| 5) | Total fee paid: |
[ ] Fee paid previously with preliminary materials.
| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) | Amount Previously |
| 2) | Form, Schedule or Registration Statement No.: |
| 3) | Filing Party: |
PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
Des Moines, Iowa 50392-208050392
Dear Contract Owner:
The enclosed proxy materials relate to only PVC and are being sent to only the PVC shareholders that owned shares of any series of PVC (each an "Account" and, collectively, the "Accounts") as of February 21, 2019, the record date for the Meeting and any adjournments or postponements thereof (the “Meeting”"Record Date"). The purposeAccounts' shareholders of the Meeting is to elect the Board of Directors, including three nominees for new Directors,record are insurance company separate accounts that offer variable life and to consider several other proposals.
PFI and PETF shareholders that owned shares of any series of PFI or PETF as of the Record Date will separately receive proxy materials for only PFI and/or PETF. References in these proxy materials to an "Account" or the "Accounts" and the "Board of Directors" are to PVC Account(s) and the PVC Board of Directors, unless otherwise indicated.
The purpose of the Meeting (the “Record Date”for PVC shareholders is to elect the Board of Directors, including one nominee for new Director, and to consider other proposals.
Proposal Affecting All Accounts. Shareholders of all Accounts are being asked to:
Elect twelve Directors as members of the Board of Directors.
Proposals Affecting Only Certain Accounts. Shareholders of the Accounts indicated in parenthesis below are being asked to:
Approve the ability of Principal Global Investors, LLC to enter into and/or materially amend agreements with wholly-owned affiliated sub-advisors, as defined in the proposal, on behalf of the Account without obtaining shareholder approval (the Accounts listed below only (each a "Group A Account" and, collectively, the "Group A Accounts")).
Group A Accounts:
| Bond Market Index Account | International Emerging Markets Account | Principal LifeTime 2050 Account |
| Core Plus Bond Account | LargeCap Growth Account | Principal LifeTime 2060 Account |
| Diversified Balanced Account | LargeCap Growth Account I | Principal LifeTime Strategic Income Account |
| Diversified Balanced Managed Volatility Account | LargeCap S&P 500 Index Account | Real Estate Securities Account |
| Diversified Growth Account | LargeCap S&P 500 Managed Volatility Index Account | Short-Term Income Account |
| Diversified Growth Managed Volatility Account | MidCap Account | SmallCap Account |
| Diversified Income Account | Principal Capital Appreciation Account | SAM Balanced Portfolio* |
| Diversified International Account | Principal LifeTime 2010 Account | SAM Conservative Balanced Portfolio* |
| Equity Income Account | Principal LifeTime 2020 Account | SAM Conservative Growth Portfolio* |
| Government & High Quality Bond Account | Principal LifeTime 2030 Account | SAM Flexible Income Portfolio* |
| Income Account | Principal LifeTime 2040 Account | SAM Strategic Growth Portfolio* |
* Strategic Asset Management (SAM) Portfolio.
Approve the ability of Principal Global Investors, LLC to enter into and/or materially amend agreements with majority-owned affiliated sub-advisors, as defined in the proposal, on behalf of the Account without obtaining shareholder approval (the Group A Accounts only).
Approve amendment of certain fundamental investment restrictions:
| ◦ | Approve an amended fundamental investment restriction relating to commodities for the Account (each Account). |
| ◦ | Approve an amended fundamental investment restriction relating to concentration for the Account (the Group B Accounts listed below only (each a "Group B Account" and, collectively, the "Group B Accounts")). |
Group B Accounts:
| Core Plus Bond Account | Income Account | MidCap Account |
| Diversified International Account | International Emerging Markets Account | Principal Capital Appreciation Account |
| Equity Income Account | LargeCap Growth Account | Short-Term Income Account |
| Government & High Quality Bond Account | LargeCap Growth Account I | SmallCap Account |
| ◦ | Approve an amended fundamental investment restriction relating to concentration for the Account (the Group C Accounts listed below only (each a "Group C Account" and, collectively, the "Group C Accounts")). |
Group C Accounts:
| Diversified Balanced Account | Multi-Asset Income Account | Principal LifeTime Strategic Income Account |
| Diversified Balanced Managed Volatility Account | Principal LifeTime 2010 Account | SAM Balanced Portfolio* |
| Diversified Balanced Volatility Control Account | Principal LifeTime 2020 Account | SAM Conservative Balanced Portfolio* |
| Diversified Growth Account | Principal LifeTime 2030 Account | SAM Conservative Growth Portfolio * |
| Diversified Growth Managed Volatility Account | Principal LifeTime 2040 Account | SAM Flexible Income Portfolio* |
| Diversified Growth Volatility Control Account | Principal LifeTime 2050 Account | SAM Strategic Growth Portfolio* |
| Diversified Income Account | Principal LifeTime 2060 Account | |
* Strategic Asset Management (SAM) Portfolio.
Transact such other business as may properly come before the Meeting or any adjournments or postponements thereof.
Enclosed you will find PVC’s Notice of SpecialJoint Annual Meeting of Shareholders, a Proxy Statement, explaining the matters to be voted on at the Meeting and a voting instruction card for shares of each FundAccount to which you ownedhad allocated contract value as of the Record Date. The Proxy Statement provides background information and describes in detail the matters to be voted on at the Meeting.
The Board of Directors has unanimously voted in favor of all of the proposals and recommends that you give voting instructions “For” all of the proposals.
In order for your shares to be voted at the Meeting, we urge you to read the Proxy Statement and then complete and mail your voting instruction card(s) in the enclosed postage-paid envelope, allowing sufficient time for receipt by us by April 3, 2012.24, 2019. As a convenience, we offer three options by which toyou may give voting instructions:
By Internet: Follow the instructions located on your voting instruction card.
By Phone: The phone number is located on your voting instruction card. Be sure you have your control number, as printed on your voting instruction card, available at the timewhen you call.
By Mail: Sign your voting instruction card and enclose it in the postage-paid envelope provided in this proxy package.
We appreciate youryou taking the time to respond to this important matter. Your vote is important. If you have questions regarding the Meeting, please call our shareholder services departmentShareholder Services Department toll-free at 1-855-600-4535.1-800-222-5852.
| Sincerely, | |
 | |
| President and Chief Executive Officer | |
PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
Des Moines, Iowa 50392-208050392
NOTICE OF SPECIALJOINT ANNUAL MEETING OF SHAREHOLDERS
| Bond Market Index Account | MidCap Account | |
| Core Plus Bond Account | Multi-Asset Income Account | |
| Diversified Balanced Account | Principal Capital Appreciation Account | |
| Diversified Balanced Managed Volatility Account | Principal LifeTime 2010 Account | |
| Principal LifeTime 2020 Account | ||
| Diversified | Principal LifeTime 2030 Account | |
| Diversified Growth Managed Volatility Account | Principal LifeTime 2040 Account | |
| Diversified | Principal LifeTime 2050 Account | |
| Principal LifeTime 2060 Account | ||
| Diversified International Account | Principal LifeTime Strategic Income Account | |
| Equity Income Account | Real Estate Securities Account | |
| Government & High Quality Bond Account | ||
| Income Account | SAM Conservative Balanced | |
| International Emerging Markets Account | ||
| SAM Conservative Growth | ||
| LargeCap Growth Account | SAM Flexible Income Portfolio* | |
| LargeCap Growth Account I | SAM Strategic Growth | |
| LargeCap S&P 500 Index Account | Short-Term Income Account | |
| LargeCap | SmallCap | |
* Strategic Asset Management (SAM) PortfoliosPortfolio.
To the Shareholders:Shareholders and Contract Owners:
A joint annual meeting of shareholders of each of the series or funds (each a “Fund” and, collectively, the “Funds”) of Principal Variable Contracts Funds, Inc. (“PVC”("PVC"), Principal Funds, Inc., and Principal Exchange-Traded Funds will be held at 650 8th 655 9th Street, Des Moines, Iowa 50392-208050392 on April 4, 2012,25, 2019 at 10:00 a.m. Central Time(the (the “Meeting”). TheFor PVC, the Meeting is being held to consider and vote on the following matters as well as any other issuesbusiness that may properly come before the Meeting andor any adjournments:adjournments or postponements thereof:
| 1. | Election of the Board of Directors (Shareholders of all Accounts). |
| 2. | Approval of |
| 3. | Approval of |
| Approval of |
a. Approval of an amended fundamental investment restriction relating to commodities for the Account (each Account).
b. Approval of an amended fundamental investment restriction relating to concentration for the Account (All Funds Except Real Estate SecuritiesGroup B Accounts, as set forth in the proposal, only).
c. Approval of an amended fundamental investment restriction relating to concentration for the Account (Group C Accounts, as set forth in the proposal, only).
Each shareholder of record at the close of business on January 6, 2012,February 21, 2019, the record date for the Meeting, is entitled to notice of and to vote at the Meeting.Meeting and any adjournments or postponements thereof. The Accounts' shareholders of record are insurance company separate accounts that offer variable life and variable annuity contracts. If you are a Contract Owner, you are receiving these materials because you own a variable annuity contract or variable life insurance policy issued by an insurance company that is a shareholder of record, and you have allocated contract value of such contract or policy to one or more Accounts. As a result, you have the right to instruct your insurance company how to vote the shares of the Accounts that represent your contract value.
Your vote is important. No matter how many shares you own, please vote. If you own shares inhave allocated your contract value to more than one Fund,Account, you will have a separate voting instruction card for each such Account, and you need to return all of the proxy ballots.voting instruction cards (or follow the instructions to vote by telephone and on the Internet). To save your Fund(s)Account(s) from incurring the cost of additional solicitations, please review the materials and vote today.
| For the Board of Directors | |
 | |
| Beth C. Wilson | |
| Vice President and Secretary | |
| Dated: | |
Important Notice Regarding Availability of Proxy Statement for the Shareholders’ Meeting to be Held on April 4, 2012.25, 2019. This Proxy Statement is available on the Internet at www.eproxy.com/principalva.www.proxyvote.com.
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PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
PROXY STATEMENT
PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.,
PRINCIPAL FUNDS, INC., AND
PRINCIPAL EXCHANGE-TRADED FUNDS
TO BE HELD APRIL 4, 201225, 2019
MARCH 4, 2019
TABLE OF CONTENTS
| Page | |||
Introduction | |||
Voting Information | |||
| Proposal 1 | Election of the Board of Directors | ||
| Proposal 2 | Approval of | ||
| Proposal 3 | Approval of | ||
| Approval of | |||
| 4(a) | Approval of an amended fundamental investment restriction relating to commodities for the Account (each Account) | ||
Approval of | |||
| 4(c) | Approval of an amended fundamental investment restriction relating to concentration for the Account (Group C Accounts only) | ||
| Independent Registered Public Accounting Firm | |||
Other Matters | |||
| Appendix A | Outstanding Shares and Share Ownership | ||
| Appendix B | Audit Committee Charter | ||
| Appendix C | Nominating and Governance Committee Charter | ||
PRINCIPAL VARIABLE CONTRACTS FUNDS, INC.
Des Moines, Iowa 50392-208050392
PROXY STATEMENT
TO BE HELD APRIL 4, 201225, 2019
_________________
INTRODUCTION
Each series of Principal Variable Contracts Funds, Inc. (“PVC” or “we”), Principal Funds, Inc. ("PFI"), and Principal Exchange-Traded Funds ("PETF") will hold a special shareholders’joint annual meeting of shareholders on April 4, 201225, 2019 at 10:00 a.m. Central Time, at 650 8th655 9th Street, Des Moines, Iowa 50392-2080 (the50392 (including any adjournments or postponements, the “Meeting”). This Proxy Statement and the accompanying form of proxy ballotvoting instruction card(s) relate to PVC only and are first being sent to PVC shareholders on or about January 25, 2012.March 11, 2019. Separate proxy materials for each of PFI and PETF are being sent to PFI and PETF shareholders.
PVC is a Maryland corporation and an open-end management investment company registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). PVC currently offers 34 Funds as set forth36 Accounts listed below:
| Bond Market Index Account | MidCap Account | |
| Core Plus Bond Account | Multi-Asset Income Account | |
| Diversified Balanced Account | Principal Capital Appreciation Account | |
| Diversified Balanced Managed Volatility Account | Principal LifeTime 2010 Account | |
| Principal LifeTime 2020 Account | ||
| Diversified | Principal LifeTime 2030 Account | |
| Diversified Growth Managed Volatility Account | Principal LifeTime 2040 Account | |
| Diversified | Principal LifeTime 2050 Account | |
| Principal LifeTime 2060 Account | ||
| Diversified International Account | Principal LifeTime Strategic Income Account | |
| Equity Income Account | Real Estate Securities Account | |
| Government & High Quality Bond Account | ||
| Income Account | SAM Conservative Balanced | |
| International Emerging Markets Account | ||
| SAM Conservative Growth | ||
| LargeCap Growth Account | SAM Flexible Income Portfolio* | |
| LargeCap Growth Account I | SAM Strategic Growth | |
| LargeCap S&P 500 Index Account | Short-Term Income Account | |
| LargeCap | SmallCap | |
* Strategic Asset Management (SAM) PortfoliosPortfolio.
The sponsor of PVC is Principal Life Insurance Company, an insurance company organized in 1879 under the laws of the State of Iowa (“Principal Life”), and the investment advisor and fund administrator to the FundsAccounts is Principal Management CorporationGlobal Investors, LLC (“PMC” or the “Manager”PGI”). Principal Funds Distributor, Inc. (the “Distributor” or “PFD”) is the distributor for all share classes of the Funds.Accounts. Principal Life, an insurance company organized in 1879 underPGI, and the laws of Iowa, PMC and PFDDistributor are indirect, wholly-owned subsidiaries of Principal Financial Group, Inc. (“PFG”). Their address is in care of the Principal Financial Group, 711 High Street, Des Moines, Iowa 50392-2080.50392.
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PVC will furnish, without charge, a copycopies of its Annual Report to Shareholders for the fiscal year ended December 31, 2010most recent annual and Semi-Annual Report for the six-month period ended June 30, 2011semi-annual shareholder reports to any shareholder upon request. To obtain a report, please contact PVC by calling our shareholder services departmentthe Shareholder Services Department toll free at 1-855-600-45351-800-222-5852 or by writing to PVC at the address above. PVC’s Annual Report for the fiscal year ended December 31, 2011 is expected toP.O. Box 219971, Kansas City, MO 64121-9971. Copies of each Account's most recent annual and semi-annual shareholder reports can also be sent to shareholders on or about February 23, 2012.obtained at www.principalfunds.com/prospectuses-pvc.
Summary of ProposalsProposals.. The Meeting is being held to consider a number of matters.several proposals. The proposals to be voted upon, and the FundsAccounts to which each proposal applies, are set forth below.
| Proposal | Applicable | |||
| Proposal 1 | Election of the Board of Directors | Shareholders of all Accounts | ||
| Proposal 2 | Approval of the ability of Principal Global Investors, LLC to enter into and/or materially amend agreements with wholly-owned affiliated sub-advisors on behalf of the Account without obtaining shareholder approval | Group A Accounts, as set forth in Proposal 2 | ||
| Proposal 3 | Approval of the ability of Principal Global Investors, LLC to enter into and/or materially amend agreements with majority-owned affiliated sub-advisors on behalf of the Account without obtaining shareholder approval | Group A Accounts, as set forth in Proposal 3 | ||
| Proposal 4 | Approval of amendment of certain fundamental investment restrictions | |||
| 4(a) | ||||
Approval of | ||||
| an amended fundamental investment restriction relating to commodities for the Account | Each Account | |||
| 4(b) | ||||
Approval of | ||||
| concentration for the Account | Group B Accounts, as set forth in Proposal 4(b) | |||
| 4(c) | ||||
Approval of | ||||
| concentration for the Account | ||||
VOTING INFORMATION
Voting proceduresprocedures.. We are furnishing this Proxy Statement to you in connection with the solicitation of proxies on behalf of the Board of proxies to be used at the Meeting. The Board is asking permissionPlease vote your shares by mailing the enclosed card(s) in the enclosed postage-paid envelope or by following the instructions on the card(s) for voting by telephone or via the Internet. Shareholders who wish to vote for you. attend the Meeting in person may call 1-800-222-5852 if they have any questions.
If you complete and return the enclosed voting instruction card(s) (or if you give your proxy ballot,by telephone or via the Internet), the persons named on the ballotcard as proxies will vote your shares as you indicate on the ballotcard(s) (or as you instruct by telephone or via the Internet) or for approval of each matterproposal for which there is no indication. If youYou may change your mind after you send in the ballot, you may change orvote and revoke your vote by: proxy at any time before it is voted at the Meeting in any of the following ways:
(i) by sending a written notice of revocation to the Meeting Secretary of Principal Variable Contracts Fund,Funds, Inc. atin care of Principal Financial Group, 711 High Street, Des Moines, Iowa 50392-2080, prior50392;
(ii) by submitting another properly signed card at a later date to the Meeting; (ii) subsequent execution and returnMeeting Secretary of Principal Variable Contracts Funds, Inc. in care of Principal Financial Group, 711 High Street, Des Moines, Iowa 50392;
(iii) by submitting another proxy ballot prior toby telephone or via the Meeting;Internet at a later date; or (iii)
(iv) being present and voting in person at the Meeting after giving oral notice of the revocation to the ChairmanChair of the Meeting.
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Voting rightsrights. . Only shareholders of record at the close of business on January 6, 2012February 21, 2019 (the "Record Date"“Record Date”) are entitled to vote. The shareholders of all FundsAccounts and all share classes will vote together on Proposal 1 regarding the election of Directors of PVC and Proposal 2 regarding approval of Amended and Restated Articles of Incorporation of PVC.Directors. The shareholders of each FundAccount subject to the proposal will vote together and not by class of shares on each other proposal that we intend to submit to the shareholders of that Fund.for Proposals 2 - 4. You are entitled to one vote on each proposal submitted to the shareholders of a Fundan Account for each share of the Fundthat Account you hold, and fractional votes for fractional shares held. Certain of the proposals require for approval the vote of a "majority of the outstanding voting securities," which is a term defined in the 1940 Act to mean, with respect to a Fund, the affirmative vote of the lesser of (1) 67% or more of the voting securities of the Fund present at the meeting of that Fund, if the holders of more than 50% of the outstanding voting securities of the Fund are present in person or by proxy, or (2) more than 50% of the outstanding voting securities of the Fund (a "Majority of the Outstanding Voting Securities").
The affirmative vote of the holders of a plurality of the shares voted at the Meeting is required for the election of a Director under Proposal 1. This means that those nominees for Director receiving the highest number of votes cast at the Meeting will be elected. The nominees are running unopposed, so each nominee is expected to be elected as a Director because all nominees who receive votes in favor will be elected. Proposals 2 - 4 require for approval the vote of a “majority of the outstanding voting securities,” which is defined in the 1940 Act to mean, with respect to an Account, the affirmative vote of the lesser of (1) 67% or more of the voting securities of the Account present in person or by proxy at the meeting of that Account, if the holders of a majoritymore than 50% of the shares entitled to vote at the Meeting is required for the approvaloutstanding voting securities of the Amended and Restated ArticlesAccount are present in person or by proxy, or (2) more than 50% of Incorporation under Proposal 2.the outstanding voting securities of the Account (such lesser amount being a “Majority of the Outstanding Voting Securities”). Under this definition, a proposal could be approved by as little as approximately one-third of the outstanding voting securities of the Account to which that proposal applies.
The number of votes eligible to be cast at the Meeting with respect to each FundAccount as of the Record Date and other share ownership information are set forth in Appendix A to this Proxy Statement.
Quorum requirementsrequirements; abstentions and broker non-votes.. A quorum must be present at the Meeting for the transaction of business. The presence in person orbusiness by proxy of one-third of the shares of each of the Funds outstanding at the close of business on the Record Date constitutes a quorum for a meeting of that Fund.any Account. For ProposalsProposal 1, and 2, the presence in person or by proxy of one-third of the shares of PVC outstanding at the close of business on the Record Date constitutes a quorum. For Proposals 2 - 4, the presence in person or by proxy of one-third of the shares of each applicable Account outstanding at the close of business on the Record Date constitutes a quorum for a meeting of that Account.
Abstentions, if any, will be considered present for purposes of determining the existence of a quorum but will be disregarded in determining the votes cast on a proposal. As a result, with respect to (i) Proposal 1 requiring the affirmative vote of a plurality of shares cast at the Meeting, abstentions will have no effect on the outcome of such proposal, and (ii) Proposals 2 - 4 requiring the affirmative vote of a Majority of the Outstanding Voting Securities, as defined above, abstentions will have the effect of a vote against such proposals.
Broker non-votes, if any, will also be considered present for purposes of determining the existence of a quorum but will be disregarded in determining the votes cast on a proposal. A "broker non-vote" occurs when a broker non-votes (proxiesor nominee indicates it has not received voting instructions from brokersa shareholder and is barred from voting the shares without such shareholder instructions because the proposal is considered non-routine under the rules of the New York Stock Exchange. Proposals 2 - 4 may be considered non-routine, so your broker or nominees indicating that they havenominee likely will not be permitted to vote your shares if it has not received instructions from you, resulting in broker non-votes. A broker non-vote on Proposals 2 - 4 will have the beneficial ownerssame effect as a vote against such proposal. Proposal 1 is considered routine under the rules of the New York Stock Exchange, so if you do not give your broker or nominee voting instructions on an item for which thethis proposal, your broker or nominee may vote your shares in its discretion, resulting in no broker non-votes. However, if your broker or nominee does not exercise such discretion and a broker non-vote results, such broker non-vote will have discretionary power) are counted toward a quorum but do not represent votes cast for any issue. Underno effect on the 1940 Act, the affirmative vote necessary to approve certainoutcome of the proposals may be determined with reference to a percentage of votes present at the meeting, which would have the effect of counting abstentions as if they were votes against a proposal.Proposal 1.
Contract Owner voting instructionsinstructions.. Shares of the FundsAccounts are sold to Separate Accounts of the Insurance Companies and are used to fund benefits under Contracts. Each Contract Owner whose Contract is funded by a Separate Account registered underhas the 1940 Act is entitledright to instruct the Contract Owner’syour Insurance Company as to how to vote the shares attributable to his or her Contract andof the Accounts that represent your contract value. You can do so by marking voting instructions on the voting instruction cardcard(s) enclosed with this Proxy Statement and then signing and dating the voting instruction cardcard(s) and mailing the card in the envelope provided. If a card is not marked to indicate voting instructions, but is signed, dated, and returned, it will be treated as an instruction to vote the shares in favor of the proposals. Each Insurance Company will vote the shares for which it receives timely voting instructions from Contract Owners in accordance with those instructions andinstructions. Each Insurance Company will vote those shares for which it receives no timely voting instructions for and against approval of a proposal, or will abstain, in the same proportion as
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the shares for which it receivesdoes not receive timely voting instructions. Shares attributable to amounts invested by an Insurance Company will be votedinstructions from Contract Owners in the same proportion as votes cast by its Contract Owners. Accordingly, there are not expected to be any broker non-votes. The effectBecause of the proportional voting as described above, it is unlikely that quorum requirements for the Meeting will not be satisfied, and, as a result, a small number of Contract Owners can determine the outcome of the voting.
Solicitation proceduresprocedures. . We intend to solicit proxies by mail. Officers or employees of PVC, PMCPGI, or their affiliates may make additional solicitations by telephone, internet, facsimileInternet, or personal contact. They will not be specially compensated for these services. Brokerage houses, banks, and other fiduciaries may be requested to forward soliciting materials to their principalscustomers and to obtain authorization for the execution of proxies. For those services, PVC will reimburse them for their out-of-pocket expenses. PVC has retained the services of a professional
proxy soliciting firm, BostonBroadridge Financial Data Services,Solutions, Inc., to assist in soliciting proxies and provide other services in connection therewith and estimates that the cost of such services will be approximately $255,387.$180,000.
Expenses of the MeetingMeeting. . The FundsAccounts will pay the expenses of the Meeting, including those associated with the preparation and distribution of proxy materials and the solicitation of proxies.
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PROPOSAL 1
ELECTION OF THE BOARD OF DIRECTORS
(All Shareholders)Shareholders of all Funds)
At its December 11-12, 2011its January 31, 2019 meeting, the Board set the number of Directors at fourteen and named the fourteentwelve persons listed below as nominees for election as Directors. Unless you do not authorize it, your proxy will be voted in favor of the fourteen nominees. Eleven of the nominees currently serve as Directors. TwoThe other nominees, Mr. Leroy T. Barnes, Jr. and Mr. Tao Huang, were elected by the Board and will begin serving as Directors effective at the Board meeting scheduled for March 2012. The final nominee, Mr. Michael J. Beer,Timothy M. Dunbar, will become a Director effective at the Board meeting scheduled for June 2012, following his electionimmediately if he is elected as a Director at the Meeting. If elected, Mr. Dunbar will fill the vacancy on the Board created by the departure of Nora Everett, who on November 28, 2018 announced her intention to retire as Chair and member of the Board, effective March 12, 2019.
Each nominee has agreed to be named in this Proxy Statement and to serve if elected. The Board has no reason to believe that any of the nominees will become unavailable for election as a Director. However, if that should occur before the Meeting, your proxy will be voted for the individualsindividual(s) recommended by the Board to fill the vacancies.each resulting vacancy.
The following table presents certain information regarding the currentPVC's Directors of PVC and the three new nominees,nominee, including their principal occupations which, unless specific dates are shown, areand other directorships. Ms. Everett is not standing for re-election at the Meeting because she is retiring from the Board prior to the date of more than five years duration. In addition, the table includes information concerning other directorships each Director or nominee holds in reporting companies under the Securities Exchange Act of 1934 or registered investment companies under the 1940 Act, as well as other companies.Meeting. Information is listed separately for those Directors and nominees who are “interested persons” (as defined in the 1940 Act) of PVC (the “Interested Directors”) and those Directors and nominees who are not interested persons of PVC (the “Independent Directors”). Three of the nominees for Independent Director, Mr. Barnes, Mr. DamosMs. McMillan, Ms. Nickels, and Mr. Huang,Ms. VanDeWeghe, have not previously been elected Directors by the shareholders of PVC.PVC's shareholders. The Board’s Nominating and Governance Committee, comprised entirelycomposed of PVC’stwo of PVC's Independent Directors, selected and nominated Mr. Barnes, Mr. DamosMs. McMillan, Ms. Nickels, and Mr. HuangMs. VanDeWeghe as candidates for Director upon the recommendations of one or more of the Independent Directors. Two of the nominees for Interested Director, Mr. Dunbar and Mr. Halter, have not previously been elected Directors by PVC's shareholders, and both were selected and nominated as candidates for Director upon the recommendations of affiliated persons of PGI, PVC's investment advisor.
All individuals who are current PVC Directors also serve as directors of PFI, another mutual fund sponsored by Principal Life, and allas trustees of PETF, an exchange-traded fund sponsored by Principal Life. All individuals who are nominees as PVC Directors are also currently standing as nominees for election as directors or trustees, as applicable, of PFI and PETF and, if elected as Directorsby those respective shareholders, will serve as directors foror trustees, as applicable, of PFI and PETF. If the same individuals are not elected by the shareholders of each of PVC, PFI, and PETF, the two investment companies (with a totalcompositions of 97 portfolios or funds that offer shares for sale as of the date of this Proxy Statement) sponsored by Principal Life:their boards will differ. PVC, PFI, and Principal Funds, Inc. (“PFI”)PETF (collectively, the “Fund Complex”). currently offer shares of a combined total of 131 funds.
Each Director will serve until the next annual meeting of shareholders or until a successor is elected and qualified, except that, consistent with PVC’s retirement policy, Ms. Lukavsky and Mr. Gilbert will serve until the conclusion of the meeting of the Board to be held in December 2012.qualified.
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| Independent Directors and Nominees | ||||||
Name, Address, and Year of Birth | Position(s) Held | Principal Occupation(s) During | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships During Past 5 Years | ||
Elizabeth Ballantine 711 High Street Des Moines, 1948 | Director (since 2004) Member Nominating and Governance Committee | Principal, EBA Associates (consulting and investments) | 131 | Durango Herald, Inc.; McClatchy Newspapers, Inc. | ||
Leroy T. Barnes, Jr. 711 High Street Des Moines, 1951 | Director | (since 2012) Member Audit Committee | Retired | 131 | McClatchy Newspapers, Inc.; | |
Craig Damos 711 High Street Des Moines, 1954 | Director (since 2008) Member | |||||
Member Audit Committee | President, C.P. Damos Consulting LLC (consulting services) | |||||
Mark A. Grimmett 711 High Street Des Moines, 1960 | Lead Independent Director (since 2011) Director (since 2004) Member 15(c) Committee Member Executive Committee Member Nominating and Governance Committee | Formerly, Executive Vice President and CFO, Merle Norman Cosmetics, Inc. (cosmetics manufacturing) | 131 | None | ||
Fritz S. Hirsch 711 High Street Des Moines, 1951 | Director (since 2005) Member Member Operations Committee | Formerly, CEO, MAM USA (manufacturer of infant and juvenile products) | 131 | |||
Tao Huang 711 High Street Des Moines, 1962 | Director (since 2012) Member 15(c) Committee Member Operations Committee | 131 | Armstrong World Industries, Inc. (manufacturing) | |||
711 High Street Des Moines, | Director (since | |||||
Member Operations Committee | Managing Director, Patomak Global Partners, LLC (financial services consulting). Formerly, General Counsel, Investment Company Institute | 131 | None | |||
711 High Street Des Moines, | Director (since Member Audit Committee | Formerly Executive Director, Herman Miller Foundation; Formerly President Herman Miller Healthcare |
Mary M. (“Meg”) VanDeWeghe 711 High Street Des Moines, IA 50392 1959 | Director (since 2018) Member Operations Committee | CEO and President, Forte Consulting, Inc. (financial and management consulting) | 131 | Formerly: Brown Advisory, B/E Aerospace, WP Carey, Nalco (and its successor Ecolab) | ||
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The following directors are considered to be Interested Directors because they are affiliated persons of PGI, the Distributor and/or PVC's principal underwriter, or Principal Securities, Inc. ("PSI”), PVC's former principal underwriter.
| Interested Directors | |||||||
Name, Address, and Year of Birth | Position(s) Held with PVC and Length of Time Served | Positions with PGI and its Affiliates; Principal Occupation(s) During Past 5 Years** (unless noted otherwise) | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director During Past 5 Years | |||
Michael J. Beer 711 High Street Des Moines, 1961 | Director (since 2012) Member Executive Committee | Executive Director - Funds and Director, PGI (since 2017) Chief Executive Officer and Director, PFD (since 2015) Executive | VP/Mutual Funds & Broker Dealer, PLIC (2001-2014) President, Chief Executive Officer, and Chair, PMC (2015-2017) EVP/Chief Operating Officer, PMC (2008-2015) Director, PMC (2006-2015) President and Director, PSI (2005-2015) Chairman and Executive Vice President, President and Director, | 131 | None | ||
711 High Street Des Moines, | Nominee for Director | Director, PGI (since | President - Principal Global Asset Management, PGI, PLIC, PFSI, and PFG (since Chair/Executive Vice President, Director, Post (since 2018) Executive Vice President/Chief Investment Officer, PLIC, PFSI, and PFG (2014-2018) | N/A | None | ||
Patrick G. Halter 711 High Street Des Moines, 1959 | Director (since 2017) | Chief Executive Officer and President, PGI (since 2018) Chief Operating Officer, PGI (2017-2018) Director, PGI (2003-2018) Director, Finisterre (since | Chair, Post (since Chief Executive Officer, Chair, Principal-REI (since 2004) Chair, Spectrum (since 2017) | 131 | None | ||
| ** | Abbreviations used: |
Columbus Circle Investors, LLC (CCI)
Finisterre Capital LLP (Finisterre)
Origin Asset Management LLP (Origin)
Post Advisory Group, LLC (Post)
Principal Funds Distributor, Inc. (PFD)
Principal Financial Group, Inc. (PFG)
Principal Financial Services, Inc. (PFSI)
Principal Life Insurance Company (PLIC)
Principal Management Corporation (PMC), now PGI
Principal Real Estate Investors, LLC (Principal-REI)
Principal Securities, Inc. (PSI)
Principal Shareholder Services, Inc. (PSS)
Spectrum Asset Management, Inc. (Spectrum)
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During the last fiscal year ended December 31, 2011,2018, the Board of Directors held eightnine meetings. For that fiscal year, each currentthen-serving Director attended at least 75% of the aggregate number of meetings of the Board and of anyeach Board Committeescommittee on which the Director served, held during the time the Director was a member of the Board.
None of the Accounts currently have a formal policy regarding Board members’ attendance at shareholders’ meetings. None of the Accounts held, or were required to hold, a shareholders’ meeting at which Board members were elected during its last fiscal year.
Correspondence intended for the Board or for an individual Director may be sent to the attention of the Board or the individual Director at 650 8th711 High Street, Des Moines, Iowa 50392-2080.50392. All communications addressed to the Board or to an individual Director received by PVC are forwarded to the full Board or to the individual Director.
Officers of PVC
The following table presents certain information regarding the current officers of PVC, including their principal occupations which, unless specific dates are shown, are of more than five years duration.occupations. Officers serve at the pleasure of the Board of Directors. Each of the officers of PVC officer holds the same position with PFI.PFI and PETF.
Name, Address, and Year of Birth | Length of Time Served | Positions with PGI and its Affiliates; Principal Occupations During (unless noted otherwise) | ||
Michael J. Beer 711 High Street Des Moines, 1961 | President and Chief Executive Officer (since 2015) Director (since 2012) Member Executive Committee | Executive | Executive Director/Principal Funds & Trust, PLIC (since 2015) VP/Chief Operating Officer Principal Funds, PLIC (2014-2015) VP/Mutual Funds & Broker Dealer, PLIC (2001-2014) President, Chief Executive Officer, and Chair, PMC (2015-2017) EVP/Chief Operating Officer, PMC (2008-2015) Director, PMC (2006-2015) President and Director, PSI (2005-2015) Chairman and Executive Vice President, President and Director, | |
Randy L. Bergstrom 711 High Street Des Moines, 1955 | Assistant Tax Counsel (since 2005) | Counsel, PGI | ||
Jennifer A. 711 High Street Des Moines, IA 50392 1973 | Deputy Chief Compliance Officer (since 2018) Vice President and Counsel (2017-2018) Assistant Counsel (2010-2017) | Counsel, PGI (2017-2018) Counsel, PLIC (2009-2018) Counsel, PMC | ||
Tracy W. Bollin 711 High Street Des Moines, IA 50392 1970 | Chief Financial Officer (since 2014) | Managing Director, PGI (since 2016) Chief Financial Officer, PFA (2010-2015) Senior Vice President, PFD (since 2015) Chief Financial Officer, PFD (2010-2016) Chief Operating Officer and Senior Vice President, PMC (2015-2017) Director, PMC (2014-2017) Chief Financial Officer, PMC (2010-2015) Chief Financial Officer, PSI (2010-2015) President, PSS (since 2015) Director, PSS (since 2014) Chief Financial Officer, PSS (2010-2015) | ||
Nora M. Everett(1) 711 High Street Des Moines, IA 50392 1959 | Chair (since 2012) Director (since 2008) Member Executive Committee | Director, Finisterre Director, Origin Chairman, PFA (2010-2015) Chairman, PFD (2011-2015) President/RIS, PLIC (since 2015) Senior Vice President/RIS, PLIC (2008-2015) Chairman, PMC (2011-2015) President, PMC (2008-2015) Director, PSI (since 2015) Chief Executive Officer, PSI (2009-2015) Chairman, PSI (2011-2015) Chairman, PSS (2011-2015) | ||
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Name, Address, and Year of Birth | Position(s) Held with PVC and Length of Time Served | Positions with PGI and its Affiliates; Principal Occupations During Past 5 Years** (unless noted otherwise) | |||
Gina L. Graham 711 High Street Des Moines, IA 50392 1965 | Treasurer (since 2016) | Vice President/Treasurer, PGI (since 2016) Vice President/Treasurer, PFA (since 2016) Vice President/Treasurer, PFD (since 2016) Vice President/Treasurer, PLIC (since 2016) Vice President/Treasurer, PMC (2016-2017) Vice President/Treasurer, Principal - REI (since 2016) Vice President/Treasurer, PSI (since 2016) Vice President/Treasurer, PSS (since 2016) | |||
Laura B. Latham 711 High Street Des Moines, IA 50392 1986 | Assistant Counsel and Assistant Secretary (since 2018) | Counsel, PGI (since 2018) Prior thereto, Attorney in Private Practice | |||
Diane K. Nelson 711 High Street Des Moines, IA 50392 1965 | AML Officer (since 2016) | Chief Compliance Officer/AML Officer, PSS (since 2015) Compliance Advisor, PMC (2013-2015) | |||
Layne A. Rasmussen 711 High Street Des Moines, 1958 | Vice President/Controller, PMC (through 2017) Director - Accounting, PLIC (since 2015) Financial Controller, | ||||
711 High Street Des Moines, | (since 2016) | Director - Accounting, PLIC (since Assistant Financial Controller, PLIC (prior to 2015) | |||
Teri R. Root 711 High Street Des Moines, IA 50392 1979 | Chief Compliance Officer (since 2018) Interim Chief Compliance Officer (2018) Deputy Chief Compliance Officer (2015 - 2018) | Chief Compliance Officer - Funds, PGI (since 2018) Deputy Chief Compliance Officer, PGI (2017-2018) Vice President and Chief Compliance Officer, PMC (2015-2017) Vice President, PSS (since 2015) | |||
Britney L. Schnathorst 711 High Street Des Moines, IA 50392 1981 | Assistant Secretary (since 2017) Assistant Counsel (since 2014) | Counsel, PLIC (since 2013) Prior thereto, Attorney in Private Practice | |||
Adam U. Shaikh 711 High Street | Des Moines, IA 50392 1972 | Assistant Counsel (since 2006) | Assistant General Counsel, | ||
PGI (2018)
| Counsel, PLIC (since 2006) Counsel, PMC (2007-2013, 2014-2017) | ||||
Dan L. Westholm 711 High Street Des Moines, 1966 | Assistant Treasurer (since 2006) | Assistant Vice President/Treasurer, PGI (since 2017) Assistant Vice President/Treasury, PFA (since 2013) Assistant Vice President/Treasury, PFD (since 2013) Assistant Vice President/Treasury, PLIC (since 2014) Director-Treasury, PLIC (2007-2014) Assistant Vice President/Treasury, PMC Assistant Vice President/Treasury, PSI (since 2013) Assistant Vice President/Treasury, PSS (since | ||
Beth C. Wilson 711 High Street Des Moines, 1956 | Vice President and Secretary (since 2007) | Director and Secretary-Funds, PLIC | ||
Clint L. Woods 711 High Street Des Moines, IA 50392 1961 | Counsel, Vice President, Of Counsel (2017-2018) Vice President (2016-2017) Counsel (2015-2017) | Vice President (since 2015) Associate General Counsel, Governance Officer, and | ||
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Name, Address, and Year of Birth | Position(s) Held with PVC and Length of Time Served | Positions with PGI and its Affiliates; Principal Occupations During Past 5 Years** (unless noted otherwise) |
Jared A. Yepsen 711 High Street Des Moines, IA 50392 1981 | Assistant Tax Counsel (since 2017) | Counsel, PGI (since 2017) Counsel, PLIC (since 2015) Senior Attorney, TLIC (2013-2015) |
| ** | Abbreviations |
•Finisterre Capital LLP (Finisterre)
(1) Effective March 12, 2019, Ms. Everett will retire as Chair and member of the Board.
Leadership Structure of the Board of Directors
Overall responsibility for directing thePVC's business and affairs of PVC rests with the Board of Directors, who are elected by PVC'sPVC’s shareholders. In addition to serving on the PVC Board, of PVC, each Director serves on the PFI Board of PFI.and the PETF Board. The Board is responsible for overseeing thePVC's operations of PVC in accordance with the provisions of the 1940 Act, other applicable laws, and PVC’s charter. The Board elects the officers of PVC to supervise its day-to-day operations. The Board meets in regularly scheduled meetings eight times throughout the year. Board meetings may occur in-person or by telephone. In addition, the Board holds special in-person or telephonic meetings or informal conference calls to discuss specific matters that may arise or require action between regularregularly scheduled meetings. Board members who are Independent Directors meet annually to consider renewal of PVC'sPVC’s advisory contracts. The Board is currently composed of eleven members, nine of whom are Independent Directors. Each Director and Director nominee has significant prior senior management and/or board experience.
As of the Record Date, the Board is composed of twelve members, nine of whom are Independent Directors. As stated above, in Decemberon November 28, 2018, Ms. Everett announced her intention to retire as Chair and member of the Board, effective March 12, 2019. Mr. Dunbar will fill the Board set the number of Directors at fourteen and appointed two of three new nominees as Directors. The appointment of the two new nominees for Director, Mr. Barnes and Mr. Huang, will becomevacancy created by Ms. Everett's retirement, effective at the Board meeting scheduled for March 2012. Mr. Beer, the third new nominee, will become a Director effective at the Board meeting scheduled for June 2012, following his election asimmediately if he is elected a Director at the Meeting.Following Ms. Everett's retirement and if Mr. Dunbar is elected, the Board will continue to be composed of twelve members, nine of whom are Independent Directors.
The Directors were selected to serve, and continue to serve, on the Board based upon their skills, experience, judgment, analytical ability, diligence and ability to work effectively with other Board members, a commitment to the interests of shareholders, and, for each Independent Director, a demonstrated willingness to take an independent and questioning view of management. In addition to these general qualifications, the Board seeks members who will build upon the diversity of the Board. In addition to those qualifications, theThe following is a brief discussion of
the specific education, experience, qualifications, or skills that led to the conclusion that each person identified below should serve as a Director for PVC.Director. As required by rules the SEC has adopted under the 1940 Act, PVC'sPVC’s Independent Directors select and nominate all candidates for Independent Director positions.
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Independent Directors
Elizabeth BallantineBallantine.. Ms. Ballantine has served as a Director of PFI and PVC since 2004 and PFIas a Trustee of PETF since 2004.2014. Through her professional training and experience as an attorney and her experience as a director of Principal Funds,and investment consultant, and a director, Ms. Ballantine is experienced in financial, investment, and regulatory matters.
Leroy T. Barnes, Jr.. Mr. Barnes will begin servinghas served as a directorDirector of PFI and PVC in March 2012.since 2012 and as a Trustee of PETF since 2014. From 2001-2005, Mr. Barnes served as Vice President and Treasurer of PG&E Corporation. From 1997-2001, Mr. Barnes served as Vice President and Treasurer of Gap, Inc. Through his education and employment experience and experience as a director, Mr. Barnes is experienced with financial, accounting, regulatory, and investment matters.
Craig DamosDamos.. Mr. Damos has served as a Director of PFI and PVC since 2008 and PFIas a Trustee of PETF since 2008.2014. Since 2011, Mr. Damos has served as the President of TheC.P. Damos CompanyConsulting LLC (consulting services). Mr. Damos served as President and Chief Executive Officer of Weitz Company from 2006-2010 and Vertical Growth Officer from 2004-2006. From 2000-2004, he served as the Chief Financial Officer of Weitz Company. From 2005-2008, Mr. Damos served as a director of West Bank. Through his education, experience as a director of Principal Funds, and employment experience, Mr. Damos is experienced with financial, accounting, regulatory, and investment matters.
Mark A. GrimmettGrimmett.. Mr. Grimmett has served as a Director of PFI and PVC since 2004 and PFILead Independent Director since 2004.2011 and as a Trustee of PETF since 2014. He is a certified public accountant. Since 1996,Certified Public Accountant. From 1996-2015, Mr. Grimmett has served as the Chief Financial Officer for Merle Norman Cosmetics, Inc. Through his service as a director of Principal Funds, his education, and his employment experience, Mr. Grimmett is experienced with financial, accounting, regulatory, and investment matters.
Fritz HirschS. Hirsch.. Mr. Hirsch has served as a Director of PFI and PVC since 2005 and PFIas a Trustee of PETF since 2005.2014. From 1983-1985, he served as Chief Financial Officer of Sassy, Inc. From 1986-2009, Mr. Hirsch served as President and Chief Executive Officer of Sassy, Inc. From 2011-2015, Mr. Hirsch served as CEO of MAM USA. Through his experience as a director of the Principal Funds, and employment experience, and his education, Mr. Hirsch is experienced with financial, accounting, regulatory, and investment matters.
Tao HuangHuang.. Mr. Huang will begin servinghas served as a directorDirector of PFI and PVC in March 2012.since 2012 and as a Trustee of PETF since 2014. From 1996-2000, Mr. Huang served as Chief Technology Officer of Morningstar, Inc. and from 1998-2000 as President of the International Division of Morningstar. From 2000-2011, Mr. Huang served as Chief Operating Officer of Morningstar. Through his education and employment experience, Mr. Huang is experienced with technology, financial, regulatory, and investment matters.
Karen ("Karrie”) McMillan.William Kimball. Mr. Kimball Ms. McMillan has served as a Director of PVC and PFI since 2000. From 1998-2004, Mr. Kimball served as Chairman and CEO of Medicap Pharmacies, Inc. Prior to 1998, he served as President and CEO of Medicap. Since 2004, Mr. Kimball has served as director of Casey's General Stores, Inc. Through his experience as a director of the Principal Funds and his employment experience, Mr. Kimball is experienced with financial, regulatory and investment matters.Barbara Lukavsky. Ms. Lukavsky has served as a Director of PVC and PFI since 1993. Ms. Lukavsky founded Barbican Enterprises, Inc. and since 1994 has served as its President and CEO. Through her experience as a director
Elizabeth A. Nickels.Ms. Nickels has served as a Director of PFI and PVC, and as a Trustee of PETF, since September 2015. Ms. Nickels currently serves as a director of SpartanNash. From 2008 to 2017, she served as a director of the not-for-profit Spectrum Health Systems; from 2014 to 2016, she served as a director of Charlotte Russe; from 2014 to 2015, she served as a director of Follet Corporation; and from 2013 to 2015, she served as a director of PetSmart. Ms. Nickels was formerly employed by Herman Miller, Inc. in several capacities: from 2012 following election by shareholders. to 2014, as the Executive Director of the Herman Miller Foundation; from 2007 to 2012, as President of Herman Miller Healthcare; and from 2000 to 2007, as Chief Financial Officer. Through her education and employment experience, she is experienced with financial, accounting, and regulatory matters.
Mary M. (“Meg”) VanDeWeghe. Ms. VanDeWeghe has served as a Director of PFI and PVC, and as a Trustee of PETF, since 2018. She is CEO and President of Forte Consulting, Inc., a management and financial consulting firm, and was previously employed as a Finance Professor at Georgetown University from 2009-2016, Senior Vice President - Finance at Lockheed Martin Corporation from 2006-2009, a Finance Professor at the University of Maryland from 1996-2006, and in various positions at J.P. Morgan from 1983-1996. Ms. VanDeWeghe served as a director of Brown Advisory from 2003-2018, B/E Aerospace from 2014-2017, WP Carey from 2014-2017, and Nalco (and its successor Ecolab) from 2009-2014. Through her education and employment experience, and her experience as a director, she is experienced with financial, investment, and regulatory matters.
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Interested Directors
Michael J. Beer. Mr. Beer has served as a Director of PFI and PVC since 2012 and as a Trustee of PETF since 2013, and has served as Chief Executive Officer and President of PFI, PVC, and PETF since 2015. Mr. Beer previously served as Executive Vice President of PFI and PVC since 2001(2001-2015) and PETF (2014-2015). Mr. Beer also served as Executive Vice President (since 2002)(2008-2015), Chief Operating Officer (since 2006)(2008-2015), and a director of PMC. Since 2007,PMC (2006-2017), prior to PMC's merger with and into PGI. Mr. Beer has also served as the President and a director of PrincorPSI and PSS since 2007.PSS. Mr. Beer serves as Executive Director - Funds and Director of PGI. Prior to working for Principal,PMC, Mr. Beer worked for Wells Fargo and Deloitte Touche. Through his education and employment experience, Mr. Beer is experienced with financial, accounting, regulatory, and investment matters.
Timothy M. Dunbar. Mr. Dunbar is a new nominee for Director of PFI and PVC and for Trustee of PETF. Mr. Dunbar serves as President of Global Asset Management for Principal®, overseeing all of Principal’s asset management capabilities, including with respect to PGI, PLIC, and PFSI, among others. He also serves on numerous boards of directors of Principal® subsidiaries, including PGI and Post. He has served in various other positions since joining Principal® in 1986. Through his education and employment experience, Mr. Dunbar is experienced with financial, accounting, regulatory, and investment matters.
Patrick G. Halter.Ralph C. Eucher. Mr. EucherHalter has served as a Director of PFI and PVC, and PFIas a Trustee of PETF, since 1999.2017. Mr. EucherHalter also serves as Chief Executive Officer, President, and director of PGI, and Chief Executive Officer and Chair of Principal-REI. He has served as a director of Principal Management Corporation and Princor Financial Services Corporationin various other positions since 1999. He has been a Senior Vice President at Principal Financial Group, Inc. since 2002.joining Principal® in 1984. Through his professional trainingeducation and experience as an attorney and his service as a director of Principal Funds and his employment experience, Mr. EucherHalter is experienced with financial, accounting, regulatory, and investment matters.
Risk oversight forms part of the Board'sBoard’s general oversight of PVC and is addressed as part of various Board and Committeecommittee activities. As part of its regular oversight of PVC, the Board, directly or through a Committee,committee, interacts with and reviews reports from, among others, FundPVC management, sub-advisors, PVC'sPVC’s Chief Compliance Officer, thePVC's independent registered public accounting firm, for PVC, and internal auditors for PMCPGI or its affiliates, as appropriate, regarding risks faced by PVC. The Board, with the assistance of FundPVC management and PMC,PGI, reviews investment policies and risks in connection with its review of PVC'sPVC’s performance. The Board has appointed a Chief Compliance Officer who oversees the implementation and testing of PVC'sPVC’s compliance program and reports to the Board regarding compliance matters for PVC and its principal service providers. In addition, as part of the Board'sBoard’s periodic review of PVC'sPVC’s advisory, sub-advisory, and other service provider agreements, the Board may consider risk management aspects of their operations and the functions for which they are responsible. With respect to valuation, the Board oversees a PMCPGI valuation committee comprised of PVC officers and PGI officers of PMC and has approved and periodically reviews valuation policies applicable to valuing PVC'sPVC’s shares.
The Board has established the following committees and the membership of each committee to assist in its oversight functions, including its oversight of the risks PVC faces.
Board Committees
Audit Committee
The Audit Committee's primary purpose of the Committee is to assist the Board in fulfilling certain of its responsibilities. The Audit Committee serves as an independent and objective party to monitor the Fund Complex'sPVC's accounting policies, financial reporting, and internal control system, as well as the work of the independent registered public accountants. The Audit Committee assists Board oversight of 1)(1) the integrity of the Fund Complex'sPVC’s financial statements; 2) the Fund Complex's(2) PVC’s compliance with certain legal and regulatory requirements; 3)(3) the independent registered public accountants'accountants’ qualifications and independence; and 4)(4) the performance of the Fund Complex'sPVC’s independent registered public accountants. The Audit Committee also provides an open avenue of communication among thePVC's independent
registered public accountants, the Manager'sPGI's internal auditors, Fund ComplexPVC management, and the Board. The Audit Committee held sixseven meetings during the last fiscal year. The Audit Committee is composed of Mr. Hirsch,Barnes, Mr. GilbertDamos, and Mr. Pavelich.Ms. Nickels.
A copy of the Audit Committee Charter of the Board is included as Appendix B to this Proxy Statement.
Executive Committee
The Committee'sExecutive Committee’s primary purpose is to exercise certain powers of the Board when the Board is not in session. When the Board is not in session, the Executive Committee may exercise all powers of the Board in the management of the business of the Fund ComplexPVC except the power to 1) authorize dividends or distributions on stock; 2)(1) issue stock, except as permitted by law 3)law; (2) recommend to the stockholdersshareholders any action whichthat requires stockholdershareholder approval; 4)(3) amend thePVC's charter or bylaws; or 5)(4) approve any merger or share exchange whichthat does not require stockholdershareholder approval. The Executive Committee held no meetings during the last fiscal year. TheAs of the Record Date, the Executive Committee is composed of Mr.
14
Grimmett, Mr. EucherBeer, and Ms. Everett.
Following Ms. Everett's retirement on March 12, 2019, the Board will appoint a third Director to serve on this committee.
Nominating and Governance Committee
The Nominating and Governance Committee's primary purpose is to oversee the structure and efficiency of the Board and the committees established by the Board. The Nominating and Governance Committee responsibilities include evaluating Board membership and functions, committee membership and functions, insurance coverage, and legal matters.
The nominating functions of the Nominating and Governance Committee include selecting and nominating all candidates who are not "interested persons"“interested persons” of the Fund ComplexPVC for election to the Board. Generally, the Nominating and Governance Committee requests director nominee suggestions from the committee membersBoard and management. In addition, the Nominating and Governance Committee will consider Directordirector candidates recommended by shareholders of the Fund Complex. RecommendationsPVC shareholders.
Director recommendations should be submitted in writing to Principal Variable Contracts Funds, Inc. at 650 8th711 High Street, Des Moines, Iowa 50392. When evaluating a person as a potential nominee to serve as an Independent Director, the Nominating and Governance Committee will generally consider, among other factors: age; education; relevant business experience; geographical factors; whether the person is "independent"“independent” and otherwise qualified under applicable laws and regulations to serve as a director; and whether the person is willing to serve, and willing and able to commit the time necessary for attendance at meetings and the performance of the duties of an independent director. The Nominating and Governance Committee also meets personally with the nominees and conducts a reference check. The final decision regarding a nominee is based on a combination of factors, including the strengths and the experience ana specific individual may bring to the Board. The Nominating and Governance Committee believes the Board generally benefits from diversity of background, experience, and views among its members, and considers this a factor in evaluating the composition of the Board. The Board does not use regularly the services of any professional search firms to identify or evaluate or assist in identifying or evaluating potential candidates or nominees. The Nominating and Governance Committee held fivefour meetings during the last fiscal year. The Nominating and Governance Committee is composed of Ms. Ballantine Mr. Grimmett and Mr. Kimball.Grimmett.
A copy of the Nominating and Governance Committee Charter of the Board is included as Appendix C to this Proxy Statement.
Operations Committee
The Committee'sOperations Committee’s primary purpose is to oversee the provision of administrative and distribution services to the Fund Complex,PVC, communications with the Fund Complex'sPVC’s shareholders, and review and oversight of the Fund Complex'sPVC’s operations. The Operations Committee held four meetings during the last fiscal year. The Operations Committee is composed of Mr. Hirsch, Mr. Huang, Ms. Blake,McMillan, and Ms. VanDeWeghe.
15(c) Committee
The 15(c) Committee's primary purpose is to assist the Board in performing the annual review of PVC's advisory and sub-advisory agreements pursuant to Section 15(c) of the 1940 Act. The 15(c) Committee's responsibilities include requesting and reviewing materials. The 15(c) Committee held five meetings during the last fiscal year. The 15(c) Committee is composed of Mr. Damos, Mr. Grimmett, Mr. Hirsch, and Ms. Lukavsky.Mr. Huang.
Compensation
PVC does not pay any remuneration to its Directors or officers who are employed by the ManagerPGI or its affiliates oraffiliates. The Board annually considers a proposal to its officers whoreimburse PGI for a portion of the Chief Compliance Officer's compensation. If the proposal is adopted, these amounts are furnished to PVC by the Manager and its affiliates pursuant to the Management Agreement.allocated across all Accounts based on relative net assets of each portfolio. Each Director who is not an "interested person"“interested person” received compensation for service as a member of the Boards of all
The following table provides information regarding the compensation received by the Independent Directors from PVC and from the Fund Complex during the fiscal year ended December 31, 2011. On that date, there were two investment companies with an aggregate total of 97 portfolios in2018. As stated above, the Fund Complex. The FundComplex includes PVC, PFI, and PETF. PVC does not provide retirement benefits to any of the Directors.Director.
| Director | PVC | Fund Complex | ||||||
| Elizabeth Ballantine | $ | 15,955 | $ | 166,000 | ||||
| Kristianne Blake | $ | 16,506 | $ | 171,750 | ||||
| Craig Damos | $ | 15,894 | $ | 165,375 | ||||
| Richard W. Gilbert | $ | 16,420 | $ | 170,875 | ||||
| Mark A. Grimmett | $ | 17,509 | $ | 182,125 | ||||
| Fritz S. Hirsch | $ | 16,651 | $ | 173,250 | ||||
| William C. Kimball | $ | 15,523 | $ | 161,500 | ||||
| Barbara A. Lukavsky | $ | 15,887 | $ | 165,275 | ||||
| Dan Pavelich | $ | 16,123 | $ | 167,750 | ||||
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| Director | PVC FY Ended 12/31/18 | Fund Complex FY Ended 12/31/18 | ||||
| Elizabeth Ballantine | $24,401 | $273,250 | ||||
| Leroy T. Barnes, Jr. | $26,347 | $295,000 | ||||
| Craig Damos | $27,294 | $305,500 | ||||
| Mark A. Grimmett | $29,198 | $327,000 | ||||
| Fritz S. Hirsch | $27,233 | $305,000 | ||||
| Tao Huang | $25,804 | $289,000 | ||||
| Karen ("Karrie") McMillan | $25,049 | $280,500 | ||||
| Elizabeth A. Nickels | $25,049 | $280,500 | ||||
| Mary M. ("Meg") VanDeWeghe * | $23,770 | $266,000 | ||||
* Director's appointment effective April 13, 2018.
Share Ownership
The following tables set forth the dollar range of the equity securities of each of the Funds,Account, and the aggregate dollar range of the equity securities of all the funds within the Fund Complex, which the current Directors and Director nominee beneficially owned as of OctoberDecember 31, 2011.2018. As of that date, of the three new nominees for Director, only Mr. Beer beneficially owned any such securities. As of OctoberDecember 31, 2011,2018, each of the Directors listed in the table did not beneficially owned noown shares of Fundsfunds that do not appear in the table.
As stated above, the Fund Complex includes the Funds of PVC, PFI, and the separate series or funds of PFI.PETF. For the purpose of these tables, beneficial ownership means a direct or indirect pecuniary interest. Directors who beneficially owned shares of the Fundsa series of PVC did so through variable life insurance and variable annuity contracts issued by Principal Life. Only the Directors who are “interested persons” are eligible to participate in ana PFG employee benefit program whichthat invests in the funds of PFI. As stated above, please note that exact dollar amounts of securities held are not listed. Rather, ownershipOwnership is listed based on the following dollar ranges:
| A - $0 | D - $50,001 up to and including $100,000 |
| B - $1 up to and including $10,000 | E - $100,001 or more |
| C - $10,001 up to and including $50,000 | |
Independent Directors (Not Considered to Be “Interested Persons”)
| PVC | Account * | Ballantine | Barnes | Damos | Grimmett | Hirsch | Huang | Nickels | ||||||||||
| Core Plus Bond | A | A | A | C | A | A | A | A | ||||||||||
| A | ||||||||||||||||||
| Equity Income | A | A | A | C | A | A | A | A | A | |||||||||
| Government & High Quality Bond | A | A | A | C | A | A | A | A | ||||||||||
| A | ||||||||||||||||||
| Principal LifeTime 2020 | A | A | A | C | A | A | A | A | ||||||||||
| A | ||||||||||||||||||
| SAM Balanced | A | A | A | C | A | A | A | A | A | |||||||||
| Total Fund Complex | E | E | E | E | E | E | E | E | E |
* Directors own shares of Principal Variable Contracts Funds, Inc. through variable annuity contracts or variable life policies.
Directors Considered to be "Interested Persons"
| PVC Account * | Beer | Dunbar | Everett | Halter |
| Midcap | A | E | A | A |
| SAM Balanced | A | B | A | A |
| SAM Strategic Growth | E | A | A | A |
| Total Fund Complex | E | E | E | E |
* Directors own shares of PVCPrincipal Variable Contracts Funds, Inc. through variable annuity contracts or variable life insurance contracts.
Required votevote.. The shareholders of all the FundsAccounts and all share classes will vote together on the election of Directors. The affirmative vote of the holders of a plurality of the shares voted at the Meeting at which a quorum is present is required for the election of a Director of PVC. If one or more nominee(s) for Director are not elected, the Board will determine what action, if any, should be taken.
The Board of Directors unanimously recommends that shareholders vote “For” all the nominees.each nominee.
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PROPOSAL 2
WITH WHOLLY-OWNED AFFILIATED SUB-ADVISORS ON BEHALF OF INCORPORATIONTHE ACCOUNT
WITHOUT OBTAINING SHAREHOLDER APPROVAL
(All Shareholders)Group A Accounts Only)
| Bond Market Index Account | International Emerging Markets Account | Principal LifeTime 2050 Account |
| Core Plus Bond Account | LargeCap Growth Account | Principal LifeTime 2060 Account |
| Diversified Balanced Account | LargeCap Growth Account I | Principal LifeTime Strategic Income Account |
| Diversified Balanced Managed Volatility Account | LargeCap S&P 500 Index Account | Real Estate Securities Account |
| Diversified Growth Account | LargeCap S&P 500 Managed Volatility Index Account | Short-Term Income Account |
| Diversified Growth Managed Volatility Account | MidCap Account | SmallCap Account |
| Diversified Income Account | Principal Capital Appreciation Account | SAM Balanced Portfolio* |
| Diversified International Account | Principal LifeTime 2010 Account | SAM Conservative Balanced Portfolio* |
| Equity Income Account | Principal LifeTime 2020 Account | SAM Conservative Growth Portfolio* |
| Government & High Quality Bond Account | Principal LifeTime 2030 Account | SAM Flexible Income Portfolio* |
| Income Account | Principal LifeTime 2040 Account | SAM Strategic Growth Portfolio* |
Background
Section 15(a) of the 1940 Act generally requires an investment company to obtain shareholder approval before retaining a new sub-advisor or making material changes to an existing sub-advisory agreement. On January 19, 1999, the SEC granted an exemptive order to, among others, the Group A Accounts and PGI(1) that allows them to enter into and materially amend agreements with unaffiliated sub-advisors without requiring shareholder approval (the “Unaffiliated Order”). Subsequently, on September 8, 2014, the SEC granted an order that expanded and replaced the Unaffiliated Order by allowing the Group A Accounts, among others, and PGI to enter into and materially amend agreements with wholly-owned affiliated sub-advisors (i.e., affiliated sub-advisors that are at least 95% owned, directly or indirectly, by PGI and/or an affiliated person of PGI) (the "Wholly-Owned Order"). However, each Group A Account's shareholders must approve any such Account's reliance on the expanded relief related to wholly-owned affiliated sub-advisors.
The Board including all the Independent Directors, unanimously approved and declared advisable, and the Board recommendsproposes that shareholders of PVCeach Group A Account approve proposed Amendedthe proposal to permit PGI, in its capacity as the investment manager to that Group A Account and Restated Articles of Incorporation of PVC (the “Amended Articles”).
(1) The Unaffiliated Order and Wholly-Owned Order order were granted to Principal Management Corporation ("PMC"), including PMC's successors (defined to mean an entity resulting from a reorganization into another jurisdiction or a change in the type of business organization) and any entity controlling, controlled by, or under common control with PMC or its successors. On May 1, 2017, PMC merged with and into PGI, both of which were indirect, wholly-owned subsidiaries of PFG and, therefore, under common control. All references to PGI in this Proposal 2 and Proposal 3 reflect the result of PMC's merger with and into its affiliate PGI.
Operation under the Wholly-Owned Order
If shareholders approve this Proposal 2, PGI will be permitted to hire, terminate, or replace unaffiliated or wholly-owned sub-advisors (“Eligible Sub-Advisors”) and materially amend agreements with Eligible Sub-Advisors without obtaining shareholder approval. New sub-advisory agreements between PGI and an Eligible Sub-Advisor, and any material changes to such agreements, will require the approval of the Board, including the Independent Directors, as is the case today. The relief under the Wholly-Owned Order does not apply to the advisory agreement between PGI and any Group A Account, and material changes to such agreement would continue to require approval of shareholders. In accordance with the conditions of the Wholly-Owned Order, within 90 days of the hiring of an Eligible Sub-Advisor, shareholders will continue to be furnished essentially all information about the Eligible Sub-Advisor and sub-advisory agreement that would be required to be included in a proxy statement.
Board Consideration in Approving Use of Wholly-Owned Order
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The Board believes that it is in the best interests of each Group A Account and its shareholders to provide PGI and the Board with increased flexibility to select and contract with sub-advisors without incurring the significant delay and expenses of seekingexpense associated with obtaining shareholder approval.
The Amended Articles would state expresslyBoard believes that the Board has broad general authorityadditional flexibility under the Wholly-Owned Order would permit each Group A Account to establishoperate more efficiently and cost-effectively. Under the Unaffiliated Order, approval by the shareholders of sub-advisory agreements or changematerial amendments thereto with respect to sharesunaffiliated sub-advisors is not required. However, each Group A Account must currently call and hold a shareholder meeting before it appoints a new wholly-owned sub-advisor or materially amends a sub-advisory agreement with a wholly-owned sub-advisor. Each time a shareholder meeting is called, the relevant Group A Account must create and distribute proxy materials and solicit proxy votes from that Account's shareholders. This process is time consuming and costly, and such costs are sometimes borne by the Group A Account, thereby reducing shareholders' net investment returns. Additionally, approval of PVCthis Proposal 2 would permit PGI to act quickly in certain situations in which PGI and the Board (whose approval of all such matters will continue to be required) believes that a sub-advisor change or sub-advisory agreement change is warranted.
Required vote. Shareholders of each Group A Account will vote separately on this Proposal 2. As to any typeGroup A Account, approval of sales charge the Wholly-Owned Order will require the affirmative vote of a Majority of the Outstanding Voting Securities (as defined above under "Voting Information - Voting rights") of that Account. If the required shareholder approval is not obtained by any Group A Account, such Group A Account will continue to be required to obtain shareholder approval to enter into and/or load, administrative, recordkeeping, servicematerially amend agreements with wholly-owned affiliated sub-advisors.
The Board of Directors recommends that the shareholders of each Group A Account vote “For”
the Proposal applicable to such Group A Account.
PROPOSAL 3
APPROVE THE ABILITY OF PGI TO ENTER INTO AND/OR MATERIALLY AMEND AGREEMENTS
WITH MAJORITY-OWNED AFFILIATED SUB-ADVISORS ON BEHALF OF THE ACCOUNT
WITHOUT OBTAINING SHAREHOLDER APPROVAL
(Group A Accounts Only)
| Bond Market Index Account | International Emerging Markets Account | Principal LifeTime 2050 Account |
| Core Plus Bond Account | LargeCap Growth Account | Principal LifeTime 2060 Account |
| Diversified Balanced Account | LargeCap Growth Account I | Principal LifeTime Strategic Income Account |
| Diversified Balanced Managed Volatility Account | LargeCap S&P 500 Index Account | Real Estate Securities Account |
| Diversified Growth Account | LargeCap S&P 500 Managed Volatility Index Account | Short-Term Income Account |
| Diversified Growth Managed Volatility Account | MidCap Account | SmallCap Account |
| Diversified Income Account | Principal Capital Appreciation Account | SAM Balanced Portfolio* |
| Diversified International Account | Principal LifeTime 2010 Account | SAM Conservative Balanced Portfolio* |
| Equity Income Account | Principal LifeTime 2020 Account | SAM Conservative Growth Portfolio* |
| Government & High Quality Bond Account | Principal LifeTime 2030 Account | SAM Flexible Income Portfolio* |
| Income Account | Principal LifeTime 2040 Account | SAM Strategic Growth Portfolio* |
* Strategic Asset Management (SAM) Portfolio.
Background
The Group A Accounts, among others, and PGI have applied for a further order that would permit PGI to enter into and materially amend agreements with majority-owned affiliated sub-advisors (i.e., affiliated sub-advisors that are at least 50% owned, directly or redemption fee indirectly, by PGI and/or other feean affiliated person of PGI) (the "Majority-Owned Order").
The SEC has not issued the Majority-Owned Order to any Group A Account or expense, which mayPGI and there is no guarantee that such order will be granted. The Board, however, is proposing that the shareholders of each Group A Account approve a proposal to permit such Group A Account to operate pursuant to the Majority-Owned Order if and when granted. It is anticipated that such order, if granted, will impose various conditions that are the same or different for any Funds or classes of sharessimilar to those currently imposed on each Group A Account and PGI by the Wholly-Owned Order. As the Majority-Owned Order has not been issued, however, such terms and conditions may be different. This Proposal 3 requests approval of the Funds,use of the Majority-Owned Order under any terms or conditions that may be imposed by the SEC in accordance with the 1940 Act andMajority-Owned Order. Each Group A Account anticipates that the manager-of-managers structure will operate
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essentially in the same manner as set forth from time to time in PVC’s registration statement under the 1940 Act. This provision is intendedWholly-Owned Order, except that the expansion of such relief will also apply to acknowledge and make explicitmajority-owned affiliated sub-advisors.
Board Consideration in Approving Reliance under Majority-Owned Order
Similar to the authority and maximum flexibility of
consideration given by the Board to determine appropriate fees and expenses forin recommending the Funds and share classes consistent with 1940 Act. The current Articles do not expressly state this authority.
Required vote. Shareholders of each Group A Account will vote separately on this Proposal 3. As to any money market Group A Account, approval of the Majority-Owned Order will require the affirmative vote of a Majority of the Outstanding Voting Securities (as defined above under "Voting Information - Voting rights") of that Group A Account. If the required shareholder approval is not obtained by any Group A Account, and if the SEC grants the Majority-Owned Order, such Group A Account will continue to be required to obtain shareholder approval to enter into and/or stable value fund or any other fundmaterially amend agreements with majority-owned affiliated sub-advisors.
The Board of Directors recommends that seeks to maintain a stable net asset value per share, to redeem pro rata from the shareholders of each Group A Account vote “For”
the fund or a share class of the fund sufficient outstanding shares (or fractional shares) of the fund or share class, orProposal applicable to take such other actions as may be permitted by the 1940 Act, to maintain for such fund or class a stable net asset value per share. This authority will give the Board the flexibility to respond quickly to changing market or other conditions affecting stable value funds.Group A Account.
PROPOSAL 34
APPROVAL OF AMENDMENT OR ELIMINATION OF
CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
Introduction
PVC has adopted certain investment policies for each of the Funds. Investment policiesAccount, which it generally refers to as “investment restrictions,” that can only be changed by a vote of shareholdersshareholders. Such investment restrictions are considered “fundamental.” The 1940 Act requires that certain policies, including those dealing with the issuance of senior securities, purchasing or selling commodities or real estate, borrowing money and making loans, diversification, industry concentration, and underwriting securities of other issuers be fundamental. Thefundamental, and the Board may elect to designate other policies as fundamental. All of PVC’s fundamental policies are generally referred to as investment restrictions.
Shareholders of each Fundcertain Accounts are being asked to approve amendments to certain fundamental investment restrictions, and the elimination of one fundamental investment restriction, to the extent applicable to the Fund.restrictions. The amendment to or elimination of each investment restriction is set forth in a separate proposal below (Proposals 3(a) through 3(g)4(a) - 4(c)).
some of the proposed amendments are intended to update those fundamental restrictions that are more restrictive than are required under the federal securities laws or eliminate a fundamental restriction that is not required. The proposed amendments are also intended to simplify PVC’s fundamental restrictions and to incorporate maximum flexibility that will permit the investment restrictions to accommodate future regulatory changes without the need for further shareholder action.
laws.
The proposed amendments are not expected to have any material effect on the manner in which any FundAccount is managed or on itsany Account's current principal investment objective. Certain of the proposed changes could give rise to an increase in the level of investment risk associated with an investment in the Funds. Such increased investment risk, if any, is discussed below under the relevant proposal.objective(s).
The Board has concluded that the proposed amendments to the investment restrictions and elimination of one investment restriction are appropriate and will benefit the FundsAccounts and their shareholders. If approved by shareholders of a Fund,an Account, each amended investment restriction will become effective as to that FundAccount when PVC’s prospectus and/or statementPVC's Statement of additional information areAdditional Information is revised or supplemented to reflect the amendment.
Required votevote. . Shareholders of each FundAccount will vote separately on each proposed amendment that applies to that Fund.Account. As to any Fund,Account, approval of each of Proposals 3(a) – 3(g)4(a) - 4(c) will require the affirmative vote of a Majority of the Outstanding Voting Securities (as defined above under "Voting Information - Voting rights") of that Fund.Account. If a proposed amendment is not approved by shareholders of a Fund,an Account, the current investment restriction will remain in effect as to that Fund.Account.
The Board unanimously recommends that the shareholders of each FundAccount vote “For”
each Proposal applicable to the Fund.Account.
Organization of Proposals
The amendment to each fundamental investment restriction is set forth in a separate proposal below (Proposals 4(a) - 4(c)). The Accounts that will vote on each proposal are identified under the caption for that proposal, and
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each proposal sets forth the proposed amended fundamental investment restriction as well as the restriction currently in effect. For each proposal, the term “Account” or "Accounts" refers to the Account or Accounts voting on the particular proposal.
PROPOSAL 3(a)4(a)
APPROVAL OF AN AMENDED FUNDAMENTAL INVESTMENT RESTRICTION
RELATING TO SENIOR SECURITIESCOMMODITIES FOR THE ACCOUNT
(All Funds)
Each Fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
Sections 8(b)(1)(F) and 13(a)(2) of the 1940 Act together require that PVCeach Account have a fundamental restriction dealing with the purchase or sale of commodities for each of the Funds.commodities. The most common types of commodities are physical1940 Act does not prohibit a fund from investing in commodities. These include currencies and bulk goods such as oil, cotton, wheat and metals. Under the federal securities and commodities laws, certain financial instruments such as futures contracts and options thereon, including currency futures, stock index futures or interest rate futures, may, under certain circumstances, also be considered to be commodities. Mutual funds typically invest in futures contracts and related options on these and other types of commodity contracts for hedging purposes, to implement tax or cash management strategies, or to enhance returns.
Proposed restriction: The Board is proposing that the FundsAccounts indicated above adopt the following fundamental investment restriction relating to commodities:
The Account may not purchase or sell commodities, except as permitted by applicable law, regulation or regulatory authority having jurisdiction.
Current Restriction: Currently, each Account has a fundamental investment restriction relating to commodities that differs from the proposed restriction. The current restriction is set forth below.
"Each FundAccount may not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time.
Discussion of proposed amendmentamendment. . The current restriction does not permit the Funds to purchase physical commodities. Under the proposed amendment, each Fund would be permitted to purchase or sell commodities as permitted by the 1940 Act and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction. Currently, the 1940 Act does not prohibit investments in physical commodities or contracts related to physical commodities. As a result, if this Proposal is approved by shareholders of a Fund, the Fund would have the flexibility to invest in physical commodities and contracts related to physical commodities to the extent PMC and/or the Board determine, as circumstances warrant, that such investments could assist the Fund in achieving its investment objective and are consistent with the best interests of the Fund’s shareholders. If a Fund were to invest in a physical commodity or a contract related to a physical commodity, it would be subject to the additional risks of such an investment. These may include price volatility, relative illiquidity and market speculation by other investors in such commodity or related contracts.
Approval by a Fundany Account of the proposed amended restriction relating to diversificationcommodities is not expected to increase the risk of an investment in the Fund.Account or affect the way the Account is currently managed or operated.
PROPOSAL 3(f)4(b)
APPROVAL OF AN AMENDED FUNDAMENTAL INVESTMENT RESTRICTION
RELATING TO CONCENTRATION FOR THE ACCOUNT
(All Funds Except Real Estate Securities Account)Group B Accounts Only)
| Core Plus Bond Account | Income Account | MidCap Account |
| Diversified International Account | International Emerging Markets Account | Principal Capital Appreciation Account |
| Equity Income Account | LargeCap Growth Account | Short-Term Income Account |
| Government & High Quality Bond Account | LargeCap Growth Account I | SmallCap Account |
Under the 1940 Act, a fund’sfund's policy regarding concentration of investments in the securities of companies in any particular industry must be fundamental. The staff of the SEC takes the position that any fund that invests 25% or more than 25% of its total assets in a particular industry (excluding the U.S. government, its agencies or instrumentalities) is deemed to be “concentrated”"concentrated" in that industry.
Proposed restriction: The Board is proposing that the FundsAccounts indicated above adopt the following fundamental investment restriction relating to concentration:
The Account may not concentrate, as that term is used in the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time, its investments in a particular industry or group of industries.
Current Restriction: Currently, the Accounts indicated above have a fundamental investment restriction relating to concentration that differs from the proposed restriction. The current restriction is set forth below.
"Each FundAccounts may not concentrate, as that term is used in the 1940 Act, its investments in a particular industry, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time."
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Discussion of proposed amendmentamendment. .Because the 1940 Act does not otherwise permit concentration, the exception stated in the current restriction is not meaningful. The proposed amendment would permit investment in an industry upis intended to clarify the limits permitted under the 1940 Act and related regulatory interpretations. In addition, the proposed amendment is expected to reduce administrative and compliance burdensrestriction by simplifying and making uniform the fundamental investment restriction with respect to concentration.deleting such exception. Each FundAccount currently has, and will continue to have, a fundamental investment restriction that prohibits the FundAccount from concentrating its investments in any one industry. As noted, the SEC staff has taken the position that investment of 25% or more of a Fund’s total assets in one or more issuers conducting their principal business activities in the same industry (excluding the U.S. Government, its agencies or instrumentalities) constitutes concentration. The Funds’ proposed fundamental restriction is consistent with this interpretation and will accommodate future regulatory changes without the need for further shareholder action.
Approval by a Fundan Account of the proposed amended restriction relating to concentration is not expected to increase the risk of an investment in the Fund, except toAccount.
PROPOSAL 4(c)
APPROVAL OF AN AMENDED FUNDAMENTAL INVESTMENT RESTRICTION
RELATING TO CONCENTRATION FOR THE ACCOUNT
(Group C Accounts Only)
| Diversified Balanced Account | Multi-Asset Income Account | Principal LifeTime Strategic Income Account |
| Diversified Balanced Managed Volatility Account | Principal LifeTime 2010 Account | SAM Balanced Portfolio* |
| Diversified Balanced Volatility Control Account | Principal LifeTime 2020 Account | SAM Conservative Balanced Portfolio* |
| Diversified Growth Account | Principal LifeTime 2030 Account | SAM Conservative Growth Portfolio * |
| Diversified Growth Managed Volatility Account | Principal LifeTime 2040 Account | SAM Flexible Income Portfolio* |
| Diversified Growth Volatility Control Account | Principal LifeTime 2050 Account | SAM Strategic Growth Portfolio* |
| Diversified Income Account | Principal LifeTime 2060 Account | |
* Strategic Asset Management (SAM) Portfolio.
Under the extent that future interpretations1940 Act, a fund's policy regarding concentration of investments in the securities of companies in any particular industry must be fundamental. The staff of the term “concentration” could permitSEC takes the Fund to invest a greater percentageposition that any fund that invests 25% or more of its total assets in issuers in a particular industry. To the extent that a Fund takes a larger position in a particular industry (excluding the Fund willU.S. government, its agencies or instrumentalities) is deemed to be subject to greater industry and sector risks associated with"concentrated" in that industry.
extent the aggregate investments of the underlying funds in which it invests result in such concentration.
Current Restriction:Discussion of proposal. As stated Currently, the Accounts indicated above a fund is not required to statehave a fundamental investment restriction relating to short salesconcentration that differs from the proposed restriction. The current restriction is set forth below.
"Each Account may not concentrate, as that term is used in the 1940 Act, its investments in a particular industry, except as permitted under the 1940 Act, as amended, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time."
Discussion of securities. PMC believesproposed amendment. The Accounts indicated above, which are funds of funds, currently have a policy not to concentrate in a particular industry and interpret such policy to apply only to direct investments. As a result, although none of these Accounts have an investment strategy to concentrate in any particular industry, it is possible that an Account's implementation of its investment strategies through investments in underlying funds could result in 25% or more of such Account's total assets being indirectly exposed to a particular industry or group of related industries. The proposed restriction is intended to incorporate such interpretation into the current fundamental restrictionsrestriction by clarifying that each of the Funds are unduly restrictiveAccounts may concentrate its investments in that there may be circumstancesa particular industry or group of industries due to its aggregate investments in which PMC or a Fund sub-advisor believes that a short sale is in the best interestsunderlying funds.
Approval by an Account of the Fund. If the fundamental restrictionsproposed amended restriction relating to short sales are eliminated, each Fund will have the maximum flexibility to be able to engage in short sales subject to its other investment restrictions and applicable law. As stated above, permitted short sales must be covered or fully collateralized.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Ernst & Young LLP ("(“Ernst & Young"Young”) has been selected as the independent registered public accounting firm for PVC for the fiscal year ending December 31, 20122019 and served as such for the last two fiscal years. The independent registered public accounting firm examinesaudits annual financial statements for PVC and reviews regulatory filings that include those financial statements. Representatives of Ernst & Young are not expected to be
present at the Meeting, but have been given the opportunity to make a statement if they so desire, and will be available should any matter arise requiring their presence.to answer appropriate questions.
The Audit Committee of the Board (the "Audit Committee"“Audit Committee”) has adopted the following policy regarding approval and pre-approval of audit and non-audit services provided by the independent registered public accounting firm (the "independent auditor"“independent auditor”).
* * *
The Principal Funds
Policy on Auditor Independence
The purpose of this policy is to ensure the independence of the Principal Funds' primary independent auditor. This policy is established by the Audit Committee (the "Committee") of the BoardBoards of Directors of Principal Variable Funds, Inc. and Principal Variable Contracts Funds, Inc. and the Board of Trustees of Principal Exchange-Traded Funds (the "Funds"“Funds”) (the “Boards of the Funds”) effective for all engagements of the primary independent auditor.
| 1. | The primary independent auditor, its subsidiaries and affiliates shall not provide Prohibited Services to the Funds. For the purposes of this policy, Prohibited Services are: |
Services that are subject to audit procedure during a financial statement audit;
Services where the auditor would act on behalf of management;
Services where the auditor is an advocate to the client's position in an adversarial proceeding;
Bookkeeping or other services related to the accounting records or financial statements of the Funds, its subsidiaries and affiliates shall not provide Prohibited Servicesaffiliates;
Financial information systems design and implementation;
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
Actuarial services;
Internal audit functions or human resources;
Broker or dealer, investment advisor, or investment banking services;
Legal services and expert services unrelated to the Funds. Foraudit;
Tax planning services related to listed, confidential and aggressive transactions;
Personal tax planning services to individuals in a financial reporting oversight role with regard to the purposesFunds (other than members of this policy, Prohibited Services are:
Any other service that the Public Company Accounting Oversight Board (PCAOB) determines, by regulation, is impermissible.
Each quarter, Management will present to the Committee for pre-approval, a detailed description of each particular service, excluding tax services, for which pre-approval is sought and a range of fees for such service. The Committee may delegate pre-approval authority to one or more of its members provided such delegated member(s) shall present a report of any services approved to the full Committee at its next regularly scheduled meeting. The Committee Chairperson shall have pre-approval authority for changes to any range of fees applicable to services the Committee previously approved and for new services and the range of fees for such services that arise between regularly scheduled Committee meetings. Similarly, the primary independent auditor will present to the Committee for pre-approval a written description of the nature and scope of all tax services not expressly prohibited, including the fee 22 arrangements for such services, and the potential effects of such services on the audit firm’s independence. In considering whether to pre-approve the primary independent auditor’s provision of non-audit services, the Committee will consider whether the services are compatible with the maintenance of such auditor's independence. The Committee will also consider whether the primary independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Funds' business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Funds' ability to manage or control risk or improve audit quality.
* * * The Audit Committee has considered whether the provision of non-audit services that were rendered to PVC’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to PVC that were not pre-approved 23 pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal Audit December 31, 2017 — $610,734 December 31, Audit-Related Fees. During the last two fiscal years, December 31, December 31, Ernst & Young billed no fees that the Audit Committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. Tax During the last two fiscal years, Ernst & Young has billed the following amounts for their professional tax services. December 31, December 31, Ernst & Young billed no fees that the Audit Committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. All Other Ernst & Young billed no fees that the Audit Committee was required to pre-approve pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X. The aggregate non-audit fees Ernst & Young billed to PVC, its investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to PVC for each of its last two fiscal years were as follows. December 31, December 31, Ernst & Young provided no services during PVC’s last two fiscal years that the Audit Committee was required to approve pursuant to paragraph (c)(7)(i)(C) of Rule 2.01 of Regulation S-X. 24 OTHER MATTERS PVC is not required to hold annual meetings of shareholders and, therefore, cannot determine when the next meeting of shareholders will be held. Shareholder proposals to be presented at any future meeting of shareholders of PVC or any Only one copy of this Proxy Statement may be mailed to households, even if more than one person in a household is an Account shareholder of record, unless PVC has received instructions to the contrary. If you need additional copies of this Proxy Statement, or if you do not want the mailing of a Proxy Statement to be combined with those for other members of your household in the future, or if you are receiving multiple copies and would rather receive just one copy for the household, please contact the Shareholder Services Department toll free at 1-800-222-5852 or by writing to PVC at P.O. Box 219971, Kansas City, MO 64121-9971. PVC will promptly deliver, upon request, a separate copy of this Proxy Statement to any shareholder residing at an address to which only one copy was mailed. BY ORDER OF THE BOARD OF DIRECTORS Des Moines, Iowa It is important that proxies be returned promptly. Therefore, shareholders who do not expect to attend the 25 APPENDIX A OUTSTANDING SHARES AND SHARE OWNERSHIP The following table shows, as of the Record Date, the number of shares outstanding and entitled to vote of each class of shares of each
A-1
As of •Core Plus Bond Account - Class 2 - 3.363% •Principal Lifetime 2020 Account - Class 2 - 2.146% As of
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-10
A-11
A-12
A-13
A-14
A-15
A-16
A-17
A-18
A-19
A-20
A-21
A-22
A-23
A-24
A-25
A-26
A-27
A-28
A-29
A-30 APPENDIX B AUDIT COMMITTEE CHARTER PRINCIPAL FUNDS1 Audit Committee Charter ( This charter sets forth the purpose, operating guidelines and responsibilities of the Audit Committee (the “Committee”) of the Boards of Purpose The primary purpose of the Committee is to assist the Board in fulfilling certain of its responsibilities. The Audit Committee serves as an independent and objective party to monitor the Funds’ accounting policies, financial reporting and internal control system, as well as the work of the independent registered public The Committee’s role is limited to oversight. Fund management is responsible for preparing the Funds’ financial statements in accordance with generally accepted accounting principles and for establishing and maintaining appropriate systems for accounting, reporting and internal control over financial reporting. The independent registered public Although the Committee has the responsibilities and powers set forth in this charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Funds’ financial statements are complete and accurate and have been prepared in accordance with generally accepted accounting principles. Nothing in this charter shall be construed to reduce the responsibilities or liabilities of the Funds’ service providers, including the independent registered public Operating Guidelines The Board shall appoint the members of the Committee and the Committee’s Chair. Members of the Committee may not be interested persons of the Funds, as defined in the Investment Company Act of 1940, as amended. The number of Committee members shall satisfy each of the securities exchanges on which the Funds offers shares. In addition, a member of the Committee may not, other than in his or her capacity as a member of the Committee, the Board or any other board committee, accept directly or indirectly any consulting, advisory, or other compensatory fee from the Funds or any affiliate of the Funds. Each member of the Committee shall be financially literate, as such qualification is interpreted by the Funds’ Board in its business judgment. At least one member of the Committee must have accounting or related financial management expertise, as the Board interprets such qualification in its business judgment. The Board will determine whether any member of the Committee is an “audit committee financial expert” as defined in Item 3 of Form N-CSR. ____________________ 1Includes Principal Funds, Inc., Principal Variable Contracts Funds, Inc. and Principal Exchange-Traded Funds 2 B-1 There shall be four regular meetings of the Committee each year. In conjunction with these meetings, the Committee shall meet in private executive sessions. The Committee or its Chair may call additional meetings as each deems appropriate. The Committee shall meet Except as provided by law, the following provisions shall govern the conduct of Committee meetings: Notice. Notice shall be given as provided for meetings of the Board of Directors/Trustees of the Principal Funds.
Action by Vote. When a quorum is present at any meeting, a majority of Committee members may take any action.
Presence Through Communications Equipment. The members of the Committee may participate in a Committee meeting by means of a conference telephone, or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
Responsibilities The Responsibilities of the Committee include, but are not limited to, the following: Overseeing Financial Reporting Process: Review with Fund management and the independent registered public accounting firm, the organizational structure, reporting relationship, adequacy of resources and qualifications of the senior Fund management personnel responsible for accounting and financial reporting. Oversee the compliance with the Funds’ Code of Ethics for Principal Executive and Senior Financial Officers and consider changes prior to presentation for Board approval. Review within 90 days prior to the filing of the Funds’ annual financial statements a report from the independent registered public accounting firm on: All alternative treatments of financial information within generally accepted accounting principles for policies and practices related to material items that have been discussed with Fund management, the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent registered public accounting firm; B-2 Monitoring System of Internal Controls: Review with Fund management and the independent registered public accounting firm their separate evaluation of the adequacy and effectiveness of the Funds’ system of internal controls, including those of the Funds’ service providers. Review with the Manager’s internal auditors any findings or recommendations related to the Funds’ systems for accounting, reporting and internal controls and Fund management’s response. Receive and review information from the Principal Financial Group’s Chief Internal Auditor and the Funds’ Chief Compliance Officer regarding any complaints concerning questionable accounting, internal accounting controls, audit matters, or fund accounting matters made through the Principal Financial Group’s “whistleblower” procedures by employees of the Funds or the investment advisor, sub-advisors, administrators, principal underwriters, or any other provider of accounting related services for the Funds. Principal Financial Group’s whistleblower procedures are intended to empower employees and others to confidentially and anonymously report any unethical employee behavior, and those procedures will be used to facilitate the identification by the Principal Financial Group’s Chief Internal Auditor and the Funds’ Chief Compliance Officer of complaint information for the Audit Committee’s review. Review the Manager’s internal audit function, including its audit plans, staffing and explanations for any deviations from plans. Overseeing the Engagement and Performance of the Funds’ Independent Registered Public Approve and recommend to the Board the appointment, retention or termination of any independent registered public accounting firm employed by the Funds and approve the fees and other compensation to be paid to such independent registered public accounting firm. Meet with the Funds’ independent registered public accounting firm, including private meetings, as necessary, to: (i) review the arrangements for the annual audit and any other audits or non-audit services; (ii) discuss any matters of concern brought to its attention relating to the Funds’ financial statements, including any proposed adjustments to such statements recommended by the independent registered public accounting firm, or other results of said audit(s); (iii) consider the independent registered public accounting firm’s comments with respect to the Funds’ financial policies, procedures and internal accounting controls and management’s responses thereto; (iv) review with management and the independent registered public accounting firm the annual financial statements, including a discussion with the independent registered public accounting firm of matters required by professional standards and (v) review the form of opinion the independent registered public accounting firm proposes to render to the Board. B-3
Obtain and review a report by the independent registered public accounting firm, at least annually, describing any material issues raised by the most recent PCAOB review of the independent registered public accounting firm or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm. Review and pre-approve all services, including all audit and non-audit services, performed by the Funds’ independent registered public accounting firm for the Funds. Review and pre-approve all non-audit services performed by the Funds’ independent registered public accounting firm for the Manager or any entity controlling, controlled by or under common control with the Manager that provides ongoing services to the Consider the controls applied by the independent registered public accounting firm in an effort to assure that all items requiring pre-approval by the Committee are identified and referred to the Committee in a timely fashion. Review annual audit plans of the independent registered public accounting firm for the Funds. Other Responsibilities Report activities to the Boards of Directors/Trustees on a regular basis. Conduct an annual self-evaluation. Maintain communication with counsel for independent directors/trustees. Investigate any other matter brought to its attention within the scope of its duties, with the authority in its discretion to retain legal, accounting or other experts or consultants to advise the Committee, at the expense of the Funds, if, in the Committee’s judgment, that is appropriate. Perform any other acts consistent with this Charter, the Funds’ Charter, By-Laws and governing law, as the Committee or the Board deems necessary or appropriate. Funding The Committee shall receive appropriate funding, as determined by the Committee, for payment of (i) compensation to the independent registered public accounting firm for approved audit or non-audit services for the Funds; (ii) compensation to any legal, accounting or other experts or consultants retained by the Committee; and (iii) ____________________ 3 B-4 APPENDIX C NOMINATING AND GOVERNANCE COMMITTEE CHARTER 06/12/2017 PRINCIPAL FUNDS1 Nominating and Governance Committee Charter This charter sets forth the purpose, operating guidelines and responsibilities of the Nominating and Governance Committee (the “Committee”) of the Boards of Purpose The Committee’s primary purpose is to oversee the structure and efficiency of the Boards of establish. Operating Guidelines The Board shall appoint the members of the Committee and the Committee Chair. There shall be four regular meetings of the Committee each year. The Committee or its Chair may call additional meetings as each deems appropriate. Except as provided by law, the following provisions shall govern the conduct of Committee meetings: Notice. Notice shall be given as provided for meetings of the Board of Directors/Trustees of the Principal Funds. Quorum. At any Committee meeting a majority of the Committee members then in office shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. Action by Vote. When a quorum is present at any meeting, a majority of Committee members may take any action. Action by Writing. Any action required or permitted to be taken at any Committee meeting may be taken without a meeting if all of the Committee members consent to the action in writing and such written consents are filed with the records of the meetings of the Committee. Such consent shall be treated for all purposes as a vote taken at a Committee meeting. ______________________ 1Includes Principal Funds, Inc., Principal Variable Contracts Funds, Inc. and Principal Exchange-Traded Funds. C-1 Presence Through Communications Equipment. The members of the Committee may participate in a Committee meeting by means of a conference telephone, or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
Responsibilities The responsibilities of the Committee include, but are not limited to, the following: Board Membership and Functions Periodically review the composition of the Board and consider whether additional members are needed Nominate the Lead Independent Director/Trustee of the Board Review internal auditor annual reports of Directors’/Trustees’ expense records Formulate a Director/Trustee retirement policy Periodically review the Board’s governance policies and procedures Committee Membership and Functions Periodically review the Board’s committee structure and assignment of functions to each committee Insurance Coverage
At least annually, review the Funds’ directors/trustees and officers and errors and omissions insurance coverage for appropriateness of Oversee the legal counsel for the independent directors/trustees and As needed, review Fund litigation matters C-2 Report activities to the Boards of Directors/Trustees on a regular basis. Maintain communication with counsel for independent directors/trustees. Investigate any other matter bought to its attention within the Perform any other acts consistent with this Charter, the Funds’ Charter, By-Laws and governing law, as C-3  PROXY TABULATOR P.O. BOX 9112 To vote by Internet FARMINGDALE, NY 11735 1) Read the  Important Notice Regarding the Availability of Proxy Materials for the Joint Annual Meeting of Shareholders to be Held on April 25, 2019: www.proxyvote.com E58531-P19704 PRINCIPAL VARIABLE CONTRACTS FUNDS, INC. JOINT ANNUAL MEETING OF SHAREHOLDERS April 25, 2019 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned holder of shares of beneficial interest of the Fund referenced above (the "Fund"), hereby appoints Michael J. Beer, Laura B. Latham, Britney L. Schnathorst, Adam U. Shaikh, Beth C. Wilson, and Clint L. Woods and each of them, with full power of substitution and revocation, as proxies to represent the undersigned at the Joint Annual Meeting of Shareholders of each series of Principal Variable Contracts Funds, Inc., Principal Funds, Inc., and Principal Exchange-Traded Funds to be held at 655 9th Street, Des Moines, Iowa 50392 on April 25, 2019 at 10:00 a.m. Central Time, and at any and all adjournments or postponements thereof, and to vote all shares of beneficial interest of the Fund which the undersigned would be entitled to vote, with all powers the undersigned would possess if personally present, in accordance with the instructions on this proxy. WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SET FORTH HEREIN AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE JOINT ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING NOTICE OF JOINT ANNUAL MEETING AND PROXY STATEMENT. PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE HEREOF AND PROMPTLY RETURN IN THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE U.S.  PROXY TABULATOR P.O. BOX 9112 To vote by Internet FARMINGDALE, NY 11735 1) Read the Proxy Statement and have the proxy card below at hand. 2) Go to website www.proxyvote.com 3) Follow the instructions provided on the website. To vote by Telephone 1) Read the Proxy Statement and have the proxy card below at hand. 2) Call 1-800-690-6903 3) Follow the instructions. To vote by Mail 1) Read the Proxy Statement. 2) Check the appropriate boxes on the  Important Notice Regarding the Availability of  PROXY TABULATOR P.O. BOX 9112 To vote by Internet FARMINGDALE, NY 11735 1) Read the Proxy Statement and have the proxy card below at hand. 2) Go to website www.proxyvote.com 3) Follow the instructions provided on the website. To vote by Telephone 1) Read the Proxy Statement and have the proxy card below at hand. 2) Call 1-800-690-6903 3) Follow the instructions. To vote by Mail 1) Read the Proxy Statement. 2) Check the appropriate boxes on the proxy card below. 3) Sign and date the proxy card. 4) Return the proxy card in the envelope provided. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E58534-P19704 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF For Withhold For All To withhold authority to vote for any individual THE FOLLOWING: All All Except nominee(s), mark "For All Except" and write the name(s) of the nominee(s) on the line below. 1. Election of the Board of Directors (Shareholders of all Accounts). Independent Directors and Nominees: ! ! ! 01) Elizabeth Ballantine 06) Tao Huang 02) Leroy T. Barnes, Jr. 07) Karen McMillan 03) Craig Damos 08) Elizabeth A. Nickels 04) Mark A. Grimmett 09) Mary M. VanDeWeghe 05) Fritz S. Hirsch Interested Director and Nominees: 10) Michael J. Beer 11) Timothy M. Dunbar 12) Patrick G. Halter For Against Abstain For Against Abstain 2. Approval of the ability of Principal Global Investors, LLC 4a. Approval of an amended fundamental investment to enter into and/or materially amend agreements with ! ! ! restriction relating to commodities for the Account (each ! ! ! wholly-owned affiliated sub-advisors, as defined in the Account). proposal, on behalf of the Account without obtaining shareholder approval (Group A Accounts, as set forth in 4c. Approval of an amended fundamental investment the proposal, only). restriction relating to concentration for the Account ! ! ! 3. Approval of the ability of Principal Global Investors, LLC (Group C Accounts, as set forth in the proposal, only). to enter into and/or materially amend agreements with majority-owned affiliated sub-advisors, as defined in the ! ! ! Transact such other business as may properly come before proposal, on behalf of the Account without obtaining the Meeting or any adjournments or postponements thereof. shareholder approval (Group A Accounts, as set forth in the proposal, only). THANK YOU FOR VOTING. PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN IN THE ACCOMPANYING ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE U.S. Note: Please sign this proxy as your name appears on the books of the Fund. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If  Important Notice Regarding the Availability of Proxy Materials for the Joint Annual Meeting of Shareholders to be Held on April 25, 2019: www.proxyvote.com E58535-P19704 PRINCIPAL VARIABLE CONTRACTS FUNDS, INC. JOINT ANNUAL MEETING OF SHAREHOLDERS April 25, 2019 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned holder of shares of beneficial interest of the Fund referenced above (the "Fund"), hereby appoints Michael J. Beer, Laura B. Latham, Britney L. Schnathorst, Adam U. Shaikh, Beth C. Wilson, and   Important Notice Regarding the Availability of Proxy Materials for the Joint Annual Meeting of Shareholders to be Held on April 25, 2019: www.proxyvote.com E58537-P19704 PRINCIPAL VARIABLE CONTRACTS FUNDS, INC. JOINT ANNUAL MEETING OF SHAREHOLDERS April 25, 2019 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned holder of shares of beneficial interest of the Fund referenced above (the "Fund"), hereby appoints Michael J. Beer, Laura B. Latham, Britney L. Schnathorst, Adam U. Shaikh, Beth C. Wilson, and Clint L. Woods and each of them, with full power of substitution and revocation, as proxies to represent the undersigned at the Joint Annual Meeting of Shareholders of each series of Principal Variable Contracts Funds, Inc., Principal Funds, Inc., and Principal Exchange-Traded Funds to be held at 655 9th Street, Des Moines, Iowa 50392 on April 25, 2019 at 10:00 a.m. Central Time, and at any and all adjournments or postponements thereof, and to vote all shares of beneficial interest of the Fund which the undersigned would be entitled to vote, with all powers the undersigned would possess if personally present, in accordance with the instructions on this proxy. WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS SET FORTH HEREIN AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE JOINT ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING NOTICE OF JOINT ANNUAL MEETING AND PROXY STATEMENT. PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE HEREOF AND PROMPTLY RETURN IN THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN THE U.S. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||