S.F. _____ Section 1. NEW SECTION . 12J.1 Legislative findings and 1 intent. 2 The general assembly is deeply concerned and does not 3 support boycotts and related tactics that have become a tool 4 of economic warfare that threaten the sovereignty and security 5 of allies and trade partners of the United States, including 6 the state of Israel. Therefore, the general assembly intends 7 that state funds and funds administered by the state, including 8 public employee retirement funds, should not be invested in, 9 and public contracts should not be entered into with, companies 10 that refuse to engage in commerce with Israel and boycott 11 Israel or persons doing business in Israel or territories 12 controlled by Israel. 13 Sec. 2. NEW SECTION . 12J.2 Definitions. 14 As used in this chapter, unless the context otherwise 15 requires: 16 1. “Company” means any sole proprietorship, organization, 17 association, corporation, partnership, joint venture, limited 18 partnership, limited liability partnership, limited liability 19 company, or other entity or business association, including 20 all wholly owned subsidiaries, majority-owned subsidiaries, 21 parent companies, or affiliates of such entities or business 22 associations. 23 2. “Direct holdings” in a company means all publicly traded 24 securities of that company that are held directly by the public 25 fund in an actively managed account or fund in which the public 26 fund owns all shares or interests. 27 3. “Indirect holdings” in a company means all securities 28 of that company that are held in an account or fund managed 29 by one or more persons not employed by the public fund, in 30 which the public fund owns shares or interests together with 31 other investors not subject to the provisions of this chapter. 32 Indirect holdings include but are not limited to mutual funds, 33 fund of funds, index funds, private equity funds, hedge funds, 34 and real estate funds. 35 -1- LSB 5462XC (3) 86 ec/sc 1/ 7

S.F. _____ 4. “Public entity” means the state, political subdivisions 1 of the state, public school corporations, and all public 2 officers, boards, commissions, departments, agencies, and 3 authorities empowered by law to enter into public contracts for 4 the expenditure of public funds, including the state board of 5 regents and institutions under the control of the state board 6 of regents. 7 5. “Public fund” means the treasurer of state, the state 8 board of regents, the public safety peace officers’ retirement 9 system created in chapter 97A, the Iowa public employees’ 10 retirement system created in chapter 97B, the statewide fire 11 and police retirement system created in chapter 411, or the 12 judicial retirement system created in chapter 602. 13 6. “Scrutinized company” means any company engaging in 14 refusals to deal, terminating business activities, or engaging 15 in other actions that are intended to limit commercial 16 relations with Israel, or persons or entities doing business 17 in Israel or in territories controlled by Israel, when such 18 actions are taken in compliance or adherence to calls for 19 a boycott of Israel other than those boycotts otherwise 20 authorized by federal law and in a manner that discriminates 21 on the basis of nationality, national origin, religion, or 22 other unreasonable basis, and is not based on a valid business 23 reason. A company’s statement that it is participating in a 24 boycott of Israel, or that it has taken the boycott action at 25 the request, in compliance with, or in furtherance of calls for 26 a boycott of Israel, can be considered one type of evidence, 27 among others, that a company is a scrutinized company. 28 Sec. 3. NEW SECTION . 12J.3 Identification of companies —— 29 notice. 30 1. a. By March 1, 2017, the public fund shall make its 31 best efforts to identify or have identified all scrutinized 32 companies in which the public fund has direct or indirect 33 holdings or could possibly have such holdings in the future and 34 shall create and make available to the public a scrutinized 35 -2- LSB 5462XC (3) 86 ec/sc 2/ 7

S.F. _____ companies list for that public fund. The public fund shall 1 review on an annual basis and update, if necessary, the 2 scrutinized companies list. 3 b. In making its best efforts to identify or have 4 identified scrutinized companies, the public fund may review 5 and rely, in the best judgment of the public fund, on publicly 6 available information regarding companies, and including other 7 information that may be provided by nonprofit organizations, 8 research firms, international organizations, and government 9 entities. The public fund may also contact asset managers 10 and institutional investors for the public fund to identify 11 scrutinized companies based upon industry-recognized lists of 12 such companies that the public fund may have indirect holdings 13 in. 14 c. The Iowa public employees’ retirement system, acting 15 on behalf of the system and other public funds subject to 16 this section, may develop and issue a request for proposals 17 for third-party services to complete the identification of 18 scrutinized companies and the compilation of a scrutinized 19 companies list. The Iowa public employees’ retirement system 20 shall consult with all other public funds on the development of 21 the request for proposals. However, selection of a successful 22 proposal and the final scope of services to be provided shall 23 be determined only by those public funds that have agreed to 24 utilize the third-party services. If more than one public fund 25 decides to utilize the third-party services, the participating 26 public funds shall equally share the costs of such services. 27 2. a. For each company on the scrutinized companies list, 28 the public fund shall send or have sent a written notice 29 informing the company of its status as a scrutinized company 30 and that it may become subject to divestment and restrictions 31 on investment in the company by the public fund. The notice 32 shall offer the company the opportunity to clarify its 33 activities or to cease its activities causing its inclusion 34 on the scrutinized company list. The public fund or its 35 -3- LSB 5462XC (3) 86 ec/sc 3/ 7

S.F. _____ representative shall continue to provide such written notice on 1 an annual basis if the company remains a scrutinized company. 2 b. If, following notice as provided by this section, a 3 scrutinized company ceases activity that designates it as a 4 scrutinized company and submits a written certification to the 5 public fund that it shall not reengage in such activity for 6 the duration of any investment by the public fund, the company 7 shall be removed from the scrutinized companies list. 8 Sec. 4. NEW SECTION . 12J.4 Prohibited investments —— 9 divestment. 10 1. The public fund shall not acquire publicly traded 11 securities of a company on the public fund’s most recent 12 scrutinized companies list so long as such company remains on 13 the public fund’s scrutinized companies list as provided in 14 this chapter. 15 2. a. The public fund shall sell, redeem, divest, or 16 withdraw all publicly traded securities of a company on the 17 public fund’s list of scrutinized companies, so long as the 18 company remains on that list, within ninety days following 19 the first written notice sent to the scrutinized company as 20 required by section 12J.3. 21 b. This subsection shall not be construed to require the 22 premature or otherwise imprudent sale, redemption, divestment, 23 or withdrawal of an investment, but such sale, redemption, 24 divestment, or withdrawal shall be completed as provided by 25 this subsection. 26 3. The requirements of this section shall not apply to 27 indirect holdings of a scrutinized company. The public 28 fund shall, however, submit letters to the managers of such 29 investment funds containing scrutinized companies requesting 30 that they consider removing such companies from the fund 31 or create a similar fund with indirect holdings devoid of 32 such companies. If the manager creates a similar fund with 33 indirect holdings devoid of such companies, the public fund 34 is encouraged to replace all applicable investments with 35 -4- LSB 5462XC (3) 86 ec/sc 4/ 7

S.F. _____ investments in the similar fund consistent with prudent 1 investing standards. 2 Sec. 5. NEW SECTION . 12J.5 Reports. 3 1. Scrutinized companies list. Each public fund shall, 4 within thirty days after the scrutinized companies list is 5 created or updated as required by section 12J.3, make the list 6 available to the public. 7 2. Annual report. On October 1, 2017, and each October 8 1 thereafter, each public fund shall make available to the 9 public, and file with the general assembly, an annual report 10 covering the prior fiscal year that includes the following: 11 a. The scrutinized companies list as of the end of the 12 fiscal year. 13 b. A summary of all written notices sent as required by 14 section 12J.3 during the fiscal year. 15 c. All investments sold, redeemed, divested, or withdrawn as 16 provided in section 12J.4 during the fiscal year. 17 Sec. 6. NEW SECTION . 12J.6 Public entities —— contract 18 requirements. 19 A public entity shall not enter into a contract of one 20 thousand dollars or more with a company to acquire or dispose 21 of services, supplies, information technology, or construction 22 unless the contract includes a written certification that 23 the company is not a scrutinized company and will not be a 24 scrutinized company for the duration of the contract. 25 Sec. 7. NEW SECTION . 12J.7 Legal obligations —— immunity. 26 With respect to actions taken in compliance with this 27 chapter, including all good-faith determinations regarding 28 companies as required by this chapter, the public fund shall 29 be immune from any liability and exempt from any conflicting 30 statutory or common law obligations, including any such 31 obligations in respect to choice of asset managers, investment 32 funds, or investments for the public fund’s securities 33 portfolios. 34 EXPLANATION 35 -5- LSB 5462XC (3) 86 ec/sc 5/ 7

S.F. _____ The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 This bill creates new Code chapter 12J, which restricts the 3 treasurer of state, the state board of regents, the Iowa public 4 employees’ retirement system (IPERS), the public safety peace 5 officers’ retirement system, the statewide fire and police 6 retirement system, and the judicial retirement system, defined 7 as “public funds”, from directly investing in certain companies 8 engaged in a boycott of Israel. The bill also requires all 9 public entities, including the state and political subdivisions 10 of the state, entering into contract with a company of $1,000 11 or more to include a written certification in the contract that 12 the company will not engage in a boycott of Israel for the 13 duration of the contract. 14 Concerning public funds, the bill requires each public 15 fund to develop and maintain a list of scrutinized companies 16 that the fund has direct or indirect holdings in or in which 17 the fund may invest in the future. Each public fund shall 18 determine this list by March 1, 2017, and update it on an 19 annual basis. The bill defines “scrutinized companies” as 20 those companies engaging in refusals to deal, terminating 21 business activities, or engaging in other actions that 22 are intended to limit commercial relations with Israel, or 23 persons or entities doing business in Israel or in territories 24 controlled by Israel. Once a company is listed on the 25 scrutinized companies list of a public fund, the bill requires 26 the public fund to send a notice to that company relative 27 to the requirements of the bill, to include notice that 28 the company may qualify for divestment and other investment 29 restrictions by the public fund. 30 New Code section 12J.4 requires that a public fund not invest 31 in, and shall divest from, holdings in a scrutinized company. 32 If the public fund has direct holdings in the company, the 33 public fund shall proceed to divest all assets with that 34 company in 90 days so long as the company continues active 35 -6- LSB 5462XC (3) 86 ec/sc 6/ 7

S.F. _____ business operations in Israel. The bill provides that a public 1 fund shall not be required to divest or refrain from investing 2 in a company if the public fund has indirect holdings, and not 3 direct holdings, in that company. However, public funds are 4 encouraged to move their indirect holdings to funds that do 5 not include scrutinized companies. The bill defines indirect 6 holdings to include shares in an account or fund managed by 7 persons not employed by the public fund, including mutual 8 funds, private equity funds, and other similar funds. 9 The bill further requires each public fund to prepare 10 and make available to the public, and file with the general 11 assembly, an annual report, beginning October 1, 2017, 12 concerning actions taken by the public fund relative to the 13 requirements of new Code chapter 12J in the previous fiscal 14 year. 15 The bill further provides that with respect to actions 16 taken in compliance with this bill, including all good-faith 17 determinations regarding companies as required, the public 18 fund shall be immune from any liability and exempt from any 19 conflicting statutory or common law obligations, including 20 any such obligations in respect to choice of asset managers, 21 investment funds, or investments for the public fund. 22 -7- LSB 5462XC (3) 86 ec/sc 7/ 7