þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES |
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Financial Statements |
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2 | ||||
3 | ||||
4-10 | ||||
Supplemental Schedule |
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11 | ||||
Exhibit |
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Note:
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Other schedules required by Section 2520.103-10 of the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act (ERISA) of 1974 have been omitted because they are not applicable. |
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2007 | 2006 | |||||||
Assets |
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Plans interest in Master Trust at fair value (Note 6) |
$ | 524,987,448 | $ | 528,621,984 | ||||
Loans to participants |
6,652,130 | 6,456,762 | ||||||
Total assets |
531,639,578 | 535,078,746 | ||||||
Liabilities |
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Accrued investment services fees |
70,435 | 64,615 | ||||||
Total liabilities |
70,435 | 64,615 | ||||||
Net assets available for benefits at fair value |
531,569,143 | 535,014,131 | ||||||
Adjustment from fair value to contract value for interest in
Master Trust related to fully benefit-responsive
investment contracts (Note 1) |
(408,084 | ) | 2,903,605 | |||||
Net assets available for benefits |
$ | 531,161,059 | $ | 537,917,736 | ||||
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2007 | 2006 | |||||||
Contributions |
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Employer |
$ | 5,120,580 | $ | 5,207,915 | ||||
Employee |
13,295,967 | 13,820,335 | ||||||
Rollovers from other qualified plans |
96,938 | 132,348 | ||||||
Total contributions |
18,513,485 | 19,160,598 | ||||||
Earnings on Investments |
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Plans interest in income of Master Trust (Note 6) |
26,249,827 | 45,913,234 | ||||||
Interest income |
466,210 | 411,387 | ||||||
Redemption fees |
(86,724 | ) | (22,025 | ) | ||||
Total earnings on investments, net |
26,629,313 | 46,302,596 | ||||||
Participant withdrawals |
(51,865,262 | ) | (45,475,200 | ) | ||||
Trustee fees |
(34,213 | ) | (118,256 | ) | ||||
Net increase/(decrease) |
(6,756,677 | ) | 19,869,738 | |||||
Net assets available for benefits |
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Beginning of year |
537,917,736 | 518,047,998 | ||||||
End of year |
$ | 531,161,059 | $ | 537,917,736 | ||||
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1. | Summary of Significant Accounting Policies | |
Basis of Accounting
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Investments
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The Plan presents in the statement of changes in net assets available for benefits the Plans interest in income of the Master Trust, which consists primarily of the realized gains or losses on the fair value of the Master Trust investments and the unrealized appreciation (depreciation) on those investments. | ||
Investment Contracts with Insurance Companies
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From August 26, 1998 to August 6, 2007, the Plan entered into benefit-responsive investment contracts for which INVESCO had oversight. INVESCO maintained the contributions in a general account. The account was credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The guaranteed investment contract issuer was contractually obligated to repay the principal and a specified interest rate that was guaranteed to the Plan. | ||
Because the guaranteed investment contracts are fully benefit-responsive, contract value is the relevant measurement attribute for that portion of the net assets available for benefits attributable to the guaranteed investment contract. Contract value, as reported to the Plan by INVESCO and Dwight Asset Management, represented contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. |
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There are no reserves against contract value for credit risk of the contract issuers or otherwise. The crediting interest rate is based on a formula agreed upon with the issuers, but it may not be less than zero percent. Such interest rates are reviewed on a monthly basis for resetting. | ||
Certain events limit the ability of the Plan to transact at contract value with the issuer. Such events include the following: (1) amendments to the plan documents (including complete or partial plan termination or merger with another plan), (2) bankruptcy of the plan sponsor or other plan sponsor events (for example, divestitures or spin-offs of a subsidiary) that cause a significant withdrawal from the plan, or (3) the failure of the trust to qualify for exemption from federal income taxes or any required prohibited transaction exemption under Employee Retirement Income Security Act of 1974. The Plan administrator does not believe that the occurrence of any such value event, which would limit the Plans ability to transact at contract value with participants, is probable. | ||
The guaranteed investment contracts do not permit the insurance company to terminate the agreement prior to the scheduled maturity date. |
2007 | 2006 | |||||||
Average Yields |
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Based on actual earnings |
5.43 | % | 5.14 | % | ||||
Based on interest rate credited to participants |
4.93 | % | 5.02 | % |
Allocation of Net Investment Income to Participants
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Risks and Uncertainties
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Use of Estimates in the Preparation of Financial Statements
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As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution |
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plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis. | ||
New Accounting Guidance
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2. | Provisions of the Plan | |
The following description of the Plan is provided for general information purposes only. Participants should refer to the Plan document for a more comprehensive description of the Plans provisions. | ||
Plan Administration
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Redemption Fees
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Plan Participation and Contribution
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Subject to limitations prescribed by the Internal Revenue Service, participants may elect to contribute from 1 percent to 50 percent of their annual wages. Participants were eligible to defer $15,500 in 2007 and $15,000 in 2006. Employee contributions are matched by Kellogg Company at a 100 percent rate on the first 3 percent and a 50 percent rate on the next 2 percent with 12.5 percent of the Company match restricted for investment in the Kellogg Company stock fund. Employees may contribute to the Plan from their date of hire; however, the monthly contributions are not matched by the Company until the participant has completed one year of service. |
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Starting January 1, 2007, employer matching contributions held in the Kellogg Company Stock Fund may be transferred by a participant at any time to any other investment fund then available under the Plan. | ||
Participants of the Plan may elect to invest the contributions to their accounts as well as their account balances in various equity, bond, fixed income or Kellogg Company stock funds or a combination thereof in multiples of one percent. | ||
Vesting
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Participant Loans
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Participant Distributions
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Participants who terminate employment before retirement, by reasons other than death or disability, may remain in the Plan or receive payment of their account balances in a lump sum. If the account balance is $1,000 or less, the terminated participant will receive the account balance in a lump sum. Participants are eligible to retire from the Company at age 62, upon reaching 55 with 20 years of service, or after 30 years of service. Upon retirement, disability, or death, a participants account balance may be received in a lump sum or installment payments. | ||
Termination
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3. | Income Tax Status | |
The Plan administrator has received a favorable letter from the Internal Revenue Service dated March 18, 2004 regarding the Plans qualification under applicable income tax regulations. The Plan has been amended since receiving the determination letter. However, the Plan administrator believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. |
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4. | Related Party Transactions | |
Certain investments held in the Master Trust are shares of Kellogg Company common stock and short term investment funds managed by The Bank of New York Mellon Corporation. Kellogg Company is the Plan sponsor, and The Bank of New York Mellon Corporation is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. | ||
5. | Reconciliation of Financial Statements to Form 5500 | |
The following is a reconciliation of net assets available for benefits per the financial statements as of December 31, 2007 to Form 5500: |
2007 | ||||
Net assets available for benefits per the financial statements |
$ | 531,161,059 | ||
Adjustment from fair value to contract value for interest in Master Trust related to fully benefit-responsive
investment contracts (Note 1) |
408,084 | |||
Net assets available for benefits per the Form 5500 |
$ | 531,569,143 | ||
The following is a reconciliation of Plans interest in income of Master Trust per the financial statements for the year ended December 31, 2007 to Form 5500: |
2007 | ||||
Plans interest in income of Master Trust per the financial statements |
$ | 26,249,827 | ||
Redemption fees |
(86,724 | ) | ||
Trustee fees |
(34,213 | ) | ||
Adjustment from fair value to contract value for interest in Master Trust related to fully benefit-responsive
investment contracts (Note 1) |
408,084 | |||
Net investment gain from Master Trust investment
accounts per the Form 5500 |
$ | 26,536,974 | ||
6. | Kellogg Company Master Trust | |
The Plan has an undivided interest in the net assets held in the Kellogg Company Master Trust in which interests are determined on the basis of cumulative funds specifically contributed on behalf of the Plan adjusted for an allocation of income. Such income allocation is based on the Plans funds available for investment during the year. | ||
Kellogg Company Master Trust net assets at December 31, 2007 and 2006 and the changes in net assets for the years ended December 31, 2007 and December 31, 2006 are as follows: |
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2007 | 2006 | |||||||
Cash/equivalents |
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Interest bearing cash |
$ | 9,705,928 | $ | 10,217,940 | ||||
Total cash/equivalents |
9,705,928 | 10,217,940 | ||||||
Receivables |
1,076,337 | 1,153,662 | ||||||
General Investments at fair value |
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Long Term U.S. Govt. Securities |
| 16,982,286 | ||||||
Short Term U.S. Govt. Securities |
| 19,277,154 | ||||||
Corporate Debt Long-Term |
| 10,784,973 | ||||||
Corporate Debt Short-Term |
| 6,991,552 | ||||||
Corporate Stock Kellogg Company Common Stock |
130,506,187 | 126,074,358 | ||||||
Commingled Funds |
215,139,223 | 217,982,282 | ||||||
Shares of Registered Investment Company |
515,821,845 | 407,696,064 | ||||||
Guaranteed Investment Contracts |
643,193,321 | 639,257,671 | ||||||
Long Term Government Bonds International |
| 707,277 | ||||||
Short Term Government Bonds International |
| 1,912,225 | ||||||
Total general investments |
1,504,660,576 | 1,447,665,842 | ||||||
Total assets |
1,515,442,841 | 1,459,037,444 | ||||||
Payables |
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Other payables |
(901,246 | ) | (195,881 | ) | ||||
Total liabilities |
(901,246 | ) | (195,881 | ) | ||||
Adjustment from fair value to contract value
for fully benefit-responsive investment contracts |
(1,179,434 | ) | 7,998,913 | |||||
Net Assets |
$ | 1,513,362,161 | $ | 1,466,840,476 | ||||
Percentage interest held by the Plan |
34.7 | % | 36.3 | % |
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2007 | 2006 | |||||||
Earnings on investments |
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Interest |
$ | 33,247,242 | $ | 33,265,656 | ||||
Dividends |
24,859,328 | 11,401,337 | ||||||
Net realized gain (loss) |
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Common Stock Kellogg Company Common Stock |
7,623,775 | 6,283,132 | ||||||
Commingled Funds |
11,625,852 | 6,333,345 | ||||||
Corporate Debt Short Term |
(474,144 | ) | (349,400 | ) | ||||
Corporate Debt Long Term |
(274,875 | ) | (60,573 | ) | ||||
US Govt. Securities Short Term |
(113,153 | ) | (244,913 | ) | ||||
US Govt. Securities Long Term |
376,348 | (159,458 | ) | |||||
International Bond Short Term |
(140,223 | ) | (35,826 | ) | ||||
International Bond Long Term |
(5,443 | ) | | |||||
Shares of Registered Investment Co. |
59,727,993 | 30,885,029 | ||||||
Net realized gain |
78,346,130 | 42,651,336 | ||||||
Total additions |
136,452,700 | 87,318,329 | ||||||
Net transfer of assets out of investment account |
(30,015,129 | ) | (27,192,635 | ) | ||||
Fees and commissions |
(590,039 | ) | (601,530 | ) | ||||
Total distributions |
(30,605,168 | ) | (27,794,165 | ) | ||||
Change in unrealized appreciation (depreciation): |
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Common Stock Kellogg Company Common Stock |
(1,468,247 | ) | 12,467,595 | |||||
Commingled Funds |
703,919 | 24,053,331 | ||||||
Corporate Debt Short Term |
38,016 | 377,287 | ||||||
Corporate Debt Long Term |
293,210 | (188,784 | ) | |||||
US Govt. Securities Short Term |
101,394 | 331,093 | ||||||
US Govt. Securities Long Term |
(204,093 | ) | (280,258 | ) | ||||
International Bond Long Term |
192,109 | (139,230 | ) | |||||
International Bond Short Term |
20,959 | 129,051 | ||||||
Shares of Registered Investment Co. |
(59,003,114 | ) | 23,526,360 | |||||
Changes in unrealized appreciation |
(59,325,847 | ) | 60,276,445 | |||||
Net change in assets |
46,521,685 | 119,800,609 | ||||||
Net assets |
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Beginning of year |
1,466,840,476 | 1,347,039,867 | ||||||
End of year |
$ | 1,513,362,161 | $ | 1,466,840,476 | ||||
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Schedule of Assets (Held at End of Year) as of December 31, 2007 |
Schedule I |
(a) | (b) | (c) | (e) | ||||
Description of Investment Including Maturity | |||||||
Identity of Issue, Borrower, Lessor | Date, Rate of Interest, Collateral, Par or | ||||||
or Similar Party | Maturity Value | Current Value | |||||
Plans interest in Master Trust at fair value | $ | 524,987,448 | |||||
* | Participants | Loans, interest rates ranging from 5.00% to | $ | 6,652,130 | |||
10.00%, with due dates at various times | |||||||
through November 11, 2022. |
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THE KELLOGG COMPANY BAKERY, CONFECTIONERY, | ||||||||
TOBACCO WORKERS AND GRAIN MILLERS SAVINGS AND | ||||||||
INVESTMENT PLAN | ||||||||
Date: June 26, 2008
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By: | /s/ John A. Bryant
Title: Executive Vice President, Chief Financial Officer, Kellogg Company and President, Kellogg North America |
Exhibit Number |
Document | |
23.1
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Consent of Independent Registered Public Accounting Firm |