Here is an update of our activities.

All of my standard reports should be completed by the end of next week, which will allow me to provide thorough and concise report of all positions and values.

Portfolio Management
Completed assignment of all portfolio companies to senior team members
Sold 20% stake in Paladin Resources (a UK public E&P company) for 44p totaling $25 million.  This was a good price (average price LTM of 37p), but was below the quarter end price.  Therefore, there is a Q3 loss of $6.4 million.  Andrew Marsden is managing this in London.
Completed all requirements to sell COPEL shares (a $100+ million investment in the Brazilian utility).  Began selling shares on 7/17.  Current price is approximately $14 million below carrying value of approximately $120 million.  Likely to take a couple of months to exit entire position.  Investment is carried as "Strategic", and any losses upon the sale will fall "below the line" in the sale of non-merchant asset line.  Steven Sheldon is managing this.
Completed negotiations on the sale of Utiliquest for $62.5 million.  Should sign on Thursday.  Enron had invested $11.6 million in cash (net of JEDI II) and will receive $14.3 million.  The sale will net a cash gain to Enron, but below our carrying value of $16.3 million, yielding a $2 million accounting loss.  Kevin Kuykendall is managing this.
Finalized processes to begin selling Hanover Compressor shares.  We own 4.6 million shares, which are trading at $30.00/share for a total value of $138 million.  Hanover has been hedged through Raptor.  However, the structure that was used to hedge is a costless collar that leaves Enron exposed below $34.875/share.  Therefore, at current trading levels we are facing a $23 million loss.  We are working with CSFB, which has proposed to execute a block trade sale.  However, the stock continues to decline each day, and CSFB will not make an offer until the price stabilizes.  If we have to sell at a block discount, or if the price continues to fall we could be facing a $35 million to $40 million loss.  Needless to say, we are very focused on this investment.
Losses from Venture Capital positions appear to be approximately $10 million for Q3, which is primarily the result of write-offs in the HEOF portfolio.
Net quarterly expectations: Cash proceeds received from sales - ~$250 million, losses from sales below carrying value ~$60 million ($46 million "above the line" and $14 million "below the line").  

Integration
All personnel decisions made.
Legal (Gil Melman), RAC (Randy Petersen), accounting (Hope Vargas), HR (Sheila Walton) and Tax (Jim Sandt) support personnel determined.
Everyone moving to same location (EB36) today.
Preparation of 2nd half 2001 budget (revenue and expense) still in process.  To be completed by 7/31.
Back office systems and filing systems in process of integration.  To be completed by 7/31.

Process Standardization
Mid stream of development of deal filtering, deal evaluation and due diligence, modeling, approval, portfolio management, and exit (all to be completed by 8/15).
Need to develop permanent approval process, including approval limits.

Strategy Development
Strategy is currently being vetted through a collaborative process including all senior members of the group and RAC.
Final drafting session for 5-7 page strategy/charter paper and 10 page powerpoint presentation scheduled for July 27.
Presentation of strategy to Greg and Ken is scheduled for July 30, to Jeff Skilling on August 15.

Other Issues
Given Andy Fastow's involvement with Corp Dev, and our groups need for capital, I would like to add Andy to the Investment Committee.  Please provide feedback.

Thanks,
KG