UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

 

1000 Nicollet Mall
Minneapolis, Minnesota 55403
(612) 304-6073

PROXY STATEMENT
Annual Meeting of Shareholders
May 24, 2007

VOTING METHODS

The accompanying Proxy Statement describes important issues affecting Target Corporation (Target). If you are a shareholder of record, you have the right to vote your shares through the Internet, by telephone or by mail. You may also revoke your proxy any time before the Annual Meeting. Please help us save time and postage costs by voting through the Internet or by telephone. Each method is generally available 24 hours a day and will ensure that your vote is confirmed and posted immediately. To vote:

1.     BY INTERNET

a.      Go to the web site at www.proxyvote.com, 24 hours a day, seven days a week.

b.      Enter the 12-digit number that appears in the box on the right side of the proxy card.

c.      Follow the simple instructions.

2.     BY TELEPHONE

a.      On a touch-tone telephone, call toll-free 1-800-690-6903, 24 hours a day, seven days a week.

b.      Enter the 12-digit number that appears in the box on the right side of the proxy card.

c.      Follow the simple recorded instructions.

3.     BY MAIL

(Do not mail the proxy card if you are voting by Internet or telephone.)

a.      Mark your selections on the proxy card.

b.      Date and sign your name exactly as it appears on your proxy card.

c.      Mail the proxy card in the enclosed postage-paid envelope.

If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the holder of record that you must follow in order for your shares to be voted.

Your vote is important. Thank you for voting.

ADMISSION POLICY

All shareholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting of Shareholders on May 24, 2007. You must have an admission ticket in order to attend the meeting. If you are a shareholder of record and plan to attend the meeting, please contact Target’s Investor Relations department by email at investorrelations@target.com or by telephone at (612) 761-6742 to request a ticket. If you hold shares through an intermediary, such as a bank or broker, and you plan to attend the meeting, you will need to send a written request for a ticket either by regular mail, fax or email, along with proof of share ownership, such as a bank or brokerage firm account statement or a letter from the broker, trustee, bank or nominee holding your shares, confirming ownership to: Investor Relations, Target Corporation, 1000 Nicollet Mall, TPN-1448, Minneapolis, MN 55403 (fax: 612-761-5555 or email: investorrelations@target.com). Requests for admission tickets will be processed in the order in which they are received and must be received no later than May 14, 2007.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

Approximate Date of Mailing of Proxy
Material: April 9, 2007

TABLE OF CONTENTS

 

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS

May 24, 2007

The Board of Directors of Target Corporation solicits the enclosed proxy for the Annual Meeting of Shareholders to be held at the Target Store, 3100 West 117th Street, Cleveland, Ohio, on Thursday, May 24, 2007, at 1:00 p.m., Eastern Daylight Time, and for any adjournment thereof.

GENERAL INFORMATION ABOUT THE MEETING AND VOTING

What is the purpose of the Annual Meeting?

At our Annual Meeting, shareholders will act upon the matters described in the accompanying notice of meeting. In addition, our management will report on Target’s performance during fiscal 2006 and respond to questions from shareholders.

Who may vote?

We have one class of voting shares outstanding. Only shareholders of record at the close of business on the record date, March 26, 2007, are entitled to receive notice of the Annual Meeting and to vote the shares of common stock that they held on the record date, at the meeting, or any postponement or adjournment of the meeting. Each share of common stock will have one vote on each matter to be voted on.

Who may attend the Annual Meeting?

All shareholders as of the record date, or their duly appointed proxies, may attend the Annual Meeting of Shareholders on May 24, 2007. If you are a shareholder of record and plan to attend the meeting, please contact Target’s Investor Relations department by email at investorrelations@target.com or by telephone at (612) 761-6742 to request a ticket. If you hold shares through an intermediary, such as a bank or broker, and you plan to attend the meeting, you will need to send a written request for a ticket either by regular mail, fax or email, along with proof of share ownership, such as a bank or brokerage firm account statement or a letter from the broker, trustee, bank or nominee holding your shares, confirming ownership to: Investor Relations, Target Corporation, 1000 Nicollet Mall, TPN-1448, Minneapolis, MN 55403 (fax: 612-761-5555 or email: investorrelations@target.com). Requests for admission tickets will be processed in the order in which they are received and must be received no later than May 14, 2007. Cameras and recording devices are not permitted at the meeting.

What constitutes a quorum?

The presence at the meeting, in person or by proxy, of the holders of a majority of our common stock outstanding on the record date will constitute a quorum, permitting the meeting to conduct its business. As of the record date, 855,321,290 shares of our common stock were outstanding. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining whether there is a quorum.

May I vote by proxy card, by telephone or through the Internet?

You may vote by completing and properly signing the enclosed proxy card and returning it to us in the envelope provided. If you are a registered shareholder (those whose shares are owned in their name and not in “street name”) and attend the meeting, you may deliver your completed proxy card in person. In

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addition, registered shareholders may vote either by telephone or through the Internet by following the instructions on the inside of the front cover of these materials. “Street name” shareholders who wish to vote at the meeting should follow the instructions on the proxy form received from the institution that holds their shares.

May I vote confidentially?

Yes. Our policy is to treat all shareholder meeting proxies, ballots and voting tabulations of a shareholder confidentially, if the shareholder has requested confidentiality on the proxy or ballot.

If you so request, your proxy will not be available for examination nor will your vote be disclosed prior to the tabulation of the final vote at the Annual Meeting except (i) to meet applicable legal requirements, (ii) to allow the independent election inspectors to count and certify the results of the vote or (iii) where there is a proxy solicitation in opposition to the Board of Directors, based upon an opposition proxy statement filed with the Securities and Exchange Commission (SEC). The independent election inspectors may at any time inform us whether or not a shareholder has voted.

May I change my vote?

Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by filing with our Corporate Secretary at least two business days prior to the Annual Meeting either a notice of revocation or a duly executed proxy bearing a later date. Alternatively, if you have voted by telephone or through the Internet, you may change your vote by calling the toll-free number again and following the instructions, or by accessing the web site and following the instructions. The powers of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting will not by itself revoke a previously granted proxy.

How does the Board recommend I vote?

Unless you give instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation is set forth in the description of each item in this Proxy Statement. In summary, the Board of Directors recommends a vote:

FOR election of the director nominees (see pages 5-12);

FOR ratification of the appointment of Ernst & Young LLP as Target’s independent registered public accounting firm (see page 47);

FOR approval of the Target Corporation Officer Short-Term Incentive Plan (see pages 49-51);

FOR approval of the amendment to our restated articles of incorporation (see page 52); and

AGAINST the shareholder proposal to require additional disclosure of political contributions (see pages 53-54).

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.

How many votes are required to approve each item?

Election of Directors. The affirmative vote of a plurality of the votes cast is required for the election of directors. The four nominees receiving the highest number of votes will be elected. For this purpose, a properly executed proxy marked “WITHHELD” with respect to the election of director nominees will be counted for purposes of determining whether there is a quorum, but will not be

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considered to have been voted in favor of the director nominee with respect to whom authority has been withheld.

Other Items. For ratification of the appointment of our independent registered public accounting firm, approval of the Target Corporation Officer Short-Term Incentive Plan, the amendment to our restated articles of incorporation, the shareholder proposal and any other items that properly come before the meeting, the affirmative vote of the greater of (i) a majority of the outstanding shares of our common stock entitled to vote on the item and present in person or by proxy at the Annual Meeting, and (ii) a majority of the minimum number of shares entitled to vote that would constitute a quorum for the transaction of business at the Annual Meeting, will be required for approval provided that a quorum is present in person or by proxy. A properly executed proxy marked “ABSTAIN” with respect to any such matter will be counted for purposes of determining whether there is a quorum and will be considered present in person or by proxy and entitled to vote. Accordingly, an abstention will have the effect of a negative vote.

What is a broker non-vote?

If you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote. In this situation, a “broker non-vote” occurs. Shares constituting broker non-votes are not counted or deemed to be present or represented for the purpose of determining whether shareholders have approved a matter, but they are counted as present for the purpose of determining a quorum at the Annual Meeting.

What if other matters are presented for determination at the Annual Meeting?

As of the date of this Proxy Statement, we know of no matters that will be presented for determination at the meeting other than those referred to herein. If any other matters properly come before the meeting calling for a vote of shareholders, proxies in the enclosed form returned to us will be voted in accordance with the recommendation of the Board of Directors, or, in the absence of such a recommendation, in accordance with the judgment of the proxy holders.

Who pays the expenses incurred in connection with the solicitation of proxies?

Expenses in connection with the solicitation of proxies will be paid by us. Proxies are being solicited principally by mail, by telephone and through the Internet. We have retained Georgeson Shareholder Communications Inc. to act as a proxy solicitor for a fee estimated to be $20,000, plus reimbursement of out-of-pocket expenses. In addition, our directors, officers and regular employees may solicit proxies personally or by e-mail, telephone, fax or special letter. We may reimburse brokerage firms and others for their expenses in forwarding proxy materials to the beneficial owners of our shares.

How may I get additional copies of the Annual Report?

Our Annual Report for the fiscal year ended February 3, 2007, including financial statements, is enclosed. The Annual Report is also available online at www.target.com (click on “Investors” and “Annual Reports”). For additional printed copies, please contact our Investor Relations representative by e-mail at investorrelations@target.com, by mail at the address listed on the cover of this Proxy Statement, Attention: Investor Relations, or online at www.target.com (click on “Investors” and “Request Printed Materials”).

How may I receive materials through the Internet?

As described more specifically in the immediately preceding question, you can obtain copies of our proxy materials, Annual Report and other periodic reports and information under the “Investors” section

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of our web site, www.target.com. You can also register at this same location to receive e-mail alerts when we post new information on our web site (click on “E-Mail Alerts”).

How may I elect to receive shareholder materials electronically and discontinue my receipt of paper copies?

Shareholders may request electronic delivery of our proxy materials and Annual Report online at www.target.com (click on “Investors” and “Enroll for E-Delivery”). To receive other shareholder information, contact us via e-mail at investorrelations@target.com.

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ITEM ONE—ELECTION OF DIRECTORS

Proxies solicited by the Board of Directors will, unless otherwise directed, be voted for the election of four nominees to serve as Class I directors for three-year terms expiring in 2010 and until their successors are elected. The four nominees are Calvin Darden, Anne M. Mulcahy, Stephen W. Sanger and Gregg W. Steinhafel. Warren R. Staley, whose term expires at this Annual Meeting, has decided to retire from the Board and is not seeking re-election. All of the nominees are currently directors.

The Board of Directors has no reason to believe that any of the nominees is not available or will not serve if elected. If for any reason a nominee becomes unavailable for election, the Nominating Committee of our Board of Directors may designate substitute nominees, in which event the shares represented by proxies returned to us will be voted for such substitute nominees, unless an instruction to the contrary is indicated on the proxy.

Our restated articles of incorporation, as amended, provide that our business and affairs will be managed by, or under the direction of, a Board of Directors consisting of not fewer than five nor more than 21 persons. Directors are divided into three classes. Directors of one class are elected each year for a term of three years. The Board of Directors currently consists of five Class I directors whose terms expire at this Annual Meeting, three Class II directors whose terms expire at the 2008 Annual Meeting, and four Class III directors whose terms expire at the 2009 Annual Meeting.

Following is information regarding the nominees and continuing directors, including information furnished by them as to their principal occupations. See page 14 for a table showing the number of shares of Target common stock beneficially owned by each director as of March 14, 2007.

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GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS

Director Independence

The Board of Directors believes that a preponderance of its members should be independent directors. The Board annually reviews all relationships that directors have with Target to affirmatively determine whether the directors are independent. If a director has a material relationship with Target, that director is not independent. The listing standards of the New York Stock Exchange (NYSE) set forth certain relationships which, if present, preclude a finding of independence. To assist the Board in making its independence determination, the Board has determined that the following relationships will be considered categorically immaterial and will not, by themselves, impair a director’s independence:

·  If the director or any of the director’s immediate family members is an executive officer of another company that does business with Target and the annual payments by Target to, or the receipt of payments by Target from, such other company is less than the greater of (i) $1,000,000 or (ii) two percent of the annual consolidated gross revenues of such other company.

·  If the director or any of the director’s immediate family members is an executive officer of another company from which Target has obtained loans, if the relationship was entered into in the ordinary course of business and on terms substantially consistent with prevailing market conditions.

·  If the director or any of the director’s immediate family members is an executive officer of a foundation, university or other not-for-profit organization that receives from Target or its foundation contributions less than the greater of (i) $1,000,000 or (ii) two percent of the not-for-profit organization’s aggregate annual charitable receipts during its fiscal year. For this purpose, any automatic matching of employee charitable contributions by Target or its foundation is not included in determining Target’s contributions.

·  If the relationship arises solely because the director or any of the director’s immediate family members is a director, the owner of a less than 10% equity interest, or both, of another entity that has a business relationship with Target.

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In light of the preceding standards, the Board has affirmatively determined that the following directors, who include all of the non-management directors and a substantial majority of the Board, met the requirements for independence: Directors Austin, Darden, Johnson, Kovacevich, Minnick, Mulcahy, Staley, Sanger, Tamke and Trujillo.

In making its independence determination the Board specifically considered the following relationships and concluded that they are categorically immaterial (under the standards listed above):

·        Ordinary course purchases from companies of which a director is, or during fiscal 2006 was, an executive officer:

·       The Coca-Cola Company (Ms. Minnick)

·       General Mills (Mr. Sanger)

·       Cargill (Mr. Staley)

·       Xerox (Ms. Mulcahy)

·        Banking relationships:

·       Wells Fargo & Company (Mr. Kovacevich)

Corporate Governance Documents Available on Our Website

Copies of our key corporate governance documents are available on our website (www.target.com; click on “Investors” and “Corporate Governance”). These documents include our Corporate Governance Guidelines, Position Descriptions, or charters, for each of the Board’s committees, our Business Conduct Guide and our Corporate Responsibility Report. Any shareholder who wishes to obtain hard copies of these documents may do so by submitting a request to our Investor Relations department by email at investorrelations@target.com or by writing to Investor Relations, Target Corporation, 1000 Nicollet Mall, TPN-1448, Minneapolis, MN 55403.

Board Meetings and Committees

The Board of Directors met five times during fiscal 2006. All directors attended at least 75% of the aggregate total of meetings of the Board and Board Committees on which the director served during the last fiscal year. At the end of each Board meeting, the non-management directors were given an opportunity to meet without the Chairman of the Board present. We do not have a policy regarding Board member attendance at the Annual Meeting of Shareholders. No director except Mr. Ulrich attended last year’s Annual Meeting of Shareholders.

Executive Committee

The Executive Committee of the Board of Directors consists of the Chairman of the Board of Target and all of the non-management directors. During the last fiscal year the Executive Committee met one time. The independent members of the Executive Committee review and act on the Compensation Committee’s recommendations on performance and compensation of all senior corporate officers and certain other Target senior executives. As part of their responsibilities, the independent members of the Executive Committee conduct the annual evaluation of our Chief Executive Officer. The Executive Committee also reviews Target’s managerial capabilities and requirements.

Mr. Johnson is the Vice Chairman of the Executive Committee. As Vice Chairman, Mr. Johnson:

·       presides at all meetings of the Board of Directors at which the Chairman of the Board is not present, including executive sessions of non-management directors;

·       serves as liaison between the Chairman of the Board and the non-management directors;

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·       writes the annual performance reviews of the Chief Executive Officer and Chairman of the Board, with input from the other independent members;

·       has an opportunity to review information and agendas sent to the Board and to assure that there is sufficient time for discussion of all agenda items; and

·       has the authority to convene meetings of non-management directors at every meeting.

Nominating Committee

The Nominating Committee of the Board of Directors consists solely of independent directors. The members of the Nominating Committee are Directors Sanger (Chair), Darden, Kovacevich and Tamke. The Nominating Committee took written action once in lieu of meeting during the last fiscal year. In addition, members of the Nominating Committee communicated periodically to discuss issues related to Board and Committee nominations. The Nominating Committee identifies individuals qualified to become Board members. The Nominating Committee then considers the qualifications of and recommends each candidate and incumbent for election as a director and nominates candidates to fill Board vacancies.

The Nominating Committee will consider a recommendation by a shareholder of a candidate for election as a Target director. Any shareholder who wishes the Nominating Committee to consider a candidate should submit a written request and related information to our Corporate Secretary on behalf of the Nominating Committee no later than December 31 of the calendar year preceding the next Annual Meeting of Shareholders (currently held in May).

Our Corporate Governance Guidelines set forth the optimal size, balance and rotation of the membership of the Board. These criteria require that a preponderance of the Board should consist of independent directors. Any management representation should be top corporate management and have potential to be Chief Executive Officer. Board members should have broad perspective, experience, knowledge and independence of judgment. Members should represent a predominance of business backgrounds that can bring a different set of experiences and perspectives to the Board. Regional balance is recognized as highly desirable, and a high degree of interest and involvement are prime requisites for membership. Non-management directors have 20-year term limits. Directors must retire at age 68 and must submit a resignation for consideration by the Board upon any substantial change in principal employment.

When evaluating prospective director candidates, the Nominating Committee conducts individual evaluations against the criteria stated in the Corporate Governance Guidelines. All director candidates, regardless of the source of their nomination, are evaluated using the same criteria. The Nominating Committee has retained two third party search firms to assist in identifying potential director candidates.

Compensation Committee

The Compensation Committee of the Board of Directors consists solely of independent directors. The members of the Compensation Committee are Directors Johnson (Chair), Darden, Sanger, Staley (who will retire when his term expires at the 2007 Annual Meeting) and Trujillo. The Compensation Committee held four meetings during the last fiscal year.

The Compensation Committee has responsibility for reviewing all aspects of executive officer and director compensation and making recommendations to the independent members of the Executive Committee, which has final approval authority. This responsibility includes reviewing our compensation philosophy, plan design, choice of performance measures for incentive compensation, and specific compensation levels and equity awards for each individual executive officer. Agendas for Compensation Committee meetings are developed jointly by the chair of the Committee and members of our senior

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management team, with input from the Committee’s independent consultant, Semler Brossy Consulting Group, LLC.

The Compensation Committee may not delegate its primary responsibility of overseeing executive officer and director compensation, but may, and has, delegated to management the administrative aspects of our compensation plans which do not involve the setting of compensation levels for executive officers. Additional information on the role of management and compensation consultants in our compensation process is contained in the Compensation Discussion and Analysis beginning on page 16.

Audit Committee

The Audit Committee of the Board of Directors consists solely of independent directors. The members of the Audit Committee are Directors Austin (Chair), Kovacevich, Mulcahy and Tamke. The Audit Committee held six meetings during the last fiscal year. The Audit Committee assists the Board with the oversight of the integrity of Target’s financial statements and internal controls, compliance with legal and regulatory requirements, the review and approval of transactions with related persons, the independent auditor’s qualifications and independence and the performance of our internal audit function. The Board of Directors, in its business judgment, has determined that all members of the Committee are “independent” and qualify as “audit committee financial experts” for purposes of applicable NYSE and SEC rules. The duties and activities of the Audit Committee are further described in the Report of the Audit Committee on pages 47-48.

Finance Committee

The Finance Committee of the Board of Directors consists solely of independent directors. The members of the Finance Committee are Directors Mulcahy (Chair), Austin, Minnick and Tamke. The Finance Committee held two meetings during the last fiscal year. The Finance Committee reviews our financial policies, our dividend policy, our performance objectives, our financing requirements, our compliance with indenture covenants and the investment policies of our employee benefit plans.

Corporate Responsibility Committee

The Corporate Responsibility Committee of the Board of Directors consists solely of independent directors. The members of the Corporate Responsibility Committee are Directors Trujillo (Chair), Darden, Johnson, Minnick and Staley (who will retire when his term expires at the 2007 Annual Meeting). The Corporate Responsibility Committee held one meeting during the last fiscal year. The Corporate Responsibility Committee reviews and evaluates our public affairs and community relations programs, including the community giving programs of the Target Foundation.

Corporate Governance Committee

The Corporate Governance Committee of the Board of Directors consists of our non-management directors, all of whom are independent. Mr. Johnson is Chairman of the Corporate Governance Committee. The Corporate Governance Committee held one meeting during the last fiscal year. The Corporate Governance Committee oversees our corporate governance practices.

Communications with Directors

Shareholders and other interested parties seeking to communicate with any individual director or group of directors may send correspondence to Target Board of Directors, c/o General Counsel and Corporate Secretary, 1000 Nicollet Mall, TPS-3255, Minneapolis, Minnesota 55403 or may send an e-mail to boardofdirectors@target.com. Communications directed to Board members will be sent to the General

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Counsel and Corporate Secretary, who has been instructed by the Board to forward all communications except those that are clearly unrelated to Board or shareholder matters.

CERTAIN RELATIONSHIPS

Robert J. Ulrich is the founder, President and a director of the Musical Instrument Museum (Museum), a not-for-profit 501(c)(3) organization. Michael R. Francis, an executive officer of Target, is a Vice President and a director of the Museum. The Museum is in the start-up stage and has not yet opened. In fiscal 2006, we supported the Museum in a manner consistent with our support of other arts and charitable organizations, except that our support of the Museum was limited to in-kind (non-cash) contributions. The in-kind support consisted of services that were primarily volunteered by our team members outside normal business hours. Team member support of the Museum typically represented less than one or two percent of that person’s working time in fiscal 2006, except for a part-time team member whose primary role is assisting our charitable partners. She devoted a substantial portion of her working time in fiscal 2006 to supporting the Museum’s activities. In addition, one of our subsidiaries has agreed to provide sourcing services to the Museum in exchange for a fee based on the value of the sourced items. The amount of the fee is consistent with what our subsidiary charges unrelated third parties for similar services.

Curtis J. Ulrich and Jacqueline D. Byers are employees of Target and are children of Mr. Ulrich. The compensation and benefits received by each of them were established in accordance with our compensation policies applicable to employees holding comparable positions.

Policy on Transactions with Related Persons

The Board of Directors has adopted a written policy which requires that any transaction involving Target in which one of our directors, nominees for director, executive officers, or greater than five percent shareholders, or their immediate family members, have a material interest be approved or ratified by the Board or a designated committee of the Board if the amount involved exceeds $120,000. The Audit Committee has general responsibility for reviewing these transactions; however, the Compensation Committee will conduct this review if the matter involves employment of an immediate family member. The full Board reviews ordinary course of business transactions in which directors have an interest as part of the Board’s annual director independence review. In determining whether to approve or ratify any such transaction, the Audit Committee must consider, in addition to other factors it deems appropriate, whether the transaction is on terms no less favorable to Target than those involving unrelated parties.

All transactions disclosed above were reviewed and approved or ratified in accordance with this policy.

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BENEFICIAL OWNERSHIP OF CERTAIN SHAREHOLDERS

Share Ownership of Directors and Officers

Set forth below is information regarding the shares of Target common stock (our only outstanding class of equity securities) owned beneficially on March 14, 2007 by all directors and nominees, each of the executive officers named in the Summary Compensation Table on page 26, and all Target directors and executive officers as a group. The column captioned “Total Shares Beneficially Owned’’ is the sum of issued shares and shares potentially issuable within 60 days. The column captioned “Common Stock Equivalents” is provided to present a more complete view of each person’s economic ownership of Target common stock.

(1)          Includes shares of common stock that the named individuals may acquire on or before May 13, 2007 pursuant to exercisable stock options and the conversion of restricted stock units.

(2)          All directors and executive officers as a group own less than 1% of Target’s outstanding common stock. The persons listed have sole voting and investment power with respect to the shares listed except that Mr. Sanger has shared voting and investment power over 17,168 shares.

(3)          These amounts represent: (i) the share equivalents of Target common stock held under Target’s deferred compensation plans as of March 14, 2007, which are payable in cash; and (ii) restricted stock units that are scheduled to convert into shares of our common stock more than 60 days after March 14, 2007.

(4)          Includes restricted stock awards that remain subject to forfeiture if the executive’s employment terminates prior to age 55 or if the executive does not comply with advance notice of resignation requirements. These share totals are as follows: Mr. Ulrich—348,657; Mr. Steinhafel—106,016; and Mr. Scovanner—53,724.

(5)          Includes shares of common stock owned by executive officers in the Target 401(k) Plan as of March 14, 2007.

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(6)          Includes 3,000 shares of common stock held in a trust of which Mr. Scovanner is the sole trustee. Mr. Scovanner disclaims beneficial ownership of such shares.

Largest Owners of Target’s Shares

The table below sets forth certain information as to each person or entity known to us to be the beneficial owner of more than five percent of any class of our voting securities: 

(1)          Capital Research and Management Company (“Capital Research”) reported its beneficial ownership on a Schedule 13G/A filed with the SEC on February 12, 2007. The filing indicates that as of December 29, 2006, Capital Research had sole voting power for 39,007,100 shares, shared voting power for 0 shares, sole dispositive power for 142,619,100 shares and shared dispositive power for 0 shares.

(2)          State Street Bank and Trust Company (“State Street”), trustee under Target’s 401(k) Plan, reported its beneficial ownership on a Schedule 13G filed with the SEC on February 12, 2007. The filing indicates that as of December 31, 2006, State Street had sole voting power for 22,524,731 shares, shared voting power for 48,982,032 shares, sole dispositive power for 0 shares and shared dispositive power for 71,506,763 shares.

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EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

Executive Summary

Throughout our history, our compensation programs have been structured to align the long-term interests of our executives and our shareholders. Over the past 20 years, Target has delivered a compound annual growth rate in earnings per share (EPS) in excess of 14 percent. As a result, an investment of $10,000 in our stock in 1987 would have a market value of approximately $200,000 today, including reinvested dividends. We continue to design our compensation programs to attract, retain, and motivate a premier management team to sustain our distinctive brand and competitive advantage in the marketplace, and to provide a framework that encourages continued outstanding financial results over the long term.

In broad terms, our compensation programs for executive officers reflect the competitive environment in which we operate and incorporate specific performance-based criteria. More specifically, we:

·       Embrace a pay-for-performance approach, in which variable compensation represents a large proportion of potential total compensation;

·       Establish our target payout levels to provide an opportunity for compensation payments above the median levels in the marketplace when performance targets are met;

·       Incorporate a balance of cash and equity compensation elements with varying time horizons and financial measures to motivate and reward sustained outstanding performance that is aligned with shareholder interests; and

·       Provide a competitive package of long-term, time-vested equity compensation, retirement and benefit plans to facilitate retention.

The elements that comprise our total compensation package include:

·       Base compensation that is aligned with the size and scope of the position, and recognizes an individual’s particular expertise, experience and performance;

·       A short-term incentive plan that incorporates annual earnings before interest and taxes (EBIT) and economic value added (EVA) financial performance objectives and personal performance objectives;

·       A long-term incentive plan comprised of stock options, performance share units which incorporate revenue and EPS performance objectives over a three-year period, and restricted stock units that are granted periodically;

·       A retirement program, including a pension plan, a 401(k) plan and a deferred compensation plan, that provides retention benefits through additional opportunities to realize future value; and

·       Limited perquisites that are typically provided to promote efficiency in conducting company business and assist the health and safety of our executive officers.

Roles of Compensation Committee, Management and Consultants

A primary function of the Compensation Committee is to recommend the composition and value of our executive officer pay packages, subject to final approval by the independent directors of the full Board. Our Compensation Committee engages an independent consultant, Semler Brossy Consulting Group, LLC, to assist in the review and planning of executive compensation. Semler Brossy reports directly to the Compensation Committee and works collaboratively as directed by the Committee with management and the Chairman of the Compensation Committee. Semler Brossy has not performed, and does not currently

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have, any consulting engagements with management or the company. Semler Brossy’s responsibilities include providing market data and prescribing a range of possible executive compensation recommendations, primarily for the CEO and other executive officers, with a strong focus on performance-based compensation. In addition, they provide advice on executive compensation best practices and the latest retail and general industry trends. Semler Brossy also reviews and advises the Committee on management recommendations as described in the following paragraph. The Committee retains its authority over all decisions.

In addition to the advice of Semler Brossy, the Committee uses comprehensive data prepared by a separate compensation consulting firm, Hewitt Associates, LLC, covering a representative group of retail and general industry companies throughout the United States. Based on the data provided by Hewitt, management formulates and presents the Compensation Committee with recommendations for the compensation of executive officers (other than the CEO) and other compensation plan features pursuant to guidance from the Committee.

Compensation Positioning

Competitive Benchmarking

Specific compensation levels for each executive officer are evaluated relative to benchmark companies on an annual basis. The market comparisons are determined by use of compensation data obtained from publicly available proxy statements and survey data that is adjusted for the size of the benchmark companies assembled by Hewitt Associates, LLC. The companies currently included in the market comparisons are:

 

The selected retail companies provide a cross-section of general merchandise, department store, food and specialty retailers that are large and meaningful competitors in their sectors. General industry companies are included in our survey group because they provide an appropriate benchmark for our positions which are not retail-specific and represent companies with whom we compete for talent. Like the selected retailers, the general industry companies are large and among the leaders in their industries. The composition of the survey group is reviewed annually and any changes made are reviewed with Semler Brossy and our Compensation Committee.

Benchmarking Elements and Amounts

For each executive officer position, we utilize the competitive market data from our benchmark companies to establish a targeted level of “total direct compensation,” which is the sum of:

·       Base salary;

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·       Short-term (annual) cash incentive compensation; and

·       Long-term equity compensation.

Because we believe that executive compensation should be highly correlated with Target’s financial performance and the creation of shareholder value, we place more weight on variable elements, particularly the long-term equity-based awards, in establishing total direct compensation levels for each executive officer. In this way, a substantial majority of each executive officer’s compensation is aligned with stock price and company financial performance.

Generally the Committee targets each executive officer’s total direct compensation opportunity, assuming that specific performance targets are met, at the 75th percentile level of market survey comparisons for comparable executive officer positions in our benchmark group. Our rationale for this positioning is our:

·       Use of financial targets focused on sustaining a high level of performance to determine “target” levels for compensation pay-outs;

·       High level of variable “at risk” compensation, in particular long-term equity compensation, in relation to total direct compensation; and

·       Intention to deliver a total compensation opportunity capable of retaining a premier management team.

Each executive officer’s total direct compensation is allocated among the various elements of total direct compensation with heavier weighting on our long-term, equity-based elements. Our method of allocating is as follows:

·       Base Salary—consistent with all exempt positions at Target, executive officers have a defined base salary grade with a midpoint targeted slightly above the median of the market. This market positioning is based on our belief that the scope of our positions is above the median of comparable positions at our peer companies. Target’s revenue is at approximately the 85th percentile of our retail peer companies. The actual base salary paid to each executive officer falls within the range of their base salary grade based on the individual’s expertise, experience and performance.

·       Short-Term (Annual) Cash Incentive Compensation (bonus and non-equity incentive plan payments)—targeted at a level that will produce total annual cash compensation (base salary, bonus and non-equity incentive plan payouts) slightly above the median of the market at target payout levels.

·       Long-Term Equity Compensation (stock option and performance share units)—generally targeted to align total direct compensation with the 75th percentile of the market, assuming our stock price increases and the performance targets for performance share units are met. The face value amounts for stock options and performance share units are typically determined at our January Compensation Committee meeting. The grant date for stock options is on the same date as the January Compensation Committee meeting. Historically we have also granted performance share units in January; however, beginning with the 2007 calendar year, we moved the grant date for performance share units to the date of our March Compensation Committee meeting, in order to set the performance criteria in concert with our annual goal setting process.

If our results exceed the financial performance targets and our stock price increases, our executive officers may receive total direct compensation well within the top quartile of the market comparisons due to the heavy weighting of variable compensation. Conversely, if we do not meet our financial performance targets and our stock price decreases, the total direct compensation of our executive officers could fall well below the median of the market.

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The Compensation Committee takes into account individual performance and circumstances in determining where total direct compensation should be positioned in relation to the market.

Our compensation positioning in 2006 was also influenced by CEO succession planning efforts prompted by our age 65 retirement policy for executive officers. Unless this mandatory policy is waived by the Board, Mr. Ulrich will retire in 2008. As part of our CEO succession planning, the Board directed the Compensation Committee to provide a special long-term equity compensation award to Mr. Steinhafel in June 2006 (see page 24 for additional details). The Compensation Committee also approved additional long-term equity awards in the form of restricted stock units with three-year cliff vesting for executive officers (other than the CEO) at the January Compensation Committee meeting to facilitate retention during this transitional period. Restricted stock units are not expected to be a regular element of our long-term incentive program, but may be used from time to time if the Committee believes they are the most appropriate vehicle. The amounts awarded were intended to facilitate the potential for top quartile market positioning over the next three years, after which time the restricted stock units cliff vest.

Key Performance Measures and Performance Targets

To provide a balanced assessment of our performance over time and ensure that our compensation program performance metrics support our financial and strategic objectives, our incentive programs use a combination of revenue, profit and investment metrics with annual and three-year time horizons. For each performance measure, we set a target level of performance that is approved in advance by our Compensation Committee and independent directors. Actual performance against these target levels determines the amount, if any, of payments to executives under our variable compensation plans.

The specific objectives of our variable compensation elements are to:

·       Focus attention on key performance measures;

·       Directly align the interests of our executive officers with those of our shareholders by linking a portion of long-term compensation to stock price performance; and

·       Allow actual compensation to vary based on individual, subjective performance assessments.

The following section describes the performance measures we use, the financial or strategic objective they are intended to reinforce, and the variable compensation element(s) with which they are aligned.

Variable Short-Term Cash-Based Compensation Measures (Bonus and Non-Equity Incentive Plan)

·       EBIT Growth—One of two financial performance measures for payments under our annual non-equity incentive plan. This measurement is designed to reinforce our focus on the annual growth in our profitability before interest and taxes. Because the majority of our receivables portfolio is based on a variable interest rate credit card, changes in interest rates affect the level of finance charge revenues which in turn affects generally accepted accounting principles (GAAP) reported EBIT. Accordingly, we adjust EBIT to generally neutralize the impact of interest rate fluctuations (either up or down) on our incentive plan calculations.

·       Investment Discipline—To ensure that we are investing our capital wisely, EVA is the second financial performance measure for payments under our annual non-equity incentive plan. EVA is a measure of annual earnings after an estimated after-tax cost of capital charge and it is used to evaluate the degree to which capital is being efficiently invested. A positive EVA performance indicates we are generating returns on invested capital at rates higher than the cost of capital. Among other things, our use of EVA helps us temper the objective of increasing revenues through new store construction with a measure of how profitably we are investing in new stores. In calculating EVA, we estimate our annualized after-tax blended cost of debt and equity capital to be

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nine percent for capital used to fund our core retail operations and approximately five percent for capital used to fund our credit card operations. For store-based assets, our calculation of EVA is measured against a prototype store return profile over time, which has been derived from our historical pattern of results as a function of store age.

·       Personal Performance—All executive officers are eligible to earn a bonus based on their personal performance. For all executive officers other than the CEO (see page 24 for further discussion regarding the CEO discretionary bonus), bonus payments correspond to a predetermined percentage of the base salary grade midpoint tied to a payout matrix for each personal performance review score. The review scores are approved by the Compensation Committee and are based on subjective management criteria, including the executive officer’s ability to develop a high performance team and the demonstration of a strong commitment to high ethical standards. We include this subjective element within our mix of variable compensation elements to recognize the critical factors upon which we believe performance should be judged, but which are not quantifiable or linked to our financial statements.

Variable Long-Term Equity-Based Compensation Measures (Option Awards and Stock Awards)

·       Stock Price Growth—We believe that consistent execution of our strategy over multi-year periods will lead to an increase in our stock price. Stock options are one way in which we provide our executive officers with a stake in this potential reward of their efforts. The stock option award values reported in the Summary Compensation Table use the same option pricing model assumptions as are utilized for financial reporting purposes, except the assumptions used to estimate potential forfeitures for service-based vesting are disregarded. These values are unlikely to reflect the actual compensation realized from the options because the amount realized is entirely dependent on increases in our stock price after the option grant dates and on each executive officer’s decision of when to exercise. We also offer performance share units and restricted stock units to our executive officers, the value of which are also dependent on our stock price over time.

·       Revenue Growth—We base one-half of our performance share unit awards on generating sustained revenue growth over a three-year performance measurement period. Our principal sources of this growth are contributions from new store expansion and increases in comparable store sales. Our objective is to consistently grow revenue at a sufficient pace to facilitate continued market share gains and drive sustainable earnings growth.

·       EPS Growth—We base the other half of our performance share unit awards on three-year EPS growth. We believe our focus on achieving sufficiently high growth in EPS over a sustained period will generate substantial value for our shareholders over the long term.

2006 Performance Target Levels for Variable Plans and Actual Results

Our variable compensation performance targets are designed to achieve low double-digit average annual percentage increases in revenue and low-to-mid teen percentage increases in EPS. Our growth strategy takes into consideration the financial risks of growing too quickly and potential lost opportunities by growing too slowly, and aims to achieve a balance between these factors.

·       Stock Awards—As mentioned, in calendar year 2007 we moved the grant date for performance share units from January to March. Accordingly, the compensation tables which follow show that no performance share units were awarded in fiscal 2006 (other than the June 2006 grant to Mr. Steinhafel). For the performance share units granted in March 2007, executive officers will earn the “target” payout of these awards only if we achieve compound annual growth rates over a three-year period for revenue and EPS of 10% and 14%, respectively. Fiscal 2006 results provide the baseline for the March 2007 awards, and actual performance will be measured following fiscal 2009.

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The performance share units are designed to have a range of potential payouts based on our actual performance relative to these financial targets. The value of any earned shares is also dependent on our future stock price. The target number of performance share units granted to each of the named executive officers was as follows:

 

The payout of the fiscal year 2002 performance share unit award, which is reflected in the Option Exercises and Stock Vested in 2006 table, was based on the achievement of a four-year compound annual growth rate of 11.8% for revenue (using 52 weeks of revenue in fiscal year 2006) and 15.9% for EPS. These results exceeded the four-year performance target levels for both revenue and EPS.

·       Non-Equity Incentive Plan—The target payout was based on achieving actual EBIT and EVA performance in line with pre-approved annual target levels of 13.7% year-over-year EBIT growth and $1.18 billion of EVA. One-half of each executive officer’s potential Non-Equity Incentive Plan payout was determined by performance related to each measure. In 2006, our actual annual EBIT growth was more than 17%, and the calculated EVA for the year was $1.3 billion. This EBIT performance reflects stronger than expected contribution from our credit card operations combined with contribution from our core retail operations generally in line with our expectations. Our EVA results for the year demonstrate that we productively employed our invested capital and created value from this investment in excess of our assumed cost of capital. Because our performance in 2006 exceeded our targets, the executive officers received actual payments above the target level of payout.

Policies on Stock Ownership and Equity Grant Timing

Stock Ownership Requirements

To ensure that the interests of our executive officers are aligned with long-term shareholder interests, we adopted stock ownership guidelines in 2004 that require our executive officers to hold a specific multiple of their base salary in Target common stock. Executive officers have five years to comply with these guidelines, either from the adoption date (if they were an executive officer at that time) or from the first day of the fiscal year after they became an executive officer. If compliance is not achieved by the deadline, the executive officer must hold any shares acquired on the exercise of stock options (net of the exercise price and applicable taxes) or the vesting of performance share units or restricted stock units (net of applicable taxes) until compliance is achieved.

The following shares are considered in determining compliance with these guidelines:

·       Performance share units that have been earned but not yet issued due to a deferral election;

·       Restricted stock and restricted stock units, whether vested or unvested;

·       Shares and share equivalents held in our 401(k) plan and the executive deferred compensation plan; and

·       Shares owned directly in the executive officer’s name.

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Our guidelines and the compliance status of the executive officers named in this Proxy Statement as of March 14, 2007 is shown in the table below. All of our named executive officers met or exceeded their guideline.

 

Grant Timing Policy

To ensure that our equity compensation awards are granted appropriately, we have the following practices regarding the timing of equity compensation grants and for stock option exercise price determinations:

·       Stock options and restricted stock units are granted on the date of our regularly scheduled January Compensation Committee meeting. Performance share units are granted on the date of our regularly scheduled March Compensation Committee meeting. Compensation Committee meetings are typically scheduled more than one year in advance.

·       We set the exercise price of stock options at the volume-weighted average trading price of our stock on the grant date. We believe that the volume-weighted average price is a better measure of the fair value of our shares than the closing price on the grant date, as it eliminates the effect of any variations in stock price that may occur in the final minutes of trading if the closing price were used.

·       We have no practice or policy of coordinating or timing the release of company information around our grant dates. Our information releases are handled in a process that is completely separate from our equity grants.

·       On occasion we will make equity compensation grants outside of our annual grant cycle for new hires, promotions and recognition or retention purposes. For grants to executive officers, all such grants are approved by the Compensation Committee with an effective date of grant on or after the date of such approval. If the grant date is after the date of approval, it is on a date that is specified by the Committee at the time of approval.

Retention Elements

Long-Term Incentive Compensation

We have designed certain aspects of our long-term variable equity compensation program to encourage executives to continue their employment with us. Specifically, we use a:

·       four-year installment vesting schedule for stock options;

·       three-year performance period for performance share units;

·       three-year cliff vesting for restricted stock units; and

·       a long-term incentive extension provision that provides a minimum of two additional years to exercise stock options (with continued vesting) following termination. This feature requires at least 15 years of service.

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Our other, non-variable compensation programs also contain elements to encourage our executives to remain at Target. These programs are our:

·       Pension plans;

·       Deferred compensation and 401(k) plans; and

·       Perquisites.

Pension Plan

We provide pension benefits to all eligible employees. A detailed description of our pension benefits is set forth in the notes to the compensation tables which follow. Importantly, our pension benefits are determined solely with reference to base salary, personal performance bonuses and non-equity incentive plan payments. Any value realized from equity compensation awards does not influence pension benefits.

Although the pension benefit formula is the same for all employees, for more highly compensated employees we provide this benefit through a combination of a tax-qualified pension plan and related supplemental plans. This is because the tax regulations limit the amount of compensation that can be used to determine benefits provided by a tax-qualified plan. The related supplemental plans are designed to provide the same benefit an employee would have received under the tax-qualified plan if these limitations did not apply. Participation in the supplemental plans is determined solely on the basis of whether an employee’s compensation exceeds the limitations applicable to tax-qualified plans, and is not limited to an employee’s status as an executive officer.

For all officers, we transfer the value of the supplemental pension benefit to their deferred compensation account to allow them to direct the investment of the value of their pension benefit, give them more flexibility regarding the timing of receipt of their benefits, and provide them with more visibility into the value of their pension benefit. We believe this feature assists our retention objective.

Deferred Compensation

We currently offer a non-qualified deferred compensation plan, called the SMG Executive Deferred Compensation Plan (EDCP), which is generally available to all employees at the management level. This plan is designed to allow for retirement savings above the limits imposed by the IRS for 401(k) plans on a tax-deferred basis. Amounts deferred into EDCP can be indexed to the same investment alternatives, including Target common stock, that are available to all eligible employees under our 401(k) plan.

For a small number of executive officers, we provide “above-market” earnings which represent an interest credit under an older, frozen deferred compensation plan, referred to as the Deferred Compensation Plan Senior Management Group (DCP-SMG). Deferrals into this plan were discontinued in 1996 and no new participants were allowed into the plan after that year. Since then, we have continued to pay an above-market interest credit on plan balances in accordance with the plan’s terms. We expect to continue these payments until the plan balances are paid out.

Balances in the deferred compensation plans reflect the savings, earnings and supplemental pension benefits that have accumulated over time. The amounts directly correlate to the long tenure of our executives, individual investment choices and individual decisions regarding the level of savings over time.

Perquisites

We provide certain perquisites to our executive officers, principally to allow them to devote more time to company business and to promote their health and safety. The personal use of our aircraft and commuting services provided to our CEO are provided for security reasons. Other perquisites are described on page 27 of this proxy statement.

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Employment Contracts

None of our executive officers, including our CEO, have employment contracts for a guaranteed term of employment.

Income Continuance

In lieu of employment contracts, we have an Income Continuance Policy (ICP) which is provided to executives who are involuntarily terminated without cause because we believe it is appropriate to provide continued income to assist in their occupational transition. The maximum payment under this policy is two times the sum of base salary plus the average of the last three years of bonus and non-equity incentive plan payments (paid during regular pay cycles over a one- to two-year timeframe).

Executive-Specific Variations in Targeted Compensation Levels

The targeting of compensation levels within the market, as well as the design of our compensation elements, is generally the same for all executive officers, except as follows:

Mr. Ulrich

Mr. Ulrich became our CEO on April 13, 1994. During his tenure he has had a powerful impact on our strategic direction, financial performance and the strength of our reputation. An investment of $10,000 in our stock at the beginning of his tenure as CEO would have a market value of approximately $110,000 today, including reinvested dividends.

Because of our extraordinary sustained performance during his tenure as CEO, the Compensation Committee has deemed it appropriate in recent years to position Mr. Ulrich’s compensation near the top of the market as compared to our benchmark companies. The Committee has used discretion in interpreting and considering the relevant market data when making pay decisions for Mr. Ulrich based on his achievements.

As a result of his long tenure with the organization, his choice to defer the majority of his compensation regularly, and our financial success under his stewardship, Mr. Ulrich has significant deferred compensation balances. In addition to these factors, Mr. Ulrich received much of his compensation in the mid 1980s and into the 1990s through a deferred compensation program, the DCP-SMG, that was designed to retain premier talent and to reward longevity with the company. As mentioned earlier, this plan was frozen in 1996. Mr. Ulrich also chooses to hold his stock options well into their ten-year term. In August 2006, he exercised stock options that were approaching expiration and that had appreciated in value more than five times from their value at their 1997 grant date.

Unlike our other executive officers, Mr. Ulrich’s personal performance bonus is 100% discretionary. In applying its discretion, the Compensation Committee considers multiple factors to evaluate Mr. Ulrich’s performance as CEO including financial performance, long range strategy, allocation of capital and the development of people. In his role as Chairman of the Board, Mr. Ulrich is evaluated on his communication with the Board and its committees, his effectiveness in chairing Board and shareholder meetings and his attention to corporate governance issues. The Committee determined Mr. Ulrich’s personal performance bonus in 2006 to be $3.0 million.

Mr. Steinhafel

In June 2006 Mr. Steinhafel received a supplemental award of stock options and performance share units that was in addition to his award in January 2007. This award was granted to recognize Mr. Steinhafel’s contribution to the company’s outstanding performance and to facilitate his retention during the Board’s succession planning process. The stock options cliff vest after four years and the performance share units will pay out at target if we achieve a compound annual growth rate for revenues of

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11% and a compound annual growth rate for EPS of 15% for the period ending January 31, 2009. The size of the award was determined by reference to market compensation data and the terms of the award were designed to support his retention. This award supports the intentional positioning of Mr. Steinhafel’s compensation near the top of the market.

Tax Considerations—Code Section 162(m)

Our compensation programs are designed to allow us to comply with the tax deductibility limitations of Section 162(m) of the Internal Revenue Code in the following ways:

·       Under a shareholder-approved plan, most of our long-term equity awards, (stock options and performance share units) qualify as deductible performance-based compensation under Section 162(m).

·       Our Non-Equity Incentive Plan payments are paid under a shareholder-approved plan and are intended to qualify as deductible performance-based compensation. Payments classified as bonus payments in the Summary Compensation table do not qualify as deductible performance-based compensation.

·       For any compensation that is not deductible under Section 162(m), we encourage executive officers to defer the portion of their compensation that would not be deductible. Because deferred compensation is not payable until after termination of employment, it is generally not subject to the deduction limits of Section 162(m) when ultimately paid.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K and this Proxy Statement.

Compensation Committee members:

 

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Summary Compensation Table

Name and Principal Position				Year				Salary ($)		Bonus ($)		Stock  Awards ($)(1)		Option Awards ($)(2)		Non-Equity  Incentive Plan Compensation ($)				Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(3)				All Other Compensation ($)(4)				Total
Robert J. Ulrich Chairman & Chief Executive Officer					2006			$ 1,659,616		$ 3,000,000		$ 16,648,572		$ 8,562,650			$ 3,128,960				$ 892,414				$ 2,536,479			$ 36,428,691
Douglas A. Scovanner Executive Vice President & Chief Financial Officer					2006			$ 881,635		$ 274,560		$ 3,159,653		$ 1,283,511			$ 480,566				$ 144,598				$ 313,047			$ 6,537,570
Gregg W. Steinhafel President					2006			$ 1,130,000		$ 389,411		$ 6,118,836		$ 2,977,996			$ 654,197				$ 313,234				$ 472,979			$ 12,056,653
Michael R. Francis Executive Vice President— Marketing					2006			$ 665,770		$ 201,920		$ 2,291,595		$ 1,322,070			$ 353,423				$ 30,785				$ 269,677			$ 5,135,240
John D. Griffith Executive Vice President— Property Development					2006			$ 549,039		$ 187,200		$ 1,620,404		$ 624,646			$ 327,659				$ 11,799				$ 180,117			$ 3,500,864

(1)   Amount expensed in fiscal 2006 pursuant to FAS 123R for performance share units and restricted stock units awarded in 2006 and prior years. The amount reported has been adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. See Note 26, Share-Based Compensation, to our consolidated financial statements for a discussion of our accounting for performance share units and restricted stock units and the assumptions used.

(2)   Amount expensed in fiscal 2006 pursuant to FAS 123R for stock options awarded in 2006 and prior years. The amount reported has been adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. Stock option values are based on the Black-Scholes option pricing model. See Note 26, Share-Based Compensation, to our consolidated financial statements for a discussion of our accounting for stock options and the assumptions used.

(3)   Consists of the following amounts related to the change in pension value and above-market earnings on non-qualified deferred compensation:

 

The above-market earnings on non-qualified deferred compensation consists of an additional 6.6% annual return on a frozen deferred compensation plan, the Deferred Compensation Plan Senior Management Group. We have not allowed deferrals into this frozen plan since 1996, and plan balances continue to earn returns at the rate determined by the terms of the plan. See the narrative following the Non-Qualified Deferred Compensation table for additional information on this plan.

(4)   The amounts reported include the following:

·  Matching contributions to the Target 401(k) Plan, which all participating employees receive.

·  Amounts credited to the EDCP which, when added to participant matching contributions under our 401(k) plan, equal 5% of cash compensation (EDCP Credits).

·  Dollar value of life insurance premiums paid by Target.

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·  Company contributions to the EDCP representing annual changes in supplemental pension plan values (SPP Credits), as explained in more detail in the narrative following the Pension Benefits Table.

·  Perquisites.

The table below sets forth the amounts of these items for each of the named executive officers:

 

Further detail on the perquisites provided to the named executive officers is as follows:

 

The dollar amount of perquisites represents the incremental cost of providing the perquisite. We generally measure incremental cost by the additional variable costs attributable to personal use, and we disregard fixed costs that do not change based on usage. Mr. Ulrich’s personal use of company-owned aircraft and the commuting services provided for him are dictated by a security study. Incremental cost for personal use of company-owned aircraft was determined by including fuel cost, landing fees, on-board catering and variable maintenance costs attributable to personal flights and related unoccupied positioning, or “deadhead,” flights.

The “other” perquisites, none of which individually exceed $25,000, consist of a company provided car or car allowance, on-site parking, on-site exercise room, gifts and club membership initiation fees. Reimbursement of club membership initiation fees was terminated effective January 1, 2007.

In addition to the perquisites included in the table above, the named executive officers receive certain other personal benefits for which we have no incremental cost, as follows:

·  Membership in a downtown business club. The club is used almost exclusively for business functions; however, executives may occasionally use the club for personal purposes provided they pay any meal or other incidental costs;

·  Occasional use of support staff time for personal matters;

·  Allowing a companion to accompany them on company-owned aircraft; and

·  Occasional personal use of event tickets when such tickets are not being used for business purposes.

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Grants of Plan-Based Awards in 2006

(1)   Awards represent potential payments under our Executive Short-Term Incentive Plan for fiscal 2006. Payments are based on specified target levels of earnings before interest and taxes (EBIT) and economic value added (EVA), as described in the Compensation Discussion and Analysis. The actual amounts earned for fiscal 2006 are reported in the Summary Compensation Table as Non-Equity Incentive Plan Compensation. Executives must be employed on the date the payments are made (typically in March of each year with respect to the preceding fiscal year) to be eligible for a payment except in the event of death, disability or retirement after age 55 with at least five years of service, in which case the payment is pro-rated. For executives other than the CEO, the threshold payments are based on achieving a minimum level of performance under one of the two financial performance measures. The CEO’s threshold is based on achieving a combined minimum level of performance under both financial performance measures. The target payments are based on achieving the target level of performance for both financial measures. The maximum payments are based on the Plan maximum, which is generally four times salary less, for executives other than the CEO, the minimum personal performance bonus payable as a condition to receiving a financial performance payout under the Plan.

(2)   Awards represent the grant of restricted stock units (RSUs) under our Long-Term Incentive Plan. The vesting terms for RSUs are described in Note 2 to the Outstanding Equity Awards table.

(3)   Awards represent stock options granted under our Long-Term Incentive Plan. The terms of stock option grants are described in Note 1 to the Outstanding Equity Awards table, except for the June 14, 2006 grant to Mr. Steinhafel which is described in Note 7 below.

(4)   The exercise price of all options was based on the volume weighted average price of Target common stock on the date of grant.

(5)   Grant date fair value for stock options and RSU’s was determined pursuant to FAS 123R. For performance share units, the actual number of units that can be earned ranges from 0 to 150% of the target amount. For this type of award, the amount reported is based on an assumption that 100% of the target number of units will be earned.

(6)   A threshold payout level for performance share unit awards is not meaningful. The number of shares that can be earned ranges from 0 to 150% of the target amount, depending on actual performance.

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(7)   The June 14, 2006 stock option grant to Mr. Steinhafel will cliff-vest and become exercisable on the fourth anniversary of the grant date. Mr. Steinhafel will forfeit the entire award if he voluntarily terminates his employment prior to the vesting date. Fifty percent (50%) of the option will vest if Mr. Steinhafel’s employment is involuntarily terminated prior to the vesting date under circumstances that entitle him to severance under our Income Continuance Policy (see discussion of the ICP in the section captioned “Potential Payments Upon Termination or Change-in-Control”). One hundred percent (100%) of the option will vest in the event of his death or disability prior to the vesting date. If the vesting is accelerated due to involuntary termination or disability, the option is exercisable for 210 days following termination of employment and exercisable for one year in the event of death.

(8)   The June 14, 2006 performance share unit award to Mr. Steinhafel has a three-year performance period ending with fiscal 2008, and has target three-year compound annual growth rates of 11% for revenue and 15% for EPS. Mr. Steinhafel will forfeit the entire award if he voluntarily terminates his employment before the end of the performance period. If he is involuntarily terminated prior to the end of the performance period under circumstances that entitle him to severance under our Income Continuance Policy (see discussion of the ICP in the section captioned “Potential Payments Upon Termination or Change-in-Control”), he will receive 50% of units that are earned based on actual performance over the three-year performance period. In the event of his death or disability, the number of units earned is based on actual performance over the three-year performance period.

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Outstanding Equity Awards at 2006 Fiscal Year-End

(1)   Stock options have a ten-year term and vest and become exercisable in 25% increments on each anniversary of the grant date. Recipients of stock options must be continuously employed by us from the grant date to the applicable vesting date to become vested. If an executive officer’s employment is terminated, unvested options are forfeited and the executive officer will have 210 days to exercise any vested options. An extension of the vesting and post-termination exercise periods may be provided (but not in excess of the original ten-year term of the option) if the executive officer satisfies certain age and years of service conditions as of the date of termination, as follows:

 

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For stock options granted prior to January 12, 2005, the potential extension of the vesting and post-termination exercise periods is based on the following age and years of service schedule:

 

To receive these extension provisions, the executive must provide a one-year advance notice if the termination is voluntary (for Mr. Ulrich, the one-year advance notice requirement does not apply if he retires pursuant to our age 65 mandatory retirement policy) and sign an agreement that includes a non-solicitation clause and provides that the award will be terminated if the executive becomes employed by specified competitors. These vesting-extension provisions are not available if an executive is involuntarily terminated due to a dishonest or illegal act.

A five-year exercise period (not to exceed the original ten-year term of the option) will apply in the event of the executive’s death or termination due to a disability. Vesting is accelerated upon death and continues during the five-year post termination exercise period in the event of disability. Options are transferable during the life of the recipient to certain family members and family-controlled entities.

The extension provisions described above do not apply to the June 14, 2006 grant to Mr. Steinhafel.

(2)   Includes: (A) restricted stock units (RSUs) granted in fiscal 2006; and (B) for Messrs. Ulrich, Scovanner and Steinhafel, outstanding restricted stock awards that were awarded from 1993 to 1995.

RSUs are subject to cliff-vesting three years after the date of grant. Recipients of RSUs must be continuously employed by us through the vesting date to become vested, except that continuous employment is not required if the executive is age 55 or older and has 15 years of service, in which case the same conditions applicable to stock option extensions described in Note 1 above apply. In addition, vesting is accelerated in the event of death or disability, and 50% of the RSUs will vest if the recipient is involuntarily terminated prior to the scheduled vesting date under circumstances that entitle him to severance under our Income Continuance Policy (see discussion of the ICP in the section captioned “Potential Payments Upon Termination or Change-in-Control”). Upon vesting, units are converted into shares of our common stock on a 1:1 basis. Recipients of RSUs may elect to defer receipt of any shares issuable upon vesting of the award. If a deferral is elected, the issuance of shares is deferred to the time specified in the deferral election. Dividend equivalents are paid (in the form of additional units) on RSUs during the vesting period and the deferral period (if applicable).

The restricted stock awards that were awarded from 1993 to 1995 will vest upon the executive’s retirement provided that retirement occurs after age 55 and the executive provides one-year’s advance notice of his retirement date (for Mr. Ulrich, the one-year advance notice requirement does not apply if he retires pursuant to our age 65 mandatory retirement policy). The vesting date will be accelerated in the following circumstances:

·  Death or total disability (100% vesting)

·  Qualifying involuntary termination after age 55 (100% vesting)

·  Qualifying involuntary termination prior to age 55 (50% vesting)

·  Change-in-control (100% vesting)

(3)   The shares reported in this column represent potentially issuable shares under outstanding performance share unit awards. All awards reported have a three-year performance period except for the units granted in fiscal 2003 that have a four-year performance period. Performance share units represent the right to receive a variable number of units based on actual performance over the

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performance period. Up to one-half of the maximum number of units can be earned based on our compound annual revenue growth and one-half based on our compound annual earnings per share (EPS) growth. The number of shares reported is based on our performance period to date growth rates for revenue and EPS and assuming that the payout will occur at the next highest level (all are reported at maximum payout levels).

No dividends or dividend equivalents are paid on performance share units during the performance period. Any units earned will be paid in shares of our common stock on a 1:1 basis. The recipients of performance share unit awards may elect to defer receipt of any shares issuable upon earning the award. If a deferral is elected, the issuance of shares is deferred to the time specified in the deferral election, and dividend equivalents are paid (in the form of additional units) during the deferral period.

The payment date of the awards, to the extent they are earned, will be the date the Compensation Committee of our Board of Directors certifies the financial results following completion of the performance period. Recipients must be continuously employed during the performance period to become vested, except that vesting will also occur, and any units earned upon certification of the financial results following completion of the performance period will be paid, if a termination occurs under the following circumstances prior to the end of the performance period (referred to as “vesting-extension provisions”):

·  Death or disability;

·  Executive is age 65 or greater and has at least five years of service;

·  Executive is age 55-64 and has at least 15 years of service; or

·  Executive is age 45-54, has at least 15 years of service and has worked for a specified minimum amount of the performance period (1-2 years, depending on age).

Awards granted prior to January 12, 2005, are eligible for a service-based vesting-extension provision only for terminations at age 55 or higher with at least five years of service.

To receive these vesting-extension provisions, the executive must comply with the same conditions that are applicable to the vesting and post-termination extension of stock-options that are described in Note 1 above. These vesting extension provisions do not apply to the June 14, 2006 performance share unit award granted to Mr. Steinhafel.

(4)   Mr. Ulrich has transferred 375,000 of these options to a trust established for estate planning purposes. Mr. Ulrich has retained control over the options through the terms of the trust.

(5)   Mr. Ulrich has transferred 156,250 of these options to a trust established for estate planning purposes. Mr. Ulrich has retained control over the options through the terms of the trust.

(6)   Includes 86,799 shares of restricted stock that Mr. Ulrich has transferred to certain permitted transferees. The transferred shares are not considered to be beneficially owned by Mr. Ulrich and are not included in the table of Share Ownership of Directors and Officers on page 14 of this Proxy Statement. The remaining 348,657 shares have been transferred by Mr. Ulrich to one or more trusts for estate planning purposes. Mr. Ulrich has retained control over these shares through the terms of the trusts.

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