Peach State Reserves news, 2nd quarter, Apr.-June 2006

Peach State Reserves News
2nd QUARTER, APRIL - JUNE 2006
Quarterly Account Statement
Enclosed is your Quarterly Account Statement covering investment activity in Peach State Reserves The Georgia Retirement Investment Plan. This statement is for the period of April 1, 2006 through June 30, 2006. If you have any questions, contact Great-West between 9:00 a.m. and 7:00 p.m., Monday through Friday, at 1-800-701-8255. Also enclosed is the Investment Options at a Glance, showing comparative performances of the investment options.
Fixed Income Option Quarterly Range of Return
For the current quarter ending September 30, 2006, the projected range of return for the Fixed Income Option is expected to be between 4.5% and 5.0% annualized until the end of the quarter. The return may be higher or lower. There is no guarantee that the fund will earn a yield within this range. The actual annualized rate of return for the Fixed Income Option for the quarter ending June 30, 2006 was 4.76%

Withdrawals Not Required After Separation from Service
Prior to 2002, Section 457 plan participants who separated from service were required to make an election regarding the anticipated date of withdrawal. As of January 1, 2002, the law changed and this was and is no longer required. Although this information has been communicated in prior newsletters, we find that some people are still unaware of this. 401(k) and 457 plan participants may leave their assets in their Peach State Reserves account, with continued ability to manage their investments. Those whose account balances are less than $1,000 will, however, be required to withdraw their money from the plan after separation from service.
The Internal Revenue Service does require individuals who are age 70 and no longer working to begin withdrawing a Minimum Distribution each year. This requirement applies to all retirement savings plans, including 401(k), 457, 403(b) and Individual Retirement Accounts. For more information please visit the Peach State Reserves section of our website at ersga.org.

How Should You React to Market Uncertainty?
In recent weeks, the stock market has shown significant volatility and negative returns. It's natural to feel unsettled when this happens and forget about the positive returns over the long term. We shouldn't allow short-term fluctuations in the stock market to distract us from our long-term investment objectives. However, this short-term volatility can help to focus our attention on our investment strategy. Making sure our investments are in line with our objectives and risk tolerance is very important. Please consider some of the following questions and answers before you make any changes to your investment options.
1. Should I transfer my funds to other investment options?
Has your investment objective or desired rate of return changed? Have your feelings changed regarding the risk you are willing to take with your investments? Are your investments diversified to reduce the risk being taken? How many years in the future before you need to start withdrawing this money?
The answers to these questions help determine whether your investment options still suit your needs.
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How Should You React to Market Uncertainty?

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2. Do the stock market statistics I hear on the news reflect how my investments are doing?
There are a number of market indices that can help you evaluate investment options that are invested in different types of stocks and/or bonds. The "market" that is quoted most frequently on the news is the Dow Jones Industrial Average. However, this index represents only 30 large company stocks and does not represent the entire stock market, which includes thousands of stocks. Another frequently referenced stock market index is the National Association of Securities Dealers Automated Quotation system (NASDAQ) composite index. This stock market lists over 6,000 stocks and is strongly influenced by the performance of the technology and biotechnology stocks that have been in the news over the last few years. The S & P 500 is another frequentlycited index, representing 500 stocks in the industrial, transportation, utility and financial economic sectors, with larger companies having a greater impact on overall performance statistics. It is a popular benchmark of overall United States stock market performance, although the statistical weighting towards large companies should be taken into account when examining performance. Depending upon the underlying stocks in your mutual funds' portfolios, some or all of the indexes may reflect investment performance.
3. Is the stock market going back up soon? Predicting the market over the short-term is very difficult and can be risky if you are trying to time the market based on short-term predictions. Market timing is the act of moving your money in and out of investments based on the performance of the market. This can be a risky strategy because the market can move quickly up or down. Many financial experts agree that you are better off sticking with your investments in the long-term. The performance of your investments in the short-term may be volatile and unpredictable, but history has shown that the power of averaging returns over the long-term has overwhelmed short-term fluctuations.

4. Is it a good time to buy when the stock market is down?
It's difficult to pick the best time to invest, especially when you don't want to miss out on any gains. How do you pick the very best time? It's impossible to consistently invest at the very best time. However, dollar cost averaging is a conservative strategy that invests the same amount of money into one or more investment options on a systematic basis (i.e., monthly, quarterly, etc.). By investing this way, your average cost per unit/share could be less because you buy more when the market goes down (lower share prices) and buy less when the market goes up. Dollar cost averaging automatically happens through payroll deduction each time you make a contribution to your account; however, dollar cost averaging cannot assure a profit nor protect against loss in a declining market.
5. My friend is making changes to his/her account and I am wondering if I should do the same?
Most participants do not have the same investment objective, risk tolerance or time horizon. Making changes to your account should be based on your own circum-
stances. If your personal situation has changed, or if short-term market fluctuations bother you, you may wish to review your account with a financial counselor to be certain you are properly diversified. Diversifying your account across asset classes has historically helped smooth market fluctuations.
While we can expect additional market fluctuations in the years ahead, any changes to your invest-
ment strategy should be based on sound principles rather than emotions of the moment.

Peach State Reserves - Two Northside 75 - Atlanta, GA 30318-7778 www.ersga.org