S.F. 499 Section 1. Section 12.8, subsection 1, Code 2021, is amended 1 to read as follows: 2 1. The treasurer of state shall invest or deposit, subject 3 to chapters 12F , 12H , and 12J , and 12K and as provided by law, 4 any of the public funds not currently needed for operating 5 expenses and shall do so upon receipt of monthly notice from 6 the director of the department of administrative services of 7 the amount not so needed. In the event of loss on redemption 8 or sale of securities invested as prescribed by law, and if 9 the transaction is reported to the executive council, neither 10 the treasurer nor director of the department of administrative 11 services is personally liable but the loss shall be charged 12 against the funds which would have received the profits or 13 interest of the investment and there is appropriated from the 14 funds the amount so required. 15 Sec. 2. NEW SECTION . 12K.1 Definitions. 16 As used in this chapter, unless the context otherwise 17 requires: 18 1. “Company” means a sole proprietorship, organization, 19 association, corporation, partnership, joint venture, limited 20 partnership, limited liability partnership, limited liability 21 company, or other entity or business association, including 22 all wholly owned subsidiaries, majority-owned subsidiaries, 23 parent companies, or affiliates of such entities or business 24 associations, that exists for profit-making purposes. 25 2. “Direct holdings” in a company means all securities of 26 a company held directly by the public fund or in an account or 27 fund in which the public fund owns all shares or interests. 28 3. “Indirect holdings” in a company means all securities 29 of a company held in an account or fund managed by one or more 30 persons not employed by the public fund, in which the public 31 fund owns shares or interests together with other investors not 32 subject to the provisions of this chapter. Indirect holdings 33 include but are not limited to mutual funds, fund of funds, 34 private equity funds, hedge funds, and real estate funds. 35 -1- LSB 2600XS (2) 89 jda/rn 1/ 9

S.F. 499 4. “Prohibited company” means a company that is owned or 1 controlled by Chinese military or government services and that 2 meets any of the following criteria: 3 a. The company has been designated by the United States 4 government as a company that citizens of the United States are 5 restricted or prohibited from entering into transactions with, 6 including a designation in any of the following lists: 7 (1) The bureau of industry and security’s entity list. 8 (2) The bureau of industry and security’s military end user 9 list. 10 (3) The department of defense’s communist Chinese military 11 companies list. 12 (4) The office of foreign assets control’s foreign 13 sanctions evaders list. 14 (5) The office of foreign assets control’s list of foreign 15 financial institutions subject to correspondent account or 16 payable-through account sanctions. 17 (6) The office of foreign assets control’s non-SDN Iran 18 sanctions list. 19 (7) The office of foreign assets control’s non-SDN 20 Palestinian legislative council list. 21 (8) The office of foreign assets control’s sectoral 22 sanctions identifications list. 23 (9) The office of foreign assets control’s specially 24 designated nationals and blocked persons list. 25 b. The company has been sanctioned in any way by the United 26 States government. 27 5. “Public fund” means the treasurer of state, the state 28 board of regents, the public safety peace officers’ retirement 29 system created in chapter 97A, the Iowa public employees’ 30 retirement system created in chapter 97B, the statewide fire 31 and police retirement system created in chapter 411, or the 32 judicial retirement system created in chapter 602. 33 6. “Scrutinized company” means any company that is owned or 34 controlled by Chinese military or government services. 35 -2- LSB 2600XS (2) 89 jda/rn 2/ 9

S.F. 499 Sec. 3. NEW SECTION . 12K.2 Identification of companies —— 1 notice. 2 1. a. Within sixty days following the effective date of 3 this Act, a public fund shall identify or have identified all 4 scrutinized companies in which the public fund has direct or 5 indirect holdings and shall create and make available to the 6 public a scrutinized companies list for that public fund. 7 The public fund shall review and update, if necessary, the 8 scrutinized companies list on a quarterly basis thereafter. 9 b. In identifying or having identified scrutinized 10 companies, the public fund may review and rely, in the best 11 judgment of the public fund, on publicly available information 12 and other information that may be provided by nonprofit 13 organizations, research firms, international organizations, and 14 government entities. The public fund may also contact asset 15 managers and institutional investors for the public fund to 16 identify scrutinized companies based upon industry-recognized 17 lists of such companies that the public fund may have indirect 18 holdings in. 19 c. The Iowa public employees’ retirement system, acting 20 on behalf of the system and other public funds subject to 21 this section, may develop and issue a request for proposals 22 for third-party services to complete the identification of 23 scrutinized companies and the compilation of a scrutinized 24 companies list. The request for proposals may request bids for 25 optional services related to this purpose, including but not 26 limited to provision of notice of such scrutinized companies 27 as required in subsection 2. The Iowa public employees’ 28 retirement system shall consult with all other public funds 29 regarding the development of the request for proposals, however 30 selection of a successful proposal and the final scope of 31 services to be provided shall be determined only by those 32 public funds that have agreed to utilize the third-party 33 services. If more than one public fund decides to utilize the 34 third-party services, the participating public funds shall 35 -3- LSB 2600XS (2) 89 jda/rn 3/ 9

S.F. 499 equally share the costs of such services. 1 2. For each company on the scrutinized companies list in 2 which a public fund has direct or indirect holdings, the public 3 fund shall send or have sent a written notice informing the 4 company of the requirements of this chapter. The public fund 5 or its representative shall continue to provide such written 6 notice on an annual basis if the company remains a scrutinized 7 company. 8 Sec. 4. NEW SECTION . 12K.3 Divestment. 9 1. A public fund shall not acquire publicly traded 10 securities of a prohibited company. 11 2. a. A public fund shall sell, redeem, divest, or withdraw 12 all publicly traded securities of a prohibited company no 13 later than sixty days following the date the company becomes a 14 prohibited company or the effective date of this Act, whichever 15 is earlier. 16 b. This subsection shall not be construed to require the 17 premature or otherwise imprudent sale, redemption, divestment, 18 or withdrawal of an investment, but such sale, redemption, 19 divestment, or withdrawal shall be completed as provided by 20 this subsection. 21 Sec. 5. NEW SECTION . 12K.4 Reports. 22 1. Each public fund shall, within thirty days after the 23 scrutinized companies list is created or updated as required by 24 section 12K.2, make the list available to the public. 25 2. On October 1, 2021, and each October 1 thereafter, each 26 public fund shall make available to the public, and file with 27 the general assembly, an annual report covering the prior 28 fiscal year that includes all of the following: 29 a. The scrutinized companies list as of the end of the 30 fiscal year. 31 b. A summary of all written notices sent as required by 32 section 12K.2 during the fiscal year. 33 c. All investments sold, redeemed, divested, or withdrawn as 34 provided in section 12K.3 during the fiscal year. 35 -4- LSB 2600XS (2) 89 jda/rn 4/ 9

S.F. 499 Sec. 6. NEW SECTION . 12K.5 Legal obligations. 1 With respect to actions taken in compliance with this 2 chapter, including all good-faith determinations regarding 3 companies as required by this chapter, the public fund 4 shall be exempt from any conflicting statutory or common law 5 obligations, including any such obligations with respect to 6 choice of asset managers, investment funds, or investments for 7 the public fund’s securities portfolios. 8 Sec. 7. NEW SECTION . 12K.6 Applicability. 9 The requirements of sections 12K.2, 12K.3, and 12K.4 shall 10 not apply upon the occurrence of any of the following: 11 1. The United States congress or president of the United 12 States, through legislation or executive order, declares that 13 mandatory divestment of the type provided for in this chapter 14 interferes with the conduct of United States foreign policy. 15 2. A controlling circuit or district court of the United 16 States issues an opinion that declares the mandatory divestment 17 of the type provided for in this chapter or similar statutes 18 of other states is preempted by the federal law of the United 19 States. 20 Sec. 8. Section 97A.7, subsection 1, Code 2021, is amended 21 to read as follows: 22 1. The board of trustees shall be the trustees of the 23 retirement fund created by this chapter as provided in section 24 97A.8 and shall have full power to invest and reinvest funds 25 subject to the terms, conditions, limitations, and restrictions 26 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 27 12K and subject to like terms, conditions, limitations, and 28 restrictions said trustees shall have full power to hold, 29 purchase, sell, assign, transfer, or dispose of any of the 30 securities and investments of the retirement fund which have 31 been invested, as well as of the proceeds of said investments 32 and any moneys belonging to the retirement fund. The board 33 of trustees may authorize the treasurer of state to exercise 34 any of the duties of this section . When so authorized the 35 -5- LSB 2600XS (2) 89 jda/rn 5/ 9

S.F. 499 treasurer of state shall report any transactions to the board 1 of trustees at its next monthly meeting. 2 Sec. 9. Section 97B.4, subsection 5, Code 2021, is amended 3 to read as follows: 4 5. Investments. The system, through the chief investment 5 officer, shall invest, subject to chapters 12F , 12H , and 12J , 6 and 12K and in accordance with the investment policy and 7 goal statement established by the board, the portion of the 8 retirement fund which, in the judgment of the system, is not 9 needed for current payment of benefits under this chapter 10 subject to the requirements of section 97B.7A . 11 Sec. 10. Section 262.14, unnumbered paragraph 1, Code 2021, 12 is amended to read as follows: 13 The board may invest funds belonging to the institutions, 14 subject to chapters 12F , 12H , and 12J , and 12K and the 15 following regulations: 16 Sec. 11. Section 411.7, subsection 1, Code 2021, is amended 17 to read as follows: 18 1. The board of trustees is the trustee of the fire 19 and police retirement fund created in section 411.8 and 20 shall annually establish an investment policy to govern the 21 investment and reinvestment of the moneys in the fund, subject 22 to the terms, conditions, limitations, and restrictions 23 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 24 12K . Subject to like terms, conditions, limitations, and 25 restrictions the system has full power to hold, purchase, sell, 26 assign, transfer, or dispose of any of the securities and 27 investments in which the fund has been invested, as well as of 28 the proceeds of the investments and any moneys belonging to the 29 fund. 30 Sec. 12. Section 602.9111, subsection 1, Code 2021, is 31 amended to read as follows: 32 1. So much of the judicial retirement fund as may not be 33 necessary to be kept on hand for the making of disbursements 34 under this article shall be invested by the treasurer of 35 -6- LSB 2600XS (2) 89 jda/rn 6/ 9

S.F. 499 state in any investments authorized for the Iowa public 1 employees’ retirement system in section 97B.7A and subject to 2 the requirements of chapters 12F , 12H , and 12J , and 12K , and 3 the earnings therefrom shall be credited to the fund. The 4 treasurer of state may execute contracts and agreements with 5 investment advisors, consultants, and investment management and 6 benefit consultant firms in the administration of the judicial 7 retirement fund. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill relates to the investment of certain public funds 12 in companies that are owned or controlled by Chinese military 13 or government services. 14 The bill defines “company” as any entity or business 15 association, including all subsidiaries, parent companies, or 16 affiliates of such entities or business associations, that 17 exist for profit-making purposes. The bill defines “direct 18 holdings” in a company as all securities of a company held 19 directly by the public fund or in an account or fund in which 20 the public fund owns all shares or interests. The bill defines 21 “indirect holdings” in a company as all securities of a company 22 held in an account or fund managed by one or more persons 23 not employed by the public fund, in which the public fund 24 owns shares or interests together with other investors not 25 subject to the provisions of this new Code chapter 12K. The 26 bill defines “prohibited company” as a company that is owned 27 or controlled by Chinese military or government services and 28 that meets criteria enumerated in the bill. The bill defines 29 “public fund” as the treasurer of state, the state board of 30 regents, the public safety peace officers’ retirement system, 31 the Iowa public employees’ retirement system (IPERS), the 32 statewide fire and police retirement system, or the judicial 33 retirement system. The bill defines “scrutinized company” as 34 any company that is owned or controlled by Chinese military or 35 -7- LSB 2600XS (2) 89 jda/rn 7/ 9

S.F. 499 government services. 1 The bill requires a public fund to identify all scrutinized 2 companies in which the public fund has direct or indirect 3 holdings within 60 days following the effective date of 4 the bill. Additionally, the bill requires a public fund 5 to create and make available to the public a scrutinized 6 companies list and review and update the list on a quarterly 7 basis. The bill authorizes a public fund to review and rely 8 on publicly available information and information from other 9 sources when identifying scrutinized companies. The bill also 10 authorizes IPERS to develop and issue a request for proposals 11 for third-party services to complete the identification of 12 scrutinized companies and the compilation of the scrutinized 13 companies list. The bill requires a public fund to send notice 14 to all companies on the scrutinized companies list on an annual 15 basis informing the company of the requirements of the new Code 16 chapter. 17 The bill prohibits a public fund from acquiring publicly 18 traded securities of a prohibited company. The bill requires a 19 public fund to sell, redeem, divest, or withdraw all publicly 20 traded securities of a prohibited company no later than 60 days 21 following the date the company becomes a prohibited company, or 22 the effective date of the bill, whichever is earlier. 23 The bill requires each public fund, within 30 days after the 24 scrutinized companies list is created or updated, to make the 25 list available to the public. Additionally, the bill requires 26 a public fund to make available to the public and file with the 27 general assembly an annual report beginning October 1, 2021, 28 and each October 1 thereafter. 29 The bill provides that, with respect to actions taken 30 in compliance with the Code chapter, the public fund shall 31 be exempt from any conflicting statutory or common law 32 obligations, including any such obligations in respect to 33 choice of asset managers, investment funds, or investments for 34 the public fund’s securities portfolios. 35 -8- LSB 2600XS (2) 89 jda/rn 8/ 9

S.F. 499 The bill provides that the provisions related to the 1 creation of a scrutinized companies list, divestment of 2 publicly traded securities of a prohibited company, and 3 reporting shall not apply if the United States congress 4 or president of the United States declares that mandatory 5 divestment of the type provided for in this chapter interferes 6 with the conduct of United States foreign policy, or a 7 controlling circuit or district court of the United States 8 issues an opinion that declares the mandatory divestment of 9 the type provided for in the Code chapter or similar statutes 10 of other states is preempted by the federal law of the United 11 States. 12 The bill makes conforming changes to Code sections 12.8, 13 97A.7, 97B.4, 262.14, 411.7, and 602.9111. 14 -9- LSB 2600XS (2) 89 jda/rn 9/ 9