1) Who should file Schedule FS?

If your savings association has been granted trust powers by the OTS, you should file Schedule FS and answer "Yes" to FS110. However, if you have trust powers but don't use them, you should answer "No" to FS120 and not continue further. If you use your trust powers to only provide services to land trusts or you only act as a document custodian for mortgage-backed securities (such as those offered by GNMA or FNMA), you should answer, "No" to FS130 and not continue further.

2) How Should I File Schedule FS if I Have Operating Subsidiaries or Service Corporations Providing Fiduciary or Related Services?

If your savings association has a significant majority-owned operating subsidiary or a service corporation providing fiduciary or related services, you should file Schedule FS on a consolidated basis. The treatment of operating subsidiaries depends on the degree of ownership held by the reporting thrift.

• A "majority-owned" subsidiary of the reporting thrift is a subsidiary in which the parent thrift directly or indirectly owns more than 50% of the outstanding voting stock.
• A "significant" subsidiary of the reporting thrift is a majority-owned subsidiary that meets any one or more of the following tests:
  1. The thrift's direct and indirect investment in and advances to the subsidiary equals 5% or more of the total equity capital of the parent thrift. NOTE: For the purposes of this test, the amount of direct and indirect investments and advances is either (a) the amount carried on the books of the parent thrift or (b) the parent's proportionate share in the total equity capital of the subsidiary, whichever is greater.
  2. The parent thrift's proportional share (based on equity ownership) of the subsidiary's gross operating income or revenue amounts to 5% or more of the gross operating income or revenue of the consolidated parent thrift.
  3. The subsidiary's income or loss before income taxes amounts to 5% or more of the parent thrift's income or loss before income taxes.
  4. The subsidiary is, in turn, the parent of one or more subsidiaries which, when consolidated with the subsidiary, constitute a significant subsidiary as defined in one or more of the above tests.

3) What are Fiduciary and/or Related Services?

Fiduciary services generally include acting as a trustee, executor, administrator, registrar of stocks and bonds, transfer agent, assignee, receiver, guardian or conservator of the estate of a minor or incompetent, investment adviser (if the savings association receives a fee for its investment advice), any capacity in which the savings association possesses investment discretion on behalf of another, or any other similar capacity. Reportable related services are those services that do not require trust powers but are related to fiduciary services. Specifically, this includes custodial services for assets held by the savings association in a fiduciary capacity. It does not include custodial activities for retail bank accounts.

4) Where Should Certain Accounts be Reported?

Sometimes it is hard to distinguish where certain accounts should be reported. The first decision to make in deciding where to place an account is to determine whether it is a fiduciary account. If it's a fiduciary account, then the next decision is whether it is a managed or an unmanaged account.

Some examples of common account situations (with their correct placement) are as follows:

Personal Trust and Agency Accounts - Managed Column

1. Irrevocable trusts with investment authority.
2. Revocable trusts with investment authority.
3. Irrevocable and revocable trusts with shared investment authority.
4. Irrevocable and revocable trusts where the investment authority has been outsourced to an outside entity or an affiliate.
5. Estates with investment authority.
6. Guardianships.
7. Accounts that are mostly invested in common fund, collective investment fund or a separate account managed by the savings association (or subsidiary).

Personal Trust and Agency Accounts - Nonmanaged Column

1. Irrevocable trusts where investment authority lies elsewhere.
2. Directed revocable trusts.
3. Accounts for individuals or entities where the savings association has provided a menu of investment options, such as mutual funds and the individual (entity) chooses from the investment menu. An example would be where an individual (entity) chooses a specific type of sweep vehicle for uninvested cash.
4. Life insurance trusts when the grantor or another entity makes the choice of which insurance policy the trust holds.

Employee Benefit - Defined Contribution - Managed Column

1. Defined contribution accounts (401k, 403b, profit-sharing, money purchase, target benefit, stock bonus, ESOPs, etc.) where the savings association acts as trustee and investment manager. Include accounts that are mostly invested in common fund, collective investment fund or a separate account managed by the savings association (or subsidiary).
2. The savings association's (or subsidiaries') own defined contribution employee benefit account.

Employee Benefit - Defined Contribution - Nonmanaged Column

Defined contribution accounts where the savings association (or subsidiary) is named as trustee but the investment authority lies with the plan sponsor, individual participants or an outside investment manager.

Employee Benefit - Defined Benefit - Managed Column

1. Defined benefit accounts where the savings association (or subsidiary) acts as trustee and investment manager. Include accounts that are mostly invested in a common fund, collective investment fund or a separate account managed by the savings association (or subsidiary).
2. Cash balance accounts where the savings association (or subsidiary) acts as trustee and investment manager.
3. Taft-Hartley (multiemployer) qualified retirement plans where the savings association (or subsidiary) acts as trustee and investment manager.
4. The savings association's (or subsidiary's) own defined benefit account.

Employee Benefit - Defined Benefit - Nonmanaged Column

1. Defined benefit accounts where the savings association (or subsidiary) acts as a trustee but the investment authority for the account lies elsewhere.
2. Cash balance accounts where the savings association (or subsidiary) acts as a trustee but the investment authority for the account lies elsewhere.
3. Taft-Hartley (multiemployer) qualified retirement plans where the savings association (or subsidiary) acts as trustee and investment manager.

Other Retirement Accounts - Managed Column

1. Rabbi trusts (grantor trusts) where the savings association (or subsidiary) acts as a trustee and has investment authority.
2. VEBA (voluntary employees' beneficiary association) accounts where the savings association (or subsidiary) has investment authority.
3. SEPs (simplified employee pension plans) where the savings association has investment authority.
4. SIMPLEs (savings incentive match plan for employees) where the savings association has investment authority.
5. Individual Retirement Accounts where the savings association is a trustee and has full investment discretion over the IRA assets. An example would be a rollover IRA account where the IRA account holder has given the savings association (or a subsidiary) full investment discretion.

Other Retirement Accounts - Nonmanaged Column

1. Rabbi trusts (grantor trusts) where the savings association (or subsidiary) acts as a trustee but the investment authority lies elsewhere.
2. SEPs (simplified employee pension plans) where the savings association (or subsidiary) is trustee but the plan sponsor or the participants direct the investments.
3. SIMPLEs (savings incentive match plan for employees) where the savings association (or subsidiary) is trustee but the plan sponsor or the participants direct the investments.
4. Self-directed Individual Retirement Accounts (Education IRAs and Roth IRAs) where the savings association (or a subsidiary) is named as a trustee but the investment choices are made by the IRA account holder.

Investment Management Agency Accounts - Managed Column

1. Accounts where an individual has given investment discretion to the savings association (or a subsidiary).
2. Accounts where an individual retains investment discretion but the savings association (or a subsidiary) provides the individual investment advice (which the individual may or may not choose to take) and the savings association (or a subsidiary) receives a fee for this advice.
3. Accounts where an entity such as a foundation, pooled fund, mutual fund or another financial institution has retained the savings association (or a subsidiary) to provide investment direction (portfolio management).
4. Accounts where the investment function has been delegated to outside entity, an affiliate or a subsidiary.
5. Accounts where the savings association makes investment recommendations (gives investment advice) to the account holder but the account holder retains the right to veto the investment recommendations. Note that the savings association (or a subsidiary) must be receiving a fee for the provision of the investment advice; otherwise these accounts should be reported in the custody and safekeeping lines.

Other Fiduciary Accounts - Nonmanaged Column

Accounts for which the savings association (or a subsidiary) provides transfer agent or registrar services.

Custody and Safekeeping Accounts - Nonmanaged Column

1. Accounts where the savings association is named as a custodian and the savings association (or a subsidiary) does not have investment discretion or provide investment advice for a fee.
2. Escrow accounts where the savings association has contracted to deliver certain funds in accordance with the contract. Title to the assets in the escrow account does not reside with the savings association (or a subsidiary).
3. Land trust accounts where the savings association serves as trustee.
4. Mortgage-backed securities where the savings association (or a subsidiary) serves as document custodian.

5) What do I do with my common trust funds or my collective investment funds?

It might be helpful to spend a minute talking about terminology. Funds used for the collective investment of assets are referred to both as common trust funds and collective investment funds. The Internal Revenue Code refers to "common trust funds" in §584 while the Office of the Comptroller of the Currency uses the term "collective investment fund" in 12 CFR §9.18. Generally, the term "common trust fund" is used to describe the collective investment of fiduciary accounts. These, generally, include accounts held by a savings association as trustee, executor, administrator or guardian. The term "collective investment fund" is used primarily to describe the collective investment of tax-qualified retirement plans. Collective investment funds are also referred to as group trusts and as (a)(2) funds, which references §9.19(a)(2).

There are several places in Schedule FS where common and collective fund information should be reported. In the Fiduciary and Related Assets Section of Schedule FS, for each type of account listed, you should include the market value of the common or collective investment fund units held by each account. If you have a nonmanaged fiduciary account that is over 50% invested in your common or collective investment funds, you should report that account as a managed account. You should include units of common or collective investment funds that are managed by your subsidiaries or affiliates. However, you should not report, under investment management agency accounts or elsewhere under the Fiduciary and Related Assets section, the common or collective fund as a whole.

Information regarding common and collective funds is collected in the Memorandum Section of Schedule FS. In the Managed Assets held in Personal Trust and Agency Accounts section you only include those fiduciary accounts, that were reported as managed assets in the Fiduciary and Related Assets Schedule of Schedule FS. The Memorandum Section takes all those managed fiduciary assets and breaks them down into specific types of investments. Again in this section, you should include, for each account, the market value of the common or collective investment fund units held by each of your managed fiduciary accounts.

In the Collective Investment Funds and Common Trust Funds part of the Memorandum Section you report the appropriate information regarding the common or collective fund as a whole. Information regarding the common or collective investment fund as a whole starts on FS610 and continues through FS65.

6) How Should I report the assets of a proprietary mutual fund for which the savings association or a subsidiary provides fiduciary investment services?

There are several places in Schedule FS where proprietary mutual fund information should be reported. In the Fiduciary and Related Assets Section of Schedule FS, for each type of account listed, you should include the market value of the proprietary mutual fund shares held by each of your accounts. If you have a nonmanaged fiduciary account that is over 50% invested in your proprietary mutual funds, you should report that account as a managed account. You should include shares of proprietary mutual funds that are managed by your subsidiaries.

You should also report the entire mutual fund as a separate investment management agency account if the savings association (or a subsidiary) provides investment advice or other fiduciary services to the proprietary mutual fund. Do not include mutual funds that are advised by your affiliate. In order not to duplicate reporting, you should subtract shares held by fiduciary or custodial accounts that are already reported on Schedule FS. After subtracting the fiduciary and custodial accounts, what would generally be reported is the value of the proprietary mutual fund that is offered to the retail public.

You should note that OTS imposes semiannual assessments on savings associations based on three components: the thrift's size, its condition, and the complexity of its portfolio. For savings associations that have trust powers, a complexity component is assessed for those institutions that administer over $1 billion in trust assets. This complexity component, broken into three different categories, is calculated by utilizing different line items of this schedule. There are situations where OTS requires savings associations to report certain assets on a line item but does not utilize some or all of those assets for assessment purposes. Therefore, FS290 and 291 are used to exclude certain assets for assessment purposes.

This is important in the case of proprietary mutual funds, as what should be reported on FS290 are those assets of proprietary mutual funds that are reported as a separate account in FS260. Both FS260 and FS290 should not include those shares of proprietary mutual funds are already reported in other sections of Schedule FS. In other words, those shares of proprietary mutual funds held by fiduciary and custodial accounts should not be reported on FS260 and FS290.