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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 11-K

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

COMMISSION FILE NUMBER 1-4171

THE KELLOGG COMPANY SAVINGS AND INVESTMENT PLAN
(Full Title of the Plan)

KELLOGG COMPANY

(Name of Issuer)

ONE KELLOGG SQUARE
BATTLE CREEK, MICHIGAN 49016-3599
(Principal Executive Office)

 
 

 


Kellogg Company
Savings and Investment Plan
Index
December 31, 2004 and 2003


         
    Page(s)  
 
       
Report of Independent Registered Public Accounting Firm
    1  
 
       
Financial Statements
       
 
       
    2  
 
       
    3  
 
       
    4-8  
 
       
Supplemental Schedule
       
 
       
    9  
     
Note:
  Other schedules required by Section 2520.103-10 of the Department of Labor’s 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.
 
Exhibits
 Consent of Independent Registered Public Accounting Firm

 


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Report of Independent Registered Public Accounting Firm

To the Participants and Administrator of the
Kellogg Company Savings and Investment Plan

In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Kellogg Company Savings and Investment Plan (the “Plan”) at December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

(-s- PRICEWATERHOUSECOOPERS LLP)

Battle Creek, Michigan
May 26, 2005


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Kellogg Company
Savings and Investment Plan

Statement of Net Assets Available for Benefits
December 31, 2004 and 2003

                 
    2004     2003  
Assets
               
Plan’s interest in Master Trust (Note 5)
  789,781,436     714,742,615  
Loans to participants
    11,301,435       10,799,720  
 
           
Total assets
    801,082,871       725,542,335  
 
           
 
               
Liabilities
               
Accrued investment services fees
    113,747       24,017  
Accrued administrative service fees
    232,346        
 
           
Total liabilities
    346,093       24,017  
 
           
Net assets available for benefits
  $ 800,736,778     $ 725,518,318  
 
           

The accompanying notes are an integral part of these financial statements.

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Kellogg Company
Savings and Investment Plan

Statement of Changes in Net Assets Available for Benefits
Years Ended December 31, 2004 and 2003


                 
    2004     2003  
Contributions
               
Employer
  $ 15,464,893     $ 14,584,793  
Employee
    39,769,106       37,157,751  
Rollovers from other qualified plans
    2,660,045       1,703,776  
 
           
Total contributions
    57,894,044       53,446,320  
 
           
 
               
Earnings on Investments
               
Plan’s interest in income of Master Trust (Note 5)
    66,345,543       88,858,491  
Interest income
    583,079       619,747  
Redemption fees
    (7,410 )      
 
           
Total earnings on investments, net
    66,921,212       89,478,238  
 
           
Participant withdrawals
    (50,709,163 )     (49,851,165 )
Trustee fees
    (187,695 )     (98,181 )
Administrative fees
    (1,095,385 )     (1,175,414 )
Transfers to/from prior trustees (Note 1)
    2,395,447       (1,336 )
 
           
Net increase
    75,218,460       91,798,462  
 
               
Net assets available for benefits
               
Beginning of year
    725,518,318       633,719,856  
 
           
End of year
  $ 800,736,778     $ 725,518,318  
 
           

The accompanying notes are an integral part of these financial statements.

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Kellogg Company
Savings and Investment Plan

Notes to Financial Statements
December 31, 2004 and 2003

1.   Summary of Significant Accounting Policies

Basis of Accounting
The Kellogg Company Savings and Investment Plan (the “Plan”) operates as a qualified defined contribution plan and was established under Section 401(k) of the Internal Revenue Code. The accounts of the Plan are maintained on the accrual basis. Expenses of administration are paid by the Plan.

Plan Mergers
On January 1, 2004 the Keebler Company Local 184-L 401(k) Plan and Trust merged with the Plan. Plan assets of $2,395,447 consisting primarily of participant investment balances were transferred to the Plan on January 1, 2004. As of January 1, 2004 participants of the Keebler Company Local 184-L 401(k) Plan and Trust were eligible to participate in the Plan subject to the same provisions as the Keebler Company Local 184-L 401(k) Plan and Trust.

Investments
All investments are reported at current quoted market values except for guaranteed insurance contracts, which are reported at contract value and represent contributions made plus interest at the contract rate. These contracts are maintained in the Stable Value Fund of the Kellogg Company Master Trust.

The Plan presents in the statement of changes in net assets available for benefits the Plan’s interest in income of 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.

Allocation of Net Investment Income to Participants
Net investment income is allocated to participant accounts daily, in proportion to their respective ownership on that day.

Risks and Uncertainties
The Plan provides for various investment options in several investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible the changes in risk in the near term would materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan’s management to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and changes in net assets available for benefits during the reporting period. Actual results could differ from those estimates.

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Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003


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 Plan’s provisions.

Plan Administration
The Plan is administered by the ERISA Finance Committee and the ERISA Administrative Committee appointed by Kellogg Company.

Redemption Fees
Effective August 16, 2004 the Plan began charging a 2 percent redemption fee for transfers and/or reallocations of units that have been in a fund for less than five business days. Fees collected are used to help offset trustee expenses.

Plan Participation
Generally, all salaried employees and non-union hourly employees of Kellogg Company and its U.S. subsidiaries, employees of the Company’s Worthington Foods subsidiary covered by a collective bargaining agreement, employees of the Company’s Cary Bakery facility covered by a collective bargaining agreement and employees of the Company’s Keebler subsidiary covered by a collective bargaining agreement are eligible to participate in the Plan.

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 $13,000 in 2004 and $12,000 in 2003. Employee contributions are matched by Kellogg Company at a 100% 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, except for employees of certain Company facilities covered by a collective bargaining agreement. Please refer to the Plan document for additional information. 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.

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
Participant account balances are fully vested.

Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Participants may have only one loan outstanding at any time. Loan transactions are treated as transfers between the Loan fund and the other funds. Loan terms range from 12 to 60 months, except for principal residence loans, which must be repaid within 15 years (or 180 months). Interest is paid at a constant rate equal to one percent over the prime rate in the month the loan begins. Principal and interest are paid ratably

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Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003


through monthly payroll deductions. Loans that are considered to be uncollectible at year end result in the outstanding principal being considered a hardship withdrawal from the participant’s plan account.

Participant Distributions
Participants may request an in-service withdrawal of all or a portion of certain types of contributions under standard in-service withdrawal rules. The withdrawal of any participant contributions which were not previously subject to income tax is restricted by Internal Revenue Service regulations.

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 $5,000 or less, the terminated participant will receive the account balance in a lump sum or installment payments.

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 participant’s account balance may be received in a lump sum or installment payments.

Termination
While the Company has expressed no intentions to do so, the Plan may be terminated at any time.

3.   Income Tax Status

The Plan administrator has received a favorable letter from the Internal Revenue Service dated March 18, 2004 regarding the Plan’s qualification under applicable income tax regulations. The Plan administrator believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the Internal Revenue Code.

4.   Subsequent Event

On March 1, 2005 the Mountaintop Baking 401(k) Retirement Savings Plan merged with the Plan. Plan assets of $1,333,204 consisting primarily of participant investment balances were transferred to the Plan on March 1, 2005. As of March 1, 2005 union participants of the Mountaintop Baking 401(k) Retirement Savings Plan were eligible to participate in the Kellogg Company Savings and Investment Plan subject to the same provisions as the Mountaintop Baking 401(k) Retirement Savings Plan. As of January 1, 2005 non-union participants of the Mountaintop Baking 401(k) Retirement Savings Plan were eligible to participate in the Kellogg Company Savings and Investment Plan subject to the same provisions of other salaried and non-union hourly participants in the Kellogg Company Savings and Investment Plan.

5.   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 Plan’s funds available for investment during the year.

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Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003


Kellogg Company Master Trust net assets at December 31, 2004 and 2003 and the changes in net assets for the years ended December 31, 2004 and December 31, 2003 are as follows:

Schedule of Net Assets of Master Trust Investment Accounts

                 
    2004     2003  
Cash/equivalents
               
Interest bearing cash
  $ 15,615,882     $ 12,791,710  
 
           
Total cash/equivalents
    15,615,882       12,791,710  
 
           
Receivables
    1,116,271       1,888,051  
 
           
 
               
General Investments
               
Long Term U.S. Govt. Securities
    24,914,061       19,060,041  
Short Term U.S. Govt. Securities
          5,793,346  
Corporate Debt — Long-Term
    19,350,278       21,930,624  
Corporate Debt — Short-Term
          3,665,846  
Corporate Stocks — Common
    113,775,950       84,130,906  
Commingled Funds
    212,891,676       200,998,048  
Shares of Registered Investment Company
    282,032,008       207,592,300  
Guaranteed Investment Contracts
    634,279,171       664,410,052  
Long Term Government Bonds — International
    3,204,550        
 
           
Total general investments
    1,290,447,694       1,207,581,163  
 
           
Total investments
    1,307,179,847       1,222,260,924  
 
           
Payables
               
Other payables
    (175,924 )     (167,091 )
 
           
Total liabilities
    (175,924 )     (167,091 )
 
           
Net Assets
  $ 1,307,003,923     $ 1,222,093,833  
 
           
Percentage interest held by the Plan
    60.4 %     58.5 %

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Kellogg Company
Savings and Investment Plan
Notes to Financial Statements
December 31, 2004 and 2003


Schedule of Changes in Net Assets of Master Trust Investment Accounts

                 
    2004     2003  
Transfer of assets from Keebler Company Local 184-L 401(k) Plan
  $ 2,395,447     $  
Earnings on investments
               
Interest
    30,552,802       32,450,775  
Dividends
    6,366,300       9,152,649  
Net realized gain (loss)
               
Common Stocks
    11,044,446       843,692  
Commingled Funds
    6,076,947       (7,776,374 )
Corporate Debt — Short Term
    (72,165 )     (16,025 )
Corporate Debt — Long Term
    (34,712 )     51,449  
US Govt. Securities — Short Term
    (149,346 )     (10,668 )
US Govt. Securities — Long Term
    73,635       933,038  
International Bond —Short Term
    (17,903 )      
International Bond — Long Term
    (7,706 )      
Shares of Registered Investment Co.
    17,980,537       8,360,127  
 
           
Net realized gain
    34,893,733       2,385,239  
Total additions
    74,208,282       43,988,663  
 
           
Net transfer of assets out of investment account
    (20,477,691 )     (20,635,134 )
Fees and commissions
    (597,515 )     (611,058 )
 
           
Total distributions
    (21,075,206 )     (21,246,192 )
Change in unrealized appreciation (depreciation):
               
Common Stocks
    3,571,974       7,503,635  
Commingled Funds
    15,082,158       52,865,988  
Corporate Debt — Short Term
    3,115       (148,571 )
Corporate Debt — Long Term
    (213,582 )     (456,780 )
US Govt. Securities — Short Term
    56,750       (755 )
US Govt. Securities — Long Term
    (295,908 )     (1,537,017 )
International Bond — Long Term
    (67,929 )      
Shares of Registered Investment Co.
    13,640,436       35,368,674  
 
           
Changes in unrealized appreciation
    31,777,014       93,595,174  
 
           
Net change in assets
    84,910,090       116,337,645  
Net assets
               
Beginning of year
    1,222,093,833       1,105,756,188  
 
           
End of year
  $ 1,307,003,923     $ 1,222,093,833  
 
           

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Kellogg Company
   
Savings and Investment Plan
   
Schedule H, Line 4i
   
Schedule of Assets (Held at End of Year)
   
December 31, 2004
  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
 
               
  Loans to participants (interest rate       $ 11,301,435  
  of 5.00% to 11.00%)            

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

     
Date: June 10, 2005
  The Kellogg Company Savings and Investment Plan
         
     
  By:  /s/ Jeffrey M. Boromisa
    Jeffrey M. Boromisa   
    Senior Vice President and Chief Financial Officer,
Kellogg Company 
 

 


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EXHIBIT INDEX

     
EXHIBIT NO.   DESCRIPTION
EX-23
  Consent of Independent Registered Public Accounting Firm