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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB



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(Mark One)

|x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------



For the fiscal year ended December 31, 2004



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the transition period from  to



Commission file number 04863



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

(Name of small business issuer in its charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 74-1223691                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)



|                                                |  |           
|----------------------------------------------- |  | ----------
|2727 North Loop West, Suite 200, Houston, Texas |  | 77008     
|(Address of principal executive offices)        |  | (Zip Code)



Issuers
telephone number (713) 869-7800



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Securities registered under Section 12(b) of the Exchange Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  |                                          



Securities
registered under Section 12(g) of the Exchange Act:



Common Stock $1.00 Par Value

(Title of Class)



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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Check if no disclosure of
delinquent filers in response to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB  x



State issuers revenues for its most recent fiscal year. $19,000



State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to
the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act). $0.00 as of March 25, 2005.



State the number of shares outstanding of each of the
issuers classes of common equity, as of the latest practicable date. 3,168,929 shares, Common Stock $1.00 par value per share as of March 25, 2005



DOCUMENTS INCORPORATED BY REFERENCE



Information contained in the Companys proxy statement for the 2005 annual meeting of shareholders is incorporated by reference into Part III.



Transitional Small Business Format (check
one)    Yes ̈No   x



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PART I



ITEM 1. DESCRIPTION OF BUSINESS



Southern Investors Service Company, Inc. (the Company) was incorporated under the laws of the State of Delaware in 1972. Prior to 1990, the Company was engaged in the
ownership and development of real estate primarily in the Houston, Texas area. The operations of the Company were significantly reduced during 1990, as a result of various debt settlements with lenders and other creditors. These settlements resulted
in the transfer of substantially all of the Companys holdings to its creditors. The Companys operations since 1990 have been limited to attempts to settle or restructure the Companys remaining liabilities. The Companys
operations also included the management of residential developments and two office buildings owned by others. During 1998, the majority of these residential projects were sold by the owners and therefore the Company no longer is managing these
projects. Effective January 1, 1999, the Company ceased all management activity and all employees related to this activity were terminated.



The Company determined in late 1999 that the sale of Lajitas (a resort property in west Texas), its sole remaining operating asset, would facilitate the Companys
ability to settle its existing liabilities most favorably. As a result, the Company retained the National Auction Group, Inc. (National Auction) to conduct an auction of Lajitas. The auction was conducted on February 24, 2000, and the property was
sold for $3,950,000. The sale of the Lajitas property closed on May 2, 2000. During 2000, the Company realized a gain on the sale of Lajitas of $755,000 and received net cash proceeds of approximately $2.4 million, after the payment of a mortgage
note related to the property sold. See also Note 1 of the Notes to Financial Statements.



Continued Operations and Going Concern Matters



The Company has attempted to use the net proceeds from the sale of Lajitas to settle or restructure existing debt, of which approximately $4,888,000 (plus accrued interest) has matured and is currently past due, and
to realize the carrying amount of its remaining assets. On March 26, 2002, the Board of Directors of the Company determined that the best alternative to settle the Companys existing debt was to file a voluntary petition for relief under
Chapter 11 (Chapter 11) of Title 11 of the United States Code (the Bankruptcy Code) with the United States Bankruptcy Court. As previously disclosed in the Current Report on Form 8-K filed by the Company on April 12, 2005, on April 8, 2005, the
Company filed a voluntary petition for relief under Chapter 11 with the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the Bankruptcy Court), Case # 05-35538-H4-11. The Company is in the process of preparing a
proposed plan of liquidation to be filed with the Bankruptcy Court. Any such plan of liquidation will call for the disposition of the Companys remaining assets and the distribution of all the net proceeds from the disposition to the
Companys creditors. The existing officers and directors of the Company will continue to oversee operation of the Companys business as a debtor in possession, pursuant to sections 1107 and 1108 of the Bankruptcy Code, and subject to the
requirements of the Bankruptcy Code, which include court approval of matters outside the ordinary course of business.



The financial statements have been prepared using the historical cost basis of accounting. Management of the Company believes the historical cost basis of accounting
states assets at no more than their liquidation values and states the Companys liabilities at their historical amounts. It is not presently determinable what amounts the creditors will agree to accept in settlement of the obligations due them.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the Company believes that the equity of the Company has, and will continue to have, no value



-2-



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and that any Chapter 11 plan confirmed by the Bankruptcy Court will result in the elimination of the equity interests of
all of the Companys stockholders. The Company anticipates that it will take approximately nine months to complete its liquidation process; however, any and all Chapter 11 plans that may be proposed will be subject to obtaining all necessary
approvals, including but not limited to creditor votes and judicial determinations of confirmability. There can be no assurance, therefore, as to how long it may take to complete the Companys liquidation process.



Interest in Real Estate Joint Ventures



The Company has a 5.8% partnership interest in a ten-story office building located at 2707
North Loop West in Houston, Texas. The Company also has a 5% cash flow interest in a seven-story office building located at 2727 North Loop West, in Houston, Texas, where its corporate headquarters are located.



Employees



The Company has no paid employees as of December 31, 2004. The Companys management is conducted pursuant to an oral management
agreement with a company affiliated with the Chairman of the Board and Chief Executive Officer. The management agreement provides the Company accounting and other administrative services and related office facilities and supplies in exchange for a
management fee paid by the Company in the amount of $1,000 per month.



ITEM
2. DESCRIPTION OF PROPERTY



The Companys principal executive offices
are located in northwest Houston and rent and other expenses are included in the management fee paid by the Company pursuant to the oral management agreement discussed above. The Company also has a 5% cash flow interest in a seven-story office
building located at 2727 North Loop West, in Houston, Texas, where its corporate headquarters are located. In addition, the Company has a 5.8% partnership interest in a ten-story office building located at 2707 North Loop West, in Houston, Texas.
The Company has not planned any significant additions to its properties for 2005.



ITEM 3. LEGAL PROCEEDINGS



As previously disclosed in the
Current Report on Form 8-K filed by the Company on April 12, 2005, on April 8, 2005, the Company filed a voluntary petition for relief under Chapter 11 with the United States Bankruptcy Court for the Southern District of Texas, Houston Division,
Case # 05-35538-H4-11. The Company is in the process of preparing a proposed plan of liquidation to be filed with the Bankruptcy Court. Any such plan of liquidation will call for the disposition of the Companys remaining assets and the
distribution of all the net proceeds from the disposition to the Companys creditors. The existing officers and directors of the Company will continue to oversee operation of the Companys business as a debtor in possession, pursuant to
sections 1107 and 1108 of the Bankruptcy Code, and subject to the requirements of the Bankruptcy Code, which include court approval of matters outside the ordinary course of business.



During August, 2004, the Company was named as a defendant in a lawsuit filed in the District Court of Montgomery County, Texas, seeking the
payment of delinquent property taxes of approximately $46,000. The lawsuit is in connection with land owned by a partnership in which the Company is a partner. Due to the recent filing of the suit, the Company is unable to determine its potential
liability, if any.



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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



No matters were submitted to a vote of security holders during the quarter ended December
31, 2004.



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PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



There is no public trading market for the Companys common stock. According to Pink Sheets, LLC, the last reported bid price of the Companys common stock was
$0.0625 on June 18, 1993. There were no prices quoted after that date. During 2002, 15,500 shares traded at $0.0001.



The approximate number of stockholders as of March 25, 2005 was 477. No dividends have been paid by the Company since its inception, and the Company has no plans to pay
dividends in the foreseeable future.



ITEM 6. MANAGEMENTS DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION



This report contains forward
looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this
section and elsewhere in this report are forward looking statements and, although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to
have been correct. The Companys business and financial results are subject to various risks and uncertainties, including the Companys ability to settle or restructure its remaining debt and other obligations and to generate positive cash
flow to cover its operating expenses, that may cause actual results to differ materially from the Companys expectations. The Company does not intend to provide updated information other than as otherwise required by applicable law. All
subsequent written and oral forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this paragraph and elsewhere in this report.



Plan of Operation



The Company has attempted to use the net proceeds from the sale of Lajitas to settle or
restructure existing debt, of which approximately $4,888,000 (plus accrued interest) has matured and is currently past due, and to realize the carrying amount of its remaining assets. On March 26, 2002, the Board of Directors of the Company
determined that the best alternative to settle the Companys existing debt was to file a voluntary petition for relief under Chapter 11 with the Bankruptcy Court. As previously disclosed in the Current Report on Form 8-K filed by the Company on
April 12, 2005, on April 8, 2005, the Company filed a voluntary petition for relief under Chapter 11 with the United States Bankruptcy Court for the Southern District of Texas, Houston Division, Case # 05-35538-H4-11. The Company is in the process
of preparing a proposed plan of liquidation to be filed with the Bankruptcy Court. Any such plan of liquidation will call for the disposition of the Companys remaining assets and the distribution of all the net proceeds from the disposition to
the Companys creditors. The existing officers and directors of the Company will continue to oversee operation of the Companys business as a debtor in possession, pursuant to sections 1107 and 1108 of the Bankruptcy Code, and subject to
the requirements of the Bankruptcy Code, which include court approval of matters outside the ordinary course of business.



The financial statements have been prepared using the historical cost basis of accounting. Management of the Company believes the historical cost basis of accounting
states assets at no more than their liquidation values and states the Companys liabilities at their historical amounts. It is not presently determinable what amounts the creditors will agree to accept in settlement of the obligations due them.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



-5-



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Accordingly, the Company believes that the equity of the Company has, and will continue to have, no value and that any
Chapter 11 plan confirmed by the Bankruptcy Court will result in the elimination of the equity interests of all of the Companys stockholders. The Company anticipates that it will take approximately nine months to complete its liquidation
process; however, any and all Chapter 11 plans that may be proposed will be subject to obtaining all necessary approvals, including but not limited to creditor votes and judicial determinations of confirmability. There can be no assurance,
therefore, as to how long it may take to complete the Companys liquidation process.



Results of Operations



The
Company reported a net loss of ($388,000) for 2004 compared with a net loss of ($384,000) in 2003.



Revenues primarily include the recognition of previously deferred gross profits from the sale of real estate. At the time of the sale, the Company chose to account for the income using the cost recovery method, and
therefore recognizes income when the receivables are collected.



The decrease
in interest income is primarily due to the lower interest rates and lower average cash balances during 2004.



Liquidity and Capital Resources



As of December 31, 2004, the Company was delinquent on notes payable of approximately $4,888,000 and interest payments of $3,656,000. As of December 31, 2004, the Company had recorded accounts payable and accrued expenses (including
interest) of $3,719,000. Due to the sale of Lajitas, the Company has sufficient funds to pay its current general and administrative operating expenses; however, the Company is unable to repay its notes payable at the face amounts and the related
accrued interest.



In assessing the Companys liquidity, the impact of
income taxes has been considered. The Company does not expect its cash flow to be affected by income taxes in the foreseeable future because of its net operating loss carryforwards. The Companys federal income taxes are disclosed in Note 4 of
the Notes to Financial Statements.



The impact of inflation on the Company over
the past several years has not been material.



No additions to property, plant
and equipment are currently anticipated, and the Company has no paid employees.



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NEW ACCOUNTING PRONOUNCEMENTS



In January, 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December, 2003, the FASB issued FIN 46 (R) which revised
certain provisions in the original interpretation and permitted multiple effective dates based upon the nature and formation date of the variable interest entity. The Company has adopted this Interpretation and it had no impact on the Companys
financial position or results of operations.



ITEM 7. FINANCIAL STATEMENTS



The following financial
statement data required pursuant to this item are included with this report:



|                                                                                                      |  |         
|----------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                      |  | Page No.
|Report of Independent Registered Public Accounting Firm                                               |  | 11      
|                                                                                                      | 
|Balance Sheet - December 31, 2004                                                                     |  | 12      
|                                                                                                      | 
|Statements of Loss for each of the Years Ended December 31, 2004 and 2003                             |  | 13      
|                                                                                                      | 
|Statements of Changes in Stockholders Deficit for each of the Years Ended December 31, 2004 and 2003 |  | 14      
|                                                                                                      | 
|Statements of Cash Flows for each of the Years Ended December 31, 2004 and 2003                       |  | 15      
|                                                                                                      | 
|Notes to Financial Statements                                                                         |  | 16      



ITEM 8. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.



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ITEM 8A. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



Based on their evaluation as of the end of the period covered by this report, the Companys Chief Executive Officer, its President and
its Senior Vice President  Finance and Principal Financial and Accounting Officer have concluded that the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)
are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.



Changes in Internal
Control Over Financial Reporting



There was no change in the
Companys internal control over financial reporting that occurred in the Companys fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial
reporting.



ITEM 8B. OTHER INFORMATION



None.



-8-



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PART III



ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT



The additional information required by Item 9 is contained in the Companys proxy
statement to be used in connection with its 2005 annual meeting of stockholders under the captions Principal Security Holders, Executive Officers and Nominees for Director, which information is incorporated herein
by reference.



The Company has a code of ethics that applies to its principal
executive officers, principal financial officer and principal accounting officer. The Company will provide to any person without charge, upon request, a copy of such code of ethics. Any such request should be sent in writing and addressed to:
Southern Investors Service Company, Inc., Attention: Corporate Secretary, 2727 North Loop West, Suite 200, Houston, Texas 77008.



ITEM 10. EXECUTIVE COMPENSATION



The information required by Item 10 is contained in the Companys proxy statement to be used in connection with its 2005 annual meeting of stockholders under the
caption Executive Compensation, which information is incorporated herein by reference.



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The information required by Item 11 is contained in the Companys proxy statement to be used in connection with its 2005 annual meeting of stockholders under the
captions Principal Security Holders and Nominees for Director, which information is incorporated herein by reference.



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information required by Item 12 is contained in the Companys proxy statement to be used in connection with its 2005 annual meeting of stockholders under the
captions Principal Security Holders, Executive Officers and Nominees for Director, which information is incorporated herein by reference.



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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K



| | (A) | Exhibits Required by Item 601 of Regulation S-B
| | --- | -----------------------------------------------



|        |  |                                                                                                                                  |  |                             
|------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Exhibit |  | *Filed or Furnished Herewith or Incorporated by Reference from Exhibit                                                          
|3       |  | (a) Certificate of Incorporation, as Amended, through June 6, 1989                                                               |  | 3(a) 1989 Form 10-K         
|        |  |                                                                                                                                 
|        |  | (b) Articles of Amendment to Certificate of Incorporation dated June 7, 1989                                                     |  | 3(b) 1989 Form 10-K         
|        |  |                                                                                                                                 
|        |  | (c) Articles of Amendment to Certificate of Incorporation dated May 21, 1993                                                     |  | 3(c) 1993 Form 10-K         
|        |  |                                                                                                                                 
|        |  | (d) Bylaws, as Amended, through date hereof                                                                                      |  | 3(d) June 30, 1989 Form 10-K
|        |  |                                                                                                                                 
|31.1    |  | Certification of Walter M. Mischer, Sr. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                |  | *                           
|        |  |                                                                                                                                 
|31.2    |  | Certification of Walter M. Mischer, Jr. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                |  | *                           
|        |  |                                                                                                                                 
|31.3    |  | Certification of Eric Schumann Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                         |  | *                           
|        |  |                                                                                                                                 
|32.1    |  | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | *                           
|        |  |                                                                                                                                 
|32.2    |  | Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | *                           



| | (B) | Reports on Form 8-K
| | --- | -------------------



The Company filed no reports on Form 8-K during the quarter ended December 31, 2004. On April 12, 2005, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K reporting the filing of the Companys Chapter 11 petition with the Bankruptcy Court.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information required by Item 14 is contained in the Companys proxy statement to be used in connection with its 2005 annual meeting of stockholders under the
captions Relationship With Independent Registered Public Accounting Firm: Fees, which information is incorporated herein by reference.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To Southern Investors Service Company, Inc.:



We have audited the
accompanying balance sheet of Southern Investors Service Company, Inc. (a Delaware Corporation) (the Company) as of December 31, 2004, and the related statements of loss, changes in stockholders deficit and cash flows for the years ended
December 31, 2004 and 2003. These financial statements are the responsibility of the Company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 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 financial position of Southern Investors Service Company, Inc. as of December 31, 2004, and the results of its operations and its cash
flows for years ended December 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America.



The Companys cash flow from operations has not been adequate to meet the Companys obligations for the past several years. As of December 31, 2004, the Company
had sold substantially all of its operating assets and continues to have a deficit in stockholders equity. As described in Note 1 to the financial statements, even though the Company has restructured certain indebtedness in the last several
years and sold substantially all of its operating assets, it continues to be delinquent on $4,888,000 of debt. These factors raise substantial doubt about the Companys ability to continue as a going concern. Also as described in Note 1 to the
financial statements, on March 26, 2002, the Board of Directors of the Company determined that the best alternative to settle the Companys existing debt was to file a voluntary petition for relief under the bankruptcy laws. On April 8, 2005,
the Company filed a voluntary petition for relief under Chapter 11 with the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the Bankruptcy Court), Case # 05-35538-H4-11.



The accompanying financial statements have been prepared using the historical cost basis of
accounting. Management of the Company believes the historical cost basis of accounting states assets at no more than their liquidation values and states the Companys liabilities at their historical amounts. It is not presently determinable
what amounts the creditors will agree to accept in settlement of the obligations due them. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Weinstein Spira & Company

Houston, Texas

April 12, 2005



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

BALANCE SHEET

DECEMBER 31, 2004

(Thousands of
Dollars, Except Share Data)



|                                                                                 |  |   |         |  
|-------------------------------------------------------------------------------- |  | - | ------- | -
|ASSETS                                                                           |  |   |         |  
|                                                                                 | 
|CASH                                                                             |  | $ | 2,065   |  
|EQUITY IN REAL ESTATE JOINT VENTURES, NET                                        |  |   | 286     |  
|NOTES RECEIVABLE AND OTHER ASSETS                                                |  |   | 26      |  
|                                                                                 |  |   |         |  
|Total assets                                                                     |  | $ | 2,377   |  
|                                                                                 |  |   |         |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                            |  |   |         |  
|                                                                                 | 
|LIABILITIES:                                                                     |  |   |         |  
|Notes payable, matured                                                           |  | $ | 4,888   |  
|Accounts payable and accrued expenses                                            |  |   | 3,719   |  
|                                                                                 |  |   |         |  
|Total liabilities                                                                |  |   | 8,607   |  
|                                                                                 |  |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                    |  |   |         |  
|                                                                                 | 
|STOCKHOLDERS DEFICIT:                                                           |  |   |         |  
|Preferred stock, $1 par, 1,000,000 shares authorized, none issued or outstanding |  |   |        |  
|Common stock, $1 par, 10,000,000 shares authorized, 3,281,331 shares issued      |  |   | 3,281   |  
|Additional paid-in capital                                                       |  |   | 3,031   |  
|Retained deficit                                                                 |  |   | (12,416 | )
|Less treasury stock, 112,402 shares, at cost                                     |  |   | (126    | )
|                                                                                 |  |   |         |  
|Total stockholders deficit                                                      |  |   | (6,230  | )
|                                                                                 |  |   |         |  
|Total liabilities and stockholders deficit                                      |  | $ | 2,377   |  
|                                                                                 |  |   |         |  



The accompanying notes
are an integral part of this financial statement.



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

STATEMENTS OF LOSS

(Thousands of Dollars, Except Share Data)



|                                     |  |                         |           |   |      |   |           |  
|------------------------------------ |  | ----------------------- | --------- | - | ---- | - | --------- | -
|                                     |  | Year Ended December 31, |          
|                                     |  | 2004                    |           |   | 2003 |  
|REVENUES                             |  | $                       | 19        |   |      | $ | 22        |  
|OPERATING EXPENSES                   |  |                         | 121       |   |      |   | 128       |  
|                                     |  |                         |           |   |      |   |           |  
|LOSS FROM OPERATIONS                 |  |                         | (102      | ) |      |   | (106      | )
|INTEREST INCOME                      |  |                         | 29        |   |      |   | 36        |  
|INTEREST EXPENSE                     |  |                         | (315      | ) |      |   | (314      | )
|                                     |  |                         |           |   |      |   |           |  
|LOSS BEFORE INCOME TAXES             |  |                         | (388      | ) |      |   | (384      | )
|INCOME TAXES                         |  |                         |          |   |      |   |          |  
|                                     |  |                         |           |   |      |   |           |  
|NET LOSS                             |  | $                       | (388      | ) |      | $ | (384      | )
|                                     |  |                         |           |   |      |   |           |  
|BASIC AND DILUTED LOSS PER SHARE     |  | $                       | (0.12     | ) |      | $ | (0.12     | )
|                                     |  |                         |           |   |      |   |           |  
|AVERAGE NUMBER OF SHARES OUTSTANDING |  |                         | 3,168,929 |   |      |   | 3,168,929 |  
|                                     |  |                         |           |   |      |   |           |  



The accompanying notes
are an integral part of these financial statements.



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT

(Thousands of Dollars)



|                            |  |              |  |        |       |                            |   |                  |  |   |                |   |  |                             |      |   |  |   |        |  
|--------------------------- |  | ------------ |  | ------ | ----- | -------------------------- | - | ---------------- |  | - | -------------- | - |  | --------------------------- | ---- | - |  | - | ------ | -
|                            |  |              |  |        |       | Additional Paid-In Capital |   | Retained Deficit |  |   | Treasury Stock |   |  | Total Stockholders Deficit |     
|                            |  | Common Stock |  |        |       |                           
|                            |  | Shares       |  | Amount |       |                            |   |                 
|Balance - December 31, 2002 |  | 3,281,331    |  | $      | 3,281 |                            | $ | 3,031            |  | $ | (11,644        | ) |  | $                           | (126 | ) |  | $ | (5,458 | )
|Net Loss                    |  |             |  |        |      |                            |   |                 |  |   | (384           | ) |  |                             |     |   |  |   | (384   | )
|                            |  |              |  |        |       |                            |   |                  |  |   |                |   |  |                             |      |   |  |   |        |  
|Balance - December 31, 2003 |  | 3,281,331    |  |        | 3,281 |                            |   | 3,031            |  |   | (12,028        | ) |  |                             | (126 | ) |  |   | (5,842 | )
|Net Loss                    |  |             |  |        |      |                            |   |                 |  |   | (388           | ) |  |                             |     |   |  |   | (388   | )
|                            |  |              |  |        |       |                            |   |                  |  |   |                |   |  |                             |      |   |  |   |        |  
|Balance - December 31, 2004 |  | 3,281,331    |  | $      | 3,281 |                            | $ | 3,031            |  | $ | (12,416        | ) |  | $                           | (126 | ) |  | $ | (6,230 | )
|                            |  |              |  |        |       |                            |   |                  |  |   |                |   |  |                             |      |   |  |   |        |  



The accompanying notes
are an integral part of these financial statements.



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

STATEMENTS OF CASH FLOWS

(Thousands of Dollars)



|                                                               |  |                         |       |   |      |   |       |  
|-------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ----- | -
|                                                               |  | Year Ended December 31, |      
|                                                               |  | 2004                    |       |   | 2003 |  
|Cash flows from operating activities:                          |  |                         |       |   |      |   |       |  
|Net loss                                                       |  | $                       | (388  | ) |      | $ | (384  | )
|Change in assets and liabilities:                              |  |                         |       |   |      |   |       |  
|(Increase) Decrease in notes receivable and other assets       |  |                         |      |   |      |   | 13    |  
|Increase in accounts payable and accrued expenses              |  |                         | 315   |   |      |   | 315   |  
|                                                               |  |                         |       |   |      |   |       |  
|Net cash used in operating activities and net decrease in cash |  |                         | (73   | ) |      |   | (56   | )
|Beginning cash                                                 |  |                         | 2,138 |   |      |   | 2,194 |  
|                                                               |  |                         |       |   |      |   |       |  
|Ending cash                                                    |  | $                       | 2,065 |   |      | $ | 2,138 |  
|                                                               |  |                         |       |   |      |   |       |  



The accompanying notes
are an integral part of these financial statements.



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SOUTHERN INVESTORS SERVICE COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS



(1) Current Business Conditions



Southern Investors Service Company, Inc. (the Company) was incorporated under the laws of
the State of Delaware in 1972. Prior to 1990, the Company was engaged in the ownership and development of real estate primarily in the Houston, Texas area. The operations of the Company were significantly reduced during 1990, as a result of various
debt settlements with lenders and other creditors. These settlements resulted in the transfer of substantially all of the Companys holdings to its creditors. The Companys operations since 1990 have been limited to attempts to settle or
restructure the Companys remaining liabilities. The Companys operations also included the management of residential developments and two office buildings owned by others. During 1998, the majority of these residential projects were sold
by the owners and therefore the Company no longer is managing these projects. Effective January 1, 1999, the Company ceased all management activity and all employees related to this activity were terminated.



The Company determined in late 1999 that the sale of Lajitas (a resort property in west
Texas), its sole remaining operating asset, would facilitate the Companys ability to settle its existing liabilities most favorably. As a result, the Company retained the National Auction Group, Inc. (National Auction) to conduct an auction of
Lajitas. The auction was conducted on February 24, 2000, and the property was sold for $3,950,000. The sale of the Lajitas property closed on May 2, 2000. During 2000, the Company realized a gain on the sale of Lajitas of $755,000 and received net
cash proceeds of approximately $2.4 million, after the payment of a mortgage note related to the property sold.



The Company has attempted to use the net proceeds from the sale of Lajitas to settle or restructure existing debt, of which approximately $4,888,000 (plus accrued
interest) has matured and is currently past due, and to realize the carrying amount of its remaining assets. On March 26 2002, the Board of Directors of the Company determined that the best alternative to settle the Companys existing debt was
to file a voluntary petition for relief under Chapter 11 (Chapter 11) of Title 11 of the United States Code (the Bankruptcy Code) with the United States Bankruptcy Court. As previously disclosed in the Current Report on Form 8-K filed by the Company
on April 12, 2005, on April 8, 2005, the Company filed a voluntary petition for relief under Chapter 11 with the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the Bankruptcy Court), Case # 05-35538-H4-11. The
Company is in the process of preparing a proposed plan of liquidation to be filed with the Bankruptcy Court. Any such plan of liquidation will call for the disposition of the Companys remaining assets and the distribution of all the net
proceeds from the disposition to the Companys creditors. The existing officers and directors of the Company will continue to oversee operation of the Companys business as a debtor in possession, pursuant to sections 1107 and 1108 of the
Bankruptcy Code, and subject to the requirements of the Bankruptcy Code, which include court approval of matters outside the ordinary course of business.



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These financial statements have been prepared using the historical cost basis of accounting. Management of the Company
believes the historical cost basis of accounting states assets at no more than their liquidation values and states the Companys liabilities at their historical amounts. It is not presently determinable what amounts the creditors will agree to
accept in settlement of the obligations due them. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the Company believes the equity of the Company has, and will continue to
have, no value and that any Chapter 11 plan confirmed by the Bankruptcy Court will result in the elimination of the equity interests of all of the Companys stockholders. The Company anticipates that it will take approximately nine months to
complete its liquidation process; however, any and all Chapter 11 plans that may be proposed will be subject to obtaining all necessary approvals, including but not limited to creditor votes and judicial determinations of confirmability. There can
be no assurance, therefore, as to how long it may take to complete the Companys liquidation process.



(2) Summary of Significant Accounting Policies



The Company maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the
United States of America. Accounting principles followed by the Company and the methods of applying those principles which materially affect the determination of financial position, results of operations and cash flows are summarized below:



CASH AND CASH EQUIVALENTS



The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. As of December 31, 2004, there were deposits in excess of federally insured limits.



EQUITY IN REAL ESTATE JOINT VENTURES



The Company has investments in two ventures accounted for on the cost method. These ventures had a book value of $286,000 as of December 31, 2004.



Management continues to monitor the impact of changes in
economic conditions to determine the effect on the carrying value of its equity in real estate joint ventures. The effect of any significant changes will be reported in income in the period such effect can be reasonably estimated.



INCOME TAXES



Income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary
differences, and operating loss and tax credit carry forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their
tax bases. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.



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REVENUE RECOGNITION



Revenues primarily include the recognition of previously deferred gross profits from the sale of real estate. At the time of
the sale, the Company chose to account for the income using the cost recovery method, and therefore recognizes income when the receivables are collected.



FAIR VALUE OF FINANCIAL INSTRUMENTS



The carrying amounts of cash and notes receivable approximate fair value due to relatively short maturities. It was not practicable to estimate the fair
value of debt and related accrued interest as the debt has matured and the Company anticipates that any plan of liquidation confirmed by the Bankruptcy Court will require the Company to settle the debt for cash payments or transfer of other assets
at substantially less than amounts due. See also Note 1.



LOSS
PER COMMON SHARE



Loss per common share was computed in
accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share issued by the Financial Accounting Standards Board.



USE OF ESTIMATES



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



NEW ACCOUNTING
PRONOUNCEMENTS



In January, 2003, the FASB issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. In December, 2003,
the FASB issued FIN 46 (R) which revised certain provisions in the original interpretation and permitted multiple effective dates based upon the nature and formation date of the variable interest entity. The Company has adopted this Interpretation
and it had no impact on the Companys financial position or results of operations.



(3) Preferred Stock



The Company has authorized 1 million shares of $1.00 par value preferred stock. No such stock has been issued. The preferred stock may be issued in one or more series,
with the shares in each such series having such voting powers and such designations, preferences and relative participating, optional redemption, conversion, exchange and other special rights and restrictions as may be fixed by a resolution of the
Companys Board of Directors.



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(4) Federal Income Taxes



The estimated income tax effect of temporary differences and tax attributes representing
deferred income tax liabilities and assets is summarized as follows:



|                                                 |  |                  |        |  
|------------------------------------------------ |  | ---------------- | ------ | -
|(Thousands of Dollars)                           |  | December 31,2004 |       
|Deferred income tax asset due to:                |  |                  |        |  
|Tax loss carryforwards                           |  | $                | 6,938  |  
|Other                                            |  |                  | 19     |  
|                                                 |  |                  |        |  
|Gross deferred income tax asset                  |  |                  | 6,957  |  
|Deferred income tax liability due to:            |  |                  |        |  
|Basis difference in investment in joint ventures |  |                  | (314   | )
|                                                 |  |                  |        |  
|Net deferred income tax asset                    |  |                  | 6,643  |  
|Less-Valuation allowance                         |  |                  | (6,643 | )
|                                                 |  |                  |        |  
|                                                 |  | $                |       |  
|                                                 |  |                  |        |  



The Company estimates that as of
December 31, 2004, its loss carryforwards for federal income tax reporting purposes were approximately $20.4 million, of which approximately $2.9 million was a capital loss carryforward. The loss carryforward will expire between 2005 and 2025. The
tax benefit of the operating loss carryforward has been recognized to the extent of the deferred income taxes provided on temporary differences which are expected to reverse during the carryforward periods. The valuation allowance as of December 31,
2004 totaled $6,643,000, an increase of approximately $96,000 from December 31, 2003. A reconciliation of the provision (benefit) for federal income tax at the statutory rate to the effective rate for financial reporting is as follows:



|                                                |  |                         |      |   |      |     |    |  |   |      |   |  |     |   
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- | --- | -- |  | - | ---- | - |  | --- | --
|                                                |  | Year Ended December 31, |     
|(Thousands of Dollars)                          |  | 2004                    |      |   | 2003 |    
|Tax benefit at statutory rate                   |  | $                       | (132 | ) |      | (34 | )% |  | $ | (131 | ) |  | (34 | )%
|Unrecognized tax benefit                        |  |                         | 132  |   |      | 34  | %  |  |   | 131  |   |  | 34  | % 
|                                                |  |                         |      |   |      |     |    |  |   |      |   |  |     |   
|Tax provision (benefit) for financial reporting |  | $                       |     |   |      |    | %  |  | $ |     |   |  |    | % 
|                                                |  |                         |      |   |      |     |    |  |   |      |   |  |     |   



No income taxes were paid during 2004
or 2003.



In October, 1986, the Tax Reform Act of 1986 (the Act) was passed.
The Act substantially changed the rules regarding the availability of a corporations operating loss carryforward following a significant change of ownership. Under most circumstances, the limitations on the use of the operating loss
carryforwards are imposed if the equity ownership of a corporations 5% stockholders increases by more than 50% over the lowest percentage of equity ownership of such stockholders during the three year period prior to the date of the ownership
change. No change of ownership had occurred through December 31, 2004.



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(5) Notes Payable



The Companys notes payable which are all currently past due are summarized as follows:



|                                                                                                             |  |                  |      
|------------------------------------------------------------------------------------------------------------ |  | ---------------- | -----
|(Thousands of Dollars)                                                                                       |  | December 31,2004
|Matured notes, bearing interest at rates ranging from 6% to 12%                                              |  | $                | 1,448
|Matured notes payable to certain directors, stockholders and affiliates, bearing interest at 6% (See Note 7) |  |                  | 3,440
|                                                                                                             |  |                  |      
|                                                                                                             |  | $                | 4,888
|                                                                                                             |  |                  |      



During 1993, the Company restructured
debentures with an aggregate principal balance of $2,331,000, loans payable to debenture holders with aggregate principal balances of $639,000 and accrued and unpaid interest with respect to these debentures and debenture loans of approximately
$470,000 in exchange for unsecured promissory notes of the Company. These notes have an aggregate principal balance of $3,440,000 and bear interest at 6% compounded annually.



As of December 31, 2004, the Company had not received any notices of default or acceleration from any of its lenders.



As of December 31, 2004, in addition to the past due principal amounts set forth on the above
table, the Company was also delinquent in making interest payments on its notes payable in the aggregate amount of $3,656,000. This amount is included in accounts payable and accrued expenses on the balance sheet.



No interest was paid during the years ended December 31, 2004 and 2003.



(6) Commitments and Contingencies



During August, 2004 the Company was named as a defendant in a lawsuit filed in the District
Court of Montgomery County Texas, seeking the payment of delinquent property taxes of approximately $46,000. The lawsuit is in connection with land owned by a partnership in which the Company is a partner. Due to the recent filing of the suit, the
Company is unable to determine its potential liability, if any.



If the
Company, in the light of its present circumstances, were required to make substantial cash expenditures in connection with future lawsuits and other claims, such expenditures would have a material adverse effect on the Companys financial
position.



(7) Related Party
Transactions



The Company had no paid employees as of December 31, 2004.
The Companys management is conducted pursuant to an oral management agreement with a company affiliated with the Chairman of the Board and Chief Executive Officer, both shareholders. The management agreement provides the Company accounting and
other administrative services and related office facilities and supplies. These services are provided for a fee of $1,000 per month and totaled $12,000 for each year ended December 31, 2004 and 2003.



-20-



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During 1993, in connection with the restructure of the Companys debentures, the Company issued $3,440,000 in
unsecured promissory notes to certain directors, stockholders and affiliates including notes to Mr. Mischer, Mr. Mischer, Jr., John D. Weil and John W. Storms, in the aggregate principal amount of $2,995,000 to consolidate amounts due for the
debentures held by them and accrued and unpaid interest. These notes bear interest at 6% compounded annually and were due October 2, 1996.



Mr. Mischer and Mr. Mischer, Jr. participate in real estate projects in the Houston area which may compete with the Companys projects.



(8) Accounts Payable and Accrued Expenses



Accounts payable and accrued expenses included the following:



|                          |  |                  |      
|------------------------- |  | ---------------- | -----
|(Thousands of Dollars)    |  | December 31,2004
|Accrued interest payable  |  | $                | 3,656
|Other accrued liabilities |  |                  | 63   
|                          |  |                  |      
|                          |  | $                | 3,719
|                          |  |                  |      



-21-



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SIGNATURES



In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.



SOUTHERN INVESTORS SERVICE COMPANY, INC.By:

/s/ Walter M. Mischer, Sr.Walter M. Mischer, Sr.Chairman of the BoardChief Executive OfficerDate: April 15, 2005




In accordance
with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                                                                                                       |  |                     
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------
|/s/ Walter M. Mischer, Sr.Walter M. Mischer, Sr. Chairman of the Board and Chief Executive Officer Director            |  | Date: April 15, 2005
|                                                                                                                       | 
|/s/ Walter M. Mischer, Jr.Walter M. Mischer, Jr. President and Director Chief Operating Officer                        |  | Date: April 15, 2005
|                                                                                                                       | 
|/s/ Eric SchumannEric Schumann Senior Vice President - Finance and Director Principal Financial and Accounting
Officer |  | Date: April 15, 2005



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