S.F. 418 Section 1. Section 12.8, subsection 1, Code 2023, 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. Section 12F.3, subsection 1, paragraph a, Code 2023, 16 is amended to read as follows: 17 a. By July 1, 2007, the public fund shall make its best 18 efforts to identify all scrutinized companies in which the 19 public fund has direct or indirect holdings or could possibly 20 have such holdings in the future and shall create and make 21 available to the public a scrutinized companies list for that 22 public fund. The list shall further identify whether the 23 company has inactive business operations or active business 24 operations. The public fund shall review and update, if 25 necessary, the scrutinized companies list and the determination 26 of whether a company has inactive or active business operations 27 on a quarterly an annual basis thereafter. 28 Sec. 3. Section 12H.3, subsection 1, paragraph a, Code 2023, 29 is amended to read as follows: 30 a. By March 1, 2012, 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 -1- LSB 1536SV (2) 90 ec/rn 1/ 9

S.F. 418 companies list for that public fund. The list shall further 1 identify whether the company has inactive business operations 2 or active business operations. The public fund shall review 3 and update, if necessary, the scrutinized companies list and 4 the determination of whether a company has inactive or active 5 business operations on a quarterly an annual basis thereafter. 6 Sec. 4. NEW SECTION . 12K.1 Definitions. 7 As used in this chapter, unless the context otherwise 8 requires: 9 1. “Company” means any business or business entity that is 10 publicly traded and that is not based in the United States. 11 2. “Direct holdings” in a company means all securities of 12 a company held directly by the public fund or in an account or 13 fund in which the public fund owns all shares or interests. 14 3. “Indirect holdings” in a company means all securities 15 of a company held in an account or fund managed by one or more 16 persons not employed by the public fund, in which the public 17 fund owns shares or interests together with other investors not 18 subject to the provisions of this chapter. Indirect holdings 19 include but are not limited to mutual funds, fund of funds, 20 private equity funds, hedge funds, and real estate funds. 21 4. “Prohibited company” means a company that is owned or 22 controlled by Chinese military or government services and has 23 been designated by the United States government as a company 24 that citizens of the United States are restricted or prohibited 25 from entering into transactions with, limited to companies on 26 any of the following lists: 27 a. The bureau of industry and security’s entity list. 28 b. The bureau of industry and security’s military end user 29 list. 30 c. The department of defense’s communist Chinese military 31 companies list. 32 d. The office of foreign assets control’s foreign sanctions 33 evaders list. 34 e. The office of foreign assets control’s list of foreign 35 -2- LSB 1536SV (2) 90 ec/rn 2/ 9

S.F. 418 financial institutions subject to correspondent account or 1 payable-through account sanctions. 2 f. The office of foreign assets control’s non-SDN Iran 3 sanctions list. 4 g. The office of foreign assets control’s non-SDN 5 Palestinian legislative council list. 6 h. The office of foreign assets control’s sectoral sanctions 7 identifications list. 8 i. The office of foreign assets control’s specially 9 designated nationals and blocked persons list. 10 j. “Public fund” means the treasurer of state, the state 11 board of regents, the public safety peace officers’ retirement 12 system created in chapter 97A, the Iowa public employees’ 13 retirement system created in chapter 97B, the statewide fire 14 and police retirement system created in chapter 411, or the 15 judicial retirement system created in chapter 602. 16 Sec. 5. NEW SECTION . 12K.2 Identification of companies —— 17 notice. 18 1. a. By January 1, 2024, a public fund shall identify or 19 have identified all prohibited companies in which the public 20 fund has direct or indirect holdings and shall create and make 21 available to the public a prohibited companies list for that 22 public fund. The public fund shall review and update, if 23 necessary, the prohibited companies list on an annual basis 24 thereafter. 25 b. In identifying or having identified prohibited companies, 26 the public fund may review and rely, in the best judgment of 27 the public fund, on publicly available information and other 28 information that may be provided by nonprofit organizations, 29 research firms, international organizations, and government 30 entities. The public fund may also contact asset managers 31 and institutional investors for the public fund to identify 32 prohibited companies based upon industry-recognized lists of 33 such companies that the public fund may have indirect holdings 34 in. 35 -3- LSB 1536SV (2) 90 ec/rn 3/ 9

S.F. 418 c. The Iowa public employees’ retirement system, acting 1 on behalf of the system and other public funds subject to 2 this section, may develop and issue a request for proposals 3 for third-party services to complete the identification of 4 prohibited companies and the compilation of a prohibited 5 companies list. The request for proposals may request bids for 6 optional services related to this purpose, including but not 7 limited to provision of notice of such prohibited companies 8 as required in subsection 2. The Iowa public employees’ 9 retirement system shall consult with all other public funds 10 regarding the development of the request for proposals, however 11 selection of a successful proposal and the final scope of 12 services to be provided shall be determined only by those 13 public funds that have agreed to utilize the third-party 14 services. If more than one public fund decides to utilize the 15 third-party services, the participating public funds shall 16 equally share the costs of such services. 17 2. If a public fund determines that a company may be subject 18 to inclusion on the prohibited companies list, the public fund 19 shall scrutinize and engage the company for a period of not 20 more than twelve months and shall include the company on the 21 prohibited companies list if the public fund determines that 22 the company is a prohibited company. 23 Sec. 6. NEW SECTION . 12K.3 Divestment. 24 1. A public fund shall not acquire any direct holdings in 25 publicly traded securities of a prohibited company. 26 2. a. A public fund shall sell, redeem, divest, or 27 withdraw all direct holdings in publicly traded securities of 28 a prohibited company no later than one hundred eighty days 29 following the date the company is included on the prohibited 30 companies list. 31 b. This subsection shall not be construed to require the 32 premature or otherwise imprudent sale, redemption, divestment, 33 or withdrawal of an investment, but such sale, redemption, 34 divestment, or withdrawal shall be completed as provided by 35 -4- LSB 1536SV (2) 90 ec/rn 4/ 9

S.F. 418 this subsection. 1 Sec. 7. NEW SECTION . 12K.4 Reports. 2 1. Each public fund shall, within thirty days after the 3 prohibited companies list is created or updated as required by 4 section 12K.2, make the list available to the public. 5 2. On October 1, 2024, and each October 1 thereafter, each 6 public fund shall make available to the public, and file with 7 the general assembly, an annual report covering the prior 8 fiscal year that includes all of the following: 9 a. The prohibited companies list as of the end of the fiscal 10 year. 11 b. All investments sold, redeemed, divested, or withdrawn as 12 provided in section 12K.3 during the fiscal year. 13 c. A list of indirect holdings of the public fund in 14 publicly traded securities of prohibited companies and the 15 percentage of the total portfolio of the public fund the 16 indirect holdings of securities in prohibited companies 17 represent. 18 Sec. 8. NEW SECTION . 12K.5 Legal obligations. 19 With respect to actions taken in compliance with this 20 chapter, including all good-faith determinations regarding 21 companies as required by this chapter, the public fund 22 shall be exempt from any conflicting statutory or common law 23 obligations, including any such obligations with respect to 24 choice of asset managers, investment funds, or investments for 25 the public fund’s securities portfolios. 26 Sec. 9. NEW SECTION . 12K.6 Applicability. 27 The requirements of sections 12K.2, 12K.3, and 12K.4 shall 28 not apply if the United States Congress or president of the 29 United States, through legislation or executive order, declares 30 that mandatory divestment of the type provided for in this 31 chapter interferes with the conduct of United States foreign 32 policy. 33 Sec. 10. Section 97A.7, subsection 1, Code 2023, is amended 34 to read as follows: 35 -5- LSB 1536SV (2) 90 ec/rn 5/ 9

S.F. 418 1. The board of trustees shall be the trustees of the 1 retirement fund created by this chapter as provided in section 2 97A.8 and shall have full power to invest and reinvest funds 3 subject to the terms, conditions, limitations, and restrictions 4 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 5 12K and subject to like terms, conditions, limitations, and 6 restrictions said trustees shall have full power to hold, 7 purchase, sell, assign, transfer, or dispose of any of the 8 securities and investments of the retirement fund which have 9 been invested, as well as of the proceeds of said investments 10 and any moneys belonging to the retirement fund. The board 11 of trustees may authorize the treasurer of state to exercise 12 any of the duties of this section . When so authorized the 13 treasurer of state shall report any transactions to the board 14 of trustees at its next monthly meeting. 15 Sec. 11. Section 97B.4, subsection 5, Code 2023, is amended 16 to read as follows: 17 5. Investments. The system, through the chief investment 18 officer, shall invest, subject to chapters 12F , 12H , and 12J , 19 and 12K and in accordance with the investment policy and 20 goal statement established by the board, the portion of the 21 retirement fund which, in the judgment of the system, is not 22 needed for current payment of benefits under this chapter 23 subject to the requirements of section 97B.7A . 24 Sec. 12. Section 262.14, unnumbered paragraph 1, Code 2023, 25 is amended to read as follows: 26 The board may invest funds belonging to the institutions, 27 subject to chapters 12F , 12H , and 12J , and 12K and the 28 following regulations: 29 Sec. 13. Section 411.7, subsection 1, Code 2023, is amended 30 to read as follows: 31 1. The board of trustees is the trustee of the fire 32 and police retirement fund created in section 411.8 and 33 shall annually establish an investment policy to govern the 34 investment and reinvestment of the moneys in the fund, subject 35 -6- LSB 1536SV (2) 90 ec/rn 6/ 9

S.F. 418 to the terms, conditions, limitations, and restrictions 1 imposed by subsection 2 and chapters 12F , 12H , and 12J , and 2 12K . Subject to like terms, conditions, limitations, and 3 restrictions the system has full power to hold, purchase, sell, 4 assign, transfer, or dispose of any of the securities and 5 investments in which the fund has been invested, as well as of 6 the proceeds of the investments and any moneys belonging to the 7 fund. 8 Sec. 14. Section 602.9111, subsection 1, Code 2023, is 9 amended to read as follows: 10 1. So much of the judicial retirement fund as may not be 11 necessary to be kept on hand for the making of disbursements 12 under this article shall be invested by the treasurer of 13 state in any investments authorized for the Iowa public 14 employees’ retirement system in section 97B.7A and subject to 15 the requirements of chapters 12F , 12H , and 12J , and 12K , and 16 the earnings therefrom shall be credited to the fund. The 17 treasurer of state may execute contracts and agreements with 18 investment advisors, consultants, and investment management and 19 benefit consultant firms in the administration of the judicial 20 retirement fund. 21 EXPLANATION 22 The inclusion of this explanation does not constitute agreement with 23 the explanation’s substance by the members of the general assembly. 24 This bill relates to restrictions on the investment in 25 certain companies by public funds. 26 The bill amends Code chapters 12F and 12H relating to 27 Sudan-related and Iran-related investments to provide that 28 public funds are required to review their lists of scrutinized 29 companies on an annual and not a quarterly basis. 30 The bill also creates new Code chapter 12K concerning the 31 investment of public funds in companies owned by the Chinese 32 military or government. 33 The bill defines “company” as any business or business 34 entity that is publicly traded and that is not based in the 35 -7- LSB 1536SV (2) 90 ec/rn 7/ 9

S.F. 418 United States. The bill defines “direct holdings” in a company 1 as all securities of a company held directly by the public 2 fund or in an account or fund in which the public fund owns 3 all shares or interests. The bill defines “indirect holdings” 4 in a company as all securities of a company held in an account 5 or fund managed by one or more persons not employed by the 6 public fund, in which the public fund owns shares or interests 7 together with other investors not subject to the provisions 8 of this new Code chapter 12K. The bill defines “prohibited 9 company” as a company that is owned or controlled by Chinese 10 military or government services and designated by the United 11 States government as a company that citizens are restricted 12 or prohibited from entering into transactions with. The bill 13 defines “public fund” as the treasurer of state, the state 14 board of regents, the public safety peace officers’ retirement 15 system, the Iowa public employees’ retirement system (IPERS), 16 the statewide fire and police retirement system, or the 17 judicial retirement system. 18 The bill requires a public fund to identify all prohibited 19 companies in which the public fund has direct or indirect 20 holdings by January 1, 2024. Additionally, the bill requires 21 a public fund to create and make available to the public a 22 prohibited companies list and review and update the list on 23 an annual basis. The bill authorizes a public fund to review 24 and rely on publicly available information and information 25 from other sources when identifying prohibited companies. The 26 bill also authorizes IPERS to develop and issue a request 27 for proposals for third-party services to complete the 28 identification of prohibited companies and the compilation of 29 the prohibited companies list. The bill requires public funds 30 to scrutinize and engage with companies the fund identifies for 31 possible inclusion as a prohibited company for a period of not 32 more than 12 months. 33 The bill prohibits a public fund from acquiring direct 34 holdings in publicly traded securities of a prohibited company. 35 -8- LSB 1536SV (2) 90 ec/rn 8/ 9

S.F. 418 The bill requires a public fund to sell, redeem, divest, or 1 withdraw all direct holdings in publicly traded securities of a 2 prohibited company no later than 180 days following the date 3 the company becomes a prohibited company. 4 The bill requires each public fund, within 30 days after the 5 prohibited companies list is created or updated, to make the 6 list available to the public. Additionally, the bill requires 7 a public fund to make available to the public and file with the 8 general assembly an annual report beginning October 1, 2024, 9 and each October 1 thereafter. 10 The bill provides that, with respect to actions taken 11 in compliance with the Code chapter, the public fund shall 12 be exempt from any conflicting statutory or common law 13 obligations, including any such obligations in respect to 14 choice of asset managers, investment funds, or investments for 15 the public fund’s securities portfolios. 16 The bill provides that the provisions related to the 17 creation of a prohibited companies list, divestment of publicly 18 traded securities of a prohibited company, and reporting shall 19 not apply if the United States Congress or president of the 20 United States declares that mandatory divestment of the type 21 provided for in the Code chapter interferes with the conduct of 22 United States foreign policy. 23 The bill makes conforming changes to Code sections 12.8, 24 97A.7, 97B.4, 262.14, 411.7, and 602.9111. 25 -9- LSB 1536SV (2) 90 ec/rn 9/ 9