Exhibit
10.2
FIELD GROUP PENSION
PLAN
RECOVERY PLAN
(Revised July
2008)
Introduction
This recovery
plan has been prepared by the Trustee to satisfy the requirements
of Section 226 of the Pensions Act 2004, after obtaining the advice
of Alison Higginbottom, the Scheme Actuary, and after obtaining the
agreement of Chesapeake Plc (formerly Field Group Plc).
It follows the
actuarial valuation of the Plan as at 5 April 2006, which revealed
a funding shortfall (technical provisions minus value of assets) of
£43.0 million.
The original
version of this recovery plan dated 8 June 2007 has been revised in
July 2008. Under the original recovery plan Chesapeake Plc
(formerly Field Group Plc) was required to make additional
contributions in 2007 and 2008 if these were necessary to bring the
Plan’s funding ratio up to 90% at 5 April 2008. The Annual
Actuarial Report as at 5 April 2008 revealed an estimated funding
shortfall of £58.9 million at 5 April 2008 equivalent to a
funding ratio of 75%. Under the original recovery plan Chesapeake
Plc was required to make a total contribution (over and above those
needed to cover benefits being earned in the future and expenses)
of £35.6 million by 15 July 2008. Chesapeake Plc is unable to
afford this level of contribution in 2008 and so the Trustee and
Chesapeake Plc have agreed a revised recovery plan after obtaining
the advice of the Scheme Actuary.
Steps to be
taken to ensure that the statutory funding objective is
met
To eliminate
this funding shortfall, the Trustee and the employer have agreed
that additional contributions (i.e. contributions over and above
those needed to cover benefits being earned in the future and
expenses) will be paid to the Plan by Chesapeake Plc as
follows:
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£6 million
each year for 15 years (from 2007 to 2021 inclusive) payable in
annual instalments by 15 July each year, save that the contribution
payable in 2008 shall be paid by 16 July 2008.
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These amounts
are in addition to the additional contribution of £5.0m which
was paid in July 2006.
The Scheme
Actuary will carry out annual funding updates at 5 April each year
using assumptions determined in line with the latest Statement of
Funding Principles from time to time but with the financial
assumptions based on market conditions at the effective date of the
funding update. Should a funding update carried out at an effective
date on or after 5 April 2015 reveal that the funding shortfall
calculated at that date is estimated to have been eliminated then
the Schedule of Contributions will be revised as soon as reasonably
practicable. The revised Schedule of Contributions will not include
any further shortfall contributions under this recovery plan or, if
as a result of the immediate termination of shortfall contributions
the Scheme Actuary would be unable to provide any certificate
required under the Pensions Act 2004, will provide that shortfall
contributions under this recovery plan will continue only until the
date which the Scheme Actuary advises is the earliest he/she
considers acceptable in order to be able to provide such
certificate.
Period in
which the statutory funding objective should be met
Under this
recovery plan, if the assumptions made are borne out in practice
the funding shortfall revealed by the valuation as at 5 April 2006
will be eliminated in 8 years, which is by 15 July
2014. The assumptions are:
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technical
provisions will continue to be calculated according to the method
and assumptions set out in the statement of funding principles
dated July 2008, with financial conditions unchanged from those at
the valuation effective date.
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the experience
of the Plan will be in line with the assumptions underlying the
technical provisions.
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Under this
recovery plan, the estimated funding shortfall revealed by the
Annual Actuarial Report as at 5 April 2008 will be eliminated in 15
years from the date of the actuarial valuation as at 5 April 2006,
which is by 15 July 2021 if the assumptions underlying the 2008
update are borne out in practice. The assumptions
are:
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technical
provisions will continue to be calculated according to the method
and assumptions set out in the statement of funding principles
dated July 2008, with financial conditions updated to 5 April
2008.
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the experience
of the Plan after 5 April 2008 will be in line with the assumptions
underlying the technical provisions.
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Progress
towards meeting the Statutory Funding Objective
On the
assumptions made, 50% of the above additional contributions will be
paid in 8 years, which is by 15 July 2014.
This Recovery
Plan was agreed by the Trustee in June 2008.
This Recovery
Plan may be executed in any number of counterparts, and this has
the same effect as if the signatures on the counterparts were on a
single copy of this Recovery Plan.
Signed on
behalf of Chesapeake Plc
Signature: /s/ G.
Faller
Name: G.
Faller
Position: Director
Date: 15
Jul. 08
Signed on
behalf of Field Group Pension Trustee Limited
Signature: /s/ M. H.
O'Connell
Name:
M. H. O'Connell
Position: Chairman
Date:
15.07.08.
Field Group Pension Plan ( the Plan
)
Statement of Funding Principles (
SFP )
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Introduction
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This statement
sets out the Trustee’s policy for securing that the statutory
funding objective ( SFO ) is met. The SFO is
defined in section 222 of the Pensions Act 2004, which states that
every scheme must have sufficient and appropriate assets to cover
its technical provisions.
The original
version of this Statement of Funding Principles dated 8 June 2007
has been revised in July 2008. The original Statement of Funding
Principles stated that the employer maintained its commitment to
reach a 90% funding level by 2008, as agreed following the 2003
valuation. Chesapeake Plc (formerly Field Group Plc) is unable to
afford the contributions needed to achieve a funding level of 90%
at April 2008 and so the Statement of Funding Principles has been
revised to remove this commitment following advice from the Scheme
Actuary. Both the Recovery Plan and the Schedule of Contributions
are also being revised to reflect the removal of the commitment to
achieve a 90% funding level by 2008. The Statement of Funding
Principles has also been revised to reflect the fact that with
effect from 1 July 2008 Chesapeake Plc will meet the Plan’s
administration expenses directly as they fall due rather than
paying contributions to the Plan annually in arrears in respect of
the Plan’s expenses.
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Technical
provisions
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The technical
provisions are the amount that will be needed to pay the Plan
benefits that relate to service up to the valuation date, if the
assumptions made are borne out in practice.
The assumptions
used to calculate the technical provisions are intended to provide
a prudent estimate of the future experience of the Plan, with a
modest allowance for the future potential outperformance over gilts
from continued investment in more risky asset sectors such as
equities. There is an underlying assumption that the
Plan will continue with benefits being met from the Plan as they
fall due.
The method and
assumptions used to calculate the technical provisions are
summarised in Appendices A and B.
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Employer
contributions
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Employer
contributions are assessed by calculating the cost of future
benefit accrual using the same assumptions as for the technical
provisions:
plus
· an estimate of the cost of providing lump sum
death benefits;
reduced
by
· the contributions made by members;
adjusted
by
· the amounts needed to eliminate any shortfall
or surplus relative to the technical provisions.
The employer
will also pay an annual contribution to the Plan equal to the
Plan’s administrative expenses including the Pension
Protection Fund (PPF) and other levies collected by the Pensions
Regulator, in respect of expenses incurred before 1 July 2008. From
1 July 2008 the employer will pay the Plan’s administrative
expenses including the PPF and other levies collected by the
Pensions Regulator directly as they fall due.
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Dealing with
shortfalls
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Any shortfall
in assets compared with technical provisions identified at an
actuarial valuation will be eliminated as quickly as the employer
can reasonably afford by the payment of additional contributions in
accordance with the recovery plan agreed between the Trustee and
the employer. The additional contributions will
generally consist of a stream of regular level payments made over
the recovery period.
In determining
the recovery period at any particular valuation the following
factors will be taken into account:
· the size of the funding shortfall;
· the business plans of the employer;
· the Trustee’s assessment of the financial
covenant of the employer; and
· any contingent security offered by the
employer.
Should future
valuations reveal a deficit larger than expected, the payments
under the original plan will continue, but will be supplemented by
additional payments.
The assumptions
to be used in the shortfall elimination calculations will be the
same as those for calculating the technical provisions.
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Policy on
discretionary increases and funding strategy
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Under the
provisions of the Plan’s Trust Deed and Rules, there are
certain discretionary powers to provide or increase benefits for,
or in respect of, all or any of the members of the Plan.
The employer
has confirmed that it does not wish to make any advance provision
for any discretionary benefits that could be provided under the
Plan’s Trust Deed and Rules. Therefore no allowance for
discretionary benefits is included in the technical
provisions.
If any
discretionary increases to benefits are made, the Trustee’s
current policy is to request immediate additional contributions to
meet the cost of such increases. This policy will be
reviewed if there is a material improvement in the Plan’s
discontinuance funding level or if substantial financial security
is offered to the Plan by the employer.
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Interaction
with investment strategy
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· The assets that most closely match the
Plan’s liabilities are index-linked and fixed-interest gilts
of appropriate term compared to the liabilities.
· The Plan is partly invested in assets such as
equities that are expected, although not guaranteed, to produce a
higher return than gilts. The Trustee understands that
investing in equities reduces the expected contributions required
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