June 2012 Re: Investment Options Changes in the TVA 401(k) Plan Dear 401(k) Plan Participant: The TVA Retirement System Board of Directors periodically reviews the investment options available through the TVA 401(k) Plan to make sure they continue to help you meet your financial goals and investment objectives. As a result, the following changes are being made to the TVA 401(k) Plan's investment lineup. New Investment Options Beginning on July 02, 2012, three new investment options will be added to the investment lineup. Your new investment options are listed below. Please see detailed information about these options in the Investment Option Descriptions section of this letter. DFA Global Real Estate Securities Spartan Emerging Markets Index Fund - Institutional Class Spartan Global ex U.S. Index Fund - Institutional Class Investment Option Changes Effective as of the market close (generally 4:00 p.m. Eastern time) on July 02, 2012, there will be two additional changes: Fidelity Magellan Fund - Class K will no longer be available in the TVA 401(k) Plan. Fidelity International Real Estate Fund balances will be frozen for a 90-day holding period and then the fund will no longer be available in the TVA 401(k) Plan. Since you have a balance in one or both of these funds, see below and the following pages for more information about how you will be impacted. Investment Option No Longer Available Effective as of the market close (generally 4:00 p.m. Eastern time) on July 02, 2012, the investment option shown below in Old Investment Option will no longer be available in the TVA 401(k) Plan. All existing balances in this investment option will be transferred to the investment option shown below in New Investment Option as of the market close (generally 4:00 p.m. Eastern time) on July 02, 2012. The transfer of balances will appear as an exchange on your account history and quarterly statement. You may receive a prospectus as a result of this transaction. Old Investment Option Existing Investment Option Fidelity Magellan Fund - Class K Fidelity Freedom K Fund by Age The reallocation of assets depends on the timely liquidation of those assets. A delay in liquidation may result in a change to the above noted dates. Page 1 of 5
If you do not want your current account balance to transfer to the investment option as shown above, you must contact Fidelity Investments before 4:00 p.m. Eastern time on July 02, 2012, and request an exchange. You can do so by logging on to Fidelity NetBenefits at www.fidelity.com/atwork or calling tollfree at 1-800-354-7121, Monday through Friday (excluding New York Stock Exchange holidays) between 8:30 a.m. - 8:00 p.m. Eastern time to speak with a Service Center Representative. Please see page 3 for additional information about Fidelity Freedom K Funds. Investment Option Being Frozen and No Longer Available Effective as of the market close (generally 4:00 p.m. Eastern time) on July 02, 2012, exchanges into the investment option shown below under Old Investment Option will no longer be permitted in the TVA 401(k) Plan, and this investment option will no longer be available in the TVA 401(k) Plan. The Fidelity International Real Estate Fund is subject to a short-term trading fee of 1.50% for shares held less than 90 days. Due to this required holding period, all remaining balances in this investment option will be transferred to the investment option shown below under New Investment Option effective as of the market close (generally 4:00 p.m. Eastern time) on October 02, 2012. The transfer of balances will appear as an exchange on your account history and quarterly statement. You may receive a prospectus as a result of this transaction. Old Investment Option New Investment Option Fidelity International Real Estate Fund DFA Global Real Estate Securities The reallocation of assets depends on the timely liquidation of those assets. A delay in liquidation may result in a change to the above noted dates. Fidelity International Real Estate Fund: There is a short-term trading fee of 1.50% for shares held less than 90 days. A short-term trading fee will not be charged as part of this reallocation. If you request a change either before or after this transition without satisfying the required holding period, you may incur a short-term trading fee. If you do not want your remaining balances to transfer to the investment option as shown above, you must contact Fidelity Investments before 4:00 p.m. Eastern time on October 02, 2012, and request an exchange. You can do so by logging on to Fidelity NetBenefits at www.fidelity.com/atwork or calling tollfree at 1-800-354-7121, Monday through Friday (excluding New York Stock Exchange holidays) between 8:30 a.m. - 8:00 p.m. Eastern time to speak with a Service Center Representative. Additional Consideration Participants using the Automatic Rebalance Feature may need to update their rebalance elections given the changes to the plan line-up on July 02, 2012. The Automatic Rebalance elections will not occur as scheduled if you have a current fund that will no longer be offered under the plan. If you have questions, or need assistance with the Automatic Rebalance feature, log on to Fidelity NetBenefits at www.fidelity.com/atwork or call toll-free at 1-800-354-7121, Monday through Friday (excluding New York Stock Exchange holidays) between 8:00 a.m. - midnight Eastern time to speak with a Service Center Representative. Go Paperless Update your e-mail address to receive important benefits information electronically. Log on to Fidelity NetBenefits at www.fidelity.com/atwork Go to Your Profile Click on E-mail Address Page 2 of 5
Fidelity Freedom K Funds The Fidelity Freedom K Funds used as the TVA 401(k) Plan default investment option are based on the assumption that the participant will retire at age 65. The following table indicates which fund any existing balances in Fidelity Magellan Fund - Class K will be directed to, as determined by your plan administrator, based on your date of birth. Please select your date of birth on the chart below to determine which Fidelity Freedom K Fund your balances will be invested. Fidelity Freedom K Funds are designed for investors assuming retirement around the year indicated in each Fidelity Freedom K Fund. The Fidelity Freedom K Funds are managed to gradually become more conservative over time. The investment risk of each Fidelity Freedom K Fund changes over time as its asset allocation changes. They are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, commodity-related, and foreign securities. Principal invested is not guaranteed at any time, including at or after their target dates. For more information on the Fidelity Freedom K Funds, log on to Fidelity NetBenefits at www.fidelity.com/atwork. Date of Birth Retirement Date Range Fidelity Freedom K Funds If no date of birth on file or invalid date of birth on file at Fidelity N/A Fidelity Freedom K Income Fund 1/1/1900-12/31/1932 Retired before 1998 Fidelity Freedom K Income Fund 1/1/1933-12/31/1937 1998-2002 Fidelity Freedom K 2000 Fund 1/1/1938-12/31/1942 2003-2007 Fidelity Freedom K 2005 Fund 1/1/1943-12/31/1947 2008-2012 Fidelity Freedom K 2010 Fund 1/1/1948-12/31/1952 2013-2017 Fidelity Freedom K 2015 Fund 1/1/1953-12/31/1957 2018-2022 Fidelity Freedom K 2020 Fund 1/1/1958-12/31/1962 2023-2027 Fidelity Freedom K 2025 Fund 1/1/1963-12/31/1967 2028-2032 Fidelity Freedom K 2030 Fund 1/1/1968-12/31/1972 2033-2037 Fidelity Freedom K 2035 Fund 1/1/1973-12/31/1977 2038-2042 Fidelity Freedom K 2040 Fund 1/1/1978-12/31/1982 2043-2047 Fidelity Freedom K 2045 Fund 1/1/1983-12/31/1987 2048-2052 Fidelity Freedom K 2050 Fund 1/1/1988 and later 2053 and later Fidelity Freedom K 2055 Fund Plan Sponsor selected to use the date of birth ranges listed above. If you wish to change how your current balance(s) are invested, please log on to NetBenefits at www.fidelity.com/atwork or call the Fidelity Retirement Benefits Center toll-free at 1-800-354-7121. Page 3 of 5
Investment Option Descriptions DFA Global Real Estate Securities Fund Code: 76298 Objective: A Specialty - Real Estate mutual fund; the Morningstar Category is Global Real Estate. Strategy: The investment seeks long-term capital appreciation. The fund seeks to achieve exposure to a broad portfolio of securities of U.S. and non-u.s. companies in the real estate industry, with a focus on real estate investment trusts ("REITs") or companies that the Advisor considers REIT-like entities by primarily purchasing shares of the Underlying Funds. Under normal circumstances, at least 80% of the Portfolio's net assets will be invested directly, or indirectly through its investment in the Underlying Funds, in securities of companies in the real estate industry. Risk: Real Estate is a cyclical industry that is sensitive to interest rates, economic conditions (both nationally and locally), property tax rates, and other factors. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. Foreign securities are subject to interest-rate, currency-exchange-rate, economic, and political risks, all of which may be magnified in emerging Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, economic or other developments. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Please consult the prospectus for additional risk information specific to this fund. Short Term Trading Fee: None Someone who is seeking to complement his or her core holdings and is comfortable with the greater risk typically associated with investments tied to the value of holding, managing, and developing real estate. Someone who is willing to accept the lower diversification and potentially higher risk of investments concentrated in the real estate industry. Footnotes: A mutual fund registered under DFA Investment Dimensions Group Inc, and managed by Dimensional Fund Advisors LP. This description is only intended to provide a brief overview of the fund Read the fund's prospectus for more detailed information about the fund Spartan Emerging Markets Index Fund - Institutional Class Fund Code: 02343 Objective: The fund seeks to provide investment results that correspond to the total return of emerging stock Strategy: Normally investing at least 80% of assets in securities included in the FTSE Emerging Index and in depository receipts representing securities included in the index. Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings ratio, price/book ratio, earnings growth, country weightings, and the effect of foreign taxes to attempt to replicate the returns of the FTSE Emerging Index. Lending securities to earn income for the fund. Risk: Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging Short Term Trading Fee: This fund has a Short-term Redemption Fee of 1.50% for shares held less than 90 days. Someone who is willing to accept the higher degree of risk associated with investing in emerging Someone who is seeking to complement a portfolio of domestic investments and/or international investments in developed countries with investments in developing countries, which can behave differently. Page 4 of 5
Footnotes: A mutual fund registered under Fidelity Salem Street Trust, and managed by Fidelity Management Research Company ("FMR") This description is only intended to provide a brief overview of the fund Read the fund's prospectus for more detailed information about the fund The FTSE Emerging Index is a market capitalization-weighted index designed to measure the performance of large and medium-capitalization companies domiciled in emerging markets countries across the world Spartan Global ex U.S. Index Fund - Institutional Class Fund Code: 02347 Objective: The fund seeks to provide investment results that correspond to the total return of foreign developed and emerging stock Strategy: Normally investing at least 80% of assets in securities included in the MSCI ACWI (All Country World Index) ex USA Index and in depository receipts representing securities included in the index. Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings ratio, price/book ratio, earnings growth, country weightings, and the effect of foreign taxes to attempt to replicate the returns of the MSCI ACWI ex USA Index. Lending securities to earn income for the fund. Risk: Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging Short Term Trading Fee: This fund has a Short-term Redemption Fee of 1.00% for shares held less than 90 days. Someone who is seeking to complement a portfolio of domestic investments with international investments, which can behave differently. Someone who is willing to accept the higher degree of risk associated with investing overseas. Footnotes: A mutual fund registered under Fidelity Salem Street Trust, and managed by Fidelity Management Research Company ("FMR"). This description is only intended to provide a brief overview of the fund. Read the fund's prospectus for more detailed information about the fund. The Morgan Stanley Capital International All Country World Ex-US Index (MSCI AC World Ex-US Index) is a recognized benchmark of non-u.s. stock It is an unmanaged index composed of a sample of companies representative of the market structure of 49 countries and includes reinvestment of all dividends. The MSCI AC World Ex-US Index, when including or excluding securities, takes into account any limitations that an international investor would experience when investing directly in such securities. The MSCI AC World Ex-US Index has been added as a comparison to a wider cross section of the marketplace in which the Fund invests, than the MSCI EAFE Index. The Net version of the MSCI AC World Ex-US adjusts for withholding taxes applicable to Massachusetts Business Trusts. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges and expenses. For this and other information, call or write to Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. The Plan is intended to be a participant-directed plan as described in Section 404(c) of ERISA, which means that fiduciaries of the Plan are ordinarily relieved of liability for any losses that are the direct and necessary result of investment instructions given by a participant or beneficiary. Unless otherwise noted, transaction requests confirmed after the close of the market, normally 4 p m Eastern time, or on weekends or holidays, will receive the next available closing prices. The investment options available through the Plan reserve the right to modify or withdraw the exchange privilege. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917 615958.1.1 Page 5 of 5