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 30, 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
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
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 30, 2002 AND 2001
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 30, 2002 AND 2001
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PAGE
Financial Statements:
Report of Independent Auditors ..................................................................... 1
Statements of Net Assets Available for
Benefits as of December 30, 2002 and 2001 ......................................................... 2
Statement of Changes in Net Assets
Available for Benefits for the fiscal year ended December 30, 2002................................. 3
Notes to Financial Statements....................................................................... 4-8
Supplemental Schedule:*
Schedule I - Schedule of Assets (Held at End of Year) at December 30, 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
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 (the "Plan"), at
December 30, 2002 and 2001, and the changes in net assets available for benefits
for the fiscal year ended December 30, 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. The
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
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 30, 2002 AND 2001
--------------------------------------------------------------------------------
2002 2001
ASSETS
Investments at fair value $ 59,032,266 $ 46,598,316
Contribution receivable -- 161,270
Profit sharing contribution receivable 2,379,168 1,245,662
Dividends receivable and other 345,807 319,456
-------------- --------------
61,757,241 48,324,704
Cash and cash equivalents 165,566 2,976
-------------- --------------
Total assets $ 61,922,807 $ 48,327,680
============== ==============
LIABILITIES
Accounts payable $ 24,409 $ 20,935
-------------- --------------
Total liabilities 24,409 20,935
-------------- --------------
Net assets available for benefits $ 61,898,398 $ 48,306,745
============== ==============
The accompanying notes are an integral part of these financial statements.
2
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2002
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Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of investments $ 7,486,287
Investment income 1,374,292
--------------
Total investment income 8,860,579
--------------
Contributions:
Employer 3,572,475
Participants 4,153,601
Rollovers from other qualified plans 102,744
--------------
Total contributions 7,828,820
--------------
Total additions 16,689,399
--------------
Deductions from net assets attributed to:
Benefits paid to participants and withdrawals 3,097,746
--------------
Net increase 13,591,653
Net assets available for benefits:
Beginning of year 48,306,745
--------------
End of year $ 61,898,398
==============
The accompanying notes are an integral part of these financial statements.
3
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS DECEMBER 30, 2002 AND 2001
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 Income 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.
Participant Contributions
Plan participants may authorize the Bank to make pre-tax and after-tax
payroll deductions 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, participant 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 Contributions
The Bank makes two types of contributions: a) a discretionary
contribution based on the Bank's profitability and b) a matching
contribution on the basic compensation for those who elect to
contribute and invest in 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
participant pretax contributions 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 that time, a
participant has full discretionary investment powers over his/her
account, including future plan sponsor contributions.
Participant 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
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
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2002 AND 2001
--------------------------------------------------------------------------------
Vesting
Participants are vested immediately 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 participant's
account. Minimum withdrawal 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.
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 Bank's 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.
No forfeitures were used to reduce the 2002 Profit Sharing contribution.
5
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2002 AND 2001
--------------------------------------------------------------------------------
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. 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.
6
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2002 AND 2001
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3. INVESTMENTS
The following table presents the Plan's investments that represent
five percent or more of the Plan's assets at December 30:
2002 2001
# OF # OF
SHARES VALUE SHARES VALUE
Common stock
Popular, Inc.* 1,718,145 $ 57,712,506 1,599,326 $ 46,364,489
* includes non-participant directed portion
During 2002, the Plan's investments (including gains and losses on
investments bought and sold) appreciated (depreciated) in value as
follows:
Mutual funds $ (143,900)
Common stock - Popular, Inc. 7,630,187
------------
$ 7,486,287
============
4. NON-PARTICIPANT DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in assets relating to non-participant directed investments as
of December 30, is as follows:
2002 2001
Net asset
Popular, Inc. Common Stock $ 40,377,107 $ 33,756,986
------------- ------------
YEAR ENDED
DECEMBER 31,
2002
Changes in net assets:
Contributions $ 3,115,137
Dividends and interest 913,639
Net appreciation 5,002,859
Benefits paid to participants (1,432,085)
Transfers to participant directed investments
and other Plans under ERISA requirements (979,429)
------------
$ 6,620,121
============
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 a participant
attains 50 years of age and 10 years of service. At that time, the
participants will be allowed to direct their investment balances to
other investment options.
7
BANCO POPULAR DE PUERTO RICO SAVINGS AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2002 AND 2001
--------------------------------------------------------------------------------
5. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Board of Directors of the Bank approved profit sharing
contributions of $2,127,434 and $1,592,864 based on 2002 and 2001 Bank
earnings, respectively. No forfeitures were used to reduce the 2002
profit sharing contribution. 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. Amounts
receivable were subsequently collected in February 2003 and January
2002, 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, 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. 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
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 30, 2002
(SCHEDULE H, PART IV, LINE 4I ON FORM 5500)
--------------------------------------------------------------------------------
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT SHARES COST VALUE
Dreyfus Emerging Leaders
Fund Mutual Fund 3,145.051 *** 87,024
Federated Government
Obligation Fund Mutual Fund 795,906.880 *** 795,907
Fidelity Advisor Equity
Fund Mutual Fund 3,552.564 *** 124,304
Fidelity Advisor Mid Cap Mutual Fund 483.909 *** 7,501
Federated Equity Income
Fund Mutual Fund 5,550.512 *** 72,934
MFS Research International
A Equity Fund Mutual Fund 739.453 *** 7,631
PIMCO Total Return Mutual Fund 4,008.931 *** 42,775
Scudder International
Equity - IV Mutual Fund 1,767 *** 27,394
Van Kampen Comstock
Fund - A Mutual Fund 803 *** 9,876
Vanguard 500 Index Fund Mutual Fund 1,414 *** 114,686
Vanguard Mutual Total
Bond Market Index Fund Mutual Fund 2,861.199 *** 29,728
Popular, Inc.* Common stock** 1,718,145.454 35,200,008 57,712,506
----------- ------------
$35,200,008 $ 59,032,266
=========== ============
* 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
(Name of Plan)
By: S/ Jorge A. Junquera
-------------------------------
Jorge A. Junquera
Authorized Representative
Dated: June 30, 2003
EXHIBIT INDEX
Exhibit
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Exhibit 23 Consent of Independent Auditors
Exhibit 99 Section 906 Certification