UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

 

Filed by the Registrant    þ
Filed by a Party other than the Registrant   o Check the appropriate box:

o   Preliminary Proxy Statement

o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ   Definitive Proxy Statement

o   Definitive Additional Materials
o   Soliciting Material Pursuant to §240.14a-12

Popular, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

POPULAR, INC.
P.O. Box 362708
San Juan, Puerto Rico 00936-2708

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, May 1, 2007

To the Stockholders of Popular, Inc.:

     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Meeting”) of Popular, Inc. ( the “Corporation”) for the year 2007 will be held at 9:00 a.m. local time on Tuesday, May 1, 2007, on the third floor of the Centro Europa Building, in San Juan, Puerto Rico, to consider and act upon the following matters:

(1) To elect three directors assigned to “Class 2” of the Board of Directors of the Corporation for a three-year term;

(2) To ratify the selection of the Corporation’s independent registered public accounting firm for 2007; and

(3) To transact any and all other business as may be properly brought before the Meeting or any adjournments thereof. At present, management knows of no other business to be brought before the Meeting.

     Stockholders of record at the close of business on March 12, 2007 are entitled to notice of and to vote at the Meeting.

     You are cordially invited to attend the Meeting, but even if you don’t attend the Meeting, it is important that your shares be represented and voted. Whether you plan to attend or not, please sign and return the enclosed proxy card so that the Corporation may be assured of the presence of a quorum at the Meeting. A postage-paid envelope is enclosed for your convenience. Remember that you may also vote by telephone or over the Internet. For further details, please refer to the enclosed proxy card.

     San Juan, Puerto Rico, March 19, 2007.

		By Order of the Board of Directors,
		SAMUEL T. CÉSPEDES
		Secretary

CONTENTS
About the Meeting			3
Principal Stockholders			4
Shares Beneficially Owned by Directors and Executive Officers of the Corporation			5
Section 16(a) Beneficial Ownership Reporting Compliance			7
Board of Directors and Committees			7
Proposal 1: Election of Directors for a three-year term			7
Nominees for Election as Class 2 Directors			8
Class 3 Directors			9
Class 1 Directors			10
Board of Directors Independence			12
Stockholders Communication with the Board of Directors			12
Standing Committees			12
Compensation Committee			12
Corporate Governance and Nominating Committee and other Corporate Governance Matters			13
Audit Committee Report			14
Audit Committee Financial Experts			15
Compensation of Directors			15
Named Executive Officers			16
Family Relationships			19
Other Relationships, Transactions and Events			19
Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm			20
Disclosure of Auditor’s Fees			21
Executive Compensation Program
Report of the Compensation Committee			21
Compensation Discussion and Analysis			21
Executive Compensation			27
Summary Compensation Table			27
Grants of Plan-Based Awards			29
Outstanding Equity Awards at Fiscal Year End			30
Options Exercised and Stock Vested Table			31
Elements of Post Termination Compensation			31
Pension Benefits			32
Non-Qualified Deferred Compensation			32
Retirement, Death, Disability or Change in Control			35
Resignation or Termination Without Cause			36
Termination With Cause			37
Compensation Committee Interlocks and Insider Participation			37
Proposals of Stockholders to be Presented at the 2008 Annual Meeting of Stockholders			38

ABOUT THE MEETING

What should I receive?

This Proxy Statement, the Corporation’s Annual Report, the Notice of Annual Meeting of Stockholders and the proxy card were sent to stockholders on or about March 19, 2007. The Corporation’s Annual Report includes the audited financial statements for the year ended December 31, 2006, duly certified by PricewaterhouseCoopers LLP, as independent registered public accountants.

Who is soliciting my vote?

The Board of Directors of the Corporation (the “Board”) is soliciting your vote at the Meeting.

What will I be voting on?

The Corporation’s stockholders will be voting on:

     •   Election of directors (see page 7)

     •   Ratification of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for 2007 (see page 20).

How many votes do I have?

You will have one vote for every share of the Corporation’s shares of common stock, par value $6 per share (“Common Stock”) you owned as of the close of business on March 12, 2007, the record date for the Meeting (the “Record Date”).

How many votes can all stockholders cast?

One vote for each of the Corporation’s 279,087,586 shares of Common Stock that were outstanding on the Record Date. The shares covered by any proxy that is properly executed and received before 9:00 a.m. local time on the day of the Meeting will be voted.

How many votes must be present to hold the Meeting?

A majority of the votes that can be cast. Votes cast by proxy or in person at the Meeting will be counted by ADP Financial Information Services, Inc., an independent third party. We urge you to vote by proxy even if you plan to attend the Meeting, so that we will know as soon as possible that enough votes will be present for us to hold the Meeting.

How do I vote?

You can vote either in person at the Meeting or by proxy without attending the Meeting.

To vote by proxy, you must either

	•		Fill out the enclosed proxy card, date and sign it, and return it in the enclosed postage–paid envelope,
	•		Vote by telephone (instructions are on the Proxy Card, as authorized by the General Corporation Law of Puerto Rico and the Bylaws of the Corporation),
			or
	•		Vote over the Internet (instructions are on the proxy card, as authorized by the General Corporation Law of Puerto Rico and the Bylaws of the Corporation).

If you want to vote in person at the Meeting, and you hold your Common Stock through a securities broker or nominee (that is, in street name), you must obtain a proxy from your broker or nominee and bring that proxy to the Meeting.

In addition to solicitation by mail, management may participate in the solicitation of proxies by telephone, personal contacts or otherwise. The Board has engaged the firm of Georgeson & Company, Inc. to aid in the solicitation of proxies. The cost of solicitation will be borne by the Corporation and is estimated at $7,000.

To avoid delays in ballot taking and counting, and in order to ensure that your proxy is voted in accordance with your wishes, compliance with the following instructions is respectfully requested: when signing a proxy as attorney, executor, administrator, trustee, guardian, authorized officer of a corporation, or on behalf of a minor, please give full title. If shares are in the name of more than one record holder, all record holders should sign.

Can I change my vote?

Yes. Just send in a new proxy card with a later date, or cast a new vote by telephone or over the Internet, or send a written notice of revocation to the President or Secretary of Popular, Inc., P.O. Box 362708, San Juan, Puerto Rico 00936-2708, delivered before the proxy is exercised. If you attend the Meeting and want to vote in person, you may request that your previously submitted proxy not be used.

What vote is required and how are abstentions and broker non-votes treated?

For purposes of determining quorum, abstentions and broker non-votes will be counted as shares that are present and entitled to vote. A broker non-vote results when a broker or nominee has expressly indicated in the proxy card that it does not have discretionary authority to vote on a particular

matter and has not received voting instructions from the beneficial owner. As to the election of directors, the proxy card being provided by the Board enables stockholders to vote for the election of the nominees proposed by the Board, or to withhold authority to vote for one or more of the nominees being proposed. The election of directors and the ratification of the independent registered public accounting firm will be acted upon a majority of the votes cast. Therefore, abstentions and broker non-votes will not have an effect on the election of directors of the Corporation, or the ratification of independent registered public accounting firm.

Could other matters be decided at the Meeting?

The Board does not intend to present any business at the Meeting other than that described in the notice of meeting. The Board at this time knows of no other matters which may come before the Meeting. However, if any new matter requiring the vote of the stockholders is properly presented before the Meeting, proxies may be voted with respect thereto in accordance with the best judgment of proxy holders, under the discretionary power granted by stockholders to their proxies in connection with general matters.

What happens if the Meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned Meeting. You will still be able to change or revoke your proxy until it is voted.

PRINCIPAL STOCKHOLDERS

     Following is the information with respect to any person (including any “group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) who is known to the Corporation to beneficially own more than five percent (5%) of the Common Stock outstanding.

		Amount and Nature		Percent
		of Beneficial		of
Name and Address of Beneficial Owner		Ownership(1)		Class (2)
State Farm Mutual Automobile Insurance Company — One State Farm Plaza, Bloomington,
IL 61710		18,265,553(3)		6.5447

SHARES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION

     Effective January 1, 2005, the Corporation adopted an Executive Stock Ownership Requirements Policy, which provides that by December 31, 2007, the Named Executive Officers (“NEOs”), defined as the Chief Executive Officer (“CEO”) and Chairman of the Board and the members of the Corporate Leadership Circle ( “CLC”), are required to own Common Stock. For additional information regarding this Policy, refer to the “Compensation Discussion and Analysis - Stock Ownership /Retention Requirements” on page 26.

     Effective June 9, 2004 each director not employed by the Corporation must own Common Stock equal to five times his or her annual retainer. Such ownership level must be achieved by June 9, 2007 for directors serving on June 9, 2004 and within three years of being named or elected as director for directors named or elected subsequently.

     The following table sets forth the beneficial ownership of the Corporation’s Common Stock and Preferred Stock as of February 28, 2007, for each director and nominee for director and each NEO and by all directors (including nominees), NEOs, the Corporation’s Secretary and the Principal Accounting Officer as a group.

COMMON STOCK

		Amount and Nature				Percent of
Name		of Beneficial Ownership(1)				Class
Juan J. Bermúdez			1,385,780	(2)			.4965
José B. Carrión Jr.			2,099,740	(3)			.7524
Richard L. Carrión			3,212,702	(4)			1.1511
María Luisa Ferré			6,509,429	(5)			2.3324
Michael Masin			1,023				.0004
Manuel Morales Jr.			1,036,696	(6)			.3715
Francisco M. Rexach Jr.			368,317	(7)			.1320
Frederic V. Salerno			22,487				.0081
William J. Teuber Jr.			11,159				.0040
José R. Vizcarrondo			374,910	(8)			.1343
David H. Chafey Jr.			512,835				.1838
Jorge A. Junquera			575,572	(9)			.2062
Roberto R. Herencia			234,658	(10)			.0841
Amílcar L. Jordán			99,834				.0358
Tere Loubriel			191,097	(11)			.0685
Brunilda Santos de Álvarez			125,388				.0449
Félix M. Villamil			111,918				.0401
All directors, NEOs, Corporation’s Secretary and the Principal Accounting Officer as a group (19 persons as a group)			16,923,148				6.0637

PREFERRED STOCK

		Amount and Nature				Percent of
Name		of Beneficial Ownership(1)				Class
Richard L. Carrión			7,156	(12)			.0957
All directors, NEOs, Corporation’s Secretary and the Principal Accounting Officer as a group (19 persons as a group)			7,156				.0957

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Act of 1934, requires the Corporation’s directors and executive officers to file with the SEC reports of ownership and changes in ownership of Common Stock of the Corporation. Officers and directors are required by SEC regulations to furnish the Corporation with copies of all Section 16(a) forms they file.

     Based solely on a review of the copies of such reports furnished to the Corporation or written representations that no other reports were required, the Corporation believes that, with respect to 2006, all filing requirements applicable to its officers and directors were satisfied.

BOARD OF DIRECTORS AND COMMITTEES

PROPOSAL 1: ELECTION OF DIRECTORS FOR A THREE-YEAR TERM

     The Certificate of Incorporation and the Bylaws of the Corporation establish a classified Board pursuant to which the Board is divided into three classes as nearly equal in number as possible, with each class having at least three members and with the term of office of one class expiring each year. Each director serves for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which such director was elected or until his or her successor has been elected and qualified.

     At the Meeting, three directors assigned to “Class 2” are to be elected to serve until the 2010 annual meeting of stockholders or until their respective successors shall have been elected and qualified. The remaining six directors of the Corporation will continue to serve as directors, as follows: until the 2008 Annual Meeting of Stockholders of the Corporation, in the case of those three directors assigned to “Class 3”, and until the 2009 Annual Meeting of Stockholders, in the case of those three directors assigned to “Class 1”, or in each case until their successors are elected and qualified.

     The policy of the Board, as set forth in a resolution adopted on January 8, 1991, provides that no person shall be nominated for election or reelection as a director of the Board if at the date of the annual meeting or during the term to be served such person attains 72 years of age. Mr. José B. Carrión Jr. would attain 72 years of age during the term to be served. In accordance with Board policy, Mr. Carrión Jr. is not being nominated for reelection as director.

     The persons named as proxies in the accompanying proxy card have advised the Corporation that, unless otherwise instructed, they intend to vote at the Meeting the shares covered by the proxies FOR the election of the three nominees named below, and that if any one or more of such nominees should become unavailable for election they intend to vote such shares FOR the election of such substitute nominees as the Board may propose. The Corporation has no knowledge that any nominee will become unavailable for election.

     The Board met 11 times during 2006. All directors attended 75% or more meetings of the Board and the committees of the Board on which such directors served.

     While the Corporation has not adopted a formal policy with respect to directors’ attendance at the Meeting, the Corporation encourages directors to attend the Meeting. All of the Corporation’s directors attended the last Meeting.

     Information relating to principal occupation, business experience and directorship during the past five years (including positions held with the Corporation or Banco Popular de Puerto Rico (the “Bank”)), age and the period during which each director has served in such capacity is set forth below.

		Principal Occupation, Business Experience
Name and Age		and Directorships

NOMINEES FOR ELECTION AS
CLASS 2 DIRECTORS
(TERMS EXPIRING IN 2010)

MICHAEL MASIN: (62 years)
		•		Senior Partner of the law firm O’ Melveny & Myers.
		•		Vice Chairman and Chief Operating Officer of Citigroup (a registered public company) until January 2004.
		•		Vice Chairman and President of Verizon Communications, Inc., (a registered public company) until November 2002, when he retired.
		•		Member of the Board of Trustees and Executive Committee of Carnegie Hall.
		•		Member of the Board of Overseers and Executive Committee of Weill Cornell Medical School.
		•		Member of the Board of Trustees and Executive Committee of W. M. Keck Foundation.
		•		Director of the Corporation since January 2007.
MANUEL MORALES JR.: (61 years)
		•		President of Parkview Realty, Inc., the Atrium Office Center, Inc., HQ Business Center P.R., Inc., entities engaged in real estate leasing, and ExecuTrain of Puerto Rico.
		•		Honorary General Consul of Japan in San Juan, Puerto Rico.
		•		Member of the Board of Trustees of the Caribbean Environmental Development Institute and of Fundación Angel Ramos, Inc.
		•		Member of the Board of Directors of Consular Corps College of the USA.
		•		Member of the Board of Trustees of Fundación Banco Popular, Inc.
		•		Chairman of the Audit Committee of the Corporation until May 2003.
		•		Director of the Bank since 1978.
		•		Director of the Corporation since 1990.
JOSÉ R. VIZCARRONDO: (45 years)
		•		President, CEO and partner of Desarrollos Metropolitanos, L.L.C., VMV Enterprises Corp., Resort Builders, L.L.C., Metropolitan Builders, L.L.C., 3V, L.L.C., DDA Management, L.L.C. and Monterrey Leasing, L.L.C. All these companies are dedicated to general construction of residential, commercial, industrial and institutional projects in Puerto Rico.
		•		Member of the Board of Directors of the Puerto Rico Chapter of the Associated General Contractors of America from 1997 to 2005.
		•		President of the Puerto Rico Chapter of the Associated General Contractors of America during 2000 and 2001.
		•		Member of the Construction Industry Advisory Council to the Governor of Puerto Rico until 2002.
		•		Member of the Private Industry Advisory Council to the President of the Government Development Bank for Puerto Rico until 2001.
		•		Member of the Board of Directors of the not-for-profit organization Hogar Cuna San Cristóbal Foundation since 2002.
		•		Member of the Board of Directors of Puerto Rico Home Builders Association since 2002.
		•		Director of the Corporation and the Bank since 2004.

		Principal Occupation, Business Experience
Name and Age		and Directorships

CLASS 3 DIRECTORS
(TERMS EXPIRING IN 2008)

MARÍA LUISA FERRÉ: (43 years)
		•		President and CEO of Grupo Ferré Rangel and Ferré Investment Fund Inc., holding companies for El Nuevo Día and Primera Hora (Puerto Rico newspapers), Advanced Graphic Printing, Inc., City View Plaza, S.E., Virtual, Inc., El Día Directo, Inc. and Asset Growth Fund, Inc. (a venture capital fund).
		•		Publisher and Chairman of the Board of Directors of El Día, Inc. and Editorial Primera Hora, Inc. (Puerto Rico newspapers).
		•		Member of the Board of Directors of El Nuevo Día Orlando, Inc.
		•		President and Trustee of the Luis A. Ferré Foundation, Inc. (a not- for -profit organization).
		•		Director and Vice President of the Ferré Rangel Foundation (a philanthropic entity).
		•		Trustee of the Editorial of the University of Puerto Rico until 2005.
		•		Director of the Bank since April 2000.
		•		Director of the Corporation since April 2004.
FREDERIC V. SALERNO: (63 years)
		•		Vice Chairman and Chief Financial Officer of Verizon Communications, Inc. (a registered public company) until September 2002, when he retired.
		•		Director of Avnet, Inc., Dun & Bradstreet Corporation and Lynch Interactive Corporation (registered public companies) until February 2004.
		•		Director of Akamai Technologies, Inc., Bear Stearns & Co., Inc., Consolidated Edison, Inc. and Viacom, Inc. ( registered public companies).
		•		Director of Gabelli Asset Managment, Inc. (a registered public company) until January 2006.
		•		Director of Intercontinental Exchange, Inc. (a registered public company) since December 2005.
		•		Chairman of the Audit Committee of the Corporation since May 2003.
		•		Director of Banco Popular North America, Popular North America, Inc., Popular Financial Holdings, Inc., Popular International Bank, Inc., all either directly or indirectly wholly-owned subsidiaries of the Corporation.
		•		Director of the Bank since January 2007.
		•		Director of the Corporation since April 2003.
WILLIAM J. TEUBER JR.: (55 years)
		•		Vice Chairman of EMC Corporation (a registered public company) since May 2006.
		•		Executive Vice President of EMC Corporation (a registered public company) since 2001 and Chief Financial Officer from 1997 to August 2006.
		•		Member of the Board of Trustees of Babson College in Wellesley, MA.
		•		Director of the Bank since January 2007.
		•		Director of the Corporation since November 2004.

		Principal Occupation, Business Experience
Name and Age		and Directorships

CLASS 1 DIRECTORS
(TERMS EXPIRING IN 2009)

JUAN J. BERMÚDEZ: (69 years)
		•		Partner of Bermúdez and Longo, S.E., electromechanical contractors, until his retirement in May 2006
		•		Partner of Decemcor, S.E., Unicenter, S.E., and PCME Commercial, S.E., inactive entities formerly engaged in real estate leasing.
		•		Principal Stockholder and Director of BL Management, Corp., PCME Development Corp., G.S.P. Corp., Unimanagement Corp., LBB Properties, Inc., Homes Unlimited Corp. and PS4 Corp.
		•		Chairman of the Corporate Governance and Nominating Committee of the Corporation since 2005.
		•		Chairman of the Trust Committee of the Bank since 1996.
		•		Director of the Bank since 1985.
		•		Director of the Corporation since 1990.
RICHARD L. CARRIÓN: (54 years)
		•		Chairman, President and CEO of the Corporation.
		•		Chairman and CEO of the Bank.
		•		President of the Bank until March 2004.
		•		Chairman and CEO of Popular International Bank, Inc., Popular North America, Inc., Banco Popular North America, Popular Financial Holdings, Inc., E-LOAN, Inc., Banco Popular, National Association, Popular FS, LLC., Popular Finance, Inc., Popular Auto, Inc., Popular Mortgage, Inc., Popular Securities, Inc., Popular Insurance, Inc. and EVERTEC, Inc., all either directly or indirectly wholly-owned subsidiaries of the Corporation.
		•		Chairman of the Board of Trustees of Fundación Banco Popular, Inc.
		•		Chairman and Director of Banco Popular Foundation, Inc.
		•		Member of the International Olympic Committee since 1990. Member of the Executive Board since 2004, and Chairman of the International Olympic Committee’s Finance Commission. Also, member of the TV & Internet Rights Commission and of the Marketing Commission since January 2002.
		•		President of the Puerto Rico Olympic Trust and Member of the Puerto Rico Olympic Committee.
		•		Member of the Board of Directors, the Benefits & Human Resources Committee and the Public Policy Committee of Verizon Communications, Inc. (a registered public company).
		•		Member of the Board of Directors of Telecomunicaciones de Puerto Rico, Inc. (TELPRI).
		•		Member of the Board of Directors, the Audit Committee and of the Compensation and Benefits Committee of Wyeth (a registered public company) until April 2006.
		•		Member of the Board of Trustees of the P.R. Committee for Economic Development.
		•		Director of the Corporation since 1990.

		Principal Occupation, Business Experience
Name and Age		and Directorships

CLASS 1 DIRECTORS
(TERMS EXPIRING IN 2009)

FRANCISCO M. REXACH JR.: (69 years)
		•		President of Capital Assets, Inc. and Rexach Consulting Group, entities engaged in investment and consulting activities.
		•		Chairman of the Compensation Committee of the Corporation.
		•		Director of the Bank, Popular International Bank, Inc., Popular North America, Inc., Banco Popular North America, and Popular Financial Holdings, Inc., all either directly or indirectly wholly-owned subsidiaries of the Corporation.
		•		Director of the Corporation since 1990.

BOARD OF DIRECTORS INDEPENDENCE

     The Board has determined that Juan J. Bermúdez, María Luisa Ferré, Michael Masin, Manuel Morales Jr., Francisco M. Rexach Jr., Frederic V. Salerno and William J. Teuber Jr. have no material relationship with the Corporation and are independent under the director independence standards of The Nasdaq Stock Market, Inc. The Corporation has a majority of independent directors.

     During 2006, the independent directors met in executive or private sessions without the Corporation’s management after every Board meeting. Currently, the independent directors have not appointed a lead director. Instead, the independent directors designate, on a rotational basis, who will preside at each executive session.

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STOCKHOLDERS COMMUNICATION WITH THE BOARD OF DIRECTORS

     Any stockholder who desires to contact the Board or any of its members may do so by writing to: Popular, Inc., Board of Directors (751), P.O. Box 362708, San Juan, PR 00936-2708. Alternatively, a stockholder may contact the Corporation’s Audit Committee or any of its members telephonically by calling the toll-free number (866) 737-6813 or electronically through www.popular.com/ethicspoint-en. Communications received by the Audit Committee that are not related to accounting or auditing matters, may be discretionally forwarded by the Audit Committee or any of its members to other committees of the Board or the Corporation’s management for review.

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STANDING COMMITTEES

     The Board has standing Audit, Risk Management, Corporate Governance and Nominating, and Compensation committees.

          Compensation Committee

     The Compensation Committee consists of three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under the director independence rules of The Nasdaq Stock Market, Inc. The Compensation Committee held five meetings during the fiscal year ended December 31, 2006. The purpose of the Compensation Committee is to discharge the Board’s responsibilities (subject to review by the full Board) relating to compensation of the Corporation’s NEOs and to produce an annual report on executive compensation for inclusion in the Corporation’s proxy statement, in accordance with the rules and regulations of the SEC.

     The duties and responsibilities of the Compensation Committee include, among others, the following:

     • consult with senior management to establish the Corporation’s general compensation philosophy and oversee the development and implementation of compensation programs;

     • review and approve the corporate goals and objectives relevant to the compensation of the CEO;

     • evaluate the performance of the CEO in light of those goals and objectives;

     • set the CEO’s compensation level based on this evaluation;

     • review and approve compensation programs applicable to executive officers of the Corporation; and

     • make recommendations to the Board with respect to the Corporation’s incentive compensation plans and equity-based plans, oversee the activities of the individuals and committees responsible for administering these plans and discharge any responsibilities imposed on the Compensation Committee by any of these plans.

     The Compensation Committee is composed of Francisco M. Rexach Jr. (Chairman), Juan J. Bermúdez, María Luisa Ferré and William J. Teuber Jr.

Corporate Governance and Nominating Committee and other Corporate Governance Matters

     The Corporate Governance and Nominating Committee consists of three or more members of the Board, each of whom the Board has determined has no material relationship with the Corporation and each of whom is otherwise independent under the director independence rules of The Nasdaq Stock Market, Inc. The Corporate Governance and Nominating Committee held six meetings during the fiscal year ended December 31, 2006.

     The purpose of the Corporate Governance and Nominating Committee is as follows:

     • identify and recommend individuals to the Board for nomination as members of the Board and its committees;

     • identify and recommend individuals to the Board for nomination as CEO and Chairman of the Corporation;

     • promote the effective functioning of the Board and its committees; and

     • develop and recommend to the Board a set of corporate governance principles applicable to the Corporation, and review these principles at least once a year.

     Under the Corporation’s Corporate Governance Guidelines, the Board should, based on the recommendations of the Corporate Governance and Nominating Committee, select new nominees for the position of independent director considering the following criteria:

     • personal qualities and characteristics, accomplishments and reputation in the business community;

     • current knowledge and contacts in the communities in which the Corporation does business and in the Corporation’s industry or other industries relevant to the Corporation’s business;

     • ability and willingness to commit adequate time to Board and committee matters;

     • the fit of the individual’s skills and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Corporation; and

     • diversity of viewpoints, background, experience and other demographics factors.

     The Corporate Governance and Nominating Committee will consider nominees recommended by stockholders. There are no differences in the manner in which the Corporate Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder. The Corporate Governance and Nominating Committee did not receive any recommendation from stockholders for the Meeting.

     Stockholders who wish to submit nominees for director for consideration by the Corporate Governance and Nominating Committee for election at the Corporation’s 2008 annual meeting of stockholders may do so by submitting in writing, prior to November 19, 2007, such nominees’ names and a brief description of the nominees’ judgment, skills, diversity, and experience with businesses and other organizations, to the Secretary of the Board of Directors (751) at Popular, Inc., 209 Muñoz Rivera Avenue, Hato Rey, Puerto Rico, 00918.

     At its January 25, 2007 meeting, the Corporate Governance and Nominating Committee approved the nominations of Michael Masin, Manuel Morales Jr. and José R. Vizcarrondo as Class 2 directors, in the Corporation’s 2007 proxy card. Mr. Masin is being nominated for election for the first time at the Meeting.

     The Board has adopted a Code of Ethics (the “Code”) to be followed by the Corporation’s employees, officers (including the CEO, Chief Financial Officer and Corporate Comptroller) and directors to achieve conduct that reflects the Corporation’s ethical principles. Certain portions of the Code deal with activities of directors, particularly with respect to transactions in the securities of the Corporation and potential conflicts of interest. Directors, NEOs, executive officers and employees are required to be familiar with and comply with the Code. The Code provides that any waivers for NEOs, executive officers or directors may be made only by the independent members of the Board and must be promptly disclosed to the stockholders. During 2006, the Corporation did not receive nor grant any request from directors or executive officers for waivers under the provisions of the Code. On September 15, 2006, the Board approved amendments to the Code. The amended version of the Code, as well as the Corporation’s Corporate Governance and Nominating Committee Charter and the Corporate Governance Guidelines are available on the Corporation’s website, www.popular.com.

     The Corporate Governance and Nominating Committee is comprised of Juan J. Bermúdez (Chairman), María Luisa Ferré, Michael Masin, Francisco M. Rexach Jr. and Frederic V. Salerno.

AUDIT COMMITTEE REPORT

Audit Committee

     The Audit Committee consists of three or more members of the Board. The members of the Audit Committee each have been determined by the Board to be independent as required by the director independence rules of The Nasdaq Stock Market, Inc. Currently, the Audit Committee is comprised of four outside directors, all of whom are independent. The Audit Committee held 13 meetings during the fiscal year ended December 31, 2006. Earnings releases, Form 10-K and Form 10-Q filings were discussed in 10 of such meetings.

     The Audit Committee’s primary purpose is to assist the Board in its oversight of the accounting and financial reporting processes of the Corporation. The Audit Committee operates pursuant to a charter that was last amended and restated by the Board on October 13, 2004.

     In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements of the Corporation for the fiscal year ended December 31, 2006 with management and PricewaterhouseCoopers LLP, the Corporation’s independent registered public accountants. The Audit Committee has also discussed with the independent accountants the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees”. Finally, the Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by Independence Standards Board Standard No. 1, as amended, “Independence Discussion with Audit Committees”, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Corporation is compatible with maintaining the auditors’ independence, and has discussed with the independent registered public accountants its independence from the Corporation and its management. These considerations and discussions, however, do not assure that the audit of the Corporation’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), that the financial statements are presented in accordance with Generally Accepted Accounting Principles (“GAAP”) or that the Company’s registered public accountants are in fact “independent.”

     As set forth in the Audit Committee Charter, the management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s financial statements. Furthermore, management and the Internal Audit Division are responsible for maintaining appropriate accounting and financial reporting principles and policies, and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. PricewaterhouseCoopers LLP is responsible for auditing the Corporation’s financial statements and expressing an opinion as to their conformity with GAAP in the United States of America.

     The members of the Audit Committee are not engaged professionally in the practice of auditing or accounting and are not employees of the Corporation. The Corporation’s management is responsible for its accounting, financial management and internal controls. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures to set auditor independence standards.

     Based on the Audit Committee’s consideration of the audited financial statements and the discussions referred to above with management and the independent registered public accountants, and subject to the limitations on the role and responsibilities of the Audit Committee set forth in the Charter and those discussed above, the Committee recommended to the Board that the Corporation’s audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the SEC.

Submitted by:
     Frederic V. Salerno (Chairman)
      Juan J. Bermúdez
      Francisco M. Rexach Jr.
      William J. Teuber Jr.

AUDIT COMMITTEE FINANCIAL EXPERTS

     The Board has determined that Frederic V. Salerno and William J. Teuber Jr. are financial experts as defined by Item 401(h) of Regulation S-K under the Act of 1934, and are independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the Act of 1934. For a brief listing of Messrs. Salerno’s and Teuber’s relevant experience, please refer to the Board of Directors section.

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COMPENSATION OF DIRECTORS

     Prior to May 2004, outside directors of the Corporation were granted options to purchase Common Stock pursuant to the 2001 Stock Option Plan (“2001 Option Plan”). Commencing May 2004, options to directors of the Corporation were granted under the Popular, Inc. 2004 Omnibus Incentive Plan (the “2004 Omnibus Plan”). The amount of stock options granted each month was equal to the quotient (rounded to the nearest whole share) of (x) 6,250 and (y) the value of the option based on the closing price of the Common Stock on the date granted. Option values on the grant dates were determined by using the Black-Scholes Option Valuation Model. The options granted under the 2004 Omnibus Plan become exercisable with respect to 20% of the shares on each anniversary of the date of grant and remain exercisable until the 10th anniversary of the grant.

     On July 14, 2004, the Board approved a new compensation package for the non-employee directors of the Corporation based on recommendations from Watson Wyatt, outside consultants to the Board. Under the terms of the new package, each director receives an annual retainer of $20,000, while directors that are elected as chairman of any Board committee receive an annual retainer of $25,000. The retainer is paid in either cash or restricted stock under the 2004 Omnibus Plan, at the director’s election. The directors also receive an annual grant of $35,000 payable in the form of restricted stock under the 2004 Omnibus Plan.

     In addition, during 2006 non-employee directors received $1,000 for each Board or committee meeting attended, payable in either cash or restricted stock at the director’s election. All restricted stock awards are subject to risk of forfeiture and restrictions on transferability until retirement of the director, when the awards become vested. Dividends are paid on the restricted stock during the vesting period which is reinvested in shares of Common Stock.

     The Corporation reimburses directors for travel expenses incurred in connection with attending Board, committee and stockholder meetings and for other Corporation-related business expenses (including the travel expenses of spouses if they are specifically invited to attend the event for appropriate business purposes), which may include use of private aircraft, if available and approved in advance by the CEO.

The following table provides compensation information for the Corporation’s non-employee directors during 2006:

DIRECTOR SUMMARY COMPENSATION TABLE

		Fees																Nonqualified
		Earned or												Non -Equity				Deferred
		Paid in				Stock				Option				Incentive Plan				Compensation				All Other
Name		Cash ($)(a)				Awards ($)(b)				Awards ($)(c)				Compensation ($)				Earnings ($)				Compensation ($)				Total ($)
Juan J. Bermúdez		$	59,000			$	35,000			$	14,712				—				—				—			$	108,712
José B. Carrión Jr.			45,000				35,000				14,712				—				—				—				94,712
María Luisa Ferré			47,000				35,000				14,712				—				—				—				96,712
Manuel Morales Jr.			40,000				35,000				14,712				—				—				—				89,712
Francisco M. Rexach Jr.			60,000				35,000				14,712				—				—				—				109,712
Frederic V. Salerno			63,000				35,000				6,250				—				—				—				104,250
William J. Teuber Jr.			49,000				35,000				—				—				—				—				84,000
José R. Vizcarrondo			40,000				35,000				1,250				—				—				—				76,250
		$	403,000			$	280,000			$	81,060				—				—				—			$	764,060

NAMED EXECUTIVE OFFICERS

     The following information sets forth the names of the NEOs of the Corporation, including their age, business experience and directorships during the past five years, and the period during which each such person has served as NEO of the Corporation.

				Business Experience
Name and Age				and Directorships
RICHARD L. CARRIÓN: (54 years)
		•		Chairman of the Board since 1993.
		•		President and CEO of the Corporation since 1990.
		•		For information about principal occupation, business experience and
				directorships during the past five years, please refer to the Board of Directors
				and Committees section.
DAVID H. CHAFEY JR.: (53 years)
		•		Senior Executive Vice President of the Corporation since 1997.
		•		President of the Bank since April 2004.
		•		Supervisor of the Bank’s Retail Banking Group from January 1996 through
				March 2004.
		•		Senior Executive Vice President of Popular International Bank, Inc. and Popular
				North America, Inc., directly and indirectly wholly-owned subsidiaries of the
				Corporation, respectively.
		•		Chairman and President of Puerto Rico Investors Tax-Free Fund, Inc. I, II, III,
				IV, V, VI, of Puerto Rico Tax-Free Target Maturity Fund, Inc. I and II and of
				Puerto Rico Investors Flexible Allocation Fund since January 1999.
		•		Director of the Bank, Popular Mortgage, Inc., Popular Auto, Inc., Banco
				Popular, National Association, Popular Insurance, Inc., Popular Securities, Inc.,
				Popular Finance, Inc. and EVERTEC, Inc., all either directly or indirectly wholly-
				owned subsidiaries of the Corporation.
		•		Member of the San Jorge Children’s Research Foundation, Inc.
		•		President of the Puerto Rico Bankers Association until October 2002.
		•		Director of Visa International and of Visa International for the Caribbean and
				LatinAmerica.
		•		President of the Organizing Committee for the 2010 Central American and Caribbean
				Sport Games.
		•		Member of the Advisory Committee of Colegio San Ignacio.
		•		Member of the Board of Trustees of Fairfield University.
		•		Director of Grupo Guayacán, Inc.
		•		Director of the Corporation until 2004.
JORGE A. JUNQUERA: (58 years)
		•		Senior Executive Vice President of the Corporation since 1997.
		•		Chief Financial Officer of the Corporation and the Bank.
		•		Supervisor of the Financial Management Group.
		•		Supervisor of the Corporation’s U.S. Operations from January 1996 to
				December 2001.
		•		President and Director of Popular International Bank, Inc. and Popular North
				America, Inc. since January 1996, directly and indirectly wholly-owned
				subsidiaries of the Corporation, respectively.
		•		Director of the Bank until April 2000 and from 2001 to present.
		•		President of Banco Popular North America until December 2001.
		•		President of Banco Popular, National Association.

				Business Experience
(cont.) Name and Age				and Directorships
JORGE A. JUNQUERA: (58 years) (cont.)
		•		Director of Popular Financial Holdings, Inc., Popular FS, LLC, Popular Leasing
				USA, Inc. Banco Popular North America and E-LOAN, Inc., indirectly wholly-
				owned subsidiaries of the Corporation.
		•		Director of Banco Hipotecario Dominicano and Consorcio de Tarjetas
				Dominicanas, S.A., where the Corporation has an indirect investment.
		•		Director of YMCA since 1988.
		•		Director of Virtual, Inc. (an Internet company) until April 2006.
		•		Director of La Familia Católica por la Familia en las Américas since 2001.
		•		Director of King's College since 2003.
		•		Director of New America Alliance (not-for-profit organization) until June
				2004.
		•		Director of the Corporation until 2004.
ROBERTO R. HERENCIA: (47 years)
		•		Executive Vice President of the Corporation since 1997.
		•		President and Director of Banco Popular North America since December 2001.
		•		Director of Popular International Bank, Inc., Popular North America, Inc.,
				Banco Popular, National Association, Popular Financial Holdings, Inc., Popular
				Leasing USA, Inc., Popular Insurance Agency USA, Inc., Popular FS,
				LLC and E-LOAN, Inc., all either directly or indirectly wholly-owned
				subsidiaries of the Corporation.
		•		Director of Banco Popular Foundation, Inc.
		•		Member of the Board of Directors of The ServiceMaster Company (a
				registered public company) and Chairman of the Audit and Finance Committee.
		•		Trustee of the Museum of Science and Industry (Chicago, Illinois), and Le
				Moyne College (Syracuse, NY).
		•		Director of Junior Achievement of Chicago, Operation HOPE, Inc., The
				Economic Club of Chicago, The Executive Club of Chicago and New America
				Alliance (all not-for-profit organizations).
AMÍLCAR L. JORDÁN: (45 years)
		•		Executive Vice President of the Corporation since April 2004.
		•		Supervisor in charge of the Corporate Risk Management Group since April
				2004.
		•		Senior Vice President and Comptroller of the Corporation from January
				1995 to March 2004.
		•		Director of March of Dimes, Puerto Rico Chapter, since February 2005.
TERE LOUBRIEL: (54 years )
		•		Executive Vice President of the Corporation since 2001.
		•		Supervisor in charge of the Corporate People, Communications and
				Planning Group since April 2004.
		•		Director of Banco Popular Foundation, Inc.
		•		Member of the Board of Trustees of Fundación Banco Popular, Inc.
		•		Member of the Board of Trustees of Universidad del Sagrado Corazón.
		•		Supervisor of Human Resources from April 2000 through March 2004.
		•		Director of the Puerto Rico Society of Certified Public Accountants until
				August 2004.

				Business Experience
Name and Age				and Directorships
BRUNILDA SANTOS DE ÁLVAREZ: (48 years)
		•		Executive Vice President of the Corporation since 2001.
		•		Chief Legal Officer of the Corporation since 1997.
		•		Senior Vice President from March 1996 until January 2001.
		•		Secretary of the Board of Directors of Popular International Bank, Inc., Banco
				Popular North America, EVERTEC, Inc., Banco Popular, National Association,
				Popular Insurance, Inc., Popular Securities, Inc., Popular Insurance Agency USA,
				Inc., Popular Auto, Inc., Popular Finance, Inc., Popular Mortgage, Inc., Popular
				Financial Holdings, Inc., Popular North America, Inc., Popular Life RE and Popular
				FS, LLC, either directly or indirectly wholly-owned subsidiaries of the Corporation.
		•		Secretary of the Board of Directors of Puerto Rico Investors Tax Free Fund, Inc.
				I, II, III, IV, V, VI, of Puerto Rico Tax Free Target Maturity Fund, Inc. I and II,
				and of Puerto Rico Investors Flexible Allocation Fund, Inc.
		•		Assistant Secretary of the Board of Directors of the Corporation and the Bank
				since May 1994.
		•		Member of the Board of Regents and of the Board of Directors , Colegio
				Puertorriqueño de Niñas, since 2005 and 2002, respectively.
		•		Member of the Cultural Activity Steering Committee, Colegio San Ignacio since
				2004.
FÉLIX M. VILLAMIL: (45 years)
		•		President and Director of EVERTEC, Inc. since April 2004.
		•		Executive Vice President of the Corporation since 2002.
		•		Supervisor of the Bank’s Operations Group from April 2002 through March
				2004.
		•		Supervisor of the Bank’s Ponce Region from April 2001 until December 2001.
		•		Supervisor of the Credit Risk Management Division of the Bank from 1997
				through March 2001.
		•		President of the Board of Big Brothers Big Sisters of Puerto Rico.
SAMUEL T. CÉSPEDES: (70 years)
		•		Secretary of the Board of Directors of the Corporation and the Bank since
				1991.
		•		Attorney-at-Law.
		•		Counsel of the law firm McConnell Valdés.
		•		Sole stockholder of Samuel T. Céspedes P.S.C.
		•		Director and stockholder of Comunicaciones Troncalizadas de Costa Rica, S.A.
		•		Secretary of the Board of Fiduciaries and Counsel to the Puerto Rico Olympic
				Trust.

FAMILY RELATIONSHIPS

     Mr. Richard L. Carrión, Chairman of the Board and President and CEO of the Corporation, is the uncle of Mr. José R. Vizcarrondo, a director of the Corporation.

OTHER RELATIONSHIPS, TRANSACTIONS AND EVENTS

     During 2006, the Corporation engaged, in the ordinary course of business, the legal services of the law firm, McConnell Valdés, of which Mr. Samuel T. Céspedes, Secretary of the Board of Directors of the Corporation and the Bank, is a Counsel. The fees paid to McConnell Valdés for fiscal year 2006 amounted to approximately $743,000, which include approximately $13,000 paid by the Corporation’s clients in connection with commercial loan transactions. The Corporation also engaged, in the ordinary course of business, the legal services of Pietrantoni Mendez & Alvarez LLP, of which Mr. Ignacio Álvarez and Mr. Antonio Santos, husband and brother, respectively, of Mrs. Brunilda Santos de Álvarez, Executive Vice President & Chief Legal Officer of the Corporation, are partners. The fees paid to Pietrantoni Mendez & Alvarez LLP for fiscal year 2006 amounted to approximately $879,000, which include $80,000 paid by the Corporation’s clients in connection with commercial loan transactions and $23,000 paid by investment companies managed by the Bank. In addition, Pietrantoni Mendez & Alvarez LLP leases office space in the Corporation’s headquarters building, which is owned by the Bank. During 2006, Pietrantoni Mendez & Alvarez LLP made lease payments of approximately $642,000 to the Bank. The engagement of the aforementioned law firms was approved by the Audit Committee as required by the Policy regarding the Approval Process for Related Party Transactions adopted by the Audit Committee of the Corporation on May 7, 2004 and amended on December 12, 2006 (the “Related Party Transactions Policy”).

     During 2006, Carrión, Laffitte & Casellas, Inc. earned commissions of approximately $1,642,000 for the institutional insurance business of the Corporation and its subsidiaries. Mr. José B. Carrión, III, son of José B. Carrión Jr., a director of the Corporation, is a significant shareholder and the president of Carrión, Laffitte & Casellas, Inc. José B. Carrión Jr. does not have any direct or indirect interest in Carrión, Laffitte & Casellas, Inc. This engagement has been approved by the Audit Committee as required by the Related Party Transactions Policy.

     Mr. José R. Vizcarrondo, director of the Corporation, is President, Chief Executive Officer and partner of Metropolitan Builders, S.E., a special partnership organized under the laws of the Commonwealth of Puerto Rico. During 2006, the Bank paid approximately $225,000 in connection with two Bank construction projects awarded to this entity in 2002. The Bank also paid approximately $51,000 in connection with the construction of a bridge connecting two of the Bank’s buildings. The award of these contracts was determined by competitive bids. In addition, during 2006 the Bank paid to Metropolitan Builders, S.E. approximately $887,000 in connection with two contracts for the interior partition and finishes of the two Bank construction projects. These two contracts were approved by the Audit Committee as required by the Related Party Transactions Policy.

     In December 2005, the Bank entered into a commitment to contribute a total of $500,000 to the Fundación Luis A. Ferré during a period of five years in connection with the remodeling of the Ponce Museum of Art premises. The second payment in the amount of $100,000 was made in November 2006. María Luisa Ferré, a director of the Corporation, is the President and a Trustee of said foundation. During 2006, the Bank also made a contribution of $50,000 to the Fundación Luis A. Ferré in connection with the sponsorship of the Ponce Museum of Art Benefit Gala. These contributions were approved by the Audit Committee as required by the Related Party Transactions Policy.

     In 2006, the Bank and EVERTEC, Inc. made a contribution of $1,200,000 and $300,000, respectively, to Fundación Banco Popular, Inc. (the “Fundación”), a Puerto Rico not-for-profit corporation created to improve the Puerto Ricans’ quality of life. Furthermore, during 2006 the Bank, the Corporation and EVERTEC, Inc. contributed approximately $579,000 in connection with the matching of employee contributions. The Fundación is the Bank’s philanthropic arm and provides a scholarship fund for employees’ children, and supports education and community development projects. Richard L. Carrión (Chairman, CEO and President of the Corporation), David H. Chafey Jr. (NEO of the Corporation), Tere Loubriel (NEO of the Corporation), and Manuel Morales Jr. (Director of the Corporation) are members of the Board of Trustees of the Fundación. The Bank appoints five of the nine members of the Board of Trustees. The remaining four trustees are appointed by the Fundación. The Bank also provides significant human and operational resources to support the

activities of the Fundación. The Bank and the Puerto Rico employees of the Corporation (through voluntary personal donations) are the main source of funds of the Fundación.

     During 2004, the Banco Popular Foundation, Inc. (“Banco Popular Foundation”), an Illinois not-for-profit corporation was created to strengthen the social and economic well-being of the communities served by Banco Popular North America. The Banco Popular Foundation is Banco Popular North America’s philanthropic arm and provides support to charitable organizations for community development and education. During 2006, Banco Popular North America made a contribution to the Banco Popular Foundation of $50,500 and contributed approximately $229,000 in connection with the matching of employee contributions. Richard L. Carrión (Chairman, CEO and President of the Corporation), Roberto R. Herencia and Tere Loubriel (both NEOs) are members of the board of directors of the Banco Popular Foundation. In addition, Messrs. Carrión and Herencia are officers of the Banco Popular Foundation. Banco Popular North America provides significant human and operational resources to support the activities of the Banco Popular Foundation.

     Certain directors and NEOs have immediate family members who are employed by subsidiaries of the Corporation. The compensation of these family members is established in accordance with the pertinent subsidiary’s employment and compensation practices applicable to employees with equivalent qualifications and responsibilities and holding similar positions. Set forth below is information on those family members of directors and NEOs of the Corporation who are employed by the Corporation’s subsidiaries and received a total compensation in excess of $120,000 during 2006.

     The son and the daughter in law of Francisco M. Rexach Jr., a director of the Corporation, are employed as Vice President of the Business Banking Division and as an Assistant Vice President of the Trust Division of the Bank, respectively, and received compensation during 2006 in the aggregate amount of $151,264. The son of Manuel Morales Jr., a director, is employed as Senior Vice President of the Ticketpop Networks Division of EVERTEC, Inc. He received compensation in the amount of $255,631 during 2006. A brother of José R. Vizcarrondo, a director of the Corporation, and nephew of Mr. Richard Carrión, is employed as a Vice President in the Merchant Business Administration Division of the Bank and received compensation of $148,904 during 2006. The son of Jorge A. Junquera, Senior Executive Vice President and Chief Financial Officer of the Corporation, is employed as an Assistant Vice President in the Corporate Finance and Advisory Services Division of the Bank and received compensation of $177,372 during 2006. The disclosed amounts include payments of salary, bonus, incentives and the cash portion of the Profit Sharing Plan of the Bank. Other benefits and payments such as the deferred portion of the Profit Sharing Plan and employer matching contribution under the Bank’s Savings and Stock Plan did not exceed $10,000.

     The Bank has had loan transactions with the Corporation’s directors and officers, and with their associates, and proposes to continue such transactions in the ordinary course of its business, on substantially the same terms, including interest rates and collateral, as those prevailing for comparable loan transactions with other people. The extensions of credit have not involved and do not currently involve more than normal risks of collectibles or present other unfavorable features.

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     The Board intends to retain the services of PricewaterhouseCoopers LLP as the independent public auditors of the Corporation for the year 2007. PricewaterhouseCoopers LLP has served as independent public auditors of the Bank since 1971 and of the Corporation since May 1991, when it was appointed by the Board.

     Neither the Corporation’s Certificate of Incorporation nor its By-Laws require that the shareholders ratify the selection of PricewaterhouseCoopers LLP as the Corporation’s independent auditors. If the shareholders do not ratify the selection, the Board and the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP, but may nonetheless retain such independent auditors. Even if the selection is ratified, the Board and the Audit Committee in their discretion may change the appointment at any time during the year if they determine that such change would be in the best interest of the Corporation and its shareholders.

     Representatives of PricewaterhouseCoopers LLP will attend the Meeting and will be available to respond to any appropriate questions that may arise; they will also have the opportunity to make a statement if they so desire.

     The selection of PricewaterhouseCoopers LLP as the Corporation’s auditors must be ratified by a majority of the votes cast at the Meeting.

     The Board recommends that you vote FOR the ratification of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm for 2007.

DISCLOSURE OF AUDITORS’ FEES

The following is a description of the fees billed to the Corporation by PricewaterhouseCoopers LLP for the years ended December 31, 2006 and 2005:

		December 31,
		2006				2005
Audit Fees		$	3,486,500			$	4,466,624
Audit-Related Fees			754,000	(a)			650,845	(a)
Tax Fees			150,000	(b)			150,000	(b)
All Other Fees			56,000	(c)			56,000	(c)
		$	4,446,500			$	5,323,469

     The Audit Committee has established controls and procedures that require the pre-approval of all audit and permissible non-audit services provided by PricewaterhouseCoopers LLP or another firm. The Audit Committee may delegate to one or more of its members the authority to pre-approve any audit or permissible non-audit services. Under the pre-approval controls and procedures, audit services for the Corporation are negotiated annually. In the event that any additional audit services not included in the annual negotiation or permissible non-audit services are required by the Corporation, a proposed engagement letter is obtained from the auditor and evaluated by the Audit Committee or the member(s) of the Audit Committee with authority to pre-approve auditor services. Any decisions to pre-approve such audit and non-audit services and fees are to be reported to the full Audit Committee at its next regular meeting. The Audit Committee has considered that the provision of the services covered by this paragraph is compatible with maintaining the independence of the independent registered public accounting firm of the Corporation. During 2006, all auditors fees were pre-approved by the Audit Committee or the Board.

EXECUTIVE COMPENSATION PROGRAM

Report of the Compensation Committee

     The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with management and, based on the review and discussions, the Committee recommended to the Board that the CD&A be included in this Proxy Statement.

Submitted by:

Francisco M. Rexach Jr. (Chairman)
Juan J. Bermúdez
María Luisa Ferré
William J. Teuber Jr.

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee

          Members and Role

     The Compensation Committee has four members —Francisco M. Rexach (Chairman), Juan J. Bermúdez, María Luisa Ferré and William J. Teuber, Jr.— each of whom has no material relationship with the Corporation and each of whom is otherwise independent under the director independence rules of The Nasdaq Stock Market, Inc. None of the members of the Committee are officers or employees of the Corporation or any of its subsidiaries.

     The Compensation Committee acts pursuant to a written charter adopted on November 12, 2003. The Committee’s charter is available online at www.popular.com under Investor Relations – Corporate Governance Documents. The charter may be reviewed and revised as needed from time to time, particularly in light of changes in regulatory requirements and best corporate governance practices. Under its charter, the Compensation Committee may, if suitable, use the necessary resources and exercise its authority to select, retain, terminate, and approve the fees and other retention terms of special counsel or other experts or consultants, as it deems appropriate, without seeking approval of the Board or management.

     The Compensation Committee discharges the Board’s responsibilities relating to the compensation of the NEOs. Its fundamental responsibilities are:

	•		establishing the Corporation’s general compensation philosophy and overseeing the development and implementation of compensation programs;
	•		reviewing and approving the corporate goals and objectives related to the compensation of the CEO;
	•		evaluating the CEO’s performance in light of those goals and objectives;
	•		setting the CEO’s compensation level based on this evaluation;
	•		reviewing and approving compensation programs applicable to the NEOs;
	•		making recommendations to the Board with respect to the Corporation’s incentive compensation plans and equity-based plans, overseeing the activities of the individuals and committees responsible for administering these plans and discharging any responsibilities imposed on the Compensation Committee by any of these plans; and,
	•		reviewing and approving any severance or similar termination payments proposed to be made to any of the NEOs.

          Committee Meetings

     The Compensation Committee’s calendar and agendas are established after evaluating the matters that require Committee consideration at different times during the year. The Compensation Committee receives and reviews materials in advance of each of its meetings. These materials include information that management believes is helpful to the Compensation Committee, as well as materials that the Committee specifically requests. Depending on the agenda for the particular meeting, such materials may include:

	•		financial reports on year-to-date performance versus budget and comparisons to prior year performance;
	•		calculations and reports on levels of achievement of individual and corporate performance objectives;
	•		reports on the Corporation’s strategic objectives and budget for future periods;
	•		information on the NEOs’ stock ownership and option holdings;
	•		tally sheets setting forth the NEOs’ total compensation, including base salary, cash incentives and equity awards; and
	•		information regarding compensation programs and compensation levels at peer groups of companies identified by the Corporation’s compensation consultant.

     During fiscal year 2006 and prior to the filing of this proxy in 2007, the Compensation Committee met on seven occasions (five in 2006 and two in 2007 prior to proxy filing). The CEO and the Executive Vice President for People, Communications and Planning (“EVP-PCP”) attended portions of all of the meetings. At the meetings, the EVP-PCP presented reports, proposals and background information in light of the Corporation’s strategic objectives, and the rationale behind compensation programs and several proposed modifications. The EVP-PCP also answered questions posed by the Compensation Committee members.

     The Compensation Committee met in executive session in three of the 2006 meetings. The CEO was the only executive present at some of the sessions. In those sessions, the Compensation Committee discussed with the CEO his accomplishments and objectives, as well as the performance of the other executives of the corporate organizational unit, the CLC, consisting of the Business Unit Leaders: David H. Chafey Jr., Roberto R. Herencia, Félix M. Villamil and Cameron Williams, and the Supporting Area Leaders: Jorge A. Junquera, Amílcar L. Jordán, Esq., Tere Loubriel and Brunilda Santos de Alvarez, Esq. The CEO also discussed with the Compensation Committee preliminary severance and related payments to Popular Financial Holdings (“PFH”) executives as a result of PFH’s Restructuring and Integration Plan, which became effective on January 9, 2007 (further described below under “PFH Restructuring and Integration Plan”). The CEO was not present when the Compensation Committee evaluated his goals and related compensation and awards.

     In its meetings, the Compensation Committee:

	•		evaluated and approved the recommended total compensation for all NEOs and evaluated the total compensation for all other executives;
	•		discussed preliminary 2006 short and long-term management incentive plans, as well as possible modifications under consideration;
	•		reviewed the SEC’s disclosure rules related to executive compensation;
	•		discussed and approved the Compensation Committee’s report on NEOs compensation for the 2006 Proxy Statement;
	•		reviewed NEOs’ compensation plans, as well as their strategic and personal scorecards;
	•		discussed the performance of the CEO and other CLC members; and
	•		reviewed, discussed and approved the CD&A for the 2007 Proxy Statement.

          The Compensation Committee Process

     The Compensation Committee oversees the general compensation practices of the Corporation. The Compensation Committee keeps abreast of competitive compensation practices regarding salaries, incentives and supplemental programs in order to assist the Corporation to attract, motivate and retain qualified NEOs capable of developing and executing the Corporation’s growth and diversification strategies. The executive compensation program for NEOs is set taking into account industry trends and is approved by the Compensation Committee. The Compensation Committee considers pay levels and programs at comparable financial institutions, the Corporation’s short and long-term financial performance, and the available means to continue developing a strong relationship among executive performance, compensation and shareholder returns.

     Although the Compensation Committee exercises its independent judgment in reaching its compensation decisions, it utilizes the advice provided by the Corporation’s EVP-PCP, with input from the Corporate People Division, the Chief Legal Officer, the Corporate Comptroller and the CEO in assessing, designing and recommending compensation programs, plans and awards for NEOs. In particular, the EVP-PCP and the Corporate People Division, with guidance and advice from external consultants, propose the design of compensation programs, plans and awards for the NEOs. The Chief Legal Officer counsels on legal matters regarding such programs. The Corporate Comptroller evaluates and advises on the programs’ accounting and tax implications. The CEO works with the Compensation Committee in establishing individual and corporate performance objectives and targets for NEOs, and in reviewing the appropriateness of the financial measures used in incentive plans and the degree of difficulty in achieving specific performance targets. They also make sure that compensation programs are aligned with the Corporation’s strategic objectives and diversification strategies.

Objectives of Compensation Programs

          Compensation Program Philosophy

     Based on the Corporation’s total compensation philosophy, NEOs compensation is designed to:

	•		attract and retain seasoned executives at competitive pay levels;
	•		motivate high levels of individual performance, coupled with increased shareholder returns;
	•		fairly reward contributions and results in attaining key operating objectives over which the executives have control or influence; and
	•		promote teamwork and collaboration among the executive team.

     The Corporation’s compensation philosophy is revised from time to time according to changing business needs, investor expectations, evolving financial accounting and legal standards, share dilution levels, results of employee engagement surveys, and market practices.

     The compensation analysis begins with a review of the Corporation’s strategic objectives and business plans. The compensation program also considers each NEO’s scope of responsibility, market competitive assessments of similar roles at peer companies, and the relationship between pay and performance (i.e., degree of achievement of the Corporation’s short-term results and long-term growth objectives). The Corporation evaluates whether its compensation programs meet the Corporation’s goals by monitoring engagement and retention among executives, and by assessing the relationship between performance and actual payouts.

          Benchmarking of Compensation

     The Corporation periodically assesses the competitiveness of its pay practices for NEOs through internal staff research and external studies conducted by executive compensation consultants. Internal staff analyzes publicly available information (e.g., proxy analysis and executive compensation data provided by sources such as SNL Financial, Watson Wyatt, Hewitt Associates and Hay Group). The Corporation also takes into consideration executive compensation information from leading financial institutions in its headquarters market of Puerto Rico and other geographical areas where it has presence.

     In making certain corporate decisions, including compensation decisions, the Corporation compares itself against a peer group of publicly-traded regional banks of comparable size and scope of financial services. This peer group includes the following companies: Comerica, Inc., M&T Bank Corporation, Marshall & Ilsley Corporation and Huntington Bancshares, Inc. The Corporation uses the peer group information primarily to ensure that the executive compensation program as a whole is competitive, meaning generally within the desired range of comparative pay of the peer group companies, when the company achieves the targeted performance levels. An individual’s relative compensation with respect to the peer group may vary according to a number of circumstances, including such individual’s qualifications and performance.

     The Corporation also contracts pay studies, the most recent of which was conducted in 2004 by Ben S. Cole Financial Incorporated, a financial services consulting firm specializing in executive compensation strategy formulation, governance consultation and program implementation. The 2004 study focused primarily on financial institutions with median assets of $27 billion, net income of $366 million, return on assets of 1.39% and return on equity of 15.87% as of December 31, 2002. At that time, the Corporation had assets of $34 billion, net income of $352 million, return on assets of 1.11% and return on common equity of 16.29%. The Corporation expects to conduct a new study during 2007.

Elements of Incentive Compensation

     The current compensation program for the Corporation’s NEOs consists of base salary plus performance-based incentive compensation. For performance years between 2004 and 2006, the performance-based incentive compensation consisted of cash incentives and restricted stock. Prior to 2004, NEOs were awarded stock options as part of their performance-based compensation. The Compensation Committee can exercise its discretion in modifying the design and awards of NEOs compensation.

          Base Salary

     Base salaries are generally designed to be competitive with comparable positions in peer group companies. However, each NEO’s actual salary varies based on his or her qualifications and experience, responsibilities and potential, individual goals and objectives, factors relating to individual and Corporation performance, and competitive pay practices. Base salaries are reviewed annually.

     In an effort to underscore the Corporation’s cost reduction objectives, the CEO requested that the Compensation Committee reduce his base salary by 10% effective September 2005. The Compensation Committee approved this request, as well as a related pay reduction of 10% for the President of the Bank and of 5% for all other NEOs. The latter reductions were reflected in base pay beginning in January 2006 and were partially offset by base pay adjustments related to the discontinuation of deferred profit sharing awards described below under Elements of Post-Termination Compensation.

          Performance-based Incentive Compensation

     The Corporation’s incentive compensation programs are governed by the 2004 Omnibus Plan, which was approved by shareholders on April 30, 2004. The Omnibus Incentive Plan provides the Compensation Committee with the ability to offer different types of cash and stock-based awards to promote high performance levels and achievement of corporate goals by key employees, encourage the growth of stockholder value and allow key employees to participate in the long-term growth and profitability of the Corporation. NEO compensation under the 2004 Omnibus Plan has consisted of annual cash incentives and service-vested restricted stock. As described below, effective in 2007, the Compensation Committee approved a modification of the Corporation’s long-term incentive component to replace approximately one-half of the existing restricted stock reward opportunity with performance shares, a stock award which is contingent upon the achievement of future financial goals.

     NEOs qualify for short and long-term incentives if they meet the individual and corporate performance objectives and targets set at the beginning of each fiscal year by the Compensation Committee. The Committee considers the Corporation’s strategic objectives and diversification strategies and sets the threshold, target and maximum performance levels such that the relative difficulty of achieving the target level is consistent from year to year. During three of the past five years, the Corporation’s performance was between 101% and 103% of target. On one occasion, the Corporation achieved the maximum performance level, and in 2006 it did not reach the threshold performance.

2006 Short-Term Incentive

     The short-term cash incentive is designed to reward achievement of annual profit goals. The Corporation measures actual performance against after-tax net income goals established at the beginning of the fiscal year. The short-term cash incentive reflects the financial performance goals according to each NEO’s degree of control or influence (comprising Corporation and business unit results), as well as strategic and personal objectives, as detailed in the tables below.

     For the 2006 short-term cash incentive, the CEO had a target of 100% of salary with a maximum of 150%, provided all objectives were met, as outlined in the following table:

Net Income Goal		Incentive as Percent of
Achievement		Base Pay
< Threshold			0	%
Threshold			40	%
100% (target)			70	%
Maximum			120	%
Strategic and Personal			30	%
Total (target)			100	%

     Since the Corporation’s net income for 2006 was below the minimum performance threshold, no payout was awarded to the CEO for financial performance. The Compensation Committee approved an award of 20% of base pay (of the potential 30%) for strategic and personal objectives based on an evaluation of the CEO’s performance against previously approved goals, including: strategic vision, enhancement of the Corporation’s reputation and image in all the markets it serves, growth and profitability of the Corporation’s U.S. franchise, growth of the Corporation’s processing and technology solutions business, strengthening of the Corporation’s banking institutions’ market share, day-to-day leadership, and other personal individual achievements.

     The other NEOs had a target short-term cash incentive for 2006 of 100% of base pay with a maximum of 140%, provided all objectives were met, as outlined in the following table:

Net Income Goal		Business Unit Leaders				Support Area Leaders
Achievement		(Chafey, Herencia,				(Jordán, Junquera,
		Villamil, Williams)				Loubriel, Santos)
Corporate Results
< Threshold			0	%			0	%
Threshold			20	%			35	%
100% (target)			35	%			65	%
Maximum			55	%			105	%
Business Unit Results
< Threshold			0	%
Threshold			20	%
100% (target)			35	%
Maximum			55	%
Strategic and Personal			30	%			35	%
Total (target)			100	%			100	%

     Inasmuch as the business units’ net income for 2006 surpassed the pre-established thresholds (with the exception of PFH), the respective Business Unit Leaders received the corresponding awards for the financial performance component. Support Area Leaders did not receive the financial performance award due to the Corporation’s performance, which was below the threshold. Strategic and personal performance awards for the NEOs, except for Mr. Williams who received no award, ranged from 25-30% of base pay. The awards were recommended by the CEO and approved by the Compensation Committee based on consideration of critical performance areas related to the Corporation’s business strategy and values, including: customer satisfaction, strategic performance in the marketplace, employee engagement scores, involvement in community service, process and efficiency improvements, achievement of critical milestones in strategic projects, including new products and delivery systems, technology infrastructure, risk management, overall teamwork, and personal development and growth.

Long-Term Incentive

     Restricted Stock - Service-vested restricted stock was awarded annually to NEOs for fiscal year performance between 2004 and 2006. Shares of restricted stock were issued subsequent to the public release of the Corporation’s annual performance results. For all awards to Mr. Carrión and the 2004 fiscal year performance award for other NEOs, the restrictions lapse upon termination of employment on or after attaining age 55 and completing 10 years of service (i.e., eligibility for unreduced retirement benefits under the defined benefit plan). For the other NEOs, restrictions on the 2005 fiscal year performance award are as follows: 40% lapse upon termination of employment on or after attaining age 55 and completing 10 years of service, and the restrictions on the remaining 60% lapse in equal installments during the 5 years subsequent to the award (the first vesting occurred on January 22, 2007). The amount of restricted stock awarded is based on the Corporation’s prior year after-tax net income results as compared to predetermined performance goals. The awards’ value to the NEOs over time is linked to the performance of the Corporation’s Common Stock.

     The CEO’s target for the long-term incentive plan for 2006 was 200% of salary with a maximum of 250%. The other NEOs had a target of 100% of salary with a maximum of 125%. Neither the CEO nor any other NEO received restricted stock awards for 2006 performance since the Corporation’s after-tax net income goal was not achieved.

     2007 Modifications - During 2006, the Corporation’s management hired executive compensation consultant Hewitt Associates to perform a review of its executive incentives. Based on the recommendations presented by Hewitt Associates, management proposed the integration into the long-term incentive component of an enhanced Corporation performance feature that reflects practices at leading U.S. financial institutions and is designed to strengthen the link between NEO performance and shareholder returns. This program is expected to motivate NEOs to make decisions that focus on financial results, while maximizing the Corporation’s utilization of capital and long-term value. The recommendations were approved by the Compensation Committee in January 2007.

     The new long-term incentive is expected to deliver to the NEOs competitive long-term incentive awards by substituting approximately one-half of the long-term incentive value that is now delivered in service-vested restricted stock (which promotes continuity and retention of key talent over time) with performance shares, a stock award which is contingent upon the achievement of future financial goals (the Corporation’s return on equity). Performance will be measured over a period of three

consecutive fiscal years, with the first performance cycle being 2007-2009. Actual awards, if earned, range from 50% to 200% of each NEO’s target award, depending on the Corporation’s performance.

     As recommended by Hewitt Associates, and validated by a review of market survey data regarding trends among financial institutions, the determination of variable pay based on a combination of annual net income and the long-term utilization of capital creates a sound framework for maximizing the Corporation’s performance and shareholder returns.

          Personal Benefits and Perquisites

     Personal benefits and perquisites are not intended to constitute a significant portion of NEO compensation. Such benefits are periodically reviewed based on market trends and regulatory developments. In accordance with market practices, perquisites such as the use of company-owned automobiles, club memberships and personal tickets to events sponsored by the Corporation or its subsidiaries are offered on a limited basis to NEOs. In addition, the Corporation owns a corporate aircraft and an apartment in New York City, used by the CEO primarily for business purposes. For detailed information about the personal benefits and perquisites mentioned above, refer to the Summary Compensation Table.

Tax Deductibility of Executive Compensation

     As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the U.S. Internal Revenue Code, which provides that the Corporation may not deduct compensation of more than $1,000,000 that is paid to certain individuals. However, the Section 162 (m) limitation does not apply to compensation that qualifies as “performance-based” under U.S. federal tax law. It is the Committee’s intention to have applicable compensation payable to our NEOs generally qualify as performance-based and to be deductible for U.S. federal income tax purposes, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.

     In addition, for NEOs resident in Puerto Rico, compensation is deductible for income tax purposes if it is reasonable in the view of the Corporation. It is the Committee’s intention to have compensation paid to our NEOs resident in Puerto Rico be deductible, unless there are valid compensatory reasons for paying non-deductible amounts in order to ensure competitive levels of total compensation.

Stock Ownership/Retention Requirements

     The Corporation has stock ownership requirements that apply to NEOs, which have been in effect since January 1, 2005. The CEO is required to own Common Stock amounting to at least five times his salary. Other NEOs are required to own Common Stock amounting to at least three times their salary.

     The following securities are taken into account toward the stock ownership requirements: shares purchased in the open market; shares jointly owned with or separately by spouse and/or children; shares held in the Savings and Investment Plan (401(k) or 1165(e) Plan); shares exercised through the Stock Option Plan; NEOs non-qualified deferred share awards; vested restricted stock; and shares of the Corporation’s Common Stock held in a trust established for estate and/or tax planning purposes that is revocable by the NEOs and/or the NEOs’ spouse.

     NEOs who have worked for the Corporation for more than five years are expected to achieve their stock ownership requirements within three years of the first day of the year following their appointment to a position subject to the requirements. Those who have worked for the Corporation for less than five years are expected to achieve their requirements within five years of the first day of the year following their appointment to a position subject to the requirements. If an NEO’s requirement changes because of a promotion, a three-year period is granted to achieve the new requirement. Once the requirement is achieved, the corresponding ownership level must be maintained for as long as the NEO is subject to the stock ownership requirements.

     Failure to meet the stock ownership requirements within the appropriate timeframe may result in the payment of future short-term incentive awards in the form of stock rather than cash. The stock ownership requirements are revised every five years. Although most of the current NEOs already meet the stock ownership requirements, they have until December 31, 2007 to reach the pre-established levels.

EXECUTIVE COMPENSATION

     In 2006, the Corporation’s net income decreased by 34% as compared with 2005, and the financial targets outlined in the short and long-term incentive plans were not achieved. The sum of cash compensation and long-term incentives granted to the NEOs declined by 57% as compared to 2005.

     The following Summary Compensation Table outlines cash compensation awarded, together with the accounting cost to the Corporation of previously granted equity awards, accrued pension benefits and other non-cash compensation.

SUMMARY COMPENSATION TABLE

																										Change
																										in
														Stock				Option				Non-				Pension				All Other				Total
Name and Principal Position		Year				Salary(a)				Bonus (b)				Awards (c)				Awards(d)				Equity Comp (e)				Value(f)				Compensation (g)				Compensation
Richard L. Carrión			2006			$	741,600			$	31,050			$	951,336				—			$	178,139			$	1,124,121			$	267,960			$	3,294,206
Chairman, President and CEO			2005				776,667				30,145				941,503				—				754,593				639,554				350,986				3,493,448
David H. Chafey Jr			2006				697,500				29,193				359,411				468,002				434,474				1,089,836				93,249				3,171,665
Senior Executive Vice President			2005				750,000				31,375				355,997				203,493				851,851				1,204,097				93,061				3,489,874
Jorge A. Junquera			2006				539,000				22,633				7,510				—				156,423				439,466				74,266				1,239,298
Senior Executive Vice President & Chief Financial Officer			2005				550,000				23,087				567,593				590,919				612,087				645,440				74,007				3,063,133
Roberto R. Herencia			2006				490,000				20,491				134,434				156,840				257,160				346,300				40,224				1,445,449
Executive Vice President			2005				500,000				20,905				70,170				162,794				549,311				463,374				70,886				1,837,440
Félix M. Villamil			2006				294,000				12,325				68,633				87,978				189,442				127,366				40,664				820,408
Executive Vice President			2005				300,000				12,570				34,609				84,988				359,769				124,935				34,521				951,392
Tere Loubriel			2006				318,500				13,411				207,074				151,905				88,060				593,176				28,442				1,400,568
Executive Vice President			2005				325,000				13,677				204,856				150,267				361,688				694,115				31,277				1,780,880
Brunilda Santos de Álvarez			2006				294,000				12,325				80,654				95,854				81,286				170,515				36,827				771,461
Executive Vice President			2005				300,000				12,570				51,805				91,571				333,866				231,820				30,364				1,051,996
Amílcar L. Jordán			2006				294,000				12,350				75,537				42,044				95,986				208,810				27,269				755,996
Executive Vice President			2005				300,000				12,595				37,791				39,962				333,866				239,265				27,762				991,241
C. E. (Bill) Williams			2006				403,750				—				5,804				—				—				—				70,900				480,454
Executive Vice President			2005				425,000				—				424,999				—				—				—				70,900				920,899

		the other NEOs, restrictions on the 2005 fiscal year award are as follows: 40% lapse upon termination of employment on or after attaining the age of 55 and 10 years of service, and the restrictions on the remaining 60% lapse in equal installments during the 5 years subsequent to the grant. The first vesting occurred on January 22, 2007.
d)		Stock options were granted to some executives between 2002 and 2004 for performance for the years 2001 through 2003. These figures reflect the FAS123R accounting cost of these awards.
e)		Non-equity compensation includes the cash portion of profit sharing, and short-term cash incentive. The short- term cash incentive is determined as a percentage of base pay using net income as the metric against which performance is measured. The details of this design are included in the CD&A.
f)		Present values were determined using year-end FAS 87 assumptions with the following exception: payments are assumed to begin at the earliest possible retirement date at which benefits are unreduced. These vary for NEOs, depending on their initial employment situation. For Mr. Villamil and Mrs. Santos, their earliest possible retirement age with unreduced benefits is the age of 60, for all other NEOs the age to receive retirement benefits with no reductions is 55. Also, each NEO is assumed to continue employment until such retirement date.
g)		All other compensation includes the Corporation’s match to savings plans for all executives, the change in value of retiree medical insurance coverage for executives with that future benefit and the value of all perquisites if their aggregate value exceeds $10,000. The 2005 data includes the deferred portion of the profit sharing award (which is no longer provided since the beginning of 2006).

a.

The detail of the perquisites for Mr. Carrión is as follows:

	i.		$146,000 related to personal security.
	ii.		Company-owned vehicles for personal use by him and his spouse; the total incremental cost to the Corporation of personal use of these cars was approximately $60,000.
	iii.		Mr. Carrión is provided with country club membership and entry tickets to sponsored events whose value does not exceed $10,000.
	iv.		The Board has made it a requirement for Mr. Carrión to use the corporate aircraft even when traveling on personal business. The aggregate incremental cost to the Corporation for such use during 2006 was $71,921. This amount is fully reimbursed by Mr. Carrión to the Corporation so it was not included in the All Other Compensation figure.
	v.		Mr. Carrión’s responsibilities as CEO require frequent travel to New York City. For this purpose, the Corporation has had an apartment since 1987 that Mr. Carrión uses for business related trips. The cost of the apartment to the Corporation is approximately $30,000. Since this apartment is primarily used for business purposes, this amount is not included as additional compensation.

b.

The Corporation also provides other executives with perquisites such as company- owned vehicles, club memberships and tickets to sponsored events. The total value of the perquisites awarded to Mrs. Loubriel and Mr. Jordán did not reach $10,000. During 2006, the following NEOs received perquisites whose aggregate value exceeded $10,000: Mr. Chafey, Mr. Junquera, Mr. Herencia, Mr. Villamil, Mr. Williams, and Mrs. Santos.

	i.		The incremental cost to the Corporation of company-owned vehicles for Mr. Chafey, Mr. Junquera, Mr. Herencia, Mr. Villamil, Mr. Williams, and Mrs. Santos is approximately, $34,000, $26,000, $36,000, $12,700, $10,400, and $5,319 respectively.
	ii.		Entry tickets to sponsored events were provide to Messrs. Chafey, Junquera and Mrs. Santos. Messrs. Chafey, Junquera, Villamil, and Mrs. Santos were also provided with the personal use of country club memberships. None of these benefits individually exceeded $10,000.

GRANTS OF PLAN-BASED AWARDS

The following table outlines the non-equity and equity incentive awards.

																														All				All
																														Other				Other				Exercise
																														Stock				Option				or
																														Awards:				Awards				Base
						Estimated												Estimated												Number				Number				Price
						Possible Payouts												Possible Payouts												of Shares				of				for
						Under Non-Equity												Under Equity												of				Securities				Options
		Grant				Incentive Plan Awards(1&2)												Incentive Plan Awards(3)												stock or				Underlying				Awards
Name		Date				Threshold(2)				Target				Maximum				Threshold($)				Target($)				Maxium($)				units				Options(#)				($/SH)
Richard L. Carrión						$	222,480			$	741,600			$	1,112,400																—				—				—
Richard L. Carrión		Feb-15-06																$	741,600			$	1,483,200			$	1,854,000				—				—				—
David H. Chafey Jr.							209,250				697,500				976,500																—				—				—
David H. Chafey Jr.		Feb-15-06																	348,750				697,500				871,875				—				—				—
Jorge A. Junquera							188,650				539,000				754,600																—				—				—
Jorge A. Junquera		Feb-15-06																	269,500				539,000				673,750				—				—				—
Roberto R. Herencia							147,000				490,000				686,000																—				—				—
Roberto R. Herencia		Feb-15-06																	245,000				490,000				612,500				—				—				—
Félix M. Villamil							88,200				294,000				411,600																—				—				—
Félix M. Villamil		Feb-15-06																	147,000				294,000				367,500				—				—				—
Tere Loubriel							111,475				318,500				445,900																—				—				—
Tere Loubriel		Feb-15-06																	159,250				318,500				398,125				—				—				—
Brunilda Santos de Álvarez							102,900				294,000				411,600																—				—				—
Brunilda Santos de Álvarez		Feb-15-06																	147,000				294,000				367,500				—				—				—
Amílcar L. Jordán							102,900				294,000				411,600																—				—				—
Amílcar L. Jordán		Feb-15-06																	147,000				294,000				367,500				—				—				—
C.E. (Bill) Williams							121,125				403,750				565,250																—				—				—
C.E. (Bill) Williams		Feb-15-06																	201,875				403,750				504,688				—				—				—

The following table sets forth certain information with respect to the value of all unexercised options and restricted stock previously awarded to the NEOs (based on the Corporation’s Common Stock price of $17.95 as of December 31, 2006).

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

						OptionAwards																Stock Awards
																														Equity
										Equity																				Incentive				Equity
										Incentive																				Plan				Incentive
										Plan																				Awards:				Plan
						Number				Awards:																				Number of				Awards:
						of				Number																				Unearned				Market or
						Securities				of																				Shares,				Payout
						Under-				Securities																				Unit or				Value of
		Number				lying				Under-												Number								Other				Unearned
		of				Unexer-				lying												of								Rights				Shares,
		Securities				cised				Unexer-												Shares				Market Value				that				that
		Underlying				Options				cised				Option								or Units				of Shares or				have				have
		Options				(#)				Unearned				Exer-				Option				of Stock				Units of Stock				not				not
		(#)				Unexer-				Options				cise				Expiration				that have				that have				Vested				Vested
Name		Exercisable				cisable				(#)				Price				Date				not vested				not vested				(#)				($)
Richard L. Carrión (1)			0				0																129,997			$	2,333,444				—				—
David H. Chafey Jr.																							63,850				1,146,100				—				—
David H. Chafey Jr.			40,482				10,120							$	14.42				2/14/2012												—				—
David H. Chafey Jr.			46,918				31,278							$	16.75				3/13/2013												—				—
David H. Chafey Jr.			30,923				46,385							$	24.05				1/16/2014												—				—
Jorge A. Junquera																							46,823				840,473				—				—
Jorge A. Junquera			35,624				8,906							$	14.42				2/14/2012												—				—
Jorge A. Junquera			41,287				27,525							$	16.75				3/13/2013												—				—
Jorge A. Junquera			27,213				40,819							$	24.05				1/16/2014												—				—
Roberto R. Herencia																							42,566				764,067				—				—
Roberto R. Herencia			32,386				8,096							$	14.42				2/14/2012												—				—
Roberto R. Herencia			37,534				25,022							$	16.75				3/13/2013												—				—
Roberto R. Herencia			24,738				37,108							$	24.05				1/16/2014												—				—
Félix M. Villamil																							25,540				458,440				—				—
Félix M. Villamil			11,029				2,757							$	14.42				2/14/2012												—				—
Félix M. Villamil			15,952				10,634							$	16.75				3/13/2013												—				—
Félix M. Villamil			17,008				25,512							$	24.05				1/16/2014												—				—
Tere Loubriel																							27,668				496,644				—				—
Tere Loubriel			18,218				4,554							$	14.42				2/14/2012												—				—
Tere Loubriel			21,113				14,075							$	16.75				3/13/2013												—				—
Tere Loubriel			13,915				20,873							$	24.05				1/16/2014												—				—
Brunilda Santos de Álvarez																							25,540				458,440				—				—
Brunilda Santos de Álvarez			18,217				4,554							$	14.42				2/14/2012												—				—
Brunilda Santos de Álvarez			21,113				14,075							$	16.75				3/13/2013												—				—
Brunilda Santos de Álvarez			13,915				20,873							$	24.05				1/16/2014												—				—
Amílcar L. Jordán																							25,540				458,440				—				—
Amílcar L. Jordán			12,025				3,006							$	14.42				2/14/2012												—				—
Amílcar L. Jordán			7,986				5,324							$	16.75				3/13/2013												—				—
Amílcar L. Jordán			5,190				7,784							$	24.05				1/16/2014												—				—
C.E. (Bill) Williams																							20,455				367,175				—				—