POLICYHOLDER INFORMATION BOOKLET PART ONE THIS PART ONE CONTAINS THE FOLLOWING MATERIAL ABOUT PRINCIPAL MUTUAL HOLDING COMPANY’S PLAN TO CONVERT TO A STOCK COMPANY: Notice of Special Meeting of Members to consider Summary of Certain the Plan of Conversion Key Features of the demutualization, for Notice from the Iowa Division of Insurance providing basic information about information on the public hearing the demutualization and how you can participate More detailed information about the demutualization Plan of Conversion, the legal document describing the demutualization PRINCIPAL MUTUAL HOLDING COMPANY 711 High Street Des Moines, Iowa 50392 Notice of Special Meeting of Members To be Held July 24, 2001 To the Members of Principal Mutual Holding Company: You are a Member of Principal Mutual Holding Company because you are a policyholder of Principal Life Insurance Company (""Principal Life''). You are also a Member if you were issued a Policy on or before April 8, 1980 and you transferred ownership rights of the Policy on or before April 8, 1980, so long as the Policy remains In Force. You are hereby notiÑed that a special meeting of Members of Principal Mutual Holding Company, a mutual insurance holding company organized pursuant to Section 521A.14(1) of Title XIII and Chapter 491 of Title XII of the Code of Iowa (the ""MIHC''), will be held at the MIHC's oÇces in the Auditorium of the Corporate One building, 711 High Street, Des Moines, Iowa 50392, on July 24, 2001, at 9:00 a.m., Central Daylight Time, and any adjournment thereof. The special meeting of Members will be held for the purpose of considering and voting upon the following proposal: To approve the Plan of Conversion of the MIHC and the transactions contemplated in the Demutualization, including: 1. the conversion of the MIHC from a mutual insurance holding company into a stock company; and 2. the Agreement and Plan of Merger in which the converted MIHC and two of its present Iowa subsidiaries, Principal Financial Group, Inc. and Principal Financial Services, Inc., will merge with and into Principal Iowa Newco, Inc., an Iowa business corporation and wholly-owned subsidiary of Principal Financial Group, Inc., a Delaware corporation, and in which Principal Iowa Newco, Inc. will change its name to ""Principal Financial Services, Inc.'' These transactions will be voted upon as a single proposal. The Plan of Conversion will not go into eÅect unless approved by the Members eligible to vote at the special meeting. Approval of the Plan of Conversion requires the aÇrmative vote of two-thirds of all votes validly cast by the Members eligible to vote at the special meeting. Approval or disapproval of the Plan of Conversion will not increase premiums or contributions, or diminish the beneÑts, values, guarantees or dividend eligibility of your policy or contract with Principal Life. Policy dividends will continue to be paid on dividend-paying policies as declared by the Board of Directors of Principal Life (although, as always, dividends are not guaranteed and may vary from year to year). You are a Member eligible to vote on the proposal to approve the Plan of Conversion and the transactions contemplated in the Demutualization if you (i) owned a Policy that was In Force on March 31, 2001 (the date the Plan of Conversion was adopted by the MIHC's Board of Directors, the ""Adoption Date'') or if you (ii) were issued a Policy on or before April 8, 1980 and transferred ownership rights of that Policy on or before April 8, 1980, so long as that Policy remained In Force on March 31, 2001. If the Demutualization becomes eÅective, compensation will be paid to Members who are Eligible Policyholders. You are an Eligible Policyholder if you (i) owned a Principal Life Policy on March 31, 2000 (one year prior to the Adoption Date) and you had a continuous Membership Interest in the MIHC through ownership of one or more Principal Life Policies from March 31, 2000 until and on the EÅective Date or if you (ii) were issued a Principal Life Policy on or before April 8, 1980 and you transferred ownership rights of that Policy on or before April 8, 1980 so long as that Policy remains In Force on the EÅective Date. Your vote on the proposal is important! Please complete, date and sign the enclosed ballot (Card 1) and return it in the enclosed postage-paid envelope as soon as possible, but in any event no later than July 17, 2001, so that the MIHC receives your vote prior to the close of the special meeting of Members on July 24, 2001. If you have misplaced the envelope, you may send the ballot (Card 1) to the Demutualization Information Center, Church Street Station, P.O. Box 1481, New York, New York 10277-1481. Mailed ballots must be received prior to the close of the special meeting to be counted. You should mark the ballot (Card 1) to vote either: ‚ Yes, for approval of the proposal to adopt the Plan of Conversion and the transactions contemplated in the Demutualization, or ‚ No, to oppose the proposal to adopt the Plan of Conversion and the transactions contemplated in the Demutualization. In order to be counted as a vote, the ballot must be properly marked either Yes or No and must be signed by every policyholder listed on the ballot. A ballot will not be counted as a vote if it is signed but not marked Yes or No, if it is signed and marked both Yes and No, or if it is not signed by every policyholder listed on the ballot. A mailed ballot may be revoked by voting in person at the special meeting of Members. After receiving the opinions of its outside advisors with respect to the Plan of Conversion, the Board of Directors of the MIHC has unanimously approved and adopted the Plan of Conversion and the transactions contemplated by the Plan of Conversion and believes that the Plan of Conversion is fair and equitable to the Members of the MIHC. The Board of Directors of the MIHC unanimously recommends that you vote Yes for the approval of the proposal to be considered at the special meeting. A copy of the Plan of Conversion and a summary of each exhibit to the Plan of Conversion are included in this Policyholder Information Booklet Part One. Also included in this mailing are instructions for completing the ballot (Card 1), the Taxpayer IdentiÑcation Card (Card 3) and the Form of Compensation Card (Card 4). This information, and additional information about the Plan of Conversion, are also available on the MIHC's website at www.principal.com. A copy of the Plan of Conversion, with all of its exhibits, and additional information about the Plan of Conversion, may also be examined at the MIHC's oÇces, 711 High Street, Des Moines, Iowa 50392. These documents will be available between 8:00 a.m. and 4:30 p.m., Central Daylight Time, Monday through Friday, except days on which the MIHC is closed for business. Please call our Demutualization Information Center toll-free at 1-866-781-1368 between the hours of 7:00 a.m. and 7:00 p.m., Central Daylight Time, if you have any questions, or if you need assistance with any of the accompanying materials. QualiÑed Plan Customers and Non-Rule 180 QualiÑed Plan Customers should call our Demutualization Information Center toll free at 1-866-781-1369 between the hours of 7:00 a.m. and 7:00 p.m. Central Daylight Time. You may also visit our website at www.principal.com for Demutualization information. Capitalized terms in this Notice are deÑned in the Glossary of the Policyholder Information Booklet Part One. BY ORDER OF THE BOARD OF DIRECTORS Joyce N. HoÅman Senior Vice President and Corporate Secretary This Policyholder Information Booklet Part One is dated May 24, 2001, and is Ñrst being mailed to the Members eligible to vote at the special meeting on or about that date. THOMAS J. VILSACK THERESE M. VAUGHAN GOVERNOR COMMISSIONER OF INSURANCE SALLY J. PEDERSON LT. GOVERNOR BEFORE THE INSURANCE COMMISSIONER OF THE STATE OF IOWA In the matter of the application of ) PRINCIPAL MUTUAL HOLDING ) NOTICE OF PUBLIC COMPANY for approval of a plan of conversion ) HEARING from a mutual insurance ) holding company into a stock company ) Please take notice: Pursuant to the provisions of Iowa Code ÛÛ 521A.14(5)(b) and 508B.7, the Insurance Commissioner of the State of Iowa will hold a public hearing regarding the application of Principal Mutual Holding Company (the ""applicant'') for approval of a Plan of Conversion. The Plan of Conversion provides for the applicant to convert from a mutual insurance holding company into a stock company and to merge with and into Principal Iowa Newco, Inc., an Iowa business corporation and wholly-owned subsidiary of Principal Financial Group, Inc., a Delaware corporation. The Plan of Conversion also provides for the merger with and into Principal Iowa Newco, Inc. of two of the applicant's present subsidiaries: Principal Financial Group, Inc., an Iowa business corporation, and Principal Financial Services, Inc., an Iowa business corporation. Following the merger of Principal Financial Services, Inc. with and into Principal Iowa Newco, Inc., the Plan of Conversion provides that Principal Iowa Newco, Inc. will change its name to ""Principal Financial Services, Inc.'' All policyholders of Principal Life Insurance Company (""Principal Life'') and interested persons are invited to attend and participate in the public hearing. 1. Date and time: Wednesday, July 25, 2001, at 9:30 a.m., Central Daylight Time.