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 31, 2003
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)
(Full title of the plan)
The South Financial Group, Inc.
102 South Main Street
Greenville, SC, 29601
--------------------------------------------------------
(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
----
Report of Independent Registered Public Accounting Firm F-1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2003 and 2002 F-2
Statements of Changes in Net Assets Available for Benefits for the year ended December 31, 2003 F-3
and period from December 16, 2002 to December 31, 2002
Notes to Financial Statements F-4
Schedule 1 - Schedule H, Line 4i - Schedule of Assets (Held at End of Year) F-10
The following Exhibits are filed as part of this Annual Report on Form 11-K:
Exhibit Index B-1
Exhibit 23 Consent of Independent Registered Public Accounting Firm
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
-------------------------------------
(Name of Plan)
Date: June 28, 2004 By: /s/ David R. Bell
--------------------------
Director of Compensation - Benefits
Plan Administrator
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 31,
2003 and 2002, and the related statements of changes in net assets available for
benefits for the year ended December 31, 2003 and for the period from December
16, 2002 to December 31, 2002. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 31, 2003 and 2002, and the changes in net assets available for benefits
for the year ended December 31, 2003 and for the period from December 16, 2002
to December 31, 2002 in conformity with U.S. generally accepted accounting
principles.
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.
May 26, 2004
F-1
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2003 and 2002
2003 2002
---------------- ----------------
Assets:
Investments, at fair value $ 46,024,761 29,788,222
Participants' contributions receivable 163,037 257,701
Employer contribution receivable 162,295 326,056
Cash 181,737 245,387
---------------- ----------------
Total assets 46,531,830 30,617,366
---------------- ----------------
Net assets available for benefits $ 46,531,830 30,617,366
================ ================
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
For the year ended December 31, 2003 and for the
period from December 16, 2002 to December 31, 2002
2003 2002
---------------- ----------------
Additions to net assets attributed to:
Net realized and unrealized appreciation (depreciation)
in fair value of investments $ 8,754,747 (563,929)
Interest on loans 22,982 958
---------------- ----------------
Total investment income (loss) 8,777,729 (562,971)
---------------- ----------------
Contributions:
Employer 3,162,169 82,313
Participant 4,550,053 140,657
Rollovers 327,579 -
---------------- ----------------
Total contributions 8,039,801 222,970
Merger of acquired companies' 401(k) plans net assets 3,358,581 -
---------------- ----------------
Total additions (decrease) 20,176,111 (340,001)
---------------- ----------------
Deductions:
Distributions to participants 4,261,647 -
---------------- ----------------
Total deductions 4,261,647 -
---------------- ----------------
Net increase (decrease) in net assets 15,914,464 (340,001)
Net assets available for benefits at beginning of period 30,617,366 30,957,367
---------------- ----------------
Net assets available for benefits at end of period $ 46,531,830 30,617,366
================ ================
See accompanying notes to financial statements.
F-3
THE SOUTH FINANCIAL GROUP, INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2003 and 2002
(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). It covers all eligible employees of The South
Financial Group, Inc. and its subsidiaries (collectively Plan
Sponsor, Employer) who are age 18 or older. Effective January 1,
2002, an employee shall be eligible to participate in the Plan
upon the date he/she attains 18 years of age. 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
Effective December 16, 2002, the Plan adopted an amendment which
changes its fiscal year end from December 15 to December 31.
(C) CONTRIBUTIONS
Each year, participants may defer up to 100% of eligible 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
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. Forfeited
balances were $177,808 for the year ended December 31, 2003 and
$7,651 for the period from December 16 to December 31, 2002. Of
the total funds forfeited $177,621 were used to pay administrative
expenses for the year ended December 31, 2003 and the remaining
forfeited balance will be used to reduce future employer
contributions.
(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-4 (Continued)
(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.
(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 5).
F-5 (Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The financial statements have been prepared on the accrual basis
of accounting in accordance with U.S. generally accepted
accounting principles.
(B) INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in mutual funds 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 and dividends earned on marketable investments are
treated as gains in appreciation of the fair value of the fund,
since all income received by the fund is reinvested in the fund
and thus increases the participants' share value. Interest income
is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
The Plan utilizes various investment instruments. Investment
securities, in general, are exposed to various risks, such as
interest rate, credit and overall market volatility. Due to the
level of risk associated with certain investment securities, it is
reasonably possible that changes in the values of investment
securities will occur in the near term and that such changes could
materially affect the amounts reported in the financial
statements.
(C) PAYMENT OF BENEFITS
Benefits are recorded when paid.
(D) USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles 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)
(3) INVESTMENTS
The fair values of individual investments that represent 5% or more of
the Plan's net assets at December 31, 2003 and 2002 are as follows:
2003 2002
------- -------
Investments, at fair value:
Putnam International Equity Fund $ 2,300,720 -
Putnam International Growth Fund - 1,585,970
Wells Fargo Stable Return Fund - 3,541,720
The South Financial Group Unitized Stock Fund 19,362,636 13,214,762
Vanguard 500 Index Fund 7,443,165 4,911,129
Dodge & Cox Stock Fund 2,596,779 -
Federated Prime Obligations Fund 4,779,447 -
During the year ended December 31, 2003 and the period from December 16,
2002 to December 31, 2002, the Plan's investments (including investments
bought, sold and held during the year) appreciated (depreciated) in value
by $8,754,747 and $(563,929), respectively, as follows:
2003 2002
------------------- -------------------
Investments, at fair value:
Mutual Funds $ 4,122,512 (98,944)
Collective Trust Funds 4,632,235 (464,985)
------------------- -------------------
$ 8,754,747 (563,929)
=================== ===================
(4) PARTY-IN-INTEREST TRANSACTIONS
The Plan's investments are held in trust by Carolina First Bank, a
subsidiary of the Plan Sponsor, until December 2002.
During the year ended December 31, 2003 and the period from December 16,
2002 to December 31, 2002, the Plan received dividends of $364,881 and
$0, respectively, on its investment in common stock of the Employer.
(5) PROHIBITED TRANSACTION
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. During 2002 and 2003, the Plan Sponsor fees exceeded
out-of-pocket expenses. In 2003, the Plan Sponsor reimbursed the Plan
$53,953 for fees received which were 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
F-7 (Continued)
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) PLAN MERGERS
Employees of Gardner Associates, Inc., which was 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 totaling
$677,144 were merged into the Plan in 2003.
On December 31, 2002, the Plan Sponsor acquired Central Bank of Tampa
(CBT). As a result, the net assets available for benefits totaling
$732,441 in the CBT 401(k) Profit Sharing Plan were merged into the Plan
effective January 1, 2003.
On April 30, 2003, the Plan Sponsor acquired American Pensions, Inc.
(API). As a result, the net assets available for benefits totaling
$341,364 in the API 401(k) Profit Sharing Plan were merged into the Plan
effective May 1, 2003.
On November 1, 2002, the Plan Sponsor acquired Rock Hill Bank and Trust.
As a result, the net assets available for benefits totaling $272,004 in
the Rock Hill 401(k) Profit Sharing Plan were merged into the Plan in
2003.
On October 3, 2003, the Plan Sponsor acquired MountainBank. As a result,
the net assets available for benefits totaling $1,335,628 in the
MountainBank 401(k) Plan were merged into the Plan in 2003.
(8) RECONCILIATION OF FINANCIAL STATEMENTS
The following is a reconciliation of net assets available for benefits
per the financial statements at December 31, 2003 and 2002 to the
respective Form 5500's:
2003 2002
----------------- -----------------
Net assets available for benefits per the financial statements $ 46,531,830 30,617,366
Amounts allocated to withdrawing participants (364,790) (187,712)
----------------- -----------------
Net assets available for benefits per the respective
Form 5500's $ 46,167,040 30,429,654
================= =================
F-8 (Continued)
The following is a reconciliation of benefits paid to participants per
the financial statements for the year ended December 31, 2003 and for the
period from December 16, 2002 to December 31, 2002, to the respective
Form 5500's:
2003 2002
---------------- --------------
Benefits paid to participants per the financial statements $ 4,261,647 -
Add amounts allocated to withdrawing participants
at December 31, 2003 and 2002 364,790 187,712
Less amounts allocated to withdrawing participants
at December 31, 2002 and 2001 (187,712) (151,338)
----------------- --------------
Benefits paid to participants per the respective Form 5500's $ 4,438,725 36,374
================= ==============
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 31, 2003 and 2002, but not yet paid as of that date.
(9) SUBSEQUENT EVENT
The Plan Document was revised on December 17, 2003, which is effective
January 1, 2004. The plan revision reflects provisions of the Internal
Revenue Code Section 404(k), which will allow participants to elect to
receive The South Financial Group, Inc. dividend payments directly from
the Plan Sponsor as opposed to reinvesting the dividends.
F-9 (Continued)
Schedule 1
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
(b) (c)
(a) Identity of issue, Description of investment (e)
Party- borrower, lessor, including maturity date, rate of interest, (d) Current
in-interest or similar party collateral, par or maturity value Cost value
- --------------- -------------------------- ------------------------------------------ --------------- ---------------
Mutual Funds:
Dodge & Cox Stock Fund ** $ 2,596,779
Dodge & Cox Balanced Fund ** 1,586,539
Janus Growth & Income Fund ** 963,736
Federated Prime Obligations Fund ** 4,779,447
Putnam International Equity Fund ** 2,300,720
T-Rowe Price Small Cap ** 766,775
SEI Core Fixed - Income Fund ** 1,173,388
SEI Diversified Conservative Income Fund ** 1,093,464
SEI Diversified U. S. Stock Fund ** 1,922,994
Vanguard Total Bond Market Fund ** 928,002
Vanguard 500 Index Fund ** 7,443,165
Vanguard Mid Cap Index Fund ** 564,141
Collective Trust Funds:
* The South Financial Group Unitized Stock Fund ** 19,362,636
* Participant loans With interest rates ranging from 4% to 11.5%
and maturity dates ranging from 2004 to 2019 542,975
------------
$ 46,024,761
============
* Indicates party-in-interest to the Plan.
** Cost information has not been included in column (d) because all investments are participant directed.
See accompanying report of independent registered public accounting firm.
F-10
EXHIBIT INDEX
Exhibit No. Description Location
- ----------- ----------- --------
(23) Consent of Independent Registered Public Accounting Firm Filed herewith
B-1