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, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-13818
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(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)
POPULAR, INC. RETIREMENT
SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 2002 AND 2001
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
AT DECEMBER 31, 2002 AND 2001
PAGE
Financial Statements:
Report of Independent Auditors.................................................................. 1
Statements of Net Assets Available for
Benefits as of December 31, 2002 and 2001...................................................... 2
Statement of Changes in Net Assets Available
for Benefits for the year ended December 31, 2002.............................................. 3
Notes to Financial Statements................................................................... 4-8
Supplemental Schedule:*
Schedule I - Schedule of Assets (Held at End of Year)
at December 31, 2002........................................................................... 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 AUDITORS
To the Participants and Administrator of
Popular, Inc. Retirement Savings Plan for Puerto Rico Subsidiaries
In our opinion, the accompanying statements 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 Popular, Inc. Retirement Savings Plan for Puerto Rico Subsidiaries (the
"Plan"), at December 31, 2002 and 2001, and the changes in net assets available
for benefits for the year ended December 31, 2002, 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. This
supplemental schedule has been subjected to the auditing procedures applied in
the audit 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/ PricewaterhouseCoopers, LLP
----------------------------------
PricewaterhouseCoopers, LLP
San Juan, Puerto Rico
June 20, 2003
1
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
ASSETS
Investments, at fair value $32,636,820 $27,076,112
Receivables:
Contribution receivable -- 46,204
Profit sharing contribution receivable 2,188,186 2,412,512
Dividend and interest receivable 125,636 89,403
----------- -----------
34,950,642 29,624,231
Cash and cash equivalents 131,441 160,541
----------- -----------
Net assets available for benefits $35,082,083 $29,784,772
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
Additions to net assets:
Investment income
Net appreciation in fair value of investments $ 337,425
Interest and dividends 529,251
-----------
Total investment income 866,676
-----------
Contributions:
Employer 3,461,462
Participants 3,084,257
Rollovers from other qualified plans 160,503
-----------
Total contributions 6,706,222
-----------
Total additions 7,572,898
Deductions from net assets:
Benefits and withdrawals paid to participants 2,275,587
-----------
Net increase 5,297,311
Net assets available for benefits:
Beginning of year 29,784,772
-----------
End of year $35,082,083
===========
The accompanying notes are an integral part of these financial statements.
3
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
1. DESCRIPTION OF PLAN
The following description of the Popular, Inc. Retirement Savings Plan
for Puerto Rico Subsidiaries (the "Plan"), 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 excluding Banco Popular de
Puerto Rico employees plan covering substantially all employees of the
Puerto Rico subsidiaries of Popular Inc. (the "Companies") who have
three months of service, are at least eighteen years old and are
residents of the Commonwealth of Puerto Rico. The Plan was created for
the purpose of providing retirement benefits to employees and to
encourage and assist them in adopting a regular savings plan that
qualifies under the applicable laws of the Commonwealth of Puerto Rico.
The Plan is subject to the provisions of Employee Retirement Income
Security Act of 1974 ("ERISA").
Contributions
Plan participants may authorize the Company to make pre-tax and after
tax payroll deductions ranging from 1% to 10% of their monthly
compensation, as defined. At no time may participant pre-tax
contributions exceed the lesser of 10% of the participant's annual
compensation, as defined, or $8,000.
The Companies match participant's pre-tax contributions at the rate of
50 cents for each dollar saved as follows:
ON THE FIRST PERCENTAGE
SUBSIDIARY OF PARTICIPANT'S COMPENSATION
------------------------- -----------------------------
Popular Insurance, Inc. 6%
Popular Mortgage, Inc. 6%
Levitt Mortgage, Inc. 6%
GM Group, Inc. 6%
Popular Finance, Inc. 5%
Popular Auto, Inc. 8%
Popular Securities, Inc. 10%
In addition, each Company may make other discretionary contributions to
its own employees out of its net profits in such amounts as each
Company may determine.
Participant Accounts
Each participant account is credited with its contribution and
allocation of (a) its own Company matching and profit sharing
contribution, (b) plan earnings, and (c) forfeitures of terminated
participants' nonvested accounts with at least five periods of
consecutive break in service. For purposes of the above, a break in
service with respect to an employee, means an eligibility computation
period (one year) during which such employee does not complete more
than 183 days of service. During the break in service, if the
terminated participant is reemployed by one of the companies, the
current dollar value of such forfeited amount should be restored to the
participant's
4
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
account. If the participant reemployed has received a distribution,
such restoration will be subject to the repayment to the Plan of an
amount equal to the dollar value of the distribution by the
participant. 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 vested account.
Vesting
Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Vesting in the Companies matching and
discretionary contributions plus actual earnings thereon is based on
years of service. The Companies contributions 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
At least 5 100
Payment of Benefits
Plan participants are permitted to make withdrawals from the Plan,
subject to provisions in the Plan agreement and only from after-tax
contributions. If a participant suffers financial hardship, as defined
in the Plan agreement, the participant may request a withdrawal from
his or her contributions. On termination of service due to disability,
retirement or other reasons, a participant may elect to receive either
a lump sum amount equal to the value of the vested interest in his or
her account or installment payments. 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 contributions.
Plan Expenses and Administration
The Company 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 Boards
of Directors of the Companies, which invests cash received, interest
and dividend income and makes distributions to participants. Banco
Popular de Puerto Rico is the trustee and recordkeeper of the Plan.
Banco Santander de Puerto Rico is the trustee for the investment in
Popular, Inc. common stock. All expenses of the Plan are borne by the
Companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting.
5
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
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.
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.'s common stock is valued at its quoted
market price. The plan presents in the statement of changes in 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.
Dividends and interest earned are recorded under the accrual basis and
credited to each participant's account, as defined.
Contributions
Employee and Companies matching contributions are recorded in the
period in which the Companies makes the payroll deductions from the
participants earnings.
Transfer of Assets to Other Plans
Companies employees or retirees may elect to transfer their savings to
other plans qualified by the Puerto Rico Department of the Treasury or
by the Internal Revenue Service (the "IRS").
Payment of Benefits
Benefits are recorded when paid.
6
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
3. INVESTMENTS
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 31,:
2002 2001
-------------------------------- --------------------------------
# OF SHARES VALUE # OF SHARES VALUE
----------------- ------------ ------------- -----------
Mutual Funds
Dreyfus Emerging Leaders Fund (*) (*) 50,841.541 $ 1,767,760
Vanguard 500 Index Fund (*) (*) 15,303.443 $ 1,620,482
Federated Government
Obligations Fund 9,351,493.057 $ 9,351,493 7,463,900.642 $ 7,463,901
Common stock
Popular, Inc.(**) 442,234.590 $14,947,529 404,037.402 $11,749,408
(*) Investment does not exceeds 5% or more of the Plan assets at December
31, 2002
(**) Party-in-interest
During 2002, the Plan's investments (including gains and losses on
investments bought and sold) (depreciated) appreciated in value as
follows:
Mutual funds $ (1,659,777)
Common stock 1,997,202
------------
$ 337,425
============
4. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company 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 participant in the Plan shall
be 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.
5. 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 has been
amended since receiving the determination letter. The Plan
Administrator, based on the Plan's tax counsel's advice, however,
believe that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the income tax law.
Therefore, no provision for income taxes has been included in the
Plan's financial statements.
7
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
6. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Boards of Directors of the Companies approved profit sharing
contributions amounting to $2,216,659 in the aggregate based on 2002
subsidiaries profits. The Companies used forfeited amounts totaling
$28,473 to reduce its profit sharing contributions. These forfeitures
were allocated to participants in 2003. The amount recorded as a
receivable in the accompanying financial statements was subsequently
collected in January, February and March of 2003.
8
SUPPLEMENTAL SCHEDULE
SCHEDULE I
POPULAR, INC. RETIREMENT AND SAVINGS PLAN FOR
PUERTO RICO SUBSIDIARIES
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 31, 2002
(SCHEDULE H, PART IV, LINE 4I ON FORM 5500)
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT VALUE
--------------------------------------------- ------------------------------------- -----------
Aim Basic Value Fund Mutual Fund- 38,274.843 units $ 836,688
American Century Ultra Fund Mutual Fund- 31,228.094 units 661,411
Dreyfus Emerging Leaders Fund Mutual Fund- 53,712.874 units 1,491,069
Federated Equity Income Fund Mutual Funds- .020 units 0.26
Fidelity Advisor Mid Cap Fund Mutual Fund- 37,160.865 units 579,338
Fidelity Advisor Equity Growth Fund Mutual Fund- 273.292 units 9,590
MFS Capital Opportunities Fund Mutual Fund- 8,038.764 units 75,082
MFS Massachusetts Investors Growth Stock Mutual Fund- 24,171.677 units 223,105
MFS Research International A Equity Fund Mutual Fund- 3,827.641 units 39,731
Oppenheimer Global Fund Mutual Fund- 3,218.172 units 116,627
Pimco Total Return Mutual Fund- 9,316 units 171,527
Scudder International Equity Mutual Fund- 16,075.653 units 146
State Street Research Aurora Fund Mutual Fund- 34,158.822 units 881,298
Vanguard Long Term Treasury Fund Mutual Fund- 74,345.240 units 874,300
Vanguard 500 Index Fund Mutual Fund- 19,396.443 units 1,574,021
Vanguard Windsor II Mutual Funds- .003 units 0.06
Van Kampen Common Stock Fund Mutual Fund- 65,143.040 units 803,865
Federated Government Obligations Fund Mutual Fund - 9,351,493.057 units 9,351,493
Popular, Inc.(*) Common Stock- 442,234.590 shares 14,947,529
-----------
$32,636,820
===========
(*) Party in-interest
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.
Popular, Inc. Retirement
Savings Plan For
Puerto Rico Subsidiaries
By: /s/ Vilma De la Torriente
-----------------------------
Vilma De la Torriente
Authorized Representative
Dated: June 30, 2003
Exhibit Index
Exhibit
Exhibit 23 Consent of Independent Auditors
Exhibit 99 Section 906 Certification
EXHIBIT INDEX
Exhibit
Exhibit 23 Consent of Independent Auditors
Exhibit 99 Section 906 Certification