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 June
30, 1997 was 4.8 years. Notional amounts, by maturity
range, were as follow (in thousands of dollars):
Notional Percent
Under one year
$ 27,226,514
13.6%
One to three years
51,618,771
25.7
Three to five years
37,977,368
18.9
Five to ten years
72,480,648
36.1
Over ten years
11,549,263
5.7
$200,852,564
100.0%
Note 2. Hedge swaps
Hedge swaps, which Swapco uses to protect itself from
the market risk associated with its investment securities,
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):
June 30 notional amount
$ 76,688
Average month-end notional amount -
quarter ended June 30
82,537
six months ended June 30
97,203
June 30 market value (in favor of SBHC)
(1,130)
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Salomon Swapco Inc
Notes to Financial Statements
Note 2. Hedge swaps (continued)
Average month-end market value (in
favor of SBHC) -
quarter ended June 30
(789)
six months ended June 30
(812)
(Loss) incurred on hedge swaps -
quarter ended June 30
(1,888)
six months ended June 30
(2,066)
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 June 30, including
securities at their market value, is as follows (in
thousands of dollars):
Collateral advanced by Swapco
to counterparties
$375,503
Collateral advanced by counterparties
to Swapco
67,510
Collateral advanced by SBHC to Swapco
669,914
Note 4. Securities purchased under agreements
to resell
At June 30, 1997, resale agreements were outstanding
with four counterparties, all of which are unrelated to
Swapco. The market value of securities collateralizing
resale agreements was $405 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 June 30, 1997, these amounts included
the following balances (in thousands of dollars):
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