Salomon IR 96 2 Q Page 2
Throughout this report, the terms "Swapco" and
"the Company" refer to Salomon Swapco Inc.
"Salomon" refers to Salomon Inc, Swapco's
ultimate parent, or to any of its affiliates other
than Swapco. "SBHC" refers to Salomon
Brothers Holding Company Inc, Swapco's
immediate parent. "Salomon Brothers Inc" refers
to Salomon Brothers Inc, the U.S. broker-dealer
affiliate of Swapco.
Copyright Salomon Swapco Inc
1996
All Rights Reserved.
Salomon Swapco Inc
To Our Clients
July 25, 1996
Notional is up again - $15.3 billion for the
second quarter bringing the book to $148 billion
at June 30. Swapco continues to add
approximately $1 billion of notional per week
and, as this letter is written, has passed the $150
billion milestone. Over the second quarter, the
number of outstanding transactions grew to
2,335, up almost 11%. Master swap agreements
grew to 236 counterparties, up 18 from March
31.
Swapco has managed the credit concentrations
in its book to prevent a need for large increases
in capital. The result is that we were able to
declare and pay a dividend of $50 million at
June 30. "Rating agency capital" as defined in
our March 31 interim report, was down $29
million, to $267 million. (A reconciliation
between Stockholder's equity and Rating
agency capital is presented in Note 4 to the
financial statements on page 23 of this report.)
By using our capital efficiently, we make it
possible to price our trades competitively
without sacrificing the credit quality that is the
basic reason for our existence.
Our last interim report described in some detail
how Swapco's capital requirements work.
Capital is the primary mechanism by which
Swapco is protected against the risk of
counterparty default. The other significant risk
that impacts Swapco's financial strength is the
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