H.F. _____ Section 1. NEW SECTION . 12H.1 Legislative findings and 1 intent. 2 The general assembly is deeply concerned over the support 3 the country of Iran has provided for acts of international 4 terrorism. Therefore, the general assembly intends that state 5 funds and funds administered by the state, including public 6 employee retirement funds, should not be invested in companies 7 that provide power production-related services, mineral 8 extraction activities, oil-related activities, or military 9 equipment to the government of Iran. 10 Sec. 2. NEW SECTION . 12H.2 Definitions. 11 As used in this chapter, unless the context otherwise 12 requires: 13 1. “Active business operations” means all business 14 operations that are not inactive business operations. 15 2. “Business operations” means engaging in commerce in any 16 form in Iran, including by acquiring, developing, maintaining, 17 owning, selling, possessing, leasing, or operating equipment, 18 facilities, personnel, products, services, personal property, 19 real property, or any other apparatus of business or commerce. 20 3. “Company” means any sole proprietorship, organization, 21 association, corporation, partnership, joint venture, limited 22 partnership, limited liability partnership, limited liability 23 company, or other entity or business association, including 24 all wholly owned subsidiaries, majority-owned subsidiaries, 25 parent companies, or affiliates of such entities or business 26 associations, that exists for profit-making purposes. 27 4. “Direct holdings” in a company means all securities of 28 that company held directly by the public fund or in an account 29 or fund in which the public fund owns all shares or interests. 30 5. “Inactive business operations” means the mere continued 31 holding or renewal of rights to property previously operated 32 for the purpose of generating revenues but not presently 33 deployed for such purpose. 34 6. “Indirect holdings” in a company means all securities of 35 -1- LSB 1973YC (3) 84 aw/nh 1/ 11

H.F. _____ that company held in an account or fund managed by one or more 1 persons not employed by the public fund, in which the public 2 fund owns shares or interests together with other investors not 3 subject to the provisions of this chapter. Indirect holdings 4 include but are not limited to mutual funds, fund of funds, 5 private equity funds, hedge funds, and real estate funds. 6 7. “Military equipment” means weapons, arms, military 7 supplies, and equipment that readily may be used for military 8 purposes including but not limited to radar systems or 9 military-grade transport vehicles, or supplies or services 10 sold or provided directly or indirectly to any terrorist 11 organization. 12 8. “Mineral extraction activities” include exploring, 13 extracting, processing, transporting, or wholesale selling or 14 trading of elemental minerals or associated metal alloys or 15 oxides, including gold, copper, chromium, chromite, diamonds, 16 iron, iron ore, silver, tungsten, uranium, and zinc, as well as 17 facilitating such activities, including by providing supplies 18 or services in support of such activities. 19 9. “Oil-related activities” include but are not limited to 20 owning rights to oil blocks; exporting, extracting, producing, 21 refining, processing, exploring for, transporting, selling, 22 or trading of oil; constructing, maintaining, or operating a 23 pipeline, refinery, or other oil field infrastructure; and 24 facilitating such activities, including by providing supplies 25 or services in support of such activities, provided that the 26 mere retail sale of gasoline and related consumer products 27 shall not be considered oil-related activities. 28 10. “Power production activities” means any business 29 operation that involves a project commissioned by any 30 Iranian government entity whose purpose is to facilitate 31 power-generation and delivery including but not limited to 32 establishing power generating plants or hydroelectric dams, 33 selling or installing components for the project, providing 34 service contracts related to the installation or maintenance 35 -2- LSB 1973YC (3) 84 aw/nh 2/ 11

H.F. _____ of the project, as well as facilitating such activities, 1 including by providing supplies or services in support of such 2 activities. 3 11. “Public fund” means the treasurer of state, the state 4 board of regents, the public safety peace officers’ retirement 5 system created in chapter 97A, the Iowa public employees’ 6 retirement system created in chapter 97B, the statewide fire 7 and police retirement system created in chapter 411, or the 8 judicial retirement system created in chapter 602. 9 12. “Scrutinized company” means any company that is not 10 a social development company that meets any of the following 11 criteria: 12 a. The company has business operations that involve 13 contracts with or provision of supplies or services to 14 the government of Iran, companies in which the government 15 of Iran has any direct or indirect equity share, Iranian 16 government-commissioned consortiums or projects, or companies 17 involved in Iranian government-commissioned consortiums or 18 projects; and meets any of the additional following criteria: 19 (1) More than ten percent of the company’s revenues or 20 assets linked to Iran involve oil-related activities or mineral 21 extraction activities and the company has failed to take 22 substantial action. 23 (2) More than ten percent of the company’s revenues or 24 assets linked to Iran involve power production activities and 25 the company has failed to take substantial action. 26 b. The company supplies military equipment to Iran, unless 27 it clearly shows that the military equipment cannot be used to 28 facilitate international acts of terrorism. 29 13. “Social development company” means a company whose 30 primary purpose in Iran is to provide humanitarian goods or 31 services, including medicine or medical equipment, agricultural 32 supplies or infrastructure, educational opportunities, 33 journalism-related activities, information or information 34 materials, spiritual-related activities, services of a purely 35 -3- LSB 1973YC (3) 84 aw/nh 3/ 11

H.F. _____ clerical or reporting nature, food, clothing, or general 1 consumer goods that are unrelated to oil-related activities, 2 mineral extraction activities, or power production activities. 3 14. “Substantial action” means adopting, publicizing, 4 and implementing a formal plan to cease scrutinized business 5 operations within one year and to refrain from any such new 6 business operations. 7 Sec. 3. NEW SECTION . 12H.3 Identification of companies —— 8 notice. 9 1. a. By July 1, 2011, the public fund shall make its best 10 efforts to identify all scrutinized companies in which the 11 public fund has direct or indirect holdings or could possibly 12 have such holdings in the future and shall create and make 13 available to the public a scrutinized companies list for that 14 public fund. The list shall further identify whether the 15 company has inactive business operations or active business 16 operations. The public fund shall review and update, if 17 necessary, the scrutinized companies list and the determination 18 of whether a company has inactive or active business operations 19 on a quarterly basis thereafter. 20 b. In making its best efforts to identify scrutinized 21 companies and companies with inactive business operations or 22 active business operations, the public fund may review and 23 rely, in the best judgment of the public fund, on publicly 24 available information regarding companies with business 25 operations in Iran, and including other information that 26 may be provided by nonprofit organizations, research firms, 27 international organizations, and government entities. The 28 public fund may also contact asset managers and institutional 29 investors for the public fund to identify scrutinized companies 30 based upon industry-recognized lists of such companies that the 31 public fund may have indirect holdings in. 32 2. a. For each company on the scrutinized companies list 33 with only inactive business operations in which the public fund 34 has direct or indirect holdings, the public fund shall send a 35 -4- LSB 1973YC (3) 84 aw/nh 4/ 11

H.F. _____ written notice informing the company of the requirements of 1 this chapter and encouraging it to continue to refrain from 2 initiating active business operations in Iran until it is 3 able to avoid scrutinized business operations. The public 4 fund shall continue to provide such written notice on an 5 annual basis if the company remains a scrutinized company with 6 inactive business operations. 7 b. For each company on the scrutinized companies list with 8 active business operations in which the public fund has direct 9 or indirect holdings, the public fund shall send a written 10 notice informing the company of its status as a scrutinized 11 company with active business operations and that it may become 12 subject to divestment and restrictions on investing in the 13 company by the public fund. The notice shall offer the company 14 the opportunity to clarify its Iran-related activities and 15 shall encourage the company to either cease its scrutinized 16 business operations or convert such operations to inactive 17 business operations in order to avoid becoming subject to 18 divestment and restrictions on investment in the company by 19 the public fund. The public fund shall continue to provide 20 such written notice on an annual basis if the company remains a 21 scrutinized company with active business operations. 22 Sec. 4. NEW SECTION . 12H.4 Prohibited investments —— 23 divestment. 24 1. The public fund shall not acquire publicly traded 25 securities of a company on the public fund’s most recent 26 scrutinized companies list with active business operations so 27 long as such company remains on the public fund’s scrutinized 28 companies list as a company with active business operations as 29 provided in this section. 30 2. a. The public fund shall sell, redeem, divest, or 31 withdraw all publicly traded securities of a company on 32 the public fund’s list of scrutinized companies with active 33 business operations, so long as the company remains on that 34 list, no sooner than ninety days, but no later than eighteen 35 -5- LSB 1973YC (3) 84 aw/nh 5/ 11

H.F. _____ months, following the first written notice sent to the 1 scrutinized company with active business operations as required 2 by section 12H.3. 3 b. This subsection shall not be construed to require the 4 premature or otherwise imprudent sale, redemption, divestment, 5 or withdrawal of an investment, but such sale, redemption, 6 divestment, or withdrawal shall be completed as provided by 7 this subsection. 8 3. The requirements of this section shall not apply to the 9 following: 10 a. A company which the United States government 11 affirmatively declares to be excluded from its present or any 12 future federal sanctions regime relating to Iran. 13 b. Indirect holdings of a scrutinized company with active 14 business operations. The public fund shall, however, submit 15 letters to the managers of such investment funds containing 16 companies with scrutinized active business operations 17 requesting that they consider removing such companies from the 18 fund or create a similar fund with indirect holdings devoid of 19 such companies. If the manager creates a similar fund, the 20 public fund is encouraged to replace all applicable investments 21 with investments in the similar fund consistent with prudent 22 investing standards. 23 Sec. 5. NEW SECTION . 12H.5 Reports. 24 1. Scrutinized companies list. Each public fund shall, 25 within thirty days after the scrutinized companies list is 26 created or updated as required by section 12H.3, make the list 27 available to the public. 28 2. Annual report. On October 1, 2012, and each October 29 1 thereafter, each public fund shall make available to the 30 public, and file with the general assembly, an annual report 31 covering the prior fiscal year that includes the following: 32 a. The scrutinized companies list as of the end of the 33 fiscal year. 34 b. A summary of all written notices sent as required by 35 -6- LSB 1973YC (3) 84 aw/nh 6/ 11

H.F. _____ section 12H.3 during the fiscal year. 1 c. All investments sold, redeemed, divested, or withdrawn as 2 provided in section 12H.4 during the fiscal year. 3 Sec. 6. NEW SECTION . 12H.6 Legal obligations. 4 With respect to actions taken in compliance with this 5 chapter, including all good faith determinations regarding 6 companies as required by this chapter, the public fund 7 shall be exempt from any conflicting statutory or common law 8 obligations, including any such obligations in respect to 9 choice of asset managers, investment funds, or investments for 10 the public fund’s securities portfolios. 11 Sec. 7. NEW SECTION . 12H.7 Applicability. 12 1. The requirements of sections 12H.3, 12H.4, and 12H.5 13 shall not apply upon the occurrence of any of the following: 14 a. The Congress or president of the United States, through 15 legislation or executive order, declares that mandatory 16 divestment of the type provided for in this chapter interferes 17 with the conduct of United States foreign policy. 18 b. A controlling circuit or district court of the United 19 States issues an opinion that declares the mandatory divestment 20 of the type provided for in this chapter or similar statutes 21 of other states is preempted by the federal law of the United 22 States. 23 2. The requirements of sections 12H.3, 12H.4, and 12H.5 24 shall not apply to Iran if the United States revokes all 25 sanctions imposed against the government of Iran. 26 Sec. 8. Section 12.8, unnumbered paragraph 1, Code 2011, is 27 amended to read as follows: 28 The treasurer of state shall invest or deposit, subject to 29 chapter chapters 12F and 12H and as provided by law, any of 30 the public funds not currently needed for operating expenses 31 and shall do so upon receipt of monthly notice from the 32 director of the department of administrative services of the 33 amount not so needed. In the event of loss on redemption or 34 sale of securities invested as prescribed by law, and if the 35 -7- LSB 1973YC (3) 84 aw/nh 7/ 11

H.F. _____ transaction is reported to the executive council, neither the 1 treasurer nor director of the department of administrative 2 services is personally liable but the loss shall be charged 3 against the funds which would have received the profits or 4 interest of the investment and there is appropriated from the 5 funds the amount so required. 6 Sec. 9. Section 97A.7, subsection 1, Code 2011, is amended 7 to read as follows: 8 1. The board of trustees shall be the trustees of the 9 retirement fund created by this chapter as provided in section 10 97A.8 and shall have full power to invest and reinvest funds 11 subject to the terms, conditions, limitations, and restrictions 12 imposed by subsection 2 of this section and chapter 13 chapters 12F and 12H , and subject to like terms, conditions, 14 limitations, and restrictions said trustees shall have full 15 power to hold, purchase, sell, assign, transfer, or dispose of 16 any of the securities and investments of the retirement fund 17 which have been invested, as well as of the proceeds of said 18 investments and any moneys belonging to the retirement fund. 19 The board of trustees may authorize the treasurer of state to 20 exercise any of the duties of this section . When so authorized 21 the treasurer of state shall report any transactions to the 22 board of trustees at its next monthly meeting. 23 Sec. 10. Section 97B.4, subsection 5, Code 2011, is amended 24 to read as follows: 25 5. Investments. The system, through the chief investment 26 officer, shall invest, subject to chapter chapters 12F and 12H 27 and in accordance with the investment policy and goal statement 28 established by the board, the portion of the retirement fund 29 which, in the judgment of the system, is not needed for 30 current payment of benefits under this chapter subject to the 31 requirements of section 97B.7A . 32 Sec. 11. Section 262.14, unnumbered paragraph 1, Code 2011, 33 is amended to read as follows: 34 The board may invest funds belonging to the institutions, 35 -8- LSB 1973YC (3) 84 aw/nh 8/ 11

H.F. _____ subject to chapter chapters 12F and 12H and the following 1 regulations: 2 Sec. 12. Section 411.7, subsection 1, Code 2011, is amended 3 to read as follows: 4 1. The board of trustees is the trustee of the fire 5 and police retirement fund created in section 411.8 and 6 shall annually establish an investment policy to govern the 7 investment and reinvestment of the moneys in the fund, subject 8 to the terms, conditions, limitations, and restrictions imposed 9 by subsection 2 and chapter chapters 12F and 12H . Subject 10 to like terms, conditions, limitations, and restrictions 11 the system has full power to hold, purchase, sell, assign, 12 transfer, or dispose of any of the securities and investments 13 in which the fund has been invested, as well as of the proceeds 14 of the investments and any moneys belonging to the fund. 15 Sec. 13. Section 602.9111, subsection 1, Code 2011, is 16 amended to read as follows: 17 1. So much of the judicial retirement fund as may not be 18 necessary to be kept on hand for the making of disbursements 19 under this article shall be invested by the treasurer of 20 state in any investments authorized for the Iowa public 21 employees’ retirement system in section 97B.7A and subject 22 to the requirements of chapter chapters 12F and 12H , and 23 the earnings therefrom shall be credited to the fund. The 24 treasurer of state may execute contracts and agreements with 25 investment advisors, consultants, and investment management and 26 benefit consultant firms in the administration of the judicial 27 retirement fund. 28 EXPLANATION 29 This bill restricts the treasurer of state, the state 30 board of regents, the Iowa public employees’ retirement 31 system (IPERS), the public safety peace officers’ retirement 32 system, the statewide fire and police retirement system, and 33 the judicial retirement system, defined as public funds, from 34 directly investing in certain companies with active business 35 -9- LSB 1973YC (3) 84 aw/nh 9/ 11

H.F. _____ operations in Iran. The bill also adds notice requirements 1 as to the public funds relative to companies with inactive 2 business operations in Iran. 3 The bill requires each public fund to develop and maintain a 4 list of scrutinized companies with active and inactive business 5 operations in Iran that the fund has direct or indirect 6 holdings in or in which the fund may invest in the future. Each 7 public fund shall determine this list by July 1, 2011, and 8 update it on a quarterly basis. The bill defines “scrutinized 9 companies” as those companies that have contracts with the 10 government of Iran and involve some oil-related or power 11 production activities, or supply military equipment to Iran. 12 Once a company is listed on the scrutinized companies list of a 13 public fund, the bill requires the public fund to send a notice 14 to that company relative to the requirements of the bill. If 15 the company has inactive business operations, the notice shall 16 describe the requirements of the bill and encourage the company 17 not to engage in active business operations. If the company 18 has active business operations, the notice shall provide that 19 the company may qualify for divestment and other investment 20 restrictions by the public fund. 21 New Code section 12H.4 requires that a public fund not invest 22 in, and shall divest from, holdings in a scrutinized company 23 with active business operations. If the public fund has direct 24 holdings in the company, the public fund shall proceed to 25 divest all assets with that company in 18 months so long as the 26 company continues active business operations in Iran. The bill 27 provides that a public fund shall not be required to divest or 28 refrain from investing in a company if the federal government 29 so provides or the public fund has indirect holdings, and not 30 direct holdings, in that company. However, public funds are 31 encouraged to move their indirect holdings to funds that do not 32 include scrutinized companies with active business operations. 33 The bill defines indirect holdings to include shares in an 34 account or fund managed by persons not employed by the public 35 -10- LSB 1973YC (3) 84 aw/nh 10/ 11

H.F. _____ fund, including mutual funds, private equity funds, and other 1 similar funds. 2 The bill further requires each public fund to prepare 3 and make available to the public, and file with the general 4 assembly, an annual report, beginning October 1, 2012, 5 concerning actions taken by the public fund relative to the 6 requirements of this new Code chapter in the previous fiscal 7 year. 8 The bill provides that the requirements of the bill cease 9 to be applicable to Iran if the United States revokes all 10 sanctions imposed against Iran, or if Congress or the president 11 of the United States declares that mandatory divestment is 12 contrary to United States foreign policy or a controlling 13 federal court declares the divestment requirements of the bill 14 or similar statutes from other states is preempted by federal 15 law. 16 -11- LSB 1973YC (3) 84 aw/nh 11/ 11