We manage our economic and transaction exposure to certain risks by using foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. We also use interest rate swaps to mitigate the effect of interest rate fluctuations on our $650 million principal amount of notes due March 15, 2021 (“2021 Notes”), and our $500 million principal amount of notes due October 1, 2028. In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies.

During the second quarter of fiscal 2021, we entered into Treasury Rate Lock ("T-Lock") contracts with an aggregate notional amount of $325 million to hedge the base interest rate variability on a portion of a potential refinancing of our maturing 2021 Notes. The T-Lock contracts are designated as cash flow hedges of interest rate risk. The fair value of the T-Lock contracts is

recognized as an asset or liability with an offsetting position in Accumulated other comprehensive income (“AOCI”) on our Condensed Consolidated Balance Sheets. The T-Lock contracts would be cash settled to the extent new debt is issued at which time a pro-rata amount from AOCI will be released and recorded in Interest expense on our Condensed Consolidated Statements of Earnings as interest is accrued.

Our derivative instruments designated as net investment hedges, interest rate swaps and cash flow hedges are recorded on our Condensed Consolidated Balance Sheets at fair value. See Note 2, Fair Value Measurements, for gross fair values of our outstanding derivative instruments and corresponding fair value classifications.



Contract Type	August 1, 2020		February 1, 2020		August 3, 2019
Derivatives designated as net investment hedges	$	68	$	129	$	23
Derivatives designated as interest rate swaps		1,150		1,150		1,150
Derivatives designated as cash flow hedges		325		-		-
No hedge designation (foreign exchange contracts)		37		31		33
Total	$	1,580	$	1,310	$	1,206

Effects of our derivatives on our Condensed Consolidated Statements of Earnings were as follows ($ in millions):



		Gain (Loss) Recognized
	Statement of	Three Months Ended				Six Months Ended
	Earnings Location	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Interest rate swap contracts	Interest expense	$	15	$	55	$	44	$	53
Adjustments to carrying value of long-term debt	Interest expense		(15)		(55)		(44)		(53)
Total		$	-	$	-	$	-	$	-