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PIF largely a domestic inward-looking entity until recently The IMF reports that the PIF had assets of 11.1% of GDP in 2014 (c.SAR310bn). PIF has foreign assets of SAR14.1bn as of end-2015. It has outstanding loans of SAR103.9bn as of 3Q15 (excluding electricity loans of SAR14bn that PIF administers). According to Bloomberg, PIF had stakes in publicly listed companies on Tadawul worth SAR934bn as of April 2016. According to the MoF, PIF held equity worth SAR63.3bn in 41 Saudi companies in total at end-2011, as well as stakes worth SAR14.9bn in a number of pan- Arab corporations. In July 2014, the cabinet authorized the PIF to establish companies inside and outside Saudi Arabia, alone or in partnership with other institutions from the public or private sectors. It also bought a USS1.1bn stake in a South Korean company and recently announced in early June it took a US$3.5bn stake in Uber, denying in the process that it was considering a US$3bn loan to fund the acquisition. PIF has been asked to co-invest US$10bn in Russia or the Middle East with the RIDF. Note that PIF has established Sanabil investments with SAR2Obn in capital. The PIF has paid dividends to the budget last year (SAR15bn). It now reports directly to the Council of Economic and Development Affairs headed by the Deputy Crown Prince, after reporting to the Ministry of Finance in the past. JASTA bill not a hurdle for further Saudi investment in the US We expect that the deep and liquid US financial markets will remain a prominent destination for Saudi foreign asset holdings. The potential passage of the “9/11” bill (Justice Against Sponsors of Terrorism Act, JASTA) in US Congress raises the possibility that Saudi Arabia would choose to liquidate up to US$750bn in assets in the US, according to Saudi Foreign Minister Adel al-Jubeir. A forced and rapid liquidation of US- based Saudi foreign assets may expose SAMA and other government entities to mark- to-market losses, and require changes to Fx reserve management The language of the JASTA bill as it currently stands does not suggest an imminent Saudi sell-off of US assets, in our view. The “Stay of Actions Pending State Negotiations” section inserted into the bill allows a stay to be granted for an indefinitely renewable 180-day period. This would be subject to court petition by the Attorney General and repeated certification by the Secretary of State that the US is “engaged in good faith discussions with the foreign state defendant concerning the resolution of the claims against the foreign state”. The certification thus depends on the current and future US administration foreign policy inclinations, in our view. Separately, we note that the White House spokesman said US President Obama did not support the legislation and likely would not sign it. (A potential presidential veto may however still be overruled if Congress assembles the necessary two-thirds vote of each house). We continue to expect a close relationship between the US and Saudi Arabia given the confluence of interests in a broad range of matters. 8 GEMs Paper #26 | 30 June 2016 38 Merrill Lynch HOUSE_OVERSIGHT_016118