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 2015						Fiscal 2014
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost:
Service cost	$	505		$	1,216		$	447		$	—
Interest cost	1,286			12,992			1,289			639
Expected return on assets	(844		)	(20,547		)	(799		)	(996		)
Amortization of net loss (gain)	694			—			(46		)	—
Curtailment loss	—			3,202			—			—
Pension settlement	—			—			—			—
	$	1,641		$	(3,137	)	$	891		$	(357	)

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	33,907		$	16,114		$	27,748		$	15,745
Benefit obligation – acquisition	2,988			1,495,089			—			—
Service cost	505			1,216			447			—
Interest on benefit obligations	1,286			12,992			1,289			639
Employee contributions	—			182			—			—
Actuarial (gain) loss	(2,960		)	8,668			5,293			1,273
Pension settlement	—			—			—			—
Net benefit payments	(922		)	(24,179		)	(870		)	(634		)
Curtailment loss	—			3,202			—			—
Exchange effect	—			(36,914		)	—			(909		)
Benefit obligation – end of year	$	34,804		$	1,476,370		$	33,907		$	16,114

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	13,575		$	15,306		$	13,324		$	15,172
Plan assets at fair value – acquisition	2,943			1,305,506			—			—
Company contributions	881			16,950			913			511
Investment (loss) gain	(590		)	6,173			208			1,133
Employee contributions	—			182			—			—
Benefit payments and plan expenses	(922		)	(24,179		)	(870		)	(634		)
Exchange effect	—			(32,215		)	—			(876		)
Plan assets at fair value – end of year	$	15,887		$	1,287,723		$	13,575		$	15,306

Funded Status:
Unfunded benefit obligation	$	(18,917	)	$	(188,647	)	$	(20,332	)	$	(808	)

Amounts recognized in balance sheet at year end:
Accrued pension benefits	$	(18,917	)	$	(188,647	)	$	(20,332	)	$	(808	)

Pre-tax components in accumulated other comprehensive income:
Net actuarial loss	$	5,811		$	20,457		$	8,030		$	2,188
Net prior service cost	—			—			—			—
Net transaction (asset) obligations	—			—			—			—
Total amount recognized	$	5,811		$	20,457		$	8,030		$	2,188

Accumulated Benefit Obligation	$	33,080		$	1,475,631		$	30,567		$	16,114

Salary growth rate	n/a			0.4		%	n/a			n/a
Assumed discount rate	4.1		%	3.7		%	3.8		%	3.6		%
Expected return on assets	5.6		%	6.2		%	6.0		%	6.3		%

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
			2015		2014
Equity	45	%	43	%	48	%
Fixed income	45		46		36
Money market	3		4		4
Other (real estate investment trusts & commodities contracts)	7		7		12

	100	%	100	%	100	%

Non-U.S. Plans:



	Target Allocation		Percentage of Plan Assets
			2015		2014
Equity	16	%	19	%	72	%
Fixed income	45		44		24
Alternatives/Other	28		20		—
Real Estate	11		12		—
Cash and cash equivalents	—		5		4
	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 January 2, 2016 (in thousands):

U.S. Plans:



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

Short Term Investment Fund (a)	$	1,371	$	—	$	1,371	$	—

Equity Securities:
Large Cap	3,402		3,149		253		—
Mid Cap	437		383		54		—
Small Cap	575		383		192		—
International	2,298		2,291		7		—

Fixed Income:
Government/Corporate	4,831		4,311		520		—
High Yield	819		778		41		—

Alternative:
Global Real Estate Investment Trust	1,773		771		1,002		—
Commodities Contracts	381		381		—		—

Total	$	15,887	$	12,447	$	3,440	$	—


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

Non-U.S. Plans:



Asset Category	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	73,005	$	64,651	$	8,354	$	—

Equity Securities:
UK	91,269		91,075		194		—
International:
Developed	147,278		144,864		2,414		—
Emerging	6,375		6,375		—		—
Unquoted/Private Equity	759		759		—		—

Fixed Income:
Government/Corporate:
UK	168,708		118,332		50,376		—
International	126,735		67,217		59,518		—
Index Linked	258,502		258,502		—		—
Other	3,518		3,518		—		—
Convertible Bonds	1,471		1,471		—		—

Real Estate:
Direct	140,764		—		140,764		—
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		3,584		51,840		—
Cash & Other	2,557		—		2,557		—
Direct Sourcing	1,655		—		1,655		—

Leveraged Loans	10,824		—		10,824		—

Alternative/Other	12,397		12,062		335		—

	$	1,287,723	$	772,587	$	515,136	$	—

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
2016	$	1,184	$	63,628
2017	1,203		65,323
2018	1,907		66,322
2019	1,909		68,185
2020 through 2025	11,913		427,101

Expected contributions to the U.S. Plans and Non-US Plans to be made in 2016 are $0.9 million and $18.7 million, respectively.


(b)	Defined Contribution Plans

As of January 2, 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 maintains defined contribution plans for its U.K. based employees.