . . . . 7
Net Asset Value . . . . . . . . . . . . . . . . . . . 9
Tax Status . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . 10
Principal Shareholders . . . . . . . . . . . . . . 12
Performance Information . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . 13

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Fund is long-term capital appreciation.
Income from dividends or interest on portfolio securities is a secondary
objective in the management of the Fund's portfolio. The portfolio and
investment strategies of the Fund are described in the Fund's Prospectus.

<PAGE>

Prior to August 13, 1990, the Fund was known as Wealth Monitors Fund.
From August 13, 1990 to September 25, 1992 the Fund was known as the
Sunshine Growth Trust. From September 25, 1992 to June 30, 1995 the Fund
was known as the Cornerstone Growth Fund.

PORTFOLIO TURNOVER

An annual portfolio turnover rate is, in general, the percentage computed
by taking the lesser of purchases or sales of portfolio securities
(excluding certain short-term securities) for a year and dividing that
amount by the monthly average of the market value of such securities
during the year. The Fund's portfolio turnover rate for the fiscal year
ended March 31, 1996 was 40.83%. The Fund's portfolio turnover rate in
the future is expected to be in the range of 30% to 70%. Higher turnover
would involve correspondingly greater commissions and transaction costs.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions (in addition to those
indicated in its Prospectus) as fundamental policies, which may not be
changed without the favorable vote of the holders of a "majority," as
defined in the 1940 Act, of the Fund's outstanding voting securities.
Under the 1940 Act, the vote of the holders of a "majority" of a Fund's
outstanding voting securities means the vote of the holders of the lesser
of (i) 67% of the shares of the Fund represented at a meeting at which
the holders of more than 50% of its outstanding shares are represented or
(ii) more than 50% of the outstanding shares. The Fund may not:

1. Purchase securities on margin (but the Fund may obtain such short-
term credits as may be necessary for the clearance of transactions);

2. Issue senior securities, borrow money or pledge its assets except
that the Fund may borrow from a bank for temporary or emergency
purposes in amounts not exceeding 33% (taken at the lower of cost or
current value) of its total assets (not including the amount
borrowed) and pledge its assets to secure such borrowings; the Fund
will not purchase any additional portfolio securities while such
borrowings are outstanding;

3. Purchase any security if as a result the Fund would then hold more
than 10% of any class of securities of an issuer (taking all common
stock issues of an issuer as a single class, all preferred stock
issues as a single class, and all debt issues as a single class) or
more than 33.33% of the outstanding voting securities of an issuer;

<PAGE>

4. Purchase any security if as a result the Fund would then have more
than 5% of its total assets (taken at current value) invested in
securities of companies (including predecessors) less than three
years old;

5. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or Trustee of the Fund or officer or director of the
Advisor owns more than 1/2 of 1% of the outstanding securities of
such issuer, and such Trustees, officers and Trustees who own more
than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer;

6. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws;

7. Make investments for the purpose of exercising control or management;

8. Participate on a joint, or joint and several basis in any trading
account in securities;

9. Invest in securities of other registered investment companies;

10. Invest in interests in oil, gas or other mineral exploration or
development programs, although it may invest in the common stocks of
companies which invest in or sponsor such programs;

11. Make loans, except through repurchase agreements;

12. Purchase warrants if as a result the Fund would then have more
than 5% of its total net assets (taken at the lower of cost or
current value) invested in warrants, or if more than 2% of the value
of the Fund's total net assets would be invested in warrants which
are not listed on the New York or American Stock Exchanges, except
for warrants included in units or attached to other securities;

13. Buy or sell commodities or commodity contracts, or real estate
or interests in real estate, although it may purchase and sell
securities which are secured by real estate and securities of
companies which invest or deal in real estate. It may buy or sell
futures contracts or options thereon for hedging purposes as
described in the Fund's prospectus.

FOREIGN SECURITIES Investments in securities of foreign issuers offer
potential benefits not available from investments solely in securities of
domestic issuers by offering the opportunity to invest in foreign issuers
that appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the United
States, or to reduce fluctuations in portfolio value by taking advantage
of foreign stock markets that do not move in a manner parallel to U.S.
markets.

<PAGE>

Investments in securities of foreign issuers present special risks and
considerations not typically associated with investments in domestic
securities. Such risks include lack of information about foreign
issuers, and lack of uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic issuers. In the
past, U.S. Government policies have influenced certain investments abroad
by U.S. investors, through taxation or other restrictions, and it is
possible that such restriction could be reimposed. The Fund may invest
in securities of foreign issuers in an amount up to 20% of its assets.

MANAGEMENT

The Board of Trustees is responsible for the overall management of the
Fund, including general supervision and review of its investment
activities. The officers, who administer the Fund's daily operations,
are appointed by the Board of Trustees. The current Trustees and
principal officers of the Fund, their addresses, and their principal
occupations for the past five years are set forth below. "Interested"
trustees, as defined by the 1940 Act, are designated below by an
asterisk.

<TABLE>
<CAPTION>
Position with Principal occupations
Name and Address Trust during past
five years
- -------------------------------------------------------------------------
<S> <C> <C>
Thomas E. Quinn* Trustee, President President,
100 Northcreek, Suite 250 and Treasurer Cornerstone Capital
3715 Northside Pkwy., NW Corp.
Atlanta, GA 30327

Gene A. Hoots* Vice President Chief Executive
119B Reynolda Village Officer,
Winston-Salem, NC 27106 Cornerstone Capital
Corp.

Richard T. Bean Secretary Portfolio Manager,
100 Northcreek, Suite 250 Cornerstone Capital
3715 Northside Pkwy., NW Corp.
Controller, Godwins Inc. Assistant
Atlanta, GA 30327

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Position with Principal occupations
Name and Address Trust during past five years
- ---------------------------------------------------------------------------------
<S> <C> <C>

Richard Boger Trustee President, Export Insurance
495 Arden at Argonne, NW Services, Inc.; Chairman
Atlanta, GA 30305

G. Harry Durity Trustee Corporate Vice President, Worldwide
58 Close Road Business Systems, Automatic Data
Greenwich, CT 06831 Processing, Inc.;
Sr. Vice President, Corp. Develop.,

Laurin M. McSwain Trustee Attorney, Bloodworth & Nix
3000 Andrews Drive, NW
#5
Atlanta, GA 30305
</TABLE>

The Fund incurred Trustees' fees and expenses for fiscal years ended
March 31, 1995 and 1996 of $4,500 and 6800, respectively. Beginning on
November 16, 1994, the Fund began paying trustees who are not affiliated
with the Advisor $500 per regular meeting and committee meeting attended,
plus reimbursement of out of pocket expenses for attending Board
meetings.

THE ADVISOR

Cornerstone Capital Corp. is the Fund's investment advisor. The Fund
pays the Advisor for the services performed a fee at the annual rate of
1% of the Fund's average net assets. This rate is higher than that paid
to most management investment companies. However, the Investment Advisory
Agreement dated September 9, 1992 between the Fund and the Advisor (the
"Agreement") provides that in the event the expenses of the Fund
(including the fees of the Advisor and amortization of organization
expenses but excluding interest, taxes, brokerage commissions and
extraordinary expenses) for any fiscal year exceed the limit set by
applicable regulations of a state securities commission, the Advisor will
reduce its fee to the Fund by the amount of such excess up to the full
amount of the advisor's annual fee. Any such reductions are accrued and
paid in the same manner as the Advisor's fee and are subject to
readjustment during the year.

As a result of this limitation, the initial former Advisor (Wealth
Monitors, Inc.) waived its fee for each of the four fiscal years ended
March 31, 1990, and the next former Advisor (Dorado/IDS) waived its fee
for the fiscal year ended March 31, 1992. The Advisor has voluntarily
agreed to waive all or such portion of its fee as may be necessary to
cause the total fund operating expenses not to exceed 2.0% of average net
assets. For1996, the Advisor waived the majority of its fee to reduce
the expense ration to 1. 8%. The Advisor has also voluntarily agreed to
reimburse the fund for certain of its operating expenses to the extent
and for so long as may be necessary to keep total Fund operating expenses
at no greater than 2.0% of average net assets.

<PAGE>

The Agreement also provides that the Advisor shall not be liable to the
Fund for any error of judgment by the Advisor or for any loss sustained
by the Fund except in the case of a breach of fiduciary duty with respect
to the receipt of compensation for services (in which case any award of
damages will be limited as provided in the 1940 Act) or of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.

ACCOUNTING AND ADMINISTRATIVE SERVICES

Cornerstone Capital Corp. provides certain record keeping and shareholder
services functions to the Fund. Commonwealth Fund Accounting, as the
Fund's pricing and accounting services agent, calculates the daily net
asset value of the Fund and maintains the accounting records.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Agreement states that in connection with its duties to arrange for
the purchase and the sale of securities held in the portfolio of the Fund
by placing purchase and sale orders for the Fund, the Advisor shall
select such broker-dealers ("brokers") as shall, in the Advisor's
judgment, implement the policy of the Fund to achieve "best execution"--
i.e., prompt and efficient execution at the most favorable securities
price. In making such selection, the Advisor is authorized in the
Agreement to consider the reliability, integrity and financial condition
of the broker.

The Advisor is also authorized by the Agreement to consider whether the
broker provides brokerage and/or research services to the Fund and/or
other accounts of the Advisor. The Agreement states that the commissions
paid to brokers may be higher than another broker would have charged if a
good faith determination is made by the Advisor that the commission is
reasonable in relation to the services provided, viewed in terms of
either that particular transaction or the Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion and that the Advisor shall use its judgment in determining
that the amount of commissions paid are reasonable in relation to the
value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the
portion of commission rates reflecting such services. The Agreement
provides that to demonstrate that such determinations were in good faith,
and to show the overall reasonableness of commissions paid, the Advisor
shall be prepared to show that commissions paid (i) were for purposes
contemplated by the Agreement; (ii) were for products or services which
provide lawful and appropriate assistance to the Advisor's decision-
making process; and (iii) were within a reasonable range as compared to
the rates charged by brokers to other institutional investors as such
rates may become known from available information. The Fund recognizes
in the Agreement that, on any particular transaction, a higher than usual
commission may be paid due to the difficulty of the transaction in
question.

<PAGE>

The research services discussed above may be in written form or through
direct contact with individuals and may include information as to
particular companies and securities as well as services assisting the
Fund in the valuation of the Fund's investments. The research which the
Advisor receives for the Fund's brokerage commissions whether or not
useful to the Fund, may be useful to the Advisor in managing the accounts
of the Advisor's other advisory clients. Similarly, the research
received for the commissions of such accounts may be useful to the Fund.

In the over-the-counter market, securities are frequently traded on a
"net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. Money market instruments usually trade
on a "net" basis as well. On occasion, certain money market instruments
may be purchased by the Fund directly from an issuer in which case no
commissions or discounts are paid. In underwritten offerings, securities
are purchased at a fixed price which includes an amount of compensation
to the underwriter, generally referred to as the underwriter's
concession or discount.

During the three fiscal years ended March 31, 1996, 1995, and 1994, the
Fund paid total brokerage commissions of $46,000, $63,821, and $28,301, ,
respectively.

DISTRIBUTION PLAN

The Fund's Distribution Plan (the "Plan") is its written plan adopted
pursuant to Rule 12b-1 (the "Rule") under the 1940 Act.

The Plan authorizes the Advisor or Distributor to make permitted payments
to any qualified recipient under a related agreement on either or both of
the following bases: (a) as reimbursement for direct expenses incurred
in the course of distributing Fund shares or providing administration
assistance to the Fund or its shareholders, including, but not limited to
advertising, printing and mailing promotional material, telephone calls
and lines, computer terminals, and personnel; and/or (b) at a rate
specified in the related agreement with the qualified recipient in
question based on the average value of the qualified holdings of such
qualified recipient ("Permitted Payments"). The Advisor or Distributor
may make permitted payments in any amount to any qualified recipient,
provided that (i) the total amount of all permitted payments made during
a fiscal year of the Fund to all qualified recipients (whether made under
(a) and/or (b) above) do not exceed in that fiscal year 1/4 of 1% of the
Fund's average annual net assets; and (ii) a majority of the Fund's
qualified Trustees may at anytime decrease or limit the aggregate amount
of all permitted payments or decrease or limit the amount payable to any
Qualified recipient. The Fund will reimburse the Advisor or Distributor
for such permitted payments within such limit, but the Advisor or
Distributor shall bear any permitted payments beyond such limits. A
related agreement will terminate automatically if it is assigned, as that
term is defined in the 1940 Act.

<PAGE>

The Plan also authorizes the Advisor or Distributor to purchase
advertising to promote the sale of shares of the Fund, to pay for sales
literature and other promotional material, and to make payments to the
Distributor's sales personnel. Any such advertising and sales material
may include references to other open-end investment companies or other
investments and any sales personnel so paid are not required to devote
their time solely to the sale of Fund shares. Any such expenses
("Permitted Expenses") made during a fiscal year of the Fund shall be
reimbursed or paid by the Fund, except that the combined amount of
reimbursement or payment of Permitted Expenses together with the
Permitted Payments made pursuant to the Plan by the Fund shall not, in
the aggregate, in that fiscal year of the Fund, exceed 1/4 of 1% of the
average net assets of the Fund in such year; and the Advisor or
Distributor shall bear any such expenses beyond such limits. No such
reimbursement may be made for Permitted Expenses or Permitted Payments
for the fiscal year prior to the fiscal year in question or in
contemplation of future Permitted Expenses or Permitted Payments.

The Plan requires that while it is in effect the Advisor shall report in
writing at least quarterly to the Board of Trustees, and the Board shall
review the following: (i) The amounts of all Permitted Payments, the
identity of the recipients of each such payment; the basis on which each
such recipient was chosen as a Qualified Recipient and the basis on which
the amount of the Permitted Payment to such Qualified Recipient was made;
(ii) the amounts of Permitted Expenses and the purpose of each such
Expense; and (iii) all costs of the other payments specified in the Plan
(making estimates of such costs where necessary or desirable), in each
case during the preceding calendar or fiscal quarter. While the Plan is
in effect, the selection and nomination of Trustees who are not
interested persons of the Fund is committed to the discretion of the
Fund's then existing disinterested Trustees.

During the fiscal years ended March 31,1991 through March 31, 1996, the
Fund neither paid nor accrued any liability pursuant to the Plan.

NET ASSET VALUE

As indicated in the Prospectus, the net asset value per share of the
Fund's shares will be determined as of 4:15 p.m. on each day that the New
York Stock Exchange ("NYSE") is open for trading. The NYSE annually
announces the days on which it will not be open for trading; the most
recent announcement indicates that it will not be open on the following
days: New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, it should be noted that the NYSE may close on days not included
in that announcement.

<PAGE>

In determining the net asset value of the Fund's shares, common stocks
and other securities that are listed on a national securities exchange or
the NASDAQ National Market System are valued at the last sale price as of
4:15 p.m., New York time, on each day that the NYSE is open for trading,
or, in the absence of recorded sales, at the last closing price on such
exchange or on such System. Unlisted securities that are not included in
such National Market System are valued at the closing price in the over-
the-counter market. Securities and other assets for which market
quotations are not readily available are valued by appraisal at their
fair value as determined in good faith by the Advisor under procedures
established by and under the general supervision and responsibility of
the Board of Trustees. Debt securities which mature in less than 60 days
are valued at amortized cost (unless the Board of Trustees determines
that this method does not represent the fair market value of such
assets), if their original maturity was 60 days or less.

TAX STATUS

The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends and Tax
Status."

When an income dividend or capital gains distribution is paid by the
Fund, net asset value per share is reduced automatically by the amount of
the dividend or distribution. If net asset value per share is reduced
below a shareholder's cost basis as a result, such a distribution might
still be taxable to the shareholder as ordinary income or capital gain
(as the case may be) although in effect it represents a return of
invested capital. For this reason, investors should consider carefully
the desirability of purchasing shares immediately prior to a distribution
date.

The Fund does not intend to invest in foreign issuers which meet the
definition in the Code of passive foreign investment companies ("PFICs").
However, foreign corporations are not required to certify their status as
PFICs to potential U.S. investors, and the Fund may unintentionally
acquire stock in a PFIC. The Fund's income and gain, if any, from the
holding of PFIC stock may be subject to a non-deductible tax at the Fund
level.
A portion of the Fund's income dividends may be eligible for the
dividends-received deduction allowed to corporations under the Code, if
certain requirements are met. Investment income received by the Fund
from sources within foreign countries may be subject to foreign income
taxes withheld at the source.

<PAGE>

The treatment of income dividends and capital gains distributions to
shareholders of the Fund under the various foreign, state, and local
income tax laws may not parallel that under the Federal law.
Shareholders should consult their tax adviser with respect to applicable
foreign, state, and local taxes.

GENERAL

The Fund is currently the only series of The CornerCap Group of Funds.
The Fund's Declaration of Trust permits its Trustees to issue an
unlimited number of full and fractional shares of beneficial interest and
to divide or combine the shares into a greater or lesser number of shares
without thereby changing the proportionate beneficial interest in the
Fund. Each share represents an interest in a Fund proportionately equal
to the interest of each other share. Upon the Fund's liquidation, all
shareholders would share pro rata in the net assets of the Fund in
question available for distribution to shareholders. If they deem it
advisable and in the best interest of shareholders, the Board of Trustees
may create additional classes of shares which differ from each other only
as to dividends. The Board of Trustees has created one class of shares,
but the Board may create additional classes in the future, which
have separate assets and liabilities; each of such classes has or will
have a designation including the word "Series". Rule 18f-2 under the
1940 Act provides that matters submitted to shareholders be approved by a
majority of the outstanding securities of each series, unless it is clear
that the interest of each series in the matter are identical or the
matter does not affect a series. However, the rule exempts the selection
of accountants and the election of Trustees from the separate voting
requirements. Income, direct liabilities and direct operating expenses
of each series will be allocated directly to each series, and general
liabilities and expenses of the Fund will be allocated among the series
in proportion to the total net assets of each series by the Board of
Trustees.

Under Massachusetts law, a shareholder of a Massachusetts business trust
may be held liable as a partner under certain circumstances. The Fund's
Declaration of Trust, however, contains an express disclaimer of
shareholder liability for its acts or obligations and requires that
notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Fund or its Trustees. The
Declaration of Trust provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations. The Declaration of Trust also provides that
the Fund shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. In addition, the operation of the Fund as an
investment company would not likely give rise to liabilities in excess of
its assets. Thus the risk of a shareholder incurring financial loss on
account of shareholder liability is highly unlikely and is limited to the
relatively remote circumstances in which the Fund would be unable to meet
its obligations.

The Fund entered into a Distribution Agreement effective as of March 31,
1995, with Attkisson, Carter & Akers, Inc., a securities broker/dealer
registered pursuant to the Securities Exchange Act of 1934, and located
in Atlanta, Georgia. No fee is paid pursuant to this agreement other
than reimbursement under the Fund's Rule 12b-1 Distribution Plan.

With respect to the purchase and sale of Fund shares, certain
broker/dealers other than the Distributor may charge a fee to Fund
investors for executing transactions on the investor's behalf. Such

<PAGE>

transactions may be executed on the investor's behalf directly through
the Fund's Transfer Agent without payment of such a fee. See the
section entitled "How to Purchase Shares" in the Prospectus.

Funds Services, Inc. serves as the Transfer Agent. Funds Services, Inc.,
in its function as Transfer Agent, disburses dividends, processes new
accounts, purchases, redemptions, transfers, and issues certificates.
Commonwealth Fund Accounting acts as the Fund's accounting services
agent. Wachovia Bank. acts as the Fund's custodian to hold its assets in
safekeeping and collect income.

The Fund's independent public accountants, Tait, Weller & Baker, perform
an annual audit of the Fund's accounts, assist in the preparation of
certain reports to the SEC, and prepare the Fund's tax returns.

<PAGE>

PRINCIPAL SHAREHOLDERS

As of June 30, 1996, no shareholder owned beneficially more than 5% of
the outstanding shares of the Fund.

PERFORMANCE INFORMATION

The average annual compound rates of return (unaudited) as of March 31,
1996 for the Fund for the periods listed below are as follows:

1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.71%
3.5 years (Since Inception of Management by Cornerstone Capital) . . . . . . . . 11.03%
5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.01%
9.71 years (Since Fund Inception) . . . . . . . . . . . . . . . . . . . . . . . 1.67%
</TABLE>

Example:
<TABLE>
<CAPTION>

Based on the average annual compound rates of (Unaudited
return listed above over these periods, you could One 3.5 Five 9.71
have expected the following values on a $10,000 Year Years Years Years
investment assuming no redemption at the end of ---- ----- ----- -----
each time period. (March 31, 1996)
<S> <C> <C> <C> <C>

$11,471 $14,423 $15,393 $11,745

</TABLE>

The following is a brief description of how performance is calculated.
Quotations of average annual total return for the Fund will be expressed
in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over periods of 1 year, 5 years, and
since inception (9.71 years). These are the annual total rates of return
that would equate the initial amount invested to the ending redeemable
value. These rates of return are calculated with the following formula:

P(1+T)n = ERV

(where T= average annual total return; ERV = ending redeemable value of a
hypothetical $10,000 investment made at the beginning of the period; P =
a hypothetical initial payment of $10,000; and n = number of years). All
total return figures reflect the deduction of a proportional share of
Fund expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid.

<PAGE>

FINANCIAL STATEMENTS

The financial statements of the Fund for the year ended March 31, 1996
and the report of the Fund's independent accountants are included in the
Fund's Annual Report to shareholders. A copy of the Annual Report
accompanies this SAI. The following financial statements appearing in
such Annual Report are incorporated by reference into this SAI.

Report of Independent Accountants . . . 1
Schedule of Investments . . . . . . . . 2
Statement of Assets and Liabilities . . 6
Statement of Operations . . . . . . . . 7
Changes in Net Assets . . . . . . . . . 8
Financial Highlights . . . . . . . . . . 9
Notes to Financial Statements . . . . . 10

<PAGE>

CORNERCAP BALANCED FUND

OF
THE CORNERCAP GROUP OF FUNDS
A "Series" Investment Company

SHAREHOLDER SERVICES QUESTIONS INVESTMENT OBJECTIVES QUESTIONS

Voice: (800) 628-4077 Voice: (800) 728-0670
Fax: (804) 285-8018 Fax: (404) 240-0144

The CornerCap Group of Funds (the "CornerCap Funds") is an open-end, diversified
management investment company presently consisting of two separate series
representing separate portfolios of investments. The investment objective of
the CornerCap Balanced Fund (the "Fund"), is to obtain capital appreciation and
current income. The Fund invests in a combination of equity and fixed-income
securities. There is no assurance that the Fund will achieve its objective.
The other portfolio comprising the CornerCap Funds is the CornerCap Growth Fund.
The CornerCap Growth Fund is offered under a separate prospectus.

This Prospectus sets forth concisely the information about the Fund that you
should know before investing in the Fund. You should read it and keep it for
future reference. A Statement of Additional Information ("SAI") for the
Balanced Fund dated ____________ ___, 1996, containing additional information
about the Fund has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference in this Prospectus in its entirety.
You may obtain a copy of the SAI without charge by calling (800) 728-0670 or
writing the Fund at the following address: Cornerstone Capital Corp., 100
Northcreek, Suite 250, Atlanta GA, 30327.

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.

The date of this Prospectus is ____________ ___, 1996.

<PAGE>

PROSPECTUS SUMMARY

The Fund .................... The Fund is a diversified open-end management
investment company (see page 7). The shares of
the Fund are offered without sales or redemption
charges (see page 3).

Investment Objective ........ The Fund's investment objective is to obtain
capital appreciation and current income The Fund
will attempt to achieve its objective by investing
in equity and fixed-income securities of domestic
and foreign issuers. Under normal circumstances,
the Fund will invest 50-70% of its assets in
equity securities and at least 30% in fixed-income
securities including cash and cash equivalents.
There can be no assurance that the Fund will
achieve its investment objective (see page 7).

Investment Policies ......... The Fund will invest in common stocks, preferred
stocks, and convertible securities selected by
Cornerstone Capital Corp. (the "Advisor") from
among 1500 issues ranked according to fundamental
factors, such as relative price/earnings ratio,
earnings growth rate, and cash flow. The Fund
may hold fixed-income securities of any maturity,
dependent upon economic and market conditions.
The Fund also may hold cash and cash equivalents
(see page 8).

Investment Advisor .......... Cornerstone Capital Corp. acts as the investment
advisor to the Fund. In that capacity, it selects
the portfolio holdings. (see page 9).

Custodian ................... The Trust Dept. of Wachovia Bank of N.C. (the
"Custodian") holds the Fund's assets.

Administration .............. Fund Services, Inc. is the Transfer Agent (see
page 10), and Commonwealth Fund Accounting, Inc.
calculates the daily net asset value (see page
11). Cornerstone Capital Corp. also provides
certain record keeping and shareholder servicing
functions (see page 10).

Dividends & Distributions ... The Fund currently intends to make two
distributions of any net income or capital gains
during each calendar year (see page 11).

Minimum Purchase ............ The minimum initial investment is $2,000 and the
minimum subsequent investment in the Fund is $250
(see page 12).

Redemption .................. Shares of the Fund may be redeemed at the next
determined net asset value, without charge (see
page 12).

<PAGE>

SUMMARY OF FUND EXPENSES

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear directly or indirectly in
connection with an investment in the Fund.

SHAREHOLDER TRANSACTION EXPENSES

Maximum sales charge on purchases . . . . . . . . . . . . . . . None

Maximum sales charge imposed on reinvested dividends. . . . . . None

Deferred sales charge . . . . . . . . . . . . . . . . . . . . . None

Redemption fee . . . . . . . . . . . . . . . . . . . . . . . . None

Exchange fee. . . . . . . . . . . . . . . . . . . . . . . . . . None

ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS)1

Management Fee(1) . . . . . . . . . . . . . . . . . . . . . . . 0.0%

12b-1 Fee(2). . . . . . . . . . . . . . . . . . . . . . . . . . 0.0%

Other Expenses(3) . . . . . . . . . . . . . . . . . . . . . . . 2.0%

Total Fund Operating Expenses(3). . . . . . . . . . . . . . . . 2.0%

1. The Fund's investment advisory agreement with the Advisor provides for
compensation to the Advisor at the annual rate of 1.0% of average daily net
assets. The Advisor has voluntarily agreed to waive all or such portion of
its fee and to reimburse the Fund to the extent and for as long as may be
necessary to maintain total Fund operating expenses at no higher than 2.0%
of average net assets.

2. The Fund has adopted a Distribution Plan pursuant to which it may reimburse
the Distributor and Advisor for certain distribution related expenses of
the Fund up to an annual amount of 0.25% of average daily net assets. No
reimbursements have been made under this plan since its inception and none
are presently contemplated.

3. "Other expenses" include fees paid to the Fund's independent accountant,
independent trustees, counsel to the independent trustees, transfer agent,
administrator, custodian and accounting services agent. "Other expenses"
also include costs associated with registration fees, reports to
shareholders, and other miscellaneous expenses. The Advisor has
voluntarily agreed to waive its advisory fee and to reimburse the Fund for
certain of its operating expenses to the extent and for as long as may be
necessary to keep total Fund operating expenses at 2.0% of average net
assets. "Other Expenses" and "Total Fund Operating Expenses" are presented
net of reimbursement.
4

<PAGE>

HYPOTHETICAL EXAMPLE OF FUND EXPENSES 1 YR. 3 YR. 5YRS. 10 YRS.
- ------------------------------------- ----- ----- ----- -------

You would pay the following expenses on a $1,000 $20 $64 $110 $244
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period.

The purpose of this example is to assist investors in understanding the
various costs and expenses which stockholders of the Fund bear directly and
indirectly. The 5% return is hypothetical and this example should not be
considered a representation of the Fund's past or future performance. The
actual expenses may be greater or less than those shown.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

The CornerCap Balanced Fund (the "Fund") is a series of the CornerCap Group of
Funds, a diversified, open-end management investment company registered with the
SEC as required under the Investment Company Act of 1940 (the "1940 Act").
Shares of the Fund may be purchased at their net asset value, without sales
load, as next determined after an account application is received in proper
form.

The Fund's investment objective is to obtain long-term capital appreciation and
current income. The Fund will attempt to achieve its objective by normally
investing 50% to 70% of its total assets in equity securities of domestic and
foreign issuers and at least 30% in fixed-income securities including cash and
cash equivalents. There can be no assurance that the Fund will achieve its
objective.

The equity securities that the Fund may purchase consist of common stocks,
preferred stocks, or convertible securities that will generally be publicly
traded on a national securities exchange or over-the-counter. In selecting
portfolio securities for purchase by the Fund, the Fund's investment advisor,
Cornerstone Capital Corp. (the "Advisor''), ranks approximately 1,500 common
stocks according to fundamental factors. The three key criteria are relative
price/earnings ratio, earnings growth rate, and cash flows that are in excess of
capital expenditures. Purchases are made from the most attractive securities
based on diversification and risk, and will be made only if they can be made at
prices which, in the judgment of the Advisor, create the possibility of
additional growth in capital.

The fixed-income securities that the Fund may purchase consist of obligations
of the U.S. Government, its agencies and instrumentalities; corporate securities
including bonds and notes; and sovereign government, municipal, mortgage-backed
and other asset-backed securities. Investments in government obligations will
include direct obligations of the U.S. Government, such as U.S. Treasury bills,
notes and bonds, and obligations of U.S. Government authorities, agencies and
instrumentalities, such as the Federal National Mortgage Association, Federal
Home Loan Bank, Federal Financing Bank and Federal Farm Credit Bank obligations.
Mortgage-backed and other asset-backed securities typically carry a guarantee
from an agency of the U.S. Government or a private issuer of the timely payment
of principal and interest. The Fund may hold securities of any maturity, with
the average maturity varying depending upon economic and market conditions. The
Fund will only invest in those corporate obligations which the Advisor considers
to be of investment grade quality. The Fund invests only in those corporate
obligations which in the Advisor's opinion have the investment characteristics
described by Moody's in rating corporate obligations within its four highest
ratings of Aaa, Aa, A and Baa and by S&P in rating corporate obligations within
its four highest ratings of AAA, AA, A and BBB. It is possible that the ability
of the portfolio to achieve its objective of current income could be diminished
by its restriction on the use of non-investment grade corporate obligations.
For a description of these ratings, see Appendix A to the SAI. The Fund,
however, does not require that its investments in corporate obligations actually
be rated by Moody's or S&P, and may acquire such unrated obligations which in
the opinion of the Advisor are of a quality at least equal to a rating of Baa by
Moody's or BBB by S&P.

<PAGE>

Investment Objective and Policies, continued

The Fund may also hold cash and cash equivalent securities. Cash and cash
equivalents will include, among others, treasury bills, banker's acceptances,
certificates of deposits, time deposits and commercial paper. For a description
of these instruments, see Appendix A to the SAI. Cash equivalents will
generally be rated Prime-1 by Moody's or A or better by S&P, or, if unrated, of
comparable quality as determined by the Advisor. For a description of these
ratings, see Appendix A to the SAI.

INVESTMENT RISKS - As a fund investing in both equity and fixed-income
securities, the Fund is subject to market risk, interest rate risk and credit
risk. The market for equity securities in the United States tends to be
cyclical, with periods when the prices of securities generally rise and periods
when they generally decline. All equity securities are usually influenced to
some extent by price movements in the equities' market. Because of the risks
associated with investments in equity securities, the Fund is intended to be a
long-term investment vehicle and is not designed to provide investors with a
means of speculating on short-term stock market movements.

The fixed-income portion of the Fund will be subject to risk arising from
fluctuating interest rate levels. As prevailing interest rates decrease, bond
prices will increase. Likewise, when prevailing interest rates increase, bond
prices will decrease. The level of price volatility of a bond is generally
dependent upon the length of time until maturity. Bonds with longer maturities
usually have higher yields and greater price volatility than bonds with shorter
maturities. A change in the level of interest rates will affect the Net Asset
Value per share of the Fund as well as changing the yield of the Fund.

Fixed-income securities are also subject to credit risk arising from the ability
of the issuer to make timely payment of interest and principal installments.
Credit ratings give an indication of the issuer's ability to maintain these
timely payments. Normally, bonds with lower credit ratings will have higher
yields than bonds with the highest credit ratings. The Fund does not require
that its investments in corporate obligations actually be rated by Moody's or
S&P, and it may acquire such unrated obligations which in the opinion of the
Advisor are of a quality at least equal to a rating of Baa by Moody's or BBB by
S&P. With respect to investments in unrated obligations, the portfolio will be
more reliant on the Advisor's judgment and experience than would be the case if
the Fund invested solely in rated obligations. Obligations rated Baa by Moody's
or BBB by S&P may have speculative characteristics. A rating of Baa by Moody's
indicates that the obligation is of "medium grade," neither highly protected nor
poorly secured. Interest payments and principal security appear adequate for
the present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. A rating of BBB by
S&P indicates that the obligation is in the lowest "investment grade" security
rating. Obligations rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas such obligations normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest than
obligations in the top three "investment grade" categories. Both credit and
market risks as described above are increased by investing in fixed-income
obligations rated Baa by Moody's and BBB by S&P. For a more detailed
description of these ratings, see Appendix A to the SAI.

Investors should consider the Fund as a vehicle with which to balance their
total investment program risks.

FOREIGN SECURITIES -The Fund may, using the criteria set forth above, invest up
to 25% of its assets in foreign equity or corporate debt securities. The Advisor
anticipates that such investments will be made in U.S. dollar denominated
securities in the form of (i) American Depository Receipts (ADRs) issued against
the securities of foreign issuers, or (ii) other securities of foreign issuers
that are traded on U.S. national securities exchanges or in the U.S.
over-the-counter market.

There are risks associated with investments in securities of foreign issuers.
Such risks include changes in currency rates, greater difficulty in commencing
lawsuits, differences between U.S. and foreign economies, and U.S. Government
policy with respect to certain investments abroad. Foreign companies are
frequently not subject to the accounting and financial reporting standards
applicable to U.S. companies, and there may be less information available about
foreign issuers. Securities of foreign issuers are generally less liquid and
more volatile than those of comparable U.S. issuers. There is often less
government regulation of issuers

<PAGE>

than in the U.S. There is also the possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect the value of those investments.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS - The Fund may purchase and
write options on securities and may invest in futures contracts for the purchase
and sale of foreign currencies, fixed-income securities and instruments based on
financial indices, options on futures contracts and forward contracts.
Additional information about futures, options and other derivative instruments
is contained in the SAI.

PRINCIPAL INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Fund is subject to certain investment restrictions which are fundamental
policies that cannot be changed without the approval of the holders of a
majority (as defined in the 1940 Act) of the Fund's outstanding securities. The
Fund's investment objective is such a policy. Among its other fundamental
policies, with respect to 75% of its assets, the Fund may not (i) invest more
than 5% of the value of its total assets in securities of any one issuer (other
than securities of the U.S. Government, its agencies and instrumentalities); or
(ii) invest 25% or more of the value of its total assets in securities of
issuers in any one industry. Additional information about the Fund's investment
restrictions is contained in the SAI.

It is the position of the staff of the SEC (and an operating although not a
fundamental policy of the Fund) that open-end investment companies, such as the
Fund, should not make certain investments if thereafter more than 10% of the
value of their net assets would be invested in illiquid assets. The investments
included in this 10% limit are (i) those which are restricted, i.e., those
which are subject to restriction as to disposition under Federal securities laws
(which the Fund does not expect to own), (ii) fixed time deposits subject to
withdrawal penalties (other than overnight deposits), (iii) repurchase
agreements having a

maturity of more than seven days, and (iv) investments which are not readily
marketable. This 10% limit does not include obligations payable at principal
amount plus accrued interest within seven days after purchase.

MANAGEMENT
- --------------------------------------------------------------------------------

The Fund's Board of Trustees decides on matters of general policy and reviews
the activities of the Fund's Advisor and officers, and reviews the business
operations of the Fund.

THE ADVISOR - Cornerstone Capital Corp., 100 Northcreek, Suite 250, 3715
Northside Parkway, NW, Atlanta, GA 30327, acts as investment Advisor to the
Fund, subject to the control of the Fund's Board of Trustees, and supervises and
arranges the purchase and sale of securities held in the portfolio of the Fund.
The Advisor is a Georgia corporation organized in 1989. It was registered with
the SEC as an investment Advisor in 1989. The Advisor is controlled by Thomas E.
Quinn and Gene A. Hoots, through equal ownership of the Advisor's outstanding
shares.

Mr. Quinn is the portfolio manager for the Fund. He has worked in investment
management and financial analysis for 22 years, the last 6 years as a principal
of Cornerstone Capital Corp. His primary responsibilities are portfolio
management, investment strategy and research. Previously, Mr. Quinn was Chief
Investment Officer for RJR Investment Management, Inc. where he managed over
$600 million in primarily equity assets. He is a Chartered Financial Analyst
and a Certified Public Accountant. His graduate degrees include an MBA from the
University of North Carolina at Greensboro and an MS in Operations Research from
Ohio University.

<PAGE>

Management, continued

Mr. Hoots has worked in investment management and financial analysis for over 26
years, the last 6 years as a principal of Cornerstone Capital Corp. His primary
responsibilities are portfolio management, client service and investment policy.
Previously, Mr. Hoots was Vice President of Reich & Tang and President of RJR
Investment Management, Inc. He has an MBA from the University of North Carolina
at Chapel Hill and a BS in Engineering from N.C. State University.

The Fund has retained the Advisor under an Investment Advisory Agreement (the
"Agreement'') dated _______________, which remains in effect from year to year
if approved annually by the Board of Trustees. The Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 1% of the Fund's
average daily net assets. This rate of fee is higher than the investment
advisory fees paid by most management investment companies.

The Agreement contains provisions relating to the selection of broker-dealers
("brokers'') for the Fund's portfolio transactions. One of such provisions
states that the Advisor, subject to all other provisions of the Agreement on the
subject, may consider sales of shares of the Fund and/or of any other investment
companies for which the Advisor acts as investment Advisor as a factor in the
selection of brokers to execute brokerage and principal transactions, subject to
the requirements of "best execution,'' as defined in the Agreement. See the SAI
for additional information as to brokerage.

The Fund is subject to the expense limitation set by applicable regulations of
the various state securities commissions relating to expenses. Currently, the
most restrictive applicable expense limitation is 2.5% of the first $30 million
of a fund's average net assets, 2.0% of the next $70 million of average net
assets, and 1.5% of average net assets in excess of $100 million. The Agreement
provides that the Advisor will reduce its fee in any fiscal year to the extent
that the expenses of the Fund exceed applicable state limitations. Should this
expense limitation be exceeded, the Advisor will waive its fee as necessary, up
to the full amount of the fee. In addition, the Advisor has voluntarily agreed
to reimburse the Fund for certain of its operating expenses to the extent and
for so long as may be necessary to keep the total operating expenses at no
greater than 2.0% of average net assets.

ADMINISTRATOR - Cornerstone Capital Corp. serves as the Fund's Administrator
pursuant to an Administration Agreement. The Administrator provides certain
record-keeping and shareholder servicing functions required of registered
investment companies, and will assist the Fund in preparing and filing certain
financial and other reports, and performs certain daily functions required for
ongoing operations.

The Administration Agreement provides that the Administrator will be paid at the
annual rate of .20% of the Funds average daily assets, up to a maximum of $4,000
a month. The Administrator will be reimbursed for certain out-of-pocket
expenses, and they may sub-contract with other responsible companies for some of
its duties. The address of the Administrator is 100 Northcreek, Suite 250, 3715
Northside Parkway, Atlanta, GA 30327.

See the SAI for more information regarding the Fund's Trustees and Officers.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per share is determined as of 4:15 PM on each day
that the New York Stock Exchange is open for trading. The net asset value per
share is the value of the Fund's assets, less its liabilities, divided by the
number of shares of the Fund outstanding. The value of the Fund's portfolio
securities is, in general, the market value of such securities. See the SAI for
further information.

DISTRIBUTION PLAN
- --------------------------------------------------------------------------------

The Fund is authorized under a Distribution Plan, pursuant to Section 12b-1 of
the 1940 Act, to use its assets to finance certain activities relating to the
distribution of shares. Pursuant to the Distribution Plan, the Advisor or

<PAGE>

Attkisson, Carter & Akers, Inc., One Buckhead Plaza, Suite 1475, 3060 Peachtree
Road, N.W., Atlanta, GA, 30305 (the "Distributor"), the Fund's distributor and
principal underwriter, are authorized to purchase advertising, sales literature,
and other promotional material and to pay affiliated sales people of the
Distributor. The annual expenditure limit under the Fund's Distribution Plan is
.25% of 1%. No such reimbursement may be made for expenditures or fees for
fiscal years prior to the current fiscal year or in contemplation of future
fees or expenditures. Any reimbursement paid pursuant to the Distribution Plan
is in addition to the investment Advisory fee.

The Fund has also entered into a separate Distribution Agreement with the
Distributor pursuant to which the Distributor acts as agent upon the receipt of
purchase orders from investors.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Shares of the Fund may be purchased at the Net Asset Value next determined after
receipt of an account application in proper form; see "Net Asset Value". The
minimum initial investment is $2,000 and the minimum subsequent investment in
the Fund is $250. The Fund reserves the right to reject any account application.

INVESTING BY MAIL - To purchase shares of the Fund, investors should mail a
completed account application with a check payable to CornerCap Balanced Fund,
Fund Services, Inc., P.O. Box 26305, Richmond, VA 23260. No certificates will
be issued unless specifically requested.

If the purchase being made is a subsequent investment, the shareholder should
send a stub from a confirmation previously sent by the Transfer Agent in lieu of
the account application. If no such stub is available, a brief letter giving the
registration of the account and the account number should accompany the check.
In addition, the shareholder's account number should be written on the check.
Checks do not need to be certified but are accepted subject to face value in
U.S. dollars and must be drawn on a U.S. bank.

INVESTING BY WIRE - You may purchase shares by requesting your bank to transmit
"Federal Funds" by wire directly to the Transfer Agent. To invest by wire
please call the Transfer Agent at 1-800-628-4077 for instructions, then notify
the Distributor by calling 1-800-848-9555. Your bank may charge you a small fee
for this service. The Account Application which accompanies this Prospectus
should be completed and promptly forwarded to the Transfer Agent. This
application is required to complete the Fund's records in order to allow you
access to your shares. Once your account is opened by mail or by wire,
additional investments may be made at any time through the wire procedure
described above. Be sure to include your name and account number in the wire
instructions you provide your bank.

EXCHANGE PRIVILEGE - You may exchange your shares in this Fund for those of the
CornerCap Growth Fund, on the basis of their respective net asset values at the
time of the exchange. Before making any exchange, be sure to review the
prospectus of the Growth Fund and consider their differences.

An exchange is the redemption of shares from one fund followed by the purchase
of shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless your account is tax
deferred).

You may make four exchanges out of each fund during each calendar year. The
fund accounts must be identically registered. In addition, the exchange
privilege is limited to states in which the shares of the other fund being
acquired are registered for sale.

The Fund reserves the right to reject any exchange request, or to modify or
terminate exchange privileges, in the best interests of the Fund and its
shareholders. Notice of all such modifications or termination will be given at
least 60 days prior to the effective date of the change in privilege, except for
unusual instances (such as when redemptions of the exchange are suspended under
Section 22(e) of the Investment Company Act of 1940, or when sales of the fund
into which you are exchanging are temporarily stopped).

<PAGE>

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

The Fund will redeem for cash all of its full and fractional shares at the net
asset value per share next determined after receipt of a redemption request in
proper form, as described below.

A shareholder wishing to redeem shares may do so at any time by writing or
calling CornerCap Balanced Fund, Fund Services, Inc., P.O. Box 26305, Richmond,
VA 23260 (800/628-4077). The instructions should specify the number of shares
to be redeemed and be signed by all registered owners exactly as the account is
registered. It will not be accepted unless it contains all required documents in
proper form, as described below.

In addition to written instructions, if any shares being redeemed or repurchased
are represented by stock certificates, the certificates must be surrendered. The
certificates must either be endorsed or accompanied by a stock power signed by
the registered owners, exactly as the certificates are registered. Additional
documents may be required from corporations or other organizations, fiduciaries
or anyone other than the shareholder of record.

The Fund does not issue share certificates unless specifically requested.
Maintaining shares in uncertificated form minimizes the risk of loss or theft of
a share certificate. A lost, stolen or destroyed certificate can only be
replaced upon obtaining a sufficient indemnity bond. The cost of such a bond,
which is borne by the shareholder, can be 2% or more of the value of the missing
certificate. To resolve questions concerning documents, contact the Transfer
Agent at 1-800-628-4077.

Payment for shares tendered will be made within three days after receipt by the
transfer agent of instructions, certificates, if any, and other documents, all
in proper form. However, payment may be delayed under unusual circumstances, as
specified in the 1940 Act or as determined by the SEC. Payment may also be
delayed for any shares purchased by check for a reasonable time (not to exceed
15 days) necessary to determine that the purchase check will be honored. Payment
will be sent only to shareholders at the address of record. A signature
guarantee is required if the shareholder requests that the check be mailed
anywhere other than to the shareholder's address of record.

If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may pay the redemption price in whole or in part by a
distribution in kind of securities from the portfolio of the Fund, in lieu of
cash, in conformity with applicable rules of the SEC. The Fund, however, has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Fund during any 90 day period for any one
shareholder. Should redemptions by any shareholder exceed such limitation, the
Fund will have the option of redeeming the excess in cash or in kind. If shares
are redeemed in kind, the redeeming shareholder would incur brokerage costs in
converting the assets into cash.

The Board of Trustees may, in order to reduce the expenses of the Fund, redeem
all of the shares of any shareholder (other than a qualified retirement plan)
whose account has declined to a net asset value of less than $2,000, as a result
of a transfer or redemption, at the net asset value determined as of the close
of business on the business day preceding the sending of notice of such
redemption. The Fund would give shareholders whose shares were being redeemed 60
days' prior written notice in which to purchase sufficient shares to avoid such
redemption.

TELEPHONE PURCHASES, EXCHANGES AND REDEMPTIONS FOR SECURITIES FIRMS
- --------------------------------------------------------------------------------

The following purchase, exchange and redemption telephone procedures have been
established by the Fund for investors who purchase Fund shares through member
firms of the National Association of Securities Dealers, Inc. (the "NASD") who
have accounts with the Fund for the benefit of their clients. Telephone
purchases, exchanges and redemptions will be effected by the Fund only through
such NASD members, who in turn will be responsible for crediting the investor's
account at the NASD member with the amount of any

<PAGE>

purchase, exchange or redemption pursuant to its account agreement with the
investors' instruction to purchase, exchange or redeem Fund shares.

NASD member firms may charge a reasonable handling fee for providing this
service. Such fees are established by each NASD member acting independently
from the Fund and neither the Fund nor the Distributor receives any part of such
fees. Such handling fees may be avoided by investing directly with the Fund
through the Distributor, but investors doing so will not be able to avail
themselves of the Fund's telephone privileges.

Member firms of the NASD may telephone the Distributor at (800) 628-4077 and
place purchase and redemption orders on behalf of investors who carry their Fund
investments through the member's account with the Fund.

PURCHASE BY TELEPHONE. Shares shall be purchased at the next determined net
asset value. Payment for shares purchased must be received from the NASD member
firm by the Fund by wire no later than the third business day following the
purchase order. If payment for any purchase order is not received on or before
the third business day, the order is subject to cancellation by the Fund and the
NASD member firm's account with the Fund will immediately be charged for any
loss.

EXCHANGE BY TELEPHONE. Exchanges will be made based on the respective net asset
values of the Funds involved.

REDEMPTION BY TELEPHONE. The redemption price is the net asset value next
determined after the receipt of the redemption request by the Fund. Shares
purchased by telephone may not be redeemed until after the Fund has received
good payment.

By electing telephone purchase, exchange and redemption privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the Fund,
the Distributor nor the Transfer Agent shall be liable for following
instructions communicated by telephone and reasonably believed to be genuine.
The Fund and its agents provide written confirmation of transactions initiated
by telephone as a procedure designed to confirm that telephone instructions are
genuine. In addition, all telephone transactions are recorded. As a result of
these and other policies, the NASD member firm may bear the risk of any loss in
the event of such a transaction. If the Fund fails to employ this and other
established procedures, it may be liable. The Fund reserves the right to modify
or terminate these telephone privileges at any time.

DIVIDENDS AND TAX STATUS
- --------------------------------------------------------------------------------

The Fund currently intends to make two distributions of any net income or
capital gains during each calendar year. The first distribution will be made
following the Fund's fiscal year end, March 31, and the second distribution, if
any, will be declared by December 31 of each year with respect to any additional
undistributed capital gains earned during the one year period ended October 31
of such calendar year and with respect to any undistributed income for such
calendar year. The amount and frequency of distributions by the Fund are not
guaranteed and are subject to the discretion of the Fund's Board of Trustees.

The Fund has qualified and elected to be treated as a "regulated investment
company'' under Subchapter M of the Code during its previous fiscal periods and
intends to continue to do so in the future. By distributing all of its net
investment income and net capital gains to its shareholders for a fiscal year in
accordance with the timing requirements of the Code and by meeting other
requirements

<PAGE>

Dividends & Tax Status, continued

of the Code relating to the sources of income and diversification of its assets,
the Fund will not be subject to Federal income or excise taxes.

All dividends from net investment income together with those derived from the
excess of net short-term capital gain over net long-term capital loss
(collectively, "income dividends''), will be taxable as ordinary income to
shareholders whether or not paid in additional shares. Any distributions
derived from the excess of net long-term capital gain over net short-term
capital loss ("capital gains distributions'') are taxable as long-term capital
gains to shareholders regardless of the length of time a shareholder has owned
his shares. Any loss realized upon the redemption of shares within six months
after the date of their purchase will be treated as a long-term capital loss to
the extent of amounts treated as distributions of net long-term capital gain
during such six-month period.

Income dividends and capital gains distributions are taxed in the manner
described above, regardless of whether they are received in cash or reinvested
in additional shares. For the convenience of investors, all income dividends and
capital gains distributions are reinvested in full and fractional shares of the
Fund based on the net asset value per share at the close of business on the
record date, unless the shareholder has given prior written notice to the
transfer agent that the payment should be made in cash or unless the investor
lives in a state in which the shares of the Fund are not registered for sale and
it is not otherwise lawful to reinvest such distributions. Shareholders will
receive information annually on Form 1099 with respect to the amount and nature
of income and gains to assist them in reporting the prior calendar year's
distributions on their Federal income tax return.

Distributions which are declared in October, November, or December but which are
not paid to shareholders until the following January will be treated for tax
purposes as if received on December 31 of the year in which they were declared.

Under the Code, the Fund may be required to impose backup withholding at a rate
of 31% on income dividends and capital gains distributions, and payment of
redemption proceeds to individuals and other non-exempt shareholders, if such
shareholders have not provided a correct taxpayer identification number and made
the certifications required by the Internal Revenue Service on the account
application. A shareholder may also be subject to backup withholding if the
Internal Revenue Service or a broker notifies the Fund that the shareholder is
subject to backup withholding.

The Fund may liquidate the account of any shareholder who fails to furnish its
certificate of taxpayer identification number within 30 days after date the
account was opened.

Shareholders should consult their tax Advisors with respect to applicable
foreign, state and local taxes.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund may publish its total return in advertisements and
communications to investors. Total return information will include the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and over the period from the Fund's inception of operations. The Fund
may also advertise aggregate and average total return information over different
periods of time. The Fund's total return will be based upon the value of the
shares acquired through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of such shares at the end of the
period, assuming reinvestment of all distributions at net asset value. Total
return figures will reflect all recurring charges against the Fund's income.

Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investor's total return may be
in any future period. For further information, see the SAI.

<PAGE>

In reports or other communications to shareholders and in advertising material,
the Fund may compare performance with that of other mutual funds as listed in
the rankings prepared by Lipper Analytical Services, Inc. and similar
independent services that monitor the performance of mutual funds, or unmanaged
indices of securities of the type in which the Fund invests.

Cornerstone Capital, the investment advisor to the Fund, manages private
accounts with substantially similar investment objectives as the CornerCap
Balanced Fund. In accordance with the Association for Investment Management and
Research (AIMR) standards for reporting, Cornerstone Capital's average annual
composite returns for accounts with a balanced objective similar to the Fund's
are as follows:

2ND QTR. '96 1YR. 3YR. 5YR.
------------ ---- ---- ----

3.4% 13.6% 10.8% 12.0%

PRIVATE ACCOUNT PERFORMANCE DOES NOT REPRESENT THE HISTORICAL PERFORMANCE OF THE
FUND AND IS NOT INDICATIVE OF THE FUND'S FUTURE PERFORMANCE. PRIVATE ACCOUNTS
MAY NOT BE SUBJECT TO CERTAIN INVESTMENT LIMITATIONS, DIVERSIFICATION
REQUIREMENTS, AND OTHER RESTRICTIONS IMPOSED BY THE INVESTMENT COMPANY ACT OF
1940 AND THE INTERNAL REVENUE CODE, WHICH, IF APPLICABLE, MAY HAVE ADVERSELY
AFFECTED THE PERFORMANCE RESULTS OF THE PRIVATE ACCOUNTS COMPOSITE. IN SPITE OF
THE FOREGOING AND THE FACT THAT PAST PERFORMANCE IS NEVER NECESSARILY INDICATIVE
OF FUTURE RESULTS, INVESTORS MAY CONSIDER THIS PRIVATE ACCOUNT INFORMATION
RELEVANT IN DECIDING WHETHER TO BECOME AN INVESTOR IN THE FUND.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a new series of the CornerCap Funds and has only recently begun
operations. The CornerCap Funds were organized on January 6, 1986, as a
Massachusetts business trust. The Declaration of Trust provides that the
Trustees will not be liable for errors of judgment or mistakes of fact or law,
but nothing in the Declaration of Trust protects a Trustee against any liability
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. In addition, the Declaration of Trust contains an
express disclaimer of Shareholder liability for acts or obligations of the Fund.

Shareholders are entitled to one vote for each full share held (and fractional
votes for fractional shares) and may vote in the election of Trustees and on
other matters submitted to meetings of shareholders. It is not contemplated
that regular annual meetings of shareholders will be held. There are no
conversion or preemptive rights in connection with any shares of each of the
series of the CornerCap Funds, nor are there cumulative rights with respect to
the shares of any series. Each issued and outstanding share of each series is
entitled to participate equally in dividends and distributions declared by its
respective series and in net assets of each series upon liquidation or
distribution remaining after satisfaction of outstanding liabilities. The
Declaration of Trust provides that the obligations and liabilities of a
particular series are restricted to the assets of that series and do not extend
to the assets of the CornerCap Funds generally. The Board of Trustees may, at
its own discretion, create additional series of shares.

<PAGE>

General Information continued

have no pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth above. The Fund may be terminated upon the
sale of its assets to another issuer, if such sale is approved by the vote of
the holders of more than 50% of the outstanding shares of each series, or upon
liquidation and distribution of its assets, if so approved. If not so
terminated, the Fund will continue indefinitely.

With respect to the purchase and sale of Fund shares, certain broker/dealers
other than the Distributor may charge a fee to Fund investors for executing
transactions on the investor's behalf. Such transactions may be executed on the
investor's behalf directly through the Fund's Transfer Agent without payment of
such a fee. See the section entitled "How to Purchase Shares" in the
Prospectus.

The Advisor will sell portfolio securities whenever it is appropriate,
regardless of how long the securities have been held by the Fund. The Advisor
will change the Fund's investments whenever it believes doing so furthers the
Fund's investment objective. Portfolio turnover involves some expense to the
Fund, including brokerage commissions and other transaction costs and
reinvestment in other securities. Portfolio turnover may also result in the
recognition of capital gains which may be distributed to shareholders. Tax
considerations may limit the Fund's portfolio turnover. The Fund's annual rate
on portfolio turnover is anticipated to be between 30% and 70%. Tait, Weller &
Baker serves as the certified public accountants of the Fund. Funds Services,
Inc. serves as the Fund's Transfer Agent. Commonwealth Fund Accounting provides
the daily pricing for the Fund. The Trust Department of Wachovia Bank of N.C.
is the custodian of the Fund's assets. The legality of the securities offered
by this Prospectus will be passed upon for the CornerCap Funds by Kilpatrick &
Cody, L.L.P. Kilpatrick & Cody, L.L.P. also represents the Advisor and
Administrator and would represent them in any dispute with the Fund.
Shareholder inquiries related to the administration of shareholder accounts
should be directed to the Transfer Agent, and inquiries related to the
investment objectives of the Fund should be directed to the Advisor.

<PAGE>

CORNERCAP BALANCED FUND
OF
THE CORNERCAP GROUP OF FUNDS
A "SERIES" INVESTMENT COMPANY

STATEMENT OF ADDITIONAL INFORMATION
Dated ____________ ___, 1996

The CornerCap Balanced Fund (the "Fund") is a series of the CornerCap Group of
Funds, a diversified open-end management investment company registered with the
Securities and Exchange Commission (the "SEC") as required by the Investment
Company Act of 1940 (the "1940 Act"). The only other series of the CornerCap
Funds is the CornerCap Growth Fund is offered under a separate Prospectus and
Statement of Additional Information. Prior to June 1995, The CornerCap Group of
Funds' name was The Cornerstone Group of Funds.

This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the Prospectus of the Fund dated November 6, 1996, as
may be amended from time to time (the "Prospectus"); copies of the Prospectus
may be obtained from the Fund, c/o Cornerstone Capital Corp., 100 Northcreek,
Suite 250, Atlanta, GA, 30327. Cornerstone Capital Corp. (the "Advisor") is the
Fund's investment advisor.

TABLE OF CONTENTS

Page

Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . 2
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Accounting & Administrative Services . . . . . . . . . . . . . . . . . . . 6
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . 6
Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Net Asset Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 12

<PAGE>

Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Fund is to obtain long-term capital appreciation
and current income. The Fund will attempt to achieve its objective by normally
investing 50% to 70% of its total assets in equity securities of domestic and
foreign issuers and at least 30% in fixed income securities including cash and
cash equivalents. The portfolio and investment strategies of the Fund are
described in the Fund's Prospectus. The following discussion elaborates on the
disclosure of the Fund's investment policies contained in the Prospectus.

REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreements. A
repurchase agreement, which may be considered a "loan" under the Investment
Company Act of 1940 as amended (the "1940 Act"), is a transaction in which a
fund purchases a security and simultaneously commits to sell the security to the
seller at an agreed-upon price and date (usually not more than seven days) after
the date of purchase. The resale price reflects the purchase price plus an
agreed-upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. The Fund's risk is limited to the ability
of the seller to pay the agreed-upon amount on the delivery date. In the
opinion of management, this risk is not material; if the seller defaults, the
underlying security constitutes collateral for the seller's obligations to pay.
This collateral, equal to or in excess of 100% of the repurchase agreement, will
be held by the custodian for the Fund's assets. However, in the absence of
compelling legal precedents in this area, there can be no assurance that the
Fund will be able to maintain its rights to such collateral upon default of the
issuer of the repurchase agreement. To the extent that the proceeds from a sale
upon a default in the obligation to repurchase are less than the repurchase
price, the Fund would suffer a loss. It is intended (but not required) that at
no time will the market value of any of the Fund's securities subject to
repurchase agreements exceed 50% of the total assets of entering into such
agreement. It is intended for the Fund to enter into repurchase agreements with
commercial banks and securities dealers. The Board of Trustees will monitor the
creditworthiness of such entities.

FOREIGN SECURITIES. The Fund may invest directly in foreign equity securities
traded on U.S. national exchanges or over-the-counter and in foreign securities
represented by ADRs, as described below. The Fund may also invest in foreign
currency-denominated fixed-income securities. Investing in securities issued by
companies whose principal business activities are outside the United States may
involve significant risks not present in domestic investments. For example,
there is generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to

<PAGE>

domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of cash or
other assets of the Fund, political or financial instability, or diplomatic and
other developments which could affect such investments. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Additional costs associated with an investment in foreign
securities may include higher custodial fees than apply to domestic custodial
arrangements, and transaction costs of foreign currency conversions.

ADRs provide a method whereby the Fund may invest in securities issued by
companies whose principal business activities are outside the United States.
These securities will not be denominated in the same currency as the securities
into which they may be converted. Generally, ADRs, in registered form, are
designed for use in U.S. securities markets.

ADRs are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities, and may be issued as sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities trade in the form of ADRs. In unsponsored programs, the
issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program.

OPTIONS. The Fund may purchase and write put and call options on securities.
The Fund may write a call or put option only if the option is "covered" by the
Fund holding a position in the underlying securities or by other means which
would permit immediate satisfaction of the Fund's obligation as writer of the
option. The purchase and writing of options involves certain risks. During
the option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. If a
put or call option purchased by the Fund is not sold when it has remaining
value, and if the market prices of the underlying security, in the case of a
put, remains equal to or greater than the exercise price or, in the case of a
call, remains less than or equal to the exercise price, the Fund will lose its
entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no

<PAGE>

assurance that a liquid market will exist when the Fund seeks to close out an
option position. Furthermore, if trading restrictions or suspensions are
imposed on the options market, a Fund may be unable to close out a position.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may invest in
interest rate futures contracts and options thereon ("futures options"); the
Fund may enter into foreign currency futures contracts and options; and the Fund
may enter into stock index futures contracts and options thereon. Such
contracts may not be entered into for speculative purposes. When a Fund
purchases a futures contract, an amount of cash, U.S. Government securities, or
money market instruments equal to the fair market value less initial and
variation margin of the futures contract will be deposited in a segregated
account to collateralize the position and thereby ensure that such futures
contract is "covered."

There are several risks associated with the use of futures and futures options.
The value of a futures contract may decline. With respect to transactions for
hedging, there can be no guarantee that there will be a correlation between
price movements in the hedging vehicle and in the portfolio securities being
hedged. An incorrect correlation could result in a loss on both the hedged
securities in a Fund and the hedging vehicle so that the Fund return might have
been greater had hedging not been attempted. There can be no assurance that a
liquid market will exist at a time when a Fund seeks to close out a futures
contract or a futures option position. Most futures exchanges and boards of
trade limit the amount of fluctuation permitted in futures contract prices
during a single day; once the daily limit has been reached on a particular
contract, no trades may be made that day at a price beyond that limit. In
addition, certain of these instruments are relatively new and without a
significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Lack of a liquid market for
any reason may prevent the Fund from liquidating an unfavorable position and the
Fund would remain obligated to meet margin requirements until the position is
closed.

The Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. The Fund will use
financial futures contracts and related options only for "bona fide hedging"
purposes, as such term is defined in applicable regulations of the Commodity
Futures Trading Commission, or, with respect to positions in financial futures
and related options that do not qualify as "bona fide hedging" positions, will
enter into such non-hedging positions only to the extent that aggregate initial
margin deposits plus premiums paid by it for open futures option positions, less
the amount by which any such positions are "in-a-money," would not exceed 5% of
the Fund's total assets.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into forward
foreign currency exchange contracts ("forward contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship between the U.S.
dollar and foreign

<PAGE>

currencies. A forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is individually negotiated
and privately traded by currency traders and their customers. Such contracts
may not be entered into for speculative purposes. The Fund will not enter into
forward contracts if, as a result, more than 10% of the value of its total
assets would be committed to the consummation of such contracts, and will
segregate assets or "cover" its positions consistent with requirements under the
1940 Act to avoid any potential leveraging of the Fund.

SWAP AGREEMENTS. The Fund may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to obtain a particular
desired return at a lower cost to the Fund than if it had invested directly in
an instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or "cap;"
interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor;" and interest rate collars, under which a party
sells a cap and purchases a floor or vice versa in an attempt to protect itself
against interest rate movements exceeding given minimum or maximum levels.

The "notional amount" of the swap agreement is only a fictive basis on which to
calculate the obligations which the parties to a swap agreement have agreed to
exchange. Most swap agreements entered into by the Fund would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, the
Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). Obligations under a swap agreement will be accrued daily (offset
against amounts owing to the Fund) and any accrued but unpaid net amounts owed
to a swap counterpart will be covered by the maintenance of a segregated account
consisting of cash, U.S. Government securities, or high-grade debt obligations,
to avoid any potential leveraging of the Fund. The Fund will not enter into a
swap agreement with any single party if the net amount owed or to be received
under existing contracts with that party would exceed 5% of the Fund's total
assets.

MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-backed and other
asset-backed securities. These securities include mortgage pass-through
certificates, collaterized

<PAGE>

mortgage obligations, mortgage-backed bonds and securities representing
interests in other types of financial assets.

MORTGAGE PASS-THROUGH SECURITIES representing interests in "pools" of mortgage
loans in which payments of both interest and principal on the securities are
generally made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities).

Payment of principal and interest on some mortgage pass-through securities may
be guaranteed by the full faith and credit of the U.S. Government (in the case
of securities guaranteed by the Government National Mortgage Association
"GNMA"); or guaranteed by agencies or instrumentalities of the U.S. Government
(in the case of securities guaranteed by the Federal National Mortgage
Association "FNMA" or the Federal Home Loan Mortgage Corporation "FHLMC", which
are supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations).

CMOS are securities which are typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FNMA, or FHLMC. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, semiannually.
CMOs are structured into multiple classes, with each class bearing a different
stated maturity. Monthly payments of principal, including prepayments, are
first returned to investors holding the shortest maturity class; investors
holding the longer maturity classes will receive principal only after the first
class has been retired. An investor is partially guarded against a sooner than
desired return of principal because of the sequential payments. CMOs that are
issued or guaranteed by the U.S. Government or by any of its agencies or
instrumentalities will be considered U.S. Government securities by the Fund,
while other CMOs, even if collateralized by U.S. Government securities, will
have the same status as other privately issued securities for purposes of
applying the Fund's diversification tests.

In a typical CMO transaction, a corporation ("issuer") issues multiple series
(E.G., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are
used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a third-party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear
current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.

<PAGE>

MORTGAGE-BACKED BONDS are general obligations of the issuer fully collateralized
directly or indirectly by a pool of mortgages. The mortgages serve as
collateral for the issuer's payment obligations on the bonds but interest and
principal payments on the mortgages are not passed through either directly (as
with GNMA certificates and FNMA and FHLMC pass-through securities) or on a
modified basis (as with CMOs). Accordingly, a change in the rate of prepayments
on the pool of mortgages could change the effective maturity of a CMO but not
that of a mortgage-backed bond (although, like many bonds, mortgage-backed bonds
can provide that they are callable by the issuer prior to maturity).

ASSET-BACKED SECURITIES are securities representing interests in other types of
financial assets, such as automobile-finance receivables or credit-card
receivables. Such securities are subject to many of the same risks as are
mortgage-backed securities, including prepayment risks and risks of foreclosure.
They may or may not be secured by the receivables themselves or may be unsecured
obligations of their issuers.

RISKS OF MORTGAGE-RELATED SECURITIES. Investment in mortgage-backed securities
poses several risks, including prepayment, market, and credit risk. Prepayment
risk reflects the risk that borrowers may prepay their mortgages faster than
expected, thereby affecting the investment's average life and perhaps it yield.
Whether or not a mortgage loan is prepaid is almost entirely controlled by the
borrower. Borrowers are most likely to exercise prepayment options at the time
when it is least advantageous to investors, generally prepaying mortgages as
interest rates fall, and slowing payments as interest rates rise. Besides the
effect of prevailing interest rates, the rate of prepayment and refinancing of
mortgages may also be affected by home value appreciation, ease of the
refinancing process and local economic conditions.

Market risk reflects the risk that the price of the security may fluctuate over
time. The price of mortgage-backed securities may be particularly sensitive to
prevailing interest rates, the length of time the security is expected to be
outstanding, and the liquidity of the issue. In a period of unstable interest
rates, there may be decreased demand for certain types of mortgage-backed
securities, and a fund invested in such securities wishing to sell them may find
it difficult to find a buyer, which may in turn decrease the price at which they
may be sold.

Credit risk reflects the risk that the Fund may not receive all or part of its
principal because the issuer or credit enhancer has defaulted on its
obligations. Obligations issued by U.S. Government-related entities are
guaranteed as to the payment of principal and interest, but are not backed by
the full faith and credit of the U.S. Government. The performance of private
label mortgage-backed securities, issued by private institutions, is based on
the financial health of those institutions. With respect to GNMA certificates,
7

<PAGE>

although GNMA guarantees timely payment even if homeowners delay or default,
tracking the "pass-through" payments may, at times, be difficult.

CONVERTIBLE SECURITIES. Although the equity investments of the Fund consists
primarily of common and preferred stocks, the Fund may buy securities
convertible into common stock if, for example, the Advisor believes that a
company's convertible securities are undervalued in the market. Convertible
securities eligible for purchase by the Fund include convertible bonds,
convertible preferred stocks, and warrants. A warrant is an instrument issued
by a corporation which gives the holder the right to subscribe to a specific
amount of the corporation's capital stock at a set price for a specified period
of time. Warrants do not represent ownership of the securities, but only the
right to buy the securities. The prices of warrants do not necessarily move
parallel to the prices of underlying securities. Warrants may be considered
speculative in that they have no voting rights, pay no dividends, and have no
rights with respect to the assets of a corporation issuing them. Warrant
positions will not be used to increase the leverage of the Fund; consequently,
warrant positions are generally accompanied by cash positions equivalent to the
required exercise amount.

PORTFOLIO TURNOVER

An annual portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
certain short-term securities) for a year and dividing that amount by the
monthly average of the market value of such securities during the year. The
Fund's portfolio turnover rate in the future is expected to be in the range of
50% to 270%. Higher turnover would involve correspondingly greater commissions
and transaction costs.

INVESTMENT RESTRICTIONS

The Fund has adopted the following restrictions (in addition to those indicated
in its Prospectus) as fundamental policies, which may not be changed without the
favorable vote of the holders of a "majority," as defined in the 1940 Act, of
the Fund's outstanding voting securities. Under the 1940 Act, the vote of the
holders of a "majority" of a Fund's outstanding voting securities means the vote
of the holders of the lesser of (i) 67% of the shares of the Fund represented at
a meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares. The Fund may not:

1. Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);

<PAGE>

2. Issue senior securities, borrow money or pledge its assets except as
permitted by the 1940 Act.

3. Purchase any security if as a result the Fund would then hold more than 10%
of any class of securities of an issuer (taking all common stock issues of
an issuer as a single class, all preferred stock issues as a single class,
and all debt issues as a single class) or more than 33.33% of the
outstanding voting securities of an issuer;

4. Purchase any security if as a result the Fund would then have more than 5%
of its total assets (taken at current value) invested in securities of
companies (including predecessors) less than one year old;

5. Invest in securities of any issuer if, to the knowledge of the Fund, any
officer or Trustee of the Fund or officer or director of the Advisor owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
Trustees, officers and Trustees who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer;

6. Act as underwriter except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws;

<PAGE>

7. Make investments for the purpose of exercising control or management;

8. Participate on a joint, or joint and several basis in any trading account
in securities;

9. Invest in securities of other registered investment companies except as
permitted by Section 12 of the 1940 Act;

10. Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in the common stocks of companies which
invest in or sponsor such programs;

11. Make loans, except through repurchase agreements;

12. Purchase warrants if as a result the Fund would then have more than 5% of
its total net assets (taken at the lower of cost or current value) invested
in warrants, or if more than 2% of the value of the Fund's total net assets
would be invested in warrants which are not listed on the New York or
American Stock Exchanges, except for warrants included in units or attached
to other securities; and

13. Buy or sell commodities or commodity contracts, or real estate or interests
in real estate, although it may purchase and sell securities which are
secured by real estate and securities of companies which invest or deal in
real estate. It may buy or sell futures contracts or options thereon for
hedging purposes as described in the Fund's prospectus.

MANAGEMENT

The Board of Trustees is responsible for the overall management of the Fund,
including general supervision and review of its investment activities. The
officers, who administer the Fund's daily operations, are appointed by the Board
of Trustees. The current Trustees and principal officers of the Fund, their
addresses, and their principal occupations for the past five years are set forth
below. "Interested" trustees, as defined by the 1940 Act, are designated below
by an asterisk.

<PAGE>

Position With Principal Occupations During Past
Name and Address Trust Five Years
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Thomas E. Quinn* Trustee, President, President, Cornerstone Capital Corp.
100 Northcreek, Suite 250 CFO and Treasurer
3715 Northside Pkwy, NW
Atlanta, GA 30327

Gene A. Hoots* Vice President Chief Executive Officer, Cornerstone
119B Reynolda Village Capital Corp.
Winston-Salem, NC 27106

Richard T. Bean Vice President & Portfolio Manager, Cornerstone
100 Northcreek, Suite 250 Secretary Capital Corp.
3715 Northside Pkwy, NW Assistant Controller, Godwins Inc.
Atlanta, GA 30327

Position With Principal Occupations During Past
Name and Address Trust Five Years
- ------------------------------------------------------------------------------------------------------
Richard L. Boger Trustee President, Export Insurance
303 Townsend Place, NW Services, Inc.
Atlanta, GA 30327

G. Harry Durity Trustee Corporate Vice President,
58 Close Road Worldwide Business Development,
Greenwich, CT 06831 Automatic Data Processing, Inc.;
Sr. Vice President, Corp. Develop.,

Laurin M. McSwain Trustee Attorney, Bloodworth & McSwain
3000 Andrews Drive, NW
#5
Atlanta, GA 30305
</TABLE>

THE ADVISOR

<PAGE>

fees of the Advisor and amortization of organization expenses but excluding
interest, taxes, brokerage commissions and extraordinary expenses) for any
fiscal year exceed the limit set by applicable regulations of a state securities
commission, the Advisor will reduce its fee to the Fund by the amount of such
excess up to the full amount of the advisor's annual fee. Any such reductions
are accrued and paid in the same manner as the Advisor's fee and are subject to
readjustment during the year.

The Advisor has voluntarily agreed to waive all or such portion of its fee as
may be necessary to cause the total fund operating expenses not to exceed 2.0%
of average net assets. The Advisor has also voluntarily agreed to reimburse the
fund for certain of its operating expenses to the extent and for so long as may
be necessary to keep total Fund operating expenses at no greater than 2.0% of
average net assets.

The Agreement also provides that the Advisor shall not be liable to the Fund for
any error of judgment by the Advisor or for any loss sustained by the Fund
except in the case of a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages will be limited as
provided in the 1940 Act) or of willful misfeasance, bad faith, gross negligence
or reckless disregard of duty.

ACCOUNTING AND ADMINISTRATIVE SERVICES

Cornerstone Capital Corp. provides certain record keeping and shareholder
services functions to the Fund. Commonwealth Fund Accounting, as the Fund's
pricing and accounting services agent, calculates the daily net asset value of
the Fund and maintains the accounting records.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Agreement states that in connection with its duties to arrange for the
purchase and the sale of securities held in the portfolio of the Fund by placing
purchase and sale orders for the Fund, the Advisor shall select such broker-
dealers ("brokers") as shall, in the Advisor's judgment, implement the policy of
the Fund to achieve "best execution"--i.e., prompt and efficient execution at
the most favorable securities price. In making such selection, the Advisor is
authorized in the Agreement to consider the reliability, integrity and financial
condition of the broker.

<PAGE>

commission is reasonable in relation to the services provided, viewed in terms
of either that particular transaction or the Advisor's overall responsibilities
as to the accounts as to which it exercises investment discretion and that the
Advisor shall use its judgment in determining that the amount of commissions
paid are reasonable in relation to the value of brokerage and research services
provided and need not place or attempt to place a specific dollar value on such
services or on the portion of commission rates reflecting such services. The
Agreement provides that to demonstrate that such determinations were in good
faith, and to show the overall reasonableness of commissions paid, the Advisor
shall be prepared to show that commissions paid (i) were for purposes
contemplated by the Agreement; (ii) were for products or services which provide
lawful and appropriate assistance to the Advisor's decision-making process; and
(iii) were within a reasonable range as compared to the rates charged by brokers
to other institutional investors as such rates may become known from available
information. The Fund recognizes in the Agreement that, on any particular
transaction, a higher than usual commission may be paid due to the difficulty of
the transaction in question.

The research services discussed above may be in written form or through direct
contact with individuals and may include information as to particular companies
and securities as well as services assisting the Fund in the valuation of the
Fund's investments. The research which the Advisor receives for the Fund's
brokerage commissions whether or not useful to the Fund, may be useful to the
Advisor in managing the accounts of the Advisor's other advisory clients.
Similarly, the research received for the commissions of such accounts may be
useful to the Fund.

In the over-the-counter market, securities are frequently traded on a "net"
basis with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to the
dealer. Money market instruments usually trade on a "net" basis as well. On
occasion, certain money market instruments may be purchased by the Fund directly
from an issuer in which case no commissions or discounts are paid. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter, generally referred to as the
underwriter's concession or discount.

DISTRIBUTION PLAN

The Fund's Distribution Plan (the "Plan") is its written plan adopted pursuant
to Rule 12b-1 (the "Rule") under the 1940 Act.

<PAGE>

providing administration assistance to the Fund or its shareholders, including,
but not limited to advertising, printing and mailing promotional material,
telephone calls and lines, computer terminals, and personnel; and/or (b) at a
rate specified in the related agreement with the qualified recipient in question
based on the average value of the qualified holdings of such qualified recipient
("Permitted Payments"). The Advisor or Distributor may make permitted payments
in any amount to any qualified recipient, provided that (i) the total amount of
all permitted payments made during a fiscal year of the Fund to all qualified
recipients (whether made under (a) and/or (b) above) do not exceed in that
fiscal year 1/4 of 1% of the Fund's average annual net assets; and (ii) a
majority of the Fund's qualified Trustees may at anytime decrease or limit the
aggregate amount of all permitted payments or decrease or limit the amount
payable to any Qualified recipient. The Fund will reimburse the Advisor or
Distributor for such permitted payments within such limit, but the Advisor or
Distributor shall bear any permitted payments beyond such limits. A related
agreement will terminate automatically if it is assigned, as that term is
defined in the 1940 Act.

The Plan also authorizes the Advisor or Distributor to purchase advertising to
promote the sale of shares of the Fund, to pay for sales literature and other
promotional material, and to make payments to the Distributor's sales personnel.
Any such advertising and sales material may include references to other open-end
investment companies or other investments and any sales personnel so paid are
not required to devote their time solely to the sale of Fund shares. Any such
expenses ("Permitted Expenses") made during a fiscal year of the Fund shall be
reimbursed or paid by the Fund, except that the combined amount of reimbursement
or payment of Permitted Expenses together with the Permitted Payments made
pursuant to the Plan by the Fund shall not, in the aggregate, in that fiscal
year of the Fund, exceed 1/4 of 1% of the average net assets of the Fund in such
year; and the Advisor or Distributor shall bear any such expenses beyond such
limits. No such reimbursement may be made for Permitted Expenses or Permitted
Payments for the fiscal year prior to the fiscal year in question or in
contemplation of future Permitted Expenses or Permitted Payments.

The Plan requires that while it is in effect the Advisor shall report in writing
at least quarterly to the Board of Trustees, and the Board shall review the
following: (i) The amounts of all Permitted Payments, the identity of the
recipients of each such payment; the basis on which each such recipient was
chosen as a Qualified Recipient and the basis on which the amount of the
Permitted Payment to such Qualified Recipient was made; (ii) the amounts of
Permitted Expenses and the purpose of each such Expense; and (iii) all costs of
the other payments specified in the Plan (making estimates of such costs where
necessary or desirable), in each case during the preceding calendar or fiscal
quarter. While the Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund is committed to the discretion of the
Fund's then existing disinterested Trustees.

NET ASSET VALUE

<PAGE>

As indicated in the Prospectus, the net asset value per share of the Fund's
shares will be determined as of 4:15 p.m. on each day that the New York Stock
Exchange ("NYSE") is open for trading. The NYSE annually announces the days on
which it will not be open for trading; the most recent announcement indicates
that it will not be open on the following days: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. However, it should be noted that the NYSE may close on
days not included in that announcement.

In determining the net asset value of the Fund's shares, common stocks and other
securities that are listed on a national securities exchange or the NASDAQ
National Market System are valued at the last sale price as of 4:15 p.m., New
York time, on each day that the NYSE is open for trading, or, in the absence of
recorded sales, at the last closing price on such exchange or on such System.
Unlisted securities that are not included in such National Market System are
valued at the closing price in the over-the-counter market. Securities and other
assets for which market quotations are not readily available are valued by
appraisal at their fair value as determined in good faith by the Advisor under
procedures established by and under the general supervision and responsibility
of the Board of Trustees. Debt securities which mature in less than 60 days are
valued at amortized cost (unless the Board of Trustees determines that this
method does not represent the fair market value of such assets), if their
original maturity was 60 days or less.

TAX STATUS

The following information supplements and should be read in conjunction with the
section in the Fund's Prospectus entitled "Dividends and Tax Status."

When an income dividend or capital gains distribution is paid by the Fund, net
asset value per share is reduced automatically by the amount of the dividend or
distribution. If net asset value per share is reduced below a shareholder's
cost basis as a result, such a distribution might still be taxable to the
shareholder as ordinary income or capital gain (as the case may be) although in
effect it represents a return of invested capital. For this reason, investors
should consider carefully the desirability of purchasing shares immediately
prior to a distribution date.

The Fund does not intend to invest in foreign issuers which meet the definition
in the Code of passive foreign investment companies ("PFICs"). However, foreign
corporations are not required to certify their status as PFICs to potential U.S.
investors, and the Fund may unintentionally acquire stock in a PFIC. The Fund's
income and gain, if any, from the holding of PFIC stock may be subject to a non-
deductible tax at the Fund level.
A portion of the Fund's income dividends may be eligible for the dividends-
received deduction allowed to corporations under the Code, if certain
requirements are met.

<PAGE>

Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source.

The treatment of income dividends and capital gains distributions to
shareholders of the Fund under the various foreign, state, and local income tax
laws may not parallel that under the Federal law. Shareholders should consult
their tax adviser with respect to applicable foreign, state, and local taxes.

GENERAL

The Fund is a series of The CornerCap Group of Funds. The Fund's Declaration of
Trust permits its Trustees to issue an unlimited number of full and fractional
shares of beneficial interest and to divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate beneficial
interest in the Fund. Each share represents an interest in a Fund
proportionately equal to the interest of each other share. Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
in question available for distribution to shareholders. If they deem it
advisable and in the best interest of shareholders, the Board of Trustees may
create additional classes of shares which differ from each other only as to
dividends. The Board of Trustees has created two classes of shares (i.e., the
Fund and the CornerCap Growth Fund), but the Board may create additional classes
in the future, which have separate assets and liabilities; each of such
classes has or will have a designation including the word "Series" or "Fund."
Rule 18f-2 under the 1940 Act provides that matters submitted to shareholders be
approved by a majority of the outstanding securities of each series, unless it
is clear that the interest of each series in the matter are identical or the
matter does not affect a series. However, the rule exempts the selection of
accountants and the election of Trustees from the separate voting requirements.
Income, direct liabilities and direct operating expenses of each series will be
allocated directly to each series, and general liabilities and expenses of the
Fund will be allocated among the series in proportion to the total net assets of
each series by the Board of Trustees.

Under Massachusetts law, a shareholder of a Massachusetts business trust may be
held liable as a partner under certain circumstances. The Fund's Declaration of
Trust, however, contains an express disclaimer of shareholder liability for its
acts or obligations and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Fund or its
Trustees. The Declaration of Trust provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for its obligations. The Declaration of Trust also provides
that the Fund shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. In addition, the operation of the Fund as an investment company would
not likely give rise to liabilities in excess of its assets. Thus the risk of a
shareholder incurring financial loss on

<PAGE>

account of shareholder liability is highly unlikely and is limited to the
relatively remote circumstances in which the Fund would be unable to meet its
obligations.

The Fund entered into a Distribution Agreement effective as of ____________ ___,
1996, with Attkisson, Carter & Akers, Inc., a securities broker/dealer
registered pursuant to the Securities Exchange Act of 1934, and located in
Atlanta, Georgia. No fee is paid pursuant to this agreement other than
reimbursement under the Fund's Rule 12b-1 Distribution Plan.

With respect to the purchase and sale of Fund shares, certain broker/dealers
other than the Distributor may charge a fee to Fund investors for executing
transactions on the investor's behalf. Such transactions may be executed on the
investor's behalf directly through the Fund's Transfer Agent without payment of
such a fee. See the section entitled "How to Purchase Shares" in the
Prospectus.

Funds Services, Inc. serves as the Transfer Agent. Funds Services, Inc., in its
function as Transfer Agent, disburses dividends, processes new accounts,
purchases, redemptions, transfers, and issues certificates. Commonwealth Fund
Accounting acts as the Fund's accounting services agent. Wachovia Bank. acts as
the Fund's custodian to hold its assets in safekeeping and collect income.

The Fund's independent public accountants, Tait, Weller & Baker, perform an
annual audit of the Fund's accounts, assist in the preparation of certain
reports to the SEC, and prepare the Fund's tax returns.

FINANCIAL STATEMENTS

No Financial Statements are provided for the Balanced Fund as it has only
recently begun operations.

<PAGE>

APPENDIX A

Some of the terms used in the Fund's Prospectus and this Statement of
Additional Information are described below.

The term "MONEY MARKET" refers to the marketplace composed of the financial
institutions which handle the purchase and sale of liquid, short-term, high-
grade debt instruments. The money market is not a single entity, but consists
of numerous separate markets, each of which deals in a different type of
short-term debt instrument. These include U.S. Government obligations,
commercial paper, certificates of deposit and bankers' acceptances, which are
generally referred to as money market instruments.

U.S. GOVERNMENT OBLIGATIONS are debt securities (including bills, notes and
bonds) issued by the U.S. Treasury or issued by an agency or instrumentality of
the U.S. Government which is established under the authority of an Act of
Congress. Such agencies or instrumentalities include, but are not limited to,
the Federal National Mortgage Association, Government National Mortgage
Association, the Federal Farm Credit Bank, and the Federal Home Loan Bank.
Although all obligations of agencies, authorities and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on these obligations is generally backed directly or indirectly by the U.S.
Government. This support can range from the backing of the full faith and
credit of the United States to U.S. Treasury guarantees, or to the backing
solely of the issuing instrumentality itself. In the case of securities not
backed by the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its commitments.

BANK OBLIGATIONS include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14 days to one
year) at a stated interest rate.

BANKERS' ACCEPTANCES are credit instruments evidencing the obligation of a
bank to pay a draft which has been drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.

TIME DEPOSITS are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.

<PAGE>

COMMERCIAL PAPER consists of short-term (usually one to 180 days) unsecured
promissory notes issued by corporations in order to finance their current
operations.

CORPORATE DEBT obligations are bonds and notes issued by corporations and
other business organizations, including business trusts, in order to finance
their long-term credit needs.

CERTIFICATES OF DEPOSIT are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return.

MORTGAGE-BACKED securities are interests in a pool of mortgage loans. Most
mortgage securities are pass-through securities, which means that they provide
investors with payments consisting of both principal and interest as mortgages
in the underlying mortgage pool are paid off by the borrowers. The dominant
issuers or guarantors of mortgage securities are the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") are hybrid instruments with
characteristics of both mortgage-backed and mortgage pass-through securities.
Similar to a bond, interest and prepaid principal on a CMO are paid, in most
cases, semi-annually. CMOs may be collateralized by whole mortgage loans but
are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured into
multiple classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired.

MUNICIPAL BONDS are debt obligations which generally have a maturity at the
time of issue in excess of one year and are issued to obtain funds for various
public purposes. The two principal classifications of municipal bonds are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities, or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued by or on
behalf of public authorities to obtain funds for privately operated facilities
and are, in most cases, revenue bonds which do not generally carry the pledge of
the full faith and credit of the issuer of such bonds, but depend for payment on
the ability of the industrial user to meet its obligations (or any property
pledged as security).

<PAGE>

ZERO COUPON BONDS are debt obligations issued without any requirement for
the periodic payment of interest. Zero coupon bonds are issued at a significant
discount from face value. The discount approximates the total amount of
interest the bonds would accrue and compound over the period until maturity at a
rate of interest reflecting the market rate at the time of issuance. A
Portfolio, if it holds zero coupon bonds in its portfolio, however, would
recognize income currently for Federal tax purposes in the amount of the unpaid,
accrued interest (determined under tax rules) and generally would be required to
distribute dividends representing such income to shareholders currently, even
though funds representing such income would not have been received by the
Portfolio. Cash to pay dividends representing unpaid, accrued interest may be
obtained from sales proceeds of portfolio securities and Portfolio shares and
from loan proceeds. Because interest on zero coupon obligations is not paid to
the Portfolio on a current basis but is in effect compounded, the value of the
securities of this type is subject to greater fluctuations in response to
changing interest rates than the value of debt obligations which distribute
income regularly.

RATINGS OF CORPORATE DEBT OBLIGATIONS Except as to the Cash Management
Portfolio, Portfolio purchases of taxable obligations are not limited to those
obligations rated within the four highest categories by Moody's and S&P.
However, the Flex Portfolio's and Income Portfolio's standards for investment
grade obligations are generally similar to those standards included in the four
highest categories by Moody's and S&P. The Cash Management Portfolio will limit
its investments to those obligations within the two highest categories. The
Relative Return Bond Portfolio may invest up to 10% of Portfolio assets in
corporate bonds rated below Baa by Moody's or below BBB by S&P but rated at
least Ba by Moody's or BB by S&P. The MultiFlex Portfolio may invest up to 5 %
of Portfolio assets in corporate bonds rated below Baa by Moody's or below BBB
by S&P, but rated at least Ba by Moody's or BB by S&P.

The characteristics of corporate debt obligations rated by Moody's are
generally as follows:

Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater

<PAGE>

amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade
obligations, I.E., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

Ba -- Bonds which are rated Ba are judged to have speculative elements.
The future of such bonds cannot be considered as well assured.

B -- Bonds which are rated B generally lack characteristics of a desirable
investment.

Caa -- Bonds rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

Ca -- Bonds rated Ca are speculative to a high degree.

C -- Bonds rated C are the lowest rated class of bonds and are regarded as
having
extremely poor prospects.

The characteristics of corporate debt obligations rated by S&P are
generally as follows:

AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.

AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.

<PAGE>

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances 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.

BB -- Debt rated BB is predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with terms of the obligation.
BB indicates the lowest degree of speculation; CC indicates the highest degree
of speculation.

BB,B,CCC,CC -- Debt in these ratings is predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the obligation. BB indicates the lowest degree of speculation and CC the
highest.

A bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the issuer or
obtained by the rating services from other sources which they consider reliable.
The ratings may be changed, suspended or withdrawn as a result of changes in or
unavailability of, such information, or for other reasons.

RATINGS OF COMMERCIAL PAPER. Cash Management Portfolio purchases are
limited to those instruments rated A-1 by S&P and Prime 1 by Moody's.

Commercial paper rated A-1 by Standard & Poor's has the following
characteristics: liquidity ratios are adequate to meet cash requirements; the
issuer's long-term debt is rated "A" or better; the issuer has access to at
least two additional channels of borrowing; and basic earnings and cash flow
have an upward trend with allowances made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a strong position
within the industry.

Commercial paper rated Prime 1 by Moody's is the highest commercial paper
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation

<PAGE>

to competition and consumer acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period of ten years; (7) financial
strength of a parent company and the relationships which exist with the issuer;
and (8) recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet such
obligations. Relative strength or weakness of the above factors determine how
the issuer's commercial paper is rated within various categories.

DETERMINATION OF CREDIT QUALITY OF UNRATED SECURITIES. In determining
whether an unrated debt security is - of comparable quality to a rated security,
the sub-adviser may consider the following factors, among others:

(1) other securities of the issuer that are rated;

(2) the issuer's liquidity, debt structure, repayment schedules, and
external credit support facilities;

(3) the reliability and quality of the issuer's management;

(4) the length to maturity of the security and the percentage of the
portfolio represented by securities of that issuer;

(5) the issuer's earnings and cash flow trends;

(6) the issuer's industry, the issuer's position in its industry, and an
appraisal of speculative risks which may be inherent in the industry;

(7) the financial strength of the issuer's parent and its relationship
with the issuer;

(8) the extent and reliability of credit support, including a letter of
credit or third party guarantee applicable to payment of principal and
interest;

(9) the issuer's ability to repay its debt from cash sources or asset
liquidation in the event that the issuer's backup credit facilities
are unavailable;

(10) other factors deemed relevant by the subadviser.

23
<PAGE>

FORM N-1A

PART C

OTHER INFORMATION

ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of the Growth Fund. Incorporated by reference in
the Growth Fund's Annual Report to Shareholders for the fiscal year
ended March 31, 1996.

(b) No Financial Statements of the Balanced Fund are provided as it has
only recently begun operations.

(b) Exhibits:

(1) (a) Declaration of Trust - Previously filed.*
(b) Supplemental Declaration of Trust - Previously filed.*
(c) Supplemental Declaration of Trust (dated September 23, 1992 -
Incorporated by Reference from PEA No. 8, filed July 29, 1993)

(2) By-Laws - Previously filed.*

(3) Not Applicable.

(4) Certificate Specimen (Incorporated by Reference from PEA No. 7, filed
September 23, 1992).

(5) (a) Investment Advisory Agreement for Growth Fund (dated September 9,
1992) - Incorporated by Reference from PEA No. 8, filed July 29, 1993.

(b) Form of Investment Advisory Agreement for Balanced Fund.

(6) (a) Distribution Agreement (dated March 31, 1995) - Incorporated by
Reference from PEA No. 10, filed July 31,1995

(b) Form of First Amendment to Distribution Agreement.

(7) Not Applicable.

(8) (a) Custody Agreement (dated October 30, 1992) - Incorporated by
Reference from PEA No. 8, filed July 29, 1993.

<PAGE>

(b) Accounting Services Agreement for Growth Fund (dated October 1,
1992) - Incorporated by Reference from PEA No. 8, Filed July 29, 1993.

(d) Transfer Agent Agreement (dated October 6, 1992) - Incorporated
by Reference from PEA No. 8, filed July 29, 1993.

(9) Administrative Agreement (dated June 30, 1995) - Incorporated by
Reference from PEA No. 10, filed July 31,1995

(10) Opinion of Counsel (The Opinion of Counsel with respect to shares
previously sold was attached to the Fund's 24f-2 Notice, which was
filed on May 29, 1996).

(11) (a) Consent of Independent Auditors
(b) Power of Attorney (Incorporated by Reference from PEA No.7, filed
September 23, 1992 and PEA No. 9, filed July 29, 1994).

(12) Not Applicable.

(13) Not Applicable.

(14) Individual Retirement Account - Incorporated by Reference from PEA No.
8, filed July 29, 1993.

(15) (a) Distribution Plan of the Growth Fund (Incorporated by Reference
from PEA No. 10, filed July 31, 1995).
(b) Distribution Plan of the Balanced Fund.

(16) Performance Calculation - Incorporated by Reference from
Prospectus dated July 28,1995, PEA No. 10, filed July 31, 1995).

(17) Financial Data Schedule for Growth Fund.

* Previously filed and incorporated by reference to the Registrants
Registration Statement on Form N-1a, File No. 33-3149

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

<PAGE>

On September ___, 1996, there were ____ record holders of the
Registrant's shares, all of which were shareholders of the Growth
Fund.

ITEM 27. INDEMNIFICATION.

Previously filed on and incorporated by reference from PEA No. 7,
filed September 23, 1992.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.

Cornerstone Capital Corp. (the "Advisor") is the investment advisor of
the Registrant. For information as to the business profession,
vocation or employment of a substantial nature of the Advisor, its
directors and officers, reference is made to Part B of this
Registration Statement and to Form ADV filed under the Investment
Advisers Act of 1940 by the Advisor.

ITEM 29. PRINCIPAL UNDERWRITER.

(a) Attkisson, Carter and Akers, Inc.

(b) NAME & PRINCIPAL POSITION WITH POSITION
BUSINESS ADDRESS UNDERWRITER REGISTRANT
- --------------------------------------------------------------------------------
Ronald L. Attkisson President, Chief None
3060 Peachtree Rd., NW Executive Officer,
Suite 1475 Director
Atlanta, GA 30305

Belfield H. Carter, Jr. Chairman, None
3060 Peachtree Rd., NW Director
Suite 1475
Atlanta, GA 30305

C. Scott Akers, Jr. Sr. Vice President, None
3060 Peachtree Rd., NW Director
Suite 1475
Atlanta, GA 30305

Kristin W. Montet Chief Financial Officer None
3060 Peachtree Rd., NW
Suite 1475
Atlanta, GA 30305

Mark D. Hill Sr. Vice President None

<PAGE>

3060 Peachtree Rd., NW
Suite 1475
Atlanta, GA 30305

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

All shareholder account records including share ledgers, duplicate
confirmation, duplicate account statements, and application forms are maintained
by the Registrant's Transfer Agent, Fund Services, Inc., 1500 Forest Avenue,
Suite 111, Richmond, Virginia 23229.

Certain accounting records of the Registrant are maintained by
Commonwealth Fund Accounting, Inc. in its capacity as Accounting Services Agent.
These records include: general ledger, supporting ledgers, pricing computations,
etc. The address of Commonwealth Fund Accounting, Inc. is 1500 Forest Avenue,
Suite 111, Richmond, Virginia, 23229.

Actual portfolio securities and other investment assets (including
cash) are maintained in the custody of the Registrant's Custodian Bank, Wachovia
Bank of North Carolina, M/C 31013, 301 N. Main Street, Winston-Salem, North
Carolina 27150-3099.

Records relating to the investment of the Cornerstone Growth Fund,
including research information, records relating to the placement of brokerage
transactions, memorandum regarding investment recommendations for supporting
and/or authorizing the purchase or sale of assets, and all other records of the
Registrant required to be maintained pursuant to Section 31(a) of the 1940 Act,
and Rule 31a-1 thereunder (such records include copies of the Declaration of
Trust, By-Laws, minute books, original copies of all agreements, compliance
records and reports, etc.) are maintained at Cornerstone Capital Corp., 100
Northcreek, Suite 250, 3715 Northside Parkway, N.W., Atlanta, Georgia, 30327.

Blue Sky records are originated and maintained by Commonwealth
Shareholder Services, Inc., at 1500 Forest Avenue, Suite 223, Richmond,
Virginia, 23229. Duplicate copies of Blue Sky records are also maintained at
Cornerstone Capital Corporation,(address noted above).

ITEM 31. MANAGEMENT SERVICES.

Not applicable.

ITEM 32. UNDERTAKINGS.

The Registrant undertakes to file a post-effective amendment, using
financial statements of the Balanced Fund which need not be certified,
within four to six months from the effective date of the Balanced Fund
Prospectus.

The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest applicable annual
report to Shareholders, upon request and without charge.

<PAGE>

SIGNATURE PAGE

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Atlanta, and the State of Georgia on the 13 day of
September, 1996.

CornerCap Group of Funds - Registrant

BY: /S/ THOMAS E. QUINN
----------------------------------------
Thomas E. Quinn, President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated below.

/S/ THOMAS E. QUINN Trustee 13 September, 1996
- -----------------------------------
Thomas E. Quinn Principal Executive Officer
Principal Accounting Officer

RICHARD L. BOGER** Trustee
- ------------------------------
Richard L. Boger

G. HARRY DURITY** Trustee
- ------------------------------
G. Harry Durity

LAURIN M. MCSWAIN** Trustee
- ------------------------------
Laurin M. McSwain

** Made pursuant to a Power of Attorney previously filed.

/S/ THOMAS E. QUINN 13 September, 1996
- -------------------
Thomas E. Quinn
Attorney in Fact

<PAGE>

EXHIBIT INDEX

EXHIBIT

5(b) Form of Advisory Agreement for Balanced Fund

6(b) Form of First Amendment to Distribution Agreement

8(c) Form of Accounting Services Agreement for Balanced Fund

(11) Consent of Independent Certified Public Accountants

15(b) Distribution Plan for Balanced Fund

17 Financial Data Schedule for Growth Fund

<PAGE>

CORNERCAP BALANCED FUND

FORM OF

INVESTMENT ADVISORY AGREEMENT

AGREEMENT made this ___ day of ____________, 1996, by and between CornerCap
Balanced Fund (the "Fund"), a Massachusetts business trust, and Cornerstone
Capital Corp. (the "Advisor").

WITNESSETH:

In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:

1. IN GENERAL

The Advisor agrees, all as more fully set forth herein, to act as
managerial investment advisor to the Fund with respect to the investment of its
assets and to supervise and arrange the purchase and sale of securities held in
the portfolio of the Fund and generally administer the attain of the Fund.

2. DUTIES AND OBLIGATION OF THE ADVISOR WITH RESPECT TO MANAGEMENT OF THE
FUND

(a) Subject to the succeeding provisions of this section and subject to
the direction and control of the Board of Trustees of the Fund, the Advisor
shall:

(i) Decide what securities shall be purchased or sold by the Fund and
when; and

(ii) Arrange for the purchase and the sale of securities held in the
portfolio of the Fund by placing purchase and sale orders for the
Fund.

(b) Any investment purchases or sales made by the Advisor shall at all
times conform to, and be in accordance with, any requirements imposed by: (1)
the provisions of the Investment Company Act of 1940 (the "Act") and any of the
rides or regulations in force thereunder, (2) any other applicable provisions of
law; (3) the provisions of the Declaration of Trust and By-Laws of the Fund as
amended from time to time, (4) any policies and determinations of the Board of
Trustees of the Fund; and (5) the fundamental policies of the Fund, as reflected
in its registration statement under the Act, or as amended by the shareholders
of the Fund.

(c) The Agreement states that the Advisor shall give the Fund the benefit
of its best judgment and effort in rendering services thereunder, but the
Advisor shall not be liable for any loss sustained by reason of the purchase,
sale or retention of any security, whether or not such purchase, sale or
retention shall have been based upon its own investigation and research or upon

<PAGE>

investigation and research made by any other individual, firm or corporation
shall have been selected in good faith. The Agreement also states that nothing
contained therein shall, however, be construed to protect the Advisor against
any liability to the Fund or its security holders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under the
Agreement.

(d) Nothing in this agreement shall prevent the Advisor or any affiliated
person (as defined in the Act) of the Advisor from acting as investment advisor
or manager and/or principal underwriter for any other person, firm or
corporation and shall not in any way limit or restrict the Advisor or any such
affiliated person from buying, selling, or trading any securities for its or
their own accounts or the accounts of others for whom it or they may be acting
provided, however, that the Advisor expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligation to the Fund under this Agreement.

(e) It is agreed that the Advisor shall have no responsibility or
liability for the accuracy or completeness of the Fund's Registration Statement
under the Act or the Securities Act of 1933 except for information supplied by
the Advisor for inclusion therein. The Fund agrees to indemnity the Advisor to
the full extent permitted by the Fund's Declaration of Trust.

3. BROKER-DEALER RELATIONSHIPS

In connection with its duties set forth in Section 2(a)(ii) of this
Agreement to arrange for the purchase and the sale of securities held in the
portfolio of the Fund by placing purchase and sale orders for the Fund, the
Advisor shall select such broker dealers ("broker") as shall in the Advisor's
judgment implement the policy of the Fund to achieve "best execution", i.e.
prompt and efficient execution at the most favorable securities price. In
making such selection, the Advisor is authorized to consider the reliability,
integrity and financial condition of the broker. The Advisor is also authorized
to consider whether the broker provides brokerage and/or research services to
the Fund and/or other accounts of the Advisor. The commissions paid to such
brokers may be higher than another broker would have charged if a good faith
determination is made by the Advisor that the commission is reasonable in
relation to the services provided, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities as to the account as to
which it exercises investment discretion. the Advisor shall use its judgment in
determining the amount of commissions paid are reasonable in relation to the
value of brokerage and research services provided and need not place or attempt
to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. To demonstrate that such
determinations were in good faith, and to show the overall reasonableness of
commissions paid, the Advisor shall be prepared to show that commissions paid
(i) were for purposes contemplated by this agreement; (ii) were not allocated or
paid for products or services which were readily and customarily available and
offered to the public on a commercial basis; and (iii) were within a reasonable
range as compared to the rates charged by qualified brokers to other
institutional investors as such rates may become known from available
information. The Fund recognizes that, on any particular transaction, a higher
than usual commission may be paid due to the difficulty of the transaction in
question. The Advisor is also authorized to consider sales of

- 2 -

<PAGE>

shares as a factor in the selection of brokers to execute brokerage and
Principal transactions, subject to the requirements of "best execution", as
defined above.

4. ALLOCATION OF EXPENSES

The Advisor agrees that it will furnish the Fund, at the Advisor's expense,
with all office space and facilities, and equipment and clerical personnel
necessary for carrying out its duties under this Agreement The Advisor will also
pay all compensation of all Trustees, officers and employees of the Fund who are
affiliated persons of the Advisor. All costs and expenses not expressly assumed
by the Advisor under this Agreement shall be paid by the Fund, including, but
not limited to

(i) interest and taxes;

(ii) brokerage commissions;

(iii) insurance premiums;

(iv) compensation and expenses of its Trustees other than those
affiliated with the Advisor,

(v) legal and audit expenses;

(vi) fees and expenses of the Fund's custodian, shareholder
servicing or transfer agent and accounting services agent;

(vii) expenses incident to the issuance of its shares, including
stock certificates and issuance of shares on the payment of, or
reinvestment of dividends;

(viii) fees and expenses incident to the registration under Federal or
state securities laws of the Fund or its shares;

(ix) expenses of preparing, printing and mailing reports and notices
and proxy material to shareholders of the Fund;

(x) all other expenses incidental to holding meetings of the Fund's
shareholders;

(XI) dues or assessments of or contributions to the Investment
Company Institute or any successor;

(xii) such nonrecurring expenses as may arise, including litigation
affecting the Fund and the legal obligations which the Fund may
have to indemnify its officers and Trustees with respect
thereto; and

- 3 -

<PAGE>

(xiii) all expenses which the Fund agrees to bear in any distribution
agreement or in any plan adopted by the Fund pursuant to Rule
12b-1 under the Act.

5. COMPENSATION OF THE ADVISOR

(a) The Fund agrees to pay the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor hereunder,
and annual management fee payable monthly and computed on the net asset value of
the Fund as of the close of business each business day at the annual rate of 1%
of such net asset value.

(b) In the event the expenses of the Fund (including the fees of the
Advisor and amortization of organization expenses but excluding interest, taxes,
brokerage commission. extraordinary expenses and sales charges and distribution
fees) for any fiscal year exceed the limits set by applicable regulation of
state securities commission, the Advisor will reduce its fee by the amount of
such excess. Any such reductions are subject to readjustment during the year.
The payment of the management fee at the end of any month will be reduced or
postponed or, if necessary a refund will be made to the Fund so that at no time
will there by any accrued but unpaid liability under this expense limitation.

6. DURATION AND TERMINATION

(a) This Agreement shall go into effect on the date set forth above
and shall, unless terminated as hereinafter provided, continue in effect until
____________ ___, 1998 and thereafter from year to year, but only so long as
such continuance is specifically approved at least annually by the Fund's Board
Of Trustees, including the vote of a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined in the Act) of any
such party cast in person at a meeting called by the purpose of voting on such
approval or by vote of the holders of a "majority" (as so defined) of the
outstanding voting securities of the Fund and by such a vote of the Trustees.

(b) This Agreement may be terminated by the Advisor at any time
without penalty upon giving the Fund sixty (60) days written notice (which
notice may be waived by the Fund), and may be terminated by the Fund at any time
without penalty upon giving the Advisor 60 days' written notice (which notice
may be waived by the Advisor), provided that such termination by the Fund shall
be directed or approved by the vote of a majority of all its Trustees in office
at the time or by the vote of the holders of a majority (as defined in the Act)
of the voting securities of the Fund at the time outstanding and entitled to
vote. This Agreement shall automatically terminate in the event of its
assignment (as so defined).

7. AGREEMENT BINDING ONLY ON FUND PROPERTY

The Advisor understands that the obligations of this Agreement are not
binding upon any shareholder of the Fund personally, but bind only the Fund's
property; the Advisor represents that it has notice of the provisions of the
Fund's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Fund.

- 4 -

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused the forgoing instrument
to be executed by duly authorized persons and their seals to be hereunto
affixed, all as of the day and year first above written.

CORNERCAP BALANCED FUND

By:

Attest:

CORNERSTONE CAPITAL CORP.

By:

Attest:

<PAGE>

FORM OF
FIRST AMENDMENT TO
DISTRIBUTION AGREEMENT

This First Amendment to the Distribution Agreement by and between The
CornerCap Group of Funds (the "Trust") and Attkisson, Carter & Akers, Inc. (the
"Underwriter"), dated as of March 31, 1995 (the "Distribution Agreement"), is
made as of ______ __, 1996.

W I T N E S S E T H:

WHEREAS, the Underwriter acts as distributor and principal underwriter for
the Trust pursuant to the Distribution Agreement;

WHEREAS, the Trust divided its common stock into two separate classes as
follows, each representing a separate portfolio of investments: CornerCap
Growth Fund Common Stock and CornerCap Balanced Fund Common Stock (collectively,
the "Funds");

NOW, THEREFORE, in consideration of these premises, the mutual covenants
and agreements hereinafter contained and other good and valuable consideration,
the amount and sufficiency of which are hereby acknowledged, the Trust and
Underwriter agree as follows:

1. DEFINITIONS. For purposes of the Distribution Agreement, the meaning of
the word "Shares" shall be amended to refer to the shares of common stock
in the Trust, regardless of whether such shares are classified into one or
more separate funds of the Trust.

2. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints and constitutes the
Underwriter as distributor and principal underwriter for all the Shares of
the Trust, and the Underwriter accepts such appointment as to the Shares of
each Fund and agrees to perform the duties set forth in the Distribution
Agreement. By virtue of this First Amendment, the Underwriter's functions
as to each Fund under the Distribution Agreement will be treated separate
and the Distribution Agreement shall be so interpreted. Any reimbursements
or other payments required pursuant to the Distribution Agreement shall
apply to each Fund separately.

3. Agreement Binding Only on Fund Property. The Distributor understands that
the obligations of this Amendment or the Distribution Agreement are not
binding upon any shareholder of the Trust personally, but bind only the
Trust property. The Distributor represents that it has notice of the
provisions of the Trust disclaiming shareholder liability for acts.

4. NO FURTHER AMENDMENTS. Except as amended herein, the Distribution
Agreement shall continue in full force and effect pursuant to its terms.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
the Distribution Agreement to be executed by their duly authorized officers as
of the day and year first above written.

UNDERWRITER TRUST:
Attkisson, Carter & Akers, Inc. The CornerCap Group of Funds

By: By:
------------------------------- -------------------------------
Print Name: Print Name:
----------------- -------------------
Title: Title:

---------------------- ------------------------

Attest: Attest:

By: By:
------------------------------- -------------------------------
Print Name: Print Name:
----------------- -------------------
Title: Title:

---------------------- ------------------------

<PAGE>

FORM OF

ACCOUNTING SERVICES AGREEMENT

THIS AGREEMENT, dated as of the ___ day of ____________, 1996 made by and
between CornerCap Balanced Fund (the "Fund") a corporation operating as an
open-end management investment company, duly organized and existing under the
laws of the State of Massachusetts, and Commonwealth Fund Accounting, Inc. (the
"Company") a corporation duly organized and existing under the laws of the State
of Virginia.

WITNESSETH THAT:

WHEREAS, the Fund consists of a Fund, at present namely Cornerstone Growth
Fund, Inc. WHEREAS, the Fund desires to appoint the Company as its Accounting
Services Agent to maintain and keep current the books, accounts, records,
journals or other records of original entry relating to the business of the Fund
as set forth in Section 2 of this Agreement (the "Accounts and Records") and to
perform certain other functions in connection with such accounts and records;
and

WHEREAS, the Company is willing to perform such functions upon the terms
and conditions set forth below; and

WHEREAS, the Fund will cause to be provided certain information to the
Company as set forth below;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
agree as follows:

<PAGE>

Section 1. The Fund shall promptly turn over to the Company such of the
Accounts and Records previously maintained by or for it as are necessary for the
Company to perform its functions under this Agreement. The Fund authorizes the
Company to rely on such Accounts and Records turned over to it and hereby
indemnities and holds the Company, its successors and assigns harmless of and
from any and all expenses, damages, claims, suits, liabilities, actions, demands
and losses whatsoever arising out of or in connection with any error, omission,
inaccuracy or other deficiency of such Accounts and Records or in the failure of
the Fund to provide any portion of such or to provide any additional information
needed by the Company to knowledgeably perform its functions, within a
reasonable time after requested by the Company.

The Company shall make reasonable efforts to isolate and correct any
inaccuracies, omissions, discrepancies, or other deficiencies in the Accounts
and Records delivered to the Company, to the extent such matters are disclosed
to the Company or are discovered by it and are relevant to its performance of
its functions under this Agreement. The Fund shall provide the Company with
such assistance as it may reasonably request in connection with its efforts to
correct such matters. The Fund agrees to pay to Company on a current and
ongoing basis for its reasonable time and costs expended on the correction of
such matters, said payment to be in addition to the fees and charges agreed to
for the normal services rendered under this Agreement, provided the amount of
such payments is approved in advance by the Fund.

Section 2. To the extent it receives the necessary information from the
Fund or its agents by Written or Oral Instructions, the Company shall maintain
and keep current the following Accounts and Records relating to the business of
the Fund, in such form as may be mutually agreed

<PAGE>

to between the Fund and the Company, and as may be required by the Investment
Company Act of 1940:

(a) Cash Receipts Journal

(b) Cash Disbursements Journal

(d) Purchase and Sales Journals - Portfolio securities

(e) Subscription and Redemption Journals

(f) Security Ledgers - Transaction Report and Tax Lot Holdings Report

(g) Broker Ledger - Commission Report

(h) Daily Expense Accruals

(i) Daily Interest Accruals

(j) Daily Trial Balance

(k) Portfolio Interest Receivable and Income Journal

(l) Listing of Portfolio Holdings showing cost, market value and
percentage of portfolio comprised of each security.

Unless necessary information to perform the above functions is furnished by
Written or Oral Instructions to the Company to enable the daily calculation of
the Fund's net asset value at 4:15 PM Eastern time (the close of trading on the
New York Stock Exchange), as provided below in accordance with the rime frame
identified in Section 7, the Company shall incur no liability, and the Fund
shall indemnity and hold harmless the Company from and against any liability
arising from any failure to provide complete information or from any discrepancy
between the information received

<PAGE>

by the Company and used in such calculations and any subsequent information
receivedfrom the Fund or any of its designated Agents.

Section 3. The Company shall perform the ministerial calculations
necessary to calculate the Fund's net asset value daily, in accordance with the
Fund's current prospectus and utilizing the information described in this
Section. Portfolio items for which market quotations are available by the
Company's use of an automated financial information service ("Service") shall be
based on the closing prices of such Service except where the Fund has given or
caused to be given Specific Written or Oral Instructions to utilize a different
value. All of the portfolio securities shall be given such values as the Fund
provides by Written or Oral Instructions including all restricted securities and
other securities requiring valuation not readily ascertainable solely by such
Service. The Company shall have no responsibility or liability for the accuracy
of prices quoted by such Service; for the accuracy of the information supplied
by the Fund; or for any loss, liability, damage, or cost arising out of any
inaccuracy of such data, unless the Company is itself negligent. The Company
shall have no responsibility or duty to include information or valuations to be
provided by the Fund in any computation unless and until it is timely supplied
to the Company in usable form. Unless the necessary information to calculate
the net asset value daily is furnished by Written or Oral Instructions from the
Fund, the Company shall incur no liability, and the Fund shall indemnity and
hold harmless the Company from and against any liability arising from any
failure to provide complete information or from any discrepancy between the
information received by the Company and used in such calculation and any
subsequent information received from the Fund or any of its designated agents,
provided the Company notifies the Fund promptly of its need for additional
information with which to calculate net asset value.

<PAGE>

Section 4. For all purposes under this Agreement, the Company is
authorized to act upon receipt of the first of any Written or Oral Instruction
it receives from the Fund or its agents on behalf of the Fund. In cases where
the first instruction is an Oral Instruction that is not in the form of a
document or written record, a confirmatory Written Instruction or Oral
Instruction in the form of a document or written record shall be delivered, and
in cases where the Company receives an Instruction, whether Written or Oral, to
enter a portfolio transaction on the records, the Fund shall cause the
Broker-Dealer to send a written confirmation to the Company. The Company shall
be entitled to rely on the first Instruction received, and for any act or
omission undertaken in compliance therewith shall be free of liability and fully
indemnified and held harmless by the Fund, provided however, that in the event a
Written or Oral Instruction received by the Company is countermanded by a timely
later Written or Oral Instruction received by the Company prior to acing upon
such countermanded Instruction, the Company shall act upon such later Written or
Oral Instruction. The sole obligation of the Company with respect to any
follow-up or confirmatory Written Instruction, Oral Instruction in documentary
or written form, or Broker-Dealer written confirmation shall be to make
reasonable efforts to detect any such discrepancy between the original
Instruction and such confirmation and to report such discrepancy to the Fund.
The Fund shall be responsible, at the Fund's expense, for taking any action,
including any reprocessing, necessary to correct any discrepancy or error, and
to the extent such action requires the Company to act the Fund shall give the
Company specific Written Instruction as to the action required.

Section 5. At the end of each month, the Fund shall cause the
Custodian to forward to the Company a monthly statement of cash and portfolio
transactions, which will be reconciled with

<PAGE>

the Company's Accounts and Records maintained for the Fund. The Company will
report any discrepancies to the Custodian, and report any unreconciled items to
the Fund.

Section 6. The Company shall promptly supply daily and periodic reports
to the Fund as requested by the Fund and agreed upon by the Company.

Section 7. The Fund shall and shall require each of its agents
(including without limitation its Transfer Agent and its Custodian) to provide
the Company as of the close of each Business Day, or on such other schedule as
the Fund determines is necessary, with Written or OraI Instructions (to be
delivered to the Company by 10:00 AM the next following business day) containing
all data and information necessary for the Company to maintain the Fund's
Accounts and Records and the Company may conclusively assume that the
information it receives by Written or Oral Instructions is complete and
accurate. The Fund is responsible to provide or cause to be provided to the
Company reports of share purchases, redemptions, and total shares outstanding on
the next business day after each net asset valuation.

Section 8. The Accounts and Records, in the agreed upon format,
maintained by the Company shall be the property of the Fund, and shall be made
available to the Fund promptly upon request and shall be maintained for the
periods prescribed in Rule 31(a)-2 under the Investment Company Act of 1940, as
amended. The Company shall assist the Fund's independent auditors, or upon
approval of the Fund, or upon demand, any regulatory body, in any requested
review of the Fund's Accounts and Records, and shall be reimbursed for all
expenses and employee time invested in any such review of the Fund's Accounts
and Records outside of routine and normal periodic reviews and audits. Upon
receipt from the Fund, or its agents, of the necessary information, the Company
shall supply the necessary data for the Fund or accountant's completion of any
necessary

<PAGE>

tax returns, questionnaires, periodic reports to shareholders and such other
reports and information requests as the Fund and the Company shall agree upon
from time to time.

Section 9. The Company and the Fund may from time to time adopt such
procedures as they agree upon in writing, and the Company may conclusively
assume that any procedure approved by the Fund or directed by the Fund, does not
conflict with or violate any requirements of its Prospectus, Articles of
Incorporation, By-Laws, or any rule or regulation of any regulatory body or
governmental agency. The Fund shall be responsible for notifying the Company of
any changes in regulations or rules which might necessitate changes in the
Company's procedures, and for working out with the Company such changes.

Section 10.

(a) the Company, its directors, officers, employees, shareholders and
agents shall not be liable for any error or judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except losses resulting from willful misfeasance, bad faith or gross
negligence on the part of the Company in the performance of its obligations and
duties under this Agreement.

(b) Any person, even though also a director, officer, employee,
shareholder or agent of the Company, who may be or become an officer, trustee,
employee or agent of the Fund, shall be deemed, when rendering services to the
Fund or acting on any business of the Fund (other than services or business in
connection with the Company's duties hereunder), to be rendering such services
to or acting solely for the Fund and not as a director, officer, employee,
shareholder or agent of, or one under the control or direction of the Company
even though paid by it.

<PAGE>

(c) Notwithstanding any other provision of this Agreement, the Fund
shall indemnity and hold harmless the Company, its directors, officers,
employees, shareholders and agents from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact or law) of any
and every nature which the Company may sustain or incur or which may be asserted
against the Company by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by the Company in good faith hereunder; (ii)
in reliance upon any certificate, instrument, order or stock certificate or
other document reasonably believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund or upon
the opinion of legal counsel for the Fund or its own counsel; or (iii) any
action taken or omitted to be taken by the Company in connection with its
appointment in good faith in reliance upon any law, fact, regulation or
interpretation of the same even though the same may thereafter have been
altered, changed, amended or repealed. However, indemnification under this
subparagraph shall not apply to actions or omissions of the Company or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.

(d) The Company shall give written notice to the Fund within ten (10)
business days of receipt by the Company of a written assertion or claim of any
threatened or pending legal proceeding which may be subject to this
indemnification. However, the failure to notify the Fund of such written
assertion or claim shall not operate in any manner whatsoever to relieve the
Fund of any liability arising from this Section or otherwise.

<PAGE>

(e) For any legal proceeding giving rise to this indemnification, the
Fund shall be entitled to defend or prosecute any claim in the name of the
Company at its own expense and through counsel of its own choosing if it gives
written notice to the Company within ten (10) business days of receiving notice
of such claim. Notwithstanding the foregoing, the Company may participate in
the litigation at its own expense through counsel of its own choosing. If the
Fund does choose to defend or prosecute such claim, then the parties shall
cooperate in the defense or prosecution thereof and shall furnish such records
and other information as are reasonably necessary.

(f) The Fund shall not settle any claim without the Company's express
written consent which shall not be unreasonably withheld. The Company shall not
settle any claim without the Fund's express written consent which shall not be
unreasonably withheld.

Section 11. All financial data provided to, processed by, and reported
by the Company under this Agreement shall be stated in United States dollars or
currency. The Company shall have no obligation to convert to, equate, or deal
in foreign currencies or values, and expressly assumes no liability for any
currency conversion or equation computations relating to the affairs of the
Fund.

Section 12. The Fund agrees to pay Company compensation for its services
and to reimburse it for expenses, as set forth in Schedule A attached hereto, or
as shall be set forth in amendments to such Schedule approved by the Fund and
Company. The Fund authorizes the Company to debit the Fund's custody account
for invoices which are rendered for the services performed for the Accounting
agent function. The invoices for the service will be sent to the Fund after the
debiting with the indication that payment has been made.

<PAGE>

Section 13. Nothing contained in this Agreement is intended to or shall
require the Company, in any capacity hereunder, to perform any functions or
duties on any holiday, day of special observance or any other day on which the
Custodian or the New York Stock Exchange is closed. Functions or duties
normally scheduled to be performed on such days shall be performed on, and as
of, the next succeeding business day on which both the New York Stock Exchange
and the Custodian are open. Not withstanding the foregoing, the Company shall
compute the net asset value of the Fund on each day required pursuant to Rule
22c-I promulgated under the Investment Act of 1940.

Section 14. This Agreement may be executed in two or more counterparts,
each of which, when so executed shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.

Section 15. For purposes of this Agreement, the terms Oral Instructions
and Written Instructions shall mean:

Oral Instructions: The term Oral Instruction shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to the Company in person or by telephone, telegram, telecopy or
other mechanical or documentary means lacking a signature, by a person or
persons believed in good faith by the Company to be a person or persons
authorized by a resolution of the Board of Directors of the Fund, to give Oral
Instructions on behalf of the Fund.

Written Instructions: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data or information of any
kind transmitted to the Company in original writing containing original
signatures or a copy of such document transmitted by telecopy including
transmission of such signature believed in good faith by the Company to be the
signature of a

<PAGE>

person authorized by a resolution of the Board of Directors of the Fund to given
Written instructions on behalf of the Fund.

The Fund shall file with the Company a certified copy of each resolution of
its Board of Directors authorizing execution of Written Instructions Or the
transmittal of Oral Instructions as provided above.

Section 16. The Fund or the Company may give written notice to the other
of the termination of this Agreement, such termination to take effect at the
time specified in the notice not less than 60 days after the giving of the
notice. Upon the effective termination date, subject to payment to the Company
by the Fund of all amounts due to the Company as of said date, the Company shall
make available to the Fund or its designated recordkeeping successor, all of the
records of the Fund maintained under this Agreement then in the Company's
possession.

Section 17. Any notice or other communication required by or permitted
to be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first class mail, postage prepaid to the
respective parties as follows:

If to the Fund:
Cornerstone Growth Fund, Inc.
400 Northcreek, Suite 575
3715 Northside Parkway, NW
Atlanta, Georgia 30327
Attention: Thomas E. Quinn

If to the Company:

Commonwealth Fund Accounting, Inc.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
Attention: J. Michael Tuohey

<PAGE>

Section 18. This Agreement may be amended from time to time by
supplemental agreement executed by the Fund and the Company and the compensation
stated in Schedule A attached hereto may be adjusted accordingly as mutually
agreed upon.

Section 19. This Agreement shall be governed by the laws of the
Commonwealth of Virginia.

Section 20. This contract sets forth the entire understanding of the
parties with respect to the provisions contemplated hereby, and supersedes any
and all prior agreements, arrangements and understandings relating to such
services.

Section 21. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

Section 22. The Company expressly agrees that, notwithstanding anything
to the contrary herein, or in law, that it will look solely to the assets of the
Fund for any obligations of the Fund hereunder and nothing herein shall be
construe to create any personal liability of any Trustee or any shareholder of
the Fund. The Fund expressly acknowledges that the declaration of trust
establishing the CornerCap Balanced Fund, dated as of November 23, 1992 (as
amended) a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name CornerCap Balanced Fund refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of the
CornerCap Balanced

<PAGE>

Fund shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise,
in connection with the affairs of said CornerCap Balanced Fund, but the property
of the CornerCap Balanced Fund only shall be liable.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized officers and their corporate seals hereunto duly affixed
and attested, as of the day and year first above written.

CORNERCAP BALANCED FUND

By:
--------------------------------
Attest

Name:
------------------------------
Title:
- ------------------------------- ------------------------------

COMMONWEALTH FUND ACCOUNTING, INC..

By:
--------------------------------
Attest

Name:
------------------------------
Title:
- ------------------------------- ------------------------------

<PAGE>

SCHEDULE A
ACCOUNTING SERVICES UNIT (ASU)

- - Commonwealth Fund Accounting, Inc. offers the CornerCap Balanced Fund a
comprehensive level of service.

- - Basic Assumptions:

1. The Fund's Administrator will complete all necessary prospectus and
compliance reports, as well as monitoring of the various limitations and
restrictions.

2. Daily Transfer Agent information will be supplied to the Company in the
required format, and within the necessary time constraints (i.e., trade
date plus one by I 1:00 AM EST).

3. The Transfer Agent will remain responsible for reconciliation of Fund share
balances between the Transfer Agent reports and the Accounting share
reports.

4. The Company will supply the Transfer Agent with daily NAV's for each
portfolio by 6:00 PM Eastern time (via fax).

5. The Funds' security trading activity is presently very low, and will remain
on average less than 30 trades per month, per portfolio.

6. To the extent the Fund requires daily security prices from specific brokers
for domestic and foreign securities, these manual prices will be obtained
by the Funds' investment advisor and faxed to the Company by 4:00 PM
Eastern time for inclusion in the NAV calculations. In our experience, we
believe the Funds' investment advisors have better success obtaining
accurate and timely quotes from their brokers on a more consistent basis
than Commonwealth Fund Accounting, Inc. would.

<PAGE>

SCHEDULE A

It is our understanding that the Fund will supply the Company with all non-
U.S. dollar denominated prices inclusive of local price, daily foreign
exchange rate and U.S. dollar price.

To the extent the Fund owns unlisted ADR's not available on Bloomberg, we
will assume receipt of these daily prices in the above stated manner.

7. The Funds' custodian and investment advisor will supply Company with all
required foreign dividend and corporate action information. For all
portfolios, we suggest documentation of clear cut security variance
procedures to minimize NAV miscalculations.

8. All foreign currency and time deposits will be held within the custodian
and sub-custodian network. To the extent tax accounting requirements for
the foreign securities differ from the "book" requirements, they will be
identified by the Fund or the Fund's independent accountant.

The Funds do not expect to invest in foreign debt instruments, forward
currency hedges, currency trading except for security settlement purposes,
or options and futures. To the extent this should change, additional fees
will apply.

9. The Company will supply timely daily Portfolio Valuation Reports (via fax)
to the Fund's investment advisor identifying current security positions,
original/amortized cost, security market values and changes in unrealized
appreciation/depreciation.

<PAGE>

SCHEDULE A

It will be the responsibility of the Fund's investment advisor to review
these reports upon receipt and to promptly notify the Company of any
possible problems", incorrect security prices or capital change information
that could result in an incorrect Fund NAV.

10. Specific deadlines and complete information will be identified for all
security trades in order to minimize any settlement problems or NAV errors.

Details of non-money market trades will be called or faxed to the Company
on trade date plus one, no later than I 1:00 AM Eastern time.

Trade Authorization Forms, with the appropriate officer signature, should
be faxed to the Company on all security trades placed by the Fund no later
than trade date for money market instruments, and trade date plus one for
non-money market securities.

There is no assurance that security trades called in after the above stated
deadline can be included in that day's work.

Money market trades will be coordinated directly through the Custody Unit
by the Fund's investment advisor.

Commonwealth Fund Accounting, Inc. will supply the investment advisor with
recommended trade ticket documents to minimize receipt of incomplete
information. (i.e., cusip numbers for all domestic trades and sedol numbers
for all foreign trades would be supplied by the investment advisor.) We
would find it difficult to be responsible for NAV changes that resulted
from incomplete information about a trade.

<PAGE>

SCHEDULE A

11. The Fund does not currently participate in Security Lending. To the extent
it does so in the future, additional fees may apply.

12. Fund management will monitor the expense accrual procedures for adequacy
based on outstanding liabilities monthly, and promptly communicate to the
Company any adjustments needed.

13. Nothing in Schedule A will supersede or modify anything in the basic
Agreement, as the foregoing assumptions relate only to the fees charged or
to be charged by the Company to the Fund.

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the use of our report dated April 19, 1996 on the
financial statements and financial highlights of the Cornercap Growth Fund.
Such financial statements and financial highlights appear in the 1996 Annual
Report to Shareholders which is incorporated by reference in the
Post-Effective Amendment to the Registration Statement on Form N-1A of
Cornercap Growth Fund. We also consent to the references to our Firm in the
Registration Statement and Prospectus.

/s/ Tait, Weller & Baker
TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
September 13, 1996

<PAGE>

CORNERCAP BALANCED FUND

FORM OF

DISTRIBUTION PLAN

DISTRIBUTION PLAN dated this ___ day of ____________ 1996, by and among
CORNERCAP BALANCED FUND, a Massachusetts Business Trust (the "Fund"),
CORNERSTONE CAPITAL CORP., a corporation (the "Advisor"), and ATTKISSON, CARTER
& AKERS, INC. (the "Distributor").

1. THE PLAN. This Distribution Plan (the "Plan") is the written plan of the
Fund contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act").

2. DEFINITIONS. As used in the Plan, the following terms shall have the
following meanings:

a) "Qualified Recipient" shall mean any broker-dealer or other "person
(as that term is defined in the 1940 Act) which (i) has rendered
distribution assistance (whether direct, administrative or both) in
the distribution of the Fund's Shares; (ii) shall furnish the Advisor
or Distributor (on behalf of the Fund) with such information as they
shall reasonably request to answer such questions as may arise
concerning the sale of Fund shares; and (iii) has been selected to
receive payments under the Plan.

b) "Qualified Holdings" shall mean all shares of the Fund beneficially
owned by (i) a Qualified Recipient, (ii) customers (brokerage or
other) of a Qualified Recipient, (iii) the clients (investment
advisory or other) of a Qualified Recipient; (iv) the accountants as
to which a Qualified Recipient has a fiduciary or custodial
relationship, and (v) the members of a Qualified Recipient, if such
qualified Recipient is an association or union; provided that the
Qualified Recipient shall have been instrumental in the purchase of
such Fund shares by, or shall have provided administrative assistance
to, such customers, clients, accounts or members in relation thereto.
The Advisor and Distributor may make final and binding decisions as to
all matters relating to Qualified Holdings and Qualified Recipients,
including but not limited to (i) the identity of Qualified Recipients;
(ii) whether or not any Fund shares are to be considered as Qualified
Holdings of any particular Qualified Recipient; and (iii) what Fund
shares, if any, are to be attributed to a particular Qualified
Recipient, to a different Qualified Recipient or to no Qualified
Recipient.

c) "Qualified Trustees" shall mean the Trustees of the Fund who are not
interested persons, as defined in the 1940 Act, of the Fund and who
have no direct or indirect financial interest in the operation of this
Plan or any agreement related to this Plan. While this Plan is in
effect, the selection and nomination of Qualified Trustees shall be
committed to the discretion of the Trustees who are not interested
persons of

<PAGE>

the Fund. Nothing herein shall prevent the involvement of others in
such selection and nomination if the final decision on any such
selection and nomination is approved by a majority of such
disinterested Trustees.

d) "Permitted Payments" shall mean payments by the Fund to Qualified
Recipients as permitted by this Plan.

3. PAYMENTS AUTHORIZED. The Fund is authorized, pursuant to this Plan, to
make Permitted Payments to any Qualified Recipient on either or both of the
following bases:

a) as reimbursement for direct expenses in the course of distributing
Fund shares or providing administrative assistance to the Fund or its
shareholders, including, but not limited to, advertising, printing and
mailing promotional material, telephone calls and lines, computer
terminals, and personnel; and/or

b) at a rate determined by the Advisor or Distributor on behalf of the
Fund with respect to the Qualified Recipient in question based on the
average value of the Qualified Holdings of such Qualified Recipient.

It may be presumed that a Qualified Recipient has provided distribution
assistance with respect to its Qualified Holdings, but if either the Advisor on
behalf of the Fund or the Fund's Qualified Trustees should have reason to
believe a Qualified Recipient may not be rendering appropriate distribution or
administrative assistance in connection with the sale of Fund shares, then the
Advisor or Distributor shall require the Qualified Recipient to provide a
written report or other information to verify that said Qualified Recipient is
providing appropriate service in this regard.

Permitted Payments may be made in any amount to any Qualified Recipient,
provided that (i) the total amount of all Permitted Payments made during a
fiscal year of the Fund to all Qualified Recipients (whether made under (a)
and/or (b) above) do not exceed, in that fiscal year of the Fund 0.25% of 1% of
the average annual net assets of the Fund in that fiscal year; and (ii) a
majority of the Fund's Qualified Trustees may at any time decrease or limit the
aggregate amount of all Permitted Payments or decrease or limit the amount
payable to any Qualified Recipient.

4. EXPENSES AUTHORIZED. The Advisor or Distributor is authorized on behalf of
the Fund, pursuant to this Plan, to purchase advertising of shares of the Fund,
to pay for sales literature and other promotional material, and to make payments
to sales personnel affiliated with either of them. Any such advertising and
sales material may include references to other series of the Trust, other open-
end investment companies or other investments, and any salesmen so paid are not
required to devote their time solely to the sale of Fund shares. The Fund will
reimburse the Advisor or Distributor for any such expenses ("Permitted
Expenses:) incurred during a fiscal year of the Fund, and the Fund may pay for
Permitted Expenses directly from the assets of the Fund, except that the
aggregate amount of reimbursement or payment of Permitted Expenses together with
the Permitted Payments made pursuant to Section 3 of this Plan shall not, in the
aggregate, in that fiscal year of the Fund exceed 0.25% of 1% of the average net
assets of the Fund in such year. No such reimbursement may be made for
Permitted Expenses or Permitted Payments for

-2-

<PAGE>

fiscal years prior to the fiscal year in question or in contemplation of future
Permitted Expenses or Permitted Payments.

5. REPORTS. While this Plan is in effect, a written report shall be provided
at least quarterly to the Fund's Board of Trustees, and the Board shall review,
the following: (i) the amounts of all Permitted Payments, the identity of the
recipients of each such Payment; the basis on which each such recipient was
chosen as a Qualified Recipient and the basis on which the amount of the
Permitted Payment to such Qualified Recipient was made; and (ii) the amounts of
Permitted Expenses and the purpose of each such Expense.

6. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan has been
approved by a vote of the Board of Trustees of the Trust and of the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on this
Plan. This Plan shall, unless terminated as hereinafter provided, continue in
effect until ____________ ___, 1998 and from year to year thereafter only so
long as such continuance is specifically approved at least annually by the
Trust's Board of Trustees and its Qualified Trustees cast in person at a meeting
called for the purpose of voting such continuance. This Plan may be terminated
at any time by a vote of a majority of the Qualified Trustees or by the vote of
the holders of a "majority" (as defined in the 1940 Act) of the outstanding
voting securities of the Fund. This Plan may not be amended to increase
materially the amount of payments to be made without approval of at least a
"majority" of the outstanding voting securities of the Fund, and all amendments
must be approved by a vote of the Board of Trustees and of the Qualified
Trustees cast in person at a meeting called for the purpose of voting on such
amendment.

-3-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.

CORNERCAP BALANCED FUND

BY:

ATTEST:

CORNERSTONE CAPITAL CORP.

BY:

ATTEST:

ATTKISSON, CARTER AND AKERS, INC.

BY:

ATTEST:

-4-

<PAGE>
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<NAME> CORNERCAP GROUP OF FUNDS
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
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<REALIZED-GAINS-CURRENT> 201,707
<APPREC-INCREASE-CURRENT> 862,129
<NET-CHANGE-FROM-OPS> 1,104,014
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 51,322
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 211,232
<NUMBER-OF-SHARES-REDEEMED> 210,768
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<GROSS-ADVISORY-FEES> 81,373
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</TABLE>