S.F. 2453 Section 1. NEW SECTION . 262C.1 Findings and purpose. 1 1. Legislative findings. The general assembly finds and 2 declares all of the following: 3 a. The state of Iowa has established state-certified 4 innovation funds to promote the growth of high-potential 5 early-stage companies, commercialize research, expand Iowa’s 6 technology ecosystem, and enhance economic competitiveness. 7 b. Iowa’s three public universities collectively steward 8 sizeable endowments that support the long-term missions of the 9 institutions. 10 c. A modest, risk-appropriate allocation of endowment 11 assets into state-certified innovation funds will do all of the 12 following: 13 (1) Expand commercialization pathways for 14 institution-developed technologies. 15 (2) Increase research to market conversions. 16 (3) Strengthen Iowa’s innovation ecosystem. 17 (4) Generate economic benefits for communities throughout 18 Iowa. 19 d. A one percent allocation of endowment assets represents 20 a small, diversified portion of institution endowments, 21 consistent with commonly accepted endowment investment 22 practices and long-term portfolio strategies. 23 2. Purpose. The purpose of this chapter is to support 24 economic growth in Iowa by requiring institutions to deploy a 25 limited portion of their endowment assets into state-certified 26 innovation funds while maintaining prudent investment standards 27 and fiduciary responsibility to the endowment beneficiaries. 28 Sec. 2. NEW SECTION . 262C.2 Definitions. 29 As used in this chapter, unless the context otherwise 30 requires: 31 1. “Board” means the state board of regents. 32 2. “Endowment assets” means all pooled, investable assets 33 held for the benefit of an institution, including but not 34 limited to foundation-managed endowments, quasi-endowments, 35 -1- LSB 6901SV (1) 91 je/ns 1/ 5

S.F. 2453 long-term investment pools, and assets held subject to 1 donor-imposed restrictions. 2 3. “Innovation fund” means the same as defined in section 3 15E.52. 4 4. “Institution” means a regents institution specified in 5 section 262.7, subsections 1 through 3. 6 Sec. 3. NEW SECTION . 262C.3 Investment in innovation funds. 7 1. By July 1, 2027, each institution shall ensure that 8 no less than one percent of its total endowment assets are 9 invested in one or more innovation funds. The one percent 10 allocation shall be calculated based on the average quarterly 11 market value of endowment assets for the most recently 12 completed fiscal year. 13 2. An institution shall retain discretion to determine all 14 of the following: 15 a. Which innovation funds to invest in. 16 b. When investments are made, subject to the requirements of 17 this chapter. 18 c. The structure of commitments, provided that all 19 investments comply with prudent investor standards. 20 3. An institution may implement investments required by 21 this chapter through any of the following means: 22 a. Direct commitments. 23 b. Reallocation of existing assets. 24 c. Rolling commitments as capital is called, provided full 25 compliance is achieved by the date provided in subsection 1. 26 4. Investments made pursuant to this chapter shall be 27 managed in accordance with generally accepted institutional 28 fiduciary standards applicable to endowment funds. 29 Sec. 4. NEW SECTION . 262C.4 Waiver —— penalty for 30 noncompliance. 31 1. The board may grant an institution a one-year waiver from 32 the requirements of this chapter if adequate innovation fund 33 capacity is not available or market conditions would materially 34 impair prudent investment. 35 -2- LSB 6901SV (1) 91 je/ns 2/ 5

S.F. 2453 2. If an institution fails to comply with this chapter 1 without receiving a waiver, the board may do any of the 2 following: 3 a. Direct the institution to carry out corrective action 4 within a specified time frame. 5 b. If the institution fails to complete the corrective 6 action required under paragraph “a” within the time frame 7 specified by the board, withhold up to one-half of one percent 8 of the moneys appropriated to the institution through the 9 board in the fiscal year until the institution becomes fully 10 compliant. 11 Sec. 5. NEW SECTION . 262C.5 Reports. 12 1. Each institution shall submit an annual report to the 13 board that includes all of the following: 14 a. The total endowment assets held by the institution. 15 b. The amount and percentage of total endowment assets 16 invested in innovation funds. 17 c. The names of innovation funds the institution is invested 18 in and the total commitments and capital deployed in each fund. 19 d. The expected or realized economic impact in Iowa of the 20 investments. 21 2. The board shall compile the reports received pursuant 22 to subsection 1 and submit a consolidated annual report to the 23 general assembly by December 1 of each year. 24 Sec. 6. NEW SECTION . 262C.6 Standards for innovation funds. 25 Innovation funds receiving investment under this chapter 26 must support the commercialization of institution technologies, 27 spinouts, or research-derived innovations and report such 28 efforts through existing reporting and compliance obligations 29 under section 15E.52 and rules adopted pursuant to that 30 section. This section shall not be construed to require 31 additional reporting beyond that required under section 15E.52 32 and rules adopted pursuant to that section. 33 Sec. 7. NEW SECTION . 262C.7 List of innovation funds. 34 The economic development authority shall maintain a public 35 -3- LSB 6901SV (1) 91 je/ns 3/ 5

S.F. 2453 list of all innovation funds eligible for investment by an 1 institution pursuant to this chapter. The authority shall 2 notify the board of any changes to the list. 3 Sec. 8. NEW SECTION . 262C.8 Implementation and construction 4 of chapter. 5 Implementation of this chapter shall not alter donor intent 6 and shall be carried out in a manner consistent with applicable 7 restrictions and fiduciary obligations. This chapter shall not 8 be construed to alter donor intent, beneficiary designation, 9 an institution’s spending policy, or the permissible use 10 of endowment distributions. This chapter addresses only 11 investment allocation and implementation consistent with 12 applicable fiduciary standards. 13 Sec. 9. EFFECTIVE DATE. This Act, being deemed of immediate 14 importance, takes effect upon enactment. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 This bill requires the university of Iowa, Iowa state 19 university, and the university of northern Iowa (institutions) 20 to ensure that no less than 1 percent of their respective 21 total endowment assets are invested by July 1, 2027, in one or 22 more innovation funds certified by the economic development 23 authority under Code section 15E.52. 24 The bill provides that each institution shall retain 25 discretion to determine which innovation funds to invest in, 26 when investments are made, and the structure of commitments. 27 The bill authorizes an institution to implement investments 28 through direct commitments, reallocation of existing assets, 29 or rolling commitments as capital is called. Investments 30 made pursuant to the bill shall be managed in accordance with 31 generally accepted institutional fiduciary standards applicable 32 to endowment funds. 33 The bill authorizes the state board of regents (board) to 34 grant an institution a one-year waiver from the requirements 35 -4- LSB 6901SV (1) 91 je/ns 4/ 5

S.F. 2453 of the bill if adequate innovation fund capacity is not 1 available or market conditions would materially impair prudent 2 investment. If an institution fails to comply with the bill 3 without receiving a waiver, the bill authorizes the board to 4 direct the institution to carry out corrective action within 5 a specified time frame, after which the board may withhold up 6 to 0.5 percent of the moneys appropriated to the institution 7 through the board in the fiscal year until the institution 8 becomes fully compliant. 9 The bill requires each institution to submit an annual 10 report to the board with specified content on investments under 11 the bill and requires the board to submit a consolidated report 12 to the general assembly by December 1 of each year. 13 The bill requires innovation funds receiving investment 14 under the bill to support the commercialization of institution 15 technologies, spinouts, or research-derived innovations and 16 report such efforts through existing reporting and compliance 17 obligations. 18 The bill requires the economic development authority to 19 maintain a public list of all innovation funds eligible for 20 investment by an institution and notify the board of any 21 changes to the list. 22 The bill includes standards for implementation and 23 construction of the bill relating to donor intent and other 24 matters. 25 The bill takes effect upon enactment. 26 -5- LSB 6901SV (1) 91 je/ns 5/ 5