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, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 000-13818
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, 2003 AND 2002
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
INDEX
PAGE(S)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.................................................. 1
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits as of
December 31, 2003 and 2002............................................................................... 2
Statement of Changes in Net Assets Available for Benefits for the
Year ended December 31, 2003............................................................................. 3
Notes to Financial Statements............................................................................ 4-8
SUPPLEMENTAL SCHEDULE*
Schedule I - Schedule of Assets (Held at End of Year)
at December 31, 2003..................................................................................... 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 REGISTERED PUBLIC ACCOUNTING FIRM
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, 2003 and 2002, and the changes in net assets available
for benefits for the year ended December 31, 2003, 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 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, 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
San Juan, Puerto Rico
June 18, 2004
1
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2003 AND 2002
2003 2002
ASSETS
Investments, at fair value $46,768,704 $32,636,820
Receivables
Contribution receivable 154,223 -
Profit sharing contribution receivable 2,861,942 2,188,186
Dividend and interest receivable 129,221 125,636
----------- -----------
49,914,090 34,950,642
Cash and cash equivalents 55,275 131,441
----------- -----------
Net assets available for benefits $49,969,365 $35,082,083
=========== ===========
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, 2003
Additions to net assets
Investment income
Net appreciation in fair value of investments $ 8,114,368
Interest and dividends 699,971
-------------
Total investment income 8,814,339
-------------
Contributions
Employer 4,826,583
Participants 3,296,856
Rollovers from other qualified plans 222,284
-------------
Total contributions 8,345,723
-------------
Total additions 17,160,062
Deductions from net assets
Benefits and withdrawals paid to participants 2,272,780
-------------
Net increase 14,887,282
Net assets available for benefits
Beginning of year 35,082,083
-------------
End of year $ 49,969,365
=============
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, 2003 AND 2002
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 covering substantially all
employees of the Puerto Rico subsidiaries of Popular Inc., except Banco
Popular de Puerto Rico (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 Corporation 6%
EVERTEC, INC. (formerly 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's
Board of Directors may determine.
PARTICIPANT ACCOUNTS
Each participant account is credited with its contribution and allocation
of (a) its own Company matching and profit sharing contribution, and (b)
plan earnings.
4
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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. Upon termination of service due to disability, retirement
or other reasons, a participant may elect to receive either 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 Companies are 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.
5
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
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.
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 employer 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
Terminated employees or retirees may elect to transfer their savings to
other plans qualified by the Puerto Rico Department of the Treasury.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
6
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR PUERTO RICO SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
3. INVESTMENTS
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 31:
2003 2002
# OF SHARES VALUE # OF SHARES VALUE
Mutual Funds
Vanguard 500 Index Fund $ 24,861.229 $ 2,552,502 * *
Federated Government
Obligations Fund 12,242,373.058 $ 12,242,373 9,351,493.057 $ 9,351,493
Common stock
Popular, Inc. ** 479,777.816 $ 21,518,035 442,234.590 $ 14,947,529
* Investment does not exceed 5% or more of the Plan assets at December 31, 2002
** Party-in-interest
During 2003, the Plan's investments (including gains and losses on
investments bought and sold) appreciated in value as follows:
Mutual funds $ 2,982,162
Common stock 5,132,206
-----------------
$ 8,114,368
=================
4. PLAN TERMINATION
Although they have not expressed any intent to do so, the Companies have
the right under the Plan to discontinue their 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 dated January 29,
2002 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, 2003 AND 2002
6. PROFIT SHARING CONTRIBUTION RECEIVABLE
The Boards of Directors of the Companies approved profit sharing
contributions amounting to $2,906,672 in the aggregate based on their 2003
subsidiaries profits. The Companies used forfeitures amounting to $44,730
to reduce its profit sharing contributions. These forfeitures were
allocated to participants in 2004. The amount recorded as a receivable in
the accompanying financial statements was subsequently collected in 2004.
7. RISKS AND UNCERTAINTIES
The Plan's investments are exposed to various risks, such as interest
rate, market and credit risks. Due to the level of risk associated with
certain investments and the level of uncertainty related to changes in the
values of investments, it is at least reasonably possible that changes
these factors in the near term would materially affect the amounts
reported in the statement of assets available for benefits and the
statement of changes in assets available for benefits.
8
SUPPLEMENTAL SCHEDULE
SCHEDULE I
POPULAR, INC. RETIREMENT SAVINGS PLAN FOR
PUERTO RICO SUBSIDIARIES
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AT DECEMBER 31, 2003
(SCHEDULE H, PART IV, LINE 4i ON FORM 5500)
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT VALUE
Aim Basic Value Fund Mutual Fund - 37,732.883 Units $ 1,103,309
American Century Ultra Fund Mutual Fund - 30,144.675 Units 803,356
Dreyfus Emerging Leaders Fund Mutual Fund - 61,813.150 Units 2,393,405
Federated Government Obligations Fund Mutual Fund - 12,242,373.058 Units 12,242,373
Fidelity Advisor Mid Cap Fund Mutual Fund - 58,924.623 Units 1,320,501
Fidelity Advisor Equity Growth Fund Mutual Fund - 311.992 Units 14,517
MFS Capital Opportunities Fund Mutual Fund - 7,644.546 Units 90,970
MFS Massachusetts Investors Growth Stock Mutual Fund - 18,739.052 Units 212,126
MFS Research International A Equity Fund Mutual Fund - 13,955.861 Units 192,033
Oppenheimer Global Fund Mutual Fund - 4,778.831 Units 246,110
Pimco Total Return Mutual Fund - 59,175.322 Units 633,768
Scudder International Equity Mutual Fund - 9.472 Units 189
State Street Research Aurora Fund Mutual Fund - 31,005.848 Units 1,197,136
Vanguard Long Term Treasury Fund Mutual Fund - 63,200.616 Units 718,591
Vanguard 500 Index Fund Mutual Fund - 24,861.229 Units 2,552,502
Van Kampen Common Stock Fund Mutual Fund - 95,911.170 Units 1,529,783
Popular, Inc. * Common Stock - 479,777.816 Shares 21,518,035
---------------
$ 46,768,704
===============
* 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
-------------------------------------
(Name of Plan)
By: /s/ Vilma De La Torriente
----------------------------------
Vilma De La Torriente
Authorized Representative
Dated: June 28, 2004