CORNERCAP GROUP OF FUNDS /VA/, 485APOS, 1997-06-02

CORNERCAP GROUP OF FUNDS /VA/
485APOS, 1997-06-02

Previous: AMERICAN RETIREMENT CORP, 424B4, 1997-06-02

Next: ASHA CORP, SB-2/A, 1997-06-02

<PAGE>

Filed with the SEC on June 2, 1997
----------------------------------

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.:14 X
-- -

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-

Amendment No.:16 X
-- -

(Check appropriate box or boxes)

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

The Peachtree, Suite 1700, 1355 Peachtree St, NE, Atlanta, GA 30309
--------------------------------------------------------------------
(Address of Principal Executive Offices)

(404)870-0700
-------------
(Registrant's Telephone Number, including Area Code)
The Peachtree, Suite 1700, 1355 Peachtree St., NE, Atlanta, GA 30309
---------------------------------------------------------------------
Thomas E. Quinn

(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 (date) pursuant to paragraph (b)
- -------
X 60 days after filing pursuant to paragraph (a)
- -------
on pursuant to paragraph (a) of Rule 485.
- ------- --
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, 1998 on or about May 30, 1998.

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

Please send copies of communications to:

Reinaldo Pascual, Esq.
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530

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

The CornerCap Group of Funds
A "Series" Investment Company

CornerCap Balanced Fund CornerCap Growth Fund

Shareholder Services Questions Investment Objectives Questions

Toll-Free Voice: (888) 81-FUNDS Toll-Free Voice: (800) 728-0670
(888) 813-8637
Telecopier: (804) 285-8018 Telecopier: (404) 240-0144

The CornerCap Group of Funds ("CornerCap") is an open-end,
diversified management investment company presently consisting of
two separate series representing separate portfolios of
investments (the "Funds").

The investment objective of the CornerCap Balanced Fund (the
"Balanced Fund") is to obtain long-term capital appreciation and
current income. The Fund invests in a combination of equity and
fixed-income securities.

The investment objective of the CornerCap Growth Fund (the
"Growth Fund") is to obtain long term capital appreciation.
Income from dividends or interest on portfolio securities is a
secondary objective.

There is no assurance that either Fund will achieve its
objective.

This Prospectus sets forth concisely the information about the
Funds that you should know before investing in the Funds. You
should read it and keep it for future reference. A Statement of
Additional Information ("SAI") dated August 1, 1997, containing
additional information about the Funds 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., The Peachtree, Suite 1700, 1355 Peachtree Street NE,
Atlanta GA, 30309.

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 August 1, 1997.
<PAGE>

PROSPECTUS SUMMARY
<TABLE>
<CAPTION>

<C> <S>
The Funds........................ The CornerCap Group of Funds (the "Funds") is an open-end,
diversified management investment company presently
consisting of two separate series representing separate
portfolios of investments, the Balanced Fund (see page 9)
and the Growth Fund (see page 11). The shares of the
Balanced Fund and the Growth Fund are offered without sales
or redemption charges (see page 5).

Investment Objective............. The Balanced 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 9).

The Growth 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. Income from dividends or interest on
portfolio securities is a secondary objective. There can be
no assurance that the Fund will achieve its investment
objective (see page 11).

Investment Policies.............. The Balanced 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 9).

The Growth 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 11).

Investment Advisor.............. Cornerstone Capital Corp. acts as the investment advisor to
the Balanced Fund and the Growth Fund. In that capacity, it
selects the portfolio holdings. (see page 13).

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

Administration.................. Fortune Fund Administration is the Transfer Agent (see page
14), Accounting Services Agent and Administrator of each
Fund.

Dividends & Distributions....... The Balanced Fund currently intends to make two
distributions of any net income or capital gains during each
calendar year (see page 20).

The Growth Fund currently intends to make at least one
distribution of any net income or capital gains during each
calendar year (see page 20).

Minimum Purchase................ The minimum initial investment for each Fund is $2,000 and
the minimum subsequent investment is $250 (see page 16).

</TABLE>
<PAGE>

<C> <S>
Redemption and Exchanges........ Shares of each Fund may be redeemed at the next
determined net asset value, without charge (see page 17).
Shareholders of either Fund may also exchange shares of
their respective Fund for shares of the other Fund (see page
17).

Investment Risk................. The Funds are subject to market risk, interest rate risk and
credit risk. The market for equity securities tends to be
cyclical, with periods when the prices for securities
generally rise and periods when they generally decline. The
fixed-income portion of the portfolios is subject to
interest rate and credit risk. As prevailing interest rates
decrease, bond prices will increase and vice-versa.
Fluctuations in interest rates will therefore affect the net
asset value per share of the Funds. 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. The Funds are intended to be long-term
investment vehicles and are not designed to provide
investors with the means of speculating on short-term market
movements. Investors should consider the Funds as vehicles
with which to balance their total investment program's risk.
(see page 6).

</TABLE>
<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 Balanced Fund Growth Fund
- -------------------------------- ------------- -----------
<S> <C> <C>
Maximum sales charge on purchases....................................................... None None
Maximum sales charge imposed on reinvested dividends.................................... None None
Deferred sales charge................................................................... None None
Redemption fee.......................................................................... None None
Exchange fee............................................................................ None None

Estimated Annual Fund Operating Expenses (as a percentage of average daily net assets)/1/
- -----------------------------------------------------------------------------------------

Management Fee........................................................................... 0.0%/1/ 0.56%/1/
12b-1 Fee................................................................................ 0.0%/2/ 0.0%/2/
Other Expenses........................................................................... 2.0%/3/ 1.15%/3/
Total Fund Operating Expenses............................................................ 2.0%/3/ 1.71%/3/
</TABLE>

1. Each 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 applicable 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 during the current fiscal year. For the year ended
March 31, 1996, the Advisor waived .44% of its 1% management fee with respect
to the Growth Fund.

2. Each 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, legal counsel, 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 each 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 during the current fiscal year. "Other Expenses" and
Total Fund Operating Expenses" are presented net of waived and reimbursement.
In absence of such waiver and reimbursement, total Growth Fund operating
expenses for the year ended March 31, 1997 were 2.15%.
<PAGE>

Hypothetical Example of Fund Expenses
- -------------------------------------
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period

1 Yr. 3 Yr. 5 Yrs. 10 Yrs.
----- ----- ------ -------
<S> <C> <C> <C> <C>
Balanced Fund $20 $64 $110 $244

Growth Fund $18 $55 $ 95 $206

</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.

Growth Fund

The following selected per share data and ratios for each of the five years in
the period ended March 31, 1997 have been examined by Tait, Weller and Baker,
independent Certified Public Accountants, whose report thereon appears in the
Growth Fund's 1997 Annual Report to Shareholders, and is incorporated by
reference into this Prospectus. Total return amounts are not covered by
auditors' reports. The Fund's annual reports to shareholders contains further
information about the performance of the Funds, and is available separately and
without charge.

Period Ending March 31, 1997
----------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992/2/ 1991/2/ 1990/1/ 1989/1/
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, Beginning of period $ 9.81 $ 8.61 $ 7.69 $ 7.58 $ 7.60 $ 6.45 $ 6.96 $ 7.37 $ 6.57
- ------------------------------------ ------- ------- ------ ------- ------- ------- ------- ------- -------
Income From Investment Operations
Net investment income (loss) .02 .04 0.05 0.02 0.23 (0.08) (0.27) 0.09 (0.06)
Net Gains or Losses on Securities 1.93 1.22 0.89 0.11 (0.25) 1.23 (0.10) (0.50) 0.92
(both realized and unrealized) ------- ------- ------- ------- ------- ------- ------- ------- --------
Total From Investment Operations 1.95 1.26 0.94 0.13 (0.02) 1.15 (0.37) (0.41) 0.86
------- ------ ------- ------- ------- ------- ------- ------- --------
Less Distributions
- ------------------ (.01) (0.06) (0.02) (0.02) 0.00 0.00 (0.14) 0.00 (0.06)
Dividends (from net investment income)
Distribution (from capital gains) (.07) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------- ------- ------ ------- ------- ------- ------- ------- -------
Total Distributions (.08) (0.06) (0.02) (0.02) 0.00 0.00 (0.14) 0.00 (0.06)
------- ------- ------ ------- ------- ------- ------- ------- -------
Net Asset Value, End of period $ 11.68 $ 9.81 $ 8.61 $ 7.69 $ 7.58 $ 7.60 $ 6.45 $ 6.96 $ 7.37
- ------------------------------ ======= ======= ====== ======= ======= ======= ======= ======= =======
Total Return 19.94% 14.64% 12.25% 1.71% (0.26)% 15.33% (5.54)% (5.56)% 13.09%

Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (x1,000) $12,856 $ 8,371 $7,299 $ 4,229 $ 3,042 $ 1,088 $ 1,107 $ 1,814 $ 3,011
Ratio of Expenses to Average Net Assets:
Before Expense Reimbursement 2.15% 2.35% 2.69% 3.00% 6.49% 6.26% 8.77% 3.49% 4.44%
After Expense Reimbursement 1.71% 1.75% 1.87% 2.00% 2.00% 2.14% 7.77% 2.49% 3.44%
Ratio of Net Income to Average Net
Assets:
Before Expense Reimbursement (0.24)% (0.11)% (0.70) (0.67)% (4.10)% (4.41)% (4.80)% (0.09)% (1.93)%
After Expense Reimbursement .19% .49% 0.12% 0.13% 0.36% (0.29)% (3.80)% 0.91% (0.93)%

Portfolio Turnover Rate 37.13% 40.83% 55.12% 35.58% 83.40% 91.62% 125.24% 127.45% 145.70%
Average Commission Rate .113 n/a n/a n/a n/a n/a n/a n/a n/a

</TABLE>

<TABLE>
<CAPTION>
1988/1/
-------
<S> <C>
Net asset value, Beginning of period 9.92
- ------------------------------------ -------
Income From Investment Operations
Net investment income (loss) 0.06
Net Gains or Losses on Securities (2.94)
(both realized and unrealized) -------
Total From Investment Operations (2.88)
--------
Less Distributions
- ------------------ (0.01)
Dividends (from net investment income)
Distribution (from capital gains) (0.46)
-------
Total Distributions (0.47)
-------
Net Asset Value, End of period 6.57
- ------------------------------ =======
Total Return (29.13)%

Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (x1,000) 3,737
Ratio of Expenses to Average Net Assets
Before Expense Reimbursement 4.54%
After Expense Reimbursement 3.54%
Ratio of Net Income to Average Net
Assets:
Before Expense Reimbursement (0.10)%
After Expense Reimbursement 0.90%

Portfolio Turnover Rate 151.80%
AVERAGE COMMISSION RATE
</TABLE>

- --------------------------------------------------------------------------------
NOTES:
- --------------------------------------------------------------------------------

1. The per share and capital change information represents performance of Wealth
Monitors, Inc., the Fund's Investment Advisor from March 1986 to August 1990.
2. 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.

Balanced Fund

The Balanced Fund is a new series of CornerCap and begun operations on May 28,
1997 following the closing of a reorganization transaction with The Atlanta
Growth Fund, Inc. pursuant to which the Balanced Fund assumed certain assets and
liabilities of The Atlanta Growth Fund, Inc. The Balanced Fund is a separate
entity from The Atlanta Growth Fund, Inc., with a different corporate structure
and different investment objectives, policies and management. [However,
accounting rules applicable to reorganization transactions generally require
that financial information about the predecessor entity be provided to
investors. The following is selected per share data and ratios for the Atlanta
Growth Fund for each of the four years ended May 31, 1996 and for the six months
ended November 30, 1996. The information for the four years ended May 31, 1996
has been examined by Coopers & Lybrand, L.L.P., independent Certified Public
Accountants. The information for the six months ended November 30, 1996 is
unaudited. Additional financial information about The Atlanta Growth Fund, Inc.
is included in its annual and semi-annual report to shareholders for the year
and period ended May 31, 1996 and November 30, 1996, respectively, as is
available separately and without charge.]

[Financial highlights will be filed by Amendment, if required]
<PAGE>

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

Balanced Fund Investment Objective and Policies

The CornerCap Balanced Fund (the "Balanced 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 Balanced 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 Balanced Fund's investment objective is to obtain long-term capital
appreciation and current income. The Balanced 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 reserves.

The equity securities that the Balanced 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 Balanced Fund, the
Balanced 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 Balanced
Fund will achieve its objective.

The fixed income securities that the Balanced Fund may purchase consist of
obligations of the United States government, its agencies and
instrumentalities; corporate securities including bonds and notes; and
sovereign government, municipal, mortgage-backed and other asset-backed
securities. Investments in U.S. 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. Should the rating or quality of a corporate
obligation decline after purchase by the Fund, the Advisor will reconsider
the advisability of continuing to hold such obligations.

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 Balanced 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
<PAGE>

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 Balanced 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 Balanced 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 effect the Net Asset Value per share of
the Balanced 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 of 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 have speculative characteristics. A rating of Baa by Moody's
indicates that the obligation is of "medium grade," neither highly
protected not 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 Balanced Fund as a vehicle with which to
balance their total investment program risks.

Foreign Securities - The Balanced 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 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 Balanced 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 of 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.
<PAGE>

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

Growth Fund Investment Objective and Policies

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

The equity securities that the Growth 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 Growth Fund, the Growth
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 Growth Fund will achieve its objective.

The Growth 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 Growth 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 Growth Fund may
invest part of its assets temporarily in debt obligations pending the
investment of the proceeds of sales of shares of the Growth Fund or of
portfolio securities.

Investment Risks - As a fund investing in equity securities, the Growth
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 Growth 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 Growth 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 Growth Fund as a vehicle with which to
balance their total investment program risks.

Foreign Securities - The Growth 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.

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 Balanced 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 Balanced Fund's
outstanding securities. The Balanced Fund's investment objective is such a
policy. Among its other fundamental policies, with respect to 75% of its
assets, the Balanced 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 Balanced Fund's
investment restrictions is contained in the SAI.

The Growth 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 Growth Fund's
outstanding securities. The Growth Fund's investment objective is such a
policy. Among its other fundamental policies, the Growth 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 Growth 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 Funds) that open-end investment companies, such
as the Funds, should not make certain investments if thereafter more than
15% of the value of their net assets would be invested in illiquid assets.
The investments included in this 15% 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 15% limit does not include obligations payable at principal amount
plus accrued interest within seven days after purchase.

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

Management

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

The Advisor - Cornerstone Capital Corp., The Peachtree, Suite 1700, 1355
Peachtree Street, Atlanta, GA 30309, acts as investment advisor to both
Funds, subject to the control of the Funds 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, who together
own a controlling interest of the Advisor's outstanding shares.

Mr. Quinn is the portfolio manager for the Growth Fund. He has worked in
investment management and financial analysis for 23 years, the last seven
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>

Mr. Quinn and D. Ray Peebles are the portfolio managers for the Balanced
Fund. Mr. Peebles has worked with Cornerstone Capital for six years. He
previously worked for Wachovia Bank of North Carolina. Mr. Peebles is a
Level III candidate in the Chartered Financial Analyst program. He has an
MBA from Wake Forest University and a BS in accounting from North Carolina
State University.

Mr. Hoots has worked in investment management and financial analysis for
over 26 years, the last six 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 Balanced Fund has retained the Advisor under an Investment Advisory
Agreement (the "Agreement") dated December 6 1996, which remains in effect
from year to year if approved annually by the Board of Trustees. The Growth
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 Funds pay the
Advisor a fee, computed daily and payable monthly, at an annual rate of 1%
of each Funds average daily net assets.

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 Funds 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 Funds are 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 - Fortune Fund Administration serves as the Funds'
-------------
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 Funds 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 per Fund 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 Administrator is an
affiliate of Cornerstone Capital Corp. The address of the Administrator is
1389 Peachtree Street, N.E., Suite 180, Atlanta, GA 30309.

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

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

Net Asset Value

The Funds net asset value per share are 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
<PAGE>

number of shares of the Fund outstanding. The value of the Fund's portfolio
securities is, in general, the market value of such securities. 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 PM, 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. Valuations of fixed-income securities are supplied by
independent pricing services used by the Fund. Valuations of fixed-income
securities are based upon a consideration of yields or prices of
obligations of comparable quality, coupon, maturity and type, indications
as to value from recognized dealers, and general market conditions. The
pricing service may use electronic data processing techniques and/or
computerized matrix systems to determine valuations. Fixed-income
securities for which market quotations are readily available are valued
based upon those quotations. The procedures used by the pricing service are
reviewed by the Fund under the general supervision of the Trustees. The
Trustees may deviate from the valuation provided by the pricing service
whenever, in their judgment, such valuation is not indicative of the fair
value of the obligation. 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.

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

Distribution Plan

The Balanced Fund and the Growth Fund are authorized under a Distribution
Plan, pursuant to Rule 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 Attkisson, Carter & Akers, Inc., One
Buckhead Plaza, Suite 1475, 3060 Peachtree Road, N.W., Atlanta, GA, 30305
(the "Distributor"), the Funds' 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 each Funds' 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 Funds have 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 either 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 either Fund is $250. The Funds reserve the
right to reject any account application.

Investing by Mail - To purchase shares of a Fund, investors should mail a
-----------------
completed account application with a check payable to the appropriate fund,
either the CornerCap Balanced Fund or CornerCap Growth Fund. Mail to
Fortune Fund Administration , P.O. Box 101281, Atlanta GA 30392-1281. 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
<PAGE>

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 1-888-813-8637 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 any CornerCap fund
-------------------
for those in another CornerCap 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 funds involved 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.

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).

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

How to Redeem Shares

The Funds 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 Funds, Fortune Fund Administration, Inc., P.O. Box
101281, Atlanta, GA 30392-1281, (888) 813-8637. The instructions should
specify the appropriate fund and 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 Funds do 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 1-888-813-8637.
<PAGE>

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 Funds to make payment
wholly or partly in cash, the Funds may pay the redemption price in whole
or in part by a distribution in kind of securities from the portfolio of
the Funds, in lieu of cash, in conformity with applicable rules of the SEC.
The Funds, however, has elected to be governed by Rule 18f-1 under the 1940
Act pursuant to which the Funds are obligated to redeem shares solely in
cash up to the lesser of $250,000 or one percent of the net asset value of
the Funds during any 90 day period for any one shareholder. Should
redemptions by any shareholder exceed such limitation, the Funds 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 Funds,
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 Funds 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 telephone procedures have been
established by the Funds for investors who purchase Fund shares through
member firms of the National Association of Securities Dealers, Inc. (the
"NASD") who have accounts with the Funds for the benefit of their clients.
Telephone purchases and redemptions will be effected by the Funds 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 Funds 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 Funds and neither the Funds nor the Distributor
receives any part of such fees. Such handling fees may be avoided by
investing directly with the Funds through the Distributor, but investors
doing so will not be able to avail themselves of the Funds' 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 Funds.

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 Funds 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 Funds
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 Funds.
Payment for shares redeemed will be made or delayed as provided above under
"How to Redeem Shares."
<PAGE>

By electing telephone purchase and redemption privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the
Funds, the Distributor nor the Transfer Agent shall be liable for
following instructions communicated by telephone and reasonably believed to
be genuine. The Funds 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 Funds fail to employ this and other established
procedures, it may be liable. The Funds reserves the right to modify or
terminate these telephone privileges at any time.

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

Dividends and Tax Status

The Balanced 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 Balanced Fund are not guaranteed and are subject to
the discretion of the Fund's Board of Trustees.

The Growth 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 Growth Fund's fiscal year-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 Growth Fund are not guaranteed and are subject to the
discretion of the Fund's Board of Trustees.

The Funds have 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 Funds 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 Funds 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.
<PAGE>

Under the Code, the Funds 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 Funds that the shareholder is subject to backup withholding.

The Funds 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 Funds may publish its total return in advertisements
and communications to investors. Total return information will include the
Funds' average annual compounded rate of return over the most recent four
calendar quarters and over the period from the Funds' inception of
operations. The Funds may also advertise aggregate and average total
return information over different periods of time. The Funds' 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 Funds will
fluctuate over time, and any presentation of the Funds' 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.

In reports or other communications to shareholders and in advertising
material, the Funds 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 Corp., the investment advisor to the Balanced 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 Balanced Fund's are as follows:

1st Quarter 1997 1 Year 3 Year 5 Year
---------------- ------ ------ ------
0.8% 12.8% 12.1% 10.9%

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,
DIVER-SIFICATION 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.
<PAGE>

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

General Information

The CornerCap Funds were organized on January 6, 1986, as a Massachusetts
business trust. Prior to August 13, 1990 the Growth Fund was known as
Wealth Monitors Fund. Between August 13, 1990 and September 25, 1992, the
Growth Fund was known as the Sunshine Growth Trust. From September 25,
1992 until July 28, 1995, the Growth Fund was known as the Cornerstone
Growth Fund. The Balanced Fund is a new series of the CornerCap Funds and
has only recently begun operations on May 28, 1997 following the closing of
a reorganization transaction with the Atlanta Growth Fund, Inc. pursuant to
which the Balanced Fund acquired the assets and assumed certain liabilities
of the Atlanta Growth Fund, Inc. 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 Funds.

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.
The Board of Trustees may, at its own discretion, create additional series
of shares.

The Declaration of Trust provides that the Funds' 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 Funds, 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 Funds 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 Funds will continue indefinitely.

With respect to the purchase and sale of Funds shares, certain
broker/dealers other than the Distributor may charge a fee to the Funds
investors for executing transactions on the investor's behalf. Such
transactions may be executed on the investor's behalf directly through the
Funds Transfer Agent without payment of such a fee. See the section
entitled "How to Purchase Shares" in the Prospectus. The Advisor may follow
a policy of considering sales of shares of the Funds as a factor in the
selection of brokers to be used in portfolio transactions for the Funds,
subject to the requirement of best execution discussed in the SAI under
"Portfolio Transactions and Brokerage."

The Advisor will sell portfolio securities whenever it is appropriate,
regardless of how long the securities have been held by the Funds. The
Advisor will change the Funds' investments whenever it believes doing so
furthers the Funds' investment objective. Portfolio turnover involves some
expense to the Funds, 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 Funds annual rate on portfolio turnover is anticipated to be between
30% and 70%. For the year ended March 31, 1996, the portfolio turnover rate
for the Growth Fund was 37.13%. Tait, Weller & Baker serves as the
certified public accountants of the Funds. Fortune Fund Administration,
Inc. serves as the Funds' Transfer Agent and Accounting Services Agent
pursuant to separate Transfer Agent and Accounting Services Agreements.
Fortune Fund Administration, Inc. provides the daily pricing for the Fund.
Fortune Fund Administration, Inc. is affiliated with Cornerstone Capital
Corp., the advisor. Pursuant to the Accounting Services Agreement, Fortune
will receive a minimum fee of $18,000 per year per Fund. Pursuant to the
Transfer Agent Agreement, Fortune will receive a minimum fee of $12,000 per
year per Fund. The Trust Department of Wachovia Bank of N.C. is the
custodian of the Funds' assets. The legality of the securities offered by
this
<PAGE>

prospectus will be passed upon for the CornerCap Funds by Kilpatrick
Stockton LLP. Kilpatrick Stockton LLP 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
CornerCap Growth Fund
of
The CornerCap Group of Funds
A "Series" Investment Company

Statement of Additional Information
Dated August 1, 1997

The CornerCap Balanced Fund (the "Balanced Fund") and the CornerCap Growth
Fund (the "Growth Fund") are series of the CornerCap Group of Funds
(collectively, the "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 Funds dated August 1,
1997, as may be amended from time to time (the "Prospectus"); copies of the
Prospectus may be obtained from the Funds, c/o Cornerstone Capital Corp.,
The Peachtree, 1355 Peachtree Street, Suite 1700, Atlanta, GA, 30309.
Cornerstone Capital Corp. (the "Advisor") is the Funds' investment advisor.

TABLE OF CONTENTS

Page

Investment Objectives and Policies.................................
Portfolio Turnover.................................................
Investment Restrictions............................................
Management.........................................................
The Advisor........................................................
Accounting & Administrative Services...............................
Portfolio Transactions and Brokerage...............................
Distribution Plan..................................................
Net Asset Value....................................................
Tax Status.........................................................
General............................................................
Appendix A.........................................................
<PAGE>

Investment Objectives and Policies
----------------------------------

The investment objective of the Balanced Fund is to obtain long-term
capital appreciation and current income. The Balanced 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 Balanced Fund are described in the
Prospectus. The following discussion elaborates on the disclosure of the
Balanced Fund's investment policies contained in the Prospectus.

The investment objective of the Growth Fund is long-term capital
appreciation. Income from dividends or interest on portfolio securities is
a secondary objective in the management of the Growth Fund's portfolio.
The portfolio and investment strategies of the Fund are described in the
Fund's Prospectus. Prior to August 13, 1990, the Growth Fund was known as
Wealth Monitors Fund. From August 13, 1990 to September 25, 1992 the
Growth 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.

Repurchase Agreements. The Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 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 Funds 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
<PAGE>

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 Funds 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 Funds 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 Funds 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 Funds
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
assurance that a liquid market will exist when the Funds 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 Funds may invest
in interest rate futures contracts and options thereon ("futures options");
the Funds may enter into foreign currency futures contracts and options;
and the Funds 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 Funds 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 Funds from liquidating an unfavorable position and the Fund
would remain obligated to meet margin requirements until the position is
closed.

The Funds 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
Funds 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 Balanced Fund may enter
into forward foreign currency exchange contracts ("forward contracts") to
attempt to minimize the risk to the Funds from adverse changes in the
relationship between the U.S. dollar and foreign 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 Balanced Fund will
not
<PAGE>

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 Funds.

Swap Agreements. The Balanced 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 Balanced 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 Balanced
Fund would calculate the obligations of the parties to the agreement on a
"net basis." Consequently, the Balanced 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 Balanced 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 Funds.
The Balanced 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 Balanced Fund may invest in mortgage-
backed and other asset-backed securities. These securities include
mortgage pass-through certificates, collaterized mortgage obligations,
mortgage-backed bonds and securities representing interests in other types
of financial bonds.

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. 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
<PAGE>

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.

Mortgage-backed bonds are general obligations of the issuer fully
collaterzlized 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, 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 Funds
consists primarily of common and preferred stocks, the Funds 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 Funds 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
<PAGE>

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.

General. Neither Fund intends to invest more than 25% of its assets in any
one industry. Notwithstanding the foregoing, the Funds do not currently
anticipate investing more than 5% of their respective assets in repurchase
agreements, foreign securities, options, futures, currency contracts, swap
agreements or mortgage related securities.

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 Growth Fund's portfolio turnover rate for the fiscal year
ended March 31, 1997 was 37.13%. The Growth Fund's portfolio turnover rate
in the future is expected to be in the range of 30% to 70%. The Balanced
Fund's portfolio turnover rate is expected to be in the range of 50% to
70%. Higher turnover would involve correspondingly greater commissions and
transaction costs.

Investment Restrictions
-----------------------

The Funds have 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 Funds' outstanding voting securities.
Under the 1940 Act, the vote of the holders of a "majority" of a Funds'
outstanding voting securities means the vote of the holders of the lesser
of (i) 67% of the shares of the Funds 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 Growth 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;

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;
<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;

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.

The Balanced 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 as
permitted by the 1940 Act.

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 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 stock of
companies which invest in or sponsor such programs;
<PAGE>

11. Make loans, except through repurchase agreements;

Management
----------

The Board of Trustees is responsible for the overall management of the
Funds, including general supervision and review of its investment
activities. The officers, who administer the Funds' daily operations, are
appointed by the Board of Trustees. The current Trustees and principal
officers of the Funds, 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 Trust Principal Occupations During Past
Name and Address (Age) Five Years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Thomas E. Quinn (51) Trustee, President, CFO President, Cornerstone
The Peachtree, Suite 1700 and Treasurer Capital Corp.
1355 Peachtree St. NE
Atlanta, GA 30309

Gene A. Hoots (57) Vice President Chairman, Cornerstone
3000 Big Oak Dr. Capital Corp.
Charlotte, NC 28210

Richard T. Bean (34) Vice President & Portfolio Manager,
The Peachtree, Suite 1700 Secretary Cornerstone Capital Corp.
1355 Peachtree St. NE Assistant Controller,
Atlanta, GA 30327 Godwins Inc.

Richard L. Boger (51) Trustee President, Export
303 Townsend Place, NW Insurance
Atlanta, GA 30327 Services, Inc.

G. Harry Durity (49) Trustee Sr. Vice President,
58 Close Road Corporate Development,
Greenwich, CT 06831 Automatic Data
Processing, Inc.

Laurin M. McSwain (45) Trustee Attorney, Bloodworth &
3000 Andrews Drive, NW McSwain
#5
Atlanta, GA 30305

</TABLE>

The Growth Fund incurred Trustees' fees and expenses for fiscal years ended
March 31, 1996 and 1997 of $6,800 and $7,939, respectively. Beginning on
December 16, 1994, the Growth 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 investment advisor for the Funds. The
Funds pay the Advisor for the services performed a fee at the annual rate
of 1% of each Fund's average net assets. The Investment Advisory Agreement
dated November 6, 1996, between the Balanced Fund and the Advisor (the
"Agreement") and the Investment Advisory Agreement dated September 9, 1992
between the Growth 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 each 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. During the fiscal years ended
March 31, 1995, 1996 and 1997, the Growth Fund paid the Advisor fees of
$______, $______ and $______, respectively. The Balanced Fund has not yet
paid the Advisor any fees.

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 of each fund. The Advisor has also
voluntarily agreed to reimburse each 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
during the current fiscal year.
<PAGE>

The Agreement also provides that the Advisor shall not be liable to the
Funds for any error of judgment by the Advisor or for any loss sustained by
the Funds 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
--------------------------------------

Fortune Fund Administration, Inc. provides certain record keeping and
shareholder services functions to the Funds., Fortune Fund Administration,
Inc. also provides the Funds' pricing and accounting services agent,
calculates the daily net asset value of the Funds and maintains the
accounting records. Fortune Fund Administration is affiliated with the
Advisor.

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 Funds by
placing purchase and sale orders for the Funds, the Advisor shall select
such broker-dealers ("brokers") as shall, in the Advisor's judgment,
implement the policy of the Funds 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 Funds 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 Funds recognize 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 Funds
in the valuation of the Funds' investments. The research which the Advisor
receives for the Fund's brokerage commissions whether or not useful to the
Funds, 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 Funds.

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 Funds 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, 1995, 1996 and 1997, the
Growth Fund paid total brokerage commissions of $______, $46,000 and
$63,821, respectively.

Distribution Plan
-----------------

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

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 the Funds shares or providing administration
assistance to the Funds 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
Funds 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 Funds' average annual
net assets; and (ii) a majority of the Funds' 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 Funds
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 Funds, 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 Funds shall be reimbursed or paid by the Funds, except
that the combined amount of reimbursement or payment of Permitted Expenses
together with the Permitted Payments made pursuant to the Plan by the Funds
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 Funds is committed to the discretion of the Fund's then
existing disinterested Trustees.

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.

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. Valuations of fixed-income securities are supplied by
independent pricing services used by the Fund. Valuations of fixed-income
securities are based upon a consideration of yields or prices of
obligations of comparable quality, coupon, maturity and type, indications
as to value from recognized dealers, and general market conditions. The
pricing service may use electronic data processing techniques and/or
computerized matrix system to determine valuations. Fixed-income securities
for which market quotations are readily available are value based upon
those quotations. The procedures used by the pricing service are reviewed
by the Fund under the general supervision of the Trustees. The Trustees may
deviate from the valuation provided by the pricing service whenever, in
their judgment, such valuation is not indicative of the fair value of the
obligation.

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.
<PAGE>

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 Funds,
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 Funds do 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 Funds 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 each 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.

The treatment of income dividends and capital gains distributions to
shareholders of the Funds 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 Funds are series of The CornerCap Group of Funds. The each 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 Funds. 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 CornerCap
Balanced 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." Matters submitted to shareholders must be
approved by a majority of the outstanding securities of each series, unless
the matter does not affect a particular series, in which case only the
affected series' approval will be required. Income, direct liabilities and
direct operating expenses of each series will be allocated directly to each
series, and general liabilities and expenses of the Funds 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 Funds'
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 Funds or its Trustees. The Declaration of
Trust provides for indemnification and reimbursement of expenses out of the
Funds' property for any shareholder held personally liable for its
obligations. The Declaration of Trust also provides that the Funds shall,
upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the Funds and satisfy any judgment thereon.
In addition, the operation of the Funds 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 Funds would be unable to meet its obligations.

The Balanced Fund entered into a Distribution Agreement effective as of
December 6 1996, and the Growth Fund entered into a Distribution Agreement
effective as of March 31, 1995, with Attkisson, Carter & Akers, Inc., a
securities
<PAGE>

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.

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

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

Principal Shareholders
----------------------

As of March 31, 1997, no shareholder owned beneficially more than 5% of the
outstanding shares of the Fund.

Performance Information
-----------------------

The average annual rates of return (unaudited) as of March 31, 1997 for the
Growth Fund for the periods listed below are as follows:

1 year 19.94%
3 years 15.54%
4.5 years (Since Inception of Management by Cornerstone Capital) 12.98%

Example:

Based on the average annual compound rates of return listed above over
these periods, you could have expected the following values on a $10,000
investment assuming no redemption at the end of each time period. (March
31, 1996)

(Unaudited)

One Year 3 Years 4.5 Years
-------- ------- ---------
$11,994 $15,459 $17,315

Cornerstone Capital Corp. became advisor to the Growth Fund in August 1992.
Prior to that time, the Growth Fund was known by other names and was
advised and managed by other entities. The Growth Fund was organized
originally on January 6, 1986. Per share income and capital changes for
the last ten years of the Growth Fund are included in the Prospectus under
"Financial Highlights" and performance information since inception is
available upon request.

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
<PAGE>

(where T = average annual total return; ERV = ending redeemable value of 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.

Financial Statements

The financial statements of the Growth Fund for the year ended March 31,
1997 and the report of the Fund's independent accountants are included in
the Fund's Annual Report to shareholders and are incorporated by reference
into this SAI. A copy of the Annual Report accompanies this SAI. The
following financial statements appearing in such Annual Report.

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.

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
<PAGE>

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).

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 Fund, 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 Fund. Cash to pay dividends
representing unpaid, accrued interest may be obtained from sales proceeds
of portfolio securities and Fund shares and from loan proceeds. Because
interest on zero coupon obligations is not paid to the Fund 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. 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 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.
<PAGE>

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.

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. 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 to
<PAGE>

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 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 Adviser.
<PAGE>

FORM N-1A

PART C

OTHER INFORMATION

ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Growth Fund. Incorporated by reference
to the Fund's Annual Report to Shareholders for the fiscal year
ended March 31, 1997.

Financial Statements for Balanced Fund. Incorporated by reference
to The Atlanta Growth Fund, Inc.'s Annual and Semi-Annual Report
to the fiscal year ended May 31, 1996 and November 30, 1996,
respectively.

(b) Exhibits:

(1) (a) Declaration of Trust, as supplemented - Incorporated by Reference
from PEA No. 13, filed November 26, 1996.

(2) By-Laws - Incorporated by Reference from PEA No. 13, filed November
26, 1996.

(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) Investment Advisory Agreement for Balanced Fund - Incorporated by
Reference from Form N-14, filed December 2, 1996.

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

(b) First Amendment to Distribution Agreement - Incorporated by
Reference from N-14, filed December 2, 1996.

(7) Not Applicable.

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

(b) Accounting Services Agreement (dated October 1, 1992) -
Incorporated by Reference from Amendment No. 1 to Form N-14,
filed February 28, 1997.

(9) Administrative Agreement - Incorporated by Reference from Form N-14,
filed December 2, 1996.

(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 30, 1997).
<PAGE>

(11) (a) Consents 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 Growth Fund - Incorporated by Reference
from PEA No. 10, filed July 31, 1995.

(b) Distribution Plan of Balanced Fund - Incorporated by Reference
from PEA No. 13, filed November 26, 1996.

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

(17) Financial Data Schedule for Growth Fund

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

None.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

On March 31, 1997, there were 455 record holders of the
Registrant's shares.

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, Director
Suite 1475
Atlanta, GA 30305

<PAGE>

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
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, Fortune Fund Administration,
Inc., 1389 Peachtree St., NE Suite 180, Atlanta GA 30309. Certain
accounting records of the Registrant are maintained by Fortune Fund
Administration, Inc. in its capacity as Accounting Services Agent

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 CornerCap Group of Funds,
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., The Peachtree, Suite 1700, 1355 Peachtree St,
N.E., Atlanta, Georgia, 30309.

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.
<PAGE>

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 date the Balanced Fund commenced
operations.

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 30th day of May, 1997.

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 May 30, 1997
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 May 30, 1997
---------------------------
Thomas E. Quinn
Attorney in Fact
<PAGE>

EXHIBIT INDEX
-------------

EXHIBIT
-------

(11) Consent of Independent Certified Public Accountants

(17) Financial Data Schedule

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the use of our report dated March 31, 1997 on the
financial statements and financial highlights of CornerCap Growth Fund.
Such financial statements and financial highlights appear in the 1997
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
May 30, 1997

<PAGE>

<ARTICLE> 6

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 7,265,699
<INVESTMENTS-AT-VALUE> 12,847,920
<RECEIVABLES> 10,371
<ASSETS-OTHER> 28,290
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,886,581
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,284
<TOTAL-LIABILITIES> 30,284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,739,717
<SHARES-COMMON-STOCK> 1,101,025
<SHARES-COMMON-PRIOR> 853,466
<ACCUMULATED-NII-CURRENT> 22,440
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 762,043
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,332,097
<NET-ASSETS> 12,856,927
<DIVIDEND-INCOME> 187,360
<INTEREST-INCOME> 22,681
<OTHER-INCOME> 0
<EXPENSES-NET> 188,857
<NET-INVESTMENT-INCOME> 21,184
<REALIZED-GAINS-CURRENT> 1,620,467
<APPREC-INCREASE-CURRENT> 233,821
<NET-CHANGE-FROM-OPS> 1,875,472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,865
<DISTRIBUTIONS-OF-GAINS> 75,349
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 375,974
<NUMBER-OF-SHARES-REDEEMED> 135,896
<SHARES-REINVESTED> 7,481
<NET-CHANGE-IN-ASSETS> 1,072,601
<ACCUMULATED-NII-PRIOR> 15,121
<ACCUMULATED-GAINS-PRIOR> (783,074)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 110,145
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 237,002
<AVERAGE-NET-ASSETS> 12,320,627
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> .024
<PER-SHARE-DISTRIBUTIONS> .062
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.68
<EXPENSE-RATIO> 1.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>