UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13818
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(formerly "Banco Popular de Puerto Rico Employees Stock Plan (Puerto Rico)"
(Full title of the Plan and address of the Plan, if
different from that of the issuer named below)
POPULAR, INC.
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(Name of issuer of the securities held pursuant to the
plan and the address of principal executive office)
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 30, 2001 AND 2000
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PAGE
Financial Statements:
---------------------
Report of Independent Accountants.......................................... 1
Statement of Net Assets Available for
Benefits as of December 30, 2001 and 2000................................. 2
Statement of Changes in Net Assets
Available for Benefits for the fiscal year ended December 30, 2001........ 3
Notes to Financial Statements.............................................. 4-8
Supplemental Schedule:*
----------------------
Schedule I - Schedule of Assets (Held at End of Year)
at December 30, 2001...................................................... 9
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA
have been omitted because they are not applicable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
Banco Popular de Puerto Rico
Savings and Stock Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Banco Popular de Puerto Rico Savings and Stock Plan (formerly "Banco
Popular de Puerto Rico Employees' Stock Plan (Puerto Rico)") (the "Plan") at
December 30, 2001 and 2000, and the changes in net assets available for benefits
for the fiscal year ended December 30, 2001, in conformity with accounting
principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose 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.
June 14, 2002
1
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 30, 2001 AND 2000
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2001 2000
ASSETS
Investments at fair value $46,598,316 $39,803,685
Contribution receivable 360,399 158,073
Profit sharing contribution receivable 1,046,533 1,884,026
Dividend receivable and other 319,456 241,617
----------- -----------
48,324,704 42,087,401
Cash and cash equivalents 2,976 18,613
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Total assets $48,327,680 $42,106,014
=========== ===========
LIABILITIES
Accounts payable $ 20,935 $ 24,310
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Total liabilities 20,935 24,310
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Net assets available for benefits $48,306,745 $42,081,704
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE FISCAL YEAR
ENDED DECEMBER 30, 2001
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Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments $ 4,207,926
Investment income 1,216,193
-----------
Total investment income 5,424,119
-----------
Contributions:
Employer 1,990,867
Participants 3,723,297
-----------
Total contributions 5,714,164
-----------
Total additions 11,138,283
-----------
Deductions from net assets attributed to:
Benefits paid to participants and withdrawals 3,977,198
Rollover to other qualified plans 936,044
-----------
Total deductions 4,913,242
-----------
Net increase 6,225,041
Net assets available for benefits:
Beginning of year 42,081,704
-----------
End of year $48,306,745
===========
The accompanying notes are an integral part of these financial statements.
3
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001 AND 2000
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1. DESCRIPTION OF PLAN
The following description of the Banco Popular de Puerto Rico Savings
and Stock Plan (the "Plan"), formerly the "Banco Popular de Puerto Rico
Employees Stock Plan (Puerto Rico)", provides only general information.
Participants should refer to the Plan agreement for a more complete
description of its provisions.
General
The Plan is a defined contribution plan created for the purpose of
providing employees with a tax advantaged approach for saving money for
retirement. The Plan provides the participants the ability to acquire
investments in mutual funds as well as share in the Bank's (the "Bank")
future through the purchase of Popular, Inc. (holding company of the
Bank) common stock. The Plan is subject to the provisions of the
Employee Retirement Security Act of 1974 ("ERISA") and covers
substantially all employees of the Bank who have three months of
service, are age eighteen or older, and are residents of the
Commonwealth of Puerto Rico. The Plan was amended and restated as of
February 1, 2001 to provide participant increased benefits and a more
favorable vesting schedule.
Participants' Contributions
Plan participants may authorize the Bank to make pre-tax and after-tax
payroll deductions under the Plan up to 10% of their monthly
compensation, which includes basic salary before overtime, commissions,
bonuses and any other special compensation. At no time may a
participant's contribution exceed the lesser of 10% of compensation, as
defined, or $8,000. As per plan provisions, participants contributions
made up to January 31, 2001 and which have been invested in the
Popular, Inc. common stock remain invested in such option until the
participant has attained 50 years of age and has completed 10 years of
service.
Employer's Contributions
The Bank makes two types of contributions: a) based on the Bank's
profitability and b) a matching contribution on basic salary for those
who elect to contribute and invest on Popular Inc. common stock. The
Plan sponsor contributes to the plan on behalf of each participant, a
matching contribution equal to 50% of each participant's pre-tax
contributions invested in Popular, Inc. common stock. After tax
contributions and those participant's pretax contribution that are not
invested in Popular, Inc. common stock shall not be matched by the
sponsor. A participant's share of any Plan Sponsor contribution, is to
be invested solely in the Popular, Inc. common stock until such time as
he/she has attained 50 years of age and has completed 10 years of
service. At this time, a participant shall have full discretionary
investment powers of his/her account, including future plan sponsor
contributions.
Participants' Accounts
Each participant account is credited with the participant's
contribution and allocations of (a) the Bank's matching and profit
sharing contribution, and (b) Plan earnings. Allocations are based on
participant earnings or account balances, as defined. Any dividends
that are paid by Popular, Inc. and mutual fund shares are reinvested in
additional shares. The benefit to which a participant is entitled is
the benefit that can be provided from the participant's vested account.
4
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001 AND 2000
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Vesting
Participants are immediately vested in their voluntary contribution
plus actual earnings thereon. Vesting in the Company's matching and
discretionary contributions plus actual earnings thereon is based on
years of service. The Company's contribution vest in accordance with
the following schedule:
YEARS OF SERVICE VESTING %
Less than 1 0
At least 1 20
At least 2 40
At least 3 60
At least 4 80
5 or more 100
Payment of Benefits
Participants receive the vested portion of their individual accounts
when employment with the Bank ends. In service withdrawals are
permitted, but limited to after-tax contributions in the participants
account. Minimum withdrawal amount is $1,000. On termination of service
due to disability or retirement, a participant may elect to receive an
amount equal to the value of the vested interest in his or her account
as a lump sum distribution in cash, shares of Popular, Inc. common
stock, if applicable, or a combination of both. In the case of
participant termination because of death, the entire vested amount is
paid to the person or persons legally entitled thereto.
The Puerto Rico Internal Revenue Code Section 1165 (b) requires that a
20% tax be withheld from termination payments in excess of after-tax
participant contribution, if any.
Investments
Upon enrolment in the Plan, a participant may elect to have its
contributions invested in one or more of the following:
Deutsche International An open-end fund whose investment objective
Equity Fund seeks long-term capital appreciation. The
fund pursues its objective by investing
primarily in stocks and other securities
from developed countries outside the United
States.
Dreyfus Emerging Leaders An open-end fund which pursues its
Fund investment objective of capital growth by
investing in companies believed to be
emerging leaders, such as small companies
characterized by new or innovative products
services or processes having the potential
to enhance earnings growth. These companies
have a market capitalization of less than
$1.5 billion.
Fidelity Advisor Equity An open-end fund that seeks capital
Growth Fund appreciation by investing in domestic and
foreign companies with above-average growth
potential. The fund normally invests 80% of
its total assets in equity securities.
5
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001 AND 2000
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Federated Government An open-end fund whose investment objective
Obligations Fund seeks to provide current income consistent
with stability of principal by investing
primarily in U.S. Treasury and agency
securities, including repurchase agreements
collateralized by U.S. Treasury and agency
securities.
Federated Equity Income An open-end fund that seeks above to average
Fund income and capital appreciation. The fund
invests primarily in income-producing equity
securities including securities that are
convertible into common stock.
Vanguard Total Bond An open-end fund whose investment objective
Market Index Fund seeks a high level of interest income. The
Fund pursues its objective by investing
in fixed income securities with prescribed
maturity and credit quality standards.
Popular Inc. common stock Investment in Popular, Inc.'s common stock.
Popular, Inc. is the Bank's parent.
Plan Expenses and Administration
The Bank is responsible for the general administration of the Plan and
for carrying out the provisions thereof.
Contributions are held and managed by a trustee appointed by the Board
of Directors of the Bank. All expenses of the Plan are borne by the
Bank.
Forfeited Accounts
Forfeited balances of terminated participants' nonvested accounts are
used to reduce future Bank contributions or, at the Banks discretion
redistributed among participants after a five (5) year severance
period. During the severance period, if the terminated participant is
reemployed by the Bank, the dollar value at the date of reemployment of
such forfeited amounts shall be restored to the participant's account
if the reemployed participant repays to the Plan an amount equal to the
dollar amount of his/her vested balance distributed upon termination.
Forfeited amounts used to reduce 2001 Profit Sharing contribution
amounted to $546,330.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting.
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 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.
6
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
NOTE TO FINANCIAL STATEMENTS
DECEMBER 30, 2001 AND 2000
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Investment Valuation and Income Recognition
Plan investments are presented at fair value. Shares of registered
investment companies are presented at quoted market prices which
represent the net asset value of shares held by the plan at the
reporting date. Popular, Inc. common stock is valued at its quoted
market price. The Plan presents in the statement of changes in net
assets available for benefits the net appreciation (depreciation) in
the fair value of its investments which consists of the realized gains
or losses and the unrealized appreciation (depreciation) on them.
Purchases and sales of securities are recorded on the trade date basis,
while dividends and interest earned are recorded on the accrual basis
and credited to each participant's account, as defined.
Contributions
Employee and Bank matching contributions are recorded in the Plan year
in which the Bank makes the payroll deductions.
Transfer of Assets to Other Plans
Bank employees and retirees may elect to transfer their savings to
other plans qualified by the Puerto Rico Treasury Department or by the
Internal Revenue Service (the "IRS").
Payment of Benefits
Benefits are recorded when paid.
3. INVESTMENT
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 31:
# OF
SHARES VALUE
Common stock
Popular, Inc.* 1,599,326,962 $46,364,489
* includes non participants directed portion
During 2001, the Plan's investments (including gains and losses on
investments bought and sold) appreciated (depreciated) in value as
follows:
Mutual funds $ (78,983)
Common stock - Popular, Inc. 4,286,909
-----------
$ 4,207,926
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7
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001 AND 2000
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4. NON-PARTICIPANT DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in assets relating to the non-participant directed investments
as of December 31, is as follows:
2001 2000
Net asset
Popular, Inc. Common Stock $33,756,986 $42,081,704
=========== ===========
YEAR ENDED
DECEMBER 31,
2001
Changes in net assets:
Contributions $ 2,384,337
Dividends and interest 898,439
Net appreciation 4,300,684
Benefits paid to participants (3,468,391)
Transfers to participant directed
investments and other Plans under
ERISA requirements (12,439,788)
------------
$ (8,324,719)
============
Effective January 31, 2001, the plan was amended to require, among
other things, that participant investments in Popular, Inc. common
stock up to that date, are to remain invested until participants attain
50 years of age and 10 years of service. At the time, participants will
be allowed to direct their investment balances to other investment
options.
5. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Board of Directors of the Bank approved profit sharing
contributions of $1,592,864 and $1,884,026 based on 2001 and 2000 Bank
earnings, respectively. The 2001 profit sharing contribution receivable
on the accompanying financial statements is net of forfeitures
amounting to $546,330 used to reduce Bank contribution. These
forfeitures were allocated to plan Participants' in 2002. No
forfeitures were used to reduce the 2000 profit sharing contribution.
Amounts receivable were subsequently collected in January 2002 and
February and March 2001, respectively.
6. TAX STATUS
The Plan obtained a favorable determination letter from the Department
of Treasury of the Commonwealth of Puerto Rico. The letter indicates
that the Plan is designed in accordance with the applicable income tax
law and is, therefore, exempt from income taxes. The Plan and the
income tax law have been amended since receiving the determination
letter. The Plan Administrator and the Plan's tax counsel, however,
believe that the Plan is designed and is currently being operated in
compliance with the applicable requirement of the income tax law.
Therefore, no provision for income taxes has been included in the
Plan's financial statements.
7. PLAN TERMINATION
Although it has not expressed any intent to do so, the Bank 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
the Plan terminates, the interest of each participating employee in the
Plan shall become fully vested and such termination shall not reduce
the interest of any participating employee or their beneficiaries
accrued under the Plan up to the date of such termination.
8
SUPPLEMENTAL SCHEDULE
SCHEDULE I
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
(FORMERLY "BANCO POPULAR DE PUERTO RICO EMPLOYEES' STOCK PLAN (PUERTO RICO)")
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 30, 2001
(SCHEDULE H, PART IV, LINE 4I ON FORM 5500)
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DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT SHARES COST VALUE
Deutshe International Mutual Fund 709,182 -- $ 13,311
Equity Fund
Dreyfus Emerging Leaders Mutual Fund 1,260,336 -- 44,036
Fund
Federated Government Mutual Fund 61,713,328 -- 61,713
Obligation Fund
Fidelity Advisor Equity Mutual Fund 1,356,269 -- 69,129
Fund
Federated Equity Income Mutual Fund 1,860,887 -- 31,114
Fund
Vanguard Mutual Total Mutual Fund 1,438,017 -- 14,524
Bond Market Index Fund
Popular, Inc.* Common stock** 1,599,326,962 31,547,815 46,364,489
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$ 31,547,815 $46,598,316
============ ===========
* Party in-interest
** Includes non participant directed portion
*** Cost is not required for participant directed investments
9
Signature
Pursuant to the requirement of the Securities Exchange Act of 1934, the
persons who administer the employee benefit plan have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly authorized.
BANCO POPULAR DE PUERTO RICO
SAVINGS AND STOCK PLAN
(formerly "Banco Popular de
Puerto Rico Employees' Stock
Plan (Puerto Rico)")
(Name of Plan)
By: /s/ Tere Loubriel
--------------------------
Tere Loubriel
Authorized Representative
By: /s/ Jorge A. Junquera
---------------------------
Jorge A. Junquera
Authorized Representative
in the United States
Dated: June 26, 2002
10