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 former Chairman ("Chairman Plan"). The retirement benefits are based upon a percentage of the Chairman’s final base salary with no 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 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 2018						Fiscal 2017
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Net Periodic Pension Cost (Benefit):
Service cost	$	365		$	3,754		$	402		$	4,013
Interest cost	1,082			32,173			1,240			32,748
Expected return on assets	(967		)	(75,017		)	(821		)	(70,630		)
Amortization of net (gain) loss	(129		)	4,056			(330		)	3,073
Amortization of prior service cost	—			437			—			—
Curtailment loss	—			906			—			3,305
Pension settlement gain	—			(655		)	—			(313		)
	$	351		$	(34,346	)	$	491		$	(27,804	)

Change in Benefit Obligation:
Benefit obligation – beginning of year	$	31,908		$	1,615,244		$	31,949		$	1,478,493
Service cost	365			3,754			402			4,013
Prior service cost	—			53,586			—			—
Interest on benefit obligations	1,082			32,173			1,240			32,748
Member contributions	—			290			—			345
Actuarial (gain) loss	(850		)	(163,746		)	(760		)	21,058
Pension settlement gain	—			(873		)	—			(4,017		)
Net benefit payments	(946		)	(72,095		)	(923		)	(65,160		)
Curtailment loss	—			906			—			3,305
Exchange effect	—			(91,664		)	—			144,459
Benefit obligation – end of year	$	31,559		$	1,377,575		$	31,908		$	1,615,244

Change in Plan Assets:
Plan assets at fair value – beginning of year	$	16,102		$	1,296,539		$	13,589		$	1,173,865
Company contributions	877			4,889			1,476			3,062
Investment (loss) gain	(1,399		)	(12,600		)	1,960			72,342
Member contributions	—			290			—			345
Pension settlement loss	—			(161		)	—			(3,254		)
Benefit payments and plan expenses	(946		)	(72,095		)	(923		)	(65,160		)
Exchange effect	—			(75,481		)	—			115,339
Plan assets at fair value – end of year	$	14,634		$	1,141,381		$	16,102		$	1,296,539

Funded Status:
Unfunded benefit obligation	$	(16,925	)	$	(236,194	)	$	(15,806	)	$	(318,705	)

Amounts recognized in balance sheet at year end:
Accrued pension benefits	$	(16,925	)	$	(236,194	)	$	(15,806	)	$	(318,705	)



	Fiscal 2018						Fiscal 2017
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans
Pre-tax components in accumulated other comprehensive income at period end:
Net actuarial loss	$	4,985		$	202,672		$	3,340		$	243,315

Pre-tax components recognized in other comprehensive income for the period:
Current year actuarial (gain) loss	$	1,516		$	(88,992	)	$	(1,898	)	$	44,316
Actuarial gain (loss) recognized	129			(4,741		)	330			(7,041		)
Prior service cost	—			53,586			—			—
Prior service cost recognized	—			(437		)	—			—
Pension settlement gain	—			(713		)	—			(763		)
Pension settlement gain recognized	—			654			—			313
Total amount recognized	$	1,645		$	(40,643	)	$	(1,568	)	$	36,825

Accumulated Benefit Obligation	$	31,559		$	1,377,532		$	31,908		$	1,615,157

Salary growth rate	n/a			0.8		%	n/a			0.6		%
Assumed discount rate	4.1		%	2.7		%	3.5		%	2.3		%
Expected return on assets	6.0		%	6.2		%	6.0		%	6.2		%

On December 31, 2017, the company adopted ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost". The service cost component is recognized within Selling, general and administrative expenses and the non-operating components of pension benefit are included within Net periodic pension benefit (other than service cost) in the Consolidated Statements of Earnings. The adoption of this standard resulted in a reclassification for fiscal 2017 and 2016, in which previously reported selling, general and administrative expenses was increased by $31.7 million and $27.2 million, respectively. Net earnings and net earnings per share did not change as a result of the adoption of this standard.

On October 26, 2018, in Lloyds Banking Group Pensions Trustees Limited vs. Lloyds Bank plc and Others, the High Court of Justice in the United Kingdom issued a ruling ("Court Ruling") requiring Lloyds Bank plc to equalize benefits payable to men and women under its U.K. defined benefit pension plan. The Court Ruling noted that the formulas used to determine guaranteed minimum pension (GMP) benefits violated gender-pay equality laws due to differences in the way benefits were calculated for men and women. As a result of this ruling, the U.K. pension plan was required to amend its benefit formulas and account for the higher pension payments resulting from GMP equalization. In accordance with ASC 715, this Court Ruling represents a change to for the company's U.K. pension plans resulting in a retroactive increase in benefit levels for plan participants and has been accounted for as a prior service cost deferred in other comprehensive income, to be amortized as a component of net periodic pension benefit in future periods. The U.K. pension plans projected benefit obligation increased $53.6 million as a result of the Court Ruling, subject to potential future adjustments as the calculations by participants are finalized.

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
			2018		2017
Equity	48	%	42	%	55	%
Fixed income	40		49		35
Money market	4		1		3
Other (real estate investment trusts & commodities contracts)	8		8		7
	100	%	100	%	100	%

Non-U.S. Plans:



	Target Allocation		Percentage of Plan Assets
			2018		2017
Equity	17	%	23	%	26	%
Fixed income	38		52		48
Alternatives/Other	32		9		12
Real Estate	13		14		11
Cash and cash equivalents	—		2		3
	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. In accordance with ASU 2015-04, "Practical Expedient for the Measurement Date of an Employer's Defined Benefit Obligation and Plan Assets", the company has elected to measure the pension plan assets and obligations as of the calendar month-end closest to the fiscal year end. The following tables summarize the basis used to measure the pension plans’ assets at fair value as of December 29, 2018 and December 30, 2017 (in thousands):

U.S. Plans:



	Fiscal 2018						Fiscal 2017
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)	$	175	$	—	$	175	$	486	$	—	$	486

Equity Securities:
Large Cap	2,615		2,615		—		3,485		3,485		—
Mid Cap	329		329		—		474		474		—
Small Cap	326		326		—		475		475		—
International	2,937		2,937		—		4,507		4,507		—

Fixed Income:
Government/Corporate	5,994		5,994		—		4,744		4,744		—
High Yield	1,102		1,102		—		809		809		—

Alternative:
Global Real Estate Investment Trust	591		591		—		469		469		—
Commodities Contracts	565		565		—		653		653		—

Total	$	14,634	$	14,459	$	175	$	16,102	$	15,616	$	486


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

Non-U.S. Plans:



	Fiscal 2018
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	$	28,434		$	4,325	$	2,656	$	—	$	21,453

Equity Securities:
UK	155,687			78,938		—		—		76,749
International:
Developed	99,872			14,497		—		—		85,375
Emerging	7,488			591		—		—		6,897
Unquoted/Private Equity	1,752			—		—		—		1,752

Fixed Income:
Government/Corporate:
UK	468,608			11,860		6,779		—		449,969
International	75,980			—		—		—		75,980
Index Linked	47,873			3,614		—		—		44,259
Other	650			—		—		—		650
Convertible Bonds	188			—		—		—		188

Real Estate:
Direct	148,551			—		148,551		—		—
Indirect	10,812			188		9,298		—		1,326

Hedge Fund Strategy:
Equity Long/Short	73,783			—		—		—		73,783
Arbitrage & Event	73,261			—		—		—		73,261
Directional Trading & Fixed Income	44,091			—		—		—		44,091
Cash & Other	21,719			—		—		—		21,719
Direct Sourcing	2,289			—		—		—		2,289

Leveraged Loans	18,295			—		—		—		18,295

Alternative/Other	(137,952		)	5		—		86		(138,043		)

Total	$	1,141,381		$	114,018	$	167,284	$	86	$	859,993



	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

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
2019	$	1,686	$	59,200
2020	1,704		61,498
2021	1,741		62,360
2022	1,755		64,772
2023 through 2028	11,055		393,112

Expected contributions to the U.S. Plans and Non-U.S. Plans to be made in 2019 are $0.6 million and $6.2 million, respectively.


(b)	Defined Contribution Plans

As of December 29, 2018, the company maintained two separate defined contribution 401(k) 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.