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 ______
Commission file number 0-13818
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165(e) PLAN")
(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
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (E) PLAN")
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
AT DECEMBER 31, 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 31, 2001 and 2000...................................................... 2
Statement of Changes in Net Assets Available
for Benefits for the year ended December 31, 2001.............................................. 3
Notes to Financial Statements................................................................... 4-10
Supplemental Schedule:*
Schedule I - Schedule of Assets (Held at End of Year)
at December 31, 2001........................................................................... 11
* 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
Popular, Inc. Retirement Savings Plan for Puerto Rico Subsidiaries
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 Popular, Inc. Retirement Savings Plan for Puerto Rico Subsidiaries
(formerly "Popular Securities, Inc. Institutional - 1165 (e) Plan") (the
"Plan"), at December 31, 2001 and 2000, and the changes in net assets available
for benefits for the year ended December 31, 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. 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.
June 21, 2002
1
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
2001 2000
ASSETS
Investments, at fair value $27,076,112 $ 3,444,789
Receivables:
Contribution receivable 46,204 7,282
Profit sharing contribution
receivable 2,412,512 --
Dividend and interest receivable 89,403 --
----------- -----------
29,624,231 3,452,071
Cash and cash equivalents 160,541 4,681
----------- -----------
Net assets available for benefits $29,784,772 $ 3,456,752
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2001
--------------------------------------------------------------------------------
Additions (deductions) to net assets:
Investment income
Net depreciation in fair value of
investments $(1,138,122)
Interest and dividends 480,164
-----------
Total investment loss (657,958)
-----------
Contributions:
Employer 4,269,049
Participants 2,614,567
Rollovers from other qualified
plans 22,268,226
-----------
Total contributions 29,151,842
-----------
Total additions 28,493,884
Deductions from net assets -
Benefits and withdrawals paid
to participants 2,165,864
-----------
Net increase 26,328,020
Net assets available for benefits:
Beginning of year 3,456,752
-----------
End of year $29,784,772
===========
The accompanying notes are an integral part of these financial statements.
3
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following description of the Popular, Inc. Retirement Savings Plan
for Puerto Rico Subsidiaries (formerly "Popular Securities, Inc.
Institutional - 1165 (e) Plan") (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 the renamed, amended, and restated Popular Securities,
Inc.-Institutional 1165(e) Plan into which the Popular Finance, Inc.
Retirement & Savings Plan, the Popular Mortgage, Inc. 1165(e) Plan, the
Popular Leasing & Rental, Inc.-Retirement & Savings Plan, the GMG
Retirement & Savings Plan, the Popular Securities Retail 1165(e) Plan
and the Popular Insurance Retirement and Savings Plan were merged.
The effective date of the amended, renamed and restated defined
contribution plan is January 1, 2001. The Plan covers substantially all
employees of the Puerto Rico subsidiaries of Popular Inc. (the
"Company") who have three months of service (the Plan was once again
amended and restated effectively July 1, 2001 to reduce the eligibility
period of one year of service to 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
Employees Retirement 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%
GM Group, Inc. 6%
Popular Finance, Inc. 5%
Popular Auto, Inc. 8%
Popular Securities, Inc. 10%
In addition, each Company may make other contributions to its own
employees out of its net profits in such amounts as each Company may
determine.
4
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
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 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 account. The
net change in the value of the Plan is posted to the participants
accounts on a monthly basis.
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
Investment Options
Upon enrollment in the Plan, a participant may elect to have its
contributions invested in one or more of the following funds:
Aim Basic Value Fund An open-end fund whose investment objective seeks long-term capital growth.
The fund seeks to achieve its objective by investing at least 65% of its
assets in equity securities of U.S. issuers that have market capitalizations
of greater than $500 million and that are believed to be undervalued in
relation to long-term earning power or other factors.
American Century Ultra Fund An open-end fund whose investment objective is long-term capital growth. The
fund pursues its objective by investing in large US and foreign companies with
earnings and revenues that are growing at an accelerated pace. Most of the
assets of the Fund are invested in US companies.
5
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
Deutsche International Equity Fund An open-end fund whose investment objective seeks long-term capital
appreciation. The fund pursues its objective by investing primarily in
stocks and other securities in developed countries outside the United
States of America.
Dreyfus Emerging Leaders Fund An open-end fund which pursues its 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.
Federated Equity Income Fund An open-end fund that seeks above average income and capital appreciation.
The fund invests primarily in income-producing equity securities
including securities that are convertible into common stock.
Fidelity Advisor Mid Cap Fund An open-end fund whose investment objective is long term capital
growth. The fund normally invests at least 80% of assets in securities
of domestic and foreign companies with medium market capitalization. It
invests in either growth or value stocks or both.
Fidelity Growth and Income Portfolio Fund An open-end fund which seeks high total return through a combination of
current income and capital appreciation by investing the majority of
its assets in common equities with a focus on those that pay current
dividends and show potential for capital appreciation.
Fidelity Advisor Equity Growth Fund An open-end fund that seeks capital 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.
MFS Capital Opportunities Fund An open-end fund that seeks capital appreciation by investing at least
65% of its net assets in common stock and related securities, such as
preferred, convertible securities, and depositary receipts.
MFS Massachusetts Investors Growth Stock An open-end fund whose investment objective is long-term capital growth
and future income rather than current income. The fund seeks to achieve
its objective by investing in common equities and securities
convertible into the common stock of companies which are believed to
offer better than average prospects for long term growth.
Oppenheimer Global Fund The fund invests in common stock of companies in the U.S. and foreign
countries, including countries with developed or emerging markets,
without limit to
6
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
companies in a particular capitalization range, but currently focuses
its investments in mid and large-cap companies.
State Street Research Aurora Fund An open-end fund whose investment objective is capital appreciation.
The Fund invests at least 65% of its total assets in small-cap value
stocks.
Vanguard Total Bond Market Index Fund An open-end fund whose investment objective 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.
Vanguard 500 Index Fund The fund objective is to match the performance of the Standard and
Poor's 500 Index, which is dominated by the stocks of large U.S.
companies. The Fund invests substantially all of its assets in the
stocks that make up the Index.
Vanguard Long-Term Treasury Fund An open-end fund whose investment objective is to provide a high level
of current income and preserve investors principal. The Fund invests at
least 85% of its assets in long-term bonds whose interest and principal
payments are backed by the full faith and credit of the U.S.
Government.
Vanguard Windsor II An open-end growth and income fund. The investment objective of the
Fund is to provide a long term growth of capital and income. A
secondary objective is to provide current income. The Fund follows a
flexible investment strategy emphasizing income-producing equities
which are believed to be undervalued by the market at the time of
purchase.
Van Kampen Common Stock Fund An open-end fund which invests in common, preferred stock and
securities convertible into common stock and preferred stocks. The fund
emphasizes a value style of investing, seeking well established,
under-valued firms with potential for capital and income growth.
Federated Government Obligations Fund An open-end fund whose investment objective seeks to provide current
income consistent with the stability of principal by investing
primarily in U.S. Treasury and agency securities, including repurchase
agreements collateralized by U.S. Treasury and agency securities.
Trust for U.S. Treasury Obligations fund An open-end money market mutual fund whose investment objective seeks
to provide shareholders with current income as is consistent with
stability of principal and maintenance of liquidity. The fund pursues
its objective by investing in short-term United States treasury
securities.
Popular Inc. Common Stock Investment in Popular, Inc.'s common stock. Popular, Inc. is the
Companies ultimate parent.
7
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
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 Board
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.
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.
8
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
Purchases and sales of securities are recorded on the trade date basis.
Dividends and interest earned are recorded on 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.
3. INVESTMENTS
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 31,:
2001 2000
# 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 8,136 991,417
Federated Government
Obligations Fund 7,463,900.642 $ 7,463,901 -- --
Fidelity Income & Growth Fund -- -- 14,559 612,927
American 20th Century Fund -- -- 42,187 1,365,596
Common stock
Popular, Inc. 404,037.402 $ 11,749,408 15,179 399,399
During 2001, the Plan's investments (including gains and losses on
investments bought and sold) appreciated (depreciated) in value as
follows:
Mutual funds $ (2,061,046)
Common stock 922,924
------------
$ (1,138,122)
============
9
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (e) PLAN")
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
--------------------------------------------------------------------------------
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 Puerto Rico Department of Treasury has not responded to the
Company's formal request for a determination as to whether the Master
Plan and related trust Company with applicable Puerto Rico income tax
law. 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.
6. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Board of Directors of the Companies approved profit sharing
contributions amounting to $2,520,511 in the aggregate based on 2001
subsidiaries profits. The Companies used forfeited amounts totaling
$107,998 to reduce its profit sharing contributions. These forfeitures
were allocated to participant's in 2002. The amount recorded as a
receivable in the accompanying financial statements was subsequently
collected in January, February and March of 2002.
10
SUPPLEMENTAL SCHEDULE
SCHEDULE I
POPULAR, INC. RETIREMENT AND SAVINGS PLAN FOR
PUERTO RICO SUBSIDIARIES
(FORMERLY "POPULAR SECURITIES, INC. INSTITUTIONAL - 1165 (E) PLAN")
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 31, 2001
(SCHEDULE H, PART IV, LINE 4I ON FORM 5500)
--------------------------------------------------------------------------------
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT VALUE
Aim Basic Value Fund Mutual Fund - 29,083.215 units $ 827,127
American Century Ultra Fund Mutual Fund - 35,095.061 units 970,027
Deutsche International Equity Fund Mutual Fund - 30.259 units 571
Dreyfus Emerging Leaders Fund Mutual Fund - 50,841.541 units 1,767,760
Federated Equity Income Fund Mutual Funds - 1990.127 units 32,976
Fidelity Advisor Mid Cap Fund Mutual Fund - 21,181.175 units 406,255
Fidelity Growth and Income Portfolio Fund Mutual Fund - 2,516.093 units 94,052
Fidelity Advisor Equity Growth Fund Mutual Fund - 385.780 units 19,393
MFS Capital Opportunities Fund Mutual Fund - 5,389.482 units 72,381
MFS Massachusetts Investors Growth Stock Mutual Fund - 16,477.436 units 212,394
Oppenheimer Global Fund Mutual Fund - 1,442.819 units 67,423
State Street Research Aurora Fund Mutual Fund - 22,790.810 units 737,283
Vanguard Total Bond Market Index Fund Mutual Fund - 4,648.410 units 47,135
Vanguard Long Term Treasury Fund Mutual Fund - 42,209.845 units 454,178
Vanguard 500 Index Fund Mutual Fund - 15,303.443 units 1,620,482
Vanguard Windsor II Mutual Funds - 272.706 units 6,979
Van Kampen Common Stock Fund Mutual Fund - 33,545.810 units 525,998
Federated Government Obligations Fund Mutual Fund - 7,463,900.642 units 7,463,901
Trust for U.S. Treasury obligations fund Mutual Fund - 388.802 units 389
Popular, Inc.* Common Stock - 404,037.402 shares 11,749,408
-----------
$27,076,112
===========
*Party in-interest
11
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
(FORMERLY "POPULAR SECURITIES, INC.
INSTITUTIONAL - 1165(e) 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
12