CUSTODIAL AGREEMENT



                  THIS CUSTODIAL AGREEMENT (this "CUSTODIAL AGREEMENT") is

entered into as of o, 2003, 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

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