do not expect them to impact our liquidity, capital resources, or our ability to meet current debt covenants and maintain credit ratings. Consolidated Financial Statements for further information on account- ing policies related to derivative financial and commodity instruments. To offset issuances under employee benefit programs, our Board of Directors authorized management to repurchase up to $250 mil- lion of Kellogg common stock during 2003 and up to $150 million in 2002. Under these authorizations, we paid $90 million during 2003 for approximately 2.9 million shares and $101 million during 2002 for approximately 3.1 million shares. We funded this repur- chase program principally by proceeds from employee stock option exercises. For 2004, our Board of Directors has authorized stock repurchases for general corporate purposes up to $300 million. We have repaid over $1.6 billion of debt originally issued for the Keebler acquisition, reducing our total debt balance from approxi- mately $6.8 billion at March 2001 to $5.2 billion at year-end 2003. Some of the long-term debt has been redeemed prior to its maturity date. In September 2002, we redeemed $300.7 million of Notes due 2003, and in December 2003, we redeemed $172.9 million of Notes due 2006. In January 2004, we repaid $500 mil- lion of maturing seven-year Notes, initially replacing these Notes with short-term debt. Our Company is exposed to fluctuations in foreign currency cash flows related to third-party purchases, intercompany loans and product shipments, and nonfunctional currency denominated third-party debt. Our Company is also exposed to fluctuations in the value of foreign currency investments in subsidiaries and cash flows related to repatriation of these investments. Additionally, our Company is exposed to volatility in the translation of foreign cur- rency earnings to U.S. Dollars. Primary exposures include the U.S. Dollar versus the British Pound, Euro, Australian Dollar, Canadian Dollar, and Mexican Peso, and in the case of inter-subsidiary trans- actions, the British Pound versus the Euro. We assess foreign cur- rency risk primarily based on transactional cash flows and enter into forward contracts, options, and currency swaps to reduce fluc- tuations in net long or short currency positions. Forward contracts and options are generally less than 18 months duration. Currency swap agreements are established in conjunction with the term of underlying debt issuances. To partially replace other maturing debt, in June 2003, we issued $500 million of five-year 2.875% fixed rate U.S. Dollar Notes. These Notes were issued under an existing shelf registration state- ment. In conjunction with this issuance, we settled $250 million notional amount of forward interest rate contracts for a loss of $11.8 million, which is being amortized to interest expense over the term of the debt. Taking into account this amortization and is- suance discount, the effective interest rate on these five-year Notes is 3.35%. The total notional amount of foreign currency derivative instru- ments at year-end 2003 was $749.2 million, representing a settle- ment obligation of $67.8 million. The total notional amount of for- eign currency derivative instruments at year-end 2002 was $816.7 million, representing a settlement obligation of $35.2 million. All of these derivatives were hedges of anticipated transactions, transla- tional exposure, or existing assets or liabilities, and mature within 18 months, except for one currency swap transaction that matures in 2006. Assuming an unfavorable 10% change in year-end ex- change rates, the settlement obligation would have increased by approximately $81.6 million in 2003 and $90.6 million in 2002. These unfavorable changes would generally have been offset by fa- vorable changes in the values of the underlying exposures. We believe that we will be able to meet our interest and principal repayment obligations and maintain our debt covenants for the foreseeable future, while still meeting our operational needs, in- cluding the pursuit of selective growth opportunities, through our strong cash flow, our program of issuing short-term debt, and maintaining credit facilities on a global basis. Our significant long- term debt issues do not contain acceleration of maturity clauses that are dependent on credit ratings. A change in the Company’s credit ratings could limit its access to the U.S. short-term debt market and/or increase the cost of refinancing long-term debt in the future. However, even under these circumstances, we would continue to have access to our credit facilities, which are in amounts sufficient to cover the outstanding short-term debt bal- ance and debt principal repayments through 2004. Our Company is exposed to interest rate volatility with regard to future issuances of fixed rate debt and existing and future is- suances of variable rate debt. Primary exposures include move- ments in U.S. Treasury rates, London Interbank Offered Rates (LI- BOR), and commercial paper rates. We currently use interest rate swaps and forward interest rate contracts to reduce interest rate volatility and funding costs associated with certain debt issues, and to achieve a desired proportion of variable versus fixed rate debt, based on current and projected market conditions. Our Company is exposed to certain market risks, which exist as a part of our ongoing business operations and we use derivative financial and commodity instruments, where appropriate, to manage these risks. Our Company, as a matter of policy, does not engage in trading or speculative transactions. Refer to Note 12 within Notes to Note 7 within Notes to Consolidated Financial Statements pro- vides information on our Company’s significant debt issues. The to- tal notional amount of interest rate derivative instruments at year- end 2003 was $1.91 billion, representing a settlement obligation of $2.1 million. The total notional amount of interest rate deriva- tive instruments at year-end 2002 was $1.83 billion, representing Market risks Interest rate risk Foreign exchange risk 26 Earning Our Stripes