Transaction Structure, Accounting and Earnings Impacts

Target expects its third quarter 2012 GAAP earnings per share will reflect a pre-tax gain of approximately $150 million due to a change in the accounting treatment of its receivables from “held for investment” to “held for sale”. In addition, at closing Target expects to recognize an additional pre-tax gain of $350 to $450 million on the sale of its portfolio. Target has posted details on the accounting aspects of this transaction on its investor relations website: www.Target.com/investors.

Target expects to deploy proceeds from the sale in a manner that will preserve its strong investment-grade credit ratings. Specifically, the company expects to apply approximately 90 percent of net transaction proceeds to reduce the company’s net debt position, with the remainder applied to share repurchase over time.

Under the terms of the program agreement, Target will continue to earn a substantial portion of the profits generated by the Target Credit Card and Target Visa portfolios. Target’s income from the profit-sharing arrangement, net of account servicing expenses, will be recognized within SG&A expenses in its U.S. Retail Segment. Beginning with the fiscal quarter in which the transaction closes, Target will no longer report its U.S. Credit Card Segment.

Target expects that net income from this profit-sharing arrangement, combined with the benefit of debt reduction and share repurchase resulting from deployment of proceeds from the sale, will result in mild dilution to Target’s adjusted earnings per share in the first 12 months following closing*. Specifically, Target expects that in the 12 months following closing its adjusted earnings per share will be approximately 10 cents lower compared with a scenario in which Target continued to fund its portfolio. Based on its forecast for income from profit sharing combined with the expected benefit from share repurchase and interest savings, Target expects that the adjusted EPS impact of this transaction will be neutral over time.

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