SECURITIES AND EXCHANGE COMMISSION
Form 11-K
(MARK ONE)
[x]
|
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For fiscal year ended December 31, 2003
or
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 1-13071
The Hanover Companies Retirement Savings Plan
(Full title of the plan)
Hanover Compressor Company
Required Information
Item 4. Financial Statements and Supplemental Schedule for the Plan
The Hanover Companies Retirement Savings Plan (the “Plan”) is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In lieu of the requirements of Items 1-3 of this Form, the Plan is filing financial statements and supplemental schedule prepared in accordance with the financial reporting requirements of ERISA. The Plan’s financial statements and supplemental schedule have been examined by an Independent Registered Public Accounting Firm and their report is included herein beginning on page F-1.
Exhibit
| Exhibit Number |
Description |
|
23
|
Consent of PricewaterhouseCoopers LLP | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator for the Hanover Companies Retirement Savings Plan has duly caused this Annual Report to be signed by the undersigned thereunto duly authorized.
Hanover Companies Retirement Savings Plan
Date: June 28, 2004
By: /s/ Hilary Ware
The Hanover Companies
Retirement Savings Plan
Financial Statements and Supplemental Schedule
December 31, 2003 and 2002
F-1
The Hanover Companies Retirement Savings Plan
Index
December 31, 2003 and 2002
| Page(s) |
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| F-3 | ||||
Financial Statements |
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| F-4 | ||||
| F-5 | ||||
| F-6 | ||||
Supplemental Schedule* |
||||
| F-13 | ||||
| * | 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. | |||||||
| Consent of PricewaterhouseCoopers LLP | ||||||||
F-2
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
The Hanover Companies Retirement Savings 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 Hanover Companies Retirement Savings Plan (the “Plan”) at December 31, 2003 and 2002, and the changes in net assets available for benefits for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2003, 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. The 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.
PricewaterhouseCoopers LLP
Houston, Texas
June 28, 2004
F-3
The Hanover Companies Retirement Savings Plan
| 2003 | 2002 | |||||||
Assets |
||||||||
Investments |
||||||||
Hanover Compressor Company common stock,
at fair value |
$ | 7,590,762 | $ | 5,270,054 | ||||
Mutual funds, at fair value |
48,102,139 | 39,141,220 | ||||||
Common collective trusts, at fair value |
20,427,941 | 15,536,025 | ||||||
Other common stocks, at fair value |
257,284 | 90,817 | ||||||
Participant loans, at cost |
2,452,159 | 2,393,349 | ||||||
Total investments |
78,830,285 | 62,431,465 | ||||||
Receivables |
||||||||
Employer contribution |
582,125 | 164,665 | ||||||
Net assets available for benefits |
$ | 79,412,410 | $ | 62,596,130 | ||||
The accompanying notes are an integral part of these financial statements.
F-4
The Hanover Companies Retirement Savings Plan
Additions to net assets attributed to |
||||
Investment income |
||||
Net appreciation in fair value of mutual funds |
$ | 9,137,650 | ||
Net appreciation in fair value of common collective trusts |
744,088 | |||
Net appreciation in fair value of Hanover Compressor Company
common stock |
1,436,066 | |||
Net appreciation in fair value of other common stock |
76,465 | |||
Dividend income |
1,102,609 | |||
Interest income |
146,461 | |||
Total investment income |
12,643,339 | |||
Contributions |
||||
Employer contributions |
2,283,784 | |||
Participant contributions |
6,037,321 | |||
Participant rollover contributions |
242,254 | |||
Plan mergers (Note 5) |
216,942 | |||
Total contributions |
8,780,301 | |||
Total additions to net assets |
21,423,640 | |||
Deductions from net assets attributed to |
||||
Benefits paid |
4,458,124 | |||
Administrative expenses |
149,236 | |||
Total deductions from net
assets |
4,607,360 | |||
Net increase in net assets available for benefits |
16,816,280 | |||
Net assets available for benefits |
||||
Beginning of year |
62,596,130 | |||
End of year |
$ | 79,412,410 | ||
The accompanying notes are an integral part of these financial statements.
F-5
The Hanover Companies Retirement Savings Plan
| 1. | Description of Plan | |||
| The Hanover Companies Retirement Savings Plan (the “Plan”) was adopted effective January 1, 1994, by Hanover Compressor Company (“Hanover”) and replaced the Company’s former plan, the Hanover Energy Employee’s Savings Plan. On December 29, 1999, the sponsor of the Plan became Hanover Compression Limited Partnership (the “Company” or the “Plan Sponsor”), an indirect wholly owned subsidiary of Hanover. | ||||
| The following description of the Plan provides only general information. Participants should refer to the plan document for a more complete description of the Plan’s provisions. | ||||
| General | ||||
| The Plan is a defined contribution plan covering all domestic employees of the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). | ||||
| Participation | ||||
| A domestic employee of the Company is generally eligible to become a participant in the Plan upon attainment of eighteen years of age and six months of service with the Company. Participants may elect to discontinue participation in the Plan at any time. | ||||
| Contributions | ||||
| Participants may contribute on a pretax basis up to 25% of their compensation, as defined in the plan document. Participants may also elect to make rollover contributions to the Plan from other qualified retirement plans. Participant contributions may not exceed the maximum statutory limit, which was $12,000 for the plan year ended December 31, 2003, except that participants age 50 or older during the plan year may elect to make an additional contribution which could not exceed $2,000 during the year ended December 31, 2003. Participants may change their contribution percentage at any time during the plan year. | ||||
| Prior to January 1, 2003, the Company made discretionary matching contributions to the Plan in the form of Hanover common stock of 35% of each participant’s contributions to the Plan up to an annual maximum of $1,000 per plan participant. Participants were required to be employed by the Company on the last day of the plan year to receive their allocation of Company matching contributions for the plan year. | ||||
| Effective January 1, 2003, the Plan was amended with regards to Company matching contributions. Company matching contributions, which are discretionary and subject to change at the election of the Company at any time, are determined based on each participant’s eligible compensation (as defined in the plan document) and contributed to the Plan in cash and invested in each individual participant’s account in accordance with their investment allocation elections on a quarterly basis. For the year ended December 31, 2003, Company matching contributions were made to each participant’s account at a rate of 50% of each participant’s contributions up to 6% of eligible compensation. | ||||
F-6
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| Participant Accounts | ||||
| Each participant’s account is credited with the participant’s contributions, Company matching contributions and an allocation of Plan earnings and forfeitures of terminated participants’ nonvested accounts. All Plan assets are allocated to individual participant account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account balance. | ||||
| Prior to January 1, 2003, all Company matching contributions to the Plan were made in the form of Hanover common stock. With regards to these matching contributions, participants were not able to withdraw or reallocate such amounts to other Plan investment options until the participant terminated participation in the Plan. Effective January 1, 2003, the Plan was amended and this restriction was removed and participants were given the option to transfer existing balances in the Hanover common stock to other investment options of the Plan. | ||||
| Vesting | ||||
| Prior to January 1, 2003, plan participants became vested in Company matching contributions, including reallocated forfeitures, and actual earnings thereon at the rate of 20% per year after two years of employment with the Company. Effective January 1, 2003, the Plan was amended to provide for participant vesting in Company matching contributions, including reallocated forfeitures, and actual earnings thereon at the rate of 20% per year after one year of employment with the Company subject to certain limitations defined in the plan document. Participants become 100% vested in Company matching contributions upon death, disability or attainment of normal retirement age. | ||||
| Forfeitures | ||||
| Forfeited nonvested Company contributions are allocated to plan participants on an annual basis as an additional Company matching contribution on a pro rata basis based on each plan participant’s total matchable contributions for the plan year. Plan participants must be employed by the Company at the end of the plan year in order to receive their share of the forfeiture allocation. For the year ended December 31, 2003, forfeited nonvested amounts totaling $49,455 were allocated to plan participants. As of December 31, 2003 and 2002, there were $179,664 and $141,305 respectively of forfeited nonvested accounts which had not yet been allocated to plan participants. | ||||
| Investment Options | ||||
| Participants are able to invest their contributions in various investment options offered by the Plan including mutual funds, common collective trusts and Hanover common stock. In addition, participants may establish individual brokerage accounts under the Plan to invest their contributions in specific stocks, bonds and other securities, subject to certain limitations. Participants may change their investment elections at any time. | ||||
| Payment of Benefits | ||||
| A participant may elect to withdraw any part of his or her vested account upon retirement, termination of employment, death or disability or attainment of age 59-1/2. Withdrawals of vested balances due to immediate and heavy financial need are also permitted subject to the terms of the plan document and are limited to one withdrawal per participant per plan year. | ||||
F-7
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| With the exception of Hanover common stock, all distributions from the Plan are made in a lump-sum cash payment. Participants may elect to receive a distribution of Hanover common stock in shares of Hanover common stock rather than cash. A distribution may be made to terminated participants with vested balances less than or equal to $5,000. | ||||
| Participant Loans | ||||
| Participants may borrow from their accounts a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of the value of the participant’s vested account balance in the Plan. Loans are secured by one-half of the vested balance in the participant’s account and bear interest at a rate determined by the plan administrator in accordance with the terms of the plan document. As of December 31, 2003 and 2002, the interest rate on outstanding loans ranged from 5.0% to 11.5% and 5.25% to 11.5%, respectively. Loan repayments are made through payroll deductions and interest paid on loans is credited to the applicable participant’s account. Participant loans are generally repaid over a period not to exceed five years. | ||||
| Administration | ||||
| The Plan is sponsored by the Company and certain officers and employees of the Company serve as the plan administrator. The plan administrator has the power and duty to take all actions and make all decisions necessary to properly carry out the provisions of the Plan subject to the terms of the plan document. These powers and duties include, among other things, the interpretation of Plan provisions and the engagement of a trustee, record keeper, investment manager, legal counsel, independent registered public accounting firm and other such specialists as are deemed necessary for operation of the Plan. AMVESCAP National Trust Company (“ANTC”) is the trustee of the Plan and AMVESCAP Retirement Inc. (“ARI”) is the Plan’s recordkeeper. | ||||
| Expenses of the Plan | ||||
| Expenses associated with sponsoring and maintaining the Plan are generally paid for by the Company. Administrative expenses reflected on the accompanying statement of changes in net assets available for benefits for the year ended December 31, 2003, represent the sum of charges to individual participant accounts for participant specific transactions and certain administrative expenses of the Plan which are allocated to participant accounts on a per capita basis in accordance with the plan document. | ||||
| 2. | Summary of Significant Accounting Policies | |||
| The financial statements of the Plan are prepared on an accrual basis in accordance with accounting principles generally accepted in the United States of America. The following is a summary of the Plan’s significant accounting policies: | ||||
| Use of Estimates | ||||
| The preparation of the Plan’s financial statements in conformity with accounting principles generally accepted in the United States of America requires the plan administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and changes in net assets available for benefits during the reporting period and, when applicable, disclosures of contingent assets and liabilities at the date of the preparation of the financial statements. Actual results could differ from those estimates. | ||||
| Payment of Benefits | ||||
| Benefits are recorded when paid. | ||||
F-8
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| Valuation of Investments | ||||
| The Plan’s investments in mutual funds and common stocks are stated at fair market value based on period ending quoted market prices. Common collective trusts are stated at fair market value of the applicable trusts’ underlying net assets. Participant loans are valued at cost, which approximates fair market value. | ||||
| Investment Income Recognition | ||||
| The net appreciation (depreciation) in fair value of investments includes the realized gain or loss on investments bought and sold during the year as well as the unrealized change in fair value of such investments during the year. Purchases and sales of securities are reflected on a trade-date basis. Dividend income is recorded on the ex-dividend date and interest income is recorded as earned. | ||||
| Certain of the Plan’s investments pay investment advisory fees and/or 12b-1 fees and administrative expenses. These fees are reflected in the valuation of these investments. | ||||
| 3. | Concentrations of Credit and Market Risk | |||
| Certain investments, including the common stock of Hanover, potentially subject the Plan to concentrations of credit and market risk. The Plan does not obtain or require collateral for these investments. Changes in the domestic and international economic environment and other factors outside the control of the Plan have a direct impact on the market value and/or credit risk of the Plan’s investments. It is reasonably possible that changes in the economic environment will occur in the near term and that such changes will have a material effect on the market value of the Plan’s investments and/or credit risk relating to such investments. | ||||
| 4. | Investments | |||
| Plan investments as of December 31, 2003 and 2002, that represent 5% or more of the Plan’s net assets available for benefits are as follows: | ||||
| 2003 | 2002 | |||||||
Common stock |
||||||||
Hanover Compressor Company |
$ | 7,590,762 | $ | 5,270,054 | ||||
Common/collective trusts |
||||||||
INVESCO Core Fixed Income |
6,153,436 | 5,584,323 | ||||||
INVESCO Stable Value |
12,347,259 | 8,810,401 | ||||||
Mutual funds |
||||||||
Schlumberger Stock Fund |
11,501,547 | 9,975,534 | ||||||
AIM Balanced Fund - A Shares |
15,113,119 | 16,121,667 | ||||||
American Growth Fund of America |
5,886,562 | 3,531,475 | ||||||
AIM Basic Value Fund - A Shares |
6,225,013 | 4,114,003 | ||||||
| The Schlumberger stock fund and Transocean stock fund are not available for future contributions by participants. |
F-9
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| 5. | Plan Mergers | |||
| Effective January 1, 2003, the Company merged the assets of two similar defined contribution retirement plans into the Plan. Such plans were sponsored by certain of the Company’s operating subsidiaries prior to the Company’s acquisition of these entities. The participants in these plans became eligible to participate in the Plan in conjunction with the Company’s acquisition of the applicable entity. Such acquisitions were completed by the Company in June and September, 2001. | ||||
| 6. | Plan Termination | |||
| Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contribution at any time and to terminate the Plan subject to the provisions of ERISA. If the Plan were to be terminated in the future, all participants would immediately become fully vested in their entire account balance at the time of the Plan’s termination. | ||||
| 7. | Tax Status | |||
| The Internal Revenue Service has determined and informed ARI by a letter dated August 30, 2001, that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (“IRC”). As a result, it is believed that the Plan is exempt from taxation under the applicable sections of the IRC. The Plan was amended during 2003. The plan administrator and Plan’s legal counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. | ||||
| 8. | Party-In-Interest Transactions | |||
| Certain Plan investments are shares of mutual funds managed by ANTC. ANTC is the trustee as defined by the Plan, and therefore, these transactions qualify as party-in-interest. | ||||
| Additionally, the Plan provides for investment in shares of Hanover common stock. As the Company is an indirect wholly owned subsidiary of Hanover, these transactions qualify as party-in-interest transactions under ERISA. | ||||
| 9. | Legal Proceedings | |||
| On and after March 26, 2003, three plaintiffs filed separate putative class actions collectively against Hanover and certain named individuals (and other purportedly unknown defendants) in the United States District Court for the Southern District of Texas relating to the Plan. The alleged classes were comprised of persons who participated in or were beneficiaries of the Plan, which was established by the Company pursuant to Section 401(k) of the United States Internal Revenue Code of 1986, as amended. The purported class actions sought relief under the Employee Retirement Income Security Act of 1974 (“ERISA”) based upon Hanover’s and the individual defendants’ alleged mishandling of the Plan. The three ERISA putative class actions were entitled: Kirkley v. Hanover, Case No. H-03-1155; Angleopoulos v. Hanover, Case No. H-03-1064; and Freeman v. Hanover, Case No. H-03-1095. | ||||
| Commencing in February 2002, approximately 15 putative securities class action lawsuits were filed against Hanover and certain of its current and former officers and directors in the United States District Court for the Southern District of Texas. These class actions (together with subsequently filed actions) were consolidated into one case, Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust, On Behalf of Itself and All Others Similarly Situated, Civil Action No. H-02-0410, naming as defendants Hanover, Michael McGhan, Michael O’Connor, and William Goldberg. On January 7, 2003, the court entered an order appointing Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust and others as lead plaintiffs, and appointing Milberg, Weiss, Bershad, Hynes & Lerach LLP as lead counsel. An amended complaint was filed by lead plaintiffs on September 5, 2003, in which they sought relief under Section 10(b) of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933 against Hanover, certain former officers and directors, and Hanover’s auditor, PricewaterhouseCoopers LLP, on behalf of themselves and the class of persons who purchased Hanover securities during the class period, which is between May 4, 1999, and December 23, 2002, inclusive. | ||||
| Beginning in February 2002, four derivative lawsuits were filed in the United States District Court for the Southern District of Texas, two derivative lawsuits were filed in state district court for Harris County, Texas (one of which was nonsuited and the second of which was removed to the United States District Court for the Southern District of Texas), and one derivative lawsuit was filed in the Court of Chancery for the State of Delaware. These derivative suits, which were filed by certain of Hanover’s shareholders purportedly on behalf of | ||||
F-10
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| Hanover, alleged, among other things, that its directors breached their fiduciary duties to Hanover shareholders in connection with certain of the transactions that were restated in 2002, and sought unspecified amounts of damages, interest, and costs, including legal fees. The derivative lawsuits in the United States District Court for the Southern District of Texas were consolidated on August 19 and August 26, 2002. | ||||
| On August 1, 2003, the three ERISA actions described above were consolidated into the Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust securities class action. On October 9, 2003, a consolidated amended complaint was filed by the plaintiffs in the ERISA class action against Hanover, Michael McGhan, Michael O’Connor, and William Goldberg on behalf of themselves and a class of persons who purchased or held Hanover securities in the Plan during the class period, which is from May 4, 1999, to December 23, 2002. On October 2, 2003, the consolidated derivative lawsuit described above was consolidated into the Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust securities class action. Following this consolidation, two actions remained against the Company: the Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust action pending in the United States District Court for the Southern District of Texas (which asserted securities claims, derivative claims, and ERISA claims against the Company and others) and a single derivative action pending in the Delaware Court of Chancery. | ||||
| On October 23, 2003, Hanover entered into a Stipulation of Settlement, which settled all of the claims underlying the putative securities class action, the putative ERISA class action and the shareholder derivative actions described above. The terms of the settlement provided for Hanover to: (1) make a cash payment of approximately $30,000,000 (of which $26,700,000 was funded by payments from Hanover’s directors and officers insurance carriers), (2) issue 2,500,000 shares of its common stock, and (3) issue a contingent note with a principal amount of approximately $6,700,000. The note is payable, together with accrued interest, on March 31, 2007, but will be extinguished (with no money owing under it) if Hanover’s common stock trades at or above the average price of $12.25 per share for 15 consecutive trading days at any time between March 31, 2004, and March 31, 2007. In addition, upon the occurrence of a change of control that involves Hanover, if the change of control or shareholder approval of the change of control occurs before February 9, 2005, which is twelve months after final court approval of the settlement, Hanover will be obligated to contribute an additional $3,000,000 to the settlement fund. As part of the settlement, Hanover has also agreed to implement corporate governance enhancements, including allowing shareholders owning more than 1% but less than 10% of its outstanding common stock to participate in the process to appoint two independent directors to its board of directors (pursuant to which on February 4, 2004, Hanover appointed Margaret K. Dorman and Stephen M. Pazuk to our board of directors) and making certain changes to our code of conduct. | ||||
| GKH Investments, L.P. and GKH Private Limited (collectively “GKH”) which, as of December 31, 2003, together owned approximately 10% of Hanover’s outstanding common stock and which sold shares in our March 2001 secondary offering of common stock, are parties to the settlement and have agreed to settle claims against them that arise out of that offering as well as other potential securities, ERISA, and derivative claims. The terms of the settlement provide for GKH to transfer 2,500,000 shares of Hanover common stock from their holdings or from other sources to the settlement fund. | ||||
| On October 24, 2003, the parties moved the United States District Court for the Southern District of Texas for preliminary approval of the proposed settlement and sought permission to provide notice to the potentially affected persons and to set a date for a final hearing to approve the proposed settlement. On December 5, 2003, the court held a hearing and granted the parties’ motion for preliminary approval of the proposed settlement and, among other things, ordered that notice be provided to appropriate persons and set the date for the final hearing. No objections to the settlement or requests to be excluded from the settlement were received prior to the deadline set by the court. | ||||
| The final hearing was held on February 6, 2004, and on February 9, 2004, the United States District Court for the Southern District of Texas entered three Orders and Final Judgments, approving the settlement on the terms agreed upon in the Stipulation of Settlement with respect to all of the claims described above, including the dismissal of each of the actions, with the exception of the derivative action (noted above) filed in the Delaware Court of Chancery. The court also entered an Order and Final Judgment approving the plans of allocation with respect to each action, as well as an Order and Final Judgment approving the schedule of attorneys’ fees for counsel for the settling plaintiffs. | ||||
F-11
The Hanover Companies Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
| The time in which these Orders and Final Judgments may be appealed expired on March 10, 2004, without any appeal being lodged. In addition, on March 16, 2004, the Delaware Court of Chancery dismissed the derivative action filed in that court. The settlement has therefore become final and will be implemented according to its terms. Hanover’s independent auditor, PricewaterhouseCoopers, is not a party to the settlement and remains a party to the securities class action. | ||||
| In connection with the settlement of the putative ERISA class actions and the putative securities class action, settlement funds were established for the benefit of class members (the ERISA Settlement Fund and the Securities Settlement Fund, respectively). Participants in the Plan may be entitled to a distribution of a portion of one or both of these Funds. | ||||
| If a participant in the Plan experienced a decline in dollar value of Hanover common stock held in such participant’s Plan account during the class period (a “loss”), in connection with their holdings of and transactions in Hanover Common Stock in the Plan, they may be an ERISA class member and thus eligible to participate in the distribution of the ERISA Settlement Fund. The value of the ERISA Settlement Fund at the time the Stipulation of Settlement was executed was $1,775,000 in cash, which Hanover deposited into an interest-bearing account. After deducting a portion of the ERISA Settlement Fund to pay certain taxes, fees, and expenses associated with the maintenance of the ERISA Settlement Fund and the settlement of the ERISA actions, the remainder of the ERISA Settlement Fund will be distributed to ERISA class members as allowed by the plan of allocation approved by the court. An ERISA class member will receive a distribution from the ERISA Settlement Fund based on the plan of allocation approved by the court and on the number and amount of other claims made against the ERISA Settlement Fund, after all permitted deductions have been taken. | ||||
| In addition to being members of the ERISA class, Plan participants may also be members of the securities class, and thus may be entitled to participate in the distribution of the Securities Settlement Fund. If a Plan participant had a net loss, after all profits from transactions in Hanover securities during the class period are subtracted from all losses, then they are eligible to receive a distribution from the Securities Settlement Fund. The value of the Securities Settlement Fund at the time the Stipulation of Settlement was executed was more than $80,000,000, consisting of cash, Hanover Common Stock, and a note with a face amount of approximately $6,700,000. After deducting a portion of the Securities Settlement Fund to pay certain taxes, fees, and expenses associated with the maintenance of the Fund and the settlement of the securities actions, the balance will be distributed to the securities class members according to the plan of allocation approved by the court and the amount of other claims made against the Securities Settlement Fund. | ||||
| To the extent that Plan participants are entitled to receive a portion of the ERISA Settlement Fund, such amounts will be added to their accounts in the Plan at the time amounts from the settlement are paid to the Plan. If no such Plan account currently exists, distributions will be made to such account as the ERISA class member may specify. Should participants in the Plan be entitled to receive a portion of the Securities Settlement Fund, such amounts will be distributed separately and in a manner to be determined by the court-appointed administrator of the Securities Settlement Fund. | ||||
| 10. | Mutual Fund Industry Investigations | |||
| We understand that various state and federal regulators, including the SEC and the New York State Attorney General are investigating alleged illegal trading practices, namely late trading and market timing, committed by certain mutual fund companies, including the following fund companies that sponsor investment options offered by the Plan: Amvescap PLC (AIM Funds and INVESCO Funds), Franklin Resources, Inc. (Franklin Templeton Funds) and Janus Capital Group (Janus Funds). | ||||
| Since it is premature to judge the outcome of these investigations, and a large number of mutual fund companies are under scrutiny, at present the Company has determined not to make any changes to the Plan in response to these investigations. Developments regarding these investigations will continue to be monitored by the Company. There has been no provision included in the financial statements for any restitution or settlement payments that may arise as a result of these investigations or from any possible, future litigation. | ||||
F-12
The Hanover Companies Retirement Savings Plan
Schedule of Assets (Held at End of Year)
| (d) | (e) | |||||||||||
| (b) | (c) | Historical | Current | |||||||||
| (a) |
Identity of Issuer |
Description of Asset |
Cost |
Value |
||||||||
* |
Hanover Compressor Company | Common stock | $ | 10,722,719 | $ | 7,590,762 | ||||||
| APT Satellite Holding | Common stock | 931 | 833 | |||||||||
| Activision Inc | Common stock | 987 | 983 | |||||||||
| Anadarko Corp | Common stock | 3,393 | 3,845 | |||||||||
| Anheuser Busch Cos | Common stock | 552 | 527 | |||||||||
| Bema Gold Corp | Common stock | 1,049 | 930 | |||||||||
| Calpine Corp | Common stock | 15,534 | 13,949 | |||||||||
| Coeur D Alene Mines Corp | Common stock | 1,376 | 1,734 | |||||||||
| Conagra Inc NFSC | Common stock | 148 | 132 | |||||||||
| Dell Computer Corp | Common stock | 2,623 | 3,398 | |||||||||
| Double Eagle Petroleum | Common stock | 9,937 | 9,150 | |||||||||
| Dynegy Inc. | Common stock | 1,143 | 2,144 | |||||||||
| Ecollege Com | Common stock | 360 | 277 | |||||||||
| Emcompass Svcs | Common stock | 900 | — | |||||||||
| Energy Conversion Devices Inc. | Common stock | 2,940 | 2,528 | |||||||||
| Evergreen RES Inc. | Common stock | 3,790 | 6,502 | |||||||||
| FPL Group Inc. | Common stock | 2,673 | 3,301 | |||||||||
| GMX Res Inc | Common stock | 706 | 1,203 | |||||||||
| Halliburton Co. | Common stock | 1,396 | 2,612 | |||||||||
| Interwoven Inc. | Common stock | 530 | 672 | |||||||||
| Krispy Kreme Doughnuts Inc. | Common stock | 1,253 | 1,354 | |||||||||
| Lowes Companies | Common stock | 142 | 111 | |||||||||
| Medco Health Solution Inc | Common stock | — | 306 | |||||||||
| Merck & Co. Inc. | Common stock | 3,783 | 3,537 | |||||||||
| Miramar Mng Corp | Common stock | 650 | 771 | |||||||||
| NASDAQ 100 TR Unit Ser 1 | Common stock | 2,309 | 3,647 | |||||||||
| North American Palladium Ltd | Common stock | 776 | 793 | |||||||||
| Northgate Expl. Ltd | Common stock | 867 | 820 | |||||||||
| Novellus | Common stock | 2,366 | 4,205 | |||||||||
| Phosphate Resources Partners | Common stock | 630 | 665 | |||||||||
| Pixar Inc | Common stock | 166 | 139 | |||||||||
| Prolong Intl Corp | Common stock | 351 | 380 | |||||||||
| Raytheon Co. | Common stock | 1,861 | 1,513 | |||||||||
| Southwest Airlines | Common stock | 480 | 404 | |||||||||
| Texas Instruments Inc. | Common stock | 6,577 | 9,702 | |||||||||
| Ultra Petroleum Corp. | Common stock | 6,075 | 18,465 | |||||||||
| Walgreen Company | Common stock | 5,023 | 5,682 | |||||||||
| Western Silver | Common stock | 882 | 1,056 | |||||||||
| Wheaton River Minerals Ltd | Common stock | 1,403 | 1,794 | |||||||||
| Williams Cos. Inc. | Common stock | 62,400 | 112,454 | |||||||||
| Ingersoll Rand Co. | Common stock | 3,889 | 6,809 | |||||||||
| Wal Mart Stores, Inc. | Common stock | 27,663 | 27,628 | |||||||||
| World Wrestling Fedn | Common stock | 305 | 328 | |||||||||
F-13
The Hanover Companies Retirement Savings Plan
Schedule of Assets (Held at End of Year)
| (d) | (e) | |||||||||||
| (b) | (c) | Historical | Current | |||||||||
| (a) |
Identity of Issuer |
Description of Asset |
Cost |
Value |
||||||||
* |
Invesco Dynamics | Mutual Fund | 75,326 | 90,174 | ||||||||
* |
Invesco Technology II | Mutual Fund | 517,499 | 524,622 | ||||||||
* |
Invesco Financial Services | Mutual Fund | 92,787 | 104,197 | ||||||||
| Schlumberger Stock Fund | Mutual Fund | 9,823,914 | 11,501,547 | |||||||||
| Transocean Stock Fund | Mutual Fund | 1,214,872 | 949,012 | |||||||||
| American Century Equity Income Advisor | Mutual Fund | 547,096 | 618,544 | |||||||||
| American Europacific Growth | Mutual Fund | 636,351 | 751,275 | |||||||||
* |
AIM Balanced Fund - A Shares | Mutual Fund | 14,020,300 | 15,133,119 | ||||||||
| American Growth Fund of America | Mutual Fund | 5,243,554 | 5,886,562 | |||||||||
| Excelsior Value & Restructuring | Mutual Fund | 405,146 | 476,689 | |||||||||
* |
AIM Small Cap-Growth-Class A | Mutual Fund | 1,304,046 | 1,505,769 | ||||||||
* |
AIM Basic Value Fund - A Shares | Mutual Fund | 5,657,659 | 6,225,013 | ||||||||
| Janus Advisor International-Class Retirement | Mutual Fund | 259,499 | 310,177 | |||||||||
* |
AIM Mid Cap Core Equity | Mutual Fund | 620,181 | 735,485 | ||||||||
* |
AIM Global Healthcare | Mutual Fund | 415,114 | 446,485 | ||||||||
| SSGA Money Market | Mutual Fund | 653,661 | 653,661 | |||||||||
| Credit Suisse War Pincus | Mutual Fund | 11,000 | 14,759 | |||||||||
| Excelsior Energy & Natural Resources | Mutual Fund | 17,239 | 22,810 | |||||||||
* |
Invesco Financial Services | Mutual Fund | 8,549 | 10,451 | ||||||||
| Janus Invt Growth & Income | Mutual Fund | 3,989 | 4,785 | |||||||||
| Janus Enterprise | Mutual Fund | 2,977 | 3,972 | |||||||||
| White Oak Growth Stock | Mutual Fund | 7,010 | 10,444 | |||||||||
| PIMCO RCM Global Technology | Mutual Fund | 2,121 | 3,563 | |||||||||
| Prudent Bear FDS Inc. | Mutual Fund | 56,046 | 46,448 | |||||||||
| Janus Venture | Mutual Fund | 146,775 | 173,923 | |||||||||
| Franklin Balance Sheet Investment | Mutual Fund | 752,215 | 877,944 | |||||||||
| Fidelity Advisor Mid Cap | Mutual Fund | 810,141 | 1,020,710 | |||||||||
* |
Invesco 500 Index Trust | Common collective trust | 1,163,660 | 1,319,802 | ||||||||
* |
Invesco Structured Small Cap Value Equity | Common collective trust | 465,759 | 607,444 | ||||||||
* |
Invesco Core Fixed Income | Common collective trust | 5,618,636 | 6,153,436 | ||||||||
* |
Invesco Stable Value | Common collective trust | 12,347,259 | 12,347,259 | ||||||||
* |
Participant Loans | Interest rates ranging from 5.00% to 11.5% with varying maturity dates | 2,452,159 | 2,452,159 | ||||||||
| $ | 76,256,078 | $ | 78,830,285 | |||||||||
* Denotes party in interest as defined by ERISA.
F-14