UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 11-K

(Mark One)

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

For the fiscal year ended December 31, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

For the transition period from ___to ___

A.

Full title of the plan and the address of the plan, if different from that of the issuer named below:

B.

Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Kellogg Company

 

 

Kellogg Company

Bakery, Confectionery, Tobacco
Workers and Grain Millers
Savings and Investment Plan

Financial Statements and
Supplemental Schedule
December 31, 2006 and 2005

 

Index

		Page(s)
Report of Independent Registered Public Accounting Firm			1
Financial Statements
Statement of Net Assets Available for Benefits as of December 31, 2006 and 2005			2
Statement of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2006 and 2005			3
Notes to Financial Statements			4-9
Supplemental Schedule
Schedule I: Schedule of Assets (Held at End of Year) as of December 31, 2006			10

		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.

 

 

Report of Independent Registered Public Accounting Firm

To the Participants and Administrator of the
Kellogg Company Bakery, Confectionery,
Tobacco Workers and Grain Millers 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 Bakery, Confectionery, Tobacco Workers and Grain Millers Savings and Investment Plan (the “Plan”) at December 31, 2006 and 2005, 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.

As further described in Note 1, the Plan adopted 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 (“FSP”) for the years ended December 31, 2006 and 2005.

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.

Grand Rapids, Michigan
June 21, 2007

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

		2006				2005
Assets
Plan’s interest in Master Trust at fair value (Note 4)		$	528,621,984			$	509,398,933
Loans to participants			6,456,762				6,899,002
Total assets			535,078,746				516,297,935
Liabilities
Accrued investment services fees			64,615				61,322
Total liabilities			64,615				61,322
Net assets available for benefits at fair value			535,014,131				516,236,613
Adjustment from fair value to contract value for interest in Master Trust related to fully benefit-responsive investment contracts (Note 1)			2,903,605				1,811,385
Net assets available for benefits		$	537,917,736			$	518,047,998

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

		2006				2005
Contributions
Employer		$	5,207,915			$	5,369,852
Employee			13,820,335				14,023,350
Rollovers from other qualified plans			132,348				953,685
Total contributions			19,160,598				20,346,887
Earnings on Investments
Plan’s interest in income of Master Trust (Note 4)			45,913,234				21,212,233
Interest income			411,387				356,181
Redemption fees			(22,025	)			(46,660	)
Total earnings on investments, net			46,302,596				21,521,754
Participant withdrawals			(45,475,200	)			(47,458,846	)
Trustee fees			(118,256	)			14,539
Net increase/(decrease)			19,869,738				(5,575,666	)
Net assets available for benefits
Beginning of year			518,047,998				523,623,664
End of year		$	537,917,736			$	518,047,998

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

1.		Summary of Significant Accounting Policies
		Basis of Accounting The Kellogg Company Bakery, Confectionery, Tobacco Workers and Grain Millers 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 sponsor, Kellogg Company.
		Investments The Plan’s investments are stated at fair value. Quoted market prices are used to value investments. Shares of mutual funds are valued at the net asset value of shares held by the Plan at year end. Participant loans are valued at their outstanding balances, which approximate fair value. The fair value of the guaranteed investment contract is calculated by discounting the related cash flows based on current yields of similar instruments with comparable durations. 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 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 Contract with Insurance Company In 1998, the Plan entered into benefit-responsive investment contracts for which INVESCO has oversite. INVESCO maintains the contributions in a general account. The account is credited with earnings on the underlying investments and charged for participant withdrawals and administrative expenses. The guaranteed investment contract issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to the Plan.
		Because the guaranteed investment contract is 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, represents 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.
		There are no reserves against contract value for credit risk of the contract issuer or otherwise. The crediting interest rate is based on a formula agreed upon with the issuer, 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 Plan’s ability to transact at contract value with participants, is probable.

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

		The guaranteed investment contract does not permit the insurance company to terminate the agreement prior to the scheduled maturity date.

		2006				2005
Average yields
Based on actual earnings			5.14	%			4.86	%
Based on interest rate credited to participants			5.02	%			4.65	%

		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.
		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 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.

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

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 following description of the Plan is administered by trustees appointed by Kellogg and employees represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers Union.
		Redemption Fees The Plan charges 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 and Contribution Generally, all Kellogg Company hourly employees belonging to the Bakery, Confectionery, Tobacco Workers and Grain Millers Union Local Nos. 3-G, 50-G, 252-G, 274-G and 401-G 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 $15,000 in 2006 and $14,000 in 2005. 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.
		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 through monthly payroll deductions. Loans that are considered to be uncollectible at year end

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

		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 $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 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.		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.
		Kellogg Company Master Trust net assets at December 31, 2006 and 2005 and the changes in net assets for the years ended December 31, 2006 and December 31, 2005 are as follows:

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

Kellogg Company Master Trust
Schedule of Net Assets of Master Trust Investment Accounts

		2006				2005
Cash/equivalents
Interest bearing cash		$	10,217,940			$	13,672,373
Total cash/equivalents			10,217,940				13,672,373
Receivables			1,153,662				893,621
General Investments
Long Term U.S. Govt. Securities			16,982,286				17,245,904
Short Term U.S. Govt. Securities			19,277,154				16,279,545
Corporate Debt — Long-Term			10,784,973				8,198,000
Corporate Debt — Short-Term			6,991,552				8,960,891
Corporate Stock — Kellogg Company Common Stock			126,074,358				127,144,034
Commingled Funds			217,982,282				200,780,541
Shares of Registered Investment Company			407,696,064				317,499,870
Guaranteed Insurance Contracts			647,256,584				633,675,888
Long Term Government Bonds — International			707,277				836,553
Short Term Government Bonds — International			1,912,225				2,082,500
Short Term International Corporate Bonds			—				716,700
Total general investments			1,455,664,755				1,333,420,426
Total investments			1,467,036,357				1,347,986,420
Payables
Other payables			(196,185	)			(356,673	)
Unsettled Trades			304				(589,880	)
Total liabilities			(195,881	)			(946,553	)
Net Assets		$	1,466,840,476			$	1,347,039,867
Percentage interest held by the Plan			36.3	%			38.0	%

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan
Notes to Financial Statements
December 31, 2006 and 2005 and
for the Years Ended December 31, 2006 and 2005

 

Kellogg Company Master Trust
Schedule of Changes in Net Assets of Master Trust Investment Accounts

		2006				2005
Transfer of assets from Mountain Top 401(k) Plan		$	—			$	1,420,446
Earnings on investments
Interest			33,265,656				31,565,638
Dividends			11,401,337				7,598,087
Net realized gain (loss)
Common Stock — Kellogg Company Common Stock			6,283,132				5,252,512
Commingled Funds			6,333,345				6,640,105
Corporate Debt — Short Term			(349,400	)			17,462
Corporate Debt — Long Term			(60,573	)			4,875
US Govt. Securities — Short Term			(244,913	)			(133,374	)
US Govt. Securities — Long Term			(159,458	)			54,678
International Bond — Short Term			(35,826	)			(35,071	)
International Bond — Long Term			—				(1,165	)
Shares of Registered Investment Co.			30,885,029				27,772,797
Net realized gain			42,651,336				39,572,819
Total additions			87,318,329				80,156,990
Net transfer of assets out of investment account			(27,192,635	)			(26,515,304	)
Fees and commissions			(601,530	)			(599,986	)
Total distributions			(27,794,165	)			(27,115,290	)
Change in unrealized appreciation (depreciation):
Common Stock — Kellogg Company Common Stock			12,467,595				(9,157,055	)
Commingled Funds			24,053,331				2,724,158
Corporate Debt — Short Term			377,287				(330,761	)
Corporate Debt — Long Term			(188,784	)			(117,444	)
US Govt. Securities — Short Term			331,093				(288,436	)
US Govt. Securities — Long Term			(280,258	)			(165,279	)
International Bond — Long Term			(139,230	)			(7,866	)
Shares of Registered Investment Co.			23,526,360				(5,558,416	)
International Bond — Short Term			129,051				(104,657	)
Changes in unrealized appreciation			60,276,445				(13,005,756	)
Net change in assets			119,800,609				40,035,944
Net assets
Beginning of year			1,347,039,867				1,307,003,923
End of year		$	1,466,840,476			$	1,347,039,867

 

Kellogg Company
Bakery, Confectionery, Tobacco Workers and Grain Millers
Savings and Investment Plan

Schedule of Assets (Held at End of Year)
as of December 31, 2006

(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

Plan’s interest in Master Trust at

$

528,621,984

fair value

Loans to participants (interest rate

$

6,456,762

of 5.00% to 10.00%)

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.

EXHIBIT INDEX

Exhibit
Number		Document
23.1		Consent of Independent Registered Public Accounting Firm