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 with no expected future increase in compensation.

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 2017						Fiscal 2016
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Net Periodic Pension Benefit:
Service cost	$	402		$	4,013		$	456		$	3,364
Interest cost	1,240			32,748			1,280			41,606
Expected return on assets	(821		)	(70,630		)	(777		)	(68,845		)
Amortization of net (gain) loss	(330		)	3,073			126			35
Curtailment loss (gain)	—			3,305			—			(632		)
Pension settlement gain	—			(313		)	—			—
	$	491		$	(27,804	)	$	1,085		$	(24,472	)

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	31,949		$	1,478,493		$	31,830		$	1,476,370
Service cost	402			4,013			456			3,364
Interest on benefit obligations	1,240			32,748			1,280			41,606
Employee contributions	—			345			—			404
Actuarial (gain) loss	(760		)	21,058			(722		)	297,754
Pension settlement gain	—			(4,017		)	—			—
Net benefit payments	(923		)	(65,160		)	(895		)	(64,466		)
Curtailment loss (gain)	—			3,305			—			(706		)
Exchange effect	—			144,459			—			(275,833		)
Benefit obligation – end of year	$	31,908		$	1,615,244		$	31,949		$	1,478,493

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	13,589		$	1,173,865		$	12,987		$	1,287,723
Company contributions	1,476			3,062			754			17,758
Investment gain	1,960			72,342			743			161,405
Employee contributions	—			345			—			404
Pension settlement loss	—			(3,254		)	—			—
Benefit payments and plan expenses	(923		)	(65,160		)	(895		)	(64,466		)
Exchange effect	—			115,339			—			(228,959		)
Plan assets at fair value – end of year	$	16,102		$	1,296,539		$	13,589		$	1,173,865

Funded Status:
Unfunded benefit obligation	$	(15,806	)	$	(318,705	)	$	(18,360	)	$	(304,628	)

Amounts recognized in balance sheet at year end:
Accrued pension benefits	$	(15,806	)	$	(318,705	)	$	(18,360	)	$	(304,628	)

Pre-tax components in accumulated other comprehensive income at period end:
Net actuarial loss	$	3,340		$	243,315		$	4,908		$	206,490

Pre-tax components in recognized in other comprehensive income for the period:
Current year actuarial (gain) loss	$	(1,898	)	$	44,316		$	(691	)	$	181,384
Actuarial gain (loss) recognized	330			(7,041		)	(126		)	(35		)
Pension settlement gain	—			(763		)	—			—
Pension settlement gain recognized	—			313			—			—
Total amount recognized	$	(1,568	)	$	36,825		$	(817	)	$	181,349

Accumulated Benefit Obligation	$	31,908		$	1,615,157		$	31,041		$	1,478,435

Salary growth rate	n/a			0.6		%	n/a			1.6		%
Assumed discount rate	3.5		%	2.3		%	3.9		%	2.5		%
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
			2017		2016
Equity	48	%	55	%	51	%
Fixed income	40		35		39
Money market	4		3		3
Other (real estate investment trusts & commodities contracts)	8		7		7

	100	%	100	%	100	%

Non-U.S. Plans:



	Target Allocation		Percentage of Plan Assets
			2017		2016
Equity	17	%	26	%	20	%
Fixed income	38		48		55
Alternatives/Other	32		12		8
Real Estate	13		11		12
Cash and cash equivalents	—		3		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 30, 2017 and December 31, 2016 (in thousands):

U.S. Plans:



	Fiscal 2017						Fiscal 2016
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)	$	486	$	—	$	486	$	368	$	—	$	368

Equity Securities:
Large Cap	3,485		3,485		—		3,055		3,055		—
Mid Cap	474		474		—		512		512		—
Small Cap	475		475		—		455		455		—
International	4,507		4,507		—		2,917		2,917		—

Fixed Income:
Government/Corporate	4,744		4,744		—		4,367		4,367		—
High Yield	809		809		—		971		971		—

Alternative:
Global Real Estate Investment Trust	469		469		—		539		539		—
Commodities Contracts	653		653		—		405		405		—

Total	$	16,102	$	15,616	$	486	$	13,589	$	13,221	$	368


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

Non-U.S. Plans:



	Fiscal 2017
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	$	42,857		$	8,135		$	15,851	$	—	$	18,871

Equity Securities:
UK	178,093			98,408			—		—		79,685
International:
Developed	145,295			16,627			—		—		128,668
Emerging	7,261			385			—		—		6,876
Unquoted/Private Equity	3,687			—			—		—		3,687

Fixed Income:
Government/Corporate:
UK	347,840			12,247			14,417		—		321,176
International	46,065			—			—		—		46,065
Index Linked	228,699			4,055			—		—		224,644
Other	3,750			—			—		—		3,750
Convertible Bonds	187			—			—		—		187

Real Estate:
Direct	135,238			—			135,238		—		—
Indirect	11,128			191			—		—		10,937

Hedge Fund Strategy:
Equity Long/Short	79,035			—			—		—		79,035
Arbitrage & Event	83,814			—			—		—		83,814
Directional Trading & Fixed Income	34,107			—			—		—		34,107
Cash & Other	48,440			—			—		—		48,440
Direct Sourcing	1,675			—			—		—		1,675

Leveraged Loans	30,755			—			—		—		30,755

Alternative/Other	(131,387		)	(4		)	—		101		(131,484		)

Total	$	1,296,539		$	140,044		$	165,506	$	101	$	990,888



	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	3,189			—		—		—		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

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
2018	$	998	$	63,250
2019	1,003		63,197
2020	1,023		65,375
2021	1,685		66,161
2022 through 2027	10,574		411,011

Expected contributions to the U.S. Plans and Non-U.S. Plans to be made in 2018 are $0.9 million and $5.4 million, respectively.


(b)	Defined Contribution Plans

As of December 30, 2017, 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.