SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended December 15, 2002
Or
|_| Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 For the transition period from ___________________
Commission File Number 0-15083
The South Financial Group 401(k) Plan (formerly Carolina First 401(k) Plan)
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(Full title of the plan)
The South Financial Group, Inc.
102 South Main Street
Greenville, SC, 29601
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(Name of Issuer of the securities held pursuant to the
plan and address of its principal executive office)
(a) The following financial statements and reports, which have been
prepared pursuant to the requirements of the Employee Retirement Income Security
Act of 1974, are filed as part of this Annual Report on Form 11-K:
PAGE
Independent Auditors' Report F-1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 15,
2002 and 2001 F-2 Statements of Changes in Net Assets Available for
Benefits for the years ended December 15, 2002 and
2001 F-3
Notes to Financial Statements F-4
Schedule 1 - Schedule H, Line 4i - Schedule of Assets (Held at End of Year) F-10
(b) The following Exhibits are filed as part of this Annual Report on Form 11-K:
Exhibit Index B-1
Exhibit 23 Independent Auditors' Consent B-2
Exhibit 99 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 B-3
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
The South Financial Group 401(k) Plan
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(Name of Plan)
Date: January 7, 2004 By: /s/ David R. Bell
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Director of Compensation - Benefits
Plan Administrator
2
INDEPENDENT AUDITORS' REPORT
Administrative Committee
The South Financial Group, Inc. 401(k) Plan
We have audited the accompanying statements of net assets available for benefits
of The South Financial Group, Inc. 401(k) Plan (the Plan) as of December 15,
2002 and 2001, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit includes assessing the accounting principles used and
significant estimates made by the Plan's management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 15, 2002 and 2001, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information included in
Schedule 1 is presented for purposes of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. The
supplemental schedule has been subjected to the auditing procedures applied in
the audits of the financial statements and, in our opinion, is fairly stated in
all material respects in relation to the financial statements taken as a whole.
/s/ KPMG LLP
Greenville, South Carolina
December 1, 2003
F-1
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 15, 2002 and 2001
2002 2001
------------------- -------------------
Assets:
Investments, at fair value $ 30,482,843 25,128,714
Participants' contributions receivable 117,044 -
Employer contribution receivable 243,743 340,871
Accrued interest and dividends - 12,706
Cash 214,379 68,271
------------------- -------------------
Total assets 31,058,009 25,550,562
------------------- -------------------
Liabilities:
Accrued administrative expenses 100,642 -
------------------- -------------------
Total liabilities 100,642 -
------------------- -------------------
Net assets available for benefits $ 30,957,367 25,550,562
=================== ===================
See accompanying notes to financial statements.
F-2
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 15, 2002 and 2001
2002 2001
------------------- -------------------
Additions to net assets attributed to:
Net realized and unrealized appreciation
in fair value of investments $ 1,077,236 1,357,376
Interest and dividends 624,605 477,398
------------------- -------------------
Total investment income 1,701,841 1,834,774
Contributions:
Employer 2,328,071 2,225,448
Participant 3,445,025 3,083,581
Rollovers 203,404 312,659
------------------- -------------------
Total contributions 5,976,500 5,621,688
Merger of Mercantile Bank 401(k) Plan and Trust 2,088,931 -
------------------- -------------------
Total additions 9,767,272 7,456,462
Deductions:
Distributions to participants 4,259,825 2,754,232
Administrative expenses 100,642 167,458
------------------- -------------------
Total deductions 4,360,467 2,921,690
Net increase in net assets 5,406,805 4,534,772
Net assets available for benefits at beginning of period 25,550,562 21,015,790
------------------- -------------------
Net assets available for benefits at end of period $ 30,957,367 25,550,562
=================== ===================
See accompanying notes to financial statements.
F-3
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
(1) DESCRIPTION OF PLAN
The following description of The South Financial Group, Inc. 401(k) Plan
(the Plan) provides only general information. Participants should refer
to the Plan Document and Summary Plan Description for a more complete
description of the Plan's provisions.
(A) GENERAL
The Plan, which was formed in January 1989, is a defined
contribution plan with a cash-or-deferred arrangement subject to
the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). Effective January 1, 2002, it covers all eligible
employees of The South Financial Group, Inc. (formerly Carolina
First Corporation) and its subsidiaries (collectively Plan
Sponsor, Employer) who are age 18 or older. Prior to January 1,
2002, employees are eligible to begin participation in the Plan on
the first day of the month coincident with or following the
attainment of one year of service (1,000 hours).
(B) FISCAL YEAR
During 1999, the Plan adopted an amendment which changed its
fiscal year end from December 31, to December 15.
(C) CONTRIBUTIONS
Each year, participants may defer up to 16% of pretax annual
compensation, as defined in the Plan. Participants may also
contribute amounts representing distributions from other qualified
defined benefit or defined contribution plans. The Plan Sponsor
will contribute a discretionary matching contribution of a
percentage of the participants' compensation that a participant
contributes to the Plan. The Plan Sponsor may also contribute a
discretionary nonelective Employer contribution.
Upon enrollment in the Plan, an employee may direct employee and
employer contributions to any of the Plan's fund options.
Participants may change their investment options daily.
(D) FORFEITURES
Forfeited balances of terminated participants' nonvested accounts
may be used to reduce future Employer contributions.
Effective January 1, 2002, the Plan adopted an amendment which
allows forfeited balances of terminated participants' non vested
accounts to be used to pay administrative expenses. Of the total
funds forfeited in 2002, $202,648 were used to pay administrative
expenses and $27,844 will be used to reduce future Employer
contributions. In 2001 forfeited balances were $270,165 and were
used to reduce future Employer contributions.
F-4 (continued)
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
(E) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions and allocations of (a) the Employer's contributions
and (b) Plan investment results. Allocations are based on
participant earnings or account balances, as defined. The benefit
to which a participant is entitled is the benefit that can be
provided from the participant's account.
(F) VESTING
Participants are immediately vested in their own contributions
plus actual earnings thereon. Vesting of employer contributions
plus actual earnings thereon is based upon years of continuous
service. A year of service is defined as working a minimum of
1,000 hours in a plan year after reaching age 18. A participant is
100% vested after five years of credited service, according to the
following schedule:
PERCENT OF
NONFORFEITABLE
INTEREST
-------------------
Years of service:
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 or more 100%
Notwithstanding the aforementioned, upon reaching normal
retirement age or upon death or disability, participants become
100% vested.
(G) PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50% of
their vested account balances. Loan terms range from one to five
years or up to 20 years for the purchase of a primary residence.
The loans are secured by the balance in the participant's account
and bear interest at a rate commensurate with local prevailing
rates as determined by Carolina First Bank (Trustee). Principal
and interest are paid ratably through payroll deductions.
(H) PAYMENT OF BENEFITS
Participants are entitled to receive a distribution of their
vested accounts upon the occurrence of retirement, death, total
and permanent disability, or termination of employment for any
other reason. Vested participants are also entitled to leave their
benefits in the Plan until retirement. The method of payment is a
lump-sum distribution.
F-5 (continued)
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
(I) PLAN TERMINATION
Although it has not expressed any intent to do so, the Employer
has the right under the Plan to discontinue its contributions at
any time and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become
100% vested in their accounts.
(J) ADMINISTRATIVE EXPENSES
Expenses incurred by the Plan Administrator or the Trustee in the
administration of the Plan and the Trust, including fees for legal
services rendered, agreed-upon compensation to the Trustee, and
all other proper charges and expenses of the Plan Administrator,
Trustee, and their agents and counsel, were charged against the
assets of the Trust, as allowed by the Plan Document. See Note 10.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The financial statements have been prepared using the accrual
basis of accounting in accordance with accounting principles
generally accepted in the United States of America.
(B) INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in mutual funds and common stock are stated at fair
value determined by the quoted market prices on the last business
day of the plan year. Investments in collective trust funds are
stated at estimated fair values, which have been determined based
on the unit values of the funds. The participant loans are valued
at their outstanding balances, which approximate fair value.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis. Dividends
are recorded on the ex-dividend date.
(C) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(D) USE OF ESTIMATES
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, and changes
therein and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
F-6 (continued)
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
(3) INVESTMENTS
The fair values of individual investments that represent 5% or more of
the Plan's net assets at December 15, 2002 and 2001 are as follows:
2002 2001
----------- -----------
Investments, at fair value as determined by quoted
market price:
Federated Prime Obligations Fund $ * 2,406,900
Putnam International Growth Fund 1,599,371 *
SEI Diversified U.S. Stock Fund * 1,529,469
The South Financial Group Common Stock * 10,931,519
The South Financial Group Unitized Stock Fund 13,714,943 *
Vanguard 500 Index Fund 4,921,343 4,812,589
Wells Fargo Stable Return Fund 3,570,231 *
* Less than 5% of Plan assets
During 2002 and 2001, the Plan's investments (including investments
bought, sold and held during the year) appreciated (depreciated) in value
by $1,077,236 and $1,357,376, respectively, as follows:
2002 2001
------------------- -------------------
Investments, at fair value as determined by quoted
market price:
Mutual Funds $ (2,013,364) (1,607,874)
Collective Trust Funds 3,090,600 (119,725)
Employer Common Stock - 3,084,975
------------------- -------------------
$ 1,077,236 1,357,376
=================== ===================
(4) PARTY-IN-INTEREST TRANSACTIONS
The Plan's investments are held in trust by Carolina First Bank and
Trust, a subsidiary of the Plan Sponsor, until December 2002.
During 2002 and 2001, the Plan received dividends of $308,197 and
$276,101, respectively, on its investment in common stock of the
Employer.
Included in Plan net assets available for benefits is $68,271 at December
15, 2001, which is held in an account with Carolina First Bank.
F-7 (continued)
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
(5) PROHIBITED TRANSACTION
The Plan had accrued expenses to the Plan Sponsor of approximately
$100,000 for administrative expenses. Pursuant to the Plan Document, the
Plan Sponsor is allowed to charge the Plan trustee fees, as long as the
fees only include out-of-pocket expenses. The Plan Sponsor is currently
evaluating if the fees exceeded out-of-pocket expenses. The Plan Sponsor
intends to reimburse the Plan for any fees received which are prohibited
according to the provisions of ERISA and the Internal Revenue Code.
(6) INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue
Service dated September 3, 1991, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code (Code) and, therefore, the
related trust is exempt from taxation. The Plan has been amended since
receiving the determination letter. Once qualified, the Plan is required
to operate in conformity with the Code to maintain its qualification. The
Plan Sponsor has indicated that it will take the necessary steps, if any,
to maintain the Plan's qualified status.
(7) MERCANTILE BANK, INC. 401(K) PLAN AND TRUST
On August 31, 2002, the Plan Sponsor acquired Gulf West Banks, Inc. As a
result, the net assets available for benefits totaling $2,088,931 in the
Mercantile Bank 401(k) Plan and Trust were merged into the Plan in
September 2002.
(8) GARDNER ASSOCIATES, INC.
Employees of Gardner Associates, Inc., which was recently acquired by the
Company, were eligible to participate in the Plan effective October 1,
2002. The assets of the Gardner Associates Profit Sharing and 401(k) Plan
will be merged into the Plan in 2003.
(9) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements at December 15, 2002 to Form 5500:
Net assets available for benefits per the
financial statements $ 30,957,367
Amounts allocated to withdrawing
participants (151,338)
-------------------
Net assets available for benefits per the
Form 5500 $ 30,806,029
===================
The following is a reconciliation of benefits paid to participants per
the financial statements for the year ended December 15, 2002, to Form
5500:
F-8 (continued)
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 15, 2002 and 2001
Benefits paid to participants per the
financial statements $ 4,259,825
Add: Amounts allocated to withdrawing
participants at December 15, 2002 151,338
-------------------
Benefits paid to participants per the
Form 5500 $ 4,411,163
===================
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for payment
prior to December 15, 2002, but not yet paid as of that date.
(10) SUBSEQUENT EVENTS
In December 2002, the Plan executed an Amendment effective December 16,
2002, that changed the Plan's year end from December 15 to December 31.
In April 2003, the Plan Sponsor acquired the recordkeeper, American
Pensions, Inc.
F-9
Schedule 1
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 15, 2002
(a) (b) (c)
Party Identity of issue, Description of investment (d) (e)
in- borrower, lessor, including maturity date, rate of interest, Current
interest or similar party collateral, par or maturity value Cost value
- ---------------- ------------------------ ------------------------------------------- -------------- ---------------
Mutual Funds
Dodge & Cox Stock Fund ** $ 1,010,978
Janus Growth & Income Fund ** 394,178
Putnam Putnam International Growth Fund ** 1,599,371
SEI Core Fixed Income Fund ** 958,381
SEI Diversified Conservative Income Fund ** 741,693
Vanguard Total Bond Market Fund ** 568,336
Vanguard 500 Index Fund ** 4,921,343
Wells Fargo Stable Return Fund ** 3,570,231
* The South Financial Group Equity Fund ** 1,533,124
* The South Financial Group Life Cycle Fund ** 1,019,867
Collective Trust Funds
* The South Financial Group Unitized Stock Fund ** 13,714,943
* Participant loans With an interest rate of prime and a range of
maturity dates from 2003 to 2018 450,398
---------------
$30,482,843
===============
* Indicates party-in-interest to the Plan.
** Cost information has not been included in column (d) because all investments are participant directed.
See accompanying independent auditors' report.
F-10
EXHIBIT INDEX
Exhibit No. Description Location
- ----------- ----------- --------
(23) Independent Auditors' Consent Filed herewith
(99) Certification pursuant to 18 U.S.C. Section 1350, as adopted Filed herewith
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
B-1