Susan:

Thanks for the update.  Gary Hickerson wants this product available on EOL 
now (which explains why I am called daily by the trading desk).  Do you know 
when a decision on the Japanese FX principal will be forthcoming?

Sara



	Susan Musch@ENRON_DEVELOPMENT
	12/14/2000 03:56 PM
		
		 To: Sara Shackleton/HOU/ECT@ECT
		 cc: Janine Juggins/LON/ECT@ECT, Melba Lozano/HOU/ECT@ECT, William 
Stuart/HOU/ECT@ECT, Steve Jacobellis/NA/Enron@Enron@ECT, Jeff 
Blumenthal/HOU/ECT@ECT, Rhett Jackson/HOU/ECT@ECT
		 Subject: Re: FX Product

Sara,

Attached are two e-mails that I sent yesterday and today on the Japanese FX 
trader.  In short, we are pursuing the dependent agency approach.  The 
specifics are set forth in the e-mails.

Please let me know if you have any questions or need any additional 
information.

Best regards,
Susan



Susan Musch
12/14/2000 09:46 AM
To: Heidi Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Jan-Erland Bekeng/AP/Enron@Enron, Sheila Glover@ECT, Darren Delage@Enron, 
Scott Gilchrist/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Janine Juggins@ECT, Rod 
Sayers@ECT (bcc: Susan Musch/ENRON_DEVELOPMENT)

Subject: FX Trader in Tokyo  

Heidi,

In response to your attached e-mail, I am attaching the e-mail message that I 
sent out yesterday regarding the structure for the FX trader in Tokyo and the 
EM-Japan traders.  (You were already copied on this but I want to make sure 
that you got it.)  

In this e-mail, I explain that PWC-Tokyo has recommended following a 
dependent agent approach for these traders (which is what you reference in 
your attached e-mail).  I recommend this approach saying that it is a 
pragmatic approach and should be easily implemented.  I talked with Sheila 
Glover and Darren Delage about this approach yesterday evening and they like 
it as well.  (In fact, they were also copied on the e-mail regarding the FX 
trader and the EM-Japan traders.)

The following points should be kept in mind in following the dependent agent 
approach, which I have already discussed with Sheila and Darren:

(1) Agency approach:  Enron Japan would be considered to be an agent of ENA.  
In this role, it would facilitate trades that would be entered into between 
ENA and the third party counterparties.  The trades would be entered into in 
the name of ENA.  Under this approach, Darren is limited in what he is 
authorized to do, and his trading parameters will need to be reduced to 
writing.  These parameters must restrict his activities so that they 
constitute activities that have a preparatory or auxiliary character.  The 
advice that we received for the FX trader's activities in Australia should 
equally apply to our facts here.  The following is an excerpt from a memo 
that I wrote last year summarizing this advice:

Guidelines and boundaries must be established on what the financial trader 
can do (e.g. price parameters, product parameters, etc.). Activities cannot 
include the negotiation of terms of master contracts, forwards and other 
derivatives with counterparties. If a master contract must be executed in 
Australia, then it should be executed by an independent agent (such as a 
lawyer) having a power of attorney from the hedging party. Confirmations 
should be issued by the hedging party, rather than by EA Finance in Sydney. 
The Australian tax advisor recommended that the financial trader say:  &My 
principal will deal with you within these parameters (.8

(2) Darren's employment:  Darren must be considered an employee of Enron 
Japan so as to avoid ENA being treated as having a permanent establishment in 
Japan.
(3) Darren's agency role:  Darren should not identify himself as an employee 
of ENA Houston.  He should make it clear that the third parties are entering 
into the transactions with ENA as principal.
(4) Service agreement:  A service agreement must be put in place between 
Enron Japan and ENA (similar to what we did for the FX trader in Sydney). 
Enron Japan should at least initially  be compensated at a cost plus 5% 
mark-up.  Yesterday evening I also forwarded to Sheila and Darren by e-mail 
the old service agreement that we put in place for the FX trader in Sydney so 
that they could review what terms have been previously used.  (Incidentally, 
the service agreement we put in place between Enron Australia and ENA was 
very similar (almost identical) to the one that was put in place between 
Enron Europe and ENA for the FX trader in London.)
(5) Potential issues upon Japanese tax audit:  Notwithstanding that this 
approach is easier to implement, more workable and more pragmatic in 
approach, we need to be aware that there could be questions upon a Japanese 
tax audit.  In that event, transfer pricing issues could be raised.  That is, 
the auditors could question whether a cost plus 5% mark-up is commensurate 
with what an unrelated third party would charge for similar services.  We 
would then need to justify that service fee, or if unsuccessful, try to work 
out a commission fee that would be acceptable to the Japanese tax auditors.  
Management needs to be aware of this potential.

I guess I wasn't clear in my attached e-mail.  I am sorry for any 
inconvenience this may have caused you.  I hope this e-mail better explains 
the recommended structure.  Please let me know if you would like to set up a 
conference call to discuss this further (and let me know who you would like 
on the call).

Best regards,
Susan


Susan Musch
12/13/2000 06:07 PM
To: Jan-Erland Bekeng/AP/Enron@ENRON
cc: Jane McBride@Enron, Tina Ward@ECT, Paul Simons@ECT, Alan Aronowitz@ECT, 
Rod Sayers@ECT, Janine Juggins@ECT, Heidi 
Mason/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Joseph P Hirl/AP/ENRON@ENRON, 
Sheila Glover@ECT, Darren Delage@Enron (bcc: Susan Musch/ENRON_DEVELOPMENT)

Subject: Enron Metals & FX Traders in Japan  

Jan-Erland,

I have not yet received the 2001 projections/budget for the Enron Metals 
trading in Japan.  If you have already sent it, could you please re-send it?  

Also, I talked with PWC-Tokyo late last night about structuring for the FX 
trader and Japanese Metals traders to confirm Baker & McKenzie's advice on 
not using a dependent agent structure in Japan.  PWC has advised that 
although Baker & McKenzie's approach is more technically correct, foreign 
traders usually set up their Japanese trading operations through the use of a 
dependent agent in Japan.  The Japanese dependent agent is usually reimbursed 
using cost plus 5%, at least initially.  Then, if the Japanese tax 
authorities raise questions upon audit, a commission arrangement is generally 
used, with the question being what should the profit split be between the 
agent and the foreign company.  Whether the Japanese tax authorities raise 
questions upon audit is dependent upon the volume of trades and the magnitude 
of the trades.  The PWC Japanese tax partner suggested that we use this 
arrangement for both the FX trader and the EM Japan trades.  I have asked PWC 
to send this advice in writing by tomorrow.

This seems to be a much more pragmatic approach than the one suggested by 
Baker & McKenzie.  And it should be easy to implement by year-end.  However, 
management must be aware of the fact that PWC's approach could raise 
questions upon a Japanese tax audit.  Note that if we follow this approach, 
we would need to set up a services agreement between Enron Japan (whichever 
the appropriate entity is) and ENA.

Please let me know if you have any questions or need any additional 
information.

Best regards,
Susan


HEIDI MASON
12/13/2000 08:38 PM
To: Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Jan-Erland Bekeng/AP/Enron@Enron 

Subject: Re: Japanese Financial Subsidiary  

Thanks for the note Susan. Like you, I would love to get the funding resolved 
before year-end as we have finalised the amounting owing to Houston etc 
(subject to some invoices etc being received) so it would be a good time to 
get this done. 

Re the FX trader, I have been harassing Sheila a bit this week, so I was 
hoping to hear from you or her on the progress here. At this stage I 
understand that the deals are still being done in the name of ENA, but there 
have not been alot, so again if we can get this addressed before the volume 
grows it would be best for all. I was reviewing this matter with JEB 
yesterday and he indicated that his preference is for an agency style 
agreement which avoids the need for the back to back deals. 

With thanks

Heidi Mason 
Chief Financial Officer
Enron Australia





From: Sara Shackleton@ECT on 12/14/2000 01:22 PM
To: Janine Juggins/LON/ECT@ECT, Susan 
Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Melba Lozano/HOU/ECT@ECT, William Stuart/HOU/ECT@ECT, Steve 
Jacobellis/NA/Enron@Enron, Jeff Blumenthal/HOU/ECT@ECT, Rhett 
Jackson/HOU/ECT@ECT 

Subject: Re: FX Product

Janine:

Thanks for the update.  Any word on the Japanese FX desk principal?  Sara
----- Forwarded by Sara Shackleton/HOU/ECT on 12/14/2000 01:23 PM -----

	Janine Juggins
	12/13/2000 04:04 PM
		
		 To: Sara Shackleton/HOU/ECT@ECT
		 cc: Jeff Blumenthal/HOU/ECT@ECT, Rhett Jackson/HOU/ECT@ECT, Melba 
Lozano/HOU/ECT@ECT, Susan Musch/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
		 Subject: Re: FX Product

Your summary is correct based on information to date (in this regard the 
agreement between ENA and EEFT still requires amendment in respect of RMT and 
I undertake to get this done). 

However, please note that there have been some last minute changes in the 
Japanese tax advice, received I understand only as of last night. Susan Musch 
will be following up on these changes at a meeting today with Sheila Glover 
and Darren Delage, and has undertaken to keep you appraised of the position. 
The effect of the change would be to permit RMT to be the principal for the 
Japanese FX desk, with a Japanese entity acting as agent to arrange the 
transactions. 

Best regards
Janine




From: Sara Shackleton on 13/12/2000 13:52 CST
To: Janine Juggins/LON/ECT@ECT
cc: Jeff Blumenthal/HOU/ECT@ECT, Rhett Jackson/HOU/ECT@ECT, Melba 
Lozano/HOU/ECT@ECT 

Subject: FX Product

Janine:

With respect to the attached (internal) FX product for EOL, I just wanted to 
verify with you that internal counterparties should transact on EOL with:

(1)  RMT  (as principal for Houston FX desk)

(2)  EEFT as agent for RMT (as principal for London FX desk).  In this 
regard, was the services agreement between ENA and EEFT ever extended to 
include RMT for internal trades? 

(3)  Enron Japan Corp. (as principal for Tokyo FX desk)

There appears to be some confusion since our meeting of November 3.  Thanks.  
Sara
----- Forwarded by Sara Shackleton/HOU/ECT on 12/13/2000 11:22 AM -----

	Melba Lozano
	12/11/2000 05:59 PM
		 
		 To: Sara Shackleton/HOU/ECT@ECT, Mark Taylor/HOU/ECT@ECT
		 cc: Robert B Cass/HOU/ECT@ECT, Steve Jacobellis/NA/Enron@Enron, Kevin 
Meredith/Corp/Enron@ENRON, Steve Jacobellis/NA/Enron@Enron
		 Subject: FX Product

Sara / Mark,

I need an approval as soon as possible from you for the FX Description 
attached.  Steve Jacobellis is requesting that this gets out on the web as 
soon as possible.  

Thank you,

Melba 
58986
---------------------- Forwarded by Melba Lozano/HOU/ECT on 12/11/2000 05:53 
PM ---------------------------
   


From:  Melba Lozano                                                           
  11/30/2000 06:41 PM	
	
	
	                           
	

To: Sara Shackleton/HOU/ECT@ECT, William Stuart/HOU/ECT@ECT
cc: Robert B Cass/HOU/ECT@ECT 
Subject: FX Product


Sara:  Please approve on the attached language for the FX Product.



William:  There is a gap between hour ending 3:00 and 4:00 .  Do you want to 
go ahead and set up Central time to trade until Hour Ending 4:00?  Please let 
me know.  



Thank you,

Melba