EMPLOYEE RETIREMENT PLANS

(a)Pension Plans

U.S. Plans:

The company maintains a non-contributory defined benefit plan for its union employees at the Elgin, Illinois facility. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2002, and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2002 upon reaching retirement age.

The company maintains a non-contributory defined benefit plan for its employees at the Smithville, Tennessee facility, which was acquired as part of the Star acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 1, 2008, and no further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 1, 2008 upon reaching retirement age.

The company also maintains a retirement benefit agreement with its Chairman ("Chairman Plan"). The retirement benefits are based upon a percentage of the Chairman’s final base salary using a weighted average rate of increase in future compensation levels of 10.0%.

Non-U.S. Plans:

The company maintains a defined benefit plan for its employees at the Wrexham, the United Kingdom facility, which was acquired as part of the Lincat acquisition. Benefits are determined based upon retirement age and years of service with the company. This defined benefit plan was frozen on April 30, 2010 prior to Middleby’s acquisition of the company. No further benefits accrue to the participants beyond this date. Plan participants will receive or continue to receive payments for benefits earned on or prior to April 30, 2010 upon reaching retirement age.

The company maintains several pension plans related to AGA and its subsidiaries (collectively, the "AGA Group"), the most significant being the Aga Rangemaster Group Pension Scheme, which covers the majority of employees in the United Kingdom. Membership in the plan on a defined benefit basis of pension provision was closed to new entrants in 2001. The plan became open to new entrants on a defined contribution basis of pension provision in 2002, but was generally closed to new entrants on this basis during 2014.

The other, much smaller, defined benefit pension plans operating within the AGA Group cover employees in France, Ireland and the United Kingdom. All pension plan assets are held in separate trust funds although the net defined benefit pension obligations are included in the company's consolidated balance sheet.

A summary of the plans’ net periodic pension cost, benefit obligations, funded status, and net balance sheet position is as follows (dollars in thousands):



	Fiscal 2016						Fiscal 2015
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost (Benefit):
Service cost	$	456		$	3,364		$	505		$	1,216
Interest cost	1,280			41,606			1,254			12,992
Expected return on assets	(777		)	(68,845		)	(813		)	(20,547		)
Amortization of net loss (gain)	126			35			694			—
Curtailment (gain) loss	—			(632		)	—			3,202
Pension settlement	—			—			—			—
	$	1,085		$	(24,472	)	$	1,640		$	(3,137	)

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	31,830		$	1,476,370		$	33,907		$	16,114
Benefit obligation – acquisition	—			—			—			1,495,089
Service cost	456			3,364			505			1,216
Interest on benefit obligations	1,280			41,606			1,254			12,992
Employee contributions	—			404			—			182
Actuarial (gain) loss	(722		)	297,754			(2,969		)	8,668
Pension settlement	—			—			—			—
Net benefit payments	(895		)	(64,466		)	(867		)	(24,179		)
Curtailment (gain) loss	—			(706		)	—			3,202
Exchange effect	—			(275,833		)	—			(36,914		)
Benefit obligation – end of year	$	31,949		$	1,478,493		$	31,830		$	1,476,370

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	12,987		$	1,287,723		$	13,575		$	15,306
Plan assets at fair value – acquisition	—			—			—			1,305,506
Company contributions	754			17,758			823			16,950
Investment gain (loss)	743			161,405			(544		)	6,173
Employee contributions	—			404			—			182
Benefit payments and plan expenses	(895		)	(64,466		)	(867		)	(24,179		)
Exchange effect	—			(228,959		)	—			(32,215		)
Plan assets at fair value – end of year	$	13,589		$	1,173,865		$	12,987		$	1,287,723

Funded Status:
Unfunded benefit obligation	$	(18,360	)	$	(304,628	)	$	(18,843	)	$	(188,647	)

Amounts recognized in balance sheet at year end:
Accrued pension benefits	$	(18,360	)	$	(304,628	)	$	(18,843	)	$	(188,647	)

Pre-tax components in accumulated other comprehensive income at period end:
Net actuarial loss	$	4,908		$	206,490		$	5,725		$	25,141

Pre-tax components in recognized in other comprehensive income for the period:
Current year actuarial (gain) loss	$	(691	)	$	181,384		$	(1,612	)	$	25,141
Actuarial loss recognized	(126		)	(35		)	(694		)	—
Total amount recognized	$	(817	)	$	181,349		$	(2,306	)	$	25,141

Accumulated Benefit Obligation	$	31,041		$	1,478,435		$	30,106		$	1,475,631

Salary growth rate	n/a			1.6		%	n/a			1.5		%
Assumed discount rate	3.9		%	2.5		%	4.1		%	3.7		%
Expected return on assets	6.0		%	6.2		%	6.0		%	6.2		%

The company has engaged non-affiliated third party professional investment advisors to assist the company to develop its investment policy and establish asset allocations. The company's overall investment objective is to provide a return, that along with company contributions, is expected to meet future benefit payments. Investment policy is established in consideration of anticipated future timing of benefit payments under the plans. The anticipated duration of the investment and the potential for investment losses during that period are carefully weighed against the potential for appreciation when making investment decisions. The company routinely monitors the performance of investments made under the plans and reviews investment policy in consideration of changes made to the plans or expected changes in the timing of future benefit payments.

The assets of the plans were invested in the following classes of securities (none of which were securities of the company):

U.S. Plans:



	Target Allocation		Percentage of Plan Assets
			2016		2015
Equity	48	%	51	%	47	%
Fixed income	40		39		39
Money market	4		3		5
Other (real estate investment trusts & commodities contracts)	8		7		9

	100	%	100	%	100	%

Non-U.S. Plans:



	Target Allocation		Percentage of Plan Assets
			2016		2015
Equity	16	%	20	%	19	%
Fixed income	45		55		44
Alternatives/Other	28		8		20
Real Estate	11		12		12
Cash and cash equivalents	—		5		5
	100	%	100	%	100	%

In accordance with ASC 820 “Fair Value Measurements and Disclosures”, the company has measured its defined benefit pension plans at fair value. The following tables summarize the basis used to measure the pension plans’ assets at fair value as of December 31, 2016 and January 2, 2016 (in thousands):

U.S. Plans:



	Fiscal 2016						Fiscal 2015
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Net Asset Value		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Net Asset Value

Short Term Investment Fund (a)	$	368	$	—	$	368	$	540	$	—	$	540

Equity Securities:
Large Cap	3,055		3,055		—		3,149		3,149		—
Mid Cap	512		512		—		383		383		—
Small Cap	455		455		—		383		383		—
International	2,917		2,917		—		2,291		2,291		—

Fixed Income:
Government/Corporate	4,367		4,367		—		4,311		4,311		—
High Yield	971		971		—		778		778		—

Alternative:
Global Real Estate Investment Trust	539		539		—		771		771		—
Commodities Contracts	405		405		—		381		381		—

Total	$	13,589	$	13,221	$	368	$	12,987	$	12,447	$	540


(a)	Represents collective short term investment fund, composed of high-grade money market instruments with short maturities.

Non-U.S. Plans:



	Fiscal 2016
Asset Category	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value

Cash and cash equivalents	$	58,131		$	4,730	$	2,886	$	—	$	50,515

Equity Securities:
UK	87,828			2,098		—		—		85,730
International:
Developed	135,186			3,547		—		—		131,639
Emerging	6,803			79		—		—		6,724
Unquoted/Private Equity	3189			0		—		—		3,189

Fixed Income:
Government/Corporate:
UK	317,621			11,203		14,009		—		292,409
International	107,882			—		103		—		107,779
Index Linked	212,327			4,205		—		—		208,122
Other	3,812			—		—		—		3,812
Convertible Bonds	160			—		—		—		160

Real Estate:
Direct	121,612			—		121,612		—		—
Indirect	10,693			138		—		—		10,555

Hedge Fund Strategy:
Equity Long/Short	61,612			—		—		—		61,612
Arbitrage & Event	64,961			—		—		—		64,961
Directional Trading & Fixed Income	30,430			—		—		—		30,430
Cash & Other	38,099			—		—		—		38,099
Direct Sourcing	1,379			—		—		—		1,379

Leveraged Loans	11,025			—		—		—		11,025

Alternative/Other	(98,885		)	—		—		95		(98,980		)

Total	$	1,173,865		$	26,000	$	138,610	$	95	$	1,009,160



	Fiscal 2015
Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Net Asset Value

Cash and cash equivalents	$	73,006	$	3,937	$	3,288	$	—	$	65,781

Equity Securities:
UK	91,269		2,565		194		—		88,510
International:
Developed	147,277		3,294		2,414		—		141,569
Emerging	6,375		77		—		—		6,298
Unquoted/Private Equity	759		—		—		—		759

Fixed Income:
Government/Corporate:
UK	168,706		10,816		19,952		—		137,938
International	126,735		—		1,046		—		125,689
Index Linked	258,502		—		—		—		258,502
Other	3,518		—		—		—		3,518
Convertible Bonds	1,471		—		—		—		1,471

Real Estate:
Direct	140,765		—		140,765		—		—
Indirect	13,617		177		—		—		13,440

Hedge Fund Strategy:
Equity Long/Short	80,230		—		—		—		80,230
Arbitrage & Event	92,635		—		—		—		92,635
Directional Trading & Fixed Income	55,424		—		—		—		55,424
Cash & Other	2,557		—		—		—		2,557
Direct Sourcing	1,655		—		—		—		1,655

Leveraged Loans	10,824		—		—		—		10,824

Alternative/Other	12,398		288		—		—		12,110

Total	$	1,287,723	$	21,154	$	167,659	$	—	$	1,098,910

The fair value of the Level 1 assets is based on observable, quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 assets is primarily based on market observable inputs to quoted market prices, benchmark yields and broker/dealer quotes. Level 3 inputs, as applicable, represent unobservable inputs that reflect assumptions developed by management to measure assets at fair value.

The expected return on assets is developed in consideration of the anticipated duration of investment period for assets held by the plan, the allocation of assets in the plan, and the historical returns for plan assets.

Estimated future benefit payments under the plans are as follows (dollars in thousands):



	U.S. Plans		Non-U.S. Plans
2017	$	977	$	54,702
2018	1,648		56,430
2019	1,653		57,493
2020	1,674		59,525
2021 through 2026	10,634		368,206

Expected contributions to the U.S. Plans and Non-U.S. Plans to be made in 2017 are $1.2 million and $3.5 million, respectively.


(b)	Defined Contribution Plans

As of December 31, 2016, the company maintained two separate defined contribution 401K savings plans covering all employees in the United States. These two plans separately cover the union employees at the Elgin, Illinois facility and all other remaining union and non-union employees in the United States. The company also maintained defined contribution plans for its UK based employees.