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, 2004
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, Inc. 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
----
Independent Registered Public Accounting Firm's Report F-1
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31, 2004 and 2003 F-2
Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2004
and 2003 F-3
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 B-2
2
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, Inc. 401(k) Plan
---------------------------------------------
(Name of Plan)
Date: July 14, 2005 By: /s/ David Bell
--------------------------------------------
Director of Compensation - Benefits
Plan Administrator
3
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,
2004 and 2003, 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 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 of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also 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, 2004 and 2003, and the changes in net assets available for benefits
for the years then ended 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 basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ KPMG LLP
Greenville, South Carolina
June 24, 2005
F-1
THE SOUTH FINANCIAL GROUP, INC. 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
2004 2003
------------------- -------------------
Assets:
Investments, at fair value $ 64,327,252 46,024,761
Participants' contributions receivable 10,610 163,037
Employer contribution receivable 170,498 162,295
Cash 387,042 181,737
------------------- -------------------
Total assets 64,895,402 46,531,830
------------------- -------------------
Net assets available for benefits $ 64,895,402 46,531,830
=================== ===================
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 31, 2004 and 2003
2004 2003
------------------- -------------------
Additions to net assets attributed to:
Net realized and unrealized appreciation
in fair value of investments $ 6,033,252 8,117,470
Interest and dividends 1,249,815 783,927
------------------- -------------------
Total investment income 7,283,067 8,901,397
------------------- -------------------
Contributions:
Employer 3,998,935 3,162,169
Participant 5,937,361 4,550,053
Rollovers 650,526 327,579
------------------- -------------------
Total contributions 10,586,822 8,039,801
Merger of acquired companies' 401(k) plan net assets 6,999,173 3,358,581
------------------- -------------------
Total additions 24,869,062 20,299,779
------------------- -------------------
Deductions:
Administrative fees, net 39,608 123,668
Distributions to participants 6,465,882 4,261,647
------------------- -------------------
Total deductions 6,505,490 4,385,315
------------------- -------------------
Net increase in net assets 18,363,572 15,914,464
Net assets available for benefits at beginning of year 46,531,830 30,617,366
------------------- -------------------
Net assets available for benefits at end of year $ 64,895,402 46,531,830
=================== ===================
See accompanying notes to financial statements.
F-3
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
(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 1987, 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. An employee is
eligible to contribute to the Plan upon the date he/she attains 18
years of age, and is eligible to receive the Employer's matching
contribution once the service requirement of 1 year (1,000 hours)
is met.
(B) CONTRIBUTIONS
Each year, participants may defer up to 100% 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.
(C) FORFEITURES
At December 31, 2004 and 2003 forfeited non-vested accounts
totaled $146,140 and $45,728, respectively. These accounts will be
used to pay future administrative expenses or to reduce future
employer contributions. In 2004, $228,405 of the forfeited funds
were used to pay administrative expenses and $147,796 of the
forfeited funds were used to reduce employer contributions.
(D) 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.
Continued
F-4
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
(E) 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.
(F) 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.
(G) 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.
(H) 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.
(I) ADMINISTRATIVE EXPENSES
Expenses incurred by the Plan administrator or the Trustee in the
administration of the Plan and the Trust, including 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 4).
Continued
F-5
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
(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 accounting principles generally
accepted in the United States of America.
(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 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
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.
(E) RECLASSIFICATIONS
Amounts previously shown have been reclassified to conform to the
current year presentation. These reclassifications had no effect
on the previously reported net assets.
(3) INVESTMENTS
The fair values of individual investments that represent 5% or more of
the Plan's net assets at December 31, 2004 and 2003 are as follows:
2004 2003
------------------- -------------------
Investments, at fair value:
Dodge & Cox Stock Fund $ 5,374,229 2,596,779
Federated Prime Obligations Fund 6,501,309 4,779,447
Putnam International Equity Fund - 2,300,720
The South Financial Group Unitized Stock Fund 24,587,735 19,362,636
Vanguard 500 Index Fund 8,923,415 7,443,165
Continued
F-6
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
During the years ended December 31, 2004 and 2003, the Plan's investments
(including investments bought, sold and held during the year) appreciated
in value by $6,033,252 and $8,117,470, respectively, as follows:
2004 2003
------------------- -------------------
Investments, at fair value:
Mutual funds $ 2,525,293 3,485,235
Collective trust funds 3,507,959 4,632,235
------------------- -------------------
$ 6,033,252 8,117,470
=================== ===================
(4) PARTY-IN-INTEREST TRANSACTIONS
The Plan's records are maintained by American Pensions, Inc. (API), a
subsidiary of the Plan Sponsor. Fees paid by the Plan for recordkeeping
services amounted to $87,996 and $177,621 for the years ended December
31, 2004 and 2003, respectively.
The Plan's assets are managed by Carolina First Bank, a subsidiary of the
Plan Sponsor. Fees paid by the Plan for the investment management
services amounted to $114,175 and $0 for the years ended December 31,
2004, and 2003, respectively.
During the years ended December 31, 2004 and 2003, the Plan received
dividends of $415,946 and $364,881, 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 for administrative fees, as long as the fees only include
out-of-pocket expenses. During 2004 and 2003, the Plan Sponsor fees
exceeded out-of-pocket expenses. In 2004 and 2003, the Plan Sponsor
reimbursed the Plan $162,563 and $53,953, respectively, for fees received
which were prohibited according to the provisions of ERISA and the
Internal Revenue Code.
(6) INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Plan Sponsor
by letter dated August 12, 2002, that the Plan is designed in accordance
with applicable sections of the Internal Revenue Code (IRC). The Plan has
been restated since receiving the determination letter. However, the Plan
administrator and the Plan's tax counsel believe that the Plan is
designed and is currently being operated in compliance with the
applicable provisions of the IRC.
(7) PLAN MERGERS
On July 16, 2004, the Plan Sponsor acquired CNB Florida Bancshares, Inc.
As a result, the net assets available for benefits totaling $4,089,496 in
the CNB Florida 401(k) Plan were merged into the Plan in 2004.
On July 16, 2004, the Plan Sponsor acquired Florida Banks, Inc. As a
result, the net assets available for benefits totaling $2,868,403 in the
Florida Banks 401(k) Plan were merged into the Plan in 2004.
Continued
F-7
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
During 2004, the Plan also received net assets available for benefits
totaling $41,274 associated with mergers that occurred in previous years.
Employees of Gardner Associates, Inc., which was acquired by the Plan
Sponsor, 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, 2004 and 2003 to the
respective Form 5500's:
2004 2003
------------------- -------------------
Net assets available for benefits per the financial statements $ 64,895,402 46,531,830
Amounts allocated to withdrawing participants (360,299) (364,790)
------------------- -------------------
Net assets available for benefits per the respective
Form 5500's $ 64,535,103 46,167,040
=================== ===================
The following is a reconciliation of benefits paid to participants per
the financial statements for the years ended December 31, 2004 and 2003,
to the respective Form 5500's:
2004 2003
------------------- -----------------
Benefits paid to participants per the financial statements $ 6,465,882 4,261,647
Add amounts allocated to withdrawing participants
at December 31, 2004 and 2003 360,299 364,790
Less amounts allocated to withdrawing participants
at December 31, 2003 and 2002 (364,790) (187,712)
------------------- -----------------
Benefits paid to participants per the respective Form 5500's $ 6,461,391 4,438,725
=================== =================
Continued
F-8
The South Financial Group, Inc. 401(k) Plan
Notes to Financial Statements
December 31, 2004 and 2003
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, 2004 and 2003, but not yet paid as of that date.
(9) SUBSEQUENT EVENT
On May 6, 2005, the Plan Sponsor acquired Pointe Financial Corporation
(PNTE). As a result, PNTE employees became eligible for the Plan. Any
possible transfer of benefit plan assets will occur at an undetermined
date after July 1, 2005.
On June 6, 2005, the Plan Sponsor acquired Bowditch Insurance
Corporation. As a result, pre-merger Bowditch employees became eligible
for the Plan. Any possible transfer of benefit plan assets will occur at
an undetermined date after July 1, 2005.
The Plan changed its trustee from the Carolina First Trust Department to
Matrix, a directed trustee, effective January 1, 2005.
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 31, 2004
(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:
American Funds Growth Fund of America ** $ 2,158,355
Dodge & Cox Balanced Fund ** 3,185,023
Dodge & Cox Stock Fund ** 5,374,229
Federated Prime Obligations Fund ** 6,501,309
Managers Bond Fund ** 1,237,215
Royce Low-Priced Stock Fund ** 1,435,891
Thompson Plumb Growth Fund ** 2,554,635
Thornburg International Value Fund ** 3,124,034
Vanguard 500 Index Fund ** 8,923,415
Vanguard Mid Cap Index Fund ** 1,565,005
Vanguard Total Bond Market Fund ** 1,138,634
Vanguard Wellesley Income Fund ** 1,608,182
Collective Trust Funds:
* The South Financial Group Unitized Stock Fund ** 24,587,735
* Participant loans With interest rates ranging from 4% to 11.5%
and maturity dates ranging from 2005 to 2019 933,590
------------
$64,327,252
============
* 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