11-K 1 e11-k.txt POPULAR FINANCE, INC. RETIREMENT & SAVINGS PLAN 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________to __________ Commission file number 0-13818 POPULAR FINANCE, INC. RETIREMENT & SAVINGS PLAN (Full title of the Plan and address of the Plan, if different from that of the issuer named below) POPULAR, INC. 209 MUNOZ RIVERA AVENUE HATO REY, PUERTO RICO 00918 (Name of issuer of the securities held pursuant to the plan and the address of principal executive office) 2 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE DECEMBER 31, 1999 AND 1998
PAGE Financial Statements: Report of Independent Accountants................................................................. 1 Statements of Assets Available for Benefits as of December 31, 1999 and 1998........................................................ 2 Statement of Changes in Assets Available for Benefits for the year ended December 31, 1999...................................... 3 Notes to Financial Statements..................................................................... 4-9 Supplemental Schedule:* Exhibit I - Schedule of Assets Held for Investment Purposes as of December 31, 1999.................................................. 10 Signature......................................................................................... 11 Consent of Independent Accountants................................................................ 12
* Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. 3 (PricewaterhouseCoopers Logo) PricewaterhouseCoopers LLP P.O. Box 363566 San Juan, PR 00936-3566 Telephone (787) 754-9090 REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of Popular Finance, Inc. Retirement and Savings Plan. In our opinion, the accompanying statements of assets available for benefits and the related statement of changes in assets available for benefits present fairly, in all material respects, the assets available for benefits of the Popular Finance, Inc. Retirement and Savings Plan (the "Plan") (formerly Popular Consumer Services, Inc. Retirement and Savings Plan) at December 31, 1999 and 1998, and the changes in assets available for benefits for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of Assets Held for Investment Purposes as of December 31, 1999 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP June 5, 2000 Certified Public Accountants (of Puerto Rico) License No. 216 Expires Dec. 1, 2001 Stamp 1644755 of the P.R. Society of Certified Public Accountants has been affixed to the file copy of this report. 1 4 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 1999 AND 1998
1999 1998 ---------- ---------- Assets: Investments, at fair value $1,565,797 $1,209,050 ---------- ---------- Receivables: Contribution receivable 17,434 15,728 Profit sharing receivable 186,749 171,884 Dividend and interest receivable 64,285 46,927 ---------- ---------- 268,468 234,539 ---------- ---------- Cash and cash equivalents 10,644 6,556 ---------- ---------- Assets available for benefits $1,844,909 $1,450,145 ========== ==========
The accompanying notes are an integral part of these financial statements. 2 5 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS YEAR ENDED DECEMBER 31, 1999 Additions to net assets: Investment income Net depreciation in fair value of investments $ (46,185) Interest 8,664 Dividends 80,170 ----------- Total investment income 42,649 ----------- Contributions: Employer 247,055 Participants 151,707 ----------- Total contributions 398,762 ----------- Total additions 441,411 ----------- Deductions from assets - Benefits paid to participants 46,647 ----------- Net increase 394,764 Assets available for benefits: Beginning of year 1,450,145 ----------- End of year $ 1,844,909 ===========
The accompanying notes are an integral part of these financial statements. 3 6 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 1. DESCRIPTION OF PLAN Effective January 28, 1999 the Popular Consumer Services, Inc. Retirement and Savings Plan changed its name to Popular Finance, Inc. Retirement and Savings Plan (the "Plan"). The following description of the Plan provides only general information. Participants should refer to the plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan which became effective on January 1, 1995. The Plan covers substantially all employees of Popular Finance, Inc. (the "Company") (a subsidiary of Popular, Inc.) who have one year of service (work at least 1,000 hours), are age eighteen or older, and are residents of the Commonwealth of Puerto Rico. The Plan was created for the purpose of providing retirement benefits to employees and to encourage and assist employees in adopting a regular savings program by means of payroll deductions through a plan that qualifies under the applicable laws of the Commonwealth of Puerto Rico. The Plan is subject to the provisions of the Employee Retirement Security Act of 1974 ("ERISA"). Contributions Plan participants may authorize the Company to make payroll deductions under the Plan ranging from 1% to 10% of their monthly compensation before overtime, commissions, Christmas bonuses and car allowance. At no time may the Plan participant contributions exceed the lesser of 10% of the participant's compensation, as defined, or $8,000. With the approval of the Plan Administrator, participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. The Company matches participant's savings contributions at the rate of 50 cents for each dollar of a participant's pre-tax contribution, up to a maximum of 5% of participant's compensation. Additionally, the Company may make additional distributions out of its net profits in such amounts as the Company may determine, if any. Participant Accounts Each participant account is credited with the participant's contribution and allocations of (a) the Company's matching and profit sharing contribution, (b) plan earnings, and (c) forfeitures of terminated participants nonvested accounts with at least five periods of consecutive breaks in service. For purposes of the above, a break in service with respect to an employee, means an eligibility computation period (one year) during which such employee does not complete more than 500 hours of services. During the break in service period, if the terminated participant is re-employed by the Company, the current value of such forfeited amounts shall be restored to the participant's account. As of December 31, 1998, no forfeitures have occurred since the Plan is less than five years old. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. The change in value of the Plan is posted to the participants accounts on a monthly basis. 4 7 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 Vesting Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company's matching and discretionary contributions portion of their accounts plus actual earnings thereon is based on years of service. The contributions vest in accordance with the following vesting schedule:
YEARS OF SERVICE VESTING % Less than 1 0 At least 1 20 At least 2 40 At least 3 60 At least 4 80 At least 5 100
Investment Options Upon enrollment in the Plan, a participant may elect to have his/her contributions invested in one or more of the following investment funds:
FUND DESCRIPTION Dreyfus Emerging Leaders Fund An open-end fund whose investment objective seeks capital growth. The Fund seeks to achieve its objective by investing at least 65% of the value of its total assets in equity securities of domestic and foreign issuers. Vanguard-Windsor II Fund An open-end, growth and income fund. The investment objective of the Fund is to provide long-term growth of capital and income. A secondary objective is to provide current income. The Fund follows a flexible investment strategy, emphasizing income-producing equities which are believed to be under valued by the market at the time of purchase. Vanguard Total Bond Market Index An open-end mutual fund whose investment objective seeks a Fund high level of interest income. The Fund pursues its objective by investing in fixed-income securities with prescribed maturity and credit quality standards. Fidelity Advisors Equity Growth The fund invests primarily in the common and preferred stock, Institutional Fund and securities convertible into common stock of companies with above average earnings or sales growth. Emphasis is placed on smaller less well-known companies. Bankers Trust International Equity An open-end, no-load fund whose investment objective seeks Fund long-term capital appreciation. The Fund seeks to achieve its objective by investing in foreign equity securities or other securities with equity characteristics. The fund changed its name to Deutsche International Equity Fund effective January 31, 2000 Popular, Inc. Common Stock Investment in Popular, Inc.'s common stock. Popular, Inc. is the Company's ultimate parent.
5 8 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 Participants may change their investment options quarterly. Payments of Benefits Plan participants are permitted to make withdrawals from the Plan subject to provisions in the Plan agreement and only from after-tax contributions. If a participant suffers financial hardship, as defined in the Plan agreement, the participant may request a withdrawal only from his or her contributions. On termination of service due to disability, retirement or other reasons, a participant may elect to receive either a lump sum amount equal to the value of the vested interest in his or her account or installment payments. In the case of a participant termination because of death, the entire vested amount is paid to the person or persons legally entitled thereto. Effective June 1, 1997, an amendment was made to the Puerto Rico Internal Revenue Code Section 1165 (b) which requires that a 20% tax be withheld from termination payments in excess of after-tax participant contributions. Plan Expenses and Administration The Company is responsible for the general administration of the Plan and for carrying out the provisions thereof. Company contributions are held and managed by a trustee appointed by the Board of Directors of the Company, which invests cash received, interest and dividend income and makes distributions to participants. Banco Popular de Puerto Rico is the trustee and recordkeeper of the Plan. Banco Santander de Puerto Rico is the trustee for the investment in Popular, Inc. stock. All expenses of the Plan are borne by the Company. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Plan are prepared under the accrual method of accounting. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments Valuation and Income Recognition The Plan's investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices which represent their net asset value at the reporting date. Popular, Inc.'s common stock is valued at its quoted market price. The Plan presents in the statement of changes in assets available for benefits the net appreciation (depreciation) in the fair value of its 6 9 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on them. Purchases and sales of securities are recorded on the trade-date basis. Dividends and interest earned are recorded on the accrual basis and credited to each participant's account, as appropriate, based on proportional shares held at the date of record. Contributions Employee and Company matching contributions are recorded in the plan year period in which the Company makes the payroll deductions from the participants earnings. Transfer of Assets to Another Plans Company employees or retirees may elect to transfer their savings to other plans qualified by the Puerto Rico Department of the Treasury or by the Internal Revenue Service (the "IRS"). Payment of Benefits Benefits are recorded when paid. Other Certain amounts reflected in the 1998 financial statements have been reclassified to conform to the 1999 presentation. 3. INVESTMENTS The following table presents the Plan's investments that represent five percent or more of the Plan's assets at December 31:
DECEMBER 31, 1999 1998 # OF # OF SHARES VALUE SHARES VALUE Mutual Funds Fidelity Advisors Equity Growth Institutional 6,513.988 $ 475,651 3,616.611 $ 209,908 Vanguard Windsor II 9,147.613 $ 228,416 6,837.086 $ 204,087 Vanguard Total Bond Market Index 11,403.736 $ 109,020 -- $ -- Dreyfus Emerging Leaders 2,728.359 $ 100,213 -- $ -- Banker's Trust International Equity 3,455.291 $ 110,466 -- $ -- Strong Government Securities -- $ -- 8,014.988 $ 86,241 Lazard Small Cap Portfolio -- $ -- 8,429.770 $ 146,594 Common stock - Popular, Inc. 19,401.915 $ 542,031 15,220.633 $ 517,502
7 10 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 During 1999, the Plan's investments (including gains and losses on investments bought and sold) appreciated (depreciated) in value as follows: Mutual funds $ 56,999 Common stock (103,184) ---------- $ (46,185) ==========
4. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event the Plan terminates, the interest of each participating employee in the Plan shall be fully vested and such termination shall not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination. 5. TAX STATUS The Puerto Rico Department of Treasury has determined and informed the Company that the Master Plan and the related trust are designed in accordance with the applicable Puerto Rico income tax law and are, therefore, exempt from income taxes. The Plan and the income tax law have been amended since receiving the determination letter. However, the Plan Administrator and the Plan's tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the income tax law. Therefore, no provision for income taxes has been included in the Plan's financial statements. 6. PROFIT SHARING CONTRIBUTION RECEIVABLE The Board of directors of the Company approved an additional contribution of $186,749 and $171,884 from 1999 and 1998 profits, respectively. These amounts are recorded in the accompanying financial statements as a receivable as of December 31, 1999 and 1998, respectively. The amounts were subsequently collected during March 2000 and April 1999, respectively. 7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
1999 1998 Assets available for benefits: Assets available for benefits per the financial statements $ 1,844,909 $ 1,450,145 Amounts allocated to withdrawing participants (13,459) -- ------------ ------------ Assets available for benefits per the Form 5500 $ 1,831,450 $ 1,450,145 ============ ============ Benefits paid to participants: Benefits paid to participants per financial statements $ 46,647 $ 77,039 Amounts allocated to withdrawing participants 13,459 -- ------------ ------------ Benefits paid to participants per the Form 5500 $ 60,106 $ 77,039 ============ ============
8 11 POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, but not yet paid as of that date, whereas for financial statement purposes these amounts are not recognized until disbursed. 9 12 SUPPLEMENTAL SCHEDULE EXHIBIT I POPULAR FINANCE, INC. RETIREMENT AND SAVINGS PLAN (FORMERLY POPULAR CONSUMER SERVICES, INC. RETIREMENT AND SAVINGS PLAN) SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES FORM 5500, ITEM 27 (A) DECEMBER 31, 1999
DESCRIPTION OF CURRENT IDENTITY OF ISSUE INVESTMENT VALUE Dreyfus Emerging Leaders Fund Mutual Fund - 2,728.359 units $ 100,213 Vanguard Windsor II Fund Mutual Fund - 9,147.613 units 228,416 Vanguard Total Bond Market Index Fund Mutual Fund - 11,403.736 units 109,020 Fidelity Advisors Equity Growth Institutional Fund Mutual Fund - 6,513.988 units 475,651 Banker's Trust International Equity Fund Mutual Fund - 3,455.295 units 110,466 Popular, Inc.* Common stock - 19,401.915 shares 542,031 ----------- $ 1,565,797 ===========
* Party in-interest 10 13 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the persons who administer the employee benefit plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. POPULAR FINANCE, INC. RETIREMENT & SAVINGS PLAN (Name of Plan) By: /s/ Maria Isabel Burckhart ---------------------------------- Maria Isabel Burckhart Authorized Representative By: /s/ Jorge A. Junquera ---------------------------------- Jorge A. Junquera Authorized Representative in the United States Date: June 27, 2000 11