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Salomon - IR 97 1 Q (Page 12)

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Salomon - IR 97 1 Q
Salomon Swapco Inc
Notes to Financial Statements
Note 1. Derivatives portfolio (continued)
Swapco's minimum required capital increases with the
level of unsecured receivables from counterparties with
lower credit ratings. Receivables from counterparties
whose ratings have fallen below Baa3/BBB- subsequent
to initiation of Swapco's transactions, and receivables
from counterparties that are not rated and not yet
approved by the rating agencies, are included as part of
Swapco's minimum required capital.
The average final maturity of Swapco's portfolio at
March 31, 1997 was 4.7 years. Notional amounts, by
maturity range, were as follow (in thousands of dollars):
Notional Percent
Under one year
$ 25,859,779
15.0%
One to three years
42,588,920
24.7
Three to five years
35,172,155
20.4
Five to ten years
60,957,510
35.4
Over ten years
7,782,643
4.5
$172,361,007
100.0%
Note 2. Hedge swaps
Hedge swaps which Swapco uses to protect itself from
market risk associated with investment securities which it
owns are not regarded as part of the company's
derivatives portfolio and, accordingly, are not included in
the data in Note 1 above. Like all other Swapco/SBHC
derivative transactions, however, hedge swaps are subject
to the Swapco/SBHC bilateral security agreement under
which Swapco is over-collateralized at all times.
Summary data related to these hedge swap transactions is
as follows (in thousands of dollars):
March 31 notional amount
$ 79,299
Average month-end notional amount
111,868
March 31 market value
334
Average month-end market value (in
favor of SBHC)
(836)
Profit (loss) incurred on hedge swaps,
quarter ended March 31
(178)
20
Salomon Swapco Inc
Notes to Financial Statements
Note 3. Collateral
Swapco exchanges collateral under bilateral security
agreements with a significant number of its customers as
well as with SBHC. Acceptable collateral includes cash,
U.S. and certain other Government securities as well as
certain triple-A rated corporate securities. Detail of
collateral amounts exchanged at March 31, including
securities at their market value, is as follows (in
thousands of dollars):
Collateral advanced by Swapco
to counterparties
$543,098
Collateral advanced by counterparties
to Swapco
103,214
Collateral advanced by SBHC to Swapco
to Swapco
780,397
Note 4. Securities purchased under agreements
to resell
At March 31, 1997, resale agreements were outstanding
with five counterparties, all of which are unrelated to
Swapco. The market value of securities collateralizing
resale agreements was $452 million.
Note 5. Receivables from and payables to
affiliates
Amounts receivable from and payable to affiliated
companies are netted, by company, and shown as assets
or liabilities. At March 31, 1997, these amounts
included the following balances (in thousands of dollars):
SBHC
Receivable from affiliates
Intermediation and other fees charged
by Swapco
$9,897
Costs incurred on behalf of affiliates
588
Management and other fees charged
to Swapco
(32
$10,453
21

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