S-3/A

As filed with the Securities and Exchange Commission on January 25, 2006

Registration Nos. 333-129763 and 333-129763-01

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Pre-Effective Amendment No. 2

to

Form S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Principal Life Insurance Company	Principal Financial Group, Inc.
(As depositor and sponsor of the trusts described herein and as issuer of the funding agreements described herein) (Exact name of registrant as specified in its charter)	(As issuer of the guarantees described herein) (Exact name of registrant as specified in its charter)
Iowa	Delaware
(State or other jurisdiction of incorporation or organization)	(State or other jurisdiction of incorporation or organization)
42-0127290	42-1520346
(I.R.S. Employer Identification Number)	(I.R.S. Employer Identification Number)
711 High Street Des Moines, Iowa 50392-0001 (515) 247-5111	711 High Street Des Moines, Iowa 50392-0001 (515) 247-5111
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)	(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Please address a copy of all communications to:

Karen E. Shaff

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392-0001

(515) 247-5111

(Name, address, including zip code, and telephone number, including area code, of agent for service of each registrant)

Copies to:

Perry J. Shwachman
Anthony J. Ribaudo
Sidley Austin LLP
One South Dearborn Street
Chicago, Illinois 60603
(312) 853-7000 Jeffrey J. Delaney
Pillsbury Winthrop Shaw Pittman LLP
1540 Broadway
New York, New York 10036
(212) 858-1000

          Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

          If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.    o

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.    þ

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box.    o

          The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

          This Registration Statement contains:

• three prospectus supplements relating to notes (one for an offering of secured medium-term notes which will be offered primarily to institutional investors, one for an offering of Principal^® Life CoreNotes^® which will be offered primarily to retail investors and one for an offering of secured medium-term notes which will be offered primarily to retail investors) that one or more newly established separate and distinct trusts may issue and sell to the public, from time to time, with payment of principal and interest on the applicable series of notes to be secured by a funding agreement sold to, and deposited into, the applicable trust, by Principal Life Insurance Company, the payment obligations under which will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc.; and

• a base prospectus relating to notes that one or more newly established separate and distinct trusts may issue and sell to the public, from time to time, with payment of principal and interest on the applicable series of notes to be secured by a funding agreement sold to, and deposited into, the applicable trust, by Principal Life Insurance Company, the payment obligations under which will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc.

          Each offering of notes made under this Registration Statement will be made pursuant to:

• the base prospectus and one of the prospectus supplements included in this Registration Statement, with the specifications of the notes, funding agreements and guarantees offered thereby set forth in a pricing supplement; or

• a newly filed prospectus supplement to the base prospectus, with the specifications of the notes, funding agreements and guarantees offered thereby set forth in such newly filed prospectus supplement or a pricing supplement.

“Principal^®” is a registered service mark of Principal Financial Services, Inc. and is used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated January 25, 2006

PROSPECTUS SUPPLEMENT

(To prospectus dated                , 2006)

$4,000,000,000

Secured Medium-Term Notes (That are also Asset-Backed Securities)

Due Between Nine Months and Thirty Years From the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements Issued by

Principal Life Insurance Company and

Guarantees Issued by Principal Financial Group, Inc.

          Principal Life: We are Principal Life Insurance Company, an Iowa insurance company, the sponsor of the program and the depositor and issuer of the funding agreements described below. This prospectus supplement relates to the offering, from time to time, through newly established separate and distinct issuing entities in the form of the trusts described below, of one or more series of secured medium-term notes (that are also asset-backed securities), which we refer to in this prospectus supplement as “notes,” in an aggregate principal amount of up to $4,000,000,000 or the equivalent amount in one or more foreign or composite currencies, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our Principal^® Life CoreNotes^® program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          Issuing Entities: The applicable trust will use the net proceeds from the offering of its series of notes to purchase a funding agreement sold to, and deposited into, the applicable trust, by us. Our payment obligations under the funding agreement relating to the applicable series of notes will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc., a Delaware corporation and our indirect parent (“PFG”).

          Each trust exists for the exclusive purpose of issuing and selling one series of notes to investors, using the net proceeds from the sale of that series of notes to acquire a funding agreement from us, collaterally assigning and granting a security interest in the applicable funding agreement, and collaterally assigning and granting a security interest in the applicable guarantee, in favor of the indenture trustee, and engaging in other activities necessary or incidental thereto.

          The notes are obligations of the applicable issuing entity. The notes are secured medium-term notes that are also asset-backed securities.

          You should read this prospectus supplement, the accompanying prospectus and the applicable pricing supplement carefully before you invest in the notes.

          The notes: The specific terms and conditions of each series of notes will be as set forth in a separate pricing supplement. The notes of each series will:

• be issued by a separate and distinct trust and will be the obligations of that issuing entity;

• rank as secured indebtedness of the trust secured primarily by a funding agreement issued by us;

• unless otherwise specified in the applicable pricing supplement, not be listed on any securities exchange;

• be issued in only one class;

• unless otherwise specified in the applicable pricing supplement, have a minimum denomination of $1,000 and integral multiples in excess thereof or other specified denominations for foreign currencies;

• be in book-entry or definitive form;

• have a stated maturity of between 9 months and 30 years from the date of issue;

• have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of the notes;

• represent non-recourse obligations of the trust and be paid only from the assets of that trust;

• represent the trust’s obligations only and will not represent obligations of, represent interests in, or be guaranteed by, us, PFG or any of our or its affiliates;

• provide for payment in U.S. dollars or one or more foreign currencies;

• bear interest at fixed or floating rates, or bear no interest at all;

• pay interest on each series of notes on a monthly, quarterly, semi-annual or annual basis (unless otherwise specified in the applicable pricing supplement); and

• be sold to United States and foreign institutional and other investors.

          Holders of a series of notes may look only to the trust’s rights and title in the funding agreement issued to, and deposited into, the applicable trust by us, the related guarantee issued by PFG and any proceeds of that funding agreement and guarantee held in the trust and not to any other assets or collateral held by any other trust, us or PFG.

          Investing in the notes involves risks that are described in the “Risk Factors” section beginning on page 2 of the accompanying prospectus.

          None of the Securities and Exchange Commission (the “SEC”), any state securities commission or any state insurance commission has approved or disapproved of these securities or determined if this prospectus supplement, the accompanying prospectus or any pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

          The trusts may sell notes to one or more of the applicable agents referred to below (collectively, the “Agents”) as principals for resale at varying or fixed offering prices or through the applicable Agents using their reasonable efforts on behalf of the trust.

Merrill Lynch & Co.

ABN AMRO Incorporated

Banc of America Securities LLC

Barclays Capital

Bear, Stearns & Co. Inc.

BNP PARIBAS

Citigroup

Credit Suisse First Boston

Deutsche Bank Securities

Goldman, Sachs & Co.

JPMorgan

Lehman Brothers

Morgan Stanley

UBS Investment Bank

Wachovia Securities

The date of this prospectus supplement is              , 2006.

“Principal^®” and “Principal Financial Group and Design^®” are registered service marks of Principal Financial Services, Inc. and are used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

TABLE OF CONTENTS

	Page
PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS		S-1
SUMMARY		S-3
DESCRIPTION OF THE NOTES		S-14
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES		S-39
DESCRIPTION OF THE FUNDING AGREEMENTS		S-41
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS		S-42
PLAN OF DISTRIBUTION		S-49
PROSPECTUS
ABOUT THIS PROSPECTUS		1
RISK FACTORS		2
FORWARD LOOKING INFORMATION		11
WHERE YOU CAN FIND MORE INFORMATION		11
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE		12
USE OF PROCEEDS		14
RATIO OF EARNINGS TO FIXED CHARGES		14
PRINCIPAL LIFE INSURANCE COMPANY AND PRINCIPAL FINANCIAL GROUP, INC.		15
DESCRIPTION OF THE TRUSTS		17
DESCRIPTION OF THE NOTES		22
DESCRIPTION OF THE FUNDING AGREEMENTS		35
DESCRIPTION OF THE GUARANTEES		41
FEES AND EXPENSES		42
ERISA CONSIDERATIONS		43
PLAN OF DISTRIBUTION		45
LEGAL MATTERS		46
EXPERTS		47
Form of Standard Indenture Terms
Form of Standard Trust Terms
Form of Funding Agreement
Form of Guarantee
Form of Omnibus Instrument
Form of Closing Instrument
Form of Custodial Agreement
Consent of Ernst & Young LLP
Consent of Sidley Austin LLP
Form of Institutional Pricing Supplement
Form of Principal Life CoreNotes Pricing Supplement
Form of Retail Pricing Supplement

ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS

          This document is a prospectus supplement and supplements a prospectus which is part of the registration statement that we and PFG have filed with the SEC. This prospectus supplement provides you with a general description of the notes being offered, through newly established separate and distinct trusts and the underlying funding agreements and guarantees, and supplements the description of the notes, the underlying funding agreements and guarantees contained in the accompanying prospectus. These notes may be offered from time to time, through trusts, in one or more series of notes with a total initial public offering price or purchase price of up to $4,000,000,000 or the equivalent amount in one or more foreign or composite currencies, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our Principal^® Life CoreNotes^® program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          The specific terms and conditions of notes being offered and the related funding agreement and guarantee will be contained in a pricing supplement. A copy of that pricing supplement will be provided to

S-1

you along with a copy of this prospectus supplement and the accompanying prospectus. That pricing supplement also may add, update, supplement or clarify information in this prospectus supplement and the accompanying prospectus. You should carefully review such additional, updated, supplemental or clarifying information contained in the pricing supplement. You should read this prospectus supplement and the accompanying prospectus and the pricing supplement together with the additional information that is incorporated by reference in this prospectus supplement and the accompanying prospectus. That additional information is described under the heading “Incorporation of Certain Documents by Reference” beginning on page 12 of the accompanying prospectus.

          You should rely only on the information incorporated by reference or provided in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement. None of us, PFG, any trust or any Agent has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. None of us, PFG, any trust or any Agent is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement, as well as information PFG previously filed with the SEC and incorporated by reference, is accurate only as of its respective date. The business, financial condition, results of operations and prospects of us and PFG may have changed since that date.

          In this prospectus supplement, references to “Principal Life,” “we,” “us” and “our” are to Principal Life Insurance Company, an Iowa life insurance company, references to “PFG” are to Principal Financial Group, Inc., a Delaware corporation and our indirect parent company, and references to “trust” are to the applicable newly established separate and distinct special purpose common law trust, formed in a jurisdiction located in the United States of America specified in the applicable pricing supplement, which actually issues the applicable series of notes. In this prospectus supplement, we refer to each series of Secured Medium-Term Notes as a “series of notes” and to Secured Medium-Term Notes in general as “notes.”

          In this prospectus supplement, references to “United States dollars,” “U.S. dollars” or “$” are to lawful currency of the United States of America, and references to “euros” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as amended.

S-2

SUMMARY

          This section summarizes the material legal and financial terms of the notes and the underlying funding agreements and guarantees that are described in more detail in “Description of the Notes” beginning on page S-14 of this prospectus supplement, “Description of the
Funding Agreements” beginning on page S-41 of this prospectus supplement, and “Description of the Guarantees” beginning on page 
40 of the accompanying prospectus. Final terms of any particular series of notes and the related funding agreement and guarantee are set at the time of sale and will be contained in a pricing supplement relating to that series of notes and the related funding agreement and guarantee. That pricing supplement may add to, update, supplement or clarify the terms contained in this summary. In addition, you should read the more detailed information appearing elsewhere in the accompanying prospectus, this prospectus supplement and the applicable pricing supplement.

The Trusts	Each series of notes will be issued by a newly established and separately created common law trust. Each trust will be established by GSS Holdings II, Inc., as trust beneficial owner, and U.S. Bank Trust National Association, as trustee, pursuant to a trust agreement (each, a “trust agreement”). The assets and liabilities of each trust are separate and distinct from the assets and liabilities of every other trust, us and PFG.
The Sponsor and the Depositor	We are the sponsor of the program and a registrant as the depositor and issuer of the funding agreements under the program.
The Guarantor	PFG is a registrant as the issuer of the guarantees that will fully and unconditionally guarantee our payment obligations under the funding agreements.
Purpose of Trusts	The sole purpose of each trust is to facilitate a program for the issuance of notes to the public. Each trust may only issue one series of notes and such notes will be issued only on the original issue date for such notes. Each series of notes will be secured by only one funding agreement purchased from us by the applicable trust, the principal amount of which may not be increased. Our payment obligations under each funding agreement will be fully and unconditionally guaranteed by PFG. The trust will use the net proceeds received from issuing a series of notes to acquire a funding agreement for, and to be held in, the trust. The trust will hold the collateral described below pertaining to the applicable series of notes to fund its obligations under that series of notes. Notes issued by the trust will be the direct obligations of the trust and will not be the obligations of any other trust, us or PFG. Holders of notes of a particular series may only look to the funding agreement issued by us, the related guarantee issued by PFG and any proceeds of such funding agreement and guarantee held in the related trust for payment on their notes and not to the assets held in any other trust or by us or PFG.
	We and PFG are not affiliated with any trust. Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates owns any beneficial interest in any trust nor has any of these persons or entities entered into any agreement with any trust other than in furtherance of the issuance of notes from time

S-3

to time as contemplated by this prospectus supplement and the accompanying prospectus.

Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates is affiliated with the trustee, the trust beneficial owner or the indenture trustee relating to the notes.

Below is a diagram showing the parties involved in the issuance of notes by each trust.

We Can Issue Medium-Term Notes and Funding Agreements Directly to Investors

We are able to issue our own medium-term notes directly to investors and do issue funding agreements directly to investors. However, by securing each trust’s notes with a funding agreement, such trust’s notes are secured by an asset that would have a higher priority in insolvency than our unsecured medium-term notes, if any, and may be entitled to receive a higher investment rating from one or more nationally recognized rating agencies than our unsecured medium-term notes. In addition, funding agreements are very difficult to transfer and have no active secondary market. By securing each trust’s notes with a funding agreement, investors may be able to avail themselves of many of the benefits of our funding agreements while benefiting from the liquidity afforded by each trust’s medium-term notes.

Agents

Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Barclays Capital Inc., Bear, Stearns & Co. Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, UBS Securities LLC and Wachovia Capital Markets, LLC.

S-4

Secured Medium-Term Notes Program	This prospectus supplement relates to notes that one or more trusts may issue and sell to United States and foreign institutional and other investors under our secured medium-term notes program.
Principal® Life CoreNotes® Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to retail investors by newly established trusts under the related Principal® Life CoreNotes® program. The terms of the Principal® Life CoreNotes® are identical in all material respects to the terms of the notes to be sold under this program, as described in this prospectus supplement, except that the Principal® Life CoreNotes®:
	• may not be issued as amortizing notes;
	• will be denominated in U.S. dollars only;
	• will not provide for the payment of additional amounts relating to any required withholding under any circumstances; and
	• may contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes.
Secured Medium-Term Notes Retail Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to retail investors by newly established trusts under the related secured medium-term notes retail program. The terms of the secured medium-term notes retail program are identical in all material respects to the terms of the notes to be sold under this program, as described in this prospectus supplement, except that the secured medium-term retail notes:
	• may not be issued as amortizing notes;
	• will be denominated in U.S. dollars only;
	• will not provide for the payment of additional amounts relating to any required withholding under any circumstances; and
	• may contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes.
Amount	The trusts may collectively issue up to a maximum aggregate principal amount of $4,000,000,000 of notes, or the equivalent in one or more foreign or composite currencies, in connection with this prospectus supplement, less any principal amount of

S-5

	notes previously issued under this program pursuant to this prospectus supplement, our Principal® Life CoreNotes® program pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.
Flow of Funds	Other than during the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to amounts due under the notes; and
	• second, with respect to any remaining funds, in accordance with the applicable trust agreement.
	During the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee, in an aggregate amount of no more than $250,000 for all notes issued under the program, to the extent not paid pursuant to the applicable expense and indemnity agreement;
	• second, to amounts due under the notes; and
	• third, with respect to any remaining funds, in accordance with the applicable trust agreement.
	See “Description of the Notes — Application of Money Collected Under the Indenture” in the accompanying prospectus.
	Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right of such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws, is no different than if we had issued the funding agreement directly to such purchasers. The right of such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.
Terms of the Notes: Status	• Each series of notes will be the unconditional, direct, non-recourse, secured and unsubordinated obligations of the applicable trust. Each series of notes will be secured by the collateral relating to that series of notes.

S-6

	• Each series of notes may be accelerated in the payment of principal and outstanding interest if an event of default under the notes occurs. Upon the occurrence of an event of default, the indenture trustee (described below), on behalf of the holders of such notes, may only proceed against the collateral held in the related trust.
	• The notes of each series are not, and will not be, obligations of, or guaranteed by, us or any other insurance company or any affiliate of ours, including PFG. The notes will not benefit from any insurance guarantee fund coverage or any similar protection.
Payment of Principal and Interest	• Principal and interest payments, if any, on any series of notes will be made solely from the proceeds of a funding agreement purchased with respect to such series of notes for, and to be held in, the related trust and the full and unconditional guarantee issued by PFG of our payment obligations under the relevant funding agreement.
	• Each series of notes may be interest bearing or non-interest bearing as specified in the applicable pricing supplement. Each series of notes may bear interest at either a fixed rate or a floating rate, or a combination of fixed rates and floating rates, as specified in the applicable pricing supplement.
	• The principal amount of each note (other than amortizing notes) will be payable on its stated maturity date, repayment date or redemption date, as specified in the applicable pricing supplement, at the corporate trust office of the paying agent, acting in its capacity as servicer, or any other place the relevant trust designates.
	• Unless otherwise specified in the applicable pricing supplement, interest, if any, on each series of notes will be payable on a monthly, quarterly, semi-annual or annual basis.
	• A trust may issue amortizing notes that pay an amount in respect of both interest and principal amortized over the life of the note as specified in the applicable pricing supplement.
Interest Rate	Each fixed rate note will bear interest from its date of issue at the rate(s) stated in the applicable pricing supplement until the principal is paid. Each floating rate note will bear interest from the date of original issuance until the principal is paid at a rate determined by reference to an interest rate or interest rate

S-7

	formula, which may be adjusted by a spread and/or spread multiplier (each as more fully described under “Description of the Notes”). The applicable pricing supplement will designate one or more of the following interest rate bases along with the index maturity for that interest rate basis:
	• the CD Rate;
	• the CMT Rate;
	• the Commercial Paper Rate;
	• the Constant Maturity Swap Rate;
	• the Eleventh District Cost of Funds Rate;
	• the Federal Funds Open Rate;
	• the Federal Funds Rate;
	• LIBOR;
	• EURIBOR;
	• the Prime Rate; or
	• the Treasury Rate.
	Interest, if any, will be payable monthly, quarterly, semi-annually or annually on each interest payment date and on the maturity date or, if applicable, earlier redemption or repayment, and, with respect to fixed rate notes, will be computed on the basis of a 360-day year of twelve 30-day months, unless otherwise specified in the applicable pricing supplement.
Maturities	Unless otherwise specified in the applicable pricing supplement, each series of notes will mature between nine months and 30 years from its date of original issuance on the last scheduled interest payment date, as specified in the applicable pricing supplement.
Redemption and Repayment	A trust will redeem its series of notes if we redeem the funding agreement securing such series of notes. Except as otherwise specified in the accompanying prospectus, this prospectus supplement or the applicable pricing supplement, the funding agreement securing a series of notes will not be redeemable by us and no series of notes will be repayable at the option of the holder prior to their stated maturity date. Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to any sinking fund.
	Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance is outstanding. Notes that may be redeemed at a time when 20% or more of the original principal amount of such notes are outstanding will be designated in their title as “callable” in the applicable pricing supplement.

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Withholding Tax	All amounts due in respect of the notes of any series, the related guarantee and the related funding agreement will be made without any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, none of the notes, the related guarantee or the related funding agreement will provide for the payment of additional amounts relating to any required withholding or deduction imposed or levied on payments in respect of a series of notes, the related guarantee or the related funding agreement. As a result, unless otherwise specified in the applicable pricing supplement, the risk of any such withholding or deduction, whether or not as a result of a change in law or otherwise, will be borne by the holders of such series of notes.
Material United States Federal Income Tax Considerations	We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness (the “Intended Tax Characterization”). Each holder of a note (or any beneficial interest therein), by acceptance of the note (or beneficial interest therein), agrees to the Intended Tax Characterization. Accordingly, holders of the notes generally will have the same United States federal income tax consequences from the purchase of the notes as they would have had if they purchased a debt obligation issued directly by us. Prospective purchasers of the notes must carefully consider the tax consequences of the ownership and disposition of the notes set forth under “Material United States Federal Income Tax Considerations.”
Fees and Expenses	We will pay the costs and expenses incurred by a trust under the expense and indemnity agreements with each of the indenture trustee, the custodian, the trust beneficial owner and the trustee (on behalf of itself and each trust formed in connection with the issuance of a series of notes) and any additional service provider appointed from time to time.
	Under each expense and indemnity agreement, we will pay certain costs and expenses relating to the offering, sale, issuance and administration of any series of notes and certain costs, expenses and taxes incurred by a trust and will indemnify the indenture trustee, the custodian, the trust beneficial owner, the trustee, each trust and additional service providers appointed from time to time with respect to certain matters. See “Fees and Expenses” in the accompanying prospectus.
	We anticipate that the indenture trustee fees for the program will be approximately $215 per year for each series of notes.

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Denominations; Currency	Unless otherwise specified in the applicable pricing supplement, the notes will be denominated in U.S. dollars and sold in denominations of $1,000 and integral multiples of $1,000 in excess thereof.
Listing	Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
Form of Notes	Unless otherwise specified in the applicable pricing supplement, each series of notes will be issued in fully registered form and will be initially represented by one or more book-entry notes registered in the name of Cede & Co., the nominee of The Depository Trust Company, as depositary. Each book-entry note will be held by the indenture trustee as custodian for the depositary or its nominee.
Clearing Systems	The Depository Trust Company and/or, in relation to any series of notes, any other clearing system as may be specified in the applicable pricing supplement.
Collateral	The notes of any series will be secured by the right, title and interest of the applicable trust in and to (1) the relevant funding agreement held in that trust, (2) the related guarantee issued by PFG to the trust fully and unconditionally guaranteeing our payment obligations under the funding agreement, (3) all proceeds of the funding agreement and the guarantee and all amounts and instruments on deposit from time to time in the related collection account, (4) all books and records pertaining to the relevant funding agreement and the related guarantee and (5) all rights of the trust pertaining to the foregoing.
	Each series of notes will be secured by the collateral held in the applicable trust. The trust will collaterally assign and grant a security interest in the related funding agreement and the related guarantee in favor of the indenture trustee for the benefit of the holders of notes of the applicable series.
	Under the custodial agreement (the “custodial agreement”) entered into among the indenture trustee, Bankers Trust Company, N.A. (the “custodian”) and the trustee (on behalf of each trust to be formed in connection with the issuance of a series of notes), upon the collateral assignment of and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.
Funding Agreements	A funding agreement is a type of insurance company product in which the purchaser, usually an institutional investor, pays the insurance company a deposit and, in turn, receives scheduled payments of principal and interest. The deposit we receive on the issuance of a funding agreement will be part of our general account and not allocated to any of our separate accounts. Our general account is the account which contains

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all of our assets and liabilities other than those held in our separate accounts. (Separate accounts are segregated accounts which are established for certain products that we sell. A separate account holds assets and liabilities specifically related to one or more products and segregates these assets and liabilities from the assets and liabilities of all other separate accounts and the assets and liabilities of our general account.) Since the deposit made under any funding agreement will be part of our general account, our obligations under each funding agreement will be the obligations of our general account, rather than the obligations of any separate account. As such, we will invest the proceeds from the sale of funding agreements in a portfolio of assets which along with our other general account assets will be used to meet our contractual obligations under the funding agreements and our other general account obligations. We will earn the spread differential between the cost of our obligations under the funding agreements and the yield on our invested assets. We may periodically, consistent with our past practice and subject to all applicable regulatory restrictions on our insurance operations, dividend a portion of the spread income to PFG.

Each trust will use the net proceeds received from the sale of its series of notes to purchase a funding agreement issued by us, the terms of which will be set forth in the applicable pricing supplement. The funding agreement will have a deposit amount equal to the sum of the principal amount (or issue price in the case of discount notes) of the related series of notes and the amount of the beneficial interest in the related trust. The rate at which the funding agreement bears interest will be equal to the rate of interest, if any, on the related series of notes. The funding agreement will otherwise have substantially similar payment and other terms to the related series of notes.

Each funding agreement is our unsecured obligation. See “— Ratings” below.

In the event of our impairment or insolvency, the Iowa Insurance Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving us pursuant to Iowa Code Sections 507C.4, 507C.12, 507C.13, 507C.14 and 507C.16. In conducting delinquency proceedings, claims are prioritized and an order of distribution is specified pursuant to Iowa Code Section 507C.42. There are nine classes within the priority scheme, with each successive class being fully junior to the preceding class. Class 1 priority is given to the costs and expenses of administration of the insurer during the delinquency proceedings and Class 2 priority is given to the claims of the insurer’s policyholders and guaranty associations. We believe that, in a properly prepared and presented case, a court applying Iowa law would conclude that loss claims of principal and interest in respect

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	of each funding agreement would be accorded Class 2 priority under Iowa Code Section 507C.42 and paid equally in priority with our other policyholders. See “Description of the Funding Agreements” in the accompanying prospectus.
	Iowa law would apply to our insolvency or receivership proceedings. Investors should note, however, that the statutory liquidation priority accorded to funding agreements under Iowa law does not clearly apply to any additional amounts required to be paid (if specified in the applicable pricing supplement and related funding agreement) as may be necessary in order that the net amounts receivable by a holder after any withholding or deduction shall equal the respective amounts which would have been receivable by such holder in the absence of such withholding or deduction. Accordingly, in the event of our insolvency or receivership, claims under a funding agreement for such payments, if any, may not rank equally with either life insurance policy and annuity claims or funding agreement claims, and may rank equally with our unsecured debt obligations, which are given Class 5 priority under Iowa Code Section 507C.42. See “Description of the Funding Agreements” in the accompanying prospectus.
Guarantees	Our payment obligations under the funding agreement issued to each trust will be fully and unconditionally guaranteed by PFG under a guarantee issued by PFG to the trust as described in the accompanying prospectus. Each guarantee will be an unsecured, unsubordinated, contingent obligation of PFG. See “Description of the Guarantees” in the accompanying prospectus.
Ratings	Unless otherwise indicated in the applicable pricing supplement, the notes will have an issue credit rating of AA from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”). Standard & Poor’s has rated the program AA. If Standard & Poor’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. We expect the program to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”). If Moody’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. Notes of a series will be issued under the program only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade rating to such series of notes and the funding agreement securing such series of notes.
Indenture, Indenture Trustee and Servicer	Each trust will issue its series of notes to the public pursuant to an indenture between that trust and Citibank, N.A., in its capacity as indenture trustee. See “Description of the Notes — General — Indenture.” The indenture trustee will act as servicer with respect to the program. The indenture is subject to the Trust Indenture Act of 1939, as amended. The

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	indenture trustee is not affiliated with any trust, with us or PFG.
Administration of the Trusts	U.S. Bank Trust National Association, a national banking association, will be each trust’s sole trustee (the “trustee”). The trustee will not be obligated in any way to make payments under or in respect of the notes. The trustee is not affiliated with us or PFG.
Trust Beneficial Owner	GSS Holdings II, Inc., a Delaware corporation, will be the sole beneficial owner of each trust (the “trust beneficial owner”). The beneficial interest of each trust:
	• will be purchased by the trust beneficial owner for $15 (or in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes), unless otherwise specified in the applicable pricing supplement;
	• will be issued in book-entry form only;
	• will entitle the trust beneficial owner to receive payments in respect thereof on the same terms as the payments to be made to the holders of notes of the related series; and
	• will be subordinated to the related series of notes.
	The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series receive interest payments. On the maturity date of the trust beneficial owner’s beneficial interest and the related series of notes, the trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner.
	The trust beneficial owner is not affiliated with us or PFG.
Governing Law	The notes and each indenture will be governed by, and construed in accordance with, the laws of the State of New York. Each guarantee issued by PFG will be governed by, and construed in accordance with, the laws of the State of New York. The trust agreement for the applicable trust will be governed by, and construed in accordance with, the laws of the jurisdiction in which it is formed. Each funding agreement will be governed by the laws of the State of Iowa.

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DESCRIPTION OF THE NOTES

          The following description of the material provisions of the notes supplements the general description of the notes provided in the accompanying prospectus. You should therefore review the accompanying prospectus carefully. You should carefully review the information in this prospectus supplement. The pricing supplement for each offering of notes will contain the specific information and terms and conditions for that offering. As such, you should carefully review the information contained in the pricing supplement, including any description of the method of calculating interest on any note. The applicable pricing supplement may also add, update, supplement or clarify information contained in this prospectus supplement or the accompanying prospectus. It is important for you to consider the information contained in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement, the indenture and the notes in making your investment decision.

          This section describes some technical concepts and uses some capitalized terms that are not defined in this prospectus supplement. You should refer to the form of indenture and the form of note certificates filed as exhibits to the registration statement (of which this prospectus supplement and the accompanying prospectus are a part) for the full description of those concepts and complete definitions of these terms.

General

Indenture

          Each trust will issue one series of notes, subject to and entitled to the benefits of a separate indenture between the trust and the indenture trustee, which will adopt and incorporate the standard indenture terms. Such notes will be issued only on the original issue date for such notes. With respect to a particular trust, we refer to the applicable indenture and the standard indenture terms as the “indenture.” Each series of notes will be the subject of a pricing supplement. The indenture is subject to, and governed by, the Trust Indenture Act of 1939, as amended. For a description of the terms of the indenture, see “Description of the Notes” beginning on page 22 of the accompanying prospectus.

          At the date of this prospectus supplement, the notes offered pursuant to this prospectus supplement are limited to an aggregate initial public offering price or purchase price of up to $4,000,000,000, or its equivalent in one or more foreign or composite currencies. This amount is subject to reduction as a result of the issuance of notes previously under this program, our Principal^® Life CoreNotes^® program, our secured medium-term notes retail program or otherwise under the accompanying prospectus.

Collateral

          The notes of a series will be the trust’s unconditional, direct, non-recourse, secured and unsubordinated obligations. Under the indenture, the funding agreement issued to and deposited into a trust by us, in exchange for the proceeds received by the trust from the offering of its series of notes and trust beneficial interest, will be collaterally assigned by the trust, and the trust will grant a security interest in the funding agreement, to the indenture trustee for the benefit of the holders of the related series of notes. A trust may purchase only one funding agreement from us and the principal amount of the funding agreement may not be increased. The trust will also collaterally assign and grant a security interest in the guarantee issued by PFG to the trust in favor of the indenture trustee for the benefit of the holders of the related series of notes. Each series of notes will be secured by a security interest in the “collateral,” consisting of:

• the relevant funding agreement;

• the related guarantee issued by PFG to the trust, which fully and unconditionally guarantees our payment obligations under the relevant funding agreement;

• all proceeds of the relevant funding agreement and the relevant guarantee and all amounts and instruments on deposit from time to time in the related collection account;

• all books and records pertaining to the relevant funding agreement and the related guarantee; and

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• all of the trust’s rights pertaining to the foregoing.

          Under the custodial agreement, upon the collateral assignment and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.

Ranking

          The notes of a series of a trust will rank equally among themselves.

Pricing Options

          Notes that bear interest will either be fixed rate notes or floating rate notes, or a combination of fixed rate and floating rate, as specified in the applicable pricing supplement. A trust may also issue discount notes and amortizing notes as specified in the applicable pricing supplement.

Pricing Supplement

          The pricing supplement relating to the offering of a series of notes will describe the following terms:

• the principal amount and specified currency for the note;

• whether the note:

          (1) is a fixed rate note,

          (2) is a floating rate note,

          (3) is an amortizing note, meaning that a portion or all of the principal amount is payable prior to the stated maturity date in accordance with a schedule or by application of a formula, and/or

          (4) is a discount note that does not bear any interest currently or bears interest at a rate that is below market rates at the time of issuance;

• the price at which the note will be issued, which will be expressed as a percentage of the aggregate principal amount or face amount;

• the original issue date on which the note will be issued;

• the stated maturity date;

• if the note is a fixed rate note, the rate per annum at which the note will bear any interest and the Interest Payment Date frequency;

• if the note is a floating rate note, relevant terms such as:

          (1) the Interest Rate Basis,

          (2) the Initial Interest Rate,

          (3) the Interest Reset Period or the Interest Reset Dates,

          (4) the Interest Payment Dates,

          (5) the Index Maturity,

          (6) any Maximum Interest Rate,

          (7) any Minimum Interest Rate,

          (8) the Spread and/or Spread Multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the note and whether and how the Spread and/or Spread Multiplier may be changed prior to the stated maturity date;

• if the note is an amortizing note, the terms for repayment prior to the stated maturity date;

• whether the note may be redeemed by the trust, or repaid at the option of the holder, prior to the stated maturity date and the terms of its redemption or repayment, provided that any such redemption or repayment will be accompanied by the simultaneous redemption or repayment of the relevant funding agreement;

• any special United States federal income tax considerations relating to the purchase, ownership and disposition of the note;

• the jurisdiction of formation of the trust; and

• any other terms of the note provided in the accompanying prospectus to be set forth in a pricing

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supplement or that are otherwise consistent with the provisions of the indenture under which the note will be issued.

Maturity

          Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on a day between nine months and 30 years from its date of original issuance on the last scheduled interest payment date (the “stated maturity date”), as specified in the applicable pricing supplement, unless the principal of such series becomes due and payable prior to the stated maturity date, whether, as applicable, by the declaration of acceleration of maturity, notice of redemption by the trust, notice of the registered holder’s option to elect repayment or otherwise (we refer to the stated maturity date or any date prior to the stated maturity date on which the particular series of notes becomes due and payable, as the case may be, as the “maturity date” with respect to the principal of such series of notes repayable on that date).

Currency

          Unless otherwise specified in the applicable pricing supplement, the notes of a series will be denominated in, and payments of principal, premium, if any, and/or interest, if any, in respect thereof will be made in, United States dollars. In the alternative, each series of notes may be denominated in, and payments of principal, premium, if any, and/or interest, if any, in respect thereof may be made in, a single foreign currency. The currency in which a particular series of notes is denominated (or, if that currency is no longer legal tender for the payment of public and private debts in the country issuing that currency or, in the case of the euro, in the member states of the European Union that have adopted the single currency in accordance with the treaty establishing the European Community, as amended by the treaty on European Union, the currency which is then legal tender in the related country or in the adopting member states of the European Union, as the case may be) is referred to as the “specified currency” with respect to such series of notes.

          You will be required to pay for your notes in the specified currency. At the present time, there are limited facilities in the United States for the conversion of United States dollars into foreign currencies and vice versa, and commercial banks do not generally offer non-United States dollar checking or savings account facilities in the United States. The Agent from or through which a foreign currency note is purchased may be prepared to arrange for the conversion of United States dollars into the specified currency in order to enable you to pay for your foreign currency note, provided that you make a request to that Agent on or prior to the fifth business day (as defined below) preceding the date of delivery of the particular foreign currency note, or by any other day determined by that Agent. Each conversion will be made by an Agent on the terms and subject to the conditions, limitations and charges as that Agent may from time to time establish in accordance with its regular foreign exchange practices. You will be required to bear all costs of exchange in respect of your foreign currency note.

          A trust may (if so specified in the applicable pricing supplement), without the consent of the holders of any note, redenominate all, but not less than all, of the notes of any series on or after the date on which the member state of the European Union in whose national currency such notes are denominated has become a participant member in the third stage of the European economic and monetary union as more fully set out in the applicable pricing supplement.

Form of Notes; Denominations

          Each trust will issue each note as a book-entry note represented by one or more fully registered global securities, unless otherwise specified in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, the minimum denominations of each note will be $1,000 and integral multiples of $1,000 in excess thereof.

Listing

          Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.

Payments

          A trust will make payments of principal of, and premium, if any, and interest and other amounts due and owing, if any, on book-entry

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notes through the indenture trustee, acting in its capacity as servicer, to the account of the depositary or its nominee. See “— Book Entry Notes.” In the case of definitive notes, the trust will make payments of principal of, and premium, if any, and interest and other amounts due and owing, if any, on the maturity date in immediately available funds upon presentation and surrender thereof (and, in the case of any repayment on an optional repayment date, upon submission of a duly completed election form if and as required by the provisions described below) at the office or agency maintained by the trust for this purpose in the Borough of Manhattan, The City of New York, which is currently the paying agency office of the indenture trustee located at 111 Wall Street, 15th Floor, Zone 3, New York, New York 10005. A trust will make payments of interest and other amounts due and owing, if any, on the maturity date of a definitive note to the person to whom payment of the principal thereof and premium, if any, thereon shall be made. A trust will make payments of interest and other amounts due and owing, if any, on a definitive note on any Interest Payment Date (as defined below) other than the maturity date by check mailed to the address of the registered holder entitled thereto appearing in the note register. Notwithstanding the foregoing, the trust will make payments of interest and other amounts due and owing, if any, on a definitive note on any Interest Payment Date other than the maturity date to each registered holder of $10,000,000 (or, if the specified currency is other than United States dollars, the equivalent thereof in the particular specified currency) or more in aggregate principal amount of definitive notes (whether having identical or different terms and provisions) by wire transfer of immediately available funds if the applicable registered holder has delivered appropriate wire transfer instructions in writing to the indenture trustee not less than 15 calendar days prior to the particular Interest Payment Date. Any wire transfer instructions received by the indenture trustee shall remain in effect until revoked by the applicable registered holder.

Business Day

          “Business day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, with respect to foreign currency notes, the day must also not be a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center (as defined below) of the country issuing the specified currency (or, if the specified currency is the euro, the day must also be a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open); provided, further, that, with respect to notes as to which LIBOR (as defined below) is an applicable Interest Rate Basis, the day must also be a London Banking Day, which means a day on which commercial banks are open for business (including dealings in the LIBOR Currency (as defined below)) in London.

Principal Financial Center

          “Principal Financial Center” means, as applicable:

• the capital city of the country issuing the specified currency; or

• the capital city of the country to which the LIBOR Currency relates;

provided, however, that with respect to United States dollars, Australian dollars, Canadian dollars, the euro, South African rand and Swiss francs, the “Principal Financial Center” shall be The City of New York, Sydney, Toronto, London (solely in the case of the LIBOR Currency), Johannesburg and Zurich, respectively.

Registration and Transfer of Notes

          Book-entry notes may be transferred or exchanged only through the clearing systems (described below). Registration of transfer or exchange of definitive notes will be made at the office or agency maintained by the trust for this purpose in the Borough of Manhattan, The City of New York, which is currently the corporate trust office of the indenture trustee located at 111 Wall Street, 15th Floor, Zone 3, New York, New York 10005. No service charge will be imposed for any such registration of transfer or exchange of notes, but the trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection there-

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with (other than certain exchanges not involving any transfer).

Withholding Tax and Payment of Additional Amounts

          All amounts due in respect of the notes will be made without any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, the trust will not pay any additional amounts to holders of any series of notes in respect of any such withholding or deduction, any such withholding or deduction will not give rise to an event of default or any independent right or obligation to redeem the notes of such series and each holder of a note of the applicable series will be deemed for all purposes to have received cash in an amount equal to the portion of such withholding or deduction that is attributable to such holder’s interest in the notes as equitably determined by the trust.

          If it is specified in the applicable pricing supplement and funding agreement that we have agreed to pay additional amounts to the trust to reflect any required withholding or deduction under the funding agreement and we are required, or based on an opinion of independent legal counsel selected by us a material probability exists that we will be required, to pay additional amounts in respect of such withholding or deduction, pursuant to (a) any amendment to, or change (including any announced prospective change) in, the tax laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the effective date of the applicable funding agreement, we will have the right to redeem the affected funding agreement by giving not less than 30 and no more than 60 days prior written notice to the trust and by paying the trust the outstanding principal of, and accrued but unpaid interest on, the related funding agreement or such other amount as is specified in the applicable pricing supplement. If we redeem the related funding agreement issued to the trust, the related trust will redeem all of the notes of the applicable series as provided in the indenture. See “Description of the Funding Agreements — Early Redemption for Tax Event” in the accompanying prospectus.

Final European Union Withholding Tax System

          On July 1, 2005, a directive adopted by the European Council of Economics and Finance Ministers regarding the taxation of savings income took effect. The directive provides for the tax authorities of the European Union member states to provide each other with details of payments of interest and similar income made to individuals but permits Austria, Belgium and Luxembourg instead to impose a withholding tax on the payments concerned for a “transitional period” (although it provides that no such withholding tax should be levied where the beneficial owner of the payment authorizes an exchange of information and/or where the beneficial owner presents a certificate from the tax authority of the European Union member state in which the beneficial owner is resident). The directive does not preclude European Union member states from levying other types of withholding tax.

          For the avoidance of doubt, unless otherwise specified in the applicable pricing supplement, no trust will pay any additional amounts with respect to its series of notes should any deduction or withholding on account of tax be required to be made, or be made, pursuant to the directive.

Tax Redemption

          If a “tax event” as to the relevant funding agreement occurs, we will have the right to redeem the funding agreement and, upon such redemption, the applicable trust will redeem its series of notes in the same manner described under “— Optional Redemption; Optional Repayment; No Sinking Fund” below. For further discussion of “tax event” redemption, see “Description of the Funding Agreements — Early Redemption for Tax Event” in the accompanying prospectus.

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Security; Non-Recourse Obligations

          Each series of notes will be solely the obligations of the related trust and will not be guaranteed by any person, including but not limited to us, PFG, any Agent, any of our or their affiliates or any other trust. A trust’s obligations under its series of notes will be secured by all of its rights and title in a funding agreement issued by us, the payment obligations of which are guaranteed by the related guarantee issued by PFG to the trust and other rights and assets included in the applicable collateral held in the trust.

          Since we will be the sole obligor under the funding agreement and PFG will be the sole obligor under the related guarantee, the trust’s ability to meet its obligations, and your ability to receive payments from the trust, with respect to the applicable series of notes, will be principally dependent upon our ability to perform our obligations under the applicable funding agreement held in the relevant trust and PFG’s ability to perform its obligations under the guarantee of our payment obligations under the related funding agreement. However, you will have no direct contractual rights against us or PFG under the funding agreement or the guarantee, respectively. Under the terms of the funding agreement and related guarantee, recourse rights to us or PFG, respectively, will belong to the trust, its successors and its permitted assignees, but only with respect to the relevant trust. In connection with the offering and sale of a series of notes, the trust will collaterally assign and grant a security interest in the relevant funding agreement for such series of notes to, and the trust will collaterally assign and grant a security interest in the related guarantee in favor of, the indenture trustee for the benefit of the holders of such series of notes. Accordingly, recourse to us under such funding agreement and to PFG under the related guarantee will be enforceable only by the indenture trustee as a secured party on behalf of the holders of such series of notes, or by the holders of such series of notes by directing the indenture trustee under the limited circumstances described in the accompanying prospectus under “Description of the Notes — Certain Rights of Holders.” See also “Description of the Notes — Nonrecourse Enforcement” in the accompanying prospectus.

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

Optional Redemption; Optional Repayment; No Sinking Fund

          In the case of notes that are not discount notes, if an optional redemption date is specified in the pricing supplement relating to a series of notes, and we have redeemed the related funding agreement in full or part, as applicable, the related trust will redeem the series of notes secured by such funding agreement, in full or in part as applicable, prior to the stated maturity date of such series of notes. Such redemptions shall be made in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or other minimum authorized denomination applicable thereto), at the applicable redemption price (as defined below), together with unpaid interest, if any, accrued thereon to, but excluding, the date of redemption. The trust must give written notice to the holders of the particular series of notes to be redeemed not more than 60 nor less than 30 calendar days prior to the date of redemption. “Redemption price,” with respect to a series of notes, means an amount equal to the initial redemption percentage specified in the applicable pricing supplement (as adjusted by the annual redemption percentage reduction, as described in the pricing supplement, if applicable) multiplied by the unpaid principal amount thereof to be redeemed. The initial redemption percentage, if any, applicable to a series of notes shall decline at each anniversary of the initial redemption date by an amount equal to the applicable annual redemption percentage reduction, if any,

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until the redemption price is equal to 100% of the unpaid amount thereof to be redeemed.

          Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance is outstanding, which are referred to as “callable” notes and will be designated in their title as “callable” in the relevant pricing supplement. Unless otherwise specified in the relevant pricing supplement, such series of notes will otherwise be subject to the redemption provisions described herein. For a discussion of the redemption of discount notes, see “— Discount Notes.”

          If fewer than all of the notes are to be redeemed, DTC will select the notes to be redeemed not more than 60 calendar days prior to the redemption date by lot or, if the notes are not in book-entry form, the indenture trustee will do so, in its reasonable discretion, by lot or on a pro rata basis in accordance with its customary procedures. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued.

          If an optional repayment right is specified in the pricing supplement relating to a series of notes, such notes may be subject to repayment at the option of the holders of such series of notes on any repayment date specified in the applicable pricing supplement. Exercise of the repayment option under the notes by the holders will also require the applicable trust to exercise a corresponding repayment under the applicable funding agreement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the notes shall be repayable in whole or in part in increments of $1,000 at the option of the holders thereof at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. A holder of a series of notes exercising its repayment right must submit to the indenture trustee at its corporate trust office, or at such other place or places of which the relevant trust has notified such holder, the notes to be repaid together with the “option to elect repayment” form attached to the notes not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment right by a holder shall be irrevocable. If a holder requests repayment in part only, a new note in principal amount equal to the principal portion of the notes not repaid will be issued.

          Only DTC may exercise a repayment option in respect of notes issued in book-entry form. Accordingly, beneficial owners of notes that desire to exercise their repayment option, if any, with respect to all or any portion of such notes, must instruct the participant through which they own their interest to direct DTC to exercise the repayment option on their behalf by delivering the duly completed election form to the indenture trustee as aforesaid. In order to ensure that the election form is received by the indenture trustee on a particular day, the applicable beneficial owner must so instruct the participant through which it owns its interest before such participant’s deadline for accepting instructions for that day. Participants may have different deadlines for accepting instructions from their customers. Accordingly, a beneficial owner should consult the participant through which it owns its interest in the notes for the participant’s deadline for receiving payment instructions. In addition, at the time such instructions are given, each such beneficial owner will cause such participant to transfer such beneficial owner’s interest in the notes issued in book-entry form, on DTC’s records, to the indenture trustee.

          No series of notes will be subject to, or entitled to the benefit of, any sinking fund unless otherwise specified in the applicable pricing supplement. A trust may issue amortizing notes that pay a level amount in respect of both interest and principal over the life of the notes, if specified in the applicable pricing supplement. See “— Amortizing Notes.”

Purchase of Notes by Us

          We may at any time purchase notes at any price or prices in the open market or otherwise. Notes so purchased by us will be surrendered to the indenture trustee for cancellation. Concurrently with the surrender to the indenture trustee of any note, the funding agreement related to such note will be similarly cancelled.

          If applicable, such trust will comply with the requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated thereunder, and any other securities laws or

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regulations in connection with any repurchase of the notes by us.

Interest

          Each interest-bearing series of notes will bear interest from its date of issue at the rate per annum, in the case of notes that bear interest at fixed rates, or pursuant to the interest rate formula, in the case of notes that bear interest at floating rates, in each case as specified in the applicable pricing supplement, until the principal thereof is paid or made available for payment. The trust will make interest payments in respect of each series of notes in an amount equal to the interest accrued from and including the immediately preceding interest payment date in respect of which interest has been paid or from and including the date of issue, if no interest has been paid, to but excluding the applicable interest payment date or the maturity date, as the case may be (each, an “interest period”).

          Interest on each series of notes will be payable in arrears on each interest payment date, to the registered holder at the close of business on the regular interest record date (as defined below) (except that interest, if any, due at maturity will be paid to the person to whom the principal of the note is paid), and on the maturity date. The first payment of interest on any series of notes originally issued between a regular interest record date and the related interest payment date will be made on the interest payment date immediately following the next succeeding regular interest record date to the registered holder on the next succeeding regular interest record date. The “regular interest record date” shall be the day that is fifteen (15) calendar days preceding the applicable interest payment date, whether or not a business day.

Fixed Rate Notes

          In the case of each series of notes that bear interest at fixed rates, the applicable pricing supplement will specify the fixed interest rate per annum applicable to each note and the frequency with which interest is payable. Interest on each series of notes that bears interest at fixed rates will be computed on the basis of a 360-day year of twelve 30-day months.

          Unless otherwise specified in the applicable pricing supplement, the interest payment dates for fixed rate notes will be as follows:

Interest Payment
Frequency	Interest Payment Dates
Monthly	Fifteenth day of each calendar month, beginning in the first calendar month following the month the note was issued.
Quarterly	Fifteenth day of every third calendar month, beginning in the third calendar month following the month the note was issued.
Semi-annual	Fifteenth day of every sixth calendar month, beginning in the sixth calendar month following the month the note was issued.
Annual	Fifteenth day of every twelfth calendar month, beginning in the twelfth calendar month following the month the note was issued.

          If any interest payment date or the maturity date of a series of notes that bear interest at fixed rates falls on a day that is not a business day, the applicable trust will make the required payment of principal, premium, if any, and/or interest or other amounts on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          Interest rates that each trust offers on its fixed rate notes may differ from the rates offered by other trusts depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

Floating Rate Notes

          Interest on each series of notes that bears interest at floating rates will be determined by reference to the applicable Interest Rate Basis or

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Interest Rate Bases, which may, as described below, include:

• the CD Rate;

• the CMT Rate;

• the Commercial Paper Rate;

• the Constant Maturity Swap Rate;

• the Eleventh District Cost of Funds Rate;

• the Federal Funds Open Rate;

• the Federal Funds Rate;

• LIBOR;

• EURIBOR;

• the Prime Rate; or

• the Treasury Rate.

          The applicable pricing supplement will specify certain terms of the particular series of notes that bears interest at floating rates, including:

• whether the note that bears interest at floating rates is:

• a “Regular Floating Rate Note;”

• a “Floating Rate/ Fixed Rate Note;” or

• an “Inverse Floating Rate Note;”

• the Fixed Rate Commencement Date, if applicable;

• Fixed Interest Rate, if applicable;

• Interest Rate Basis or Interest Rate Bases;

• Initial Interest Rate, if any;

• Interest Reset Dates;

• Interest Payment Dates;

• Index Maturity;

• Maximum Interest Rate and/or Minimum Interest Rate, if any;

• Spread and/or Spread Multiplier; or

• if one or more of the applicable Interest Rate Bases is LIBOR, the LIBOR Currency and LIBOR Page.

          The rate derived from the applicable Interest Rate Basis will be determined in accordance with the related provisions below. The interest rate in effect on each day will be based on:

• if that day is an Interest Reset Date, the rate determined as of the Interest Determination Date (as defined below) immediately preceding that Interest Reset Date; or

• if that day is not an Interest Reset Date, the rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date.

          The “Spread” is the number of basis points (one one-hundredth of a percentage point) specified in the applicable pricing supplement to be added to or subtracted from the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates. The “Spread Multiplier” is the percentage specified in the applicable pricing supplement of the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates by which the Interest Rate Basis or Interest Rate Bases will be multiplied to determine the applicable interest rate. The “Index Maturity” is the period to maturity of the instrument or obligation with respect to which the related Interest Rate Basis or Interest Rate Bases will be calculated.

          Interest rates that each trust offers on its floating rate notes may differ from the rates offered by other trusts depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

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Regular Floating Rate Notes

          Unless a series of notes that bears interest at floating rates is designated as a series of Floating Rate/ Fixed Rate Notes or a series of Inverse Floating Rate Notes, or as having an addendum attached or having other/additional provisions apply, in each case relating to a different interest rate formula, such series of notes that bears interest at floating rates will be a series of Regular Floating Rate Notes and will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable Spread, if any; and/or

• multiplied by the applicable Spread Multiplier, if any.

          Commencing on the first Interest Reset Date, as specified in the relevant pricing supplement, the rate at which interest on a series of Regular Floating Rate Notes is payable will be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate.

Floating Rate/ Fixed Rate Notes

          If a series of notes that bears interest at floating rates is designated as a series of Floating Rate/ Fixed Rate Notes, such series of notes that bears interest at floating rates will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable Spread, if any; and/or

• multiplied by the applicable Spread Multiplier, if any.

          Commencing on the first Interest Reset Date, the rate at which interest on a series of Floating Rate/ Fixed Rate Notes is payable will be reset as of each Interest Reset Date; provided, however, that:

• the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate, as specified in the relevant pricing supplement; and

• the interest rate in effect commencing on the Fixed Rate Commencement Date will be the Fixed Interest Rate, if specified in the applicable pricing supplement, or, if not so specified, the interest rate in effect on the day immediately preceding the Fixed Rate Commencement Date.

Inverse Floating Rate Notes

          If a series of notes that bears interest at floating rates is designated as a series of Inverse Floating Rate Notes, such series of notes that bears interest at floating rates will bear interest at the Fixed Interest Rate minus the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable Spread, if any; and/or

• multiplied by the applicable Spread Multiplier, if any;

provided, however, that interest on a series of Inverse Floating Rate Notes will not be less than zero. Commencing on the first Interest Reset Date, the rate at which interest on a series of Inverse Floating Rate Notes is payable will be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate.

Interest Reset Dates

          The applicable pricing supplement will specify the dates on which the rate of interest on a series of notes that bears interest at floating rates will be reset (each, an “Interest Reset Date”), and the period between Interest Reset Dates will be the “Interest Reset Period.” Unless otherwise specified in the applicable pricing supplement, the Interest Reset Dates will be, in the case of a series of notes that bears interest at floating rates which reset:

• daily — each business day;

• weekly — the Wednesday of each week, with the exception of weekly

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	reset series of notes that bear interest at floating rates as to which the Treasury Rate is an applicable Interest Rate Basis, which will reset the Tuesday of each week;
•	monthly — the fifteenth day of each calendar month, with the exception of monthly reset series of notes that bear interest at floating rates as to which the Eleventh District Cost of Funds Rate is an applicable Interest Rate Basis, which will reset on the first calendar day of the month;
•	quarterly — the fifteenth day of March, June, September and December of each year;
•	semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and
•	annually — the fifteenth day of the month of each year specified in the applicable pricing supplement; provided, however, that, with respect to any series of Floating Rate/ Fixed Rate Notes, the rate of interest thereon will not reset after the particular Fixed Rate Commencement Date.

          If any Interest Reset Date for any series of notes that bears interest at floating rates would otherwise be a day that is not a business day, the particular Interest Reset Date will be postponed to the next succeeding business day, except that in the case of a series of notes that bears interest at floating rates as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Reset Date will be the immediately preceding business day.

Interest Determination Dates

          The interest rate applicable to a series of notes that bears interest at floating rates for an Interest Reset Period commencing on the related Interest Reset Date will be determined by reference to the applicable Interest Rate Basis as of the particular “Interest Determination Date,” which will be:

• with respect to the Federal Funds Open Rate — the related Interest Reset Date;

• with respect to the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate — the business day preceding the related Interest Reset Date;

• with respect to the CD Rate and the CMT Rate — the second business day preceding the related Interest Reset Date;

• with respect to the Constant Maturity Swap Rate — the second U.S. Government Securities business day (as defined under “— Constant Maturity Swap Rate” below) preceding the related Interest Reset Date; provided, however, that if, after attempting to determine the Constant Maturity Swap Rate (as described under “— Constant Maturity Swap Rate” below), such rate is not determinable for a particular Interest Determination Date (the “original interest determination date”), then such Interest Determination Date shall be the first U.S. Government Securities business day preceding the original interest determination date for which the Constant Maturity Swap Rate can be determined as described under “— Constant Maturity Swap Rate” below;

• with respect to the Eleventh District Cost of Funds Rate — the last working day of the month preceding the related Interest Reset Date on which the Federal Home Loan Bank of San Francisco publishes the Eleventh District Index (as defined below);

• with respect to LIBOR and EURIBOR — the second London Banking Day preceding the related Interest Reset Date; and

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• with respect to the Treasury Rate — the day of the week in which the related Interest Reset Date falls on which day Treasury Bills (as defined below) are normally auctioned (i.e., Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday); provided, however, that if an auction is held on the Friday of the week preceding the related Interest Reset Date, the Interest Determination Date will be the preceding Friday.

          The Interest Determination Date pertaining to a series of notes that bears interest at floating rates the interest rate of which is determined with reference to two or more Interest Rate Bases will be the latest business day which is at least two business days before the related Interest Reset Date for the applicable note that bears interest at floating rates on which each Interest Reset Basis is determinable.

Calculation Dates

          The indenture trustee will be the “Calculation Agent,” unless otherwise specified in the applicable pricing supplement. The interest rate applicable to each Interest Reset Period will be determined by the Calculation Agent on or prior to the Calculation Date (as defined below), except with respect to LIBOR, EURIBOR and the Eleventh District Cost of Funds Rate, which will be determined on the particular Interest Determination Date. Upon request of the registered holder of a series of notes that bears interest at floating rates, the Calculation Agent will disclose the interest rate then in effect and, if determined, the interest rate that will become effective as a result of a determination made for the next succeeding Interest Reset Date with respect to the particular series of notes that bears interest at floating rates. The “Calculation Date,” if applicable, pertaining to any Interest Determination Date will be the earlier of:

• the tenth calendar day after the particular Interest Determination Date or, if such day is not a business day, the next succeeding business day; or

• the business day immediately preceding the applicable Interest Payment Date or the maturity date, as the case may be.

Maximum and Minimum Interest Rates

          A series of notes that bears interest at floating rates may also have either or both of the following if specified in the applicable pricing supplement:

• a maximum numerical limitation, or ceiling, that may accrue during any Interest Reset Period (a “Maximum Interest Rate”); and

• a minimum numerical limitation, or floor, that may accrue during any Interest Reset Period (a “Minimum Interest Rate”).

          In addition to any Maximum Interest Rate that may apply to a series of notes that bears interest at floating rates, the interest rate on a series of notes that bears interest at floating rates will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application.

Interest Payments

          Unless otherwise specified in the applicable pricing supplement, interest on each series of notes that bears interest at floating rates will be payable on the date(s) set forth below (each, an “Interest Payment Date” with respect to such series of notes that bears interest at floating rates). Unless otherwise specified in the applicable pricing supplement, the Interest Payment Dates will be, in the case of a series of notes that bears interest at floating rates which reset:

• daily, weekly or monthly — the fifteenth day of each calendar month or on the fifteenth day of March, June, September and December of each year, as specified in the applicable pricing supplement;

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• quarterly — the fifteenth day of March, June, September and December of each year;

• semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and

• annually — the fifteenth day of the month of each year specified in the applicable pricing supplement.

          In addition, the maturity date will also be an Interest Payment Date.

          If any Interest Payment Date other than the maturity date for any series of notes that bears interest at floating rates would otherwise be a day that is not a business day, such Interest Payment Date will be postponed to the next succeeding business day, except that in the case of a series of notes that bears interest at floating rates as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding business day. If the maturity date of a series of notes that bears interest at floating rates falls on a day that is not a business day, the trust will make the required payment of principal, premium, if any, and interest or other amounts on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          All percentages resulting from any calculation on notes that bear interest at floating rates will be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards. For example, 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655). All dollar amounts used in or resulting from any calculation on notes that bear interest at floating rates will be rounded, in the case of United States dollars, to the nearest cent or, in the case of a foreign currency, to the nearest unit (with one-half cent or unit being rounded upwards).

          With respect to each series of notes that bears interest at floating rates, accrued interest is calculated by multiplying the principal amount of such note that bears interest at floating rates by an accrued interest factor. The accrued interest factor is computed by adding the interest factor calculated for each day in the particular Interest Reset Period. The interest factor for each day will be computed by dividing the interest rate applicable to such day by 360, in the case of a series of notes that bears interest at floating rates as to which the CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal Funds Open Rate, the Federal Funds Rate, LIBOR, EURIBOR or the Prime Rate is an applicable Interest Rate Basis, or by the actual number of days in the year, in the case of a series of notes that bears interest at floating rates as to which the CMT Rate or the Treasury Rate is an applicable Interest Rate Basis. In the case of a series of notes that bears interest at floating rates as to which the Constant Maturity Swap Rate is the Interest Rate Basis, the interest factor for each day will be computed by dividing the number of days in the interest period by 360 (the number of days to be calculated on the basis of a year of 360 days with twelve 30-day months (unless (i) the last day of the interest period is the 31st day of a month but the first day of the interest period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii) the last day of the interest period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)). The interest factor for a series of notes that bears interest at floating rates as to which the interest rate is calculated with reference to two or more Interest Rate Bases will be calculated in each period in the same manner as if only the applicable Interest Rate Basis specified in the applicable pricing supplement applied.

          The Calculation Agent shall determine the rate derived from each Interest Rate Basis in accordance with the following provisions.

CD Rate

          “CD Rate” means:

          (1) the rate on the particular Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) (as defined

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below) under the caption “CDs (secondary market);” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date for negotiable United States dollar certificates of deposit of the particular Index Maturity as published in H.15 Daily Update (as defined below), or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “CDs (secondary market);” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on that Interest Determination Date, of three leading non-bank dealers in negotiable United States dollar certificates of deposit in The City of New York (which may include the Agents or their affiliates) selected by the Calculation Agent for negotiable United States dollar certificates of deposit of major United States money market banks for negotiable United States certificates of deposit with a remaining maturity closest to the particular Index Maturity in an amount that is representative for a single transaction in that market at that time; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the CD Rate in effect on the particular Interest Determination Date.

          “H.15(519)” means the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

          “H.15 Daily Update” means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/ H15/update, or any successor site or publication.

CMT Rate

          “CMT Rate” means:

          (1) if CMT Moneyline Telerate Page 7051 is specified in the applicable pricing supplement:

          (a) the percentage equal to the yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Treasury Constant Maturities,” as the yield is displayed on Moneyline Telerate (or any successor service) on page 7051 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7051”), for the particular Interest Determination Date; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7051, the percentage equal to the yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the particular Interest Determination Date as published in H.15(519) under the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the rate on the particular Interest Determination Date for the period of the particular Index Maturity as may then be published by either the Federal Reserve System Board of Governors or the United States Department of the Treasury that the Calculation Agent determines to be comparable to the rate which would otherwise have been published in H.15(519); or

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          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three leading primary United States government securities dealers in The City of New York (which may include the Agents or their affiliates) (each, a “Reference Dealer”), selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on the particular Interest Determination Date; or

          (2) if CMT Moneyline Telerate Page 7052 is specified in the applicable pricing supplement:

          (a) the percentage equal to the one-week or one-month, as specified in the applicable pricing supplement average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as

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published in H.15(519) opposite the caption “Treasury Constant Maturities”, as the yield is displayed on Moneyline Telerate (or any successor service) (on page 7052 or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7052”), for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7052, the percentage equal to the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the week or month, as applicable, preceding the particular Interest Determination Date as published in H.15(519) opposite the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity as otherwise announced by the Federal Reserve Bank of New York for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the

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highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at the time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on that Interest Determination Date.

          If two United States Treasury securities with an original maturity greater than the Index Maturity specified in the applicable pricing supplement have remaining terms to maturity equally close to the particular Index Maturity, the quotes for the United States Treasury security with the shorter original remaining term to maturity will be used.

Commercial Paper Rate

          “Commercial Paper Rate” means:

          (1) the Money Market Yield (as defined below) on the particular Interest Determination Date of the rate for commercial paper having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Commercial Paper — Nonfinancial;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Money Market Yield of the rate on the particular Interest Determination Date for commercial paper having the particular Index Maturity as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Commercial Paper — Nonfinancial;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on that Interest Determination Date of three leading dealers of United States dollar commercial paper in The City of New York (which may include the Agents or their affiliates) selected by the Calculation Agent for commercial paper having the particular Index Maturity placed for industrial issuers whose bond rating is “Aa”, or the equivalent, from a nationally recognized statistical rating organization; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Commercial Paper Rate in effect on the particular Interest Determination Date.

          “Money Market Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Money Market Yield = D × 360
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and “M” refers to the actual number of days in the applicable Interest Reset Period.

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Constant Maturity Swap Rate

          “Constant Maturity Swap Rate” means:

          (1) the rate for U.S. dollar swaps with the designated maturity specified in the applicable pricing supplement, expressed as a percentage, which appears on the Reuters Screen (or any successor service) ISDAFIX1 Page as of 11:00 A.M., New York City time, on the particular Interest Determination Date; or

          (2) if the rate referred to in clause (1) does not appear on the Reuters Screen (or any successor service) ISDAFIX1 Page by 2:00 P.M., New York City time, on such Interest Determination Date, a percentage determined on the basis of the mid-market semi-annual swap rate quotations provided by the reference banks (as defined below) as of approximately 11:00 A.M., New York City time, on such Interest Determination Date, and, for this purpose, the semi-annual swap rate means the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating U.S. dollar interest rate swap transaction with a term equal to the designated maturity specified in the applicable pricing supplement commencing on the Interest Reset Date and in a representative amount (as defined below) with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis, is equivalent to USD-LIBOR-BBA with a designated maturity specified in the applicable pricing supplement. The Calculation Agent will request the principal New York City office of each of the reference banks to provide a quotation of its rate. If at least three quotations are provided, the rate for that Interest Determination Date will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest); or

          (3) if at least three quotations are not received by the Calculation Agent as mentioned in clause (2), the Constant Maturity Swap Rate in effect on the particular Interest Determination Date.

          “U.S. Government Securities business day” means any day except for Saturday, Sunday, or a day on which The Bond Market Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

          “Representative amount” means an amount that is representative for a single transaction in the relevant market at the relevant time.

          “Reference banks” mean five leading swap dealers in the New York City interbank market, selected by the Calculation Agent, after consultation with us.

Eleventh District Cost of Funds Rate

          “Eleventh District Cost of Funds Rate” means:

          (1) the rate equal to the monthly weighted average cost of funds for the calendar month immediately preceding the month in which the particular Interest Determination Date falls as set forth under the caption “11th District” on the display on Moneyline Telerate (or any successor service) on page 7058 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7058”) as of 11:00 A.M., San Francisco time, on that Interest Determination Date; or

          (2) if the rate referred to in clause (1) does not so appear on Moneyline Telerate Page 7058, the monthly weighted average cost of funds paid by member institutions of the Eleventh Federal Home Loan Bank District that was most recently announced (the “Eleventh District Index”) by the Federal Home Loan Bank of San Francisco as the cost of funds for the calendar month immediately preceding that Interest Determination Date; or

          (3) if the Federal Home Loan Bank of San Francisco fails to announce the Eleventh District Index on or prior to the particular Interest Deter-

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mination Date for the calendar month immediately preceding that Interest Determination Date, the Eleventh District Cost of Funds Rate in effect on the particular Interest Determination Date.

Federal Funds Rates

          “Federal Funds Open Rate” means the rate set forth on Moneyline Telerate (or any successor service) on page 5 (or any other page as may replace the specified page on that service) for an Interest Determination Date underneath the caption “FEDERAL FUNDS” in the row titled “OPEN”. If the rate is not available for an Interest Determination Date, the rate for that Interest Determination Date shall be the Federal Funds Rate as determined below.

          “Federal Funds Rate” means:

          (1) the rate on the particular Interest Determination Date for United States dollar federal funds as published in H.15(519) under the caption “Federal Funds (Effective)” and displayed on Moneyline Telerate (or any successor service) on page 120 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 120”); or

          (2) if the rate referred to in clause (1) does not so appear on Moneyline Telerate Page 120 or is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date for United States dollar federal funds as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Federal Funds (Effective);” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of United States dollar federal funds transactions in The City of New York (which may include the Agents or their affiliates), selected by the Calculation Agent prior to 9:00 A.M., New York City time, on that Interest Determination Date; or

          (4) if the brokers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Federal Funds Rate in effect on the particular Interest Determination Date.

LIBOR

          “LIBOR” means:

          (1) if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or if neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the rate for deposits in the LIBOR Currency having the Index Maturity specified in the applicable pricing supplement, commencing on the related Interest Reset Date, that appears on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (2) if “LIBOR Reuters” is specified in the applicable pricing supplement, the arithmetic mean of the offered rates, calculated by the Calculation Agent, or the offered rate, if the LIBOR Page by its terms provides only for a single rate, for deposits in the LIBOR Currency having the particular Index Maturity, commencing on the related Interest Reset Date, that appear or appears, as the case may be, on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (3) if fewer than two offered rates appear, or no rate appears, as the case may be, on the particular Interest Determination Date on the LIBOR Page as specified in clause (1) or (2), as applicable, the rate calculated by the Calculation Agent of at least two offered quotations obtained by the Calculation Agent after requesting the principal

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London offices of each of four major reference banks (which may include affiliates of the Agents), in the London interbank market to provide the Calculation Agent with its offered quotation for deposits in the LIBOR Currency for the period of the particular Index Maturity, commencing on the related Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on that Interest Determination Date and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (4) if fewer than two offered quotations referred to in clause (3) are provided as requested, the rate calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the applicable Principal Financial Center, on the particular Interest Determination Date by three major banks (which may include affiliates of the Agents) in that principal financial center selected by the Calculation Agent for loans in the LIBOR Currency to leading European banks, having the particular Index Maturity and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in clause (4), LIBOR in effect on the particular Interest Determination Date.

          “LIBOR Currency” means the currency specified in the applicable pricing supplement as to which LIBOR shall be calculated or, if no currency is specified in the applicable pricing supplement, United States dollars.

          “LIBOR Page” means either:

• if “LIBOR Reuters” is specified in the applicable pricing supplement, the display on the Reuter Monitor Money Rates Service (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace that page on that service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency; or

• if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the display on Moneyline Telerate (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency.

EURIBOR

          “EURIBOR” means: (1) with respect to any Interest Determination Date relating to a series of EURIBOR Notes or a series of notes that bears interest at floating rates for which the interest rate is determined with reference to EURIBOR (a “EURIBOR Interest Determination Date”), the rate for deposits in euros as sponsored, calculated and published jointly by the European Banking Federation and ACI — The Financial Market Association, or any company established by the joint sponsors for purposes of compiling and publishing those rates, having the Index Maturity specified in the applicable pricing supplement, commencing on the applicable Interest Reset Date, as the rate appears on Moneyline Telerate, Inc., or any successor service, on page 248 (or any other page as may replace that specified page on the service) (“Moneyline Telerate Page 248”) as of 11:00 A.M., Brussels time, on the applicable EURIBOR Interest Determination Date; or (2) if such rate does not appear on Moneyline Telerate Page 248, or is not so published by 11:00 A.M., Brussels time, on the applicable EURIBOR Interest Determination Date, such rate will be calculated by the Calculation Agent and will be the arithmetic mean of at least two quotations obtained by the Calculation Agent after requesting the principal

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          Euro-zone (as defined below) offices of four major banks in the Euro-zone interbank market to provide the Calculation Agent with its offered quotation for deposits in euros for the period of the Index Maturity specified in the applicable pricing supplement, commencing on the applicable Interest Reset Date, to prime banks in the Euro-zone interbank market at approximately 11:00 A.M., Brussels time, on the applicable EURIBOR Interest Determination Date and in a principal amount not less than the equivalent of $1 million in euros that is representative for a single transaction in euro in the market at that time; or (3) if fewer than two such quotations are so provided, the rate on the applicable EURIBOR Interest Determination Date will be calculated by the Calculation Agent and will be the arithmetic mean of the rates quoted at approximately 11:00 A.M., Brussels time, on such EURIBOR Interest Determination Date by four major banks in the Euro-zone for loans in euro to leading European banks, having the Index Maturity specified in the applicable pricing supplement, commencing on the applicable Interest Reset Date and in a principal amount not less than the equivalent of $1 million in euros that is representative for a single transaction in euros in the market at that time; or (4) if the banks so selected by the Calculation Agent are not quoting as mentioned above, EURIBOR will be EURIBOR in effect on the applicable EURIBOR Interest Determination Date.

          “Euro-zone” means the region comprised of member states of the European Union that have adopted the single currency in accordance with the treaty establishing the European Community, as amended by the treaty on European Union.

Prime Rate

          “Prime Rate” means:

          (1) the rate on the particular Interest Determination Date as published in H.15(519) under the caption “Bank Prime Loan;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Bank Prime Loan;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as defined below) as the applicable bank’s prime rate or base lending rate as of 11:00 A.M., New York City time, on that Interest Determination Date; or

          (4) if fewer than four rates referred to in clause (3) are so published by 3:00 p.m., New York City time, on the related Calculation Date, the rate calculated by the Calculation Agent as the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the prime rates or base lending rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on that Interest Determination Date by three major banks (which may include affiliates of the Agents) in The City of New York selected by the Calculation Agent; or

          (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in clause (4), the Prime Rate in effect on the particular Interest Determination Date.

          “Reuters Screen US PRIME 1 Page” means the display on the Reuter Monitor Money Rates Service (or any successor service) on the “US PRIME 1” page (or any other page as may replace that page on that service) for the purpose of displaying prime rates or base lending rates of major United States banks.

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Treasury Rate

          “Treasury Rate” means:

          (1) the rate from the auction held on the Treasury Rate Interest Determination Date (the “Auction”) of direct obligations of the United States (“Treasury Bills”) having the Index Maturity specified in the applicable pricing supplement under the caption “INVESTMENT RATE” on the display on Moneyline Telerate (or any successor service) on page 56 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 56”) or page 57 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 57”); or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Auction High”; or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield of the auction rate of the applicable Treasury Bills as announced by the United States Department of the Treasury; or

          (4) if the rate referred to in clause (3) is not so announced by the United States Department of the Treasury, or if the Auction is not held, the Bond Equivalent Yield of the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15(519) under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market;” or

          (5) if the rate referred to in clause (4) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market”; or

          (6) if the rate referred to in clause (5) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on that Interest Determination Date, of three primary United States government securities dealers (which may include the Agents or their affiliates) selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified in the applicable pricing supplement; or

          (7) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (6), the Treasury Rate in effect on the particular Interest Determination Date.

          “Bond Equivalent Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Bond Equivalent Yield = D × N
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be, and “M” refers to the actual number of days in the applicable Interest Reset Period.

Other/ Additional Provisions; Addendum

          Any provision with respect to a series of notes, including the specification and determination of one or more Interest Rate Bases, the calculation of the interest rate applicable to a note that bears interest at floating rates, the interest

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payment dates, the stated maturity date, any redemption or repayment provisions or any other term relating to the applicable notes, may be modified and/or supplemented as specified under “Other/ Additional Provisions” on the face thereof or in an addendum relating thereof, if so specified on the face thereof and in each case described in the applicable pricing supplement.

Discount Notes

          A trust may issue a series of notes (“Discount Notes”) that has an Issue Price (as specified in the applicable pricing supplement) that is less than the principal amount thereof by an amount that is equal to or greater than the de minimis amount. The de minimis amount is equal to 0.25% multiplied by the product of the principal amount of the notes and the number of full years to the stated maturity date. A series of Discount Notes may not bear any interest currently or may bear interest at a rate that is below market rates at the time of issuance. The difference between the Issue Price of a series of Discount Notes and par is referred to as the “Discount.” In the event of redemption, repayment or acceleration of maturity of a series of Discount Notes, the amount payable to the holders of such series of Discount Notes will be equal to the sum of:

• the Issue Price (increased by any accruals of Discount) and, in the event of any redemption of such series of Discount Notes, if applicable, multiplied by the initial redemption percentage (as adjusted by the annual redemption percentage reduction, if applicable); and

• any unpaid interest accrued on such series of Discount Notes to the maturity date.

          Unless otherwise specified in the applicable pricing supplement, for purposes of determining the amount of Discount that has accrued as of any date on which a redemption, repayment or acceleration of maturity occurs for a series of Discount Notes, a Discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates for the applicable series of Discount Notes (with ratable accruals within a compounding period), a coupon rate equal to the initial coupon rate applicable to the applicable series of Discount Notes and an assumption that the maturity of such series of Discount Notes will not be accelerated. If the period from the date of issue to the first Interest Payment Date for a series of Discount Notes (the “Initial Period”) is shorter than the compounding period for such series of Discount Notes, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then the period will be divided into a regular compounding period and a short period with the short period being treated as provided in the preceding sentence. The accrual of the applicable Discount may differ from the accrual of original issue discount for purposes of the Internal Revenue Code of 1986, as amended, certain series of Discount Notes may not be treated as having original issue discount within the meaning of such Code, and certain series of notes other than Discount Notes may be treated as issued with original issue discount for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”

          Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance of such notes is outstanding, which are referred to as “callable” notes. In the case of discount notes that may be redeemed at a time when 20% or more of such notes are outstanding, such notes will be designated in their title as “callable” in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, such series of notes will otherwise be subject to the redemption provisions as specified under “— Optional Redemption; Optional Repayment; No Sinking Fund.”

Amortizing Notes

          A trust may issue a series of notes (“Amortizing Notes”) with the amount of principal thereof and interest thereon payable in installments over their terms. Unless otherwise specified in the applicable pricing supplement, interest on each series of Amortizing Notes will be computed on the basis of a 360-day year of twelve 30-day months. Payments with respect to a series of

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Amortizing Notes will be applied first to interest due and payable thereon and then to the reduction of the unpaid principal amount thereof. Further information concerning additional terms and provisions of a particular series of Amortizing Notes will be specified in the applicable pricing supplement, including a table setting forth repayment information for such series of Amortizing Notes.

Book-Entry Notes

          We have established a depositary arrangement, on behalf of the trusts, with DTC with respect to the book-entry notes, the terms of which are summarized below.

          All book-entry notes having the same terms will be represented by one or more global securities. Each global security will be deposited with, or on behalf of, DTC and will be registered in the name of DTC or its nominee. No global security may be transferred or exchanged except as a whole by DTC or a nominee of DTC to DTC or to another nominee of DTC, or by DTC or another nominee of DTC to a successor of DTC or a nominee of a successor to DTC. So long as DTC or its nominee is the registered holder of a global security, DTC or its nominee will be the sole owner of the related book-entry notes represented thereby for all purposes under the indenture. Except as otherwise provided below, the beneficial owners of the global security or securities represented by book-entry notes will not be entitled to receive physical delivery of definitive notes and will not be considered the registered holders of the book-entry notes for any purpose under the indenture and no global security representing book-entry notes will be exchangeable or transferable. As a result, to exercise any rights of a registered holder under the indenture, a beneficial owner must rely on the procedures of DTC and, if the beneficial owner is not a participant, on the procedures of the participant or participants through which the beneficial owner owns its interest. The laws of some jurisdictions require that some purchasers of securities take physical delivery of securities in definitive form. These laws may limit the ability to transfer beneficial interests in a global security represented by book-entry notes.

          Each global security representing book-entry notes will be exchangeable for definitive notes having the same terms in a like aggregate principal amount only if:

• the trust notifies the indenture trustee that the trust wishes in its sole discretion to exchange the global security for definitive notes;

• an event of default on the notes of that series has occurred and has not been cured; or

• DTC notifies us that it is unwilling or unable to continue as a clearing system for the global securities, or we have become aware that it has ceased to be a clearing agency registered under the Exchange Act and, in either case, a successor clearing system is not appointed by us within 60 calendar days after receiving the notice from DTC or becoming aware that DTC is no longer registered.

          If any of these events occurs, the appropriate trust will print and deliver definitive notes. Definitive notes issued under these circumstances will be registered in the names of the beneficial owners of the related global securities as provided to the indenture trustee by the participants identified by DTC.

About the Depositary

          The following is based on information furnished by DTC:

          DTC will act as securities depository for the book-entry notes. The book-entry notes will be issued as fully registered securities in the name of Cede & Co. (DTC’s nominee) or another name requested by DTC. One fully registered global security will be issued for each issue of a series of book-entry notes in the aggregate principal amount of that issue and will be deposited with, or on behalf of, DTC. If the aggregate principal amount of any issue exceeds DTC’s limit for a single global security, then the global securities will be issued in the form of one or more global securities having a principal amount equal to DTC’s limit and one or more additional global securities representing any remaining principal amount.

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          DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its direct participants deposit with it. DTC also facilitates the settlement among direct participants of transactions in deposited securities, such as transfers and pledges, through electronic computerized book-entry changes in direct participants’ accounts. This eliminates the need for physical movement of securities certificates. DTC’s direct participants include securities brokers and dealers (including the purchasing agent), banks, trust companies, clearing corporations and other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to DTC’s system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its direct and indirect participants are on file with the SEC.

          Under DTC’s system, purchases of book-entry notes must be made by or through direct participants, which will receive a credit for the book-entry notes on DTC’s records. The ownership interest of the actual purchaser is in turn recorded on the records of the direct and indirect participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participants through which they entered into the transaction. Transfers of ownership interests in book-entry notes are accomplished by entries made on the books of the direct and indirect participants acting on behalf of the beneficial owners. Beneficial owners will not receive definitive notes unless use of the book-entry system is discontinued as described above.

          To facilitate subsequent transfers, all global securities representing the book-entry notes deposited with, or on behalf of, DTC will be registered in the name of DTC’s nominee, Cede & Co., or any other name that DTC requests. The deposit of global securities with, or on behalf of, DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the book-entry notes; DTC’s records reflect only the identity of the direct participants to whose accounts the book-entry notes are credited, which may or may not be the beneficial owners. DTC’s participants are responsible for keeping account of their holdings on behalf of their customers.

          Conveyance of notices and other communications from DTC to direct participants, from direct participants to indirect participants and from direct participants and indirect participants to beneficial owners are governed by arrangements among them and are subject to statutory and regulatory requirements.

          Neither DTC nor Cede & Co. will consent or vote with respect to global securities. Under its usual procedures, DTC mails an omnibus proxy to a company as soon as possible after a record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts the book-entry notes are credited on the record date (identified in a listing attached to the omnibus proxy).

          The trust will make payments on the global securities in immediately available funds to Cede & Co. or any other nominee named by DTC. DTC’s practice is to credit direct participants’ accounts on the applicable payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on that date. Payments by participants to beneficial owners are governed by standing instructions and customary practices and are subject to statutory and regulatory requirements. The trust and the trustee are responsible only for making payments to DTC; DTC is responsible for disbursing those payments to its direct participants and the direct participants (and any indirect participants) are solely responsible for disbursing those payments to the beneficial owners.

          Any redemption notices will be sent to Cede & Co. If less than all of the book-entry notes having the same terms are being redeemed,

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DTC’s current practice is to determine by lot the amount of the interest of each direct participant in those notes to be redeemed.

          A beneficial owner must give notice of any election to have its book-entry notes repaid through its participant to the indenture trustee. Delivery of the book-entry notes will be effected by causing the relevant direct participant to transfer the relevant part of its interest in the global securities to the indenture trustee on DTC’s records.

          DTC may discontinue providing its services as securities depository at any time by giving reasonable notice to us or the indenture trustee. If we do not obtain a successor securities depository, the applicable trust will print and deliver definitive notes.

          We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). If we do so, the applicable trust will print and deliver definitive notes.

SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES

General

          Unless otherwise specified in the applicable pricing supplement, foreign currency notes will not be sold in, or to residents of, the country issuing the specified currency. The information set forth in this prospectus supplement is directed to prospective purchasers who are United States residents and, with respect to foreign currency notes, is by necessity incomplete. We, PFG, the trusts and the Agents disclaim any responsibility to advise prospective purchasers who are residents of countries other than the United States with respect to any matters that may affect the purchase, holding or receipt of payments of principal of, and premium, if any, and interest, if any, on, their foreign currency notes. These purchasers should consult their own financial and legal advisors with regard to these risks. See “Risk Factors — Risk Factors Relating to the Notes — If the trust issues notes denominated in a foreign currency, those notes are subject to exchange rate and exchange control risks” in the accompanying prospectus.

Payment of Principal, Premium, if Any, and Interest, if Any

          Unless otherwise specified in the applicable pricing supplement, a trust is obligated to make payments of principal of, and premium, if any, and interest, if any, on, a foreign currency note in the specified currency. Any amounts so payable by the trust in the specified currency will be converted by the exchange rate agent named in the applicable pricing supplement (the “exchange rate agent”) into United States dollars for payment to the registered holders thereof unless otherwise specified in the applicable pricing supplement or a registered holder elects, in the manner described below, to receive these amounts in the specified currency.

          Any United States dollar amount to be received by a registered holder of a foreign currency note will be based on the highest bid quotation in The City of New York received by the exchange rate agent at approximately 11:00 A.M., New York City time, on the second business day preceding the applicable payment date from three recognized foreign exchange dealers (one of whom may be the exchange rate agent) selected by the exchange rate agent and approved by the trust for the purchase by the quoting dealer of the specified currency for United States dollars for settlement on that payment date in the aggregate amount of the specified currency payable to all registered holders of foreign currency notes scheduled to receive United States dollar payments and at which the applicable dealer commits to execute a contract. All currency exchange costs will be borne by the registered holders of foreign currency notes by deductions from any payments. If three bid quotations are not available, payments will be made in the specified currency.

          Registered holders of foreign currency notes may elect to receive all or a specified portion of any payment of principal, premium, if any, and/or interest, if any, in the specified currency by submitting a written request to the indenture trustee at its corporate trust office in The City of New York on or prior to the applicable regular record date or at least 15 calendar days prior to the maturity date, as the case

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may be. This written request may be mailed or hand delivered or sent by cable, telex or other form of facsimile transmission. This election will remain in effect until revoked by written notice delivered to the indenture trustee on or prior to a regular record date or at least 15 calendar days prior to the maturity date, as the case may be. Registered holders of foreign currency notes to be held in the name of a broker or nominee should contact their broker or nominee to determine whether and how an election to receive payments in the specified currency may be made.

          Unless otherwise specified in the applicable pricing supplement, if the specified currency is other than United States dollars, a beneficial owner of a global security which elects to receive payments of principal, premium, if any, and/or interest, if any, in the specified currency must notify the participant through which it owns its interest on or prior to the applicable record date or at least 15 calendar days prior to the maturity date, as the case may be, of its election. The applicable participant must notify the depositary of its election on or prior to the third business day after the applicable record date or at least 12 calendar days prior to the maturity date, as the case may be, and the depositary will notify the indenture trustee of that election on or prior to the fifth business day after the applicable record date or at least ten calendar days prior the maturity date, as the case may be. If complete instructions are received by the participant from the applicable beneficial owner and forwarded by the participant to the depositary, and by the depositary to the trustee, on or prior to such dates, then the applicable beneficial owner will receive payments in the specified currency.

          A trust will make payments of the principal of, and premium, if any, and/or interest, if any, on foreign currency notes which are to be made in United States dollars in the manner specified herein with respect to notes denominated in United States dollars. See “Description of the Notes — General.” A trust will make payments of interest, if any, on foreign currency notes which are to be made in the specified currency on an Interest Payment Date other than the maturity date by check mailed to the address of the registered holders of their foreign currency notes as they appear in the register, subject to the right to receive these payments by wire transfer of immediately available funds under the circumstances described under “Description of the Notes — General.” A trust will make payments of principal of, and premium, if any, and/or interest, if any, on, foreign currency notes which are to be made in the specified currency on the maturity date by wire transfer of immediately available funds to an account with a bank designed at least 15 calendar days prior to the maturity date by the applicable registered holder, provided the particular bank has appropriate facilities to make these payments and the particular foreign currency note is presented and surrendered at the office or agency maintained by the trust for this purpose in the Borough of Manhattan, The City of New York, in time for the indenture trustee, acting in its capacity as servicer, to make these payments in accordance with its normal procedures.

Availability of Specified Currency

          If the specified currency for foreign currency notes is not available for any required payment of principal, premium, if any, and/or interest, if any, due to the imposition of exchange controls or other circumstances beyond its control, a trust will be entitled to satisfy its obligations to the registered holders of these foreign currency notes by making payments in United States dollars on the basis of the market exchange rate, computed by the exchange rate agent, on the second business day prior to the particular payment or, if the market exchange rate is not then available, on the basis of the most recently available market exchange rate.

          The “market exchange rate” for a specified currency other than United States dollars means the noon dollar buying rate in The City of New York for cable transfers for the specified currency as certified for customs purposes (or, if not so certified, as otherwise determined) by the Federal Reserve Bank of New York.

          All determinations made by the exchange rate agent shall be at its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and binding on the registered holders of the foreign currency notes.

Judgments

          Under current New York law, a state court in the State of New York would be required to render a judgment in respect of a foreign currency note in the specified currency, and a

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judgment in the specified currency would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. Accordingly, registered holders of foreign currency notes would be subject to exchange rate fluctuations between the date of entry of a foreign currency judgment and the time when the amount of the foreign currency judgment is paid in United States dollars and converted by the applicable registered holder into the specified currency. It is not certain, however, whether a non-New York state court would follow the same rules and procedures with respect to conversions of foreign currency judgments.

          Each trust will indemnify the registered holder of any of its notes against any loss incurred as a result of any judgment or order being given or made for any amount due under the particular note and that judgment or order requiring payment in a currency (the “judgment currency”) other than the specified currency, and as a result of any variation between:

• the rate of exchange at which the specified currency amount is converted into the judgment currency for the purpose of that judgment or order; and

• the rate of exchange at which the registered holder, on the date of payment of that judgment or order, is able to purchase the specified currency with the amount of the judgment currency actually received.

DESCRIPTION OF THE FUNDING AGREEMENTS

          Each trust will use the net proceeds from the issuance of a series of notes to the public and the issuance of the trust beneficial interest to the trust beneficial owner to purchase a funding agreement. The funding agreement will have substantially similar payment and other terms to the related series of notes. The funding agreement may be interest bearing or non-interest bearing. A funding agreement may bear interest at either a fixed or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. The calculation of the interest rate, the dates of interest and maturity payments and such other payment terms on the funding agreement will be determined in the same manner as described above under “Description of the Notes.” An amount equal to the funding agreement deposit plus accrued but unpaid interest, if any, and accrued discount, if any (in the case of a discount funding agreement) (other than an amortizing funding agreement) will be payable on its stated maturity date, as specified in the applicable pricing supplement. We may issue an amortizing funding agreement that pays an amount in respect of both interest and deposit amount over the life of the funding agreement, if specified in the applicable pricing supplement.

          The pricing supplement relating to a series of notes will describe the following pricing terms of the related funding agreement:

• the deposit amount and the specified currency for the funding agreement;

• whether the funding agreement:

          (1) is a fixed rate funding agreement,

          (2) is a floating rate funding agreement,

          (3) is an amortizing funding agreement, meaning that a portion or all of the deposit amount is payable prior to the stated maturity in accordance with a schedule or by application of a formula, and/or

          (4) is a discount funding agreement that does not bear interest currently or bears interest at a rate that is below market rates at the effective date;

• the price at which the funding agreement will be issued, which will be expressed as a percentage of the aggregate deposit amount or face amount;

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• the effective date on which the funding agreement will be issued;

• the stated maturity date;

• if the funding agreement is a fixed rate funding agreement, the rate per annum at which the funding agreement will bear any interest and the interest payment date frequency;

• if the funding agreement is a floating rate funding agreement, relevant terms such as:

          (1) the interest rate basis,

          (2) the initial interest rate,

          (3) the interest reset period or the interest reset dates,

          (4) the interest payment dates,

          (5) the index maturity,

          (6) any maximum interest rate,

          (7) any minimum interest rate,

          (8) the spread and/or spread multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the funding agreement and whether and how the spread and/or spread multiplier may be changed prior to stated maturity;

• if the funding agreement is an amortizing funding agreement, the terms for repayment prior to the stated maturity;

• whether the funding agreement may be redeemed by us, or repaid at the option of the trust, prior to the stated maturity and the terms of its redemption or repayment; provided in either case the relevant series of notes will contain substantially the same redemption and repayment terms and no funding agreement may be redeemed or repaid without the simultaneous redemption or repayment of the related series of notes; and

• any other terms of the funding agreement.

          For a more detailed discussion of the funding agreements, see “Description of the Funding Agreements” in the accompanying prospectus.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

          The following is a general discussion of the material United States federal income tax considerations relating to the purchase, ownership and disposition of the notes by initial purchasers of the notes who purchase the notes at their issue price (determined as set forth below) and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). The statements set forth in the following discussion, to the extent they constitute matters of United States federal income tax law or legal conclusions with respect thereto, represent the opinion of Sidley Austin LLP, special United States income tax counsel to us. This discussion does not address all of the tax considerations that may be relevant to prospective purchasers in light of their particular circumstances or to persons subject to special rules under United States federal tax laws, such as certain financial institutions, insurance companies, real estate investment trusts, dealers in securities, tax-exempt entities, certain former citizens or residents of the United States, persons who hold the notes as part of a “straddle,” “hedging,” “conversion” or other integrated transaction, persons who mark their securities to market for United States federal income tax purposes or persons whose functional currency (as defined in section 985 of the Code) is not the U.S. dollar. In addition, this discussion does not address the effect of any state, local or foreign tax laws or the effect of the U.S. federal alternative minimum tax. Accordingly, prospective purchasers are advised to consult their own tax advisers with respect to their individual circumstances.

          This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect.

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          For purposes of the following discussion, the term “U.S. Holder” means a beneficial owner of a note who or which is, for United States federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate or trust treated as a United States person under section 7701(a)(30) of the Code. The term “Non-U.S. Holder” means a beneficial owner of a note other than a U.S. Holder. For the purposes of this discussion, U.S. Holders and Non-U.S. Holders shall be referred to collectively as “holders.”

          Special rules, not discussed in this prospectus supplement or the accompanying prospectus, may apply to persons purchasing notes through entities treated for U.S. federal income tax purposes as partnerships, and such persons should consult their own tax advisors in that regard.

Classification of the Notes and the Trust

          We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness (the “Intended Tax Characterization”). Each holder of a note (or any beneficial interest therein), by acceptance of the note (or beneficial interest), agrees to treat the trust with respect to which the note was issued and the note consistently with the Intended Tax Characterization.

          Notwithstanding the Intended Tax Characterization, it is possible that a trust could be viewed as a separate entity for United States federal income tax purposes. Sidley Austin LLP is of the opinion that, under current law and assuming full compliance with the terms of the trust agreement and the indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, each trust will not be classified as an association (or publicly traded partnership) taxable as a corporation for United States federal income tax purposes. Accordingly, whether the Intended Tax Characterization is respected or not, each trust will not be treated as a taxable entity for United States federal income tax purposes. If a trust is viewed as a separate entity rather than disregarded, each holder of a note (or any beneficial interest therein) agrees to treat the trust as a grantor trust and the notes as undivided ownership interests in such trust. If this were the case, a U.S. Holder would be required to include in income, consistent with its method of accounting, its pro rata share of any amounts paid to the relevant trust to satisfy expenses and would be entitled to deduct, consistent with its method of accounting, its pro rata share of any such expenses as provided in sections 162 and 212 of the Code. If the U.S. Holder is an individual, trust or estate, or to the extent the U.S. Holder’s income is reportable on the income tax return of an individual, trust or estate, the deduction for such person’s share of such expenses will be allowed only to the extent that all of such person’s miscellaneous itemized deductions, including such person’s share of the relevant trust’s expenses, exceed two percent of such person’s adjusted gross income. In addition, an individual’s itemized deductions may be subject to other limitations. Accordingly, U.S. Holders who are individuals, or whose income is reported in whole or in part on the income tax return of a United States citizen or resident, should consult their tax advisers with respect to such deductions.

          The remainder of this summary assumes that the Intended Tax Characterization is correct.

U.S. Holders

Interest and Original Issue Discount

          Each U.S. Holder of a note will include in income payments of “qualified stated interest” (as described below) in respect of such note, in accordance with such U.S. Holder’s method of accounting for United States federal income tax purposes, as ordinary interest income. In general, if the issue price of a note, determined by the first price at which a substantial amount of the notes of the related series are sold (ignoring sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), is less than the “stated redemption price at maturity” (as described below) of such note by an amount equal to or more than a de minimis amount, a U.S. Holder will be considered to have purchased such note with original issue discount (“OID”). In general, the de minimis amount is equal to ¹/4 of one percent of the stated redemption price at maturity multiplied by the weighted average num-

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ber of complete years to maturity from the issue date of such note. If a U.S. Holder acquires a note with OID, then regardless of such U.S. Holder’s method of accounting, such U.S. Holder will be required to accrue its pro rata share of OID on such note on a constant-yield basis and include such accruals in gross income, whether or not such U.S. Holder has received any cash payment on the notes. Any amount not treated as OID because it is less than the de minimis amount generally must be included in income (generally as gain from the sale of notes) as principal payments are received in the proportion that each such payment bears to the original principal amount of the note. Special rules apply to notes with a fixed maturity of one year or less. See “— Short Term Notes.”

          “Stated redemption price at maturity” means the sum of all payments to be made on a note other than payments of “qualified stated interest.” “Qualified stated interest” generally means stated interest that is unconditionally payable at least annually at a single fixed rate or, in the case of a variable rate debt instrument (as defined below), at a single qualified floating rate or single objective rate (as such terms are defined below). If a note is a variable rate debt instrument but interest is payable at other than a single qualified floating rate or a single objective rate, special rules apply that are not discussed in this prospectus supplement or the accompanying prospectus.

          In the case of a variable rate debt instrument, the amount of qualified stated interest and the amount of OID, if any, that accrues during an accrual period is generally determined assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate (each as defined below), the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate or (ii) in the case of an objective rate (as defined below, and other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the debt instrument, and the qualified stated interest (or, if there is no qualified stated interest, OID) allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid during the accrual period pursuant to clause (i) or (ii), as applicable. Special rules apply to a variable rate debt instrument that provides for stated interest at a fixed rate under certain circumstances.

          A “variable rate debt instrument” is a debt instrument that (i) has an issue price that does not exceed the total noncontingent principal payments by more than an amount equal to the lesser of (a) 0.015 multiplied by the product of such total noncontingent principal payments and the number of complete years to maturity of the instrument (or, in the case of a note providing for the payment of any amount other than qualified stated interest prior to maturity, multiplied by the weighted average maturity of the note) or (b) 15 percent of the total noncontingent principal payments, (ii) provides for stated interest (compounded or paid at least annually) at the current value of (A) one or more qualified floating rates, (B) a single fixed rate and one or more qualified floating rates, (C) a single objective rate or (D) a single fixed rate and a single objective rate that is a qualified inverse floating rate, and (iii) does not provide for any principal payments that are contingent. The current value is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.

          A “qualified floating rate” is generally a floating rate under which variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which a debt instrument is denominated. A multiple of a qualified floating rate is not a qualified floating rate unless the relevant multiplier is (i) fixed at a number that is greater than 0.65 but not more than 1.35 or (ii) fixed at a number that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. A variable rate is not considered a qualified floating rate if the variable rate is subject to a cap, floor, governor (i.e., a restriction on the amount of increase or decrease in the stated interest rate) or similar restriction that is reasonably expected as of the issue date to cause the yield on the note to be significantly more or less than the expected yield determined without the restriction (other than a cap, floor, governor or similar restriction that is fixed throughout the term of the note).

          An “objective rate” is a rate (other than a qualified floating rate) that is determined using

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a single fixed formula and that is based on objective financial or economic information, provided, however, that an objective rate will not include a rate based on information that is within the control of the issuer (or certain related parties of the issuer) or that is unique to the circumstances of the issuer (or certain related parties of the issuer), such as dividends, profits or the value of the issuer’s stock. A “qualified inverse floating rate” is an objective rate (x) that is equal to a fixed rate minus a qualified floating rate and (y) the variations in which can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate (disregarding any caps, floors, governors or similar restrictions that would not, as described above, cause a rate to fail to be a qualified floating rate). Notwithstanding the first sentence of this paragraph, a rate is not an objective rate if it is reasonably expected that the average value of the rate during the first half of the note’s term will be either significantly less than or significantly greater than the average value of the rate during the final half of the note’s term. The Internal Revenue Service (“IRS”) may designate rates other than those specified above that will be treated as objective rates. As of the date of this prospectus supplement, no other rates have been designated.

          If interest on a note is stated at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. A fixed rate and a variable rate will be conclusively presumed to meet the requirements of the preceding sentence if the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 0.25 percentage points (25 basis points).

          If a floating rate note does not qualify as a variable rate debt instrument or otherwise provides for contingent payments, or if a fixed rate note provides for contingent payments, such note may constitute a “contingent payment debt instrument.” A note that is a contingent payment debt instrument is generally taxable as follows:

          First, we are required to determine, as of the issue date, the comparable yield for the note. The comparable yield is generally the yield at which we would issue a fixed rate debt instrument with terms and conditions similar to those of the note (including the level of subordination, term, timing of payments and general market conditions, but not taking into consideration the riskiness of the contingencies or the liquidity of the note), but not less than the applicable federal rate announced monthly by the IRS (the “AFR”). In certain cases where a floating rate note is marketed or sold in substantial part to tax-exempt investors or other investors for whom the prescribed inclusion of interest is not expected to have a substantial effect on their U.S. federal tax liability, the comparable yield for the note, without proper evidence to the contrary, is presumed to be the AFR.

          Second, we are required to construct a projected schedule of payments (the “Schedule”). The Schedule is determined as of the issue date and generally remains in place throughout the term of the note. The Schedule includes each noncontingent payment and a projected payment for each contingent payment. The Schedule must produce the comparable yield determined as set forth above.

          Third, under the usual rules applicable to OID and based on the comparable yield, each U.S. Holder will be required to accrue its pro rata share of OID on a constant yield basis and include such accrual in gross income.

          Fourth, appropriate adjustments are made to the OID determined under the foregoing rules to account for any differences between actual contingent payments and the projected payments on the Schedule.

          Differences between the actual contingent payments made to a U.S. Holder in such U.S. Holder’s taxable year and the projected payments for such taxable year are generally aggregated and taken into account, in the case of a positive difference, as additional interest income, or, in the case of a negative difference, first as a reduction in OID for such year and thereafter, subject to certain limitations, as ordinary loss. We are required to provide to each holder of notes a

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copy of the Schedule. Our determination of the Schedule must be used by a U.S. Holder unless the Schedule is unreasonable and such U.S. Holder discloses to the IRS that it is using a different schedule. In general, any gain realized by a U.S. Holder on the sale, exchange, retirement or other disposition of a note that is a contingent payment debt instrument prior to the time no contingent payments remain is treated as interest income. In general, any loss on such a note is treated as ordinary loss to the extent it does not exceed such U.S. Holder’s prior interest inclusions on the note (net of negative adjustments). The above described treatment of contingent payment debt instruments assumes that the instrument is properly treated as debt for U.S. federal tax purposes.

Premiums

          If the amount paid by a U.S. Holder for a note exceeds the stated redemption price at maturity of the note, the U.S. Holder generally will be considered to have purchased the note at a premium equal in amount to such excess. In this event, the U.S. Holder may elect to amortize such premium, generally on a constant-yield basis, as an offset to interest income. In the case of a note that may be redeemed prior to maturity, the premium is calculated assuming the trust and the U.S. Holder will exercise or not exercise redemption rights in a manner that maximizes the U.S. Holder’s yield. It is unclear how premium is calculated when the redemption date or the amount of any redemption premium is uncertain. The election to amortize bond premium, once made, will apply to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.

Short-Term Notes

          Notes that have a fixed maturity of one year or less (“Short-Term Notes”) will be treated as issued with OID. In general, an individual or other U.S. Holder that uses the cash method of accounting is not required to accrue such OID unless the U.S. Holder elects to do so. If such an election is not made, any gain recognized by such U.S. Holder on the sale, exchange, retirement or other disposition of Short-Term Notes will be ordinary income to the extent of the OID accrued on a straight-line basis, or upon election under the constant yield method (based on daily compounding), through the date of sale, exchange, retirement or other disposition, and a portion of the deduction otherwise allowable to such U.S. Holder for interest on borrowings allocable to Short-Term Notes will be deferred until a corresponding amount of income is realized. U.S. Holders who report income for United States federal income tax purposes under the accrual method of accounting and certain other holders are required to accrue OID related to a Short-Term Note as ordinary income on a straight-line basis unless an election is made to accrue the OID under a constant yield method (based on daily compounding).

Sale, Exchange, Retirement or Other Disposition of Notes

          In general, a U.S. Holder of a note will have a tax basis in the note equal to the cost of the note to the U.S. Holder, increased by any amount includible in income by the U.S. Holder as OID and reduced by any amortized premium and any payments other than payments of qualified stated interest. Upon a sale, exchange, retirement or other disposition of a note, a U.S. Holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange, retirement or other disposition (less any amount realized that is attributable to accrued but unpaid qualified stated interest, which will constitute ordinary income if not previously included in income) and the U.S. Holder’s tax basis in such note. Subject to the rules described below under “Foreign Currency Notes,” such gain or loss will be long-term capital gain or loss if the U.S. Holder held the note for more than one year at the time of disposition. A U.S. Holder that is an individual is entitled to preferential treatment for net long-term capital gains. The ability of a U.S. Holder to offset capital losses against ordinary income is limited.

Foreign Currency Notes

          The following discussion generally describes special rules that apply, in addition to the rules described above, to notes that are denominated in, or provide for payments determined by reference to, a currency or currency unit other than the U.S. dollar (“Foreign Currency Notes”). The amount of qualified stated interest paid with

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respect to a Foreign Currency Note that is includible in income by a U.S. Holder that uses the cash method of accounting for United States federal income tax purposes is the U.S. dollar value of the amount paid, as determined on the date of actual or constructive receipt by such U.S. Holder, using the spot rate of exchange on such date. In the case of qualified stated interest paid to a U.S. Holder that uses the accrual method of accounting, and in the case of OID (other than OID from a Short-Term Note that is not required to be accrued) for every U.S. Holder, such U.S. Holder is required to include the U.S. dollar value of the amount of such interest income or OID that accrued during the accrual period. The U.S. dollar value of such accrued interest income or OID is generally determined by translating such income at the average rate of exchange for the accrual period or, at the U.S. Holder’s election, at the spot rate of exchange on the last day of the accrual period. The U.S. Holder will recognize, as ordinary income or loss, foreign currency exchange gain or loss with respect to such accrued interest income or OID on the date the interest or OID is actually or constructively received, reflecting fluctuations in currency exchange rates between the exchange rate used to determine the accrued interest income or OID for the relevant accrual period and the exchange rate on the date such interest or OID is actually or constructively received.

          The amount realized with respect to a sale, exchange, retirement or other disposition of a Foreign Currency Note generally will be the U.S. dollar value of the payment received, determined on the date of disposition of such note (using the spot rate on such date). Gain or loss that is recognized will be ordinary income or loss to the extent it is attributable to fluctuations in currency rates between the date of purchase and the date of sale, exchange, retirement or other disposition. Such foreign currency gain or loss will be recognized only to the extent of the total gain or loss realized by the U.S. Holder on the sale, exchange, retirement or other disposition of the Foreign Currency Note. Any gain or loss realized by a U.S. Holder in excess of such foreign currency gain or loss generally will be capital gain or loss.

Non-U.S. Holders

          Subject to the discussion below concerning backup withholding, the following is a discussion of United States federal income tax considerations generally applicable to Non-U.S. Holders:

          (a) payments of principal and interest (including OID) with respect to a note held by or for a Non-U.S. Holder will not be subject to withholding of United States federal income tax, provided that, in the case of interest, (i) such interest is not received by a bank on an extension of credit made pursuant to a loan agreement entered in the ordinary course of its trade or business, (ii) such Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all of our classes of stock entitled to vote, (iii) such Non-U.S. Holder is not a controlled foreign corporation, within the meaning of section 957(a) of the Code, that is related, directly or indirectly, to us through stock ownership, (iv) such interest is not contingent interest described in section 871(h)(4)(A) of the Code and (v) the statement requirement set forth in section 871(h) or section 881(c) of the Code (described below) has been fulfilled with respect to such Non-U.S. Holder; and

          (b) a Non-U.S. Holder will generally not be subject to United States federal income tax on gain realized on the sale, exchange, retirement or other disposition of a note, unless (i) such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale, exchange, retirement or other disposition and certain other conditions are met or (ii) such gain is effectively connected with the conduct, by such Non-U.S. Holder, of a trade or business in the United States.

          Sections 871(h) and 881(c) of the Code require that, in order to obtain the exemption from withholding of United States federal income tax described in paragraph (a) above, either the Non-U.S. Holder or a securities clearing organiza-

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tion, bank or other financial institution that holds customers’ securities in the ordinary course of its trade or business (a “Financial Institution”) and that is holding the note on behalf of such Non-U.S. Holder must file a statement with the withholding agent to the effect that the Non-U.S. Holder is not a United States person. Such requirement will be fulfilled if the Non-U.S. Holder certifies on IRS Form W-8BEN (or successor form), under penalties of perjury, that it is not a United States person and provides its name and address, or any Financial Institution holding the note on behalf of the Non-U.S. Holder files a statement with the withholding agent to the effect that it has received such a statement from the Non-U.S. Holder (and furnishes the withholding agent with a copy thereof). In addition, in the case of notes held by a foreign intermediary (other than a “qualified intermediary”) or a foreign partnership (other than a “withholding foreign partnership”), the foreign intermediary or partnership, as the case may be, generally must provide a properly executed IRS Form W-8IMY (or successor form) and attach thereto an appropriate certification by each foreign beneficial owner or United States payee.

          If a Non-U.S. Holder is engaged in a trade or business in the United States, and if amounts treated as interest for United States federal income tax purposes on a note or gain realized on the sale, exchange, retirement or other disposition of a note is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding of federal income tax described in paragraph (a) above, will, unless otherwise provided by an applicable tax treaty, generally be subject to regular United States federal income tax on such effectively connected income in the same manner as if it were a U.S. Holder. In lieu of the certificate described in the preceding paragraph, such Non-U.S. Holder will be required to provide a properly executed IRS Form W-8ECI (or successor form) to the withholding agent in order to claim an exemption from withholding tax. In addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments.

          If a Non-U.S. Holder is not eligible for relief under one of the exceptions described above, it may nonetheless qualify for an exemption from, or reduced rate of, United States withholding tax under an income tax treaty. In general, this exemption or reduced rate of tax applies only if the Non-U.S. Holder provides a properly completed IRS Form W-8BEN claiming benefits under an applicable treaty.

Backup Withholding and Information Reporting

          Backup withholding and information reporting requirements generally apply to interest (including OID) and principal payments made to, and to the proceeds of sales by, certain non-corporate U.S. Holders. A U.S. Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing a properly-executed IRS Form W-9 (or successor form). In the case of a Non-U.S. Holder, backup withholding and information reporting will not apply to payments on, or from the sale, exchange, retirement or other disposition of, a note if a statement referred to in clause (a)(v) of the first paragraph in “Non-U.S. Holders” above has been received and the payor does not have actual knowledge that the beneficial owner is a United States person. Withholding agents must nevertheless report to the IRS and to each Non-U.S. Holder the amount of interest (including OID) paid with respect to the notes held by each Non-U.S. Holder and the rate of withholding (if any) applicable to each Non-U.S. Holder. Non-U.S. Holders should consult their own tax advisers regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the beneficial owner’s United States federal income tax liability provided the required information is furnished to the IRS.

European Union Directive on the Taxation of Savings Income

          On July 1, 2005, a directive adopted by the European Council of Economics and Finance

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Ministers regarding the taxation of savings income took effect. Should any deduction or withholding on account of tax be required to be made, or be made, in accordance with the terms of this section, no additional amounts shall be paid or payable by any trust or by us unless specified in the applicable pricing supplement or funding agreement that additional amounts will be paid. See “Description of the Notes — Final European Union Withholding Tax System.”

Opinion Regarding Tax Matters

          Prior to the issuance of any notes, we will file with a Current Report on Form 8-K an unqualified opinion of legal counsel regarding the tax treatment of such notes.

PLAN OF DISTRIBUTION

          This prospectus supplement relates to the offering of notes by separate trusts from time to time for sale to or through Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Barclays Capital Inc., Bear, Stearns & Co. Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, UBS Securities LLC and Wachovia Capital Markets, LLC (the “Agents”) pursuant to a distribution agreement (the “Distribution Agreement”) among the applicable trust, us, PFG and the Agents. From time to time, we may also appoint one or more other broker-dealers to act as an Agent under the secured medium-term notes program pursuant to the terms of the Distribution Agreement and such Agent will be specified in the applicable pricing supplement. The Agents, individually or in a syndicate, may purchase notes, as principal, from separate trusts from time to time for resale to investors and other purchasers at varying prices relating to prevailing market prices at the time of resale as determined by the applicable Agent or, if so specified in the applicable pricing supplement, for resale at a fixed offering price. However, the applicable trust may agree with an Agent for that Agent to utilize its reasonable efforts on an agency basis on its behalf to solicit offers to purchase notes at 100% of the principal amount thereof, unless otherwise specified in the applicable pricing supplement. In all such cases, a single trust may only issue notes of a single series on the initial date of sale of such notes. No additional notes may thereafter be issued by that trust. Unless otherwise specified in the applicable pricing supplement, the applicable trust will pay a commission to an Agent, ranging from .150% to .875% of the principal amount of each note, depending upon its stated maturity, sold through that Agent as its agent. The notes may be sold to United States and foreign institutional and other investors.

          Subject to the terms of the Distribution Agreement, concurrently with any offering of notes as described in this prospectus supplement by the applicable trust, a separate trust may issue other notes under our Principal^® Life CoreNotes^® program or our secured medium-term notes retail program primarily to retail investors or the accompanying prospectus or this prospectus supplement.

          Unless otherwise specified in the applicable pricing supplement, any note sold to an Agent as principal will be purchased by that Agent at a price equal to 100% of the principal amount thereof less a percentage of the principal amount equal to the commission applicable to an agency sale of a note of identical maturity. An Agent may sell notes it has purchased from the applicable trust as principal to certain dealers less a concession equal to all or any portion of the discount received in connection with that purchase. An Agent may allow, and dealers may reallow, a discount to certain other dealers. After the initial offering of notes (in the case of notes to be sold on a fixed offering price basis), the concession and the reallowance may be changed.

          The applicable trust reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject offers in whole or in part. Each Agent will have the right, in its discretion reasonably exercised, to reject in whole or in part any offer to purchase notes received by it on an agency basis.

          Unless otherwise specified in the applicable pricing supplement, you will be required to

S-49

pay the purchase price of your notes in immediately available funds in the specified currency in The City of New York on the date of settlement.

          Upon issuance, the notes will not have an established trading market. The notes may not be listed on any securities exchange. The Agents may from time to time purchase and sell notes in the secondary market, but the Agents are not obligated to do so. There can be no assurance that a secondary market for the notes will develop or that there will be liquidity in the secondary market if one develops. From time to time, the Agents may make a market in the notes, but the Agents are not obligated to do so and may discontinue any market-making activity at any time.

          In connection with an offering of notes purchased by one or more Agents as principal on a fixed offering price basis, the applicable Agents will be permitted to engage in certain transactions that stabilize the price of notes. These transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of notes. If those Agents create a short position in notes (i.e., if they sell notes in an amount exceeding the amount referred to in the applicable pricing supplement), they may reduce that short position by purchasing notes in the open market. In general, purchases of notes for the purpose of stabilization or to reduce a short position could cause the price of notes to be higher than it might be in the absence of these type of purchases.

          None of us, PFG, the applicable trust or any Agent makes any representation or prediction as to the direction or magnitude of any effect that the transactions described in the immediately preceding paragraph may have on the price of notes. In addition, none of us, PFG, the applicable trust or any Agent makes any representation that the Agents will engage in any such transactions or that such transactions, once commenced, will not be discontinued without notice.

          The Agents are “underwriters” within the meaning of the Securities Act of 1933, as amended, with respect to the notes being distributed, the funding agreement purchased by the trust and the guarantee issued to the trust. We and PFG have agreed, jointly and severally, to indemnify the Agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Agents may be required to make in respect thereof.

          With respect to any series of notes as to which affiliates of the indenture trustee will serve as an Agent, the relevant trust will appoint an eligible and unaffiliated entity to serve as indenture trustee with respect to such series of notes, instead of the indenture trustee.

          We are a statutory issuer of the notes under the Securities Act of 1933, as amended. In addition, under the Securities Act of 1933, as amended, each trust is a statutory underwriter of the related funding agreement and guarantee.

          In the ordinary course of business, the Agents and their affiliates have engaged, and may in the future engage, in investment and commercial banking transactions with us and certain of our affiliates, including PFG.

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$4,000,000,000

Secured Medium-Term Notes (That are also Asset-Backed Securities)

Due Between Nine Months

and Thirty Years From

the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements

Issued by Principal Life Insurance Company

and

Guarantees Issued by

Principal Financial Group, Inc.

PROSPECTUS SUPPLEMENT

Merrill Lynch & Co.

ABN AMRO Incorporated

Banc of America Securities LLC

Barclays Capital

Bear, Stearns & Co. Inc.

BNP PARIBAS

Citigroup

Credit Suisse First Boston

Deutsche Bank Securities

Goldman, Sachs & Co.

JPMorgan

Lehman Brothers

Morgan Stanley

UBS Investment Bank

Wachovia Securities

                    , 2006

The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated January 25, 2006

PROSPECTUS SUPPLEMENT

(To prospectus dated                , 2006)

$4,000,000,000

Principal^® Life CoreNotes^® (That are also Asset-Backed Securities)

Due Between Nine Months and Thirty Years From the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements Issued by

Principal Life Insurance Company and

Guarantees Issued by Principal Financial Group, Inc.

          Principal Life: We are Principal Life Insurance Company, an Iowa insurance company, the sponsor of the program and the depositor and issuer of the funding agreements described below. This prospectus supplement relates to the offering, from time to time, through newly established separate and distinct issuing entities in the form of the trusts described below, of one or more series of Principal^® Life CoreNotes^® (that are also asset-backed securities), which we refer to in this prospectus supplement as “notes,” in an aggregate principal amount of up to $4,000,000,000, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program issued primarily to institutional investors pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          Issuing Entities: The applicable trust will use the net proceeds from the offering of its series of notes to purchase a funding agreement sold to, and deposited into, the applicable trust, by us. Our payment obligations under the funding agreement relating to the applicable series of notes will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc., a Delaware corporation and our indirect parent (“PFG”).

          Each trust exists for the exclusive purpose of issuing and selling one series of notes to investors, using the net proceeds from the sale of that series of notes to acquire a funding agreement from us, collaterally assigning and granting a security interest in the applicable funding agreement, and collaterally assigning and granting a security interest in the applicable guarantee, in favor of the indenture trustee, and engaging in other activities necessary or incidental thereto.

          The notes are obligations of the applicable issuing entity. The notes are secured medium-term notes that are also asset-backed securities.

          You should read this prospectus supplement, the accompanying prospectus and the applicable pricing supplement carefully before you invest in the notes.

          The notes: The specific terms and conditions of each series of notes will be as set forth in a separate pricing supplement. The notes of each series will:

• be issued by a separate and distinct trust and will be the obligations of that issuing entity;

• provide for payment in U.S. dollars;

• rank as secured indebtedness of the trust secured primarily by a funding agreement issued by us;

• be issued in only one class;

• unless otherwise specified in the applicable pricing supplement, not be listed on any securities exchange;

• unless otherwise specified in the applicable pricing supplement, have a minimum denomination of $1,000 and integral multiples in excess thereof;

• be in book-entry form;

• represent non-recourse obligations of the trust and be paid only from the assets of that trust;

• represent the trust’s obligations only and will not represent obligations of, represent interests in, or be guaranteed by, us, PFG or any of our or its affiliates;

• bear interest at fixed or floating rates, or bear no interest at all;

• pay interest on each series of notes on a monthly, quarterly, semi-annual or annual basis (unless otherwise specified in the applicable pricing supplement);

• have a stated maturity of between 9 months and 30 years from the date of issue;

• have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of notes; and

• be sold in the United States to retail investors.

          Holders of a series of notes may look only to the trust’s rights and title in the funding agreement issued to, and deposited into, the applicable trust by us, the related guarantee issued by PFG and any proceeds of that funding agreement and guarantee held in the trust and not to any other assets or collateral held by any other trust, us or PFG.

          Investing in the notes involves risks that are described in the “Risk Factors” section beginning on page 2 of the accompanying prospectus.

          None of the Securities and Exchange Commission (the “SEC”), any state securities commission or any state insurance commission has approved or disapproved of these securities or determined if this prospectus supplement, the accompanying prospectus or any pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

          The trusts may sell notes to the purchasing agent referred to below as principal for resale at a fixed offering price specified in the applicable pricing supplement or at varying prices. The trusts may also explicitly agree with the purchasing agent that it will use its reasonable efforts as agent on the trust’s behalf to solicit offers to purchase notes from such trusts.

Merrill Lynch & Co.

The date of this prospectus supplement is               , 2006.

“Principal^®” and “Principal Financial Group and Design^®” are registered service marks of Principal Financial Services, Inc. and are used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

TABLE OF CONTENTS

	Page
PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS		S-1
SUMMARY		S-3
DESCRIPTION OF THE NOTES		S-14
DESCRIPTION OF THE FUNDING AGREEMENTS		S-37
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS		S-38
PLAN OF DISTRIBUTION		S-43
REPAYMENT ELECTION FORM		A-1
PROSPECTUS
ABOUT THIS PROSPECTUS		1
RISK FACTORS		2
FORWARD LOOKING INFORMATION		11
WHERE YOU CAN FIND MORE INFORMATION		11
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE		12
USE OF PROCEEDS		14
RATIO OF EARNINGS TO FIXED CHARGES		14
PRINCIPAL LIFE INSURANCE COMPANY AND PRINCIPAL FINANCIAL GROUP, INC.		15
DESCRIPTION OF THE TRUSTS		17
DESCRIPTION OF THE NOTES		22
DESCRIPTION OF THE FUNDING AGREEMENTS		35
DESCRIPTION OF THE GUARANTEES		41
FEES AND EXPENSES		42
ERISA CONSIDERATIONS		43
PLAN OF DISTRIBUTION		45
LEGAL MATTERS		46
EXPERTS		47

ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS

          This document is a prospectus supplement and supplements a prospectus which is part of the registration statement that we and PFG have filed with the SEC. This prospectus supplement provides you with a general description of the notes being offered, through newly established separate and distinct trusts and the underlying funding agreements and guarantees, and supplements the description of the notes, the underlying funding agreements and guarantees contained in the accompanying prospectus. These notes may be offered from time to time, through trusts, in one or more series of notes with a total initial public offering price or purchase price of up to $4,000,000,000, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program issued primarily to institutional investors pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          The specific terms and conditions of notes being offered and the related funding agreement and guarantee will be contained in a pricing supplement. A copy of that pricing supplement will be provided to you along with a copy of this prospectus supplement and the accompanying prospectus. That pricing

S-1

supplement also may add, update, supplement or clarify information in this prospectus supplement and the accompanying prospectus. You should carefully review such additional, updated, supplemental or clarifying information contained in the pricing supplement. You should read this prospectus supplement and the accompanying prospectus and the pricing supplement together with the additional information that is incorporated by reference in this prospectus supplement and the accompanying prospectus. That additional information is described under the heading “Incorporation of Certain Documents by Reference” beginning on page 12 of the accompanying prospectus.

          You should rely only on the information incorporated by reference or provided in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement. None of us, PFG, any trust or the purchasing agent has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. None of us, PFG, any trust or the purchasing agent is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement, as well as information PFG previously filed with the SEC and incorporated by reference, is accurate only as of its respective date The business, financial condition, results of operations and prospects of us and PFG may have changed since that date.

          In this prospectus supplement, references to “Principal Life,” “we,” “us” and “our” are to Principal Life Insurance Company, an Iowa life insurance company, references to “PFG” are to Principal Financial Group, Inc., a Delaware corporation and our indirect parent company, and references to “trust” are to the applicable newly established separate and distinct special purpose common law trust, formed in a jurisdiction located in the United States of America specified in the applicable pricing supplement, which actually issues the applicable series of notes. In this prospectus supplement, we refer to each series of Principal^® Life CoreNotes^® as a “series of notes” and to Principal^® Life CoreNotes^® in general as “notes.”

          In this prospectus supplement, references to “United States dollars,” “U.S. dollars” or “$” are to lawful currency of the United States of America.

S-2

SUMMARY

          This section summarizes the material legal and financial terms of the notes and the underlying funding agreements and guarantees that are described in more detail in “Description of the Notes” beginning on page S-14 of this prospectus supplement, “Description of the Funding Agreements” beginning on page S-37 of this prospectus supplement, and “Description of the Guarantees” beginning on page 40 of the accompanying prospectus. Final terms of any particular series of notes are set at the time of sale and will be contained in a pricing supplement relating to that series of notes and the related funding agreement and guarantee. That pricing supplement may add to, update, supplement or clarify the terms contained in this summary. In addition, you should read the more detailed information appearing elsewhere in the accompanying prospectus, this prospectus supplement and the applicable pricing supplement.

The Trusts	Each series of notes will be issued by a newly established and separately created common law trust. Each trust will be established by GSS Holdings II, Inc., as trust beneficial owner, and U.S. Bank Trust National Association, as trustee, pursuant to a trust agreement (each, a “trust agreement”). The assets and liabilities of each trust are separate and distinct from the assets and liabilities of every other trust, us and PFG.
The Sponsor and the Depositor	We are the sponsor of the program and the registrant as a depositor and issuer of the funding agreements under the program.
The Guarantor	PFG is a registrant as the issuer of the guarantees that will fully and unconditionally guarantee our payment obligations under the funding agreements.
Purpose of Trusts	The sole purpose of each trust is to facilitate a program for the issuance of notes to the public. Each trust may only issue one series of notes and such notes will be issued only on the original issue date for such notes. Each series of notes will be secured by only one funding agreement purchased from us by the applicable trust, the principal amount of which may not be increased. Our payment obligations under each funding agreement will be fully and unconditionally guaranteed by PFG. The trust will use the net proceeds received from issuing a series of notes to acquire a funding agreement, for, and to be held in, the trust. The trust will hold the collateral described below pertaining to the applicable series of notes to fund its obligations under that series of notes. Notes issued by the trust will be the direct obligations of the trust and will not be the obligation of any other trust, us or PFG. Holders of notes of a particular series may only look to the funding agreement issued by us, the related guarantee issued by PFG and any proceeds of such funding agreement and guarantee held in the related trust for payment on their notes and not to the assets held in any other trust or by us or PFG.
	We and PFG are not affiliated with any trust. Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates owns any beneficial interest in any trust nor has any of these persons or entities entered into any agreement with any trust other than in furtherance of the issuance of notes from time

S-3

to time as contemplated by this prospectus supplement and the accompanying prospectus.

Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates is affiliated with the trustee, the trust beneficial owner or the indenture trustee relating to the notes.

Below is a diagram showing the parties involved in the issuance of notes by each trust.

We Can Issue Medium-Term Notes and Funding Agreements Directly to Investors	We are able to issue our own medium-term notes directly to investors and do issue funding agreements directly to investors. However, by securing each trust’s notes with a funding agreement, such trust’s notes are secured by an asset that would have a higher priority in insolvency than our unsecured medium-term notes, if any, and may be entitled to receive a higher investment rating from one or more nationally recognized rating agencies than our unsecured medium-term notes. In addition, funding agreements are very difficult to transfer and have no active secondary market. By securing each trust’s notes with a funding agreement, investors may be able to avail themselves of many of the benefits of our funding agreements while benefiting from the liquidity afforded by each trust’s medium-term notes.
Purchasing Agent	Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Principal® Life CoreNotes®	This prospectus supplement relates to notes that one or more trusts may issue and sell in the United States to retail and other investors under our Principal® Life CoreNotes® program.
Secured Medium-Term Notes Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement

S-4

	relating to notes that may be issued and sold to institutional investors by newly established trusts under the related secured medium-term notes program. The terms of the secured medium-term notes are identical in all material respects to the terms of the notes to be sold under this Principal® Life CoreNotes® program, as described in this prospectus supplement, except that the secured medium-term notes:
	• may be issued as amortizing notes;
	• may be denominated in one or more foreign currencies;
	• will not contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes; and
	• may contain a provision providing for the redemption of the notes if we are required to pay additional amounts on the related funding agreement pursuant to the applicable pricing supplement and we exercise our right to redeem the funding agreement.
Secured Medium-Term Notes Retail Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to retail investors by newly established trusts under the related secured medium-term notes retail program. The terms of the secured medium-term notes retail program are identical in all material respects to the terms of the notes to be sold under this Principal® Life CoreNotes® program. However, unlike the Principal® Life CoreNotes® program, the notes issued and sold under the secured medium-term notes retail program may be distributed by one or more agents which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Amount	The trusts may collectively issue up to a maximum aggregate principal amount of $4,000,000,000 of notes in connection with this prospectus supplement, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program pursuant to a separate prospectus supplement dated the date hereof, our secured medium-term notes retail program pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.
Flow of Funds	Other than during the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to amounts due under the notes; and

S-5

	• second, with respect to any remaining funds, in accordance with the applicable trust agreement.
	During the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee, in an aggregate amount of no more than $250,000 for all notes issued under the program, to the extent not paid pursuant to the applicable expense and indemnity agreement;
	• second, to amounts due under the notes; and
	• third, with respect to any remaining funds, in accordance with the applicable trust agreement.
	See “Description of the Notes — Application of Money Collected Under the Indenture” in the accompanying prospectus.
	Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right of such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws, is no different than if we had issued the funding agreement directly to such purchasers. The right of such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.
Terms of the Notes: Status	• Each series of notes will be the unconditional, direct, non-recourse, secured and unsubordinated obligations of the applicable trust. Each series of notes will be secured by the collateral relating to that series of notes.
	• Each series of notes may be accelerated in the payment of principal and outstanding interest if an event of default under the notes occurs. Upon the occurrence of an event of default, the indenture trustee (described below), on behalf of the holders of notes, may only proceed against the collateral held in the related trust.
	• The notes of each series are not, and will not be, obligations of, or guaranteed by, us or any other insurance company or any affiliate of ours, including PFG. The notes will not benefit

S-6

	from any insurance guarantee fund coverage or any similar protection.
Principal	The principal amount of each series of notes will be payable on its stated maturity date, as specified in the applicable pricing supplement, at the corporate trust office of the paying agent, acting in its capacity as servicer, or any other place the relevant trust designates.
Interest	Notes of a series may bear interest at a fixed interest rate or a floating interest rate, or bear no interest at all. Each series of notes that bears interest at a fixed interest rate (“fixed rate notes”) will bear interest from the date of original issuance at a fixed rate per year, as specified in the applicable pricing supplement, until the principal is paid. Interest, if any, will be payable monthly, quarterly, semi-annually or annually on each interest payment date and on the maturity date, as specified in the applicable pricing supplement. Interest also will be paid on the date of redemption or repayment if a series of notes is redeemed or repaid prior to maturity. Interest, with respect to fixed rate notes, will be computed on the basis of a 360-day year of twelve 30-day months, unless otherwise specified in the applicable pricing supplement. Each series of notes that bear interest at a floating interest rate (“floating rate notes”) will bear interest from the date of original issuance at a rate determined by reference to a base rate, which may be adjusted by a spread and/or spread multiplier, as specified in the applicable pricing supplement, until the principal is paid. The pricing supplement will designate one or more of the following interest rate bases, along with the index maturity for that interest rate basis:
	• the CD Rate;
	• the CMT Rate;
	• the Commercial Paper Rate;
	• the Constant Maturity Swap Rate;
	• the Federal Funds Open Rate;
	• the Federal Funds Rate;
	• LIBOR;
	• the Prime Rate; or
	• the Treasury Rate.
Payment of Principal and Interest	Principal and interest payments, if any, on any series of notes will be made solely from the proceeds of a funding agreement purchased with respect to such series of notes for, and to be held in, the related trust, and the full and unconditional guarantee issued by PFG of our payment obligations under the relevant funding agreement.

S-7

Maturities	Unless otherwise specified in the applicable pricing supplement, each series of notes will mature between nine months and 30 years from its date of original issuance on the last scheduled interest payment date, as specified in the applicable pricing supplement.
Redemption and Repayment	A trust will redeem its series of notes if we redeem the funding agreement securing such series of notes. Except as otherwise specified in the accompanying prospectus, this prospectus supplement or the applicable pricing supplement, the funding agreement securing a series of notes will not be redeemable by us and no series of notes will be repayable at the option of the holder prior to their stated maturity date. Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to any sinking fund.
	Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance is outstanding. Notes that may be redeemed at a time when 20% or more of the original principal amount of such notes are outstanding will be designated in their title as “callable” in the applicable pricing supplement.
Survivor’s Option	A series of notes may contain a provision (which we refer to as the “survivor’s option”) permitting optional repayment of notes of that series prior to maturity, if requested, following the death of the beneficial owner of notes of that series, so long as the notes either were purchased by the deceased beneficial owner within ninety (90) days of their issuance or were held by the deceased beneficial owner for a period of six (6) months immediately prior to such death. Your notes may not be repaid in this manner unless the pricing supplement for your series of notes provides for the survivor’s option. If the pricing supplement for your series of notes provides for the survivor’s option, the funding agreement securing your series of notes will contain a provision which will allow the applicable trust to tender the funding agreement in whole or in part to us. The ability of the applicable trust to tender the funding agreement related to a series of notes that contain a survivor’s option, however, will be subject to certain limitations set by us. As a result, your right to exercise the survivor’s option is subject to limits set by us with respect to the relevant funding agreement. We have the discretionary right to limit:
	• the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the Principal® Life CoreNotes® program as to which exercises of any put option by any trust shall be accepted by us in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the Principal® Life CoreNotes® program

S-8

	and the secured medium-term notes retail program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement;
	• the aggregate principal amount of funding agreements securing the notes as to which exercises of any put option by the applicable trust attributable to notes as to which the survivor’s option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement; and
	• the aggregate principal amount of the funding agreement securing a series of notes as to which exercises of any put option by the applicable trust shall be accepted in any calendar year as set forth in the applicable funding agreement and the applicable pricing supplement.
	Additional details on the survivor’s option are described in this prospectus supplement in the section entitled “Description of the Notes — Repayment Upon Exercise of Survivor’s Option” on page S-31.
Withholding Tax	All amounts due in respect of the notes of any series, the related guarantee and the related funding agreement will be made without any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, none of the notes, the related guarantee, or the related funding agreement will provide for the payment of additional amounts relating to any required withholding or deduction imposed or levied on payments in respect of a series of notes, the related guarantee or the related funding agreement. As a result, unless otherwise specified in the applicable pricing supplement, the risk of any such withholding or deduction, whether or not as a result of a change in law or otherwise, will be borne by the holders of such series of notes.
Material United States Federal Income Tax Considerations	We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness (the “Intended Tax Characterization”). Each holder of a note

S-9

	(or any beneficial interest therein), by acceptance of the note (or beneficial interest therein), agrees to the Intended Tax Characterization. Accordingly, holders of the notes generally will have the same United States federal income tax consequences from the purchase of the notes as they would have had if they purchased a debt obligation issued directly by us. Prospective purchasers of the notes must carefully consider the tax consequences of the ownership and disposition of the notes set forth under “Material United States Federal Income Tax Considerations.”
Fees and Expenses	We will pay the costs and expenses incurred by a trust under the expense and indemnity agreements with each of the indenture trustee, the custodian, the trust beneficial owner and the trustee (on behalf of itself and each trust formed in connection with the issuance of a series of notes) and any additional service provider appointed from time to time.
	Under each expense and indemnity agreement, we will pay certain costs and expenses relating to the offering, sale, issuance and administration of any series of notes and certain costs, expenses and taxes incurred by a trust and will indemnify the indenture trustee, the custodian, the trust beneficial owner, the trustee, each trust and additional service providers appointed from time to time with respect to certain matters. See “Fees and Expenses” in the accompanying prospectus.
	We anticipate that the indenture trustee fees for the program will be approximately $215 per year for each series of notes.
Denominations; Currency	Unless otherwise specified in the applicable pricing supplement, the notes will be issued and sold in denominations of $1,000 and integral multiples of $1,000 in excess thereof. The notes of each series will be denominated in, and payments of principal, premium, if any, and/or interest, and any other amounts in respect of the notes, will be made in U.S. dollars.
Listing	Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
Form of Notes	The trusts will sell notes in the United States only. Each series of notes will be issued in book-entry form only and cleared through The Depository Trust Company (“DTC” or the “depositary”). Each book-entry note will be held by the indenture trustee as custodian for DTC or its nominee. We do not intend to issue notes in certificated form.
Collateral	The notes of any series will be secured by the right, title and interest of the applicable trust in and to (1) the relevant funding agreement held in that trust, (2) the related guarantee issued by PFG to the trust fully and unconditionally guaranteeing our payment obligations under the funding agreement, (3) all proceeds of the funding agreement and the guarantee and all amounts and instruments on deposit from

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	time to time in the related collection account, (4) all books and records pertaining to the relevant funding agreement and the related guarantee and (5) all rights of the trust pertaining to the foregoing.
	Each series of notes will be secured by the collateral held in the applicable trust. The trust will collaterally assign and grant a security interest in the related funding agreement and the related guarantee in favor of the indenture trustee for the benefit of the holders of notes of the applicable series.
	Under the custodial agreement (the “custodial agreement”) entered into among the indenture trustee, Bankers Trust Company, N.A. (the “custodian”) and the trustee (on behalf of each trust to be formed in connection with the issuance of a series of notes), upon the collateral assignment of and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.
Funding Agreements	A funding agreement is a type of insurance company product in which the purchaser, usually an institutional investor, pays the insurance company a deposit and, in turn, receives scheduled payments of principal and interest. The deposit we receive on the issuance of a funding agreement will be part of our general account and not allocated to any of our separate accounts. Our general account is the account which contains all of our assets and liabilities other than those held in our separate accounts. (Separate accounts are segregated accounts which are established for certain products that we sell. A separate account holds assets and liabilities specifically related to one or more products and segregates these assets and liabilities from the assets and liabilities of all other separate accounts and the assets and liabilities of our general account.) Since the deposit made under any funding agreement will be part of our general account, our obligations under each funding agreement will be the obligations of our general account, rather than the obligations of any separate account. As such, we will invest the proceeds from the sale of funding agreements in a portfolio of assets which along with our other general account assets will be used to meet our contractual obligations under the funding agreements and our other general account obligations. We will earn the spread differential between the cost of our obligations under the funding agreements and the yield on our invested assets. We may periodically, consistent with our past practice and subject to all applicable regulatory restrictions on our insurance operations, dividend a portion of the spread income to PFG.
	Each trust will use the net proceeds received from the sale of its series of notes to purchase a funding agreement issued by us, the terms of which will be set forth in the applicable pricing supplement. The funding agreement will have a deposit amount equal to the sum of the principal amount (or

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	issue price in the case of discount notes) of the related series of notes and the amount of the beneficial interest in the related trust. The rate at which the funding agreement bears interest will be equal to the rate of interest, if any, on the related series of notes. The funding agreement will otherwise have substantially similar payment and other terms to the related series of notes.
	Each funding agreement is our unsecured obligation. See “— Ratings” below.
	In the event of our impairment or insolvency, the Iowa Insurance Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving us pursuant to Iowa Code Sections 507C.4, 507C.12, 507C.13, 507C.14 and 507C.16. In conducting delinquency proceedings, claims are prioritized and an order of distribution is specified pursuant to Iowa Code Section 507C.42. There are nine classes within the priority scheme, with each successive class being fully junior to the preceding class. Class 1 priority is given to the costs and expenses of administration of the insurer during the delinquency proceedings and Class 2 priority is given to the claims of the insurer’s policyholders and guaranty associations. We believe that, in a properly prepared and presented case, a court applying Iowa law would conclude that loss claims of principal and interest in respect of each funding agreement would be accorded Class 2 priority under Iowa Code Section 507C.42 and paid equally in priority with our other policyholders. See “Description of the Funding Agreements” in the accompanying prospectus.
Guarantees	Our payment obligations under the funding agreement issued to each trust will be fully and unconditionally guaranteed by PFG under a guarantee issued by PFG to the trust as described in the accompanying prospectus. Each guarantee will be an unsecured, unsubordinated, contingent obligation of PFG. See “Description of the Guarantees” in the accompanying prospectus.
Ratings	Unless otherwise indicated in the applicable pricing supplement, the notes will have an issue credit rating of AA from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”). Standard & Poor’s has rated the program AA. If Standard & Poor’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. We expect the program to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”). If Moody’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. Notes of a series will be issued under the program only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade

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	rating to such series of notes and the funding agreement securing such series of notes.
Indenture, Indenture Trustee and Servicer	Each trust will issue its series of notes to the public pursuant to an indenture between that trust and Citibank, N.A., in its capacity as indenture trustee. See “Description of the Notes — General — Indenture.” The indenture trustee will act as servicer with respect to the program. The indenture is subject to the Trust Indenture Act of 1939, as amended. The indenture trustee is not affiliated with any trust, us or PFG.
Administration of the Trusts	U.S. Bank Trust National Association, a national banking association, will be each trust’s sole trustee (the “trustee”). The trustee will not be obligated in any way to make payments under or in respect of the notes. The trustee is not affiliated with us or PFG.
Trust Beneficial Owner	GSS Holdings II, Inc., a Delaware corporation, will be the sole beneficial owner of each trust (the “trust beneficial owner”). The beneficial interest of each trust:
	• will be purchased by the trust beneficial owner for $15 (or in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes), unless otherwise specified in the applicable pricing supplement;
	• will be issued in book-entry form only;
	• will entitle the trust beneficial owner to receive payments in respect thereof on the same terms as the payments to be made to the holders of notes of the related series; and
	• will be subordinated to the related series of notes.
	The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series receive interest payments. On the maturity date of the trust beneficial owner’s beneficial interest and the related series of notes, the trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner.
	The trust beneficial owner is not affiliated with us or PFG.
Governing Law	The notes and each indenture will be governed by, and construed in accordance with, the laws of the State of New York. Each guarantee issued by PFG will be governed by, and construed in accordance with, the laws of the State of New York. The trust agreement for the applicable trust will be governed by, and construed in accordance with, the laws of the jurisdiction in which it is formed. Each funding agreement will be governed by the laws of the State of Iowa.

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DESCRIPTION OF THE NOTES

          The following description of the material provisions of the notes supplements the general description of the notes provided in the accompanying prospectus. You should therefore review the accompanying prospectus carefully. You should carefully review the information in this prospectus supplement. The pricing supplement for each offering of notes will contain the specific information and terms and conditions for that offering. As such, you should carefully review the information contained in the pricing supplement, including any description of the method of calculating interest on any note. The applicable pricing supplement may also add, update, supplement or clarify information contained in this prospectus supplement or the accompanying prospectus. It is important for you to consider the information contained in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement, the indenture and the notes in making your investment decision.

          This section describes some technical concepts and uses some capitalized terms that are not defined in the prospectus supplement. You should refer to the form of indenture and the form of note certificates filed as exhibits to the registration statement (of which this prospectus supplement and the accompanying prospectus are a part) for the full description of those concepts and complete definitions of these terms.

General

Indenture

          Each trust will issue one series of notes, subject to and entitled to the benefits of a separate indenture between the trust and the indenture trustee, which will adopt and incorporate the standard indenture terms. Such notes will be issued only on the original issue date for such notes. With respect to a particular trust, we refer to the applicable indenture and the standard indenture terms as the “indenture.” Each series of notes will be the subject of a pricing supplement. The indenture is subject to, and governed by, the Trust Indenture Act of 1939, as amended. For a description of the terms of the indenture, see “Descriptions of the Notes” beginning on page 22 of the accompanying prospectus.

          At the date of this prospectus supplement, the notes offered pursuant to this prospectus supplement are limited to an aggregate initial public offering price or purchase price of up to $4,000,000,000. This amount is subject to reduction as a result of the issuance of notes of notes previously under this program, our secured medium-term notes program or otherwise under the accompanying prospectus.

Collateral

          The notes of a series will be the trust’s unconditional, direct, non-recourse, secured and unsubordinated obligations. Under the indenture, the funding agreement issued to and deposited into a trust by us, in exchange for the proceeds received by the trust from the offering of its series of notes and trust beneficial interest, will be collaterally assigned by the trust, and the trust will grant a security interest in the funding agreement, to the indenture trustee for the benefit of the holders of the related series of notes. A trust may purchase only one funding agreement from us and the principal amount of the funding agreement may not be increased. The trust will also collaterally assign and grant a security interest in the guarantee issued by PFG to the trust in favor of the indenture trustee for the benefit of the holders of the related series of notes. Each series of notes will be secured by a security interest in the “collateral,” consisting of:

• the relevant funding agreement;

• the related guarantee issued by PFG to the trust, which fully and unconditionally guarantees our payment obligations under the relevant funding agreement;

• all proceeds of the relevant funding agreement and the relevant guarantee and all amounts and instruments on deposit from time to time in the related collection account;

• all books and records pertaining to the relevant funding agreement and the related guarantee; and

• all of the trust’s rights pertaining to the foregoing.

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          Under the custodial agreement, upon the collateral assignment and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.

Ranking

          The notes of a series of a trust will rank equally among themselves.

Pricing Options

          Notes that bear interest will either be fixed rate notes or floating rate notes, or a combination of fixed rate and floating rate, as specified in the applicable pricing supplement. A trust may also issue discount notes as specified in the applicable pricing supplement.

Pricing Supplement

          The pricing supplement relating to the offering of a series of notes will describe the following terms:

• the principal amount for the note;

• whether the note:

          (1) is a fixed rate note,

          (2) is a floating rate note, and/or

          (3) is a discount note that does not bear any interest currently or bears interest at a rate that is below market rates at the time of issuance;

• the price at which the note will be issued, which will be expressed as a percentage of the aggregate principal amount or face amount;

• the original issue date on which the note will be issued;

• the stated maturity date;

• if the note is a fixed rate note, the rate per annum at which the note will bear any interest and the Interest Payment Date frequency;

• if the note is a floating rate note, relevant terms such as:

          (1) the Interest Rate Basis,

          (2) the Initial Interest Rate,

          (3) the Interest Reset Period or the Interest Reset Dates,

          (4) the Interest Payment Dates,

          (5) the Index Maturity,

          (6) any Maximum Interest Rate,

          (7) any Minimum Interest Rate,

          (8) the spread and/or spread multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the note and whether and how the spread and/or spread multiplier may be changed prior to the stated maturity date;

•  whether the authorized representative of the beneficial owner of a beneficial interest in the note will have the right to seek repayment upon the death of the beneficial owner as described under “— Repayment Upon Exercise of Survivor’s Option” on page S-31;

• whether the note may be redeemed by the trust, or repaid at the option of the holder, prior to the stated maturity date and the terms of its redemption or repayment, provided that any such redemption or repayment will be accompanied by the simultaneous redemption or repayment of the relevant funding agreement;

• any special United States federal income tax considerations relating to the purchase, ownership and disposition of the note;

• the jurisdiction of formation of the trust; and

• any other terms of the note provided in the accompanying prospectus to be set forth in a pricing supplement or that are otherwise

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consistent with the provisions of the indenture under which the note will be issued.

Maturity

          Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on a day between nine months and 30 years from its date of original issuance on the last scheduled interest payment date (the “stated maturity date”), as specified in the applicable pricing supplement, unless the principal of such series becomes due and payable prior to the stated maturity date, whether, as applicable, by the declaration of acceleration of maturity, notice of redemption by the trust, notice of a beneficial owner’s exercise of his or her option to elect repayment or otherwise (we refer to the stated maturity date or any date prior to the stated maturity date on which the particular series of notes becomes due and payable, as the case may be, as the “maturity date” with respect to the principal of such series of notes repayable on that date).

Currency

          The notes of each series will be denominated in, and payments of principal, premium, if any, and/or interest, if any, and any other amounts in respect of the notes will be made in, U.S. dollars.

Form of Notes; Denominations

          Each trust will issue each note in book-entry form represented by one or more fully registered book-entry securities registered in the name of Cede &. Co., the nominee of The Depository Trust Company, as depositary. Each book-entry note will be held by the indenture trustee as custodian for the depositary. Unless otherwise specified in the applicable pricing supplement, the minimum denominations of each note will be $1,000 and integral multiples of $1,000 in excess thereof.

Transfers and Exchanges

          Book-entry notes may be transferred or exchanged only through the depositary. See “— Book-Entry Notes.” No service charge will be imposed for any such registration of transfer or exchange of notes, but the trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with such transfer or exchange (other than certain exchanges not involving any transfer).

Listing

          Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.

Business Day

          As used in this prospectus supplement, “business day” means:

• any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; and

• for purposes of LIBOR determination dates for floating rate notes (as defined below) based on LIBOR (as defined below) the day must also be a London Banking Day, which means a day on which commercial banks are open for business (including dealings in the LIBOR currency (as defined below)) in London.

Payments of Principal and Interest

          Principal of and interest on the notes will be paid to owners of a beneficial interest in the notes in accordance with the arrangements then in place between the paying agent and DTC as depositary and its participants as described under “— Book-Entry Notes.” Notes of a series may bear interest at a fixed interest rate (“fixed rate notes”) or at a floating interest rate (“floating rate notes”).

Fixed Rate Notes

          Each series of fixed rate notes will bear interest at a fixed rate from and including its date of issue or from and including the most recent interest payment date as to which interest has been paid or made available for payment until the principal is paid or made available for payment.

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The applicable pricing supplement will specify the fixed interest rate per annum applicable to each note and the frequency with which interest is payable. Interest, including interest for any partial period, will be computed on the basis of a 360-day year of twelve 30-day months. Each payment of interest, including interest to be paid at maturity, will include interest to, but excluding, the date that the interest payment is due.

          Interest on notes that bear interest at fixed rates will be payable in arrears on each interest payment date to the registered holder at the close of business on the record date except that interest, if any, due at maturity will be paid to the person to whom the principal of the note is paid. Unless otherwise specified in the applicable pricing supplement, the record date will be the day that is fifteen (15) calendar days preceding the applicable interest payment date, whether or not a business day. Unless otherwise specified in the applicable pricing supplement, the interest payment dates for fixed rate notes will be as follows:

Interest Payment
Frequency	Interest Payment Dates
Monthly	Fifteenth day of each calendar month, beginning in the first calendar month following the month the note was issued.
Quarterly	Fifteenth day of every third calendar month, beginning in the third calendar month following the month the note was issued.
Semi-annual	Fifteenth day of every sixth calendar month, beginning in the sixth calendar month following the month the note was issued.
Annual	Fifteenth day of every twelfth calendar month, beginning in the twelfth calendar month following the month the note was issued.

          If any interest payment date or the maturity date of a fixed rate note falls on a day that is not a business day, the applicable trust will make the required payment of principal, premium, if any, and/or interest, if any on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          Interest rates that each trust offers on the fixed rate notes may differ depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

Floating Rate Notes

          Interest on each series of floating rate notes will be determined by reference to the applicable Interest Rate Basis or Interest Rate Bases, which may, as described below, include:

• the CD Rate;

• the CMT Rate;

• the Commercial Paper Rate;

• the Constant Maturity Swap Rate;

• the Federal Funds Open Rate;

• the Federal Funds Rate;

• LIBOR;

• the Prime Rate; or

• the Treasury Rate.

          The applicable pricing supplement will specify certain terms of the particular series of notes that bears interest at floating rates, including:

• whether the note that bears interest at floating rates is:

• a “Regular Floating Rate Note;” or

• a “Floating Rate/ Fixed Rate Note;”

• the Fixed Rate Commencement Date, if applicable;

• Fixed Interest Rate, if applicable;

• Interest Rate Basis or Interest Rate Bases;

• Initial Interest Rate, if any;

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• Interest Reset Dates;

• Interest Payment Dates;

• Index Maturity;

• Maximum Interest Rate and/or Minimum Interest Rate;

• spread and/or spread multiplier; or

• if one or more of the applicable Interest Rate Bases is LIBOR, the LIBOR Currency and LIBOR Page.

          The rate derived from the applicable Interest Rate Basis will be determined in accordance with the related provisions below. The interest rate in effect on each day will be based on:

• if that day is an Interest Reset Date, the rate determined as of the Interest Determination Date (as defined below) immediately preceding that Interest Reset Date; or

• if that day is not an Interest Reset Date, the rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date.

          The “spread” is the number of basis points (one one-hundredth of a percentage point) specified in the applicable pricing supplement to be added to or subtracted from the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates. The “spread multiplier” is the percentage specified in the applicable pricing supplement of the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates by which the Interest Rate Basis or Interest Rate Bases will be multiplied to determine the applicable interest rate. The “Index Maturity” is the period to maturity of the instrument or obligation with respect to which the related Interest Rate Basis or Interest Rate Bases will be calculated.

          Interest rates that each trust offers on its floating rate notes may differ from the rate offered by other trusts depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

Regular Floating Rate Notes

          Unless a series of floating rate notes is designated as a series of Floating Rate/ Fixed Rate Notes, or as having an addendum attached or having other/additional provisions apply, in each case relating to a different interest rate formula, such series of notes that bears interest at floating rates will be a series of Regular Floating Rate Notes and will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable spread, if any; and/or

• multiplied by the applicable spread multiplier, if any.

          Commencing on the first Interest Reset Date, as specified in the relevant pricing supplement, the rate at which interest on a series of Regular Floating Rate Notes is payable will be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate.

Floating Rate/ Fixed Rate Notes

          If a series of notes that bears interest at floating rates is designated as a series of Floating Rate/ Fixed Rate Notes, such series of notes that bears interest at floating rates will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable spread, if any; and/or

• multiplied by the applicable spread multiplier, if any.

          Commencing on the first Interest Reset Date, the rate at which interest on a series of Floating Rate/ Fixed Rate Notes is payable will be

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reset as of each Interest Reset Date; provided, however, that:

• the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate, as specified in the relevant pricing supplement; and

• the interest rate in effect commencing on the Fixed Rate Commencement Date will be the Fixed Interest Rate, if specified in the applicable pricing supplement, or, if not so specified, the interest rate in effect on the day immediately preceding the Fixed Rate Commencement Date.

Interest Reset Dates

          The applicable pricing supplement will specify the dates on which the rate of interest on a series of notes that bears interest at floating rates will be reset (each, an “Interest Reset Date”), and the period between Interest Reset Dates will be the “Interest Reset Period.” Unless otherwise specified in the applicable pricing supplement, the Interest Reset Dates will be, in the case of a series of floating rate notes which reset:

• daily — each business day;

• weekly — the Wednesday of each week, with the exception of weekly reset series of notes that bear interest at floating rates as to which the Treasury Rate is an applicable Interest Rate Basis, which will reset the Tuesday of each week;

• monthly — the fifteenth day of each calendar month;

• quarterly — the fifteenth day of March, June, September and December of each year;

• semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and

• annually — the fifteenth day of the month of each year specified in the applicable pricing supplement; provided, however, that, with respect to any series of Floating Rate/ Fixed Rate Notes, the rate of interest thereon will not reset after the particular Fixed Rate Commencement Date.

          If any Interest Reset Date for any series of notes that bears interest at floating rates would otherwise be a day that is not a business day, the particular Interest Reset Date will be postponed to the next succeeding business day, except that in the case of a series of notes that bears interest at floating rates as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Reset Date will be the immediately preceding business day.

Interest Determination Dates

          The interest rate applicable to a series of notes that bears interest at floating rates for an Interest Reset Period commencing on the related Interest Reset Date will be determined by reference to the applicable Interest Rate Basis as of the particular “Interest Determination Date,” which will be:

• with respect to the Federal Funds Open Rate — the related Interest Reset Date;

• with respect to the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate — the business day preceding the related Interest Reset Date;

• with respect to the CD Rate and the CMT Rate — the second business day preceding the related Interest Reset Date;

• with respect to the Constant Maturity Swap Rate — the second U.S. Government Securities business day (as defined under “— Constant Maturity Swap Rate” below) preceding the related Interest Reset Date; provided, however, that if, after attempting to determine the Constant Maturity Swap Rate (as described under “— Constant Maturity Swap Rate” below), such rate is not determinable for a

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	particular Interest Determination Date (the “original interest determination date”), then such Interest Determination Date shall be the first U.S. Government Securities business day preceding the original interest determination date for which the Constant Maturity Swap Rate can be determined as described under “— Constant Maturity Swap Rate” below;
•	with respect to LIBOR — the second London Banking Day preceding the related Interest Reset Date; and
•	with respect to the Treasury Rate — the day of the week in which the related Interest Reset Date falls on which day Treasury Bills (as defined below) are normally auctioned (i.e., Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday); provided, however, that if an auction is held on the Friday of the week preceding the related Interest Reset Date, the Interest Determination Date will be the preceding Friday.

          The Interest Determination Date pertaining to a series of floating rate notes that bears interest at the interest rate of which is determined with reference to two or more Interest Rate Bases will be the latest business day which is at least two business days before the related Interest Reset Date for the applicable note that bears interest at floating rates on which each Interest Reset Basis is determinable.

Calculation Dates

          The indenture trustee will be the “Calculation Agent”, unless otherwise specified in the applicable pricing supplement. The interest rate applicable to each Interest Reset Period will be determined by the Calculation Agent on or prior to the Calculation Date (as defined below), except with respect to LIBOR, which will be determined on the particular Interest Determination Date. Upon request of the registered holder of a series of floating rate notes, the Calculation Agent will disclose the interest rate then in effect and, if determined, the interest rate that will become effective as a result of a determination made for the next succeeding Interest Reset Date with respect to the particular series of floating rate notes. The “Calculation Date,” if applicable, pertaining to any Interest Determination Date will be the earlier of:

• the tenth calendar day after the particular Interest Determination Date or, if such day is not a business day, the next succeeding business day; or

• the business day immediately preceding the applicable Interest Payment Date or the maturity date, as the case may be.

Maximum and Minimum Interest Rates

          A series of notes that bears interest at floating rates may also have either or both of the following if specified in the applicable pricing supplement:

• a maximum numerical limitation, or ceiling, that may accrue during any Interest Reset Period (a “Maximum Interest Rate”); and

• a minimum numerical limitation, or floor, that may accrue during any Interest Reset Period (a “Minimum Interest Rate”).

          In addition to any Maximum Interest Rate that may apply to a series of notes that bears interest at floating rates, the interest rate on a series of floating rate notes will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application.

Interest Payments

          Unless otherwise specified in the applicable pricing supplement or in this prospectus supplement, interest on each series of notes that bears interest at floating rates will be payable on the date(s) as set forth below (each, an “Interest Payment Date” with respect to such series of notes that bears interest at floating rates). Unless

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otherwise specified in the applicable pricing supplement, the record date will be the day that is fifteen (15) calendar days preceding the applicable interest payment date, whether or not a business day. Unless otherwise specified in the applicable pricing supplement, the Interest Payment Dates will be, in the case of a series of floating rate notes which reset:

• daily, weekly or monthly — the fifteenth day of each calendar month or on the fifteenth day of March, June, September and December of each year, as specified in the applicable pricing supplement;

• quarterly — the fifteenth day of March, June, September and December of each year;

• semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and

• annually — the fifteenth day of the month of each year specified in the applicable pricing supplement.

          In addition, the maturity date will also be an Interest Payment Date.

          If any Interest Payment Date other than the maturity date for any series of floating rate notes would otherwise be a day that is not a business day, such Interest Payment Date will be postponed to the next succeeding business day, except that in the case of a series of floating rate notes as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding business day. If the maturity date of a series of floating rate notes falls on a day that is not a business day, the trust will make the required payment of principal, premium, if any, and interest or other amounts on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          All percentages resulting from any calculation on floating rate notes will be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards. For example, 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655). All dollar amounts used in or resulting from any calculation on floating rate notes will be rounded to the nearest cent.

          With respect to each series of floating rate notes, accrued interest is calculated by multiplying the principal amount of such floating rate note by an accrued interest factor. The accrued interest factor is computed by adding the interest factor calculated for each day in the particular Interest Reset Period. The interest factor for each day will be computed by dividing the interest rate applicable to such day by 360, in the case of a series of floating rate notes as to which the CD Rate, the Commercial Paper Rate, the Federal Funds Open Rate, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable Interest Rate Basis, or by the actual number of days in the year, in the case of a series of floating rate notes as to which the CMT Rate or the Treasury Rate is an applicable Interest Rate Basis. In the case of a series of notes that bears interest at floating rates as to which the Constant Maturity Swap Rate is the Interest Rate Basis, the interest factor for each day will be computed by dividing the number of days in the interest period by 360 (the number of days to be calculated on the basis of a year of 360 days with twelve 30-day months (unless (i) the last day of the interest period is the 31st day of a month but the first day of the interest period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii) the last day of the interest period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)). The interest factor for a series of floating rate notes as to which the interest rate is calculated with reference to two or more Interest Rate Bases will be calculated in each period in the same manner as if only the applicable Interest Rate Basis specified in the applicable pricing supplement applied.

          The Calculation Agent shall determine the rate derived from each Interest Rate Basis in accordance with the following provisions.

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CD Rate

          “CD Rate” means:

          (1) the rate on the particular Interest Determination Date for negotiable United States dollar certificates of deposit having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) (as defined below) under the caption “CDs (secondary market)”; or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date for negotiable United States dollar certificates of deposit of the particular Index Maturity as published in H.15 Daily Update (as defined below), or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “CDs (secondary market)”; or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on that Interest Determination Date, of three leading non-bank dealers in negotiable United States dollar certificates of deposit in The City of New York (which may include the purchasing agent or its affiliates) selected by the Calculation Agent for negotiable United States dollar certificates of deposit of major United States money market banks for negotiable United States certificates of deposit with a remaining maturity closest to the particular Index Maturity in an amount that is representative for a single transaction in that market at that time; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the CD Rate in effect on the particular Interest Determination Date.

          “H.15(519)” means the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

          “H.15 Daily Update” means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/ H15/update, or any successor site or publication.

CMT Rate

          “CMT Rate” means:

          (1) if CMT Moneyline Telerate Page 7051 is specified in the applicable pricing supplement:

          (a) the percentage equal to the yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Treasury Constant Maturities,” as the yield is displayed on Moneyline Telerate (or any successor service) on page 7051 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7051”), for the particular Interest Determination Date; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7051, the percentage equal to the yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the particular Interest Determination Date as published in H.15(519) under the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the rate on

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the particular Interest Determination Date for the period of the particular Index Maturity as may then be published by either the Federal Reserve System Board of Governors or the United States Department of the Treasury that the Calculation Agent determines to be comparable to the rate which would otherwise have been published in H.15(519); or

          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three leading primary United States government securities dealers in The City of New York (which may include the purchasing agent or its affiliates) (each, a “Reference Dealer”) selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on the par-

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ticular Interest Determination Date; or

          (2) if CMT Moneyline Telerate Page 7052 is specified in the applicable pricing supplement:

          (a) the percentage equal to the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) opposite the caption “Treasury Constant Maturities”, as the yield is displayed on Moneyline Telerate (or any successor service) (on page 7052 or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7052”), for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7052, the percentage equal to the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the week or month, as applicable, preceding the particular Interest Determination Date as published in H.15(519) opposite the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity as otherwise announced by the Federal Reserve Bank of New York for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d)

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are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at the time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on that Interest Determination Date.

          If two United States Treasury securities with an original maturity greater than the Index Maturity specified in the applicable pricing supplement have remaining terms to maturity equally close to the particular Index Maturity, the quotes for the United States Treasury security with the shorter original remaining term to maturity will be used.

Commercial Paper Rate

          “Commercial Paper Rate” means:

          (1) the Money Market Yield (as defined below) on the particular Interest Determination Date of the rate for commercial paper having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Commercial Paper — Nonfinancial;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Money Market Yield of the rate on the particular Interest Determination Date for commercial paper having the particular Index Maturity as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Commercial Paper — Nonfinancial;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on that Interest Determination Date of three leading dealers of United States dollar commercial paper in The City of New York (which may include the purchasing agent or its affiliates) selected by the Calculation Agent for commercial paper having the particular Index Maturity placed for industrial issuers whose bond rating is “Aa”, or the equivalent, from a nationally recognized statistical rating organization; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Commercial Paper Rate in effect on the particular Interest Determination Date.

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          “Money Market Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Money Market Yield = D × 360
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and “M” refers to the actual number of days in the applicable Interest Reset Period.

Constant Maturity Swap Rate

          “Constant Maturity Swap Rate” means:

          (1) the rate for U.S. dollar swaps with the designated maturity specified in the applicable pricing supplement, expressed as a percentage, which appears on the Reuters Screen (or any successor service) ISDAFIX1 Page as of 11:00 A.M., New York City time, on the particular Interest Determination Date; or

          (2) if the rate referred to in clause (1) does not appear on the Reuters Screen (or any successor service) ISDAFIX1 Page by 2:00 P.M., New York City time, on such Interest Determination Date, a percentage determined on the basis of the mid-market semi-annual swap rate quotations provided by the reference banks (as defined below) as of approximately 11:00 A.M., New York City time, on such Interest Determination Date, and, for this purpose, the semi-annual swap rate means the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating U.S. dollar interest rate swap transaction with a term equal to the designated maturity specified in the applicable pricing supplement commencing on the Interest Reset Date and in a representative amount (as defined below) with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis, is equivalent to USD-LIBOR-BBA with a designated maturity specified in the applicable pricing supplement. The Calculation Agent will request the principal New York City office of each of the reference banks to provide a quotation of its rate. If at least three quotations are provided, the rate for that Interest Determination Date will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest); or

          (3) if at least three quotations are not received by the Calculation Agent as mentioned in clause (2), the Constant Maturity Swap Rate in effect on the particular Interest Determination Date.

          “U.S. Government Securities business day” means any day except for Saturday, Sunday, or a day on which The Bond Market Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

          “Representative amount” means an amount that is representative for a single transaction in the relevant market at the relevant time.

          “Reference banks” mean five leading swap dealers in the New York City interbank market, selected by the Calculation Agent, after consultation with us.

Federal Funds Rates

          “Federal Funds Open Rate” means the rate set forth on Moneyline Telerate (or any successor service) on page 5 (or any other page as may replace the specified page on that service) for an Interest Determination Date underneath the caption “FEDERAL FUNDS” in the row titled “OPEN”. If the rate is not available for an Interest Determination Date, the rate for that Interest Determination Date shall be the Federal Funds Rate as determined below.

          “Federal Funds Rate” means:

          (1) the rate as of the particular Interest Determination Date for United States dollar federal funds as published in H.15(519) under the caption “Federal Funds (Effective)” and displayed on Moneyline Telerate (or any successor service) on page 120 (or any other page as may replace the specified page on that

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service) (“Moneyline Telerate Page 120”); or

          (2) if the rate referred to in clause (1) does not so appear on Moneyline Telerate Page 120 or is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate as of the particular Interest Determination Date for United States dollar federal funds as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Federal Funds (Effective);” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate as of the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of United States dollar federal funds transactions in The City of New York (which may include the Agents or their affiliates), selected by the Calculation Agent prior to 9:00 A.M., New York City time, on the business day following that Interest Determination Date; or

          (4) if the brokers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Federal Funds Rate in effect on the particular Interest Determination Date.

LIBOR

          “LIBOR” means:

          (1) if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or if neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the rate for deposits in the LIBOR Currency having the Index Maturity specified in the applicable pricing supplement, commencing on the related Interest Reset Date, that appears on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (2) if “LIBOR Reuters” is specified in the applicable pricing supplement, the arithmetic mean of the offered rates, calculated by the Calculation Agent, or the offered rate, if the LIBOR Page by its terms provides only for a single rate, for deposits in the LIBOR Currency having the particular Index Maturity, commencing on the related Interest Reset Date, that appear or appears, as the case may be, on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (3) if fewer than two offered rates appear, or no rate appears, as the case may be, on the particular Interest Determination Date on the LIBOR Page as specified in clause (1) or (2), as applicable, the rate calculated by the Calculation Agent of at least two offered quotations obtained by the Calculation Agent after requesting the principal London offices of each of four major reference banks (which may include affiliates of the purchasing agent) in the London interbank market to provide the Calculation Agent with its offered quotation for deposits in the LIBOR Currency for the period of the particular Index Maturity, commencing on the related Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on that Interest Determination Date and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (4) if fewer than two offered quotations referred to in clause (3) are provided as requested, the rate calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the applicable Principal Financial Center, on the particular Interest Determination Date by three major banks (which may include affiliates of the purchasing agent) in that principal financial center selected by the Calcula-

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tion Agent for loans in the LIBOR Currency to leading European banks, having the particular Index Maturity and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in clause (4), LIBOR in effect on the particular Interest Determination Date.

          “LIBOR Currency” means the currency specified in the applicable pricing supplement as to which LIBOR shall be calculated or, if no currency is specified in the applicable pricing supplement, United States dollars.

          “LIBOR Page” means either:

• if “LIBOR Reuters” is specified in the applicable pricing supplement, the display on the Reuter Monitor Money Rates Service (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace that page on that service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency; or

• if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the display on Moneyline Telerate (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency.

Prime Rate

          “Prime Rate” means:

          (1) the rate on the particular Interest Determination Date as published in H.15(519) under the caption “Bank Prime Loan;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Bank Prime Loan,” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as defined below) as the applicable bank’s prime rate or base lending rate as of 11:00 A.M., New York City time, on that Interest Determination Date; or

          (4) if fewer than four rates referred to in clause (3) are so published by 3:00 p.m., New York City time, on the related Calculation Date, the rate calculated by the Calculation Agent as the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the prime rates or base lending rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on that Interest Determination Date by three major banks (which may include affiliates of the purchasing agent) in The City of New York selected by the Calculation Agent; or

          (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in clause (4), the Prime Rate in effect on the particular Interest Determination Date.

          “Reuters Screen US PRIME 1 Page” means the display on the Reuter Monitor Money Rates Service (or any successor service) on the

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“US PRIME 1” page (or any other page as may replace that page on that service) for the purpose of displaying prime rates or base lending rates of major United States banks.

Treasury Rate

          “Treasury Rate” means:

          (1) the rate from the auction held on the Treasury Rate Interest Determination Date (the “Auction”) of direct obligations of the United States (“Treasury Bills”) having the Index Maturity specified in the applicable pricing supplement under the caption “INVESTMENT RATE” on the display on Moneyline Telerate (or any successor service) on page 56 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 56”) or page 57 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 57”); or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Auction High;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield of the auction rate of the applicable Treasury Bills as announced by the United States Department of the Treasury; or

          (4) if the rate referred to in clause (3) is not so announced by the United States Department of the Treasury, or if the Auction is not held, the Bond Equivalent Yield of the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15(519) under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market;” or

          (5) if the rate referred to in clause (4) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market;” or

          (6) if the rate referred to in clause (5) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on that Interest Determination Date, of three primary United States government securities dealers (which may include the purchasing agent or its affiliates) selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified in the applicable pricing supplement; or

          (7) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (6), the Treasury Rate in effect on the particular Interest Determination Date.

“Bond Equivalent Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Bond Equivalent Yield = D × N
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be, and “M” refers to the actual number of days in the applicable Interest Reset Period.

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Discount Notes

          A trust may issue a series of notes (“Discount Notes”) that has an Issue Price (as specified in the applicable pricing supplement) that is less than the principal amount thereof by an amount that is equal to or greater than the de minimis amount. The de minimis amount is equal to 0.25% multiplied by the product of the principal amount of the notes and the number of full years to the stated maturity date. A series of Discount Notes may not bear any interest currently or may bear interest at a rate that is below market rates at the time of issuance. The difference between the Issue Price of a series of Discount Notes and par is referred to as the “Discount.” In the event of redemption, repayment or acceleration of maturity of a series of Discount Notes, the amount payable to the holders of such series of Discount Notes will be equal to the sum of:

• the Issue Price (increased by any accruals of Discount); and

• any unpaid interest accrued on such series of Discount Notes to the maturity date.

          Unless otherwise specified in the applicable pricing supplement, for purposes of determining the amount of Discount that has accrued as of any date on which a redemption, repayment or acceleration of maturity occurs for a series of Discount Notes, a Discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates for the applicable series of Discount Notes (with ratable accruals within a compounding period), a coupon rate equal to the initial coupon rate applicable to the applicable series of Discount Notes and an assumption that the maturity of such series of Discount Notes will not be accelerated. If the period from the date of issue to the first Interest Payment Date for a series of Discount Notes (the “Initial Period”) is shorter than the compounding period for such series of Discount Notes, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then the period will be divided into a regular compounding period and a short period with the short period being treated as provided in the preceding sentence. The accrual of the applicable Discount may differ from the accrual of original issue discount for purposes of the Internal Revenue Code of 1986, as amended, certain series of Discount Notes may not be treated as having original issue discount within the meaning of such Code, and certain series of notes other than Discount Notes may be treated as issued with original issue discount for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”

          Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance of such notes is outstanding, which are referred to as “callable” notes. In the case of discount notes that may be redeemed at a time when 20% or more of such notes are outstanding, such notes will be designated in their title as “callable” in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, such series of notes will be otherwise subject to the redemption provisions specified under “— Optional Redemption; Optional Repayment; No Sinking Fund.”

Optional Redemption; Optional Repayment; No Sinking Fund

          In the case of notes that are not discount notes, if an optional redemption date is specified in the pricing supplement relating to a series of notes, and we have redeemed the related funding agreement in full or in part, as applicable, the related trust will redeem the series of notes secured by such funding agreement, in full or in part as applicable, prior to the stated maturity date of such series of notes. Such redemptions shall be made in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or other minimum authorized denomination applicable thereto), at a redemption price equal to 100% of the unpaid principal amount to be redeemed, together with unpaid interest, if any, accrued thereon to, but excluding, the date of redemption. The trust must give written notice to the holders of the particular series of notes to be redeemed not more than 60

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nor less than 30 calendar days prior to the date of redemption.

          Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance of such notes is outstanding, which are referred to as “callable” notes and will be designated in their title as “callable” in the relevant pricing supplement. Unless otherwise specified in the applicable pricing supplement, such series of notes will otherwise be subject to the redemption provisions specified herein. For a discussion of the redemption of discount notes, see “— Discount Notes.”

          If fewer than all of the notes are to be redeemed, DTC will select the notes to be redeemed not more than 60 calendar days prior to the redemption date by lot or, if the notes are not in book-entry form, the indenture trustee will do so, in its reasonable discretion, by lot or on a pro rata basis in accordance with its customary procedures. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued.

          If an optional repayment right is specified in the pricing supplement relating to a series of notes, such notes may be subject to repayment at the option of the holders of such series of notes on any repayment date specified in the applicable pricing supplement. Exercise of the repayment option under the notes by the holders will also require the applicable trust to exercise a corresponding repayment option under the applicable funding agreement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the notes shall be repayable in whole or in part in increments of $1,000 at the option of the holders thereof at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. A holder of a series of notes exercising its repayment right must submit to the indenture trustee at its corporate trust office, or at such other place or places of which the relevant trust has notified such holder, the notes to be repaid together with the “option to elect repayment” form attached to the notes not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment right by a holder shall be irrevocable. If a holder requests repayment in part only, a new note in principal amount equal to the principal portion of the notes not repaid will be issued.

          Only DTC may exercise a repayment option in respect of notes issued in book-entry form. Accordingly, beneficial owners of notes that desire to exercise their repayment option, if any, with respect to all or any portion of such notes, must instruct the participant through which they own their interest to direct DTC to exercise the repayment option on their behalf by delivering the duly completed election form to the indenture trustee as aforesaid. In order to ensure that the election form is received by the indenture trustee on a particular day, the applicable beneficial owner must so instruct the participant through which it owns its interest before such participant’s deadline for accepting instructions for that day. Participants may have different deadlines for accepting instructions from their customers. Accordingly, a beneficial owner should consult the participant through which it owns its interest in the notes for the participant’s deadline for receiving payment instructions. In addition, at the time such instructions are given, each such beneficial owner will cause such participant to transfer such beneficial owner’s interest in the notes issued in book-entry form, on DTC’s records, to the indenture trustee.

          No series of notes will be subject to, or entitled to the benefit of, any sinking fund unless otherwise specified in the applicable pricing supplement.

Repayment Upon Exercise of Survivor’s Option

          The “survivor’s option” is the trust’s agreement with the beneficial owner of a note to repurchase that note in whole or in part prior to maturity if requested, following the death of the beneficial owner of notes of that series, so long as the notes either were purchased by the deceased beneficial owner within ninety (90) days of their issuance or were held by the deceased beneficial owner for a period of six (6) months prior to such death. Unless otherwise specified in the applicable pricing supplement, the estate of the deceased beneficial owner of a note will be eligible to exercise the survivor’s option.

          Subject to the limitations described below, upon the valid exercise of the survivor’s option, the proper tender of that note for repayment and the tender and acceptance of that

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portion of the funding agreement related to such note, a trust will repay any of its notes pursuant to the survivor’s option by or on behalf of a person that has the legal authority to act on behalf of the note’s deceased owner. Unless otherwise specified in the applicable pricing supplement, the repurchase price will be 100% of the unpaid principal amount plus accrued interest to, but excluding, the date of repayment.

          Unless otherwise set forth in the applicable pricing supplement for your series of notes, the funding agreement securing your series of notes will contain a provision which will allow the trust to tender the funding agreement in whole or in part to us. A trust’s ability to tender the funding agreement related to a series of notes that contain a survivor’s option will be subject to certain limitations set by us. As a result, your right to exercise the survivor’s option is subject to limits set by us with respect to the relevant funding agreement. We have the discretionary right to limit:

• the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the Principal^® Life CoreNotes^® program as to which exercises of any put option by any trust shall be accepted by us in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the Principal^® Life CoreNotes^® program and the secured medium-term note retail program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement;

• the aggregate principal amount of funding agreements securing the notes as to which exercises of any put option by the applicable trust attributable to notes as to which the survivor’s option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement; and

• the aggregate principal amount of the funding agreement securing a series of notes as to which exercises of any put option by the applicable trust shall be accepted in any calendar year as set forth in the applicable funding agreement and the applicable pricing supplement.

          In any such event, a trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor’s option shall be accepted by the trust from authorized representatives of deceased beneficial owners. In addition, the exercise of the survivor’s option will not be permitted for a principal amount less than $1,000 or if such exercise will result in a note with a principal amount of less than $1,000 to remain outstanding. All other questions, other than with respect to the right to limit the aggregate principal amount of notes subject to the survivor’s option that will be accepted as to any series of notes or in any calendar year, regarding the eligibility or validity of any exercise of the survivor’s option will be determined by the trustee for the trust, in its sole discretion, which determination will be final and binding on all parties. The indenture trustee, upon written request by the authorized representative of the deceased beneficial owner of notes, will request the trustee to provide the status of the remaining program and series limitations for such calendar year on the exercise of any survivor’s option.

          The trust will accept elections to exercise the survivor’s option in the order received by the trustee of the trust. Notes that are not repaid in any calendar year due to the application of the limits described above will be treated as though they had been tendered on the first day of the following calendar year in the order in which they were originally tendered. Subject to the limitations described above, notes accepted for repayment will be repaid on the first interest payment date that occurs 20 or more calendar days after the date of acceptance.

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          If repayment of a note submitted for repayment pursuant to a valid exercise of the survivor’s option is not accepted or is to be delayed, the trustee of the trust will deliver a written notice by first-class mail to the depositary that states the reason that repayment of that particular note has not been accepted or will be delayed.

          A valid exercise of the survivor’s option may not be withdrawn.

          To exercise the survivor’s option with respect to a book-entry note, the deceased owner’s authorized person must provide the following items to the DTC “participant” through which the relevant beneficial interest is owned (for a discussion of DTC and its participants, see “— About the Depositary”):

• a written instruction to the participant to notify DTC of the authorized person’s desire to obtain a payment pursuant to the exercise of the survivor’s option;

• appropriate evidence (a) that the person has authority to act on behalf of the deceased owner, (b) of the death of the beneficial owner, (c) that the deceased was the beneficial owner of the notes at the time of death and (d) that the beneficial owner acquired the interest in the note either within ninety (90) days of their issuance or at least six (6) months prior to the date of death of such beneficial owner;

• if the beneficial interest in the relevant note is held by a nominee of the deceased owner, a certificate from the nominee attesting to the deceased owner’s ownership of a beneficial interest in that note;

• a written request for repayment signed by the authorized person for the deceased owner with signature guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States;

• if applicable, a properly executed assignment or endorsement;

• tax waivers and any other instruments or documents reasonably required to establish the validity of the ownership of the beneficial interest in the related note and the claimant’s entitlement to payment; and

• any additional information reasonably required to document the ownership or authority to exercise the survivor’s option and to cause the repayment of the related note.

          In turn, on the basis of this information, the participant will be required to deliver to the indenture trustee a properly completed repayment election form to exercise the survivor’s option, together with evidence satisfactory to the indenture trustee from the participant stating that it represents the deceased owner of the beneficial interest in the relevant note. The indenture trustee will then deliver these items to the trustee and will provide the trustee with any additional information (after receipt from the participant) the trustee may request in connection with such exercise.

          Apart from our discretionary right to limit the principal amount of notes as to which the survivor’s option may be exercised in any calendar year as described above, the trustee will determine all other questions regarding the eligibility or validity of any exercise of the survivor’s option. The trustee’s determination will be final and binding on all parties.

          The death of a person owning a note in joint tenancy or tenancy by the entirety with another or others will be treated as the death of the owner of that note, and the entire principal amount so owned will be eligible for repayment.

          The death of a person owning a note by tenancy in common will be treated as the death of the owner of that note only with respect to the deceased owner’s interest in the note held by tenancy in common. However, if a note is held by husband and wife as tenants in common, the death of either spouse will be treated as the death

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of the owner of the note and the entire principal amount so owned will be eligible for repayment.

          The death of a person who was a lifetime beneficiary of a trust that owns a note will be treated as the death of the owner of the note to the extent of that person’s interest in the trust. The death of a person who was a tenant by the entirety or joint tenant in a tenancy which is the beneficiary of a trust that owns a note will be treated as the death of the owner of the note. The death of an individual who was a tenant in common in a tenancy which is the beneficiary of a trust that owns a note will be treated as the death of the owner of the note only with respect to the deceased person’s beneficial interest in the note, unless a husband and wife are the tenants in common, in which case the death of either will be treated as the death of the owner of the note.

          The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial interests of ownership of a note will be treated as the death of the owner of the note if the beneficial interest can be established to the trustee’s satisfaction. This will be done in typical cases of nominee ownership, such as ownership under the Uniform Transfers of Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife and lifetime custodial and trust arrangements.

          The applicable participant will be responsible for disbursing payments received from the indenture trustee, acting in its capacity as servicer, to the authorized person for the deceased owner.

          Annex A to this prospectus supplement is the repayment election form for use by DTC participants in exercising the survivor’s option. Copies of this form may be obtained from the trustee at its corporate trust office located at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

          If applicable, the applicable trust will comply with the requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended, the related regulations and any other securities laws or regulations in connection with any repayment of notes at the option of the registered holders.

Purchase of Notes by Us

          We may at any time purchase notes at any price or prices in the open market or otherwise. Notes so purchased by us will be surrendered to the indenture trustee for cancellation. Concurrently with the surrender to the indenture trustee of any note, the funding agreement related to such note will be similarly redeemed.

          If applicable, such applicable trust will comply with the requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, and any other securities laws or regulations in connection with any repurchase of the notes by us.

Tax Redemption

          If a “tax event” as to the relevant funding agreement occurs, we will have the right to redeem the funding agreement and, upon such redemption, the applicable trust will redeem its series of notes in the same manner described under “— Optional Redemption; Optional Repayment; No Sinking Fund” above. For further discussion of “tax event” redemption, see “Description of the Funding Agreements — Early Redemption for Tax Event” in the accompanying prospectus.

Security; Non-Recourse Obligations

          Each series of notes will be solely the obligations of the related trust and will not be guaranteed by any person, including but not limited to us, PFG, the purchasing agent, any of our or their affiliates or any other trust. A trust’s obligations under its series of notes will be secured by all of its rights and title in a funding agreement issued by us, the payment obligations of which are guaranteed by the related guarantee issued by PFG to the trust and other rights and assets included in the applicable collateral held in the trust.

          Since we will be the sole obligor under the funding agreement and PFG will be the sole obligor under the related guarantee, the trust’s ability to meet its obligations, and your ability to receive payments from the trust, with respect to each applicable series of notes, will be principally dependent upon our ability to perform our obligations under the applicable funding agreement held

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in the relevant trust and PFG’s ability to perform its obligations under the guarantee of our payment obligations under the related funding agreement. However, you will have no direct contractual rights against us or PFG under the funding agreement or the guarantee, respectively. Under the terms of the funding agreement and related guarantee, recourse rights to us or PFG, respectively, will belong to the trust, its successors and its permitted assignees, but only with respect to the relevant trust. In connection with the offering and sale of a series of notes, the trust will collaterally assign and grant a security interest in the relevant funding agreement for such series of notes to, and the trust will collaterally assign and grant a security interest in the related guarantee in favor of, the indenture trustee for the benefit of the holders of such series of notes. Accordingly, recourse to us under such funding agreement and to PFG under the related guarantee will be enforceable only by the indenture trustee as a secured party on behalf of the holders of such series of notes by directing the indenture trustee under the limited circumstances described in the accompanying prospectus under “Description of the Notes — Certain Rights of Holders.” See also “Description of the Notes — Nonrecourse Enforcement” in the accompanying prospectus.

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

Book-Entry Notes

          We have established a depositary arrangement, on behalf of the trusts, with DTC with respect to the book-entry notes, the terms of which are summarized below.

          All book-entry notes having the same terms will be represented by one or more global securities. Each global security will be deposited with, or on behalf of, DTC and will be registered in the name of DTC or its nominee. No global security may be transferred or exchanged except as a whole by DTC or a nominee of DTC to DTC or to another nominee of DTC, or by DTC or another nominee of DTC to a successor of DTC or a nominee of a successor to DTC. So long as DTC or its nominee is the registered holder of a global security, DTC or its nominee will be the sole owner of the related book-entry notes represented thereby for all purposes under the indenture. Except as otherwise provided below, the beneficial owners of the global security or securities represented by book-entry notes will not be entitled to receive physical delivery of definitive notes and will not be considered the registered holders of the book-entry notes for any purpose under the indenture and no global security representing book-entry notes will be exchangeable or transferable. As a result, to exercise any rights of a registered holder under the indenture, a beneficial owner must rely on the procedures of DTC and, if the beneficial owner is not a participant, on the procedures of the participant or participants through which the beneficial owner owns its interest. The laws of some jurisdictions require that some purchasers of securities take physical delivery of securities in definitive form. These laws may limit the ability to transfer beneficial interests in a global security represented by book-entry notes.

          Each global security representing book-entry notes will be exchangeable for definitive notes having the same terms in a like aggregate principal amount only if:

• the trust notifies the indenture trustee that the trust wishes in its sole discretion to exchange the global security for definitive notes;

• an event of default on the notes of that series has occurred and has not been cured; or

• DTC notifies us that it is unwilling or unable to continue as a clearing system for the global securities, or we have become aware that it has ceased to be a clearing agency registered under the Securities Exchange Act of 1934, as amended and, in either case, a successor clearing system is not appointed by

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us within 60 calendar days after receiving the notice from DTC or becoming aware that DTC is no longer registered.

          If any of these events occurs, the appropriate trust will print and deliver definitive notes. Definitive notes issued under these circumstances will be registered in the names of the beneficial owners of the related global securities as provided to the indenture trustee by the participants identified by DTC.

About the Depositary

          The following is based on information furnished by DTC:

          DTC will act as securities depository for the book-entry notes. The book-entry notes will be issued as fully registered securities in the name of Cede & Co. (DTC’s nominee) or another name requested by DTC. One fully registered global security will be issued for each issue of a series of book-entry notes in the aggregate principal amount of that issue and will be deposited with, or on behalf of, DTC. If the aggregate principal amount of any issue exceeds DTC’s limit for a single global security, then the global securities will be issued in the form of one or more global securities having a principal amount equal to DTC’s limit and one or more additional global securities representing any remaining principal amount.

          DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its direct participants deposit with it. DTC also facilitates the settlement among direct participants of transactions in deposited securities, such as transfers and pledges, through electronic computerized book-entry changes in direct participants’ accounts. This eliminates the need for physical movement of securities certificates. DTC’s direct participants include securities brokers and dealers (including the purchasing agent), banks, trust companies, clearing corporations and other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to DTC’s system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its direct and indirect participants are on file with the SEC.

          Under DTC’s system, purchases of book-entry notes must be made by or through direct participants, which will receive a credit for the book-entry notes on DTC’s records. The ownership interest of the actual purchaser is in turn recorded on the records of the direct and indirect participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participants through which they entered into the transaction. Transfers of ownership interests in book-entry notes are accomplished by entries made on the books of the direct and indirect participants acting on behalf of the beneficial owners. Beneficial owners will not receive definitive notes unless use of the book-entry system is discontinued as described above.

          To facilitate subsequent transfers, all global securities representing the book-entry notes deposited with, or on behalf of, DTC will be registered in the name of DTC’s nominee, Cede & Co., or any other name that DTC requests. The deposit of global securities with, or on behalf of, DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the book-entry notes; DTC’s records reflect only the identity of the direct participants to whose accounts the book-entry notes are credited, which may or may not be the beneficial owners. DTC’s participants are responsible for keeping account of their holdings on behalf of their customers.

          Conveyance of notices and other communications from DTC to direct participants, from direct participants to indirect participants and from direct participants and indirect participants to beneficial owners are governed by arrangements

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among them and are subject to statutory and regulatory requirements.

          Neither DTC nor Cede & Co. will consent or vote with respect to global securities. Under its usual procedures, DTC mails an omnibus proxy to a company as soon as possible after a record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts the book-entry notes are credited on the record date (identified in a listing attached to the omnibus proxy).

          The trust will make payments on the global securities in immediately available funds to Cede & Co. or any other nominee named by DTC. DTC’s practice is to credit direct participants’ accounts on the applicable payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on that date. Payments by participants to beneficial owners are governed by standing instructions and customary practices and are subject to statutory and regulatory requirements. The trust and the trustee are responsible only for making payments to DTC; DTC is responsible for disbursing those payments to its direct participants and the direct participants (and any indirect participants) are solely responsible for disbursing those payments to the beneficial owners.

          Any redemption notices will be sent to Cede & Co. If less than all of the book-entry notes having the same terms are being redeemed, DTC’s current practice is to determine by lot the amount of the interest of each direct participant in those notes to be redeemed.

          A beneficial owner must give notice of any election to have its book-entry notes repaid through its participant to the indenture trustee. Delivery of the book-entry notes will be effected by causing the relevant direct participant to transfer the relevant part of its interest in the global securities to the indenture trustee on DTC’s records.

          DTC may discontinue providing its services as securities depository at any time by giving reasonable notice to us or the indenture trustee. If we do not obtain a successor securities depository, the applicable trust will print and deliver definitive notes.

          We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). If we do so, the applicable trust will print and deliver definitive notes.

DESCRIPTION OF THE FUNDING AGREEMENTS

          Each trust will use the net proceeds from the issuance of a series of notes to the public and the issuance of the trust beneficial interest to the trust beneficial owner to purchase a funding agreement. The funding agreement will have substantially similar payment and other terms to the related series of notes. The funding agreement may be interest bearing or non-interest bearing. A funding agreement may bear interest at either a fixed or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. The calculation of the interest rate, the dates of interest and maturity payments and such other payment terms on the funding agreement will be determined in the same manner as described above under “Description of the Notes.” An amount equal to the funding agreement deposit plus accrued but unpaid interest, if any, and accrued discount, if any (in the case of a discount funding agreement) will be payable on its stated maturity date, as specified in the applicable pricing supplement.

          The pricing supplement relating to a series of notes will describe the following pricing terms of the related funding agreement:

• the deposit amount for the funding agreement;

• whether the funding agreement:

          (1) is a fixed rate funding agreement,

          (2) is a floating rate funding agreement, and/or

          (3) is a discount funding agreement that does not bear interest currently or bears interest at a rate that is below market rates at the effective date;

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• the price at which the funding agreement will be issued, which will be expressed as a percentage of the aggregate deposit amount or face amount;

• the effective date on which the funding agreement will be issued;

• the stated maturity date;

• if the funding agreement is a fixed rate funding agreement, the rate per annum at which the funding agreement will bear any interest and the interest payment date frequency;

• if the funding agreement is a floating rate funding agreement, relevant terms such as:

          (1) the interest rate basis,

          (2) the initial interest rate,

          (3) the interest reset period or the interest reset dates,

          (4) the interest payment dates,

          (5) the index maturity,

          (6) any maximum interest rate,

          (7) any minimum interest rate,

          (8) the spread and/or spread multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the funding agreement and whether and how the spread and/or spread multiplier may be changed prior to stated maturity;

• whether the funding agreement may be redeemed by us, or repaid at the option of the trust, prior to the stated maturity and the terms of its redemption or repayment; provided in either case the relevant series of notes will contain substantially the same redemption and repayment terms and no funding agreement may be redeemed or repaid without the simultaneous redemption or repayment of the related series of notes; and

• any other terms of the funding agreement.

          For a more detailed discussion of the funding agreements, see “Description of the Funding Agreements” in the accompanying prospectus.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

          The following is a general discussion of the material United States federal income tax considerations relating to the purchase, ownership and disposition of the notes by initial purchasers of the notes who are Holders (as defined below), purchase the notes at their stated principal amount and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). The statements set forth in the following discussion, to the extent they constitute matters of United States federal income tax law or legal conclusions with respect thereto, represent the opinion of Sidley Austin LLP, special United States income tax counsel to us. This discussion does not address all of the tax considerations that may be relevant to prospective purchasers in light of their particular circumstances or to persons subject to special rules under United States federal tax laws, such as certain financial institutions, insurance companies, real estate investment trusts, dealers in securities, tax-exempt entities, persons who hold the notes as part of a “straddle,” “hedging,” “conversion” or other integrated transaction, persons who mark their securities to market for United States federal income tax purposes or persons whose functional currency (as defined in section 985 of the Code) is not the U.S. dollar. In addition, this discussion does not address the effect of any state, local or foreign tax laws or the effect of the U.S. federal alternative minimum tax. Accordingly, prospective purchasers are advised to consult their own tax advisers with respect to their individual circumstances.

          This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Except where indicated, this discussion does not

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describe the tax consequences of holding a note that is treated as a “variable rate debt instrument” or a “contingent payment debt instrument” under applicable Treasury Regulations, and a general summary of any materially different federal income tax considerations relating to any such note will be included in the relevant pricing supplement.

          For purposes of the following discussion, the term “Holder” means a beneficial owner of a note who or which is, for United States federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate or trust treated as a United States person under section 7701(a)(30) of the Code. This discussion does not address the tax considerations that may be relevant to a person who or which is not a Holder.

          Special rules, not discussed in this prospectus supplement or the accompanying prospectus, may apply to persons purchasing notes through entities treated for U.S. federal income tax purposes as partnerships, and such persons should consult their own tax advisors in that regard.

Classification of the Notes and the Trust

          We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness (the “Intended Tax Characterization”). Each Holder of a note (or any beneficial interest therein), by acceptance of the note (or beneficial interest), agrees to treat the trust with respect to which the note was issued and the note consistently with the Intended Tax Characterization.

          Notwithstanding the Intended Tax Characterization, it is possible that a trust could be viewed as a separate entity for United States federal income tax purposes. Sidley Austin LLP is of the opinion that, under current law and assuming full compliance with the terms of the trust agreement and the indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, each trust will not be classified as an association (or publicly traded partnership) taxable as a corporation for United States federal income tax purposes. Accordingly, whether the Intended Tax Characterization is respected or not, each trust will not be treated as a taxable entity for United States federal income tax purposes. If a trust is viewed as a separate entity rather than disregarded, each Holder of a note (or any beneficial interest therein) agrees to treat the trust as a grantor trust and the notes as undivided ownership interests in such trust. If this were the case, a Holder would be required to include in income, consistent with its method of accounting, its pro rata share of any amounts paid to the relevant trust to satisfy expenses and would be entitled to deduct, consistent with its method of accounting, its pro rata share of any such expenses as provided in sections 162 and 212 of the Code. If the Holder is an individual, trust or estate, or to the extent the Holder’s income is reportable on the income tax return of an individual, trust or estate, the deduction for such person’s share of such expenses will be allowed only to the extent that all of such person’s miscellaneous itemized deductions, including such person’s share of the relevant trust’s expenses, exceed two percent of such person’s adjusted gross income. In addition, an individual’s itemized deductions may be subject to other limitations. Accordingly, Holders who are individuals, or whose income is reported in whole or in part on the income tax return of a United States citizen or resident, should consult their tax advisers with respect to such deductions.

          The remainder of this summary assumes that the Intended Tax Characterization is correct.

Interest and Original Issue Discount

          Each Holder of a note will include in income payments of “qualified stated interest” (as described below) in respect of such note, in accordance with such Holder’s method of accounting for United States federal income tax purposes, as ordinary interest income. In general, if the issue price of a note, determined by the first price at which a substantial amount of the notes of the related series are sold (ignoring sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), is less than the “stated redemption price at maturity” (as described below) of such note by an amount equal to or more than a de minimis amount, a Holder will be considered to have purchased such note

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with original issue discount (“OID”). In general, the de minimis amount is equal to ¹/4 of one percent of the stated redemption price at maturity multiplied by the weighted average number of complete years to maturity from the issue date of such note. If a Holder acquires a note with OID, then regardless of such Holder’s method of accounting, such Holder will be required to accrue its pro rata share of OID on such note on a constant-yield basis and include such accruals in gross income, whether or not such Holder has received any cash payment on the notes. Any amount not treated as OID because it is less than the de minimis amount generally must be included in income (generally as gain from the sale of notes) as principal payments are received in the proportion that each such payment bears to the original principal amount of the note. Special rules apply to notes with a fixed maturity of one year or less. See “Short Term Notes.”

          “Stated redemption price at maturity” means the sum of all payments to be made on a note other than payments of “qualified stated interest.” “Qualified stated interest” generally means stated interest that is unconditionally payable at least annually at a single fixed rate or, in the case of a variable rate debt instrument (as defined below), at a single qualified floating rate or single objective rate (as such terms are defined below). If a note is a variable rate debt instrument but interest is payable at other than a single qualified floating rate or a single objective rate, special rules apply that are not discussed in this prospectus supplement or the accompanying prospectus.

          In the case of a variable rate debt instrument, the amount of qualified stated interest and the amount of OID, if any, that accrues during an accrual period is generally determined assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate (each as defined below), the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate or (ii) in the case of an objective rate (as defined below, and other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the debt instrument, and the qualified stated interest (or, if there is no qualified stated interest, OID) allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid during the accrual period pursuant to clause (i) or (ii), as applicable. Special rules apply to a variable rate debt instrument that provides for stated interest at a fixed rate under certain circumstances.

          A “variable rate debt instrument” is a debt instrument that (i) has an issue price that does not exceed the total noncontingent principal payments by more than an amount equal to the lesser of (a) 0.015 multiplied by the product of such total noncontingent principal payments and the number of complete years to maturity of the instrument (or, in the case of a note providing for the payment of any amount other than qualified stated interest prior to maturity, multiplied by the weighted average maturity of the note) or (b) 15 percent of the total noncontingent principal payments, (ii) provides for stated interest (compounded or paid at least annually) at the current value of (A) one or more qualified floating rates, (B) a single fixed rate and one or more qualified floating rates, (C) a single objective rate or (D) a single fixed rate and a single objective rate that is a qualified inverse floating rate, and (iii) does not provide for any principal payments that are contingent. The current value is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.

          A “qualified floating rate” is generally a floating rate under which variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which a debt instrument is denominated. A multiple of a qualified floating rate is not a qualified floating rate unless the relevant multiplier is (i) fixed at a number that is greater than 0.65 but not more than 1.35 or (ii) fixed at a number that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. A variable rate is not considered a qualified floating rate if the variable rate is subject to a cap, floor, governor (i.e., a restriction on the amount of increase or decrease in the stated interest rate) or similar restriction that is reasonably expected as of the issue date to cause the yield on the note to be significantly more or less than the expected yield determined without the restriction (other than a cap, floor, governor or similar restriction that is fixed throughout the term of the note).

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          An “objective rate” is a rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided, however, that an objective rate will not include a rate based on information that is within the control of the issuer (or certain related parties of the issuer) or that is unique to the circumstances of the issuer (or certain related parties of the issuer), such as dividends, profits or the value of the issuer’s stock. A “qualified inverse floating rate” is an objective rate (x) that is equal to a fixed rate minus a qualified floating rate and (y) the variations in which can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate (disregarding any caps, floors, governors or similar restrictions that would not, as described above, cause a rate to fail to be a qualified floating rate). Notwithstanding the first sentence of this paragraph, a rate is not an objective rate if it is reasonably expected that the average value of the rate during the first half of the note’s term will be either significantly less than or significantly greater than the average value of the rate during the final half of the note’s term. The Internal Revenue Service (“IRS”) may designate rates other than those specified above that will be treated as objective rates. As of the date of this prospectus supplement, no other rates have been designated.

          If interest on a note is stated at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. A fixed rate and a variable rate will be conclusively presumed to meet the requirements of the preceding sentence if the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 0.25 percentage points (25 basis points).

          If a floating rate note does not qualify as a variable rate debt instrument or otherwise provides for contingent payments, or if a fixed rate note provides for contingent payments, such note may constitute a “contingent payment debt instrument.” A note that is a contingent payment debt instrument is generally taxable as follows:

          First, we are required to determine, as of the issue date, the comparable yield for the note. The comparable yield is generally the yield at which we would issue a fixed rate debt instrument with terms and conditions similar to those of the note (including the level of subordination, term, timing of payments and general market conditions, but not taking into consideration the riskiness of the contingencies or the liquidity of the note), but not less than the applicable federal rate announced monthly by the IRS (the “AFR”). In certain cases where a floating rate note is marketed or sold in substantial part to tax-exempt investors or other investors for whom the prescribed inclusion of interest is not expected to have a substantial effect on their U.S. federal tax liability, the comparable yield for the note, without proper evidence to the contrary, is presumed to be the AFR.

          Second, we are required to construct a projected schedule of payments (the “Schedule”). The Schedule is determined as of the issue date and generally remains in place throughout the term of the note. The Schedule includes each noncontingent payment and a projected payment for each contingent payment. The Schedule must produce the comparable yield determined as set forth above.

          Third, under the usual rules applicable to OID and based on the comparable yield, each Holder will be required to accrue its pro rata share of OID on a constant yield basis and include such accrual in gross income.

          Fourth, appropriate adjustments are made to the OID determined under the foregoing rules to account for any differences between actual contingent payments and the projected payments on the Schedule.

          Differences between the actual contingent payments made to a Holder in such Holder’s taxable year and the projected payments for such taxable year are generally aggregated and taken into account, in the case of a positive difference, as additional interest income, or, in the case of a negative difference, first as a reduction in OID for such year and thereafter, subject to certain limitations, as ordinary loss. We are required to provide to each holder of notes a copy of the Schedule.

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Our determination of the Schedule must be used by a Holder unless the Schedule is unreasonable and such Holder discloses to the IRS that it is using a different schedule. In general, any gain realized by a Holder on the sale, exchange, retirement or other disposition of a note that is a contingent payment debt instrument prior to the time no contingent payments remain is treated as interest income. In general, any loss on such a note is treated as ordinary loss to the extent it does not exceed such Holder’s prior interest inclusions on the note (net of negative adjustments). The above described treatment of contingent payment debt instruments assumes that the instrument is properly treated as debt for U.S. federal tax purposes.

Premiums

          If the amount paid by a Holder for a note exceeds the stated redemption price at maturity of the note, the Holder generally will be considered to have purchased the note at a premium equal in amount to such excess. In this event, the Holder may elect to amortize such premium, generally on a constant-yield basis, as an offset to interest income. In the case of a note that may be redeemed prior to maturity, the premium is calculated assuming the trust and the Holder will exercise or not exercise redemption rights in a manner that maximizes the Holder’s yield. It is unclear how premium is calculated when the redemption date or the amount of any redemption premium is uncertain. The election to amortize bond premium, once made, will apply to all debt obligations held or subsequently acquired by the electing Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.

Short-Term Notes

          Notes that have a fixed maturity of one year or less (“Short-Term Notes”) will be treated as issued with OID. In general, an individual or other Holder that uses the cash method of accounting is not required to accrue such OID unless the Holder elects to do so. If such an election is not made, any gain recognized by such Holder on the sale, exchange, retirement or other disposition of Short-Term Notes will be ordinary income to the extent of the OID accrued on a straight-line basis, or upon election under the constant yield method (based on daily compounding), through the date of sale, exchange, retirement or other disposition, and a portion of the deduction otherwise allowable to such Holder for interest on borrowings allocable to Short-Term Notes will be deferred until a corresponding amount of income is realized. Holders who report income for United States federal income tax purposes under the accrual method of accounting and certain other Holders are required to accrue OID related to a Short-Term Note as ordinary income on a straight-line basis unless an election is made to accrue the OID under a constant yield method (based on daily compounding).

Sale, Exchange, Retirement or Other Disposition of Notes

          In general, a Holder of a note will have a tax basis in the note equal to the cost of the note to the Holder, increased by any amount includible in income by the Holder as OID and reduced by any principal payments. Upon a sale, exchange, retirement or other disposition (including upon exercise of a survivor’s option) of a note, a Holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange, retirement or other disposition (less any amount realized that is attributable to accrued but unpaid interest, which will constitute ordinary income if not previously included in income) and the Holder’s tax basis in such note. Such gain or loss will be long-term capital gain or loss if the Holder held the note for more than one year at the time of disposition. A Holder that is an individual is entitled to preferential treatment for net long-term capital gains. The ability of a Holder to offset capital losses against ordinary income is limited.

Backup Withholding and Information Reporting

          Backup withholding and information reporting requirements generally apply to interest (including OID) and principal payments made to, and to the proceeds of sales by, certain non-corporate Holders. A Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing a properly-executed Internal Revenue Service Form W-9 (or successor form). Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the beneficial owner’s United States federal income tax liability provided

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the required information is furnished to the Internal Revenue Service.

Opinion Regarding Tax Matters

          Prior to the issuance of any notes, we will file with a Current Report on Form 8-K an unqualified opinion of legal counsel regarding the tax treatment of such notes.

PLAN OF DISTRIBUTION

          This prospectus supplement relates to the offering of notes by separate trusts from time to time for sale to or through Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Purchasing Agent, pursuant to a distribution agreement (the “Distribution Agreement”) among the applicable trust, us, PFG and the agents named therein. The trusts may not sell notes offered under this Principal^® Life CoreNotes^® program to or through any brokers or dealers other than the Purchasing Agent. Under the terms of the Distribution Agreement, one or more separate trusts may also sell notes to or through agents primarily to institutional investors under our secured medium-term notes program or retail investors under our secured medium-term notes retail program. The Purchasing Agent may purchase notes, as principal, from the applicable trust for resale to investors at a fixed offering price or at varying prices relating to prevailing market prices at the time of resale as determined by the Purchasing Agent. The applicable trust may agree with the Purchasing Agent that the Purchasing Agent will utilize its reasonable efforts on an agency basis on its behalf to solicit offers to purchase notes at 100% of the principal amount thereof, unless otherwise specified in the applicable pricing supplement. In all such cases, a single trust may only issue notes of a single series on the initial date of sale of such notes. No additional notes may thereafter be issued by that trust Unless otherwise specified in the applicable pricing supplement, the applicable trust will pay a commission to the Purchasing Agent, ranging from .125% to 2.00% of the principal amount of each note, depending upon its stated maturity, sold through the Purchasing Agent as its agent. The applicable trust may negotiate commissions with respect to notes with stated maturities in excess of 20 years that are sold through the Purchasing Agent as the trust’s agent at the time of the related sale. The notes may be sold in the United States to retail, institutional and other investors.

          Subject to the terms of the Distribution Agreement, concurrently with any offering of notes as described in this prospectus supplement by the applicable trust, a separate trust may issue other notes under our secured medium-term notes program primarily to institutional investors, our secured medium-term notes retail program primarily to retail investors or the accompanying prospectus or this prospectus supplement.

          Unless otherwise specified in the applicable pricing supplement, any note sold to the Purchasing Agent as principal will be purchased by the Purchasing Agent at a price equal to 100% of the principal amount thereof less a percentage of the principal amount equal to the commission applicable to an agency sale of a note of identical maturity. The Purchasing Agent may sell notes it has purchased from the applicable trust as principal to other National Association of Securities Dealers, Inc. dealers in good standing at a concession. Unless otherwise specified in the applicable pricing supplement, the concession allowed to any dealer will not, during the distribution of the notes, be in excess of the concession the Purchasing Agent will receive from the applicable trust. After the initial offering of notes, the offering price (in the case of notes to be sold on a fixed offering price basis), the concession and any reallowance may be changed.

          The applicable trust reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject offers in whole or in part. The Purchasing Agent will have the right, in its discretion reasonably exercised, to reject in whole or in part any offer to purchase notes received by it on an agency basis.

          Unless otherwise specified in the applicable pricing supplement, you will be required to pay the purchase price of your notes in immediately available funds in United States dollars in The City of New York on the date of settlement.

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          Upon issuance, the notes will not have an established trading market. The notes may not be listed on any securities exchange. The Purchasing Agent may from time to time purchase and sell notes in the secondary market, but the Purchasing Agent is not obligated to do so. There can be no assurance that a secondary market for the notes will develop or that there will be liquidity in the secondary market if one develops. From time to time, the Purchasing Agent may make a market in the notes, but the Purchasing Agent is not obligated to do so and may discontinue any market-making activity at any time.

          In connection with an offering of notes purchased by the Purchasing Agent as principal on a fixed offering price basis, the Purchasing Agent will be permitted to engage in certain transactions that stabilize the price of notes. These transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of notes. If the Purchasing Agent creates a short position in notes (i.e., if they sell notes in an amount exceeding the amount referred to in the applicable pricing supplement), they may reduce that short position by purchasing notes in the open market. In general, purchases of notes for the purpose of stabilization or to reduce a short position could cause the price of notes to be higher than it might be in the absence of these type of purchases.

          None of us, PFG, any trust or the Purchasing Agent makes any representation or prediction as to the direction or magnitude of any effect that the transactions described in the immediately preceding paragraph may have on the price of notes. In addition, none of us, PFG, any trust or the Purchasing Agent makes any representation that the Purchasing Agent will engage in any such transactions or that such transactions, once commenced, will not be discontinued without notice.

          The Purchasing Agent is an “underwriter” within the meaning of the Securities Act of 1933, as amended, with respect to the notes being distributed, the funding agreement purchased by the trust and the guarantee issued to the trust. We and PFG have agreed, jointly and severally, to indemnify the Purchasing Agent against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Purchasing Agent may be required to make in respect thereof.

          We are a statutory issuer of the notes under the Securities Act of 1933, as amended. In addition, under the Securities Act of 1933, as amended, each trust is a statutory underwriter of the related funding agreement and guarantee.

          In the ordinary course of business, the Purchasing Agent and its affiliates have engaged, and may in the future engage, in investment and commercial banking transactions with us and certain of our affiliates.

          Broker-dealers and securities firms have executed dealer agreements with the Purchasing Agent and have agreed to market and sell the notes in accordance with the terms of those agreements and applicable laws and regulations.

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ANNEX A

REPAYMENT ELECTION FORM

Principal Life Insurance Company

Principal^® Life CoreNotes^®

Cusip Number           

To: [Name of Trust] (the “TRUST”)

          The undersigned financial institution (the “FINANCIAL INSTITUTION”) represents the following:

• The Financial Institution has received a request for repayment from the executor or other authorized representative (the “AUTHORIZED REPRESENTATIVE”) of the deceased beneficial owner listed below (the “DECEASED BENEFICIAL OWNER”) of Principal^® Life CoreNotes^® (CUSIP No.           ) (the “NOTES”).

• At the time of his or her death, the Deceased Beneficial Owner owned Notes in the principal amount listed below.

• The Deceased Beneficial Owner acquired the Notes either within ninety (90) days of their issuance or at least six (6) months before the date of death of such Deceased Beneficial Owner.

• The Financial Institution currently holds such notes as a direct or indirect participant in The Depository Trust Company (the “DEPOSITARY”).

          The Financial Institution agrees to the following terms:

• The Financial Institution shall follow the instructions (the “INSTRUCTIONS”) accompanying this Repayment Election Form (this “FORM”).

• The Financial Institution shall make all records specified in the Instructions supporting the above representations available to U.S. Bank Trust National Association (the “TRUSTEE”) or the [Name of Trust] (the “TRUST”) for inspection and review within five business days of the Trustee’s or the Trust’s request.

• If the Financial Institution, the Trustee or the Trust, in any such party’s reasonable discretion, deems any of the records specified in the Instructions supporting the above representations unsatisfactory to substantiate a claim for repayment, the Financial Institution shall not be obligated to submit this Form, and the Trustee or Trust may deny repayment. If the Financial Institution cannot substantiate a claim for repayment, it shall notify the Trustee immediately.

• Repayment elections may not be withdrawn.

• The Financial Institution agrees to indemnify and hold harmless the Trustee and the Trust against and from any and all claims, liabilities, costs, losses, expenses, suits and damages resulting from the Financial Institution’s above representations and request for repayment on behalf of the Authorized Representative.

• The Notes will be repaid on the first Interest Payment Date to occur at least 20 calendar days after the date of acceptance of the notes for repayment, unless such date is not a business day, in which case the date of repayment shall be the next succeeding business day.

• Subject to the Trust’s rights to limit the aggregate principal amount of Notes as to which exercises of the survivor’s option shall be accepted in any one calendar year, all questions as to the eligibility or validity of any exercise of the survivor’s option will be determined by the Trustee, in its sole discretion, which determination shall be final and binding on all parties.

A-1

REPAYMENT ELECTION FORM

(1)

Name of Deceased Beneficial Owner

(2)

Date of Death

(3)

Name of Authorized Representative Requesting Repayment

(4)

Name of Financial Institution Requesting Repayment

(5)

Signature of Authorized Representative of Financial Institution Requesting Repayment

(6)

Principal Amount of Requested Repayment

(7)

Date of Election

(8) Financial Institution
Representative Name:
Phone Number:
Fax Number:
Mailing Address (no P.O. Boxes): (9) Wire instructions for payment:
Bank Name:
ABA Number:
Account Name:
Account Number:
Reference (optional):

TO BE COMPLETED BY THE TRUSTEE:

(A)	Election Number*:
(B)	Delivery and Payment Date:
(C)	Principal Amount:
(D)	Accrued Interest:
(E)	Date of Receipt of Form by the Trustee:
(F)	Date of Acknowledgment by the Trustee:

*  To be assigned by the Trustee upon receipt of this Form. An acknowledgement, in the form of a copy of this document with the assigned Election Number, will be returned to the party and location designated in item (8) above.

A-2

INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM AND EXERCISING REPAYMENT OPTION

          Capitalized terms used and not defined herein have the meanings defined in the accompanying Repayment Election Form.

          1. Collect and retain for a period of at least three years (1) satisfactory evidence of the authority of the Authorized Representative, (2) satisfactory evidence of death of the Deceased Beneficial Owner, (3) satisfactory evidence that the Deceased Beneficial Owner beneficially owned, at the time of his or her death, the notes being submitted for repayment, (4) satisfactory evidence that the notes being submitted for repayment either were purchased by the Deceased Beneficial Owner within ninety (90) days of their issuance or were acquired by the Deceased Beneficial Owner at least six (6) months before the date of the death of such Deceased Beneficial Owner and (5) any necessary tax waivers. For purposes of determining whether the notes will be deemed beneficially owned by an individual at any given time, the following rules shall apply:

• If a note (or a portion thereof) is beneficially owned by tenants by the entirety or joint tenants, the note (or relevant portion thereof) will be regarded as beneficially owned by a single owner. Accordingly, the death of a tenant by the entirety or joint tenant will be deemed the death of the beneficial owner and the entire principal amount so owned will become eligible for repayment.

• The death of a person beneficially owning a note (or a portion thereof) by tenancy in common will be deemed the death of the beneficial owner only with respect to the deceased owner’s interest in the note (or relevant portion thereof) so owned, unless a husband and wife are the tenants in common, in which case the death of either will be deemed the death of the beneficial owner and the entire principal amount so owned will be eligible for repayment.

• A note (or a portion thereof) beneficially owned by a trust will be regarded as beneficially owned by each beneficiary of the trust to the extent of that beneficiary’s interest in the trust (however, a trust’s beneficiaries collectively cannot be beneficial owners of more notes than are owned by the trust). The death of a beneficiary of a trust will be deemed the death of the beneficial owner of the notes (or relevant portion thereof) beneficially owned by the trust to the extent of that beneficiary’s interest in the trust. The death of an individual who was a tenant by the entirety or joint tenant in a tenancy which is the beneficiary of a trust will be deemed the death of the beneficiary of the trust. The death of an individual who was a tenant in common in a tenancy which is the beneficiary of a trust will be deemed the death of the beneficiary of the trust only with respect to the deceased holder’s beneficial interest in the note, unless a husband and wife are the tenants in common, in which case the death of either will be deemed the death of the beneficiary of the trust.

• The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial interest in a note (or a portion thereof) will be deemed the death of the beneficial owner of that note (or relevant portion thereof), regardless of the registration of ownership, if such beneficial interest can be established to the satisfaction of the Trustee. Such beneficial interest will exist in many cases of street name or nominee ownership, custodial arrangements, ownership by a trustee, ownership under the Uniform Transfers of Gifts to Minors Act and community property or other joint ownership arrangements between spouses. Beneficial interest will be evidenced by such factors as the power to sell or otherwise dispose of a note, the right to receive the proceeds of sale or disposition and the right to receive interest and principal payments on a note.

          2. Indicate the name of the Deceased Beneficial Owner on line (1).

          3. Indicate the date of death of the Deceased Beneficial Owner on line (2).

A-3

          4. Indicate the name of the Authorized Representative requesting repayment on line (3).

          5. Indicate the name of the Financial Institution requesting repayment on line (4).

          6. Affix the authorized signature of the Financial Institution’s representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE GUARANTEED.

          7. Indicate the principal amount of notes to be repaid on line (6).

          8. Indicate the date this Form was completed on line (7).

          9. Indicate the name, mailing address (no P.O. boxes, please), telephone number and facsimile-transmission number of the party to whom the acknowledgment of this election may be sent in item (8).

          10. Indicate the wire instruction for payment on line (9).

          11. Leave lines (A), (B), (C), (D), (E) and (F) blank.

          12. Mail or otherwise deliver an original copy of the completed Form to:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

          13. FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE ACCEPTED.

          14. If the acknowledgement of the Trustee’s receipt of this Form, including the assigned Election Number, is not received within ten days of the date such information is sent to Citibank, N.A., contact the Trustee at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

          15. For assistance with this Form or any questions relating thereto, please contact U.S. Bank Trust National Association at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

A-4

$4,000,000,000

Principal^® Life CoreNotes^® (That are also Asset-Backed Securities)

Due Between Nine Months and Thirty Years

From the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements

Issued by

Principal Life Insurance Company

and

Guarantees Issued by

Principal Financial Group, Inc.

PROSPECTUS SUPPLEMENT

Merrill Lynch & Co.

                    , 2006

“Principal^®” is a registered service mark of Principal Financial Services, Inc. and is used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

The information in this prospectus supplement is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated January 25, 2006

PROSPECTUS SUPPLEMENT

(To prospectus dated                , 2006)

$4,000,000,000

Secured Medium-Term Retail Notes (That are also Asset-Backed Securities)

Due Between Nine Months and Thirty Years From the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements Issued by

Principal Life Insurance Company and

Guarantees Issued by Principal Financial Group, Inc.

          Principal Life: We are Principal Life Insurance Company, an Iowa insurance company, the sponsor of the program and the depositor and issuer of the funding agreements described below. This prospectus supplement relates to the offering, from time to time, through newly established separate and distinct issuing entities in the form of the trusts described below, of one or more series of secured medium-term notes (that are also asset-backed securities), which we refer to in this prospectus supplement as “notes,” in an aggregate principal amount of up to $4,000,000,000, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program issued primarily to institutional investors pursuant to a separate prospectus supplement dated the date hereof, our Principal^® Life CoreNotes^® program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          Issuing Entities: The applicable trust will use the net proceeds from the offering of its series of notes to purchase a funding agreement sold to, and deposited into, the applicable trust, by us. Our payment obligations under the funding agreement relating to the applicable series of notes will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc., a Delaware corporation and our indirect parent (“PFG”).

          The notes are obligations of the applicable issuing entity. The notes are secured medium-term notes that are also asset-backed securities.

          Each trust exists for the exclusive purpose of issuing and selling one series of notes to investors, using the net proceeds from the sale of that series of notes to acquire a funding agreement from us, collaterally assigning and granting a security interest in the applicable funding agreement, and collaterally assigning and granting a security interest in the applicable guarantee, in favor of the indenture trustee, and engaging in other activities necessary or incidental thereto.

          You should read this prospectus supplement, the accompanying prospectus and the applicable pricing supplement carefully before you invest in the notes.

          The notes: The specific terms and conditions of each series of notes will be as set forth in a separate pricing supplement. The notes of each series will:

• be issued by a separate and distinct trust and will be the obligations of that issuing entity;

• provide for payment in U.S. dollars;

• rank as secured indebtedness of the trust secured primarily by a funding agreement issued by us;

• be issued in only one class;

• unless otherwise specified in the applicable pricing supplement, not be listed on any securities exchange;

• unless otherwise specified in the applicable pricing supplement, have a minimum denomination of $1,000 and integral multiples in excess thereof;

• be in book-entry form;

• represent non-recourse obligations of the trust and be paid only from the assets of that trust;

• represent the trust’s obligations only and will not represent obligations of, represent interests in, or be guaranteed by, us, PFG or any of our or its affiliates;

• bear interest at fixed or floating rates, or bear no interest at all;

• pay interest on each series of notes on a monthly, quarterly, semi-annual or annual basis (unless otherwise specified in the applicable pricing supplement);

• have a stated maturity of between 9 months and 30 years from the date of issue;

• have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of notes; and

• be sold in the United States to retail investors.

          Holders of a series of notes may look only to the trust’s rights and title in the funding agreement issued to, and deposited into, the applicable trust by us, the related guarantee issued by PFG and any proceeds of that funding agreement and guarantee held in the trust and not to any other assets or collateral held by any other trust, us or PFG.

          Investing in the notes involves risks that are described in the “Risk Factors” section beginning on page 2 of the accompanying prospectus.

          None of the Securities and Exchange Commission (the “SEC”), any state securities commission or any state insurance commission has approved or disapproved of these securities or determined if this prospectus supplement, the accompanying prospectus or any pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

          The trusts may sell notes to the agents specified in the applicable pricing supplement (each an “Agent”) as principal for resale at a fixed offering price specified in the applicable pricing supplement or at varying prices. The trusts may also explicitly agree with the Agents that they will use their reasonable efforts as Agents on the trust’s behalf to solicit offers to purchase notes from such trusts.

          The date of this prospectus supplement is               , 2006.

“Principal^®” and “Principal Financial Group and Design^®” are registered service marks of Principal Financial Services, Inc. and are used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

TABLE OF CONTENTS

	Page
PROSPECTUS SUPPLEMENT
ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS		S-1
SUMMARY		S-3
DESCRIPTION OF THE NOTES		S-14
DESCRIPTION OF THE FUNDING AGREEMENTS		S-37
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS		S-38
PLAN OF DISTRIBUTION		S-43
REPAYMENT ELECTION FORM		A-1
PROSPECTUS
ABOUT THIS PROSPECTUS		1
RISK FACTORS		2
FORWARD LOOKING INFORMATION		11
WHERE YOU CAN FIND MORE INFORMATION		11
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE		12
USE OF PROCEEDS		14
RATIO OF EARNINGS TO FIXED CHARGES		14
PRINCIPAL LIFE INSURANCE COMPANY AND PRINCIPAL FINANCIAL GROUP, INC.		15
DESCRIPTION OF THE TRUSTS		17
DESCRIPTION OF THE NOTES		22
DESCRIPTION OF THE FUNDING AGREEMENTS		35
DESCRIPTION OF THE GUARANTEES		41
FEES AND EXPENSES		42
ERISA CONSIDERATIONS		43
PLAN OF DISTRIBUTION		45
LEGAL MATTERS		46
EXPERTS		47

ABOUT THIS PROSPECTUS SUPPLEMENT AND THE PRICING SUPPLEMENTS

          This document is a prospectus supplement and supplements a prospectus which is part of the registration statement that we and PFG have filed with the SEC. This prospectus supplement provides you with a general description of the notes being offered, through newly established separate and distinct trusts and the underlying funding agreements and guarantees, and supplements the description of the notes, the underlying funding agreements and guarantees contained in the accompanying prospectus. These notes may be offered from time to time, through trusts, in one or more series of notes with a total initial public offering price or purchase price of up to $4,000,000,000, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program issued primarily to institutional investors pursuant to a separate prospectus supplement dated the date hereof, our Principal^® Life CoreNotes^® program issued primarily to retail investors pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.

          The specific terms and conditions of notes being offered and the related funding agreement and guarantee will be contained in a pricing supplement. A copy of that pricing supplement will be provided to you along with a copy of this prospectus supplement and the accompanying prospectus. That pricing

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supplement also may add, update, supplement or clarify information in this prospectus supplement and the accompanying prospectus. You should carefully review such additional, updated, supplemental or clarifying information contained in the pricing supplement. You should read this prospectus supplement and the accompanying prospectus and the pricing supplement together with the additional information that is incorporated by reference in this prospectus supplement and the accompanying prospectus. That additional information is described under the heading “Incorporation of Certain Documents by Reference” beginning on page 12 of the accompanying prospectus.

          You should rely only on the information incorporated by reference or provided in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement. None of us, PFG, any trust or any Agent has authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. None of us, PFG, any trust or any Agent is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and the applicable pricing supplement, as well as information PFG previously filed with the SEC and incorporated by reference, is accurate only as of its respective date The business, financial condition, results of operations and prospects of us and PFG may have changed since that date.

          In this prospectus supplement, references to “Principal Life,” “we,” “us” and “our” are to Principal Life Insurance Company, an Iowa life insurance company, references to “PFG” are to Principal Financial Group, Inc., a Delaware corporation and our indirect parent company, and references to “trust” are to the applicable newly established separate and distinct special purpose common law trust, formed in a jurisdiction located in the United States of America specified in the applicable pricing supplement, which actually issues the applicable series of notes. In this prospectus supplement, we refer to each series of secured medium-term notes as a “series of notes” and to secured medium-term notes in general as “notes.”

          In this prospectus supplement, references to “United States dollars,” “U.S. dollars” or “$” are to lawful currency of the United States of America.

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SUMMARY

          This section summarizes the material legal and financial terms of the notes and the underlying funding agreements and guarantees that are described in more detail in “Description of the Notes” beginning on page S-14 of this prospectus supplement, “Description of the Funding Agreements” beginning on page S-37 of this prospectus supplement, and “Description of the Guarantees” beginning on page 40 of the accompanying prospectus. Final terms of any particular series of notes are set at the time of sale and will be contained in a pricing supplement relating to that series of notes and the related funding agreement and guarantee. That pricing supplement may add to, update, supplement or clarify the terms contained in this summary. In addition, you should read the more detailed information appearing elsewhere in the accompanying prospectus, this prospectus supplement and the applicable pricing supplement.

The Trusts	Each series of notes will be issued by a newly established and separately created common law trust. Each trust will be established by GSS Holdings II, Inc., as trust beneficial owner, and U.S. Bank Trust National Association, as trustee, pursuant to a trust agreement (each, a “trust agreement”). The assets and liabilities of each trust are separate and distinct from the assets and liabilities of every other trust, us and PFG.
The Sponsor and the Depositor	We are the sponsor of the program and the registrant as the depositor and issuer of the funding agreements under the program.
The Guarantor	PFG is a registrant as the issuer of the guarantees that will fully and unconditionally guarantee our payment obligations under the funding agreements.
Purpose of Trusts	The sole purpose of each trust is to facilitate a program for the issuance of notes to the public. Each trust may only issue one series of notes and such notes will be issued only on the original issue date for such notes. Each series of notes will be secured by only one funding agreement purchased from us by the applicable trust, the principal amount of which may not be increased. Our payment obligations under each funding agreement will be fully and unconditionally guaranteed by PFG. The trust will use the net proceeds received from issuing a series of notes to acquire a funding agreement, for, and to be held in, the trust. The trust will hold the collateral described below pertaining to the applicable series of notes to fund its obligations under that series of notes. Notes issued by the trust will be the direct obligations of the trust and will not be the obligation of any other trust, us or PFG. Holders of notes of a particular series may only look to the funding agreement issued by us, the related guarantee issued by PFG and any proceeds of such funding agreement and guarantee held in the related trust for payment on their notes and not to the assets held in any other trust or by us or PFG.
	We and PFG are not affiliated with any trust. Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates owns any beneficial interest in any trust nor has any of these persons or entities entered into any agreement with any trust other than in furtherance of the issuance of notes from time

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to time as contemplated by this prospectus supplement and the accompanying prospectus.

Neither we, PFG nor any of our officers, directors, subsidiaries or affiliates is affiliated with the trustee, the trust beneficial owner or the indenture trustee relating to the notes.

Below is a diagram showing the parties involved in the issuance of notes by each trust.

We Can Issue Medium-Term Notes and Funding Agreements Directly to Investors	We are able to issue our own medium-term notes directly to investors and do issue funding agreements directly to investors. However, by securing each trust’s notes with a funding agreement, such trust’s notes are secured by an asset that would have a higher priority in insolvency than our unsecured medium-term notes, if any, and may be entitled to receive a higher investment rating from one or more nationally recognized rating agencies than our unsecured medium-term notes. In addition, funding agreements are very difficult to transfer and have no active secondary market. By securing each trust’s notes with a funding agreement, investors may be able to avail themselves of many of the benefits of our funding agreements while benefiting from the liquidity afforded by each trust’s medium-term notes.
Agents	One or more Agents will be specified in the applicable pricing supplement.
Secured Medium-Term Notes Retail Program	This prospectus supplement relates to notes that one or more trusts may issue and sell in the United States to retail and other investors under our secured medium-term notes retail program.

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Secured Medium-Term Notes Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to institutional investors by newly established trusts under the related secured medium-term notes program. The terms of the secured medium-term notes are identical in all material respects to the terms of the notes to be sold under this program, as described in this prospectus supplement, except that the secured medium-term notes:
	• may be issued as amortizing notes;
	• may be denominated in one or more foreign currencies;
	• will not contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes; and
	• may contain a provision providing for the redemption of the notes if we are required to pay additional amounts on the related funding agreement pursuant to the applicable pricing supplement and we exercise our right to redeem the funding agreement.
Principal® Life CoreNotes® Program	Included in the registration statement, of which this prospectus supplement is a part, is another prospectus supplement relating to notes that may be issued and sold to retail investors by newly established trusts under the related Principal® Life CoreNotes® Program. The terms of the Principal® Life CoreNotes® Program are identical in all material respects to the terms of the notes to be sold under this program. However, unlike the Principal® Life CoreNotes® Program, the notes issued and sold under this program may be distributed by one or more Agents which may include Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Amount	The trusts may collectively issue up to a maximum aggregate principal amount of $4,000,000,000 of notes in connection with this prospectus supplement, less any principal amount of notes previously issued under this program pursuant to this prospectus supplement, our secured medium-term notes program pursuant to a separate prospectus supplement dated the date hereof, our Principal® Life CoreNotes® program pursuant to a separate prospectus supplement dated the date hereof or otherwise under the accompanying prospectus.
Flow of Funds	Other than during the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to amounts due under the notes; and

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	• second, with respect to any remaining funds, in accordance with the applicable trust agreement.
	During the occurrence and continuance of an event of default under the notes of a trust, amounts received by or on behalf of the trust will be paid:
	• first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee, in an aggregate amount of no more than $250,000 for all notes issued under the program, to the extent not paid pursuant to the applicable expense and indemnity agreement;
	• second, to amounts due under the notes; and
	• third, with respect to any remaining funds, in accordance with the applicable trust agreement.
	See “Description of the Notes — Application of Money Collected Under the Indenture” in the accompanying prospectus.
	Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right of such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws, is no different than if we had issued the funding agreement directly to such purchasers. The right of such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.
Terms of the Notes: Status	• Each series of notes will be the unconditional, direct, non-recourse, secured and unsubordinated obligations of the applicable trust. Each series of notes will be secured by the collateral relating to that series of notes.
	• Each series of notes may be accelerated in the payment of principal and outstanding interest if an event of default under the notes occurs. Upon the occurrence of an event of default, the indenture trustee (described below), on behalf of the holders of notes, may only proceed against the collateral held in the related trust.
	• The notes of each series are not, and will not be, obligations of, or guaranteed by, us or any other insurance company or any affiliate of ours, including PFG. The notes will not benefit

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	from any insurance guarantee fund coverage or any similar protection.
Principal	The principal amount of each series of notes will be payable on its stated maturity date, as specified in the applicable pricing supplement, at the corporate trust office of the paying agent, acting in its capacity as servicer, or any other place the relevant trust designates.
Interest	Notes of a series may bear interest at a fixed interest rate or a floating interest rate, or bear no interest at all. Each series of notes that bears interest at a fixed interest rate (“fixed rate notes”) will bear interest from the date of original issuance at a fixed rate per year, as specified in the applicable pricing supplement, until the principal is paid. Interest, if any, will be payable monthly, quarterly, semi-annually or annually on each interest payment date and on the maturity date, as specified in the applicable pricing supplement. Interest also will be paid on the date of redemption or repayment if a series of notes is redeemed or repaid prior to maturity. Interest, with respect to fixed rate notes, will be computed on the basis of a 360-day year of twelve 30-day months, unless otherwise specified in the applicable pricing supplement. Each series of notes that bear interest at a floating interest rate (“floating rate notes”) will bear interest from the date of original issuance at a rate determined by reference to a base rate, which may be adjusted by a spread and/or spread multiplier, as specified in the applicable pricing supplement, until the principal is paid. The pricing supplement will designate one or more of the following interest rate bases, along with the index maturity for that interest rate basis:
	• the CD Rate;
	• the CMT Rate;
	• the Commercial Paper Rate;
	• the Constant Maturity Swap Rate;
	• the Federal Funds Open Rate;
	• the Federal Funds Rate;
	• LIBOR;
	• the Prime Rate; or
	• the Treasury Rate.
Payment of Principal and Interest	Principal and interest payments, if any, on any series of notes will be made solely from the proceeds of a funding agreement purchased with respect to such series of notes for, and to be held in, the related trust, and the full and unconditional guarantee issued by PFG of our payment obligations under the relevant funding agreement.

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Maturities	Unless otherwise specified in the applicable pricing supplement, each series of notes will mature between nine months and 30 years from its date of original issuance on the last scheduled interest payment date, as specified in the applicable pricing supplement.
Redemption and Repayment	A trust will redeem its series of notes if we redeem the funding agreement securing such series of notes. Except as otherwise specified in the accompanying prospectus, this prospectus supplement or the applicable pricing supplement, the funding agreement securing a series of notes will not be redeemable by us and no series of notes will be repayable at the option of the holder prior to their stated maturity date. Unless otherwise specified in the applicable pricing supplement, the notes will not be subject to any sinking fund.
	Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance is outstanding. Notes that may be redeemed at a time when 20% or more of the original principal amount of such notes are outstanding will be designated in their title as “callable” in the applicable pricing supplement.
Survivor’s Option	A series of notes may contain a provision (which we refer to as the “survivor’s option”) permitting optional repayment of notes of that series prior to maturity, if requested, following the death of the beneficial owner of notes of that series, so long as the notes either were purchased by the deceased beneficial owner within ninety (90) days of their issuance or were held by the deceased beneficial owner for a period of six (6) months immediately prior to such death. Your notes may not be repaid in this manner unless the pricing supplement for your series of notes provides for the survivor’s option. If the pricing supplement for your series of notes provides for the survivor’s option, the funding agreement securing your series of notes will contain a provision which will allow the applicable trust to tender the funding agreement in whole or in part to us. The ability of the applicable trust to tender the funding agreement related to a series of notes that contain a survivor’s option, however, will be subject to certain limitations set by us. As a result, your right to exercise the survivor’s option is subject to limits set by us with respect to the relevant funding agreement. We have the discretionary right to limit:
	• the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the secured medium-term notes retail program as to which exercises of any put option by any trust shall be accepted by us in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued

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	under the secured medium-term notes retail program and the Principal® Life CoreNotes® program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement;
	• the aggregate principal amount of funding agreements securing the notes as to which exercises of any put option by the applicable trust attributable to notes as to which the survivor’s option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement; and
	• the aggregate principal amount of the funding agreement securing a series of notes as to which exercises of any put option by the applicable trust shall be accepted in any calendar year as set forth in the applicable funding agreement and the applicable pricing supplement.
	Additional details on the survivor’s option are described in this prospectus supplement in the section entitled “Description of the Notes — Repayment Upon Exercise of Survivor’s Option” on page S-31.
Withholding Tax	All amounts due in respect of the notes of any series, the related guarantee and the related funding agreement will be made without any applicable withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable pricing supplement, none of the notes, the related guarantee, or the related funding agreement will provide for the payment of additional amounts relating to any required withholding or deduction imposed or levied on payments in respect of a series of notes, the related guarantee or the related funding agreement. As a result, unless otherwise specified in the applicable pricing supplement, the risk of any such withholding or deduction, whether or not as a result of a change in law or otherwise, will be borne by the holders of such series of notes.
Material United States Federal Income Tax Considerations	We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness

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	(the “Intended Tax Characterization”). Each holder of a note (or any beneficial interest therein), by acceptance of the note (or beneficial interest therein), agrees to the Intended Tax Characterization. Accordingly, holders of the notes generally will have the same United States federal income tax consequences from the purchase of the notes as they would have had if they purchased a debt obligation issued directly by us. Prospective purchasers of the notes must carefully consider the tax consequences of the ownership and disposition of the notes set forth under “Material United States Federal Income Tax Considerations.”
Fees and Expenses	We will pay the costs and expenses incurred by a trust under the expense and indemnity agreements with each of the indenture trustee, the custodian, the trust beneficial owner and the trustee (on behalf of itself and each trust formed in connection with the issuance of a series of notes) and any additional service provider appointed from time to time.
	Under each expense and indemnity agreement, we will pay certain costs and expenses relating to the offering, sale, issuance and administration of any series of notes and certain costs, expenses and taxes incurred by a trust and will indemnify the indenture trustee, the custodian, the trust beneficial owner, the trustee, each trust and additional service providers appointed from time to time with respect to certain matters. See “Fees and Expenses” in the accompanying prospectus.
	We anticipate that the indenture trustee fees for the program will be approximately $215 per year for each series of notes.
Denominations; Currency	Unless otherwise specified in the applicable pricing supplement, the notes will be issued and sold in denominations of $1,000 and integral multiples of $1,000 in excess thereof. The notes of each series will be denominated in, and payments of principal, premium, if any, and/or interest, and any other amounts in respect of the notes, will be made in U.S. dollars.
Listing	Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.
Form of Notes	The trusts will sell notes in the United States only. Each series of notes will be issued in book-entry form only and cleared through The Depository Trust Company (“DTC” or the “depositary”). Each book-entry note will be held by the indenture trustee as custodian for DTC or its nominee. We do not intend to issue notes in certificated form.
Collateral	The notes of any series will be secured by the right, title and interest of the applicable trust in and to (1) the relevant funding agreement held in that trust, (2) the related guarantee issued by PFG to the trust fully and unconditionally guaranteeing our payment obligations under the funding agreement, (3) all proceeds of the funding agreement and the

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	guarantee and all amounts and instruments on deposit from time to time in the related collection account, (4) all books and records pertaining to the relevant funding agreement and the related guarantee and (5) all rights of the trust pertaining to the foregoing.
	Each series of notes will be secured by the collateral held in the applicable trust. The trust will collaterally assign and grant a security interest in the related funding agreement and the related guarantee in favor of the indenture trustee for the benefit of the holders of notes of the applicable series.
	Under the custodial agreement (the “custodial agreement”) entered into among the indenture trustee, Bankers Trust Company, N.A. (the “custodian”) and the trustee (on behalf of each trust to be formed in connection with the issuance of a series of notes), upon the collateral assignment of and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.
Funding Agreements	A funding agreement is a type of insurance company product in which the purchaser, usually an institutional investor, pays the insurance company a deposit and, in turn, receives scheduled payments of principal and interest. The deposit we receive on the issuance of a funding agreement will be part of our general account and not allocated to any of our separate accounts. Our general account is the account which contains all of our assets and liabilities other than those held in our separate accounts. (Separate accounts are segregated accounts which are established for certain products that we sell. A separate account holds assets and liabilities specifically related to one or more products and segregates these assets and liabilities from the assets and liabilities of all other separate accounts and the assets and liabilities of our general account.) Since the deposit made under any funding agreement will be part of our general account, our obligations under each funding agreement will be the obligations of our general account, rather than the obligations of any separate account. As such, we will invest the proceeds from the sale of funding agreements in a portfolio of assets which along with our other general account assets will be used to meet our contractual obligations under the funding agreements and our other general account obligations. We will earn the spread differential between the cost of our obligations under the funding agreements and the yield on our invested assets. We may periodically, consistent with our past practice and subject to all applicable regulatory restrictions on our insurance operations, dividend a portion of the spread income to PFG.
	Each trust will use the net proceeds received from the sale of its series of notes to purchase a funding agreement issued by us, the terms of which will be set forth in the applicable pricing supplement. The funding agreement will have a

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	deposit amount equal to the sum of the principal amount (or issue price in the case of discount notes) of the related series of notes and the amount of the beneficial interest in the related trust. The rate at which the funding agreement bears interest will be equal to the rate of interest, if any, on the related series of notes. The funding agreement will otherwise have substantially similar payment and other terms to the related series of notes.
	Each funding agreement is our unsecured obligation. See “— Ratings” below.
	In the event of our impairment or insolvency, the Iowa Insurance Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving us pursuant to Iowa Code Sections 507C.4, 507C.12, 507C.13, 507C.14 and 507C.16. In conducting delinquency proceedings, claims are prioritized and an order of distribution is specified pursuant to Iowa Code Section 507C.42. There are nine classes within the priority scheme, with each successive class being fully junior to the preceding class. Class 1 priority is given to the costs and expenses of administration of the insurer during the delinquency proceedings and Class 2 priority is given to the claims of the insurer’s policyholders and guaranty associations. We believe that, in a properly prepared and presented case, a court applying Iowa law would conclude that loss claims of principal and interest in respect of each funding agreement would be accorded Class 2 priority under Iowa Code Section 507C.42 and paid equally in priority with our other policyholders. See “Description of the Funding Agreements” in the accompanying prospectus.
Guarantees	Our payment obligations under the funding agreement issued to each trust will be fully and unconditionally guaranteed by PFG under a guarantee issued by PFG to the trust as described in the accompanying prospectus. Each guarantee will be an unsecured, unsubordinated, contingent obligation of PFG. See “Description of the Guarantees” in the accompanying prospectus.
Ratings	Unless otherwise indicated in the applicable pricing supplement, the notes will have an issue credit rating of AA from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”). Standard & Poor’s has rated the program AA. If Standard & Poor’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. We expect the program to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”). If Moody’s changes the program rating, the new program rating will be specified in the applicable pricing supplement. Notes of a series will be issued under the program only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade

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	rating to such series of notes and the funding agreement securing such series of notes.
Indenture, Indenture Trustee and Servicer	Each trust will issue its series of notes to the public pursuant to an indenture between that trust and Citibank, N.A., in its capacity as indenture trustee. See “Description of the Notes — General — Indenture.” The indenture trustee will act as servicer with respect to the program. The indenture is subject to the Trust Indenture Act of 1939, as amended. The indenture trustee is not affiliated with any trust, us or PFG.
Administration of the Trusts	U.S. Bank Trust National Association, a national banking association, will be each trust’s sole trustee (the “trustee”). The trustee will not be obligated in any way to make payments under or in respect of the notes. The trustee is not affiliated with us or PFG.
Trust Beneficial Owner	GSS Holdings II, Inc., a Delaware corporation, will be the sole beneficial owner of each trust (the “trust beneficial owner”). The beneficial interest of each trust:
	• will be purchased by the trust beneficial owner for $15 (or in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes), unless otherwise specified in the applicable pricing supplement;
	• will be issued in book-entry form only;
	• will entitle the trust beneficial owner to receive payments in respect thereof on the same terms as the payments to be made to the holders of notes of the related series; and
	• will be subordinated to the related series of notes.
	The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series receive interest payments. On the maturity date of the trust beneficial owner’s beneficial interest and the related series of notes, the trust will redeem the principal amount of the related series of notes to the holders of such notes and the principal amount of the beneficial interest to the trust beneficial owner.
	The trust beneficial owner is not affiliated with us or PFG.
Governing Law	The notes and each indenture will be governed by, and construed in accordance with, the laws of the State of New York. Each guarantee issued by PFG will be governed by, and construed in accordance with, the laws of the State of New York. The trust agreement for the applicable trust will be governed by, and construed in accordance with, the laws of the jurisdiction in which it is formed. Each funding agreement will be governed by the laws of the State of Iowa.

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DESCRIPTION OF THE NOTES

          The following description of the material provisions of the notes supplements the general description of the notes provided in the accompanying prospectus. You should therefore review the accompanying prospectus carefully. You should carefully review the information in this prospectus supplement. The pricing supplement for each offering of notes will contain the specific information and terms and conditions for that offering. As such, you should carefully review the information contained in the pricing supplement, including any description of the method of calculating interest on any note. The applicable pricing supplement may also add, update, supplement or clarify information contained in this prospectus supplement or the accompanying prospectus. It is important for you to consider the information contained in the accompanying prospectus, this prospectus supplement, the applicable pricing supplement, the indenture and the notes in making your investment decision.

          This section describes some technical concepts and uses some capitalized terms that are not defined in the prospectus supplement. You should refer to the form of indenture and the form of note certificates filed as exhibits to the registration statement (of which this prospectus supplement and the accompanying prospectus are a part) for the full description of those concepts and complete definitions of these terms.

General

Indenture

          Each trust will issue one series of notes, subject to and entitled to the benefits of a separate indenture between the trust and the indenture trustee, which will adopt and incorporate the standard indenture terms. Such notes will be issued only on the original issue date for such notes. With respect to a particular trust, we refer to the applicable indenture and the standard indenture terms as the “indenture.” Each series of notes will be the subject of a pricing supplement. The indenture is subject to, and governed by, the Trust Indenture Act of 1939, as amended. For a description of the terms of the indenture, see “Descriptions of the Notes” beginning on page 22 of the accompanying prospectus.

          At the date of this prospectus supplement, the notes offered pursuant to this prospectus supplement are limited to an aggregate initial public offering price or purchase price of up to $4,000,000,000. This amount is subject to reduction as a result of the issuance of notes of notes previously under this program, our secured medium-term notes program or otherwise under the accompanying prospectus.

Collateral

          The notes of a series will be the trust’s unconditional, direct, non-recourse, secured and unsubordinated obligations. Under the indenture, the funding agreement issued to and deposited into a trust by us, in exchange for the proceeds received by the trust from the offering of its series of notes and trust beneficial interest, will be collaterally assigned by the trust, and the trust will grant a security interest in the funding agreement, to the indenture trustee for the benefit of the holders of the related series of notes. A trust may purchase only one funding agreement from us and the principal amount of the funding agreement may not be increased. The trust will also collaterally assign and grant a security interest in the guarantee issued by PFG to the trust in favor of the indenture trustee for the benefit of the holders of the related series of notes. Each series of notes will be secured by a security interest in the “collateral,” consisting of:

• the relevant funding agreement;

• the related guarantee issued by PFG to the trust, which fully and unconditionally guarantees our payment obligations under the relevant funding agreement;

• all proceeds of the relevant funding agreement and the relevant guarantee and all amounts and instruments on deposit from time to time in the related collection account;

• all books and records pertaining to the relevant funding agreement and the related guarantee; and

• all of the trust’s rights pertaining to the foregoing.

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          Under the custodial agreement, upon the collateral assignment and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.

Ranking

          The notes of a series of a trust will rank equally among themselves.

Pricing Options

          Notes that bear interest will either be fixed rate notes or floating rate notes, or a combination of fixed rate and floating rate, as specified in the applicable pricing supplement. A trust may also issue discount notes as specified in the applicable pricing supplement.

Pricing Supplement

          The pricing supplement relating to the offering of a series of notes will describe the following terms:

• the principal amount for the note;

• whether the note:

          (1) is a fixed rate note,

          (2) is a floating rate note, and/or

          (3) is a discount note that does not bear any interest currently or bears interest at a rate that is below market rates at the time of issuance;

• the price at which the note will be issued, which will be expressed as a percentage of the aggregate principal amount or face amount;

• the original issue date on which the note will be issued;

• the stated maturity date;

• if the note is a fixed rate note, the rate per annum at which the note will bear any interest and the Interest Payment Date frequency;

• if the note is a floating rate note, relevant terms such as:

          (1) the Interest Rate Basis,

          (2) the Initial Interest Rate,

          (3) the Interest Reset Period or the Interest Reset Dates,

          (4) the Interest Payment Dates,

          (5) the Index Maturity,

          (6) any Maximum Interest Rate,

          (7) any Minimum Interest Rate,

          (8) the spread and/or spread multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the note and whether and how the spread and/or spread multiplier may be changed prior to the stated maturity date;

• whether the authorized representative of the beneficial owner of a beneficial interest in the note will have the right to seek repayment upon the death of the beneficial owner as described under “— Repayment Upon Exercise of Survivor’s Option” on page S-31;

• whether the note may be redeemed by the trust, or repaid at the option of the holder, prior to the stated maturity date and the terms of its redemption or repayment, provided that any such redemption or repayment will be accompanied by the simultaneous redemption or repayment of the relevant funding agreement;

• any special United States federal income tax considerations relating to the purchase, ownership and disposition of the note;

• the jurisdiction of formation of the trust; and

• any other terms of the note provided in the accompanying prospectus to be set forth in a pricing supplement or that are otherwise

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consistent with the provisions of the indenture under which the note will be issued.

Maturity

          Unless otherwise specified in the applicable pricing supplement, each series of notes will mature on a day between nine months and 30 years from its date of original issuance on the last scheduled interest payment date (the “stated maturity date”), as specified in the applicable pricing supplement, unless the principal of such series becomes due and payable prior to the stated maturity date, whether, as applicable, by the declaration of acceleration of maturity, notice of redemption by the trust, notice of a beneficial owner’s exercise of his or her option to elect repayment or otherwise (we refer to the stated maturity date or any date prior to the stated maturity date on which the particular series of notes becomes due and payable, as the case may be, as the “maturity date” with respect to the principal of such series of notes repayable on that date).

Currency

          The notes of each series will be denominated in, and payments of principal, premium, if any, and/or interest, if any, and any other amounts in respect of the notes will be made in, U.S. dollars.

Form of Notes; Denominations

          Each trust will issue each note in book-entry form represented by one or more fully registered book-entry securities registered in the name of Cede &. Co., the nominee of The Depository Trust Company, as depositary. Each book-entry note will be held by the indenture trustee as custodian for the depositary. Unless otherwise specified in the applicable pricing supplement, the minimum denominations of each note will be $1,000 and integral multiples of $1,000 in excess thereof.

Transfers and Exchanges

          Book-entry notes may be transferred or exchanged only through the depositary. See “— Book-Entry Notes.” No service charge will be imposed for any such registration of transfer or exchange of notes, but the trust may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with such transfer or exchange (other than certain exchanges not involving any transfer).

Listing

          Unless otherwise specified in the applicable pricing supplement, your series of notes will not be listed on any securities exchange.

Business Day

          As used in this prospectus supplement, “business day” means:

• any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; and

• for purposes of LIBOR determination dates for floating rate notes (as defined below) based on LIBOR (as defined below) the day must also be a London Banking Day, which means a day on which commercial banks are open for business (including dealings in the LIBOR currency (as defined below)) in London.

Payments of Principal and Interest

          Principal of and interest on the notes will be paid to owners of a beneficial interest in the notes in accordance with the arrangements then in place between the paying agent and DTC as depositary and its participants as described under “— Book-Entry Notes.” Notes of a series may bear interest at a fixed interest rate (“fixed rate notes”) or at a floating interest rate (“floating rate notes”).

Fixed Rate Notes

          Each series of fixed rate notes will bear interest at a fixed rate from and including its date of issue or from and including the most recent interest payment date as to which interest has been paid or made available for payment until the principal is paid or made available for payment.

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The applicable pricing supplement will specify the fixed interest rate per annum applicable to each note and the frequency with which interest is payable. Interest, including interest for any partial period, will be computed on the basis of a 360-day year of twelve 30-day months. Each payment of interest, including interest to be paid at maturity, will include interest to, but excluding, the date that the interest payment is due.

          Interest on notes that bear interest at fixed rates will be payable in arrears on each interest payment date to the registered holder at the close of business on the record date except that interest, if any, due at maturity will be paid to the person to whom the principal of the note is paid. Unless otherwise specified in the applicable pricing supplement, the record date will be the day that is fifteen (15) calendar days preceding the applicable interest payment date, whether or not a business day. Unless otherwise specified in the applicable pricing supplement, the interest payment dates for fixed rate notes will be as follows:

Interest Payment
Frequency	Interest Payment Dates
Monthly	Fifteenth day of each calendar month, beginning in the first calendar month following the month the note was issued.
Quarterly	Fifteenth day of every third calendar month, beginning in the third calendar month following the month the note was issued.
Semi-annual	Fifteenth day of every sixth calendar month, beginning in the sixth calendar month following the month the note was issued.
Annual	Fifteenth day of every twelfth calendar month, beginning in the twelfth calendar month following the month the note was issued.

          If any interest payment date or the maturity date of a fixed rate note falls on a day that is not a business day, the applicable trust will make the required payment of principal, premium, if any, and/or interest, if any on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          Interest rates that each trust offers on the fixed rate notes may differ depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

Floating Rate Notes

          Interest on each series of floating rate notes will be determined by reference to the applicable Interest Rate Basis or Interest Rate Bases, which may, as described below, include:

• the CD Rate;

• the CMT Rate;

• the Commercial Paper Rate;

• the Constant Maturity Swap Rate;

• the Federal Funds Open Rate;

• the Federal Funds Rate;

• LIBOR;

• the Prime Rate; or

• the Treasury Rate.

          The applicable pricing supplement will specify certain terms of the particular series of notes that bears interest at floating rates, including:

• whether the note that bears interest at floating rates is:

• a “Regular Floating Rate Note;” or

• a “Floating Rate/ Fixed Rate Note;”

• the Fixed Rate Commencement Date, if applicable;

• Fixed Interest Rate, if applicable;

• Interest Rate Basis or Interest Rate Bases;

• Initial Interest Rate, if any;

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• Interest Reset Dates;

• Interest Payment Dates;

• Index Maturity;

• Maximum Interest Rate and/or Minimum Interest Rate;

• spread and/or spread multiplier; or

• if one or more of the applicable Interest Rate Bases is LIBOR, the LIBOR Currency and LIBOR Page.

          The rate derived from the applicable Interest Rate Basis will be determined in accordance with the related provisions below. The interest rate in effect on each day will be based on:

• if that day is an Interest Reset Date, the rate determined as of the Interest Determination Date (as defined below) immediately preceding that Interest Reset Date; or

• if that day is not an Interest Reset Date, the rate determined as of the Interest Determination Date immediately preceding the most recent Interest Reset Date.

          The “spread” is the number of basis points (one one-hundredth of a percentage point) specified in the applicable pricing supplement to be added to or subtracted from the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates. The “spread multiplier” is the percentage specified in the applicable pricing supplement of the related Interest Rate Basis or Interest Rate Bases applicable to a series of notes that bears interest at floating rates by which the Interest Rate Basis or Interest Rate Bases will be multiplied to determine the applicable interest rate. The “Index Maturity” is the period to maturity of the instrument or obligation with respect to which the related Interest Rate Basis or Interest Rate Bases will be calculated.

          Interest rates that each trust offers on its floating rate notes may differ from the rate offered by other trusts depending upon, among other factors, the aggregate principal amount of notes purchased in any single transaction. Notes with different variable terms other than interest rates may also be offered by other trusts concurrently to different investors. Other trusts may change interest rates or formulas and other terms of notes from time to time, but no change of terms will affect any note any other trust has previously issued or as to which any other trust has accepted an offer to purchase.

Regular Floating Rate Notes

          Unless a series of floating rate notes is designated as a series of Floating Rate/ Fixed Rate Notes, or as having an addendum attached or having other/additional provisions apply, in each case relating to a different interest rate formula, such series of notes that bears interest at floating rates will be a series of Regular Floating Rate Notes and will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable spread, if any; and/or

• multiplied by the applicable spread multiplier, if any.

          Commencing on the first Interest Reset Date, as specified in the relevant pricing supplement, the rate at which interest on a series of Regular Floating Rate Notes is payable will be reset as of each Interest Reset Date; provided, however, that the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate.

Floating Rate/ Fixed Rate Notes

          If a series of notes that bears interest at floating rates is designated as a series of Floating Rate/ Fixed Rate Notes, such series of notes that bears interest at floating rates will bear interest at the rate determined by reference to the applicable Interest Rate Basis or Interest Rate Bases:

• plus or minus the applicable spread, if any; and/or

• multiplied by the applicable spread multiplier, if any.

          Commencing on the first Interest Reset Date, the rate at which interest on a series of Floating Rate/ Fixed Rate Notes is payable will be

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reset as of each Interest Reset Date; provided, however, that:

• the interest rate in effect for the period, if any, from the date of issue to the first Interest Reset Date will be the Initial Interest Rate, as specified in the relevant pricing supplement; and

• the interest rate in effect commencing on the Fixed Rate Commencement Date will be the Fixed Interest Rate, if specified in the applicable pricing supplement, or, if not so specified, the interest rate in effect on the day immediately preceding the Fixed Rate Commencement Date.

Interest Reset Dates

          The applicable pricing supplement will specify the dates on which the rate of interest on a series of notes that bears interest at floating rates will be reset (each, an “Interest Reset Date”), and the period between Interest Reset Dates will be the “Interest Reset Period.” Unless otherwise specified in the applicable pricing supplement, the Interest Reset Dates will be, in the case of a series of floating rate notes which reset:

• daily — each business day;

• weekly — the Wednesday of each week, with the exception of weekly reset series of notes that bear interest at floating rates as to which the Treasury Rate is an applicable Interest Rate Basis, which will reset the Tuesday of each week;

• monthly — the fifteenth day of each calendar month;

• quarterly — the fifteenth day of March, June, September and December of each year;

• semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and

• annually — the fifteenth day of the month of each year specified in the applicable pricing supplement;

provided, however, that, with respect to any series of Floating Rate/ Fixed Rate Notes, the rate of interest thereon will not reset after the particular Fixed Rate Commencement Date.

          If any Interest Reset Date for any series of notes that bears interest at floating rates would otherwise be a day that is not a business day, the particular Interest Reset Date will be postponed to the next succeeding business day, except that in the case of a series of notes that bears interest at floating rates as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Reset Date will be the immediately preceding business day.

Interest Determination Dates

          The interest rate applicable to a series of notes that bears interest at floating rates for an Interest Reset Period commencing on the related Interest Reset Date will be determined by reference to the applicable Interest Rate Basis as of the particular “Interest Determination Date,” which will be:

• with respect to the Federal Funds Open Rate — the related Interest Reset Date;

• with respect to the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate — the business day preceding the related Interest Reset Date;

• with respect to the CD Rate and the CMT Rate — the second business day preceding the related Interest Reset Date;

• with respect to the Constant Maturity Swap Rate — the second U.S. Government Securities business day (as defined under “— Constant Maturity Swap Rate” below) preceding the related Interest Reset Date; provided, however, that if, after attempting to determine the Constant Maturity Swap Rate (as described under “— Constant Maturity Swap Rate” below), such rate is not determinable for a particular Interest Determination Date (the “original interest deter-

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	mination date”), then such Interest Determination Date shall be the first U.S. Government Securities business day preceding the original interest determination date for which the Constant Maturity Swap Rate can be determined as described under “— Constant Maturity Swap Rate” below;
•	with respect to LIBOR — the second London Banking Day preceding the related Interest Reset Date; and
•	with respect to the Treasury Rate — the day of the week in which the related Interest Reset Date falls on which day Treasury Bills (as defined below) are normally auctioned (i.e., Treasury Bills are normally sold at auction on Monday of each week, unless that day is a legal holiday, in which case the auction is normally held on the following Tuesday, except that the auction may be held on the preceding Friday); provided, however, that if an auction is held on the Friday of the week preceding the related Interest Reset Date, the Interest Determination Date will be the preceding Friday.

          The Interest Determination Date pertaining to a series of floating rate notes that bears interest at the interest rate of which is determined with reference to two or more Interest Rate Bases will be the latest business day which is at least two business days before the related Interest Reset Date for the applicable note that bears interest at floating rates on which each Interest Reset Basis is determinable.

Calculation Dates

          The indenture trustee will be the “Calculation Agent”, unless otherwise specified in the applicable pricing supplement. The interest rate applicable to each Interest Reset Period will be determined by the Calculation Agent on or prior to the Calculation Date (as defined below), except with respect to LIBOR, which will be determined on the particular Interest Determination Date. Upon request of the registered holder of a series of floating rate notes, the Calculation Agent will disclose the interest rate then in effect and, if determined, the interest rate that will become effective as a result of a determination made for the next succeeding Interest Reset Date with respect to the particular series of floating rate notes. The “Calculation Date,” if applicable, pertaining to any Interest Determination Date will be the earlier of:

• the tenth calendar day after the particular Interest Determination Date or, if such day is not a business day, the next succeeding business day; or

• the business day immediately preceding the applicable Interest Payment Date or the maturity date, as the case may be.

Maximum and Minimum Interest Rates

          A series of notes that bears interest at floating rates may also have either or both of the following if specified in the applicable pricing supplement:

• a maximum numerical limitation, or ceiling, that may accrue during any Interest Reset Period (a “Maximum Interest Rate”); and

• a minimum numerical limitation, or floor, that may accrue during any Interest Reset Period (a “Minimum Interest Rate”).

          In addition to any Maximum Interest Rate that may apply to a series of notes that bears interest at floating rates, the interest rate on a series of floating rate notes will in no event be higher than the maximum rate permitted by New York law, as the same may be modified by United States law of general application.

Interest Payments

          Unless otherwise specified in the applicable pricing supplement or in this prospectus supplement, interest on each series of notes that bears interest at floating rates will be payable on the date(s) as set forth below (each, an “Interest Payment Date” with respect to such series of notes that bears interest at floating rates). Unless otherwise specified in the applicable pricing supplement, the record date will be the day that is

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fifteen (15) calendar days preceding the applicable interest payment date, whether or not a business day. Unless otherwise specified in the applicable pricing supplement, the Interest Payment Dates will be, in the case of a series of floating rate notes which reset:

• daily, weekly or monthly — the fifteenth day of each calendar month or on the fifteenth day of March, June, September and December of each year, as specified in the applicable pricing supplement;

• quarterly — the fifteenth day of March, June, September and December of each year;

• semi-annually — the fifteenth day of the two months of each year specified in the applicable pricing supplement; and

• annually — the fifteenth day of the month of each year specified in the applicable pricing supplement.

          In addition, the maturity date will also be an Interest Payment Date.

          If any Interest Payment Date other than the maturity date for any series of floating rate notes would otherwise be a day that is not a business day, such Interest Payment Date will be postponed to the next succeeding business day, except that in the case of a series of floating rate notes as to which LIBOR is an applicable Interest Rate Basis and that business day falls in the next succeeding calendar month, the particular Interest Payment Date will be the immediately preceding business day. If the maturity date of a series of floating rate notes falls on a day that is not a business day, the trust will make the required payment of principal, premium, if any, and interest or other amounts on the next succeeding business day, and no additional interest will accrue in respect of the payment made on that next succeeding business day.

          All percentages resulting from any calculation on floating rate notes will be rounded to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upwards. For example, 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655). All dollar amounts used in or resulting from any calculation on floating rate notes will be rounded to the nearest cent.

          With respect to each series of floating rate notes, accrued interest is calculated by multiplying the principal amount of such floating rate note by an accrued interest factor. The accrued interest factor is computed by adding the interest factor calculated for each day in the particular Interest Reset Period. The interest factor for each day will be computed by dividing the interest rate applicable to such day by 360, in the case of a series of floating rate notes as to which the CD Rate, the Commercial Paper Rate, the Federal Funds Open Rate, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable Interest Rate Basis, or by the actual number of days in the year, in the case of a series of floating rate notes as to which the CMT Rate or the Treasury Rate is an applicable Interest Rate Basis. In the case of a series of notes that bears interest at floating rates as to which the Constant Maturity Swap Rate is the Interest Rate Basis, the interest factor for each day will be computed by dividing the number of days in the interest period by 360 (the number of days to be calculated on the basis of a year of 360 days with twelve 30-day months (unless (i) the last day of the interest period is the 31st day of a month but the first day of the interest period is a day other than the 30th or 31st day of a month, in which case the month that includes that last day shall not be considered to be shortened to a 30-day month, or (ii) the last day of the interest period is the last day of the month of February, in which case the month of February shall not be considered to be lengthened to a 30-day month)). The interest factor for a series of floating rate notes as to which the interest rate is calculated with reference to two or more Interest Rate Bases will be calculated in each period in the same manner as if only the applicable Interest Rate Basis specified in the applicable pricing supplement applied.

          The Calculation Agent shall determine the rate derived from each Interest Rate Basis in accordance with the following provisions.

CD Rate

          “CD Rate” means:

          (1) the rate on the particular Interest Determination Date for negotiable United States dollar certificates of

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deposit having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) (as defined below) under the caption “CDs (secondary market)”; or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date for negotiable United States dollar certificates of deposit of the particular Index Maturity as published in H.15 Daily Update (as defined below), or other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “CDs (secondary market)”; or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York City time, on that Interest Determination Date, of three leading non-bank dealers in negotiable United States dollar certificates of deposit in The City of New York (which may include an Agent or its affiliates) selected by the Calculation Agent for negotiable United States dollar certificates of deposit of major United States money market banks for negotiable United States certificates of deposit with a remaining maturity closest to the particular Index Maturity in an amount that is representative for a single transaction in that market at that time; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the CD Rate in effect on the particular Interest Determination Date.

          “H.15(519)” means the weekly statistical release designated as H.15(519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

          “H.15 Daily Update” means the daily update of H.15(519), available through the world-wide-web site of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov/releases/H15/
update, or any successor site or publication.

CMT Rate

          “CMT Rate” means:

          (1) if CMT Moneyline Telerate Page 7051 is specified in the applicable pricing supplement:

          (a) the percentage equal to the yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Treasury Constant Maturities,” as the yield is displayed on Moneyline Telerate (or any successor service) on page 7051 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7051”), for the particular Interest Determination Date; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7051, the percentage equal to the yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the particular Interest Determination Date as published in H.15(519) under the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the rate on the particular Interest Determination Date for the period of the particular Index Maturity as may then be published by either the Federal Reserve System Board of Governors or the United States Department of the Treasury that

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the Calculation Agent determines to be comparable to the rate which would otherwise have been published in H.15(519); or

          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three leading primary United States government securities dealers in The City of New York (which may include an Agent or its affiliates) (each, a “Reference Dealer”) selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on the particular Interest Determination Date; or

          (2) if CMT Moneyline Telerate Page 7052 is specified in the applicable pricing supplement:

          (a) the percentage equal to the one-week or one-month, as specified in the applicable pricing

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supplement, average yield for United States Treasury securities at “constant maturity” having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) opposite the caption “Treasury Constant Maturities”, as the yield is displayed on Moneyline Telerate (or any successor service) (on page 7052 or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 7052”), for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (b) if the rate referred to in clause (a) does not so appear on Moneyline Telerate Page 7052, the percentage equal to the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity and for the week or month, as applicable, preceding the particular Interest Determination Date as published in H.15(519) opposite the caption “Treasury Constant Maturities;” or

          (c) if the rate referred to in clause (b) does not so appear in H.15(519), the one-week or one-month, as specified in the applicable pricing supplement, average yield for United States Treasury securities at “constant maturity” having the particular Index Maturity as otherwise announced by the Federal Reserve Bank of New York for the week or month, as applicable, ended immediately preceding the week or month, as applicable, in which the particular Interest Determination Date falls; or

          (d) if the rate referred to in clause (c) is not so published, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices at approximately 3:30 P.M., New York City time, on that Interest Determination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation, or, in the event of equality, one of the highest, and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity equal to the particular Index Maturity, a remaining term to maturity no more than one year shorter than that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at that time; or

          (e) if fewer than five but more than two of the prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations shall be eliminated; or

          (f) if fewer than three prices referred to in clause (d) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent as a yield to maturity based on the arithmetic mean of the secondary market bid prices as of approximately 3:30 P.M., New York City time, on that Interest Deter-

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mination Date of three Reference Dealers selected by the Calculation Agent from five Reference Dealers selected by the Calculation Agent and eliminating the highest quotation or, in the event of equality, one of the highest and the lowest quotation or, in the event of equality, one of the lowest, for United States Treasury securities with an original maturity greater than the particular Index Maturity, a remaining term to maturity closest to that Index Maturity and in a principal amount that is representative for a single transaction in the securities in that market at the time; or

          (g) if fewer than five but more than two prices referred to in clause (f) are provided as requested, the rate on the particular Interest Determination Date calculated by the Calculation Agent based on the arithmetic mean of the bid prices obtained and neither the highest nor the lowest of the quotations will be eliminated; or

          (h) if fewer than three prices referred to in clause (f) are provided as requested, the CMT Rate in effect on that Interest Determination Date.

          If two United States Treasury securities with an original maturity greater than the Index Maturity specified in the applicable pricing supplement have remaining terms to maturity equally close to the particular Index Maturity, the quotes for the United States Treasury security with the shorter original remaining term to maturity will be used.

Commercial Paper Rate

          “Commercial Paper Rate” means:

          (1) the Money Market Yield (as defined below) on the particular Interest Determination Date of the rate for commercial paper having the Index Maturity specified in the applicable pricing supplement as published in H.15(519) under the caption “Commercial Paper — Nonfinancial;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Money Market Yield of the rate on the particular Interest Determination Date for commercial paper having the particular Index Maturity as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Commercial Paper — Nonfinancial;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Money Market Yield of the arithmetic mean of the offered rates at approximately 11:00 A.M., New York City time, on that Interest Determination Date of three leading dealers of United States dollar commercial paper in The City of New York (which may include an Agent or its affiliates) selected by the Calculation Agent for commercial paper having the particular Index Maturity placed for industrial issuers whose bond rating is “Aa”, or the equivalent, from a nationally recognized statistical rating organization; or

          (4) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Commercial Paper Rate in effect on the particular Interest Determination Date.

          “Money Market Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Money Market Yield = D × 360
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for commercial paper quoted on a bank discount basis and expressed as a decimal, and “M” refers

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to the actual number of days in the applicable Interest Reset Period.

Constant Maturity Swap Rate

          “Constant Maturity Swap Rate” means:

          (1) the rate for U.S. dollar swaps with the designated maturity specified in the applicable pricing supplement, expressed as a percentage, which appears on the Reuters Screen (or any successor service) ISDAFIX1 Page as of 11:00 A.M., New York City time, on the particular Interest Determination Date; or

          (2) if the rate referred to in clause (1) does not appear on the Reuters Screen (or any successor service) ISDAFIX1 Page by 2:00 P.M., New York City time, on such Interest Determination Date, a percentage determined on the basis of the mid-market semi-annual swap rate quotations provided by the reference banks (as defined below) as of approximately 11:00 A.M., New York City time, on such Interest Determination Date, and, for this purpose, the semi-annual swap rate means the mean of the bid and offered rates for the semi-annual fixed leg, calculated on a 30/360 day count basis, of a fixed-for-floating U.S. dollar interest rate swap transaction with a term equal to the designated maturity specified in the applicable pricing supplement commencing on the Interest Reset Date and in a representative amount (as defined below) with an acknowledged dealer of good credit in the swap market, where the floating leg, calculated on an actual/360 day count basis, is equivalent to USD-LIBOR-BBA with a designated maturity specified in the applicable pricing supplement. The Calculation Agent will request the principal New York City office of each of the reference banks to provide a quotation of its rate. If at least three quotations are provided, the rate for that Interest Determination Date will be the arithmetic mean of the quotations, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest); or

          (3) if at least three quotations are not received by the Calculation Agent as mentioned in clause (2), the Constant Maturity Swap Rate in effect on the particular Interest Determination Date.

          “U.S. Government Securities business day” means any day except for Saturday, Sunday, or a day on which The Bond Market Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

          “Representative amount” means an amount that is representative for a single transaction in the relevant market at the relevant time.

          “Reference banks” mean five leading swap dealers in the New York City interbank market, selected by the Calculation Agent, after consultation with us.

Federal Funds Rates

          “Federal Funds Open Rate” means the rate set forth on Moneyline Telerate (or any successor service) on page 5 (or any other page as may replace the specified page on that service) for an Interest Determination Date underneath the caption “FEDERAL FUNDS” in the row titled “OPEN”. If the rate is not available for an Interest Determination Date, the rate for that Interest Determination Date shall be the Federal Funds Rate as determined below.

          “Federal Funds Rate” means:

          (1) the rate as of the particular Interest Determination Date for United States dollar federal funds as published in H.15(519) under the caption “Federal Funds (Effective)” and displayed on Moneyline Telerate (or any successor service) on page 120 (or any other page as may replace the specified page on that service) (“Moneyline Telerate Page 120”); or

          (2) if the rate referred to in clause (1) does not so appear on Moneyline Telerate Page 120 or is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate as of the particular Interest Determi-

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nation Date for United States dollar federal funds as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Federal Funds (Effective);” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate as of the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates for the last transaction in overnight United States dollar federal funds arranged by three leading brokers of United States dollar federal funds transactions in The City of New York (which may include the Agents or their affiliates), selected by the Calculation Agent prior to 9:00 A.M., New York City time, on the business day following that Interest Determination Date; or

          (4) if the brokers so selected by the Calculation Agent are not quoting as mentioned in clause (3), the Federal Funds Rate in effect on the particular Interest Determination Date.

LIBOR

          “LIBOR” means:

          (1) if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or if neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the rate for deposits in the LIBOR Currency having the Index Maturity specified in the applicable pricing supplement, commencing on the related Interest Reset Date, that appears on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (2) if “LIBOR Reuters” is specified in the applicable pricing supplement, the arithmetic mean of the offered rates, calculated by the Calculation Agent, or the offered rate, if the LIBOR Page by its terms provides only for a single rate, for deposits in the LIBOR Currency having the particular Index Maturity, commencing on the related Interest Reset Date, that appear or appears, as the case may be, on the LIBOR Page as of 11:00 A.M., London time, on the particular Interest Determination Date; or

          (3) if fewer than two offered rates appear, or no rate appears, as the case may be, on the particular Interest Determination Date on the LIBOR Page as specified in clause (1) or (2), as applicable, the rate calculated by the Calculation Agent of at least two offered quotations obtained by the Calculation Agent after requesting the principal London offices of each of four major reference banks (which may include affiliates of an Agent) in the London interbank market to provide the Calculation Agent with its offered quotation for deposits in the LIBOR Currency for the period of the particular Index Maturity, commencing on the related Interest Reset Date, to prime banks in the London interbank market at approximately 11:00 A.M., London time, on that Interest Determination Date and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (4) if fewer than two offered quotations referred to in clause (3) are provided as requested, the rate calculated by the Calculation Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M., in the applicable Principal Financial Center, on the particular Interest Determination Date by three major banks (which may include affiliates of an Agent) in that principal financial center selected by the Calculation Agent for loans in the LIBOR Currency to leading European banks, having the particular Index Maturity and in a principal amount that is representative for a single transaction in the LIBOR Currency in that market at that time; or

          (5) if the banks so selected by the Calculation Agent are not quoting as

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mentioned in clause (4), LIBOR in effect on the particular Interest Determination Date.

          “LIBOR Currency” means the currency specified in the applicable pricing supplement as to which LIBOR shall be calculated or, if no currency is specified in the applicable pricing supplement, United States dollars.

          “LIBOR Page” means either:

• if “LIBOR Reuters” is specified in the applicable pricing supplement, the display on the Reuter Monitor Money Rates Service (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace that page on that service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency; or

• if “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement or neither “LIBOR Reuters” nor “LIBOR Moneyline Telerate” is specified in the applicable pricing supplement as the method for calculating LIBOR, the display on Moneyline Telerate (or any successor service) on the page specified in the applicable pricing supplement (or any other page as may replace such page on such service) for the purpose of displaying the London interbank rates of major banks for the LIBOR Currency.

Prime Rate

          “Prime Rate” means:

          (1) the rate on the particular Interest Determination Date as published in H.15(519) under the caption “Bank Prime Loan;” or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date as published in H.15 Daily Update, or such other recognized electronic source used for the purpose of displaying the applicable rate, under the caption “Bank Prime Loan,” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the rates of interest publicly announced by each bank that appears on the Reuters Screen US PRIME 1 Page (as defined below) as the applicable bank’s prime rate or base lending rate as of 11:00 A.M., New York City time, on that Interest Determination Date; or

          (4) if fewer than four rates referred to in clause (3) are so published by 3:00 p.m., New York City time, on the related Calculation Date, the rate calculated by the Calculation Agent as the particular Interest Determination Date calculated by the Calculation Agent as the arithmetic mean of the prime rates or base lending rates quoted on the basis of the actual number of days in the year divided by a 360-day year as of the close of business on that Interest Determination Date by three major banks (which may include affiliates of an Agent) in The City of New York selected by the Calculation Agent; or

          (5) if the banks so selected by the Calculation Agent are not quoting as mentioned in clause (4), the Prime Rate in effect on the particular Interest Determination Date.

          “Reuters Screen US PRIME 1 Page” means the display on the Reuter Monitor Money Rates Service (or any successor service) on the “US PRIME 1” page (or any other page as may replace that page on that service) for the purpose of displaying prime rates or base lending rates of major United States banks.

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Treasury Rate

          “Treasury Rate” means:

          (1) the rate from the auction held on the Treasury Rate Interest Determination Date (the “Auction”) of direct obligations of the United States (“Treasury Bills”) having the Index Maturity specified in the applicable pricing supplement under the caption “INVESTMENT RATE” on the display on Moneyline Telerate (or any successor service) on page 56 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 56”) or page 57 (or any other page as may replace that page on that service) (“Moneyline Telerate Page 57”); or

          (2) if the rate referred to in clause (1) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield (as defined below) of the rate for the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Auction High;” or

          (3) if the rate referred to in clause (2) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the Bond Equivalent Yield of the auction rate of the applicable Treasury Bills as announced by the United States Department of the Treasury; or

          (4) if the rate referred to in clause (3) is not so announced by the United States Department of the Treasury, or if the Auction is not held, the Bond Equivalent Yield of the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15(519) under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market;” or

          (5) if the rate referred to in clause (4) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date of the applicable Treasury Bills as published in H.15 Daily Update, or another recognized electronic source used for the purpose of displaying the applicable rate, under the caption “U.S. Government Securities/ Treasury Bills/ Secondary Market;” or

          (6) if the rate referred to in clause (5) is not so published by 3:00 P.M., New York City time, on the related Calculation Date, the rate on the particular Interest Determination Date calculated by the Calculation Agent as the Bond Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of approximately 3:30 P.M., New York City time, on that Interest Determination Date, of three primary United States government securities dealers (which may include an Agent or its affiliates) selected by the Calculation Agent, for the issue of Treasury Bills with a remaining maturity closest to the Index Maturity specified in the applicable pricing supplement; or

          (7) if the dealers so selected by the Calculation Agent are not quoting as mentioned in clause (6), the Treasury Rate in effect on the particular Interest Determination Date.

          “Bond Equivalent Yield” means a yield (expressed as a percentage) calculated in accordance with the following formula:

Bond Equivalent Yield = D × N
360 - (D × M) × 100

where “D” refers to the applicable per annum rate for Treasury Bills quoted on a bank discount basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be, and “M” refers to the actual number of days in the applicable Interest Reset Period.

Discount Notes

          A trust may issue a series of notes (“Discount Notes”) that has an Issue Price (as specified in the applicable pricing supplement) that is less than the principal amount thereof by an amount that is equal to or greater than the de

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minimis amount. The de minimis amount is equal to 0.25% multiplied by the product of the principal amount of the notes and the number of full years to the stated maturity date. A series of Discount Notes may not bear any interest currently or may bear interest at a rate that is below market rates at the time of issuance. The difference between the Issue Price of a series of Discount Notes and par is referred to as the “Discount.” In the event of redemption, repayment or acceleration of maturity of a series of Discount Notes, the amount payable to the holders of such series of Discount Notes will be equal to the sum of:

• the Issue Price (increased by any accruals of Discount); and

• any unpaid interest accrued on such series of Discount Notes to the maturity date.

          Unless otherwise specified in the applicable pricing supplement, for purposes of determining the amount of Discount that has accrued as of any date on which a redemption, repayment or acceleration of maturity occurs for a series of Discount Notes, a Discount will be accrued using a constant yield method. The constant yield will be calculated using a 30-day month, 360-day year convention, a compounding period that, except for the Initial Period (as defined below), corresponds to the shortest period between Interest Payment Dates for the applicable series of Discount Notes (with ratable accruals within a compounding period), a coupon rate equal to the initial coupon rate applicable to the applicable series of Discount Notes and an assumption that the maturity of such series of Discount Notes will not be accelerated. If the period from the date of issue to the first Interest Payment Date for a series of Discount Notes (the “Initial Period”) is shorter than the compounding period for such series of Discount Notes, a proportionate amount of the yield for an entire compounding period will be accrued. If the Initial Period is longer than the compounding period, then the period will be divided into a regular compounding period and a short period with the short period being treated as provided in the preceding sentence. The accrual of the applicable Discount may differ from the accrual of original issue discount for purposes of the Internal Revenue Code of 1986, as amended, certain series of Discount Notes may not be treated as having original issue discount within the meaning of such Code, and certain series of notes other than Discount Notes may be treated as issued with original issue discount for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”

          Each trust may issue a series of notes which may be redeemed by the issuing trust where 20% or more of the original principal balance of such notes is outstanding, which are referred to as “callable” notes. In the case of discount notes that may be redeemed at a time when 20% or more of such notes are outstanding, such notes will be designated in their title as “callable” in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, such series of notes will be otherwise subject to the provisions specified under “— Optional Redemption; Optional Repayment; No Sinking Fund.”

Optional Redemption; Optional Repayment; No Sinking Fund

          In the case of notes that are not discount notes, if an optional redemption date is specified in the pricing supplement relating to a series of notes, and we have redeemed the related funding agreement in full or in part, as applicable, the related trust will redeem the series of notes secured by such funding agreement, in full or in part as applicable, prior to the stated maturity date of such series of notes. Such redemptions shall be made in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or other minimum authorized denomination applicable thereto), at a redemption price equal to 100% of the unpaid principal amount to be redeemed, together with unpaid interest, if any, accrued thereon to, but excluding, the date of redemption. The trust must give written notice to the holders of the particular series of notes to be redeemed not more than 60 nor less than 30 calendar days prior to the date of redemption.

          Each trust may issue a series of notes which may be redeemed by the issuing trust where 20% or more of the original principal

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balance of such notes is outstanding, which are referred to as “callable” notes and will be designated in their title as “callable” in the relevant pricing supplement. Unless otherwise specified in the applicable pricing supplement, such series of notes will otherwise be subject to the redemption provisions specified herein. For a discussion of the redemption of discount notes, see “— Discount Notes.”

          If fewer than all of the notes are to be redeemed, DTC will select the notes to be redeemed not more than 60 calendar days prior to the redemption date by lot or, if the notes are not in book-entry form, the indenture trustee will do so, in its reasonable discretion, by lot or on a pro rata basis in accordance with its customary procedures. If any note is redeemed in part only, a new note in principal amount equal to the unredeemed principal portion will be issued.

          If an optional repayment right is specified in the pricing supplement relating to a series of notes, such notes may be subject to repayment at the option of the holders of such series of notes on any repayment date specified in the applicable pricing supplement. Exercise of the repayment option under the notes by the holders will also require the applicable trust to exercise a corresponding repayment option under the applicable funding agreement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the notes shall be repayable in whole or in part in increments of $1,000 at the option of the holders thereof at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. A holder of a series of notes exercising its repayment right must submit to the indenture trustee at its corporate trust office, or at such other place or places of which the relevant trust has notified such holder, the notes to be repaid together with the “option to elect repayment” form attached to the notes not more than 60 nor less than 30 calendar days prior to the date of repayment. Exercise of such repayment right by a holder shall be irrevocable. If a holder requests repayment in part only, a new note in principal amount equal to the principal portion of the notes not repaid will be issued.

          Only DTC may exercise a repayment option in respect of notes issued in book-entry form. Accordingly, beneficial owners of notes that desire to exercise their repayment option, if any, with respect to all or any portion of such notes, must instruct the participant through which they own their interest to direct DTC to exercise the repayment option on their behalf by delivering the duly completed election form to the indenture trustee as aforesaid. In order to ensure that the election form is received by the indenture trustee on a particular day, the applicable beneficial owner must so instruct the participant through which it owns its interest before such participant’s deadline for accepting instructions for that day. Participants may have different deadlines for accepting instructions from their customers. Accordingly, a beneficial owner should consult the participant through which it owns its interest in the notes for the participant’s deadline for receiving payment instructions. In addition, at the time such instructions are given, each such beneficial owner will cause such participant to transfer such beneficial owner’s interest in the notes issued in book-entry form, on DTC’s records, to the indenture trustee.

          No series of notes will be subject to, or entitled to the benefit of, any sinking fund unless otherwise specified in the applicable pricing supplement.

Repayment Upon Exercise of Survivor’s Option

          The “survivor’s option” is the trust’s agreement with the beneficial owner of a note to repurchase that note in whole or in part prior to maturity if requested, following the death of the beneficial owner of notes of that series, so long as the notes either were purchased by the deceased beneficial owner within ninety (90) days of their issuance or were held by the deceased beneficial owner for a period of six (6) months prior to such death. Unless otherwise specified in the applicable pricing supplement, the estate of the deceased beneficial owner of a note will be eligible to exercise the survivor’s option.

          Subject to the limitations described below, upon the valid exercise of the survivor’s option, the proper tender of that note for repayment and the tender and acceptance of that portion of the funding agreement related to such note, a trust will repay any of its notes pursuant to the survivor’s option by or on behalf of a person that has the legal authority to act on behalf of the note’s deceased owner. Unless otherwise specified

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in the applicable pricing supplement, the repurchase price will be 100% of the unpaid principal amount plus accrued interest to, but excluding, the date of repayment.

          Unless otherwise set forth in the applicable pricing supplement for your series of notes, the funding agreement securing your series of notes will contain a provision which will allow the trust to tender the funding agreement in whole or in part to us. A trust’s ability to tender the funding agreement related to a series of notes that contain a survivor’s option will be subject to certain limitations set by us. As a result, your right to exercise the survivor’s option is subject to limits set by us with respect to the relevant funding agreement. We have the discretionary right to limit:

• the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the secured medium-term notes retail program as to which exercises of any put option by any trust shall be accepted by us in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series of notes issued under the secured medium-term notes retail program and the Principal^® Life CoreNotes^® program as of the end of the most recent calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement;

• the aggregate principal amount of funding agreements securing the notes as to which exercises of any put option by the applicable trust attributable to notes as to which the survivor’s option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement; and

• the aggregate principal amount of the funding agreement securing a series of notes as to which exercises of any put option by the applicable trust shall be accepted in any calendar year as set forth in the applicable funding agreement and the applicable pricing supplement.

          In any such event, a trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor’s option shall be accepted by the trust from authorized representatives of deceased beneficial owners. In addition, the exercise of the survivor’s option will not be permitted for a principal amount less than $1,000 or if such exercise will result in a note with a principal amount of less than $1,000 to remain outstanding. All other questions, other than with respect to the right to limit the aggregate principal amount of notes subject to the survivor’s option that will be accepted as to any series of notes or in any calendar year, regarding the eligibility or validity of any exercise of the survivor’s option will be determined by the trustee for the trust, in its sole discretion, which determination will be final and binding on all parties. The indenture trustee, upon written request by the authorized representative of the deceased beneficial owner of notes, will request the trustee to provide the status of the remaining program and series limitations for such calendar year on the exercise of any survivor’s option.

          The trust will accept elections to exercise the survivor’s option in the order received by the trustee of the trust. Notes that are not repaid in any calendar year due to the application of the limits described above will be treated as though they had been tendered on the first day of the following calendar year in the order in which they were originally tendered. Subject to the limitations described above, notes accepted for repayment will be repaid on the first interest payment date that occurs 20 or more calendar days after the date of acceptance.

          If repayment of a note submitted for repayment pursuant to a valid exercise of the survivor’s option is not accepted or is to be delayed, the trustee of the trust will deliver a

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written notice by first-class mail to the depositary that states the reason that repayment of that particular note has not been accepted or will be delayed.

          A valid exercise of the survivor’s option may not be withdrawn.

          To exercise the survivor’s option with respect to a book-entry note, the deceased owner’s authorized person must provide the following items to the DTC “participant” through which the relevant beneficial interest is owned (for a discussion of DTC and its participants, see “— About the Depositary”):

• a written instruction to the participant to notify DTC of the authorized person’s desire to obtain a payment pursuant to the exercise of the survivor’s option;

• appropriate evidence (a) that the person has authority to act on behalf of the deceased owner, (b) of the death of the beneficial owner, (c) that the deceased was the beneficial owner of the notes at the time of death and (d) that the beneficial owner acquired the interest in the note either within ninety (90) days of their issuance or at least six (6) months prior to the date of death of such beneficial owner;

• if the beneficial interest in the relevant note is held by a nominee of the deceased owner, a certificate from the nominee attesting to the deceased owner’s ownership of a beneficial interest in that note;

• a written request for repayment signed by the authorized person for the deceased owner with signature guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States;

• if applicable, a properly executed assignment or endorsement;

• tax waivers and any other instruments or documents reasonably required to establish the validity of the ownership of the beneficial interest in the related note and the claimant’s entitlement to payment; and

• any additional information reasonably required to document the ownership or authority to exercise the survivor’s option and to cause the repayment of the related note.

          In turn, on the basis of this information, the participant will be required to deliver to the indenture trustee a properly completed repayment election form to exercise the survivor’s option, together with evidence satisfactory to the indenture trustee from the participant stating that it represents the deceased owner of the beneficial interest in the relevant note. The indenture trustee will then deliver these items to the trustee and will provide the trustee with any additional information (after receipt from the participant) the trustee may request in connection with such exercise.

          Apart from our discretionary right to limit the principal amount of notes as to which the survivor’s option may be exercised in any calendar year as described above, the trustee will determine all other questions regarding the eligibility or validity of any exercise of the survivor’s option. The trustee’s determination will be final and binding on all parties.

          The death of a person owning a note in joint tenancy or tenancy by the entirety with another or others will be treated as the death of the owner of that note, and the entire principal amount so owned will be eligible for repayment.

          The death of a person owning a note by tenancy in common will be treated as the death of the owner of that note only with respect to the deceased owner’s interest in the note held by tenancy in common. However, if a note is held by husband and wife as tenants in common, the death of either spouse will be treated as the death of the owner of the note and the entire principal amount so owned will be eligible for repayment.

          The death of a person who was a lifetime beneficiary of a trust that owns a note will be treated as the death of the owner of the note to

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the extent of that person’s interest in the trust. The death of a person who was a tenant by the entirety or joint tenant in a tenancy which is the beneficiary of a trust that owns a note will be treated as the death of the owner of the note. The death of an individual who was a tenant in common in a tenancy which is the beneficiary of a trust that owns a note will be treated as the death of the owner of the note only with respect to the deceased person’s beneficial interest in the note, unless a husband and wife are the tenants in common, in which case the death of either will be treated as the death of the owner of the note.

          The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial interests of ownership of a note will be treated as the death of the owner of the note if the beneficial interest can be established to the trustee’s satisfaction. This will be done in typical cases of nominee ownership, such as ownership under the Uniform Transfers of Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife and lifetime custodial and trust arrangements.

          The applicable participant will be responsible for disbursing payments received from the indenture trustee, acting in its capacity as servicer, to the authorized person for the deceased owner.

          Annex A to this prospectus supplement is the repayment election form for use by DTC participants in exercising the survivor’s option. Copies of this form may be obtained from the trustee at its corporate trust office located at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

          If applicable, the applicable trust will comply with the requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended, the related regulations and any other securities laws or regulations in connection with any repayment of notes at the option of the registered holders.

Purchase of Notes by Us

          We may at any time purchase notes at any price or prices in the open market or otherwise. Notes so purchased by us will be surrendered to the indenture trustee for cancellation. Concurrently with the surrender to the indenture trustee of any note, the funding agreement related to such note will be similarly redeemed.

          If applicable, such applicable trust will comply with the requirements of Section 14(e) of the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, and any other securities laws or regulations in connection with any repurchase of the notes by us.

Tax Redemption

          If a “tax event” as to the relevant funding agreement occurs, we will have the right to redeem the funding agreement and, upon such redemption, the applicable trust will redeem its series of notes in the same manner described under “— Optional Redemption; Optional Repayment; No Sinking Fund” above. For further discussion of “tax event” redemption, see “Description of the Funding Agreements — Early Redemption for Tax Event” in the accompanying prospectus.

Security; Non-Recourse Obligations

          Each series of notes will be solely the obligations of the related trust and will not be guaranteed by any person, including but not limited to us, PFG, any Agent, any of our or their affiliates or any other trust. A trust’s obligations under its series of notes will be secured by all of its rights and title in a funding agreement issued by us, the payment obligations of which are guaranteed by the related guarantee issued by PFG to the trust and other rights and assets included in the applicable collateral held in the trust.

          Since we will be the sole obligor under the funding agreement and PFG will be the sole obligor under the related guarantee, the trust’s ability to meet its obligations, and your ability to receive payments from the trust, with respect to each applicable series of notes, will be principally dependent upon our ability to perform our obligations under the applicable funding agreement held in the relevant trust and PFG’s ability to perform its obligations under the guarantee of our payment obligations under the related funding agreement. However, you will have no direct contractual rights against us or PFG under the funding agreement or the guarantee, respectively. Under the terms of the funding agreement and related

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guarantee, recourse rights to us or PFG, respectively, will belong to the trust, its successors and its permitted assignees, but only with respect to the relevant trust. In connection with the offering and sale of a series of notes, the trust will collaterally assign and grant a security interest in the relevant funding agreement for such series of notes to, and the trust will collaterally assign and grant a security interest in the related guarantee in favor of, the indenture trustee for the benefit of the holders of such series of notes. Accordingly, recourse to us under such funding agreement and to PFG under the related guarantee will be enforceable only by the indenture trustee as a secured party on behalf of the holders of such series of notes by directing the indenture trustee under the limited circumstances described in the accompanying prospectus under “Description of the Notes — Certain Rights of Holders.” See also “Description of the Notes — Nonrecourse Enforcement” in the accompanying prospectus.

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

Book-Entry Notes

          We have established a depositary arrangement, on behalf of the trusts, with DTC with respect to the book-entry notes, the terms of which are summarized below.

          All book-entry notes having the same terms will be represented by one or more global securities. Each global security will be deposited with, or on behalf of, DTC and will be registered in the name of DTC or its nominee. No global security may be transferred or exchanged except as a whole by DTC or a nominee of DTC to DTC or to another nominee of DTC, or by DTC or another nominee of DTC to a successor of DTC or a nominee of a successor to DTC. So long as DTC or its nominee is the registered holder of a global security, DTC or its nominee will be the sole owner of the related book-entry notes represented thereby for all purposes under the indenture. Except as otherwise provided below, the beneficial owners of the global security or securities represented by book-entry notes will not be entitled to receive physical delivery of definitive notes and will not be considered the registered holders of the book-entry notes for any purpose under the indenture and no global security representing book-entry notes will be exchangeable or transferable. As a result, to exercise any rights of a registered holder under the indenture, a beneficial owner must rely on the procedures of DTC and, if the beneficial owner is not a participant, on the procedures of the participant or participants through which the beneficial owner owns its interest. The laws of some jurisdictions require that some purchasers of securities take physical delivery of securities in definitive form. These laws may limit the ability to transfer beneficial interests in a global security represented by book-entry notes.

          Each global security representing book-entry notes will be exchangeable for definitive notes having the same terms in a like aggregate principal amount only if:

• the trust notifies the indenture trustee that the trust wishes in its sole discretion to exchange the global security for definitive notes;

• an event of default on the notes of that series has occurred and has not been cured; or

• DTC notifies us that it is unwilling or unable to continue as a clearing system for the global securities, or we have become aware that it has ceased to be a clearing agency registered under the Securities Exchange Act of 1934, as amended and, in either case, a successor clearing system is not appointed by us within 60 calendar days after receiving the notice from DTC or becoming aware that DTC is no longer registered.

          If any of these events occurs, the appropriate trust will print and deliver definitive notes.

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Definitive notes issued under these circumstances will be registered in the names of the beneficial owners of the related global securities as provided to the indenture trustee by the participants identified by DTC.

About the Depositary

          The following is based on information furnished by DTC:

          DTC will act as securities depository for the book-entry notes. The book-entry notes will be issued as fully registered securities in the name of Cede & Co. (DTC’s nominee) or another name requested by DTC. One fully registered global security will be issued for each issue of a series of book-entry notes in the aggregate principal amount of that issue and will be deposited with, or on behalf of, DTC. If the aggregate principal amount of any issue exceeds DTC’s limit for a single global security, then the global securities will be issued in the form of one or more global securities having a principal amount equal to DTC’s limit and one or more additional global securities representing any remaining principal amount.

          DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its direct participants deposit with it. DTC also facilitates the settlement among direct participants of transactions in deposited securities, such as transfers and pledges, through electronic computerized book-entry changes in direct participants’ accounts. This eliminates the need for physical movement of securities certificates. DTC’s direct participants include securities brokers and dealers (including the Agents), banks, trust companies, clearing corporations and other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC and the National Association of Securities Dealers, Inc. Access to DTC’s system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its direct and indirect participants are on file with the SEC.

          Under DTC’s system, purchases of book-entry notes must be made by or through direct participants, which will receive a credit for the book-entry notes on DTC’s records. The ownership interest of the actual purchaser is in turn recorded on the records of the direct and indirect participants. Beneficial owners will not receive written confirmation from DTC of their purchase, but are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the direct or indirect participants through which they entered into the transaction. Transfers of ownership interests in book-entry notes are accomplished by entries made on the books of the direct and indirect participants acting on behalf of the beneficial owners. Beneficial owners will not receive definitive notes unless use of the book-entry system is discontinued as described above.

          To facilitate subsequent transfers, all global securities representing the book-entry notes deposited with, or on behalf of, DTC will be registered in the name of DTC’s nominee, Cede & Co., or any other name that DTC requests. The deposit of global securities with, or on behalf of, DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the book-entry notes; DTC’s records reflect only the identity of the direct participants to whose accounts the book-entry notes are credited, which may or may not be the beneficial owners. DTC’s participants are responsible for keeping account of their holdings on behalf of their customers.

          Conveyance of notices and other communications from DTC to direct participants, from direct participants to indirect participants and from direct participants and indirect participants to beneficial owners are governed by arrangements among them and are subject to statutory and regulatory requirements.

          Neither DTC nor Cede & Co. will consent or vote with respect to global securities. Under its usual procedures, DTC mails an omnibus proxy to a company as soon as possible after a

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record date. The omnibus proxy assigns Cede & Co.’s consenting or voting rights to those direct participants to whose accounts the book-entry notes are credited on the record date (identified in a listing attached to the omnibus proxy).

          The trust will make payments on the global securities in immediately available funds to Cede & Co. or any other nominee named by DTC. DTC’s practice is to credit direct participants’ accounts on the applicable payment date in accordance with their respective holdings shown on DTC’s records unless DTC has reason to believe that it will not receive payment on that date. Payments by participants to beneficial owners are governed by standing instructions and customary practices and are subject to statutory and regulatory requirements. The trust and the trustee are responsible only for making payments to DTC; DTC is responsible for disbursing those payments to its direct participants and the direct participants (and any indirect participants) are solely responsible for disbursing those payments to the beneficial owners.

          Any redemption notices will be sent to Cede & Co. If less than all of the book-entry notes having the same terms are being redeemed, DTC’s current practice is to determine by lot the amount of the interest of each direct participant in those notes to be redeemed.

          A beneficial owner must give notice of any election to have its book-entry notes repaid through its participant to the indenture trustee. Delivery of the book-entry notes will be effected by causing the relevant direct participant to transfer the relevant part of its interest in the global securities to the indenture trustee on DTC’s records.

          DTC may discontinue providing its services as securities depository at any time by giving reasonable notice to us or the indenture trustee. If we do not obtain a successor securities depository, the applicable trust will print and deliver definitive notes.

          We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). If we do so, the applicable trust will print and deliver definitive notes.

DESCRIPTION OF THE FUNDING AGREEMENTS

          Each trust will use the net proceeds from the issuance of a series of notes to the public and the issuance of the trust beneficial interest to the trust beneficial owner to purchase a funding agreement. The funding agreement will have substantially similar payment and other terms to the related series of notes. The funding agreement may be interest bearing or non-interest bearing. A funding agreement may bear interest at either a fixed or a floating rate, or a combination of fixed and floating rates, as specified in the applicable pricing supplement. The calculation of the interest rate, the dates of interest and maturity payments and such other payment terms on the funding agreement will be determined in the same manner as described above under “Description of the Notes.” An amount equal to the funding agreement deposit plus accrued but unpaid interest, if any, and accrued discount, if any (in the case of a discount funding agreement) will be payable on its stated maturity date, as specified in the applicable pricing supplement.

          The pricing supplement relating to a series of notes will describe the following pricing terms of the related funding agreement:

• the deposit amount for the funding agreement;

• whether the funding agreement:

          (1) is a fixed rate funding agreement,

          (2) is a floating rate funding agreement, and/or

          (3) is a discount funding agreement that does not bear interest currently or bears interest at a rate that is below market rates at the effective date;

• the price at which the funding agreement will be issued, which will be expressed as a percentage of the aggregate deposit amount or face amount;

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• the effective date on which the funding agreement will be issued;

• the stated maturity date;

• if the funding agreement is a fixed rate funding agreement, the rate per annum at which the funding agreement will bear any interest and the interest payment date frequency;

• if the funding agreement is a floating rate funding agreement, relevant terms such as:

          (1) the interest rate basis,

          (2) the initial interest rate,

          (3) the interest reset period or the interest reset dates,

          (4) the interest payment dates,

          (5) the index maturity,

          (6) any maximum interest rate,

          (7) any minimum interest rate,

          (8) the spread and/or spread multiplier, and

          (9) any other terms relating to the particular method of calculating the interest rate for the funding agreement and whether and how the spread and/or spread multiplier may be changed prior to stated maturity;

• whether the funding agreement may be redeemed by us, or repaid at the option of the trust, prior to the stated maturity and the terms of its redemption or repayment; provided in either case the relevant series of notes will contain substantially the same redemption and repayment terms and no funding agreement may be redeemed or repaid without the simultaneous redemption or repayment of the related series of notes; and

• any other terms of the funding agreement.

          For a more detailed discussion of the funding agreements, see “Description of the Funding Agreements” in the accompanying prospectus.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

          The following is a general discussion of the material United States federal income tax considerations relating to the purchase, ownership and disposition of the notes by initial purchasers of the notes who are Holders (as defined below), purchase the notes at their stated principal amount and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). The statements set forth in the following discussion, to the extent they constitute matters of United States federal income tax law or legal conclusions with respect thereto, represent the opinion of Sidley Austin LLP, special United States income tax counsel to us. This discussion does not address all of the tax considerations that may be relevant to prospective purchasers in light of their particular circumstances or to persons subject to special rules under United States federal tax laws, such as certain financial institutions, insurance companies, real estate investment trusts, dealers in securities, tax-exempt entities, persons who hold the notes as part of a “straddle,” “hedging,” “conversion” or other integrated transaction, persons who mark their securities to market for United States federal income tax purposes or persons whose functional currency (as defined in section 985 of the Code) is not the U.S. dollar. In addition, this discussion does not address the effect of any state, local or foreign tax laws or the effect of the U.S. federal alternative minimum tax. Accordingly, prospective purchasers are advised to consult their own tax advisers with respect to their individual circumstances.

          This discussion is based on the Code, the Treasury Regulations promulgated thereunder and administrative and judicial pronouncements, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Except where indicated, this discussion does not describe the tax consequences of holding a note that is treated as a “variable rate debt instrument” or a “contingent payment debt instrument” under applicable Treasury Regulations, and a general summary of any materially different federal income tax considerations relating to any such note

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will be included in the relevant pricing supplement.

          For purposes of the following discussion, the term “Holder” means a beneficial owner of a note who or which is, for United States federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate or trust treated as a United States person under section 7701(a)(30) of the Code. This discussion does not address the tax considerations that may be relevant to a person who or which is not a Holder.

          Special rules, not discussed in this prospectus supplement or the accompanying prospectus, may apply to persons purchasing notes through entities treated for U.S. federal income tax purposes as partnerships, and such persons should consult their own tax advisors in that regard.

Classification of the Notes and the Trust

          We intend to take the position, for United States federal income tax purposes, that each trust will be disregarded and that the notes will be treated as representing our indebtedness (the “Intended Tax Characterization”). Each Holder of a note (or any beneficial interest therein), by acceptance of the note (or beneficial interest), agrees to treat the trust with respect to which the note was issued and the note consistently with the Intended Tax Characterization.

          Notwithstanding the Intended Tax Characterization, it is possible that a trust could be viewed as a separate entity for United States federal income tax purposes. Sidley Austin LLP is of the opinion that, under current law and assuming full compliance with the terms of the trust agreement and the indenture (and certain other documents), and based on certain facts and assumptions contained in such opinion, each trust will not be classified as an association (or publicly traded partnership) taxable as a corporation for United States federal income tax purposes. Accordingly, whether the Intended Tax Characterization is respected or not, each trust will not be treated as a taxable entity for United States federal income tax purposes. If a trust is viewed as a separate entity rather than disregarded, each Holder of a note (or any beneficial interest therein) agrees to treat the trust as a grantor trust and the notes as undivided ownership interests in such trust. If this were the case, a Holder would be required to include in income, consistent with its method of accounting, its pro rata share of any amounts paid to the relevant trust to satisfy expenses and would be entitled to deduct, consistent with its method of accounting, its pro rata share of any such expenses as provided in sections 162 and 212 of the Code. If the Holder is an individual, trust or estate, or to the extent the Holder’s income is reportable on the income tax return of an individual, trust or estate, the deduction for such person’s share of such expenses will be allowed only to the extent that all of such person’s miscellaneous itemized deductions, including such person’s share of the relevant trust’s expenses, exceed two percent of such person’s adjusted gross income. In addition, an individual’s itemized deductions may be subject to other limitations. Accordingly, Holders who are individuals, or whose income is reported in whole or in part on the income tax return of a United States citizen or resident, should consult their tax advisers with respect to such deductions.

          The remainder of this summary assumes that the Intended Tax Characterization is correct.

Interest and Original Issue Discount

          Each Holder of a note will include in income payments of “qualified stated interest” (as described below) in respect of such note, in accordance with such Holder’s method of accounting for United States federal income tax purposes, as ordinary interest income. In general, if the issue price of a note, determined by the first price at which a substantial amount of the notes of the related series are sold (ignoring sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers), is less than the “stated redemption price at maturity” (as described below) of such note by an amount equal to or more than a de minimis amount, a Holder will be considered to have purchased such note with original issue discount (“OID”). In general, the de minimis amount is equal to ¹/4 of one percent of the stated redemption price at maturity multiplied by the weighted average number of complete years to maturity from the issue date of such note. If a Holder acquires a note with OID,

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then regardless of such Holder’s method of accounting, such Holder will be required to accrue its pro rata share of OID on such note on a constant-yield basis and include such accruals in gross income, whether or not such Holder has received any cash payment on the notes. Any amount not treated as OID because it is less than the de minimis amount generally must be included in income (generally as gain from the sale of notes) as principal payments are received in the proportion that each such payment bears to the original principal amount of the note. Special rules apply to notes with a fixed maturity of one year or less. See “Short Term Notes.”

          “Stated redemption price at maturity” means the sum of all payments to be made on a note other than payments of “qualified stated interest.” “Qualified stated interest” generally means stated interest that is unconditionally payable at least annually at a single fixed rate or, in the case of a variable rate debt instrument (as defined below), at a single qualified floating rate or single objective rate (as such terms are defined below). If a note is a variable rate debt instrument but interest is payable at other than a single qualified floating rate or a single objective rate, special rules apply that are not discussed in this prospectus supplement or the accompanying prospectus.

          In the case of a variable rate debt instrument, the amount of qualified stated interest and the amount of OID, if any, that accrues during an accrual period is generally determined assuming that the variable rate is a fixed rate equal to (i) in the case of a qualified floating rate or qualified inverse floating rate (each as defined below), the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate or (ii) in the case of an objective rate (as defined below, and other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the debt instrument, and the qualified stated interest (or, if there is no qualified stated interest, OID) allocable to an accrual period is increased (or decreased) if the interest actually paid during an accrual period exceeds (or is less than) the interest assumed to be paid during the accrual period pursuant to clause (i) or (ii), as applicable. Special rules apply to a variable rate debt instrument that provides for stated interest at a fixed rate under certain circumstances.

          A “variable rate debt instrument” is a debt instrument that (i) has an issue price that does not exceed the total noncontingent principal payments by more than an amount equal to the lesser of (a) 0.015 multiplied by the product of such total noncontingent principal payments and the number of complete years to maturity of the instrument (or, in the case of a note providing for the payment of any amount other than qualified stated interest prior to maturity, multiplied by the weighted average maturity of the note) or (b) 15 percent of the total noncontingent principal payments, (ii) provides for stated interest (compounded or paid at least annually) at the current value of (A) one or more qualified floating rates, (B) a single fixed rate and one or more qualified floating rates, (C) a single objective rate or (D) a single fixed rate and a single objective rate that is a qualified inverse floating rate, and (iii) does not provide for any principal payments that are contingent. The current value is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.

          A “qualified floating rate” is generally a floating rate under which variations in the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which a debt instrument is denominated. A multiple of a qualified floating rate is not a qualified floating rate unless the relevant multiplier is (i) fixed at a number that is greater than 0.65 but not more than 1.35 or (ii) fixed at a number that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate. A variable rate is not considered a qualified floating rate if the variable rate is subject to a cap, floor, governor (i.e., a restriction on the amount of increase or decrease in the stated interest rate) or similar restriction that is reasonably expected as of the issue date to cause the yield on the note to be significantly more or less than the expected yield determined without the restriction (other than a cap, floor, governor or similar restriction that is fixed throughout the term of the note).

          An “objective rate” is a rate (other than a qualified floating rate) that is determined using a single fixed formula and that is based on objective financial or economic information, provided, however, that an objective rate will not include a rate based on information that is within the control of

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the issuer (or certain related parties of the issuer) or that is unique to the circumstances of the issuer (or certain related parties of the issuer), such as dividends, profits or the value of the issuer’s stock. A “qualified inverse floating rate” is an objective rate (x) that is equal to a fixed rate minus a qualified floating rate and (y) the variations in which can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate (disregarding any caps, floors, governors or similar restrictions that would not, as described above, cause a rate to fail to be a qualified floating rate). Notwithstanding the first sentence of this paragraph, a rate is not an objective rate if it is reasonably expected that the average value of the rate during the first half of the note’s term will be either significantly less than or significantly greater than the average value of the rate during the final half of the note’s term. The Internal Revenue Service (“IRS”) may designate rates other than those specified above that will be treated as objective rates. As of the date of this prospectus supplement, no other rates have been designated.

          If interest on a note is stated at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single qualified floating rate or objective rate. A fixed rate and a variable rate will be conclusively presumed to meet the requirements of the preceding sentence if the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 0.25 percentage points (25 basis points).

          If a floating rate note does not qualify as a variable rate debt instrument or otherwise provides for contingent payments, or if a fixed rate note provides for contingent payments, such note may constitute a “contingent payment debt instrument.” A note that is a contingent payment debt instrument is generally taxable as follows:

          First, we are required to determine, as of the issue date, the comparable yield for the note. The comparable yield is generally the yield at which we would issue a fixed rate debt instrument with terms and conditions similar to those of the note (including the level of subordination, term, timing of payments and general market conditions, but not taking into consideration the riskiness of the contingencies or the liquidity of the note), but not less than the applicable federal rate announced monthly by the IRS (the “AFR”). In certain cases where a floating rate note is marketed or sold in substantial part to tax-exempt investors or other investors for whom the prescribed inclusion of interest is not expected to have a substantial effect on their U.S. federal tax liability, the comparable yield for the note, without proper evidence to the contrary, is presumed to be the AFR.

          Second, we are required to construct a projected schedule of payments (the “Schedule”). The Schedule is determined as of the issue date and generally remains in place throughout the term of the note. The Schedule includes each noncontingent payment and a projected payment for each contingent payment. The Schedule must produce the comparable yield determined as set forth above.

          Third, under the usual rules applicable to OID and based on the comparable yield, each Holder will be required to accrue its pro rata share of OID on a constant yield basis and include such accrual in gross income.

          Fourth, appropriate adjustments are made to the OID determined under the foregoing rules to account for any differences between actual contingent payments and the projected payments on the Schedule.

          Differences between the actual contingent payments made to a Holder in such Holder’s taxable year and the projected payments for such taxable year are generally aggregated and taken into account, in the case of a positive difference, as additional interest income, or, in the case of a negative difference, first as a reduction in OID for such year and thereafter, subject to certain limitations, as ordinary loss. We are required to provide to each holder of notes a copy of the Schedule. Our determination of the Schedule must be used by a Holder unless the Schedule is unreasonable and such Holder discloses to the IRS that it is using a different schedule. In general, any gain realized by a Holder on the sale, exchange, retirement or other disposition of a note that is a contingent payment debt instrument prior to the time no contingent payments remain is treated as interest income. In general, any loss on such a note is treated as ordinary loss to the extent it does not exceed such Holder’s prior interest

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inclusions on the note (net of negative adjustments). The above described treatment of contingent payment debt instruments assumes that the instrument is properly treated as debt for U.S. federal tax purposes.

Premiums

          If the amount paid by a Holder for a note exceeds the stated redemption price at maturity of the note, the Holder generally will be considered to have purchased the note at a premium equal in amount to such excess. In this event, the Holder may elect to amortize such premium, generally on a constant-yield basis, as an offset to interest income. In the case of a note that may be redeemed prior to maturity, the premium is calculated assuming the trust and the Holder will exercise or not exercise redemption rights in a manner that maximizes the Holder’s yield. It is unclear how premium is calculated when the redemption date or the amount of any redemption premium is uncertain. The election to amortize bond premium, once made, will apply to all debt obligations held or subsequently acquired by the electing Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS.

Short-Term Notes

          Notes that have a fixed maturity of one year or less (“Short-Term Notes”) will be treated as issued with OID. In general, an individual or other Holder that uses the cash method of accounting is not required to accrue such OID unless the Holder elects to do so. If such an election is not made, any gain recognized by such Holder on the sale, exchange, retirement or other disposition of Short-Term Notes will be ordinary income to the extent of the OID accrued on a straight-line basis, or upon election under the constant yield method (based on daily compounding), through the date of sale, exchange, retirement or other disposition, and a portion of the deduction otherwise allowable to such Holder for interest on borrowings allocable to Short-Term Notes will be deferred until a corresponding amount of income is realized. Holders who report income for United States federal income tax purposes under the accrual method of accounting and certain other Holders are required to accrue OID related to a Short-Term Note as ordinary income on a straight-line basis unless an election is made to accrue the OID under a constant yield method (based on daily compounding).

Sale, Exchange, Retirement or Other Disposition of Notes

          In general, a Holder of a note will have a tax basis in the note equal to the cost of the note to the Holder, increased by any amount includible in income by the Holder as OID and reduced by any principal payments. Upon a sale, exchange, retirement or other disposition (including upon exercise of a survivor’s option) of a note, a Holder will generally recognize gain or loss equal to the difference between the amount realized on the sale, exchange, retirement or other disposition (less any amount realized that is attributable to accrued but unpaid interest, which will constitute ordinary income if not previously included in income) and the Holder’s tax basis in such note. Such gain or loss will be long-term capital gain or loss if the Holder held the note for more than one year at the time of disposition. A Holder that is an individual is entitled to preferential treatment for net long-term capital gains. The ability of a Holder to offset capital losses against ordinary income is limited.

Backup Withholding and Information Reporting

          Backup withholding and information reporting requirements generally apply to interest (including OID) and principal payments made to, and to the proceeds of sales by, certain non-corporate Holders. A Holder not otherwise exempt from backup withholding generally can avoid backup withholding by providing a properly-executed Internal Revenue Service Form W-9 (or successor form). Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the beneficial owner’s United States federal income tax liability provided the required information is furnished to the Internal Revenue Service.

Opinion Regarding Tax Matters

          Prior to the issuance of any notes, we will file with a Current Report on Form 8-K an unqualified opinion of legal counsel regarding the tax treatment of such notes.

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PLAN OF DISTRIBUTION

          This prospectus supplement relates to the offering of notes by separate trusts from time to time for sale to one or more broker-dealers (the “Agents”) pursuant to a distribution agreement (the “Distribution Agreement”) among the applicable trust, us, PFG and the Agents. Under the terms of the Distribution Agreement, one or more separate trusts may also sell notes to or through agents primarily to institutional investors under our secured medium-term notes program or to or through Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Purchasing Agent primarily to retail investors under our Principal^® Life CoreNotes^® program. Each Agent will be specified in the applicable pricing supplement. The Agents, individually or in a syndicate, may purchase notes, as principal, from separate trusts from time to time for resale to investors and other purchasers at varying prices relating to prevailing market prices at the time of resale as determined by the applicable Agent or, if so specified in the applicable pricing supplement, for resale at a fixed offering price. The notes may be sold in the United States to retail, institutional and other investors.

          Subject to the terms of the Distribution Agreement, concurrently with any offering of notes as described in this prospectus supplement by the applicable trust, a separate trust may issue other notes under our Principal^® Life CoreNotes^® program to retail investors, our secured medium-term note program primarily to institutional investors or the accompanying prospectus or this prospectus supplement.

          Unless otherwise specified in the applicable pricing supplement, any note sold to an Agent as principal will be purchased by that Agent at a price equal to 100% of the principal amount thereof less a percentage of the principal ranging from .125% to 2.00% of the principal amount of such note, depending on its stated maturity. An Agent may sell notes it has purchased from the applicable trust as principal to certain dealers less a concession equal to all or any portion of the discount received in connection with that purchase. An Agent may allow, and dealers may reallow, a discount to certain other dealers. After the initial offering of notes (in the case of notes to be sold on a fixed offering price basis), the concession and the reallowance may be changed.

          The applicable trust reserves the right to withdraw, cancel or modify the offer made hereby without notice and may reject offers in whole or in part.

          Unless otherwise specified in the applicable pricing supplement, you will be required to pay the purchase price of your notes in immediately available funds in the specified currency in The City of New York on the date of settlement.

          Upon issuance, the notes will not have an established trading market. The notes may not be listed on any securities exchange. The Agents may from time to time purchase and sell notes in the secondary market, but the Agents are not obligated to do so. There can be no assurance that a secondary market for the notes will develop or that there will be liquidity in the secondary market if one develops. From time to time, the Agents may make a market in the notes, but the Agents are not obligated to do so and may discontinue any market-making activity at any time.

          In connection with an offering of notes purchased by one or more Agents as principal on a fixed offering price basis, the applicable Agents will be permitted to engage in certain transactions that stabilize the price of notes. These transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of notes. If those Agents create a short position in notes (i.e., if they sell notes in an amount exceeding the amount referred to in the applicable pricing supplement), they may reduce that short position by purchasing notes in the open market. In general, purchases of notes for the purpose of stabilization or to reduce a short position could cause the price of notes to be higher than it might be in the absence of these type of purchases.

          None of us, PFG, the applicable trust or any Agent makes any representation or prediction as to the direction or magnitude of any effect that the transactions described in the immediately preceding paragraph may have on the price of notes. In addition, none of us, PFG, the applicable trust or any Agent makes any representation that the Agents will engage in any such transactions or that such transactions, once commenced, will not be discontinued without notice.

S-43

          The Agents are “underwriters” within the meaning of the Securities Act of 1933, as amended, with respect to the notes being distributed, the funding agreement purchased by the trust and the guarantee issued to the trust. We and PFG have agreed, jointly and severally, to indemnify the Agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Agents may be required to make in respect thereof.

          With respect to any series of notes as to which affiliates of the indenture trustee will serve as an Agent, the relevant trust will appoint an eligible and unaffiliated entity to serve as indenture trustee with respect to such series of notes, instead of the indenture trustee.

          We are a statutory issuer of the notes under the Securities Act of 1933, as amended. In addition, under the Securities Act of 1933, as amended, each trust is a statutory underwriter of the related funding agreement and guarantee.

          In the ordinary course of business, the Agents and their affiliates have engaged, and may in the future engage, in investment and commercial banking transactions with us and certain of our affiliates, including PFG.

S-44

ANNEX A

REPAYMENT ELECTION FORM

Principal Life Insurance Company

Secured Medium-Term Retail Notes

Cusip Number           

To: [Name of Trust] (the “TRUST”)

          The undersigned financial institution (the “FINANCIAL INSTITUTION”) represents the following:

• The Financial Institution has received a request for repayment from the executor or other authorized representative (the “AUTHORIZED REPRESENTATIVE”) of the deceased beneficial owner listed below (the “DECEASED BENEFICIAL OWNER”) of Secured Medium-Term Notes (CUSIP No.           ) (the “NOTES”).

• At the time of his or her death, the Deceased Beneficial Owner owned Notes in the principal amount listed below.

• The Deceased Beneficial Owner acquired the Notes either within ninety (90) days of their issuance or at least six (6) months before the date of death of such Deceased Beneficial Owner.

• The Financial Institution currently holds such notes as a direct or indirect participant in The Depository Trust Company (the “DEPOSITARY”).

          The Financial Institution agrees to the following terms:

• The Financial Institution shall follow the instructions (the “INSTRUCTIONS”) accompanying this Repayment Election Form (this “FORM”).

• The Financial Institution shall make all records specified in the Instructions supporting the above representations available to U.S. Bank Trust National Association (the “TRUSTEE”) or the [Name of Trust] (the “TRUST”) for inspection and review within five business days of the Trustee’s or the Trust’s request.

• If the Financial Institution, the Trustee or the Trust, in any such party’s reasonable discretion, deems any of the records specified in the Instructions supporting the above representations unsatisfactory to substantiate a claim for repayment, the Financial Institution shall not be obligated to submit this Form, and the Trustee or Trust may deny repayment. If the Financial Institution cannot substantiate a claim for repayment, it shall notify the Trustee immediately.

• Repayment elections may not be withdrawn.

• The Financial Institution agrees to indemnify and hold harmless the Trustee and the Trust against and from any and all claims, liabilities, costs, losses, expenses, suits and damages resulting from the Financial Institution’s above representations and request for repayment on behalf of the Authorized Representative.

• The Notes will be repaid on the first Interest Payment Date to occur at least 20 calendar days after the date of acceptance of the notes for repayment, unless such date is not a business day, in which case the date of repayment shall be the next succeeding business day.

• Subject to the Trust’s rights to limit the aggregate principal amount of Notes as to which exercises of the survivor’s option shall be accepted in any one calendar year, all questions as to the eligibility or validity of any exercise of the survivor’s option will be determined by the Trustee, in its sole discretion, which determination shall be final and binding on all parties.

A-1

REPAYMENT ELECTION FORM

(1)

Name of Deceased Beneficial Owner

(2)

Date of Death

(3)

Name of Authorized Representative Requesting Repayment

(4)

Name of Financial Institution Requesting Repayment

(5)

Signature of Authorized Representative of Financial Institution Requesting Repayment

(6)

Principal Amount of Requested Repayment

(7)

Date of Election

(8) Financial Institution
Representative Name:
Phone Number:
Fax Number:
Mailing Address (no P.O. Boxes): (9) Wire instructions for payment:
Bank Name:
ABA Number:
Account Name:
Account Number:
Reference (optional):

TO BE COMPLETED BY THE TRUSTEE:

(A)	Election Number*:
(B)	Delivery and Payment Date:
(C)	Principal Amount:
(D)	Accrued Interest:
(E)	Date of Receipt of Form by the Trustee:
(F)	Date of Acknowledgment by the Trustee:

*  To be assigned by the Trustee upon receipt of this Form. An acknowledgement, in the form of a copy of this document with the assigned Election Number, will be returned to the party and location designated in item (8) above.

A-2

INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM AND EXERCISING REPAYMENT OPTION

          Capitalized terms used and not defined herein have the meanings defined in the accompanying Repayment Election Form.

          1. Collect and retain for a period of at least three years (1) satisfactory evidence of the authority of the Authorized Representative, (2) satisfactory evidence of death of the Deceased Beneficial Owner, (3) satisfactory evidence that the Deceased Beneficial Owner beneficially owned, at the time of his or her death, the notes being submitted for repayment, (4) satisfactory evidence that the notes being submitted for repayment either were purchased by the Deceased Beneficial Owner within ninety (90) days of their issuance or were acquired by the Deceased Beneficial Owner at least six (6) months before the date of the death of such Deceased Beneficial Owner, and (5) any necessary tax waivers. For purposes of determining whether the notes will be deemed beneficially owned by an individual at any given time, the following rules shall apply:

• If a note (or a portion thereof) is beneficially owned by tenants by the entirety or joint tenants, the note (or relevant portion thereof) will be regarded as beneficially owned by a single owner. Accordingly, the death of a tenant by the entirety or joint tenant will be deemed the death of the beneficial owner and the entire principal amount so owned will become eligible for repayment.

• The death of a person beneficially owning a note (or a portion thereof) by tenancy in common will be deemed the death of the beneficial owner only with respect to the deceased owner’s interest in the note (or relevant portion thereof) so owned, unless a husband and wife are the tenants in common, in which case the death of either will be deemed the death of the beneficial owner and the entire principal amount so owned will be eligible for repayment.

• A note (or a portion thereof) beneficially owned by a trust will be regarded as beneficially owned by each beneficiary of the trust to the extent of that beneficiary’s interest in the trust (however, a trust’s beneficiaries collectively cannot be beneficial owners of more notes than are owned by the trust). The death of a beneficiary of a trust will be deemed the death of the beneficial owner of the notes (or relevant portion thereof) beneficially owned by the trust to the extent of that beneficiary’s interest in the trust. The death of an individual who was a tenant by the entirety or joint tenant in a tenancy which is the beneficiary of a trust will be deemed the death of the beneficiary of the trust. The death of an individual who was a tenant in common in a tenancy which is the beneficiary of a trust will be deemed the death of the beneficiary of the trust only with respect to the deceased holder’s beneficial interest in the note, unless a husband and wife are the tenants in common, in which case the death of either will be deemed the death of the beneficiary of the trust.

• The death of a person who, during his or her lifetime, was entitled to substantially all of the beneficial interest in a note (or a portion thereof) will be deemed the death of the beneficial owner of that note (or relevant portion thereof), regardless of the registration of ownership, if such beneficial interest can be established to the satisfaction of the Trustee. Such beneficial interest will exist in many cases of street name or nominee ownership, custodial arrangements, ownership by a trustee, ownership under the Uniform Transfers of Gifts to Minors Act and community property or other joint ownership arrangements between spouses. Beneficial interest will be evidenced by such factors as the power to sell or otherwise dispose of a note, the right to receive the proceeds of sale or disposition and the right to receive interest and principal payments on a note.

          2. Indicate the name of the Deceased Beneficial Owner on line (1).

          3. Indicate the date of death of the Deceased Beneficial Owner on line (2).

A-3

          4. Indicate the name of the Authorized Representative requesting repayment on line (3).

          5. Indicate the name of the Financial Institution requesting repayment on line (4).

          6. Affix the authorized signature of the Financial Institution’s representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE GUARANTEED.

          7. Indicate the principal amount of notes to be repaid on line (6).

          8. Indicate the date this Form was completed on line (7).

          9. Indicate the name, mailing address (no P.O. boxes, please), telephone number and facsimile-transmission number of the party to whom the acknowledgment of this election may be sent in item (8).

          10. Indicate the wire instruction for payment on line (9).

          11. Leave lines (A), (B), (C), (D), (E) and (F) blank.

          12. Mail or otherwise deliver an original copy of the completed Form to:

Citibank, N.A.

Citibank Agency & Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

          13. FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE ACCEPTED.

          14. If the acknowledgement of the Trustee’s receipt of this Form, including the assigned Election Number, is not received within ten days of the date such information is sent to Citibank, N.A., contact the Trustee at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

          15. For assistance with this Form or any questions relating thereto, please contact U.S. Bank Trust National Association at 100 Wall Street, 16th Floor, New York, New York 10005, attention: Corporate Trust Administration, telephone number: (212) 361-6184.

A-4

$4,000,000,000

Secured Medium-Term Retail Notes (That are also Asset-Backed Securities)

Due Between Nine Months and Thirty Years

From the Date of Issue

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements

Issued by

Principal Life Insurance Company

and

Guarantees Issued by

Principal Financial Group, Inc.

PROSPECTUS SUPPLEMENT

                    , 2006

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated January 25, 2006

PROSPECTUS

$4,000,000,000

Secured Medium-Term Notes (That are also Asset-Backed Securities)

Issued Through and Obligations of

Principal Life Income Fundings Trusts

Secured by Funding Agreements

Issued by Principal Life Insurance Company

and

Guarantees Issued by Principal Financial Group, Inc.

          Principal Life: We are Principal Life Insurance Company, an Iowa insurance company, the sponsor of the program and the depositor and issuer of the funding agreements described below. This prospectus relates to the offering, from time to time, through newly established separate and distinct issuing entities in the form of the trusts described below to institutional and retail investors, of one or more series of secured medium-term notes (that are also asset-backed securities), which we refer to in this prospectus as “notes,” in an aggregate principal amount of up to $4,000,000,000 or the equivalent amount in one or more foreign or composite currencies.

          Issuing Entities: The applicable trust will use the net proceeds from the offering of its series of notes to purchase a funding agreement sold to, and deposited into, the applicable trust by us. Our payment obligations under the funding agreement relating to the applicable series of notes will be fully and unconditionally guaranteed by a guarantee issued by Principal Financial Group, Inc., a Delaware corporation and our indirect parent (“PFG”).

          Each trust will exist for the exclusive purpose of issuing and selling one series of notes to investors, using the net proceeds from the sale of that series of notes to acquire a funding agreement from us, collaterally assigning and granting a security interest in the applicable funding agreement, and collaterally assigning and granting a security interest in the applicable guarantee, in favor of the indenture trustee, and engaging in other activities necessary or incidental thereto. The notes may be offered to institutional or retail investors.

          The notes are obligations of the applicable issuing entity. The notes are secured medium-term notes that are also asset-backed securities.

          Notes offered to institutional investors will be offered under the prospectus supplement to this prospectus relating to our secured medium-term notes program. The notes of each series will:

• be issued by a separate and distinct trust and will be the obligations of that issuing entity;

• be issued in only one class;

• provide for payment in U.S. dollars or one or more foreign currencies;

• bear interest at fixed or floating rates, or bear no interest at all;

• pay interest on each series of notes on a monthly, quarterly, semi-annual or annual basis (unless otherwise specified in the applicable pricing supplement);

• have a stated maturity of between 9 months and 30 years from the date of issue; and

• have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of the notes.

          Notes offered to retail investors will be offered under the prospectus supplement to this prospectus relating to the Principal^® Life CoreNotes^® program or the prospectus supplement to this prospectus relating to the secured medium-term notes retail program. The notes of each series will:

• be issued by a separate and distinct trust and will be the obligations of that issuing entity;

• be issued in only one class;

• provide for payment in U.S. dollars;

• bear interest at fixed or floating rates, or bear no interest at all;

• pay interest on each series of notes on a monthly, quarterly, semi-annual or annual basis (unless otherwise specified in the applicable pricing supplement);

• have a stated maturity of between 9 months and 30 years from the date of issue; and

• have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of notes.

          Holders of a series of notes may look only to the trust’s rights and title in the funding agreement issued to, and deposited into, the applicable trust by us, the related guarantee issued by PFG and any proceeds of that funding agreement and guarantee held in the trust and not to any other assets or collateral held by any other trust, us or PFG.

          We will provide the specific terms of an offering of notes in an accompanying prospectus supplement and pricing supplement, including how a particular offering of notes will be made and whether the notes of any series will be listed on a securities exchange.

          Our principal executive offices are located at 711 High Street, Des Moines, Iowa 50392-0001 and our telephone number is (515) 247-5111.

          See “Risk Factors” beginning on page 2 for a discussion of certain risks that should be considered in connection with an investment in the notes.

          None of the Securities and Exchange Commission, any state securities commission or any state insurance commission has approved or disapproved of these securities or determined if this prospectus, any prospectus supplement or any pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                 , 2006

“Principal^®” and “Principal Financial Group and Design^®” are registered service marks of Principal Financial Services, Inc. and are used under license.

“CoreNotes^®” is a registered service mark of Merrill Lynch & Co., Inc.

ABOUT THIS PROSPECTUS

          This prospectus is part of a registration statement that we and PFG filed with the Securities and Exchange Commission (the “SEC”) utilizing a “shelf” registration process. Under this process, notes may be offered, from time to time, through newly established separate and distinct trusts, up to a total amount of $4,000,000,000 in aggregate principal amount or the equivalent principal amount in one or more foreign or composite currencies. This prospectus provides you with a general description of the notes offered through trusts and the underlying funding agreements and guarantees. An accompanying prospectus supplement to this prospectus will provide the specific terms of the notes and the underlying funding agreements and guarantees. Each time notes are offered through a trust, we may also provide a pricing supplement to this prospectus and the applicable prospectus supplement that will contain specific information about the terms of the offering. The pricing supplement may also add to, update, supplement or clarify the information contained in this prospectus and applicable prospectus supplement and, accordingly, before you agree to purchase any notes, you should read this prospectus, the applicable prospectus supplement and any pricing supplement together with the information described under the heading “Where You Can Find More Information” on page 11.

          In this prospectus, references to “Principal Life,” “we,” “us” and “our” are to Principal Life Insurance Company, an Iowa insurance company, references to “PFG” are to Principal Financial Group, Inc., a Delaware corporation and our indirect parent company, and references to a “trust” are to the applicable separate and distinct special purpose common law trusts, formed in a jurisdiction located in the United States of America, which actually issues the applicable series of notes. In this prospectus, we refer to each series of Secured Medium-Term Notes as a “series of notes” and to Secured Medium-Term Notes in general as “notes.”

          In this prospectus, references to “United States dollars,” “U.S. dollars,” or “$” are to lawful currency of the United States of America, and references to “euro” are to the currency introduced at the start of the third stage of the European economic and monetary union pursuant to the treaty establishing the European Community, as amended.

          You should rely only on the information incorporated by reference or provided in this prospectus, the applicable prospectus supplement and the applicable pricing supplement. None of us, PFG, any trust or any of our or their respective agents or dealers has authorized any other person to provide you with different or additional information. If anyone provides you with different information, you should not rely on it. None of us, PFG, any trust or any of our or their respective agents or dealers is making an offer to sell the notes in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, the applicable prospectus supplement or the applicable pricing supplement, as well as information PFG previously filed with the SEC and incorporated by reference, is accurate only as of the date on the front cover of those documents or the date those documents were filed with the SEC, as applicable. Our and PFG’s business, financial condition, results of operations and prospects may have changed since that date. For more detail on the terms of the notes, you should read the exhibits filed with or incorporated by reference in our registration statement.

1

RISK FACTORS

          Your investment in the notes will involve certain risks. This prospectus and the accompanying prospectus supplement contain all of the risks that we believe are material to an investment in the notes.

          In consultation with your own financial, accounting and legal advisors, you should carefully consider the information included in or incorporated by reference in this prospectus, the accompanying prospectus supplement and the applicable pricing supplement, and pay special attention to the following discussion of risks before deciding whether an investment in the notes is suitable for you. The notes will not be an appropriate investment for you if you are not knowledgeable about significant features of the notes or financial matters in general. You should not purchase notes unless you understand, and know that you can bear, these investment risks.

          Because the applicable trust will rely on the payments that the trust receives on the funding agreement (or the related guarantee) to fund all payments on the related notes, you are making an investment decision regarding the funding agreement and the related guarantee as well as the related notes. You should carefully review the information in this prospectus, the accompanying prospectus supplement and the related pricing supplement about the notes, the funding agreement and the related guarantee.

Risk Factors Relating to Each Trust

Each trust has limited resources and therefore each trust’s ability to make timely payments with respect to its series of notes will depend on our making payments under the related funding agreement or PFG making payments under the related guarantee

          The principal assets of each trust will be a funding agreement (a “funding agreement”) issued by us and a related full and unconditional guarantee (a “guarantee”) issued by PFG of our payment obligations under the funding agreement. Although the trust will purchase the funding agreement relating to a particular series of notes, the trust will grant a security interest in and collaterally assign the funding agreement to the indenture trustee and the trust will collaterally assign and grant a security interest in the related guarantee to the indenture trustee, in each case for the benefit of the holders of the related series of notes to secure the trust’s obligations under that series of notes. Accordingly, each series of notes will be secured by a funding agreement and the related guarantee, together with all of the proceeds in respect of, all amounts and instruments on deposit from time to time in the relevant collection account and all of the books and records pertaining to, such funding agreement and related guarantee and all of the trust’s rights thereto, which we collectively refer to in this prospectus as the “collateral”. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular trust will be enforceable against only the assets held in such trust and not against the assets of any other trust, us or PFG. No series of notes will have any right to receive payments from the collateral related to any other series of notes issued by another trust or from our assets or PFG’s assets.

          The ability to receive payments on a series of notes will principally depend on payments under each related funding agreement and the related guarantee. Accordingly, the applicable trust will only be able to make timely payments with respect to a series of notes if we have made all required payments under the funding agreement securing the related series of notes or, if we fail to make such payments, PFG has made all required payments under the related guarantee. See “— Risk Factors Relating to the Collateral” below in this prospectus.

The notes are the obligations of the applicable trust only and are not obligations of, or guaranteed by, us, PFG or any of our or its affiliates

          The notes will not be obligations of, and will not be guaranteed by, us, PFG or any of our or its respective subsidiaries or affiliates. Except for our payment obligations under the funding agreement and the expense and indemnity agreements and the full and unconditional guarantee of our payment obligations under the funding agreement by PFG, none of us, PFG, U.S. Bank Trust National Association, as trustee (the “trustee”) or GSS Holdings II, Inc., as trust beneficial owner (the “trust beneficial owner”) is under

2

any obligation to provide funds or capital to the trust. In addition, the notes will not benefit from any insurance guarantee fund coverage or any similar protection. Each trust has no net worth as of the date of this prospectus, and the net worth of each trust will be approximately $15 at inception, unless otherwise specified in the applicable pricing supplement. The net worth of each trust is not expected to increase materially.

Each trust has no prior operating history

          Each trust exists solely to:

• issue and sell, from time to time, one series of notes to investors;

• use the net proceeds from the sale of its series of notes to acquire a funding agreement from us and a related guarantee from PFG;

• collaterally assign and grant a security interest in the applicable funding agreement, and collaterally assign and grant a security interest in the applicable guarantee, in favor of the indenture trustee; and

• engage in other activities necessary or incidental thereto.

          Each trust has no prior operating history.

Risk Factors Relating to the Notes

The notes are non-recourse obligations of the applicable trust and your claims as a holder of a series of notes are limited to the amount of the applicable collateral

          The notes of a series are payable only from the collateral held as security for notes of a series by the relevant trust. If any event of default occurs under any series of notes, the rights of the holders of the series of notes and the indenture trustee, acting on behalf of such holders will be limited to a proceeding against the applicable collateral. None of the holders of the affected notes or the indenture trustee, acting on behalf of such holders, will have the right to proceed against the collateral related to any other series of notes issued by another trust. Furthermore, no holder or the indenture trustee, acting on behalf of such holder, will have the ability to proceed against any of us, PFG, our or its officers, directors, affiliates, employees or agents or any of the applicable trust’s trustees, beneficial owner or agents, or any of their respective officers, directors, affiliates, employees or agents except with respect to enforcing obligations under the funding agreement against us and the guarantee of our payment obligations under that funding agreement against PFG. All claims of the holders of a series of notes in excess of amounts received from the related collateral will be extinguished.

Noteholders will not have any direct contractual rights against us under the applicable funding agreement or against PFG under the related guarantee

          The funding agreement issued by us to the applicable trust will be a contractual obligation between us and that trust. Once the trust collaterally assigns and grants a security interest in all of its rights and privileges in the funding agreement to the indenture trustee for the benefit of the holders of the related series of notes to secure the trust’s obligations under such series of notes, the indenture trustee will be the only party with recourse rights against us under the funding agreement. Subject to certain conditions in the indenture, however, holders of the applicable series of notes representing a majority in aggregate principal amount of the outstanding notes of such series have the right to direct the time, method and place of conducting any proceedings for exercising any remedy available to the indenture trustee in respect of such series of notes, including with respect to the related funding agreement. See “Description of the Notes — Nonrecourse Enforcement.”

          The guarantee issued by PFG to the trust will be a contractual obligation between PFG and that trust. Once that trust collaterally assigns and grants a security interest in all of its rights and privileges in the guarantee to the indenture trustee for the benefit of the holders of the related series of notes to secure

3

its obligations under such notes, the indenture trustee will be the only party with recourse rights against PFG under the guarantee. Subject to certain conditions in the indenture, however, holders of the applicable series of notes representing a majority in aggregate principal amount of the outstanding notes of such series have the right to direct the time, method and place of conducting any proceedings for exercising any remedy available to the indenture trustee in respect of such series of notes, including with respect to the related guarantee. See “Description of the Notes — Nonrecourse Enforcement.”

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

An event of default under the notes may not constitute an “event of default” under the applicable funding agreement and the applicable guarantee

          In certain circumstances an event of default under a series of notes may not constitute an event of default under the applicable funding agreement and the applicable guarantee.

          To the extent that:

• the trust fails to observe or perform in any material respect any covenant contained in the indenture or its series of notes;

• the indenture ceases to be in full force and effect or the indenture trustee’s security interest in the collateral is successfully challenged or is determined to be defective; or

• the trust or the collateral is subject to certain actions under applicable bankruptcy, insolvency or other similar laws or any receivership, liquidation, dissolution or other similar action or the trust is unable to pay its debts;

it is possible that the trust’s obligations under any series of notes may be accelerated while our obligations under the funding agreement and PFG’s obligations under the related guarantee may not be similarly accelerated. If this occurs, scheduled payments under the funding agreement would not be accelerated and the indenture trustee may have no or limited ability to proceed against the funding agreement and the related guarantee and holders of the trust’s notes may not be paid in full, or in a timely manner upon such acceleration. See “Description of the Notes — Events of Default” and “Description of the Funding Agreements” in this prospectus and “Risk Factors — Risk Factors Relating to the Notes — Ratings of our programs and any rated series of notes may not reflect all risks of an investment in the notes and may change in accordance with our financial strength rating.”

As a result of withholding, payments under the funding agreement and the related guarantee may be insufficient to pay principal and interest under the notes

          Payments of the principal of and interest on a series of notes will be made solely from the payments the trust receives under the funding agreement or, if we fail to make such payments, the payments the trust receives under the related guarantee. Unless otherwise specified in the applicable prospectus supplement or pricing supplement, we or PFG will not pay any additional amounts in respect of a funding agreement to compensate for any withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied on payments in respect of a funding agreement, by or on behalf of any governmental authority, and each holder of a note of the related series of notes will be deemed for all purposes to have received cash in an amount equal to the portion of such withholding or deduction that is attributable to such holder’s interest in the notes, as equitably determined by the trust. Under this circumstance, the trust will not actually pay, or cause to be paid, to such holder all of the amounts which would have been receivable by such holder in

4

the absence of such taxes, duties, levies, assessments or other governmental charges. Any such withholding or deduction will not give rise to an event of default or any independent right or obligation to redeem the affected funding agreement or the related series of notes.

The notes could be deemed to be contracts of insurance or participations in the related funding agreement which could subject holders of the notes to certain regulatory requirements and reduce the marketability and market value of the notes

          The laws and regulations of the 50 states of the United States and the District of Columbia (the “covered jurisdictions”) contain broad definitions of the activities that may constitute the business of insurance or the distribution of insurance products. Because the primary asset of the relevant trust will be a funding agreement issued by us, it is possible that insurance regulators in one or more jurisdictions could take the position that (i) the issuance of notes by the trust, or the performance of the trust’s obligations under the notes, including the payment or prepayment of amounts due under the notes, constitutes the indirect issuance of a funding agreement or other insurance product, and (ii) the distribution, transfer, sale, resale or assignment of the notes of a series constitutes the production or sale of a funding agreement or other insurance product. If such a position were to be taken in any covered jurisdiction, the underlying activity and the person conducting such activity (including the relevant trust, us, any underwriter, dealer or agent, an investor or any other person) could become subject to regulation under the insurance laws of one or more of the covered jurisdictions, which could, among other effects, require such persons to be subject to regulatory licensure or other qualification and levels of compliance that cannot practically be achieved. Failure to comply with such requirements could subject such persons to regulatory penalties. In addition, any such failure to comply or the threat of any such regulation could reduce liquidity with respect to the notes, prevent an investor from transferring notes and reduce the marketability and market value of the notes. Any financial penalty assessed against the relevant trust could affect its ability to pay amounts due under the notes. Therefore, any such regulation or threat of such regulation by any one or more covered jurisdictions could result in an investor being unable to liquidate its investment in the notes, or, upon any such liquidation, receiving a value significantly less than the initial investment in the notes.

          We believe that the notes will not be considered to be funding agreements, insurance or annuity policies or contracts or any other products regulated under the insurance laws of the covered jurisdictions and the trust will not be deemed to be engaging in the business of insurance in such jurisdictions solely as a result of such offer or sale of the notes.

          There are wide variations in the insurance laws of the covered jurisdictions, subtle nuances in their application and a general absence of any consistent pattern of interpretation or enforcement with respect to the subject regulatory issues. Insurance regulatory authorities have broad discretionary powers in administering and interpreting the insurance laws of their respective jurisdictions. Any such regulatory interpretation is not necessarily binding on any state or federal court. Any such insurance regulatory authorities or courts could take positions contrary to our beliefs described above. Accordingly, there can be no assurance that the purchase, resale, transfer or assignment of the notes will not subject the parties to such transaction to regulation or enforcement proceedings under the insurance laws of one or more covered jurisdictions, which could result in fines, penalties and other civil and criminal enforcement actions, as well as prohibiting the transfer or effectiveness of the notes without compliance with appropriate insurance licensing and other laws.

Any survivor’s option may be subject to certain limitations

          Under our programs targeted to retail investors, we have the discretionary right to limit the aggregate principal amount of:

• all funding agreements securing all outstanding series of notes issued under our programs targeted to retail investors as to which exercises of any put option by any trust shall be accepted by us in any calendar year to an amount equal to the greater of $2,000,000 or 2% of the aggregate principal amount of all funding agreements securing all outstanding series

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	of notes issued under our programs targeted to retail investors as of the end of the most recent calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement;
•	the funding agreements securing the notes as to which exercises of any put option by the applicable trust attributable to notes as to which the survivor’s option has been exercised by the authorized representative of any individual deceased beneficial owner to $250,000 in any calendar year or such other greater amount as determined in accordance with the applicable funding agreement and set forth in the applicable pricing supplement; and
•	the funding agreement securing a series of notes as to which exercises of any put option by the applicable trust shall be accepted in any calendar year to an amount as set forth in the applicable funding agreement and the applicable pricing supplement.

          In any such event, a trust shall similarly be required to limit the aggregate principal amount of notes as to which exercises of the survivor’s option shall be accepted by the trust. Accordingly, no assurance can be given that the exercise of the survivor’s option for a desired amount will be accepted as to any series of notes or in any single calendar year.

Redemption may adversely affect your return on the notes

          If the funding agreement related to your notes is redeemable at our option, including our right to redeem such funding agreement if we are, or a material probability exists that we will be, if specified in the circumstances set forth in the relevant pricing supplement, required to pay additional amounts in connection with any withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or governmental charges of whatever nature imposed or levied on payments in respect of such funding agreement or the notes such funding agreement secures, by or on behalf of any governmental authority, or upon the occurrence of a “tax event” (as defined under “Description of the Funding Agreements — Early Redemption for Tax Event”), the trust will redeem your notes if we choose to redeem the related funding agreement. Each trust may issue a series of notes which may be redeemed by the issuing trust when 20% or more of the original principal balance of such notes is outstanding, which are referred to as “callable” notes. Notes that may be redeemed at the option of the trust at a time when 20% or more of the original principal amount of such notes are outstanding will be designated in their title as “callable” in the applicable pricing supplement. Prevailing interest rates at the time the trust redeems your notes may be lower than the rate borne by the notes as of their original issue date. In such a case, you generally will not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your notes being redeemed. Our redemption right also may adversely impact your ability to sell your notes.

There may not be any trading market for your notes and many factors affect the trading and market value of your notes

          Upon issuance, a series of notes will not have an established trading market. We cannot assure you a trading market for your notes will ever develop or be maintained if developed. In addition to the trust’s, PFG’s and our creditworthiness, many factors affect the trading market for, and trading value of, your notes. These factors include:

• the complexity and volatility of the formula applicable to the interest rate borne by your notes;

• the method of calculating the principal, premium and interest in respect of your notes;

• the time remaining to the maturity of your notes;

• the outstanding amount of the applicable series of notes;

• any redemption or repayment features of your notes;

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• the amount of other debt securities linked to the formula applicable to your notes; and

• the level, direction and volatility of market interest rates generally.

          There may be a limited number of buyers if you decide to sell your notes. This may affect the price you receive for your notes or your ability to sell your notes at all. In addition, notes that are designed for specific investment objectives or strategies often experience a more limited trading market and more price volatility than those not so designed. You should not purchase notes unless you understand and know you can bear all of the investment risks associated with your notes.

If the trust issues notes denominated in a foreign currency, those notes are subject to exchange rate and exchange control risks

          If you invest in notes that are denominated and/or payable in a currency other than U.S. dollars, which we refer to in this prospectus and the accompanying prospectus supplement as “foreign currency notes,” you will be subject to significant risks not associated with an investment in a debt security denominated and payable in U.S. dollars. The risks include but are not limited to:

• the possibility of significant market changes in rates of exchange between U.S. dollars and the specified currency;

• the possibility of significant changes in rates of exchange between U.S. dollars and the specified currency resulting from official redenomination relating to the specified currency; and

• the possibility of the imposition or modification of foreign exchange controls by either the United States or foreign governments.

          The existence, magnitude and longevity of these risks generally depend on factors over which none of the trust, we or PFG has any control and which cannot be readily foreseen, such as:

• economic events;

• political and regulatory events; and

• financial events, such as the supply of, and demand for, the relevant currencies.

          Moreover, if payments on your foreign currency notes are determined by reference to a formula containing a multiplier or leverage factor, the effect of any change in the exchange rates between the applicable currencies will be magnified. In recent years, exchange rates between certain currencies have been highly volatile and volatility between these currencies or with other currencies may be expected in the future. Fluctuations between currencies in the past are not necessarily indicative, however, of fluctuations that may occur in the future. Depreciation of your payment currency would result in a decrease (1) in the U.S. dollar equivalent yield of your foreign currency notes, (2) in the U.S. dollar equivalent value of the principal and any premium payable at maturity or any earlier redemption of your foreign currency notes and (3) generally in the U.S. dollar equivalent market value of your foreign currency notes.

          Governments have imposed from time to time, and may in the future impose, exchange controls that could affect exchange rates as well as the availability of a specified currency other than U.S. dollars at the time of payment of principal, any premium or interest on a foreign currency note. Governments may use a variety of techniques, such as intervention by a country’s central bank, the imposition of regulatory controls or taxes or changes in interest rates to influence the exchange rates of their currencies. Governments may also alter the exchange rate or relative exchange characteristics by a devaluation or revaluation of a currency. There can be no assurance that exchange controls will not restrict or prohibit payments of principal, any premium or interest denominated in any such specified currency.

          Even if there are no actual exchange controls, it is possible that the specified currency would not be available to us when payments on a funding agreement are due because of circumstances beyond our

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control. In this event, we will make required payments in U.S. dollars on the basis described in the accompanying prospectus supplement or the applicable pricing supplement. You should consult your own financial and legal advisors as to the risks of an investment in notes denominated in a currency other than U.S. dollars.

          The information set forth in this prospectus and the accompanying prospectus supplement is directed to prospective purchasers of notes who are United States residents. The trust, we and PFG disclaim any responsibility to advise prospective purchasers who are residents of countries other than the United States regarding any matters that may affect the purchase or holding of, or receipt of payments of principal of, or premium or interest on, notes. Such persons should consult their advisors with regard to these matters.

Ratings of our programs and any rated series of notes may not reflect all risks of an investment in the notes and may change in accordance with our financial strength rating

          In the event that the programs generally or a specific series of notes is rated by a rating agency, the ratings of the programs or such notes will primarily reflect our financial strength and will change in accordance with our financial strength rating and with any change in the priority status of funding agreement obligations under Iowa law. Any rating is not a recommendation to purchase, sell or hold any particular security, including the notes. Such ratings do not comment as to the market price or suitability of the notes for a particular investor. In addition, there can be no assurance that a rating will be maintained for any given period of time or that a rating will not be lowered or withdrawn in its entirety. The ratings of our secured medium-term notes program and our program targeted to retail investors and any rated series of notes issued under these programs may not reflect the potential impact of all risks related to structure and other factors on any trading market for, or trading value of, your notes.

An increase in market interest rates could result in a decrease in the value of any notes bearing interest at a fixed rate

          If market interest rates increase above the interest rate of fixed rate notes, then fixed rate notes generally decline in value because debt instruments of the same face value priced at market interest rates will yield higher income. Consequently, if you purchase fixed rate notes and market interest rates increase above the fixed interest rate on the notes you have purchased, the market value of your notes may decline. Neither we nor PFG can give any assurance regarding the future level of market interest rates.

If you purchase discount notes, the amount payable to you upon early redemption, repayment or acceleration of these notes may be less than the principal amount (i.e., par) of the notes plus accrued but unpaid interest and premium, if any

          If you purchase discount notes, the amount payable to you upon early redemption, repayment or acceleration of these notes may be less than the principal amount thereof plus accrued and unpaid interest. The amount payable will be determined by the formula set forth in the applicable prospectus supplement or pricing supplement.

Risk Factor Relating to the Collateral

The funding agreements are our unsecured obligations, the payment obligations of which are fully and unconditionally guaranteed by PFG. If the funding agreements were not accorded Class 2 priority, they would be accorded the same priority in our insolvency as our other general unsecured obligations. In the event of our insolvency, PFG may not be able to satisfy its obligations under the guarantees

          The funding agreements are our unsecured obligations and, in the event of our impairment or insolvency, the Iowa Insurance Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving us pursuant to Iowa Code Sections 507C.4, 507C.12, 507C.13, 507C.14 and 507C.16. In conducting delinquency proceedings, claims are prioritized and an order of distribution is specified pursuant to Iowa Code Section 507C.42.

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There are nine classes within the priority scheme, with each successive class being fully junior to the preceding class. Sidley Austin LLP, counsel to us and PFG, has opined that, subject to the limitations, qualifications and assumptions set forth in its opinion letter, in a properly prepared and presented case, a court applying Iowa law would conclude that loss claims of principal and interest in respect of each funding agreement would be accorded Class 2 priority under Iowa Code Section 507C.42 and paid equally in priority with our other policyholders.

          Sidley Austin LLP has advised that its opinion is based on its interpretation of the relevant provisions of the Iowa Code as construed by relevant administrative and judicial authority. However, the Iowa Code and regulations, interpretations and decisions are subject to change, either prospectively or retroactively, and many of the issues addressed in counsel’s opinion depend upon a facts and circumstances analysis that has received little or no administrative or judicial consideration. Therefore, the Iowa Insurance Commissioner, in his/her capacity as liquidator, rehabilitator or otherwise, or the courts could disagree in whole or in part with our analysis.

          In the event that a funding agreement were not accorded Class 2 priority in our insolvency, the funding agreement would be accorded the lower priority associated with our general unsecured obligations, which would adversely affect the ability of the applicable trust to recover any claims of principal and interest in respect of such funding agreement. See “Description of the Funding Agreements — Priority.”

          Iowa law would apply to our insolvency or receivership proceedings. Investors should note, however, that the statutory liquidation priority accorded to funding agreements under Iowa law does not clearly apply to any additional amounts required to be paid (if specified in the applicable pricing supplement) as may be necessary in order that the net amounts receivable by a holder after any withholding or deduction under United States tax law shall equal the respective amounts which would have been receivable by such holder in the absence of such withholding or deduction. Accordingly, claims for such payments, if any, may not rank equally with either life insurance policy and annuity claims or funding agreement claims, and may rank with our unsecured debt obligations, which would adversely affect the ability of the applicable trust to recover any claims of additional amounts in respect of such funding agreement. See “Description of the Funding Agreements.”

          Each guarantee will be issued by PFG, our indirect parent company. We represent a substantial portion of the assets of PFG. In the event of our insolvency or receivership, PFG may incur limitations in receiving any distributions from us. In such an event, PFG may have limited resources to satisfy its obligations under the guarantees.

Risk Factors Relating to PFG

PFG’s efforts to reduce the impact of interest rate changes on its profitability and financial condition may not be effective

          PFG attempts to reduce the impact of changes in interest rates on the profitability and financial condition of its asset accumulation and life and health insurance operations. PFG accomplishes this reduction primarily by managing the duration of its assets relative to the duration of its liabilities. During a period of rising interest rates, policy surrenders, withdrawals and requests for policy loans may increase as customers seek to achieve higher returns. Despite PFG’s efforts to reduce the impact of rising interest rates, it may be required to sell assets to raise the cash necessary to respond to such surrenders, withdrawals and loans, thereby realizing capital losses on the assets sold. An increase in policy surrenders and withdrawals may also require PFG to accelerate amortization of policy acquisition costs relating to these contracts, which would further reduce its net income.

          During periods of declining interest rates, borrowers may prepay or redeem mortgages and bonds that PFG owns, which would force PFG to reinvest the proceeds at lower interest rates. For some of PFG’s products, such as guaranteed investment contracts and funding agreements, PFG is unable to lower the rate it credits to customers in response to the lower return it will earn on its investments. In addition, it may be more difficult for PFG to maintain its desired spread between the investment income it earns

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and the interest it credits to its customers during periods of declining interest rates thereby reducing PFG’s profitability.

A downgrade in any of our ratings may, among other things, increase policy surrenders and withdrawals, reduce new sales and terminate relationships with distributors, any of which could adversely affect PFG’s profitability and financial condition

          Ratings are important factors in establishing the competitive position of insurance companies. A downgrade, or the potential for such a downgrade, of any of our ratings could, among other things:

• materially increase the number of policy or contract surrenders for all or a portion of their net cash values and withdrawals by policyholders of cash values from their policies;

• result in the termination of relationships with broker-dealers, banks, agents, wholesalers and other distributors of PFG’s products and services;

• reduce new sales, particularly with respect to general account guaranteed investment contracts and funding agreements purchased by pension plans and other institutions; and

• cause some of PFG’s existing liabilities to be subject to acceleration, additional collateral support, changes in terms or creation of additional financial obligations.

          Any of these consequences could adversely affect PFG’s profitability and financial condition.

PFG’s investment portfolio is subject to several risks that may diminish the value of its invested assets and adversely affect its sales, profitability and the investment returns credited to its customers

          PFG’s investment portfolio is subject to several risks, including, among other things:

• An increase in defaults or delinquency on PFG’s investment portfolio, including its commercial mortgage loan portfolio.

• PFG may have greater difficulty selling its privately placed fixed maturity securities, commercial mortgage loans and real estate investments at attractive prices, in a timely manner, or both, because they are less liquid than its publicly traded fixed maturity securities.

• Derivative instruments may not be honored by counterparties resulting in ineffective hedging of PFG’s risks.

• Environmental liability exposure may result from PFG’s commercial mortgage loan portfolio and real estate investments.

• Regional concentration of PFG’s commercial mortgage loan portfolio may subject PFG to economic downturns or losses attributable to natural disasters in these regions.

          Any of these consequences may diminish the value of PFG’s invested assets and adversely affect its sales, profitability or the investment returns credited to its customers.

Changes in regulation in the United States may reduce PFG’s profitability

          PFG’s insurance business is subject to comprehensive state regulation and supervision throughout the United States. The primary purpose of state regulation of the insurance business is to protect policyholders, and not necessarily to protect other constituencies such as creditors or investors. State insurance regulators and the National Association of Insurance Commissioners continually reexamine existing laws and regulations and may impose changes in the future. Changes in federal legislation and administrative policies in areas such as employee benefit plan regulation, financial services regulation and federal taxation could result in increased exposure on outstanding products or reduced sales of new products and therefore, could reduce PFG’s profitability.

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FORWARD LOOKING INFORMATION

          This prospectus, any prospectus supplement, any pricing supplement and the information incorporated by reference in such documents may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are intended to enhance the reader’s ability to assess the future financial performance of PFG, as our indirect parent company and the guarantor of our payment obligations under the funding agreement that will secure the related series of notes. Forward-looking statements include, but are not limited to, statements that represent beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “would,” “should” and similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on PFG. Such forward-looking statements are not guarantees of future performance. The safe harbors contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, do not apply to us or the trusts.

          Actual results may differ materially from those included in the forward-looking statements as a result of risks and uncertainties including, but not limited to, the following: (1) a decline or increased volatility in the securities markets could result in investors withdrawing from the markets or decreasing their rates of investment, either of which could reduce PFG’s net income, revenues and assets under management; (2) PFG’s investment portfolio is subject to several risks which may diminish the value of invested assets and affect its sales, profitability and the investment returns credited to its customers; (3) competition from companies that may have greater financial resources, broader arrays of products, higher ratings and stronger financial performance may impair PFG’s ability to retain existing customers, attract new customers and maintain its profitability; (4) a downgrade in our financial strength ratings may increase policy surrenders and withdrawals, reduce new sales and terminate relationships with distributors and cause some of PFG’s existing liabilities to be subject to acceleration, additional collateral support, changes in terms or creation of additional financial obligations; (5) PFG’s efforts to reduce the impact of interest rate changes on its profitability and surplus may not be effective; (6) if PFG is unable to attract and retain sales representatives and develop new distribution sources, sales of its products and services may be reduced; (7) PFG’s international businesses face political, legal, operational and other risks that could reduce its profitability in those businesses; (8) PFG reserves established for future policy benefits and claims may prove inadequate, requiring it to increase liabilities; (9) PFG’s ability to pay stockholder dividends and meet its obligations may be constrained by the limitations on dividends Iowa insurance laws impose on us; (10) PFG may need to fund deficiencies in our closed block (“Closed Block”) assets which benefit only the holders of Closed Block policies; (11) changes in laws, regulations, accounting standards or interpretations thereof may reduce the profitability of PFG; (12) litigation and regulatory investigations may harm PFG’s financial strength and reduce its profitability; (13) fluctuations in foreign currency exchange rates could reduce PFG’s profitability; (14) applicable laws and PFG’s stockholder rights plan, certificate of incorporation and by-laws may discourage takeovers and business combinations that PFG’s stockholders might consider in their best interests; and (15) a downgrade in PFG’s debt ratings may adversely affect PFG’s ability to secure funds and cause some of its existing liabilities to be subject to acceleration, additional collateral support, changes in terms or creation of additional financial obligations.

          You should not place undue reliance on these forward-looking statements, which speak only as of their dates. Except as required by the federal securities laws, we, PFG, each trust, and our or their respective agents and dealers shall not undertake any obligation to update or review forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time.

WHERE YOU CAN FIND MORE INFORMATION

          This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. Parts of the registration statement are omitted from this

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prospectus in accordance with the rules and regulations of the SEC. The registration statement, including the attached exhibits, contains additional relevant information about us, PFG and the trusts. PFG is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and, in compliance with such laws, PFG files annual, quarterly and current reports, proxy statements and other information with the SEC. You can read and copy any reports or other information PFG files at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. You can also request copies of PFG’s documents upon payment of a duplicating fee, by writing the SEC’s public reference room. You can obtain information regarding the public reference room by calling the SEC at 1-800-SEC-0330. PFG filings are available to the public from commercial document retrieval services and over the internet at http://www.sec.gov. (This uniform resource locator (URL) is an inactive textual reference only and is not intended to incorporate the SEC web site into this prospectus.)

          As depositor, we will file periodic reports, with respect to the trusts formed under the programs, on Form 8-K or Form 10-D, as applicable, and we will file annual reports with respect to the trusts on Form 10-K. You may access these filings on the SEC’s web site (which is at http://www.sec.gov) by using our central index key, which is 0001126328. The URL is an inactive textual reference only and is not intended to incorporate the SEC web site into this prospectus. The depositor does not make each Form 8-K, Form 10-D and Form 10-K filed with the SEC in connection the trusts available on its web site because including such reports would require the depositor to incur additional expense without providing additional benefit to investors given that those reports will be available on the SEC’s web site.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

          The SEC allows us and PFG to “incorporate by reference” information that PFG files with the SEC into this prospectus and any accompanying prospectus supplement and pricing supplement, which means that incorporated documents are considered part of this prospectus and any accompanying prospectus supplement and pricing supplement. We and PFG can disclose important information to you by referring you to those documents. Information that PFG files with the SEC will automatically update and supersede the information in this prospectus and any accompanying prospectus supplement and pricing supplement.

          This prospectus and any accompanying prospectus supplement and pricing supplement incorporate by reference the following documents:

• PFG’s Annual Report on Form 10-K for the year ended December 31, 2004.

• PFG’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2005.

• PFG’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2005.

• PFG’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005

• PFG’s Current Report on Form 8-K filed on March 7, 2005.

• PFG’s Current Report on Form 8-K filed on May 23, 2005.

• PFG’s Current Report on Form 8-K filed on June 17, 2005.

• PFG’s Current Report on Form 8-K filed on September 26, 2005.

• PFG’s Current Report on Form 8-K filed on December 2, 2005.

          This prospectus and any accompanying prospectus supplement and pricing supplement also incorporate by reference all documents that we, on behalf of ourself or the trusts, as depositor, or PFG file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of this prospectus and prior to the termination of the offering of the notes. These documents contain important information about the trusts and PFG and their finances, respectively.

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          You may also request a copy of any documents incorporated by reference in this prospectus and any accompanying prospectus supplement and pricing supplement (including any exhibits that are specifically incorporated by reference in them), at no cost, by writing or telephoning the following addresses or telephone numbers:

Principal Financial Group, Inc.
711 High Street
Des Moines, Iowa 50392-0001
Attention: Amy Wiseman
Telephone: (800) 986-3343 Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0001
Attention: Amy Wiseman
Telephone: (800) 986-3343

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USE OF PROCEEDS

          Each trust will use the net proceeds from the issuance of its series of notes to the public and the trust beneficial interest to the trust beneficial owner to purchase a funding agreement issued to, and deposited into, that trust by us. We intend to use the net proceeds from the sale to the trust of the funding agreement to purchase investment assets. We expect such assets, and our other general account assets, will generate investment income in excess of amounts payable under the funding agreement.

RATIO OF EARNINGS TO FIXED CHARGES

          The following table sets forth, for the years and periods indicated, PFG’s ratios of:

• earnings to fixed charges before interest credited on investment products; and

• earnings to fixed charges.

          PFG calculates the ratio of “earnings to fixed charges before interest credited on investment products” by dividing the sum of income from continuing operations before income taxes (BT), interest expense (I), interest factor of rental expense (IF) less undistributed income from equity investees (E) by the sum of interest expense (I), interest factor of rental expense (IF) and dividends on majority-owned subsidiary redeemable preferred securities (non-intercompany) (D). The formula for this ratio is: (BT+I+IF-E)/(I+IF+D).

          PFG calculates the ratio of “earnings to fixed charges” by dividing the sum of income from continuing operations before income taxes (BT), interest expense (I), interest factor of rental expense (IF) less undistributed income from equity investees (E) and the addition of interest credited on investment products (IC) by interest expense (I), interest factor of rental expense (IF), dividends on majority-owned subsidiary redeemable preferred securities (non-intercompany) (D) and interest credited on investment products (IC). The formula for this calculation is: (BT+I+IF-E+IC)/(I+IF+D+IC). “Interest credited on investment products” includes interest paid on guaranteed investment contracts, funding agreements, medium-term notes and other investment-only pension products. Similar to debt, these products have a total fixed return and a fixed maturity date.

	For the Year Ended December 31,
	2005*		2004		2003		2002		2001		2000
Ratio of earnings to fixed charges before interest credited on investment products		13.7		9.5		7.3		4.2		3.2		6.5
Ratio of earnings to fixed charges		2.2		2.0		1.9		1.4		1.3		1.8

*  Through the fiscal quarter ended September 30, 2005.

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PRINCIPAL LIFE INSURANCE COMPANY AND PRINCIPAL FINANCIAL GROUP, INC.

          PFG is a leading provider of retirement savings, investment and insurance products and services and has $188.4 billion in assets under management and approximately 15.0 million customers as of September 30, 2005. PFG focuses on providing retirement products and services to businesses and their employees.

          PFG provides financial products and services through the following three segments: (1) U.S. Asset Management and Accumulation, which provides retirement and related financial products and services primarily to businesses, their employees and other individuals and provides asset management services to PFG’s asset accumulation business, the life and health insurance operations, the Corporate and Other segment and third-party clients; (2) International Asset Management and Accumulation, which provides retirement products and services, annuities, long-term mutual funds and life insurance through subsidiaries and joint ventures in various countries; and (3) Life and Health Insurance, which provides individual life insurance, group health insurance, as well as, specialty benefits, including group dental and vision insurance, individual and group disability insurance and group life insurance throughout the United States. PFG markets these products and services through career agents, brokers, financial institutions, employee-benefit consultants, financial planners, direct marketing to existing customers and a variety of representatives. PFG also has a Corporate and Other segment, which manages the assets representing capital that has not been allocated to any other segment.

          PFG life insurance in force, net of reinsurance, was $147.8 billion as of September 30, 2005. As of September 30, 2005, PFG total invested assets were $57.0 billion; its separate account assets were $56.8 billion; and its stockholders’ equity was $7.8 billion. PFG net income for the nine months ended September 30, 2005, was $663.8 million.

          We are an indirect, wholly-owned subsidiary of PFG and are the 7th largest United States life insurance company based on December 31, 2004 statutory total assets (based on individual company rankings) according to data provided by Insurance Research Group, Inc.

          We were organized as an individual life insurer in 1879, and formed a mutual insurance holding company in 1998. On July 1, 1998, Principal Mutual Life Insurance Company converted to a mutual holding company structure, changed its name to Principal Life Insurance Company and created Principal Mutual Holding Company, a mutual insurance holding company, and Principal Financial Services, Inc. (“PFS”), an intermediate holding company.

          Consistent with Iowa law in a process sometimes referred to as a “demutualization”, Principal Mutual Holding Company, under the terms of its plan of conversion, converted from a mutual insurance holding company to a stock company subsidiary of PFG, a Delaware business corporation, effective October 26, 2001. All membership interests in Principal Mutual Holding Company were extinguished on that date and eligible policyholders received compensation in the form of common stock, cash or policy credits.

          After giving effect to the reorganization resulting from the demutualization, we are now a direct wholly-owned subsidiary of PFS, which, in turn, is a direct wholly-owned subsidiary of PFG.

          In connection with the issuance of a series of notes by an issuing trust, we will issue a funding agreement to such issuing trust with pricing terms substantially similar to that trust’s series of notes, will procure the related guarantee from PFG, will make payments under the funding agreement, as required, and will file the reports for the issuing trust, as required by the Securities Exchange Act of 1934, as amended. We have been engaged in the securitization of funding agreements as sponsor or depositor in connection with an existing $4.0 billion secured notes program which is substantially identical to this program and was declared effective by the SEC in March 2004. We have also been engaged in the securitization of funding agreements in connection with private placement facilities similar in structure to this program since 1998.

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          We are authorized to issue up to $4.0 billion of funding agreements under a program established in 1998 to support the prospective issuance of medium-term notes by an unaffiliated entity in non-U.S. markets.

          In addition, we are authorized to issue up to $7.0 billion of funding agreements under a program established in 2001 to support the prospective private issuance of medium-term notes by an unaffiliated entity in both domestic and international markets. We do not anticipate any new issuance activity under that program, in light of our other $4.0 billion secured notes program declared effective by the SEC in March 2004 and this program once declared effective by the SEC.

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DESCRIPTION OF THE TRUSTS

          The following is a general description of the trusts and the material provisions of the standard trust terms which will be incorporated into each trust agreement and other related documents governing the trusts. The trust agreement is included in the form of omnibus instrument. This summary is not intended to be a full restatement of all of the terms of the standard trust terms or the trust agreement and is subject to the detailed provisions of such documents. Copies of the standard trust terms and the form of omnibus instrument (including the form of trust agreement) have been filed as exhibits to the registration statement (which includes this prospectus) and are incorporated into this prospectus by reference. Executed copies of the applicable trust agreement may be inspected during normal business hours at our principal executive offices set forth on the cover page of this prospectus.

General

          A separate trust will be created for each series of notes. Each trust will be a separate and distinct special purpose common law trust formed in a jurisdiction located in the United States of America specified in the applicable pricing supplement. Each trust will be organized pursuant to, and governed by, a trust agreement, dated as of the date of the applicable pricing supplement, between the trustee and the trust beneficial owner. The trust agreement will adopt and incorporate the standard trust terms in its entirety. With respect to a particular trust, we refer to the applicable trust agreement and the standard trust terms as the “trust agreement.” The assets and liabilities of each trust will be separate and distinct from the assets and liabilities of every other trust, us and PFG.

          In connection with the issuance of a series of notes by a trust:

• a separate and distinct trust will be formed pursuant to a trust agreement, which adopts and incorporates the standard trust terms in its entirety;

• the trust will acquire a funding agreement issued by us, the payment obligations of which will be fully and unconditionally guaranteed by a guarantee issued by PFG to the trust; and

• the trust will collaterally assign and grant a security interest in the related funding agreement and collaterally assign and grant a security interest in the related guarantee in favor of the indenture trustee for the benefit of the holders of notes of the applicable series.

          Each trust’s principal executive offices will be located at c/o U.S. Bank Trust National Association, 100 Wall Street, 16th Floor, New York, New York 10005 and its telephone number is (212) 361-6184.

Nature of Each Trust

          The trust agreement provides that each trust will be a separate and distinct special purpose common law trust formed in a jurisdiction located in the United States of America specified in the applicable pricing supplement.

          The applicable series of notes and the liabilities, obligations and expenses related to such series of notes will constitute debt, liabilities, obligations and expenses incurred, contracted for or otherwise of the applicable trust.

          As separate and distinct special purpose trusts, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular trust will be enforceable only against the assets of such trust and not against the assets of any other trust, us or PFG. In addition, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to us, PFG or any trust will be enforceable against the assets of any other trust. See “Description of the Notes — Nonrecourse Enforcement.”

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Application of Money Received by the Trustee on Behalf of a Trust

          Except for payments made in connection with the liquidation of a trust, all monies and other property received by the trustee on behalf of a trust shall be distributed as follows:

          first, to the indenture trustee for the payment of all amounts then due and unpaid upon the applicable notes, if any, in accordance with the applicable indenture; and

          second, to the trust beneficial owner for the payment of all amounts that would be payable to the trust beneficial owner if the trust beneficial owner held a note with an original principal amount of $15 (multiplied by the issue price of the related notes in the case of discount notes); any remaining monies and other property shall be distributed ratably in proportion to their original principal amounts to the holders of notes last noted in the register as the holders of the notes and trust beneficial owner (as if the trust beneficial owner held a note with an original principal amount of $15 (multiplied by the issue price of the related notes in the case of discount notes)).

          Upon the liquidation of a trust, the remaining collateral and any other assets held in the trust shall be liquidated, and the trust shall be wound-up by the trustee in accordance with the trust agreement. In such event, (i) the trust shall first pay all amounts due and unpaid on the notes, if any, in accordance with the applicable indenture, (ii) the trust shall then pay any other claims, including expenses relating to such liquidation to the extent not paid, or reasonably provided for, pursuant to the applicable expense and indemnity agreement, and (iii) the trust shall then pay to the trust beneficial owner all amounts that would be payable under the indenture to the trust beneficial owner if the trust beneficial owner held a note with an original principal amount of $15 (multiplied by the issue price of the related notes in the case of discount notes). Any remaining monies and other property shall be paid ratably in proportion to their original principal amounts to the holders last noted in the register as the holders of the notes and the trust beneficial owner (as if the trust beneficial owner held a note with an original principal amount of $15 (multiplied by the issue price of the related notes in the case of discount notes) and as if each such holder continued to hold its notes after all amounts due on such notes under the indenture have been paid).

Bankruptcy Concerns

          In the trust agreement, the trustee and the trust beneficial owner agree that neither party will institute against the trust any bankruptcy proceeding. Also, in the indenture, the indenture trustee agrees that it will not institute against the trust any bankruptcy proceeding for payments due the indenture trustee. However, during the occurrence and continuance of an event of default, the indenture trustee (on behalf of the holders of notes) or the holders of notes may accelerate payments of principal and interest under the notes as well as institute bankruptcy proceedings against the trust. If a bankruptcy proceeding is commenced against the trust, we do not anticipate that the assets of the trust will be consolidated with the assets of any other party. As the primary asset of each trust is a funding agreement issued by us, upon a proceeding for our liquidation, rehabilitation, conservation or supervision or similar event, an event of default under the notes issued by each trust will occur and the indenture trustee on behalf of the noteholders will have a claim against us in such proceeding. We have been advised by counsel that such claim will be a policyholder claim against our assets. See “Description of The Funding Agreements — Priority”. No other creditors or policyholders of ours should have a claim against the funding agreement held by each trust or any claims thereunder. Although PFG issues a guarantee to each trust, a proceeding for PFG’s liquidation, rehabilitation, conservation or supervision or similar event may not result in an event of default under the notes if we continue to make payments received under the related funding agreement. In such event, if we do not make the required payments under any funding agreement, an event of default under the related notes will occur and the indenture trustee on behalf of the noteholders will be able to make a claim against us, and against PFG in a bankruptcy proceeding of PFG.

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The Trustee

          Pursuant to each trust agreement, the trustee is acting as the sole trustee of the applicable trust. The trustee will conduct the activities of each trust. The trustee will only perform those duties set forth in each trust agreement. Among other items, the trustee, on behalf of the trust, will:

• enter into the applicable documents relating to the related series of notes;

• collaterally assign and grant a security interest in the funding agreement and guarantee held in the trust to the indenture trustee for the benefit of the holders of the related series of notes;

• file any required tax returns or tax information; and

• maintain the books and records of the trust.

          The trustee will not be liable under the trust agreement under any circumstances or for any action or failure to act, except for (i) its own willful misconduct, bad faith or negligence or (ii) the inaccuracy of any representation or warranty contained in the trust agreement made by the trustee.

          The trustee may resign by giving at least 60 days written notice to the trust beneficial owner and the indenture trustee. If at any time the trustee ceases to be eligible to serve as the trustee under a trust agreement, or the trustee is unable to serve as trustee, or is bankrupt or insolvent, then the trust beneficial owner and the indenture trustee may remove the trustee. No resignation or removal of the trustee and no appointment of a successor trustee shall become effective until the acceptance of appointment by the successor trustee.

          U.S. Bank Trust National Association (“U.S. Bank Trust”) will act as trustee under the applicable trust agreements. U.S. Bank Trust is a national banking association and a wholly-owned subsidiary of U.S. Bancorp, which is currently ranked as the sixth largest bank holding company in the United States with total assets exceeding $204 billion. U.S. Bancorp serves approximately 13.1 million customers, operates 2,383 branch offices in 24 states and has over 51,000 employees. A network of specialized U.S. Bancorp offices across the nation, inside and outside its 24-state footprint, provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses, governments and institutions.

          U.S. Bank Trust provides trustee services from at least 5 U.S. cities. The indenture will be administered from U.S. Bank Trust’s office located at 100 Wall Street, New York, New York 10005.

          U.S. Bank Trust or its predecessors have provided fiduciary services since 1924. As of December 30, 2004, U.S. Bank Trust was acting as trustee with respect to over 60,000 issuances of securities. U.S. Bank Trust has acted as trustee of insurance policy-backed securities since 2003. As of September 30, 2005, U.S. Bank Trust was acting as trustee on 2 issuances of insurance policy-backed securitizations, involving more than 200 series of such securities with an outstanding aggregate principal balance of approximately $3,500,000,000.

The Trust Beneficial Owner

          GSS Holdings II, Inc. as the trust beneficial owner will be the sole beneficial owner of each trust. The beneficial interest in each trust:

• will be purchased by the trust beneficial owner for $15 (or in the case of a trust that issues discount notes, such other amount as corresponds to the discount on such notes);

• will be issued in book-entry form only;

• will entitle the trust beneficial owner to receive payment in respect thereof on the same terms as the payments to be made to holders of the related series of notes; and

• will be subordinated to the related series of notes and will not be secured by the collateral.

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          The trust beneficial owner will receive periodic distributions on its beneficial interest at the same rate and on the same day that holders of notes of the related series of notes receive interest payments. On the maturity date of the trust beneficial owner’s beneficial interest and the related series of notes, the trust will redeem the principal amount of the related series of notes and the principal amount of the trust beneficial interest.

No Affiliation

          None of us, PFG or any of our or its officers, directors, subsidiaries or affiliates owns any beneficial interest in any trust nor has any of these persons or entities entered into any agreement with any trust other than in furtherance of the issuance of notes from time to time as contemplated by this prospectus.

          None of us, PFG or any of our or its officers, directors, subsidiaries or affiliates is affiliated with the trustee, the trust beneficial owner or the indenture trustee relating to the notes.

Recordkeeping

          Each trust will:

• maintain separate and distinct records; and

• hold and account for the assets associated with each such trust separately from the assets of any other trust, us or PFG.

          On behalf of the trusts, as depositor, we will be subject to certain reporting requirements under the Securities Exchange Act of 1934, as amended.

Expenses

          We have entered into a separate expense and indemnity agreement with each of the indenture trustee, the custodian (see “Description of the Notes — Collateral”), the trust beneficial owner and the trustee (on behalf of itself and each trust to be formed in connection with the issuance of a series of notes). We will enter into an expense and indemnity agreement with additional service providers appointed from time to time. Under each expense and indemnity agreement, we will pay certain costs and expenses relating to the offering, sale, issuance and administration of any series of notes and certain costs, expenses and taxes incurred by a trust and will indemnify the indenture trustee, the custodian, the trust beneficial owner, the trustee, each trust and additional service providers with respect to certain matters. Forms of each expense and indemnity agreement have been filed as exhibits to the registration statement (which includes this prospectus) and are incorporated into this prospectus by reference. Executed copies of each expense and indemnity agreement may be inspected during normal business hours at our principal executive offices set forth on the cover page of this prospectus. See “Fees and Expenses” below.

Amendment

          The trust agreement may be amended by the trustee and the trust beneficial owner:

• in any way that is not inconsistent with the intent of the trust agreement and that does not adversely affect, in any material respect, the terms of any notes;

• with the prior consent of the holders of a majority of the outstanding principal amount of affected notes, in any way that would adversely affect, in any material respect, the terms of any such notes; and

• with the prior consent of each affected holder, to (1) change the amount or timing of any payment of any trust beneficial interest or series of notes or (2) impair the right of the trust beneficial owner or any noteholder to institute suit for the enforcement of any right for principal and interest or other distribution.

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          Subject to the second and third bullet points above, the trustee and the trust beneficial owner may amend the trust agreement, without the consent of any noteholder, at any time to the extent necessary to ensure that the applicable trust will be disregarded or treated as a grantor trust (assuming that any such trust were not disregarded) for United States federal income tax purposes or to ensure that the applicable trust will not be required to register as an investment company under the Investment Company Act of 1940, as amended. We shall advise each rating agency that is then rating the program or any series of notes of any such amendment.

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DESCRIPTION OF THE NOTES

          The following is a general description of the terms of the notes. We will provide specific terms of a series of notes in the applicable prospectus supplement and a pricing supplement to this prospectus. For purposes of this prospectus, “business day” shall have the meaning set forth in the applicable prospectus supplement or the applicable pricing supplement.

          Each series of notes will be issued pursuant to an indenture, between the applicable trust and Citibank, N.A., as indenture trustee (the “indenture trustee”), which will adopt and incorporate the standard indenture terms in its entirety. The indenture is included in the form of omnibus instrument. Copies of the form of standard indenture terms and the form of omnibus instrument (including the form of indenture) are filed as exhibits to the registration statement (of which this prospectus is a part) and is incorporated into this prospectus by reference. With respect to a particular trust, we refer to the applicable indenture and the standard indenture terms as the “indenture.” The following summary highlights some of the provisions of the indenture, but it may not contain all of the information that is important to you. We do not restate the indenture in its entirety and we urge you to read the indenture, which is filed as an exhibit to the registration statement of which this prospectus forms a part.

General

          Except as described in the applicable prospectus supplement or the applicable pricing supplement, the indenture does not limit the amount of notes that a trust may issue, and a trust may only issue notes in one series. A series of notes will be the trust’s unconditional, direct, non-recourse, secured and unsubordinated obligations. Each series of notes will be secured by a funding agreement relating to that series of notes and the related guarantee issued by PFG.

          The notes may be offered to institutional or retail investors. Notes offered to institutional investors will be offered under the prospectus supplement to this prospectus relating to our secured medium-term notes program. These notes:

• may bear interest at a fixed rate or floating rate or bear no interest at all;

• may be amortizing notes, meaning that a portion or all of the principal amount is payable prior to the stated maturity in accordance with a schedule or by application of a formula;

• may be discount notes that do not bear interest currently or bear interest at a rate that is below market rates at the time of issuance;

• may have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of the notes;

• will not contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes;

• may be denominated in U.S. dollars or one or more foreign currencies; and

• may provide for the payment of additional amounts relating to any required withholding if specified in the applicable pricing supplement.

          Each fixed rate note offered to institutional investors will bear interest at the rate specified in the applicable pricing supplement. Each floating rate note offered to institutional investors will bear interest at a rate determined by reference to one or more of the following interest rate bases, which will be specified in the applicable pricing supplement:

• the CD Rate;

• the CMT Rate;

• the Commercial Paper Rate;

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• the Constant Maturity Swap Rate;

• the Eleventh District Cost of Funds Rate;

• the Federal Funds Open Rate;

• the Federal Funds Rate;

• LIBOR;

• EURIBOR;

• the Prime Rate; or

• the Treasury Rate.

          These interest rate bases are further described in the prospectus supplement to this prospectus relating to our secured medium-term notes program.

          Notes offered to retail investors will be offered under the prospectus supplement to this prospectus relating to the Principal^® Life CoreNotes^® program or the prospectus supplement to this prospectus relating to the secured medium-term notes retail program. These notes:

• may bear interest at a fixed rate or floating rate as specified in the applicable prospectus supplement (see “Description of the Notes” in the applicable prospectus supplement) or bear no interest at all;

• will not be amortizing notes;

• may be discount notes that do not bear interest currently or bear interest at a rate that is below market rates at the time of issuance;

• may have redemption and/or repayment provisions, if applicable, whether mandatory or at the option of the trust or the holders of the notes;

• may contain a survivor’s option, permitting optional repayment of notes of a series of notes, subject to certain limitations, prior to maturity, if requested, following the death of the beneficial owner of notes of that series of notes;

• will be denominated in U.S. dollars only; and

• will not provide for the payment of additional amounts relating to any required withholding under any circumstances.

          Each fixed rate note offered to retail investors will bear interest at the rate specified in the applicable pricing supplement. Each floating rate note offered to retail investors will bear interest at a rate determined by reference to one or more of the following interest rate bases, which will be specified in the applicable pricing supplement:

• the CD Rate;

• the CMT Rate;

• the Commercial Paper Rate;

• the Constant Maturity Swap Rate;

• the Federal Funds Open Rate;

• the Federal Funds Rate;

• LIBOR;

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• the Prime Rate; or

• the Treasury Rate.

          These interest rate bases are further described in the prospectus supplement to this prospectus relating to the Principal^® Life CoreNotes^® program or the prospectus supplement to this prospectus relating to the secured medium-term notes retail program.

          At the time of sale of a series of notes, at least one nationally recognized statistical rating organization will have rated the notes in one of its generic rating categories which signifies investment grade.

          Material United States federal income tax considerations relating to the notes will be described in the applicable prospectus supplement.

          Each indenture and the notes will be governed by the internal laws of the State of New York.

Collateral

          Under the indenture, the funding agreement issued to and deposited into a trust by us in exchange for the proceeds received by the trust from the offering of its series of notes will be collaterally assigned by the trust, and the trust will grant a security interest in the funding agreement, to the indenture trustee for the benefit of the holders of the related series of notes. The trust will also collaterally assign and grant a security interest in the guarantee issued by PFG to the trust in favor of the indenture trustee for the benefit of the holders of the related series of notes. Accordingly, each series of notes will be secured by a perfected security interest in the “collateral,” consisting of:

• the relevant funding agreement held in the relevant trust;

• the guarantee issued by PFG to the trust, which fully and unconditionally guarantees our payment obligations under the relevant funding agreement;

• all proceeds of the relevant funding agreement and the relevant guarantee and all amounts and instruments on deposit from time to time in the related collection account;

• all books and records pertaining to the relevant funding agreement and the related guarantee; and

• all of the trust’s rights pertaining to the foregoing.

          Under the custodial agreement entered into among the indenture trustee, Bankers Trust Company, N.A. (the “custodian”) and the trustee (on behalf of each trust to be formed in connection with the issuance of a series of notes), upon the collateral assignment of and grant of security interest in the funding agreement and the guarantee related to a series of notes of a trust, the custodian will hold the funding agreement and the guarantee, on behalf of the indenture trustee in the State of Iowa.

Covenants

          Under the indenture, the trust will make certain covenants to the indenture trustee for the benefit of noteholders. In addition, the indenture requires the trust to hold funds in trust for payments under the notes, pay to the indenture trustee, acting in its capacity as servicer, principal, interest and premium (if any) due on the notes and take all necessary action to protect the collateral. Further, the trust is obligated to deliver to the indenture trustee an annual statement certifying its compliance with the conditions, performance of obligations and adherence to covenants under the indenture. In addition to its other covenants, the trust has agreed that it will not, so long as any notes of its series are outstanding, take any of the following actions, except as otherwise permitted by the indenture:

• sell, transfer, exchange, assign, lease, convey or otherwise dispose of any assets held by the trust (owned as of the date of the trust agreement or thereafter acquired), including, without limitation, any portion of the relevant collateral;

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• incur or otherwise become liable, directly or indirectly, for any debt obligation except for the notes of its series and the transactions contemplated thereby;

• engage in any business or activity other than in connection with, or relating to, (1) the performance of the trust agreement and the execution, delivery and performance of any documents (other than the trust agreement), including the indenture, the funding agreement, the guarantee, the license agreement to be entered into between the trust and PFS (the “license agreement”), the distribution agreement to be entered into among the trust, us, PFG and our agents and dealers (the “distribution agreement”), the expense and indemnity agreements and any other documents or instruments entered into by, or with respect to, the trust (all documents and instruments including the trust agreement are referred to herein collectively as the “Program Documents”), relating to any notes of its series issued under the indenture and the transactions contemplated thereby, and (2) the issuance of notes of its series pursuant to the indenture;

• (1) permit the validity or effectiveness of the indenture or any grant of security interest in or assignment for collateral purposes of the applicable collateral to be impaired, or permit a lien created under the indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any person or entity to be released from any covenants or obligations under any document or agreement assigned to the indenture trustee, except as may be expressly permitted thereby, (2) create, incur, assume or permit any lien or other encumbrance (other than the lien created under the indenture) on any of its properties or assets owned or hereafter acquired, or any interest therein or the proceeds thereof or (3) permit a lien created under the indenture not to constitute a valid first priority perfected security interest in the applicable collateral;

• amend, modify or fail to comply with any material provision of the trust agreement except for any amendment or modification of the trust agreement expressly permitted thereunder;

• own any subsidiary or lend or advance any funds to, or make any investment in, any person, except for an investment in a funding agreement or the investment of any of its funds held by the indenture trustee, the paying agent, or the trustee, as provided in the indenture or the trust agreement;

• directly or indirectly declare or make any distribution or other payment to, or redeem or otherwise acquire or retire for value the interest of, the trust beneficial owner if any amount under the related series of notes is due and unpaid, or directly or indirectly redeem or otherwise acquire or retire for value any debt other than such series of notes;

• cause or permit the sale or other transfer of all or a portion of any trust beneficial interest, or cause or permit the creation, incurrence, assumption or existence of any lien on all or a portion of any trust beneficial interest;

• exercise any rights with respect to the relevant collateral except at the written direction of, or with the prior written approval of, the indenture trustee;

• become an “investment company” or come under the “control” of an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended;

• enter into any transaction of merger or consolidation or liquidate or dissolve itself (or suffer any liquidation or dissolution), or acquire by purchase or otherwise all or substantially all the business or assets of, or any stock or other evidence of beneficial ownership of, any other person;

• take any action that would cause the trust not to be disregarded or treated as a grantor trust (assuming such trust were not disregarded) for United States federal income tax purposes;

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• have any subsidiaries, employees or agents other than the trustee and other persons necessary to conduct its activities and enter into transactions contemplated under the Program Documents;

• have an interest in any bank account other than (1) the accounts required under the Program Documents and (2) those accounts expressly permitted by the indenture trustee, provided that any interest therein shall be charged or otherwise secured in favor of the indenture trustee;

• issue any notes unless

• the trust has purchased, or will simultaneously purchase in connection with the issuance of a series of notes, a funding agreement from us to secure such notes, the payment obligations of which will be fully and unconditionally guaranteed by PFG;

• we have affirmed to the trust in writing that we have made or simultaneously will make changes to our books and records to reflect the granting by the trust of a security interest in, and the making by the trust of an assignment for collateral purposes of, the relevant funding agreement to the indenture trustee with respect to a series of notes;

• PFG has issued the guarantee to the trust and the trust has collaterally assigned and granted a security interest in the guarantee in favor of the indenture trustee for the benefit of the holders of such notes; and

• the trust has taken such other steps as may be necessary to cause the indenture trustee’s grant of such security interest in, and assignment for collateral purposes of, the relevant funding agreement and other collateral, including the relevant guarantee, to be perfected for purposes of the Uniform Commercial Code or effective against the trust’s creditors or subsequent purchasers of the relevant funding agreement and collateral pursuant to insurance or other applicable law;

• permit any affiliate, employee, officer or agent of us or PFG or any dealer or agent appointed under the distribution agreement to be a trustee of the trust;

• commingle its assets with the assets of any affiliates or any other trust or guarantee any obligation of any of its affiliates or any other trust; or

• maintain any joint account with any person or entity, become a party, whether as co-obligor or otherwise, to any agreement to which any person or entity is a party (other than in respect of the Program Documents), or become liable as a guarantor or otherwise with respect to any debt or contractual obligation of any person or entity.

Events of Default

          Upon the occurrence of an Event of Default (as defined below), the notes may become due and payable at an amount equal to the outstanding principal amount plus accrued but unpaid interest and any other amounts payable or, if such notes are non-interest bearing, the amortized face amount of such notes or such other redemption amount as may be specified in the applicable pricing supplement.

          The following will be Events of Default under the notes of any series:

• the trust’s failure to pay the principal (other than any installment payment), when due and payable, of any note of such series and continuance of such failure for a period of one business day;

• the trust’s failure to pay any interest, premium, if applicable, installment payments (if applicable) or any other amounts, when due and payable, on any note of such series and continuance of such failure for a period of seven business days;

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• any “Event of Default” (as defined in the funding agreement related to such series of notes) by us under the funding agreement securing the notes of such series (see “Description of the Funding Agreements — Funding Agreement Events of Default”);

• the trust’s failure to observe or perform in any material respect any covenant contained in the indenture (other than those listed in the first, second and, if applicable, eighth bullet points herein) or the notes of such series for a period of 60 days after the date on which the indenture trustee provides the trust written notice by registered or certified mail, return receipt requested, specifying such failure, or the holder(s) of at least 25% in aggregate principal amount of the notes of the series provide the trust and the indenture trustee written notice in the same manner, specifying such failure and requiring such failure to be remedied and stating that it is a “notice of default;”

• the indenture ceases to be in full force and effect (other then in accordance with its terms) or is declared null and void, or the indenture trustee fails to have or maintain a validly created and perfected security interest subject to no prior liens or security interests in the collateral required to secure the notes of such series, or any person successfully claims as finally determined by a court of competent jurisdiction that any lien with respect to the collateral is void or that the enforcement of such lien or any other recourse by the indenture trustee is materially limited because of any preference, fraudulent transfer, conveyance or similar law;

• either (1) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the trust or the relevant collateral in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect in the applicable jurisdiction, which decree or order is not stayed, or any other similar relief shall be granted under any applicable law, or (2) an involuntary case shall be commenced against the trust or the relevant collateral under any applicable bankruptcy, insolvency or other similar law of the applicable jurisdiction, or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the trust or the relevant collateral, or over all or a substantial part of its property, shall have been entered, or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of the trust or the relevant collateral for all or a substantial part of the trust’s property, or a court having jurisdiction in the premises shall enter a decree or order declaring the dissolution of the trust, or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the trust’s property and any such event described in this clause (2) shall continue for 60 days unless dismissed, bonded or discharged;

• either (1) the trust shall have an order for relief entered with respect to the trust or shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law of the applicable jurisdiction, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of the trust’s property, or the trust shall make any assignment for the benefit of creditors, or (2) the trust shall fail or be unable, or the trust admits in writing the trust’s inability, to pay the trust’s debts as such debts become due, or the trustee shall adopt any resolution or otherwise authorize any action to approve or for the purpose of effecting any of the actions referred to in this paragraph; or

• any other Event of Default provided in any pricing supplement and the applicable notes of such series or the indenture.

          When an Event of Default specified in the fourth, fifth or eighth bullet point above shall have occurred and be continuing, the indenture trustee or the holder(s) of at least 25% in aggregate principal amount of the outstanding notes of the affected series may, by written notice to the trust and the indenture

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trustee (if applicable), declare the principal of and all accrued and unpaid interest and any other amounts payable on the notes of such series to be due and payable. Such amounts shall become due and payable on the date the written declaration is received by the trust. This provision, however, is subject to the condition that, at any time after the principal of the notes of such series shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered, the holder(s) of at least 66²/3% in aggregate principal amount of the notes of such series then outstanding by written notice to the trust and the indenture trustee may rescind and annul such declaration and its consequences with respect solely to such series, subject to certain conditions, but no such rescission and annulment shall affect any subsequent default or shall impair any right consequent thereon. If an Event of Default specified in the first, second, third, sixth or seventh bullet point above occurs, the principal of and accrued and unpaid interest and any other amounts payable on the notes of such series will be immediately due and payable without any declaration or other action by the trust, the indenture trustee or the holder of any note.

          The Events of Default described above (other than the Event of Default specified in the third bullet point above) are different from the funding agreement defaults described later in this prospectus under the heading “Description of the Funding Agreements.” In certain circumstances, an Event of Default may occur and give rise to an acceleration of principal and interest on the notes of a series without there being a corresponding funding agreement default and acceleration of payment obligations under the related funding agreement. In such a case, there would be no or limited funds available to pay the accelerated principal and interest under the notes. In such a case, the indenture trustee, acting for the benefit of the holders of the applicable series of notes, will be limited to a proceeding against the funding agreement and the related collateral. However, because under such circumstances we would not be under any obligation to accelerate our payment obligations under the funding agreement, the indenture trustee could only:

• continue to receive scheduled periodic payments under the collateral, including any applicable funding agreement;

• dispose of the collateral, including the funding agreement, subject to obtaining our consent; or

• exercise any combination of the foregoing.

          Any such disposition of collateral could be made on unfavorable terms and result in material losses to the holders of the applicable series of notes.

          An event of default under the PFG guarantee relating to a series of notes will not be an Event of Default with respect to such series of notes or under the indenture.

          We shall advise each rating agency that is then rating the program or any series of notes of any such Event of Default.

Application of Money Collected Under the Indenture

          On or prior to the issue date of a series of notes, we will establish a collection account with the indenture trustee in the name of the trust. This account shall collect payments received under the applicable funding agreement for the benefit of the related noteholders and shall be segregated from any other account maintained by the indenture trustee.

          Following an Event of Default and during the continuance thereof, with respect to a series of notes, any moneys that may then be held or thereafter received by the indenture trustee as security with respect to the notes of such series shall be held in the relevant collection account and shall be applied in the following order, at the dates and manner fixed by the indenture trustee:

          first, to the payment of the reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the trust, in an

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aggregate amount of no more than $250,000 for all series of notes issued by all trusts outstanding, to the extent not paid pursuant to the expense and indemnity agreements;

          second, to the payment of the amounts then due and unpaid upon the notes of the relevant series for principal and interest and all other amounts in respect of which or for the benefit of which such amount has been collected, ratably, without preference or priority of any kind, according to the aggregate principal amounts due and payable on such notes; and

          third, any remaining balance shall be paid to the trust and such remaining balance shall be distributed by the trustee in accordance with the trust agreement as described under “Description of the Trusts — Application of Money Received by the Trustee on Behalf of a Trust.”

          If no Event of Default exists, the following priority of payments shall apply:

          first, to the payment of the amounts then due and unpaid upon the notes of the relevant series for principal and interest and all other amounts in respect of which or for the benefit of which such amount has been collected, ratably, without preference or priority of any kind, according to the aggregate principal amounts due and payable on such notes; and

          second, any remaining balance shall be paid to the trust and such remaining balance shall be distributed by the trustee in accordance with the trust agreement as described under “Description of the Trusts — Application of Money Received by the Trustee on Behalf of a Trust.”

          We will pay the costs and expenses incurred by a trust under the expense and indemnity agreements with each of the indenture trustee, the custodian, the trust beneficial owner and the trustee (on behalf of itself and the trust) and any additional service provider appointed from time to time. See “Fees and Expenses.”

          Except as expressly set forth in the indenture, none of the indenture trustee, any paying agent, registrar or any of their successors, employees, officers, directors, affiliates or agents shall have any claim or rights of any nature in or to the relevant collateral, whether as a result of set-off, banker’s lien or otherwise.

Certain Rights of Holders

          The holder(s) of a majority in aggregate principal amount of the notes of any series at the time outstanding, who provide the indenture trustee with indemnification satisfactory to the indenture trustee, shall have the right to direct the time, method, and place of conducting any proceeding for exercising any remedy available to the indenture trustee or exercising any trust or power conferred on the indenture trustee by the indenture, in each case solely in respect of such series of notes, including with respect to the collateral, provided, however, that such direction shall not be in conflict with any rule of law or the indenture and the indenture trustee may take any other action deemed proper by the indenture trustee that is not inconsistent with such direction.

          No holder of the notes of a series shall have any right to institute any proceedings, judicial or otherwise, with respect to the indenture or any agreement or instrument included in the collateral for such series of notes or for the appointment of a receiver or trustee, unless:

• such holder has previously given written notice to the indenture trustee of a continuing Event of Default with respect to such series of notes;

• the holder(s) of notes representing not less than 25% of the aggregate principal amount of the outstanding notes of such series shall have made written request to the indenture trustee to institute proceedings in respect of such Event of Default in its own name as the indenture trustee;

• such holder(s) have offered to the indenture trustee indemnity or security satisfactory to it against the costs, expenses and liabilities to be reasonably incurred in compliance with such request;

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• the indenture trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

• no direction inconsistent with such written request has been given to the indenture trustee during such 60 day period by the holder(s) of notes of any series representing at least 66²/3% of the aggregate principal amount of the outstanding notes of such series.

          With respect to the above, no holder(s) of notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of the indenture to affect, disturb or prejudice the rights of any other holder of any note of the relevant series or to obtain or to seek to obtain priority or preference over any other holder of any note of the relevant series to enforce any right under the indenture, except in the manner therein provided and for the equal and ratable benefit of all the holders of the notes of the relevant series.

          Notwithstanding the foregoing, nothing in the notes of the relevant series or the indenture will prevent any relevant holder from enforcing its right to receive payment of the principal of and interest on such notes, or any other amount payable under such notes or the indenture, when and to the extent such payments become due and such rights will not be impaired without the consent of such holder.

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

Reports to Holders

          Pursuant to the terms of each indenture, within ten days following any distribution made or scheduled to be made on the notes, the indenture trustee shall deliver to us a report that contains the relevant payment information, the current principal amount of the notes and applicable funding agreement and the compensation received by the indenture trustee during the period relating to such payment. As depositor, we will file this report as an exhibit to the distribution report on Form 10-D within fifteen days of the distribution date. As depositor, we will also file an annual report with respect to each trust on Form 10-K. For information on receiving copies of these reports, see “Where You Can Find More Information” above.

          In accordance with the terms of the Trust Indenture Act of 1939, as amended, the indenture trustee will be required to transmit to holders of notes reports with respect to certain matters, including any changes to the eligibility and qualifications of the indenture trustee, conflicting interests of the indenture trustee, any unpaid advances made by the indenture trustee, and any actions by the indenture trustee that materially affect the applicable notes or collateral. A copy of each such report shall, at the time of such transmission to holders of notes, be filed with each stock exchange upon which the applicable note may be listed, and also with the SEC.

Modifications and Amendments

Modifications and Amendments Without Consent of Holders

          The trust may enter into a supplemental indenture with the indenture trustee at any time, without the consent of any holder of notes, for the purpose of:

• curing any ambiguity or correcting or supplementing any provision contained in the indenture, the notes of the relevant series or any supplemental indenture, which may be defective or inconsistent with any other provision contained in the indenture, the notes of that series, the relevant supplemental indenture, the relevant funding agreement or any other

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	Program Documents, which shall not materially adversely affect the interests of any holder of the relevant series of notes;
•	adding to the trust’s covenants or those of the indenture trustee for the benefit of the holders of the applicable series of notes or to surrender any right or power conferred in the indenture on the trust;
•	adding any additional Events of Default to the indenture;
•	evidencing and providing for the acceptance of appointment by a successor indenture trustee with respect to the notes of the applicable series and to add to or change any of the provisions of the indenture as shall be necessary to provide for or facilitate the administration of the trust or the applicable series of notes under the indenture by more than one trustee;
•	providing for the issuance of and establishing the forms and terms and conditions of notes of the applicable series; or
•	establishing the form of any certifications required to be furnished pursuant to the terms of the indenture or the applicable series of notes.

          We shall advise each rating agency that is then rating the program or any series of notes of any such supplemental indenture.

Modifications and Amendments With Consent of Holders

          The trust and the indenture trustee may enter into one or more supplemental indentures for the purpose of making any amendment or modification to the notes of the applicable series or the indenture or modifying in any manner the rights of any holder of notes with consent of the holder(s) representing a majority in aggregate principal amount of the notes of the applicable series at the time outstanding. However, no such supplemental indenture may, without the affirmative consent or affirmative vote of the holder of each note of the applicable series affected thereby:

• change the stated maturity of the principal of or any installment of interest on any note of the applicable series;

• reduce the principal amount of or interest on any note of the applicable series;

• change any place of payment where, or the coin or currency in which the principal of or interest on, any note of the applicable series is payable;

• impair or affect the right of any holder of the applicable series to institute suit for the enforcement of any payment on or with respect to the notes of the applicable series;

• reduce the percentage of the aggregate principal amount of the outstanding notes of the applicable series the consent of the holders of which is required for any supplemental indenture, or the consent of the holders of which is required for any waiver of compliance with provisions of the indenture or defaults thereunder and their consequences provided for in the indenture;

• modify any of the provisions of the indenture respecting modifications and amendments, except to increase any percentage specified in the indenture or to provide that additional provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding note of the applicable series;

• modify or alter the provisions of the definition of “Outstanding” in the indenture;

• modify or affect in any manner adverse to the interest of any holder of notes of the applicable series the terms and conditions of the applicable trust’s obligations regarding the

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due and punctual payment of the principal of, interest on or any other amounts due with respect to the notes of such series; or

•

permit the creation of any lien ranking prior to or on a parity with the lien of such indenture with respect to any part of the collateral of the applicable series of notes or terminate the lien of such indenture on any property held for the benefit and security of holders of notes of the applicable series or deprive the holder or any note of the applicable series of the security afforded by the collateral.

          We shall advise each rating agency that is then rating the program or any series of notes of any such supplemental indenture.

          The trust will not enter into any supplemental indenture with the indenture trustee (either with or without the consent of the holders of notes) that would cause any trust not to be disregarded or treated as a grantor trust (assuming any such trust were not disregarded) for United States federal income tax purposes.

Indenture Trustee and Servicer

          Under the indenture, if an Event of Default with respect to the applicable series of notes has occurred and is continuing, the indenture trustee is obligated to exercise such of the rights and powers vested in it by the indenture, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

          Except during the continuance of an Event of Default, the indenture provides that the indenture trustee shall perform only those duties that are specifically set forth therein, and no implied covenants or obligations of the indenture trustee will be read into the indenture.

          No provision of the indenture will be construed to relieve the indenture trustee from liability for its own negligent action, its own negligent failure to act or its own bad faith or willful misconduct, except that:

• this paragraph does not limit the effect of the immediately preceding paragraph;

• the indenture trustee may in good faith rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the indenture trustee and conforming to the requirements of the indenture unless a “responsible officer” (as defined in the indenture) of the indenture trustee has actual knowledge that such statements or opinions are false, provided that the indenture trustee must examine such certificates and opinions to determine whether they conform to the requirements of the indenture;

• the indenture trustee will not be liable for any error of judgment made in good faith by a responsible officer, unless it is proved that the indenture trustee was negligent in ascertaining the pertinent facts;

• the indenture trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with the direction of the holders of notes representing a majority of the aggregate principal amount of the notes of the applicable series then outstanding (or if an Event of Default under the notes has occurred and the holders direct the indenture trustee to take action as described under “— Certain Rights of Holders” above) relating to the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or exercising any trust or power conferred upon the indenture trustee, under the indenture; and

• no provision of the indenture requires the indenture trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties thereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for

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believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

          The indenture trustee may resign at any time by giving not less than 60 days’ prior written notice thereof to the trust and the holders of the applicable series of notes. If no successor indenture trustee shall have accepted appointment within 30 days after the giving of such notice of resignation, the resigning indenture trustee may petition any court of competent jurisdiction for the appointment of a successor indenture trustee.

          If at any time:

• the indenture trustee shall cease to be eligible to serve as indenture trustee under the requirements of the indenture and shall fail to resign after written request by the trust or any applicable holder of notes of such series (who has been a bona fide holder of a note for at least six months);

• the indenture trustee shall become incapable of acting with respect to the applicable series of notes or shall be adjudged as bankrupt or insolvent, or a receiver or liquidator of the indenture trustee or of its property shall be appointed, or any public officer shall take charge or control of the indenture trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; or

• the indenture trustee shall fail to comply with the obligations imposed upon it under Section 310(b) of the Trust Indenture Act of 1939, as amended, with respect to the applicable series of notes after written request by the trust or any applicable holder of notes of such series (who has been a bona fide holder of a note for at least six months);

then, the trust (except upon the occurrence and during the continuation of an Event of Default) may petition any court of competent jurisdiction to remove the indenture trustee with respect to such series of notes and appoint a successor indenture trustee.

          In addition to the right of petition given to the resigning indenture trustee and the right of removal given to the trust pursuant to the preceding paragraphs, any holder who has been a bona fide holder of notes of the applicable series for at least six months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor indenture trustee or the removal of the indenture trustee and the appointment of a successor indenture trustee, as the case may be.

          Holders of a majority in aggregate principal amount of the notes of the applicable series at the time outstanding may at any time remove the indenture trustee with respect to the notes of the applicable series and appoint a successor indenture trustee with respect to the notes of the applicable series by delivering to the indenture trustee so removed, to the successor indenture trustee so appointed and to the trust the evidence required for such action by the indenture.

          If the indenture trustee resigns, is removed or becomes incapable of acting, or if a vacancy occurs in the office of the indenture trustee for any reason, the trust shall promptly appoint a successor indenture trustee. If, within one year after such resignation, removal or incapability or the occurrence of such vacancy, a successor indenture trustee shall be appointed by holders of notes representing a majority in aggregate principal amount of the outstanding notes of the applicable series delivered to the trust and the retiring indenture trustee, the successor indenture trustee so appointed shall, upon its acceptance of such appointment, become the successor indenture trustee and supersede the successor indenture trustee appointed by the trust.

          The indenture trustee and each successor indenture trustee must be a United States person within the meaning of section 7701(a)(30) of the Code.

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          With respect to any series of notes as to which affiliates of the indenture trustee will serve as Agent, the relevant trust will appoint an eligible and unauthorized entity to serve as indenture trustee with respect to such series of notes, instead of the indenture trustee.

          Citibank, N.A., in its capacities as indenture trustee, paying agent, registrar, transfer agent and calculation agent under each indenture, will act as servicer under the program. Citibank, N.A. is a national banking association and wholly owned subsidiary of Citigroup Inc., a Delaware corporation. Citibank, N.A. performs as indenture trustee through the Agency and Trust line of business, which is part of the Global Transaction Services division. Citibank, N.A. has primary corporate trust offices located in both New York and London. Citibank, N.A. is a leading provider of corporate trust services offering a full range of agency, fiduciary, tender and exchange, depositary and escrow services. Citibank’s Agency & Trust group manages in excess of 3 trillion in fixed income and equity investments on behalf of 2,500 corporations worldwide. Since 1987, Citibank Agency & Trust has provided trustee services for asset-backed securities containing pool assets consisting of airplane leases, auto loans and leases, boat loans, commercial loans, commodities, credit cards, durable goods, equipment leases, foreign securities, funding agreement backed note programs, truck loans, utilities, student loans and commercial and residential mortgages. Citibank, N.A. currently acts as indenture trustee or paying agent for various funding agreement backed programs with approximately 210 trusts outstanding.

Meetings of Holders

          A meeting of holders of notes of the applicable series may be called at any time and from time to time pursuant to the indenture to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by the indenture to be made, given or taken by such holders of such series of notes.

          Unless otherwise provided in the notes of the applicable series, the indenture trustee may at any time call a meeting of holders of notes of the applicable series for any purpose specified in the preceding paragraph, to be held at such time and at such place in The City of New York or at such other place as the indenture trustee shall determine. Notice of every meeting of such holders of notes of the applicable series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, must be given not less than 21 nor more than 180 days prior to the date fixed for the meeting.

          Subject to the provisions under “— Modification and Amendments” above and Section 316 of the Trust Indenture Act of 1939, as amended, any resolution passed or decision taken at any meeting of holders of notes of the applicable series duly held in accordance with the indenture will be binding on all of the holders of notes of the applicable series, whether or not such holders were present or represented at the meeting.

Nonrecourse Enforcement

          Notwithstanding anything to the contrary contained in the indenture or the notes, other than as described below, none of us, PFG, our or its officers, directors, affiliates, employees or agents, the trust and none of its trustees, beneficial owners (including the trust beneficial owner) or agents, or any of their respective officers, directors, affiliates, employees or agents, all of whom we refer to collectively in this prospectus and the accompanying prospectus supplement as the “nonrecourse parties,” will be personally liable for the payment of any principal, interest or any other sums at any time owing under the terms of any notes. If any Event of Default shall occur with respect to a series of notes, the right of the holder(s) of the notes of such series and the indenture trustee on behalf of such holder(s) in connection with a claim on such series of notes will be limited solely to a proceeding against the collateral for such series of notes.

          Neither such holder(s) nor the indenture trustee on behalf of such holder(s) will have the right to proceed against the nonrecourse parties or the assets of any other trust to enforce the relevant series of notes (except that to the extent they exercise their rights, if any, to seize the funding agreement and the

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related guarantee securing the notes held by such holder(s), they may enforce the funding agreement against us or the related guarantee against PFG) or for any deficiency judgment remaining after foreclosure of any property included in the collateral. However, this will not in any manner or way constitute or be deemed a release of the debt or other obligations evidenced by the notes or otherwise affect or impair the enforceability against the assets of the relevant trust of the collateral or any other instrument or agreement evidencing, securing or relating to the indebtedness or the obligations evidenced by the notes. The holders of notes are not precluded from foreclosing upon any property included in the collateral.

Enforcement of Rights Under Securities Law

          Since we and PFG are registrants, purchasers of notes may proceed directly against us and PFG to enforce their rights under the United States federal and state securities laws. The right by such purchasers to proceed against us, with respect to the applicable funding agreement, under the United States federal and state securities laws is no different than if we had issued the funding agreement directly to such purchasers. The right by such purchasers to proceed against PFG, with respect to the applicable guarantee, under the United States federal and state securities laws is no different than if PFG had issued the guarantee directly to such purchasers.

Miscellaneous

Notices

          All notices regarding notes may be sent by overnight courier or first class mail (or equivalent) or (if posted to an overseas address) by airmail, postage prepaid, to the registered owners of the notes as their names appear in the note register maintained by the registrar or, for book-entry notes, notice may be given to The Depository Trust Company for communication by it to its accountholders or by delivery.

Governing Law; Submission to Jurisdiction

          The indenture and the notes of each series shall be governed by, and construed in accordance with, the laws of the State of New York, except to the extent that the validity or perfection of the ownership of and security interest in the relevant funding agreement and the related guarantee of the relevant trust or remedies under the indenture in respect thereof may be governed by the laws of a jurisdiction other than the State of New York. All judicial proceedings brought against the trust or the indenture trustee arising out of or relating to the indenture, any note or any portion of the collateral may be brought in a United States federal court of competent jurisdiction located in New York City, the Borough of Manhattan, provided that the pricing supplement for any series of notes may specify other jurisdictions as to which the trust may consent to the nonexclusive jurisdiction of its courts with respect to such series of notes.

DESCRIPTION OF THE FUNDING AGREEMENTS

          This section provides a summary of the material terms and conditions of the funding agreements. Specific terms of a funding agreement issued with respect to a series of notes and the extent to which these general provisions apply to that funding agreement will be provided in the applicable prospectus supplement and pricing supplement to this prospectus. This summary is not complete and you should read the detailed provisions of the funding agreement. A form of the funding agreement is filed as an exhibit to the registration statement (of which this prospectus is a part) and is incorporated into this prospectus by reference.

General

          Each funding agreement will be issued by us to the applicable trust and will be held separately as collateral by the indenture trustee for the benefit of the holders of the related series of notes. Each funding

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agreement will represent our unsecured obligation. Under each funding agreement, the applicable trust shall pay us a deposit in an amount equal to the issue price (expressed as a percentage) of the notes multiplied by the aggregate principal amount of the series of notes plus the aggregate amount of the trust beneficial interest issued in connection with such funding agreement plus accrued interest, if any, less any commission or compensation payments due to any person. Such deposit shall be made in the currency in which such notes are denominated. Upon receipt of such deposit we shall then be obligated to establish a bookkeeping account which will evidence our obligation under the funding agreement. Unless otherwise specified in the applicable pricing supplement, the initial deposit of such obligation will be deemed to be equal to the aggregate face amount of the notes of such series of notes plus the aggregate amount of the trust beneficial interest and interest, if any, will accrue on such balance at such rate and upon such terms as is accruing on the applicable series of notes. Unless otherwise specified in the applicable pricing supplement, for a funding agreement securing a series of notes other than discount notes, the aggregate of the deposits received pursuant to the funding agreement (as specified in the applicable annex to such funding agreement), less any withdrawals to make payments under such funding agreement (other than additional amounts, if applicable), plus any interest accrued pursuant to such funding agreement, all as set forth in the applicable annex to such funding agreement, is referred to as the “fund.” Unless otherwise specified in the applicable pricing supplement, for a funding agreement securing a series of notes that are discount notes, the aggregate of the deposits received pursuant to the funding agreement (as specified in the applicable annex to such funding agreement), less any withdrawals to make payments under such funding agreement (other than additional amounts, if applicable), plus any accrual of discount (determined in accordance with the applicable series of notes), plus, if applicable, any interest accrued pursuant to such funding agreement, all as set forth in the applicable annex to such funding agreement, is referred to as the “fund.” The bookkeeping account established to evidence the fund is a general account obligation and shall not be an obligation of any of our separate accounts.

          Under each funding agreement, we will be obligated to make or cause to be made certain payments as are necessary to permit the trust to meet in full its scheduled payment obligations under the relevant series of notes. Therefore, the currency of denomination, maturity, redemption, repayment and interest rate provisions of the funding agreement issued by us to the trust shall be structured so that the payments made by or at the direction of us will enable the trust to meet its requisite obligations under the relevant series of notes. The repayment of principal on such funding agreement will occur at the stated date of maturity of the funding agreement, or, under certain circumstances specified by the terms of the funding agreement, at a date or dates prior to maturity. Amounts received by a trust in respect of interest or principal on a funding agreement will be applied to all payments due the holders of notes of the related series of notes and beneficial interest for that trust. Each funding agreement provides that all such payments are intended to be made without any United States tax withholding obligations. Any amendment or modification to the terms of a series of notes made after the effective date of the relevant funding agreement will not affect our payment obligations pursuant to the relevant funding agreement, unless such amendment or modification has been consented to in writing by us. Additional terms of each funding agreement will be described in the applicable prospectus supplement and pricing supplement.

          A funding agreement is a type of insurance company product in which the purchaser, usually an institutional investor, pays the insurance company a deposit and, in turn, receives scheduled payments of principal and interest. The deposit we receive on the issuance of a funding agreement will be part of our general account and not allocated to any of our separate accounts. Our general account is the account which contains all of our assets and liabilities other than those held in our separate accounts. (Separate accounts are segregated accounts which are established for certain products that we sell. A separate account holds assets and liabilities specifically related to one or more products and segregates these assets and liabilities from the assets and liabilities of all other separate accounts and the assets and liabilities of our general account.) Since the deposit made under any funding agreement will be part of our general account, our obligations under each funding agreement will be the obligations of our general account, rather than the obligations of any separate account. As such, we will invest the proceeds from the sale of funding agreements in a portfolio of assets which along with our other general account assets will be used to meet our contractual obligations under the funding agreements and our other general account

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obligations. We will earn the spread differential between the cost of our obligations under the funding agreements and the yield on our invested assets. We may periodically, consistent with our past practice and subject to all applicable regulatory restrictions on our insurance operations, dividend a portion of the spread income to PFG.

          We have established internal procedures to ensure that we perform all of our payment obligations under the funding agreements. A specific group of employees in our company will monitor performance of our payment obligations under the funding agreements and will promptly notify the indenture trustee in the event we have not timely made payments under any funding agreement. Under the applicable indenture, the calculation agent will notify us of the amount of interest due on any notes prior to any interest payment date. Additionally, in the event that we fail timely to make any payment under the applicable funding agreement and PFG fails timely to make any payment under the related guarantee, the indenture trustee will notify us and PFG of such failure and will have the right to enforce the rights of noteholders contained in the indenture.

          Unless otherwise set forth in the applicable pricing supplement, the funding agreements will be rated AA by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. We expect the funding agreements to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”). The rating of the applicable funding agreement by Moody’s will be specified in the applicable pricing supplement. Notes of a series will be issued only in the event that, at the time of issuance of such series of notes, at least one nationally recognized rating agency would assign an investment grade rating to such series of notes and the funding agreement securing such series of notes.

          The trust will grant a security interest in and collaterally assign the funding agreement relating to the applicable series of notes to the indenture trustee as collateral to secure the trust’s obligations under that series of notes.

Priority

          Each funding agreement is our unsecured obligation and, in the event of our impairment or insolvency, the Iowa Insurance Commissioner will be authorized and directed to commence delinquency proceedings for the purpose of liquidating, rehabilitating, reorganizing or conserving us pursuant to Iowa Code Sections 507C.4, 507C.12, 507C.13, 507C.14 and 507C.16. In conducting delinquency proceedings, claims are prioritized and an order of distribution is specified pursuant to Iowa Code Section 507C.42. There are nine classes within the priority scheme, with each successive class being fully junior to the preceding class. Class 1 priority is given to the costs and expenses of administration of the insurer during the delinquency proceedings and Class 2 priority is given to the claims of the insurer’s policyholders and guaranty associations. Sidley Austin LLP, counsel to us and PFG, has opined that, subject to the limitations, qualifications and assumptions set forth in its opinion letter, in a properly prepared and presented case, a court applying Iowa law would conclude that loss claims of principal and interest in respect of each funding agreement would be accorded Class 2 priority under Iowa Code Section 507C.42 and paid equally in priority with our other policyholders.

          Sidley Austin LLP has advised that its opinion is based on its interpretation of the relevant provisions of the Iowa Code as construed by relevant administrative and judicial authority. However, the Iowa Code and regulations, interpretations and decisions are subject to change, either prospectively or retroactively, and many of the issues addressed in counsel’s opinion depend upon a facts and circumstances analysis that has received little or no administrative or judicial consideration. Therefore, the Iowa Insurance Commissioner, in his/her capacity as liquidator, rehabilitator or otherwise, or the courts could disagree in whole or in part with our analysis.

          Iowa law would apply to our insolvency or receivership proceedings. Sidley Austin LLP has advised that the statutory liquidation priority accorded to funding agreements under Iowa law does not clearly apply to any additional amounts required to be paid (if specified in the applicable pricing supplement) as may be necessary in order that the net amounts receivable by a holder after any withholding or deduction under United States tax law shall equal the respective amounts which would

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have been receivable by such holder in the absence of such withholding or deduction. Accordingly, Sidley Austin LLP has advised that claims for such payments, if any, may not rank equally with either life insurance policy and annuity claims or funding agreement claims, but would rank at least equally with the claims of our general creditors, which are given Class 5 priority under Iowa Code Section 507C.42. Sidley Austin LLP expressly disclaimed any opinion that claims for such payments would be entitled to any greater priority.

          The scope of the Sidley Austin LLP opinion regarding a delinquency proceeding with respect to Principal Life is limited to an Iowa delinquency proceeding under Iowa law and to only those claims that are made in domiciliary proceedings in an Iowa court. The opinion of Sidley Austin LLP recites basic facts with respect to the transaction in which the funding agreement is to be issued, and those facts are implicitly assumed in connection with the rendering of the opinion. The limitations and qualifications in the opinion are that it is limited to the application of the law of the State of Iowa and federal law of the United States and that the opinion is rendered solely as of the date thereof.

          In the event that the funding agreements were not accorded Class 2 priority in our insolvency, the funding agreements would be accorded the lower priority associated with our general unsecured obligations. Our payment obligations under the funding agreements are fully and unconditionally guaranteed by PFG. See “Description of the Guarantees.”

Funding Agreement Events of Default

          Each of the following events will constitute an event of default (a “funding agreement default”) under each funding agreement:

• we shall fail to make any payment of interest, premium (if applicable), installment payments (if applicable) or additional amounts (if and as specified in the annex to such funding agreement) in accordance with the funding agreement, if such failure to pay is not corrected within seven business days after it becomes due and payable;

• we shall fail to make any payment of principal (other than any installment payment) in accordance with the funding agreement, if such failure to pay is not corrected within one business day after it becomes due and payable; or

• if we: (a) are dissolved (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes our obligations); (b) become insolvent or are unable to pay our debts or fail or admit in writing our inability generally to pay our debts as they become due; (c) make a general assignment, arrangement or composition with or for the benefit of our creditors; (d) institute or have instituted against us an administrative or legal proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any supervision, rehabilitation, liquidation, bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for our winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against us, such proceeding or petition (1) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for our rehabilitation, winding-up or liquidation or (2) is not dismissed, discharged, stayed or restrained in each case within 60 days of the institution or presentation thereof; (e) have a resolution passed for our rehabilitation, winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger in which the resulting entity assumes our obligations); (f) seek or become subject to the appointment of an administrator, supervisor, rehabilitator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for us or for all or substantially all our assets; (g) have a secured party take possession of all or substantially all our assets or have a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all our assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 60 days thereafter; (h) cause or are subject to any event with

38

respect to us which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (a) to (g) (inclusive); or (i) take any action in furtherance of, or indicating our consent to, approval of, or acquiescence in, any of the foregoing acts.

          Upon the occurrence and continuance of a funding agreement default specified in the first or second bullet point above, the indenture trustee (as collateral holder) has the right, in addition to any other rights and remedies they may have at law or in equity, to immediately demand payment of all principal and accrued and unpaid interest and any other amount due to such date under the affected funding agreement. Upon the occurrence of a funding agreement default specified in the third bullet point above, the principal of and accrued and unpaid interest and any other amounts payable under the affected funding agreement will be immediately due and payable without any declaration or other action by the trust or the indenture trustee (as collateral holder).

Optional Redemption; Optional Repayment

          If a redemption right is specified in the pricing supplement related to a series of notes, we may redeem the related funding agreement prior to the stated maturity date of such funding agreement in whole or from time to time in part in increments of $1,000 or any other integral multiple of an authorized denomination specified in the applicable pricing supplement (provided that any remaining principal amount thereof shall be at least $1,000 or other minimum authorized denomination applicable thereto), at the applicable redemption price (as defined below), together with unpaid interest, if any, accrued thereon to, but excluding, the date of redemption. We must give written notice to the trust not more than 60 nor less than 35 calendar days prior to the date of redemption. “Redemption price”, with respect to a funding agreement, means an amount equal to the initial redemption percentage specified in the applicable pricing supplement (as adjusted by the annual redemption percentage reduction, as described in the pricing supplement, if applicable) multiplied by the unpaid principal amount to be redeemed. The initial redemption percentage, if any, applicable to a funding agreement shall decline at each anniversary of the initial redemption date by an amount equal to the applicable annual redemption percentage reduction, if any, until the redemption price is equal to 100% of the unpaid amount thereof to be redeemed.

          If a repayment right is specified in the pricing supplement relating to a series of notes, the related funding agreement may be subject to repayment at the request of the relevant trust, upon the valid exercise of the repayment right in the related notes by the holder of such notes, on any repayment date specified in the applicable pricing supplement. On any such repayment date, unless otherwise specified in the applicable pricing supplement, the funding agreement shall be repayable in whole or in part in increments of $1,000 at the request of the relevant trust at a repayment price equal to 100% of the principal amount thereof to be repaid, together with interest thereon payable to the date of repayment. Exercise of such repayment right by a trust shall be irrevocable.

Survivor’s Option

          Unless a funding agreement has been declared due and payable prior to its stated maturity date by reason of any event of default thereunder, or has been previously redeemed or otherwise repaid, a trust may request repayment of such funding agreement upon the valid exercise of the survivor’s option in the related notes by the authorized representative of the deceased beneficial owner of such notes. If a survivor’s option is specified in the notes and the applicable pricing supplement it will be more fully described in the prospectus supplement relating to such notes.

Withholding Tax and Payment of Additional Amounts

          All amounts due in respect of each funding agreement will be made without withholding or deduction for or on account of any present or future taxes, duties, levies, assessments or other governmental charges of whatever nature imposed or levied by or on behalf of any governmental authority, unless such withholding or deduction is required by law. Unless otherwise specified in the applicable

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pricing supplement, we will not pay any additional amounts to the trust in respect of such withholding or deduction, any such withholding or deduction will not give rise to any funding agreement default or any independent right or obligation to redeem such funding agreement and the trust will be deemed for all purposes to have received cash in an amount equal to the portion of such withholding or deduction that is attributable to such trust’s interest in the funding agreement as equitably determined by us.

          If it is specified in the applicable pricing supplement and funding agreement that we have agreed to pay additional amounts to the trust to reflect any required withholding or deduction under the funding agreement and we are required, or based on an opinion of independent legal counsel selected by us a material probability exists that we will be required, to pay additional amounts in respect of such withholding or deduction, pursuant to (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the effective date of the applicable funding agreement, we will have the right to redeem the affected funding agreement by giving not less than 30 and no more than 60 days prior written notice to the trust and by paying to the trust the outstanding principal of, and premium, if any, and accrued but unpaid interest, on, the relevant funding agreement or such other amount as is specified in the applicable pricing supplement. If we redeem the related funding agreement issued to the trust, the related trust will redeem all of the notes of the applicable series as provided in the indenture.

Early Redemption for Tax Event

          Each funding agreement will provide that, upon the occurrence of a tax event (as described below), we may redeem such funding agreement by giving not less than 35 and no more than 60 calendar days prior written notice to the applicable trust and by paying to such trust the outstanding principal of, and premium, if any, and accrued but unpaid interest, on, the relevant funding agreement or such other amount as is specified in the applicable pricing supplement. If we redeem a funding agreement, the applicable trust will redeem all of the notes of the series secured by such funding agreement as provided in the indenture. The term “tax event” means that we shall have received an opinion of independent legal counsel stating in effect that as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of any such laws or regulations by any governmental authority in the United States, which amendment or change is enacted, promulgated, issued or announced on or after the effective date of the funding agreement there is more than an insubstantial risk that (i) the trust is, or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the relevant funding agreement or (ii) the trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges.

Restrictions on Transfer

          Each funding agreement will contain provisions prohibiting the owner of the funding agreement from transferring or assigning the funding agreement or any right to receive payments under the funding agreement to any other person without our express written consent. In connection with the issuance of a series of notes by the trust, we will consent to the assignment of the related funding agreement that will secure the obligations of the issuer trust under such notes to the indenture trustee.

Agreed Tax Treatment

          We and the trust will agree that each funding agreement shall be disregarded for United States federal income tax purposes. The funding agreement will provide that we and the applicable trust each agree to treat the funding agreement, if not disregarded for United States federal income tax purposes, as a debt obligation of ours for United States federal, state and local income and franchise tax purposes.

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Governing Law

          Each funding agreement will be subject to the laws of the State of Iowa.

DESCRIPTION OF THE GUARANTEES

          Set forth below is a summary of the guarantee that will be issued by PFG to each trust in connection with each issuance of a series of notes. This summary is not complete and you should read the detailed provisions of the guarantee. A form of the guarantee is filed as an exhibit to the registration statement (of which this prospectus forms a part) and is incorporated into this prospectus by reference.

General

          Under each guarantee, PFG will fully, irrevocably, absolutely and unconditionally guarantee to pay to the trust any payments required to be made by us to the trust under the applicable funding agreement which shall become due and payable regardless of whether such payment is due at maturity, on an interest payment date or as a result of redemption or otherwise (the “scheduled payments”) but shall be unpaid by us (the “guaranteed amounts”). However, in no event shall the guaranteed amounts under a guarantee exceed the deposit of the related funding agreement, plus accrued but unpaid interest and any other amounts due and owing under the funding agreement, less any amounts paid by us to the applicable trust.

          In the event we do not make a scheduled payment when due (the “payment notice date”) then the indenture trustee or the trust may present a payment notice in writing to PFG on or after the payment notice date, and PFG will be required to immediately pay the guaranteed amounts.

          The trust will collaterally assign and grant a security interest in the guarantee to the indenture trustee as collateral to secure the trust’s obligations under the applicable series of notes.

          Each guarantee will be an unsecured, unsubordinated and contingent obligation of PFG ranking equally with all other unsecured and unsubordinated obligations of PFG. PFG is a non-operating holding company, conducting a substantial portion of its business through us. In the event of our insolvency or receivership, PFG may incur limitations in receiving any distributions from us. In such an event, PFG may have limited resources to satisfy its obligations under the guarantees. PFG’s obligations under each guarantee will be effectively subordinated to all existing and future debt and liabilities of PFG’s subsidiaries.

Events of Default

          An event of default under each guarantee will occur upon the failure of PFG to perform any of its payment obligations thereunder. The trust and the indenture trustee, on behalf of the holders of the applicable series of notes, have the right to enforce the obligations of PFG under the applicable guarantee and may institute any legal proceeding directly against PFG without first instituting a legal proceeding against us. Bankruptcy or similar events relating to PFG, the failure of any guarantee to be in full force and effect and any revocation of any guarantee by PFG will not constitute events of default under such guarantee.

Termination of the Guarantee

          Each guarantee will terminate and be of no further force and effect with respect to the applicable funding agreement upon the full payment of the scheduled payments or upon the earlier extinguishment of our obligations under the relevant funding agreement.

Governing Law

          Each guarantee will be governed by, and construed in accordance with, the laws of the State of New York without regard to conflict of law principles.

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FEES AND EXPENSES

          All expenses of the program will be paid pursuant to the separate expense and indemnity agreements entered into between us and the indenture trustee, the custodian, the trust beneficial owner and the trustee (on behalf of itself and each trust to be formed in connection with the issuance of a series of notes) and each expense and indemnity agreement to be entered into with each service provider that may become a provider of services under the programs from time to time. A form of each expense and indemnity agreement have been filed as exhibits to the registration statement (which includes this prospectus) and are incorporated into this prospectus by reference.

          Pursuant to each expense and indemnity agreement, we will pay the costs and expenses relating to the offering, sale and issuance of any series of notes and costs, expenses and taxes incurred by each trust other than certain excluded amounts described below and we will pay the costs and expenses of the indenture trustee, the custodian, the trust beneficial owner, the trustee, each trust and each service provider appointed from time to time and will indemnify each of them with respect to certain matters.

          Under each expense and indemnity agreement, we will not be obligated to pay any costs, expenses, taxes or other amounts that are considered excluded amounts. Excluded amounts include:

• any payment obligation by a trust to a noteholder under the note;

• any obligation of a trust to the extent such obligation has been paid using funds available to the trust from payments under the relevant funding agreement;

• any cost, loss, damage, claim, action, suit, expense, disbursement, tax, penalty or liability of any kind or nature whatsoever resulting from or relating to any insurance regulatory or other governmental authority asserting that:

• the notes are participations in the relevant funding agreement or are contracts of insurance; or

• the offer, purchase, sale and/or transfer of the notes and/or the pledge and collateral assignment of the funding agreement by the trust to the indenture trustee constitute the conduct of the business of insurance or reinsurance or require the trust or holder of notes to be licensed as an insurer, insurance agent or broker;

• any cost, loss, damage, claim, expense, tax, penalty or liability of any kind imposed on a service provider to the trust resulting from the bad faith, misconduct or negligence of such service provider;

• any income taxes or overhead expenses of any service provider; or

• any withholding taxes imposed with respect to payments made under the relevant funding agreement and any additional amounts paid to any noteholder.

          Each expense and indemnity agreement will be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles.

          Additionally, under certain circumstances to the extent not paid pursuant to the applicable expense and indemnity agreement, the indenture trustee, the custodian, the trust beneficial owner, the

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trustee and any service provider appointed from time to time may be paid out of the trust’s assets as described in the table below:

Circumstances
Giving Rise to	Party Receiving
Payment of	such Fees and			Distribution
Expenses	Expenses	General Purpose	Source of Funds	Priority	Amount Payable
Event of Default under Indenture	Indenture Trustee	Reasonable and customary expenses and counsel fees incurred by the indenture trustee and any other amounts due and unpaid to the indenture trustee by the trust	Amounts collected by the indenture trustee following an event of default under the indenture	First Priority	Actual fees and expenses (in an aggregate amount of no more than $250,000 for all notes issued under the program)
Liquidation of the Trust	Indenture Trustee, Trustee, Custodian, Trust Beneficial Holder and any service provider appointed from time to time	Any claims, including expenses	Assets of a trust upon the liquidation of such trust	Second Priority (after the payment of all amounts due and unpaid on the notes, if any, of the applicable trust)	Actual Expenses

ERISA CONSIDERATIONS

          The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), imposes certain requirements on “employee benefit plans” (as defined in Section 3(3) of ERISA) subject to ERISA, including entities such as collective investment funds whose underlying assets include the assets of such plans (collectively, “ERISA plans”), and on those persons who are fiduciaries with respect to ERISA plans. Investments by ERISA plans are subject to ERISA’s general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA plan’s investments be made in accordance with the documents governing the ERISA plan. Each fiduciary of an ERISA plan should consider the fiduciary standards of ERISA in the context of the ERISA plan’s particular circumstances before authorizing an investment in the notes. Accordingly, among other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements of ERISA and would be consistent with the documents and instruments governing the ERISA plan.

          Subject to the considerations described herein, the notes are eligible for purchase by plans, any entity whose underlying assets include “plan assets” by reason of any plan’s investment in the entity (“plan asset entity”) and any person investing “plan assets” of any plan.

          Under United States Department of Labor regulations at 29 C.F.R. § 2510.3-101, as in effect from time to time (the “plan asset regulations”), the assets of a trust may be deemed to be “plan assets” of an ERISA plan or a “plan” such as an individual retirement account or a Keogh plan (as defined in Section 4975(e)(1) of the Code, other than a governmental or church plan described in Section 4975(g)(2) or (3) of the Code) (together with ERISA plans, “plans”) for purposes of ERISA and Section 4975 of the Code if a plan or a person investing “plan assets” of a plan acquires an equity interest in a trust and none of the exceptions contained in the plan asset regulations are applicable. An equity

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interest is defined under the plan asset regulations as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and has no substantial equity features. There is very little pertinent authority on the issue of what constitutes an equity interest for purposes of the plan asset regulations. Accordingly, whether the notes would be treated as debt or equity for purposes of the plan asset regulations is unclear. Since, however, the holders of notes of a series will have recourse only to the relevant collateral that secures such series of notes, if the notes were treated as equity interests, only the related funding agreement would be treated as assets of any plan holding a note.

          Even if the notes are treated as equity interests for purposes of the plan asset regulations, because (a) the relevant trust expects that the funding agreement will be treated as debt, rather than equity, for United States federal tax purposes and (b) the funding agreement should not be deemed to have any “substantial equity features,” none of the assets underlying the funding agreement should be treated as “plan assets” for purposes of the plan asset regulations. Those conclusions are based, in part, upon the traditional debt features of the funding agreement, including the reasonable expectation of purchasers of the notes that the payments due under the funding agreement will be paid when due, as well as the absence of conversion rights, warrants and other typical equity features.

          Section 406 of ERISA and Section 4975 of the Code prohibit plans from engaging in certain transactions involving “plan assets” with persons who are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to such plans (together, “parties in interest”), unless a statutory or administrative exemption is available. For example, if we, a trust or any Agent are a party in interest with respect to a plan (either directly or by reason of our ownership of subsidiaries), the purchase of the notes by or on behalf of the plan would likely be a prohibited transaction under Section 406(a)(1) of ERISA and Section 4975(c)(1) of the Code, unless exemptive relief were available under an applicable administrative exemption (see below). A party in interest that engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code, unless a statutory or administrative exemption is available.

          The United States Department of Labor (“DOL”) has issued prohibited transaction class exemptions (“PTCEs”) that may provide exemptive relief for direct or indirect prohibited transactions resulting from the purchase and holding of the notes by or on behalf of a plan. These class exemptions include PTCE 96-23 (for certain transactions determined by in-house asset managers), PTCE 95-60 (for certain transactions involving insurance company general accounts), PTCE 91-38 (for certain transactions involving bank collective investment funds), PTCE 90-1 (for certain transactions involving insurance company pooled separate accounts) and PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers). There can be no assurances that any of these class exemptions or any other exemptions will be available with respect to any particular transaction involving the notes. In addition, a purchaser of the notes should be aware that, even if the conditions specified in one or more of the above-referenced exemptions are met, the scope of the exemptive relief provided by the exemption might not cover all acts which might be construed as prohibited transactions.

          Accordingly, the notes may not be purchased or held by any plan, any plan asset entity or any person investing “plan assets” of any plan, unless the purchase and holding of the notes is not a prohibited transaction or is exempt under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or any other prohibited transaction exemption issued by the DOL. Any purchaser of the notes or any interest therein, including in the secondary market, will be deemed to have represented that, among other things, either it is not a plan or other plan asset entity and it is not purchasing the notes on behalf of or with “plan assets” of any plan or other plan asset entity, or its purchase and holding of the notes is exempt under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 or another applicable exemption. Such representations shall be deemed to be made each day from the date on which the purchaser purchases the notes through and including the date on which the purchaser disposes of the notes.

          Moreover, the notes may not be purchased or held by any plan, any plan asset entity or any person investing “plan assets” of any plan if we, the trust, the indenture trustee, the guarantor or any of their respective affiliates: (a) has investment discretion with respect to the assets of the plan used to effect

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such purchase; (b) has authority or responsibility to give, or regularly give, investment advice with respect to such assets for a fee and pursuant to an agreement or understanding that such advice (1) will serve as a primary basis for investment decisions with respect to such assets and (2) will be based on the particular investment needs of such plan; or (c) unless PTCE 95-60, 91-38 or 90-1 applies, is an employer maintaining or contributing to such plan.

          Any insurance company proposing to invest assets of its general account in the notes should consider the implications of the United States Supreme Court’s decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86, 114 S. Ct. 517 (1993), in which the United States Supreme Court held that in certain circumstances assets in a life insurance company’s general account are treated as assets of a plan that owns a policy or other contract with such insurance company, as well as the effect of Section 401(c) of ERISA as interpreted by regulations issued by the DOL in January 2000.

          Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries or other persons considering purchasing notes on behalf of or with “plan assets” of any plan or plan asset entity consult with their counsel regarding the potential consequences under ERISA and the Code and the availability of exemptive relief under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.

          Governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA), while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state, local or other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code such as Section 503 of the Code. No view is expressed as to whether an investment in the notes (and any continued holding of the notes), or the operation and administration of the trust, is appropriate or permissible for any governmental plan or church plan under Section 503 of the Code, or under any state, local or other law respecting such plan. Any purchaser of the notes or any interest therein, including in the secondary market, will be deemed to have represented that, among other things, either (a) it is not a governmental plan or a church plan or any entity the assets of which are treated as including assets of such plans and it is not purchasing the notes on behalf of or with assets of any such plan or entity or (b) its purchase, holding and disposition of the notes is not in violation of the laws applicable to any such governmental plan or church plan. Such representations shall be deemed to be made each day from the date on which the purchaser purchases the notes through and including the date on which the purchaser disposes of the notes. Fiduciaries of any such plans should consult with their counsel before purchasing any notes.

          The sale of any notes to a plan is in no respect a representation by any party or entity that such an investment meets all relevant legal requirements with respect to investments by plans generally or any particular plan, or that such an investment is appropriate for plans generally or any particular plan.

          Notwithstanding the above, with regard to a particular trust, the sale of notes to plans, or a person utilizing the plan assets of plans, might not be allowed, or might only be allowed subject to certain additional conditions, in which case the applicable pricing supplement will disclose the prohibition or such additional conditions.

          THE ERISA CONSIDERATIONS SET FORTH ABOVE ARE ONLY INTENDED AS A SUMMARY AND MAY NOT BE APPLICABLE DEPENDING UPON A PLAN’S SPECIFIC FACTS AND CIRCUMSTANCES. PLAN FIDUCIARIES SHOULD CONSULT THEIR OWN ADVISORS WITH RESPECT TO THE ADVISABILITY OF AN INVESTMENT IN THE NOTES, AND POTENTIALLY ADVERSE CONSEQUENCES OF SUCH INVESTMENT, INCLUDING WITHOUT LIMITATION THE POSSIBLE EFFECTS OF CHANGES IN APPLICABLE LAWS.

PLAN OF DISTRIBUTION

          This prospectus relates to the offering of notes through the trusts to institutional and retail investors from time to time for sale to or through the agents identified in the applicable prospectus

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supplement. Merrill Lynch, Pierce, Fenner & Smith Incorporated, ABN AMRO Incorporated, Banc of America Securities LLC, Barclays Capital Inc., Bear, Stearns & Co. Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc., Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, UBS Securities LLC and Wachovia Capital Markets, LLC have been named as agents (referred to below as “Agents”) in the prospectus supplement relating to the offering of notes to institutional investors under our secured medium-term notes program. If we add or remove an Agent from our secured medium-term notes program, the applicable pricing supplement will disclose such addition or removal. Merrill Lynch, Pierce, Fenner & Smith Incorporated has been named as the purchasing agent (also referred to below as an “Agent”) in the prospectus supplement relating to the offering of notes to retail investors under our Principal^® Life CoreNotes^® program. Also, Agents to our secured medium-term notes retail program will be disclosed in the applicable pricing supplement.

          The distribution of the notes offered under this prospectus may occur in one or more transactions at fixed prices, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices, all of which may change over time. A trust may not issue additional notes after the first and only issuance of its notes.

          In connection with the sale of the notes, the Agents may receive from the trust or from purchasers of the notes for whom they may act as agents compensation in the form of discounts, concessions or commissions. The Agents may sell the notes to or through dealers, and those dealers may receive compensation in the form of discounts, concessions or commissions from the purchasers for whom they may act as agents. The Agents and dealers that participate in the distribution of the notes are “underwriters” within the meaning of the Securities Act of 1933, as amended, with respect to the notes being distributed, the funding agreement purchased by the trust and the guarantee issued to the trust. Any Agents that participate in the offering of the notes will be identified and their compensation will be described in the applicable prospectus supplement or pricing supplement. The applicable prospectus supplement or pricing supplement will also describe the other terms of the offering, including any discounts or concessions allowed or reallowed or paid to dealers.

          We and PFG will agree to indemnify, jointly and severally, the Agents against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the Agents may be required to make in respect thereof.

          With respect to any series of notes as to which affiliates of the indenture trustee will serve as an Agent, the relevant trust will appoint an eligible and unaffiliated entity to serve as indenture trustee with respect to such series of notes, instead of the indenture trustee.

          We are a statutory issuer of the notes under the Securities Act of 1933, as amended.

          Under the Securities Act of 1933, as amended, each trust is a statutory underwriter of the funding agreement and related guarantee.

          In the ordinary course of its business, the Agents and their affiliates have engaged, and may in the future engage, in investment and commercial banking transactions with us, PFG and certain of our and its affiliates.

LEGAL MATTERS

          Certain matters regarding the notes and their offering will be passed upon:

• for us by either Karen E. Shaff or Nora M. Everett, internal counsel for Principal Life (as to Iowa law);

• for us by John D. Schmidt, internal counsel for Principal Life (as to tax law matters);

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•  for the trusts, us and PFG by Sidley Austin LLP (as to New York law matters, as to Delaware law matters, as to United States federal securities and tax law matters and as to certain insurance regulatory matters); and

• for the Agents by Pillsbury Winthrop Shaw Pittman LLP (as to New York law matters and as to United States federal securities law matters).

          Opinions issued in connection with future offerings may be issued by counsel other than those listed above. The name of such counsel other than those listed above will be included in the applicable pricing supplement.

          Sidley Austin LLP has from time to time represented, and continues to represent, one or more of the Agents in connection with matters unrelated to the offering of the notes. Pillsbury Winthrop Shaw Pittman LLP has from time to time represented, and continues to represent, us in connection with matters unrelated to the offering of the notes.

EXPERTS

          The consolidated financial statements of Principal Financial Group, Inc. appearing in Principal Financial Group, Inc.’s Annual Report (Form 10-K) for the year ended December 31, 2004 (including schedules appearing therein), and Principal Financial Group, Inc. management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 included therein, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and management’s assessment are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

47

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

          The following table sets forth those expenses to be incurred by Principal Life Insurance Company in connection with the issuance and distribution of the securities being registered. Except for the Securities and Exchange Commission filing fee, all amounts shown are estimates.

Securities and Exchange Commission registration fee		$
Fees and expenses of trustees		$
Printing and engraving expenses		$
Accountant’s fees and expenses		$
Legal fees and expenses		$
Rating agency fees		$
Miscellaneous expenses		$
	Total	$

Item 15. Indemnification of Directors and Officers.

Principal Life Insurance Company

          The Iowa Business Corporation Act grants Principal Life Insurance Company the power to indemnify its directors and officers against liabilities under certain circumstances. The Amended and Restated Articles of Incorporation and the Amended and Restated By-laws of Principal Life Insurance Company provide for indemnification of directors, officers and employees to the full extent provided by the Iowa Business Corporation Act. The Amended and Restated Articles of Incorporation provide that Principal Life Insurance Company shall indemnify its directors and officers, as provided under the Iowa Business Corporation Act, subject to such limitations as may be established by Principal Life Insurance Company. The Amended and Restated Articles of Incorporation further provide that a director shall not be personally liable to Principal Life Insurance Company or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for a breach of the director’s duty of loyalty to Principal Life Insurance Company or its shareholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of the law, (c) for a transaction from which the director derives an improper personal benefit or (d) under Section 490.833 of the Iowa Business Corporation Act (relating to certain unlawful distributions to shareholders).

          The Amended and Restated By-laws provide that Principal Life Insurance Company shall indemnify, directly and through insurance coverage, its directors and officers against all damages, awards, legal fees and other expenses reasonably incurred in connection with or resulting from any proceeding because of the director’s or officer’s position with Principal Life Insurance Company or another entity that the director or officer serves at Principal Life Insurance Company’s request. The Amended and Restated By-laws further state that the indemnification provided therein shall not be deemed exclusive and shall be in addition to any rights as may be otherwise provided as a matter of law subject to such limitations as may be established by Principal Life Insurance Company.

Principal Financial Group, Inc.

          Principal Financial Group, Inc.’s Amended and Restated Certificate of Incorporation provides that its directors will not be liable to Principal Financial Group, Inc. or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that this limitation on or exemption from liability is not permitted by the General Corporation Law of the State of Delaware and any amendments to that law. Principal Financial Group, Inc.’s Amended and Restated By-laws also provide indemnification for its directors and officers to the fullest extent permitted by Delaware law. Principal Financial Group,

II-1

Inc. is required to indemnify its directors and officers for all judgments, fines, settlements, legal fees and other expenses incurred in connection with pending or threatened legal proceedings because of the director’s or officer’s position with Principal Financial Group, Inc. or another entity that the director or officer serves at Principal Financial Group, Inc.’s request, subject to various conditions, and to advance funds to its directors and officers to enable them to defend against such proceedings. To receive indemnification, the director or officer must have been successful in the legal proceeding or have acted in good faith and in what was reasonably believed to be a lawful manner in the best interest of Principal Financial Group, Inc.

Item 16. Exhibits.

Exhibit
Number		Description
	1.1*	Form of Distribution Agreement
	4.1	Form of Standard Indenture Terms to be entered into between Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee on behalf of the applicable trust
	4.2	Form of Indenture to be entered into between Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee on behalf of the applicable trust (included as Section C to the Omnibus Instrument filed as Exhibit 4.10 hereto)
	4.3	Form of Institutional Global Note (Secured Medium-Term Notes) (included as Exhibit A-2 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.4	Form of Retail Global Note (Principal® Life CoreNotes®) (included as Exhibit A-1 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.5	Form of Retail Global Note (Secured Medium-Term Retail Notes) (included as Exhibit A-3 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.6	Form of Standard Trust Terms to be entered into between U.S. Bank Trust National Association, as trustee, and GSS Holdings II, Inc., as trust beneficial owner
	4.7	Form of Trust Agreement to be entered into between U.S. Bank Trust National Association, as trustee, and GSS Holdings II, Inc., as trust beneficial owner (included as Section A to the Omnibus Instrument filed as Exhibit 4.10 hereto)
	4.8	Form of Funding Agreement to be issued by Principal Life Insurance Company
	4.9	Form of Guarantee to be issued by Principal Financial Group, Inc.
	4.10	Form of Omnibus Instrument
	4.11	Form of Closing Instrument
	4.12	Form of Custodial Agreement by and among Bankers Trust Company, N.A., as custodian, Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee (on behalf of each trust)
	5.1†	Opinion of Karen E. Shaff, internal counsel for Principal Life Insurance Company
	5.2†	Opinion of Sidley Austin LLP
	8†	Opinion of Sidley Austin LLP
	10.1†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and U.S. Bank Trust National Association, as trustee (on behalf of itself and each trust)
	10.2†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and Citibank, N.A., as indenture trustee, registrar, transfer agent, paying agent and calculation agent
	10.3†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and GSS Holdings II, Inc., as trust beneficial owner
	10.4†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and Bankers Trust Company, N.A., as custodian

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Exhibit
Number		Description
	12†	Statement Regarding Computation of Ratio of Earnings to Fixed Charges
	23.1	Consent of Ernst & Young LLP
	23.2†	Consent of Karen E. Shaff, internal counsel for Principal Life Insurance Company (included in Exhibit 5.1)
	23.3†	Consent of Sidley Austin LLP (included in Exhibit 5.2)
	23.4†	Consent of Sidley Austin LLP (included in Exhibit 8)
	23.5	Consent of Sidley Austin LLP
	25.1†	Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of Citibank, N.A., as indenture trustee under each Indenture
	99.1	Form of Institutional Pricing Supplement
	99.2	Form of Principal® Life CoreNotes® Pricing Supplement
	99.3	Form of Retail Pricing Supplement

*  To be filed by Amendment.

†  Previously filed.

Item 17. Undertakings.

          (a) Rule 415 Offering.

          Each undersigned registrant hereby undertakes:

          (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

          (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

          (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

          (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

          Provided, however, that:

          (A) The undertakings set forth in paragraphs (i), (ii) and (iii) above do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrants pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this registration statement.

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          (B) Provided, further, however, that the undertakings set forth in paragraphs (i) and (ii) do not apply if the registration statement is for an offering of asset-backed securities on Form S-1 or Form S-3, and the information required to be included in a post-effective amendment is provided pursuant to Item 1100(c) of Regulation AB.

          (2) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrants are relying on Rule 430B:

          (A) Each prospectus filed by the registrants pursuant to Rule 424(b)(3) shall be deemed to be part of this registration statement as of the date the filed prospectus was deemed part of and included in this registration statement; and

          (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of this registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in this registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at the date an underwriter, such date shall be deemed to be a new effective date of this registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in this registration statement or prospectus that is part of this registration statement or made in a document incorporated or deemed incorporated by reference into this registration statement or prospectus that is part of this registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in this registration statement or prospectus that was part of this registration statement or made in any such document immediately prior to such effective date.

          (3) That, for the purpose of determining liability of the registrants under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

          The undersigned registrants undertake that in a primary offering of securities of the undersigned registrants pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrants will be sellers to the purchaser and will be considered to offer or sell such securities to such purchaser:

          (i) Any preliminary prospectus or prospectus of the undersigned registrants relating to the offering required to be filed pursuant to Rule 424;

          (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrants or used or referred to by the undersigned registrants;

          (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrants or their securities provided by or on behalf of the undersigned registrants; and

          (iv) Any other communication that is an offer in the offering made by the undersigned registrants to the purchaser.

          (4) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating

II-4

to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

          (5) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

          (b) The undersigned registrants hereby further undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of any annual reports of the registrants pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

          (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions discussed in Item 15 above, or otherwise, the undersigned registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by its director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

          (d) The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

          (e) The undersigned registrants hereby undertake to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

II-5

SIGNATURES

          Pursuant to the requirements of the Securities Act of 1933, Principal Life Insurance Company (i) certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and (ii) has duly caused this amendment no. 2 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Des Moines, State of Iowa, on this 24^th day of January, 2006.

PRINCIPAL LIFE INSURANCE COMPANY

By: /s/ MICHAEL H. GERSIE

Name: Michael H. Gersie

Title:  Executive Vice President and Chief Financial Officer

          Pursuant to the requirements of the Securities Act of 1933, this amendment no. 2 to the registration statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
* J. Barry Griswell	Chairman, President and Chief Executive Officer, Director
/s/ MICHAEL H. GERSIE Michael H. Gersie	Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)	January 24, 2006
* Betsy J. Bernard	Director
* Jocelyn Carter-Miller	Director
* Gary E. Costley	Director
* David J. Drury	Director
*  C. Daniel Gelatt, Jr.	Director
* Sandra L. Helton	Director
* Charles S. Johnson	Director

II-6

Signature		Title	Date
* William T. Kerr		Director
* Richard L. Keyser		Director
* Arjun K. Mathrani		Director
* Federico F. Peña		Director
* Elizabeth E. Tallett		Director
*By:	/s/ MICHAEL H. GERSIE Michael H. Gersie Attorney-in-Fact

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SIGNATURES

          Pursuant to the requirements of the Securities Act of 1933, Principal Financial Group, Inc. (i) certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and (ii) has duly caused this amendment no. 2 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Des Moines, State of Iowa, on this 24^th day of January, 2006.

PRINCIPAL FINANCIAL GROUP, INC.

By: /s/ MICHAEL H. GERSIE

Name: Michael H. Gersie

Title:  Executive Vice President and Chief Financial Officer

          Pursuant to the requirements of the Securities Act of 1933, this amendment no. 2 to the registration statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
* J. Barry Griswell	Chairman, President and Chief Executive Officer, Director
/s/ MICHAEL H. GERSIE Michael H. Gersie	Executive Vice President and Chief Financial Officer (principal financial officer and principal accounting officer)	January 24, 2006
* Betsy J. Bernard	Director
* Jocelyn Carter-Miller	Director
* Gary E. Costley	Director
* David J. Drury	Director
*  C. Daniel Gelatt, Jr.	Director
* Sandra L. Helton	Director
* Charles S. Johnson	Director

II-8

Signature		Title	Date
* William T. Kerr		Director
* Richard L. Keyser		Director
* Arjun K. Mathrani		Director
* Federico F. Peña		Director
* Elizabeth E. Tallett		Director
*By:	/s/ MICHAEL H. GERSIE Michael H. Gersie Attorney-in-Fact

II-9

EXHIBIT INDEX

Exhibit
Number		Description
	1.1*	Form of Distribution Agreement
	4.1	Form of Standard Indenture Terms to be entered into between Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee on behalf of the applicable trust
	4.2	Form of Indenture to be entered into between Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee on behalf of the applicable trust (included as Section C to the Omnibus Instrument filed as Exhibit 4.10 hereto)
	4.3	Form of Institutional Global Note (Secured Medium-Term Notes) (included as Exhibit A-2 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.4	Form of Retail Global Note (Principal® Life CoreNotes®) (included as Exhibit A-1 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.5	Form of Retail Global Note (Secured Medium-Term Retail Notes) (included as Exhibit A-3 to the Standard Indenture Terms filed as Exhibit 4.1 hereto)
	4.6	Form of Standard Trust Terms to be entered into between U.S. Bank Trust National Association, as trustee, and GSS Holdings II, Inc., as trust beneficial owner
	4.7	Form of Trust Agreement to be entered into between U.S. Bank Trust National Association, as trustee, and GSS Holdings II, Inc., as trust beneficial owner (included as Section A to the Omnibus Instrument filed as Exhibit 4.10 hereto)
	4.8	Form of Funding Agreement to be issued by Principal Life Insurance Company
	4.9	Form of Guarantee to be issued by Principal Financial Group, Inc.
	4.10	Form of Omnibus Instrument
	4.11	Form of Closing Instrument
	4.12	Form of Custodial Agreement by and among Bankers Trust Company, N.A., as custodian, Citibank, N.A., as indenture trustee, and U.S. Bank Trust National Association, as trustee (on behalf of each trust)
	5.1†	Opinion of Karen E. Shaff, internal counsel for Principal Life Insurance Company
	5.2†	Opinion of Sidley Austin LLP
	8†	Opinion of Sidley Austin LLP
	10.1†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and U.S. Bank Trust National Association, as trustee (on behalf of itself and each trust)
	10.2†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and Citibank, N.A., as indenture trustee, registrar, transfer agent, paying agent and calculation agent
	10.3†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and GSS Holdings II, Inc., as trust beneficial owner
	10.4†	Form of Expense and Indemnity Agreement by and between Principal Life Insurance Company and Bankers Trust Company, N.A., as custodian
	12†	Statement Regarding Computation of Ratio of Earnings to Fixed Charges
	23.1	Consent of Ernst & Young LLP
	23.2†	Consent of Karen E. Shaff, internal counsel for Principal Life Insurance Company (included in Exhibit 5.1)
	23.3†	Consent of Sidley Austin LLP (included in Exhibit 5.2)
	23.4†	Consent of Sidley Austin LLP (included in Exhibit 8)
	23.5	Consent of Sidley Austin LLP
	25.1†	Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of Citibank, N.A., as indenture trustee under each Indenture†
	99.1	Form of Institutional Pricing Supplement
	99.2	Form of Principal® Life CoreNotes® Pricing Supplement
	99.3	Form of Retail Pricing Supplement

*  To be filed by Amendment.

†  Previously filed.

EX-4.1

                                                                     EXHIBIT 4.1


                            STANDARD INDENTURE TERMS

                                 WITH RESPECT TO

                      PRINCIPAL LIFE INCOME FUNDINGS TRUSTS

                           SECURED MEDIUM-TERM NOTES,
                      SECURED MEDIUM-TERM RETAIL NOTES AND
                         PRINCIPAL(R) LIFE CORENOTES(R)




                                 DATED AS OF [O]










"CoreNotes(R)" is a registered service mark of Merrill Lynch & Co.
"Principal(R)" is a registered service mark of Principal Financial Services,
Inc. and is used under license.





                                TABLE OF CONTENTS


                                    ARTICLE 1
             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION


                                                                                                  
SECTION 1.01.  Definitions...............................................................................1
SECTION 1.02.  Compliance Certificates and Opinions.....................................................11
SECTION 1.03.  Form of Documents Delivered to Indenture Trustee.........................................11
SECTION 1.04.  Acts of Holders..........................................................................13
SECTION 1.05.  Notices..................................................................................15
SECTION 1.06.  Notice to Holders; Waiver................................................................16
SECTION 1.07.  Severability.............................................................................16
SECTION 1.08.  Successors and Assigns...................................................................17
SECTION 1.09.  Benefits of Indenture....................................................................17
SECTION 1.10.  Language of Notices......................................................................17
SECTION 1.11.  Governing Law............................................................................17
SECTION 1.12.  Waiver of Jury Trial.....................................................................17
SECTION 1.13.  Counterparts.............................................................................18
SECTION 1.14.  Third Party Beneficiaries................................................................18
SECTION 1.15.  Conflict with Trust Indenture Act........................................................18


                                    ARTICLE 2
                                    THE NOTES
                                                                                                  
SECTION 2.01.  Forms Generally..........................................................................18
SECTION 2.02.  No Limitation on Aggregate Principal Amount of Notes.....................................21
SECTION 2.03.  Listing..................................................................................21
SECTION 2.04.  Redemption and Repayment.................................................................21
SECTION 2.05.  Execution, Authentication and Delivery Generally.........................................23
SECTION 2.06.  Registration.............................................................................26
SECTION 2.07.  Transfer.................................................................................26
SECTION 2.08.  Mutilated, Destroyed, Lost and Stolen Notes..............................................27
SECTION 2.09.  Payment of Interest; Rights To Interest Preserved........................................28
SECTION 2.10.  Cancellation.............................................................................28
SECTION 2.11.  Persons Deemed Owners....................................................................29
SECTION 2.12.  Tax Treatment; Tax Returns and Reports...................................................29
SECTION 2.13.  No Association...........................................................................29
SECTION 2.14.  Administrative Procedures................................................................30

                                    ARTICLE 3
                    COVENANTS, REPRESENTATIONS AND WARRANTIES

SECTION 3.01.  Payment of Principal and any Premium, Interest and Additional Amounts....................30
SECTION 3.02.  Collection Account.......................................................................30
SECTION 3.03.  Agreements of the Paying Agent...........................................................30



                                        i


                                                                                                  
SECTION 3.04.  Maintenance of Office or Agency..........................................................33
SECTION 3.05.  Duties of the Agents.....................................................................33
SECTION 3.06.  Duties of the Transfer Agent.............................................................34
SECTION 3.07.  Duties of the Registrar..................................................................35
SECTION 3.08.  Unclaimed Monies.........................................................................36
SECTION 3.09.  Protection of Collateral.................................................................36
SECTION 3.10.  Opinions as to Collateral; Annual Statement as to Compliance.............................38
SECTION 3.11.  Performance of Obligations...............................................................40
SECTION 3.12.  Existence................................................................................40
SECTION 3.13.  Reports; Financial Information; Notices of Defaults......................................40
SECTION 3.14.  Payment of Taxes and Other Claims........................................................42
SECTION 3.15.  Negative Covenants.......................................................................42
SECTION 3.16.  Non-Petition.............................................................................44
SECTION 3.17.  Title to the Collateral..................................................................44
SECTION 3.18.  Withholding and Payment of Additional Amounts............................................45
SECTION 3.19.  Additional Representations and Warranties................................................47
SECTION 3.20.  Ancillary Documents......................................................................48

                                    ARTICLE 4
      GRANTING OF SECURITY INTEREST AND ASSIGNMENT FOR COLLATERAL PURPOSES

SECTION 4.01.  Creation.................................................................................48
SECTION 4.02.  Scope....................................................................................49
SECTION 4.03.  Termination of Security Interest.........................................................50

                                    ARTICLE 5
                     SATISFACTION AND DISCHARGE; SUBROGATION

SECTION 5.01.  Satisfaction and Discharge of Indenture..................................................50
SECTION 5.02.  Application of Trust Money...............................................................51

                                    ARTICLE 6
                              DEFAULTS AND REMEDIES

SECTION 6.01.  Events of Default........................................................................52
SECTION 6.02.  Acceleration of Maturity Date; Rescission and Annulment..................................53
SECTION 6.03.  Collection of Indebtedness and Suits for Enforcement.....................................54
SECTION 6.04.  Indenture Trustee May File Proofs of Claim...............................................55
SECTION 6.05.  Indenture Trustee May Enforce Claims Without Possession of Notes.........................56
SECTION 6.06.  Application of Money Collected...........................................................56
SECTION 6.07.  Limitation on Suits......................................................................57
SECTION 6.08.  Unconditional Rights of Holders to Receive Payments......................................57
SECTION 6.09.  Restoration of Rights and Remedies.......................................................57
SECTION 6.10.  Rights and Remedies Cumulative...........................................................58
SECTION 6.11.  Delay or Omission Not Waiver.............................................................58
SECTION 6.12.  Control by Holders.......................................................................58



                                       ii


                                                                                                  
SECTION 6.13.  Waiver of Past Defaults..................................................................58
SECTION 6.14.  Undertaking for Costs....................................................................59
SECTION 6.15.  Waiver of Stay or Extension Laws.........................................................59

                                    ARTICLE 7
                     THE INDENTURE TRUSTEE AND OTHER AGENTS

SECTION 7.01.  Duties of Indenture Trustee..............................................................59
SECTION 7.02.  No Liability to Invest...................................................................61
SECTION 7.03.  Performance Upon Default.................................................................61
SECTION 7.04.  No Assumption by Paying Agent, Transfer Agent, Calculation Agent or Registrar............61
SECTION 7.05.  Notice of Default........................................................................61
SECTION 7.06.  Rights of Indenture Trustee..............................................................62
SECTION 7.07.  Not Responsible for Recitals or Issuance of Notes........................................63
SECTION 7.08.  Indenture Trustee May Hold Notes.........................................................64
SECTION 7.09.  Money Held in Trust......................................................................64
SECTION 7.10.  Compensation and Reimbursement...........................................................64
SECTION 7.11.  Eligibility..............................................................................64
SECTION 7.12.  Resignation and Removal; Appointment of Successor........................................65
SECTION 7.13.  Acceptance of Appointment by Successor...................................................66
SECTION 7.14.  Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.........66
SECTION 7.15.  Co-trustees..............................................................................67
SECTION 7.16.  Appointment and Duties of the Calculation Agent..........................................68
SECTION 7.17.  Changes in Agents........................................................................69
SECTION 7.18.  Limitation of Trustee Liability..........................................................71

                                    ARTICLE 8
                             SUPPLEMENTAL INDENTURES

SECTION 8.01.  Supplemental Indentures Without Consent of Holders.......................................71
SECTION 8.02.  Supplemental Indenture With Consent of Holders...........................................72
SECTION 8.03.  Execution of Supplemental Indentures.....................................................73
SECTION 8.04.  Effect of Supplemental Indenture.........................................................74
SECTION 8.05.  Reference in Notes to Supplemental Indentures............................................74
SECTION 8.06.  Conformity with Trust Indenture Act......................................................74

                                    ARTICLE 9
                             NON-RECOURSE PROVISIONS

SECTION 9.01.  Nonrecourse Enforcement..................................................................74

                                   ARTICLE 10
                          MEETINGS OF HOLDERS OF NOTES

SECTION 10.01.  Purposes for Which Meetings May be Called...............................................75
SECTION 10.02.  Call, Notice and Place of Meetings......................................................75



                                       iii


                                                                                                  
SECTION 10.03.  Persons Entitled to Vote at Meetings....................................................75
SECTION 10.04.  Quorum; Action..........................................................................76
SECTION 10.05.  Determination of Voting Rights; Conduct and Adjournment of Meetings.....................77
SECTION 10.06.  Counting Votes and Recording Action of Meetings.........................................77

                                   ARTICLE 11
                           NOTES IN FOREIGN CURRENCIES

SECTION 11.01.  Notes in Foreign Currencies.............................................................78





                                       iv


                            STANDARD INDENTURE TERMS

     This document constitutes the Standard Indenture Terms, dated as of [o],
which are incorporated by reference in the Indenture (specified in Section C of
the Omnibus Instrument, as defined below), by and among the Trust named in the
Omnibus Instrument and the Indenture Trustee, Registrar, Transfer Agent, Paying
Agent and Calculation Agent for such Trust, in connection with the Program (all
as defined in the Indenture).

     These Standard Indenture Terms shall be of no force and effect unless and
until incorporated by reference into, and then only to the extent not modified
by, such Indenture.

     The following terms and provisions shall govern the Notes subject to
contrary terms and provisions expressly adopted in such Indenture, any
supplemental indenture or the Notes, which contrary terms shall be controlling.

                               ARTICLE 1
             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

     SECTION 1.01. Definitions. For all purposes of the Indenture, of all
indentures supplemental to the Indenture and of all Notes issued under the
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:

         (a) the terms defined in the Indenture have the meanings assigned to
them in this Article 1, and include the plural as well as the singular;

         (b) all accounting terms not otherwise defined in the Indenture have
the meanings assigned to them in accordance with generally accepted accounting
principles in the United States, and, except as otherwise expressly provided in
the Indenture, the term "generally accepted accounting principles" with respect
to any computation required or permitted under the Indenture shall mean such
accounting principles as are generally accepted at the date of such computation
in the United States;

         (c) the word "including" shall be construed to be followed by the words
"without limitation";

         (d) Article and Section headings are for the convenience of the reader
and shall not be considered in interpreting the Indenture or the intent of the
parties to the Indenture;

         (e) the words "hereby," "herein," "hereof" and "hereunder" and other
words of similar import refer to the Indenture as a whole and not to any
particular Article, Section, Exhibit or other subdivision; and

         (f) references in the Indenture to Articles, Sections, Exhibits and
Schedules shall, refer respectively to Articles, Sections, Exhibits and
Schedules of these Standard Indenture Terms, unless otherwise expressly
provided.

     "ACT", with respect to any Holder, has the meaning set forth in Section
1.04.

                                       1


     "ADDITIONAL AMOUNTS" means additional amounts that are required by the
Indenture or the Notes to be paid by the Trust to Holders pursuant to Section
3.18 or additional amounts that are required pursuant to the Funding Agreement,
under circumstances specified therein, to be paid by Principal Life to the
Funding Agreement Holder, to compensate for any withholding or deduction for or
on the account of any present or future taxes, duties, levies, assessments or
other governmental charges of whatever nature imposed or levied on payments in
respect of such Notes or Funding Agreement, as applicable, by or on behalf of
any governmental authority in the United States having the power to tax, so that
the net amount received by the Holders or the Funding Agreement Holder, will
equal the amount that would have been received under such Notes or Funding
Agreement, as applicable, had no such deduction or withholding been required.

     "AFFILIATE" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, that Person and, in the case of an individual, any spouse or other
member of that individual's immediate family. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities or by contract or otherwise.

     "AGENT" means any of the Registrar, Transfer Agent, Paying Agent or
Calculation Agent.

     "AUTHORIZED NEWSPAPER" means a newspaper, in an official language of the
place of publication or in the English language, customarily published on each
day that is a business day in the place of publication, whether or not published
on days that are not business days in the place of publication, and of general
circulation in each place in connection with which the term is used or in the
financial community of each such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications may be
made in the same or in different newspapers in the same city meeting the
foregoing requirements and, in each case, on any day that is a business day in
the place of publication.

     "AUTHORIZED SIGNATORIES" mean Responsible Officers authorized to execute
documents on behalf of the Trust.

     "BANKING DAY" means a day (other than a Saturday or Sunday) on which
commercial banks are generally open for business (including dealings in foreign
exchange and foreign currency deposits) in the place where the specified office
of the Paying Agent or, as the case may be, the Registrar is located.

     "BUSINESS DAY" means (except as otherwise specified in the Pricing
Supplement) (i) for any Note, any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York,
(ii) for LIBOR Notes only, any day on which commercial banks are open for
business (including dealings in the LIBOR Currency) in London, England, (iii)
for Notes that have a Specified Currency other than U.S. Dollars only, and other
than Notes denominated in euros, any day that is not a day on which commercial
banks are authorized or required by law, regulation or executive order to close
in the Principal Financial Center of the

                                       2


country issuing the Specified Currency, and (iv) for Notes that have euros as
the Specified Currency only a day on which the TARGET System is open.

     "CALCULATION AGENT" means the institution appointed as calculation agent
for the Notes and named as such in the relevant Pricing Supplement or its
successors or assigns. For such purpose, the Paying Agent accepts its
appointment as the initial Calculation Agent pursuant to Section 7.16.

     "CLEARING SYSTEM" means DTC and any other clearing system specified in the
relevant Pricing Supplement.

     "CODE" means the Internal Revenue Code of 1986, as amended, including any
successor or amendatory statutes and any applicable rules, regulations, notices
or orders promulgated thereunder.

     "COLLATERAL" means the right, title, benefits, remedies and interests of
the Trust in, to and under (i) the Funding Agreement, (ii) all Proceeds of the
Funding Agreement and the Guarantee and all amounts and instruments on deposit
from time to time in the Collection Account, (iii) the Guarantee, (iv) all books
and records pertaining to the Funding Agreement and the Guarantee, and (v) all
rights of the Trust pertaining to the foregoing.

     "COLLECTION ACCOUNT" means a non-interest bearing account with the
Indenture Trustee in the name of the Trust or such other account with a
depositary institution that is rated at least AA- or Aa3 by a nationally
recognized statistical rating organization as may be designated by the Trustee,
which account shall be segregated from other accounts held by the Indenture
Trustee or such other depositary institution.

     "COMMISSION" means the Securities and Exchange Commission or any successor
body performing such duties of the Commission.

     "CONTINGENT OBLIGATION" means, as applied to any Person, without
duplication, any direct or indirect liability, contingent or otherwise, of that
Person (i) with respect to any Indebtedness, lease, dividend, letter of credit
or other obligation of another if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to the
obligee of such obligation of another that such obligation of another will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof, (ii) under any letter of credit issued
for the account of or for which that Person is otherwise liable for
reimbursement thereof, (iii) under agreements providing for the hedging or
limitation of interest rate or currency risk, (iv) under any performance bond or
other surety arrangement, (v) under any direct or indirect guaranty, endorsement
(otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the
obligation of another, or (vi) for the obligations of another through any
agreement (contingent or otherwise).

     "CORPORATE TRUST OFFICE" means the office of the Indenture Trustee at which
the corporate trust business of the Indenture Trustee shall, at any particular
time, be principally administered, which office at the date of the Indenture is
located as indicated in Section 1.05.

                                       3


     "DEFAULT" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.

     "DEFAULTED INTEREST" has the meaning set forth in Section 2.09.

     "DEFINITIVE NOTE" means a Note issued in certificated and registered form.

     "DEPOSITARY" means the Person designated as Depositary by the Trust
pursuant to the Indenture, which Person, if required by any applicable law,
regulation or exchange requirement, must be a clearing agency registered under
the Securities Exchange Act and, if so provided with respect to any Note, any
successor to such Person. Initially, the "Depositary" shall be DTC.

     "DISTRIBUTION AGREEMENT" means that certain Distribution Agreement, dated
[o], by and among Principal Life, PFG and the agents named therein and
acknowledged and agreed to by the Trust, relating to the issuance and sale of
the Notes under the Program, as the same may be amended, modified or
supplemented from time to time.

     "DOLLARS", "$", "U.S. $", "UNITED STATES DOLLARS" and "U.S. DOLLARS" mean
such coin or currency of the United States as at the time shall be legal tender
for the payment of public or private debts.

     "DTC" means The Depository Trust Company, New York, New York, and its
successors and assigns.

     "EUROPEAN UNION DIRECTIVE" means any law, regulation, directive or any
interpretation by the European Union or a member nation of the European Union
which requires the withholding or deduction of any amounts payable under the
Notes, the Indenture or the Funding Agreement.

     "EVENT OF DEFAULT" has the meaning set forth in Section 6.01.

     "EXPENSE AND INDEMNITY AGREEMENT" means, as applicable, (i) that certain
Expense and Indemnity Agreement, dated [o], by and between Principal Life and
the Trustee, on behalf of itself and each trust organized under the Program,
including the Trust, (ii) that certain Expense and Indemnity Agreement, dated
[o], by and between Principal Life and the Indenture Trustee, (iii) that certain
Expense and Indemnity Agreement, dated [o], by and between Principal Life and
the Trust Beneficial Owner and (iv) that certain Expense and Indemnity
Agreement, dated [o], by and between Principal Life and Bankers Trust Company,
N.A., as each may be amended, modified or supplemented from time to time.

     "FUNDING AGREEMENT" means that certain funding agreement designated in the
Indenture, entered into by and between Principal Life and the Trust, as it may
be modified, restated, replaced, supplemented or otherwise amended from time to
time in accordance with the terms thereof.

     "FUNDING AGREEMENT HOLDER" means, with respect to the Notes, the "Agreement
Holder" as specified in the Funding Agreement.

                                       4


     "GLOBAL NOTE" means a Note issued in book-entry and registered form.

     "GUARANTEE" means that certain guarantee issued by PFG to the Trust
designated in the Indenture, which fully and unconditionally guarantees
Principal Life's payment obligations under the Funding Agreement, as it may be
modified, restated, replaced, supplemented or otherwise amended from time to
time in accordance with the terms thereof.

     "HOLDER" means the Person in whose name a Note or Notes is registered in
the Register.

     "INDEBTEDNESS" means, as applied to any Person, (i) all indebtedness for
borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingent or otherwise, or in respect
of which such Person otherwise assures a creditor against loss (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
as determined in good faith by such Person), (ii) that portion of obligations
with respect to capital leases which is properly classified as a liability on a
balance sheet in conformity with generally accepted accounting principles, (iii)
obligations evidenced by bonds, notes, debentures or similar instruments of such
Person, and notes payable by such Person and drafts accepted by such Person
representing extensions of credit whether or not representing obligations for
borrowed money, including the face amount of all drafts drawn thereunder, and
(iv) all indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is non-recourse to the credit of that Person.

     "INDENTURE" means that certain Indenture, contained in, and dated as of the
date specified in the Omnibus Instrument, by and among the Indenture Trustee,
Registrar, Transfer Agent, Paying Agent and Calculation Agent and the Trust, as
may be amended, modified or supplemented from time to time, which incorporates
by reference these Standard Indenture Terms, and shall include the terms of the
Notes established as contemplated hereunder and thereunder.

     "INDENTURE TRUSTEE" means, unless otherwise specified in the Indenture,
Citibank, N.A. and, subject to the provisions of Article 7, shall also include
its successors and assigns as Indenture Trustee under the Indenture.

     "INTEREST PAYMENT DATE" means each date on which interest is due and
payable to the Holders of the Notes as specified in the Indenture.

     "INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as it
may be amended or supplemented from time to time, and any successor statute
thereto, and the rules, regulations and published interpretations of the
Commission promulgated thereunder from time to time.

     "LIBOR CURRENCY" means the currency specified in the Pricing Supplement as
to which LIBOR shall be calculated or, if no currency is specified in the
Pricing Supplement, United States Dollars.

     "LIBOR NOTES" means Notes that bear interest based on LIBOR (as defined in
the Notes).

                                       5


     "LICENSE AGREEMENT" means that certain License Agreement by and between the
Trustee, on behalf of the Trust, and Principal Financial Services, Inc.,
contained in and dated as of the date specified in the Omnibus Instrument, as
the same may be amended, modified or supplemented from time to time.

     "LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including without limitation any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the UCC or comparable law of any jurisdiction).

     "MATURITY DATE" means the date on which the principal of the Notes becomes
due and payable as provided therein or in the Indenture, whether at the Stated
Maturity Date thereof, by declaration of acceleration, notice of redemption of
the Trust, notice of the Holder's option to elect repayment or otherwise.

     "NONRECOURSE PARTIES" has the meaning set forth in Section 9.01.

     "NOTE" means any secured note of the Trust designated in the Indenture and
authenticated and delivered under the Indenture, which is in registered form and
may be represented by a Global Note or a Definitive Note, and which shall be
substantially in the forms attached as Exhibit A-1, Exhibit A-2 and Exhibit A-3
to the Indenture and "NOTES" means the secured notes of the Trust represented by
such Note.

     "NOTICE OF DEFAULT" has the meaning set forth in Section 6.01.

     "OFFICE OR AGENCY" means an office or agency of the Trust, the Indenture
Trustee, the Paying Agent or the Registrar, as the case may be, maintained or
designated as the Place of Payment for the Notes pursuant to Section 3.04 or any
other office or agency of the Trust, Indenture Trustee, Paying Agent or
Registrar, as the case may be, maintained or designated for such Notes pursuant
to Section 3.04.

     "OMNIBUS INSTRUMENT" means the omnibus instrument pursuant to which certain
Program Documents are executed.

     "OPINION OF COUNSEL" means a written opinion addressed to the Indenture
Trustee (among other addressees) by legal counsel, who may be internal legal
counsel to Principal Life, who may, except as otherwise expressly provided in
the Indenture, be counsel for the Trust or Principal Life or other counsel and
who shall be reasonably satisfactory to the Indenture Trustee.

     "ORIGINAL ISSUE DATE" with respect to the Notes, means the original issue
date of the Notes, as specified in the Pricing Supplement.

     "OUTSTANDING" means as of any date of determination, all of the Notes
theretofore authenticated and delivered under the Indenture or in one or more
indentures supplemental to the Indenture, except:

                                       6


                  (i) Notes theretofore cancelled by the Indenture Trustee or
         delivered to the Indenture Trustee for cancellation;

                  (ii) Notes or portions thereof for the payment or redemption
         of which money in the necessary amount has been theretofore deposited
         with the Indenture Trustee or any Paying Agent in trust for the Holders
         of the Notes, provided that, if the Notes are to be redeemed, notice of
         such redemption has been duly given pursuant to the Indenture or
         provision therefor satisfactory to the Indenture Trustee has been made;

                  (iii) Notes in exchange for or in lieu of which other Notes
         have been authenticated and delivered pursuant to the Indenture unless
         proof satisfactory to the Indenture Trustee is presented that any such
         Notes are held by a holder in due course;

                  (iv) Notes alleged to have been destroyed, lost, stolen or
         mutilated and surrendered to the Indenture Trustee for which either
         replacement Notes have been issued or payment has been made as provided
         for in Section 2.08 unless proof satisfactory to the Indenture Trustee
         is presented that any such Notes are held by a holder in due course;
         and

                  (v) Notes represented by Global Notes to the extent that they
         shall have been duly exchanged for Definitive Notes pursuant to the
         Indenture unless proof satisfactory to the Indenture Trustee is
         presented that any such Notes are held by a holder in due course;

provided further, however, that in determining whether the Holders of the
requisite percentage of the principal amount of the Outstanding Notes have given
any request, demand, authorization, direction, notice, consent or waiver under
the Indenture, Notes owned by the Trust or any Affiliate of the Trust shall be
disregarded and deemed not to be Outstanding, except that in determining whether
the Indenture Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes that the
Indenture Trustee knows to be so owned shall be so disregarded. Notes so owned
that have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Indenture Trustee that the
pledgee is entitled so to act with respect to such Notes and that the pledgee is
not the Trust or any Affiliate of the Trust.

     "PAYING AGENT" means, unless otherwise specified in the Indenture or a
supplemental indenture, the Indenture Trustee, in its capacity as paying agent
under the Indenture or its successors or assigns.

     "PERSON" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
limited liability company, trust (including any beneficiary thereof), bank,
trust company, land trust, business trust or other organization, whether or not
a legal entity, and governments and agencies and political subdivisions thereof.

                                       7


     "PFG" means Principal Financial Group, Inc., a Delaware corporation and the
indirect parent of Principal Life, or any successor thereto.

     "PLACE OF PAYMENT" means the place where the principal of, premium, if any,
and interest on the Notes are payable which, unless otherwise specified in the
Indenture, shall be the address specified in Section 1.05 for the Indenture
Trustee.

     "PRICING SUPPLEMENT" means the pricing supplement attached to the Omnibus
Instrument as Exhibit D as prepared by the Trust in connection with the issuance
and sale by the Trust of the Notes and agreed to by Principal Life, the Trust
and the Relevant Agents appointed under the Distribution Agreement, as such
Pricing Supplement may be amended, modified, supplemented or replaced from time
to time.

     "PRINCIPAL FINANCIAL CENTER" means, as applicable, the capital city of the
country issuing the Specified Currency or the capital city of the country to
which the LIBOR Currency relates; provided, however, that with respect to United
States Dollars, Australian dollars, Canadian dollars, the euro, South African
rand and Swiss francs, the "Principal Financial Center" shall be The City of New
York, Sydney, Toronto, London (solely in the case of the LIBOR Currency),
Johannesburg and Zurich, respectively.

     "PRINCIPAL LIFE" means Principal Life Insurance Company, an Iowa insurance
company, or any successor thereto.

     "PROCEEDS" means all of the proceeds of, and all other profits, products,
rents, principal payments, interest payments or other receipts, in whatever
form, arising from the collection, sale, lease, exchange, assignment, licensing
or other disposition or maturity of, or other realization upon, the Funding
Agreement or the Guarantee, including without limitation all claims of the Trust
against third parties for loss of, damage to or destruction of, or for proceeds
payable under, the Funding Agreement or the Guarantee, in each case whether now
existing or hereafter arising.

     "PROGRAM" means, collectively, the Secured Medium-Term Notes Program, the
Secured Medium-Term Notes Retail Program and the Principal(R) Life CoreNotes(R)
Program, in each case, of the Principal Life Income Fundings Trusts.

     "PROGRAM DOCUMENTS" means the Indenture, the Notes, the Trust Agreement,
the Funding Agreement, the Guarantee, the Distribution Agreement, the License
Agreement and each Expense and Indemnity Agreement and any other documents or
instruments entered into by, with respect to, or on behalf of, the Trust.

     "RATING AGENCY" means any rating agency that has rated the Program or the
Notes.

     "REDEMPTION PRICE" means the price at which the Notes are to be redeemed
pursuant to Section 2.04, as set forth in the applicable Pricing Supplement or a
supplemental indenture.

     "REGISTER" has the meaning set forth in Section 2.06.

                                       8


     "REGISTRAR" means, unless otherwise specified in the Indenture or a
supplemental indenture, the Indenture Trustee, in its capacity as registrar
under the Indenture, or its successors or assigns.

     "REGISTRATION STATEMENT" means (a) a registration statement on Form S-3 or
other appropriate form, including the prospectus, prospectus supplements and the
exhibits included therein and including any documents or filings incorporated by
reference therein, any pre-effective or post-effective amendments thereto and
any registration statements filed subsequent thereto under rules promulgated
under the Securities Act, relating to the registration under the Securities Act
of the Notes, the Funding Agreement and the Guarantee, (b) any preliminary
prospectus or prospectus supplements thereto relating to the Notes whether or
not required to be filed pursuant to the Securities Act and any documents or
filings incorporated therein by reference, and (c) a registration statement and
such other documents, forms or filings as may be required by the Securities Act
or the Trust Indenture Act, or other securities laws in each case relating to
the Notes.

     "REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
means the date specified for that purpose in the Notes or the Indenture.

     "RELEVANT AGENTS" means the agent or agents (in a firm commitment offering
of Notes or in a best efforts offering of Notes) appointed pursuant to the
Distribution Agreement.

     "RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee or the
Trustee, any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, any trust officer or assistant trust
officer, or any other officer of the Indenture Trustee or the Trustee, as the
case may be, customarily performing functions similar to those performed by any
of the above designated officers and also, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject,
and also, with respect to the Trustee, having direct responsibility for the
administration of the Trust, or with respect to the Indenture Trustee, having
direct responsibility for the administration of the Indenture.

     "SECURED OBLIGATIONS" means the obligations of the Trust secured under the
Notes and the Indenture, including (i) all principal of, premium, if any, and
interest (including, without limitation, any interest which accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Trust, whether or not allowed or allowable
as a claim in any such proceeding) on such Notes or pursuant to the Indenture,
(ii) all other amounts payable by the Trust under the Indenture or under such
Notes including all Additional Amounts (if applicable) and all costs and
expenses (including without limitation attorneys' fees) incurred by the
Indenture Trustee (to the extent not paid pursuant to the applicable Expense and
Indemnity Agreement) and (iii) any renewals or extensions of the foregoing.

     "SECURITIES ACT" means the Securities Act of 1933, as it may be amended or
supplemented from time to time, and any successor statute thereto, and the
rules, regulations and published interpretations of the Commission promulgated
thereunder from time to time.

                                       9


     "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as it
may be amended or supplemented from time to time, and any successor statute
thereto, and the rules, regulations and published interpretations of the
Commission promulgated thereunder from time to time.

     "SPECIAL RECORD DATE" means a date fixed by the Indenture Trustee pursuant
to Section 2.09 for the payment of any Defaulted Interest on any Note.

     "SPECIFIED CURRENCY" means the currency in which the Notes are denominated
(or, if such currency is no longer legal tender for the payment of public and
private debts in the country issuing such currency or, in the case of the euro,
in the member states of the European Union that have adopted the single currency
in accordance with the treaty establishing the European Community, as amended by
the treaty on European Union, such currency which is then such legal tender).

     "STANDARD INDENTURE TERMS" means these Standard Indenture Terms, dated as
of [o].

     "STATED MATURITY DATE" means the date specified in the Notes, as the fixed
date on which the principal of such Notes is due and payable, which date will be
a day between nine months and thirty years from the date of original issuance of
the Notes and be on the last scheduled Interest Payment Date.

     "STERLING" means such coin or currency of the United Kingdom as at the time
shall be legal tender for the payment of public or private debts.

     "TARGET SYSTEM" means the Trans-European Automated Real-Time Gross
Settlement Express Transfer System.

     "TERMS AGREEMENT" has the meaning set forth in the Distribution Agreement.

     "TRANSFER AGENT" means, unless otherwise specified in the Indenture or a
supplemental indenture, the Indenture Trustee, in its capacity as transfer agent
under the Indenture or its successors or assigns.

     "TREASURY REGULATIONS" means the regulations promulgated by the United
States Treasury Department pursuant to the Code.

     "TRUST" means the Principal Life Income Fundings Trust named in the Omnibus
Instrument, which shall be a trust, formed under the laws of the jurisdiction
specified in the Trust Agreement, together with its permitted successors and
assigns; provided, however, unless the context requires otherwise, all
references in the Indenture to the "Trust" shall also include the Trustee, on
behalf of the Trust.

     "TRUST AGREEMENT" means that certain Trust Agreement, contained in, and
dated as of the date specified in the Omnibus Instrument, by and between the
Trustee and the Trust Beneficial Owner, declaring and establishing the Trust, as
may be amended, modified or supplemented from time to time.

                                       10


     "TRUST BENEFICIAL INTEREST" has the meaning set forth in the Trust
Agreement.

     "TRUST BENEFICIAL OWNER" means the beneficial owner of the Trust Beneficial
Interest.

     "TRUST CERTIFICATE" means a certificate signed by one or more Responsible
Officers of the Trustee on behalf of the Trust and delivered to the Indenture
Trustee.

     "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as it may be
amended or supplemented from time to time, and any successor statute thereto,
and the rules, regulations and published interpretations of the Commission
promulgated thereunder from time to time.

     "TRUST ORDER" or "TRUST REQUEST" means a written statement, request or
order of the Trust signed in its name by one or more Responsible Officers of the
Trustee and delivered to the Indenture Trustee.

     "TRUSTEE" means, unless otherwise specified in the Trust Agreement, U.S.
Bank Trust National Association, not in its individual capacity, but solely as
the Trustee under the Trust Agreement, and shall also include its permitted
successors and assigns under the Trust Agreement.

     "UCC" means the Uniform Commercial Code, as from time to time in effect in
the State of New York; provided that, with respect to the perfection, effect of
perfection or non-perfection, or priority of any security interest in the
Collateral, "UCC" shall mean the Uniform Commercial Code, as from time to time
in effect in the applicable jurisdiction whose law governs such perfection,
non-perfection or priority.

     "UNITED STATES" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.

     SECTION 1.02. Compliance Certificates and Opinions. Upon any application
or request by the Trust to the Indenture Trustee to take any action under any
provision of the Indenture, the Trust shall furnish to the Indenture Trustee a
Trust Certificate stating that all conditions precedent, if any, provided for in
the Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of the Indenture, no additional
certificate or opinion need be furnished.

     SECTION 1.03. Form of Documents Delivered to Indenture Trustee.

         (a) In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

                                       11


         (b) Any certificate or opinion of the Trust may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless the Trustee knows that the certificate or opinion or
representations with respect to the matters upon which its certificate or
opinion is based are erroneous. Any such certificate or opinion or any Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, the Trustee stating that the
information with respect to such factual matters is in the possession of the
Trustee, unless such counsel knows that the certificate or opinion or
representations with respect to such matters are erroneous. Any Opinion of
Counsel may be based on the written opinion of other counsel, in which event
such Opinion of Counsel shall be accompanied by a copy of such other counsel's
opinion and shall include a statement to the effect that such counsel believes
that such counsel and the Indenture Trustee may reasonably rely upon the opinion
of such other counsel. Any certificate or opinion of the Trust or of counsel may
be based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by an accountant or firm of accountants in the
employ of Principal Life, PFG or the Trust, unless the Trustee knows that the
certificate or opinion or representations with respect to the accounting matters
upon which its certificate or opinion is based are erroneous.

         (c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under the Indenture, they may, but need not, be consolidated and
form one instrument.

         (d) Wherever in the Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of compliance with any term of the Indenture, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to limit the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 7.01.

         (e) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in the Indenture (including one furnished
pursuant to specific requirements of the Indenture relating to a particular
application or request) shall substantially include:

                  (i) a statement that each individual signing such certificate
         or opinion has read such covenant or condition and the definitions in
         the Indenture relating thereto;

                  (ii) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                                       12


                  (iii) a statement that, in the opinion of each such
         individual, he or she has made such examination or investigation as is
         necessary to enable him or her to express an informed opinion as to
         whether or not such covenant or condition has been complied with; and

                  (iv) a statement as to whether, in the opinion of each such
         individual, such condition or covenant has been complied with.

     SECTION 1.04. Acts of Holders.

         (a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by the Indenture to be given or taken by any
Holder may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holder in person or by one or more
agents duly appointed in writing. Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by the Indenture to be given or
taken by Holders may, alternatively, be embodied in and evidenced by the record
of Holders of Notes voting in favor thereof, either in person or by proxies duly
appointed in writing, at any meeting of Holders of Notes duly called and held in
accordance with the provisions of Article 10, or a combination of such
instruments and any such record. Except as otherwise expressly provided in the
Indenture, such action shall become effective when such instrument or
instruments or record or both are delivered to the Indenture Trustee. Such
instrument or instruments and any such record (and the action embodied therein
and evidenced thereby) are sometimes referred to in the Indenture as the "ACT"
of the Holders signing such instrument or instruments or so voting at any
meeting. Proof of execution of any such instrument or of writing appointing any
such agent, or of the holding by any Person of a Note, shall be sufficient for
any purpose of the Indenture and (subject to Section 7.01) conclusive in favor
of the Indenture Trustee, and the Trust, if made in the manner provided in this
Section 1.04. The record of any meeting of Holders of Notes shall be proved in
the manner provided in Section 10.06. Without limiting the generality of this
Section 1.04, unless otherwise provided in or pursuant to the Indenture, a
Clearing System that is or whose nominee is a Holder of a Global Note may allow
its account holders who have beneficial interests in such Global Note credited
to accounts with such Clearing System to direct such Clearing System in taking
such action through such Clearing System's standing instructions and customary
practices. The Clearing System shall report only one result of its solicitation
of proxies to the Indenture Trustee.

         (b) Subject to Section 7.01, the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Whenever such execution is by a signer acting in a capacity other than his or
her individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his or her authority. The fact and date of the execution of
any such instrument or writing, or the authority of the Person executing the
same, may be proved in any other manner that the Indenture Trustee deems
sufficient.

                                       13


         (c) The ownership, principal amount and serial numbers of Notes held by
any Person, and the date of the commencement and the date of the termination of
holding the same, shall be proved by the Register.

         (d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Indenture Trustee or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Note.

         (e) Except as provided in subsection (f) below, if the Trust shall
solicit from the Holders of Notes any Act referred to in Section 1.04(a), the
Trust may, at its option, fix in advance a record date for the determination of
Holders entitled to vote or consent in connection with any such Act, but the
Trust shall have no obligation to do so. If such record date is fixed, such Act
may be given after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of Outstanding Notes
have authorized or agreed or consented to such Act, and for that purpose the
Outstanding Notes shall be computed as of such record date; provided, that no
such Act by Holders on such record date shall be deemed effective unless it
shall become effective pursuant to the provisions of the Indenture not later
than six months after the record date. Nothing in this subsection (e) shall be
construed to render ineffective any action taken by Holders of the requisite
principal amount of Outstanding Notes on the date such action is taken. Promptly
after any record date is set pursuant to this subsection (e), the Trust shall
cause notice of such record date and the proposed action by Holders to be given
to the Indenture Trustee in writing and to each Holder of the Notes in the
manner set forth in Section 1.06.

         (f) The Indenture Trustee may set any day as a record date for the
purpose of determining the Holders entitled to join in the giving or making of
(i) any notice delivered pursuant to Section 6.01(d), (ii) any declaration of
acceleration referred to in Section 6.02, (iii) any request to institute
proceedings referred to in Section 6.07(b) or (iv) any direction referred to in
Section 6.12. If such a record date is fixed pursuant to this subsection (f),
the relevant action may be taken or given after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Notes have authorized or agreed or consented to such
action, and for that purpose the Outstanding Notes shall be computed as of such
record date; provided, that no such action by Holders on such record date shall
be deemed effective unless it shall become effective pursuant to the provisions
of the Indenture not later than six months after the record date. Nothing in
this subsection (f) shall be construed to prevent the Indenture Trustee from
setting a new record date for any action for which a record date has previously
been set pursuant to this subsection (f) (whereupon the record date previously
set shall automatically and with no action by any Person be cancelled and of no
effect), and nothing in this subsection (f) shall be construed to render
ineffective any action taken by Holders of the requisite principal amount of
Outstanding Notes on the date such action is taken. Promptly after any record
date is set pursuant to this subsection (f), the Indenture Trustee shall cause
notice of such record date and the proposed action by Holders to be given to the
Trust in writing and to each Holder of the Notes in the manner set forth in
Section 1.06.

                                       14


     SECTION 1.05. Notices. Any request, demand, authorization, direction,
notice, consent, waiver or other action required or permitted by the Indenture
to be made upon, given or furnished to, or filed with, the Indenture Trustee,
the Registrar, the Transfer Agent, the Paying Agent, the Calculation Agent, the
Trust and the Rating Agencies shall be sufficient for every purpose under the
Indenture (unless otherwise expressly provided in the Indenture) if in writing
and sent by fax, telex, or mailed, first-class mail or overnight courier, in
each case postage prepaid, at the address specified in this Section 1.05 or at
any other address previously furnished in writing by one party to the other.

         Such notices shall be addressed

         if to the Indenture Trustee, to:

         Citibank, N.A.
         Citibank Agency & Trust
         388 Greenwich Street, 14th Floor
         New York, NY  10013
         Facsimile:  (212) 816-5527
         Attention:  Nancy Forte

         or if Citibank, N.A. is not acting as Indenture Trustee, then to the
         Indenture Trustee specified in Section C the Omnibus Instrument.

         if to the Registrar, Transfer Agent, Paying Agent and Calculation
         Agent, to:

         Citibank, N.A.
         Citibank Agency & Trust
         388 Greenwich Street, 14th Floor
         New York, NY  10013
         Facsimile:  (212) 816-5527
         Attention:  Nancy Forte

         if to the Trustee, to:

         U.S. Bank Trust National Association
         100 Wall Street, 16th Floor
         New York, New York  10005
         Attention: Adam Berman
         Facsimile: (212) 509-3384

         if to the Trust, to:

         Principal Life Income Fundings Trust (followed by the number of the
         Trust Designated in the Omnibus Instrument)
         c/o U.S. Bank Trust National Association
         100 Wall Street, 16th Floor
         New York, NY  10005
                                       15


         Telephone:  (212) 361-2458
         Facsimile:  (212) 509-3384
         Attention:  Adam Berman

         if to the Rating Agencies, to:

         Standard & Poor's Rating Services
         55 Water Street
         33rd Floor
         New York, New York  10041
         Facsimile:  (212)438-5215
         Attention:  Capital Markets

         Moody's Investors Service, Inc.
         Life Insurance Group
         99 Church Street
         New York, New York  10007
         Facsimile:  (212) 553-4805
         Attention:  Principal Life Income Fundings Trusts

     SECTION 1.06. Notice to Holders; Waiver.

         (a) Except as otherwise expressly provided in or pursuant to the
Indenture, notices to Holders required under the Notes shall be sufficiently
given upon the mailing by overnight courier or first-class mail (or equivalent),
or (if posted to an overseas address) by airmail, postage prepaid, of such
notices to each Holder of the Notes at their registered addresses as recorded in
the Register.

         (b) Where the Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Indenture Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver. In any case, neither the failure to give
such notice, nor any defect in any notice to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders, and any notice
which is mailed in the manner provided in the Indenture shall be conclusively
presumed to have been duly given.

         (c) In the case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Indenture
Trustee shall constitute a sufficient notification for every purpose under the
Indenture.

     SECTION 1.07. Severability. In case any provision in or obligation under
the Indenture or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby to the
fullest extent permitted under applicable law.

                                       16


     SECTION 1.08. Successors and Assigns. All covenants, stipulations,
promises and agreements in the Indenture by the Trust shall bind its successors
and assigns, whether so expressed or not.

     SECTION 1.09. Benefits of Indenture. Nothing in the Indenture or in any
Note, expressed or implied, shall give to any Person other than the parties
under the Indenture and their successors and the Holders, any legal or equitable
right, remedy or claim under the Indenture.

     SECTION 1.10. Language of Notices. Any request, demand, authorization,
direction, notice, consent, election or waiver required or permitted under the
Indenture shall be in the English language, except that, if the Trust so elects,
any published notice may also be in an official language of the country of
publication.

     SECTION 1.11. Governing Law.

         (a) The Indenture and the Notes (unless otherwise specified in the
Pricing Supplement) shall be governed by, and construed in accordance with, the
laws of the State of New York without regard to conflict of law principles,
except as required by mandatory provisions of law and except to the extent that
the validity or perfection of the Trust's ownership of the Funding Agreement and
Guarantee, the perfection of the Indenture Trustee's security interest therein,
or remedies under the Indenture in respect thereof may be governed by laws of a
jurisdiction other than the State of New York.

         (b) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE TRUST, THE ASSETS OF
THE TRUST, THE INDENTURE TRUSTEE, REGISTRAR, TRANSFER AGENT OR PAYING AGENT OR
ANY OTHER AGENT, ARISING OUT OF OR RELATING TO THE INDENTURE, ANY NOTE OR ANY
PORTION OF THE COLLATERAL MAY BE BROUGHT IN A UNITED STATES FEDERAL COURT OF
COMPETENT JURISDICTION LOCATED IN NEW YORK CITY, THE BOROUGH OF MANHATTAN, AND
BY EXECUTION AND DELIVERY OF THE INDENTURE EACH OF THE TRUST, THE INDENTURE
TRUSTEE, THE REGISTRAR, THE TRANSFER AGENT, THE PAYING AGENT AND ANY OTHER AGENT
(IN SUCH CAPACITIES) ACCEPT (AND WITH RESPECT TO THE TRUST, IN CONNECTION WITH
ITS PROPERTY ACCEPTS), GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURT AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS (EXCEPT TO THE EXTENT A UNITED STATES FEDERAL COURT RAISES SUCH ISSUE
ON ITS OWN MOTION) AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THE INDENTURE, ANY NOTE OR ANY PORTION OF THE
COLLATERAL.

     SECTION 1.12. Waiver of Jury Trial. EACH OF THE PARTIES TO THE INDENTURE
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE INDENTURE, THE NOTES OR ANY
DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. The
scope of this waiver is intended to encompass any and all disputes that may be
filed in any court and that relate to the subject

                                       17


matter of this transaction including without limitation contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
Each party under the Indenture acknowledges that this waiver is a material
inducement to enter into a business relationship, that such party has already
relied on the waiver in entering into the Indenture, and that such party will
continue to rely on the waiver in its related future dealings. Each party under
the Indenture further warrants and represents that it has reviewed this waiver
with its legal counsel, and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THE INDENTURE OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE INDENTURE. In the event of litigation, the Indenture may be filed as a
written consent to a trial by the court.

     SECTION 1.13. Counterparts. The Indenture and any amendments, waivers,
consents or supplements to the Indenture may be executed in any number of
counterparts, and by different parties to the Indenture in separate
counterparts, and each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one and the
same instrument. The Indenture shall become effective upon the execution of a
counterpart of the Indenture by each of the parties to the Indenture.

     SECTION 1.14. Third Party Beneficiaries. The Indenture will inure to the
benefit of and be binding upon the parties to the Indenture, and the Trustee and
their respective successors and permitted assigns.

     SECTION 1.15. Conflict with Trust Indenture Act. If any provision of the
Indenture limits, qualifies or conflicts with any duties imposed by any of
Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of
Section 318(c) thereof, such imposed duties shall control.

                                    ARTICLE 2
                                    THE NOTES

     SECTION 2.01. Forms Generally.

         (a) The Notes constitute direct, unconditional, unsubordinated and
secured non-recourse obligations of the Trust and rank equally among themselves.
The Notes shall be in substantially the form set forth in Exhibit A-1, Exhibit
A-2 and Exhibit A-3 attached to these Standard Indenture Terms, as applicable,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required by the Indenture or as may in the Trust's
judgment be necessary, appropriate or convenient to permit such Notes to be
issued and sold, or to comply, or facilitate compliance, with applicable laws,
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the
rules of any securities exchange on which such Notes may be listed, or as may,
consistently with the Indenture, be determined by the Trustee (based
conclusively on the advice of counsel) as evidenced by its execution thereof.
Any portion of the

                                       18


text of any Note may be set forth on the reverse thereof with an appropriate
reference on the face of the Note.

         (b) The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made a part of the Indenture, and, to the extent
applicable, the Indenture Trustee, by its execution and delivery of the
Indenture, and the Trust by its execution and delivery of the Indenture,
expressly agree to such terms and provisions and to be bound thereby.

         (c) Except as described in this Section 2.01(c), no Global Note
evidencing any of the Notes and deposited with or on behalf of any Clearing
System shall be exchangeable for Definitive Notes. Subject to the foregoing
sentence, if (i) such Clearing System notifies Principal Life that it is
unwilling or unable to continue as Depositary or Principal Life becomes aware
that the Clearing System has ceased to be a clearing agency registered under the
Securities Exchange Act and in any such case Principal Life fails to appoint a
successor depositary within sixty (60) calendar days after receiving the notice
from such Clearing System or becoming aware that such Clearing System is no
longer registered under the Exchange Act, (ii) an Event of Default shall have
occurred and is continuing with respect to the Notes and the Notes shall have
been accelerated in accordance with their terms or (iii) the Trust shall have
decided in its sole discretion that the Notes should no longer be evidenced
solely by one or more Global Notes, then, pursuant to written instructions by
Principal Life to the Indenture Trustee (in the case of clause (i)), or upon
written request of the Holder (or accountholder of such Clearing System with an
interest in the Notes) (in the case of clause (ii)), or pursuant to written
instructions by the Trust to the Indenture Trustee and Clearing System (in the
case of clause (iii)):

     (A) with respect to each Global Note evidencing such Notes, the Trust shall
         execute, and the Indenture Trustee shall authenticate and deliver,
         Definitive Notes in authorized denominations in exchange for the Global
         Note, in an aggregate principal amount equal to the Outstanding
         principal amount of the related Global Note. Upon the exchange of the
         Global Note for the Definitive Notes, such Global Note shall be
         cancelled by the Registrar. Definitive Notes issued in exchange for a
         Global Note pursuant to this Section 2.01(c) shall be registered in the
         Register in such names and in such denominations as the
         Clearing System for such Global Note, pursuant to the instructions from
         its direct or indirect participants or otherwise, shall instruct the
         Indenture Trustee, serving as custodian, on behalf of the nominee of
         the Depositary, of the Global Note. The Indenture Trustee shall
         immediately provide the information to the Registrar. Immediately after
         the authentication of the Definitive Notes by the Indenture Trustee,
         the Indenture Trustee shall deliver such Definitive Notes to the
         Holders of such Notes;

     (B) if Definitive Notes are issued in exchange for any portion of a Global
         Note after the close of business at the Office or Agency for such Note
         where such exchange occurs on (1) any Regular Record Date for such
         Notes and before the opening of business at such Office or Agency on
         the next Interest Payment Date, or (2) any Special Record Date for such
         Notes and before the opening of business at such Office or Agency on
         the related proposed date for payment of interest or Defaulted
         Interest, as the case may be, interest shall not be payable on such
         Interest Payment Date or proposed date for payment, as the case may be,
         in respect of such Definitive Notes, but shall be payable on such

                                       19


         Interest Payment Date or proposed date for payment, as the case may
         be, only to the Person to whom interest in respect of such portion of
         such Global Note shall be payable in accordance with the provisions of
         the Indenture; and

     (C) if for any reason Definitive Notes are not issued, authenticated and
         delivered to the Holders in accordance with paragraph (A) of this
         Section 2.01(c), then:

                  (1) the Clearing System or its successors may provide to each
            of its accountholders a statement of such accountholder's interest
            in the Notes evidenced by each Global Note held by such Clearing
            System or its successors, together with a copy of such Global Note;
            and

                  (2) subject to the limitations on individual Holder action
            contained in the Notes or the Indenture, each such accountholder or
            its successors and assigns (x) shall have a claim, directly against
            the Trust, for the payment of any amount due or to become due in
            respect of such accountholder's interest in the Notes evidenced by
            such Global Note, and shall be empowered to bring any claim, to the
            extent of such accountholder's interest in the Notes evidenced by
            such Global Note and to the exclusion of such Clearing System or its
            successors, that as a matter of law could be brought by the Holder
            of such Global Note and the Person in whose name the Notes are
            registered and (y) may, without the consent and to the exclusion of
            such Clearing System or its successors, file any claim, take any
            action or institute any proceeding, directly against the Trust, to
            compel the payment of such amount or enforce any such rights, as
            fully as though the interest of such accountholder in the Notes
            evidenced by such Global Note were evidenced by a Definitive Note in
            such accountholder's actual possession and as if an amount of Notes
            equal to such accountholder's stated interest were registered in
            such accountholder's name and without the need to produce such
            Global Note in its original form.

         Notwithstanding anything in this paragraph (C) to the contrary, the
         Indenture Trustee shall not be required to recognize any account holder
         or any of its successors and assigns referred to in said paragraph as a
         Holder for any purpose of the Indenture or the Notes and shall be
         entitled to treat the Person in whose name the Global Note is
         registered as a Holder for all purposes of the Indenture and the Notes
         if and until Definitive Notes are issued to and registered in the names
         of such accountholders or their successors and assigns.

The account records of any Clearing System or its successor shall, in the
absence of manifest error, be conclusive evidence of the identity of each
accountholder that has any interest in the Notes evidenced by the Global Note
held by such Clearing System or its successor and the amount of such interest.
Definitive Notes shall be issued only in denominations as specified in the
relevant Pricing Supplement.

                                       20


         (d) Subject to the other provisions of the Indenture, if any Global
Note is exchanged for Definitive Notes, then:

                  (i) the Trust, the Indenture Trustee and any Paying Agent will
            have the right to treat each Holder of Definitive Notes as the
            Person exclusively entitled to receive interest and other payments
            or property in respect of or in exchange for the Notes, and
            otherwise to exercise all the rights and powers with respect to any
            Note (subject to the record date provisions of the Indenture and of
            the Notes); and

                  (ii) the obligation of the Trust to make payments of
            principal, premium, if any, interest and other amounts with respect
            to the Notes shall be discharged at the time payment in the
            appropriate amount is made in accordance with the Indenture to each
            Holder.

     SECTION 2.02. No Limitation on Aggregate Principal Amount of Notes. The
aggregate principal amount of Notes which may be authenticated and delivered
under the Indenture is unlimited. Unless otherwise specified in the applicable
Pricing Supplement, the Notes shall be issued in denominations of $1,000 and any
larger amount that is a multiple of $1,000; the authorized denominations of
Notes that have a Specified Currency other than U.S. Dollars will be the
appropriate equivalent in such Specified Currency. The specific terms and
conditions of the Notes shall be set out in a Pricing Supplement, the Omnibus
Instrument and, if applicable, a supplemental indenture entered into pursuant to
Section 8.01(e).

     SECTION 2.03. Listing. If specified in the Pricing Supplement, the Notes
will be listed on the securities exchange set forth in such Pricing Supplement.

     SECTION 2.04. Redemption and Repayment.

         (a) Except as otherwise provided in the Pricing Supplement, a
supplemental indenture and the Notes or in Section 6.02, the Trust will redeem
the Notes only if Principal Life redeems the Funding Agreement securing such
Notes in an amount equal to the amount of the related Notes to be redeemed in
accordance with the terms of the Indenture and the Notes, and the Trust will not
redeem the Notes if Principal Life does not redeem the Funding Agreement
securing such Notes in an amount equal to the amount of the Notes to be redeemed
in accordance with the Indenture and the Notes. Unless otherwise specified in
the relevant Pricing Supplement and a supplemental indenture or the Notes, the
Trust may not redeem the Notes after the date that is thirty (30) calendar days
prior to the Stated Maturity Date.

         (b) If, but only if, specified in the Pricing Supplement and a
supplemental indenture or the Notes, such Notes will be repayable at the option
of the Holders thereof in accordance with the repayment provisions included in
the Pricing Supplement and supplemental indenture or the Notes.

         (c) In connection with the redemption by the Trust of the Notes under
Section 2.04(a), upon receipt by the Trust of notice of redemption of the
Funding Agreement from Principal Life, the Trust will promptly give written
notice of such redemption to the Indenture Trustee and the Indenture Trustee
will give written notice to the Holders in accordance with

                                       21


Section 1.06 not less than thirty (30) calendar days and no more than sixty (60)
calendar days prior to the date set for such redemption. All notices of
redemption shall identify the Notes to be redeemed (including the CUSIP numbers)
and shall state:

                  (i) the redemption date;

                  (ii) the Redemption Price or, if not then ascertainable, the
         manner of calculation thereof;

                  (iii) that on the redemption date the Redemption Price will
         become due and payable on the Notes to be redeemed and that interest
         thereon will cease to accrue on and after said date; and

                  (iv) the place or places where the Notes to be redeemed are to
         be surrendered for payment of the Redemption Price.

         (d) Prior to 10:00 a.m. New York City time on the redemption date, the
Trust shall deposit with the Paying Agent an amount of money sufficient to pay
the Redemption Price of and accrued and unpaid interest on all Notes which are
to be redeemed on that date.

         (e) Upon notice of redemption having been given pursuant to Section
2.04(c), the Notes to be so redeemed shall, on the redemption date, become due
and payable at the Redemption Price therein specified, and from and after such
date (unless the Trust shall default in the payment of the Redemption Price and
accrued interest, if any) such Notes shall cease to bear or accrue any interest.
Upon surrender of the Notes for redemption in accordance with said notice, such
Notes shall be paid by the Trust at the Redemption Price, together with any
accrued but unpaid interest to but not including the redemption date.

         (f) The election of the Trust to redeem any Notes shall be evidenced by
a Trust Certificate. In case of any redemption at the election of the Trust, the
Trust shall, at least forty-five (45) calendar days prior to the redemption date
fixed by the Trust (unless a shorter notice shall be satisfactory to the
Indenture Trustee), notify the Indenture Trustee of such redemption date, and of
the principal amount of Notes to be redeemed. In the case of any redemption of
Notes (a) prior to the expiration of any restriction on such redemption provided
in the terms of such Notes or elsewhere in the Indenture, or (b) pursuant to an
election of the Trust which is subject to a condition specified in the terms of
such Notes or elsewhere in the Indenture, the Trust shall furnish the Indenture
Trustee with a Trust Certificate evidencing compliance with such restriction or
condition.

         (g) If less than all of the Notes are to be redeemed (unless such
redemption affects only a single Note), the particular Notes to be redeemed
shall be selected not more than sixty (60) calendar days prior to the redemption
date by the Indenture Trustee, from the Outstanding Notes not previously called
for redemption, by lot or pro rata, in its reasonable discretion, in accordance
with the customary procedures of the Indenture Trustee; provided that the
unredeemed portion of the principal amount of any Note shall be in an authorized
denomination (which shall not be less than the minimum authorized denomination)
for such Note; provided further, that if at the time of redemption such Notes
are registered as Global

                                       22


Notes, the Depositary shall determine, in accordance with its procedures, the
principal amount of such Notes to be redeemed by each of the Depositary's
participants.

     The Indenture Trustee shall promptly notify the Trust in writing of the
Notes selected for redemption as aforesaid and, in the case of any Notes
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.

     For all purposes of the Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Notes shall relate, in the case of
any Notes redeemed or to be redeemed only in part, to the portion of the
principal amount of such Notes which has been or is to be redeemed.

         (h) Any Note which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Trust or the Indenture Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Trust and the Indenture Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Trust shall
execute, and the Indenture Trustee shall authenticate and deliver to the Holder
of such Note without service charge, a new Note or Notes, of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Note so
surrendered.

         (i) The Notes will not be subject to, or entitled to the benefit of,
any sinking fund unless otherwise specified in the Pricing Supplement and a
supplemental indenture of the Notes.

     SECTION 2.05. Execution, Authentication and Delivery Generally.

         (a) Upon the execution of any Terms Agreement pursuant to the
Distribution Agreement (if the Relevant Agents agree to purchase the Notes on a
principal basis), the acceptance of an offer to purchase Notes solicited by the
Relevant Agents on an agency basis, or the acceptance of a direct offer of Notes
for sale by the Trust, the Trust shall, as soon as practicable but in any event
(unless otherwise agreed by the parties) not later than 11:00 a.m. (New York
City time) on the second Business Day following the date of Principal Life's
acceptance of the offer for the purchase of Notes:

                  (i) confirm by fax to the Indenture Trustee, the Paying Agent
         and the Registrar, all such information as the Indenture Trustee, the
         Paying Agent or the Registrar may reasonably require to carry out their
         respective functions under the Indenture, including, in particular, the
         settlement and payment procedures that will apply to the relevant Notes
         and, if applicable, the account of the Trust to which payment should be
         made;

                  (ii) deliver a copy of the Pricing Supplement or duly executed
         supplemental indenture in relation to the relevant Notes to the
         Indenture Trustee, the Paying Agent and the Registrar; and

                  (iii) unless a Global Note is to be used and the Trust shall
         have provided such Global Note to the Registrar pursuant to Section
         2.05(c), ensure

                                       23


         that there is delivered to the Registrar a stock of
         Definitive Notes (in unauthenticated form and with the names of the
         registered Holders left blank but duly executed on behalf of the Trust
         and otherwise complete) in relation to the relevant Notes.

         (b) The Trust will deliver to the Indenture Trustee on the Original
Issue Date for the Notes a duly executed original of the Funding Agreement,
Guarantee and Trust Agreement (unless previously delivered) and all
documentation relating to the foregoing for the Notes.

         (c) The Trust may, at its option, and shall, at the request of the
Registrar, deliver from time to time to the Registrar a stock of Global Notes
(in unauthenticated form but duly executed on behalf of the Trust).

         (d) The Registrar shall, having been advised in accordance with Section
2.05(a) on behalf of the Trust, on which securities exchange, if any, the Notes
are to be listed, deliver a copy of the Pricing Supplement or supplemental
indenture in relation to each relevant Notes to such exchange or the relevant
listing agent for such exchange as soon as practicable but in any event no later
than two (2) Business Days prior to the proposed Original Issue Date therefor.

         (e) Having received from the Trust the documents referred to in Section
2.05(a), (b) and (c) (to the extent applicable) (such documents constituting,
for all purposes of the Indenture, a Trust Order for the authentication and
delivery of the applicable Notes), on or before 10:00 a.m. (New York City time)
on the Original Issue Date in relation to the Notes (unless otherwise agreed by
the parties), the Indenture Trustee shall authenticate and deliver the relevant
Global Note to the relevant custodian for DTC and/or any other relevant Clearing
System or otherwise in accordance with such Clearing System's procedures. The
Indenture Trustee shall give instructions to DTC and/or any other relevant
Clearing System to credit Notes represented by a Global Note registered in the
name of a nominee for such Clearing System, to the Indenture Trustee's
distribution account and to hold each such Note to the order of the Trust
pending delivery to the Relevant Agent(s) on a delivery against payment basis
(or on such other basis as shall have been agreed between the Trust and the
Relevant Agent(s) and which the Indenture Trustee has been notified) in
accordance with the normal procedures of DTC or such other Clearing System, as
the case may be and, following payment (unless otherwise agreed), to debit the
Notes represented by such Global Note to such securities account(s) as shall
have been notified in writing to the Indenture Trustee by the Trust. The
Indenture Trustee shall on the Original Issue Date in respect of the relevant
Notes, and upon receipt of funds from the Relevant Agent(s), transfer, or cause
to be transferred, the proceeds of issue (net of any applicable commissions,
fees or like amounts specified in writing by Principal Life) to or as directed
by Principal Life on behalf of the Trust to satisfy the deposit requirement
pursuant to the Funding Agreement (as specified by Principal Life in such
direction).

         If no such securities account(s) shall have been specified, or the
relevant Notes is not intended to be cleared through any Clearing System, the
Indenture Trustee shall authenticate and make available at its specified office
on the Original Issue Date in respect of the relevant

                                       24

Notes the relevant Global Note or the relevant Definitive Notes, as the case
may be, duly executed and made available to the Indenture Trustee by the Trust.

         (f) If the Indenture Trustee should pay an amount (an "ADVANCE") to the
Trust in the belief that a payment has been or will be received from the
Relevant Agents, and if such payment is not received by the Indenture Trustee on
the date that the Indenture Trustee pays the Trust, the Trust shall forthwith
repay the advance (unless prior to such repayment the payment is received from
the Relevant Agents) and shall pay interest on such amount which shall accrue
(after as well as before judgment) on the basis of a year of 360 days (365 days
(366 days in the case of a leap year) in the case of an advance paid in
Sterling) and the actual number of days elapsed from the date of payment of such
advance until the earlier of (i) repayment of the advance or (ii) receipt by the
Indenture Trustee of the payment from the Relevant Agents, and at the rate per
annum which is the aggregate of one percent per annum and the rate determined
and certified by the Indenture Trustee and expressed as a rate per annum as
reflecting its cost of funds for the time being in relation to the unpaid
amount.

         (g) The Notes shall be executed on behalf of the Trust by a Responsible
Officer of the Trustee. The signature of any of these officers on the Notes may
be manual or facsimile.

         Notes bearing the manual or facsimile signatures of individuals who
were at any time Responsible Officers of the Trustee shall bind the Trust,
notwithstanding that any such individuals have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold such offices at
the date of such Notes.

         Each Note shall be dated the date of its authentication.

         No Note shall be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for in the
Indenture executed by the Indenture Trustee by manual signature of an authorized
officer, and such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
under the Indenture.

         The Indenture Trustee's certificate of authentication shall be in
substantially the following form:

         This is one of the Notes of Principal Life Income Fundings Trust
specified on the face of this Note referred to in the within-mentioned
Indenture.

                                       CITIBANK, N.A.,
                                       As Indenture Trustee


                                       By:_______________________
                                             Authorized Signatory

                                       25


         If Citibank, N.A. is not acting as Indenture Trustee, then the acting
Indenture Trustee's certificate of authentication shall be in the form specified
in Section C of the Omnibus Instrument.

         Notes bearing the manual signatures of individuals who were at any time
authorized officers of the Indenture Trustee shall bind the Trust,
notwithstanding that any such individuals have ceased to hold such offices prior
to the delivery of such Notes or did not hold such offices at the date of such
Notes.

         In authenticating Notes under the Indenture, the Indenture Trustee
shall be entitled to conclusively assume that any Note authenticated by it has
been duly executed on behalf of, and is a legal, valid, binding and enforceable
obligation of, the Trust and is entitled to the benefits of the Indenture, and
that the Trust Agreement, the Funding Agreement and the Guarantee have been duly
executed by, and are the legal, valid, binding and enforceable obligations of,
the parties thereto.

         (h) The Trust undertakes to notify the Paying Agent, the Registrar and,
if different, the Indenture Trustee, in writing, of any changes in the identity
of the agents appointed generally in respect of the Program.

     SECTION 2.06. Registration. All Notes shall be registered and may be
represented either as Global Notes or Definitive Notes. Unless otherwise
specified in the relevant Pricing Supplement, Global Notes will be registered in
the name of a nominee for, and deposited with, a custodian for DTC. The
Registrar shall maintain a register (in the Indenture sometimes referred to as
the "REGISTER") in which, subject to such reasonable regulations as it may
prescribe, the Registrar shall provide for the registration of the Notes and
registration of transfer of the Notes. The Register shall be in written form in
English or in any other form capable of being converted into such form within a
reasonable time. The Indenture Trustee is hereby initially appointed as the
Registrar. In the event that the Indenture Trustee shall not be the Registrar,
it shall have the right to examine the Register at all reasonable times. Subject
to the definition of "Outstanding" in Section 1.01, the Trust, the Indenture
Trustee, the Registrar or the Paying Agent or any other Agent may become the
owner or pledgee of Notes and may deal with such Notes with the same rights of
any other Holder of such Notes.

     SECTION 2.07. Transfer.

         (a) Subject to Section 2.01(c) and (d), (A) upon surrender for
registration of transfer of any Note in accordance with its terms, the Trustee,
on behalf of the Trust shall execute, and the Indenture Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes denominated as authorized in or pursuant to
the Indenture, of a like aggregate principal amount bearing a number not
contemporaneously outstanding and containing identical terms and provisions and
(B) at the option of the Holder, Notes may be exchanged, in accordance with
their terms, for other Notes containing identical terms and provisions, in any
authorized denominations, and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at the Office or Agency of the Indenture
Trustee. Whenever any Notes are surrendered for exchange as contemplated by this
Section 2.07(a), the Trust shall execute, and the Indenture Trustee shall
authenticate and deliver, the Notes which the

                                       26


Holder making the exchange is entitled to receive. Definitive Notes shall not be
exchanged for Global Notes. Beneficial interests in Global Notes may be
transferred or exchanged only through the Depositary. No Global Note may be
transferred except as a whole by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary, or by the Depositary or another nominee
of the Depositary to a successor of the Depositary or a nominee of a successor
to the Depositary. With respect to any Global Note, the Depositary or its
nominee is the Holder of such Global Note for the purposes of the Indenture.
Except as set forth in Section 2.01(c), the beneficial owners of any Global Note
will not be entitled to receive Definitive Notes and shall not be considered
"Holders" under the Indenture.

         (b) All Notes issued upon a registration of transfer or exchange of
Notes shall be the valid obligations of the Trust evidencing the same debt and
entitling the Holders thereof to the same benefits under the Indenture as the
Notes surrendered upon such registration of transfer or exchange.

         (c) No service charge shall be made for any registration of transfer or
exchange, of Notes, but the Indenture Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes (other than
certain exchanges not involving any transfer).

         (d) Every Note presented or surrendered for registration of transfer or
for exchange shall be duly endorsed, or be accompanied by a written instrument
of transfer in a form satisfactory to the Trust and the Indenture Trustee duly
executed, by the Holder thereof or his attorney duly authorized in writing.

     SECTION 2.08. Mutilated, Destroyed, Lost and Stolen Notes.

         (a) If (i) any mutilated Note is surrendered to the Indenture Trustee
directly or through any Paying Agent or (ii) in the case of an allegedly
destroyed, lost or stolen Note, the Indenture Trustee receives evidence to its
satisfaction of the destruction, loss or theft of the Note and there is
delivered to the Indenture Trustee, the Registrar and the Trust such security or
indemnity as may be required by the Indenture Trustee, the Registrar and the
Trust to save the Indenture Trustee, the Registrar and the Trust harmless, then
in either case the Trust shall execute and the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of such mutilated,
destroyed, lost or stolen Note, a new Note, of the same maturity, tenor and
principal amount as such mutilated, destroyed, lost or stolen Note, bearing a
number not contemporaneously outstanding; provided, however, that if any such
mutilated, destroyed, lost or stolen Note shall have become or shall be about to
become due and payable, instead of issuing a new Note, the Trust may pay such
Note without surrender of such Note, except that any mutilated Note shall be
surrendered.

         (b) Upon the issuance of any new Note under this Section 2.08, the
Indenture Trustee or the Trust may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee, Registrar or any Paying Agent) in connection therewith.

                                       27


         (c) Every new Note issued pursuant to this Section 2.08 in lieu of any
destroyed, lost or stolen Note shall constitute a separate obligation of the
Trust, whether or not the destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of the
Indenture equally and proportionately with any and all other Notes duly issued
under the Indenture. The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.

     SECTION 2.09. Payment of Interest; Rights To Interest Preserved.

         (a) The Notes shall bear interest at a rate and on terms stated on the
Notes.

         (b) Any interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date, shall be paid to the Person
in whose name that Note is registered at the close of business on the Regular
Record Date for such interest payment (except that interest, if any, on any Note
due on the Maturity Date will be paid to the Person to whom the principal of the
Note is paid).

         (c) Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (in the Indenture called
"DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of their having been such Holder, and
such Defaulted Interest shall be paid by the Trust to the Persons in whose names
such Notes (or their respective predecessor Notes) are registered at the close
of business on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. The Trust shall notify the
Indenture Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Note and the date of the proposed payment. Thereupon the Indenture
Trustee shall fix a date for the payment of such Defaulted Interest which shall
be not more than fifteen (15) days and not less than ten (10) days prior to the
date of the proposed payment and not less than ten (10) days after the receipt
by the Indenture Trustee of the notice of the proposed payment (the "SPECIAL
RECORD DATE"). The Indenture Trustee shall promptly notify the Trust of such
Special Record Date and, in the name of the Trust shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date therefor
to be given to each Holder in accordance with Section 1.06. The Trust may make
payment of any Defaulted Interest on the Notes in any other lawful manner not
inconsistent with the requirements of any securities exchange, if any, on which
such Notes may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Trust to the Indenture Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Indenture Trustee. Subject to the foregoing provisions of
this Section, each Note delivered under the Indenture upon registration of
transfer of or in exchange for or in lieu of any other Note shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Note.

     SECTION 2.10. Cancellation. All Notes surrendered for payment, registration
of transfer or exchange shall, if surrendered to any Person other than the
Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly
cancelled by it. Principal Life or any Affiliate thereof shall promptly deliver
to the Indenture Trustee for cancellation any Note previously authenticated and
delivered under the Indenture that Principal Life or such Affiliate

                                       28


may have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly cancelled by the Indenture Trustee. No Notes shall be authenticated in
lieu of or in exchange for any Notes cancelled as provided in this Section,
except as expressly permitted by the Indenture. All cancelled Notes held by the
Indenture Trustee shall be disposed of by the Indenture Trustee in accordance
with its customary procedures, unless the Trust shall otherwise direct by a
Trust Order.

     SECTION 2.11. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Trust, the Indenture Trustee, the
Registrar, the Paying Agent, any other Agent, and any other agent of the Trust,
or the Indenture Trustee may treat the Person in whose name any Note is
registered as the absolute and sole owner of such Note for the purpose of
receiving payment of the principal of, any premium, or interest on or any
Additional Amounts with respect to such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and, except as otherwise
required by applicable law, none of the Trust, the Indenture Trustee, the
Registrar, the Paying Agent, any other Agent, or any other agent of the Trust or
the Indenture Trustee shall be affected by notice to the contrary.

     SECTION 2.12. Tax Treatment; Tax Returns and Reports.

         (a) The Trust and the Trust Beneficial Owner agree, and by acceptance
of a beneficial interest in a Note, each holder of a beneficial interest in a
Note agrees, for U.S. federal, state and local income and franchise tax
purposes, to (i) disregard the Trust and (ii) treat such Note as debt of
Principal Life. The Trust covenants that it shall take no action inconsistent
with such treatment (including, without limitation, under Treasury Regulations
Section 301.7701-2 or 301.7701-3 (the "check-the-box regulation")). To the
extent that it is ultimately determined that the Trust cannot be disregarded for
United States federal, state and local income or franchise tax purposes, and
that the Notes are treated as undivided ownership interests in the Trust, the
Trust and the Trust Beneficial Owner agree, and by acceptance of a beneficial
interest in a Note each holder of a beneficial interest in a Note agrees, to
treat (i) the Trust as a "grantor trust" under Subpart E of Part I of Subchapter
J of the Code (or the state or local equivalent), owned by the holders of
beneficial interests in the Notes and the Trust Beneficial Owner and (ii) the
Funding Agreement as debt of Principal Life.

         (b) The Trust Agreement provides that the Trustee shall prepare and
file or cause to be prepared or filed, consistent with the treatment of the
Trust as disregarded, all federal, state and local income tax and information
returns and reports required to be filed with respect to the Trust and the Notes
under any applicable federal, state or local tax statute or any rule or
regulation under any of them. The Trust Agreement provides that the Trustee
shall keep copies or cause copies to be kept of any such tax and information
returns and reports required to be filed. The Indenture Trustee agrees to
provide to the Trustee such information, upon receipt of written request from
the Trust, as is necessary for the Trustee to fulfill its obligations under this
Section 2.12.

     SECTION 2.13. No Association. Nothing set forth in the Indenture shall
be construed to constitute the Holders of Notes, from time to time, as members
of an association.

                                       29


     SECTION 2.14. Administrative Procedures. The Indenture Trustee shall
comply with the Procedures (as defined in the Distribution Agreement), as they
may be amended from time to time in accordance with the terms of the
Distribution Agreement.

                                    ARTICLE 3
                    COVENANTS, REPRESENTATIONS AND WARRANTIES

     SECTION 3.01. Payment of Principal and any Premium, Interest and
Additional Amounts. The Trust covenants and agrees, for the benefit of the
Holders of the Notes, that it will:

         (a) Pay or cause to be paid to the Paying Agent on or before the date
on which any payment becomes due, an amount equal to the amount of principal
(and premium, if any) and interest and any Additional Amount (if applicable)
payable in respect of the Notes then becoming due in respect of the Notes.

         (b) Pay each amount payable to the Paying Agent under Section 3.01(a)
by transfer of immediately available funds denominated in the Specified Currency
not later than 10:00 a.m. (at the Place of Payment) on the date when such
amounts are due and payable in respect of the Notes.

         (c) Confirm, before 10:00 a.m. (at the Place of Payment) on the second
Business Day before the due date of each payment by it under Section 3.01(a) to
the Paying Agent by confirmed facsimile, that irrevocable instructions have been
given by it, for the transfer of the relevant funds to the Paying Agent and the
name and the account of the bank through which such payment is being made.

For purposes of this Section 3.01, an installment of principal, premium, if any,
or interest and any other amount payable in respect of the Notes shall be
considered paid on the date it is due if the Trust has deposited, or caused to
be deposited, with the Paying Agent by such date money designated for, and
capable of being applied towards, and sufficient to pay such installment.

     SECTION 3.02. Collection Account. The Indenture Trustee shall, on or
prior to the initial Original Issue Date, establish a non-interest bearing
account with the Indenture Trustee or such other depository institution that is
rated at least AA- or Aa3 by a nationally recognized statistical rating
organization as may be designated by the Trustee, in the name of the Trust,
which account shall collect payments received under the applicable Funding
Agreement and/or related Guarantee and shall be segregated from other accounts
held by the Indenture Trustee or such other depositary institution.

     SECTION 3.03. Agreements of the Paying Agent. The Paying Agent agrees
that:

         (a) The Paying Agent shall be entitled to deal with each amount paid to
it under the Indenture in the same manner as other amounts paid to it as a
banker by its customers provided that:

                                       30


                  (i) the Paying Agent shall not, against the Trust or any
         Holder of a Note, exercise any lien, right of set-off or similar claim
         in respect thereof (except as otherwise provided or permitted under the
         Indenture);

                  (ii) the Paying Agent shall not be liable to any Person for
         interest thereon;

                  (iii) the Paying Agent need not segregate any money held by it
         except as required by law or as otherwise provided under the Indenture;
         and

                  (iv) the Paying Agent shall comply with the provisions of
         Section 317(b) of the Trust Indenture Act and agrees that it will,
         during the continuance of any default by the Trust (or any other
         obligor upon the Notes) in the making of any payment in respect of the
         Notes, upon the written request of the Indenture Trustee, forthwith pay
         to the Indenture Trustee all sums held in trust by such Paying Agent
         for payment in respect of the Notes.

         (b) The Paying Agent shall pay or cause to be paid by transfer of
immediately available funds denominated in the Specified Currency to the Holders
all moneys received by the Paying Agent for such purpose from the Trust pursuant
to Section 3.01. In the event a Note is issued between a Regular Record Date or
Special Record Date and the related Interest Payment Date, interest for the
period beginning on the original issue date for such Note or the previous
Interest Payment Date, as the case may be, and ending on the subject Interest
Payment Date will be paid on the immediately following Interest Payment Date to
the Person who was the registered Holder of such Note as of the immediately
preceding Regular Record Date. With respect to Global Notes, the Paying Agent
shall pay principal, premium, if any, interest and any other amounts due on such
Global Notes in accordance with the Notes and the arrangements established by
and between the Paying Agent and the Depositary. Notwithstanding anything in the
Indenture to the contrary, payments of principal and premium, if any, in respect
of Definitive Notes on the Maturity Date shall be made as provided in or
pursuant to the Indenture in immediately available funds against presentation
and surrender of the relevant Definitive Notes at the designated office of the
Registrar in The City of New York, as provided in the Indenture or in the
applicable Definitive Note. Payments of interest and other amounts due and
owing, if any, on the Maturity Date of Definitive Notes shall be made to the
Person to whom payment of the principal thereof and premium, if any, thereon
shall be made. Notwithstanding anything in the Indenture to the contrary,
interest on Definitive Notes other than on the Maturity Date shall be paid to
the person shown in the applicable Register at the close of business on the
Regular Record Date or Special Record Date, as applicable, as provided in or
pursuant to the Indenture before the due date for payment thereof.
Notwithstanding anything in the Indenture to the contrary, payments of interest
and other amounts due and owing on each Definitive Note other than on the
Maturity Date shall be made in the currency in which such payments are due by
check drawn on a bank in the Principal Financial Center of the country of the
Specified Currency and mailed to the Holder (or to the first named of joint
holders) of such Definitive Note at its address appearing in the applicable
Register. Notwithstanding the foregoing, the Paying Agent shall make, or cause
to be made, payments of interest and other amounts due and owing, if any, on a
Definitive Note on any Interest Payment Date other than the Maturity Date to
each Holder of $10,000,000 (or, if the Specified Currency is other than U.S.
Dollars, the equivalent thereof in

                                       31


the particular Specified Currency) or more in aggregate principal amount of
Definitive Notes by wire transfer of immediately available funds if the
applicable Holder has delivered appropriate wire transfer instructions in
writing to the Paying Agent not less than fifteen (15) calendar days prior to
the particular Interest Payment Date. Any such wire transfer instructions
received by the Paying Agent shall remain in effect until revoked by the
applicable Holder. All moneys paid to the Paying Agent by the Trust in respect
of any Note shall be held by the Paying Agent from the moment when such moneys
are received until the time of actual payment thereof, for the persons entitled
thereto, and shall be applied in accordance with Section 3.03(c) through (g);
provided, that the obligation of the Paying Agent to hold such moneys shall be
subject to the provisions of Section 3.08.

         (c) The Paying Agent acting through its specified office shall make
payments of interest and Additional Amounts (if applicable) or, as the case may
be, principal in respect of the Notes in accordance with the terms thereof and
of the Indenture, provided that such Paying Agent shall not be obligated (but
shall be entitled) to make such payments if it is not able to establish that it
has received (whether or not at the due time) the full amount of the relevant
payment due to it under Section 3.01(a). Payment of any Note redemption amount
(together with accrued interest) due in respect of Notes will be made against
presentation and surrender of the relevant Notes at the specified office of the
Paying Agent, subject to Section 2.04(h). Payment of amounts (whether principal,
interest or otherwise) due in respect of Notes will be paid by the Paying Agent
to the Holder thereof (or, in the case of joint Holders, the first named) which
shall be the person appearing as Holder in the register kept by the Registrar as
at the close of business (local time in the place of the specified office of the
Registrar) on the Regular Record Date.

         (d) If a Paying Agent makes any payment in accordance with paragraph
(c), it shall be entitled to appropriate for its own account out of the funds
received by it under Section 3.01(a) an amount equal to the amount so paid by
it.

         (e) If a Paying Agent makes a payment in respect of Notes at a time at
which it has not received the full amount of the relevant payment due to it
under Section 3.01(a) and is not able to reimburse itself out of funds received
by it under Section 3.01(a) therefor by appropriation under this Section
3.03(e), the Trust shall from time to time, on demand, pay to the Paying Agent
for its own account:

                  (i) the amount so paid out by such Paying Agent and not so
         reimbursed to it; and

                  (ii) interest on such amount from the date on which such
         Paying Agent made such payment until the date of reimbursement of such
         amount;

         provided that any payment made under clause (i) above shall satisfy pro
         tanto the Trust's obligations under Section 3.01(a).

         (f) Interest shall accrue for the purpose of Section 3.03(e)(ii) (as
well after as before judgment) on the basis of a year of 360 days (365 days (366
days in the case of a leap

                                       32


year) in the case of an amount in Sterling) and the actual number of days
elapsed and at the rate per annum which is the aggregate of one percent per
annum and the rate per annum specified by the Paying Agent as reflecting its
cost of funds for the time being in relation to the unpaid amount.

         (g) If at any time and for any reason a Paying Agent makes a partial
payment in respect of any Note surrendered for payment to it, such Paying Agent
shall endorse thereon and in the Register a statement indicating the amount and
date of such payment.

     SECTION 3.04. Maintenance of Office or Agency.

         (a) The Trust will maintain in the Place of Payment an Office or Agency
where Notes may be presented or surrendered for payment, where Notes may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trust in respect of the Notes and the Indenture may be
served; provided, however, that if the Notes are listed on any stock exchange
and the rules of such stock exchange shall so require, the Trust shall maintain
an Office or Agency in any other required city so long as the Notes are listed
on such exchange. The Trust will give prompt written notice to the Indenture
Trustee of the location, and any change in the location, of such Office or
Agency. If at any time the Trust shall fail to maintain any such required Office
or Agency or shall fail to furnish the Indenture Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Indenture Trustee and the Trust
hereby appoints the Indenture Trustee as its agent to receive such respective
presentations, surrenders, notices and demands. The Trust shall promptly notify
the Indenture Trustee of the name and address of each Paying Agent (if different
than the Indenture Trustee) appointed by it and will notify the Indenture
Trustee of the resignation or termination of any Paying Agent.

         (b) The Trust may also from time to time designate one or more other
Offices or Agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Trust of its obligation to maintain the Offices or Agencies for Notes in the
Place of Payment for the foregoing purposes. The Trust shall give prompt written
notice to the Indenture Trustee of any such designation or rescission and of any
change in the location of any such Office or Agency.

         (c) Unless otherwise provided in or pursuant to the Indenture, the
Trust hereby appoints the Indenture Trustee as Paying Agent, Registrar and
Transfer Agent.

     SECTION 3.05. Duties of the Agents.

         (a) The Trust shall provide to the Paying Agent sufficient copies of
all documents required to be available for inspection as provided in the
Registration Statement or the Pricing Supplement in respect of the Notes.

         (b) To the extent permitted by applicable law, the Paying Agent shall
make available for inspection during normal business hours at its specified
office such documents as may be specified as so available at the specified
office of the Paying Agent in respect of the Notes, or as may be required by any
stock exchange on which the Notes may be listed.

                                       33


         (c) Notwithstanding anything to the contrary, the Trust shall be solely
responsible for ensuring that each Note to be issued or other transactions to be
effected under the Indenture shall comply with all applicable laws and
regulations of any governmental or other regulatory authority in connection with
any Note and that all necessary consents and approvals of, notifications to and
registrations and filings with, any such authority in connection therewith are
effected, obtained and maintained in full force and effect.

         (d) The Paying Agent shall collect all forms from Holders or, in the
case of Notes held in a Clearing System, from the relevant Clearing System, that
are required to exempt payments under the Notes, the related Guarantee, and/or
the related Funding Agreement, from United States federal income tax
withholding. The Paying Agent shall (i) withhold from each payment under the
Indenture or under any Note any and all United States federal or state
withholding taxes applicable thereto as required by law and (ii) file any
information reports as it may be required to file under applicable law.

         (e) Each Agent shall be obligated to perform such duties and only such
duties as are set out in the Indenture and no implied duties or obligations
shall be read into the Indenture against such Agent.

         (f) Each Agent shall be protected and shall incur no liability for or
in respect of any action taken, omitted or suffered in reliance upon any
instruction, request or order from the Trust or any notice, resolution,
direction, consent, certificate, affidavit, statement, facsimile, telex or other
paper or document (duly signed or which it believes in good faith to have been
duly signed, where applicable) which it believes in good faith to be genuine and
to have been delivered, signed or sent by the proper party or parties.

         (g) Each Agent and any of its officers, directors, employees or
controlling persons may become the owner of, or acquire any interest in, any
Note, with the same rights that it or he would have if it or he were not
appointed under the Indenture, and may engage or be interested in, any financial
or other transaction with the Trust, PFG or Principal Life, or any Affiliate
thereof, or may act as depositary, trustee or agent for any committee or body of
Holders, as freely as if it or he were not appointed under the Indenture.

         (h) Each Agent may consult with legal and other professional advisers
and the opinion of the advisers shall be full and complete protection in respect
of action taken, omitted or suffered under the Indenture in good faith and in
accordance with the opinion of the advisers.

         (i) Under no circumstances will the Paying Agent or any other Agent be
liable to the Trust, or any other party to the Indenture for any consequential
loss (being loss of business, goodwill, opportunity or profit), punitive damages
or indirect loss even if advised of the possibility of such loss.

     SECTION 3.06. Duties of the Transfer Agent. If and to the extent
specified in the terms and conditions of the Notes or if otherwise requested by
the Trust or Indenture Trustee, the Transfer Agent shall in compliance with the
Notes and the Indenture:

         (a) Receive requests from Holders of Notes for the transfer of
Definitive Notes, inform the Registrar in writing of the receipt of such
requests, forward the deposited

                                       34


Definitive Note(s) to or to the order of the Registrar and assist in the
issuance of a new Definitive Note and in particular, without limitation, notify
the Registrar in writing of (i) the name and address of the Holder of the
Definitive Note, (ii) the serial number and principal amount of the Definitive
Note, (iii) in the case of a transfer of a portion of the Note only, the
principal amount of the Definitive Note to be so transferred and (iv) the name
and address of the transferee to be entered on the Register;

         (b) Make available for collection by each relevant Holder new
Definitive Notes;

         (c) Accept surrender of Definitive Notes and assist in effecting final
payment of the Notes on the due date for payment;

         (d) Keep the Registrar informed of all transfers; and

         (e) Carry out such other acts as may reasonably be necessary to give
effect to the Notes and the Indenture.

     SECTION 3.07. Duties of the Registrar.

         (a) The Registrar shall maintain a Register which shall show the
aggregate principal amount and date of issue of the Notes, the names and
addresses of the initial Holders thereof and the dates of all transfers to, and
the names and addresses of, all subsequent Holders thereof.

         (b) The Registrar shall by the issue of new Notes, the cancellation of
old Notes and the making of entries in the Register give effect to transfers of
Notes in accordance with the Indenture.

         (c) The Trust may from time to time deliver to the Registrar Notes of
which it is the Holder for cancellation, whereupon the Registrar shall cancel
the same and shall make the corresponding entries in the Register.

         (d) As soon as reasonably practicable but in any event within ninety
(90) calendar days after each date on which Notes fall due for redemption, the
Registrar shall notify the Trust of the serial numbers of any Notes against
surrender of which payment has been made and of the serial numbers of any Notes
(and the names and addresses of the Holders thereof) which have not yet been
surrendered for payment.

         (e) The Registrar shall, upon and in accordance with the instructions
of the Trust but not otherwise, arrange for the delivery in accordance with the
Indenture of any notice which is to be given to the Holders of Notes and shall
supply a copy thereof to the Indenture Trustee and the Paying Agent.

         (f) The Trust shall ensure that the Registrar has available to it
supplies of such Notes as shall be necessary in connection with the transfer of
Notes and the exchange of Global Notes for Definitive Notes.

                                       35


         (g) The Registrar shall make available, at the request of the Holder of
any Note, forms of proxy in a form and manner which comply with the provisions
of the Indenture and shall perform and comply with the provisions of the
Indenture.

         (h) The Trust shall provide to the Registrar:

                  (i) specimen Notes in definitive form; and

                  (ii) sufficient copies of all documents required to be
         available for inspection as provided in the Registration Statement or
         the Pricing Supplement in respect of the Notes, as may be required by
         any securities exchange on which the Notes may be listed, or as may be
         required by applicable law.

         (i) The Registrar shall make available for inspection during normal
business hours at its specified office such documents as may be specified as so
available at the specified office of such Registrar, as may be required by any
securities exchange on which the Notes may be listed, or as may be required by
applicable law.

         (j) The Registrar shall provide the Paying Agent and/or the Indenture
Trustee with all such information in the Registrar's possession with respect to
the Notes as the Paying Agent or the Indenture Trustee, as the case may be, may
reasonably require in order to perform the obligations set out in the Indenture.

         (k) The Registrar shall ensure that in no event shall Definitive Notes
be exchanged for Global Notes.

     SECTION 3.08. Unclaimed Monies. Any money deposited with the Indenture
Trustee, Registrar or the Paying Agent for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal or any such premium or interest had become due and payable
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property law, be paid to Principal Life pursuant to a
Trust Request and pursuant to the applicable Funding Agreement; and the Holder
of such Note shall thereafter, as an unsecured general creditor, look only to
Principal Life for payment thereof, and all liability of the Indenture Trustee,
Registrar or Paying Agent with respect to such trust money shall thereupon
cease; provided, however, that the Indenture Trustee, Registrar or the Paying
Agent, before being required to make any such repayment, may cause to be
published once, in an Authorized Newspaper in each Place of Payment or to be
mailed to Holders, or both, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than thirty (30)
calendar days from the date of such publication or mailing, any unclaimed
balance of such money then remaining will be repaid to Principal Life.

     SECTION 3.09. Protection of Collateral.

         (a) The Trust shall, from time to time, execute and deliver all such
supplements and amendments to the Indenture and all such financing statements,
continuation

                                       36


statements, instruments of further assurance, and other instruments, and take
such other action as may be necessary or advisable to:

                  (i) create, perfect or maintain a perfected security interest
         in, grant, or make or maintain a valid and effective assignment for
         collateral purposes of, all or any portion of the Collateral (including
         without limitation the Funding Agreement and the Guarantee included
         therein);

                  (ii) maintain or preserve any Lien of the Indenture, the
         Funding Agreement or the Guarantee or carry out more effectively the
         purposes of the Indenture or thereof;

                  (iii) perfect, publish notice of, or protect the validity of,
         any security interest or assignment for collateral purposes made
         pursuant to the Indenture, the Funding Agreement or the Guarantee;

                  (iv) enforce any portion, or obtain the full benefits, of the
         Collateral (including without limitation the Funding Agreement and the
         Guarantee included therein); and

                  (v) preserve and defend title to the Collateral and the rights
         of the Indenture Trustee and of the Holders in the Collateral held for
         the benefit and security of the Holders or other instrument against the
         claims of all Persons.

     The Trust hereby designates the Indenture Trustee as its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required or permitted pursuant to this Section 3.09; provided,
however, that the duty of the Indenture Trustee to execute any instrument
required pursuant to this Section 3.09 shall arise only if any Responsible
Officer of the Indenture Trustee has actual knowledge of any failure of the
Trust to comply with the provisions of this Section 3.09.

         (b) The Trust will pay or cause to be paid all taxes and fees
incidental to such filing, registration and recording, and all expenses
incidental to the preparation, execution and acknowledgment of any instrument of
further assurance, and all Federal or state or jurisdiction of organization of
the Trust stamp taxes or other similar taxes, duties and charges arising out of
or in connection with the execution and delivery of such instruments; provided,
however, that the Trust shall not be required to pay or discharge or cause to be
paid or discharged any Lien affecting the Collateral to the extent such Lien is
being contested in good faith by appropriate proceedings. The Trust will at all
times preserve, warrant and defend the Indenture Trustee's title and right in
and to the property included in the Collateral against the claims of all
Persons.

         (c) The Trust will faithfully observe and perform, or cause to be
observed and performed, all its covenants, agreements, conditions and
requirements contained in the Funding Agreement in accordance with the terms
thereof and will maintain the validity and effectiveness of the Funding
Agreement and the security interest therein or the assignment for collateral
purposes thereof to the Indenture Trustee. The Trust will take no action, nor
permit any action to be taken, which will release any party to the Funding
Agreement from any of its obligations or liabilities thereunder, or will result
in the termination, modification or amendment, or will impair

                                       37


the validity, of the Funding Agreement except as expressly provided for in the
Indenture and therein. The Trust will give the Indenture Trustee written notice
of any default by any party to the Funding Agreement promptly after it becomes
known to the Trust.

         (d) The Trust will faithfully observe and perform, or cause to be
observed and performed, all its covenants, agreements, conditions and
requirements contained in the Guarantee in accordance with the terms thereof and
will maintain the validity and effectiveness of the Guarantee and the security
interest therein or the assignment for collateral purposes thereof to the
Indenture Trustee. The Trust will take no action, nor permit any action to be
taken, which will release any party to the Guarantee from any of its obligations
or liabilities thereunder, or will result in the termination, modification or
amendment, or will impair the validity, of the Guarantee except as expressly
provided for in the Indenture and therein. The Trust will give the Indenture
Trustee written notice of any breach by any party to the Guarantee promptly
after it becomes known to the Trust.

         (e) At the written request of the Indenture Trustee and also following
the occurrence of an "Event of Default" under the Funding Agreement or a breach
of PFG's obligations under the Guarantee, the Trust will, subject to the written
direction and control of the Indenture Trustee, take such action, or at the
Indenture Trustee's written request furnish funds sufficient to enable the
Indenture Trustee to take such action, as the Indenture Trustee may deem
necessary or advisable for enforcing payment when due, subject to applicable
notice and grace periods, under or pursuant to the Indenture, the Funding
Agreement or the Guarantee.

     SECTION 3.10. Opinions as to Collateral; Annual Statement as to Compliance.

         (a) On or before the 15th day of [o] of each calendar year, commencing
[o], the Trust shall furnish or cause to be furnished to the Indenture Trustee
an Opinion of Counsel stating that, in the opinion of such counsel, either (i)
such action has been taken with respect to the recording, filing, re-recording
and re-filing of the Indenture, any indentures supplemental to the Indenture and
any other requisite documents and with respect to the execution and filing of
any financing statements and continuation statements as is necessary to perfect
and/or maintain the perfection of liens, security interests and assignments for
collateral purposes created or effected pursuant to the Indenture with respect
to the Funding Agreement and the Guarantee that is part of any Collateral and
reciting the details of such action or (ii) in the opinion of such counsel no
such action is necessary to perfect and/or maintain the perfection of such lien,
security interest and/or assignment for collateral purposes. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and re-filing of
the Indenture, any indentures supplemental to the Indenture and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to perfect and/or maintain the perfection of the liens, security interests and
assignments for collateral purposes created or effected pursuant to the
Indenture with respect to the Funding Agreement and the Guarantee that is part
of any Collateral until the 15th day of [o] in the following calendar year.

         (b) On or before the 15th day of [o] of each calendar year, commencing
[o], the Trust shall deliver to the Indenture Trustee a Trust Certificate
stating, as to each signer thereof, that in the course of the performance by
each signer of such Trust Certificate of his or her present

                                       38


duties as a Responsible Officer of the Trustee, such signer would normally
obtain knowledge as to the existence of any condition or event which would
constitute a Default or an Event of Default and that to the best of such
signer's knowledge:

                  (i) a review of the fulfillment by the Trust during such year
         of its obligations under the Indenture has been made under the
         supervision of such signer; and

                  (ii) the Trust has fulfilled in all material respects its
         obligations under the Indenture throughout such year, or, if there has
         been a Default or an Event of Default in the fulfillment of any such
         obligation, specifying each such Default or Event of Default known to
         such signer and the nature and status thereof.

         (c) The Trust, pursuant to Section 314(a) of the Trust Indenture Act,
shall:

                  (i) file, or cause to be filed, with the Indenture Trustee,
         within fifteen (15) days after the Trust or Principal Life is required
         to file the same with the Commission and to the extent available to the
         Trust, copies of the annual reports and of the information, documents
         and other reports (or copies of such portions of any of the foregoing
         as the Commission may from time to time by rules and regulations
         prescribe) which the Trust or Principal Life may be required to file
         with the Commission in connection with the Program pursuant to Section
         13 or Section 15(d) of the Securities Exchange Act; or, if the Trust or
         Principal Life is not required to file information, documents or
         reports pursuant to either of said Sections, then it shall file, or
         cause to be filed, with the Indenture Trustee and the Commission, in
         accordance with rules and regulations prescribed from time to time by
         the Commission, such of the supplementary and periodic information,
         documents and reports which may be required pursuant to Section 13 of
         the Securities Exchange Act in respect of a security listed and
         registered on a national securities exchange as may be prescribed from
         time to time in such rules and regulations; provided that if, pursuant
         to any publicly available interpretations of the Commission, the Trust
         or Principal Life would not be required to make such filings in
         connection with the Program under Section 314(a) of the Trust Indenture
         Act, then the Trust or Principal Life shall not be required to make
         such filings;

                  (ii) file, or cause to be filed, with the Indenture Trustee
         and the Commission, in accordance with rules and regulations prescribed
         from time to time by the Commission, such additional information,
         documents and reports with respect to compliance by the Trust, with the
         conditions and covenants of the Indenture as may be required from time
         to time by such rules and regulations; and

                  (iii) transmit, or cause to be transmitted, within thirty (30)
         days after the filing thereof with the Indenture Trustee, in the manner
         and to the extent provided in Section 313(c) of the Trust Indenture
         Act, such summaries of any information, documents and reports required
         to be filed by the Trust pursuant to

                                       39


         paragraphs (i) and (ii) of this Section 3.10(c) as may be required by
         rules and regulations prescribed from time to time by the Commission.

         (d) The Trust shall comply with the provisions of Section 314(d) of the
Trust Indenture Act.

     SECTION 3.11. Performance of Obligations. The Trust may contract with
other Persons for the performance of the Trust's obligations under the Indenture
(other than the execution and delivery of Trust Requests, Trust Orders and Trust
Certificates) and the performance of such obligations by such other Persons
shall be deemed to be the performance thereof by the Trust, as applicable.

     SECTION 3.12. Existence.

         (a) The Trust will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence, rights (charter and
statutory) and franchises as a trust formed under the jurisdiction set forth in
the Omnibus Instrument, as applicable, and, upon the advice of counsel, will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes or any portion of the Collateral. The
Trust will, promptly after any amendment or modification of the Trust Agreement,
send copies thereof to the Indenture Trustee and the Rating Agencies.

         (b) The Trust will maintain books and records and bank accounts
separate from those of any other Person and any other trust organized under the
Program; at all times hold itself out to the public as separate and distinct
from any Affiliates and each other trust organized under the Program; and file
or cause to be filed its own tax returns.

         (c) The Trust shall maintain its assets and transactions separately
from those of any Affiliates and any other trust organized under the Program,
reflect such assets and transactions in financial statements separate and
distinct from those of any Affiliates and any other trust organized under the
Program and evidence such assets and transactions by appropriate entries in
books and records separate and distinct from those of any Affiliates (including
any other trust organized under the Program).

     SECTION 3.13. Reports; Financial Information; Notices of Defaults.

         (a) The Trust shall promptly deliver to the Indenture Trustee copies of
all reports, statements and information received by it pursuant to the Funding
Agreement, the Guarantee or otherwise in respect of the Collateral.

         (b) The Trust shall promptly inform the Indenture Trustee in writing of
the occurrence of any Default or Event of Default which is continuing of which
it has actual knowledge. Each notice given pursuant to this Section 3.13(b)
shall be accompanied by a Trust Certificate setting forth details of the
occurrence referred to therein and stating what action, if any, the Trust has
taken or proposes to take with respect thereto.

                                       40


         (c) The Trust shall collect all forms (or, if applicable, copies of
such forms), if any, from the Paying Agent or Registrar (or from such other
persons as are relevant) that are required to exempt payments under the Notes,
the Guarantee or the Funding Agreement from United States federal income tax
withholding. In addition, the Trust shall execute and file such forms and take
such actions for United States federal income tax purposes as shall be
reasonable and necessary to ensure that payments of interest, principal, premium
and Additional Amounts, if applicable, in respect of the Notes, the Funding
Agreement or the Guarantee are not subject to United States federal withholding
or backup withholding tax.

         (d) In accordance with Section 312(a) of the Trust Indenture Act, the
Trust shall furnish or cause to be furnished to the Indenture Trustee:

                  (i) semi-annually with respect to Notes not later than the
         15th day of [o] and the 15th day of [o] of each year or upon such other
         dates as are set forth in or pursuant to a Trust Order or indenture
         supplemental to the Indenture a list, in each case in such form as the
         Indenture Trustee may reasonably require, of the names and addresses of
         Holders as of the applicable date, and

                  (ii) at such other times as the Indenture Trustee may request
         in writing, within thirty (30) days after the receipt by the Trust of
         any such request, a list of similar form and content as of a date not
         more than fifteen (15) days prior to the time such list is furnished,

provided, however, that so long as the Indenture Trustee is the Registrar no
such list shall be required to be furnished.

         (e) The Indenture Trustee shall comply with the obligations imposed
upon it pursuant to Section 312 of the Trust Indenture Act.

         Every Holder, by receiving and holding Notes, agrees with the Trust and
the Indenture Trustee that none of the Trust, the Indenture Trustee, the Paying
Agent or the Registrar shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with Section 312(c) of the Trust Indenture Act, regardless of the source from
which such information was derived, and that the Indenture Trustee shall not be
held accountable by reason of mailing any material pursuant to a request made
under Section 312(b) of the Trust Indenture Act.

         (f) (i) Within sixty (60) days after the 15th day of [o] of each
year commencing with the first such date following the first issuance of Notes,
if required by Section 313(a) of the Trust Indenture Act, the Indenture Trustee
shall transmit, pursuant to Section 313(c) of the Trust Indenture Act, a brief
report dated as of such 15th day of [o] of such year with respect to any of the
events specified in said Section 313(a) of the Trust Indenture Act which may
have occurred since the later of the immediately preceding 15th day of [o] and
the date of the Indenture.

                  (ii) The Indenture Trustee shall transmit, pursuant to Section
         313(c) of the Trust Indenture Act, the reports required by Section
         313(b) of the Trust Indenture Act at the time specified therein.

                                       41


                  (iii) Reports pursuant to this Section shall be transmitted in
         the manner and to the Persons required by Sections 313(c) and 313(d) of
         the Trust Indenture Act.

         (g) Within ten (10) days following any distribution made or scheduled
to be made on the Notes, including any Interest Payment Date or the Maturity
Date, the Indenture Trustee will deliver to Principal Life and the Holders a
report substantially in the form of Exhibit B attached to these Standard
Indenture Terms.

     SECTION 3.14. Payment of Taxes and Other Claims. The Trust will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Trust or upon the income, profits or property of the Trust, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a Lien upon the property of the Trust; provided, however, that the
Trust shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings. The
Trust shall comply with the requirements of all other applicable laws, the
non-compliance with which would, individually or in the aggregate, materially
and adversely affect the condition (financial or otherwise) of the Trust or
which would impair in any material respect the ability of the Trust to perform
its obligations under the Notes or the Indenture.

     SECTION 3.15. Negative Covenants. So long as any Notes are Outstanding,
the Trust will not take any of the following actions, except as otherwise
permitted under the Indenture:

         (a) sell, transfer, exchange, assign, lease, convey or otherwise
dispose of any assets held by the Trust (owned as of the date of the Trust
Agreement or thereafter acquired), including, without limitation, any portion of
the Collateral, except as expressly permitted by the Indenture;

         (b) incur or otherwise become liable, directly or indirectly, for any
Indebtedness or Contingent Obligation except for the Notes issued pursuant to
the Indenture and the transactions contemplated thereby;

         (c) engage in any business or activity other than in connection with,
or relating to, (i) the performance of the Trust Agreement and the execution,
delivery and performance of any documents (other than the Trust Agreement),
including the Program Documents, relating to the Notes issued under the
Indenture and the transactions contemplated thereby, and (ii) the issuance of
the Notes pursuant to the Indenture;

         (d) (i) permit the validity or effectiveness of the Indenture or any
grant of security interest in or assignment for collateral purposes of the
Collateral to be impaired, or permit a Lien created under the Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations under any document or
agreement assigned to the Indenture Trustee, except as may be expressly
permitted by the Indenture, (ii) create, incur, assume or permit any Lien or
other encumbrance (other than the Lien created by the Indenture) on any of its
properties or assets owned or thereafter acquired,

                                       42


or any interest therein or the proceeds thereof, or (iii) permit a Lien created
under the Indenture not to constitute a valid first priority perfected security
interest in the Collateral;

         (e) amend, modify or fail to comply with any material provision of the
Trust Agreement except for any amendment or modification of the Trust Agreement
expressly permitted thereunder;

         (f) own any subsidiary or lend or advance any funds to, or make any
investment in, any Person, except for an investment in the Funding Agreement or
the investment of any funds held by the Indenture Trustee, the Paying Agent or
the Trustee as provided in the Indenture or the Trust Agreement;

         (g) directly or indirectly declare or make any distribution or other
payment to, or redeem or otherwise acquire or retire for value the interest of,
the Trust Beneficial Owner if any amount under the Notes is due and unpaid, or
directly or indirectly redeem or otherwise acquire or retire for value any
Indebtedness or Contingent Obligation other than the Notes;

         (h) exercise any rights with respect to the Collateral except at the
written direction of, or with the prior written approval of, the Indenture
Trustee;

         (i) cause or, to the fullest extent permitted by law, permit the sale
or other transfer of all or a portion of the Trust Beneficial Interest, or cause
or, to the fullest extent permitted by law, permit the creation, incurrence,
assumption or existence of any Lien on, all or a portion of any of the Trust
Beneficial Interest;

         (j) become an "investment company", or come under the "control" of an
"investment company," as such terms are defined in the Investment Company Act;

         (k) enter into any transaction of merger or consolidation or liquidate
or dissolve itself (or, to the fullest extent permitted by law, suffer any
liquidation or dissolution), or acquire by purchase or otherwise all or
substantially all the business or assets of, or any stock or other evidence of
beneficial ownership of, any other Person;

         (l) take any action that would cause it not to be disregarded or
treated as a grantor trust (assuming it were not disregarded) for United States
federal income tax purposes;

         (m) have any subsidiaries, employees or agents other than the Trustee
and other persons necessary to conduct its activities and enter into
transactions contemplated under the Program Documents;

         (n) have an interest in any bank account other than (i) those accounts
required under the Program Documents, and (ii) those accounts expressly
permitted by the Indenture Trustee; provided that any such further accounts or
the Trust's interest therein shall be charged or otherwise secured in favor of
the Indenture Trustee;

         (o) issue Notes under the Indenture unless (i) the Trust has purchased
or will simultaneously purchase the Funding Agreement from Principal Life to
secure such Notes, (ii) Principal Life has affirmed in writing to the Trust that
it has made or simultaneously will make

                                       43


changes to its books and records to reflect the granting of a security interest
in, and the making of an assignment for collateral purposes of, the Funding
Agreement by the Trust to the Indenture Trustee, (iii) PFG has issued the
Guarantee to the Trust, which the Trust has granted a security interest and
collaterally assigned to the Indenture Trustee on behalf of the Holders of Notes
(and PFG has affirmed in writing to the Trust that it has made or simultaneously
will make changes to its books and records to reflect such security interest),
and (iv) the Trust has taken such other steps as may be necessary to cause the
grant of security interest in, and assignment for collateral purposes of, the
Collateral to the Indenture Trustee to be perfected for purposes of the UCC or
effective against the Trust's creditors and subsequent purchasers of the
Collateral pursuant to insurance or other applicable law;

         (p) permit any Affiliate, employee or officer of Principal Life or PFG
or any agent under the Distribution Agreement to be a trustee of the Trust;

         (q) commingle the assets of the Trust with assets of any Affiliates
(including any other trust organized under the Program), or guarantee any
obligation of any Affiliates (including any other trust organized under the
Program); or

         (r) maintain any joint account with any Person, become a party, whether
as co-obligor or otherwise, to any agreement to which any Person is a party
(other than in respect of the Program Documents), or become liable as a
guarantor or otherwise with respect to any Indebtedness or contractual
obligation of any Person.

     SECTION 3.16. Non-Petition. Each of the Indenture Trustee, each Holder
of a Note, each Agent and the Trustee covenants and agrees that, for a period of
one year plus one day after payment in full of all amounts payable under or in
respect of the Indenture and the Notes, it will not institute against, or join
any other Person in instituting against, the Trust any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law. The
immediately preceding sentence shall survive any termination of the Indenture.

     Notwithstanding the foregoing, each of the Indenture Trustee and each Agent
covenants and agrees that, it will not institute against, or join any other
Person in instituting against, the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law, as a result of the failure to
pay fees or expenses pursuant to Section 7.10 to any party entitled thereto.

     Moreover, each of the Indenture Trustee, the Paying Agent, the Transfer
Agent, the Calculation Agent and the Registrar covenants and agrees that it will
not cause an Event of Default as a result of the Trust's failure to pay any fees
or expenses pursuant to Section 7.10 to any party entitled thereto.

     SECTION 3.17. Title to the Collateral. The Trust covenants and agrees
that the Trust owns or, prior to the issuance of the Notes will own, the Funding
Agreement, the Guarantee and all of the rest of the Collateral, free and clear
of any Liens other than the security interests or assignments for collateral
purposes made pursuant to Article 4; and that the Trust is not and will not
become a party to or otherwise be bound by any agreement, other than the
Indenture, which

                                       44


restricts in any manner the rights of any present or future holder of any of the
Collateral with respect thereto.

     The Trust shall notify in writing the Indenture Trustee and any Rating
Agencies as promptly as practicable upon becoming aware of any change in the law
of the State of Iowa following the date of the Indenture with respect to the
priority status of the Funding Agreement in a liquidation of, or other
delinquency proceeding against, Principal Life.

     SECTION 3.18. Withholding and Payment of Additional Amounts.

         (a) All payments due in respect of the Notes will be made without
withholding or deduction for or on account of any present or future taxes,
duties, levies, assessments or other governmental charges of whatever nature
imposed or levied by or on behalf of any governmental authority, unless such
withholding or deduction is so required by law. Unless otherwise specified in
the applicable Pricing Supplement and the Notes, the Trust will not pay any
Additional Amounts to Holders in respect of any such withholding or deduction
and any such withholding or deduction will not give rise to a Default or an
Event of Default or any independent right or obligation to redeem the Notes.
Unless the Funding Agreement specifies that Principal Life will pay Additional
Amounts to the Trust in the event that any amount due with respect to the
Funding Agreement is subject to withholding or deduction for or on account of
any present or future taxes, duties, levies, assessments or other governmental
charges of whatever nature imposed or levied by or on behalf of any governmental
authority, the Trust will be deemed for all purposes of the Program Documents to
have received cash in an amount equal to the amount of any such withholding or
deduction, and each Holder will be deemed for all purposes of the Program
Documents to have received cash in an amount equal to the portion of such
withholding or deduction that is attributable to such Holder's interest in the
Notes as equitably determined by the Trust.

         (b) Subject to the final sentence of this Section 3.18(b), and only to
the extent specified in the applicable Pricing Supplement and the Notes, the
Trust shall pay to a Holder of any Note who is not a "United States person"
within the meaning of Section 7701(a)(30) of the Code, Additional Amounts to
compensate for any withholding or deduction for or on account of any present or
future taxes, duties, levies, assessments or other governmental charges of
whatever nature imposed or levied on payments in respect of such Note, by or on
behalf of any governmental authority in the United States having the power to
tax, so that the net amount received by the Holder under that Note, after giving
effect to such withholding or deduction, will equal the amount that would have
been received under such Note were no such deduction or withholding required;
provided that the Trust shall not, unless otherwise specified in the applicable
Pricing Supplement and the Notes, be required to make any payment of any
Additional Amount for or on account of: (i) any tax, duty, levy, assessment or
other governmental charge imposed which would have not been imposed but for (A)
the existence of any present or former connection between the Holder or
beneficial owner (as determined for United States federal income tax purposes)
of the Note or the Funding Agreement (any such Holder or beneficial owner, the
"Owner") and such governmental authority, including without limitation, being or
having been a citizen or resident thereof, or being or having been present
therein, incorporated therein, engaged in a trade or business therein or having
(or having had) a permanent establishment or principal office therein, (B) such
Owner being or having been a

                                       45


controlled foreign corporation within the meaning of Section 957(a) of the Code,
related within the meaning of Section 864(d)(4) of the Code to Principal Life or
a private foundation or other tax-exempt organization, (C) such Owner being or
having been an actual or constructive owner of ten percent (10%) or more of the
total combined voting power of all the outstanding stock of Principal Life, (D)
such Owner being a bank for United States federal income tax purposes whose
receipt of interest on the Note or Funding Agreement is described in Section
881(c)(3)(A) of the Code or (E) such Owner being subject to backup withholding
as of the date of becoming an Owner; (ii) any tax, duty, levy, assessment or
other governmental charge which would not have been imposed but for the
presentation of the Note or other evidence of beneficial ownership thereof
(where presentation is required) for payment on a date more than thirty (30)
days after the date on which such payment becomes due and payable or the date on
which payment is duly provided for whichever occurs later; except to the extent
that the Owner would have been entitled to Additional Amounts had the Note been
presented on the last day of such thirty (30) day period; (iii) any tax, duty,
levy, assessment or other governmental charge which is imposed or withheld by
reason of the failure of an Owner to comply with certification, identification
or information reporting requirements concerning the nationality, residence,
identity or connection with the United States of an Owner (including, without
limitation, failure to provide IRS Form W-8BEN or W-8ECI), if compliance is
required by statute, by regulation of the United States Treasury Department,
judicial or administrative interpretation, other law or by an applicable income
tax treaty to which the United States is a party as a condition to exemption
from such tax, duty, levy, assessment or other governmental charge; (iv) any
inheritance, gift, estate, personal property, sales, transfer or similar tax,
duty, levy, assessment or similar governmental charge; (v) any tax, duty, levy,
assessment or other governmental charge that is payable otherwise than by
withholding from payments in respect of the Notes; (vi) any tax, duty, levy,
assessment or other governmental charge that would not have been imposed or
withheld but for the treatment of payments in respect of the Notes or the
Funding Agreement as contingent interest described in Section 871(h)(4) of the
Code; (vii) any tax, duty, levy, assessment or other governmental charge that
would not have been imposed or withheld but for an election by the Owner the
effect of which is to make payment in respect of the Notes subject to United
States federal income tax; (viii) any tax, duty, levy, assessment or other
governmental charge resulting from a European Union Directive; or (ix) any
combination of items (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii). The
obligation to pay Additional Amounts under this Section 3.18 shall not apply
unless Principal Life is obligated to pay additional amounts under the Funding
Agreement (1) to compensate for any withholding or deduction for or on account
of any present or future taxes, duties, levies, assessments or other
governmental charges of whatever nature imposed or levied on payments in respect
of the Funding Agreement by or on behalf of any governmental authority in the
United States having the power to tax and (2) to reimburse the Trust for any
Additional Amounts due to Holders.

         (c) If the applicable Pricing Supplement and the Notes indicate that
the Trust will pay any Additional Amounts to Holders as described in Section
3.18(b) and any such Additional Amounts actually become due and payable the
Trust shall deliver to the Indenture Trustee, at least 30 days prior to the
payment date, a Trust Certificate that indicates the amount of such Additional
Amounts and the dates of the payment of such Additional Amounts. The Indenture
Trustee may conclusively rely on such Trust Certificate in making the payment of
such Additional Amounts.

                                       46


         (d) Whenever in the Indenture or in any Note there is mentioned, in any
context, the payment of the principal of or any premium or interest on, or in
respect of, any Note or the net proceeds received on the sale or exchange of any
Note, such mention shall be deemed to include mention of the payment of
Additional Amounts if so specified in the applicable Pricing Supplement.
Further, express mention of the payment of Additional Amounts (if applicable) in
any provision of the Indenture or in any Note shall not be construed as
excluding Additional Amounts in those provisions of the Indenture or in such
Note where such express mention is not made.

     SECTION 3.19. Additional Representations and Warranties.

         (a) The Trust hereby represents and warrants that:

                  (i) to the extent the creation of a security interest in the
         Funding Agreement is governed by the UCC, the Indenture will create a
         valid security interest (as defined in the UCC) in the Funding
         Agreement in favor of the Indenture Trustee for the benefit and
         security of the Holders, which security interest will be prior to all
         other Liens;

                  (ii) the Indenture will create a valid security interest (as
         defined in the UCC) in the Guarantee in favor of the Indenture Trustee
         for the benefit and security of the Holders, which security interest
         will be prior to all other Liens;

                  (iii) the Funding Agreement and the Guarantee will each
         constitute a "general intangible" or "instrument" within the meaning of
         the UCC;

                  (iv) subject to the grant of security interest, pledge and
         collateral assignment of the Trust's right, title and interest in the
         Funding Agreement, the Trust will be a party to and will be the person
         entitled to payment under the Funding Agreement on the dates specified
         therein free and clear of any Lien, claim or encumbrance of any Person,
         other than the Lien created under the Indenture or any Lien otherwise
         permitted under the Indenture;

                  (v) subject to the grant of security interest, pledge and
         collateral assignment of the Trust's right, title and interest in the
         Guarantee, the Trust will be the person entitled to any payment under
         the Guarantee free and clear of any Lien, claim or encumbrance of any
         Person, other than the Lien created under the Indenture or any Lien
         otherwise permitted under the Indenture;

                  (vi) to the extent the UCC applies, the Trust has caused or
         will have caused, within ten (10) days of the issuance of the Notes,
         the filing of all appropriate financing statements in the proper filing
         office in the appropriate jurisdictions under applicable law in order
         to perfect the security interest in the Funding Agreement and the
         Guarantee granted to the Indenture Trustee for the benefit and security
         of the Holders;

                  (vii) other than the security interests granted to the
         Indenture Trustee for the benefit and security of the Holders pursuant
         to the Indenture, the

                                       47


         Trust will not pledge, assign, sell, grant a security interest in, or
         otherwise convey any interest in the Funding Agreement or the
         Guarantee;

                  (viii) the Trust will not authorize the filing of and is not
         aware of any financing statements against the Trust that include a
         description of collateral covering the Funding Agreement or the
         Guarantee other than any financing statement relating to the security
         interests granted to the Indenture Trustee for the benefit and security
         of the Holders;

                  (ix) the Trust is not aware of any judgment or tax lien
         filings against the Trust; and

                  (x) none of the instruments that constitute or evidence the
         Funding Agreement or Guarantee has any marks or notations indicating
         that it has been pledged, assigned or otherwise conveyed to any Person
         other than the Indenture Trustee for the benefit and security of the
         Holders.

         (b) The foregoing representations and warranties will survive the
execution and delivery of the Notes. No party will waive any of the foregoing
representations and warranties. The Indenture Trustee and the Trust will
maintain the perfection and priority of the security interest in the Funding
Agreement and the Guarantee.

     SECTION 3.20. Ancillary Documents. The Trust hereby expressly authorizes
and directs the Indenture Trustee to execute and deliver each of the documents,
instruments and agreements attached as Exhibits or otherwise expressly
contemplated by the terms of the Indenture with respect to the Notes from time
to time.

                                    ARTICLE 4
      GRANTING OF SECURITY INTEREST AND ASSIGNMENT FOR COLLATERAL PURPOSES

     SECTION 4.01. Creation. To secure the full and punctual payment of the
Secured Obligations in accordance with the terms thereof and to secure the
performance of the Trust's obligations under the Notes and the Indenture, the
Trust, with respect to the Funding Agreement and the Guarantee, hereby assigns
and pledges to and with the Indenture Trustee for the ratable benefit of each
Holder and, with respect to all of the Collateral, grants to the Indenture
Trustee for the ratable benefit of each Holder security interests in the
Collateral, and all of its rights and privileges with respect to the Collateral,
and all income and profits thereon, and all interest, dividends and other
payments and distributions with respect thereto, and all Proceeds of the
foregoing. Contemporaneously with the issuance of the Notes, the Trust will
deliver the Funding Agreement and the Guarantee to the Indenture Trustee or its
agent in pledge under the Indenture and make such filings, cause Principal Life
as the issuer of the Funding Agreement, and PFG as issuer of the Guarantee, to
register and acknowledge the Indenture Trustee or its agent or the Holders as
having the rights of an assignee for collateral purposes of the Funding
Agreement and the Guarantee, respectively, and take such other action as may be
necessary to cause the Indenture Trustee for the ratable benefit of each Holder
to have a perfected security interest in or be the recipient of a valid
assignment for collateral purposes of the Funding

                                       48


Agreement and the Guarantee, respectively, and the rest of the Collateral that
is effective against the Trust's creditors and subsequent purchasers thereof.

     SECTION 4.02. Scope.

         (a) The security interest or assignment for collateral purposes granted
or made pursuant to Section 4.01 is granted or made in trust to secure the full
and punctual payment of the Secured Obligations equally and ratably among the
Holders, without prejudice, priority or distinction, except as expressly
provided in the Indenture, in the following order of priority:

            first, to the payment of the amounts then due and unpaid upon the
     Notes for principal and interest and all other amounts in respect of which
     or for the benefit of which such amount has been collected, ratably,
     without preference or priority of any kind, according to the aggregate
     amounts due and payable on the Notes; and

            second, any remaining balance shall be paid to the Trust and such
     remaining balance shall be distributed by the Trustee in accordance with
     the Trust Agreement.

         (b) The Trust does hereby constitute and irrevocably appoint the
Indenture Trustee the true and lawful attorney of the Trust, with full power (in
the name of the Trust or otherwise), upon the occurrence and during the
continuance of an Event of Default, to exercise all rights of the Trust with
respect to the Collateral and to ask, require, demand, receive, settle,
compromise, compound and give acquittance for any and all monies and claims for
monies due and to become due under or arising out of any of the Collateral, to
endorse any checks or other instruments or orders in connection therewith and to
file any claims or take any action or institute any proceedings that the
Indenture Trustee may deem to be necessary or advisable in the circumstances.
The power of attorney granted pursuant to the Indenture and all authority
conferred by the Indenture are granted and conferred solely to protect the
Indenture Trustee's interest in the Collateral held for the benefit and security
of the Holders and shall not impose any duty upon the Indenture Trustee to
exercise any power. This power of attorney shall be irrevocable as one coupled
with an interest prior to the payment in full of all the Notes.

         (c) The Indenture shall constitute a security agreement and an
agreement to assign the Collateral for collateral purposes under the laws of the
State of New York applicable to agreements made and to be performed therein.
Upon the occurrence of any Event of Default with respect to the Notes, and in
addition to any other rights available under the Indenture, the Funding
Agreement and the Guarantee or otherwise available at law or in equity, the
Indenture Trustee shall have all rights and remedies of a secured party or an
assignee for collateral purposes on default under the laws of the State of New
York and other applicable law to enforce the assignments and security interests
contained in the Indenture and, in addition, shall have the right, subject to
compliance with any mandatory requirements of applicable law, to sell or apply
the Funding Agreement or Guarantee, exercise its rights under the Guarantee and
any other rights and other interests assigned or pledged by the Indenture in
accordance with the terms of the Indenture at public or private sale. All
amounts received under the Indenture shall be applied

                                       49


first to all costs and expenses incurred by the Indenture Trustee in connection
with such collection and enforcement and thereafter as provided in the
Indenture.

         (d) It is expressly agreed that anything in the Indenture or therein
contained to the contrary notwithstanding, the Trust shall remain liable under
the Funding Agreement or the Guarantee to perform all the obligations of it
thereunder, all in accordance with and pursuant to the terms and provisions
thereof, and the Indenture Trustee shall not have any obligations or liabilities
with respect to the Funding Agreement or the Guarantee by reason of or arising
out of the Indenture, nor shall the Indenture Trustee be required or obligated
in any manner to perform or fulfill any obligations of the Trust under or
pursuant to the Funding Agreement or the Guarantee or, other than as provided in
the Indenture, to make any payment, to make any inquiry as to the nature or
sufficiency of any payment received by it, or, prior to the occurrence and
continuance of an Event of Default, to present or file any claim, or to take any
action to collect or enforce the payment of any amounts that may have been
assigned to it or to which it may be entitled at any time or times.

         (e) The Trust hereby directs and instructs the Indenture Trustee to
enter into a custodial arrangement with Bankers Trust Company, N.A., a national
banking association, to hold the Funding Agreement and Guarantee in safe custody
for the benefit of the Indenture Trustee within the State of Iowa.

         (f) The Indenture Trustee acknowledges the granting of such security
interests and the making of such assignments for collateral purposes, accepts
the terms under the Indenture in accordance with the provisions of the Indenture
and agrees to perform its duties in the Indenture subject to and in accordance
with the benefit of the provisions of the Indenture, to the end that the
interests of the Holders may be adequately and effectively protected.

     SECTION 4.03. Termination of Security Interest. Upon the payment in full
of all Secured Obligations relating to the Notes, the security interest shall
terminate and all rights to the Collateral shall revert to the Trust. Upon
termination of the security interest, the Indenture Trustee will execute and
deliver to the Trust such documents as the Trust shall reasonably request to
evidence the termination of such security interest.

                                    ARTICLE 5
                    SATISFACTION AND DISCHARGE; SUBROGATION

     SECTION 5.01. Satisfaction and Discharge of Indenture. The Indenture
shall cease to be of further effect with respect to the Notes (except as to any
surviving rights of registration of transfer or exchange of Notes expressly
provided for in the Indenture) and the Indenture Trustee, on written demand of
the Trust, shall execute proper instruments acknowledging satisfaction and
discharge of the Indenture with respect to the Notes, when

         (a) either:

                  (i) all Notes theretofore authenticated and delivered (other
         than Notes which have been mutilated, destroyed, lost or stolen and
         which have been replaced or paid as provided in Section 2.08) have been
         delivered to the Indenture Trustee for cancellation; or

                                       50


                  (ii) all Notes

                         (A) have become due and payable,

                         (B) will become due and payable at their Stated
                  Maturity Date within one year, or

                         (C) are to be called for redemption within one year
                  under arrangements satisfactory to the Indenture Trustee for
                  the giving of notice of redemption by the Indenture Trustee in
                  the name, and at the expense, of the Trust,

         and the Trust, in the case of (A), (B) or (C) above, has deposited or
         caused to be deposited with the Indenture Trustee as trust funds in
         trust for such purpose, an amount sufficient to pay and discharge the
         entire indebtedness on the Notes not theretofore delivered to the
         Indenture Trustee for cancellation, for principal of, premium, if any,
         or any interest on, the Notes to the date of such deposit (in the case
         of Notes which have become due and payable) or to the Stated Maturity
         Date, as the case may be;

         (b) the Trust has paid or caused to be paid in full all other sums
payable under the Indenture by the Trust with respect to the Secured
Obligations; and

         (c) the Trust has delivered to the Indenture Trustee a Trust
Certificate and an Opinion of Counsel each stating that all conditions precedent
in the Indenture providing for the satisfaction and discharge of the Indenture
with respect to the Notes have been complied with.

     Notwithstanding the satisfaction and discharge of the Indenture with
respect to the Notes, the obligations of the Indenture Trustee under Section
5.02 shall survive.

     SECTION 5.02. Application of Trust Money. All money deposited with the
Indenture Trustee pursuant to the Indenture shall be held in trust in the
Collection Account and applied by it, in accordance with the provisions of the
Notes and the Indenture, to the payment through any Paying Agent, to the Persons
entitled thereto, of the principal, premium, if any, interest and Additional
Amounts, if any, for whose payment such money has been deposited with or
received by the Indenture Trustee.

If no Event of Default with respect to the Notes exists, the following priority
of payments shall apply:

            first, to the payment of the amounts then due and unpaid upon the
     Notes for principal and interest and all other amounts in respect of which
     or for the benefit of which such amount has been collected, ratably,
     without preference or priority of any kind, according to the aggregate
     principal amounts due and payable on the Notes; and

                                       51


            second, any remaining balance shall be paid to the Trust and such
     remaining balance shall be distributed by the Trustee in accordance with
     the Trust Agreement.

                                    ARTICLE 6
                              DEFAULTS AND REMEDIES

     SECTION 6.01. Events of Default.

     "EVENT OF DEFAULT" means any one of the following events with respect to
the Notes (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

         (a) failure to pay the principal (other than any installment payment),
when due and payable, of any Note and the continuance of such failure for a
period of one (1) Business Day;

         (b) failure to pay any interest, premium (if applicable), installment
payments (if applicable) or any other amounts, when due and payable, on any Note
and a continuance of such failure for a period of seven (7) Business Days;

         (c) an "Event of Default" (as defined in the Funding Agreement) by
Principal Life under the Funding Agreement securing the Notes;

         (d) failure to observe or perform in any material respect any one or
more of the other covenants in the Indenture (other than a covenant or default
or breach of which is specifically set forth in Section 6.01(a), (b) and, if
applicable (h)) or the Notes, and continuance of such failure for a period of
sixty (60) days after the date on which there shall have been given written
notice by registered or certified mail, return receipt requested, specifying
such failure, thereof to the Trust by the Indenture Trustee or to the Trust and
the Indenture Trustee by Holders of Notes representing at least twenty-five
percent (25%) of the aggregate principal amount of the Outstanding Notes, which
written notice shall be delivered by registered or certified mail, return
receipt requested, and shall specify such failure and require such failure to be
remedied and which notice shall state that it is a "NOTICE OF DEFAULT" under the
Indenture;

         (e) the Indenture for any reason shall cease to be in full force and
effect (other than in accordance with its terms) or shall be declared null and
void, or the Indenture Trustee fails to have or maintain a validly created and
perfected security interest subject to no prior Liens or security interests in
the Collateral and proceeds thereof except as expressly permitted by the
Indenture; or any Person shall successfully claim as finally determined by a
court of competent jurisdiction that any of the Liens granted to the Indenture
Trustee with respect to any of the Collateral are void or that the enforcement
thereof or any other recourse by the Indenture Trustee against any of the
Collateral is materially limited because of any preference, fraudulent transfer,
conveyance or similar law;

         (f) either (i) a court having jurisdiction in the premises shall enter
a decree or order for relief in respect of the Trust or the Collateral in an
involuntary case under any

                                       52


applicable bankruptcy, insolvency or other similar law now or hereafter in
effect in the applicable jurisdiction, which decree or order is not stayed; or
any other similar relief shall be granted under any applicable law; or (ii) an
involuntary case shall be commenced against the Trust or the Collateral under
any applicable bankruptcy, insolvency or other similar law of the applicable
jurisdiction; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Trust or the
Collateral, or over all or a substantial part of its property, shall have been
entered; or there shall have occurred the involuntary appointment of an interim
receiver, trustee or other custodian of the Trust or the Collateral for all or a
substantial part of its property; or a court having jurisdiction in the premises
shall enter a decree or order declaring the dissolution of the Trust; or a
warrant of attachment, execution or similar process shall have been issued
against any substantial part of the property of the Trust and any such event
described in this clause (ii) shall continue for sixty (60) days unless
dismissed, bonded or discharged;

         (g) either (i) the Trust shall have an order for relief entered with
respect to it or shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law of the applicable jurisdiction, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or the
Trust shall make any assignment for the benefit of creditors; or (ii) the Trust
shall fail or be unable, or the Trust admits in writing its inability, to pay
its debts as such debts become due; or the trustee of the Trust shall adopt any
resolution or otherwise authorize any action to approve or for the purpose of
effecting any of the actions referred to in this paragraph (g); or

         (h) any other Event of Default provided in (i) the applicable Pricing
Supplement and (ii) the Notes or any supplemental indenture.

     Notwithstanding anything contained herein to the contrary, any event of
default or other breach by PFG under the Guarantee will not be an Event of
Default hereunder with respect to the Notes.

     SECTION 6.02. Acceleration of Maturity Date; Rescission and Annulment.
If an Event of Default specified in any of Sections 6.01(a), (b), (c), (f) or
(g) occurs and is continuing, the principal of and all accrued and unpaid
interest and any other amounts payable on the Notes or if such Notes are
non-interest bearing, the amortized face amount of such Notes or other
redemption amount as may be specified in the Pricing Supplement, shall
automatically be and become due and payable immediately, without any declaration
or other act whatsoever on the part of the Trust, the Indenture Trustee or any
Holder. If any Event of Default other than those specified in Sections 6.01(a),
(b), (c), (f) or (g) occurs and is continuing, then in every such case the
Indenture Trustee or the Holders of more than twenty-five percent (25%) in
aggregate principal amount of the Outstanding Notes, by a notice in writing to
the Trust (and to the Indenture Trustee if given by the Holders of the Notes),
may (but are not required to) declare the sum of (a) the principal amount of all
the Outstanding Notes and (b) any other amounts, including accrued and unpaid
interest, payable to the Holders to the extent such amounts are permitted by law
to be paid, to be due and payable immediately, and upon any such declaration
such amount shall become due and payable on the date the written declaration is
received by the

                                       53


Trust; provided, however, that with respect to any Note issued with original
issue discount the amount of principal due and payable for such Note will be the
amount determined as set forth in the Pricing Supplement or, if not so set
forth, by multiplying (i) the then outstanding aggregate principal amount of
such Note by (ii) the sum of (A) the original issue price of the Note (expressed
as a percentage of the then outstanding aggregate principal amount of such Note)
plus (B) the original issue discount (expressed as a percentage) amortized from
the original issue date of such Note to the date of declaration of acceleration
of maturity of such Note (calculated using the interest method in accordance
with generally accepted accounting principles in effect on the date of
determination).

     At any time after such a declaration of acceleration of maturity of the
Notes has been made pursuant to the second sentence of this Section 6.02 and
before a judgment or decree for payment of the money due has been obtained by
the Indenture Trustee as provided in this Article, the Holders of Notes
representing at least sixty-six and two-thirds percent (66-2/3%) of the
aggregate principal amount of the Outstanding Notes, by written notice to the
Trust and the Indenture Trustee, may rescind and annul such declaration and its
consequences if

         (a) the Trust has paid or deposited with the Indenture Trustee a sum
sufficient to pay:

                  (i) all overdue installments of interest and Additional
         Amounts, if applicable, on all Notes,

                  (ii) the principal and premium, if any, of any Notes which
         have become due otherwise than by such declaration of acceleration and
         interest thereon with respect thereto at the rate borne by the Notes,
         and

                  (iii) all sums paid or advanced by the Indenture Trustee under
         the Indenture; and

         (b) all Events of Default, other than the nonpayment of the principal
of or interest on the Notes which have become due solely as a result of such
acceleration, have been cured or waived as provided in Section 6.13.

     No such rescission shall affect any subsequent Default or Event of Default
or impair any right consequent thereon.

     SECTION 6.03. Collection of Indebtedness and Suits for Enforcement. The
Trust covenants that if:

         (a) default is made in the payment of any installment of interest on
any Note when such interest becomes due and payable (after the expiration of any
applicable cure period), or

         (b) default is made in the payment of the principal or premium, if any,
of any Note when such principal or premium, if any, becomes due and payable,

                                       54


the Trust will upon demand of the Indenture Trustee (which the Indenture Trustee
may make, but is not required to make) pay to the Indenture Trustee, for the
benefit of all the Holders of the Notes, the whole amount then due and payable
on the Notes (together, as applicable, with interest upon the overdue principal
and any premium and (to the extent that payment of such interest is enforceable
under applicable law) upon the overdue installments of interest at the rate
borne by the Notes or, if the Notes are non-interest bearing, the rate for such
interest set forth in the Notes or the Indenture, if applicable) and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and counsel.

     If the Trust fails to pay such amounts it is required to pay the Indenture
Trustee pursuant to the preceding paragraph, then forthwith upon the demand of
the Indenture Trustee, in its own name and as trustee of an express trust, the
Indenture Trustee may (but is not required to) institute a judicial proceeding
for the collection of the sums so due and unpaid, may prosecute such proceeding
to judgment or final decree and may enforce the same against the Trust or any
other obligor upon any of the Notes and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of the Trust or
any other obligor upon the Notes, including the Collateral, wherever situated.

     If an Event of Default with respect to the Notes occurs and is continuing,
the Indenture Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders of Notes by such appropriate judicial
proceedings as the Indenture Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in the Indenture or in aid of the exercise of any power granted in the
Indenture, or to enforce any other proper remedy.

     SECTION 6.04. Indenture Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, composition or other judicial proceeding relative
to the Trust or any other obligor upon the Notes or the property held in the
Trust or of such other obligor or their creditors, the Indenture Trustee
(irrespective of whether the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand on the Trust for the payment of any
overdue principal, premium or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,

         (a) to file and prove a claim for the whole amount of principal of, and
any premium and interest owing and unpaid in respect of, the Notes and to file
such other papers or documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel) and of the Holders allowed in such proceeding; and

         (b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same, and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent, to make such payments directly to the Holders, and to pay to the
Indenture Trustee any amount due to it for the reasonable compensation,
expenses,

                                       55


     disbursements and advances of the Indenture Trustee, its agents and
counsel, and any other amounts due to the Indenture Trustee under Section 7.10.

     Nothing contained in the Indenture shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment, or composition
affecting any of the Notes or the rights of any Holder thereof, or to authorize
the Indenture Trustee to vote in respect of the claim of any Holder in any such
proceeding.

     SECTION 6.05. Indenture Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under the Indenture or any of the Notes
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Notes or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Indenture Trustee in
accordance with the terms of the Indenture shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel, be for the ratable
benefit of the Holders of Notes in respect of which such judgment has been
recovered.

     SECTION 6.06. Application of Money Collected. Notwithstanding anything
in the Indenture to the contrary, any money collected by the Indenture Trustee
following an Event of Default and during the continuance thereof pursuant to
Article 6 or otherwise under the Indenture or, any supplements to the Indenture,
and any moneys that may then be held or thereafter received by the Indenture
Trustee as security with respect to the Notes shall be held in the Collection
Account and be applied in the following order, at the date or dates fixed by the
Indenture Trustee and, in case of the distribution on account of principal or
interest, upon presentation of the Notes, or both, and the notation thereon of
the payment if only partially paid and upon surrender thereof if fully paid:

            first, to the payment of the reasonable and customary expenses and
     counsel fees incurred by the Indenture Trustee and any other amounts due
     and unpaid to the Indenture Trustee by the Trust, in an aggregate amount of
     no more than $250,000 for all notes issued under the Program, to the extent
     not paid pursuant to the applicable Expense and Indemnity Agreement;

            second, to the payment of the amounts then due and unpaid upon the
     Notes for principal and interest and all other amounts in respect of which,
     or for the benefit of which, such amount has been collected, ratably,
     without preference or priority of any kind, according to the aggregate
     principal amounts due and payable on the Notes; and

            third, any remaining balance shall be paid to the Trust and such
     remaining balance shall be distributed by the Trustee in accordance with
     the Trust Agreement.

     Except as expressly set forth in the Indenture, none of the Indenture
Trustee, Paying Agent, Registrar or any other Agent or any of their successors,
employees, officers, directors,

                                       56


affiliates or agents shall have any claim or rights of any nature in or to the
Collateral, whether as a result of set-off, banker's lien or otherwise, and the
Indenture Trustee hereby waives, and the Paying Agent and Registrar appointed
under the Indenture shall be deemed to have waived, by its acceptance of the
duties under the Indenture, on behalf of itself and each such other Person, any
such claim or rights in or to the Collateral.

     SECTION 6.07. Limitation on Suits. Except as otherwise provided in
Section 6.08, no Holder shall have any right to institute any proceedings,
judicial or otherwise, with respect to the Indenture or any agreement or
instrument included in the Collateral for the Notes or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:

         (a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default with respect to the Notes;

         (b) the Holder or Holders of Notes representing not less than
twenty-five percent (25%) of the aggregate principal amount of the Outstanding
Notes shall have made written request to the Indenture Trustee to institute
proceedings in respect of such Event of Default in its own name as Indenture
Trustee under the Indenture;

         (c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity or security satisfactory to it against the costs, expenses
and liabilities to be incurred in compliance with such request;

         (d) the Indenture Trustee for sixty (60) days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and

         (e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such sixty (60) day period by the Holder or
Holders of Notes representing at least 66 2/3% in aggregate principal amount of
the Outstanding Notes;

it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of the Indenture to affect, disturb or prejudice the rights of any other Holder
of any Note or to obtain or to seek to obtain priority or preference over any
other Holder of any Note or to enforce any right under the Indenture, except in
the manner provided in the Indenture and for the equal and ratable benefit of
all the Holders of the Notes.

     SECTION 6.08. Unconditional Rights of Holders to Receive Payments.
Notwithstanding any other provision in the Indenture, each Holder of any Note
shall have the right, which is absolute and unconditional, to receive payment of
the principal of, any interest on, and premium, if any, on such Note on the
respective Stated Maturity Date or redemption date thereof and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

     SECTION 6.09. Restoration of Rights and Remedies. If the Indenture
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under the Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Indenture
Trustee or to such Holder, then and in every such case the Trust, the

                                       57


Indenture Trustee and each such Holder shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions under the Indenture, and thereafter all rights and remedies of the
Indenture Trustee and each such Holder shall continue as though no such
proceeding had been instituted.

     SECTION 6.10. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in Section 2.08, no right or remedy in the Indenture
conferred upon or reserved to the Indenture Trustee or to each and every Holder
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given under the Indenture or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy under the Indenture, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.

     SECTION 6.11. Delay or Omission Not Waiver. No delay or omission of the
Indenture Trustee or of any Holder to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such right or remedy accruing upon any Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Indenture Trustee or to any Holder may be exercised from time to time, and
as often as may be deemed expedient, by the Indenture Trustee or by such Holder,
as the case may be.

     SECTION 6.12. Control by Holders. Holders, representing a majority of
the aggregate principal amount of the Outstanding Notes, who provide the
Indenture Trustee with indemnification satisfactory to the Indenture Trustee,
shall have the right to direct the time, method and place of conducting any
proceedings for exercising any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee with respect to
the Notes, including with respect to the Collateral; provided, however, that (a)
such direction shall not be in conflict with any rule of law or with the
Indenture and (b) the Indenture Trustee may take any other action deemed proper
by the Indenture Trustee that is not inconsistent with such direction.

     SECTION 6.13. Waiver of Past Defaults. Notwithstanding anything in the
Indenture to the contrary, only Holders representing a majority of the aggregate
principal amount of the Outstanding Notes may on behalf of the Holders of all
the Notes waive any past Default with respect thereto and its consequences,
except a Default:

         (a) in the payment of any principal of, any interest on, or premium, if
any, on any Note, or

         (b) in respect of a covenant or provision of the Indenture that cannot
be modified or amended without the consent of the Holder of each Outstanding
Note.

Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of the Indenture with respect

                                       58


to the Notes; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.

     SECTION 6.14. Undertaking for Costs. All parties to the Indenture agree,
and each Holder, by acceptance of a Note, shall be deemed to have agreed that,
in any suit for the enforcement of any right or remedy under the Indenture, or
in any suit against the Indenture Trustee for any action taken, suffered or
omitted by it as Indenture Trustee, any court may in its discretion require the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Indenture Trustee or any Agent, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate Notes representing
more than ten percent (10%) of the aggregate principal amount of the Outstanding
Notes, or to any suit instituted by any Holder for the enforcement of the
payment of any installment of interest on any Note on or after the Stated
Maturity Date thereof expressed in such Note or for the enforcement of the
payment of any principal of such Note at the Stated Maturity Date therefor.

     SECTION 6.15. Waiver of Stay or Extension Laws. The Trust covenants that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any law wherever enacted, now or at any
time hereafter in force, providing for any appraisement, valuation, stay,
extension or redemption, which may affect the covenants in, or the performance
of, the Indenture; and the Trust hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power granted in the Indenture to the Indenture
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.

                                    ARTICLE 7
                     THE INDENTURE TRUSTEE AND OTHER AGENTS

     SECTION 7.01. Duties of Indenture Trustee.

         (a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
the Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.

         (b) Except during the continuance of an Event of Default, the duties
and liabilities of the Indenture Trustee are to perform only those duties that
are specifically set forth in the Indenture and no others, and no implied
covenants or obligations of the Indenture Trustee shall be read into the
Indenture.

         (c) No provision of the Indenture shall be construed to relieve the
Indenture Trustee or any Agent from liability for its own negligent action, its
own negligent failure to act, or its own bad faith or willful misconduct, except
that:

                  (i) this subsection does not limit the effect of subsection
         (b) of this Section 7.01;

                                       59


                  (ii) each of the Indenture Trustee and each Agent may in good
         faith conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon certificates or
         opinions furnished to it and conforming to the requirements of the
         Indenture unless a Responsible Officer of the Indenture Trustee or such
         Agent, respectively, has actual knowledge that such statements or
         opinions are false; provided that the Indenture Trustee or Agent, as
         the case may be, must examine such certificates and opinions to
         determine whether they conform to the requirements of the Indenture;

                  (iii) each of the Indenture Trustee and each Agent shall not
         be liable for any error of judgment made in good faith by a Responsible
         Officer, unless it is proved that the Indenture Trustee or Agent, as
         the case may be, was negligent in ascertaining the pertinent facts;

                  (iv) the Indenture Trustee shall not be liable with respect to
         any action it takes or omits to take in good faith in accordance with
         the direction of Holders representing a majority of the aggregate
         principal amount of the Outstanding Notes or pursuant to Section 6.07
         for actions or omissions relating to the time, method and place of
         conducting any proceeding for any remedy available to the Indenture
         Trustee, or exercising any trust or power conferred upon the Indenture
         Trustee, under the Indenture with respect to the Notes; and

                  (v) no provision of the Indenture shall require the Indenture
         Trustee or any Agent to expend or risk its own funds or otherwise incur
         any financial liability in the performance of any of its duties under
         the Indenture, or in the exercise of any of its rights or powers, if it
         shall have reasonable grounds for believing that repayment of such
         funds or adequate indemnity against such risk or liability is not
         reasonably assured to it.

         (d) Whether or not therein expressly so provided, every provision of
the Indenture relating to the conduct or affecting the liability of or affording
protection to the Indenture Trustee shall be subject to the provisions of this
Section 7.01.

         (e) The Indenture Trustee shall promptly upon its receipt thereof
deliver to each Rating Agency copies of each of the following:

                  (i) any notice of any Event of Default by any party under the
         Funding Agreement delivered by the Trust to the Indenture Trustee
         pursuant to paragraph (b) of Section 3.13;

                  (ii) any amendment or modification of the Trust Agreement
         delivered by the Trust to the Indenture Trustee pursuant to paragraph
         (a) of Section 3.12;

                  (iii) any notice of any Default or Event of Default, together
         with any relevant Trust Certificate relating thereto, delivered by the
         Trust to the Indenture Trustee pursuant to paragraph (b) of Section
         3.13;

                                       60


                  (iv) any supplemental indenture referred to in Section 8.01 or
         8.02;

                  (v) any other information reasonably requested by any Rating
         Agency;

                  (vi) any notice of change in the identity of the Trust;

                  (vii) any notice of change in the identity of the Indenture
         Trustee;

                  (viii) any notice of adverse change in the priority status of
         the Funding Agreement as a matter of the laws of the State of Iowa; and

                  (ix) any notice of redemption delivered to the Indenture
         Trustee under Section 2.04.

         (f) The Indenture Trustee shall, on behalf of the Trust, and to the
extent that the relevant information shall be reasonably available to it, submit
such reports or information as may be required from time to time in relation to
the issue of the Notes by applicable law, regulations and guidelines by
governmental regulatory authorities as may be subsequently requested by the
Trust and agreed to in writing between the Trust and the Indenture Trustee.

     SECTION 7.02. No Liability to Invest. None of the Agents shall be under
any liability for interest on, or have any responsibility to invest, any monies
received by it pursuant to any of the provisions of the Indenture or the Notes.

     SECTION 7.03. Performance Upon Default. None of the Agents shall have
any duty or responsibility in case of any default by the Trust in the
performance of its obligations (including, without limiting the generality of
the foregoing, any duty or responsibility to accelerate all or any of the Notes
or to initiate or to attempt to initiate any proceedings at law or otherwise or
to make any demand for the payment thereof upon the Trust).

     SECTION 7.04. No Assumption by Paying Agent, Transfer Agent, Calculation
Agent or Registrar. In acting under the Indenture and in connection with the
Notes, the Paying Agent, the Transfer Agent, the Calculation Agent and the
Registrar shall act solely as agents of the Trust and will not thereby assume
any obligations towards, or relationship of agency or trust for, any of the
Holders.

     SECTION 7.05. Notice of Default. Within ninety (90) days after a
Responsible Officer of the Indenture Trustee becomes aware of the occurrence of
any Default or Event of Default which is continuing, the Indenture Trustee shall
transmit to the Trustee, PFG and Principal Life and all Holders of Notes notice
of each such Default or Event of Default known to the Indenture Trustee, unless
such Default or Event of Default shall have been cured or waived; provided,
however, that, except in the case of a Default of the kind described in Section
6.01(a), (b), (c), (f) or (g) the Indenture Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or

                                       61


Responsible Officers of the Indenture Trustee in good faith determine that the
withholding of such notice is in the interests of the Holders.

     SECTION 7.06. Rights of Indenture Trustee. Subject to the provisions of
Section 7.01(c):

         (a) The Indenture Trustee may conclusively rely on any document
believed by it in good faith to be genuine and to have been signed or presented
by the proper Person. The Indenture Trustee need not investigate any fact or
matter stated in the document.

         (b) Before the Indenture Trustee acts or refrains from acting,
including in connection with the issuance of the Notes pursuant to Section 2.02,
it may require a Trust Certificate or an Opinion of Counsel (or may consult with
financial or other advisors or consultants appointed with due care). The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on any Trust Order, Trust Request, Trust Certificate,
Opinion of Counsel or advice from financial or other advisors or consultants
appointed with due care.

         (c) The Indenture Trustee may act through agents or attorneys and shall
not be responsible for monitoring or supervising the actions of, or for the
misconduct or negligence of, any agent or attorney appointed with due care.

         (d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within its
rights or powers.

         (e) (i) The Indenture Trustee may employ or retain such counsel,
accountants, appraisers, agents or other experts or advisers as it may
reasonably require for the purpose of determining and discharging its rights and
duties under the Indenture and shall not be responsible for misconduct on the
part of any such person appointed with due care.

                  (ii) The Indenture Trustee may conclusively act and rely and
         shall be protected in acting and relying in good faith on the opinion
         or advice of or information obtained from any counsel, accountant,
         appraiser, agents or other expert or adviser, whether retained or
         employed by the Trust or by the Indenture Trustee, in relation to any
         matter arising in the administration of the trusts of the Indenture.

         (f) The Indenture Trustee may consult with counsel of its selection and
the advice of such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it under the Indenture in good faith and in reliance thereon.

         (g) The Indenture Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by the Indenture at the request or
direction of any of the Holders pursuant to the Indenture, unless such Holders
shall have offered to the Indenture Trustee security or indemnity satisfactory
to it against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction.

                                       62


         (h) The Indenture Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Indenture Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Indenture Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the Trust,
personally or by agent or attorney, with any reasonable costs related thereto to
be paid by Principal Life pursuant to the applicable Expense and Indemnity
Agreement, and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation.

         (i) The Indenture Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the Indenture
Trustee has actual knowledge thereof or unless written notice of any event which
is in fact such a default is received by a Responsible Officer of the Indenture
Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice
references the Notes and the Indenture and states that a Default or Event of
Default has occurred.

         (j) Permissive powers granted to the Indenture Trustee under the
Indenture shall not be construed to be mandatory duties on its part.

         (k) The rights and protections afforded to the Indenture Trustee
pursuant to this Article 7 shall also be afforded to the Paying Agent,
Calculation Agent, Registrar or Transfer Agent, or any successor or agent
thereof.

         (l) The Indenture Trustee shall have no liability for the actions or
omissions of the Paying Agent, Registrar, Calculation Agent or Transfer Agent,
provided that such action or omission is not caused by the Indenture Trustee's
own negligence, bad faith or willful misconduct.

         (m) The Indenture Trustee may execute any of the trusts or powers under
the Indenture or perform any duties under the Indenture either directly or by or
through delegates, agents, attorneys, custodians, or nominees, and the Indenture
Trustee shall not be responsible for any misconduct or negligence on the part,
or the supervision, of any agent, attorney, custodian, or nominee appointed with
due care under the Indenture except as otherwise agreed in writing with the
Trust.

         (n) The Indenture Trustee may request that the Trust deliver an
officer's certificate setting forth the names of individuals and/or titles of
officers authorized at such time to take specified actions pursuant to the
Indenture, which officer's certificate may be signed by any person authorized to
sign an officer's certificate, including any person specified as so authorized
in any such certificate previously delivered and not superseded.

     SECTION 7.07. Not Responsible for Recitals or Issuance of Notes. The
recitals contained in the Indenture and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Trust and
neither the Indenture Trustee nor any Agent assumes any responsibility for their
correctness. Neither the Indenture Trustee nor any

                                       63


Agent makes any representations with respect to any Collateral or as to the
validity, enforceability or sufficiency of the Indenture or of the Notes or of
any security interest created under the Indenture. Neither the Indenture Trustee
nor any Agent shall be accountable for the use or application by the Trust of
the Notes or the proceeds thereof or any money paid to the Trust or upon Trust
Order pursuant to the provisions of the Indenture.

     SECTION 7.08. Indenture Trustee May Hold Notes. The Indenture Trustee,
in its individual or any other capacity, may become the owner or pledgee of
Notes and, subject to Section 7.11 and Section 311(a) of the Trust Indenture Act
and Rule 3a-7 of the Investment Company Act, may otherwise deal with the Trust
with the same rights it would have if it were not Indenture Trustee.

     SECTION 7.09. Money Held in Trust. Money held by the Indenture Trustee
in trust under the Indenture need not be segregated from other funds except to
the extent required by the Indenture or by law. The Indenture Trustee shall be
under no liability for interest on any money received by it under the Indenture
and shall not invest such money, unless otherwise agreed to in writing and
permitted by law.

     SECTION 7.10. Compensation and Reimbursement. The Indenture Trustee and
the Agents will be entitled to payment of fees, reimbursement for, and
indemnification with respect to, costs and expenses for services rendered under
the Indenture to the extent provided in the applicable Expense and Indemnity
Agreement and, with respect to only the Indenture Trustee, Section 6.06. Except
as provided in Section 6.06 with respect to the Indenture Trustee, none of the
Indenture Trustee, Paying Agent, Registrar or Transfer Agent shall be entitled
to seek any payment from the Trust with respect to its services under the
Indenture.

     SECTION 7.11. Eligibility. The Trust agrees, for the benefit of the
Holders, that there shall at all times be an Indenture Trustee under the
Indenture which shall be a corporation or national banking association organized
and doing business under the laws of the United States, any state thereof or the
District of Columbia, authorized under such law to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000 subject to
supervision or examination by federal or state authority and having a credit
rating of BBB- or better by Standard & Poor's Ratings Service, a Division of the
McGraw-Hill Companies or a credit rating of Baa3 or better by Moody's Investors
Service, Inc. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 7.11, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition as
published. If at any time the Indenture Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect specified in this Article.

     Notwithstanding any provision of the Indenture to the contrary, the
Indenture Trustee also must meet the requirements set forth in Section 310 of
the Trust Indenture Act, as applicable. In addition, the Indenture Trustee, each
successor Indenture Trustee and each Person appointed to act as co-trustee
pursuant to Section 7.15 must be a "United States person" within the meaning of
Section 7701(a)(30) of the Code.

                                       64


     SECTION 7.12. Resignation and Removal; Appointment of Successor.

         (a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Section shall
become effective until the acceptance of appointment by the successor Indenture
Trustee under Section 7.13.

         (b) The Indenture Trustee may resign at any time by giving not less
than sixty (60) days' prior written notice thereof to the Trust and the Holders
of the Notes. If an instrument of acceptance by a successor Indenture Trustee
shall not have been delivered to the Indenture Trustee within thirty (30) days
after the giving of such notice of resignation, the resigning Indenture Trustee
may petition any court of competent jurisdiction at the expense of the Trust for
the appointment of a successor Indenture Trustee and any and all amounts then
due and owing to the retiring Indenture Trustee shall be paid in full.

         (c) The Indenture Trustee may be removed at any time by an Act of
Holders of Notes representing a majority of the aggregate principal amount of
the Outstanding Notes, delivered to the Indenture Trustee and to the Trust. If
an instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within thirty (30) days after the giving of
such notice of removal, the Indenture Trustee being removed may petition, at the
expense of the Trust, any court of competent jurisdiction for the appointment of
a successor Indenture Trustee with respect to the Notes.

         (d) If at any time (i) the Indenture Trustee shall cease to be eligible
under Section 7.11 and shall fail to resign after written request by the Trust
or any Holder (who has been a bona fide Holder of a Note for at least six
months), (ii) shall become incapable of acting or shall be adjudged as bankrupt
or insolvent, or a receiver or liquidator of the Indenture Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation or (iii) the Indenture Trustee shall
fail to comply with the obligations imposed upon it under Section 310(b) of the
Trust Indenture Act with respect to the Notes after written request therefor by
the Trust or any Holder who has been a bona fide Holder of a Note for at least
six months, then, (x) the Trust (except during the existence of an Event of
Default) by a Trust Order may remove the Indenture Trustee, or (y) subject to
Section 6.14, any Holder who has been a bona fide Holder for at least six months
may, on behalf of himself, herself or itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.

         (e) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Indenture
Trustee for any reason, the Trust, by a Trust Order, shall promptly appoint a
successor Indenture Trustee and shall comply with the applicable requirements of
Section 7.13. If, within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Indenture Trustee
shall be appointed by Act of Holders of Notes representing a majority of the
aggregate principal amount of the Outstanding Notes delivered to the Trust and
the retiring Indenture Trustee, the successor Trustee so appointed shall, upon
its acceptance of such appointment in accordance with the applicable
requirements of Section 7.13, become the successor Indenture Trustee and
supersede the successor Indenture Trustee appointed by the Trust. If no
successor Indenture Trustee shall

                                       65


have been so appointed by the Trust or Holders and shall have accepted
appointment in the manner provided in the Indenture, any Holder who has been a
Holder for at least six months may (subject to Section 6.14), on behalf of
himself, herself or itself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Indenture Trustee.

         (f) The Trust shall give notice of each resignation and each removal of
the Indenture Trustee and each appointment of a successor Indenture Trustee by
mailing written notice of such event by first-class mail, postage prepaid, to
the Holders of the Notes, if any, as their names and addresses appear in the
Register. Each notice shall include the name of the successor Indenture Trustee
and the address of its Corporate Trust Office.

         (g) Any successor Indenture Trustee shall satisfy all applicable
requirements under the Indenture.

     SECTION 7.13. Acceptance of Appointment by Successor.

         (a) Every successor Indenture Trustee appointed under the Indenture
shall execute, acknowledge and deliver to the Trust and the retiring Indenture
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Indenture Trustee shall become effective and such
successor Indenture Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Indenture Trustee. Notwithstanding the foregoing, on request of the Trust or the
successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment
of all amounts owed to it, execute and deliver an instrument transferring to
such successor Indenture Trustee all the rights, powers and trusts of the
retiring Indenture Trustee, and shall duly assign, transfer and deliver to such
successor Indenture Trustee all property and money held by such retiring
Indenture Trustee under the Indenture.

         (b) Upon request of any such successor Indenture Trustee, the Trust
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Indenture Trustee all such rights, powers and
trusts referred to in this Section, as the case may be.

         (c) No successor Indenture Trustee shall accept its appointment unless
at the time of such acceptance such successor Indenture Trustee shall be
qualified and eligible under this Article.

     SECTION 7.14. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee. Any corporation or national banking association
into which the Indenture Trustee may be merged or converted or with which it may
be consolidated, or any corporation or national banking association resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation or national banking association succeeding
to all or substantially all of the corporate trust business of the Indenture
Trustee, shall be the successor of the Indenture Trustee under the Indenture,
without the execution or filing of any paper or any further act on the part of
any of the parties to the Indenture; provided, however, that such corporation or
national banking association shall be otherwise qualified and eligible under
this Article. In case any Notes have been authenticated, but not delivered, by
the

                                       66


Indenture Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Indenture Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as if
such successor Indenture Trustee had authenticated such Notes.

     SECTION 7.15. Co-trustees.

         (a) At any time or times, for the purpose of meeting the legal or
regulatory requirements of any jurisdiction in which any portion of any
Collateral may at the time be located, the Trust and the Indenture Trustee shall
have power to appoint, and, upon the written request of the Holders of Notes
representing a majority of the aggregate principal amount of the Outstanding
Notes, the Trust shall for such purpose join with the Indenture Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint one or more Persons approved by the Indenture Trustee to
act as co-trustee, jointly with the Indenture Trustee, of all or any part of the
Collateral, with such powers as may be provided in the instrument of
appointment, and to vest in such Person or Persons in the capacity aforesaid,
any property, title, right or power deemed necessary or desirable, subject to
the other provisions of this Section. If the Trust does not join in such
appointment within fifteen (15) days after the receipt by it of a request so to
do, or in case an Event of Default has occurred and is continuing, the Indenture
Trustee alone shall have power to make such appointment.

         (b) Should any written instrument from the Trust be required by any
co-trustee so appointed for more fully confirming to such co-trustee such
property, title, right or power, any and all such instruments shall, on request,
be executed, acknowledged and delivered by the Trust.

         (c) Every co-trustee shall, to the extent permitted by law, but to such
extent only, be appointed subject to the following terms:

                  (i) the Notes shall be authenticated and delivered and all
         rights, powers, duties and obligations under the Indenture in respect
         of the custody of securities, cash and other personal property held by,
         or required to be deposited or pledged with, the Indenture Trustee
         under the Indenture, shall be exercised solely by the Indenture
         Trustee;

                  (ii) the rights, powers, duties and obligations conferred by
         the Indenture or imposed upon the Indenture Trustee shall be conferred
         or imposed upon and exercised or performed by the Indenture Trustee or
         by the Indenture Trustee and such co-trustee jointly, as shall be
         provided in the instrument appointing such co-trustee, except to the
         extent that, under any law of any jurisdiction in which any particular
         act is to be performed, the Indenture Trustee shall be incompetent or
         unqualified to perform such act, in which event such rights, powers,
         duties and obligations shall be exercised and performed by such
         co-trustee;

                  (iii) the Indenture Trustee at any time, by an instrument in
         writing executed by it, with the concurrence of the Trust evidenced by
         a Trust

                                       67


         Request, may accept the resignation of or remove any co-trustee
         appointed under this Section, and, in case an Event of Default has
         occurred and is continuing, the Indenture Trustee shall have power to
         accept the resignation of, or remove, any such co-trustee without the
         concurrence of the Trust. Upon the written request of the Indenture
         Trustee, the Trust shall join with the Indenture Trustee in the
         execution, delivery and performance of all instruments and agreements
         necessary or proper to effectuate such resignation or removal. A
         successor to any co-trustee so resigned or removed may be appointed in
         the manner provided in this Section;

                  (iv) no co-trustee under the Indenture shall be personally
         liable by reason of any act or omission of the Indenture Trustee or any
         other such trustee under the Indenture and the Indenture Trustee shall
         not be personally liable by reason of any act or omission of any
         co-trustee under the Indenture; and

                  (v) any Act of Holders delivered to the Indenture Trustee
         shall be deemed to have been delivered to each such co-trustee.

     SECTION 7.16. Appointment and Duties of the Calculation Agent.

         (a) Unless the Paying Agent advises the Trust that it is unable to act
as Calculation Agent, the Trust appoints the Paying Agent at its specified
office as Calculation Agent in relation to the Notes in respect of which it is
named as such in the relevant Pricing Supplement for the purposes specified in
the Indenture and all matters incidental thereto.

         (b) The Paying Agent accepts its appointment as Calculation Agent in
relation to the Notes in respect of which it is named as such in the relevant
Pricing Supplement and shall perform all matters expressly to be performed by it
in, and otherwise comply with, the terms and conditions of the Notes and the
provisions of the Indenture and, in connection therewith, shall take all such
action as may be incidental thereto. The Paying Agent acknowledges and agrees
that it shall be named in the relevant Pricing Supplement as Calculation Agent
in respect of the Notes unless the Relevant Agents (or one of the Relevant
Agents) through whom the Notes are issued has agreed with the Trust to act as
Calculation Agent (in which case such Relevant Agent or Agents shall be named as
Calculation Agent in the related Pricing Supplement). If the Calculation Agent
is incapable or unwilling to perform its duties under the Indenture, the
Indenture Trustee will appoint the Paying Agent or another leading commercial
bank to serve as Calculation Agent. Any resignation by or termination of a
Calculation Agent shall not be effective until a successor Calculation Agent has
been appointed.

         (c) The Calculation Agent shall:

                  (i) obtain such quotes and rates and/or make such
         determinations, calculations and adjustments as may be required under
         the Notes and provide notice of any applicable interest rate
         calculations or determinations or periods with respect to the Notes to
         the Holders of the Notes upon their request and to the Indenture
         Trustee, Paying Agent, the Trust, Principal Life and PFG, and if the
         Notes are listed on a stock exchange, and the rules of such exchange so
         require, such exchange as soon as possible after the Calculation
         Agent's

                                       68


         determination or calculation of such interest rates or interest rate
         periods, but in no event later than the fourth (4th) Banking Day
         thereafter or, earlier in the case of notification to a stock exchange,
         if the rules of such exchange so require; and

                  (ii) maintain a record of all quotations obtained by it and of
         all amounts, rates and other items determined or calculated by it and
         make such record available for inspection at all reasonable times by
         the Trust, the Indenture Trustee, Principal Life, PFG and the Paying
         Agent.

         (d) The Calculation Agent shall have no liability to the Holders of
Notes in respect of any determination, calculation, quote or rate made or
provided by the Calculation Agent.

     SECTION 7.17. Changes in Agents.

         (a) Any Agent may resign its appointment under the Indenture upon the
expiration of not less than thirty (30) days' notice to that effect to the Trust
(with a copy to the Indenture Trustee); provided, however, that any such notice
which would otherwise expire within thirty (30) days before or after the
Maturity Date or any interest or other payment date of the Notes shall be deemed
to expire on the thirtieth (30th) day following the Maturity Date or, as the
case may be, such interest or other payment date.

         (b) The Trust may revoke its appointment of any Agent under the
Indenture by giving not less than thirty (30) days' notice to the applicable
Agent and the Indenture Trustee to that effect.

         (c) The appointment of any Agent under the Indenture shall terminate
forthwith if any of the following events or circumstances shall occur or arise,
namely, such Agent becomes incapable of acting; such Agent is adjudged bankrupt
or insolvent; such Agent files a voluntary petition in bankruptcy or makes an
assignment for the benefit of its creditors or consents to the appointment of a
receiver, administrator or other similar official of all or any substantial part
of its property or admits in writing its inability to pay or meet its debts as
they mature or suspends payment thereof; a resolution is passed or an order is
made for the winding-up or dissolution of such Agent; a receiver, administrator
or other similar official of such Agent or of all or any substantial part of its
property is appointed; an order of any court is entered approving any petition
filed by or against such Agent under the provisions of any applicable bankruptcy
or insolvency law; or any public officer takes charge or control of such Agent
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation.

         (d) The Trust may (and shall where necessary to comply with the terms
and conditions of the Notes) appoint substitute or additional agents in relation
to the Notes and shall forthwith notify the other parties to the Indenture,
whereupon the parties to the Indenture and such substitute or additional agents
shall thereafter have the same rights and obligations among them as would have
been the case had they then entered into an agreement in the form mutatis
mutandis of the Indenture.

         (e) If any Agent gives notice of its resignation in accordance with
this Section 7.17, the provisions of paragraph (d) of Section 7.17 apply and by
the tenth (10th) day before the

                                       69


expiration of such notice a successor to such Agent in relation to such Notes
has not been appointed by the Trust, such Agent may itself, following such
consultation with the Trust as may be practicable in the circumstances, appoint
as its successor any reputable and experienced bank or financial institution
(which will ensure compliance with the terms and conditions of the Notes) and
give notice of such appointment in accordance with the terms and conditions of
the Notes, whereupon the parties to the Indenture and such successor agent shall
thereafter have the same rights and obligations among them as would have been
the case had they then entered into an agreement in the form mutatis mutandis of
the Indenture.

         (f) Upon any resignation or revocation becoming effective under this
Section, the relevant Agent shall:

                  (i) be released and discharged from its obligations under the
         Indenture;

                  (ii) repay, in accordance with the applicable Expense and
         Indemnity Agreement, to Principal Life such part of any fee paid to it
         as may be agreed between the relevant Agent and Principal Life;

                  (iii) in the case of the Paying Agent, deliver to the Trust
         and to the successor Paying Agent a copy, certified as true and
         up-to-date by an officer of the Paying Agent, of the records maintained
         by it in accordance with Section 3.04;

                  (iv) in the case of the Registrar, deliver to the Trust and to
         the successor Registrar a copy, certified as true and up-to-date by an
         officer of such Registrar, of each of the Registers and other records
         maintained by it in accordance with Section 2.06;

                  (v) in the case of a Calculation Agent, deliver to the Trust
         and to the successor Calculation Agent a copy, certified as true and
         up-to-date by an officer of such Calculation Agent of the records
         maintained by it in accordance with Section 7.16; and

                  (vi) upon payment to it by Principal Life of all amounts owed
         to it, forthwith transfer all moneys and papers (including any unissued
         Global Notes or Definitive Notes) held by it under the Indenture to its
         successor in that capacity and, upon appropriate notice, provide
         reasonable assistance to such successor for the discharge by it of its
         duties and responsibilities under the Indenture.

         (g) Any corporation into which any Agent may be merged or converted,
any corporation with which any Agent may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which any Agent shall
be a party or any corporation succeeding to all or substantially all the
corporate agency business of such Agent, shall, to the extent permitted by
applicable law, be the successor to such Agent under the Indenture and in
relation to the Notes without any further formality, whereupon the parties to
the Indenture and such successor agent shall thereafter have the same rights and
obligations among them as would have been the case had they then entered into an
agreement in the form mutatis mutandis of the

                                       70


Indenture. Notice of any such merger, conversion, consolidation or asset
transfer shall forthwith be given by such successor to the Trust and the other
parties to the Indenture.

         (h) If any Agent decides to change its specified office (which may only
be effected within the same city) it shall give notice to the Trust (with a copy
to the Indenture Trustee) of the address of the new specified office stating the
date on which such change is to take effect, which date shall be not less than
thirty (30) days after the date of such notice. The relevant Agent shall at its
own expense not less than fourteen (14) days prior to the date on which such
change is to take effect (unless the appointment of the relevant Agent is to
terminate pursuant to any of the foregoing provisions of this Section on or
prior to the date of such change) publish or cause to be published notice
thereof.

Upon the execution of the Indenture and thereafter forthwith upon any change of
the same, the Trust shall deliver to the Indenture Trustee (with a copy to the
Paying Agent) a list of the Authorized Signatories of the Trust together with
certified specimen signatures of the same.

     SECTION 7.18. Limitation of Trustee Liability. It is expressly
understood and agreed by the parties that (a) the Indenture is executed and
delivered by U.S. Bank Trust National Association, not individually or
personally, but solely as trustee of the Trust, in the exercise of the powers
and authority conferred and vested in it, pursuant to the Trust Agreement, (b)
each of the representations, undertakings and agreements in the Indenture made
on the part of the Trust is made and intended not as personal representations,
undertakings and agreements by U.S. Bank Trust National Association, but is made
and intended for the purpose of binding only the Trust, (c) nothing contained in
the Indenture shall be construed as creating any liability on the part of U.S.
Bank Trust National Association, individually or personally, to perform any
covenant either expressed or implied contained in the Indenture, all such
liability, if any, being expressly waived by the parties to the Indenture and by
any person claiming by, through or under the parties to the Indenture, and (d)
under no circumstances shall U.S. Bank Trust National Association, be personally
liable for the payment of any indebtedness or expenses of the Trust or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Trust under the Indenture or any other
related documents.

                                    ARTICLE 8
                             SUPPLEMENTAL INDENTURES

     SECTION 8.01. Supplemental Indentures Without Consent of Holders.
Without notice to, or the consent of, any Holder, the Trust and the Indenture
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Indenture, in form satisfactory to the Indenture
Trustee, for the purpose of:

         (a) curing any ambiguity or correcting or supplementing any provision
contained in the Indenture, in the Notes or in any supplemental indenture which
may be defective or inconsistent with any other provision contained in the
Indenture, the Notes, the Funding Agreement or any other Program Documents,
which shall not materially adversely affect the interests of any Holder of the
Notes;

                                       71


         (b) evidencing and providing for the acceptance of appointment under
the Indenture of a successor Indenture Trustee and to add or to change any of
the provisions of the Indenture as shall be necessary to provide for or
facilitate the administration of the Trust or of the Notes under the Indenture
by more than one trustee;

         (c) adding to the covenants of the Trust or the Indenture Trustee for
the benefit of the Holders of the Notes or to surrender any right or power
conferred in the Indenture on the Trust;

         (d) adding any additional Events of Default;

         (e) to provide for the issuance of and establish the form and terms and
conditions of Notes as provided in Section 2.02; or

         (f) to establish the form of any certifications required to be
furnished pursuant to the terms of the Indenture or of the Notes.

     Notwithstanding any other provision, the Trust will not enter into any
supplemental indenture with the Indenture Trustee or permit the Indenture to be
amended or modified if such supplemental indenture, amendment or modification
would cause the Trust not to be disregarded or treated as a grantor trust
(assuming the Trust were not disregarded) for United States federal income tax
purposes.

     The Indenture Trustee shall be entitled to receive and rely on an Opinion
of Counsel as to whether any such supplemental indenture complies with the
requirements of Section 8.01(a), if applicable, and any such opinion shall be
conclusive on the Holders.

     SECTION 8.02. Supplemental Indenture With Consent of Holders.

         (a) With the consent of the Holders of Notes representing a majority in
aggregate principal amount of all Outstanding Notes affected by such
supplemental indenture, by Act of said Holders delivered to the Trust and the
Indenture Trustee, the Trust and the Indenture Trustee may enter one or more
indentures supplemental to the Indenture for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, the Indenture or of modifying in any manner the rights of the Holders of the
Notes under the Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Note affected
thereby:

                  (i) change the Stated Maturity Date of the principal of, or
         the time of payment of interest on, any Note;

                  (ii) reduce the principal amount of, or the interest on, any
         Note;

                  (iii) change any Place of Payment where, or the coin or
         currency in which the principal of, or interest on, any Note is
         payable;

                  (iv) impair or affect the right of any Holder to institute
         suit for the enforcement of any payment on or with respect to the
         Notes;

                                       72


                  (v) reduce the percentage of the aggregate principal amount of
         the Outstanding Notes, the consent of the Holders of which is required
         for any such supplemental indenture, or the consent of the Holders of
         which is required for any waiver of compliance with provisions of the
         Indenture or defaults thereunder and their consequences provided for in
         the Indenture;

                  (vi) modify any of the provisions of this Section or similar
         provisions, except to increase any percentage specified in the
         Indenture or to provide that additional provisions of the Indenture
         cannot be modified or waived without the consent of the Holder of each
         Outstanding Note affected thereby;

                  (vii) modify or alter the provisions of the definition of the
         term "Outstanding";

                  (viii) modify or affect in any manner adverse to the interest
         of any Holder the terms and conditions of the obligations of the Trust
         regarding the due and punctual payment of the principal of or interest
         on, or any other amounts due with respect to, the Notes; or

                  (ix) permit the creation of any Lien ranking prior to or on a
         parity with the Lien of the Indenture with respect to any part of any
         Collateral or terminate the Lien of the Indenture on any property held
         for the benefit and security of Holders at any time subject to the
         Indenture or deprive any Holder of the security afforded by the Lien of
         the Indenture.

         (b) The Indenture Trustee may in its discretion determine whether or
not any Notes would be affected by any supplemental indenture (and may receive
and conclusively rely upon an Opinion of Counsel in doing so) and any such
determination shall be conclusive upon all the Holders, whether theretofore or
thereafter authenticated and delivered under the Indenture. The Indenture
Trustee shall not be liable for any such determination made in good faith. It
shall not be necessary for any Act of Holders under this Section to approve the
particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof. Promptly after the
execution by the Trust and the Indenture Trustee of any supplemental indenture
pursuant to this Section, the Indenture Trustee shall mail to the Holders of the
Notes a notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trust to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.

         (c) Notwithstanding any other provision, the Trust will not enter into
any supplemental indenture with the Indenture Trustee or permit the Indenture to
be amended or modified if such supplemental indenture, amendment or modification
would cause the Trust not to be disregarded or treated as a grantor trust
(assuming it were not disregarded) for United States federal income tax
purposes.

     SECTION 8.03. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by the
Indenture, the Indenture Trustee shall be

                                       73


entitled to receive, and (subject to Section 7.01) shall be fully protected in
relying upon, an Opinion of Counsel or officer's certificate stating that the
execution of such supplemental indenture is authorized or permitted by the
Indenture. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, indemnities or immunities under the Indenture or otherwise.

     SECTION 8.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture under this Article, the Indenture shall be modified
in accordance therewith, and such supplemental indenture shall form a part of
the Indenture for all purposes; and every Holder of a Note which has theretofore
been or thereafter authenticated and delivered under the Indenture shall be
bound thereby. Further, the Trust shall be bound by any such supplemental
indenture.

     SECTION 8.05. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Trust shall so determine,
new Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Trust, to any such supplemental indenture may be prepared and executed by
the Trust and authenticated by the Indenture Trustee and delivered by the
Indenture Trustee in exchange for Outstanding Notes.

     SECTION 8.06. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.

                                    ARTICLE 9
                             NON-RECOURSE PROVISIONS

     SECTION 9.01. Nonrecourse Enforcement. Notwithstanding anything to the
contrary contained in the Indenture or any Notes, none of Principal Life, its
officers, directors, Affiliates, employees or agents, PFG, its officers,
directors, Affiliates, employees or agents, or the Trust or any of the Trustee,
the Trust Beneficial Owner, the Agents or any of their respective officers,
directors, Affiliates, employees or agents (the "NONRECOURSE PARTIES") will be
personally liable for the payment of any principal, interest or any other sums
at any time owing under the terms of the Notes. If any Event of Default shall
occur with respect to the Notes, the right of the Holders of the Notes and the
Indenture Trustee on behalf of such Holders in connection with a claim on such
Notes shall be limited solely to a proceeding against the Collateral. Neither
such Holders nor the Indenture Trustee on behalf of such Holders will have the
right to proceed against the Nonrecourse Parties or the assets held in any other
trust organized under the Program or otherwise, to enforce the Notes (except
that to the extent they exercise their rights, if any, to (i) seize the Funding
Agreement, they may enforce the Funding Agreement against Principal Life, its
successors or assigns or (ii) collect under the Guarantee, they may enforce
their rights under the Guarantee against PFG, its successors or assigns) or for
any deficiency judgment remaining after foreclosure of any property included in
the Collateral.

                                       74


     It is expressly understood and agreed that nothing contained in this
Section 9.01 shall in any manner or way constitute or be deemed a release of the
debt or other obligations evidenced by the Notes or otherwise affect or impair
the enforceability against the Trust of the liens, assignments, rights and
security interests created by the Indenture, the Collateral or any other
instrument or agreement evidencing, securing or relating to the indebtedness or
the obligations evidenced by the Notes. Nothing in this Section 9.01 shall
preclude the Holders from foreclosing upon any property included in the
Collateral.

     Holders may not seek to enforce rights against the Trust (a) by commencing
any recovery or enforcement proceedings against the Trust, (b) by applying to
wind up the Trust, (c) otherwise than through the Indenture Trustee in its
exercise of powers to petition a court to appoint a receiver or administrator to
the Trust or for the Collateral, (d) by making any statutory demand upon the
Trust under applicable corporation law, or (e) in any other manner except as may
be provided in the Indenture or in the Notes.

                                   ARTICLE 10
                          MEETINGS OF HOLDERS OF NOTES

     SECTION 10.01. Purposes for Which Meetings May be Called. A meeting of
Holders of Notes may be called at any time and from time to time pursuant to
this Article to make, give or take any request, demand, authorization,
direction, notice, consent, waiver or other action provided by the Indenture to
be made, given or taken by the Holders of Notes.

     SECTION 10.02. Call, Notice and Place of Meetings. (a) Unless otherwise
provided in the Notes, the Indenture Trustee may at any time call a meeting of
Holders of the Notes for any purpose specified in Section 10.01, to be held at
such time and at such place in The City of New York or such other place as the
Indenture Trustee shall determine. Notice of every meeting of Holders, setting
forth the time and the place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be given, in the manner provided in
Section 1.06, not less than twenty-one (21) nor more than 180 days prior to the
date fixed for the meeting.

         (b) In case at any time the Trust or the Holders of at least ten
percent (10%) in principal amount of the Outstanding Notes shall have requested
the Indenture Trustee to call a meeting of Holders for any purpose specified in
Section 10.01, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Indenture Trustee shall not have
made the first publication or mailing of the notice of such meeting within
twenty-one (21) days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided in the Indenture, then the
Trust or the Holders of Notes in the amount above specified, as the case may be,
may determine the time and the place in The City of New York and may call such
meeting for such purposes by giving notice thereof as provided in paragraph (a)
of this Section.

     SECTION 10.03. Persons Entitled to Vote at Meetings. To be entitled to
vote at any meeting of Holders, a Person shall be (a) a Holder of one or more
Outstanding Notes; or (b) a Person appointed by an instrument in writing as
proxy for a Holder or Holders of one or more Outstanding Notes by such Holder or
Holders. The only Persons who shall be entitled to be present or to speak at any
meeting of Holders shall be the Persons entitled to vote at such

                                       75


meeting and their counsel, any representatives of the Indenture Trustee and its
counsel and any representatives of the Trust and its counsel.

     SECTION 10.04. Quorum; Action. The Persons entitled to vote a majority in
principal amount of the Outstanding Notes shall constitute a quorum for a
meeting of Holders; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which the Indenture expressly
provides may be given by the Holders of a majority in principal amount of the
Outstanding Notes, the Persons entitled to vote a majority in principal amount
of the Outstanding Notes shall constitute a quorum. In the absence of a quorum
within thirty (30) minutes after the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders, be dissolved. In any other
case the meeting may be adjourned for a period of not less than ten (10) days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than ten
(10) days as determined by the chairman of the meeting prior to the adjournment
of such adjourned meeting. Notice of the reconvening of any adjourned meeting
shall be given as provided in Section 10.02(a), except that such notice need be
given only once not less than five (5) days prior to the date on which the
meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above, of the
principal amount of the Outstanding Notes which shall constitute a quorum.

     Except as limited by Section 8.02(a) and Section 6.02, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum is
present as aforesaid may be adopted only by the affirmative vote of the Holders
of a majority in principal amount of the Outstanding Notes; provided, however,
that, except as limited by Section 8.02(a) and Section 6.02, any resolution with
respect to any consent or waiver which the Indenture expressly provides may be
given by the Holders of a majority in principal amount of the Outstanding Notes
may be adopted at a meeting or an adjourned meeting duly convened and at which a
quorum is present as aforesaid only by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Notes; and provided, further,
that, except as limited by Section 8.02(a) and Section 6.02, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action which the Indenture expressly provides may be made, given
or taken by the Holders of a specified percentage, which is less than a majority
in principal amount of the Outstanding Notes may be adopted at a meeting or an
adjourned meeting duly reconvened and at which a quorum is present as aforesaid
by the affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Notes.

     Notwithstanding the preceding two paragraphs, any request, demand,
authorization, direction, notice, consent, waiver or other action of Holders
under the Indenture or the Notes may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing; and, except as otherwise expressly
provided in the Indenture, such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee and, when it is
expressly required, to the Trust. The percentage of principal amount of the
Outstanding Notes held by the Holders delivering such instruments which is
required to approve any such action shall be the same as the percentage required
for approval at a duly convened meeting of Holders.

                                       76


     Any resolution passed or decision taken at any meeting of Holders duly held
or by duly executed instrument in accordance with this Section shall be binding
on all Holders of the Notes, whether or not such Holders were present or
represented at the meeting.

     SECTION 10.05. Determination of Voting Rights; Conduct and Adjournment of
Meetings.

         (a) Notwithstanding any other provisions of the Indenture, the
Indenture Trustee may make such reasonable regulations as it may deem advisable
for any meeting of Holders in regard to proof of the holding of Notes and of the
appointment of proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Notes shall be proved in the
manner specified in Section 1.04 and the appointment of any proxy shall be
proved in the manner specified in Section 1.04. Such regulations may provide
that written instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section 1.04 or other
proof.

         (b) The Indenture Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Trust or by Holders as provided in Section 10.02(b), in which case the Trust
or the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the Persons entitled to vote a majority
in principal amount of the Outstanding Notes represented at the meeting.

         (c) At any meeting, each Holder or proxy shall be entitled to one vote
for each $1,000 of principal amount of Notes held or represented by him, her or
it; provided, however, that no vote shall be cast or counted at any meeting in
respect of any Note challenged as not Outstanding and ruled by the chairman of
the meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder or proxy.

         (d) Notwithstanding any other provision in the Indenture to the
contrary, any meeting of Holders duly called pursuant to Section 10.02 at which
a quorum is present may be adjourned from time to time by Persons entitled to
vote a majority in principal amount of the Outstanding Notes represented at the
meeting; and the meeting may be held as so adjourned without further notice.

     SECTION 10.06. Counting Votes and Recording Action of Meetings. The vote
upon any resolution submitted to any meeting of Holders shall be by written
ballots on which shall be subscribed the signatures of the Holders or of their
representatives by proxy and the principal amounts and serial numbers of the
Outstanding Notes held or represented by them. The permanent chairman of the
meeting shall appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in triplicate of all
votes cast at the meeting. A record, at least in triplicate, of the proceedings
of each meeting of Holders shall be

                                       77


prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was given as provided in Section 10.02 and, if applicable, Section 10.04.
Each copy shall be signed and verified by the affidavits of the permanent
chairman and secretary of the meeting and one such copy shall be delivered to
the Trust, and another to the Indenture Trustee to be preserved by the Indenture
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.

                                   ARTICLE 11
                           NOTES IN FOREIGN CURRENCIES

     SECTION 11.01. Notes in Foreign Currencies. In the absence of any
provision to the contrary in the form of Notes, whenever the Indenture provides
for (a) any action by, or the determination of any of the rights of, the Holders
of Notes if not all of the Notes are denominated in the same currency, or (b)
any distribution to the Holders of Notes of any amount in respect of any Note
denominated in a currency other than U.S. Dollars, then all foreign denominated
Notes shall be treated for any such action, determination of rights or
distribution as that amount of U.S. Dollars that could be obtained for such
amount on such reasonable basis of exchange and as of the Regular Record Date
with respect to such Notes for such action, determination of rights or
distribution (or, if there shall be no applicable Regular Record Date, such
other date reasonably proximate to the date of such action, determination of
rights or distribution) as the Trust may specify in a written notice to the
Indenture Trustee or, in the absence of such written notice, as the Indenture
Trustee may determine.



                                       78

                                                                     EXHIBIT A-1

       FORM OF GLOBAL NOTE FOR THE PRINCIPAL(R) LIFE CORENOTES PROGRAM(R)



THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE (HEREINAFTER
DEFINED) AND IS REGISTERED IN THE NAME OF A DEPOSITARY (AS DEFINED IN THE
INDENTURE) OR A NOMINEE OF A DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST (HEREINAFTER
DEFINED) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
UNLESS ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

REGISTERED NO.:                CUSIP NO.:               PRINCIPAL AMOUNT: U.S. $


                     PRINCIPAL LIFE INCOME FUNDINGS TRUST o

                         PRINCIPAL(R) LIFE CORENOTES(R)

                                                          
Original Issue Date:                                         Floating Rate Note: [  ] Yes [  ] No.  If yes,
Issue Price:                                                          Regular Floating Rate Notes [  ]
Stated Maturity Date:                                                 Floating Rate/ Fixed Rate Notes: [  ]
Settlement Date:                                                      Interest Rate:
Securities Exchange Listing:  [  ] Yes  [  ] No.  If yes,             Interest Rate Basis(es):
         indicate name(s) of Securities Exchange(s):                  LIBOR [  ]
         ________________________.                                             [ ] LIBOR Reuters Page:
Depositary:                                                                    [ ] LIBOR Moneyline Telerate Page:
Authorized Denominations:                                                      LIBOR Currency:
Collateral held in the Trust:  Principal Life Insurance               CMT Rate [  ]
   Company Funding Agreement No. o, the related Principal                      Designated CMT Telerate Page:
   Financial Group, Inc. Guarantee which fully and
   unconditionally guarantees the payment




                                     A-1-1

                                                         
obligations of Principal Life Insurance                      If Telerate Page 7052:
Company under the Funding Agreement, all                                     [ ] Weekly Average
proceeds of the Funding Agreement and the                                    [ ] Monthly Average
related Guarantee and all rights and                                  Designated CMT Maturity Index:
books and records pertaining to the foregoing.               CD Rate [  ]
                                                             Commercial Paper Rate [  ]
Interest Rate or Formula:                                             Constant Maturity Swap Rate [  ]
Fixed Rate Note: [  ] Yes [  ] No.  If yes,                           Federal Funds Open Rate [  ]
         Interest Rate:                                               Federal Funds Rate [  ]
         Interest Payment Frequency:                                  Prime Rate [  ]
         Interest Payment Dates:                                      Treasury Rate [  ]
         Day Count Convention:                                        Index Maturity:
         Additional/Other Terms:                                      Spread and/or Spread Multiplier:
Discount Note: [  ] Yes [  ] No.  If yes,                             Initial Interest Rate, if any:
         Total Amount of Discount:                                    Initial Interest Reset Date:
         Initial Accrual Period of Discount:                          Interest Reset Dates:
         Interest Payment Dates:                                      Interest Determination Date(s):
         Additional/Other Terms:                                      Interest Payment Dates:
Redemption Provisions: [  ] Yes  [  ] No.  If yes,                    Maximum Interest Rate, if any:
         Initial Redemption Date:                                     Minimum Interest Rate, if any:
         Additional/Other Terms:                                      Fixed Rate Commencement Date, if any:
Repayment Provisions: [  ] Yes  [  ] No.  If yes,                     Floating Rate Commencement Date, if any:
         Repayment Date(s):                                           Fixed Interest Rate, if any:
         Repayment Price:                                             Day Count Convention:
         Additional/Other Terms:                                      Additional/Other Terms:
                                                             Regular Record Date(s):
                                                             Sinking Fund:
                                                             Calculation Agent:
                                                             Additional/Other Terms:
                                                             Survivor's Option: [  ] Yes [  ] No.
                                                                     If yes, the attached Survivor's Option Rider is
                                                                     incorporated into this Note.
                                                             Trust Put Limitation:



         The Principal Life Income Fundings Trust designated above (the
"Trust"), for value received, hereby promises to pay to Cede & Co., or its
registered assigns, the Principal Amount specified above on the Stated Maturity
Date specified above and, if so specified above, to pay interest thereon from
the Original Issue Date specified above or from the most recent Interest Payment
Date specified above to which interest has been paid or duly provided for at the
rate per annum determined in accordance with the provisions on the reverse
hereof and as specified above, until the principal hereof is paid or made
available for payment. Payments of principal, premium, if any, and interest
hereon will be made in the lawful currency of the United States of America
("U.S. Dollars" or "United States dollars"). The "Principal Amount" of this Note
at any time means (1) if this Note is a Discount Note (as hereinafter defined),
the Amortized Face

                                     A-1-2


Amount (as hereinafter defined) at such time (as defined in Section 3(c) on the
reverse hereof) and (2) in all other cases, the Principal Amount hereof.
Capitalized terms not otherwise defined herein shall have their meanings set
forth in the Indenture, dated as of the date of the Pricing Supplement (the
"Indenture"), between Citibank, N.A., as the indenture trustee (the "Indenture
Trustee"), and the Trust, or on the face hereof.

         This Note will mature on the Stated Maturity Date, unless its principal
(or any installment of its principal) becomes due and payable prior to the
Stated Maturity Date, whether, as applicable, by the declaration of acceleration
of maturity, notice of redemption by the Trust or otherwise (the Stated Maturity
Date or any date prior to the Stated Maturity Date on which this Note becomes
due and payable, as the case may be, is referred to as the "Maturity Date").

         A "Discount Note" is any Note that has an Issue Price that is less than
100% of the Principal Amount thereof by a percentage that is equal to or greater
than 0.25% multiplied by the product of the principal amount of the Notes and
the number of full years to the Stated Maturity Date.

         Unless otherwise specified above, the interest payable on each Interest
Payment Date or the Maturity Date will be the amount of interest accrued from
and including the Original Issue Date or from and including the last Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, to, but excluding, such Interest Payment Date or the Maturity Date, as
the case may be.

         Unless otherwise specified above, the interest payable on any Interest
Payment Date will be paid to the Holder on the Regular Record Date for such
Interest Payment Date, which Regular Record Date shall be the fifteenth (15th)
calendar day, whether or not a Business Day, immediately preceding the related
Interest Payment Date; provided that, notwithstanding any provision of the
Indenture to the contrary, interest payable on any Maturity Date shall be
payable to the Person to whom principal shall be payable; and provided, further,
that unless otherwise specified above, in the case of a Note initially issued
between a Regular Record Date and the Interest Payment Date relating to such
Regular Record Date, interest for the period beginning on the Original Issue
Date and ending on such Interest Payment Date shall be paid on the Interest
Payment Date following the next succeeding Regular Record Date to the Holder on
such next succeeding Regular Record Date.

         Payments of principal of, and premium, if any, and interest and other
amounts due and owing, if any, will be made through the Indenture Trustee to the
account of DTC or its nominee and will be made in accordance with depositary
arrangements with DTC.

         Unless otherwise specified on the face hereof, the Holder hereof will
not be obligated to pay any administrative costs imposed by banks in making
payments in immediately available funds by the Trust. Unless otherwise specified
on the face hereof, any tax assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.

                                     A-1-3


         REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

         Unless the certificate of authentication hereon shall have been
executed by the Indenture Trustee pursuant to the Indenture, this Note shall not
be entitled to any benefit under such Indenture or be valid or obligatory for
any purpose.



         IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed, by manual or facsimile signature.



                                     
                                        THE PRINCIPAL LIFE INCOME FUNDINGS TRUST
                                              SPECIFIED ON THE FACE OF THIS NOTE

Dated:  Original Issue Date             By: U.S. Bank Trust National Association, not in its
                                        individual capacity but solely as Trustee.



                                        By:
                                            ------------------------------------
                                             Authorized Officer













                          CERTIFICATE OF AUTHENTICATION

         This is one of the Notes of the Principal Life Income Fundings Trust
specified on the face of this Note referred to in the within-mentioned
Indenture.



                                          CITIBANK, N.A.
                                         As Indenture Trustee

Dated:  Original Issue Date


                                       By:
                                           -------------------------------------
                                           Authorized Signatory


                                     A-1-4



                             [REVERSE FORM OF NOTE]


SECTION 1. GENERAL. This Note is one of a duly authorized issue of Notes of the
Trust. The Notes are issued pursuant to the Indenture.

SECTION 2. CURRENCY. This Note is denominated in, and payments of principal,
premium, if any, and/or interest, if any, will be made in U.S. Dollars.

SECTION 3. DETERMINATION OF INTEREST RATE AND CERTAIN OTHER TERMS.


         (a) Fixed Rate Notes. If this Note is specified on the face hereof as a
         "Fixed Rate Note":

                  (i) This Note will bear interest at the rate per annum
                  specified on the face hereof. Interest on this Note will be
                  computed on the basis of a 360-day year of twelve 30-day
                  months.

                  (ii) Unless otherwise specified on the face hereof, the
                  Interest Payment Dates for this Note will be as follows:




 INTEREST PAYMENT FREQUENCY     INTEREST PAYMENT DATES
 --------------------------     --------------------------------------
                             
 Monthly                        Fifteenth day of each calendar
                                month, beginning in the first
                                calendar month following the month
                                this Note was issued.

 Quarterly                      Fifteenth day of every third calendar
                                month, beginning in the third
                                calendar month following the month
                                this Note was issued.

 Semi-annual                    Fifteenth day of every sixth calendar
                                month, beginning in the sixth
                                calendar month following the month
                                this Note was issued.

 Annual                         Fifteenth day of every twelfth
                                calendar month, beginning in the
                                twelfth calendar month following the
                                month this Note was issued.



                  (iii) If any Interest Payment Date or the Maturity Date of
                  this Note falls on a day that is not a Business Day, the Trust
                  will make the required payment of principal, premium, if any,
                  and/or interest or other amounts on the next succeeding
                  Business Day, and no additional interest will accrue in
                  respect of the payment made on that next succeeding Business
                  Day.

         (b) Floating Rate Notes. If this Note is specified on the face hereof
         as a "Floating Rate Note":

                                     A-1-5


                  (i) Interest Rate Basis. Interest on this Note will be
                  determined by reference to the applicable Interest Rate Basis
                  or Interest Rate Bases, which may, as described below, include
                  the CD Rate, the CMT Rate, the Commercial Paper Rate, the
                  Constant Maturity Swap Rate, the Federal Funds Open Rate, the
                  Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate
                  (each as defined below).

                  (ii) Effective Rate. The rate derived from the applicable
                  Interest Rate Basis or Interest Rate Bases will be determined
                  in accordance with the related provisions below. The interest
                  rate in effect on each day will be based on: (1) if that day
                  is an Interest Reset Date, the rate determined as of the
                  Interest Determination Date immediately preceding that
                  Interest Reset Date; or (2) if that day is not an Interest
                  Reset Date, the rate determined as of the Interest
                  Determination Date immediately preceding the most recent
                  Interest Reset Date.

                  (iii) Spread; Spread Multiplier; Index Maturity. The "Spread"
                  is the number of basis points (one one-hundredth of a
                  percentage point) specified on the face hereof to be added to
                  or subtracted from the related Interest Rate Basis or Interest
                  Rate Bases applicable to this Note. The "Spread Multiplier" is
                  the percentage specified on the face hereof of the related
                  Interest Rate Basis or Interest Rate Bases applicable to this
                  Note by which the Interest Rate Basis or Interest Rate Bases
                  will be multiplied to determine the applicable interest rate.
                  The "Index Maturity" is the period to maturity of the
                  instrument or obligation with respect to which the related
                  Interest Rate Basis or Interest Rate Bases will be calculated.

                  (iv) Regular Floating Rate Note. Unless this Note is specified
                  on the face hereof as a Floating Rate/Fixed Rate Note, this
                  Note (a "Regular Floating Rate Note") will bear interest at
                  the rate determined by reference to the applicable Interest
                  Rate Basis or Interest Rate Bases: (1) plus or minus the
                  applicable Spread, if any; and/or (2) multiplied by the
                  applicable Spread Multiplier, if any. Commencing on the first
                  Interest Reset Date, the rate at which interest on this
                  Regular Floating Rate Note is payable will be reset as of each
                  Interest Reset Date; provided, however, that the interest rate
                  in effect for the period, if any, from the Original Issue Date
                  to the first Interest Reset Date will be the Initial Interest
                  Rate.

                  (v) Floating Rate/Fixed Rate Notes. If this Note is specified
                  on the face hereof as a "Floating Rate/Fixed Rate Note", this
                  Note will bear interest at the rate determined by reference to
                  the applicable Interest Rate Basis or Interest Rate Bases: (1)
                  plus or minus the applicable Spread, if any; and/or (2)
                  multiplied by the applicable Spread Multiplier, if any.
                  Commencing on the first Interest Reset Date, the rate at which
                  this Floating Rate/Fixed Rate Note is payable will be reset as
                  of each Interest Reset Date; provided, however, that: (A) the
                  interest rate in effect for the period, if any, from the
                  Original Issue Date to the first Interest Reset Date will be
                  the Initial Interest Rate specified on the face hereof; and
                  (B) the interest rate in effect commencing on the Fixed Rate
                  Commencement Date will be the Fixed Interest Rate, if
                  specified on the face hereof, or, if not so specified, the
                  interest rate in effect on the day immediately preceding the
                  Fixed Rate Commencement Date.

                                     A-1-6


               (vi) Interest Reset Dates. The period between Interest Reset
               Dates will be the "Interest Reset Period." Unless otherwise
               specified on the face hereof, the Interest Reset Dates will be,
               in the case of this Floating Rate Note if by its terms it resets:
               (1) daily--each business day; (2) weekly--the Wednesday of each
               week, with the exception of any weekly reset Floating Rate Note
               as to which the Treasury Rate is an applicable Interest Rate
               Basis, which will reset the Tuesday of each week; (3)
               monthly--the fifteenth day of each calendar month; (4)
               quarterly--the fifteenth day of March, June, September and
               December of each year; (5) semi-annually--the fifteenth day of
               the two months of each year specified on the face hereof; and (6)
               annually--the fifteenth day of the month of each year specified
               on the face hereof; provided, however, that, with respect to a
               Floating Rate/Fixed Rate Note, the rate of interest thereon will
               not reset after the particular Fixed Rate Commencement Date. If
               any Interest Reset Date for this Floating Rate Note would
               otherwise be a day that is not a Business Day, the particular
               Interest Reset Date will be postponed to the next succeeding
               Business Day, except that in the case of a Floating Rate Note as
               to which LIBOR is an applicable Interest Rate Basis and that
               Business Day falls in the next succeeding calendar month, the
               particular Interest Reset Date will be the immediately preceding
               Business Day.

               (vii) Interest Determination Dates. The interest rate applicable
               to a Floating Rate Note for an Interest Reset Period commencing
               on the related Interest Reset Date will be determined by
               reference to the applicable Interest Rate Basis as of the
               particular "Interest Determination Date", which will be: (1) with
               respect to the Federal Funds Open Rate--the related Interest
               Reset Date; (2) with respect to the Commercial Paper Rate, the
               Federal Funds Rate and the Prime Rate--the Business Day
               immediately preceding the related Interest Reset Date; (3) with
               respect to the CD Rate and the CMT Rate--the second Business Day
               preceding the related Interest Reset Date; (4) with respect to
               the Constant Maturity Swap Rate--the second U.S. Government
               Securities business day preceding the related Interest Reset
               Date, provided, however, that if after attempting to determine
               the Constant Maturity Swap Rate, such rate is not determinable
               for a particular Interest Determination Date, then such Interest
               Determination Date shall be the first U.S. Government Securities
               business day preceding the original interest determination date
               for which the Constant Maturity Swap Rate can be determined; (5)
               with respect to LIBOR--the second London Banking Day (as defined
               below) preceding the related Interest Reset Date; and (6) with
               respect to the Treasury Rate--the day of the week in which the
               related Interest Reset Date falls on which day Treasury Bills (as
               defined below) are normally auctioned (i.e., Treasury Bills are
               normally sold at auction on Monday of each week, unless that day
               is a legal holiday, in which case the auction is normally held on
               the following Tuesday, except that the auction may be held on the
               preceding Friday); provided, however, that if an auction is held
               on the Friday of the week preceding the related Interest Reset
               Date, the Interest Determination Date will be the preceding
               Friday. The Interest Determination Date pertaining to a Floating
               Rate Note, the interest rate of which is determined with
               reference to two or more Interest Rate Bases, will be the latest
               Business Day which is at least two Business Days before the
               related Interest Reset Date for the applicable Floating Rate Note
               on which each Interest Reset Basis is determinable. "London
               Banking Day" means a day on which commercial banks are open for
               business (including dealings in the LIBOR Currency) in London.

                                     A-1-7


               (viii) Calculation Dates. The interest rate applicable to each
               Interest Reset Period will be determined by the Calculation Agent
               on or prior to the Calculation Date (as defined below), except
               with respect to LIBOR, which will be determined on the particular
               Interest Determination Date. Upon request of the Holder of a
               Floating Rate Note, the Calculation Agent will disclose the
               interest rate then in effect and, if determined, the interest
               rate that will become effective as a result of a determination
               made for the next succeeding Interest Reset Date with respect to
               such Floating Rate Note. The "Calculation Date", if applicable,
               pertaining to any Interest Determination Date will be the earlier
               of: (1) the tenth calendar day after the particular Interest
               Determination Date or, if such day is not a Business Day, the
               next succeeding Business Day; or (2) the Business Day immediately
               preceding the applicable Interest Payment Date or the Maturity
               Date, as the case may be.

               (ix) Maximum or Minimum Interest Rate. If specified on the face
               hereof, this Note may have either or both of a Maximum Interest
               Rate or a Minimum Interest Rate. If a Maximum Interest Rate is so
               designated, the interest rate for a Floating Rate Note cannot
               ever exceed such Maximum Interest Rate and in the event that the
               interest rate on any Interest Reset Date would exceed such
               Maximum Interest Rate (as if no Maximum Interest Rate were in
               effect) then the interest rate on such Interest Reset Date shall
               be the Maximum Interest Rate. If a Minimum Interest Rate is so
               designated, the interest rate for a Floating Rate Note cannot
               ever be less than such Minimum Interest Rate and in the event
               that the interest rate on any Interest Reset Date would be less
               than such Minimum Interest Rate (as if no Minimum Interest Rate
               were in effect) then the interest rate on such Interest Reset
               Date shall be the Minimum Interest Rate. Notwithstanding anything
               to the contrary contained herein, the interest rate on a Floating
               Rate Note shall not exceed the maximum interest rate permitted by
               applicable law.

               (x) Interest Payments. Unless otherwise specified on the face
               hereof, the Interest Payment Dates will be, in the case of a
               Floating Rate Note which resets: (1) daily, weekly or
               monthly--the fifteenth day of each calendar month or on the
               fifteenth day of March, June, September and December of each
               year, as specified on the face hereof; (2) quarterly--the
               fifteenth day of March, June, September and December of each
               year; (3) semi-annually--the fifteenth day of the two months of
               each year specified on the face hereof; and (4) annually--the
               fifteenth day of the month of each year as specified on the face
               hereof. In addition, the Maturity Date will also be an Interest
               Payment Date. If any Interest Payment Date other than the
               Maturity Date for this Floating Rate Note would otherwise be a
               day that is not a Business Day, such Interest Payment Date will
               be postponed to the next succeeding Business Day, except that in
               the case of a Floating Rate Note as to which LIBOR is an
               applicable Interest Rate Basis and that Business Day falls in the
               next succeeding calendar month, the particular Interest Payment
               Date will be the immediately preceding Business Day. If the
               Maturity Date of a Floating Rate Note falls on a day that is not
               a Business Day, the Trust will make the required payment of
               principal, premium, if

                                     A-1-8


               any, and interest or other amounts on the next succeeding
               Business Day, and no additional interest will accrue in
               respect of the payment made on that next succeeding Business
               Day.

               (xi) Rounding. Unless otherwise specified on the face hereof, all
               percentages resulting from any calculation on this Floating Rate
               Note will be rounded to the nearest one hundred-thousandth of a
               percentage point, with five one-millionths of a percentage point
               rounded upwards. All dollar amounts used in or resulting from any
               calculation on this Floating Rate Note will be rounded to the
               nearest cent.

               (xii) Interest Factor. With respect to this Floating Rate Note,
               accrued interest is calculated by multiplying the principal
               amount of such Note by an accrued interest factor. The accrued
               interest factor is computed by adding the interest factor
               calculated for each day in the particular Interest Reset Period.
               The interest factor for each day will be computed by dividing the
               interest rate applicable to such day by 360, in the case of a
               Floating Rate Note as to which the CD Rate, the Commercial Paper
               Rate, the Federal Funds Open Rate, the Federal Funds Rate, LIBOR
               or the Prime Rate is an applicable Interest Rate Basis, or by the
               actual number of days in the year, in the case of a Floating Rate
               Note as to which the CMT Rate or the Treasury Rate is an
               applicable Interest Rate Basis. In the case of a series of Notes
               that bear interest at floating rates as to which the Constant
               Maturity Swap Rate is the Interest Rate Basis, the interest
               factor for each day will be computed by dividing the number of
               days in the interest period by 360 (the number of days to be
               calculated on the base is of a year of 360 days with twelve
               30-day months (unless (i) the last day of the interest period is
               the 31st day of a month but the first day of the interest period
               is a day other than the 30th or 31st day of a month, in which
               case the month that includes that last day shall not be
               considered to be shortened to a 30-day month, or (ii) the last
               day of the interest period is the last day of the month of
               February, in which case the month of February shall not be
               considered to be lengthened to a 30-day month)). The interest
               factor for a Floating Rate Note as to which the interest rate is
               calculated with reference to two or more Interest Rate Bases will
               be calculated in each period in the same manner as if only the
               applicable Interest Rate Basis specified above applied.

               (xiii) Determination of Interest Rate Basis. The Calculation
               Agent shall determine the rate derived from each Interest Rate
               Basis in accordance with the following provisions.

                  (A) CD Rate Notes. If the Interest Rate Basis is the CD Rate,
                  this Note shall be deemed a "CD Rate Note." Unless otherwise
                  specified on the face hereof, "CD Rate" means: (1) the rate on
                  the particular Interest Determination Date for negotiable
                  United States dollar certificates of deposit having the Index
                  Maturity specified on the face hereof as published in
                  H.15(519) (as defined below) under the caption "CDs (secondary
                  market)"; or (2) if the rate referred to in clause (1) is not
                  so published by 3:00 P.M., New York City time, on the related
                  Calculation Date, the rate on the particular Interest
                  Determination Date for negotiable United States dollar
                  certificates of deposit of the particular Index Maturity as
                  published in

                                     A-1-9


H.15 Daily Update (as defined below), or other recognized electronic source used
for the purpose of displaying the applicable rate, under the caption "CDs
(secondary market)"; or (3) if the rate referred to in clause (2) is not so
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on the particular Interest Determination Date calculated by the Calculation
Agent as the arithmetic mean of the secondary market offered rates as of 10:00
A.M., New York City time, on that Interest Determination Date, of three leading
non-bank dealers in negotiable United States dollar certificates of deposit in
The City of New York (which may include the purchasing agent or its affiliates)
selected by the Calculation Agent for negotiable United States dollar
certificates of deposit of major United States money market banks for negotiable
United States certificates of deposit with a remaining maturity closest to the
particular Index Maturity in an amount that is representative for a single
transaction in that market at that time; or (4) if the dealers so selected by
the Calculation Agent are not quoting as mentioned in clause (3), the CD Rate in
effect on the particular Interest Determination Date. "H.15(519)" means the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through the
world-wide-web site of the Board of Governors of the Federal Reserve System at
http://www.federalreserve.gov/releases/H15/ update, or any successor site or
publication.

(B) CMT Rate Notes. If the Interest Rate Basis is the CMT Rate, this Note shall
be deemed a "CMT Rate Note." Unless otherwise specified on the face hereof, "CMT
Rate" means:

         (1) if CMT Moneyline Telerate Page 7051 is specified on the face
         hereof:

               i.   the percentage equal to the yield for United States Treasury
                    securities at "constant maturity" having the Index Maturity
                    specified on the face hereof as published in H.15(519) under
                    the caption "Treasury Constant Maturities", as the yield is
                    displayed on Moneyline Telerate (or any successor service)
                    on page 7051 (or any other page as may replace the specified
                    page on that service) ("Moneyline Telerate Page 7051"), for
                    the particular Interest Determination Date; or

               ii.  if the rate referred to in clause (i) does not so appear on
                    Moneyline Telerate Page 7051, the percentage equal to the
                    yield for United States Treasury securities at "constant
                    maturity" having the particular Index Maturity and for the
                    particular Interest Determination Date as published in
                    H.15(519) under the caption "Treasury Constant Maturities";
                    or

               iii. if the rate referred to in clause (ii) does not so appear in
                    H.15(519), the rate on the particular Interest Determination
                    Date for the period of the particular Index Maturity as may
                    then be

                                     A-1-10


                    published by either the Federal Reserve System Board
                    of Governors or the United States Department of the Treasury
                    that the Calculation Agent determines to be comparable to
                    the rate which would otherwise have been published in
                    H.15(519); or

               iv.  if the rate referred to in clause (iii) is not so published,
                    the rate on the particular Interest Determination Date
                    calculated by the Calculation Agent as a yield to maturity
                    based on the arithmetic mean of the secondary market bid
                    prices at approximately 3:30 P.M., New York City time, on
                    that Interest Determination Date of three leading primary
                    United States government securities dealers in The City of
                    New York (which may include the purchasing agent or its
                    affiliates) (each, a "Reference Dealer") selected by the
                    Calculation Agent from five Reference Dealers selected by
                    the Calculation Agent and eliminating the highest quotation,
                    or, in the event of equality, one of the highest, and the
                    lowest quotation or, in the event of equality, one of the
                    lowest, for United States Treasury securities with an
                    original maturity equal to the particular Index Maturity, a
                    remaining term to maturity no more than one year shorter
                    than that Index Maturity and in a principal amount that is
                    representative for a single transaction in the securities in
                    that market at that time; or

               v.   if fewer than five but more than two of the prices referred
                    to in clause (iv) are provided as requested, the rate on the
                    particular Interest Determination Date calculated by the
                    Calculation Agent based on the arithmetic mean of the bid
                    prices obtained and neither the highest nor the lowest of
                    the quotations shall be eliminated; or

               vi.  if fewer than three prices referred to in clause (iv) are
                    provided as requested, the rate on the particular Interest
                    Determination Date calculated by the Calculation Agent as a
                    yield to maturity based on the arithmetic mean of the
                    secondary market bid prices as of approximately 3:30 P.M.,
                    New York City time, on that Interest Determination Date of
                    three Reference Dealers selected by the Calculation Agent
                    from five Reference Dealers selected by the Calculation
                    Agent and eliminating the highest quotation or, in the event
                    of equality, one of the highest and the lowest quotation or,
                    in the event of equality, one of the lowest, for United
                    States Treasury securities with an original maturity greater
                    than the particular Index Maturity, a remaining term to
                    maturity closest to that Index Maturity and in a principal
                    amount that is representative for a single transaction in
                    the securities in that market at that time; or

                                     A-1-11


     vii. if fewer than five but more than two prices referred to in clause (vi)
          are provided as requested, the rate on the particular Interest
          Determination Date calculated by the Calculation Agent based on the
          arithmetic mean of the bid prices obtained and neither the highest nor
          the lowest of the quotations will be eliminated; or

     viii.if fewer than three prices referred to in clause (vi) are provided as
          requested, the CMT Rate in effect on the particular Interest
          Determination Date; or

(2) if CMT Moneyline Telerate Page 7052 is specified on the face hereof:

     i.   the percentage equal to the one-week or one-month, as specified on the
          face hereof, average yield for United States Treasury securities at
          "constant maturity" having the Index Maturity specified on the face
          hereof as published in H.15(519) opposite the caption "Treasury
          Constant Maturities", as the yield is displayed on Moneyline Telerate
          (or any successor service) (on page 7052 or any other page as may
          replace the specified page on that service) ("Moneyline Telerate Page
          7052"), for the week or month, as applicable, ended immediately
          preceding the week or month, as applicable, in which the particular
          Interest Determination Date falls; or

     ii.  if the rate referred to in clause (i) does not so appear on Moneyline
          Telerate Page 7052, the percentage equal to the one-week or one-month,
          as specified on the face hereof, average yield for United States
          Treasury securities at "constant maturity" having the particular Index
          Maturity and for the week or month, as applicable, preceding the
          particular Interest Determination Date as published in H.15(519)
          opposite the caption "Treasury Constant Maturities"; or

     iii. if the rate referred to in clause (ii) does not so appear in
          H.15(519), the one-week or one-month, as specified on the face hereof,
          average yield for United States Treasury securities at "constant
          maturity" having the particular Index Maturity as otherwise announced
          by the Federal Reserve Bank of New York for the week or month, as
          applicable, ended immediately preceding the week or month, as
          applicable, in which the particular Interest Determination Date falls;
          or

     iv.  if the rate referred to in clause (iii) is not so published, the rate
          on the particular Interest Determination Date calculated by the
          Calculation Agent as a yield to maturity based on the arithmetic mean
          of the secondary market bid prices at approximately 3:30 P.M., New
          York City time, on that Interest Determination Date of

                                     A-1-12


          three Reference Dealers selected by the Calculation Agent from five
          Reference Dealers selected by the Calculation Agent and eliminating
          the highest quotation, or, in the event of equality, one of the
          highest, and the lowest quotation or, in the event of equality, one of
          the lowest, for United States Treasury securities with an original
          maturity equal to the particular Index Maturity, a remaining term to
          maturity no more than one year shorter than that Index Maturity and in
          a principal amount that is representative for a single transaction in
          the securities in that market at that time; or

     v.   if fewer than five but more than two of the prices referred to in
          clause (iv) are provided as requested, the rate on the particular
          Interest Determination Date calculated by the Calculation Agent based
          on the arithmetic mean of the bid prices obtained and neither the
          highest nor the lowest of the quotations shall be eliminated; or

     vi.  if fewer than three prices referred to in clause (iv) are provided as
          requested, the rate on the particular Interest Determination Date
          calculated by the Calculation Agent as a yield to maturity based on
          the arithmetic mean of the secondary market bid prices as of
          approximately 3:30 P.M., New York City time, on that Interest
          Determination Date of three Reference Dealers selected by the
          Calculation Agent from five Reference Dealers selected by the
          Calculation Agent and eliminating the highest quotation or, in the
          event of equality, one of the highest and the lowest quotation or, in
          the event of equality, one of the lowest, for United States Treasury
          securities with an original maturity greater than the particular Index
          Maturity, a remaining term to maturity closest to that Index Maturity
          and in a principal amount that is representative for a single
          transaction in the securities in that market at the time; or

     vii. if fewer than five but more than two prices referred to in clause (vi)
          are provided as requested, the rate on the particular Interest
          Determination Date calculated by the Calculation Agent based on the
          arithmetic mean of the bid prices obtained and neither the highest nor
          the lowest of the quotations will be eliminated; or

     viii.if fewer than three prices referred to in clause (vi) are provided as
          requested, the CMT Rate in effect on that Interest Determination Date.

          If two United States Treasury securities with an original maturity
          greater than the Index Maturity specified on the face hereof have
          remaining terms to maturity equally close to the particular Index
          Maturity, the quotes for the United States Treasury security with the
          shorter original remaining term to maturity will be used.

                                     A-1-13


(C) Commercial Paper Rate Notes. If the Interest Rate Basis is the Commercial
Paper Rate, this Note shall be deemed a "Commercial Paper Rate Note." Unless
otherwise specified on the face hereof, "Commercial Paper Rate" means: (1) the
Money Market Yield (as defined below) on the particular Interest Determination
Date of the rate for commercial paper having the Index Maturity specified on the
face hereof as published in H.15(519) under the caption "Commercial
Paper--Nonfinancial"; or (2) if the rate referred to in clause (1) is not so
published by 3:00 P.M., New York City time, on the related Calculation Date, the
Money Market Yield of the rate on the particular Interest Determination Date for
commercial paper having the particular Index Maturity as published in H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "Commercial
Paper--Nonfinancial"; or (3) if the rate referred to in clause (2) is not so
published by 3:00 P.M., New York City time, on the related Calculation Date, the
rate on the particular Interest Determination Date calculated by the Calculation
Agent as the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on that Interest Determination
Date of three leading dealers of United States dollar commercial paper in The
City of New York (which may include the purchasing agent or its affiliates)
selected by the Calculation Agent for commercial paper having the particular
Index Maturity placed for industrial issuers whose bond rating is "Aa", or the
equivalent, from a nationally recognized statistical rating organization; or (4)
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in clause (3), the Commercial Paper Rate in effect on the particular Interest
Determination Date. "Money Market Yield" means a yield (expressed as a
percentage) calculated in accordance with the following formula:

                        
     Money Market Yield =             D x 360      x 100
                                ------------------
                                  360 - (D x M)



     

where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.

(D) Constant Maturity Swap Rate Notes. If the Interest Rate Basis is the
Constant Maturity Swap Rate, this Note shall be deemed a "Constant Maturity Swap
Rate Note." Unless otherwise specified on the face hereof, "Constant Maturity
Swap Rate" means: (1) the rate for U.S. dollar swaps with the designated
maturity specified in the applicable pricing supplement, expressed as a
percentage, which appears on the Reuters Screen (or any successor service)
ISDAFIX1 Page as of 11:00 A.M., New York City time, on the particular Interest
Determination Date; or (2) if the rate referred to in clause (1) does not appear
on the Reuters Screen (or any successor service) ISDAFIX1 Page by 2:00 P.M., New
York City time, on such Interest Determination Date, a percentage determined on

                                     A-1-14


the basis of the mid-market semiannual swap rate quotations provided by the
reference banks (as defined below) as of approximately 11:00 A.M., New York City
time, on such Interest Determination Date, and, for this purpose, the
semi-annual swap rate means the mean of the bid and offered rates for the
semi-annual fixed leg, calculated on a 30/360 day count basis, of a
fixed-for-floating U.S. dollar interest rate swap transaction with a term equal
to the designated maturity specified in the applicable pricing supplement
commencing on the Interest Reset Date and in a representative amount (as defined
below) with an acknowledged dealer of good credit in the swap market, where the
floating leg, calculated on an actual/360 day count basis, is equivalent to
USD-LIBOR-BBA with a designated maturity specified in the applicable pricing
supplement. The Calculation Agent will request the principal New York City
office of each of the reference banks to provide a quotation of its rate. If at
least three quotations are provided, the rate for that Interest Determination
Date will be the arithmetic mean of the quotations, eliminating the highest
quotation (or, in the event of equality, one of the highest) and the lowest
quotation (or, in the event of equality, one of the lowest); or (3) if at least
three quotations are not received by the Calculation Agent as mentioned in
clause (2), the Constant Maturity Swap Rate in effect on the particular Interest
Determination Date. "U.S. Government Securities business day" means any day
except for Saturday, Sunday, or a day on which The Bond Market Association
recommends that the fixed income departments of its members be closed for the
entire day for purposes of trading in U.S. government securities.
"Representative amount" means an amount that is representative for a single
transaction in the relevant market at the relevant time. "Reference banks" mean
five leading swap dealers in the New York City interbank market, selected by the
Calculation Agent, after consultation with us.

(E) Federal Funds Open Rate Notes. If the Interest Rate Basis is the Federal
Funds Open Rate, this Note shall be deemed a "Federal Funds Open Rate Note."
Unless otherwise specified on the face hereof, "Federal Funds Open Rate" means
the rate set forth on Moneyline Telerate (or any successor service) on page 5
(or any other page as may replace the specified page on that service) for an
Interest Determination Date underneath the caption "FEDERAL FUNDS" in the row
titled "OPEN". If the rate is not available for an Interest Determination Date,
the rate for that Interest Determination Date shall be the Federal Funds Rate as
determined below.

(F) Federal Funds Rate Notes. If the Interest Rate Basis is the Federal Funds
Rate, this Note shall be deemed a "Federal Funds Rate Note." Unless otherwise
specified on the face hereof, "Federal Funds Rate" means: (1) the rate on the
particular Interest Determination Date for United States dollar federal funds as
published in H.15(519) under the caption "Federal Funds (Effective)" and
displayed on Moneyline Telerate (or any successor service) on page 120 (or any
other page as may replace the specified page on that service) ("Moneyline
Telerate Page 120"); or (2) if the rate referred to in clause (1) does not so
appear on Moneyline Telerate Page 120 or is not so published by 3:00 P.M., New
York City time, on the related Calculation Date, the rate on the particular
Interest

                                     A-1-15


Determination Date for United States dollar federal funds as published
in H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "Federal Funds
(Effective)"; or (3) if the rate referred to in clause (2) is not so published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
the particular Interest Determination Date calculated by the Calculation Agent
as the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of United States
dollar federal funds transactions in The City of New York (which may include the
purchasing agent or its affiliates) selected by the Calculation Agent prior to
9:00 A.M., New York City time, on that Interest Determination Date; or (4) if
the brokers so selected by the Calculation Agent are not quoting as mentioned in
clause (3), the Federal Funds Rate in effect on the particular Interest
Determination Date.

(G) LIBOR Notes. If the Interest Rate Basis is LIBOR, this Note shall be deemed
a "LIBOR Note." Unless otherwise specified on the face hereof, "LIBOR" means:
(1) if "LIBOR Moneyline Telerate" is specified on the face hereof or if neither
"LIBOR Reuters" nor "LIBOR Moneyline Telerate" is specified on the face hereof
as the method for calculating LIBOR, the rate for deposits in the LIBOR Currency
(as defined below) having the Index Maturity specified on the face hereof,
commencing on the related Interest Reset Date, that appears on the LIBOR Page
(as defined below) as of 11:00 A.M., London time, on the particular Interest
Determination Date; or (2) if "LIBOR Reuters" is specified on the face hereof,
the arithmetic mean of the offered rates, calculated by the Calculation Agent,
or the offered rate, if the LIBOR Page by its terms provides only for a single
rate, for deposits in the LIBOR Currency having the particular Index Maturity,
commencing on the related Interest Reset Date, that appear or appears, as the
case may be, on the LIBOR Page as of 11:00 A.M., London time, on the particular
Interest Determination Date; or (3) if fewer than two offered rates appear, or
no rate appears, as the case may be, on the particular Interest Determination
Date on the LIBOR Page as specified in clause (1) or (2), as applicable, the
rate calculated by the Calculation Agent of at least two offered quotations
obtained by the Calculation Agent after requesting the principal London offices
of each of four major reference banks (which may include affiliates of the
purchasing agent) in the London interbank market to provide the Calculation
Agent with its offered quotation for deposits in the LIBOR Currency for the
period of the particular Index Maturity, commencing on the related Interest
Reset Date, to prime banks in the London interbank market at approximately 11:00
A.M., London time, on that Interest Determination Date and in a principal amount
that is representative for a single transaction in the LIBOR Currency in that
market at that time; or (4) if fewer than two offered quotations referred to in
clause (3) are provided as requested, the rate calculated by the Calculation
Agent as the arithmetic mean of the rates quoted at approximately 11:00 A.M., in
the applicable Principal Financial Center, on the particular Interest
Determination Date by three major banks (which may include affiliates of the
purchasing agent) in that principal financial center selected by the Calculation
Agent for loans in the LIBOR Currency to leading European banks, having the
particular Index Maturity

                                     A-1-16


and in a principal amount that is representative for a single transaction in the
LIBOR Currency in that market at that time; or (5) if the banks so selected by
the Calculation Agent are not quoting as mentioned in clause (4), LIBOR in
effect on the particular Interest Determination Date. "LIBOR Currency" means the
currency specified on the face hereof as to which LIBOR shall be calculated or,
if no currency is specified on the face hereof, United States dollars. "LIBOR
Page" means either: (1) if "LIBOR Reuters" is specified on the face hereof, the
display on the Reuter Monitor Money Rates Service (or any successor service) on
the page specified on the face hereof (or any other page as may replace that
page on that service) for the purpose of displaying the London interbank rates
of major banks for the LIBOR Currency; or (2) if "LIBOR Moneyline Telerate" is
specified on the face hereof or neither "LIBOR Reuters" nor "LIBOR Moneyline
Telerate" is specified on the face hereof as the method for calculating LIBOR,
the display on Moneyline Telerate (or any successor service) on the page
specified on the face hereof (or any other page as may replace such page on such
service) for the purpose of displaying the London interbank rates of major banks
for the LIBOR Currency.

(H) Prime Rate Notes. If the Interest Rate Basis is the Prime Rate, this Note
shall be deemed a "Prime Rate Note." Unless otherwise specified on the face
hereof, "Prime Rate" means: (1) the rate on the particular Interest
Determination Date as published in H.15(519) under the caption "Bank Prime
Loan"; or (2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date as published in H.15 Daily Update, or
such other recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "Bank Prime Loan", or (3) if the rate
referred to in clause (2) is not so published by 3:00 P.M., New York City time,
on the related Calculation Date, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as the arithmetic mean of
the rates of interest publicly announced by each bank that appears on the
Reuters Screen US PRIME 1 Page (as defined below) as the applicable bank's prime
rate or base lending rate as of 11:00 A.M., New York City time, on that Interest
Determination Date; or (4) if fewer than four rates referred to in clause (3)
are so published by 3:00 p.m., New York City time, on the related Calculation
Date, the rate calculated by the Calculation Agent as the particular Interest
Determination Date calculated by the Calculation Agent as the arithmetic mean of
the prime rates or base lending rates quoted on the basis of the actual number
of days in the year divided by a 360-day year as of the close of business on
that Interest Determination Date by three major banks (which may include
affiliates of the purchasing agent) in The City of New York selected by the
Calculation Agent; or (5) if the banks so selected by the Calculation Agent are
not quoting as mentioned in clause (4), the Prime Rate in effect on the
particular Interest Determination Date. "Reuters Screen US PRIME 1 Page" means
the display on the Reuter Monitor Money Rates Service (or any successor service)
on the "US PRIME 1" page (or any other page as may replace that page on that
service) for the purpose of displaying prime rates or base lending rates of
major United States banks.

                                     A-1-17


(I) Treasury Rate Notes. If the Interest Rate Basis is the Treasury Rate, this
Note shall be deemed a "Treasury Rate Note." Unless otherwise specified on the
face hereof, "Treasury Rate" means: (1) the rate from the auction held on the
Interest Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified on the face hereof
under the caption "INVESTMENT RATE" on the display on Moneyline Telerate (or any
successor service) on page 56 (or any other page as may replace that page on
that service) ("Moneyline Telerate Page 56") or page 57 (or any other page as
may replace that page on that service) ("Moneyline Telerate Page 57"); or (2) if
the rate referred to in clause (1) is not so published by 3:00 P.M., New York
City time, on the related Calculation Date, the Bond Equivalent Yield (as
defined below) of the rate for the applicable Treasury Bills as published in
H.15 Daily Update, or another recognized electronic source used for the purpose
of displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High"; or (3) if the rate referred to in
clause (2) is not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the Bond Equivalent Yield of the auction rate of the
applicable Treasury Bills as announced by the United States Department of the
Treasury; or (4) if the rate referred to in clause (3) is not so announced by
the United States Department of the Treasury, or if the Auction is not held, the
Bond Equivalent Yield of the rate on the particular Interest Determination Date
of the applicable Treasury Bills as published in H.15(519) under the caption
"U.S. Government Securities/Treasury Bills/Secondary Market"; or (5) if the rate
referred to in clause (4) is not so published by 3:00 P.M., New York City time,
on the related Calculation Date, the rate on the particular Interest
Determination Date of the applicable Treasury Bills as published in H.15 Daily
Update, or another recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market"; or (6) if the rate referred to in
clause (5) is not so published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on the particular Interest Determination Date
calculated by the Calculation Agent as the Bond Equivalent Yield of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on that Interest Determination Date, of three primary
United States government securities dealers (which may include the purchasing
agent or its affiliates) selected by the Calculation Agent, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity specified
on the face hereof; or (7) if the dealers so selected by the Calculation Agent
are not quoting as mentioned in clause (6), the Treasury Rate in effect on the
particular Interest Determination Date. "Bond Equivalent Yield" means a yield
(expressed as a percentage) calculated in accordance with the following formula:

                            
      Bond Equivalent Yield =              D x N        x 100
                                     ------------------
                                      360 - (D x M)

      

                                     A-1-18


where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the applicable
Interest Reset Period.

     (c) Discount Notes. If this Note is specified on the face hereof as a
     "Discount Note":

          (i) Principal and Interest. This Note will bear interest in the same
          manner as set forth in Section 3(a) above, and payments of principal
          and interest shall be made as set forth on the face hereof. Discount
          Notes may not bear any interest currently or may bear interest at a
          rate that is below market rates at the time of issuance. The
          difference between the Issue Price of a Discount Note and par is
          referred to as the "Discount".

          (ii) Redemption; Repayment; Acceleration. In the event a Discount Note
          is redeemed, repaid or accelerated, the amount payable to the Holder
          of such Discount Note will be equal to the sum of: (A) the Issue Price
          (increased by any accruals of Discount); and (B) any unpaid interest
          accrued on such Discount Note to the Maturity Date ("Amortized Face
          Amount"). Unless otherwise specified on the face hereof, for purposes
          of determining the amount of Discount that has accrued as of any date
          on which a redemption, repayment or acceleration of maturity occurs
          for a Discount Note, a Discount will be accrued using a constant yield
          method. The constant yield will be calculated using a 30-day month,
          360-day year convention, a compounding period that, except for the
          Initial Period (as defined below), corresponds to the shortest period
          between Interest Payment Dates for the applicable Discount Note (with
          ratable accruals within a compounding period), a coupon rate equal to
          the initial coupon rate applicable to the applicable Discount Note and
          an assumption that the maturity of such Discount Note will not be
          accelerated. If the period from the date of issue to the first
          Interest Payment Date for a Discount Note (the "Initial Period") is
          shorter than the compounding period for such Discount Note, a
          proportionate amount of the yield for an entire compounding period
          will be accrued. If the Initial Period is longer than the compounding
          period, then the period will be divided into a regular compounding
          period and a short period with the short period being treated as
          provided above.

SECTION 4. REDEMPTION. If no redemption right is set forth on the face hereof,
this Note may not be redeemed prior to the Stated Maturity Date, except as set
forth in the Indenture or in Section 10 hereof. In the case of a Note that is
not a Discount Note, if a redemption right is set forth on the face of this
Note, the Trust shall elect to redeem this Note on the Interest Payment Date
after the Initial Redemption Date set forth on the face hereof on which the
Funding Agreement is to be redeemed in whole or in part by Principal Life
Insurance Company ("Principal Life") (each, a "Redemption Date"), in which case
this Note must be redeemed on such Redemption Date in whole or in part, as
applicable, prior to the Stated Maturity Date, in increments of $1,000 at the
applicable Redemption Price (as defined below), together with unpaid interest,
if any, accrued thereon to, but excluding, the applicable Redemption Date.
"Redemption Price" shall mean the unpaid Principal Amount of this Note to be
redeemed. The unpaid Principal Amount of this Note to be redeemed shall be
determined by multiplying (1) the Outstanding Principal Amount of this Note by
(2) the quotient derived by dividing (A) the outstanding principal amount of the

                                     A-1-19


Funding Agreement to be redeemed by Principal Life by (B) the outstanding
principal amount of the Funding Agreement. Notice must be given not more than
sixty (60) nor less than thirty (30) calendar days prior to the proposed
Redemption Date. In the event of redemption of this Note in part only, a new
Note for the unredeemed portion hereof shall be issued in the name of the Holder
hereof upon the surrender hereof. If less than all of this Note is redeemed, the
Indenture Trustee will select by lot or, in its discretion, on a pro rata basis,
the amount of the interest of each direct participant in the Trust to be
redeemed.

SECTION 5. SINKING FUNDS. Unless specified on the face hereof, this Note will
not be subject to, or entitled to the benefit of, any sinking fund.

SECTION 6. REPAYMENT. If no repayment right is set forth on the face hereof,
this Note may not be repaid at the option of the Holder hereof prior to the
Stated Maturity Date. If a repayment right is granted on the face of this Note,
this Note may be subject to repayment at the option of the Holder on any
Interest Payment Date on and after the date, if any, indicated on the face
hereof (each, a "Repayment Date"). On any Repayment Date, unless otherwise
specified on the face hereof, this Note shall be repayable in whole or in part
in increments of $1,000 at the option of the Holder hereof at a repayment price
equal to 100% of the Principal Amount to be repaid, together with interest
thereon payable to the Repayment Date. For this Note to be repaid in whole or in
part at the option of the Holder hereof, this Note must be received by the
Indenture Trustee, with the form entitled "Option to Elect Repayment", below,
duly completed by the Indenture Trustee. Exercise of such repayment option by
the Holder hereof shall be irrevocable. In the event of a repayment of this Note
in part only, a new Note for the portion hereof not repaid shall be issued in
the name of the Holder hereof upon the surrender hereof.

SECTION 7. MODIFICATIONS AND WAIVERS. The Indenture contains provisions
permitting the Trust and the Indenture Trustee (1) at any time and from time to
time without notice to, or the consent of, the Holders of any Notes issued under
the Indenture to enter into one or more supplemental indentures for certain
enumerated purposes and (2) with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Notes affected thereby, to enter
into one or more supplemental indentures for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, the Indenture or of modifying in any manner the rights of Holders of Notes
under the Indenture; provided, that, with respect to certain enumerated
provisions, no such supplemental indenture shall be entered into without the
consent of the Holder of each Note affected thereby. Any such consent or waiver
by the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Note or such other
Notes.

SECTION 8. OBLIGATIONS UNCONDITIONAL. No reference herein to the Indenture and
no provisions of this Note or of the Indenture shall impair the right of each
Holder of any Note, which is absolute and unconditional, to receive payment of
the principal of, and any interest on, and premium, if any, on, such Note on the
respective Stated Maturity Date or redemption date thereof and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

                                     A-1-20


SECTION 9. EVENTS OF DEFAULT. If an Event of Default with respect to this Note
shall occur and be continuing, the principal of, and all other amounts payable
on, the Notes may be declared due and payable, or may be automatically
accelerated, as the case may be, in the manner and with the effect provided in
the Indenture. In the event that this Note is a Discount Note, the amount of
principal of this Note that becomes due and payable upon such acceleration shall
be equal to the amount calculated as set forth in Section 3(c) hereof.

SECTION 10. WITHHOLDING; NO ADDITIONAL AMOUNTS; TAX EVENT AND REDEMPTION. All
amounts due on this Note will be made without any applicable withholding or
deduction for or on account of any present or future taxes, duties, levies,
assessments or other governmental charges of whatever nature imposed or levied
by or on behalf of any governmental authority, unless such withholding or
deduction is required by law. Unless otherwise specified on the face hereof, the
Trust will not pay any additional amounts to the Holder of this Note in respect
of such withholding or deduction, any such withholding or deduction will not
give rise to an event of default or any independent right or obligation to
redeem this Note and the Holder will be deemed for all purposes to have received
cash in an amount equal to the portion of such withholding or deduction that is
attributable to such Holder's interest in this Note as equitably determined by
the Trust.

         If (1) a Tax Event (defined below) as to the Funding Agreement occurs
and (2) Principal Life redeems the Funding Agreement in whole or in part, the
Trust will redeem the Notes, subject to the terms and conditions of Section 2.04
of the Standard Indenture Terms, at the Tax Event Redemption Price (defined
below) together with unpaid interest accrued thereon to the applicable
redemption date. "Tax Event" means that Principal Life shall have received an
opinion of independent legal counsel stating in effect that as a result of (a)
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the effective date of the
Funding Agreement, there is more than an insubstantial risk that (i) the Trust
is, or will be within ninety (90) days of the date thereof, subject to U.S.
federal income tax with respect to interest accrued or received on the Funding
Agreement or (ii) the Trust is, or will be within ninety (90) days of the date
thereof, subject to more than a de minimis amount of taxes, duties or other
governmental charges. "Tax Event Redemption Price" means an amount equal to the
unpaid principal amount of this Note to be redeemed, which shall be determined
by multiplying (1) the Outstanding Principal Amount of this Note by (2) the
quotient derived by dividing (A) the outstanding principal amount to be redeemed
by Principal Life of the Funding Agreement by (B) the outstanding principal
amount of the Funding Agreement.

SECTION 11. LISTING. Unless otherwise specified on the face hereof, this Note
will not be listed on any securities exchange.

SECTION 12. COLLATERAL. The Collateral for this Note includes the Funding
Agreement and the Guarantee specified on the face hereof.

                                     A-1-21


SECTION 13. NO RECOURSE AGAINST CERTAIN PERSONS. No recourse shall be had for
the payment of any principal, interest or any other sums at any time owing under
the terms of this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against the Nonrecourse Parties, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability being, by the acceptance hereof and as
part of the consideration for issue hereof, expressly waived and released.

SECTION 14.  MISCELLANEOUS.

     (a) This Note is issuable only as a registered Note without coupons in
denominations of $1,000 and any integral multiple in excess thereof unless
otherwise specified on the face of this Note.

     (b) Prior to due presentment for registration of transfer of this Note, the
Trust, the Indenture Trustee, the Registrar, the Paying Agent, any Agent, and
any other agent of the Trust or the Indenture Trustee may treat the Person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note shall be overdue, and none of the Trust, the Indenture Trustee, the
Registrar, the Paying Agent, any Agent, or any other agent of the Trust or the
Indenture Trustee shall be affected by notice to the contrary.

     (c) The Notes are being issued by means of a book-entry-only system with no
physical distribution of certificates to be made except as provided in the
Indenture. The book-entry system maintained by DTC will evidence ownership of
the Notes, with transfers of ownership effected on the records of DTC and its
participants pursuant to rules and procedures established by DTC and its
participants. The Trust and the Indenture Trustee will recognize Cede & Co., as
nominee of DTC, as the registered owner of the Notes, as the Holder of the Notes
for all purposes, including payment of principal, premium (if any) and interest,
notices and voting. Transfer of principal, premium (if any) and interest to
participants of DTC will be the responsibility of DTC, and transfer of
principal, premium (if any) and interest to beneficial holders of the Notes by
participants of DTC will be the responsibility of such participants and other
nominees of such beneficial holders. So long as the book-entry system is in
effect, the selection of any Notes to be redeemed or repaid will be determined
by DTC pursuant to rules and procedures established by DTC and its participants.
Neither the Trust nor the Indenture Trustee shall be responsible or liable for
such transfers or payments or for maintaining, supervising or reviewing the
records maintained by DTC, its participants or persons acting through such
participants.

     (d) This Note or portion hereof may not be exchanged for Definitive Notes,
except in the limited circumstances provided for in the Indenture. The transfer
or exchange of Definitive Notes shall be subject to the terms of the Indenture.
No service charge will be made for any registration of transfer or exchange, but
the Trust may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.

SECTION 15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                     A-1-22


                            OPTION TO ELECT REPAYMENT

         The undersigned hereby irrevocably request(s) and instruct(s) the Trust
to repay this Note (or portion hereof specified below) pursuant to its terms at
a price equal to the Principal Amount hereof together with interest to the
repayment date, to the undersigned, at:

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

- --------------------------------------------------------------------------------
(Please print or typewrite name and address of the undersigned).

     For this Note to be repaid, the Indenture Trustee (or the Paying Agent on
behalf of the Indenture Trustee) must receive at its Corporate Trust Office, or
at such other place or places of which the Trust shall from time to time notify
the Holder of this Note, not more than sixty (60) nor less than thirty (30) days
prior to a Repayment Date, if any, shown on the face of this Note, this Note
with this "Option to Elect Repayment" form duly completed.

     If less than the entire Principal Amount of this Note is to be repaid,
specify the portion hereof (which shall be in increments of $1,000) which the
Holder elects to have repaid and specify the denomination or denominations
(which shall be $______ or an integral multiple of $1,000 in excess of $______)
of the Notes to be issued to the Holder for the portion of this Note not being
repaid (in the absence of any such specification, one such Note will be issued
for the portion not being repaid).

                                                  
$
 --------------------------------                    --------------------------------------

       -------------------------
DATE:                                                NOTICE: The signature on this
       -------------------------                     Option to Elect Repayment must
                                                     correspond with the name as
                                                     written upon the face of this Note
                                                     in every particular, without
                                                     alteration or enlargement or any
                                                     change whatever.

Principal Amount to be repaid, if amount to be
repaid is less than the Principal Amount of this     Fill in for registration of Notes
Note (Principal Amount remaining must be an          if to be issued otherwise than
authorized denomination)                             to the registered Holder:

                                                     Name: __________________________
$_________________________                           Address: _______________________
                                                     ___________________________
                                                     (Please print name and
                                                     address including zip code)

SOCIAL SECURITY OR OTHER TAXPAYER ID NUMBER: _________________



                                     A-1-23



                             SURVIVOR'S OPTION RIDER

     (a) Unless this Note, on its face, has been declared due and payable prior
to the Maturity Date by reason of any Event of Default under the Indenture, or
has been previously redeemed or otherwise repaid, the authorized Representative
(as defined below) of a deceased Beneficial Owner (as defined below) of this
Note shall have the option to elect repayment by the Trust in whole or in part
prior to the Maturity Date following the death of the Beneficial Owner (a
"Survivor's Option"). The Survivor's Option may not be exercised unless the
deceased Beneficial Owner purchased the Notes either within ninety (90) days of
their issuance or acquired the Notes at least six (6) months before the date of
death of such deceased Beneficial Owner. "Beneficial Owner" as used in this
Survivor's Option Rider means, with respect to this Note, the person who has the
right, immediately prior to such person's death, to receive the proceeds from
the disposition of this Note, as well as the right to receive payments on this
Note.

     (b) Upon (1) the valid exercise of the Survivor's Option and the proper
tender of this Note by or on behalf of a person that has authority to act on
behalf of the deceased Beneficial Owner of this Note under the laws of the
appropriate jurisdiction (including, without limitation, the personal
representative or executor of the deceased Beneficial Owner or the surviving
joint owner of the deceased Beneficial Owner) (the "Representative") and (2) the
tender and acceptance of that portion of the Funding Agreement equal to the
amount of the portion of this Note to be redeemed, the Trust shall repay this
Note (or portion thereof) at a price equal to 100% of the unpaid Principal
Amount of the deceased Beneficial Owner's beneficial interest in this Note plus
accrued and unpaid interest to, but excluding, the date of such repayment.
However, the Trust shall not be obligated to repay:

     (i) beneficial ownership interests in Notes exceeding the greater of
     $2,000,000 or 2% (or such other amounts, as specified in the Pricing
     Supplement) in aggregate principal amount for all notes then outstanding
     under the Principal(R) Life CoreNotes(R) Program and the Secured
     Medium-Term Notes Retail Program as of the end of the most recent calendar
     year (the "Annual Put Limitation");

     (ii) on behalf of an individual deceased Beneficial Owner, any beneficial
     ownership interest in all notes issued under the Principal(R) Life
     CoreNotes(R) Program and the Secured Medium-Term Notes Retail Program that
     exceeds $250,000 (or such other amounts, as specified in the Pricing
     Supplement) in any calendar year (the "Individual Put Limitation"); or

     (iii) beneficial ownership interests in Notes exceeding the amount
     specified on the face hereof and in the Pricing Supplement (the "Trust Put
     Limitation").

     (c) The Trust shall not make principal repayments pursuant to exercise of
the Survivor's Option in amounts that are less than $1,000, and, in the event
that the limitations described in the preceding sentence would result in the
partial repayment of this Note, the Principal Amount remaining Outstanding after
repayment must be at least $1,000 (the minimum authorized denomination of the
Notes).

     (d) An otherwise valid election to exercise the Survivor's Option may not
be withdrawn.

                                     A-1-24


     (e) Election to exercise the Survivor's Option will be accepted in the
order that elections are received by the Trustee, except for any Notes (or
portion thereof) the acceptance of which would contravene (1) the Annual Put
Limitation, (2) the Individual Put Limitation or (3) the Trust Put Limitation.
Any Note (or portion thereof) accepted for repayment pursuant to exercise of the
Survivor's Option shall be repaid on the first Interest Payment Date that occurs
20 or more calendar days after the date of such acceptance. If, as of the end of
any calendar year, the aggregate principal amount of all notes (or portions
thereof) issued under the Principal(R) Life CoreNotes(R) Program and the Secured
Medium-Term Notes Retail Program that have been tendered pursuant to the valid
exercise of the Survivor's Option during such year has exceeded the Annual Put
Limitation or the Individual Put Limitation, for such year, any exercise(s) of
the Survivor's Option with respect to Notes (or portions thereof) not accepted
during such calendar year, because such acceptance would have contravened any
such limitation, shall be deemed to be tendered on the first day of the
following calendar year in the order all such Notes (or portions thereof) were
originally tendered. If, as of the end of any calendar year, the aggregate
principal amount of all Notes (or portions thereof) that have been tendered
pursuant to the valid exercise of the Survivor's Option during such year has
exceeded the Trust Put Limitation, for such year, any exercise(s) of the
Survivor's Option with respect to Notes (or portions thereof) not accepted
during such calendar year, because such acceptance would have contravened any
such limitation, shall be deemed to be tendered on the first day of the
following calendar year in the order all such Notes (or portions thereof) were
originally tendered. In the event that this Note (or any portion hereof)
tendered for repayment pursuant to valid exercise of the Survivor's Option is
not accepted or is to be delayed, the Trustee shall deliver a notice by
first-class mail to the Depositary that states the reason such Note (or portion
thereof) has not been accepted for payment or is to be delayed.

     (f) In order to obtain repayment through exercise of the Survivor's Option
with respect to this Note (or portion hereof), the Representative must provide
the following items to the broker or other entity through which the beneficial
interest in this Note is held by the deceased Beneficial Owner: (1) a written
instruction to such broker or other entity in the form of Annex A attached
hereto to notify the Depositary of the Representative's desire to obtain
repayment through the exercise of the Survivor's Option; (2) appropriate
evidence satisfactory to the Trustee that (i) the deceased Beneficial Owner
purchased the Notes either within ninety (90) days of their issuance or acquired
the Notes at least six (6) months before the date of death of such deceased
Beneficial Owner, (ii) the death of such Beneficial Owner has occurred, and the
date of such death, and (iii) the Representative has authority to act on behalf
of the deceased Beneficial Owner; (3) if the interest in this Note is held by a
nominee of the deceased Beneficial Owner, a certificate satisfactory to the
Trustee from such nominee attesting to the deceased's beneficial ownership of
this Note; (4) a written request for repayment signed by the Representative,
with the signature guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States; (5) if applicable, a properly executed assignment or endorsement;
(6) tax waivers and such other instruments or documents that the Trustee
reasonably requires in order to establish the validity of the beneficial
ownership of this Note and the claimant's entitlement to payment; and (7) any
additional information the Trustee reasonably requires to evidence satisfaction
of any conditions to the exercise of such Survivor's Option or to document
beneficial ownership or authority to make the election and to cause the
repayment of this Note. Such broker or other entity shall then deliver

                                     A-1-25


each of these items to the direct participant of the Depositary, such direct
participant being the entity that holds the beneficial interest in this Note on
behalf of the deceased Beneficial Owner, together with evidence satisfactory to
the Indenture Trustee from the broker or other entity stating that it represents
the deceased Beneficial Owner. Such direct participant shall then deliver such
items to the Indenture Trustee. The Indenture Trustee will then deliver these
items to the Trustee and will provide the Trustee with any additional
information (after receipt from such direct participant) the Trustee may request
in connection with such exercise. Such direct participant shall be responsible
for disbursing any payments it receives from the Depositary pursuant to exercise
of the Survivor's Option to the appropriate Representative. All questions, other
than with respect to the right to limit the aggregate Principal Amount of Notes
as to which exercises of the Survivor's Option shall be accepted in any one
calendar year or as to the Notes, regarding the eligibility or validity of any
exercise of the Survivor's Option will be determined by the Trustee, in its sole
discretion, which determination shall be final and binding on all parties.

     (g) The death of a person holding a beneficial interest in this Note as a
joint tenant or tenant by the entirety with another person, or as a tenant in
common with the deceased owner's spouse, will be deemed the death of the
Beneficial Owner of this Note, and the entire Principal Amount of this Note so
held shall be subject to repayment by the Trust upon request in accordance with
the terms and provisions hereof. However, the death of a person holding a
beneficial interest in this Note as tenant in common with a person other than
such deceased owner's spouse will be deemed the death of a Beneficial Owner only
with respect to such deceased person's ownership interest in this Note.

     (h) The death of a person who was a lifetime beneficiary of a trust holding
a beneficial interest in this Note will be treated as the death of the
Beneficial Owner of this Note to the extent of that person's interest in the
trust. The death of a person who was a tenant by the entirety or joint tenant in
a tenancy which is the beneficiary of a trust holding a beneficial interest in
this Note will be treated as the death of the Beneficial Owner of this Note. The
death of an individual who was a tenant in common in a tenancy which is the
beneficiary of a trust holding a beneficial interest in this Note will be
treated as the death of the Beneficial Owner of this Note only with respect to
the deceased person's beneficial interest in this Note, unless a husband and
wife are the tenants in common, in which case the death of either will be
treated as the death of the owner of this Note.

     (i) The death of a person who, during his or her lifetime, was entitled to
substantially all of the beneficial ownership interests in this Note will be
deemed the death of the Beneficial Owner of this Note for purposes of the
Survivor's Option, regardless of whether that Beneficial Owner was the
registered holder of this Note, if such beneficial ownership interest can be
established to the satisfaction of the Trustee. A beneficial ownership interest
will be deemed to exist in typical cases of nominee ownership, such as ownership
under the Uniform Transfers of Gifts to Minors Act, community property or other
joint ownership arrangements between a husband and wife and lifetime custodial
and trust arrangements.

                                     A-1-26



                                                                         ANNEX A

                             REPAYMENT ELECTION FORM

                        PRINCIPAL LIFE INSURANCE COMPANY

                         PRINCIPAL(R) LIFE CORENOTES(R)

                              CUSIP NUMBER ________

To:  [Name of Issuing Trust] (the "TRUST")

The undersigned financial institution (the "FINANCIAL INSTITUTION") represents
the following:

     o    The Financial Institution has received a request for repayment from
          the executor or other authorized representative (the "AUTHORIZED
          REPRESENTATIVE") of the deceased beneficial owner listed below (the
          "DECEASED BENEFICIAL OWNER") of Principal(R) Life CoreNotes(R) (CUSIP
          No. ____________) (the "NOTES").

     o    At the time of his or her death, the Deceased Beneficial Owner owned
          Notes in the principal amount listed below.

     o    The Deceased Beneficial Owner purchased the Notes either within ninety
          (90) days of their issuance or acquired the Notes at least six (6)
          months before the date of death of such Deceased Beneficial Owner.

     o    The Financial Institution currently holds such notes as a direct or
          indirect participant in The Depository Trust Company (the
          "DEPOSITARY").

     o    The Financial Institution agrees to the following terms:

     o    The Financial Institution shall follow the instructions (the
          "INSTRUCTIONS") accompanying this Repayment Election Form (this
          "FORM").

     o    The Financial Institution shall make all records specified in the
          Instructions supporting the above representations available to U.S.
          Bank Trust National Association (the "TRUSTEE") or the [Name of
          Issuing Trust] (the "TRUST") for inspection and review within five
          business days of the Trustee's or the Trust's request.

- ----------
(R)"Principal(R)" is a registered service mark of Principal Financial Services,
Inc. and is used under license.

"CoreNotes(R)" is a registered service mark of Merrill Lynch & Co.

                                     A-1-27



     o    If the Financial Institution, the Trustee or the Trust, in any such
          party's reasonable discretion, deems any of the records specified in
          the Instructions supporting the above representations unsatisfactory
          to substantiate a claim for repayment, the Financial Institution shall
          not be obligated to submit this Form, and the Trustee or Trust may
          deny repayment. If the Financial Institution cannot substantiate a
          claim for repayment, it shall notify the Trustee immediately.

     o    Repayment elections may not be withdrawn.

     o    The Financial Institution agrees to indemnify and hold harmless the
          Trustee and the Trust against and from any and all claims,
          liabilities, costs, losses, expenses, suits and damages resulting from
          the Financial Institution's above representations and request for
          repayment on behalf of the Authorized Representative.

     o    The Notes will be repaid on the first Interest Payment Date to occur
          at least 20 calendar days after the date of acceptance of the notes
          for repayment, unless such date is not a business day, in which case
          the date of repayment shall be the next succeeding business day.

     o    Subject to the Trust's rights to limit the aggregate principal amount
          of Notes as to which exercises of the Survivor's Option shall be
          accepted in any one calendar year, all questions as to the eligibility
          or validity of any exercise of the Survivor's Option will be
          determined by the Trustee, in its sole discretion, which determination
          shall be final and binding on all parties.

                                     A-1-28






                             REPAYMENT ELECTION FORM
          
(1)
- --------------------------------------------------------------------------------
                        Name of Deceased Beneficial Owner

(2)
- --------------------------------------------------------------------------------
                                  Date of Death

(3)
- --------------------------------------------------------------------------------
             Name of Authorized Representative Requesting Repayment

(4)
- --------------------------------------------------------------------------------
               Name of Financial Institution Requesting Repayment

(5)
- --------------------------------------------------------------------------------
               Signature of Authorized Representative of Financial
                        Institution Requesting Repayment

(6)
- --------------------------------------------------------------------------------
                     Principal Amount of Requested Repayment

(7)
- --------------------------------------------------------------------------------
                                Date of Election

(8) Financial Institution                   (9) Wire instructions for payment:
    Representative Name:                        Bank Name:
    Phone Number:                               ABA Number:
    Fax Number:                                 Account Name:
    Mailing Address (no P.O. Boxes):            Account Number:
                                                Reference (optional):


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




TO BE COMPLETED BY THE TRUSTEE:

(A)      ELECTION NUMBER*:

(B)      DELIVERY AND PAYMENT DATE:

(C)      PRINCIPAL AMOUNT:

(D)      ACCRUED INTEREST:

(E)      DATE OF RECEIPT OF FORM BY THE TRUSTEE:

(F)      DATE OF ACKNOWLEDGMENT BY THE TRUSTEE:


- ------------
*    To be assigned by the Trustee upon receipt of this Form. An
     acknowledgement, in the form of a copy of this document with the assigned
     Election Number, will be returned to the party and location designated in
     item (8) above.

                                     A-1-29

             INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM AND
                                   EXERCISING
                                REPAYMENT OPTION

         Capitalized terms used and not defined herein have the meanings defined
in the accompanying Repayment Election Form.

1.       Collect and retain for a period of at least three years (1)
         satisfactory evidence of the authority of the Authorized
         Representative, (2) satisfactory evidence of death of the Deceased
         Beneficial Owner, (3) satisfactory evidence that the Deceased
         Beneficial Owner beneficially owned, at the time of his or her death,
         the notes being submitted for repayment, (4) satisfactory evidence that
         the notes being submitted for repayment either were purchased within
         ninety (90) days of their issuance or were acquired by the Deceased
         Beneficial Owner at least six (6) months before the date of the death
         of such Deceased Beneficial Owner, and (5) any necessary tax waivers.
         For purposes of determining whether the notes will be deemed
         beneficially owned by an individual at any given time, the following
         rules shall apply:

         o        If a note (or a portion thereof) is beneficially owned by
                  tenants by the entirety or joint tenants, the note (or
                  relevant portion thereof) will be regarded as beneficially
                  owned by a single owner. Accordingly, the death of a tenant by
                  the entirety or joint tenant will be deemed the death of the
                  beneficial owner and the entire principal amount so owned will
                  become eligible for repayment.

         o        The death of a person beneficially owning a note (or a portion
                  thereof) by tenancy in common will be deemed the death of the
                  beneficial owner only with respect to the deceased owner's
                  interest in the note (or relevant portion thereof) so owned,
                  unless a husband and wife are the tenants in common, in which
                  case the death of either will be deemed the death of the
                  beneficial owner and the entire principal amount so owned will
                  be eligible for repayment.

         o        A note (or a portion thereof) beneficially owned by a trust
                  will be regarded as beneficially owned by each beneficiary of
                  the trust to the extent of that beneficiary's interest in the
                  trust (however, a trust's beneficiaries collectively cannot be
                  beneficial owners of more notes than are owned by the trust).
                  The death of a beneficiary of a trust will be deemed the death
                  of the beneficial owner of the notes (or relevant portion
                  thereof) beneficially owned by the trust to the extent of that
                  beneficiary's interest in the trust. The death of an
                  individual who was a tenant by the entirety or joint tenant in
                  a tenancy which is the beneficiary of a trust will be deemed
                  the death of the beneficiary of the trust. The death of an
                  individual who was a tenant in common in a tenancy which is
                  the beneficiary of a trust will be deemed the death of the
                  beneficiary of the trust only with respect to the deceased
                  holder's beneficial interest in the note, unless a husband and
                  wife are the tenants in common, in which case the death of
                  either will be deemed the death of the beneficiary of the
                  trust.

         o        The death of a person who, during his or her lifetime, was
                  entitled to substantially all of the beneficial interest in a
                  note (or a portion thereof) will be deemed the death of the

                                     A-1-30


                  beneficial owner of that note (or relevant portion thereof),
                  regardless of the registration of ownership, if such
                  beneficial interest can be established to the satisfaction of
                  the Trustee. Such beneficial interest will exist in many cases
                  of street name or nominee ownership, custodial arrangements,
                  ownership by a trustee, ownership under the Uniform Transfers
                  of Gifts to Minors Act and community property or other joint
                  ownership arrangements between spouses. Beneficial interest
                  will be evidenced by such factors as the power to sell or
                  otherwise dispose of a note, the right to receive the proceeds
                  of sale or disposition and the right to receive interest and
                  principal payments on a note.

2.       Indicate the name of the Deceased Beneficial Owner on line (1).

3.       Indicate the date of death of the Deceased Beneficial Owner on line
         (2).

4.       Indicate the name of the Authorized Representative requesting repayment
         on line (3).

5.       Indicate the name of the Financial Institution requesting repayment on
         line (4).

6.       Affix the authorized signature of the Financial Institution's
         representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE
         GUARANTEED.

7.       Indicate the principal amount of notes to be repaid on line (6).

8.       Indicate the date this Form was completed on line (7).

9.       Indicate the name, mailing address (no P.O. boxes, please), telephone
         number and facsimile-transmission number of the party to whom the
         acknowledgment of this election may be sent in item (8).

10.      Indicate the wire instruction for payment on line (9).

11.      Leave lines (A), (B), (C), (D), (E) and (F) blank.

12.      Mail or otherwise deliver an original copy of the completed Form to:

                                 Citibank, N.A.
                             Citibank Agency & Trust
                        388 Greenwich Street, 14th Floor
                            New York, New York 10013

13.      FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE
         ACCEPTED.

14.      If the acknowledgement of the Trustee's receipt of this Form, including
         the assigned Election Number, is not received within ten days of the
         date such information is sent to Citibank, N.A., contact the Trustee at
         100 Wall Street, 16th Floor, New York, New York 10005, attention:
         Corporate Trust Administration, telephone number: (212) 361-2458.

15.      For assistance with this Form or any questions relating thereto, please
         contact U.S. Bank Trust National Association at 100 Wall Street, 16th
         Floor, New York, New York 10005, attention: Corporate Trust
         Administration, telephone number: (212) 361-2458.


                                     A-1-31





                                                                     EXHIBIT A-2

          FORM OF GLOBAL NOTE FOR THE SECURED MEDIUM-TERM NOTES PROGRAM


THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE (HEREINAFTER
DEFINED) AND IS REGISTERED IN THE NAME OF A DEPOSITARY (AS DEFINED IN THE
INDENTURE) OR A NOMINEE OF A DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST (HEREINAFTER
DEFINED) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
UNLESS ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

REGISTERED NO.:            CUSIP NO.:          PRINCIPAL AMOUNT: U.S. $

                     PRINCIPAL LIFE INCOME FUNDINGS TRUST o

                            SECURED MEDIUM-TERM NOTES

                                                          
Original Issue Date:                                         Floating Rate Note: [  ] Yes [  ] No.  If yes,
Issue Price:                                                          Regular Floating Rate Notes [  ]
Stated Maturity Date:                                                 Inverse Floating Rate Notes [  ]
Settlement Date:                                                      Floating Rate/ Fixed Rate Notes: [  ]
Securities Exchange Listing:  [  ] Yes  [  ] No.  If yes,             Interest Rate:
         indicate name(s) of Securities Exchange(s):                  Interest Rate Basis(es):
         ________________________.                                    LIBOR [  ]
Depositary:                                                                    [ ] LIBOR Reuters Page:
Authorized Denominations:                                                      [ ] LIBOR Moneyline Telerate Page:
Collateral held in the Trust:  Principal Life Insurance                        LIBOR Currency:
   Company Funding Agreement No. o, the related Principal             EURIBOR [  ]
   Financial Group, Inc. Guarantee which fully and                    CMT Rate [  ]
   unconditionally guarantees the payment




                                     A-2-1


                                                                   
   obligations of Principal Life Insurance Company                    Designated CMT Telerate Page:
   under the Funding Agreement, all proceeds of the                            If Telerate Page 7052:
   Funding Agreement and the related Guarantee and all                         [ ] Weekly Average
   rights and books and records pertaining to the                              [ ] Monthly Average
   foregoing.                                                         Designated CMT Maturity Index:

Additional Amounts to be Paid: [  ] Yes  [  ] No                      CD Rate [  ]
Interest Rate or Formula:                                             Commercial Paper Rate [  ]
Fixed Rate Note: [  ] Yes [  ] No.  If yes,                           Constant Maturity Swap Rate [  ]
         Interest Rate:                                               Eleventh District Cost of Funds Rate [  ]
         Interest Payment Frequency:                                  Federal Funds Open Rate [  ]
         Interest Payment Dates:                                      Federal Funds Rate [  ]
         Day Count Convention:                                        Prime Rate [  ]
         Additional/Other Terms:                                      Treasury Rate [  ]
Amortizing Note: [  ] Yes [  ] No.  If yes,                           Index Maturity:
         Amortization schedule or formula:                            Spread and/or Spread Multiplier:
         Additional/Other Terms:                                      Initial Interest Rate, if any:
Discount Note: [  ] Yes [  ] No.  If yes,                             Initial Interest Reset Date:
         Total Amount of Discount:                                    Interest Reset Dates:
         Initial Accrual Period of Discount:                          Interest Determination Date(s):
         Interest Payment Dates:                                      Interest Payment Dates:
         Additional/Other Terms:                                      Maximum Interest Rate, if any:
Redemption Provisions: [  ] Yes  [  ] No.  If yes,                    Minimum Interest Rate, if any:
         Initial Redemption Date:                                     Fixed Rate Commencement Date, if any:
         Initial Redemption Percentage:                               Floating Rate Commencement Date, if any:
         Annual Redemption Percentage Reduction,                      Fixed Interest Rate, if any:
                  if any:                                             Day Count Convention:
         Additional/Other Terms:                                      Additional/Other Terms:
Repayment Provisions: [  ] Yes  [  ] No.  If yes,            Regular Record Date(s):
         Repayment Date(s):                                  Sinking Fund:
         Repayment Price:                                    Specified Currency:
         Additional/Other Terms:                             Exchange Rate Agent:
                                                             Calculation Agent:
                                                             Additional/Other Terms:




         The Principal Life Income Fundings Trust designated above (the
"Trust"), for value received, hereby promises to pay to Cede & Co., or its
registered assigns, the Principal Amount specified above on the Stated Maturity
Date specified above and, if so specified above, to pay interest thereon from
the Original Issue Date specified above or from the most recent Interest Payment
Date specified above to which interest has been paid or duly provided for at the
rate per annum determined in accordance with the provisions on the reverse
hereof and as specified above, until the principal hereof is paid or made
available for payment. Unless otherwise specified above, payments of principal,
premium, if any, and interest hereon will be made in the lawful currency of the
United States of America ("U.S. Dollars" or "United States dollars"). If the
Specified Currency specified above is other than U.S. Dollars, the Holder (as
defined in the


                                     A-2-2


Indenture) shall receive such payments in such Foreign Currency
(as hereinafter defined). The "Principal Amount" of this Note at any time means
(1) if this Note is a Discount Note (as hereinafter defined), the Amortized Face
Amount (as hereinafter defined) at such time (as defined in Section 3(c) on the
reverse hereof) and (2) in all other cases, the Principal Amount hereof.
Capitalized terms not otherwise defined herein shall have their meanings set
forth in the Indenture, dated as of the date of the Pricing Supplement (the
"Indenture"), between Citibank, N.A., as the indenture trustee (the "Indenture
Trustee"), and the Trust, or on the face hereof.

         This Note will mature on the Stated Maturity Date, unless its principal
(or any installment of its principal) becomes due and payable prior to the
Stated Maturity Date, whether, as applicable, by the declaration of acceleration
of maturity, notice of redemption by the Trust or otherwise (the Stated Maturity
Date or any date prior to the Stated Maturity Date on which this Note becomes
due and payable, as the case may be, is referred to as the "Maturity Date").

         A "Discount Note" is any Note that has an Issue Price that is less than
100% of the Principal Amount thereof by a percentage that is equal to or greater
than 0.25% multiplied by the product of the principal amount of the Notes and
the number of full years to the Stated Maturity Date.

         Unless otherwise specified above, the interest payable on each Interest
Payment Date or the Maturity Date will be the amount of interest accrued from
and including the Original Issue Date or from and including the last Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, to, but excluding, such Interest Payment Date or the Maturity Date, as
the case may be.

         Unless otherwise specified above, the interest payable on any Interest
Payment Date will be paid to the Holder on the Regular Record Date for such
Interest Payment Date, which Regular Record Date shall be the fifteenth (15th)
calendar day, whether or not a Business Day, immediately preceding the related
Interest Payment Date; provided that, notwithstanding any provision of the
Indenture to the contrary, interest payable on any Maturity Date shall be
payable to the Person to whom principal shall be payable; and provided, further,
that unless otherwise specified above, in the case of a Note initially issued
between a Regular Record Date and the Interest Payment Date relating to such
Regular Record Date, interest for the period beginning on the Original Issue
Date and ending on such Interest Payment Date shall be paid on the Interest
Payment Date following the next succeeding Regular Record Date to the Holder on
such next succeeding Regular Record Date.

         Payments of principal of, and premium, if any, and interest and other
amounts due and owing, if any, will be made through the Indenture Trustee to the
account of DTC or its nominee and will be made in accordance with depositary
arrangements with DTC.

         Unless otherwise specified on the face hereof, the Holder hereof will
not be obligated to pay any administrative costs imposed by banks in making
payments in immediately available funds by the Trust. Unless otherwise specified
on the face hereof, any tax assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.


                                     A-2-3


         REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

         Unless the certificate of authentication hereon shall have been
executed by the Indenture Trustee pursuant to the Indenture, this Note shall not
be entitled to any benefit under such Indenture or be valid or obligatory for
any purpose.


                                     A-2-4






         IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed, by manual or facsimile signature.



                                   THE PRINCIPAL LIFE INCOME FUNDINGS TRUST
                                      SPECIFIED ON THE FACE OF THIS NOTE

Dated:  Original Issue Date        By: U.S. Bank Trust National Association, not
                                   in its individual capacity but solely as
                                   Trustee.

                                   By: _________________________________________
                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Notes of the Principal Life Income Fundings Trust
specified on the face of this Note referred to in the within-mentioned
Indenture.

                                   CITIBANK, N.A.
                                   As Indenture Trustee

Dated:  Original Issue Date

                                   By:
                                      ------------------------------------------
                                             Authorized Signatory

                                     A-2-5


                             [REVERSE FORM OF NOTE]

SECTION 1. GENERAL. This Note is one of a duly authorized issue of Notes of the
Trust. The Notes are issued pursuant to the Indenture.

SECTION 2.  CURRENCY.

         (a) Unless specified otherwise on the face hereof, this Note is
denominated in, and payments of principal, premium, if any, and/or interest, if
any, will be made in U.S. Dollars. If specified as the Specified Currency, this
Note may be denominated in, and payments of principal, premium, if any, and/or
interest, if any, may be made in a single currency other than U.S. Dollars (a
"Foreign Currency"). If this Note is denominated in a Foreign Currency, the
Holder of this Note is required to pay for this Note in the Specified Currency.

         (b) Unless specified otherwise on the face hereof, if this Note is
denominated in a Foreign Currency, the Trust is obligated to make payments of
principal of, and premium, if any, and interest, if any, on, this Note in the
Specified Currency. Any amounts so payable by the Trust in the Specified
Currency will be converted by the Exchange Rate Agent into U.S. Dollars for
payment to the Holder hereof unless otherwise specified on the face of this Note
or the Holder elects, in the manner described below, to receive these amounts in
the Specified Currency. If this Note is denominated in a Foreign Currency, any
U.S. Dollar amount to be received by the Holder hereof will be based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 A.M., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign exchange
dealers (one of whom may be the Exchange Rate Agent) selected by the Exchange
Rate Agent and approved by the Trust for the purchase by the quoting dealer of
the Specified Currency for U.S. Dollars for settlement on that payment date in
the aggregate amount of the Specified Currency payable to all Holders of the
Notes scheduled to receive U.S. Dollar payments and at which the applicable
dealer commits to execute a contract. All currency exchange costs will be borne
by the Holders of the Notes by deductions from any payments. If three bid
quotations are not available, payments will be made in the Specified Currency.
If this Note is denominated in a Foreign Currency, the Holder of this Note may
elect to receive all or a specified portion of any payment of principal,
premium, if any, and/or interest, if any, in the Specified Currency by
submitting a written request to the Indenture Trustee at its Corporate Trust
Office in The City of New York on or prior to the applicable Regular Record Date
or at least 15 calendar days prior to the Maturity Date, as the case may be.
This written request may be mailed or hand delivered or sent by cable, telex or
other form of facsimile transmission. This election will remain in effect until
revoked by written notice delivered to the Indenture Trustee on or prior to a
Regular Record Date or at least 15 calendar days prior to the Maturity Date, as
the case may be. The Holder of a Note denominated in a Foreign Currency to be
held in the name of a broker or nominee should contact their broker or nominee
to determine whether and how an election to receive payments in the Specified
Currency may be made. Unless specified otherwise on the face hereof, if the
Specified Currency is other than U.S. Dollars, a beneficial owner of a Note
represented by a global security which elects to receive payments of principal,
premium, if any, and/or interest, if any, in the Specified Currency must notify
the participant through which it owns its interest on or prior to the applicable
Regular Record Date or at least 15

                                     A-2-6

calendar days prior to the Maturity Date, as the case may be, of its election.
The applicable participant must notify DTC of its election on or prior to the
third Business Day after the applicable Regular Record Date or at least 12
calendar days prior to the Maturity Date, as the case may be, and DTC will
notify the Indenture Trustee of that election on or prior to the fifth Business
Day after the applicable Regular Record Date or at least ten calendar days prior
the Maturity Date, as the case may be. If complete instructions are received by
the participant from the applicable beneficial owner and forwarded by the
participant to DTC, and by DTC to the Indenture Trustee, on or prior to such
dates, then the applicable beneficial owner will receive payments in the
Specified Currency.

         (c) The Trust will indemnify the Holder hereof against any loss
incurred as a result of any judgment or order being given or made for any amount
due under this Note and that judgment or order requiring payment in a currency
(the "Judgment Currency") other than the Specified Currency, and as a result of
any variation between: (i) the rate of exchange at which the Specified Currency
amount is converted into the Judgment Currency for the purpose of that judgment
or order; and (ii) the rate of exchange at which the Holder, on the date of
payment of that judgment or order, is able to purchase the Specified Currency
with the amount of the Judgment Currency actually received.

         (d) Unless otherwise specified on the face hereof, if payment hereon is
required to be made in a Foreign Currency and such currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the Trust's
control, then the Trust will be entitled to make payments with respect hereto in
U.S. Dollars on the basis of the Market Exchange Rate (as hereinafter defined),
computed by the Exchange Rate Agent, on the second Business Day prior to the
particular payment or, if the Market Exchange Rate is not then available, on the
basis of the most recently available Market Exchange Rate.

         (e) The "Market Exchange Rate" for the Foreign Currency shall mean the
noon dollar buying rate in The City of New York for cable transfers for the
Foreign Currency as certified for customs purposes (or, if not so certified, as
otherwise determined) by the Federal Reserve Bank of New York.

         (f) All determinations made by the Exchange Rate Agent shall be at its
sole discretion and shall, in the absence of manifest error, be conclusive for
all purposes and binding on the Holder hereof.

         (g) All costs of exchange in respect of this Note, if denominated in a
Foreign Currency, will be borne by the Holder hereof.

SECTION 3.  DETERMINATION OF INTEREST RATE AND CERTAIN OTHER TERMS.


         (a)      Fixed Rate Notes. If this Note is specified on the face hereof
                  as a "Fixed Rate Note":


                  (i) This Note will bear interest at the rate per annum
                  specified on the face hereof. Interest on this Note will be
                  computed on the basis of a 360-day year of twelve 30-day
                  months.

                                     A-2-7


(ii) Unless otherwise specified on the face hereof, the Interest Payment Dates
for this Note will be as follows:

                 
                 
                                        
INTEREST PAYMENT FREQUENCY                 INTEREST PAYMENT DATES
- --------------------------------------     --------------------------------------

Monthly                                    Fifteenth day of
                                           each calendar month,
                                           beginning in the
                                           first calendar month
                                           following the month
                                           this Note was
                                           issued.

Quarterly                                  Fifteenth day of
                                           every third calendar
                                           month, beginning in
                                           the third calendar
                                           month following the
                                           month this Note was
                                           issued.

Semi-annual                                Fifteenth day of
                                           every sixth calendar
                                           month, beginning in
                                           the sixth calendar
                                           month following the
                                           month this Note was
                                           issued.

Annual                                     Fifteenth day of
                                           every twelfth
                                           calendar month,
                                           beginning in the
                                           twelfth calendar
                                           month following the
                                           month this Note was
                                           issued.


         (iii) If any Interest Payment Date or the Maturity Date of this Note
         falls on a day that is not a Business Day, the Trust will make the
         required payment of principal, premium, if any, and/or interest or
         other amounts on the next succeeding Business Day, and no additional
         interest will accrue in respect of the payment made on that next
         succeeding Business Day.

(b)      Floating Rate Notes. If this Note is specified on the face hereof as a
         "Floating Rate Note":

         (i) Interest Rate Basis. Interest on this Note will be determined by
         reference to the applicable Interest Rate Basis or Interest Rate Bases,
         which may, as described below, include the CD Rate, the CMT Rate, the
         Commercial Paper Rate, the Constant Maturity Swap Rate; the Eleventh
         District Cost of Funds Rate, the Federal Funds Open Rate, the Federal
         Funds Rate, LIBOR, EURIBOR, the Prime Rate or the Treasury Rate (each
         as defined below).

         (ii) Effective Rate. The rate derived from the applicable Interest Rate
         Basis or Interest Rate Bases will be determined in accordance with the
         related provisions below. The interest rate in effect on each day will
         be based on: (1) if that day is an Interest Reset Date, the rate
         determined as of the Interest Determination Date immediately preceding
         that Interest Reset Date; or (2) if that day is not an Interest Reset
         Date, the rate determined as of the Interest Determination Date
         immediately preceding the most recent Interest Reset Date.

         (iii) Spread; Spread Multiplier; Index Maturity. The "Spread" is the
         number of basis points (one one-hundredth of a percentage point)
         specified on the face hereof

                                     A-2-8



         to be added to or subtracted from the related Interest Rate Basis or
         Interest Rate Bases applicable to this Note. The "Spread Multiplier" is
         the percentage specified on the face hereof of the related Interest
         Rate Basis or Interest Rate Bases applicable to this Note by which the
         Interest Rate Basis or Interest Rate Bases will be multiplied to
         determine the applicable interest rate. The "Index Maturity" is the
         period to maturity of the instrument or obligation with respect to
         which the related Interest Rate Basis or Interest Rate Bases will be
         calculated.

         (iv) Regular Floating Rate Note. Unless this Note is specified on the
         face hereof as a Floating Rate/Fixed Rate Note or an Inverse Floating
         Rate Note, this Note (a "Regular Floating Rate Note") will bear
         interest at the rate determined by reference to the applicable Interest
         Rate Basis or Interest Rate Bases: (1) plus or minus the applicable
         Spread, if any; and/or (2) multiplied by the applicable Spread
         Multiplier, if any. Commencing on the first Interest Reset Date, the
         rate at which interest on this Regular Floating Rate Note is payable
         will be reset as of each Interest Reset Date; provided, however, that
         the interest rate in effect for the period, if any, from the Original
         Issue Date to the first Interest Reset Date will be the Initial
         Interest Rate.

         (v) Floating Rate/Fixed Rate Notes. If this Note is specified on the
         face hereof as a "Floating Rate/Fixed Rate Note", this Note will bear
         interest at the rate determined by reference to the applicable Interest
         Rate Basis or Interest Rate Bases: (1) plus or minus the applicable
         Spread, if any; and/or (2) multiplied by the applicable Spread
         Multiplier, if any. Commencing on the first Interest Reset Date, the
         rate at which this Floating Rate/Fixed Rate Note is payable will be
         reset as of each Interest Reset Date; provided, however, that: (A) the
         interest rate in effect for the period, if any, from the Original Issue
         Date to the first Interest Reset Date will be the Initial Interest Rate
         specified on the face hereof; and (B) the interest rate in effect
         commencing on the Fixed Rate Commencement Date will be the Fixed
         Interest Rate, if specified on the face hereof, or, if not so
         specified, the interest rate in effect on the day immediately preceding
         the Fixed Rate Commencement Date.

         (vi) Inverse Floating Rate Notes. If this Note is specified on the face
         hereof as an "Inverse Floating Rate Note", this Note will bear interest
         at the Fixed Interest Rate minus the rate determined by reference to
         the applicable Interest Rate Basis or Interest Rate Bases: (1) plus or
         minus the applicable Spread, if any; and/or (2) multiplied by the
         applicable Spread Multiplier, if any; provided, however, that interest
         on this Inverse Floating Rate Note will not be less than zero.
         Commencing on the first Interest Reset Date, the rate at which interest
         on this Inverse Floating Rate Note is payable will be reset as of each
         Interest Reset Date; provided, however, that the interest rate in
         effect for the period, if any, from the Original Issue Date to the
         first Interest Reset Date will be the Initial Interest Rate.

         (vii) Interest Reset Dates. The period between Interest Reset Dates
         will be the "Interest Reset Period." Unless otherwise specified on the
         face hereof, the Interest Reset Dates will be, in the case of this
         Floating Rate Note if by its terms it resets: (1) daily--each business
         day; (2) weekly--the Wednesday of each week, with the

                                     A-2-9


         exception of any weekly reset Floating Rate Note as to which the
         Treasury Rate is an applicable Interest Rate Basis, which will reset
         the Tuesday of each week; (3) monthly--the fifteenth day of each
         calendar month, with the exception of any monthly reset Floating Rate
         Note as to which the Eleventh District Cost of Funds Rate is an
         applicable Interest Rate Basis, which will reset on the first calendar
         day of the month; (4) quarterly--the fifteenth day of March, June,
         September and December of each year; (5) semi-annually--the fifteenth
         day of the two months of each year specified on the face hereof; and
         (6) annually--the fifteenth day of the month of each year specified on
         the face hereof; provided, however, that, with respect to a Floating
         Rate/Fixed Rate Note, the rate of interest thereon will not reset after
         the particular Fixed Rate Commencement Date. If any Interest Reset Date
         for this Floating Rate Note would otherwise be a day that is not a
         Business Day, the particular Interest Reset Date will be postponed to
         the next succeeding Business Day, except that in the case of a Floating
         Rate Note as to which LIBOR is an applicable Interest Rate Basis and
         that Business Day falls in the next succeeding calendar month, the
         particular Interest Reset Date will be the immediately preceding
         Business Day.

         (viii) Interest Determination Dates. The interest rate applicable to a
         Floating Rate Note for an Interest Reset Period commencing on the
         related Interest Reset Date will be determined by reference to the
         applicable Interest Rate Basis as of the particular "Interest
         Determination Date", which will be: (1) with respect to the Federal
         Funds Open Rate--the related Interest Reset Date; (2) with respect to
         the Commercial Paper Rate, Federal Funds Rate and the Prime Rate--the
         Business Day immediately preceding the related Interest Reset Date; (3)
         with respect to the CD Rate and the CMT Rate--the second Business Day
         preceding the related Interest Reset Date; (4) with respect to the
         Constant Maturity Swap Rate--the second U.S. Government Securities
         business day preceding the related Interest Reset Date, provided,
         however, that if after attempting to determine the Constant Maturity
         Swap Rate, such rate is not determinable for a particular Interest
         Determination Date, then such Interest Determination Date shall be the
         first U.S. Government Securities business day preceding the original
         interest determination date for which the Constant Maturity Swap Rate
         can be determined; (5) with respect to the Eleventh District Cost of
         Funds Rate--the last working day of the month immediately preceding the
         related Interest Reset Date on which the Federal Home Loan Bank of San
         Francisco publishes the Eleventh District Index (as defined below); (6)
         with respect to LIBOR and EURIBOR--the second London Banking Day (as
         defined below) preceding the related Interest Reset Date; and (7) with
         respect to the Treasury Rate--the day of the week in which the related
         Interest Reset Date falls on which day Treasury Bills (as defined
         below) are normally auctioned (i.e., Treasury Bills are normally sold
         at auction on Monday of each week, unless that day is a legal holiday,
         in which case the auction is normally held on the following Tuesday,
         except that the auction may be held on the preceding Friday); provided,
         however, that if an auction is held on the Friday of the week preceding
         the related Interest Reset Date, the Interest Determination Date will
         be the preceding Friday. The Interest Determination Date pertaining to
         a Floating Rate Note, the interest rate of which is determined with
         reference to two or more Interest Rate Bases, will be the latest
         Business Day which

                                     A-2-10


         is at least two Business Days before the related Interest Reset Date
         for the applicable Floating Rate Note on which each Interest Reset
         Basis is determinable. "London Banking Day" means a day on which
         commercial banks are open for business (including dealings in the LIBOR
         Currency) in London.

         (ix) Calculation Dates. The interest rate applicable to each Interest
         Reset Period will be determined by the Calculation Agent on or prior to
         the Calculation Date (as defined below), except with respect to LIBOR,
         EURIBOR and the Eleventh District Cost of Funds Rate, which will be
         determined on the particular Interest Determination Date. Upon request
         of the Holder of a Floating Rate Note, the Calculation Agent will
         disclose the interest rate then in effect and, if determined, the
         interest rate that will become effective as a result of a determination
         made for the next succeeding Interest Reset Date with respect to such
         Floating Rate Note. The "Calculation Date", if applicable, pertaining
         to any Interest Determination Date will be the earlier of: (1) the
         tenth calendar day after the particular Interest Determination Date or,
         if such day is not a Business Day, the next succeeding Business Day; or
         (2) the Business Day immediately preceding the applicable Interest
         Payment Date or the Maturity Date, as the case may be.

         (x) Maximum or Minimum Interest Rate. If specified on the face hereof,
         this Note may have either or both of a Maximum Interest Rate or a
         Minimum Interest Rate. If a Maximum Interest Rate is so designated, the
         interest rate for a Floating Rate Note cannot ever exceed such Maximum
         Interest Rate and in the event that the interest rate on any Interest
         Reset Date would exceed such Maximum Interest Rate (as if no Maximum
         Interest Rate were in effect) then the interest rate on such Interest
         Reset Date shall be the Maximum Interest Rate. If a Minimum Interest
         Rate is so designated, the interest rate for a Floating Rate Note
         cannot ever be less than such Minimum Interest Rate and in the event
         that the interest rate on any Interest Reset Date would be less than
         such Minimum Interest Rate (as if no Minimum Interest Rate were in
         effect) then the interest rate on such Interest Reset Date shall be the
         Minimum Interest Rate. Notwithstanding anything to the contrary
         contained herein, the interest rate on a Floating Rate Note shall not
         exceed the maximum interest rate permitted by applicable law.

         (xi) Interest Payments. Unless otherwise specified on the face hereof,
         the Interest Payment Dates will be, in the case of a Floating Rate Note
         which resets: (1) daily, weekly or monthly--the fifteenth day of each
         calendar month or on the fifteenth day of March, June, September and
         December of each year, as specified on the face hereof; (2)
         quarterly--the fifteenth day of March, June, September and December of
         each year; (3) semi-annually--the fifteenth day of the two months of
         each year specified on the face hereof; and (4) annually--the fifteenth
         day of the month of each year as specified on the face hereof. In
         addition, the Maturity Date will also be an Interest Payment Date. If
         any Interest Payment Date other than the Maturity Date for this
         Floating Rate Note would otherwise be a day that is not a Business Day,
         such Interest Payment Date will be postponed to the next succeeding
         Business Day, except that in the case of a Floating Rate Note as to
         which LIBOR is an applicable Interest Rate Basis and that Business Day
         falls in the next succeeding calendar

                                     A-2-11


         month, the particular Interest Payment Date will be the immediately
         preceding Business Day. If the Maturity Date of a Floating Rate Note
         falls on a day that is not a Business Day, the Trust will make the
         required payment of principal, premium, if any, and interest or other
         amounts on the next succeeding Business Day, and no additional interest
         will accrue in respect of the payment made on that next succeeding
         Business Day.

         (xii) Rounding. Unless otherwise specified on the face hereof, all
         percentages resulting from any calculation on this Floating Rate Note
         will be rounded to the nearest one hundred-thousandth of a percentage
         point, with five one-millionths of a percentage point rounded upwards.
         All dollar amounts used in or resulting from any calculation on this
         Floating Rate Note will be rounded, in the case of U.S. Dollars, to the
         nearest cent or, in the case of a Foreign Currency, to the nearest unit
         (with one-half cent or unit being rounded upwards).

         (xiii) Interest Factor. With respect to this Floating Rate Note,
         accrued interest is calculated by multiplying the principal amount of
         such Note by an accrued interest factor. The accrued interest factor is
         computed by adding the interest factor calculated for each day in the
         particular Interest Reset Period. The interest factor for each day will
         be computed by dividing the interest rate applicable to such day by
         360, in the case of a Floating Rate Note as to which the CD Rate, the
         Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
         Federal Funds Open Rate, the Federal Funds Rate, LIBOR, EURIBOR or the
         Prime Rate is an applicable Interest Rate Basis, or by the actual
         number of days in the year, in the case of a Floating Rate Note as to
         which the CMT Rate or the Treasury Rate is an applicable Interest Rate
         Basis. In the case of a series of Notes that bear interest at floating
         rates as to which the Constant Maturity Swap Rate is the Interest Rate
         Basis, the interest factor for each day will be computed by dividing
         the number of days in the interest period by 360 (the number of days to
         be calculated on the base is of a year of 360 days with twelve 30-day
         months (unless (i) the last day of the interest period is the 31st day
         of a month but the first day of the interest period is a day other than
         the 30th or 31st day of a month, in which case the month that includes
         that last day shall not be considered to be shortened to a 30-day
         month, or (ii) the last day of the interest period is the last day of
         the month of February, in which case the month of February shall not be
         considered to be lengthened to a 30-day month)). The interest factor
         for a Floating Rate Note as to which the interest rate is calculated
         with reference to two or more Interest Rate Bases will be calculated in
         each period in the same manner as if only the applicable Interest Rate
         Basis specified above applied.

         (xiv) Determination of Interest Rate Basis. The Calculation Agent shall
         determine the rate derived from each Interest Rate Basis in accordance
         with the following provisions.

                  (A) CD Rate Notes. If the Interest Rate Basis is the CD Rate,
                  this Note shall be deemed a "CD Rate Note." Unless otherwise
                  specified on the face hereof, "CD Rate" means: (1) the rate on
                  the particular Interest Determination Date for negotiable
                  United States dollar certificates of deposit having the Index
                  Maturity

                                     A-2-12


                  specified on the face hereof as published in H.15(519) (as
                  defined below) under the caption "CDs (secondary market)"; or
                  (2) if the rate referred to in clause (1) is not so published
                  by 3:00 P.M., New York City time, on the related Calculation
                  Date, the rate on the particular Interest Determination Date
                  for negotiable United States dollar certificates of deposit of
                  the particular Index Maturity as published in H.15 Daily
                  Update (as defined below), or other recognized electronic
                  source used for the purpose of displaying the applicable rate,
                  under the caption "CDs (secondary market)"; or (3) if the rate
                  referred to in clause (2) is not so published by 3:00 P.M.,
                  New York City time, on the related Calculation Date, the rate
                  on the particular Interest Determination Date calculated by
                  the Calculation Agent as the arithmetic mean of the secondary
                  market offered rates as of 10:00 A.M., New York City time, on
                  that Interest Determination Date, of three leading non-bank
                  dealers in negotiable United States dollar certificates of
                  deposit in The City of New York (which may include the
                  purchasing agent or its affiliates) selected by the
                  Calculation Agent for negotiable United States dollar
                  certificates of deposit of major United States money market
                  banks for negotiable United States certificates of deposit
                  with a remaining maturity closest to the particular Index
                  Maturity in an amount that is representative for a single
                  transaction in that market at that time; or (4) if the dealers
                  so selected by the Calculation Agent are not quoting as
                  mentioned in clause (3), the CD Rate in effect on the
                  particular Interest Determination Date. "H.15(519)" means the
                  weekly statistical release designated as H.15(519), or any
                  successor publication, published by the Board of Governors of
                  the Federal Reserve System. "H.15 Daily Update" means the
                  daily update of H.15(519), available through the
                  world-wide-web site of the Board of Governors of the Federal
                  Reserve System at http://www.federalreserve.gov/releases/H15/
                  update, or any successor site or publication.

                  (B) CMT Rate Notes. If the Interest Rate Basis is the CMT
                  Rate, this Note shall be deemed a "CMT Rate Note." Unless
                  otherwise specified on the face hereof, "CMT Rate" means:

                           (1) if CMT Moneyline Telerate Page 7051 is specified
                           on the face hereof:

                               i.   the percentage equal to the yield for United
                                    States Treasury securities at "constant
                                    maturity" having the Index Maturity
                                    specified on the face hereof as published in
                                    H.15(519) under the caption "Treasury
                                    Constant Maturities", as the yield is
                                    displayed on Moneyline Telerate (or any
                                    successor service) on page 7051 (or any
                                    other page as may replace the specified page
                                    on that service) ("Moneyline Telerate Page
                                    7051"), for the particular Interest
                                    Determination Date; or

                               ii.  if the rate referred to in clause (i) does
                                    not so appear on Moneyline Telerate Page
                                    7051, the percentage equal to the yield for
                                    United States Treasury securities at
                                    "constant maturity" having the particular
                                    Index Maturity and for the particular
                                    Interest

                                     A-2-13


                                    Determination Date as published in H.15(519)
                                    under the caption "Treasury Constant
                                    Maturities"; or

                               iii. if the rate referred to in clause (ii) does
                                    not so appear in H.15(519), the rate on the
                                    particular Interest Determination Date for
                                    the period of the particular Index Maturity
                                    as may then be published by either the
                                    Federal Reserve System Board of Governors or
                                    the United States Department of the Treasury
                                    that the Calculation Agent determines to be
                                    comparable to the rate which would otherwise
                                    have been published in H.15(519); or

                               iv.  if the rate referred to in clause (iii) is
                                    not so published, the rate on the particular
                                    Interest Determination Date calculated by
                                    the Calculation Agent as a yield to maturity
                                    based on the arithmetic mean of the
                                    secondary market bid prices at approximately
                                    3:30 P.M., New York City time, on that
                                    Interest Determination Date of three leading
                                    primary United States government securities
                                    dealers in The City of New York (which may
                                    include the purchasing agent or its
                                    affiliates) (each, a "Reference Dealer")
                                    selected by the Calculation Agent from five
                                    Reference Dealers selected by the
                                    Calculation Agent and eliminating the
                                    highest quotation, or, in the event of
                                    equality, one of the highest, and the lowest
                                    quotation or, in the event of equality, one
                                    of the lowest, for United States Treasury
                                    securities with an original maturity equal
                                    to the particular Index Maturity, a
                                    remaining term to maturity no more than one
                                    year shorter than that Index Maturity and in
                                    a principal amount that is representative
                                    for a single transaction in the securities
                                    in that market at that time; or

                               v.   if fewer than five but more than two of the
                                    prices referred to in clause (iv) are
                                    provided as requested, the rate on the
                                    particular Interest Determination Date
                                    calculated by the Calculation Agent based on
                                    the arithmetic mean of the bid prices
                                    obtained and neither the highest nor the
                                    lowest of the quotations shall be
                                    eliminated; or

                               vi.  if fewer than three prices referred to in
                                    clause (iv) are provided as requested, the
                                    rate on the particular Interest
                                    Determination Date calculated by the
                                    Calculation Agent as a yield to maturity
                                    based on the arithmetic mean of the
                                    secondary market bid prices as of
                                    approximately 3:30 P.M., New York City time,
                                    on that Interest Determination Date of three
                                    Reference Dealers selected by the
                                    Calculation Agent from five Reference
                                    Dealers selected by the Calculation Agent
                                    and eliminating the highest quotation or, in
                                    the event of equality, one of the highest
                                    and the lowest quotation or, in the event of
                                    equality, one of the lowest, for United
                                    States Treasury securities with an original
                                    maturity greater than the

                                     A-2-14


                                    particular Index Maturity, a remaining term
                                    to maturity closest to that Index Maturity
                                    and in a principal amount that is
                                    representative for a single transaction in
                                    the securities in that market at that time;
                                    or

                               vii. if fewer than five but more than two prices
                                    referred to in clause (vi) are provided as
                                    requested, the rate on the particular
                                    Interest Determination Date calculated by
                                    the Calculation Agent based on the
                                    arithmetic mean of the bid prices obtained
                                    and neither the highest nor the lowest of
                                    the quotations will be eliminated; or

                               viii.if fewer than three prices referred to in
                                    clause (vi) are provided as requested, the
                                    CMT Rate in effect on the particular
                                    Interest Determination Date; or

                           (2) if CMT Moneyline Telerate Page 7052 is specified
                           on the face hereof:

                               i.   the percentage equal to the one-week or
                                    one-month, as specified on the face hereof,
                                    average yield for United States Treasury
                                    securities at "constant maturity" having the
                                    Index Maturity specified on the face hereof
                                    as published in H.15(519) opposite the
                                    caption "Treasury Constant Maturities", as
                                    the yield is displayed on Moneyline Telerate
                                    (or any successor service) (on page 7052 or
                                    any other page as may replace the specified
                                    page on that service) ("Moneyline Telerate
                                    Page 7052"), for the week or month, as
                                    applicable, ended immediately preceding the
                                    week or month, as applicable, in which the
                                    particular Interest Determination Date
                                    falls; or

                               ii.  if the rate referred to in clause (i) does
                                    not so appear on Moneyline Telerate Page
                                    7052, the percentage equal to the one-week
                                    or one-month, as specified on the face
                                    hereof, average yield for United States
                                    Treasury securities at "constant maturity"
                                    having the particular Index Maturity and for
                                    the week or month, as applicable, preceding
                                    the particular Interest Determination Date
                                    as published in H.15(519) opposite the
                                    caption "Treasury Constant Maturities"; or

                               iii. if the rate referred to in clause (ii) does
                                    not so appear in H.15(519), the one-week or
                                    one-month, as specified on the face hereof,
                                    average yield for United States Treasury
                                    securities at "constant maturity" having the
                                    particular Index Maturity as otherwise
                                    announced by the Federal Reserve Bank of New
                                    York for the week or month, as applicable,
                                    ended immediately preceding the week or
                                    month, as applicable, in which the
                                    particular Interest Determination Date
                                    falls; or

                                     A-2-15


                               iv.  if the rate referred to in clause (iii) is
                                    not so published, the rate on the particular
                                    Interest Determination Date calculated by
                                    the Calculation Agent as a yield to maturity
                                    based on the arithmetic mean of the
                                    secondary market bid prices at approximately
                                    3:30 P.M., New York City time, on that
                                    Interest Determination Date of three
                                    Reference Dealers selected by the
                                    Calculation Agent from five Reference
                                    Dealers selected by the Calculation Agent
                                    and eliminating the highest quotation, or,
                                    in the event of equality, one of the
                                    highest, and the lowest quotation or, in the
                                    event of equality, one of the lowest, for
                                    United States Treasury securities with an
                                    original maturity equal to the particular
                                    Index Maturity, a remaining term to maturity
                                    no more than one year shorter than that
                                    Index Maturity and in a principal amount
                                    that is representative for a single
                                    transaction in the securities in that market
                                    at that time; or

                               v.   if fewer than five but more than two of the
                                    prices referred to in clause (iv) are
                                    provided as requested, the rate on the
                                    particular Interest Determination Date
                                    calculated by the Calculation Agent based on
                                    the arithmetic mean of the bid prices
                                    obtained and neither the highest nor the
                                    lowest of the quotations shall be
                                    eliminated; or

                               vi.  if fewer than three prices referred to in
                                    clause (iv) are provided as requested, the
                                    rate on the particular Interest
                                    Determination Date calculated by the
                                    Calculation Agent as a yield to maturity
                                    based on the arithmetic mean of the
                                    secondary market bid prices as of
                                    approximately 3:30 P.M., New York City time,
                                    on that Interest Determination Date of three
                                    Reference Dealers selected by the
                                    Calculation Agent from five Reference
                                    Dealers selected by the Calculation Agent
                                    and eliminating the highest quotation or, in
                                    the event of equality, one of the highest
                                    and the lowest quotation or, in the event of
                                    equality, one of the lowest, for United
                                    States Treasury securities with an original
                                    maturity greater than the particular Index
                                    Maturity, a remaining term to maturity
                                    closest to that Index Maturity and in a
                                    principal amount that is representative for
                                    a single transaction in the securities in
                                    that market at the time; or

                               vii. if fewer than five but more than two prices
                                    referred to in clause (vi) are provided as
                                    requested, the rate on the particular
                                    Interest Determination Date calculated by
                                    the Calculation Agent based on the
                                    arithmetic mean of the bid prices obtained
                                    and neither the highest nor the lowest of
                                    the quotations will be eliminated; or

                                     A-2-16


                               viii.if fewer than three prices referred to in
                                    clause (vi) are provided as requested, the
                                    CMT Rate in effect on that Interest
                                    Determination Date.

                           If two United States Treasury securities with an
                           original maturity greater than the Index Maturity
                           specified on the face hereof have remaining terms to
                           maturity equally close to the particular Index
                           Maturity, the quotes for the United States Treasury
                           security with the shorter original remaining term to
                           maturity will be used.

                  (C) Commercial Paper Rate Notes. If the Interest Rate Basis is
                  the Commercial Paper Rate, this Note shall be deemed a
                  "Commercial Paper Rate Note." Unless otherwise specified on
                  the face hereof, "Commercial Paper Rate" means: (1) the Money
                  Market Yield (as defined below) on the particular Interest
                  Determination Date of the rate for commercial paper having the
                  Index Maturity specified on the face hereof as published in
                  H.15(519) under the caption "Commercial Paper--Nonfinancial";
                  or (2) if the rate referred to in clause (1) is not so
                  published by 3:00 P.M., New York City time, on the related
                  Calculation Date, the Money Market Yield of the rate on the
                  particular Interest Determination Date for commercial paper
                  having the particular Index Maturity as published in H.15
                  Daily Update, or such other recognized electronic source used
                  for the purpose of displaying the applicable rate, under the
                  caption "Commercial Paper--Nonfinancial"; or (3) if the rate
                  referred to in clause (2) is not so published by 3:00 P.M.,
                  New York City time, on the related Calculation Date, the rate
                  on the particular Interest Determination Date calculated by
                  the Calculation Agent as the Money Market Yield of the
                  arithmetic mean of the offered rates at approximately 11:00
                  A.M., New York City time, on that Interest Determination Date
                  of three leading dealers of United States dollar commercial
                  paper in The City of New York (which may include the
                  purchasing agent or its affiliates) selected by the
                  Calculation Agent for commercial paper having the particular
                  Index Maturity placed for industrial issuers whose bond rating
                  is "Aa", or the equivalent, from a nationally recognized
                  statistical rating organization; or (4) if the dealers so
                  selected by the Calculation Agent are not quoting as mentioned
                  in clause (3), the Commercial Paper Rate in effect on the
                  particular Interest Determination Date. "Money Market Yield"
                  means a yield (expressed as a percentage) calculated in
                  accordance with the following formula:

Money Market Yield =                D x 360       x 100
                               ----------------
                                360 - (D x M)



                  where "D" refers to the applicable per annum rate for
                  commercial paper quoted on a bank discount basis and expressed
                  as a decimal, and "M" refers to the actual number of days in
                  the applicable Interest Reset Period.

                  (D) Constant Maturity Swap Rate Notes. If the Interest Rate
                  Basis is the Constant Maturity Swap Rate, this Note shall be
                  deemed a "Constant Maturity Swap Rate Note." Unless otherwise
                  specified on the face hereof, "Constant

                                     A-2-17


                  Maturity Swap Rate" means: (1) the rate for U.S. dollar swaps
                  with the designated maturity specified in the applicable
                  pricing supplement, expressed as a percentage, which appears
                  on the Reuters Screen (or any successor service) ISDAFIX1 Page
                  as of 11:00 A.M., New York City time, on the particular
                  Interest Determination Date; or (2) if the rate referred to in
                  clause (1) does not appear on the Reuters Screen (or any
                  successor service) ISDAFIX1 Page by 2:00 P.M., New York City
                  time, on such Interest Determination Date, a percentage
                  determined on the basis of the mid-market semiannual swap rate
                  quotations provided by the reference banks (as defined below)
                  as of approximately 11:00 A.M., New York City time, on such
                  Interest Determination Date, and, for this purpose, the
                  semi-annual swap rate means the mean of the bid and offered
                  rates for the semi-annual fixed leg, calculated on a 30/360
                  day count basis, of a fixed-for-floating U.S. dollar interest
                  rate swap transaction with a term equal to the designated
                  maturity specified in the applicable pricing supplement
                  commencing on the Interest Reset Date and in a representative
                  amount (as defined below) with an acknowledged dealer of good
                  credit in the swap market, where the floating leg, calculated
                  on an actual/360 day count basis, is equivalent to
                  USD-LIBOR-BBA with a designated maturity specified in the
                  applicable pricing supplement. The Calculation Agent will
                  request the principal New York City office of each of the
                  reference banks to provide a quotation of its rate. If at
                  least three quotations are provided, the rate for that
                  Interest Determination Date will be the arithmetic mean of the
                  quotations, eliminating the highest quotation (or, in the
                  event of equality, one of the highest) and the lowest
                  quotation (or, in the event of equality, one of the lowest);
                  or (3) if at least three quotations are not received by the
                  Calculation Agent as mentioned in clause (2), the Constant
                  Maturity Swap Rate in effect on the particular Interest
                  Determination Date. "U.S. Government Securities business day"
                  means any day except for Saturday, Sunday, or a day on which
                  The Bond Market Association recommends that the fixed income
                  departments of its members be closed for the entire day for
                  purposes of trading in U.S. government securities.
                  "Representative amount" means an amount that is representative
                  for a single transaction in the relevant market at the
                  relevant time. "Reference banks" mean five leading swap
                  dealers in the New York City interbank market, selected by the
                  Calculation Agent, after consultation with us.

                  (E) Eleventh District Cost of Funds Rate Notes. If the
                  Interest Rate Basis is the Eleventh District Cost of Funds
                  Rate, this Note shall be deemed an "Eleventh District Cost of
                  Funds Rate Note." Unless otherwise specified on the face
                  hereof, "Eleventh District Cost of Funds Rate" means: (1) the
                  rate equal to the monthly weighted average cost of funds for
                  the calendar month immediately preceding the month in which
                  the particular Interest Determination Date falls as set forth
                  under the caption "11th District" on the display on Moneyline
                  Telerate (or any successor service) on page 7058 (or any other
                  page as may replace the specified page on that service)
                  ("Moneyline Telerate Page 7058") as of 11:00 A.M., San
                  Francisco time, on that Interest Determination Date; or (2) if
                  the rate referred to in clause (1) does not so appear on
                  Moneyline Telerate Page 7058, the monthly weighted average
                  cost of funds paid by member institutions of the Eleventh
                  Federal Home Loan Bank District that was most recently
                  announced (the "Eleventh District

                                     A-2-18


                  Index") by the Federal Home Loan Bank of San Francisco as the
                  cost of funds for the calendar month immediately preceding
                  that Interest Determination Date; or (3) if the Federal Home
                  Loan Bank of San Francisco fails to announce the Eleventh
                  District Index on or prior to the particular Interest
                  Determination Date for the calendar month immediately
                  preceding that Interest Determination Date, the Eleventh
                  District Cost of Funds Rate in effect on the particular
                  Interest Determination Date.

                  (F) Federal Funds Open Rate Notes. If the Interest Rate Basis
                  is the Federal Funds Open Rate, this Note shall be deemed a
                  "Federal Funds Open Rate Note." Unless otherwise specified on
                  the face hereof, "Federal Funds Open Rate" means the rate set
                  forth on Moneyline Telerate (or any successor service) on page
                  5 (or any other page as may replace the specified page on that
                  service) for an Interest Determination Date underneath the
                  caption "FEDERAL FUNDS" in the row titled "OPEN". If the rate
                  is not available for an Interest Determination Date, the rate
                  for that Interest Determination Date shall be the Federal
                  Funds Rate as determined below.

                  (G) Federal Funds Rate Notes. If the Interest Rate Basis is
                  the Federal Funds Rate, this Note shall be deemed a "Federal
                  Funds Rate Note." Unless otherwise specified on the face
                  hereof, "Federal Funds Rate" means: (1) the rate on the
                  particular Interest Determination Date for United States
                  dollar federal funds as published in H.15(519) under the
                  caption "Federal Funds (Effective)" and displayed on Moneyline
                  Telerate (or any successor service) on page 120 (or any other
                  page as may replace the specified page on that service)
                  ("Moneyline Telerate Page 120"); or (2) if the rate referred
                  to in clause (1) does not so appear on Moneyline Telerate Page
                  120 or is not so published by 3:00 P.M., New York City time,
                  on the related Calculation Date, the rate on the particular
                  Interest Determination Date for United States dollar federal
                  funds as published in H.15 Daily Update, or such other
                  recognized electronic source used for the purpose of
                  displaying the applicable rate, under the caption "Federal
                  Funds (Effective)"; or (3) if the rate referred to in clause
                  (2) is not so published by 3:00 P.M., New York City time, on
                  the related Calculation Date, the rate on the particular
                  Interest Determination Date calculated by the Calculation
                  Agent as the arithmetic mean of the rates for the last
                  transaction in overnight United States dollar federal funds
                  arranged by three leading brokers of United States dollar
                  federal funds transactions in The City of New York (which may
                  include the purchasing agent or its affiliates) selected by
                  the Calculation Agent prior to 9:00 A.M., New York City time,
                  on that Interest Determination Date; or (4) if the brokers so
                  selected by the Calculation Agent are not quoting as mentioned
                  in clause (3), the Federal Funds Rate in effect on the
                  particular Interest Determination Date.

                  (H) LIBOR Notes. If the Interest Rate Basis is LIBOR, this
                  Note shall be deemed a "LIBOR Note." Unless otherwise
                  specified on the face hereof, "LIBOR" means: (1) if "LIBOR
                  Moneyline Telerate" is specified on the face hereof or if
                  neither "LIBOR Reuters" nor "LIBOR Moneyline Telerate" is
                  specified on the face hereof as the method for calculating
                  LIBOR, the rate for

                                     A-2-19


                  deposits in the LIBOR Currency (as defined below) having the
                  Index Maturity specified on the face hereof, commencing on the
                  related Interest Reset Date, that appears on the LIBOR Page
                  (as defined below) as of 11:00 A.M., London time, on the
                  particular Interest Determination Date; or (2) if "LIBOR
                  Reuters" is specified on the face hereof, the arithmetic mean
                  of the offered rates, calculated by the Calculation Agent, or
                  the offered rate, if the LIBOR Page by its terms provides only
                  for a single rate, for deposits in the LIBOR Currency having
                  the particular Index Maturity, commencing on the related
                  Interest Reset Date, that appear or appears, as the case may
                  be, on the LIBOR Page as of 11:00 A.M., London time, on the
                  particular Interest Determination Date; or (3) if fewer than
                  two offered rates appear, or no rate appears, as the case may
                  be, on the particular Interest Determination Date on the LIBOR
                  Page as specified in clause (1) or (2), as applicable, the
                  rate calculated by the Calculation Agent of at least two
                  offered quotations obtained by the Calculation Agent after
                  requesting the principal London offices of each of four major
                  reference banks (which may include affiliates of the
                  purchasing agent) in the London interbank market to provide
                  the Calculation Agent with its offered quotation for deposits
                  in the LIBOR Currency for the period of the particular Index
                  Maturity, commencing on the related Interest Reset Date, to
                  prime banks in the London interbank market at approximately
                  11:00 A.M., London time, on that Interest Determination Date
                  and in a principal amount that is representative for a single
                  transaction in the LIBOR Currency in that market at that time;
                  or (4) if fewer than two offered quotations referred to in
                  clause (3) are provided as requested, the rate calculated by
                  the Calculation Agent as the arithmetic mean of the rates
                  quoted at approximately 11:00 A.M., in the applicable
                  Principal Financial Center, on the particular Interest
                  Determination Date by three major banks (which may include
                  affiliates of the purchasing agent) in that principal
                  financial center selected by the Calculation Agent for loans
                  in the LIBOR Currency to leading European banks, having the
                  particular Index Maturity and in a principal amount that is
                  representative for a single transaction in the LIBOR Currency
                  in that market at that time; or (5) if the banks so selected
                  by the Calculation Agent are not quoting as mentioned in
                  clause (4), LIBOR in effect on the particular Interest
                  Determination Date. "LIBOR Currency" means the currency
                  specified on the face hereof as to which LIBOR shall be
                  calculated or, if no currency is specified on the face hereof,
                  United States dollars. "LIBOR Page" means either: (1) if
                  "LIBOR Reuters" is specified on the face hereof, the display
                  on the Reuter Monitor Money Rates Service (or any successor
                  service) on the page specified on the face hereof (or any
                  other page as may replace that page on that service) for the
                  purpose of displaying the London interbank rates of major
                  banks for the LIBOR Currency; or (2) if "LIBOR Moneyline
                  Telerate" is specified on the face hereof or neither "LIBOR
                  Reuters" nor "LIBOR Moneyline Telerate" is specified on the
                  face hereof as the method for calculating LIBOR, the display
                  on Moneyline Telerate (or any successor service) on the page
                  specified on the face hereof (or any other page as may replace
                  such page on such service) for the purpose of displaying the
                  London interbank rates of major banks for the LIBOR Currency.

                                     A-2-20


                  (I) EURIBOR Notes. If the Interest Rate Basis is EURIBOR, this
                  Note shall be deemed a "EURIBOR Note." Unless otherwise
                  specified on the face hereof, "EURIBOR" means: (1) with
                  respect to any Interest Determination Date relating to this
                  EURIBOR Note (a "EURIBOR Interest Determination Date"), the
                  rate for deposits in euros as sponsored, calculated and
                  published jointly by the European Banking Federation and ACI
                  -- The Financial Market Association, or any company
                  established by the joint sponsors for purposes of compiling
                  and publishing those rates, having the Index Maturity
                  specified on the face hereof, commencing on the applicable
                  Interest Reset Date, as the rate appears on Moneyline Telerate
                  or any successor service, on page 248 (or any other page as
                  may replace that specified page on the service) ("Moneyline
                  Telerate Page 248") as of 11:00 A.M., Brussels time, on the
                  applicable EURIBOR Interest Determination Date; or (2) if such
                  rate does not appear on Moneyline Telerate Page 248, or is not
                  so published by 11:00 A.M., Brussels time, on the applicable
                  EURIBOR Interest Determination Date, such rate will be
                  calculated by the Calculation Agent and will be the arithmetic
                  mean of at least two quotations obtained by the Calculation
                  Agent after requesting the principal Euro-zone (as defined
                  below) offices of four major banks in the Euro-zone interbank
                  market to provide the Calculation Agent with its offered
                  quotation for deposits in euros for the period of the Index
                  Maturity specified on the face hereof, commencing on the
                  applicable Interest Reset Date, to prime banks in the
                  Euro-zone interbank market at approximately 11:00 A.M.,
                  Brussels time, on the applicable EURIBOR Interest
                  Determination Date and in a principal amount not less than the
                  equivalent of $1 million in euros that is representative for a
                  single transaction in euro in the market at that time; or (3)
                  if fewer than two such quotations are so provided, the rate on
                  the applicable EURIBOR Interest Determination Date will be
                  calculated by the Calculation Agent and will be the arithmetic
                  mean of the rates quoted at approximately 11:00 A.M., Brussels
                  time, on such EURIBOR Interest Determination Date by four
                  major banks in the Euro-zone for loans in euro to leading
                  European banks, having the Index Maturity specified on the
                  face hereof, commencing on the applicable Interest Reset Date
                  and in a principal amount not less than the equivalent of $1
                  million in euros that is representative for a single
                  transaction in euros in the market at that time; or (4) if the
                  banks so selected by the Calculation Agent are not quoting as
                  mentioned above, EURIBOR will be EURIBOR in effect on the
                  applicable EURIBOR Interest Determination Date. "Euro-zone"
                  means the region comprised of member states of the European
                  Union that have adopted the single currency in accordance with
                  the treaty establishing the European Community, as amended by
                  the treaty on European Union.

                  (J) Prime Rate Notes. If the Interest Rate Basis is the Prime
                  Rate, this Note shall be deemed a "Prime Rate Note." Unless
                  otherwise specified on the face hereof, "Prime Rate" means:
                  (1) the rate on the particular Interest Determination Date as
                  published in H.15(519) under the caption "Bank Prime Loan"; or
                  (2) if the rate referred to in clause (1) is not so published
                  by 3:00 P.M., New York City time, on the related Calculation
                  Date, the rate on the particular Interest Determination Date
                  as published in H.15 Daily Update, or such other recognized
                  electronic source

                                     A-2-21


                  used for the purpose of displaying the applicable rate, under
                  the caption "Bank Prime Loan", or (3) if the rate referred to
                  in clause (2) is not so published by 3:00 P.M., New York City
                  time, on the related Calculation Date, the rate on the
                  particular Interest Determination Date calculated by the
                  Calculation Agent as the arithmetic mean of the rates of
                  interest publicly announced by each bank that appears on the
                  Reuters Screen US PRIME 1 Page (as defined below) as the
                  applicable bank's prime rate or base lending rate as of 11:00
                  A.M., New York City time, on that Interest Determination Date;
                  or (4) if fewer than four rates referred to in clause (3) are
                  so published by 3:00 p.m., New York City time, on the related
                  Calculation Date, the rate calculated by the Calculation Agent
                  as the particular Interest Determination Date calculated by
                  the Calculation Agent as the arithmetic mean of the prime
                  rates or base lending rates quoted on the basis of the actual
                  number of days in the year divided by a 360-day year as of the
                  close of business on that Interest Determination Date by three
                  major banks (which may include affiliates of the purchasing
                  agent) in The City of New York selected by the Calculation
                  Agent; or (5) if the banks so selected by the Calculation
                  Agent are not quoting as mentioned in clause (4), the Prime
                  Rate in effect on the particular Interest Determination Date.
                  "Reuters Screen US PRIME 1 Page" means the display on the
                  Reuter Monitor Money Rates Service (or any successor service)
                  on the "US PRIME 1" page (or any other page as may replace
                  that page on that service) for the purpose of displaying prime
                  rates or base lending rates of major United States banks.

                  (K) Treasury Rate Notes. If the Interest Rate Basis is the
                  Treasury Rate, this Note shall be deemed a "Treasury Rate
                  Note." Unless otherwise specified on the face hereof,
                  "Treasury Rate" means: (1) the rate from the auction held on
                  the Interest Determination Date (the "Auction") of direct
                  obligations of the United States ("Treasury Bills") having the
                  Index Maturity specified on the face hereof under the caption
                  "INVESTMENT RATE" on the display on Moneyline Telerate (or any
                  successor service) on page 56 (or any other page as may
                  replace that page on that service) ("Moneyline Telerate Page
                  56") or page 57 (or any other page as may replace that page on
                  that service) ("Moneyline Telerate Page 57"); or (2) if the
                  rate referred to in clause (1) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  Bond Equivalent Yield (as defined below) of the rate for the
                  applicable Treasury Bills as published in H.15 Daily Update,
                  or another recognized electronic source used for the purpose
                  of displaying the applicable rate, under the caption "U.S.
                  Government Securities/Treasury Bills/Auction High"; or (3) if
                  the rate referred to in clause (2) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  Bond Equivalent Yield of the auction rate of the applicable
                  Treasury Bills as announced by the United States Department of
                  the Treasury; or (4) if the rate referred to in clause (3) is
                  not so announced by the United States Department of the
                  Treasury, or if the Auction is not held, the Bond Equivalent
                  Yield of the rate on the particular Interest Determination
                  Date of the applicable Treasury Bills as published in
                  H.15(519) under the caption "U.S. Government
                  Securities/Treasury Bills/Secondary Market"; or (5) if the
                  rate referred to in clause (4) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  rate on the particular Interest Determination Date of the
                  applicable Treasury Bills as published in H.15 Daily Update,
                  or another recognized electronic source used for the purpose
                  of displaying the applicable rate, under the caption "U.S.
                  Government Securities/Treasury Bills/Secondary Market"; or (6)
                  if the rate referred to in clause (5) is not so published by
                  3:00 P.M., New York City time, on the related

                                     A-2-22


                  Calculation Date, the rate on the particular Interest
                  Determination Date calculated by the Calculation Agent as the
                  Bond Equivalent Yield of the arithmetic mean of the secondary
                  market bid rates, as of approximately 3:30 P.M., New York City
                  time, on that Interest Determination Date, of three primary
                  United States government securities dealers (which may include
                  the purchasing agent or its affiliates) selected by the
                  Calculation Agent, for the issue of Treasury Bills with a
                  remaining maturity closest to the Index Maturity specified on
                  the face hereof; or (7) if the dealers so selected by the
                  Calculation Agent are not quoting as mentioned in clause (6),
                  the Treasury Rate in effect on the particular Interest
                  Determination Date. "Bond Equivalent Yield" means a yield
                  (expressed as a percentage) calculated in accordance with the
                  following formula:

                         Bond Equivalent Yield =       D x N        x 100
                                                  ----------------
                                                   360 - (D x M)


                  where "D" refers to the applicable per annum rate for Treasury
                  Bills quoted on a bank discount basis and expressed as a
                  decimal, "N" refers to 365 or 366, as the case may be, and "M"
                  refers to the actual number of days in the applicable Interest
                  Reset Period.

         (c) Discount Notes. If this Note is specified on the face hereof as a
         "Discount Note":

               (i) Principal and Interest. This Note will bear interest in the
               same manner as set forth in Section 3(a) above, and payments of
               principal and interest shall be made as set forth on the face
               hereof. Discount Notes may not bear any interest currently or may
               bear interest at a rate that is below market rates at the time of
               issuance. The difference between the Issue Price of a Discount
               Note and par is referred to as the "Discount".

               (ii) Redemption; Repayment; Acceleration. In the event a Discount
               Note is redeemed, repaid or accelerated, the amount payable to
               the Holder of such Discount Note will be equal to the sum of: (A)
               the Issue Price (increased by any accruals of Discount) and, in
               the event of any redemption of such Discount Note, if applicable,
               multiplied by the Initial Redemption Percentage (as adjusted by
               the Annual Redemption Percentage Reduction, if applicable); and
               (B) any unpaid interest accrued on such Discount Note to the
               Maturity Date ("Amortized Face Amount"). Unless otherwise
               specified on the face hereof, for purposes of determining the
               amount of Discount that has accrued as of any date on which a
               redemption, repayment or acceleration of maturity occurs for a
               Discount Note, a Discount will be accrued using a constant yield
               method. The constant yield will be calculated using a 30-day
               month, 360-day year convention, a compounding period that, except
               for the

                                     A-2-23


               Initial Period (as defined below), corresponds to the shortest
               period between Interest Payment Dates for the applicable
               Discount Note (with ratable accruals within a compounding
               period), a coupon rate equal to the initial coupon rate
               applicable to the applicable Discount Note and an assumption that
               the maturity of such Discount Note will not be accelerated. If
               the period from the date of issue to the first Interest Payment
               Date for a Discount Note (the "Initial Period") is shorter than
               the compounding period for such Discount Note, a proportionate
               amount of the yield for an entire compounding period will be
               accrued. If the Initial Period is longer than the compounding
               period, then the period will be divided into a regular
               compounding period and a short period with the short period being
               treated as provided above.

         (d) Amortizing Notes. If this Note is specified on the face hereof as
an "Amortizing Note", this Note will bear interest in the same manner as set
forth in Section 3(a) above, and payments on principal, premium, if any, and
interest will be made as set forth on the face hereof and/or in accordance with
Schedule I attached hereto. The Trust will make payments combining principal,
premium (if any) and interest, if applicable, on the dates and in the amounts
set forth in the table appearing in Schedule I, attached to this Note or in
accordance with the formula specified on the face hereof. Payments made hereon
will be applied first to interest due and payable hereon and then to the
reduction of the unpaid principal amount hereof.

SECTION 4. REDEMPTION. If no redemption right is set forth on the face hereof,
this Note may not be redeemed prior to the Stated Maturity Date, except as set
forth in the Indenture or in Section 10 hereof. In the case of a Note that is
not a Discount Note, if a redemption right is set forth on the face of this
Note, the Trust shall elect to redeem this Note on the Interest Payment Date
after the Initial Redemption Date set forth on the face hereof on which the
Funding Agreement is to be redeemed in whole or in part by Principal Life
Insurance Company ("Principal Life") (each, a "Redemption Date"), in which case
this Note must be redeemed on such Redemption Date in whole or in part, as
applicable, prior to the Stated Maturity Date, in increments of $1,000 at the
applicable Redemption Price (as defined below), together with unpaid interest,
if any, accrued thereon to, but excluding, the applicable Redemption Date.
"Redemption Price" shall mean an amount equal to the Initial Redemption
Percentage (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) multiplied by the unpaid Principal Amount of this Note to be
redeemed. The unpaid Principal Amount of this Note to be redeemed shall be
determined by multiplying (1) the Outstanding Principal Amount of this Note by
(2) the quotient derived by dividing (A) the outstanding principal amount of the
Funding Agreement to be redeemed by Principal Life by (B) the outstanding
principal amount of the Funding Agreement. The Initial Redemption Percentage, if
any, applicable to this Note shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the applicable Annual Redemption
Percentage Reduction, if any, until the Redemption Price is equal to 100% of the
unpaid amount thereof to be redeemed. Notice must be given not more than sixty
(60) nor less than thirty (30) calendar days prior to the proposed Redemption
Date. In the event of redemption of this Note in part only, a new Note for the
unredeemed portion hereof shall be issued in the name of the Holder hereof upon
the surrender hereof. If less than all of this Note is redeemed, the Indenture
Trustee will select by lot or, in its discretion, on a pro rata basis, the
amount of the interest of each direct participant in the Trust to be redeemed.

                                     A-2-24


SECTION 5. SINKING FUNDS AND AMORTIZING NOTES. Unless specified on the face
hereof, this Note will not be subject to, or entitled to the benefit of, any
sinking fund. If this Note is an Amortizing Note, this Note may pay an amount in
respect of both interest and principal amortized over the life of this Note.

SECTION 6. REPAYMENT. If no repayment right is set forth on the face hereof,
this Note may not be repaid at the option of the Holder hereof prior to the
Stated Maturity Date. If a repayment right is granted on the face of this Note,
this Note may be subject to repayment at the option of the Holder on any
Interest Payment Date on and after the date, if any, indicated on the face
hereof (each, a "Repayment Date"). On any Repayment Date, unless otherwise
specified on the face hereof, this Note shall be repayable in whole or in part
in increments of $1,000 at the option of the Holder hereof at a repayment price
equal to 100% of the Principal Amount to be repaid, together with interest
thereon payable to the Repayment Date. For this Note to be repaid in whole or in
part at the option of the Holder hereof, this Note must be received by the
Indenture Trustee, with the form entitled "Option to Elect Repayment", below,
duly completed by the Indenture Trustee. Exercise of such repayment option by
the Holder hereof shall be irrevocable. In the event of a repayment of this Note
in part only, a new Note for the portion hereof not repaid shall be issued in
the name of the Holder hereof upon the surrender hereof.

SECTION 7. MODIFICATIONS AND WAIVERS. The Indenture contains provisions
permitting the Trust and the Indenture Trustee (1) at any time and from time to
time without notice to, or the consent of, the Holders of any Notes issued under
the Indenture to enter into one or more supplemental indentures for certain
enumerated purposes and (2) with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Notes affected thereby, to enter
into one or more supplemental indentures for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, the Indenture or of modifying in any manner the rights of Holders of Notes
under the Indenture; provided, that, with respect to certain enumerated
provisions, no such supplemental indenture shall be entered into without the
consent of the Holder of each Note affected thereby. Any such consent or waiver
by the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Note or such other
Notes.

SECTION 8. OBLIGATIONS UNCONDITIONAL. No reference herein to the Indenture and
no provisions of this Note or of the Indenture shall impair the right of each
Holder of any Note, which is absolute and unconditional, to receive payment of
the principal of, and any interest on, and premium, if any, on, such Note on the
respective Stated Maturity Date or redemption date thereof and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

SECTION 9. EVENTS OF DEFAULT. If an Event of Default with respect to this Note
shall occur and be continuing, the principal of, and all other amounts payable
on, the Notes may be declared due and payable, or may be automatically
accelerated, as the case may be, in the manner and with the effect provided in
the Indenture. In the event that this Note is a Discount Note, the amount of
principal of this Note that becomes due and payable upon such acceleration shall
be equal to the amount calculated as set forth in Section 3(c) hereof.

                                     A-2-25


SECTION 10. WITHHOLDING; NO ADDITIONAL AMOUNTS; TAX EVENT AND REDEMPTION. All
amounts due on this Note will be made without any applicable withholding or
deduction for or on account of any present or future taxes, duties, levies,
assessments or other governmental charges of whatever nature imposed or levied
by or on behalf of any governmental authority, unless such withholding or
deduction is required by law. Unless otherwise specified on the face hereof, the
Trust will not pay any additional amounts to the Holder of this Note in respect
of such withholding or deduction, any such withholding or deduction will not
give rise to an event of default or any independent right or obligation to
redeem this Note and the Holder will be deemed for all purposes to have received
cash in an amount equal to the portion of such withholding or deduction that is
attributable to such Holder's interest in this Note as equitably determined by
the Trust.

         If (1) a Tax Event (defined below) as to the Funding Agreement occurs
and (2) Principal Life redeems the Funding Agreement in whole or in part, the
Trust will redeem the Notes, subject to the terms and conditions of Section 2.04
of the Standard Indenture Terms, at the Tax Event Redemption Price (defined
below) together with unpaid interest accrued thereon to the applicable
redemption date. "Tax Event" means that Principal Life shall have received an
opinion of independent legal counsel stating in effect that as a result of (a)
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the effective date of the
Funding Agreement, there is more than an insubstantial risk that (i) the Trust
is, or will be within ninety (90) days of the date thereof, subject to U.S.
federal income tax with respect to interest accrued or received on the Funding
Agreement or (ii) the Trust is, or will be within ninety (90) days of the date
thereof, subject to more than a de minimis amount of taxes, duties or other
governmental charges. "Tax Event Redemption Price" means an amount equal to the
unpaid principal amount of this Note to be redeemed, which shall be determined
by multiplying (1) the Outstanding Principal Amount of this Note by (2) the
quotient derived by dividing (A) the outstanding principal amount to be redeemed
by Principal Life of the Funding Agreement by (B) the outstanding principal
amount of the Funding Agreement.

SECTION 11. LISTING. Unless otherwise specified on the face hereof, this Note
will not be listed on any securities exchange.

SECTION 12. COLLATERAL. The Collateral for this Note includes the Funding
Agreement and the Guarantee specified on the face hereof.

SECTION 13. NO RECOURSE AGAINST CERTAIN PERSONS. No recourse shall be had for
the payment of any principal, interest or any other sums at any time owing under
the terms of this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against the Nonrecourse Parties, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability being, by the acceptance hereof and as
part of the consideration for issue hereof, expressly waived and released.

                                     A-2-26


SECTION 14.  MISCELLANEOUS.

         (a) This Note is issuable only as a registered Note without coupons in
denominations of $1,000 and any integral multiple in excess thereof unless
otherwise specified on the face of this Note.

         (b) Prior to due presentment for registration of transfer of this Note,
the Trust, the Indenture Trustee, the Registrar, the Paying Agent, any Agent,
and any other agent of the Trust or the Indenture Trustee may treat the Person
in whose name this Note is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note shall be overdue, and none of the Trust, the Indenture Trustee, the
Registrar, the Paying Agent, any Agent, or any other agent of the Trust or the
Indenture Trustee shall be affected by notice to the contrary.

         (c) The Notes are being issued by means of a book-entry-only system
with no physical distribution of certificates to be made except as provided in
the Indenture. The book-entry system maintained by DTC will evidence ownership
of the Notes, with transfers of ownership effected on the records of DTC and its
participants pursuant to rules and procedures established by DTC and its
participants. The Trust and the Indenture Trustee will recognize Cede & Co., as
nominee of DTC, as the registered owner of the Notes, as the Holder of the Notes
for all purposes, including payment of principal, premium (if any) and interest,
notices and voting. Transfer of principal, premium (if any) and interest to
participants of DTC will be the responsibility of DTC, and transfer of
principal, premium (if any) and interest to beneficial holders of the Notes by
participants of DTC will be the responsibility of such participants and other
nominees of such beneficial holders. So long as the book-entry system is in
effect, the selection of any Notes to be redeemed or repaid will be determined
by DTC pursuant to rules and procedures established by DTC and its participants.
Neither the Trust nor the Indenture Trustee shall be responsible or liable for
such transfers or payments or for maintaining, supervising or reviewing the
records maintained by DTC, its participants or persons acting through such
participants.

         (d) This Note or portion hereof may not be exchanged for Definitive
Notes, except in the limited circumstances provided for in the Indenture. The
transfer or exchange of Definitive Notes shall be subject to the terms of the
Indenture. No service charge will be made for any registration of transfer or
exchange, but the Trust may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.

SECTION 15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                     A-2-27


                            OPTION TO ELECT REPAYMENT

         The undersigned hereby irrevocably request(s) and instruct(s) the Trust
to repay this Note (or portion hereof specified below) pursuant to its terms at
a price equal to the Principal Amount hereof together with interest to the
repayment date, to the undersigned, at:

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


- --------------------------------------------------------------------------------
 (Please print or typewrite name and address of the undersigned).

         For this Note to be repaid, the Indenture Trustee (or the Paying Agent
on behalf of the Indenture Trustee) must receive at its Corporate Trust Office,
or at such other place or places of which the Trust shall from time to time
notify the Holder of this Note, not more than sixty (60) nor less than thirty
(30) days prior to a Repayment Date, if any, shown on the face of this Note,
this Note with this "Option to Elect Repayment" form duly completed.

         If less than the entire Principal Amount of this Note is to be repaid,
specify the portion hereof (which shall be in increments of $1,000) which the
Holder elects to have repaid and specify the denomination or denominations
(which shall be $______ or an integral multiple of $1,000 in excess of $______)
of the Notes to be issued to the Holder for the portion of this Note not being
repaid (in the absence of any such specification, one such Note will be issued
for the portion not being repaid).

                                                   

$
 --------------------------------                     ---------------------------------------------------------

DATE:                                                   NOTICE: The signature on this Option to
     ----------------------------                       Elect Repayment must correspond with the
                                                        name as written upon the face of this
                                                        Note in every particular, without
                                                        alteration or enlargement or any change
                                                        whatever.

Principal Amount to be repaid, if amount to be          Fill in for registration of Notes
repaid is less than the Principal Amount of this        if to be issued otherwise than
Note (Principal Amount remaining must be an             to the registered Holder:
authorized denomination)

                                                        Name: __________________________
$_________________________                              Address: ________________________
                                                        ________________________
                                                        (Please print name and
                                                        address including zip code)



SOCIAL SECURITY OR OTHER TAXPAYER ID NUMBER: _________________

                                     A-2-28


                                   SCHEDULE I

                          AMORTIZATION TABLE OR FORMULA

                                     A-2-29

                                                                 EXHIBIT A-3


      FORM OF GLOBAL NOTE FOR THE SECURED MEDIUM-TERM NOTES RETAIL PROGRAM


THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE (HEREINAFTER
DEFINED) AND IS REGISTERED IN THE NAME OF A DEPOSITARY (AS DEFINED IN THE
INDENTURE) OR A NOMINEE OF A DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST (HEREINAFTER
DEFINED) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
UNLESS ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

REGISTERED NO.:           CUSIP NO.:           PRINCIPAL AMOUNT: U.S. $

                     PRINCIPAL LIFE INCOME FUNDINGS TRUST o

                        SECURED MEDIUM-TERM RETAIL NOTES

                                                          
Original Issue Date:                                         Floating Rate Note: [  ] Yes [  ] No.  If yes,
Issue Price:                                                          Regular Floating Rate Notes [  ]
Stated Maturity Date:                                                 Floating Rate/ Fixed Rate Notes: [  ]
Settlement Date:                                                      Interest Rate:
Securities Exchange Listing:  [  ] Yes  [  ] No.  If yes,             Interest Rate Basis(es):
         indicate name(s) of Securities Exchange(s):                  LIBOR [  ]
         ________________________.                                             [ ] LIBOR Reuters Page:
Depositary:                                                                    [ ] LIBOR Moneyline Telerate Page:
Authorized Denominations:                                                      LIBOR Currency:
Collateral held in the Trust:  Principal Life Insurance               CMT Rate [  ]
   Company Funding Agreement No. o, the related Principal                      Designated CMT Telerate Page:



                                     A-3-1

                                                          
   Financial Group, Inc. Guarantee which fully and                                      If Telerate Page 7052:
   unconditionally guarantees the payment obligations of                                [ ] Weekly Average
   Principal Life Insurance Company under the Funding                                   [ ] Monthly Average
   Agreement, all proceeds of the Funding Agreement and                        Designated CMT Maturity Index:
   the related Guarantee and all rights and books and                 CD Rate [  ]
   records pertaining to the foregoing.                               Commercial Paper Rate [  ]
Interest Rate or Formula:                                             Constant Maturity Swap Rate [  ]
Fixed Rate Note: [  ] Yes [  ] No.  If yes,                           Federal Funds Open Rate [  ]
         Interest Rate:                                               Federal Funds Rate [  ]
         Interest Payment Frequency:                                  Prime Rate [  ]
         Interest Payment Dates:                                      Treasury Rate [  ]
         Day Count Convention:                                        Index Maturity:
         Additional/Other Terms:                                      Spread and/or Spread Multiplier:
Discount Note: [  ] Yes [  ] No.  If yes,                             Initial Interest Rate, if any:
         Total Amount of Discount:                                    Initial Interest Reset Date:
         Initial Accrual Period of Discount:                          Interest Reset Dates:
         Interest Payment Dates:                                      Interest Determination Date(s):
         Additional/Other Terms:                                      Interest Payment Dates:
Redemption Provisions: [  ] Yes  [  ] No.  If yes,                    Maximum Interest Rate, if any:
         Initial Redemption Date:                                     Minimum Interest Rate, if any:
         Additional/Other Terms:                                      Fixed Rate Commencement Date, if any:
Repayment Provisions: [  ] Yes  [  ] No.  If yes,                     Floating Rate Commencement Date, if any:
         Repayment Date(s):                                           Fixed Interest Rate, if any:
         Repayment Price:                                             Day Count Convention:
         Additional/Other Terms:                                      Additional/Other Terms:
                                                             Regular Record Date(s):
                                                             Sinking Fund:
                                                             Calculation Agent:
                                                             Additional/Other Terms:
                                                             Survivor's Option: [  ] Yes [  ] No.
                                                                      If yes, the attached Survivor's Option Rider is
                                                                      incorporated into this Note.
                                                             Trust Put Limitation:



         The Principal Life Income Fundings Trust designated above (the
"Trust"), for value received, hereby promises to pay to Cede & Co., or its
registered assigns, the Principal Amount specified above on the Stated Maturity
Date specified above and, if so specified above, to pay interest thereon from
the Original Issue Date specified above or from the most recent Interest Payment
Date specified above to which interest has been paid or duly provided for at the
rate per annum determined in accordance with the provisions on the reverse
hereof and as specified above, until the principal hereof is paid or made
available for payment. Payments of principal, premium, if any, and interest
hereon will be made in the lawful currency of the United States of America
("U.S. Dollars" or "United States dollars"). The "Principal Amount" of this Note
at any time means (1) if this Note is a Discount Note (as hereinafter defined),
the Amortized Face

                                     A-3-2


Amount (as hereinafter defined) at such time (as defined in Section 3(c) on the
reverse hereof) and (2) in all other cases, the Principal Amount hereof.
Capitalized terms not otherwise defined herein shall have their meanings set
forth in the Indenture, dated as of the date of the Pricing Supplement (the
"Indenture"), between Citibank, N.A., as the indenture trustee (the "Indenture
Trustee"), and the Trust, or on the face hereof.

         This Note will mature on the Stated Maturity Date, unless its principal
(or any installment of its principal) becomes due and payable prior to the
Stated Maturity Date, whether, as applicable, by the declaration of acceleration
of maturity, notice of redemption by the Trust or otherwise (the Stated Maturity
Date or any date prior to the Stated Maturity Date on which this Note becomes
due and payable, as the case may be, is referred to as the "Maturity Date").

         A "Discount Note" is any Note that has an Issue Price that is less than
100% of the Principal Amount thereof by a percentage that is equal to or greater
than 0.25% multiplied by the product of the principal amount of the Notes and
the number of full years to the Stated Maturity Date.

         Unless otherwise specified above, the interest payable on each Interest
Payment Date or the Maturity Date will be the amount of interest accrued from
and including the Original Issue Date or from and including the last Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, to, but excluding, such Interest Payment Date or the Maturity Date, as
the case may be.

         Unless otherwise specified above, the interest payable on any Interest
Payment Date will be paid to the Holder on the Regular Record Date for such
Interest Payment Date, which Regular Record Date shall be the fifteenth (15th)
calendar day, whether or not a Business Day, immediately preceding the related
Interest Payment Date; provided that, notwithstanding any provision of the
Indenture to the contrary, interest payable on any Maturity Date shall be
payable to the Person to whom principal shall be payable; and provided, further,
that unless otherwise specified above, in the case of a Note initially issued
between a Regular Record Date and the Interest Payment Date relating to such
Regular Record Date, interest for the period beginning on the Original Issue
Date and ending on such Interest Payment Date shall be paid on the Interest
Payment Date following the next succeeding Regular Record Date to the Holder on
such next succeeding Regular Record Date.

         Payments of principal of, and premium, if any, and interest and other
amounts due and owing, if any, will be made through the Indenture Trustee to the
account of DTC or its nominee and will be made in accordance with depositary
arrangements with DTC.

         Unless otherwise specified on the face hereof, the Holder hereof will
not be obligated to pay any administrative costs imposed by banks in making
payments in immediately available funds by the Trust. Unless otherwise specified
on the face hereof, any tax assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.

                                     A-3-3


         REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

         Unless the certificate of authentication hereon shall have been
executed by the Indenture Trustee pursuant to the Indenture, this Note shall not
be entitled to any benefit under such Indenture or be valid or obligatory for
any purpose.



         IN WITNESS WHEREOF, the Trust has caused this instrument to be duly
executed, by manual or facsimile signature.

                                 

                                    THE PRINCIPAL LIFE INCOME FUNDINGS TRUST
                                       SPECIFIED ON THE FACE OF THIS NOTE

Dated:  Original Issue Date         By: U.S. Bank Trust National Association, not in its
                                    individual capacity but solely as Trustee.



                                    By:
                                       --------------------------------------------
                                        Authorized Officer



                          CERTIFICATE OF AUTHENTICATION

         This is one of the Notes of the Principal Life Income Fundings Trust
specified on the face of this Note referred to in the within-mentioned
Indenture.



                                 CITIBANK, N.A.
                              As Indenture Trustee

Dated:  Original Issue Date
                                   By:
                                      ------------------------------------------
                                      Authorized Signatory

                                     A-3-4



                             [REVERSE FORM OF NOTE]


SECTION 1. GENERAL. This Note is one of a duly authorized issue of Notes of the
Trust. The Notes are issued pursuant to the Indenture.

SECTION 2. CURRENCY. This Note is denominated in, and payments of principal,
premium, if any, and/or interest, if any, will be made in U.S. Dollars.

SECTION 3. DETERMINATION OF INTEREST RATE AND CERTAIN OTHER TERMS.


         (a)      Fixed Rate Notes. If this Note is specified on the face hereof
                  as a "Fixed Rate Note":


                  (i) This Note will bear interest at the rate per annum
                  specified on the face hereof. Interest on this Note will be
                  computed on the basis of a 360-day year of twelve 30-day
                  months.

                  (ii) Unless otherwise specified on the face hereof, the
                  Interest Payment Dates for this Note will be as follows:

                                        
INTEREST PAYMENT FREQUENCY                 INTEREST PAYMENT DATES
- --------------------------------------     --------------------------------------
Monthly                                    Fifteenth day of
                                           each calendar month,
                                           beginning in the
                                           first calendar month
                                           following the month
                                           this Note was
                                           issued.

Quarterly                                  Fifteenth day of
                                           every third calendar
                                           month, beginning in
                                           the third calendar
                                           month following the
                                           month this Note was
                                           issued.

Semi-annual                                Fifteenth day of
                                           every sixth calendar
                                           month, beginning in
                                           the sixth calendar
                                           month following the
                                           month this Note was
                                           issued.

Annual                                     Fifteenth day of
                                           every twelfth
                                           calendar month,
                                           beginning in the
                                           twelfth calendar
                                           month following the
                                           month this Note was
                                           issued.




                  (iii) If any Interest Payment Date or the Maturity Date of
                  this Note falls on a day that is not a Business Day, the Trust
                  will make the required payment of principal, premium, if any,
                  and/or interest or other amounts on the next succeeding
                  Business Day, and no additional interest will accrue in
                  respect of the payment made on that next succeeding Business
                  Day.

         (b)      Floating Rate Notes. If this Note is specified on the face
                  hereof as a "Floating Rate Note":

                                     A-3-5


                  (i) Interest Rate Basis. Interest on this Note will be
                  determined by reference to the applicable Interest Rate Basis
                  or Interest Rate Bases, which may, as described below, include
                  the CD Rate, the CMT Rate, the Commercial Paper Rate, the
                  Constant Maturity Swap Rate, the Federal Funds Open Rate, the
                  Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate
                  (each as defined below).

                  (ii) Effective Rate. The rate derived from the applicable
                  Interest Rate Basis or Interest Rate Bases will be determined
                  in accordance with the related provisions below. The interest
                  rate in effect on each day will be based on: (1) if that day
                  is an Interest Reset Date, the rate determined as of the
                  Interest Determination Date immediately preceding that
                  Interest Reset Date; or (2) if that day is not an Interest
                  Reset Date, the rate determined as of the Interest
                  Determination Date immediately preceding the most recent
                  Interest Reset Date.

                  (iii) Spread; Spread Multiplier; Index Maturity. The "Spread"
                  is the number of basis points (one one-hundredth of a
                  percentage point) specified on the face hereof to be added to
                  or subtracted from the related Interest Rate Basis or Interest
                  Rate Bases applicable to this Note. The "Spread Multiplier" is
                  the percentage specified on the face hereof of the related
                  Interest Rate Basis or Interest Rate Bases applicable to this
                  Note by which the Interest Rate Basis or Interest Rate Bases
                  will be multiplied to determine the applicable interest rate.
                  The "Index Maturity" is the period to maturity of the
                  instrument or obligation with respect to which the related
                  Interest Rate Basis or Interest Rate Bases will be calculated.

                  (iv) Regular Floating Rate Note. Unless this Note is specified
                  on the face hereof as a Floating Rate/Fixed Rate Note, this
                  Note (a "Regular Floating Rate Note") will bear interest at
                  the rate determined by reference to the applicable Interest
                  Rate Basis or Interest Rate Bases: (1) plus or minus the
                  applicable Spread, if any; and/or (2) multiplied by the
                  applicable Spread Multiplier, if any. Commencing on the first
                  Interest Reset Date, the rate at which interest on this
                  Regular Floating Rate Note is payable will be reset as of each
                  Interest Reset Date; provided, however, that the interest rate
                  in effect for the period, if any, from the Original Issue Date
                  to the first Interest Reset Date will be the Initial Interest
                  Rate.

                  (v) Floating Rate/Fixed Rate Notes. If this Note is specified
                  on the face hereof as a "Floating Rate/Fixed Rate Note", this
                  Note will bear interest at the rate determined by reference to
                  the applicable Interest Rate Basis or Interest Rate Bases: (1)
                  plus or minus the applicable Spread, if any; and/or (2)
                  multiplied by the applicable Spread Multiplier, if any.
                  Commencing on the first Interest Reset Date, the rate at which
                  this Floating Rate/Fixed Rate Note is payable will be reset as
                  of each Interest Reset Date; provided, however, that: (A) the
                  interest rate in effect for the period, if any, from the
                  Original Issue Date to the first Interest Reset Date will be
                  the Initial Interest Rate specified on the face hereof; and
                  (B) the interest rate in effect commencing on the Fixed Rate
                  Commencement Date will be the Fixed Interest Rate, if
                  specified on the face hereof, or, if not so specified, the
                  interest rate in effect on the day immediately preceding the
                  Fixed Rate Commencement Date.

                                     A-3-6


                  (vi) Interest Reset Dates. The period between Interest Reset
                  Dates will be the "Interest Reset Period." Unless otherwise
                  specified on the face hereof, the Interest Reset Dates will
                  be, in the case of this Floating Rate Note if by its terms it
                  resets: (1) daily--each business day; (2) weekly--the
                  Wednesday of each week, with the exception of any weekly reset
                  Floating Rate Note as to which the Treasury Rate is an
                  applicable Interest Rate Basis, which will reset the Tuesday
                  of each week; (3) monthly--the fifteenth day of each calendar
                  month; (4) quarterly--the fifteenth day of March, June,
                  September and December of each year; (5) semi-annually--the
                  fifteenth day of the two months of each year specified on the
                  face hereof; and (6) annually--the fifteenth day of the month
                  of each year specified on the face hereof; provided, however,
                  that, with respect to a Floating Rate/Fixed Rate Note, the
                  rate of interest thereon will not reset after the particular
                  Fixed Rate Commencement Date. If any Interest Reset Date for
                  this Floating Rate Note would otherwise be a day that is not a
                  Business Day, the particular Interest Reset Date will be
                  postponed to the next succeeding Business Day, except that in
                  the case of a Floating Rate Note as to which LIBOR is an
                  applicable Interest Rate Basis and that Business Day falls in
                  the next succeeding calendar month, the particular Interest
                  Reset Date will be the immediately preceding Business Day.

                  (vii) Interest Determination Dates. The interest rate
                  applicable to a Floating Rate Note for an Interest Reset
                  Period commencing on the related Interest Reset Date will be
                  determined by reference to the applicable Interest Rate Basis
                  as of the particular "Interest Determination Date", which will
                  be: (1) with respect to the Federal Funds Open Rate--the
                  related Interest Reset Date; (2) with respect to the
                  Commercial Paper Rate, the Federal Funds Rate and the Prime
                  Rate--the Business Day immediately preceding the related
                  Interest Reset Date; (3) with respect to the CD Rate and the
                  CMT Rate--the second Business Day preceding the related
                  Interest Reset Date; (4) with respect to the Constant Maturity
                  Swap Rate--the second U.S. Government Securities business day
                  preceding the related Interest Reset Date, provided, however,
                  that if after attempting to determine the Constant Maturity
                  Swap Rate, such rate is not determinable for a particular
                  Interest Determination Date, then such Interest Determination
                  Date shall be the first U.S. Government Securities business
                  day preceding the original interest determination date for
                  which the Constant Maturity Swap Rate can be determined; (5)
                  with respect to LIBOR--the second London Banking Day (as
                  defined below) preceding the related Interest Reset Date; and
                  (6) with respect to the Treasury Rate--the day of the week in
                  which the related Interest Reset Date falls on which day
                  Treasury Bills (as defined below) are normally auctioned
                  (i.e., Treasury Bills are normally sold at auction on Monday
                  of each week, unless that day is a legal holiday, in which
                  case the auction is normally held on the following Tuesday,
                  except that the auction may be held on the preceding Friday);
                  provided, however, that if an auction is held on the Friday of
                  the week preceding the related Interest Reset Date, the
                  Interest Determination Date will be the preceding Friday. The
                  Interest Determination Date pertaining to a Floating Rate
                  Note, the interest rate of which is determined with reference
                  to two or more Interest Rate Bases, will be the latest
                  Business Day which is at least two Business Days before the
                  related Interest Reset Date for the applicable Floating Rate
                  Note on which each Interest Reset Basis is determinable.
                  "London Banking Day" means a day on

                                     A-3-7


                  which commercial banks are open for business (including
                  dealings in the LIBOR Currency) in London.

                  (viii) Calculation Dates. The interest rate applicable to each
                  Interest Reset Period will be determined by the Calculation
                  Agent on or prior to the Calculation Date (as defined below),
                  except with respect to LIBOR, which will be determined on the
                  particular Interest Determination Date. Upon request of the
                  Holder of a Floating Rate Note, the Calculation Agent will
                  disclose the interest rate then in effect and, if determined,
                  the interest rate that will become effective as a result of a
                  determination made for the next succeeding Interest Reset Date
                  with respect to such Floating Rate Note. The "Calculation
                  Date", if applicable, pertaining to any Interest Determination
                  Date will be the earlier of: (1) the tenth calendar day after
                  the particular Interest Determination Date or, if such day is
                  not a Business Day, the next succeeding Business Day; or (2)
                  the Business Day immediately preceding the applicable Interest
                  Payment Date or the Maturity Date, as the case may be.

                  (ix) Maximum or Minimum Interest Rate. If specified on the
                  face hereof, this Note may have either or both of a Maximum
                  Interest Rate or a Minimum Interest Rate. If a Maximum
                  Interest Rate is so designated, the interest rate for a
                  Floating Rate Note cannot ever exceed such Maximum Interest
                  Rate and in the event that the interest rate on any Interest
                  Reset Date would exceed such Maximum Interest Rate (as if no
                  Maximum Interest Rate were in effect) then the interest rate
                  on such Interest Reset Date shall be the Maximum Interest
                  Rate. If a Minimum Interest Rate is so designated, the
                  interest rate for a Floating Rate Note cannot ever be less
                  than such Minimum Interest Rate and in the event that the
                  interest rate on any Interest Reset Date would be less than
                  such Minimum Interest Rate (as if no Minimum Interest Rate
                  were in effect) then the interest rate on such Interest Reset
                  Date shall be the Minimum Interest Rate. Notwithstanding
                  anything to the contrary contained herein, the interest rate
                  on a Floating Rate Note shall not exceed the maximum interest
                  rate permitted by applicable law.

                  (x) Interest Payments. Unless otherwise specified on the face
                  hereof, the Interest Payment Dates will be, in the case of a
                  Floating Rate Note which resets: (1) daily, weekly or
                  monthly--the fifteenth day of each calendar month or on the
                  fifteenth day of March, June, September and December of each
                  year, as specified on the face hereof; (2) quarterly--the
                  fifteenth day of March, June, September and December of each
                  year; (3) semi-annually--the fifteenth day of the two months
                  of each year specified on the face hereof; and (4)
                  annually--the fifteenth day of the month of each year as
                  specified on the face hereof. In addition, the Maturity Date
                  will also be an Interest Payment Date. If any Interest Payment
                  Date other than the Maturity Date for this Floating Rate Note
                  would otherwise be a day that is not a Business Day, such
                  Interest Payment Date will be postponed to the next succeeding
                  Business Day, except that in the case of a Floating Rate Note
                  as to which LIBOR is an applicable Interest Rate Basis and
                  that Business Day falls in the next succeeding calendar month,
                  the particular Interest Payment Date will be the immediately
                  preceding Business Day. If the Maturity Date of a Floating
                  Rate Note falls on a day that is not a Business Day, the Trust
                  will make the required payment of principal, premium, if

                                     A-3-8


                  any, and interest or other amounts on the next succeeding
                  Business Day, and no additional interest will accrue in
                  respect of the payment made on that next succeeding Business
                  Day.

                  (xi) Rounding. Unless otherwise specified on the face hereof,
                  all percentages resulting from any calculation on this
                  Floating Rate Note will be rounded to the nearest one
                  hundred-thousandth of a percentage point, with five
                  one-millionths of a percentage point rounded upwards. All
                  dollar amounts used in or resulting from any calculation on
                  this Floating Rate Note will be rounded to the nearest cent.

                  (xii) Interest Factor. With respect to this Floating Rate
                  Note, accrued interest is calculated by multiplying the
                  principal amount of such Note by an accrued interest factor.
                  The accrued interest factor is computed by adding the interest
                  factor calculated for each day in the particular Interest
                  Reset Period. The interest factor for each day will be
                  computed by dividing the interest rate applicable to such day
                  by 360, in the case of a Floating Rate Note as to which the CD
                  Rate, the Commercial Paper Rate, the Federal Funds Open Rate,
                  the Federal Funds Rate, LIBOR or the Prime Rate is an
                  applicable Interest Rate Basis, or by the actual number of
                  days in the year, in the case of a Floating Rate Note as to
                  which the CMT Rate or the Treasury Rate is an applicable
                  Interest Rate Basis. In the case of a series of Notes that
                  bear interest at floating rates as to which the Constant
                  Maturity Swap Rate is the Interest Rate Basis, the interest
                  factor for each day will be computed by dividing the number of
                  days in the interest period by 360 (the number of days to be
                  calculated on the base is of a year of 360 days with twelve
                  30-day months (unless (i) the last day of the interest period
                  is the 31st day of a month but the first day of the interest
                  period is a day other than the 30th or 31st day of a month, in
                  which case the month that includes that last day shall not be
                  considered to be shortened to a 30-day month, or (ii) the last
                  day of the interest period is the last day of the month of
                  February, in which case the month of February shall not be
                  considered to be lengthened to a 30-day month)). The interest
                  factor for a Floating Rate Note as to which the interest rate
                  is calculated with reference to two or more Interest Rate
                  Bases will be calculated in each period in the same manner as
                  if only the applicable Interest Rate Basis specified above
                  applied.

                  (xiii) Determination of Interest Rate Basis. The Calculation
                  Agent shall determine the rate derived from each Interest Rate
                  Basis in accordance with the following provisions.

                           (A) CD Rate Notes. If the Interest Rate Basis is the
                           CD Rate, this Note shall be deemed a "CD Rate Note."
                           Unless otherwise specified on the face hereof, "CD
                           Rate" means: (1) the rate on the particular Interest
                           Determination Date for negotiable United States
                           dollar certificates of deposit having the Index
                           Maturity specified on the face hereof as published in
                           H.15(519) (as defined below) under the caption "CDs
                           (secondary market)"; or (2) if the rate referred to
                           in clause (1) is not so published by 3:00 P.M., New
                           York City time, on the related Calculation Date, the
                           rate on the particular Interest Determination Date
                           for negotiable United States dollar certificates of
                           deposit of the particular Index Maturity as published
                           in

                                     A-3-9


                           H.15 Daily Update (as defined below), or other
                           recognized electronic source used for the purpose of
                           displaying the applicable rate, under the caption
                           "CDs (secondary market)"; or (3) if the rate referred
                           to in clause (2) is not so published by 3:00 P.M.,
                           New York City time, on the related Calculation Date,
                           the rate on the particular Interest Determination
                           Date calculated by the Calculation Agent as the
                           arithmetic mean of the secondary market offered rates
                           as of 10:00 A.M., New York City time, on that
                           Interest Determination Date, of three leading
                           non-bank dealers in negotiable United States dollar
                           certificates of deposit in The City of New York
                           (which may include the purchasing agent or its
                           affiliates) selected by the Calculation Agent for
                           negotiable United States dollar certificates of
                           deposit of major United States money market banks for
                           negotiable United States certificates of deposit with
                           a remaining maturity closest to the particular Index
                           Maturity in an amount that is representative for a
                           single transaction in that market at that time; or
                           (4) if the dealers so selected by the Calculation
                           Agent are not quoting as mentioned in clause (3), the
                           CD Rate in effect on the particular Interest
                           Determination Date. "H.15(519)" means the weekly
                           statistical release designated as H.15(519), or any
                           successor publication, published by the Board of
                           Governors of the Federal Reserve System. "H.15 Daily
                           Update" means the daily update of H.15(519),
                           available through the world-wide-web site of the
                           Board of Governors of the Federal Reserve System at
                           http://www.federalreserve.gov/releases/H15/update,
                           or any successor site or publication.

                           (B) CMT Rate Notes. If the Interest Rate Basis is the
                           CMT Rate, this Note shall be deemed a "CMT Rate
                           Note." Unless otherwise specified on the face hereof,
                           "CMT Rate" means:

                           (1) if CMT Moneyline Telerate Page 7051 is specified
                           on the face hereof:

                                    i.       the percentage equal to the yield
                                             for United States Treasury
                                             securities at "constant maturity"
                                             having the Index Maturity specified
                                             on the face hereof as published in
                                             H.15(519) under the caption
                                             "Treasury Constant Maturities", as
                                             the yield is displayed on Moneyline
                                             Telerate (or any successor service)
                                             on page 7051 (or any other page as
                                             may replace the specified page on
                                             that service) ("Moneyline Telerate
                                             Page 7051"), for the particular
                                             Interest Determination Date; or

                                    ii.      if the rate referred to in clause
                                             (i) does not so appear on Moneyline
                                             Telerate Page 7051, the percentage
                                             equal to the yield for United
                                             States Treasury securities at
                                             "constant maturity" having the
                                             particular Index Maturity and for
                                             the particular Interest
                                             Determination Date as published in
                                             H.15(519) under the caption
                                             "Treasury Constant Maturities"; or

                                    iii.     if the rate referred to in clause
                                             (ii) does not so appear in
                                             H.15(519), the rate on the
                                             particular Interest Determination
                                             Date for the period of the
                                             particular Index Maturity as may
                                             then be


                                     A-3-10

                                             published by either the Federal
                                             Reserve System Board of Governors
                                             or the United States Department of
                                             the Treasury that the Calculation
                                             Agent determines to be comparable
                                             to the rate which would otherwise
                                             have been published in H.15(519);
                                             or

                                    iv.      if the rate referred to in clause
                                             (iii) is not so published, the rate
                                             on the particular Interest
                                             Determination Date calculated by
                                             the Calculation Agent as a yield to
                                             maturity based on the arithmetic
                                             mean of the secondary market bid
                                             prices at approximately 3:30 P.M.,
                                             New York City time, on that
                                             Interest Determination Date of
                                             three leading primary United States
                                             government securities dealers in
                                             The City of New York (which may
                                             include the purchasing agent or its
                                             affiliates) (each, a "Reference
                                             Dealer") selected by the
                                             Calculation Agent from five
                                             Reference Dealers selected by the
                                             Calculation Agent and eliminating
                                             the highest quotation, or, in the
                                             event of equality, one of the
                                             highest, and the lowest quotation
                                             or, in the event of equality, one
                                             of the lowest, for United States
                                             Treasury securities with an
                                             original maturity equal to the
                                             particular Index Maturity, a
                                             remaining term to maturity no more
                                             than one year shorter than that
                                             Index Maturity and in a principal
                                             amount that is representative for a
                                             single transaction in the
                                             securities in that market at that
                                             time; or

                                    v.       if fewer than five but more than
                                             two of the prices referred to in
                                             clause (iv) are provided as
                                             requested, the rate on the
                                             particular Interest Determination
                                             Date calculated by the Calculation
                                             Agent based on the arithmetic mean
                                             of the bid prices obtained and
                                             neither the highest nor the lowest
                                             of the quotations shall be
                                             eliminated; or

                                    vi.      if fewer than three prices referred
                                             to in clause (iv) are provided as
                                             requested, the rate on the
                                             particular Interest Determination
                                             Date calculated by the Calculation
                                             Agent as a yield to maturity based
                                             on the arithmetic mean of the
                                             secondary market bid prices as of
                                             approximately 3:30 P.M., New York
                                             City time, on that Interest
                                             Determination Date of three
                                             Reference Dealers selected by the
                                             Calculation Agent from five
                                             Reference Dealers selected by the
                                             Calculation Agent and eliminating
                                             the highest quotation or, in the
                                             event of equality, one of the
                                             highest and the lowest quotation
                                             or, in the event of equality, one
                                             of the lowest, for United States
                                             Treasury securities with an
                                             original maturity greater than the
                                             particular Index Maturity, a
                                             remaining term to maturity closest
                                             to that Index Maturity and in a
                                             principal amount that is
                                             representative for a single
                                             transaction in the securities in
                                             that market at that time; or

                                     A-3-11


                                    vii.     if fewer than five but more than
                                             two prices referred to in clause
                                             (vi) are provided as requested, the
                                             rate on the particular Interest
                                             Determination Date calculated by
                                             the Calculation Agent based on the
                                             arithmetic mean of the bid prices
                                             obtained and neither the highest
                                             nor the lowest of the quotations
                                             will be eliminated; or

                                    viii.    if fewer than three prices referred
                                             to in clause (vi) are provided as
                                             requested, the CMT Rate in effect
                                             on the particular Interest
                                             Determination Date; or

                               (2) if CMT Moneyline Telerate Page 7052 is
                               specified on the face hereof:

                                    i.       the percentage equal to the
                                             one-week or one-month, as specified
                                             on the face hereof, average yield
                                             for United States Treasury
                                             securities at "constant maturity"
                                             having the Index Maturity specified
                                             on the face hereof as published in
                                             H.15(519) opposite the caption
                                             "Treasury Constant Maturities", as
                                             the yield is displayed on Moneyline
                                             Telerate (or any successor service)
                                             (on page 7052 or any other page as
                                             may replace the specified page on
                                             that service) ("Moneyline Telerate
                                             Page 7052"), for the week or month,
                                             as applicable, ended immediately
                                             preceding the week or month, as
                                             applicable, in which the particular
                                             Interest Determination Date falls;
                                             or

                                    ii.      if the rate referred to in clause
                                             (i) does not so appear on Moneyline
                                             Telerate Page 7052, the percentage
                                             equal to the one-week or one-month,
                                             as specified on the face hereof,
                                             average yield for United States
                                             Treasury securities at "constant
                                             maturity" having the particular
                                             Index Maturity and for the week or
                                             month, as applicable, preceding the
                                             particular Interest Determination
                                             Date as published in H.15(519)
                                             opposite the caption "Treasury
                                             Constant Maturities"; or

                                    iii.     if the rate referred to in clause
                                             (ii) does not so appear in
                                             H.15(519), the one-week or
                                             one-month, as specified on the face
                                             hereof, average yield for United
                                             States Treasury securities at
                                             "constant maturity" having the
                                             particular Index Maturity as
                                             otherwise announced by the Federal
                                             Reserve Bank of New York for the
                                             week or month, as applicable, ended
                                             immediately preceding the week or
                                             month, as applicable, in which the
                                             particular Interest Determination
                                             Date falls; or

                                    iv.      if the rate referred to in clause
                                             (iii) is not so published, the rate
                                             on the particular Interest
                                             Determination Date calculated by
                                             the Calculation Agent as a yield to
                                             maturity based on the arithmetic
                                             mean of the secondary market bid
                                             prices at approximately 3:30 P.M.,
                                             New York City time, on that
                                             Interest Determination Date of

                                     A-3-12


                                             three Reference Dealers selected by
                                             the Calculation Agent from five
                                             Reference Dealers selected by the
                                             Calculation Agent and eliminating
                                             the highest quotation, or, in the
                                             event of equality, one of the
                                             highest, and the lowest quotation
                                             or, in the event of equality, one
                                             of the lowest, for United States
                                             Treasury securities with an
                                             original maturity equal to the
                                             particular Index Maturity, a
                                             remaining term to maturity no more
                                             than one year shorter than that
                                             Index Maturity and in a principal
                                             amount that is representative for a
                                             single transaction in the
                                             securities in that market at that
                                             time; or

                                    v.       if fewer than five but more than
                                             two of the prices referred to in
                                             clause (iv) are provided as
                                             requested, the rate on the
                                             particular Interest Determination
                                             Date calculated by the Calculation
                                             Agent based on the arithmetic mean
                                             of the bid prices obtained and
                                             neither the highest nor the lowest
                                             of the quotations shall be
                                             eliminated; or

                                    vi.      if fewer than three prices referred
                                             to in clause (iv) are provided as
                                             requested, the rate on the
                                             particular Interest Determination
                                             Date calculated by the Calculation
                                             Agent as a yield to maturity based
                                             on the arithmetic mean of the
                                             secondary market bid prices as of
                                             approximately 3:30 P.M., New York
                                             City time, on that Interest
                                             Determination Date of three
                                             Reference Dealers selected by the
                                             Calculation Agent from five
                                             Reference Dealers selected by the
                                             Calculation Agent and eliminating
                                             the highest quotation or, in the
                                             event of equality, one of the
                                             highest and the lowest quotation
                                             or, in the event of equality, one
                                             of the lowest, for United States
                                             Treasury securities with an
                                             original maturity greater than the
                                             particular Index Maturity, a
                                             remaining term to maturity closest
                                             to that Index Maturity and in a
                                             principal amount that is
                                             representative for a single
                                             transaction in the securities in
                                             that market at the time; or

                                    vii.     if fewer than five but more than
                                             two prices referred to in clause
                                             (vi) are provided as requested, the
                                             rate on the particular Interest
                                             Determination Date calculated by
                                             the Calculation Agent based on the
                                             arithmetic mean of the bid prices
                                             obtained and neither the highest
                                             nor the lowest of the quotations
                                             will be eliminated; or

                                    viii.    if fewer than three prices referred
                                             to in clause (vi) are provided as
                                             requested, the CMT Rate in effect
                                             on that Interest Determination
                                             Date.

                           If two United States Treasury securities with an
                           original maturity greater than the Index Maturity
                           specified on the face hereof have remaining terms to
                           maturity equally close to the particular Index
                           Maturity, the quotes for

                                     A-3-13


                           the United States Treasury security with the shorter
                           original remaining term to maturity will be used.

                  (C) Commercial Paper Rate Notes. If the Interest Rate Basis is
                  the Commercial Paper Rate, this Note shall be deemed a
                  "Commercial Paper Rate Note." Unless otherwise specified on
                  the face hereof, "Commercial Paper Rate" means: (1) the Money
                  Market Yield (as defined below) on the particular Interest
                  Determination Date of the rate for commercial paper having the
                  Index Maturity specified on the face hereof as published in
                  H.15(519) under the caption "Commercial Paper--Nonfinancial";
                  or (2) if the rate referred to in clause (1) is not so
                  published by 3:00 P.M., New York City time, on the related
                  Calculation Date, the Money Market Yield of the rate on the
                  particular Interest Determination Date for commercial paper
                  having the particular Index Maturity as published in H.15
                  Daily Update, or such other recognized electronic source used
                  for the purpose of displaying the applicable rate, under the
                  caption "Commercial Paper--Nonfinancial"; or (3) if the rate
                  referred to in clause (2) is not so published by 3:00 P.M.,
                  New York City time, on the related Calculation Date, the rate
                  on the particular Interest Determination Date calculated by
                  the Calculation Agent as the Money Market Yield of the
                  arithmetic mean of the offered rates at approximately 11:00
                  A.M., New York City time, on that Interest Determination Date
                  of three leading dealers of United States dollar commercial
                  paper in The City of New York (which may include the
                  purchasing agent or its affiliates) selected by the
                  Calculation Agent for commercial paper having the particular
                  Index Maturity placed for industrial issuers whose bond rating
                  is "Aa", or the equivalent, from a nationally recognized
                  statistical rating organization; or (4) if the dealers so
                  selected by the Calculation Agent are not quoting as mentioned
                  in clause (3), the Commercial Paper Rate in effect on the
                  particular Interest Determination Date. "Money Market Yield"
                  means a yield (expressed as a percentage) calculated in
                  accordance with the following formula:

                         Money Market Yield =        D x 360       x 100
                                                ----------------
                                                 360 - (D x M)

                  where "D" refers to the applicable per annum rate for
                  commercial paper quoted on a bank discount basis and expressed
                  as a decimal, and "M" refers to the actual number of days in
                  the applicable Interest Reset Period.

                  (D) Constant Maturity Swap Rate Notes. If the Interest Rate
                  Basis is the Constant Maturity Swap Rate, this Note shall be
                  deemed a "Constant Maturity Swap Rate Note." Unless otherwise
                  specified on the face hereof, "Constant Maturity Swap Rate"
                  means: (1) the rate for U.S. dollar swaps with the designated
                  maturity specified in the applicable pricing supplement,
                  expressed as a percentage, which appears on the Reuters Screen
                  (or any successor service) ISDAFIX1 Page as of 11:00 A.M., New
                  York City time, on the particular Interest Determination Date;
                  or (2) if the rate referred to in clause (1) does not appear
                  on the Reuters Screen (or any successor service) ISDAFIX1 Page
                  by 2:00 P.M., New York City time, on such Interest
                  Determination Date, a percentage determined on

                                     A-3-14


                  the basis of the mid-market semiannual swap rate quotations
                  provided by the reference banks (as defined below) as of
                  approximately 11:00 A.M., New York City time, on such Interest
                  Determination Date, and, for this purpose, the semi-annual
                  swap rate means the mean of the bid and offered rates for the
                  semi-annual fixed leg, calculated on a 30/360 day count basis,
                  of a fixed-for-floating U.S. dollar interest rate swap
                  transaction with a term equal to the designated maturity
                  specified in the applicable pricing supplement commencing on
                  the Interest Reset Date and in a representative amount (as
                  defined below) with an acknowledged dealer of good credit in
                  the swap market, where the floating leg, calculated on an
                  actual/360 day count basis, is equivalent to USD-LIBOR-BBA
                  with a designated maturity specified in the applicable pricing
                  supplement. The Calculation Agent will request the principal
                  New York City office of each of the reference banks to provide
                  a quotation of its rate. If at least three quotations are
                  provided, the rate for that Interest Determination Date will
                  be the arithmetic mean of the quotations, eliminating the
                  highest quotation (or, in the event of equality, one of the
                  highest) and the lowest quotation (or, in the event of
                  equality, one of the lowest); or (3) if at least three
                  quotations are not received by the Calculation Agent as
                  mentioned in clause (2), the Constant Maturity Swap Rate in
                  effect on the particular Interest Determination Date. "U.S.
                  Government Securities business day" means any day except for
                  Saturday, Sunday, or a day on which The Bond Market
                  Association recommends that the fixed income departments of
                  its members be closed for the entire day for purposes of
                  trading in U.S. government securities. "Representative amount"
                  means an amount that is representative for a single
                  transaction in the relevant market at the relevant time.
                  "Reference banks" mean five leading swap dealers in the New
                  York City interbank market, selected by the Calculation Agent,
                  after consultation with us.

                  (E) Federal Funds Open Rate Notes. If the Interest Rate Basis
                  is the Federal Funds Open Rate, this Note shall be deemed a
                  "Federal Funds Open Rate Note." Unless otherwise specified on
                  the face hereof, "Federal Funds Open Rate" means the rate set
                  forth on Moneyline Telerate (or any successor service) on page
                  5 (or any other page as may replace the specified page on that
                  service) for an Interest Determination Date underneath the
                  caption "FEDERAL FUNDS" in the row titled "OPEN". If the rate
                  is not available for an Interest Determination Date, the rate
                  for that Interest Determination Date shall be the Federal
                  Funds Rate as determined below.

                  (F) Federal Funds Rate Notes. If the Interest Rate Basis is
                  the Federal Funds Rate, this Note shall be deemed a "Federal
                  Funds Rate Note." Unless otherwise specified on the face
                  hereof, "Federal Funds Rate" means: (1) the rate on the
                  particular Interest Determination Date for United States
                  dollar federal funds as published in H.15(519) under the
                  caption "Federal Funds (Effective)" and displayed on Moneyline
                  Telerate (or any successor service) on page 120 (or any other
                  page as may replace the specified page on that service)
                  ("Moneyline Telerate Page 120"); or (2) if the rate referred
                  to in clause (1) does not so appear on Moneyline Telerate Page
                  120 or is not so published by 3:00 P.M., New York City time,
                  on the related Calculation Date, the rate on the particular
                  Interest

                                     A-3-15


                  Determination Date for United States dollar federal funds as
                  published in H.15 Daily Update, or such other recognized
                  electronic source used for the purpose of displaying the
                  applicable rate, under the caption "Federal Funds
                  (Effective)"; or (3) if the rate referred to in clause (2) is
                  not so published by 3:00 P.M., New York City time, on the
                  related Calculation Date, the rate on the particular Interest
                  Determination Date calculated by the Calculation Agent as the
                  arithmetic mean of the rates for the last transaction in
                  overnight United States dollar federal funds arranged by three
                  leading brokers of United States dollar federal funds
                  transactions in The City of New York (which may include the
                  purchasing agent or its affiliates) selected by the
                  Calculation Agent prior to 9:00 A.M., New York City time, on
                  that Interest Determination Date; or (4) if the brokers so
                  selected by the Calculation Agent are not quoting as mentioned
                  in clause (3), the Federal Funds Rate in effect on the
                  particular Interest Determination Date.

                  (G) LIBOR Notes. If the Interest Rate Basis is LIBOR, this
                  Note shall be deemed a "LIBOR Note." Unless otherwise
                  specified on the face hereof, "LIBOR" means: (1) if "LIBOR
                  Moneyline Telerate" is specified on the face hereof or if
                  neither "LIBOR Reuters" nor "LIBOR Moneyline Telerate" is
                  specified on the face hereof as the method for calculating
                  LIBOR, the rate for deposits in the LIBOR Currency (as defined
                  below) having the Index Maturity specified on the face hereof,
                  commencing on the related Interest Reset Date, that appears on
                  the LIBOR Page (as defined below) as of 11:00 A.M., London
                  time, on the particular Interest Determination Date; or (2) if
                  "LIBOR Reuters" is specified on the face hereof, the
                  arithmetic mean of the offered rates, calculated by the
                  Calculation Agent, or the offered rate, if the LIBOR Page by
                  its terms provides only for a single rate, for deposits in the
                  LIBOR Currency having the particular Index Maturity,
                  commencing on the related Interest Reset Date, that appear or
                  appears, as the case may be, on the LIBOR Page as of 11:00
                  A.M., London time, on the particular Interest Determination
                  Date; or (3) if fewer than two offered rates appear, or no
                  rate appears, as the case may be, on the particular Interest
                  Determination Date on the LIBOR Page as specified in clause
                  (1) or (2), as applicable, the rate calculated by the
                  Calculation Agent of at least two offered quotations obtained
                  by the Calculation Agent after requesting the principal London
                  offices of each of four major reference banks (which may
                  include affiliates of the purchasing agent) in the London
                  interbank market to provide the Calculation Agent with its
                  offered quotation for deposits in the LIBOR Currency for the
                  period of the particular Index Maturity, commencing on the
                  related Interest Reset Date, to prime banks in the London
                  interbank market at approximately 11:00 A.M., London time, on
                  that Interest Determination Date and in a principal amount
                  that is representative for a single transaction in the LIBOR
                  Currency in that market at that time; or (4) if fewer than two
                  offered quotations referred to in clause (3) are provided as
                  requested, the rate calculated by the Calculation Agent as the
                  arithmetic mean of the rates quoted at approximately 11:00
                  A.M., in the applicable Principal Financial Center, on the
                  particular Interest Determination Date by three major banks
                  (which may include affiliates of the purchasing agent) in that
                  principal financial center selected by the Calculation Agent
                  for loans in the LIBOR Currency to leading European banks,
                  having the particular Index Maturity

                                     A-3-16


                  and in a principal amount that is representative for a single
                  transaction in the LIBOR Currency in that market at that time;
                  or (5) if the banks so selected by the Calculation Agent are
                  not quoting as mentioned in clause (4), LIBOR in effect on the
                  particular Interest Determination Date. "LIBOR Currency" means
                  the currency specified on the face hereof as to which LIBOR
                  shall be calculated or, if no currency is specified on the
                  face hereof, United States dollars. "LIBOR Page" means either:
                  (1) if "LIBOR Reuters" is specified on the face hereof, the
                  display on the Reuter Monitor Money Rates Service (or any
                  successor service) on the page specified on the face hereof
                  (or any other page as may replace that page on that service)
                  for the purpose of displaying the London interbank rates of
                  major banks for the LIBOR Currency; or (2) if "LIBOR Moneyline
                  Telerate" is specified on the face hereof or neither "LIBOR
                  Reuters" nor "LIBOR Moneyline Telerate" is specified on the
                  face hereof as the method for calculating LIBOR, the display
                  on Moneyline Telerate (or any successor service) on the page
                  specified on the face hereof (or any other page as may replace
                  such page on such service) for the purpose of displaying the
                  London interbank rates of major banks for the LIBOR Currency.

                  (H) Prime Rate Notes. If the Interest Rate Basis is the Prime
                  Rate, this Note shall be deemed a "Prime Rate Note." Unless
                  otherwise specified on the face hereof, "Prime Rate" means:
                  (1) the rate on the particular Interest Determination Date as
                  published in H.15(519) under the caption "Bank Prime Loan"; or
                  (2) if the rate referred to in clause (1) is not so published
                  by 3:00 P.M., New York City time, on the related Calculation
                  Date, the rate on the particular Interest Determination Date
                  as published in H.15 Daily Update, or such other recognized
                  electronic source used for the purpose of displaying the
                  applicable rate, under the caption "Bank Prime Loan", or (3)
                  if the rate referred to in clause (2) is not so published by
                  3:00 P.M., New York City time, on the related Calculation
                  Date, the rate on the particular Interest Determination Date
                  calculated by the Calculation Agent as the arithmetic mean of
                  the rates of interest publicly announced by each bank that
                  appears on the Reuters Screen US PRIME 1 Page (as defined
                  below) as the applicable bank's prime rate or base lending
                  rate as of 11:00 A.M., New York City time, on that Interest
                  Determination Date; or (4) if fewer than four rates referred
                  to in clause (3) are so published by 3:00 p.m., New York City
                  time, on the related Calculation Date, the rate calculated by
                  the Calculation Agent as the particular Interest Determination
                  Date calculated by the Calculation Agent as the arithmetic
                  mean of the prime rates or base lending rates quoted on the
                  basis of the actual number of days in the year divided by a
                  360-day year as of the close of business on that Interest
                  Determination Date by three major banks (which may include
                  affiliates of the purchasing agent) in The City of New York
                  selected by the Calculation Agent; or (5) if the banks so
                  selected by the Calculation Agent are not quoting as mentioned
                  in clause (4), the Prime Rate in effect on the particular
                  Interest Determination Date. "Reuters Screen US PRIME 1 Page"
                  means the display on the Reuter Monitor Money Rates Service
                  (or any successor service) on the "US PRIME 1" page (or any
                  other page as may replace that page on that service) for the
                  purpose of displaying prime rates or base lending rates of
                  major United States banks.

                                     A-3-17


                  (I) Treasury Rate Notes. If the Interest Rate Basis is the
                  Treasury Rate, this Note shall be deemed a "Treasury Rate
                  Note." Unless otherwise specified on the face hereof,
                  "Treasury Rate" means: (1) the rate from the auction held on
                  the Interest Determination Date (the "Auction") of direct
                  obligations of the United States ("Treasury Bills") having the
                  Index Maturity specified on the face hereof under the caption
                  "INVESTMENT RATE" on the display on Moneyline Telerate (or any
                  successor service) on page 56 (or any other page as may
                  replace that page on that service) ("Moneyline Telerate Page
                  56") or page 57 (or any other page as may replace that page on
                  that service) ("Moneyline Telerate Page 57"); or (2) if the
                  rate referred to in clause (1) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  Bond Equivalent Yield (as defined below) of the rate for the
                  applicable Treasury Bills as published in H.15 Daily Update,
                  or another recognized electronic source used for the purpose
                  of displaying the applicable rate, under the caption "U.S.
                  Government Securities/Treasury Bills/Auction High"; or (3) if
                  the rate referred to in clause (2) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  Bond Equivalent Yield of the auction rate of the applicable
                  Treasury Bills as announced by the United States Department of
                  the Treasury; or (4) if the rate referred to in clause (3) is
                  not so announced by the United States Department of the
                  Treasury, or if the Auction is not held, the Bond Equivalent
                  Yield of the rate on the particular Interest Determination
                  Date of the applicable Treasury Bills as published in
                  H.15(519) under the caption "U.S. Government
                  Securities/Treasury Bills/Secondary Market"; or (5) if the
                  rate referred to in clause (4) is not so published by 3:00
                  P.M., New York City time, on the related Calculation Date, the
                  rate on the particular Interest Determination Date of the
                  applicable Treasury Bills as published in H.15 Daily Update,
                  or another recognized electronic source used for the purpose
                  of displaying the applicable rate, under the caption "U.S.
                  Government Securities/Treasury Bills/Secondary Market"; or (6)
                  if the rate referred to in clause (5) is not so published by
                  3:00 P.M., New York City time, on the related Calculation
                  Date, the rate on the particular Interest Determination Date
                  calculated by the Calculation Agent as the Bond Equivalent
                  Yield of the arithmetic mean of the secondary market bid
                  rates, as of approximately 3:30 P.M., New York City time, on
                  that Interest Determination Date, of three primary United
                  States government securities dealers (which may include the
                  purchasing agent or its affiliates) selected by the
                  Calculation Agent, for the issue of Treasury Bills with a
                  remaining maturity closest to the Index Maturity specified on
                  the face hereof; or (7) if the dealers so selected by the
                  Calculation Agent are not quoting as mentioned in clause (6),
                  the Treasury Rate in effect on the particular Interest
                  Determination Date. "Bond Equivalent Yield" means a yield
                  (expressed as a percentage) calculated in accordance with the
                  following formula:

                         Bond Equivalent Yield =        D x N        x 100
                                                   ----------------
                                                    360 - (D x M)

                                     A-3-18


where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the applicable
Interest Reset Period.

         (c) Discount Notes. If this Note is specified on the face hereof as a
         "Discount Note":


               (i) Principal and Interest. This Note will bear interest in the
               same manner as set forth in Section 3(a) above, and payments of
               principal and interest shall be made as set forth on the face
               hereof. Discount Notes may not bear any interest currently or may
               bear interest at a rate that is below market rates at the time of
               issuance. The difference between the Issue Price of a Discount
               Note and par is referred to as the "Discount".

               (ii) Redemption; Repayment; Acceleration. In the event a Discount
               Note is redeemed, repaid or accelerated, the amount payable to
               the Holder of such Discount Note will be equal to the sum of: (A)
               the Issue Price (increased by any accruals of Discount); and (B)
               any unpaid interest accrued on such Discount Note to the Maturity
               Date ("Amortized Face Amount"). Unless otherwise specified on the
               face hereof, for purposes of determining the amount of Discount
               that has accrued as of any date on which a redemption, repayment
               or acceleration of maturity occurs for a Discount Note, a
               Discount will be accrued using a constant yield method. The
               constant yield will be calculated using a 30-day month, 360-day
               year convention, a compounding period that, except for the
               Initial Period (as defined below), corresponds to the shortest
               period between Interest Payment Dates for the applicable Discount
               Note (with ratable accruals within a compounding period), a
               coupon rate equal to the initial coupon rate applicable to the
               applicable Discount Note and an assumption that the maturity of
               such Discount Note will not be accelerated. If the period from
               the date of issue to the first Interest Payment Date for a
               Discount Note (the "Initial Period") is shorter than the
               compounding period for such Discount Note, a proportionate amount
               of the yield for an entire compounding period will be accrued. If
               the Initial Period is longer than the compounding period, then
               the period will be divided into a regular compounding period and
               a short period with the short period being treated as provided
               above.

SECTION 4. REDEMPTION. If no redemption right is set forth on the face hereof,
this Note may not be redeemed prior to the Stated Maturity Date, except as set
forth in the Indenture or in Section 10 hereof. In the case of a Note that is
not a Discount Note, if a redemption right is set forth on the face of this
Note, the Trust shall elect to redeem this Note on the Interest Payment Date
after the Initial Redemption Date set forth on the face hereof on which the
Funding Agreement is to be redeemed in whole or in part by Principal Life
Insurance Company ("Principal Life") (each, a "Redemption Date"), in which case
this Note must be redeemed on such Redemption Date in whole or in part, as
applicable, prior to the Stated Maturity Date, in increments of $1,000 at the
applicable Redemption Price (as defined below), together with unpaid interest,
if any, accrued thereon to, but excluding, the applicable Redemption Date.
"Redemption Price" shall mean the unpaid Principal Amount of this Note to be
redeemed. The unpaid Principal Amount of this Note to be redeemed shall be
determined by multiplying (1) the Outstanding Principal Amount of this Note by
(2) the quotient derived by dividing (A) the outstanding principal amount of the
Funding Agreement
                                     A-3-19

to be redeemed by Principal Life by (B) the outstanding principal amount of the
Funding Agreement. Notice must be given not more than sixty (60) nor less than
thirty (30) calendar days prior to the proposed Redemption Date. In the event of
redemption of this Note in part only, a new Note for the unredeemed portion
hereof shall be issued in the name of the Holder hereof upon the surrender
hereof. If less than all of this Note is redeemed, the Indenture Trustee will
select by lot or, in its discretion, on a pro rata basis, the amount of the
interest of each direct participant in the Trust to be redeemed.

SECTION 5. SINKING FUNDS. Unless specified on the face hereof, this Note will
not be subject to, or entitled to the benefit of, any sinking fund.

SECTION 6. REPAYMENT. If no repayment right is set forth on the face hereof,
this Note may not be repaid at the option of the Holder hereof prior to the
Stated Maturity Date. If a repayment right is granted on the face of this Note,
this Note may be subject to repayment at the option of the Holder on any
Interest Payment Date on and after the date, if any, indicated on the face
hereof (each, a "Repayment Date"). On any Repayment Date, unless otherwise
specified on the face hereof, this Note shall be repayable in whole or in part
in increments of $1,000 at the option of the Holder hereof at a repayment price
equal to 100% of the Principal Amount to be repaid, together with interest
thereon payable to the Repayment Date. For this Note to be repaid in whole or in
part at the option of the Holder hereof, this Note must be received by the
Indenture Trustee, with the form entitled "Option to Elect Repayment", below,
duly completed by the Indenture Trustee. Exercise of such repayment option by
the Holder hereof shall be irrevocable. In the event of a repayment of this Note
in part only, a new Note for the portion hereof not repaid shall be issued in
the name of the Holder hereof upon the surrender hereof.

SECTION 7. MODIFICATIONS AND WAIVERS. The Indenture contains provisions
permitting the Trust and the Indenture Trustee (1) at any time and from time to
time without notice to, or the consent of, the Holders of any Notes issued under
the Indenture to enter into one or more supplemental indentures for certain
enumerated purposes and (2) with the consent of the Holders of a majority in
aggregate principal amount of the Outstanding Notes affected thereby, to enter
into one or more supplemental indentures for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, the Indenture or of modifying in any manner the rights of Holders of Notes
under the Indenture; provided, that, with respect to certain enumerated
provisions, no such supplemental indenture shall be entered into without the
consent of the Holder of each Note affected thereby. Any such consent or waiver
by the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Note or such other
Notes.

SECTION 8. OBLIGATIONS UNCONDITIONAL. No reference herein to the Indenture and
no provisions of this Note or of the Indenture shall impair the right of each
Holder of any Note, which is absolute and unconditional, to receive payment of
the principal of, and any interest on, and premium, if any, on, such Note on the
respective Stated Maturity Date or redemption date thereof and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.

                                     A-3-20


SECTION 9. EVENTS OF DEFAULT. If an Event of Default with respect to this Note
shall occur and be continuing, the principal of, and all other amounts payable
on, the Notes may be declared due and payable, or may be automatically
accelerated, as the case may be, in the manner and with the effect provided in
the Indenture. In the event that this Note is a Discount Note, the amount of
principal of this Note that becomes due and payable upon such acceleration shall
be equal to the amount calculated as set forth in Section 3(c) hereof.

SECTION 10. WITHHOLDING; NO ADDITIONAL AMOUNTS; TAX EVENT AND REDEMPTION. All
amounts due on this Note will be made without any applicable withholding or
deduction for or on account of any present or future taxes, duties, levies,
assessments or other governmental charges of whatever nature imposed or levied
by or on behalf of any governmental authority, unless such withholding or
deduction is required by law. Unless otherwise specified on the face hereof, the
Trust will not pay any additional amounts to the Holder of this Note in respect
of such withholding or deduction, any such withholding or deduction will not
give rise to an event of default or any independent right or obligation to
redeem this Note and the Holder will be deemed for all purposes to have received
cash in an amount equal to the portion of such withholding or deduction that is
attributable to such Holder's interest in this Note as equitably determined by
the Trust.

         If (1) a Tax Event (defined below) as to the Funding Agreement occurs
and (2) Principal Life redeems the Funding Agreement in whole or in part, the
Trust will redeem the Notes, subject to the terms and conditions of Section 2.04
of the Standard Indenture Terms, at the Tax Event Redemption Price (defined
below) together with unpaid interest accrued thereon to the applicable
redemption date. "Tax Event" means that Principal Life shall have received an
opinion of independent legal counsel stating in effect that as a result of (a)
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the effective date of the
Funding Agreement, there is more than an insubstantial risk that (i) the Trust
is, or will be within ninety (90) days of the date thereof, subject to U.S.
federal income tax with respect to interest accrued or received on the Funding
Agreement or (ii) the Trust is, or will be within ninety (90) days of the date
thereof, subject to more than a de minimis amount of taxes, duties or other
governmental charges. "Tax Event Redemption Price" means an amount equal to the
unpaid principal amount of this Note to be redeemed, which shall be determined
by multiplying (1) the Outstanding Principal Amount of this Note by (2) the
quotient derived by dividing (A) the outstanding principal amount to be redeemed
by Principal Life of the Funding Agreement by (B) the outstanding principal
amount of the Funding Agreement.

SECTION 11. LISTING. Unless otherwise specified on the face hereof, this Note
will not be listed on any securities exchange.


SECTION 12. COLLATERAL. The Collateral for this Note includes the Funding
Agreement and the Guarantee specified on the face hereof.

                                     A-3-21


SECTION 13. NO RECOURSE AGAINST CERTAIN PERSONS. No recourse shall be had for
the payment of any principal, interest or any other sums at any time owing under
the terms of this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Indenture or any indenture supplemental
thereto, against the Nonrecourse Parties, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability being, by the acceptance hereof and as
part of the consideration for issue hereof, expressly waived and released.

SECTION 14.  MISCELLANEOUS.

         (a) This Note is issuable only as a registered Note without coupons in
denominations of $1,000 and any integral multiple in excess thereof unless
otherwise specified on the face of this Note.

         (b) Prior to due presentment for registration of transfer of this Note,
the Trust, the Indenture Trustee, the Registrar, the Paying Agent, any Agent,
and any other agent of the Trust or the Indenture Trustee may treat the Person
in whose name this Note is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note shall be overdue, and none of the Trust, the Indenture Trustee, the
Registrar, the Paying Agent, any Agent, or any other agent of the Trust or the
Indenture Trustee shall be affected by notice to the contrary.

         (c) The Notes are being issued by means of a book-entry-only system
with no physical distribution of certificates to be made except as provided in
the Indenture. The book-entry system maintained by DTC will evidence ownership
of the Notes, with transfers of ownership effected on the records of DTC and its
participants pursuant to rules and procedures established by DTC and its
participants. The Trust and the Indenture Trustee will recognize Cede & Co., as
nominee of DTC, as the registered owner of the Notes, as the Holder of the Notes
for all purposes, including payment of principal, premium (if any) and interest,
notices and voting. Transfer of principal, premium (if any) and interest to
participants of DTC will be the responsibility of DTC, and transfer of
principal, premium (if any) and interest to beneficial holders of the Notes by
participants of DTC will be the responsibility of such participants and other
nominees of such beneficial holders. So long as the book-entry system is in
effect, the selection of any Notes to be redeemed or repaid will be determined
by DTC pursuant to rules and procedures established by DTC and its participants.
Neither the Trust nor the Indenture Trustee shall be responsible or liable for
such transfers or payments or for maintaining, supervising or reviewing the
records maintained by DTC, its participants or persons acting through such
participants.

         (d) This Note or portion hereof may not be exchanged for Definitive
Notes, except in the limited circumstances provided for in the Indenture. The
transfer or exchange of Definitive Notes shall be subject to the terms of the
Indenture. No service charge will be made for any registration of transfer or
exchange, but the Trust may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.

SECTION 15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                     A-3-22


                            OPTION TO ELECT REPAYMENT

         The undersigned hereby irrevocably request(s) and instruct(s) the Trust
to repay this Note (or portion hereof specified below) pursuant to its terms at
a price equal to the Principal Amount hereof together with interest to the
repayment date, to the undersigned, at:

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


- --------------------------------------------------------------------------------
 (Please print or typewrite name and address of the undersigned).

         For this Note to be repaid, the Indenture Trustee (or the Paying Agent
on behalf of the Indenture Trustee) must receive at its Corporate Trust Office,
or at such other place or places of which the Trust shall from time to time
notify the Holder of this Note, not more than sixty (60) nor less than thirty
(30) days prior to a Repayment Date, if any, shown on the face of this Note,
this Note with this "Option to Elect Repayment" form duly completed.

         If less than the entire Principal Amount of this Note is to be repaid,
specify the portion hereof (which shall be in increments of $1,000) which the
Holder elects to have repaid and specify the denomination or denominations
(which shall be $______ or an integral multiple of $1,000 in excess of $______)
of the Notes to be issued to the Holder for the portion of this Note not being
repaid (in the absence of any such specification, one such Note will be issued
for the portion not being repaid).




                                                   
$
  --------------------------------                     ---------------------------------------------------------

     -----------------------------
DATE:                                                   NOTICE: The signature on this Option to
     -----------------------------                      Elect Repayment must correspond with the
                                                        name as written upon the face of this
                                                        Note in every particular, without
                                                        alteration or enlargement or any change
                                                        whatever.

Principal Amount to be repaid, if amount to be          Fill in for registration of Notes
repaid is less than the Principal Amount of this        if to be issued otherwise than
Note (Principal Amount remaining must be an             to the registered Holder:
authorized denomination)

                                                        Name: __________________________
$_________________________                              Address: ________________________
                                                        (Please print name and
                                                        address including zip code)



SOCIAL SECURITY OR OTHER TAXPAYER ID NUMBER: _________________

                                     A-3-23


                             SURVIVOR'S OPTION RIDER

         (a) Unless this Note, on its face, has been declared due and payable
prior to the Maturity Date by reason of any Event of Default under the
Indenture, or has been previously redeemed or otherwise repaid, the authorized
Representative (as defined below) of a deceased Beneficial Owner (as defined
below) of this Note shall have the option to elect repayment by the Trust in
whole or in part prior to the Maturity Date following the death of the
Beneficial Owner (a "Survivor's Option"). The Survivor's Option may not be
exercised unless the deceased Beneficial Owner purchased the Notes either within
ninety (90) days of their issuance or acquired the Notes at least six (6) months
before the date of death of such deceased Beneficial Owner. "Beneficial Owner"
as used in this Survivor's Option Rider means, with respect to this Note, the
person who has the right, immediately prior to such person's death, to receive
the proceeds from the disposition of this Note, as well as the right to receive
payments on this Note.

         (b) Upon (1) the valid exercise of the Survivor's Option and the proper
tender of this Note by or on behalf of a person that has authority to act on
behalf of the deceased Beneficial Owner of this Note under the laws of the
appropriate jurisdiction (including, without limitation, the personal
representative or executor of the deceased Beneficial Owner or the surviving
joint owner of the deceased Beneficial Owner) (the "Representative") and (2) the
tender and acceptance of that portion of the Funding Agreement equal to the
amount of the portion of this Note to be redeemed, the Trust shall repay this
Note (or portion thereof) at a price equal to 100% of the unpaid Principal
Amount of the deceased Beneficial Owner's beneficial interest in this Note plus
accrued and unpaid interest to, but excluding, the date of such repayment.
However, the Trust shall not be obligated to repay:

               (i) beneficial ownership interests in Notes exceeding the greater
               of $2,000,000 or 2% (or such other amounts, as specified in the
               Pricing Supplement) in aggregate principal amount for all notes
               then outstanding under the Principal(R) Life CoreNotes(R) Program
               and the Secured Medium-Term Notes Retail Program as of the end of
               the most recent calendar year (the "Annual Put Limitation");

               (ii) on behalf of an individual deceased Beneficial Owner, any
               beneficial ownership interest in all notes issued under the
               Principal(R) Life CoreNotes(R) Program and the Secured
               Medium-Term Notes Retail Program that exceeds $250,000 (or such
               other amounts, as specified in the Pricing Supplement) in any
               calendar year (the "Individual Put Limitation"); or

               (iii) beneficial ownership interests in Notes exceeding the
               amount specified on the face hereof and in the Pricing Supplement
               (the "Trust Put Limitation").

         (c) The Trust shall not make principal repayments pursuant to exercise
of the Survivor's Option in amounts that are less than $1,000, and, in the event
that the limitations described in the preceding sentence would result in the
partial repayment of this Note, the Principal Amount remaining Outstanding after
repayment must be at least $1,000 (the minimum authorized denomination of the
Notes).

         (d) An otherwise valid election to exercise the Survivor's Option may
not be withdrawn.

                                     A-3-24


         (e) Election to exercise the Survivor's Option will be accepted in the
order that elections are received by the Trustee, except for any Notes (or
portion thereof) the acceptance of which would contravene (1) the Annual Put
Limitation, (2) the Individual Put Limitation or (3) the Trust Put Limitation.
Any Note (or portion thereof) accepted for repayment pursuant to exercise of the
Survivor's Option shall be repaid on the first Interest Payment Date that occurs
20 or more calendar days after the date of such acceptance. If, as of the end of
any calendar year, the aggregate principal amount of all notes (or portions
thereof) issued under the Principal(R) Life CoreNotes(R) Program and the Secured
Medium-Term Notes Retail Program that have been tendered pursuant to the valid
exercise of the Survivor's Option during such year has exceeded the Annual Put
Limitation or the Individual Put Limitation, for such year, any exercise(s) of
the Survivor's Option with respect to Notes (or portions thereof) not accepted
during such calendar year, because such acceptance would have contravened any
such limitation, shall be deemed to be tendered on the first day of the
following calendar year in the order all such Notes (or portions thereof) were
originally tendered. If, as of the end of any calendar year, the aggregate
principal amount of all Notes (or portions thereof) that have been tendered
pursuant to the valid exercise of the Survivor's Option during such year has
exceeded the Trust Put Limitation, for such year, any exercise(s) of the
Survivor's Option with respect to Notes (or portions thereof) not accepted
during such calendar year, because such acceptance would have contravened any
such limitation, shall be deemed to be tendered on the first day of the
following calendar year in the order all such Notes (or portions thereof) were
originally tendered. In the event that this Note (or any portion hereof)
tendered for repayment pursuant to valid exercise of the Survivor's Option is
not accepted or is to be delayed, the Trustee shall deliver a notice by
first-class mail to the Depositary that states the reason such Note (or portion
thereof) has not been accepted for payment or is to be delayed.

         (f) In order to obtain repayment through exercise of the Survivor's
Option with respect to this Note (or portion hereof), the Representative must
provide the following items to the broker or other entity through which the
beneficial interest in this Note is held by the deceased Beneficial Owner: (1) a
written instruction to such broker or other entity in the form of Annex A
attached hereto to notify the Depositary of the Representative's desire to
obtain repayment through the exercise of the Survivor's Option; (2) appropriate
evidence satisfactory to the Trustee that (i) the deceased Beneficial Owner
purchased the Notes either within ninety (90) days of their issuance or acquired
the Notes at least six (6) months before the date of death of such deceased
Beneficial Owner, (ii) the death of such Beneficial Owner has occurred, and the
date of such death, and (iii) the Representative has authority to act on behalf
of the deceased Beneficial Owner; (3) if the interest in this Note is held by a
nominee of the deceased Beneficial Owner, a certificate satisfactory to the
Trustee from such nominee attesting to the deceased's beneficial ownership of
this Note; (4) a written request for repayment signed by the Representative,
with the signature guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States; (5) if applicable, a properly executed assignment or endorsement;
(6) tax waivers and such other instruments or documents that the Trustee
reasonably requires in order to establish the validity of the beneficial
ownership of this Note and the claimant's entitlement to payment; and (7) any
additional information the Trustee reasonably requires to evidence satisfaction
of any conditions to the exercise of such Survivor's Option or to document
beneficial ownership or authority to make the election and to cause the
repayment of this Note. Such broker or other entity shall then deliver

                                     A-3-25


each of these items to the direct participant of the Depositary, such direct
participant being the entity that holds the beneficial interest in this Note on
behalf of the deceased Beneficial Owner, together with evidence satisfactory to
the Indenture Trustee from the broker or other entity stating that it represents
the deceased Beneficial Owner. Such direct participant shall then deliver such
items to the Indenture Trustee. The Indenture Trustee will then deliver these
items to the Trustee and will provide the Trustee with any additional
information (after receipt from such direct participant) the Trustee may request
in connection with such exercise. Such direct participant shall be responsible
for disbursing any payments it receives from the Depositary pursuant to exercise
of the Survivor's Option to the appropriate Representative. All questions, other
than with respect to the right to limit the aggregate Principal Amount of Notes
as to which exercises of the Survivor's Option shall be accepted in any one
calendar year or as to the Notes, regarding the eligibility or validity of any
exercise of the Survivor's Option will be determined by the Trustee, in its sole
discretion, which determination shall be final and binding on all parties.

         (g) The death of a person holding a beneficial interest in this Note as
a joint tenant or tenant by the entirety with another person, or as a tenant in
common with the deceased owner's spouse, will be deemed the death of the
Beneficial Owner of this Note, and the entire Principal Amount of this Note so
held shall be subject to repayment by the Trust upon request in accordance with
the terms and provisions hereof. However, the death of a person holding a
beneficial interest in this Note as tenant in common with a person other than
such deceased owner's spouse will be deemed the death of a Beneficial Owner only
with respect to such deceased person's ownership interest in this Note.

         (h) The death of a person who was a lifetime beneficiary of a trust
holding a beneficial interest in this Note will be treated as the death of the
Beneficial Owner of this Note to the extent of that person's interest in the
trust. The death of a person who was a tenant by the entirety or joint tenant in
a tenancy which is the beneficiary of a trust holding a beneficial interest in
this Note will be treated as the death of the Beneficial Owner of this Note. The
death of an individual who was a tenant in common in a tenancy which is the
beneficiary of a trust holding a beneficial interest in this Note will be
treated as the death of the Beneficial Owner of this Note only with respect to
the deceased person's beneficial interest in this Note, unless a husband and
wife are the tenants in common, in which case the death of either will be
treated as the death of the owner of this Note.

         (i) The death of a person who, during his or her lifetime, was entitled
to substantially all of the beneficial ownership interests in this Note will be
deemed the death of the Beneficial Owner of this Note for purposes of the
Survivor's Option, regardless of whether that Beneficial Owner was the
registered holder of this Note, if such beneficial ownership interest can be
established to the satisfaction of the Trustee. A beneficial ownership interest
will be deemed to exist in typical cases of nominee ownership, such as ownership
under the Uniform Transfers of Gifts to Minors Act, community property or other
joint ownership arrangements between a husband and wife and lifetime custodial
and trust arrangements.

                                     A-3-26

                                                                         ANNEX A

                             REPAYMENT ELECTION FORM

                        PRINCIPAL LIFE INSURANCE COMPANY

                    SECURED MEDIUM-TERM NOTES RETAIL PROGRAM

                              CUSIP NUMBER ________

To:  [Name of Issuing Trust] (the "TRUST")

The undersigned financial institution (the "FINANCIAL INSTITUTION") represents
the following:

         o        The Financial Institution has received a request for repayment
                  from the executor or other authorized representative (the
                  "AUTHORIZED REPRESENTATIVE") of the deceased beneficial owner
                  listed below (the "DECEASED BENEFICIAL OWNER") of Secured
                  Medium-Term Retail Notes (CUSIP No. ____________) (the
                  "NOTES").

         o        At the time of his or her death, the Deceased Beneficial Owner
                  owned Notes in the principal amount listed below.

         o        The Deceased Beneficial Owner purchased the Notes either
                  within ninety (90) days of their issuance or acquired the
                  Notes at least six (6) months before the date of death of such
                  Deceased Beneficial Owner.

         o        direct or indirect participant in The Depository Trust Company
                  (the "DEPOSITARY").

         o        The Financial Institution agrees to the following terms:

         o        The Financial Institution shall follow the instructions (the
                  "INSTRUCTIONS") accompanying this Repayment Election Form
                  (this "FORM").

o                 The Financial Institution shall make all records specified in
                  the Instructions supporting the above representations
                  available to U.S. Bank Trust National Association (the
                  "TRUSTEE") or the [Name of Issuing Trust] (the "TRUST") for
                  inspection and review within five business days of the
                  Trustee's or the Trust's request.

o                 If the Financial Institution, the Trustee or the Trust, in any
                  such party's reasonable discretion, deems any of the records
                  specified in the Instructions supporting the above
                  representations unsatisfactory to substantiate a claim for
                  repayment, the Financial Institution shall not be obligated to
                  submit this Form, and the Trustee or Trust may deny repayment.
                  If the Financial Institution cannot substantiate a claim for
                  repayment, it shall notify the Trustee immediately.

                                     A-3-27


         o        Repayment elections may not be withdrawn.

         o        The Financial Institution agrees to indemnify and hold
                  harmless the Trustee and the Trust against and from any and
                  all claims, liabilities, costs, losses, expenses, suits and
                  damages resulting from the Financial Institution's above
                  representations and request for repayment on behalf of the
                  Authorized Representative.

         o        The Notes will be repaid on the first Interest Payment Date to
                  occur at least 20 calendar days after the date of acceptance
                  of the notes for repayment, unless such date is not a business
                  day, in which case the date of repayment shall be the next
                  succeeding business day.

         o        Subject to the Trust's rights to limit the aggregate principal
                  amount of Notes as to which exercises of the Survivor's Option
                  shall be accepted in any one calendar year, all questions as
                  to the eligibility or validity of any exercise of the
                  Survivor's Option will be determined by the Trustee, in its
                  sole discretion, which determination shall be final and
                  binding on all parties.

                                     A-3-28


                  

                                                  REPAYMENT ELECTION FORM
(1)
- -------------------------------------------------------------------------------------------------------------
                                             Name of Deceased Beneficial Owner
(2)
- -------------------------------------------------------------------------------------------------------------
                                                       Date of Death
(3)
- -------------------------------------------------------------------------------------------------------------
                                   Name of Authorized Representative Requesting Repayment
(4)
- -------------------------------------------------------------------------------------------------------------
                                     Name of Financial Institution Requesting Repayment
(5)
- -------------------------------------------------------------------------------------------------------------

                    Signature of Authorized Representative of Financial Institution Requesting Repayment
(6)
- -------------------------------------------------------------------------------------------------------------
                                          Principal Amount of Requested Repayment
(7)
- -------------------------------------------------------------------------------------------------------------

                                                      Date of Election
(8)        Financial Institution                      (9)      Wire instructions for payment:
           Representative Name:                                Bank Name:
           Phone Number:                                       ABA Number:
           Fax Number:                                         Account Name:
           Mailing Address (no P.O. Boxes):                    Account Number:
                                                               Reference (optional):



TO BE COMPLETED BY THE TRUSTEE:

(A)      ELECTION NUMBER*:

(B)      DELIVERY AND PAYMENT DATE:

(C)      PRINCIPAL AMOUNT:

(D)      ACCRUED INTEREST:

(E)      DATE OF RECEIPT OF FORM BY THE TRUSTEE:

(F)      DATE OF ACKNOWLEDGMENT BY THE TRUSTEE:

- ------------
*         To be assigned by the Trustee upon receipt of this Form. An
          acknowledgement, in the form of a copy of this document with the
          assigned Election Number, will be returned to the party and location
          designated in item (8) above.

                                     A-3-29


             INSTRUCTIONS FOR COMPLETING REPAYMENT ELECTION FORM AND
                                   EXERCISING
                                REPAYMENT OPTION

         Capitalized terms used and not defined herein have the meanings defined
in the accompanying Repayment Election Form.

1.       Collect and retain for a period of at least three years (1)
         satisfactory evidence of the authority of the Authorized
         Representative, (2) satisfactory evidence of death of the Deceased
         Beneficial Owner, (3) satisfactory evidence that the Deceased
         Beneficial Owner beneficially owned, at the time of his or her death,
         the notes being submitted for repayment, (4) satisfactory evidence that
         the notes being submitted for repayment either were purchased within
         ninety (90) days of their issuance or were acquired by the Deceased
         Beneficial Owner at least six (6) months before the date of the death
         of such Deceased Beneficial Owner, and (5) any necessary tax waivers.
         For purposes of determining whether the notes will be deemed
         beneficially owned by an individual at any given time, the following
         rules shall apply:

         o        If a note (or a portion thereof) is beneficially owned by
                  tenants by the entirety or joint tenants, the note (or
                  relevant portion thereof) will be regarded as beneficially
                  owned by a single owner. Accordingly, the death of a tenant by
                  the entirety or joint tenant will be deemed the death of the
                  beneficial owner and the entire principal amount so owned will
                  become eligible for repayment.

         o        The death of a person beneficially owning a note (or a portion
                  thereof) by tenancy in common will be deemed the death of the
                  beneficial owner only with respect to the deceased owner's
                  interest in the note (or relevant portion thereof) so owned,
                  unless a husband and wife are the tenants in common, in which
                  case the death of either will be deemed the death of the
                  beneficial owner and the entire principal amount so owned will
                  be eligible for repayment.

         o        A note (or a portion thereof) beneficially owned by a trust
                  will be regarded as beneficially owned by each beneficiary of
                  the trust to the extent of that beneficiary's interest in the
                  trust (however, a trust's beneficiaries collectively cannot be
                  beneficial owners of more notes than are owned by the trust).
                  The death of a beneficiary of a trust will be deemed the death
                  of the beneficial owner of the notes (or relevant portion
                  thereof) beneficially owned by the trust to the extent of that
                  beneficiary's interest in the trust. The death of an
                  individual who was a tenant by the entirety or joint tenant in
                  a tenancy which is the beneficiary of a trust will be deemed
                  the death of the beneficiary of the trust. The death of an
                  individual who was a tenant in common in a tenancy which is
                  the beneficiary of a trust will be deemed the death of the
                  beneficiary of the trust only with respect to the deceased
                  holder's beneficial interest in the note, unless a husband and
                  wife are the tenants in common, in which case the death of
                  either will be deemed the death of the beneficiary of the
                  trust.

         o        The death of a person who, during his or her lifetime, was
                  entitled to substantially all of the beneficial interest in a
                  note (or a portion thereof) will be deemed the death of the

                                     A-3-30


                  beneficial owner of that note (or relevant portion thereof),
                  regardless of the registration of ownership, if such
                  beneficial interest can be established to the satisfaction of
                  the Trustee. Such beneficial interest will exist in many cases
                  of street name or nominee ownership, custodial arrangements,
                  ownership by a trustee, ownership under the Uniform Transfers
                  of Gifts to Minors Act and community property or other joint
                  ownership arrangements between spouses. Beneficial interest
                  will be evidenced by such factors as the power to sell or
                  otherwise dispose of a note, the right to receive the proceeds
                  of sale or disposition and the right to receive interest and
                  principal payments on a note.

2.       Indicate the name of the Deceased Beneficial Owner on line (1).

3.       Indicate the date of death of the Deceased Beneficial Owner on line
         (2).

4.       Indicate the name of the Authorized Representative requesting repayment
         on line (3).

5.       Indicate the name of the Financial Institution requesting repayment on
         line (4).

6.       Affix the authorized signature of the Financial Institution's
         representative on line (5). THE SIGNATURE MUST BE MEDALLION SIGNATURE
         GUARANTEED.

7.       Indicate the principal amount of notes to be repaid on line (6).

8.       Indicate the date this Form was completed on line (7).

9.       Indicate the name, mailing address (no P.O. boxes, please), telephone
         number and facsimile-transmission number of the party to whom the
         acknowledgment of this election may be sent in item (8).

10.      Indicate the wire instruction for payment on line (9).

11.      Leave lines (A), (B), (C), (D), (E) and (F) blank.

12.      Mail or otherwise deliver an original copy of the completed Form to:

                                 Citibank, N.A.
                             Citibank Agency & Trust
                        388 Greenwich Street, 14th Floor
                            New York, New York 10013

13.      FACSIMILE TRANSMISSIONS OF THE REPAYMENT ELECTION FORM WILL NOT BE
         ACCEPTED.

14.      If the acknowledgement of the Trustee's receipt of this Form, including
         the assigned Election Number, is not received within ten days of the
         date such information is sent to Citibank, N.A., contact the Trustee at
         100 Wall Street, 16th Floor, New York, New York 10005, attention:
         Corporate Trust Administration, telephone number: (212) 361-2458.

15.      For assistance with this Form or any questions relating thereto, please
         contact U.S. Bank Trust National Association at 100 Wall Street, 16th
         Floor, New York, New York 10005, attention: Corporate Trust
         Administration, telephone number: (212) 361-2458.

                                     A-3-31

                                                                       EXHIBIT B


                            Indenture Trustee Report
                                       for
              Principal Life Income Fundings Trust o (the "Trust")

                                  Payment Date
                                     o, 200o
                                 CUSIP Number o

(i)      the amount received by the Indenture Trustee as of the last statement
         in respect of the principal, interest and premium, if any, on Funding
         Agreement No. o (the "Funding Agreement") issued by Principal Life
         Insurance Company ("Principal Life") or the Guarantee issued by
         Principal Financial Group, Inc. which fully and unconditionally
         guarantees the payment obligations of Principal Life under the Funding
         Agreement.

                                    Interest: o
                                    Principal: o
                                    Premium, if any: o


(ii)     the amounts of compensation received by the Indenture Trustee, during
         the period relating to such Payment Date.

                                    Paid by the Trust: o
                                    Paid by Principal Life: o

(iii)    the amount of payment on such Payment Date to holders allocable to
         principal of and premium, if any, and interest on the notes of the
         Trust and the amount of aggregate unpaid interest accrued on such notes
         as of such Payment Date.

                                    Interest: o
                                    Principal: o
                                    Unpaid Interest Accrued: o

(iv)     the aggregate stated principal amount of the Funding Agreement, the
         current interest rate or rates thereon at the close of business on such
         Payment Date, and the current rating assigned to the Funding Agreement.

                                    Principal Amount: o
                                    Interest Rate: o
                                    Ratings: o
                                            Moody's Investor Service: o
                                            Standard & Poors' Rating Service: o

(v)      the aggregate principal balance of the notes at the close of business
         on such Payment Date and the current rating assigned to the notes.

                                    Initial Principal Amount: o
                                    Reduction: o
                                    Principal Amount on the Payment Date: o
                                    Ratings: o
                                            Moody's Investor Service: o
                                            Standard & Poors' Rating Service: o



                                     B-1

EX-4.6

                                                                     EXHIBIT 4.6

                              STANDARD TRUST TERMS

                                 WITH RESPECT TO

                      PRINCIPAL LIFE INCOME FUNDINGS TRUSTS

                                DATED AS OF [ O ]







                                TABLE OF CONTENTS





                                                                                                       Page
                                                                                                       ----

                                                                                                    
                                                 ARTICLE 1
                                                DEFINITIONS

Section 1.01.  Definitions...............................................................................1
Section 1.02.  Usage of Terms............................................................................3
Section 1.03.  Section References........................................................................3

                                                 ARTICLE 2
                                             CREATION OF TRUST

Section 2.01.  Name of the Trust.........................................................................3
Section 2.02.  Office of the Trustee; Principal Place of Business........................................3
Section 2.03.  Appointment of Trustee....................................................................3
Section 2.04.  Trust Beneficial Interest.................................................................4
Section 2.05.  Issuance of the Notes.....................................................................4
Section 2.06.  Acquisition of Funding Agreement and Guarantee............................................4
Section 2.07.  Security Interest in the Collateral.......................................................4
Section 2.08.  Purposes of the Trust.....................................................................4
Section 2.09.  Title to Collateral.......................................................................5
Section 2.10.  Allocation of Trust Expenses..............................................................5
Section 2.11.  Liability.................................................................................5
Section 2.12.  Income Tax Treatment; Tax Returns and Reports.............................................5
Section 2.13.  Situs of Trust............................................................................5

                                                 ARTICLE 3
                                              PAYMENT ACCOUNT

Section 3.01.  Payment Account...........................................................................7

                                                 ARTICLE 4
                                              TRUST SECURITIES

Section 4.01.  Initial Ownership.........................................................................8
Section 4.02.  Notes.....................................................................................8
Section 4.03.  Registration of Transfer of Trust Beneficial Interest.....................................8
Section 4.04.  Persons Deemed Holders of Trust Securities................................................8
Section 4.05.  Maintenance of Office.....................................................................8
Section 4.06.  Ownership of the Trust Beneficial Interest................................................9



                                        i




                                TABLE OF CONTENTS
                                   (Continued)



                                                                                                       Page
                                                                                                       ----
                                                                                                    
                                                 ARTICLE 5
                                       Representations and Warranties

Section 5.01.  Trustee...................................................................................9
Section 5.02.  Trust Beneficial Owner...................................................................10

                                                 ARTICLE 6
                                                  TRUSTEE

Section 6.01.  General Authority........................................................................10
Section 6.02.  General Duties...........................................................................16
Section 6.03.  Specific Duties..........................................................................16
Section 6.04.  Acceptance of Trust and Duties; Limitation on Liability..................................16
Section 6.05.  Reliance; Advice of Counsel..............................................................19
Section 6.06.  Delegation of Authorities and Duties.....................................................20
Section 6.07.  Acknowledgement of the Trustee...........................................................20

                                                 ARTICLE 7
                                        LIQUIDATION AND TERMINATION

Section 7.01.  Termination Upon the Trust Expiration Date...............................................20
Section 7.02.  Termination of Agreement.................................................................20
Section 7.03.  Liquidation..............................................................................21

                                                 ARTICLE 8
                                     SUCCESSOR AND ADDITIONAL TRUSTEES

Section 8.01.  Eligibility Requirements for the Trustee.................................................21
Section 8.02.  Resignation or Removal of the Trustee....................................................22
Section 8.03.  Successor Trustee........................................................................22
Section 8.04.  Merger or Consolidation of Trustee.......................................................23
Section 8.05.  Appointment of Co-Trustee or Separate Trustee............................................23
Section 8.06.  Trustee May Own Notes....................................................................24

                                                 ARTICLE 9
                                 VOTING; ACTS OF SECURITYHOLDERS; MEETINGS

Section 9.01.  Limitations on Voting Rights.............................................................25
Section 9.02.  Meetings of the Trust Beneficial Owner...................................................25


                                       ii

                                TABLE OF CONTENTS
                                   (Continued)



                                                                                                       Page
                                                                                                       ----
                                                                                                    


                                                 ARTICLE 10
                                          MISCELLANEOUS PROVISIONS

Section 10.01.  Limitation on Rights of Securityholders.................................................25
Section 10.02.  Amendment...............................................................................26
Section 10.03.  Notice..................................................................................27
Section 10.04.  No Recourse.............................................................................28
Section 10.05.  No Petition.............................................................................28
Section 10.06.  Governing Law...........................................................................28
Section 10.07.  Severability............................................................................28
Section 10.08.  Trust Securities Nonassessable and Fully Paid...........................................28
Section 10.09.  Third-Party Beneficiaries...............................................................28



                                      iii




                              STANDARD TRUST TERMS

         This document constitutes the Standard Trust Terms, dated as of [ o ],
which will be incorporated by reference in the Trust Agreement (specified in
Section A of the Omnibus Instrument, as defined in the Indenture (as defined
below)) between U.S. Bank Trust National Association, a national banking
association, as trustee, (the "Trustee"), and GSS Holdings II, Inc., a Delaware
corporation, as trust beneficial owner (the "Trust Beneficial Owner").

         These Standard Trust Terms shall be of no force and effect unless and
until incorporated by reference in, and then only to the extent not modified by,
such Trust Agreement.

         The following terms and provisions shall govern the activities of the
Trust (as defined in the Indenture) subject to contrary terms and provisions
expressly adopted in such Trust Agreement, which contrary terms shall be
controlling.

                                   WITNESSETH:

         WHEREAS, the Trustee and the Trust Beneficial Owner desire to establish
a trust for the purpose of issuing Notes (as defined in the Indenture) to
investors which will be secured, and payments with respect to which will be
funded, solely by the assets held in the Trust, and the proceeds of which will
be used to purchase the Funding Agreement (as defined in the Indenture), issued
by Principal Life (as defined in the Indenture), the payment obligations of
which will be fully and unconditionally guaranteed by the Guarantee (as defined
in the Indenture).

         NOW, THEREFORE, it being the intention of the parties hereto that the
Trust Agreement (as defined below) constitutes the governing instrument of the
Trust, the Trustee and the Trust Beneficial Owner agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         Section 1.01. Definitions. All capitalized terms not otherwise defined
herein will have the meanings set forth in the Indenture. The following terms
have the meanings set forth below:

         "Corporate Trust Office" means the office of the Trustee located at 100
Wall Street, 16th Floor, New York, New York 10005.

         "Funding Agreement Event of Default" means an "Event of Default" as
defined in the Funding Agreement.



                                       1



         "Indenture" means that certain Indenture dated as of the date specified
in the Omnibus Instrument, by and among the Trust and the Indenture Trustee,
Registrar, Transfer Agent, Paying Agent and Calculation Agent, as it may be
amended, modified or supplemented from time to time.

         "Payment Account" means each segregated non-interest-bearing corporate
trust account for the Trust maintained by the Trustee in its trust department in
which all amounts paid to the Trustee in respect of the Collateral will be held
and from which the Trustee shall make payments pursuant to Section 3.01(b) and
Article 7, to the extent such amounts are paid to the Trustee and deposited in
the Payment Account.

         "Registrar" has the meaning specified in Section 4.03.

         "Securities Register" has the meaning specified in Section 4.03.

         "Securityholder" means each Person in whose name any Trust Security is
registered in the Securities Register or Register.

         "Standard Trust Terms" means these Standard Trust Terms, dated as of
[ o ].

         "Standing Order" has the meaning set forth in Section 3.01(d).

         "Trust Agreement" means that certain Trust Agreement dated as of the
date specified in the Omnibus Instrument, by and between the Trustee and the
Trust Beneficial Owner, as may be amended, modified or supplemented from time to
time, which incorporates by reference these Standard Trust Terms.

         "Trust Beneficial Interest" means the undivided beneficial interest in
the assets held in the Trust, having such rights as are provided for in the
Trust Agreement.

         "Trust Beneficial Owner" means the Person identified as the "Trust
Beneficial Owner" in the preamble to the Trust Agreement, in its capacity as the
sole beneficial owner of the Trust, and any successor in such capacity.

         "Trust Expenses" means any liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to the Trust.

         "Trust Expiration Date" means the date specified in the Pricing
Supplement or such earlier date as all of the outstanding Notes are redeemed or
repaid in full by the Trust.

         "Trust Security" means a Note or the Trust Beneficial Interest.



                                       2


         "Trustee" means the party named as such in the preamble to the Trust
Agreement and shall also include its permitted successors and assigns, or any
successor Trustee appointed, acting not in its individual capacity but solely as
Trustee under the Trust Agreement. If there shall be at any time more than one
Trustee hereunder, "Trustee" shall mean each such Trustee.

         Section 1.02. Usage of Terms. With respect to all terms used in these
Standard Trust Terms, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
"writing" include printing, typing, lithography, facsimile, electronic
transmissions and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent
amendments hereto or changes herein entered into in accordance with their
respective terms and not prohibited by the Trust Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."

         Section 1.03. Section References. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
these Standard Trust Terms unless otherwise expressly provided.

                                    ARTICLE 2
                                CREATION OF TRUST

         Section 2.01. Name of the Trust. The Trust created under the Trust
Agreement shall have the name specified in the Omnibus Instrument. The Trust's
activities shall be conducted under the name of the Trust.

         Section 2.02. Office of the Trustee; Principal Place of Business. The
principal office of the Trust shall be in care of the Trustee at the Corporate
Trust Office, or such other address in the State of New York as the Trustee may
designate by written notice to the Trust Beneficial Owner, the Indenture Trustee
and the Rating Agencies.

         Section 2.03. Appointment of Trustee. The parties to the Trust
Agreement hereby appoint the Trustee as trustee of the Trust, to have all
rights, powers and duties set forth in the Trust Agreement and in accordance
with the applicable law with respect to accomplishing the purposes of the Trust.



                                       3


         Section 2.04. Trust Beneficial Interest. Contemporaneously with the
execution and delivery of the Trust Agreement, the Trustee, on behalf of the
Trust, shall cause the Trust Beneficial Owner to be recorded as the registered
owner of the Trust Beneficial Interest on the Securities Register, against
payment of $15 (or in the case of Notes that are discount notes, the product of
$15 and the issue price of the Notes (expressed as a percentage of the original
principal amount of the Notes)) by the Trust Beneficial Owner to, or to an
account at the direction of, the Trustee.

         Section 2.05. Issuance of the Notes. Promptly following the execution
and delivery of the Trust Agreement, the Trust shall, in accordance with the
Indenture, issue and deliver or cause to be issued and delivered the aggregate
principal amount of the Notes specified in the Omnibus Instrument or supplement
to the Indenture against payment therefor. The Holders of the Notes shall only
have a right to receive payments from the Collateral as described in the
Indenture and shall have no right to receive payments under the assets held in
any other trust organized under the Program.

         Section 2.06. Acquisition of Funding Agreement and Guarantee.
Contemporaneously with the issuance and delivery of the Notes, the Trust shall
acquire the Funding Agreement and the Guarantee.

         Section 2.07. Security Interest in the Collateral. Contemporaneously
with the issuance and delivery of the Notes, pursuant to the Indenture, the
Trust shall collaterally assign the Funding Agreement and Guarantee to the
Indenture Trustee, for the benefit of the Holders of the Notes, and grant to the
Indenture Trustee, for the benefit of the Holders of the Notes, a first priority
perfected security interest in and to the Collateral, including, without
limitation, the Funding Agreement purchased by the Trust and the Guarantee.

         Section 2.08. Purposes of the Trust. The exclusive purposes and
functions of the Trust are (a) to issue and sell the Notes and the Trust
Beneficial Interest, (b) to use the proceeds of the sale of the Notes and the
Trust Beneficial Interest to acquire the Funding Agreement, (c) to collaterally
assign and grant a security interest in the Funding Agreement in favor of the
Indenture Trustee, (d) to acquire the Guarantee and to collaterally assign and
grant a security interest in the Guarantee in favor of the Indenture Trustee,
(e) to pay amounts due in respect of the Notes and the Trust Beneficial
Interest, (f) to enter into the agreements and to take such actions as the
Trustee has the power and authority to take pursuant to Section 6.01, as
applicable, and (g) to engage in those activities necessary, advisable or
incidental thereto (such as registering the transfer of the Trust Securities).



                                       4


         Section 2.09. Title to Collateral. Legal title to the Collateral shall
be vested at all times in the Trust as a separate and distinct legal entity and
shall be held and administered by the Trustee for the benefit of the Trust and
each Securityholder, except that with respect to the Funding Agreement and the
Guarantee collaterally assigned to the Indenture Trustee, legal title to the
Funding Agreement and the Guarantee shall be recorded at all times in the books
and records of Principal Life and PFG, respectively, in the name of the
Indenture Trustee, for the benefit of the Holders.

         Section 2.10. Allocation of Trust Expenses. Any costs and expenses of
the Trust shall be paid by Principal Life pursuant to the applicable Expense and
Indemnity Agreement to the extent provided therein.

         Section 2.11. Liability. None of the Trustee or the Securityholders
shall have any personal liability for any liability or obligation of the Trust.

         Section 2.12. Income Tax Treatment; Tax Returns and Reports.

         (a) The Trust and the Trust Beneficial Owner agree, and by acceptance
of a beneficial interest in a Note, each holder of a beneficial interest in a
Note agrees, for U.S. federal, state and local income and franchise tax
purposes, to (i) disregard the Trust and (ii) treat such Note as debt of
Principal Life. The Trust covenants that it shall take no action inconsistent
with such treatment (including, without limitation, under Treasury Regulations
Section 301.7701-2 or 301.7701-3 (the "check-the-box regulation")). To the
extent that it is ultimately determined that the Trust cannot be disregarded for
United States federal, state and local income or franchise tax purposes, and
that the Notes are treated as undivided ownership interests in the Trust, the
Trust and the Trust Beneficial Owner agree, and by acceptance of a beneficial
interest in a Note each holder of a beneficial interest in a Note agrees, to
treat (i) the Trust as a "grantor trust" under Subpart E of Part I of Subchapter
J of the Code (or the state or local equivalent), owned by the holders of
beneficial interests in the Notes and the Trust Beneficial Owner and (ii) the
Funding Agreement as debt of Principal Life.

         (b) The Trustee shall prepare, file and sign or cause to be prepared,
filed and signed, consistent with the treatment of the Trust as disregarded, all
federal, state and local income tax and information returns and reports required
to be filed with respect to the Trust and the Notes under any applicable
federal, state or local tax statute or any rule or regulation under any of them.
The Trustee shall keep copies or cause copies to be kept of any such tax and
information returns and reports required to be filed.

         Section 2.13. Situs of Trust. The Trust shall be located in the
jurisdiction set forth in the Trust Agreement. All bank accounts maintained by
the Trustee on behalf of the Trust shall be located in such jurisdiction except
that those accounts established under the Indenture shall be maintained with the
Indenture Trustee in accordance with the


                                       5


Indenture. The Trust shall not have any employees in any jurisdiction other than
in such jurisdiction. Except as otherwise set forth in the Program Documents,
payments will be received by the Trust only in such jurisdiction and payments
will be made by the Trust only from such jurisdiction.




                                       6



                                    ARTICLE 3
                                 PAYMENT ACCOUNT

         Section 3.01. Payment Account.

         (a) On the Original Issue Date, the Trustee shall establish a Payment
Account. The Trustee and any agent of the Trustee shall have exclusive control
and sole right of withdrawal with respect to the Payment Account for the purpose
of making deposits in and withdrawals from the Payment Account in accordance
with the Trust Agreement and the Indenture. Subject to the Indenture, all monies
or other property received by the Trustee on behalf of the Trust in respect of
the Collateral will be deposited in the Payment Account. All monies and other
property deposited or held from time to time in the Payment Account shall be
held by the Trustee in the Payment Account for the exclusive benefit of the
Trust Beneficial Owner, subject to the security interest in the Collateral in
favor of the Indenture Trustee on behalf of the Holders of the Notes, and for
distribution by the Trustee as provided in the Trust Agreement, including (and
subject to) any priority of payments provided for in the Trust Agreement.

         (b) Except for payments made on the Trust Expiration Date or otherwise
pursuant to Section 7.03 and subject to Section 3.01(a), all monies and other
property deposited into the Payment Account shall be distributed by the Trust as
follows:

         first, to the Indenture Trustee for the payment of all amounts then due
and unpaid upon the Notes, if any, in accordance with the Indenture; and

         second, to the Trust Beneficial Owner all of the amounts that would be
payable under the first clause of Section 5.02 of the Standard Indenture Terms
to the Trust Beneficial Owner (as if the Trust Beneficial Owner held a Note with
an original principal amount of $15 (multiplied by the issue price of the Notes
in the case of Notes that are discount notes)).

         Any remaining monies and other property deposited into the Payment
Account shall be distributed ratably in proportion to their original principal
amounts to the Holders last noted in the Register as the Holders of the Notes
and the Trust Beneficial Owner (as if the Trust Beneficial Owner held a Note
with an original principal amount of $15 (multiplied by the issue price of the
Notes in the case of Notes that are discount notes)).

         (c) The Trustee shall deposit in the Payment Account, promptly upon
receipt, any payments received with respect to the Collateral. Amounts held in
the Payment Account shall not be invested by the Trustee pending the
distribution of such amounts to cover the Trust's obligations on the Notes or
the Trust Beneficial Interest.

         (d) Notwithstanding anything herein to the contrary, the Trustee, on
behalf of the Trust, shall issue a standing order (the "Standing Order") to the
Indenture Trustee



                                       7


pursuant to which the Indenture Trustee shall distribute all amounts due and
unpaid under Section 3.01(b); provided, however, that all payments to be made by
the Trust to the Trust Beneficial Owner on the Trust Expiration Date or
otherwise pursuant to Section 7.03 shall be made by the Trustee on behalf of and
at the direction of the Trust (such direction to be evidenced by a certificate
of the Trust). For so long as (i) the Trustee, on behalf of the Trust, has not
rescinded the Standing Order and (ii) the Indenture Trustee is able to, and
does, comply with the Standing Order, the Trustee will not be required to
establish a Payment Account in accordance with Section 3.01.

                                    ARTICLE 4
                                TRUST SECURITIES

         Section 4.01. Initial Ownership. Upon the creation of the Trust, the
Trust Beneficial Owner shall be the sole beneficial owner of such Trust.

         Section 4.02. Notes.

         The Notes will be issued pursuant to and be governed by the Indenture.

         Section 4.03. Registration of Transfer of Trust Beneficial Interest.

         (a) The Trustee or its agent (in this capacity, the "Registrar") shall
maintain a register or registers for the Trust for the purpose, subject to
Section 4.06, of registering the transfer of the Trust Beneficial Interest and
Notes (a "Securities Register").

         (b) The Registrar shall not be required to register the transfer of the
Trust Beneficial Interest in any manner inconsistent with the terms of the Trust
Agreement or the Indenture.

         Section 4.04. Persons Deemed Holders of Trust Securities. The Trustee
and the Registrar shall treat the Person in whose name any Trust Beneficial
Interest is registered as the owner of such Trust Beneficial Interest for all
purposes whatsoever, and none of the Trustee and the Registrar shall be bound by
any notice to the contrary. The Trustee shall treat the Person determined in
accordance with Section 2.11 of the Standard Indenture Terms as the owner of the
applicable Note(s) for all purposes whatsoever, and the Trustee shall not be
bound by any notice to the contrary.

         Section 4.05. Maintenance of Office. Subject to the provisions of the
Indenture, the Trustee shall maintain an office or offices where notices and
demands to or upon the Trustee in respect of the Trust Securities may be served.
The Trustee initially designates its Corporate Trust Office as the office for
such purposes. The Trustee shall give prompt written notice to the Trust
Beneficial Owner and the Indenture Trustee of any change in the location of the
register or any office or agency.



                                       8


         Section 4.06. Ownership of the Trust Beneficial Interest. On the
Original Issue Date, the Trust Beneficial Owner shall acquire and, thereafter,
retain beneficial and record ownership of the Trust Beneficial Interest. The
Trust Beneficial Interest shall not be certificated, but it shall be evidenced
by recordation on the books and records of the Trustee. To the fullest extent
permitted by law, any attempted transfer of the Trust Beneficial Interest shall
be void.

                                    ARTICLE 5
                         REPRESENTATIONS AND WARRANTIES

         Section 5.01. Trustee. The Trustee represents and warrants for the
benefit of the Securityholders as follows:

         (a) it is a national banking association duly organized, validly
existing and in good standing under the laws of the United States and it is a
"bank" within the meaning of Section 581 of the Code;

         (b) it is a "United States person" within the meaning of Section
7701(a)(30) of the Code;

         (c) it has full corporate or other power, authority and legal right to
execute, deliver and perform its obligations under the Trust Agreement and has
taken all necessary action to authorize the execution, delivery and performance
by it of the Trust Agreement;

         (d) the Trust Agreement has been duly authorized, executed and
delivered by it and constitutes the valid and legally binding agreement of it
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity;

         (e) neither the execution or delivery by it of the Trust Agreement, nor
the performance by it of its obligations under the Trust Agreement, will (i)
violate its organizational documents, (ii) violate any provision of, or
constitute, with or without notice or lapse of time, a default under, or result
in the creation or imposition of any Lien on any properties or assets held in
the Trust pursuant to the provisions of, any indenture, mortgage, credit
agreement, license or other agreement or instrument to which it is a party or by
which it is bound which would materially and adversely affect the Trust, or
(iii) violate any law, governmental rule or regulation of the United States
governing the banking, trust or general powers of it or any order, judgment or
decree applicable to it;

         (f) the authorization, execution or delivery by it of the Trust
Agreement and the consummation of any of the transactions by it contemplated by
the Trust Agreement do not require the consent or approval of, the giving of
notice to, the registration with or the taking of any other action with respect
to any governmental authority or agency; and



                                       9


         (g) there are no proceedings pending or, to the best of its knowledge,
threatened against or affecting it in any court or before any governmental
authority, agency or arbitration board or tribunal which, individually or in the
aggregate, would materially and adversely affect the Trust or would question the
right, power and authority of it to enter into or perform its obligations under
the Trust Agreement.

         Section 5.02. Trust Beneficial Owner. The Trust Beneficial Owner hereby
represents and warrants that, to the fullest extent permitted by law, it has
irrevocably waived any right or interest it may have under the Trust Agreement,
by operation of law or equity, to direct or otherwise require the Trustee to
initiate or consent to any bankruptcy, insolvency or receivership proceedings,
it being expressly understood that any such action by the Trustee shall be
undertaken or refrained from, in the Trustee's sole and absolute discretion,
without regard to any rights or interests of the Trust Beneficial Owner.

                                    ARTICLE 6
                                     TRUSTEE

         Section 6.01. General Authority.

         (a) The Trustee shall conduct the affairs of the Trust in accordance
with the terms of the Trust Agreement. Subject to the limitations set forth in
Section 6.01(b), the Trustee shall have the power and authority to act on behalf
of the Trust, with respect to the following matters:

                  (i) to execute and deliver the Notes and the Trust Beneficial
         Interest in accordance with the Trust Agreement and the Indenture;

                  (ii) to cause the Trust to perform the Trust Agreement and to
         enter into, and to execute, deliver and perform on behalf of itself,
         the Program Documents to which it is or may become a party and such
         other certificates, amendments, other documents or agreements as may be
         necessary, contemplated by or desirable in connection with the purposes
         and function of the Trust or any of such Program Documents;

                  (iii) subject to the Indenture, to purchase, receive and
         maintain custody of the Funding Agreement and to exercise all of the
         rights, powers and privileges of an owner or policyholder of the
         Funding Agreement;

                  (iv) subject to the Indenture and the Guarantee, to receive
         and maintain custody of the Guarantee and to exercise all of the
         rights, powers and privileges of a beneficiary under the Guarantee;



                                       10


                  (v) to grant to the Indenture Trustee a first priority
         perfected security interest in the Collateral and to collaterally
         assign the rights, title and interest of the Trust in such Collateral
         to the Indenture Trustee for the benefit of the Holders and to seek
         release of such security interest upon payment in full of all amounts
         required to be paid with respect to the Notes pursuant to the terms and
         conditions of the Notes or the Indenture;

                  (vi) to establish the Payment Account and issue the Standing
         Order;

                  (vii) subject to Section 4.06, to cause any transfer of the
         Trust Beneficial Interest to be registered in accordance with the Trust
         Agreement;

                  (viii) to send notices regarding the Trust Securities, the
         Funding Agreement and the Guarantee to Principal Life, PFG, the
         Indenture Trustee, the Rating Agencies, the Trust Beneficial Owner and
         the relevant Agents in accordance with the Funding Agreement, the
         Guarantee, the Distribution Agreement and the Trust Agreement;

                  (ix) to take all actions necessary or appropriate to enable
         the Trust to comply with Section 2.12 regarding income tax treatment,
         tax returns and information reporting;

                  (x) after the occurrence of a Funding Agreement Event of
         Default actually known to a Responsible Officer of the Trustee, subject
         to the Indenture, to take any action as it may from time to time
         determine (based solely upon the advice of counsel) is necessary or
         advisable to give effect to the terms of the Trust Agreement and to
         protect and conserve the Collateral for the benefit of each
         Securityholder (without consideration of the effect of any such action
         on any particular Securityholder) and, within five Business Days after
         the occurrence of a Funding Agreement Event of Default actually known
         to a Responsible Officer of the Trustee, to give notice thereof to the
         Trust Beneficial Owner and the Indenture Trustee;

                  (xi) to cause to be paid, on behalf of the Trust generally or
         with respect to any Trust Securities, any amounts due and owing by the
         Trust under any of the Program Documents or any other documents or
         instruments to which the Trust is a party, in all cases in accordance
         with the Program Documents; provided, that such amounts shall be paid
         by the Trustee only to the extent the Trustee has access to sufficient
         assets of the Trust to make such payments;

                  (xii) to the extent permitted by the Trust Agreement, to
         participate in the winding up of the affairs of and liquidation of the
         Trust;


                                       11


                  (xiii) subject to the Indenture, to take any action and to
         execute any documents on behalf of the Trust, incidental to the
         foregoing as the Trustee may from time to time determine (based on the
         advice of counsel) is necessary or advisable to give effect to the
         terms of the Trust Agreement for the benefit of each Securityholder
         (without consideration of the effect of any such action on any
         particular Securityholder);

                  (xiv) to do or cause to be done all things necessary to
         preserve and keep in full force and effect the Trust's existence,
         rights and franchises; and

                  (xv) to enter into agreements with accountants so that such
         accountants, subject to the receipt of all necessary information, will
         provide all clerical, bookkeeping and other administrative services
         necessary and appropriate for the administration of the Trust,
         including, without limitation, maintenance of all books and records of
         the Trust relating to the fees, costs and expenses of the Trust, which
         books and records shall be maintained separately from books and records
         of the Trustee, maintenance of records of cash payments and
         disbursements (excluding principal and interest on any Funding
         Agreement) of the Trust in accordance with accounting principles
         generally accepted in the United States, preparation for audit of such
         periodic financial statements as may be necessary or appropriate and
         taking such other administrative or ministerial actions as may be
         incidental or reasonably necessary to the accomplishment of the actions
         of the Trustee authorized in this Trust Agreement or to the
         accomplishment of the purposes, duties and responsibilities of the
         Trust under any of the Program Documents and any other document or
         instrument to which the Trust is a party to the extent not otherwise
         the responsibility of the Indenture Trustee, the Paying Agent or the
         Registrar.

         It is expressly understood and agreed that the Trustee shall be
entitled to engage outside counsel, independent accountants and other experts
appointed with due care to assist the Trustee in connection with the performance
of its duties and powers set forth in this Section 6.01(a), including, without
limitation, the preparation of all tax reports and returns, securities law
filings, certificates, reports, opinions, notices or any other documents. The
Trustee shall be entitled to rely conclusively on the advice of such counsel,
accountants and other experts in the performance of all its duties under the
Trust Agreement and shall have no liability for any documents prepared by such
counsel, accountants or experts or any action or inaction taken pursuant to the
advice of such counsel, accountants or experts. Any expenses of such counsel,
accountants and experts shall be paid by Principal Life in accordance with the
applicable Expense and Indemnity Agreement to the extent provided therein.

         (b) So long as the Trust Agreement remains in effect, the Trust (and
the Trustee acting on behalf of the Trust) shall not undertake any business,
activity or transaction



                                       12


except as expressly provided for or contemplated by the Trust Agreement or the
Indenture. In particular, the Trust shall not, except as otherwise contemplated
by the Indenture:

                  (i) sell, transfer, exchange, assign, lease, convey or
         otherwise dispose of any assets held by the Trust (owned as of the date
         of the Trust Agreement or thereafter acquired), including, without
         limitation, any portion of the Collateral, except as expressly
         permitted under the Indenture;

                  (ii) incur or otherwise become liable, directly or indirectly,
         for any Indebtedness or Contingent Obligation except for the Notes
         issued pursuant to the Indenture and the transactions contemplated
         under the Indenture;

                  (iii) engage in any business or activity other than in
         connection with, or relating to, (a) the performance of the Trust
         Agreement and the execution, delivery and performance of any documents
         (other than the Trust Agreement), including the Program Documents,
         relating to the Notes issued under the Indenture and the transactions
         contemplated thereby, and (b) the issuance of the Notes pursuant to the
         Indenture;

                  (iv) (a) permit the validity or effectiveness of the Indenture
         or any grant of security interest in or assignment for collateral
         purposes of the Collateral to be impaired, or permit a Lien created
         under the Indenture to be amended, hypothecated, subordinated,
         terminated or discharged, or permit any Person to be released from any
         covenants or obligations under any document or agreement assigned to
         the Indenture Trustee, except as may be expressly permitted under the
         Indenture, (b) create, incur, assume or permit any Lien or other
         encumbrance (other than a Lien created under the Indenture) on any of
         its properties or assets owned or thereafter acquired, or any interest
         therein or the proceeds thereof, or (c) permit a Lien created under the
         Indenture not to constitute a valid first priority perfected security
         interest in the Collateral;

                  (v) amend, modify or fail to comply with any material
         provision of the Trust Agreement except for any amendment or
         modification of the Trust Agreement expressly permitted thereunder;

                  (vi) own any subsidiary or lend or advance any funds to, or
         make any investment in, any Person, except for an investment in the
         Funding Agreement or the investment of any funds held by the Indenture
         Trustee, the Paying Agent, or the Trustee as provided in the Indenture
         or the Trust Agreement;

                  (vii) directly or indirectly declare or make any distribution
         or other payment to, or redeem or otherwise acquire or retire for value
         the interests of, the



                                       13


         Trust Beneficial Owner if any amount under the Notes is due and unpaid,
         or directly or indirectly redeem or otherwise acquire or retire for
         value any Indebtedness or Contingent Obligation other than the Notes;

                  (viii) exercise any rights with respect to the Collateral
         except at the written direction of, or with the prior written approval
         of, the Indenture Trustee;

                  (ix) cause or, to the fullest extent permitted by law, permit
         the sale or other transfer of all or a portion of the Trust Beneficial
         Interest, or cause or, to the fullest extent permitted by law, permit
         the creation, incurrence, assumption or existence of any Lien on, all
         or a portion of the Trust Beneficial Interest;

                  (x) become an "investment company" or come under the "control"
         of an "investment company," as such terms are defined in the Investment
         Company Act;

                  (xi) enter into any transaction of merger or consolidation or
         liquidate or dissolve itself (or, to the fullest extent permitted by
         law, suffer any liquidation or dissolution), or acquire by purchase or
         otherwise all or substantially all the business or assets of, or any
         stock or other evidence of beneficial ownership of, any other Person;

                  (xii) take any action that would cause it not to be
         disregarded or treated as a grantor trust (assuming it were not
         disregarded) for United States federal income tax purposes;

                  (xiii) have any subsidiaries, employees or agents other than
         the Trustee and other persons necessary to conduct its business and
         enter into transactions contemplated under the Program Documents;

                  (xiv) have an interest in any bank account other than (a)
         those accounts required under the Program Documents, and (b) those
         accounts expressly permitted by the Indenture Trustee; provided that
         any interest therein shall be charged or otherwise secured in favor of
         the Indenture Trustee;

                  (xv) permit any Affiliate, employee or officer of Principal
         Life or PFG or any agent appointed under the Distribution Agreement to
         be a trustee of the Trust;

                  (xvi) issue Notes under the Indenture unless (a) the Trust has
         purchased or will simultaneously purchase the Funding Agreement from
         Principal Life to secure such Notes, (b) Principal Life has affirmed in
         writing to the Trust that it has made or simultaneously will make
         changes to its books and records to reflect the granting of a security
         interest in, and the making of an assignment for



                                       14


         collateral purposes of, the Funding Agreement by the Trust, to the
         Indenture Trustee, (c) PFG has issued the Guarantee to the Trust, which
         the Trust has collaterally assigned to the Indenture Trustee on behalf
         of the Holder of Notes and in which the Trust has granted a security
         interest or will simultaneously grant a security interest to the
         Indenture Trustee on behalf of the Holders of Notes (and PFG has
         affirmed in writing to the Trust that it has made or simultaneously
         will make changes to its books and records to reflect such collateral
         assignment and security interest) and (d) the Trust has taken such
         other steps as may be necessary to cause the grant of a security
         interest in, and assignment for collateral purposes of, the Collateral
         to the Indenture Trustee to be perfected for purposes of the UCC or
         effective against the Trust's creditors and subsequent purchasers of
         the Collateral pursuant to insurance or other applicable law;

                  (xvii) commingle the assets of the Trust with assets of any
         Affiliates (including any other trust organized under the Program), or
         guarantee any obligation of any Affiliates (including any other trust
         organized under the Program); or

                  (xviii) maintain any joint account with any Person, become a
         party, whether as co-obligor or otherwise, to any agreement to which
         any Person is a party (other than in respect of the Program Documents),
         or become liable as a guarantor or otherwise with respect to any
         Indebtedness or contractual obligation of any Person.

         (c) The Trust and the Trustee acting on behalf of the Trust shall not,
notwithstanding any other provision of the Trust Agreement, take any action that
would cause the Trust not to be disregarded or treated as a grantor trust
(assuming it were not disregarded) for U.S. federal income tax purposes.

         (d) The Trustee shall, based on the advice of counsel, defend against
all claims and demands of all Persons at any time claiming any Lien on any of
the assets of the Trust adverse to the interest of the Trust or any
Securityholder, other than the security interest in the Collateral granted in
favor of the Indenture Trustee for the benefit of each Holder of the Notes
pursuant to the Indenture.

         (e) If and for so long as the Funding Agreement and the Guarantee are
held by the Trustee for the benefit of the Trust, the Trustee shall not (i)
waive any default under the Funding Agreement or Guarantee or (ii) consent to
any amendment, modification or termination of the Funding Agreement or the
Guarantee, without, in each case, obtaining the prior approval of the Indenture
Trustee in accordance with the Indenture and an opinion of counsel experienced
in such matters to the effect that any such action shall not cause the Trust not
to be disregarded or treated as a grantor trust (assuming it were not
disregarded) for U.S. federal income tax purposes.



                                       15


         (f) The Trustee is authorized and directed to conduct the affairs of
the Trust and to operate the Trust (i) so that the Trust will not become
required to register as an "investment company" under the Investment Company
Act, and (ii) so that the Trust will not fail to be disregarded or treated as a
grantor trust (assuming it were not disregarded) for U.S. federal income tax
purposes. In connection with the preceding sentence, the Trustee shall have no
duty to determine whether any action it takes complies with the preceding
sentence and shall be entitled to rely conclusively on an opinion of counsel
with respect to any such matters.

         Section 6.02. General Duties. It shall be the duty of the Trustee to
discharge, or cause to be discharged, all of its responsibilities pursuant to
the terms of the Trust Agreement, or any other documents or instruments to which
it is a party, and to administer the Trust, in accordance with the provisions of
the Trust Agreement and the other Program Documents and any other documents or
instruments to which the Trust is a party.

         Section 6.03. Specific Duties.

         (a) The Trustee undertakes to perform only such duties as are
specifically set forth in the Trust Agreement and as it may be directed from
time to time by the Trust Beneficial Owner and the Indenture Trustee in
accordance with the terms of the Trust Agreement and the Indenture.

         (b) The Trustee agrees that it will not manage, control, use, sell,
dispose of or otherwise deal with the Collateral except as expressly required or
permitted by the terms of the Trust Agreement and the Indenture.

         Section 6.04. Acceptance of Trust and Duties; Limitation on Liability.
The Trustee accepts the trust created by the Trust Agreement and agrees to
perform its duties under the Trust Agreement with respect to the same, but only
upon the terms of the Trust Agreement. No implied covenants or obligations shall
be read into the Trust Agreement. The Trustee shall not be liable under the
Trust Agreement under any circumstances or for any action or failure to act,
except for (i) its own willful misconduct, bad faith or negligence or (ii) the
inaccuracy of any representation or warranty contained in the Trust Agreement
expressly made by it. In particular (but without limitation), subject to the
exceptions set forth in the preceding sentence:

         (a) the Trustee shall not be liable for any error of judgment made in
good faith by any of its Responsible Officers, unless such error of judgment
constitutes negligence;

         (b) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the written
instructions of the Trust Beneficial Owner or the Indenture Trustee or pursuant
to the advice of counsel,



                                       16


accountants or other experts selected by it in good faith, so long as such
action or omission is consistent with the terms of the Trust Agreement and the
Indenture;

         (c) no provision of the Trust Agreement shall require the Trustee to
expend or risk personal funds or otherwise incur any financial liability in the
performance of any of its rights or powers hereunder if the Trustee has
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or provided
to it;

         (d) under no circumstances shall the Trustee be liable for indebtedness
or other obligations evidenced by or arising under the Trust Agreement, the
Funding Agreement, the Guarantee or any related document, including the
principal of and interest on the Notes and payments on the Trust Beneficial
Interest;

         (e) the Trustee shall not be responsible for, or in respect of, the
validity or sufficiency of the Trust Agreement or any related document or for
the due execution of the Trust Agreement by any party (except by the Trustee
itself) or for the form, character, genuineness, sufficiency, value or validity
of any of the Collateral, other than, in the case of the Trustee, the execution
of any certificate;

         (f) the Trustee shall not be liable for any action, inaction, default
or misconduct of the Indenture Trustee or any Paying Agent under the Indenture,
the Notes or any related documents or otherwise, and the Trustee shall not have
any obligation or liability to perform the obligations of the Trust under the
Trust Agreement or any related document or under any federal, state, foreign or
local tax or securities law, in each case, that are required to be performed by
other Persons, including the Indenture Trustee under the Indenture;

         (g) the Trustee shall not be liable for any action, inaction, default
or misconduct of Principal Life or PFG, and the Trustee shall not have any
obligation or liability to perform the obligations of Principal Life under the
Funding Agreement or PFG under the Guarantee or any related documents;

         (h) the Trustee shall not be under any obligation to exercise any of
the rights or powers vested in it by the Trust Agreement, or to institute,
conduct or defend any litigation under the Trust Agreement or otherwise or in
relation to the Trust Agreement or any related document, at the request, order
or direction of any Person unless such Person has offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Trustee. The right of the Trustee to
perform any discretionary act enumerated in the Trust Agreement or in any
related document shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act;



                                       17


         (i) except as expressly provided in the Trust Agreement in accepting
the trusts created by the Trust Agreement the Trustee acts solely as trustee
under the Trust Agreement and not in its individual capacity, and all persons
having any claim against the Trustee by reason of the transactions contemplated
by the Trust Agreement shall look only to the Trust's property for payment or
satisfaction thereof;

         (j) the Trustee shall not have any responsibility or liability for or
with respect to the genuineness, value, sufficiency or validity of any
Collateral, and the Trustee shall in no event assume or incur any liability,
duty or obligation to the Trust Beneficial Owner or any other Person other than
as expressly provided for in the Trust Agreement;

         (k) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note or other paper or document;

         (l) every provision of the Trust Agreement relating to the Trustee
shall be subject to the provisions of this Article 6;

         (m) the Trustee shall have no duty, except as set forth in Section 3.09
of the Standard Indenture Terms, (i) to see to any recording or filing of any
document, (ii) to confirm or verify any financial statements of the Trust
Beneficial Owner or the Indenture Trustee, (iii) to inspect the Trust Beneficial
Owner's or the Indenture Trustee's books and records at any time or (iv) to see
to the payment or discharge of any tax, assessment or other governmental charge
or any lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust, except to the extent the Trustee has received
funds, on behalf of the Trust, pursuant to the applicable Expense and Indemnity
Agreement from Principal Life in satisfaction of any such tax, assessment or
other governmental charge or any lien or encumbrance of any kind and in
accordance with payment or transfer instructions provided by Principal Life;

         (n) the Trustee shall have no duty or obligation to manage, control,
use, sell, dispose of or otherwise deal with the Trust or to otherwise take or
refrain from taking any action under the Trust Agreement, except as expressly
required by the terms of the Trust Agreement, or as expressly provided in
written instructions from the Trust Beneficial Owner, and in no event shall the
Trustee have any implied duties or obligations under the Trust Agreement; the
Trustee nevertheless agrees that it will, at its own cost and expense, promptly
take all action as may be necessary to discharge any Liens on any part of the
property of the Trust which result from claims against the Trustee personally
that are not related to the ownership or the administration of the property of
the Trust or the transactions contemplated by the Program Documents;

         (o) the Trustee shall not be required to take any action under the
Trust Agreement if the Trustee shall reasonably determine or shall have been
advised by counsel that such action is contrary to the terms of the Trust
Agreement or is otherwise contrary to law;



                                       18


         (p) the Trustee may fully rely upon and shall have no liability in
connection with calculations or instructions forwarded to the Trustee by the
Trust Beneficial Owner or the Indenture Trustee, nor shall the Trustee have any
obligation to furnish information to any Trust Beneficial Owner or other Person
if it has not received such information as it may need from the Trust Beneficial
Owner, the Indenture Trustee or any other Person;

         (q) the Trustee shall not be liable with respect to any act or omission
in good faith in accordance with the advice or direction of the Trust Beneficial
Owner or the Indenture Trustee. Whenever the Trustee is unable to decide between
alternative courses of action permitted or required by the terms of the Trust
Agreement, or is unsure as to the application, intent, interpretation or meaning
of any provision hereof, the Trustee may give notice (in such form as shall be
appropriate under the circumstances) to the Trust Beneficial Owner requesting
instructions as to the course of action to be adopted, and, to the extent the
Trustee acts in good faith in accordance with any such instruction received, the
Trustee shall not be liable on account of such action to any Person. If the
Trustee shall not have received appropriate instructions within ten days of such
notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances), it may, but shall be
under no duty to, take or refrain from taking such action which is consistent,
in its view, with the Trust Agreement and as it shall deem to be in the best
interest of the relevant Trust Beneficial Owner, and the Trustee shall have no
liability to any Person for such action or inaction;

         (r) in no event whatsoever shall the Trustee be personally liable for
any representation, warranty, covenant, agreement, indebtedness or other
obligation of the Trust; and

         (s) the Trustee shall incur no liability if, by reason of any provision
of any present or future law or regulation thereunder, or by any force majeure
event, including but not limited to natural disaster, war or other circumstances
beyond its control, the Trustee shall be prevented or forbidden from doing or
performing any act or thing which the terms of the Trust Agreement provide shall
or may be done or performed.

         Section 6.05. Reliance; Advice of Counsel.

         (a) The Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond or other document or paper reasonably believed by it in
good faith to be genuine and signed by the proper party or parties. The Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the manner of ascertainment of which is not



                                       19


specifically prescribed in the Trust Agreement, the Trustee may for all purposes
of the Trust Agreement rely on a certificate, signed by the president or any
vice president or by the treasurer or any assistant treasurer or the secretary
or any assistant secretary of the relevant party, as to such fact or matter, and
such certificate shall constitute full protection to the Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.

         (b) In the exercise or administration of the Trust, the Trustee (i) may
act directly or, at the expense of the Trust, through agents or attorneys
pursuant to agreements entered into with any of them, and the Trustee shall not
be liable for the action, inaction, default or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Trustee in
good faith and with reasonable care, and (ii) may consult with counsel,
accountants and other skilled persons to be selected in good faith and with
reasonable care and employed by it, and it shall not be liable for anything
done, suffered or omitted to be done in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other skilled
persons.

         Section 6.06. Delegation of Authorities and Duties. The Trustee
delegates to the Indenture Trustee all duties required to be performed by the
Indenture Trustee pursuant to the terms of the Trust Agreement and the
Indenture. The Trustee undertakes no responsibility for the performance, or
non-performance, of any duties delegated to the Indenture Trustee under the
Trust Agreement.

         Section 6.07. Acknowledgement of the Trustee. Notwithstanding anything
to the contrary contained in these Standard Trust Terms, the Trustee, acting on
its own behalf, acknowledges that any license, right or privilege granted to any
Trust pursuant to the License Agreement is an exclusive license, right or
privilege of any such Trust and is not a license, right or privilege of the
Trustee in its individual capacity.

                                    ARTICLE 7
                           LIQUIDATION AND TERMINATION

         Section 7.01. Termination Upon the Trust Expiration Date. Unless
earlier terminated, the Trust shall terminate on the Trust Expiration Date.

         Section 7.02. Termination of Agreement. The Trust Agreement and the
Trust created and continued thereby shall terminate upon the latest to occur of
the following: (a) a distribution by the Trustee to Securityholders upon the
liquidation of the Trust pursuant to Section 7.03 of all amounts required to be
distributed under the Trust Agreement upon the final payment of the Trust
Securities; (b) the payment of, or reasonable provision for payment of, all
expenses and other liabilities owed by the Trust; (c) the discharge of all
administrative duties of the Trustee including the performance of any tax
reporting obligations with respect to the Trust or the Securityholders; and (d)
the Trust Expiration Date.



                                       20


         Section 7.03. Liquidation. On the Trust Expiration Date, the remaining
Collateral and any other assets held in the Trust shall be liquidated and
distributed as follows: (i) the Trust shall first pay all amounts due and unpaid
on the Notes, if any, in accordance with the Indenture, (ii) the Trust shall
then pay any other claims, including expenses relating to such liquidation to
the extent not paid, or reasonably provided for, pursuant to the applicable
Expense and Indemnity Agreement, and (iii) the Trust shall then pay to the Trust
Beneficial Owner all of the amounts that would be payable under clause first of
Section 5.02 of the Standard Indenture Terms to the Trust Beneficial Owner as if
the Trust Beneficial Owner held a Note with an original principal amount of $15
(multiplied by the issue price of the Notes in the case of Notes that are
discount notes). Any remaining monies and other property shall be paid ratably
in proportion to their original principal amounts to the Holders last noted in
the Register as the Holders of the Notes and the Trust Beneficial Owner (as if
the Trust Beneficial Owner held a Note with an original principal amount of $15
(multiplied by the issue price of the Notes in the case of Notes that are
discount notes) and as if each such Holder continued to hold its Notes after all
amounts due on such Notes under the Indenture have been paid).

                                    ARTICLE 8
                        SUCCESSOR AND ADDITIONAL TRUSTEES

         Section 8.01. Eligibility Requirements for the Trustee. The Trustee
shall at all times (a) be a Person organized and doing business under the laws
of the United States or the State of New York, (b) be authorized to exercise
corporate trust powers, (c) have a combined capital and surplus of at least
$50,000,000 and be subject to supervision or examination by Federal or State
authorities, (d) have (or have a parent which has) a rating of at least Baa3 by
Moody's Investors Service, Inc. or BBB- by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., (e) be a "bank" within the meaning
of Section 581 of the Code and (f) be a "United States person" within the
meaning of Section 7701(a)(30) of the Code. In addition, the Trustee shall be an
entity with its Corporate Trust Office in the State of New York. If the Trustee
shall publish reports of condition at least annually, pursuant to applicable law
or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 8.01, the combined capital and surplus of the
Trustee shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
8.01, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.02.


                                       21


         Section 8.02. Resignation or Removal of the Trustee. The Trustee may at
any time resign and be discharged from its duties under the Trust Agreement and
the Trust created by the Trust Agreement by giving written notice thereof to the
Trust Beneficial Owner and the Indenture Trustee at least 60 days before the
date specified in such instrument. Upon receiving such notice of resignation,
the Trust Beneficial Owner shall promptly appoint a successor Trustee meeting
the qualifications set forth in Section 8.01 by written instrument, in
duplicate, one copy of which instrument shall be delivered to each of the
resigning Trustee, the successor Trustee, any remaining Trustees, the Indenture
Trustee and Principal Life. If no successor Trustee shall have been so appointed
and have accepted appointment within 90 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.01 and shall fail to resign after written
request therefor by the Trust Beneficial Owner and the Indenture Trustee, or if
at any time the Trustee shall be legally unable to act or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Trust Beneficial Owner and the Indenture Trustee may
remove such Trustee. If the Trust Beneficial Owner and the Indenture Trustee
shall remove the Trustee under the authority of the immediately preceding
sentence, the Trust Beneficial Owner shall promptly appoint a successor Trustee
meeting the qualification requirements of Section 8.01 by (i) the execution of a
written instrument, one copy of which instrument shall be delivered to each of
the outgoing Trustee so removed, the successor Trustee, the Indenture Trustee
and Principal Life and (ii) the payment of all fees and expenses owed to the
outgoing Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 8.02 shall
not become effective until all fees and expenses, including any indemnity
payments, due to the outgoing Trustee have been paid and until acceptance of
appointment by the successor Trustee pursuant to Section 8.03.

         Section 8.03. Successor Trustee. Any successor Trustee appointed
pursuant to Section 8.02 shall execute, acknowledge and deliver to the Trust
Beneficial Owner, the Indenture Trustee and the predecessor Trustee an
instrument accepting such appointment under the Trust Agreement, and thereupon
the resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under the Trust Agreement, with like effect as if originally named
as Trustee. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements and monies held by it under the Trust Agreement; and
the



                                       22


predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.

         No successor Trustee shall accept appointment as provided in this
Section 8.03 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 8.01.

         Section 8.04. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of the Trustee, shall, without the execution or
filing of any instrument or any further act on the part of any of the parties to
the Trust Agreement, anything in the Trust Agreement to the contrary
notwithstanding, be the successor of the Trustee under the Trust Agreement;
provided, such Person shall be eligible pursuant to Section 8.01; provided,
further, that the notice of such merger, conversion or consolidation shall be
mailed to each of Principal Life, the Trust Beneficial Owner and the Indenture
Trustee not less than 30 days prior to the closing date thereof.

         Section 8.05. Appointment of Co-Trustee or Separate Trustee.

         (a) Notwithstanding any other provisions of the Trust Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of any Collateral may at the time be located, the Trustee shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee, jointly with it, or
as separate trustee or separate trustees, of all or any part of any Collateral,
and subject to Section 2.09 to vest in such Person, in such capacity, such title
to any Collateral, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee under the
Trust Agreement shall be required to meet the terms of eligibility as a
successor Trustee pursuant to Section 8.03 and no notice of the appointment of
any co-trustee or separate trustee shall be required; provided, however, that
any co-trustee or separate trustee must be a "United States person" within the
meaning of Section 7701(a)(30) of the Code and a "bank" within the meaning of
Section 581 of the Code.

         (b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

                  (i) all rights, powers, duties, and obligations conferred or
         imposed upon the Trustee shall be conferred upon and exercised or
         performed by the Trustee and such separate trustee or co-trustee
         jointly (it being understood that



                                       23


         such separate trustee or co-trustee is not authorized to act separately
         without the Trustee joining in such act), except to the extent that
         under any law of any jurisdiction in which any particular act or acts
         are to be performed, the Trustee shall be incompetent or unqualified to
         perform such act or acts, in which event such rights, powers, duties
         and obligations (including the holding of title to the Trust or any
         portion thereof in any such jurisdiction) shall be exercised and
         performed singly by such separate trustee or co-trustee, but solely at
         the discretion of the trustee;

                  (ii) the Trustee may at any time accept the resignation of or
         remove any separate trustee or co-trustee; and

                  (iii) no trustee shall be personally liable by reason of the
         act or omission of any other trustee under the Trust Agreement.

         (c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustee and co-trustee,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Section 8.05 and the
conditions of this Article 8. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instruments of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of the
Trust Agreement, specifically including every provision of the Trust Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed with the Trustee.

         (d) Any separate trustee or co-trustee may at any time appoint the
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of the
Trust Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.

         Section 8.06. Trustee May Own Notes. Except to the extent prohibited
under the terms of the Notes, the Trustee, in its individual or any other
capacity, may become the beneficial owner or pledgee of Notes, to the extent
that such ownership does not inhibit the Trust from relying on Rule 3a-7
promulgated under the Investment Company Act, with the same rights as it would
have if it were not the Trustee; provided, that any Notes so owned or pledged
shall not be entitled to participate in any decisions made or instructions given
to the Trustee or the Indenture Trustee by the Holders as a group. The Trustee
may deal with the Trust and the Trust Beneficial Owner in banking and trustee
transactions with the same rights as it would have if it were not the Trustee.



                                       24


                                    ARTICLE 9
                    VOTING; ACTS OF SECURITYHOLDERS; MEETINGS

         Section 9.01. Limitations on Voting Rights. Except as provided in the
Trust Agreement or in the Indenture or as otherwise required by law, no Holder
of Trust Securities shall have any right to vote or in any manner otherwise
control the administration, operation and management of the Trust or the
obligations of the parties to the Trust Agreement, nor shall anything in the
Trust Agreement set forth, or contained in the terms of the Trust Securities, be
construed so as to constitute the Securityholders from time to time as members
of an association.

         Section 9.02. Meetings of the Trust Beneficial Owner. No annual or
other meeting of the Trust Beneficial Owner is required to be held.

                                   ARTICLE 10
                            MISCELLANEOUS PROVISIONS

         Section 10.01. Limitation on Rights of Securityholders.

         (a) The death, bankruptcy, termination, dissolution or incapacity of
any Person having an interest, beneficial or otherwise, in Trust Securities or
the Trust shall not operate to terminate the Trust Agreement, nor to annul,
dissolve or terminate the Trust, nor to entitle the legal successors,
representatives or heirs of such Person or any Securityholder for such Person,
to claim an accounting, take any action or bring any proceeding in any court for
a partition or winding up of the arrangements contemplated by the Trust
Agreement, nor otherwise affect the rights, obligations and liabilities of the
parties to the Trust Agreement or any of them.

         (b) Except as provided in the Indenture, no Securityholder shall have
any right by virtue of any provision of the Trust Agreement to institute any
suit, action or proceeding in equity or at law with respect to the Trust
Agreement, unless (i) the Securityholders shall have made a written request upon
the Trustee to institute such suit, action or proceeding in the name of the
Trust and shall have offered to the Trustee and the Trust such reasonable
indemnity as they may require against the costs, expenses and liabilities to be
incurred thereby and (ii) the Trustee, for 30 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute any such suit, action or proceeding. It is expressly understood and
covenanted by each Securityholder with every other Securityholder, the Trust and
the Trustee, that no one or more Securityholder shall have any right in any
manner whatever by availing itself or themselves of any provision of the Trust
Agreement to affect, disturb or prejudice the rights of any other
Securityholder, or to obtain or seek to obtain priority over or preference to
any other such Securityholder, or to enforce any right under the Trust
Agreement, except in the manner provided in the Trust Agreement.



                                       25


         Section 10.02. Amendment.

         (a) The Trust Agreement may be amended from time to time by the Trustee
and the Trust Beneficial Owner, by, and only by, a written instrument executed
by the Trustee and the Trust Beneficial Owner, in any way that is not
inconsistent with the intent of the Trust Agreement, including, without
limitation, (i) to cure any ambiguity, (ii) to correct, supplement or modify any
provision in the Trust Agreement that is inconsistent with another provision in
the Trust Agreement or (iii) to modify, eliminate or add to any provisions of
the Trust Agreement to the extent necessary to ensure that the Trust will be
classified for U.S. federal income tax purposes as disregarded or treated as a
grantor trust (assuming that the Trust were not disregarded) at all times or to
ensure that the Trust will not be required to register as an investment company
under the Investment Company Act and no such amendment shall require the consent
of any other Securityholder, except to the extent specified in Sections 10.02(b)
and 10.02(c).

         (b) For so long as any Trust Securities remain outstanding, except as
provided in Section 10.02(c), any amendment to the Trust Agreement that would
adversely affect, in any material respect, the terms of any Notes, other than
any amendment of the type contemplated by clause (iii) of Section 10.02(a),
shall require the prior consent of the Holders of a majority of the outstanding
principal amount of the Notes.

         (c) For so long as any Trust Securities remain outstanding, the Trust
Agreement may not be amended to (i) change the amount or timing of any payment
of any Trust Securities or (ii) impair the right of any Securityholder to
institute suit for the enforcement of any right for principal and interest or
other distribution without the consent of each affected Securityholder.

         (d) The Trustee shall not be required to enter into any amendment to
the Trust Agreement which affects its own rights, duties or immunities under the
Trust Agreement.

         (e) Prior to execution of any amendment to the Trust Agreement, the
Trustee shall be entitled to an opinion of counsel as to whether such amendment
is permitted by the terms of the Trust Agreement and whether all conditions
precedent to such amendment have been met.

         (f) Promptly after the execution of any such amendment or consent, the
Trustee shall furnish a copy of such amendment or consent (including those
obtained or effected hereby) to the Indenture Trustee, the Trust Beneficial
Owner, the agents under the Distribution Agreement and the Rating Agencies.

         (g) Notwithstanding any other provision of the Trust Agreement, (i) no
amendment to the Trust Agreement may be made if such amendment would cause the
Trust not to be disregarded or treated as a grantor trust (assuming that the
Trust were not



                                       26


disregarded) for U.S. federal income tax purposes and (ii) no amendment to the
Trust Agreement may be made without the prior consent of Principal Life.

         Section 10.03. Notice. All demands, notices, instructions and other
communications shall be in writing (including telecopied or telegraphic
communications) and shall be personally delivered, mailed or transmitted by
telecopy or telegraph, respectively, addressed as set forth below:

         If to the Trustee:

         U.S. Bank Trust National Association
         100 Wall Street, 16th Floor
         New York, New York  10005
         Attention: Adam Berman
         Facsimile: (212) 509-3384

         If to the Trust Beneficial Owner:

         GSS Holdings II, Inc.
         445 Broad Hollow Road, Suite 239
         Melville, New York  11747
         Attention:  Andy Stidd
         Facsimile:  (212) 302-8767

         If to the Indenture Trustee:

         Citibank, N.A.
         Citibank Agency & Trust
         388 Greenwich Street, 14th Floor
         New York, NY  10013
         Attention:  Nancy Forte
         Facsimile:  (212) 816-5527

         If Citibank, N.A. is not acting as the Indenture Trustee, to the
         indenture trustee as specified in Section C of the Omnibus Instrument.

or at such other address as shall be designated by any such party in a written
notice to the other parties. Notwithstanding the foregoing, any notice required
or permitted to be mailed to the Trust Beneficial Owner shall be given by first
class mail, postage prepaid, at the address of the Trust Beneficial Owner as
shown in the Securities Register, and any notices mailed within the time
prescribed in the Trust Agreement shall be conclusively presumed to have been
duly given, whether or not the Trust Beneficial Owner received such notice. Any
notice required or permitted to be mailed to any Holder of a Note shall be given
as specified in the Indenture.


                                       27


         Section 10.04. No Recourse. The Trust Beneficial Owner acknowledges
that the Trust Beneficial Interest represents a beneficial interest in the Trust
only and does not represent an obligation of Principal Life, the Trustee, the
Indenture Trustee or any Affiliate of any of the foregoing and no recourse may
be had against such parties or their assets, except as may be expressly set
forth or contemplated in the Trust Agreement or the Indenture.

         Section 10.05. No Petition. To the extent permitted by applicable law,
each of the Trustee and the Trust Beneficial Owner covenants and agrees that it
will not institute against, or join with any other Person in instituting
against, the Trust any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under the laws of any
jurisdiction. This Section 10.05 shall survive termination of the Trust
Agreement.

         Section 10.06. Governing Law. The Trust Agreement shall be governed by
and construed in accordance with the laws of the jurisdiction specified in the
Trust Agreement without regard to the principles of conflicts of laws thereof
and the obligations, rights and remedies of the parties under the Trust
Agreement shall be determined in accordance with such laws.

         Section 10.07. Severability. If any provision in the Trust Agreement
shall be invalid, illegal or unenforceable, such provisions shall be deemed
severable from the remaining provisions of the Trust Agreement and shall in no
way affect the validity or enforceability of such other provisions of the Trust
Agreement.

         Section 10.08. Trust Securities Nonassessable and Fully Paid.
Securityholders shall not be personally liable for the obligations of the Trust.
The fractional undivided beneficial interest in the assets held in the Trust
represented by the Trust Beneficial Interest shall be nonassessable for any
losses or expenses related to the Trust or for any reason whatsoever. The Notes,
upon execution thereof by the Trustee pursuant to the Indenture and upon receipt
of payment therefor, are and shall be deemed fully paid.

         Section 10.09. Third-Party Beneficiaries. The Trust Agreement shall
inure to the benefit of and be binding upon the parties thereto and their
respective successors and permitted assigns. Except as otherwise provided in the
Trust Agreement, no other Person shall have any right or obligation thereunder.


                                       28

EX-4.8

                                                                     EXHIBIT 4.8


MTN GLOBAL FUNDING AGREEMENT

Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0001
(515) 247-5111

In consideration of the payment made by, or at the direction of,

                     PRINCIPAL LIFE INCOME FUNDINGS TRUST o

                            (the "Agreement Holder")

of the Net Deposit, as described below, Principal Life Insurance Company
("Principal Life") agrees to make payments to the person or persons entitled to
them, subject to the provisions of this funding agreement (this "Agreement").

This Agreement is delivered in and subject to the laws of the State of Iowa.

This Agreement is issued and accepted subject to all the terms set out in it.

This Agreement is executed by Principal Life at its Corporate Center to take
effect as of the o day of o, 200o, which is referred to as the Effective Date,
subject to the receipt by Principal Life or its designee of the Net Deposit (as
set forth in Section 1).


                              --------------------
                                    Registrar


                              --------------------
                                      Date


                         GLOBAL FUNDING AGREEMENT NO. o

                 RESTRICTIONS REGARDING THE TRANSFER OR SALE OF
       THIS FUNDING AGREEMENT OR ANY INTEREST HEREIN ARE SET FORTH HEREIN



FUNDING AGREEMENT                                                          NO. o

         This Agreement is issued in connection with the issuance by the Trust
(specified in the Annex) of Secured Notes (the "Notes") which are identified in
the annex hereto (the "Annex") and which are being issued by the Trust pursuant
to the Prospectus dated o, the Prospectus Supplement dated o, as from time to
time amended or supplemented, and the Pricing Supplement applicable to the Notes
(the "Pricing Supplement"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Notes. Where used in this Agreement,
the term "Notes" shall mean the Notes secured by this Agreement as the same
exist on the Effective Date, without giving effect to any amendments or
modifications to said Notes effected or made after any such Effective Date
unless such amendments or modifications to said Notes have been consented to in
writing by Principal Life.

1.       DEPOSIT

         Principal Life agrees to accept, and the Agreement Holder agrees to pay
         or cause to be paid to Principal Life, for value on the Effective Date,
         the Net Deposit (as specified in the Annex). All funds received by
         Principal Life under this Agreement shall become the exclusive property
         of Principal Life and remain a part of Principal Life's general account
         without any duty or requirement of segregation or separate investment.

         This Agreement shall become effective only upon the receipt by
         Principal Life or its designee of the Net Deposit.

2.       FUND

         Upon receipt of the Net Deposit, Principal Life will establish, under
         this Agreement, a bookkeeping account in the name of the Agreement
         Holder, which will evidence Principal Life's obligations under this
         Agreement.

         The Deposit deemed received (as specified in the Annex), (i) less any
         withdrawals to make payments hereunder and (ii) plus any interest
         accrued and premium, if any, pursuant to Section 7, will be referred to
         as the "Fund".

         Principal Life is neither a trustee nor a fiduciary with respect to the
         Fund.

3.       PURCHASE OF NOTES BY PRINCIPAL LIFE.

         Principal Life may purchase some or all of the Notes in the open market
         or otherwise at any time, and from time to time. Simultaneously, upon
         such purchase, (1) the purchased Notes shall, by their terms become
         mandatorily redeemable by the Trust as specified in the related Pricing
         Supplement, Prospectus Supplement and/or Prospectus and (2) the Fund
         under this Agreement shall be permanently reduced by the same
         percentage as the principal amount of the Notes so redeemed bears to
         the sum of (i) the aggregate principal amount of all Notes issued and
         outstanding immediately prior to such redemption and (ii) the principal
         amount of the Trust Beneficial Interest related to such Notes. If
         Principal Life, in its sole discretion, engages in such open market or
         other purchases, then the Trust, the Indenture Trustee in respect of
         such Notes, and Principal Life shall take

                                       2


         such actions (including, in the case of Principal Life, making the
         payment(s) necessary to effect the Trust's redemption of such Notes) as
         may be necessary or desirable to effect the cancellation of such Notes
         by the Trust.

4.       ENTIRE AGREEMENT

         This Agreement and the Annex attached hereto constitute the entire
         Agreement.

5.       REPRESENTATIONS

         (a)      Each party hereto represents and warrants to the other that as
                  of the date hereof:

                  (i)      it has the power to enter into this Agreement and to
                           consummate the transactions contemplated hereby;

                  (ii)     this Agreement has been duly authorized, executed and
                           delivered, this Agreement constitutes a legal, valid
                           and binding obligation of each party hereto, and this
                           Agreement is enforceable in accordance with the terms
                           hereof, subject to applicable bankruptcy, insolvency
                           and similar laws affecting creditors' rights, and
                           subject as to enforceability to general principles of
                           equity, regardless of whether enforcement is sought
                           in a proceeding in equity or at law; and

                  (iii)    the execution and delivery of this Agreement and the
                           performance of obligations hereunder do not and will
                           not constitute or result in a default, breach or
                           violation of the terms or provisions of its
                           certificate, articles or charter of incorporation,
                           declaration of trust, by-laws or any agreement,
                           instrument, mortgage, judgment, injunction or order
                           applicable to it or any of its property.

         (b)      The Trust further represents and warrants to Principal Life
                  that:

                  (i)      it is a person other than a natural person and is
                           purchasing this Agreement for the purpose of
                           providing collateral security for securities
                           registered with the United States Securities and
                           Exchange Commission;

                  (ii)     it has been informed and understands that transfer is
                           restricted by the terms of this Agreement; and

                  (iii)    it (a) is solely responsible for determining whether
                           this Agreement is suitable for the purpose intended;
                           (b) has carefully read this Agreement (including the
                           Annex) before signing this Agreement; (c) has had a
                           reasonable opportunity to make such inquiries as it
                           deemed necessary prior to signing this Agreement; and
                           (d) has received or had access to such additional
                           information as it deemed necessary in connection with
                           its decision to sign this Agreement.

                                       3


         In performing its obligations hereunder Principal Life is not acting as
         a fiduciary, agent or other representative for the Agreement Holder or
         anyone else. All representations and warranties made by the Agreement
         Holder and Principal Life in this Agreement shall be considered to have
         been relied upon by the other in connection with the execution hereof.

6.       ASSIGNMENT OF AGREEMENT

         The following conditions must be satisfied in order to effectuate any
         assignment of this Agreement:

         (i)      This Agreement may only be transferred through a book entry
                  system maintained by Principal Life, or an agent designated by
                  it, within the meaning of Temporary Treasury Regulations
                  Section 5f.103-1(c) and Treasury Regulations Section
                  1.871-14(c)(1)(i).

         (ii)     The Agreement Holder, and any assignee, must comply with
                  applicable securities laws.

         (iii)    Principal Life has consented in writing to the proposed
                  assignment, such consent not to be unreasonably withheld.

         (iv)     Principal Life shall have received from the proposed assignee
                  a duly executed certificate containing, in substance, the
                  information, representations, warranties, acknowledgments and
                  agreements set forth in this Agreement.

         Any attempted sale, transfer, anticipation, assignment, hypothecation,
         or alienation not in accordance with this Section 6 shall be void and
         of no effect. Until such time, if any, as Principal Life has consented
         in writing to a proposed assignment, Principal Life shall not be
         obligated to make any payments to or at the direction of anyone other
         than the person shown on Principal Life's books and records as the
         Agreement Holder. Once the foregoing conditions have been satisfied
         with respect to an assignment, the assignee or its successor shall be
         deemed to be the sole Agreement Holder for all purposes of this
         Agreement and Principal Life shall promptly amend its records to
         reflect the assignee's status as Agreement Holder.

7.       PAYMENTS TO THE AGREEMENT HOLDER

         Principal Life shall pay to, or at the direction of, the Agreement
         Holder by the date (the "Due Date") on which any payment becomes due in
         respect of the Notes secured by this Agreement (and in any event such
         period of time prior to the Due Date as shall be necessary to ensure
         that the Trust can fulfill its obligation to make payment in full of
         all amounts due and payable under the Notes on the Due Date), an amount
         in the currency or currencies in which the Notes are denominated as
         specified in the Notes equal to the sum of (i) the amount of principal
         and/or (as the case may be) interest and/or (as the case may be)
         premium falling due in respect of the Notes on such Due Date (the
         "Notes Component") and (ii) the amount of any payments owed by the
         Trust in respect of the Trust Beneficial Interest falling due on such
         date (the "Beneficial Interest Component"). In the event that Principal
         Life fails to make payment of any such amount on or prior to

                                       4


         the Due Date, Principal Life shall pay to or at the direction of the
         Agreement Holder, on demand by the Agreement Holder, (i) if the failure
         relates to the Notes Component, an amount in the currency specified in
         the Notes equal to the amount of default interest (or other amount)
         which becomes due and payable by the Trust in accordance with the Notes
         as a consequence of any delay in the Trust making the relevant payment
         of principal, interest or premium (as the case may be) to the holders
         of the of Notes and (ii) if the failure relates to the Beneficial
         Interest Component, such amount or default interest, if any, determined
         in the same manner as default interest on the Notes Component.

         Interest shall accrue on the Fund in the same amount and pursuant to
         the same terms as interest accrues on the Notes secured by this
         Agreement and on the Trust Beneficial Interest related to the Notes.

         If any amount is withdrawn from the Fund in order to make a payment
         under this Section 7, interest will cease to be credited with regard to
         such amount as of the end of the day immediately preceding the date on
         which such withdrawal is made.

         All payments made by Principal Life to the Agreement Holder hereunder
         shall be paid in same-day, freely transferable funds to such account as
         has been specified for such purpose by the Agreement Holder.

         Notwithstanding anything to the contrary in this Section 7, if
         Principal Life shall, with respect to any scheduled amount due and
         payable under any of the Notes, comply in all respects with the
         requirements of this Section 7, but an event of default has occurred
         with respect to the Notes and as a result payments with respect to the
         Notes have been accelerated, otherwise than by reason of any default
         under this Agreement by Principal Life, no Event of Default (as defined
         below) under this Funding Agreement shall be deemed to have occurred,
         no payments with respect to this Agreement shall be accelerated and
         Principal Life will remain obligated to make payments under this
         Agreement as if no event of default had occurred with respect to the
         Notes.

8.       TERMINATION OF AGREEMENT

         Subject to the provisions of the following paragraph and the Annex,
         this Agreement shall terminate and cease to be of any further force or
         effect on the day and at the time upon which all amounts have been
         withdrawn from the Fund pursuant to this Agreement.

         Upon the occurrence of any of the following events (each, an "Event of
         Default") and following a written demand by the Agreement Holder,
         Principal Life shall pay to, or at the direction of, the Agreement
         Holder all amounts that the Trust is required to pay in such event
         under the Notes and the Trust Beneficial Interest:

         (i)      Principal Life's failure to make any payment of interest,
                  premium (if applicable) or installment payments (if
                  applicable) in accordance with this Agreement, if such failure
                  to pay is not corrected within seven (7) Business Days after
                  such payment becomes due and payable; or

                                       5


         (ii)     Principal Life's failure to make any payment of principal
                  (other than any installment payment) in accordance with this
                  Agreement, if such failure to pay is not corrected within one
                  (1) Business Day after such payment becomes due and payable;
                  or

         (iii)    if Principal Life (a) is dissolved (other than pursuant to a
                  consolidation, amalgamation or merger in which the resulting
                  entity assumes its obligations); (b) becomes insolvent or is
                  unable to pay its debts or fails or admits in writing its
                  inability generally to pay its debts as they become due; (c)
                  makes a general assignment, arrangement or composition with or
                  for the benefit of its creditors; (d) institutes or has
                  instituted against it an administrative or legal proceeding
                  seeking a judgment of insolvency or bankruptcy or any other
                  relief under any supervision, rehabilitation, liquidation,
                  bankruptcy or insolvency law or other similar law affecting
                  creditors' rights, or a petition is presented for its
                  winding-up or liquidation, and, in the case of any such
                  proceeding or petition instituted or presented against it,
                  such proceeding or petition (1) results in a judgment of
                  insolvency or bankruptcy or the entry of an order for relief
                  or the making of an order for its rehabilitation, winding-up
                  or liquidation or (2) is not dismissed, discharged, stayed or
                  restrained in each case within 60 days of the institution or
                  presentation thereof; (e) has a resolution passed for its
                  rehabilitation, winding-up, official management or liquidation
                  (other than pursuant to a consolidation, amalgamation or
                  merger in which the resulting entity assumes the obligations
                  of Principal Life); (f) seeks or becomes subject to the
                  appointment of an administrator, supervisor, rehabilitator,
                  provisional liquidator, conservator, receiver, trustee,
                  custodian or other similar official for it or for all or
                  substantially all its assets; (g) has a secured party take
                  possession of all or substantially all its assets or has a
                  distress, execution, attachment, sequestration or other legal
                  process levied, enforced or sued on or against all or
                  substantially all its assets and such secured party maintains
                  possession, or any such process is not dismissed, discharged,
                  stayed or restrained, in each case within 60 days thereafter;
                  (h) causes or is subject to any event with respect to it
                  which, under the applicable laws of any jurisdiction, has an
                  analogous effect to any of the events specified in clauses (a)
                  to (g) (inclusive); or (i) takes any action in furtherance of,
                  or indicating its consent to, approval of, or acquiescence in,
                  any of the foregoing acts.

         Notwithstanding anything to the contrary in this Section 8, if an event
         described in clause (iii) above occurs, this Agreement will
         automatically terminate and the amount of the Fund will be immediately
         due and payable by Principal Life to the Agreement Holder, or the
         account specified by the Agreement Holder.

         Principal Life will promptly notify the Agreement Holder and the Rating
         Agencies in writing of the occurrence of any of (i) through (iii)
         above.

9.       WITHHOLDING; ADDITIONAL AMOUNTS

         All amounts due in respect of this Agreement will be made without
         withholding or deduction for or on account of any present or future
         taxes, duties, levies, assessments or

                                       6


         other governmental charges of whatever nature imposed or levied by or
         on behalf of any governmental authority in the United States unless the
         withholding or deduction is required by law, regulation or official
         interpretation thereof. Unless otherwise specified in the Annex,
         Principal Life will not pay any additional amounts to the Agreement
         Holder in the event that any withholding or deduction is so required by
         law, regulation or official interpretation thereof, and the imposition
         of a requirement to make any such withholding or deduction will not
         give rise to an Event of Default or any independent right or obligation
         to redeem this Agreement.

10.      CURRENCY

         Except as may be specifically noted in the Annex, the Net Deposit and
         all payments under Section 7 of this Agreement shall be made using the
         currency or currencies as specified in the Notes.

11.      TAX TREATMENT

         Principal Life and the Agreement Holder agree that this Agreement shall
         be disregarded for U.S. Federal income tax purposes. Principal Life and
         the Agreement Holder further agree that if this Agreement is not so
         disregarded, it will and is intended to be treated as a debt obligation
         of Principal Life issued in registered form within the meaning of
         Treasury Regulations Section 1.871-14(c)(1)(i), except to the extent
         provided in Treasury Regulations Section 1.163-5T (or any subsequent
         similar regulation).

12.      AMENDMENT AND MODIFICATION

         This Agreement may be amended or modified in whole or in part, at any
         time and from time to time, for any period or periods (a) by mutual
         written agreement by such officers of Principal Life, the Agreement
         Holder and, where such Agreement Holder is the Indenture Trustee upon
         an assignment by way of security of this Agreement by the Trust, the
         Trust and (b) without the consent of any other person affected thereby.

13.      NOTICE

         Except as otherwise provided herein, all notices given pursuant to this
         Agreement shall be in writing, and shall either be delivered, mailed or
         telecopied to the locations listed below or at such other address or to
         the attention of such other persons as such party shall have designated
         for such purpose in a written notice complying as to delivery with the
         terms of this Section 13. Each such notice shall be effective (i) if
         given by telecopy, when transmitted to the applicable number so
         specified in this Section 13 (if required herein, such notice shall
         also be sent by mail, with first class postage prepaid), (ii) if given
         by mail, three days after deposit in the mails with first class postage
         prepaid, or (iii) if given by any other means, when actually delivered
         at such address.

                                       7


         If to Principal Life:

                      Principal Life Insurance Company
                      711 High Street
                      Des Moines, Iowa 50392-0001
                      Attention:     General Counsel
                      Telephone:    (515) 247-5111
                      Telecopy:      (515) 248-3011

                      Principal Life Insurance Company
                      711 High Street
                      Des Moines, Iowa 50392-0001
                      Attention:    Jim Fifield, Counsel
                      Telephone:   (515) 248-9196
                      Telecopy:     (866) 496-6527

         If to the Agreement Holder:

                      Principal Life Income Fundings Trust o
                      c/o U.S. Bank Trust National Association
                      100 Wall Street, 16th Floor
                      New York, NY  10005
                      Attention:  Thomas E. Tabor
                      Telephone: (212) 361-6184
                      Facsimile: (212) 809-5459

         with a copy to:

                      Citibank, N.A.
                      Citibank Agency and Trust
                      388 Greenwich Street, 14th Floor
                      New York, NY 10013

                      Attention:  Nancy Forte
                      Telephone:  (212) 816-5685
                      Telecopy:  (212) 816-5527

14.      BUSINESS DAY

         For purposes of this Agreement, "Business Day" means any day that is a
         Business Day as specified in the Notes or the Indenture.

15.      BUSINESS DAY CONVENTION

         If the date on which any payment is due to be made under this Agreement
         shall occur on a day on which is not a Business Day, such payment shall
         be made in accordance with the Business Day Convention as specified in
         the Notes or the Indenture.

                                       8


16.      JURISDICTION

         The parties to this Agreement hereby consent to the non-exclusive
         jurisdiction of any State or Federal Court of competent jurisdiction
         located within the State of New York, in the Borough of Manhattan, in
         connection with any actions or proceedings arising directly or
         indirectly from this Agreement.

17.      WAIVER

         The obligations of Principal Life or the Agreement Holder under this
         Agreement may be waived only in writing by the party to this Agreement
         whose interests are adversely affected by such waiver. No failure or
         delay, on the part of the party adversely affected, in exercising any
         right or remedy hereunder shall operate as a waiver thereof.

18.      TAX REDEMPTION.

         If a Tax Event (defined below) occurs, Principal Life will have the
         right to redeem this Agreement by giving not less than 30 and no more
         than 60 days prior written notice to the Agreement Holder and by paying
         to the Agreement Holder an amount equal to the Fund. The term "Tax
         Event" means that Principal Life shall have received an opinion of
         independent legal counsel stating in effect that as a result of (a) any
         amendment to, or change (including any announced prospective change)
         in, the laws (or any regulations thereunder) of the United States or
         any political subdivision or taxing authority thereof or therein or (b)
         any amendment to, or change in, an interpretation or application of any
         such laws or regulations by any governmental authority in the United
         States, which amendment or change is enacted, promulgated, issued or
         announced on or after the Effective Date of this Agreement, there is
         more than an insubstantial risk that (i) the Trust is, or will be
         within 90 days of the date thereof, subject to U.S. federal income tax
         with respect to interest accrued or received on this Agreement or (ii)
         the Trust is, or will be within 90 days of the date thereof, subject to
         more than a de minimis amount of taxes, duties or other governmental
         charges.

                                       9





                                      ANNEX

This Annex will become effective as of the Effective Date, subject to the
requirements of Section 1.

                       
Trust:                    Principal Life Income Fundings Trust o

Net Deposit:              The Net Deposit is $o.

Deposit:                  Regardless of the amount of the Net Deposit, the Deposit is deemed to be $o.

Bank and Account:         Bank: o
                          ABA No.: o
                          For credit to Principal Life Insurance Company
                          Account #o

Title of Notes:           [Principal Life Income Fundings Trust o   [o%][o Rate] Principal(R) Life
                          CoreNotes(R) Due o]
                          [Principal Life Income Fundings Trust o   [o%][o Rate] Secured Medium-Term
                          Retail Notes Due o]
                          [Principal Life Income Fundings Trust o   [o%][o Rate] Secured Medium-Term
                          Notes Due o]

[Survivor's Option:       Unless this Agreement has been declared due and payable prior to the
                          Maturity Date of the related Notes by reason of any Event of Default, or has
                          been previously redeemed or otherwise repaid, the Agreement Holder may
                          request repayment of this Agreement upon the valid exercise of the
                          Survivor's Option in the Notes by the Representative of the deceased
                          Beneficial Owner of such Notes (a "Survivor's Option").

                          Except as provided below, upon the tender to and acceptance by Principal
                          Life of this Agreement (or portion thereof) securing the Notes as to which
                          the Survivor's Option has been exercised, Principal Life shall repay to the
                          Agreement Holder the amount of the Fund equal to (i) 100% of the principal
                          amount of the Notes as to which the Survivor's Option has been validly
                          exercised and accepted, plus accrued and unpaid interest on such amount to
                          the date of repayment, or (ii) in the case of Discount Notes, the Issue
                          Price of the Notes as to which the Survivor's Option has been validly
                          exercised and accepted, plus accrued discount and any accrued and unpaid
                          interest on such amount to the date of repayment. However, Principal Life
                          shall not be obligated to repay:




                                       A-1

o        more than the greater of $2,000,000 or 2% of the aggregate deposit for
         all funding agreement contracts securing all outstanding notes issued
         under the Principal(R) Life CoreNotes(sm) Program and Secured
         Medium-Term Notes Retail Program as of the end of the most recent
         calendar year;

o        more than $250,000 in aggregate deposit of funding agreement contracts
         securing outstanding notes issued under the Principal(R) Life
         CoreNotes(sm) Program and Secured Medium Term Notes Retail Program as
         to which the Survivor's Option has been exercised on behalf of any
         single beneficial owner in any calendar year; or

o        more than 2% of the Deposit under this Agreement which secures the
         related Notes, as of the end of the most recent calendar year.

Principal Life shall not make repayments pursuant to the Agreement Holder's
request for repayment upon exercise of the Survivor's Option in amounts that are
less than $1,000, and, in the event that the limitations described in the
preceding sentence would result in the partial repayment of this Agreement, the
principal amount of this Agreement remaining outstanding after repayment must be
at least $1,000 (the minimum authorized denomination of this Agreement). A
request for repayment by the Agreement Holder upon an otherwise valid election
to exercise the Survivor's Option may not be withdrawn.

This Agreement (or portion thereof) accepted for repayment shall be repaid on
the first Interest Payment Date for the related Notes that occurs 20 or more
calendar days after the date of such acceptance.

In order to obtain repayment of this Agreement (or portion thereof) upon
exercise of the Survivor's Option, the Agreement Holder must provide to
Principal Life (i) a written request for repayment signed by the Agreement
Holder, and (ii) any additional information Principal Life requires to evidence
satisfaction of any conditions to the repayment of this Agreement (or portion
thereof).]

                                       A-2


PRINCIPAL LIFE INSURANCE COMPANY

By:________________________________

Name: o

Title:  Officer

PRINCIPAL LIFE INCOME FUNDINGS TRUST o

By:     U.S. Bank Trust National Association,
        not in its individual capacity, but solely in its
        capacity as trustee

By:     Bankers Trust Company, N.A.,
        under Limited Power of Attorney, dated o

By:________________________________

Name: _____________________________

Title:_____________________________

                                      A-3

EX-4.9

                                                                     EXHIBIT 4.9


                                    GUARANTEE


         FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
and in connection with that certain funding agreement (the "Funding Agreement"),
entered into by and between Principal Life Insurance Company, an Iowa insurance
company ("Principal Life"), and Principal Life Income Fundings Trust o, a New
York common law trust (the "Trust"), relating to the notes (the "Notes") issued
by the Trust, Principal Financial Group, Inc., a Delaware corporation and the
indirect parent company of Principal Life (the "Guarantor"), hereby furnishes to
the Trust its full and unconditional guarantee of the Guaranteed Amounts (as
hereinafter defined) as follows:

         1.       GUARANTEE.

                  (a) The Guarantor hereby fully, irrevocably, absolutely and
unconditionally guarantees, as a guarantee of payment and not merely as a
guarantee of collection, immediate payment when due to the Trust any payments
required to be made by Principal Life to the Trust under the Funding Agreement
which shall become due and payable regardless of whether such payment is due at
maturity, on an interest payment date or as a result of redemption or otherwise
(the "Scheduled Payments") but shall be unpaid by Principal Life (the
"Guaranteed Amounts"). Notwithstanding anything to the contrary contained
herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined
in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid
interest and any other amounts due and owing under the Funding Agreement, less
any amounts paid by Principal Life to the Trust.

                  (b) In the event that Principal Life fails to make a Scheduled
Payment in full when due (the "Payment Notice Date"), then the Trust or
Citibank, N.A., as indenture trustee for the benefit of the holders of the Notes
(the "Indenture Trustee"), pursuant to the indenture (the "Indenture") between
the Trust and the Indenture Trustee, may present the Guarantor with notice
(each, a "Payment Notice") of such failure in writing on or after the Payment
Notice Date. The Payment Notice shall identify (1) the Funding Agreement, (2)
the Trust, (3) the Payment Notice Date and (4) the amount of the Scheduled
Payments not paid by Principal Life to the Trust as of the Payment Notice Date.
Upon receipt of such Payment Notice, the Guarantor will immediately pay the
Guaranteed Amounts pursuant to Section 7.

                  (c) In the event that, after receipt of a Payment Notice from
the Trust, the Guarantor fails to make immediate payment to the Trust or the
Indenture Trustee of the Guaranteed Amounts, then the Trust and the Indenture
Trustee may enforce the obligations of the Guarantor under this Guarantee,
including by immediately bringing suit directly against the Guarantor (without
first bringing suit against Principal Life) for the Guaranteed Amounts not paid
to the Trust as of the Payment Notice Date.

                                       1


                  (d) This Guarantee is an unsecured, unsubordinated and
contingent obligation of the Guarantor and ranks equally with all other
unsecured and unsubordinated obligations of the Guarantor.

     2. TERMINATION. This Guarantee is a continuing and irrevocable guarantee of
the Guaranteed Amounts now or hereafter existing and shall terminate and be of
no further force and effect with respect to the Funding Agreement and the Notes
upon the full payment of the Scheduled Payments or upon the earlier
extinguishment of the obligations of Principal Life under the Funding Agreement.

     3. AMENDMENTS. Subject to the trust agreement relating to the Trust and the
Indenture, no provision of this Guarantee may be waived, amended, supplemented
or modified, except by a written instrument executed by the Trust and the
Guarantor.

     4. ASSIGNMENT; GOVERNING LAW. This Guarantee shall inure to the benefit of
the Trust and its successors, assigns and pledgees. This Guarantee shall be
governed by, and construed in accordance with, the laws of the State of New York
without regard to conflict of law principles.

     5. NOTICES. All notices given pursuant to this Guarantee shall be in
writing, and shall either be delivered, mailed or telecopied to the locations
listed below or at such other address or to the attention of such other persons
as such party shall have designated for such purpose in a written notice
complying as to delivery with the terms of this Section 5. Each such notice
shall be effective (i) if given by telecopy, when transmitted to the applicable
number so specified in this Section 5 (such notice shall also be sent by mail,
with first class postage prepaid), (ii) if given by mail, three days after
deposit in the mails with first class postage prepaid, or (iii) if given by any
other means, when actually delivered at such address.

     If to the Guarantor:

     Principal Financial Group, Inc.
     711 High Street
     Des Moines, Iowa 50392
     Attention: General Counsel
     Telephone: (515) 247-5111
     Facsimile: (515) 248-3011

     With a copy to:

     Principal Life Insurance Company
     711 High Street
     Des Moines, Iowa 50392
     Attention: Jim Fifield
     Telephone: (515) 248-9196
     Facsimile: (866) 496-6527

                                       2


     If to the Trust:

     Principal Life Income Fundings Trust (followed by the number of the
     Trust specified in this Guarantee)
     c/o U.S. Bank Trust National Association
     100 Wall Street, 16th Floor
     New York, New York 10005
     Attention: Thomas E. Tabor
     Telephone: (212) 361-6184
     Facsimile: (212) 809-5459

     With a copy to:

     Citibank, N.A.
     Citibank Agency and Trust
     388 Greenwich Street, 14th Floor
     New York, New York 10013
     Attention: Nancy Forte
     Telephone: (212) 816-5685
     Facsimile: (212) 816-5527

     6. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants
that: (i) it is duly organized and in good standing under the laws of the
jurisdiction of its organization and has full capacity and right to make and
perform this Guarantee, and all necessary authority has been obtained; (ii) this
Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights and general principles
of equity, regardless of whether enforcement is sought in a proceeding in equity
or at law; (iii) the making and performance of this Guarantee does not and will
not violate the provisions of any applicable law, regulation or order, and does
not and will not result in the breach of, or constitute a default under, any
material agreement, instrument or document to which it is a party or by which it
or any of its property may be bound or affected, except to the extent disclosed
in the registration statement registering the issuance of this Guarantee and the
Funding Agreement, as amended, supplemented or modified from time to time (the
"Registration Statement"), and to the extent that any such violation, breach or
default does not result in a material adverse effect on the Guarantor; and (iv)
all consents, approvals, licenses and authorizations of, and filings and
registrations with, any governmental authority required under applicable law and
regulations for the making and performance of this Guarantee have been obtained
or made and are in full force and effect, except to the extent disclosed in the
Registration Statement and to the extent that the failure to acquire any such
consent, approval, license, authorization, filing or registration does not
result in a material adverse effect on the Guarantor.

     7. NOTICE OF, AND CONSENT TO, SECURITY INTEREST. The Trust hereby notifies
the Guarantor that it has granted to the Indenture Trustee, on behalf of the
holders of the Notes, a security interest in the Collateral (as defined in the
Indenture), including, but not limited to, any and all payment to be made by the
Guarantor to the Trust under this Guarantee. The Trust

                                       3


hereby notifies the Guarantor that it has collaterally assigned to the Indenture
Trustee, for the benefit of the holders of the Notes, this Guarantee. The
Guarantor, by executing this Guarantee, hereby (i) affirms that it has made or
simultaneously will make changes to its books and records to reflect such
security interest and collateral assignment, (ii) consents to the security
interest granted, and collateral assignment made, by the Trust to the Indenture
Trustee of this Guarantee, (iii) agrees to make all payments due under this
Guarantee to the Collection Account (as defined in the Indenture) or any other
account designated in writing to the Guarantor by the Indenture Trustee and (iv)
agrees to comply with all orders of the Indenture Trustee with respect to this
Guarantee without any further consent from the Trust.

     8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY
APPLICABLE LAW, THE GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION,
CLAIM, SUIT OR PROCEEDING ON OR ARISING OUT OF THIS GUARANTEE. THIS GUARANTEE
REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE TRUST AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH
PARTIES.

                                        PRINCIPAL FINANCIAL GROUP, INC.



                                        By:
                                            ------------------------------------

                                        Name:
                                              ----------------------------------

                                        Title:
                                               ---------------------------------

                                        Date: The Effective Date (as defined in
                                              the Funding Agreement)

Acknowledged and Agreed:

THE PRINCIPAL LIFE INCOME FUNDINGS
TRUST DESIGNATED IN THIS GUARANTEE

By:      U.S. Bank Trust National Association,
         not in its individual capacity, but solely in its
         capacity as trustee

By:      Bankers Trust Company, N.A.,
         under Limited Power of Attorney, dated o

By:
    ------------------------------------------------------

Name:
      ----------------------------------------------------

Title:
       ---------------------------------------------------

Date: The Effective Date (as defined in the Funding
      Agreement)


                                       4

EX-4.10

                                                                    EXHIBIT 4.10

                               OMNIBUS INSTRUMENT

         WHEREAS, the parties named herein desire to enter into certain Program
Documents contained herein, each such document dated as of this o day of o,
200o, relating to the issuance by Principal Life Income Fundings Trust o (the
"Trust") of Notes with a [principal amount/face amount] of $o to investors under
Principal Life's secured notes program;

         WHEREAS, the Trust is a trust and will be organized under and its
activities will be governed by the provisions of the Trust Agreement (set forth
in Section A of this Omnibus Instrument), dated as of the date of the Pricing
Supplement (attached to this Omnibus Instrument as Exhibit D) (the "Pricing
Supplement"), by and between the parties thereto indicated in Section F herein;

         WHEREAS, certain expense and indemnification arrangements between
Principal Life and the Trustee, on behalf of itself and on behalf of the Trust,
are governed pursuant to the provisions of the Expense and Indemnity Agreement
dated as of o, 2006, by and between Principal Life and the Trustee;

         WHEREAS, certain licensing arrangements between the Trust and Principal
Financial Services, Inc. will be governed pursuant to the provisions of the
License Agreement (set forth in Section B of this Omnibus Instrument), dated as
of the date of the Pricing Supplement, by and between the parties thereto
indicated in Section F herein;

         WHEREAS, certain custodial arrangements of the Funding Agreement and
the Guarantee will be governed pursuant to the provisions of the Custodial
Agreement (the "Custodial Agreement") dated as of o, 2006 by and among Bankers
Trust Company, N.A., acting as custodian (the "Custodian"), the Indenture
Trustee and the Trustee, on behalf of the Trust;

         WHEREAS, the Notes will be issued pursuant to the Indenture (set forth
in Section C of this Omnibus Instrument), dated as of the Original Issue Date,
by and between the parties thereto indicated in Section F herein;

         WHEREAS, the sale of the Notes will be governed by the Terms Agreement
(set forth in Section D of this Omnibus Instrument), dated the date of the
Pricing Supplement, by and among the parties thereto indicated in Section F
herein; and

         WHEREAS, certain agreements relating to the Notes, the Funding
Agreement and the Guarantee are set forth in the Coordination Agreement (set
forth in Section E of this Omnibus Instrument), dated as of the date of the
Pricing Supplement, by and among the parties thereto indicated in Section F
herein.

         All capitalized terms used herein and not otherwise defined will have
the meanings set forth in the Indenture.

                  [Remainder of Page Left Intentionally Blank.]




                                    SECTION A

                                 TRUST AGREEMENT

         This TRUST AGREEMENT (this "Trust Agreement"), dated as of the date of
the Pricing Supplement, is entered into by and between GSS Holdings II, Inc., a
Delaware corporation, as trust beneficial owner (the "Trust Beneficial Owner"),
and U.S. Bank Trust National Association, a national banking association, as
Trustee (the "Trustee").


                              W I T N E S S E T H:

         WHEREAS, the Trust Beneficial Owner and the Trustee desire to authorize
the issuance of a Trust Beneficial Interest and a series of Notes in connection
with the entry into this Trust Agreement;

         WHEREAS, all things necessary to make this Trust Agreement a valid and
legally binding agreement of the Trustee and the Trust Beneficial Owner,
enforceable in accordance with its terms, have been done;

         WHEREAS, the parties intend to provide for, among other things, (i) the
issuance and sale of the Notes (pursuant to the Indenture, the Distribution
Agreement and the related Terms Agreement) and the Trust Beneficial Interest,
(ii) the use of the proceeds of the sale of the Notes and Trust Beneficial
Interest to acquire the Funding Agreement, the payment obligations of which will
be fully and unconditionally guaranteed by the Guarantee, and (iii) all other
actions deemed necessary or desirable in connection with the transactions
contemplated by this Trust Agreement; and

         WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard Trust Terms, dated as of o, 2006, and attached to the Omnibus
Instrument as Exhibit A (the "Standard Trust Terms") and all capitalized terms
not otherwise defined herein (including the recitals hereof) shall have the
meanings set forth in the Standard Trust Terms (the Standard Trust Terms and
this Trust Agreement, collectively, the "Trust Agreement").

         NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which are hereby acknowledged, each party hereby agrees as follows:

                                   ARTICLE 1

         Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard Trust Terms (except to the extent expressly
modified herein) are hereby incorporated herein by reference with the same force
and effect as though fully set forth herein. To the extent that the terms set
forth in Article 2 of this Trust Agreement are inconsistent with the terms of
the Standard Trust Terms, the terms set forth in Article 2 herein shall apply.


                                      A-1


                                   ARTICLE 2

         Section 2.01 Name. The Trust created and governed by the Trust
Agreement shall be the trust specified in the Omnibus Instrument. The name of
the Trust shall be the name specified in the first paragraph of the Omnibus
Instrument, as such name may be modified from time to time by the Trustee
following written notice to the Trust Beneficial Owner.

         Section 2.02 Jurisdiction. The Trust is hereby organized in, and formed
under and pursuant to, the laws of the State of New York.

         Section 2.03 Initial Capital Contribution and Ownership. The Trust
Beneficial Owner has paid or has caused to be paid to, or to an account at the
direction of, the Trustee, on the date hereof, the sum of $15 (or, in the case
of Notes issued with original issue discount, such amount multiplied by the
issue price of the Notes). The Trustee hereby acknowledges receipt in trust from
the Trust Beneficial Owner, as of the date hereof, of the foregoing
contribution, which shall be used along with the proceeds from the sale of the
series of Notes to purchase the Funding Agreement. Upon the creation of the
Trust and the registration of the Trust Beneficial Interest in the Securities
Register (as defined in the Trust Agreement) by the Registrar in the name of the
Trust Beneficial Owner, the Trust Beneficial Owner shall be the sole beneficial
owner of the Trust.

         Section 2.04 Acknowledgment. The Trustee, on behalf of the Trust,
expressly acknowledges its duties and obligations set forth in the Standard
Trust Terms incorporated herein.

         Section 2.05 Additional Terms.

         None

         Section 2.06 Omnibus Instrument; Execution and Incorporation of Terms.

         The parties to the Trust Agreement will enter into the Trust Agreement
by executing the Omnibus Instrument.

         By executing the Omnibus Instrument, the Trustee and the Trust
Beneficial Owner hereby agree that the Trust Agreement will constitute a legal,
valid and binding agreement between the Trustee and the Trust Beneficial Owner.

         All terms relating to the Trust or the series of Notes not otherwise
included in the Trust Agreement will be as specified in the Omnibus Instrument,
the Pricing Supplement or the Distribution Agreement as indicated herein.

                                      A-2


         Section 2.07 Governing Law. The Trust Agreement will be governed by,
and construed in accordance with, the laws of the State of New York.

         Section 2.08 Counterparts. The Trust Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

                  [Remainder of Page Left Intentionally Blank.]


                                      A-3


                                    SECTION B

                                LICENSE AGREEMENT

         This LICENSE AGREEMENT (this "License Agreement"), dated as of the date
of the Pricing Supplement, is entered into by and between Principal Financial
Services, Inc., an Iowa corporation with its principal place of business at 711
High Street, Des Moines, Iowa 50392 (the "Licensor"), and the Principal Life
Income Fundings Trust specified in the Omnibus Instrument (the "Licensee").


                              W I T N E S S E T H:

         WHEREAS, the Licensor is the owner of certain trademarks and service
marks and registrations and pending applications therefor, and may acquire
additional trademarks and service marks in the future, all as described more
fully below;

         WHEREAS, the Licensee desires to use certain of the Licensor's
trademarks and service marks in connection with the Licensee's activities, as
described more fully below;

         WHEREAS, the Licensor and the Licensee wish to formalize the agreement
between them regarding the Licensee's use of the Licensor's marks; and

         WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard License Agreement Terms, dated March 5, 2004, and attached to
the Omnibus Instrument as Exhibit B (the "Standard License Agreement Terms") and
all capitalized terms not otherwise defined herein (including the recitals
hereof) shall have the meanings set forth in the Standard License Agreement
Terms (the Standard License Agreement Terms and this License Agreement,
collectively, the "License Agreement").

         NOW, THEREFORE, in consideration of the mutual promises set forth
herein and for other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, each party hereby agrees as follows:

                                   ARTICLE 1

         Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard License Agreement Terms (except to the
extent expressly modified herein) are hereby incorporated herein by reference
with the same force and effect as though fully set forth herein. To the extent
that the terms set forth in Article 2 of this License Agreement are inconsistent
with the terms of the Standard License Agreement Terms, the terms set forth in
Article 2 herein shall apply.

                                   ARTICLE 2

         Section 2.01 Additional Terms.

         None

                                      B-1


         Section 2.02 Omnibus Instrument; Execution and Incorporation of Terms.

         The parties to the License Agreement will enter into the License
Agreement by executing the Omnibus Instrument.

         By executing the Omnibus Instrument, the Licensor and the Licensee
hereby agree that the License Agreement will constitute a legal, valid and
binding agreement between the Licensor and the Licensee.

         All terms relating to the Trust or the Notes not otherwise included in
the License Agreement will be as specified in the Omnibus Instrument or Pricing
Supplement, as indicated herein.

         Section 2.03 Counterparts. The License Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

                  [Remainder of Page Left Intentionally Blank.]


                                      B-2


                                    SECTION C

                                    INDENTURE

         This INDENTURE (this "Indenture") is entered into as of the Original
Issue Date by and between the Principal Life Income Fundings Trust specified in
the Omnibus Instrument (the "Trust") and [Citibank, N.A.][indenture trustee if
Citibank, N.A. is not acting as indenture trustee], as indenture trustee (the
"Indenture Trustee").

         [Citibank, N.A.][indenture trustee if Citibank, N.A. is not acting as
indenture trustee], in its capacity as indenture trustee, hereby accepts its
role as Registrar, Paying Agent, Transfer Agent and Calculation Agent hereunder.

         References herein to "Indenture Trustee," "Registrar," "Transfer
Agent," "Paying Agent" or "Calculation Agent" shall include the permitted
successors and assigns of any such entity from time to time.

                              W I T N E S S E T H:

         WHEREAS, the Trust has duly authorized the execution and delivery of
this Indenture to provide for the issuance of Notes;

         WHEREAS, all things necessary to make this Indenture a valid and
legally binding agreement of the Trust and the other parties to this Indenture,
enforceable in accordance with its terms, have been done, and the Trust proposes
to do all things necessary to make the Notes, when executed by the Trust and
authenticated and delivered pursuant hereto, valid and legally binding
obligations of the Trust as hereinafter provided; and

         WHEREAS, the parties hereto desire to incorporate by reference those
certain Standard Indenture Terms, dated as of o, 2006, and attached to the
Omnibus Instrument as Exhibit C (the "Standard Indenture Terms") and all
capitalized terms not otherwise defined herein (including the recitals hereof)
shall have the meanings set forth in the Standard Indenture Terms (the Standard
Indenture Terms and this Indenture, collectively, the "Indenture").

         NOW, THEREFORE, for and in consideration of the premises and the
purchase of the Notes by the Holders thereof, it is mutually covenanted and
agreed by each of the parties hereto as follows:

                                   ARTICLE 1

         Section 1.01 Incorporation by Reference. All terms, provisions and
agreements set forth in the Standard Indenture Terms (except to the extent
expressly modified herein) are hereby incorporated herein by reference (with the
same force and effect as though fully set forth herein). To the extent that the
terms set forth in Article 2 of this Indenture are inconsistent with the terms
of the Standard Indenture Terms, the terms set forth in Article 2 herein shall
apply.


                                      C-1


                                   ARTICLE 2

         Section 2.01 Agreement to be Bound. Each of the Trust, the Indenture
Trustee, the Registrar, the Transfer Agent, the Paying Agent and the Calculation
Agent hereby agrees to be bound by all of the terms, provisions and agreements
set forth in the Indenture, with respect to all matters contemplated in the
Indenture, including, without limitation, those relating to the issuance of the
below-referenced Notes.

         Section 2.02 Designation of the Trust, the Notes, the Funding Agreement
and the Guarantee. The Trust created by the Trust Agreement and referred to in
the Indenture is the Principal Life Income Fundings Trust specified in the
Omnibus Instrument. The Notes issued by the Trust and governed by the Indenture
shall be the Notes specified in the Pricing Supplement. The Funding Agreement
designated hereby is the Funding Agreement designated in the Pricing Supplement
dated as of the Original Issue Date between the Trust and Principal Life. The
Guarantee designated hereby is the Guarantee dated as of the Original Issue Date
of PFG.

         Section 2.03 Additional Terms.

         None

         Section 2.04 Omnibus Instrument; Execution and Incorporation of Terms.

         The parties to the Indenture will enter into the Indenture by executing
the Omnibus Instrument.

         By executing the Omnibus Instrument, the Indenture Trustee, the
Registrar, the Transfer Agent, the Paying Agent, the Calculation Agent and the
Trust hereby agree that the Indenture will constitute a legal, valid and binding
agreement between the Indenture Trustee, the Registrar, the Transfer Agent, the
Paying Agent, the Calculation Agent and the Trust.

         All terms relating to the Trust or the Notes not otherwise included in
the Indenture will be as specified in the Omnibus Instrument or Pricing
Supplement, as indicated herein.

         Section 2.05 Counterparts. The Indenture, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute one and the same instrument.

                  [Remainder of Page Left Intentionally Blank.]


                                      C-2


                                    SECTION D

                                 TERMS AGREEMENT

         This TERMS AGREEMENT (this "Terms Agreement") is entered into as of the
Original Issue Date by and among Principal Life Insurance Company ("Principal
Life"), Principal Financial Group, Inc. ("PFG"), the Principal Life Income
Fundings Trust specified in the Omnibus Instrument (the "Trust") and the
Purchasing Agent specified in the Pricing Supplement (the "Purchasing Agent").

                              W I T N E S S E T H:

         WHEREAS, Principal Life, PFG and the agents named therein, including
the Purchasing Agent have entered into that certain Distribution Agreement dated
o, 2006 (the "Distribution Agreement").

         NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, each of the parties hereby agrees as follows:

                                   ARTICLE 1

         Section 1.01 Incorporation by Reference. The provisions of the
Distribution Agreement and the related definitions (unless otherwise specified
herein) are incorporated by reference herein and shall be deemed to have the
same force and effect as if set forth in full herein.

                                   ARTICLE 2

         Section 2.01 Addition of Trust as Party to Distribution Agreement.

         Pursuant to Section 1 of the Distribution Agreement, each of the
undersigned parties hereby acknowledges and agrees that the Trust, upon
execution hereof by the Trust and the other parties to the Distribution
Agreement (other than any other trusts organized in connection with the
Registration Statement that are party thereto as of the date hereof), shall
become a Trust for purposes of the Distribution Agreement in accordance with the
terms thereof, in respect of the Notes, with all the authority, rights, powers,
duties and obligations of a Trust under the Distribution Agreement. The Trust
confirms that any agreement, covenant, acknowledgment, representation or
warranty under the Distribution Agreement applicable to the Trust is made by the
Trust at the date hereof, unless another time or times are specified in the
Distribution Agreement, in which case such agreement, covenant, acknowledgment,
representation or warranty shall be deemed to be confirmed by the Trust at such
specified time or times.

         Section 2.02 Purchase of Notes as Principal.

         (a) Subject in all respects to the terms and conditions of the
Distribution Agreement, the Trust hereby agrees to sell to the Purchasing Agent
and the Purchasing Agent hereby agrees to purchase the Notes having the terms
specified in the Pricing Supplement relating to such Notes.


                                      D-1


         (b) In connection with any purchase of Notes from the Trust by the
Purchasing Agent as principal, the parties agrees that the items specified on
Schedule I of the Omnibus Instrument will be delivered as of the Settlement
Date.

         Section 2.03 Termination. Upon the termination of this Terms Agreement
pursuant to Section 13(b) of the Distribution Agreement the undersigned parties
hereby agree to that the expenses reasonably incurred prior to or in connection
with such termination will be borne by Principal Life and PFG.

         Section 2.04 Applicable Time. For purposes of the Distribution
Agreement, the Applicable Time shall be o.

         Section 2.05 Free Writing Prospectus. For purposes of the Distribution
Agreement, each free writing prospectus (attached to this Omnibus Instrument as
Exhibit G) constitutes a part of the Time of Sale Prospectus.

         Section 2.06 Governing Law. This Terms Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to the principles of conflicts of laws thereof.

         Section 2.07 Notices. For purposes of Section 14 of the Distribution
Agreement, the Trust's communications details are as set forth in Section E of
the Omnibus Instrument.

         Section 2.08 Omnibus Instrument; Execution and Incorporation of Terms.

         The parties to this Terms Agreement will enter into this Terms
Agreement by executing the Omnibus Instrument.

         By executing the Omnibus Instrument, each party hereto agrees that this
Terms Agreement will constitute a legal, valid and binding agreement by and
among such parties.

         All terms relating to the Trust or the Notes not otherwise included in
this Terms Agreement will be as specified in the Omnibus Instrument, the Pricing
Supplement or the Distribution Agreement as indicated herein.

         Section 2.09 Counterparts. This Terms Agreement, through the Omnibus
Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

                  [Remainder of Page Left Intentionally Blank.]



                                      D-2


                                    SECTION E

                             COORDINATION AGREEMENT

         This COORDINATION AGREEMENT (this "Coordination Agreement"), dated as
of the date of the Pricing Supplement, is entered into by and among Principal
Life Insurance Company ("Principal Life"), Principal Financial Group, Inc.
("PFG"), the Principal Life Income Fundings Trust specified in the Omnibus
Instrument (the "Trust"), Principal Financial Services, Inc. ("PFSI"), Bankers
Trust Company, N.A. and [Citibank, N.A.,][indenture trustee if Citibank, N.A. is
not acting as indenture trustee], as indenture trustee (the "Indenture
Trustee").

                               W I T N E S S E T H

         WHEREAS, the Trust will enter into the Funding Agreement with Principal
Life dated as of the Original Issue Date specified in the Pricing Supplement;

         WHEREAS, PFG will issue a Guarantee to the Trust as of the Original
Issue Date specified in the Pricing Supplement, which will fully and
unconditionally guarantee the payment obligations of Principal Life under the
Funding Agreement;

         WHEREAS, the Purchasing Agent (as defined in the Distribution
Agreement) have agreed to sell the Notes in accordance with the Registration
Statement;

         WHEREAS, the Trust intends to issue the Notes in accordance with the
Indenture, to collaterally assign to, and grant a security interest in, the
Funding Agreement and the Guarantee to and in favor of the Indenture Trustee in
accordance with the Indenture to secure payment of the Notes;

         WHEREAS, the Custodian will hold the Funding Agreement and the
Guarantee on behalf of the Indenture Trustee pursuant to the terms of the
Custodial Agreement; and

         WHEREAS, certain licensing arrangements between the Trust and PFSI will
be governed pursuant to the provisions of the License Agreement.

         NOW, THEREFORE, to give effect to the agreements and arrangements
established under the Terms Agreement included in the Omnibus Instrument, as
applicable, the Trust Agreement, the Indenture and the Notes, and in
consideration of the agreements and obligations set forth herein and for other
good and valuable consideration, the sufficiency of which are hereby
acknowledged, each party hereby agrees as follows:

                                   ARTICLE 1

         Section 1.01 Delivery of the Funding Agreement and the Guarantee. The
Trust hereby authorizes the Custodian, on behalf of the Indenture Trustee, to
receive the Funding Agreement from Principal Life and the Guarantee from PFG
pursuant to the assignment of the Funding Agreement and Guarantee (the
"Assignment"), to be entered into on the Original Issue Date, included in the
closing instrument dated as of the Original Issue Date (the "Closing
Instrument").

                                      E-1


         Section 1.02 Issuance and Purchase of the Notes.


         (a) Delivery of the Funding Agreement and the Guarantee to the
Custodian, on behalf of the Indenture Trustee, pursuant to the Assignment or
execution of the cross receipt contained in the Closing Instrument shall be
confirmation of payment by the Trust for the Funding Agreement.

         (b) The Trust hereby directs the Indenture Trustee, upon receipt by the
Custodian, on behalf of the Indenture Trustee, of the Funding Agreement pursuant
to the Assignment and upon receipt by the Custodian, on behalf of the Indenture
Trustee, of the Guarantee, (i) to authenticate the certificates representing the
Notes (the "Notes Certificates") in accordance with the Indenture and (ii) to
(A) deliver each relevant Notes Certificate to the clearing system or systems
identified in each such Notes Certificate, or to the nominee of such clearing
system, or the custodian thereof, for credit to such accounts as the Purchasing
Agent may direct, or (B) deliver each relevant Notes Certificate to the
purchasers thereof as identified by the Purchasing Agent.

                                   ARTICLE 2

         Section 2.01 Directions Regarding Periodic Payments. As registered
owner of the Funding Agreement and the Guarantee as collateral securing payments
on the Notes, the Indenture Trustee will receive payments on the Funding
Agreement and the Guarantee on behalf of the Trust. The Trust hereby directs the
Indenture Trustee to use such funds to make payments on behalf of the Trust
pursuant to the Trust Agreement and the Indenture.

         Section 2.02 Maturity of the Funding Agreement. Upon the maturity of
the Funding Agreement and the return of funds thereunder, the Trust hereby
directs the Indenture Trustee to set aside from such funds an amount sufficient
for the repayment of the outstanding principal on the Notes and Trust Beneficial
Interest when due.

                                   ARTICLE 3

         Section 3.01 Certificates. Principal Life hereby agrees to deliver an
Officer's Certificate, a copy of which is attached hereto as Exhibit E, on a
quarterly basis to any rating agency currently rating the Program. The Trust
hereby agrees to deliver an Officer's Certificate, a copy of which is attached
hereto as Exhibit F, on a quarterly basis to any rating agency currently rating
the Program.

         Section 3.02 Filings. Principal Life hereby covenants, as sponsor and
depositor, to file, or cause to be filed, in a timely manner on behalf of the
Trust all reports, certifications or similar filings required under the
Securities Exchange Act of 1934, as amended.

                                   ARTICLE 4

         Section 4.01 No Additional Liability. Nothing in this Coordination
Agreement shall impose any liability or obligation on the part of any party to
this Coordination Agreement to make any payment or disbursement in addition to
any liability or obligation such party has under the Program Documents, except
to the extent that a party has actually received funds which it is obligated to
disburse pursuant to this Coordination Agreement.


                                      E-2


         Section 4.02 No Conflict. This Coordination Agreement is intended to be
in furtherance of the agreements reflected in the documents related to the
Program Documents, and not in conflict. To the extent that a provision of this
Coordination Agreement conflicts with the provisions of one or more Program
Documents, the provisions of such Program Documents shall govern.

         Section 4.03 Governing Law. This Coordination Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to the principles of conflicts of laws thereof.

         Section 4.04 Severability. If any provision in this Coordination
Agreement shall be invalid, illegal or unenforceable, such provision shall be
deemed severable from the remaining provisions of this Coordination Agreement
and shall in no way affect the validity or enforceability of such other
provisions of this Coordination Agreement.

         Section 4.05 Severability. If any provision in this Coordination
Agreement shall be invalid, illegal or unenforceable, such provision shall be
deemed severable from the remaining provisions of this Coordination Agreement
and shall in no way affect the validity or enforceability of such other
provisions of this Coordination Agreement.

         Section 4.06 Notices. All demands, notices and communications under
this Coordination Agreement shall be in writing and shall be deemed to have been
duly given upon receipt at the addresses set forth below:

         To the Trust:

                  Principal Life Income Fundings Trust (followed by the number
                    set forth in the Omnibus Instrument)
                  c/o U.S. Bank Trust National Association
                  100 Wall Street, 16th Floor
                  New York, New York 10005
                  Attention: Corporate Trust Administration
                  Telephone:  (212) 361-2184
                  Facsimile:  (212) 509-3384

         To the Indenture Trustee:

                  [Citibank, N.A.
                  Citibank Agency & Trust
                  388 Greenwhich Street, 14th Floor
                  New York, New York 10013
                  Attention: Nancy Forte
                  Telephone: (212) 816-5685
                  Facsimile:  (212) 657-3862]

                  [or if Citibank, N.A. is not acting as Indenture Trustee,
                    then to:

                  [          ]]


                                      E-3


         To Principal Life:

                  Principal Life Insurance Company
                  711 High Street
                  Des Moines, Iowa 50392
                  Attention:  General Counsel
                  Telephone:  (515) 247-5111
                  Facsimile:  (515) 248-3011

                  With a copy to:

                  Principal Life Insurance Company
                  711 High Street
                  Des Moines, Iowa  50392
                  Attention:  Jim Fifield
                  Telephone:  (515) 248-9196
                  Facsimile:  (866) 496-6527

         To PFG:

                  Principal Financial Group, Inc.
                  711 High Street
                  Des Moines, Iowa 50392
                  Attention:  General Counsel
                  Telephone:  (515) 247-5111
                  Facsimile:  (515) 248-3011

                  With a copy to:

                  Principal Life Insurance Company
                  711 High Street
                  Des Moines, Iowa  50392
                  Attention:  Jim Fifield
                  Telephone:  (515) 248-9196
                  Facsimile:  (866) 496-6527

         To Principal Financial Services, Inc.:

                  Principal Financial Services, Inc.
                  711 High Street
                  Des Moines, Iowa 50392
                  Attention:  General Counsel
                  Telephone:  (515) 247-5111
                  Facsimile:  (515) 248-3011

                                      E-4


                  With a copy to:

                  Principal Life Insurance Company
                  711 High Street
                  Des Moines, Iowa  50392
                  Attention:  Jim Fifield
                  Telephone:  (515) 248-9196
                  Facsimile:  (866) 496-6527

         To Bankers Trust Company, N.A:

                  Bankers Trust Company, N.A.
                  453 7th Street
                  Des Moines, Iowa  50309-2728
                  Attention: Angela C. Brick
                  Telephone:  (515) 245-2820
                  Facsimile:  (515) 247-2101

or at such other address as shall be designated by any such party in a written
notice to the other parties.

                                   ARTICLE 5

         Section 5.01 Omnibus Instrument; Execution and Incorporation of Terms.

         The parties to this Coordination Agreement will enter into this
Coordination Agreement by executing the Omnibus Instrument.

         By executing the Omnibus Instrument, each party hereto agrees that this
Coordination Agreement will constitute a legal, valid and binding agreement by
and among the Trust, Principal Life, PFG, PFSI, the Custodian and the Indenture
Trustee.

         All terms relating to the Trust or the Notes not otherwise included in
this Coordination Agreement will be as specified in the Omnibus Instrument or
Pricing Supplement, as indicated herein.

         Section 5.02 Acknowledgment. Principal Life hereby acknowledges Section
2.10 of the Indenture and Section 6.1 of the Custodial Agreement. The Trust
hereby acknowledges and agrees to the terms of the Custodial Agreement.

         Section 5.03 Counterparts. This Coordination Agreement, through the
Omnibus Instrument, may be executed in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.

         Section 5.04 Capitalized Terms. All capitalized terms used herein and
not otherwise defined in this Coordination Agreement will have the meanings set
forth in the Indenture.

                  [Remainder of Page Left Intentionally Blank.]

                                      E-5


                                    SECTION F

                        MISCELLANEOUS AND EXECUTION PAGES

         This Omnibus Instrument may be executed by each of the parties hereto
in any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

         Each signatory, by its execution hereof, does hereby become a party to
each of the agreements or indenture identified for such party as of the date
specified in such agreements or indenture.

         IN WITNESS WHEREOF, the undersigned have executed this Omnibus
Instrument with respect to the Notes as of the date first written above.

                                    PRINCIPAL LIFE INSURANCE COMPANY (in
                                    executing below agrees and becomes a party
                                    to (i) the Terms Agreement set forth in
                                    Section D herein and (ii) the Coordination
                                    Agreement set forth in Section E herein)

                                    By:_________________________________
                                       Name:
                                       Title:

                                    PRINCIPAL FINANCIAL GROUP, INC. (in
                                    executing below agrees and becomes a party
                                    to (i) the Terms Agreement set forth in
                                    Section D herein and (ii) the Coordination
                                    Agreement set forth in Section E herein)

                                    By:_________________________________
                                       Name:
                                       Title:

                                    PRINCIPAL FINANCIAL SERVICES, INC. (in
                                    executing below agrees and becomes a party
                                    to (i) the License Agreement set forth in
                                    Section B herein and (ii) the Coordination
                                    Agreement set forth in Section E herein)

                                    By:_________________________________
                                       Name:
                                       Title:

                             [Execution Page 1 of 3]



                                    THE PRINCIPAL LIFE INCOME FUNDINGS TRUST
                                    DESIGNATED IN THIS OMNIBUS INSTRUMENT (in
                                    executing below agrees and becomes a party
                                    to (i) the License Agreement set forth in
                                    Section B herein, (ii) the Indenture set
                                    forth in Section C herein, (iii) the Terms
                                    Agreement set forth in Section D herein and
                                    (iv) the Coordination Agreement set forth in
                                    Section E herein)

                                    By: U.S. Bank Trust National Association,
                                    not in its individual capacity but solely in
                                    its capacity as trustee of the Trust

                                    By:__________________________________
                                       Name:
                                       Title:

                                    U.S. BANK TRUST NATIONAL ASSOCIATION (in
                                    executing below agrees and becomes a party
                                    to the Trust Agreement set forth in Section
                                    A herein), as Trustee

                                    By:__________________________________
                                       Name:
                                       Title:

                                    GSS HOLDINGS II, INC. (in executing below
                                    agrees and becomes a party to the Trust
                                    Agreement set forth in Section A herein), as
                                    Trust Beneficial Owner

                                    By:__________________________________
                                       Name:
                                       Title:

                                    [CITIBANK, N.A.][indenture trustee if
                                    Citibank, N.A. is not acting as indenture
                                    trustee] (in executing below agrees and
                                    becomes a party to (i) the Indenture set
                                    forth in Section C herein, as Indenture
                                    Trustee, Registrar, Transfer Agent, Paying
                                    Agent and Calculation Agent and (ii) the
                                    Coordination Agreement set forth in Section
                                    E herein), as Indenture Trustee, Registrar,
                                    Transfer Agent, Paying Agent and Calculation
                                    Agent

                                    By:__________________________________
                                       Name:
                                       Title:

                             [Execution Page 2 of 3]


                                    BANKERS TRUST COMPANY, N.A. (in executing
                                    below agrees and becomes a party to the
                                    Coordination Agreement set forth in Section
                                    E herein)

                                    By:__________________________________
                                       Name:
                                       Title:

                                    [Purchasing Agent] (in executing below
                                    agrees and becomes a party to the Terms
                                    Agreement set forth in Section D herein)

                                    By:__________________________________
                                       Name:
                                       Title:

                             [Execution Page 3 of 3]



            INDEX OF EXHIBITS AND SCHEDULES TO THE OMNIBUS INSTRUMENT

Exhibit A      Standard Trust Terms -- Incorporated herein by reference to
               Exhibit 4.6 to Principal Life Insurance Company's and Principal
               Financial Group, Inc.'s Registration Statement on Form S-3
               (Registration Nos. 333-129763 and 333-129763-01.

Exhibit B      Standard License Agreement Terms -- Incorporated herein by
               reference to Exhibit 99.1 to Principal Life Insurance Company's
               Current Report on Form 8-K, filed on March 29, 2004.

Exhibit C      Standard Indenture Terms -- Incorporated herein by reference to
               Exhibit 4.1 to Principal Life Insurance Company's and Principal
               Financial Group, Inc.'s Registration Statement on Form S-3
               (Registration Nos. 333-129763 and 333-129763-01.

Exhibit D      Pricing Supplement -- Incorporated herein by reference to the
               Pricing Supplement with respect to Principal Life Income Fundings
               Trust o, filed on o, with the Securities and Exchange Commission
               pursuant to Rule 424(b)(2) under the Securities Act of 1933, as
               amended.

Exhibit E      Principal Life Insurance Company Officer's Certificate

Exhibit F      Principal Life Income Fundings Trusts Trustee Officer's
               Certificate

Exhibit G      Free Writing Prospectus(es)

Schedule I     Terms Agreement Specifications




                                    EXHIBIT E
                        Principal Life Insurance Company

                              Officer's Certificate

         The undersigned, an officer of Principal Life Insurance Company, an
Iowa stock life insurance company ("Principal Life"), does hereby certify to
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc., in such capacity and on behalf of Principal Life, to the knowledge of the
undersigned and after reasonable inquiry, that:

         1.       each of the representations and warranties of Principal Life
                  contained in each Expense and Indemnity Agreement entered into
                  in connection with the Registration Statement (defined below),
                  and each Funding Agreement issued in connection with the
                  Program (the "Specified Agreements") (other than any
                  representation or warranty expressly made as of a date prior
                  to the date hereof) are true and correct on and as of the date
                  hereof, with the same effect as though such representation or
                  warranty had been made on and as of the date hereof;

         2.       no default under any of the Specified Agreements and no event
                  or any condition which, with notice or lapse of time or both,
                  would become a default, has occurred and is continuing as of
                  the date hereof;

         3.       Principal Life has performed and complied with, respectively,
                  in all material respects, all of the agreements, covenants,
                  obligations and conditions applicable to Principal Life
                  required by the Specified Agreements to be performed or
                  complied with by Principal Life on or before the date hereof;

         4.       the Registration Statement filed on Form S-3 (File Nos.
                  333-129763 and 333-129763-01) (the "Registration Statement")
                  by Principal Life and Principal Financial Group, Inc. has been
                  declared effective by the Securities and Exchange Commission
                  (the "Commission") under the Securities Act of 1933, as
                  amended (the "Act") and no stop order suspending the
                  effectiveness of the Registration Statement has been issued
                  and no proceedings for that purpose have been commenced by or
                  are pending before or contemplated by the Commission;

         5.       all filings, if any, required by Rule 424 and Rule 430A under
                  the Act have been made in a timely manner;

         6.       since ______, the Trusts organized in connection with the
                  program contemplated by the Registration Statement have issued
                  the following series of Notes:

                           [List each series of Notes.] [(collectively, the
                            "Designated Notes")]; and

         7.       the Funding Agreements issued in connection with the
                  Designated Notes have been executed and delivered by Principal
                  Life in accordance with the terms and conditions of the
                  Program Documents.


                                      E-1


         Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Standard Indenture Terms attached as Exhibit
4.1 to the Registration Statement.

         IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the o day of o, 200o.

                                    [NAME], [in his/her] capacity as an
                                    authorized officer of Principal Life


                                    By:__________________________________
                                       Name:
                                       Title:


                                      E-2


                                    EXHIBIT F
                      Principal Life Income Fundings Trusts

                          Trustee Officer's Certificate

         U.S. Bank Trust National Association, not in its individual capacity
but solely in its capacity as trustee acting on behalf of each common law trust
organized under the laws of the State of New York (in such capacity, the
"Trustee," and each such common law trust being referred to herein as, a
"Trust") in connection with the program contemplated by Registration Statement
Nos. 333-129763 and 333-129763-01 filed on Form S-3 (the "Registration
Statement") by Principal Life Insurance Company and Principal Financial Group,
Inc. with the Securities and Exchange Commission, does hereby certify to
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc., in such capacity and on behalf of each Trust, to the knowledge of the
Trustee, that:

         1.       each of the representations and warranties of each Trust
                  contained in the Notes issued in connection with the Program,
                  each Indenture entered into in connection with the
                  Registration Statement and the Expense and Indemnity Agreement
                  concerning the Trusts (the "Specified Agreements") (other than
                  any representation or warranty expressly made as of a date
                  prior to the date hereof) are true and correct on and as of
                  the date hereof, with the same effect as though such
                  representation or warranty had been made on and as of the date
                  hereof;

         2.       no default under any of the Specified Agreements and no event
                  or any condition which, with notice or lapse of time or both,
                  would become a default, has occurred and is continuing as of
                  the date hereof;

         3.       each Trust has performed and complied with, respectively, in
                  all material respects, all of the agreements, covenants,
                  obligations and conditions applicable to such Trust required
                  by the Specified Agreements to be performed or complied with
                  by such Trust on or before the date hereof;

         4.       the Notes issued in connection with the Program, have been
                  issued, in all material respects, in accordance with the terms
                  and conditions of the Program Documents; and

         5.       each Funding Agreement has been executed and delivered by the
                  related Trust in accordance with the terms and conditions of
                  the Program Documents.

         Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Standard Indenture Terms attached as Exhibit
4.1 to the Registration Statement. In no event shall U.S. Bank Trust National
Association in its personal corporate capacity have any liability for any of the
certifications or statements contained in this Trustee Officer's Certificate,
such liability being solely that of each Trust.


                                      F-1


         IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the o day of o, 200o.

                                    U.S. Bank Trust National Association, not in
                                    its capacity but solely in its capacity as
                                    Trustee acting on behalf of each Trust

                                    By: __________________________________
                                        Name:
                                        Title:



                                      F-2


                                    EXHIBIT G
                           Free Writing Prospectus(es)

                                     [None.]


                                      G-1


                                   SCHEDULE I
                         Terms Agreement Specifications

         In connection with Section 3(a)(iv) of the Distribution Agreement, the
Program under which the Notes are issued is rated Aa2 by Moody's Investors
Service, Inc. ("Moody's") and AA by Standard & Poor's Rating Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"). Principal Life and PFG
expect that the Notes will be rated Aa2 by Moody's. The Company's financial
strength rating is Aa2 by Moody's and AA by S&P.

         In accordance with Section 2.02(b) of the Terms Agreement and in
connection with the purchase of Notes from the Trust by the Purchasing Agent as
principal, the following items will be delivered on the Settlement Date:

         o        Opinion of Sidley Austin LLP regarding the enforceability of
                  the Guarantee and the Notes.

         All capitalized terms used herein and not otherwise defined herein will
have the meanings set forth in the Distribution Agreement.


                                      I-1

EX-4.11

                                                                    EXHIBIT 4.11

                               CLOSING INSTRUMENT

         WHEREAS, the parties named herein desire to enter into certain Program
Documents contained herein, each such document dated as of this o day of o, 200o
(the "Original Issue Date"), relating to the issuance by Principal Life Income
Fundings Trust o (the "Trust") of Notes to investors under Principal Life's
secured notes program;

         WHEREAS, the Trust is a trust organized under, and its activities will
be governed by, the provisions of the Trust Agreement as set forth in the
omnibus instrument related to the Trust dated as of the date of the Pricing
Supplement (the "Omnibus Instrument");

         WHEREAS, certain licensing arrangements between the Trust and Principal
Financial Services, Inc. will be governed pursuant to the provisions of the
License Agreement, as set forth in the Omnibus Instrument;

         WHEREAS, the Notes will be issued pursuant to the Indenture, as set
forth in the Omnibus Instrument (the "Indenture");

         WHEREAS, the sale of the Notes will be governed by the Terms Agreement,
as set forth in the Omnibus Instrument;

         WHEREAS, certain custodial arrangements of the Funding Agreement and
the Guarantee will be governed pursuant to the provisions of the Custodial
Agreement dated as of o, 2006 by and among Bankers Trust Company, N.A., acting
as custodian (the "Custodian"), the Indenture Trustee and the Trustee, on behalf
of the Trust;

         WHEREAS, certain agreements relating to the Notes, the Funding
Agreement and the Guarantee are set forth in the Coordination Agreement, as set
forth in the Omnibus Instrument.

         All capitalized terms used herein and not otherwise defined will have
the meanings set forth in the Indenture.

                  [Remainder of Page Intentionally Left Blank]



                                     PART I
                            INSTRUCTIONS OF THE TRUST

         As of the Original Issue Date, the Trust herewith delivers to the
Indenture Trustee, or has caused to be delivered to the Indenture Trustee, the
Notes specified in the Pricing Supplement, having the [principal amount/face
amount] as set forth in the Omnibus Instrument.

         As of the Original Issue Date, the Trust hereby instructs the Indenture
Trustee to take all actions required to be taken with respect to the Notes under
Section 2.05(e) of the Standard Indenture Terms.

         As of the Original Issue Date, Principal Life and the Trust hereby
direct the Indenture Trustee to deposit the amount of $o, the Net Proceeds to
the Trust (as specified in the Pricing Supplement) in respect of the Notes to:

   Bank: o

   ABA #:  o

   Account #: o

   Contract #: o



         As of the Original Issue Date, the agents specified in the Pricing
Supplement hereby direct the Indenture Trustee to deliver the Notes as follows:

         [Purchasing Agent] DTC #o

         The Depository Trust Company

                  [Remainder of Page Intentionally Left Blank]


                                      I-1


                                    PART II
            ACKNOWLEDGMENT OF INDENTURE TRUSTEE CONCERNING THE NOTES

         The Indenture Trustee certifies, as of the Original Issue Date, the
following:

         (a) The Indenture Trustee acknowledges receipt of the Notes; and

         (b) The Indenture Trustee (including in its capacity as Registrar) has
taken all action required to be taken with respect to the Notes under Section
2.05(e) of the Standard Indenture Terms.

                  [Remainder of Page Intentionally Left Blank]


                                      II-1


                                    PART III
    CERTIFICATE REGARDING CUSTODY OF THE FUNDING AGREEMENT AND THE GUARANTEE

         In connection with the issuance of the Funding Agreement and the
Guarantee, the Assignment of Funding Agreement and Guarantee (set forth in Part
IV of this Closing Instrument), the Custodian hereby represents that it has
received delivery of the Funding Agreement and the Guarantee and is holding the
Funding Agreement and the Guarantee for the benefit of the Indenture Trustee and
that the Funding Agreement and the Guarantee are in the possession of the
Custodian at the address below:

         Bankers Trust Company, N.A.
         453 7th Street
         Des Moines, Iowa  50309-2728


                  [Remainder of Page Intentionally Left Blank]


                                     III-1


                                    PART IV
                  ASSIGNMENT OF FUNDING AGREEMENT AND GUARANTEE

         Pursuant to the terms of the Indenture, the Trust hereby grants to the
Indenture Trustee, for the benefit of the Holders of the Notes, a first priority
perfected security interest in, and collaterally assigns to the Indenture
Trustee, for the benefit of the Holders of the Notes, the Trust's right, title,
benefits, remedies and interests in, to and under the Funding Agreement, the
Guarantee and the other Collateral described in the Indenture and all of its
rights and privileges with respect to the Collateral and all income and profits
thereon, and all interest, dividends and other payments and distributions with
respect thereto, and all Proceeds of the foregoing.

         Each of the Trust, the Indenture Trustee, Principal Life and PFG hereby
agrees that, in furtherance of the collateral assignment described above, until
such time as the Indenture Trustee notifies the Trust, Principal Life and PFG
that all obligations of the Trust pursuant or related to the Notes have been
paid or satisfied in full, the Indenture Trustee shall have and may exercise the
rights and remedies of an Agreement Holder (as defined in the Funding Agreement)
under the Funding Agreement and of the Trust under the Guarantee.
Notwithstanding the foregoing (and whether or not the foregoing notification is
given) and Section 5 of the Funding Agreement (which Principal Life acknowledges
and agrees has been complied with) all obligations, representations and
warranties of an Agreement Holder under the Funding Agreement and of the Trust
under the Guarantee shall nevertheless remain obligations, representations and
warranties of the Trust, as the case may be, and shall not be obligations of the
Indenture Trustee. Principal Life, PFG and the Trust hereby agree that, until
such time as the Indenture Trustee notifies the Trust, Principal Life and PFG
that all obligations of the Trust pursuant to or related to the Notes have been
paid or satisfied in full, Principal Life and PFG, as applicable, will comply
with instructions originated by the Indenture Trustee with respect to the
Funding Agreement and the Guarantee, as applicable, without further consent by
the Trust.

         Principal Life and PFG hereby affirm that they have recorded the
collateral assignment and grant of the security interest on their books and
records to reflect the same described above. Principal Life and PFG each agree,
as applicable, that it will comply with all orders of the Indenture Trustee with
respect to the Funding Agreement and the Guarantee, as applicable without any
further consent of the Trust. Each of Principal Life and PFG hereby confirms
that it has received all documents and instruments which it requires pursuant to
the terms of the Funding Agreement and Guarantee, as applicable, in connection
with the collateral assignment and grant of such security interest and/or rights
of the Indenture Trustee hereunder.

         Each of Principal Life and PFG hereby also represents that it has not
received any notice of any adverse claim to the Funding Agreement or Guarantee,
as applicable, other than the creation and perfection of a security interest in
the Funding Agreement and Guarantee, as applicable, and the proceeds thereof as
described herein.

         The collateral assignment and grant of the security interest and this
instrument shall be governed by, and shall be construed and enforced in
accordance with, the laws of the State of New York, without regard to conflicts
of laws principles thereof, and shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.

         This instrument may not be amended, modified or waived without the
consent of the Indenture Trustee, the Trust, Principal Life and PFG.

         The Custodian hereby acknowledges the terms of this Assignment of
Funding Agreement and Guarantee.



                                      IV-1


                                     PART V
          ACKNOWLEDGEMENT OF FUNDING AGREEMENT AND GUARANTEE ASSIGNMENT

         Simultaneously herewith, Principal Life has issued the Funding
Agreement to the Trust and PFG has issued the Guarantee to the Trust. By this
instrument, the receipt of which Principal Life and PFG hereby acknowledge, the
Trust has informed Principal Life and PFG that it has conveyed and assigned (for
security purposes) all of its right, title, benefits, remedies and interests in,
to and under the Funding Agreement and the Guarantee to the Indenture Trustee
pursuant to the Indenture.

         Principal Life and PFG hereby consent to the aforementioned assignment
of the Funding Agreement and the Guarantee, as applicable, with respect to the
assignment thereof to the Indenture Trustee under the Indenture. Principal Life
and PFG affirm that they have changed their books and records to reflect such
assignment and agree to make payments in accordance with the terms of the
Funding Agreement and the Guarantee, as applicable, to the Indenture Trustee.
Principal Life and PFG also agree that all of the covenants made in the Funding
Agreement and the Guarantee, as applicable, are also for the benefit of the
Indenture Trustee, and further agree that Principal Life and PFG shall deliver
to the Indenture Trustee duplicate original copies of all notices, statements,
communications and instruments delivered by Principal Life and PFG, as
applicable, to the Trust pursuant to the Funding Agreement and the Guarantee, as
applicable.

         Principal Life and PFG agree to execute and deliver to the Trust and
the Indenture Trustee such documents and take such other action as the Trust and
the Indenture Trustee may reasonably request in order to ensure that the consent
granted by Principal Life and PFG pursuant to the preceding paragraph shall
remain continuously effective until the termination of the Funding Agreement and
the Guarantee, as applicable. The consent contained in the preceding paragraph
is coupled with an interest and shall be irrevocable.

         This acknowledgment of collateral assignment and grant of security
interest and this instrument shall be governed by, and shall be construed and
enforced in accordance with, the laws of the State of New York, without regard
to conflicts of laws principles thereof, and shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.

         This instrument may not be amended, modified or waived without the
consent of the Indenture Trustee, the Trust, Principal Life and PFG.

         The Custodian hereby acknowledges the terms of this Acknowledgment of
Funding Agreement and Guarantee Assignment.

                  [Remainder of Page Intentionally Left Blank]


                                      V-1


                                    PART VI
                           NOTICE OF SECURITY INTEREST

         Pursuant to the Indenture, the Trust has collaterally assigned the
Funding Agreement and Guarantee to the Indenture Trustee pursuant to the
Indenture.

         Notice is hereby given that the Indenture Trustee, on behalf of the
Holders of the Notes, has a security interest in the Collateral, including, but
not limited to, any and all payments to be made by Principal Life to the Trust
pursuant to the Funding Agreement and any and all payments to be made by PFG to
the Trust pursuant to the Guarantee. Each of Principal Life and PFG, by
executing this instrument, hereby (x) consents to the security interest granted
by the Trust, to the Indenture Trustee in the payments under the Funding
Agreement and Guarantee, as applicable, (y) agrees to make all payments due
under the Funding Agreement and Guarantee, as applicable, to the Collection
Account or any other account designated in writing to Principal Life or PFG, as
applicable, by the Indenture Trustee and (z) agrees to comply with all orders of
the Indenture Trustee with respect to the Funding Agreement and Guarantee, as
applicable, without any further consent from the Trust.

         This notice of security interest shall be governed by, and shall be
construed and enforced in accordance with, the laws of the State of New York,
without regard to conflicts of laws principles thereof, and shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.

         This instrument may not be amended, modified or waived without the
consent of the Indenture Trustee, the Trust, Principal Life and PFG.

         The Custodian hereby acknowledges the terms of this Notice of Security
Interest.

                  [Remainder of Page Intentionally Left Blank]

                                      VI-1



                                    PART VII
                      PRINCIPAL LIFE OFFICER'S CERTIFICATE

         The undersigned, an authorized officer of Principal Life, does hereby
certify to each agent that is a party to the Terms Agreement (as defined in the
Omnibus Instrument) relating to the Notes, in such capacity and on behalf of
Principal Life, pursuant to the Distribution Agreement, that:

         1. Since the respective dates as of which information is given in the
Prospectus (as defined in the Distribution Agreement), as of the date hereof,
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
Principal Life and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business;

         2. The representations and warranties of Principal Life contained in
the Distribution Agreement are true and correct with the same force and effect
as though expressly made at and as of the date hereof;

         3. Principal Life has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the date
hereof; and

         4. No stop order suspending the effectiveness of the Registration
Statement (as defined in the Distribution Agreement) has been issued and no
proceedings for that purpose have been instituted or are pending or, to the best
of such person's knowledge, are threatened by the Commission (as defined in the
Distribution Agreement).

         5. Since the date of the Prospectus, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or Prospectus, and there has been no document required to be filed
under the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act
Regulations (all as defined in the Distribution Agreement) which, upon filing,
would be deemed to be incorporated by reference in the Prospectus which has not
been so filed.

                  [Remainder of Page Intentionally Left Blank]


                                     VII-1


                                   PART VIII
                            PFG OFFICER'S CERTIFICATE


         The undersigned, an authorized officer of PFG, does hereby certify to
each Purchasing Agent that is a party to the Terms Agreement (as defined in the
Omnibus Instrument) relating to the Notes, in such capacity and on behalf of
PFG, pursuant to the Distribution Agreement, that:

         1. Since the respective dates as of which information is given in the
Prospectus (as defined in the Distribution Agreement), as of the date hereof,
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of PFG and
its subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business;

         2. The representations and warranties of PFG contained in the
Distribution Agreement are true and correct with the same force and effect as
though expressly made at and as of the date hereof;

         3. PFG has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the date hereof; and

         4. No stop order suspending the effectiveness of the Registration
Statement (as defined in the Distribution Agreement) has been issued and no
proceedings for that purpose have been instituted or are pending or, to the best
of such person's knowledge, are threatened by the Commission (as defined in the
Distribution Agreement).

         5. Since the date of the Prospectus, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or Prospectus, and there has been no document required to be filed
under the 1933 Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act
Regulations (all as defined in the Distribution Agreement) which, upon filing,
would be deemed to be incorporated by reference in the Prospectus which has not
been so filed.

                  [Remainder of Page Intentionally Left Blank]




                                     VIII-1



                                    PART IX
                               TRUST CERTIFICATES

         A. Trust Certificate pursuant to the Distribution Agreement

         The Trust does hereby certify to each Purchasing Agent that is a party
to the Terms Agreement (as defined in the Omnibus Instrument) relating to the
Notes, in such capacity and on behalf of the Trust, pursuant to the Distribution
Agreement and Terms Agreement, as applicable, that:

         1. Since the respective dates as of which information is given in the
Prospectus (as defined in the Distribution Agreement), as of the date hereof,
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Trust, whether or not arising in the ordinary course of business;

         2. The representations and warranties of the Trust contained in the
Distribution Agreement are true and correct with the same force and effect as
though expressly made at and as of the date hereof; and

         3. The Trust has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the date
hereof.

         B. Trust Certificate pursuant to Section 314(c) of the Trust Indenture
Act

         The undersigned, a Responsible Officer of the Trustee, on behalf of the
Trust and pursuant to Section 1.02 of the Standard Indenture Terms, does hereby
certify to the Indenture Trustee as follows:

         1. I am familiar with the Indenture and have read the covenants,
conditions and definitions contained therein related to the issuance,
authentication and delivery of the Notes;

         2. As to the matters set forth herein, I either have personal knowledge
thereof or have obtained knowledge thereof from officers or employees of the
Trust, Principal Life or PFG in whom I have confidence and whose duties require
them to have personal knowledge thereof. In my opinion, I have made such
examination and investigation as has been necessary to enable me to express an
informed opinion as to whether or not the covenants or conditions contained in
the Indenture have been complied with; and

         3. All conditions precedent provided for in the Indenture to the
authentication and delivery of the Notes have been complied with.

         It is expressly understood that: (i) this Certificate is executed by
U.S. Bank Trust Company, N.A., not in its individual capacity but solely as
Trustee of the Trust, in the exercise of the power and authority conferred and
vested in it as such Trustee and (ii) each of the representations made herein by
the Trustee are not personal representations, undertakings and agreements of
U.S. Bank Trust Company, N.A., or its officers, but are binding solely on the
Trust.

                                       IX-1



                                     PART X
                          PRINCIPAL LIFE CERTIFICATION

         Principal Life certifies, as of the Original Issue Date, that the
Principal Life Officer's Certificate, a copy of which is attached as Exhibit A
to this Closing Instrument, is true and correct and remains in full force and
effect.


                  [Remainder of Page Intentionally Left Blank]

                                      X-1


                                    PART XI
                                PFG CERTIFICATION

         PFG certifies, as of the Original Issue Date, that the PFG Officer's
Certificate, a copy of which is attached as Exhibit B to this Closing
Instrument, is true and correct and remains in full force and effect.

                  [Remainder of Page Intentionally Left Blank]

                                      XI-1



                                    PART XII
                         INDENTURE TRUSTEE CERTIFICATION

         The Indenture Trustee certifies, as of the Original Issue Date, that
the Indenture Trustee Officer's Certificate, a copy of which is attached as
Exhibit C to this Closing Instrument, is true and correct and remains in full
force and effect.

                  [Remainder of Page Intentionally Left Blank]

                                      XII-1



                                   PART XIII
                              TRUSTEE CERTIFICATION

         The Trustee certifies, as of the Original Issue Date, that the Trustee
Officer's Certificate, a copy of which is attached as Exhibit D to this Closing
Instrument, is true and correct and remains in full force and effect.

                  [Remainder of Page Intentionally Left Blank]

                                      XIII-1



                                    PART XIV
                         PURCHASING AGENT CERTIFICATION


         On the date hereof, the Trust will issue Notes in accordance with the
terms of the Distribution Agreement. The Purchasing Agent hereby certifies to
Principal Life, PFG and the Trust as follows:

         (i) that such Purchasing Agent has anti-money laundering policies and
procedures in place in accordance with the requirements imposed by the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), Pub. L, 107-56, 115 Stat.
280 (October 26, 2001), or any rules or regulations promulgated thereunder, and
the Foreign Assets Control Regulations issued by the Office of Foreign Assets
Control of the United States Department of Treasury (31 CFR Part 500), in each
case to the extent applicable to such Purchasing Agent; and

         (ii) that such Purchasing Agent has implemented an anti-money
laundering compliance program pursuant to NASD Rule 3011, to the extent
applicable to such Purchasing Agent.

                  [Remainder of Page Intentionally Left Blank]

                                      XIV-1



                                    PART XV
                                  CROSS-RECEIPT

         The Trust hereby acknowledges receipt of the Net Proceeds to the Trust
(as specified in the Pricing Supplement) from the Indenture Trustee and herewith
delivers to the Indenture Trustee, or has caused to be delivered to the
Indenture Trustee, the Notes, duly executed by the Trust pursuant to the
Indenture.

         The Trust hereby acknowledges receipt of funds for the Trust Beneficial
Interest from or at the direction of the Trust Beneficial Owner and has caused
to be registered in the name of the Trust Beneficial Owner the Trust Beneficial
Interest pursuant to the Trust Agreement.

         Principal Life hereby acknowledges receipt of the Net Proceeds to the
Trust and, for purposes of the Funding Agreement, the receipt of the Net
Proceeds to the Trust shall be deemed to be receipt by Principal Life in full of
the Net Deposit (as specified in the Funding Agreement). Principal Life herewith
delivers to the Indenture Trustee, or has caused to be delivered to the
Indenture Trustee, the Funding Agreement, duly executed by Principal Life.

         The Custodian, on behalf of the Indenture Trustee, hereby acknowledges
receipt from Principal Life of the Funding Agreement.

         The Custodian, on behalf of the Indenture Trustee, hereby acknowledges
receipt from PFG of the Guarantee.

         The Trust Beneficial Owner hereby acknowledges ownership of the Trust
Beneficial Interest.

         PFG and the Indenture Trustee hereby acknowledge the terms of this
Cross-Receipt.

                  [Remainder of Page Intentionally Left Blank]

                                      XV-1



                                    PART XVI
                        MISCELLANEOUS AND EXECUTION PAGES

         This Closing Instrument may be executed by each of the parties hereto
in any number of counterparts, and by each of the parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

         Each signatory, by its execution hereof, does hereby become a party to
each of the agreements or instruments identified for such party as of the
Original Issue Date.

         IN WITNESS WHEREOF, the undersigned have executed this Closing
Instrument with respect to the Trust, dated as of the date first written above.

                                    By:      PRINCIPAL LIFE INSURANCE COMPANY
                                             (in executing below agrees and
                                             becomes a party to (i) the
                                             Instructions of the Trust set forth
                                             in Part I herein, (ii) the
                                             Assignment of Funding Agreement and
                                             Guarantee set forth in Part IV
                                             herein, (iii) the Acknowledgement
                                             of Funding Agreement and Guarantee
                                             Assignment set forth in Part V
                                             herein, (iv) the Notice of Security
                                             Interest set forth in Part VI
                                             herein, (v) the Principal Life
                                             Certification set forth in Part X
                                             herein and (vi) the Cross-Receipt
                                             set forth in Part XV herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      PRINCIPAL FINANCIAL GROUP, INC. (in
                                             executing below agrees and becomes
                                             a party to (i) the Assignment of
                                             Funding Agreement and Guarantee set
                                             forth in Part IV herein, (ii) the
                                             Acknowledgement of Funding
                                             Agreement and Guarantee Assignment
                                             set forth in Part V herein, (iii)
                                             the Notice of Security Interest set
                                             forth in Part VI herein, (iv) the
                                             PFG Certification set forth in Part
                                             XI herein and (v) the Cross Receipt
                                             set forth in Part XV herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                             [Execution Page 1 of 4]



                                    By:      THE PRINCIPAL LIFE INCOME FUNDINGS
                                             TRUST DESIGNATED IN THIS CLOSING
                                             INSTRUMENT (in executing below
                                             agrees and becomes party to (i) the
                                             Instructions of the Trust set forth
                                             in Part I herein, (ii) the
                                             Assignment of Funding Agreement and
                                             Guarantee set forth in Part IV
                                             herein, (iii) the Acknowledgement
                                             of Funding Agreement and Guarantee
                                             Assignment set forth in Part V
                                             herein, (iv) the Notice of Security
                                             Interest set forth in Part VI
                                             herein, (v) the Trust Certificate
                                             set forth in Part IX herein and
                                             (vi) the Cross-Receipt set forth in
                                             Part XV herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      [CITIBANK, N.A.][indenture trustee
                                             if Citibank, N.A. is not acting as
                                             indenture trustee], in its capacity
                                             as Indenture Trustee, Registrar,
                                             Transfer Agent, Paying Agent and
                                             Calculation Agent (in executing
                                             below agrees and becomes party to
                                             (i) the Instructions of the Trust
                                             set forth in Part I herein, (ii)
                                             the Acknowledgement of Indenture
                                             Trustee Concerning the Notes set
                                             forth in Part II herein, (iii) the
                                             Assignment of Funding Agreement and
                                             Guarantee set forth in Part IV
                                             herein, (iv) the Acknowledgement of
                                             Funding Agreement and Guarantee
                                             Assignment set forth in Part V
                                             herein, (v) the Notice of Security
                                             Interest set forth in Part VI
                                             herein, (vi) the Indenture Trustee
                                             Certification set forth in Part XII
                                             herein and (vii) the Cross Receipt
                                             set forth in Part XV herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                             [Execution Page 2 of 4]



                                    By:      U.S. BANK TRUST NATIONAL
                                             ASSOCIATION, in its capacity as
                                             Trustee (in executing below agrees
                                             and becomes a party to the Trustee
                                             Certification set forth in Part
                                             XIII herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      GSS HOLDINGS II, INC., in its
                                             capacity as Trust Beneficial Owner
                                             (in executing below agrees and
                                             becomes a party to the
                                             Cross-Receipt set forth in Part XV
                                             herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                             [Execution Page 3 of 4]



                                    By:      BANKERS TRUST COMPANY, N.A., in its
                                             capacity as custodian (in executing
                                             below agrees and becomes a party to
                                             (i) the Certificate Regarding
                                             Custody of the Funding Agreement
                                             and the Guarantee set forth in Part
                                             III herein, (ii) the Assignment of
                                             Funding Agreement and Guarantee set
                                             forth in Part IV herein, (iii) the
                                             Acknowledgment of Funding Agreement
                                             and Guarantee Assignment set forth
                                             in Part V herein, (iv) the Notice
                                             of Security Interest set forth in
                                             Part VI herein and (v) the Cross
                                             Receipt set forth in Part XV
                                             herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      [Name], in his/her capacity as an
                                             authorized officer of Principal
                                             Life (in executing below agrees and
                                             becomes a party to the Principal
                                             Life Officer's Certificate set
                                             forth in Part VII herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      [Name], in his/her capacity as an
                                             authorized officer of PFG (in
                                             executing below agrees and becomes
                                             a party to the PFG Officer's
                                             Certificate set forth in Part VIII
                                             herein)

                                             By: ________________________
                                             Name: ______________________
                                             Title: _____________________

                                    By:      [Purchasing Agent] (in executing
                                             below agrees and becomes a party to
                                             (i) the Instructions of the Trust
                                             set forth in Part I herein and (ii)
                                             the Purchasing Agent Certification
                                             set forth in Part XIV herein)

                                             By: _________________________
                                             Name: _______________________
                                             Title: ______________________

                             [Execution Page 4 of 4]

EX-4.12

                                                                    EXHIBIT 4.12

                               CUSTODIAL AGREEMENT

                        THIS CUSTODIAL AGREEMENT (this "CUSTODIAL AGREEMENT") is
entered into as of o, 2006 among Bankers Trust Company, N.A., a national banking
association, acting as custodian (the "CUSTODIAN"), Citibank, N.A. in its
capacity as indenture trustee (the "INDENTURE TRUSTEE") for the holders of the
notes (the "NOTES") to be issued by each trust (each a "TRUST") organized in
connection with the Principal Life Insurance Company Secured Notes Program (the
"PROGRAM"), and U.S. Bank Trust National Association, as trustee (the "TRUSTEE")
on behalf of each Trust organized in connection with the Program.

                        WHEREAS, in connection with the issuance and sale of the
Notes by each Trust, the Trustee, on behalf of each Trust, will purchase
from Principal Life Insurance Company ("PRINCIPAL LIFE") a funding agreement (a
"FUNDING AGREEMENT"), the payment obligations of which are fully and
unconditionally guaranteed by Principal Financial Group, Inc. ("PFG") pursuant
to a guarantee issued to such Trust (the "GUARANTEE");

                        WHEREAS, the parties desire that each Funding Agreement
and Guarantee be held in the State of Iowa at all times prior to the
occurrence and continuance of an Event of Default (as defined in each such
Funding Agreement) or a breach of PFG's obligations under the terms of the
Guarantee;

                        WHEREAS, the parties desire that the Custodian be
appointed as custodian for the Indenture Trustee, to hold in safe custody for
the benefit of the Indenture Trustee, on the terms and conditions provided in
this Custodial Agreement, each Funding Agreement and Guarantee; and

                        WHEREAS, the Custodian has the power and ability
sufficient to undertake and to discharge the duties accepted by it under this
Custodial Agreement;

                        NOW, THEREFORE, in consideration of the foregoing
premises and the covenants contained herein, and for other good and valuable
consideration, the receipt of which are hereby acknowledged, the parties hereto
covenant and agree as follows:

                                   ARTICLE 1
                                   DEFINITIONS

                        SECTION 1.1. Incorporation of Definitions by Reference.
All capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Standard Indenture Terms filed as an
exhibit to the registration statement concerning the Program.

                                   ARTICLE 2
                            APPOINTMENT OF CUSTODIAN

                        SECTION 2.1. Appointment of Custodian. The Indenture
Trustee hereby appoints the Custodian and the Custodian hereby acknowledges that
it will act as custodian for the Indenture Trustee with respect to each Funding
Agreement and Guarantee that is collaterally assigned to the Indenture Trustee
pursuant to the Indenture and with respect to





each Funding Agreement and each Guarantee in which a security interest is
granted to the Indenture Trustee pursuant to the Indenture, and that comes into
the physical custody or possession of the Custodian under this Custodial
Agreement, until the earlier of (a) such time when the Indenture Trustee
notifies the Custodian in writing to the contrary, whereupon such physical
custody and possession of each Funding Agreement and Guarantee specified in such
notice will be transferred to the Indenture Trustee or another Person in the
manner directed by the Indenture Trustee or (b) the termination of this
Custodial Agreement. Acceptance by the Custodian of this appointment is
conclusively evidenced by its execution of this Custodial Agreement.

                        SECTION 2.2. Custodian Not Subject to Direction of Any
Trust. In no event shall the Custodian, in such custodial role, be construed to
be subject to the direction of the Trustee, on behalf of any Trust, or deliver
any such Funding Agreement or Guarantee to the Trustee, on behalf of any Trust,
without the express written consent of the Indenture Trustee.

                                   ARTICLE 3
                  DELIVERY OF FUNDING AGREEMENTS AND GUARANTEES

                        SECTION 3.1. Delivery of Funding Agreements and
Guarantees. The Indenture Trustee shall, for safekeeping, deposit each Funding
Agreement and Guarantee with and deliver each Funding Agreement and Guarantee
into, or cause each Funding Agreement and Guarantee to be deposited with and
delivered into, the actual, exclusive and continuous possession and control of
the Custodian as custodian for the Indenture Trustee.

                        SECTION 3.2. Limited Interest of Each Trust. Each Trust
shall retain and reserve only such interests, claims or rights in the Funding
Agreements and Guarantees as are set forth herein, in the Indenture or other
such documents as are used (i) to effect the applicable Trust's collateral
assignment of the applicable Funding Agreement and applicable Guarantee to the
Indenture Trustee and to record Principal Life's acknowledgement thereof and
(ii) to grant a security interest in the applicable Funding Agreement and
applicable Guarantee to the Indenture Trustee and to record PFG's and Principal
Life's, respectively, acknowledgement thereof.

                        SECTION 3.3. Security Interest of Indenture Trustee.
Delivery of any Funding Agreement or Guarantee to the Custodian shall, without
any further act or condition, constitute conclusive evidence against the
applicable Trust and all third parties of the Indenture Trustee's security
interest therein.

                        SECTION 3.4. Indenture Trustee Covenant to Abide by
Custodial Agreement. The Indenture Trustee hereby covenants that, at all times
prior to an Event of Default or a breach of PFG's obligation under the Guarantee
and so long as it retains a security interest or other ownership interest in a
Funding Agreement or Guarantee, it will take no action to terminate or to cause
the termination of this Custodial Agreement, and it will abide by the
requirement herein that the physical custody and possession of each such


                                       2



Funding Agreement and each such Guarantee be at the location provided in Section
9.5 or at such other location within the State of Iowa designated by the
Custodian.

                                   ARTICLE 4
         INSPECTION OF FUNDING AGREEMENTS, GUARANTEES, BOOKS AND RECORDS

                        SECTION 4.1. Inspection of Funding Agreements and
Guarantees. So long as any Notes are Outstanding, the Indenture Trustee and the
Trustee, on behalf of the applicable Trust, by or through their attorneys,
agents or employees, shall each be entitled, but shall be under no obligation,
at any mutually agreeable time, during normal business hours, at the expense of
the applicable Trust, upon two Business Days' notice to the Custodian, to
examine and audit each Funding Agreement and Guarantee held by the Custodian.

                        SECTION 4.2. Inspection of Books and Records. The
Custodian shall maintain appropriate books and records relating to services
performed by it with respect to each Funding Agreement and Guarantee and, so
long as any Notes are Outstanding, the Indenture Trustee and the Trustee, on
behalf of the applicable Trust, by or through their attorneys, agents or
employees, shall each be entitled, but shall be under no obligation, at any
mutually agreeable time, during normal business hours, at the expense of the
applicable Trust, upon two Business Days' notice to the Custodian, to examine
such books and records.

                                   ARTICLE 5
                               DUTIES OF CUSTODIAN

                        SECTION 5.1. General.  The Custodian shall:


              (a)       on behalf of the Indenture Trustee, accept and hold each
                        Funding Agreement and Guarantee in the State of Iowa at
                        its address indicated in Section 9.5 as custodian for
                        the Indenture Trustee, subject to the provisions of this
                        Custodial Agreement, the Indenture and each such Funding
                        Agreement and Guarantee;

              (b)       have and maintain open, continuous and exclusive
                        possession, dominion and control over each Funding
                        Agreement and Guarantee delivered to it under this
                        Custodial Agreement, subject only to the rights and
                        interest of the Indenture Trustee and the applicable
                        Trust;

              (c)       from time to time, certify the receipt of each Funding
                        Agreement and Guarantee as may be reasonably requested
                        by the Indenture Trustee or the Trustee, on behalf of
                        the applicable Trust;

              (d)       from time to time upon request by (i) the Indenture
                        Trustee, or (ii) the Trustee, on behalf of the
                        applicable Trust, and the Indenture Trustee, submit such
                        information and take such action as may be reasonably
                        required by the Trustee, on behalf of the applicable
                        Trust or the Indenture Trustee to assure



                                       3



                        that each Funding Agreement and Guarantee is maintained
                        in a proper and secure condition;

              (e)       upon receipt of any Funding Agreement or Guarantee,
                        issue to the Indenture Trustee and the applicable Trust
                        a certificate relating to the applicable Funding
                        Agreement and related Guarantee in substantially the
                        form attached as Exhibit A attached hereto, which is
                        made a part hereof;

              (f)       upon its receipt of written notice from the Indenture
                        Trustee that an Event of Default has occurred with
                        respect to any Funding Agreement or a breach of the
                        obligations of PFG under any Guarantee has occurred and
                        at the written direction of the Indenture Trustee,
                        deliver each such Funding Agreement and related
                        Guarantee to the Indenture Trustee;

              (g)       at its own expense, maintain at all times during the
                        term of this Custodial Agreement and keep in full force
                        and effect (i) fidelity insurance, (ii) theft of
                        documents insurance and (iii) forgery insurance;
                        provided, that such insurance shall be in amounts, with
                        standard coverage and subject to deductibles, as are
                        customary for similar insurance typically maintained by
                        financial institutions that act as custodians in similar
                        transactions;

              (h)       unless otherwise specified herein, in providing services
                        hereunder with respect to any Funding Agreement or
                        Guarantee, follow the written instructions received from
                        the Indenture Trustee;

              (i)       exercise reasonable care and diligence, consistent with
                        customary standards for such custody, in the possession,
                        retention and protection of each Funding Agreement and
                        Guarantee delivered to it under this Custodial
                        Agreement;

              (j)       except as otherwise required by applicable law, maintain
                        the confidentiality of the information provided
                        hereunder and in each Funding Agreement and Guarantee,
                        and not disclose or in any way communicate such
                        information to third parties without the express written
                        consent of the Trustee, on behalf of the applicable
                        Trust (provided, however, that notwithstanding anything
                        herein to the contrary and except as reasonably
                        necessary to comply with any applicable federal and
                        state securities laws, the Custodian (and each employee,
                        representative or other agent of the Custodian) may
                        disclose to any and all persons, without limitation of
                        any kind, the U.S. federal and state income tax
                        treatment and tax structure of the transaction and all
                        materials of any kind (including opinions or other tax
                        analyses) that are provided to the Custodian relating to
                        such U.S. federal and state income tax treatment and tax
                        structure, where "tax structure" is any fact that may be
                        relevant to understanding the U.S. federal or state
                        income tax treatment of the transaction);


                                       4



              (k)       request written direction from the Indenture Trustee and
                        rely upon such written direction in the event that (i)
                        any dispute shall arise between the parties with respect
                        to the disposition of any Funding Agreement or Guarantee
                        held hereunder or (ii) the Custodian shall be uncertain
                        as to how to proceed in a situation not explicitly
                        addressed by the terms of this Custodial Agreement
                        whether because of conflicting demands by the other
                        parties hereto or otherwise; and

              (l)       have only those duties as are specifically provided
                        herein, which shall be deemed purely ministerial in
                        nature, and shall under no circumstance be deemed a
                        fiduciary for any of the parties to this Custodial
                        Agreement.

                        SECTION 5.2. Merger, Conversion or Consolidation of
Custodian. Notwithstanding anything herein to the contrary, any banking
association or corporation into which the Custodian may be merged, converted or
with which the Custodian may be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Custodian shall be a party,
or any banking association or corporation to which all or substantially all of
the corporate trust business of the Custodian shall be transferred, shall
succeed to all the Custodian's rights, obligations and immunities hereunder
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.

                        SECTION 5.3. Compliance with Writs, Orders or Decrees.
In the event that any Funding Agreement or Guarantee shall be attached,
garnished or levied upon by any court order, or the delivery thereof shall be
stayed or enjoined by an order of a court, or any order, judgment or decree
shall be made or entered by any court order affecting the property deposited
under this Custodial Agreement, the Custodian is hereby expressly authorized, in
its sole discretion, to obey and comply with all writs, orders or decrees so
entered or issued, which it is advised by legal counsel of its own choosing is
binding upon it, whether with or without jurisdiction, and in the event the
Custodian obeys or complies with any such writ, order or decree it shall not be
liable to any of the parties hereto or to any other Person, firm or corporation
by reason of such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.

                        SECTION 5.4. Delegation of Duties. The Custodian shall
not employ any third party institution to carry out any of the services to be
provided hereunder without the express written consent of the Indenture Trustee,
which consent shall not be unreasonably withheld.

                        SECTION 5.5. No Constructive Knowledge. The Custodian
shall not be deemed to have knowledge of the occurrence of a Default or Event of
Default unless the Custodian receives a written notice of such Default or Event
of Default from the Indenture Trustee or the Trustee, on behalf of the
applicable Trust.

                        SECTION 5.6. Reliance. In performance of its duties
under this Custodial Agreement, the Custodian shall be permitted to rely on any
certificate, instrument, document or communication believed by it to be genuine,
correct and signed by the proper


                                       5



Person or Persons. The Trustee, on behalf of the applicable Trust, and the
Indenture Trustee shall each execute and deliver to the Custodian a certificate
of incumbency for the purpose of establishing the identity of the
representatives of the Trustee, on behalf of the applicable Trust, and the
Indenture Trustee, respectively, entitled to issue instructions or directions to
the Custodian on behalf of each such party. In the event of any change in the
identity of such representatives, a new certificate of incumbency shall be
executed and delivered to the Custodian by the appropriate party. Until such
time as the Custodian shall receive a new incumbency certificate, the Custodian
shall be fully protected in relying without inquiry on any then current
incumbency certificate on file with the Custodian.

                        SECTION 5.7. Release of Funding Agreements and
Guarantees. Except as consented to by the Indenture Trustee or as otherwise
provided in the Indenture and this Custodial Agreement, the Custodian shall not
release any Funding Agreement or Guarantee from its possession without receiving
a prior written request duly executed on behalf of the Indenture Trustee.

                        SECTION 5.8. Limitations of Custodian Responsibility.

              (a)       The Custodian assumes no responsibility under this
                        Custodial Agreement other than to render the services
                        contemplated hereunder.

              (b)       The Custodian assumes no responsibility for the
                        effectiveness, genuineness, validity or enforceability
                        of any Funding Agreement or Guarantee in its custody or
                        for making any inquiry into any such Funding Agreement
                        or Guarantee.

              (c)       The Custodian shall not be liable or deemed to be in
                        default for any failure or delay in performance of any
                        duty in whole or in part arising out of or caused by any
                        of the following: a major external flood; earthquake;
                        "act of God;" failure of public utility; act of war; act
                        of terrorism; or rebellion or revolution in the United
                        States.

                        SECTION 5.9. Other Activities of the Custodian.

              (a)       Nothing herein shall prevent the Custodian or any of its
                        Affiliates from engaging in other businesses, or from
                        rendering services of any kind to any Trust, the
                        Indenture Trustee or any other Person or entity to the
                        extent permitted by applicable law.

              (b)       It is understood that the Custodian and any of its
                        Affiliates may engage in any other business and furnish
                        custodial services to others.

              (c)       The Custodian will be free, in its sole discretion, to
                        effect transactions on behalf of itself or for others,
                        which may be the same as or different from those
                        effected under this Custodial Agreement.


                                       6



              (d)       The Custodian shall have the right, but not the
                        obligation to consult with counsel of its choice and
                        shall not be liable for action taken or omitted to be
                        taken by the Custodian either in accordance with the
                        advice of such counsel or in accordance with any opinion
                        of counsel to any Trust addressed and delivered to the
                        Custodian.

                                   ARTICLE 6
                   COMPENSATION, EXPENSES AND INDEMNIFICATION

                        SECTION 6.1. Compensation, Expenses and Indemnification.
The Custodian shall be entitled to compensation, expenses and indemnification as
set forth in that certain Expense and Indemnity Agreement (the "EXPENSE AND
INDEMNITY AGREEMENT"), dated as of o, 2006 entered into between the Custodian
and Principal Life.


                                    ARTICLE 7
             REPRESENTATIONS, WARRANTIES AND COVENANTS OF CUSTODIAN

                        SECTION 7.1. Representations and Warranties of
Custodian. The Custodian hereby represents and warrants to the Indenture Trustee
and the Trustee, for the benefit of each Trust, that:

              (a)       it is a national banking association duly organized and
                        validly existing and in good standing under the laws of
                        the State of Iowa and has full power and authority to
                        own its assets and to transact the business in which it
                        is currently engaged and is duly qualified and in good
                        standing under the laws of each jurisdiction where its
                        ownership or lease of property or the conduct of its
                        business requires, or the performance of this Custodial
                        Agreement would require, such qualification;

              (b)       it, and each Person acting on its behalf, has full power
                        and authority to execute and deliver this Custodial
                        Agreement and to perform all of its obligations under
                        this Custodial Agreement; and

              (c)       this Custodial Agreement, and each instrument and
                        document required hereunder that was executed and
                        delivered by, or on behalf of, the Custodian, has been
                        executed and delivered by a duly authorized officer of
                        the Custodian.

                        SECTION 7.2. Covenants of Custodian. The Custodian
hereby covenants to the Indenture Trustee and the Trustee, for the benefit of
each Trust, that:

              (a)       at all times it will maintain physical custody and
                        possession of each Funding Agreement and Guarantee
                        deposited with it pursuant to the terms of this
                        Custodial Agreement within the State of Iowa at the
                        location specified in Section 9.5 or at such other
                        location within the State of Iowa designated by the
                        Custodian;


                                       7



              (b)       each instrument and document required to be executed or
                        delivered by, or on behalf of, the Custodian, shall be
                        executed and delivered by a duly authorized officer of
                        the Custodian;

              (c)       prior to any affiliation with any Trust in the future,
                        it shall notify the Indenture Trustee of any such
                        contemplated affiliation; and

              (d)       it shall not institute, or join any other Person in
                        instituting, against any Trust any bankruptcy,
                        reorganization, arrangement, insolvency, moratorium or
                        liquidation proceedings or other proceedings under
                        federal or state bankruptcy or similar laws until at
                        least one year and one day (or, if longer, the
                        applicable preference period then in effect) after the
                        payment in full of all Notes issued by any Trust in
                        connection with the Program.

                                   ARTICLE 8
                                   TERMINATION

                        SECTION 8.1. General. This Custodial Agreement and the
duties and responsibilities of the Custodian hereunder shall remain in effect
until the occurrence of one or more of the following events:

              (a)       delivery to the Custodian by the Indenture Trustee of a
                        written certification signed by the Indenture Trustee
                        that each Trust organized in connection with the Program
                        has paid and discharged all obligations with respect to
                        the Notes issued by each such Trust and that the Program
                        has been terminated;

              (b)       termination of each Indenture entered into by each Trust
                        organized in connection with the Program, and delivery
                        by the Custodian of each Funding Agreement and Guarantee
                        in its possession hereunder to the Indenture Trustee or
                        as the Indenture Trustee shall direct in writing and
                        certification by the Indenture Trustee that the Program
                        has been terminated; or

              (c)       termination of this Custodial Agreement pursuant to
                        Section 8.2, 8.3 or 8.4.

                        SECTION 8.2. Termination by Custodian. This Custodial
Agreement may be terminated by the Custodian, at any time, and the Custodian may
resign, upon 30 days' prior written notice to the Trustee, on behalf of each
Trust and the Indenture Trustee; provided, however, that no termination or
resignation pursuant to this Section 8.2 shall be effective until the date as of
which a successor Custodian shall be appointed in accordance with Section 8.6
and shall have agreed in writing to assume all of the Custodian's duties and
obligations under this Custodial Agreement.

                        SECTION 8.3. Termination by Indenture Trustee Without
Cause. This Custodial Agreement may be terminated at any time by the Indenture
Trustee, without cause, and the Indenture Trustee may remove the Custodian, upon
30 days' prior written notice to the Custodian and each Trust (or such shorter
notice as is acceptable to the


                                       8



Custodian and each Trust); provided, however, that no termination or removal
pursuant to this Section 8.3 shall be effective until the date as of which a
successor Custodian shall be appointed in accordance with Section 8.6 and shall
have agreed in writing to assume all of the Custodian's duties and obligations
under this Custodial Agreement.

                        SECTION 8.4. Termination by Indenture Trustee for Cause.
This Custodial Agreement may be terminated at any time by the Indenture Trustee,
for cause, and the Indenture Trustee may remove the Custodian, upon 10 days'
prior written notice to the Custodian; provided, however, that no termination or
removal pursuant to this Section 8.4 shall be effective until the date as of
which a successor Custodian shall be appointed in accordance with Section 8.6
and shall have agreed in writing to assume all of the Custodian's duties and
obligations under this Custodial Agreement. For purposes of determining "cause"
with respect to any such termination of this Custodial Agreement, such term
shall mean any one of the following events:

              (a)       the Custodian willfully violates, or takes any action
                        that it knows materially breaches, any provision of this
                        Custodial Agreement;

              (b)       the Custodian materially breaches in any respect any
                        provision of this Custodial Agreement (other than as
                        specified in paragraph (a) of this Section 8.4) and
                        fails to cure such breach within 30 days of its becoming
                        aware, or its receiving notice from the Indenture
                        Trustee, of such breach;

              (c)       the Custodian is wound up or dissolved or there is
                        appointed over it, or a substantial portion of its
                        assets, a receiver, administrator, administrative
                        receiver, trustee or similar officer;

              (d)       the Custodian (i) ceases to be able to, or admits in
                        writing its inability to, pay its debts as they become
                        due and payable, or makes a general assignment for the
                        benefit of, or enters into any composition or
                        arrangement with, its creditors generally; (ii) applies
                        for or consents to the appointment of a receiver,
                        trustee, assignee, custodian, liquidator or sequestrator
                        (or other similar official) of the Custodian or of any
                        substantial part of its properties or assets, or
                        authorizes such an application or consent, or
                        proceedings seeking such appointment are commenced
                        without such authorization, consent or application
                        against the Custodian and continue undismissed for 60
                        days; (iii) authorizes or files a voluntary petition in
                        bankruptcy, or applies for or consents to the
                        application of any bankruptcy, reorganization,
                        arrangement, readjustment of debt, insolvency or
                        dissolution, or authorizes such application or consent,
                        or proceedings to such end are instituted against the
                        Custodian without such authorization, application or
                        consent and are approved as properly instituted and
                        remain undismissed for 60 days or result in adjudication
                        of bankruptcy or insolvency; (iv) permits or suffers all
                        or any substantial part of its properties or assets to
                        be sequestered or attached by court order and such order
                        remains undismissed for 60 days; or (v) engages in any
                        activity analogous


                                       9



                        to the activities set forth in clauses (i) through (iv)
                        of this Section 8.4(d) in any applicable jurisdiction;
                        or

              (e)       the occurrence of an act by the Custodian that
                        constitutes fraud or criminal activity in the
                        performance of its obligations under this Custodial
                        Agreement, or the Custodian being convicted of a
                        criminal offense materially related to its primary
                        businesses.

                        SECTION 8.5. Liabilities After Termination. If this
Custodial Agreement is terminated as provided herein, none of the parties hereto
shall have any further liability or obligation to the other parties hereto,
except as provided in Sections 5.1(j), 8.6, 8.7 and 8.8 of this Custodial
Agreement.

                        SECTION 8.6. Appointment of Successor Custodian. Any
removal or resignation of the Custodian while any Notes are Outstanding will be
effective only upon the appointment by the Indenture Trustee (and the acceptance
in writing by such successor Custodian) of a successor Custodian that is an
established institution in the State of Iowa which (a) has demonstrated an
ability to professionally and competently perform duties similar to those
imposed upon the Custodian hereunder and (b) is legally qualified and has the
capacity to act as Custodian hereunder in the assumption of all of the
responsibilities, duties and obligations of the Custodian hereunder. The
Trustee, on behalf of each Trust, the Indenture Trustee, the Custodian and the
successor Custodian shall take such action (or cause the removed or resigning
Custodian to take such action) consistent with this Custodial Agreement as shall
be necessary to effectuate any such succession.

                        SECTION 8.7. Rights and Remedies of Indenture Trustee
Regarding Termination. In the event of removal of the Custodian pursuant to this
Custodial Agreement by the Indenture Trustee, the Indenture Trustee shall have
all of the rights and remedies available with respect thereto at law or equity,
and, without limiting the foregoing, the Indenture Trustee may by notice in
writing to the Custodian as provided under this Custodial Agreement terminate
all the rights and obligations of the Custodian under this Custodial Agreement
(except those that survive termination pursuant to Section 8.5). Upon the
expiration of any applicable notice period with respect to termination of this
Custodial Agreement, all authority and power of the Custodian under this
Custodial Agreement, whether with respect to each Funding Agreement or Guarantee
or otherwise, shall automatically and without further action by any Person or
entity pass to and be vested in the successor Custodian upon the appointment
thereof and the agreement of such successor Custodian to assume the Custodian's
duties and obligations under this Custodial Agreement.

                        SECTION 8.8. Actions Upon Termination.

              (a)       Upon the effective date of termination of this Custodial
                        Agreement, the Custodian shall, as soon as practicable:

                        (i)       deliver to the Indenture Trustee, the
                                  successor Custodian or to such other Person as
                                  the Indenture Trustee directs in writing all
                                  Funding


                                       10



                                  Agreements and Guarantees then in the custody
                                  of the Custodian; and

                        (ii)      deliver to the Indenture Trustee or successor
                                  Custodian an accounting with respect to the
                                  books and records relating to each Funding
                                  Agreement and Guarantee that was delivered to
                                  the Custodian.

              (b)       Notwithstanding any such termination, the Custodian
                        shall remain liable to the extent set forth herein (but
                        subject to Section 8.6) for its acts or omissions
                        hereunder arising prior to termination and for any
                        expenses, losses, claims, damages, judgments,
                        assessments, costs or other liabilities (including
                        reasonable attorneys' fees) in respect of or arising out
                        of a material breach of the representations, warranties
                        or covenants made by the Custodian under this Custodial
                        Agreement or from any failure of the Custodian to comply
                        with the provisions of this Section 8.8.

              (c)       The Custodian agrees that, notwithstanding any
                        termination, it shall reasonably cooperate in any
                        proceeding arising in connection with this Custodial
                        Agreement, the Indenture or any Funding Agreement or
                        Guarantee upon receipt of appropriate indemnification
                        and expense reimbursement.

                                   ARTICLE 9
                               GENERAL PROVISIONS

                        SECTION 9.1. Binding Effect; Successors, Transferees and
Assigns. This Custodial Agreement shall be binding upon the parties hereto,
their respective successors, transferees and assigns, and shall inure the
benefit of and be enforceable by all parties hereto and their respective
successors, transferees and permissible assigns.

                        SECTION 9.2. Amendments. This Custodial Agreement may
not be amended without the express written consent of the Custodian, the
Indenture Trustee and the Trustee acting on behalf of each Trust.

                        SECTION 9.3. Assignment of Funding Agreements and
Guarantees. No collateral assignment, grant of security interest or similar
action by, or on behalf of, any Trust of any Funding Agreement or Guarantee
shall be recognized by the Custodian or be effective unless approved in writing
by the Indenture Trustee.

                        SECTION 9.4. Notices. All notices, requests and other
communications under this Custodial Agreement shall be in writing (including
bank wire, facsimile or similar writing) and shall be given to the relevant
Person at its address or facsimile number set forth below or such other address
or facsimile number as such Person may hereafter specify for such purpose by not
less than 10 Business Days' prior notice to each other Person specified in this
Section 9.4. Each such notice, request or other communication shall be effective
(a) if given by facsimile, when such facsimile is transmitted to the


                                       11



facsimile number specified pursuant to this Section 9.4, (b) if given by mail,
48 hours after such communication is deposited in the mails with first class
postage prepaid, or (c) if given by any other means, when delivered or received
at the address specified in this Section 9.4.

                        Such notices, requests and other communications shall be
addressed, if to the Trust, to:

                        Principal Life Income Fundings Trust
                        c/o U.S. Bank Trust National Association, as Trustee
                        100 Wall Street, 16th Floor
                        New York, New York 10005
                        Attention: Adam Berman
                        Facsimile: 212-509-3384

                        if to the Indenture Trustee, to:

                        Citibank, N.A.
                        Citibank Agency & Trust
                        388 Greenwich Street, 14th Floor
                        New York, New York   10013
                        Attention:  Nancy Forte
                        Facsimile: 212-816-5527

                        if to the Trustee, to:

                        U.S. Bank Trust National Association
                        100 Wall Street, 16th Floor
                        New York, New York 10005
                        Attention: Adam Berman
                        Facsimile: 212-509-3384

                        SECTION 9.5. Address of Custodian. The Custodian shall
hold each Funding Agreement and Guarantee at the following address:

                        Bankers Trust Company, N.A.
                        453 7th Street
                        Des Moines, Iowa  50309-2728
                        Attention:  Angela C. Brick
                        Facsimile: 515-247-2101

                        SECTION 9.6. Waiver of Certain Rights. The Custodian
hereby waives, relinquishes and releases any rights which it may have by way of
contract or law, whether through exercise of a right of set-off, security
interest, counterclaim or otherwise, to obtain any property or payment from,
under or with respect to any Funding Agreement or Guarantee delivered to it
hereunder.


                                       12



                        SECTION 9.7. Provisions Separable. Any provision of this
Custodial Agreement which is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, unenforceability or non-authorization without invalidating the
remaining provisions hereof or affecting the validity or enforceability or
legality of such provision in any other jurisdiction.

                        SECTION 9.8. Governing Law. This Custodial Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to its choice of law principles.

                        SECTION 9.9. Waiver of Jury Trial. Each of the parties
to this Custodial Agreement hereby irrevocably waives any and all right to a
trial by jury with respect to any legal proceeding arising out of or relating to
this or any related transaction.

                        SECTION 9.10. Headings Not to Affect Interpretation. The
headings contained in this Custodial Agreement are for convenience only, and
they neither form a part of this Custodial Agreement nor are they to be used in
the construction or interpretation hereof.

                        SECTION 9.11. Counterparts. This Custodial Agreement may
be executed and delivered in any number of counterparts, each of which, when so
executed and delivered, shall be an original; provided, however, that such
counterparts shall together constitute but one and the same instrument.


                                       13



             IN WITNESS WHEREOF, the parties have caused this Custodial
Agreement to be duly executed by their respective authorized officers, as of the
date first above written.



                                       BANKERS TRUST COMPANY, N.A., as Custodian


                                       By:
                                          --------------------------------------
                                          Name: Angela C. Brick
                                          Title:  Vice President


                                       CITIBANK, N.A., as Indenture Trustee for
                                       the benefit of the holders of the Notes
                                       issued in connection with the Program


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


                                       U.S. BANK TRUST NATIONAL
                                       ASSOCIATION, as Trustee, on behalf of
                                       each Trust organized in connection with
                                       the Program


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


                                       14



                                                                       EXHIBIT A

                      CERTIFICATE REGARDING CUSTODY OF THE
                       FUNDING AGREEMENT AND THE GUARANTEE

            In connection with the issuance of the Funding Agreement, the
Assignment of Funding Agreement (set forth in Part IV of the Closing Instrument
(as defined in the Omnibus Instrument)) and the issuance of the Guarantee, the
Custodian hereby represents that it has received delivery of the Funding
Agreement and the Guarantee and is holding the Funding Agreement and the
Guarantee for the benefit of the Indenture Trustee and that the Funding
Agreement and the Guarantee are in the possession of the Custodian at the
address below:

            Bankers Trust Company, N.A.
            665 Locust Street
            Des Moines, Iowa 50309-3702


                                      A-1

EX-23.1

                                                                    EXHIBIT 23.1

            Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Principal Financial
Group, Inc. and Principal Life Insurance Company for the registration of
$4,000,000,000 Secured Medium-Term Notes and to the incorporation by reference
therein of our reports dated February 16, 2005 (except for the second paragraph
of Note 15, as to which the date is March 3, 2005), with respect to the
consolidated financial statements and schedules of Principal Financial Group,
Inc., Principal Financial Group, Inc. management's assessment of the
effectiveness of internal control over financial reporting, and the
effectiveness of internal control over financial reporting of Principal
Financial Group, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 2004, filed with the Securities and Exchange Commission.


                                 /s/ Ernst & Young LLP

Des Moines, Iowa
January 24, 2006

EX-23.5

                                                                    EXHIBIT 23.5

                      SIDLEY AUSTIN LLP    BEIJING   GENEVA       SAN FRANCISCO
                      ONE SOUTH DEARBORN   BRUSSELS  HONG KONG    SHANGHAI
                      CHICAGO, IL  60603   CHICAGO   LONDON       SINGAPORE
  SIDLEY AUSTIN LLP   (312) 853 7000       DALLAS    LOS ANGELES  TOKYO
 ------------------   (312) 853 7036 FAX             NEW YORK     WASHINGTON, DC
SIDLEY

                                           FOUNDED 1866


                                January 25, 2006




Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392

Principal Financial Group, Inc.
711 High Street
Des Moines, Iowa 50392

RE:      $4,000,000,000 SECURED NOTES REGISTRATION STATEMENT
         ON FORM S-3 -- -- CONSENT TO REGISTRATION STATEMENT REFERENCE

         This letter will serve as our consent to the reference in the
registration statement, as amended, on Form S-3 to be filed by Principal Life
Insurance Company and Principal Financial Group, Inc. with the Securities and
Exchange Commission, to the legal opinion of Sidley Austin LLP, as counsel to
Principal Life Insurance Company and Principal Financial Group, Inc., regarding
priority of claims with respect to funding agreements pursuant to Iowa Code
Section 507C.42.

Very truly yours,

/s/ SIDLEY AUSTIN LLP
- ----------------------------
SIDLEY AUSTIN LLP




                 Sidley Austin LLP is a limited liability partnership practicing
                            in affiliation with other Sidley Austin partnerships

EX-99.1

Exhibit 99.1

Pricing Supplement Dated •	Filed Pursuant to Rule 424(b)(•)
(To Prospectus dated •, and	Registration Statement Nos. 333-129763 and
Prospectus Supplement dated •)		333-129763-01
	CUSIP: •

Principal Life Insurance Company
Secured Medium-Term Notes [(Callable)] (That are also Asset-Backed Securities)
Issued Through and Obligations of
Principal Life Income Fundings Trust • (the “Trust” and the “Issuing Entity”)

     The description in this pricing supplement of the particular terms of the Secured Medium-Term Notes offered hereby, and the Funding Agreement (specified below) issued by Principal Life Insurance Company (“Principal Life”) to the Trust, the payment obligations of which are fully and unconditionally guaranteed by the Guarantee (specified below) issued by Principal Financial Group, Inc. to the Trust, supplements the description of the general terms and provisions of the notes, the funding agreements and the guarantees set forth in the accompanying prospectus and prospectus supplement, to which reference is hereby made.

1. The Notes

Principal Amount:	Purchasing Agent(s) Discount:
Issue Price:	Original Issue Date:
Net Proceeds to the Trust:	Stated Maturity Date:

Specified Currency:
Interest Payment Dates:
Initial Interest Payment Dates:
Regular Record Date:	[15 calendar days prior to the Interest Payment Date]
Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Floating Rate Notes:	o Yes	o No.	If, Yes,
Regular Floating Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Note:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:

Inverse Floating Rate Note:	o Yes	o No.	If, Yes,
Fixed Interest Rate:
Floating Interest Rate:
Interest Rate Basis(es):
Initial Interest Reset Date:

Interest Rate Basis(es). Check all that apply:
	o CD Rate	o Commercial Paper Rate
	o CMT Rate	o Eleventh District Cost of Funds Rate
	o Constant Maturity Swap Rate	o Federal Fund Open Rate
	o LIBOR	o Federal Funds Rate
	o EURIBOR	o Treasury Rate
	o Prime Rate	o Other (See Attached)
If LIBOR:	o LIBOR Reuters Page	o LIBOR Moneyline Telerate
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:
Index Maturity:
Spread (+/-):
Spread Multiplier:
Interest Reset Date(s):
Interest Rate Determination Date(s):
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:

Calculation Agent:	[Citibank, N.A.]
Exchange Rate Agent:
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Amortizing Notes:	o Yes	o No.	If, Yes,
Amortizing Schedule:
Additional/Other Terms:
Discount Note:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:
Redemption Provisions:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction (if any):
Redemption:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:

Repayment:	o Yes	o No.	If Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):
Additional Amounts to be Paid for Withholding Tax (not applicable unless specified):
Securities Exchange Listing:	o Yes	o No.	If Yes, Name of Exchange:
Authorized Denominations:

Ratings:

The Notes issued under the Program are rated AA by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”). Principal Life expects the Notes to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”).

Purchasing Agent(s) Purchasing Notes as Principal: o Yes o No. If Yes,

Purchasing Agent(s)	Principal Amount
Total:

Purchasing Agent(s) Acting as Agent: o Yes o No. If Yes,

Purchasing Agent(s)	Principal Amount
Total:

State of Organization of Trust:	New York
Additional/Other Terms:
Special Tax Considerations:
2. The Funding Agreement
Funding Agreement Issuer:	Principal Life Insurance Company
Funding Agreement No.:
Deposit Amount:
Net Deposit:
Effective Date:
Stated Maturity Date:
Specified Currency:
Interest Payment Dates:
Initial Interest Payment Date:

Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Funding Agreement:	o Yes	o No.	If, Yes,

Interest Rate:
Floating Rate Funding Agreement:	o Yes	o No.	If, Yes,
Regular Floating Rate Funding
Agreement:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Funding
Agreement:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:
Inverse Floating Rate Funding
Agreement:	o Yes	o No.	If, Yes,
Fixed Interest Rate:
Floating Interest Rate:
Interest Rate Basis(es):
Initial Interest Rate, if any:
Initial Interest Reset Date:

Interest Rate Basis(es). Check all that apply:
	o CD Rate	o Commercial Paper Rate
	o CMT Rate	o Eleventh District Cost of Funds Rate
	o Constant Maturity Swap Rate	o Federal Funds Open Rate
	o LIBOR	o Federal Funds Rate
	o EURIBOR	o Treasury Rate
	o Prime Rate	o Other (See Attached)
If LIBOR:	o LIBOR Reuters Page	o LIBOR Moneyline Telerate
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:

Index Maturity:

Spread (+/-):

Spread Multiplier:

Interest Reset Date(s):

Interest Rate Determination Date(s):

Maximum Interest Rate, if any:

Minimum Interest Rate, if any:

Calculation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):

Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):

Amortizing Funding Agreement:	o Yes	o No.	If, Yes,
Amortizing Schedule:
Additional/Other Terms:
Discount Funding Agreement:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:

Redemption Provisions:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction (if any):
Redemption:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Repayment:	o Yes	o No.	If, Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):
Additional Amounts to be Paid For Withholding Tax (not applicable unless specified):

Ratings: The Funding Agreement issued under the Program is rated AA by S&P. Principal Life expects the Funding Agreement to be rated Aa2 by Moody’s.

Additional/Other Terms if any:
Special Tax Considerations:
3. The Guarantee
Guarantee Issuer:	Principal Financial Group, Inc.
Effective Date:
Additional/Other Terms:

EX-99.2

Exhibit 99.2

Pricing Supplement Dated •	Filed pursuant to Rule 424(b)(•)
(To Prospectus dated • , and	Registration Statement Nos.	333-129763 and 333-129763-01
Prospectus Supplement dated •
	CUSIP: •

Principal Life Insurance Company
Principal^® Life CoreNotes^® [(Callable)] (That are also Asset-Backed Securities)
Issued Through and Obligations of
Principal Life Income Fundings Trust • (the “Trust” and “Issuing Entity”)

     The description in this pricing supplement of the particular terms of the Principal^® Life CoreNotes^® offered hereby, and the Funding Agreement (specified below) issued by Principal Life Insurance Company (“Principal Life”) to the Trust, the payment obligations of which are fully and unconditionally guaranteed by the Guarantee (specified below) issued by Principal Financial Group, Inc. to the Trust, supplements the description of the general terms and provisions of the notes, the funding agreements and the guarantees set forth in the accompanying prospectus and prospectus supplement, to which reference is hereby made.

1. The Notes

Principal Amount:	Purchasing Agent(s) Discount:
Issue Price:	Original Issue Date:
Net Proceeds to the Trust:	Stated Maturity Date:

Interest Payment Dates:
Initial Interest Payment Dates:
Regular Record Date:	[15 calendar days prior to the Interest Payment Date]
Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Floating Rate Notes:	o Yes	o No.	If, Yes,
Regular Floating Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Note:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:
Initial Interest Rate, if any:
Initial Interest Reset Date:

“Principal^®” is a registered service mark of Principal Financial Services, Inc. and is used under license.
“CoreNotes^®” is a registered service mark of Merrill Lynch & Co.

Interest Rate Basis(es). Check all that apply:

o	CD Rate	o	Commercial Paper Rate
o	CMT Rate	o	Constant Maturity Swap Rate
o	LIBOR	o	Federal Fund Open Rate
o	Federal Funds Rate	o	Treasury Rates
o	Prime Rate	o	Other (See Attached)

If LIBOR:	o LIBOR Reuters	o LIBOR Moneyline Telerate
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:
Index Maturity:
Spread (+/-):
Spread Multiplier:
Interest Reset Date(s):
Interest Rate Determination Date(s):
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:
Calculation Agent:	[Citibank, N.A.]
Exchange Rate Agent:
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Discount Note:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:
Terms of Survivor’s Option:
Annual Put Limitation:		o $2,000,000 or 2%; or
		o $                   or      %
Individual Put Limitation:		o $250,000; or
		o $
Trust Put Limitation:		o $
Redemption:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Redemption	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Repayment:	o Yes	o No.	If, Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):

Securities Exchange Listing:	o Yes	o No.	If Yes, Name of Exchange:
Authorized Denominations:

Ratings:
 

The Notes issued under the Program are rated AA by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”). Principal Life expects the Notes to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”).

Purchasing Agent(s) Purchasing Notes as Principal: o Yes o No. If Yes,

Purchasing Agent(s)	Principal Amount
Total:

State of Organization of Trust:	New York
Additional/Other Terms:
Special Tax Considerations:
2. The Funding Agreement
Funding Agreement Issuer:	Principal Life Insurance Company
Funding Agreement No.:
Deposit Amount:
Net Deposit:
Effective Date:
Stated Maturity Date:
Specified Currency:
Interest Payment Dates:
Initial Interest Payment Date:
Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Funding Agreement:	o Yes	o No.	If, Yes,
Interest Rate:
Floating Rate Funding Agreement:	o Yes	o No.	If, Yes,
Regular Floating Rate Funding Agreement:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Funding Agreement:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:
Initial Interest Rate, if any:
Initial Interest Reset Date:

Interest Rate Basis(es). Check all that apply:
	o CD Rate	o Commercial Paper Rate
	o CMT Rate	o  Federal Funds Open Rate
	o LIBOR	o  Federal Funds Rate
	o  Constant Maturity Swap Rate	o Treasury Rate
	o Prime Rate	o Other (See Attached)
If LIBOR:	o LIBOR Reuters Page	o LIBOR Moneyline Telerate Page
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:

Index Maturity:
Spread (+/-):
Spread Multiplier:
Interest Reset Date(s):
Interest Rate Determination Date(s):
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Discount Funding Agreement:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:
Terms of Survivor’s Option:
Annual Put Limitation:		o $2,000,000 or 2%; or
		o $                   or      %
Individual Put Limitation:		o $250,000; or
		o $
Trust Put Limitation:		o $
Redemption:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Redemption:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Repayment:	o Yes	o No.	If, Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):
Additional Amounts to be Paid For Witholding Tax (not applicable unless specified):

Ratings: The Funding Agreement issued under the Program is rated AA by S&P. Principal Life expects Funding Agreements to be rated Aa2 by Moody’s.

Additional/Other Terms if any:
Special Tax Considerations:
3. The Guarantee
Guarantee Issuer:	Principal Financial Group, Inc.
Effective Date:
Additional/Other Terms:

EX-99.3

Exhibit 99.3

Pricing Supplement Dated •	Filed pursuant to Rule 424(b)(•)
(To Prospectus dated •, and	Registration Statement Nos.	333-129763 and
Prospectus Supplement dated •		333-129763-01
	CUSIP: •

Principal Life Insurance Company
Secured Medium-Term Retail Notes [(Callable)] (That are also Asset-Backed Securities)
Issued Through and Obligations of
Principal Life Income Fundings Trust • (the “Trust” and the “Issuing Entity”)

     The description in this pricing supplement of the particular terms of the Secured Medium-Term Retail Notes offered hereby, and the Funding Agreement (specified below) issued by Principal Life Insurance Company (“Principal Life”) to the Trust, the payment obligations of which are fully and unconditionally guaranteed by the Guarantee (specified below) issued by Principal Financial Group, Inc. to the Trust, supplements the description of the general terms and provisions of the notes, the funding agreements and the guarantees set forth in the accompanying prospectus and prospectus supplement, to which reference is hereby made.

1. The Notes

Principal Amount:	Purchasing Agent(s) Discount:
Issue Price:	Original Issue Date:
Net Proceeds to the Trust:	Stated Maturity Date:

Interest Payment Dates:
Initial Interest Payment Date:
Regular Record Date:	[15 calendar days prior to the Interest Payment Date]
Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Floating Rate Notes:	o Yes	o No.	If, Yes,
Regular Floating Rate Notes:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Note:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:
Initial Interest Rate, if any:
Initial Interest Reset Date:

Interest Rate Basis(es). Check all that apply:
	o CD Rate	o Commercial Paper Rate
	o CMT Rate	o  Constant Maturity Swap Rate
	o LIBOR	o Federal Fund Open Rate
	o  Federal Funds Rate	o Treasury Rates
	o Prime Rate	o Other (See Attached)
If LIBOR:	o LIBOR Reuters	o LIBOR Moneyline Telerate
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:
Index Maturity:
Spread (+/-):
Spread Multiplier:
Interest Reset Date(s):
Interest Rate Determination Date(s):
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:

Calculation Agent:	[Citibank, N.A.]
Exchange Rate Agent:
Computation of Interest (not applicable unless different than as specified in the prospectus and prospectus supplement):
Day Count Convention (not applicable unless different than as specified in the prospectus and prospectus supplement):
Discount Note:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:
Terms of Survivor’s Option:
Annual Put Limitation:		o $2,000,000 or 2%; or
		o $                   or  %
Individual Put Limitation:		o $250,000; or
		o $
Trust Put Limitation:		o $
Redemption:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Redemption:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:

Repayment:	o Yes	o No.	If, Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):

Securities Exchange Listing:	o Yes	o No.	If, Yes, Name of Exchange:
Authorized Denominations:

Ratings:

The Notes issued under the Program are rated AA by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”). Principal Life expects the Notes to be rated Aa2 by Moody’s Investors Service, Inc. (“Moody’s”).

Purchasing Agents Acting as Agent: o Yes o No. If, Yes:

Purchasing Agent(s)	Principal Amount
Total:

State of Organization of the Trust:	New York
Additional/Other Terms:
Special Tax Considerations:
2. The Funding Agreement
Funding Agreement Issuer:	Principal Life Insurance Company
Funding Agreement No.:
Deposit Amount:
Net Deposit:
Effective Date:
Stated Maturity Date:
Specified Currency:
Interest Payment Dates:
Initial Interest Payment Date:

Type of Interest Rate:	o Fixed Rate	o Floating Rate
Fixed Rate Funding Agreement:	o Yes	o No.	If, Yes:

Interest Rate:
Floating Rate Funding Agreement:	o Yes	o No.	If, Yes,
Regular Floating Rate Funding Agreement:	o Yes	o No.	If, Yes,
Interest Rate:
Interest Rate Basis(es):
Floating Rate/Fixed Rate Funding Agreement:	o Yes	o No.	If, Yes,
Floating Interest Rate:
Interest Rate Basis(es):
Fixed Interest Rate:
Fixed Rate Commencement Date:
Initial Interest Rate, if any:
Initial Interest Reset Date:

Interest Rate Basis(es). Check all that apply:
	o CD Rate	o Commercial Paper Rate
	o CMT Rate	o Federal Fund Open Rate
	o LIBOR	o Federal Funds Rate
	o Constant Maturity Swap Rate	o Treasury Rate
	o Prime Rate	o Other (See Attached)
If LIBOR:	o LIBOR Reuters Page	o LIBOR Moneyline Telerate
	LIBOR Currency:
If CMT Rate:
Designated CMT Telerate Page:
If 7052:	o Weekly Average	o Monthly Average
Designated CMT Maturity Index:

Index Maturity:

Spread (+/-):

Spread Multiplier:

Interest Reset Date(s):

Interest Rate Determination Date(s):

Maximum Interest Rate, if any:

Minimum Interest Rate, if any:

Computation of Interest:(not applicable unless different than as specified in the prospectus and prospectus supplement):

Day Count Convention: (not applicable unless different than as specified in the prospectus and prospectus supplement):

Discount Funding Agreement:	o Yes	o No.	If, Yes,
Total Amount of Discount:
Initial Accrual Period of Discount:
Additional/Other Terms:
Terms of Survivor’s Option:
Annual Put Limitation:		o $2,000,000 or 2%; or
		o $                   or  %
Individual Put Limitation:		o $250,000; or
		o $
Trust Put Limitation:		o $
Redemption:	o Yes	o No.	If, Yes,
Initial Redemption Date:
Redemption:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Repayment:	o Yes	o No.	If, Yes,
Repayment Date(s):
Repayment Price:
Repayment:	o In whole only and not in part
	o May be in whole or in part
Additional/Other Terms:
Sinking Fund (not applicable unless specified):
Additional Amounts to be Paid For Withholding Tax (not applicable unless specified):

Ratings: The Funding Agreement issued under the Program is rated AA by S&P. Principal Life expects Funding Agreement to be rated Aa2 by Moody’s.

Additional/Other Terms if any:
Special Tax Considerations:
3. The Guarantee
Guarantee Issuer:	Principal Financial Group, Inc.
Effective Date:
Additional/Other Terms: