<PAGE> 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 MORTGAGE, INC. 1165(e) PLAN
(Full title of the Plan and address of the Plan,
if different from that of the issuer named below)
POPULAR, INC.
209 MUNOZ RIVERA AVENUE
HATO REY, PUERTO RICO 00918
(Name of issuer of the securities held pursuant to the
plan and the address of principal executive office)
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PAGE
<S> <C>
Financial Statements:
Report of Independent Accountants ................................................................ 1
Statements of Net Assets Available for Benefits as of
December 31, 1999 and 1998....................................................................... 2
Statement of Changes in Net Assets Available for
Benefits for the year ended December 31, 1999.................................................... 3
Notes to Financial Statements .................................................................... 4-8
Supplemental Schedule:*
Exhibit I - Schedule of Assets Held
for Investment Purposes as of December 31, 1999 ................................................ 9
Signature........................................................................................ 10
Consent of Independent Accountants.............................................................. 11
</TABLE>
* 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.
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[PRICEWATERHOUSECOOPERS LOGO]
PRICEWATERHOUSECOOPERS LLP
PO BOX 363566
San Juan PR 00936-3566
Telephone (787) 754 9090
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of
Popular Mortgage, Inc. 1165(e) Plan
(formerly Puerto Rico Home Mortgage 1165(e) Plan)
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Popular Mortgage, Inc. 1165(e) Plan (the "Plan") (formerly Puerto Rico
Home Mortgage 1165(e) Plan) at December 31, 1999 and 1998, and the changes in
net 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 audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PRICEWATERHOUSECOOPERS LLP
June 5, 2000
CERTIFIED PUBLIC ACCOUNTANTS
(OF PUERTO RICO)
License No. 216 Expires Dec. 1, 2001
Stamp 1644753 of the P.R. Society of
Certified Public Accountants has been
affixed to the file copy of this report
1
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
Investments, at fair value $4,832,227 $4,976,758
---------- ----------
Receivables:
Contribution receivable -- 13,065
Profit sharing receivable 192,530 126,632
Dividend and interest receivable 245,693 134,296
---------- ----------
438,223 273,993
---------- ----------
Cash and cash equivalents 15,552 330,794
---------- ----------
Total assets 5,286,002 5,581,545
---------- ----------
LIABILITIES
Investments purchased payable $ 7,115 $ --
---------- ----------
Total liabilities 7,115
---------- ----------
Net assets available for benefits $5,278,887 $5,581,545
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Additions (deductions) to net assets:
Investment loss:
Net depreciation in fair value of investments $ (620,533)
Interest 21,522
Dividends 327,949
-----------
Total investment loss (271,062)
-----------
Contributions:
Employer 276,048
Participants 224,141
Rollovers from other qualified plans 4,542
-----------
Total contributions 504,731
-----------
Total additions 233,669
-----------
Deductions from net assets -
Benefits paid to participants 536,327
-----------
Net decrease (302,658)
Net assets available for benefits:
Beginning of year 5,581,545
-----------
End of year $ 5,278,887
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF PLAN
Effective January 28, 1999 the Puerto Rico Home Mortgage 1165(e) Plan
changed its name to Popular Mortgage, Inc. 1165(e) 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 its provisions.
General
The Plan is a defined contribution plan, which became effective on
April 1, 1995. The Plan covers substantially all employees of Popular
Mortgage, Inc. (the "Company" or "Popular Mortgage") (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").
During 1998, the employees of the Mortgage Division of Banco Popular de
Puerto Rico were transferred to Popular Mortgage. The assets related to
those employees were rolled over from the Banco Popular de Puerto Rico
Profit Sharing Plan and the Banco Popular de Puerto Rico Employees'
Stock Plan (Puerto Rico) to the Plan. The total rollover amount was
approximately $3,486,000.
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, Christmas bonus and car allowance. At no time may
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 saved, on the first 6% of the
participant's compensation. Additionally, the Company may make
contributions 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 purpose 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, 1999, no forfeitures have occurred since
the Plan is less than five years old. Allocations are based on the
proportion that each participant's compensation during the Plan year
bears to the total compensation during such Plan year or account
balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the
4
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
particular account of each participant. The net change in value of the
Plan is posted to the participants accounts on a monthly basis.
Vesting
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's contributions plus actual
earnings thereon is based on years of service. The contributions vest
in accordance with the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTING %
<S> <C>
Less than 2 0
At least 2 25
At least 3 50
At least 4 75
At least 5 100
</TABLE>
Investment Options
Upon enrollment in the Plan, participants may elect to have their
contributions invested in one or more of the following investment
funds:
<TABLE>
<CAPTION>
FUND DESCRIPTION
<S> <C>
Vanguard Fixed Short-Term Federal Fund A fund that seeks to provide investors with a high level of
income consistent with the maintenance of principal and
liquidity. The Fund invests in short-term Federal Government
bonds, usually with maturities of one to four years.
Strong Government Securities Fund An open-end fund that seeks a high level of current
income. The Fund achieves its objective by investing
in a diversified portfolio of securities issued or
guaranteed by the U.S. Government.
Vanguard Wellesley Income Fund An open-end income fund. The investment objective of
the fund is to provide as much current income as is
consistent with reasonable risk. The fund also offers
the potential for moderate growth of capital. The
fund invests primarily in U.S. Government and
corporate fixed-income securities of investment-grade
quality and dividend-paying common stocks.
Fidelity Equity Income II Fund An open-end fund that seeks reasonable income with
secondary emphasis on capital appreciation. The fund
invests at least 65% of its assets in income-producing
equity securities.
Mutual Beacon Fund A fund that seeks capital appreciation. The Fund
invests in securities that are available at prices
below their intrinsic value according to factors such
as price-book ratios, price/earnings ratios and cash
flow. The Fund invests up to 50% of its assets in
securities of companies involved in mergers,
consolidations, liquidations, and reorganizations. It
is an open-end fund.
Popular, Inc. Common Stock Investment in Popular, Inc.'s common stock. Popular,
Inc. is the Company's ultimate parent.
</TABLE>
5
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 from
his or her contributions and vested employer matching 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 participant's 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 on 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 on 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.
Investment 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 investments which
consists of the realized gains or losses and the unrealized
appreciation (depreciation) on them.
6
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
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 year in
which the Company makes the payroll deductions from the participants
earnings.
Transfer of Assets to Other 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.
3. INVESTMENTS
The following table presents the Plan's investments that represent five
percent or more of the Plan's assets at December 31:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
# OF # OF
SHARES VALUE SHARES VALUE
<S> <C> <C> <C> <C>
Mutual Funds
Fidelity Equity Income II 47,139.380 $1,290,205 41,135.96 $1,233,256
Mutual Beacon 57,278.681 $ 792,737 50,159.29 $ 658,090
Common stock - Popular, Inc. 89,752.567 $2,507,416 79,763.32 $2,711,953
</TABLE>
During 1999, the Plan's investments (including gains and losses on
investments bought and sold) depreciated in value as follows:
<TABLE>
<S> <C>
Mutual funds $ (117,222)
Common stock (503,311)
-----------
$ (620,533)
===========
</TABLE>
7
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POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
4. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and
to terminate the Plan subject to the provisions of ERISA. In the event
the Plan terminates, the interest of each participant in the Plan shall
be fully vested and such termination shall not reduce the interest of
any participating employee or their beneficiaries accrued under the
Plan up to the date of such termination.
5. TAX STATUS
The Puerto Rico Department of Treasury has 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,
therefore, the Plan is 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 a profit sharing
contribution of $192,530 and $126,632 based on 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 February
2000 and June 1999, respectively.
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net assets available for benefits:
Assets available for benefits per the
financial statements $ 5,278,887 $ 5,581,545
Amounts allocated to withdrawing participants -- (470,924)
----------- -----------
Net assets available for benefits per the Form 5500 $ 5,278,887 $ 5,110,621
=========== ===========
Benefits paid to participants:
Benefits paid to participants per the financial statements $ 536,327 $ 322,779
Amounts allocated to withdrawing participants
at December 31, 1998 (470,924) 470,924
Amounts allocated to withdrawing participants
at December 31, 1997 -- (6,185)
----------- -----------
Benefits paid to participants per the Form 5500 $ 65,403 $ 787,518
=========== ===========
</TABLE>
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.
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SUPPLEMENTAL SCHEDULE
EXHIBIT I
POPULAR MORTGAGE, INC. 1165(E) PLAN
(FORMERLY PUERTO RICO HOME MORTGAGE 1165(E) PLAN)
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES FORM 5500, ITEM 27 (A)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
DESCRIPTION OF CURRENT
IDENTITY OF ISSUE INVESTMENT VALUE
<S> <C> <C>
Vanguard Fixed Short-Term Federal Fund Mutual Fund - 6,395.733 units $ 63,318
Strong Government Securities Fund Mutual Fund - 5,904.228 units 59,515
Vanguard Wellesley Income Fund Mutual Fund - 6,314.9 units 119,036
Fidelity Equity Income II Fund Mutual Fund - 47,139.38 units 1,290,205
Mutual Beacon Fund Mutual Fund - 57,278.681 units 792,737
Popular, Inc.* Common stock - 89,752.567 shares 2,507,416
----------
$4,832,227
==========
</TABLE>
* Party in-interest
9
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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 MORTGAGE, INC. 1165(e) 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
10
