Target (TGT) 10-K 2004 FY Annual report

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Report of Independent Auditors

Exhibit 99.A

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 11-K

(Mark One)

/X/
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended December 31, 2003

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                        to                        

Commission File Number 1-6049

        A.    Full title of the plan and address of the plan, if different from that of the issuer named below: Target Corporation 401(k) Plan.

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

TARGET CORPORATION
1000 Nicollet Mall
Minneapolis, Minnesota 55403

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-8, Nos. 33-66050, 333-27435 and 333-103920) pertaining to the Target Corporation 401(k) Plan of our report dated March 12, 2004, with respect to the financial statements and schedules of the Target Corporation 401(k) Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2003.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
April 5, 2004

AUDITED FINANCIAL STATEMENTS AND SCHEDULES

Target Corporation 401(k) Plan
Years Ended December 31, 2003 and 2002

Target Corporation 401(k) Plan

Audited Financial Statements and Schedules

Years Ended December 31, 2003 and 2002

Contents

Audited Financial Statements

Report of Independent Auditors

The Board of Directors
Target Corporation

We have audited the accompanying statements of net assets available for benefits of the Target Corporation 401(k) Plan (the Plan) as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2003 and reportable transactions for the year then ended are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan's management. These supplemental schedules have been subjected to the auditing procedures applied in the audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ Ernst & Young

Minnesota, Minneapolis
March 12, 2004

Target Corporation 401(k) Plan

Statements of Net Assets Available for Benefits
(In 000s)

December 31, 2003

		Total		Participant- Directed Funds		Non-Participant- Directed Employer Match Funds
Assets
Securities sold but not settled		$	3,497	$	1,329	$	2,168
Receivables:
	Participants' 401(k) and after-tax contributions		33		33		—
	Employer contribution		21		—		21
	Interest		2,233		2,227		6
Total receivables			5,784		3,589		2,195
Investments			3,818,479		2,345,553		1,472,926
Total assets			3,824,263		2,349,142		1,475,121
Liabilities
Investment settlements payable			143		143		—
Expenses payable			178		164		14
Withdrawals payable to participants			201		145		56
Total liabilities			522		452		70
Net assets available for benefits		$	3,823,741	$	2,348,690	$	1,475,051

See accompanying notes.

Target Corporation 401(k) Plan

Statements of Net Assets Available for Benefits (continued)
(In 000s)

December 31, 2002

		Total		Participant- Directed Funds		Non-Participant- Directed Employer Match Funds
Assets
Receivables:
	Participants' 401(k) and after-tax contributions	$	55	$	55	$	—
	Employer contribution		33		—		33
	Interest		1,965		1,955		10
Total receivables			2,053		2,010		43
Investments			3,070,753		1,895,721		1,175,032
Total assets			3,072,806		1,897,731		1,175,075
Liabilities
Investment settlements payable			71		—		71
Expenses payable			813		496		317
Withdrawals payable to participants			157		136		21
Total liabilities			1,041		632		409
Net assets available for benefits		$	3,071,765	$	1,897,099	$	1,174,666

See accompanying notes.

Target Corporation 401(k) Plan

Statements of Changes in Net Assets Available for Benefits
(In 000s)

Year Ended December 31, 2003

		Total			Participant- Directed Funds			Non-Participant- Directed Employer Match Funds
Participants' 401(k) and after-tax contributions		$	190,308		$	190,308		$	—
Employer contributions			116,624			—			116,624
Investment income:
	Interest (net)		25,887			24,781			1,106
	Dividends		16,267			6,199			10,068
Total investment income			42,154			30,980			11,174
			349,086			221,288			127,798
Distributions to participants			(271,391	)		(198,505	)		(72,886	)
Trustee fees			(869	)		(536	)		(333	)
Administration fees			(8,819	)		(5,592	)		(3,227	)
			(281,079	)		(204,633	)		(76,446	)
Net realized and unrealized appreciation in fair value of investments			683,969			364,915			319,054
Interfund transfers			—			70,021			(70,021	)
Net increase			751,976			451,591			300,385
Net assets available for benefits at beginning of year			3,071,765			1,897,099			1,174,666
Net assets available for benefits at end of year		$	3,823,741		$	2,348,690		$	1,475,051

See accompanying notes.

Target Corporation 401(k) Plan

Statements of Changes in Net Assets Available for Benefits (continued)
(In 000s)

Year Ended December 31, 2002

		Total			Participant- Directed Funds			Non-Participant- Directed Employer Match Funds
Participants' 401(k) and after-tax contributions		$	180,842		$	180,842		$	—
Employer contributions			110,594			—			110,594
Investment income:
	Interest (net)		27,548			26,206			1,342
	Dividends		15,029			5,792			9,237
Total investment income			42,577			31,998			10,579
			334,013			212,840			121,173
Distributions to participants			(253,029	)		(178,603	)		(74,426	)
Trustee fees			(750	)		(479	)		(271	)
Administration fees			(8,930	)		(6,328	)		(2,602	)
			(262,709	)		(185,410	)		(77,299	)
Net realized and unrealized depreciation in fair value of investments			(778,429	)		(356,430	)		(421,999	)
Interfund transfers			—			49,628			(49,628	)
Net decrease			(707,125	)		(279,372	)		(427,753	)
Net assets available for benefits at beginning of year			3,778,890			2,176,471			1,602,419
Net assets available for benefits at end of year		$	3,071,765		$	1,897,099		$	1,174,666

See accompanying notes.

Target Corporation 401(k) Plan

Notes to Financial Statements

December 31, 2003

1.     Description of the Plan

Employees of Target Corporation (the Company) who meet certain eligibility requirements of age and hours worked can participate in the Target Corporation 401(k) Plan (the Plan). Under the terms of the Plan, participants can invest up to 80% of their current gross cash compensation in the Plan, within Employee Retirement Income Security Act (ERISA) limits, in any combination of before-tax and/or after-tax contributions.

Participants identified as "highly compensated," as defined by Internal Revenue Code (Code) Section 414(q), are not allowed to make after-tax contributions and are limited to contributions of up to 5% of gross cash compensation (to a limit of $200,000 of compensation) on a before-tax basis, subject to certain Internal Revenue Service (IRS) limitations.

The Company matches 100% of all participants' 401(k) before- and after-tax contributions up to 5% of each participant's gross cash compensation. The Company's contributions to the Plan are invested in Company stock. These contributions are reflected in the column titled "Non-Participant-Directed Employer Match Funds" on the financial statements.

Participants become 20% vested in employer matching contributions immediately upon meeting plan eligibility requirements, 40% one year later, 70% two years later, and fully vested three years after becoming eligible to participate in the Plan. Participant contributions are fully vested at all times. Participants who leave the Plan forfeit unvested Company contributions, which are then used to reduce future Company contributions. For the years ended December 31, 2003 and 2002, forfeitures were $3.232 million and $2.556 million, respectively.

Participants may receive benefits upon termination, death, disability, or retirement as either a lump-sum amount equal to the vested value of their account or in installments, subject to certain plan restrictions. Participants may also withdraw some or all of their account balances prior to termination, subject to certain plan restrictions.

Expenses, including fund management fees (which are netted against investment interest income), trustee fees, monthly processing costs (including recordkeeping fees), quarterly statement preparation and distribution, and other third-party administrative expenses are the significant expenses paid by the Plan.

Participants are entitled to apply for up to two loans from the Plan, one for the purchase of a primary residence, the other a general purpose loan, subject to certain restrictions, as defined in the Plan. Repayment of loans, including interest, is allocated to participants' investment accounts in accordance with each participant's investment election in effect at the time of the repayment.

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their accounts.

For more detailed information regarding the Plan, participants may refer to the Summary Plan Description (SPD) available from the Company.

2.     Accounting Policies

Accounting Method

All investments are carried at fair market value except fully benefit-responsive investment contracts which are stated at contract value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to pay plan benefits. Common stock is valued at the quoted market price on the last business day of the plan year. Collective investment fund values are based on the fair value of the underlying securities (as determined by quoted market prices) as of the last business day of the plan year. Participant loans are valued at the unpaid principal balance, which approximates fair value.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Reclassifications

Certain 2002 amounts were reclassified to conform to the 2003 presentation.

3.     Investments (In 000s)

The Plan allows participants to choose from among 14 investment funds. Participants may change their fund designations for past and future contributions on a daily basis.

The yield on the Plan's investment contracts for the years ended December 31, 2003 and 2002, ranged from 5.07% to 5.75% and 5.16% to 6.27%, respectively. According to the contracts, rates are adjusted quarterly. Fair value of the investment contracts was estimated to be approximately 105% and 106% of contract value for the years ended December 31, 2003 and 2002, respectively. Under the contracts, the issuer does not guarantee payment of withdrawals at contract value as a result of premature termination of the contract by the Plan or upon plan termination.

Fair value for synthetic contracts was estimated based on the market values of the underlying securities. Related wrap instruments for synthetic contracts were valued at the difference between the fair value of the underlying securities and the contract value attributable by the wrapper to such assets.

The Plan's investments are held by State Street Bank, the trustee. The Plan's investments, including investments bought and sold as well as held during the year, appreciated (depreciated) in fair value as follows:

		Net Appreciation (Depreciation) in Fair Value During Year
Year ended December 31, 2003:
	Collective investment funds	$	154,583
	Target Corporation common stock		529,386
		$	683,969
Year ended December 31, 2002:
	Collective investment funds	$	(90,474	)
	Target Corporation common stock		(687,955	)
		$	(778,429	)

The fair value of individual investments representing 5% or more of the Plan's net assets is as follows:

	December 31
	2003		2002
Target Corporation common stock	$	2,371,885	$	1,920,170
State Street Bank & Trust Co. Flagship S&P 500 Index Fund		249,491		190,516
AIG Financial Products Group Annuity Contract No. 130221		260,086		213,633
Pacific Mutual Life Insurance Co. Group Annuity Contract No. 26255		242,721		209,653
Wells Fargo Bank Minnesota, N.A. Stable Return Fund		*		187,041

*

Investment does not meet 5% threshold at December 31, 2003.

4.     Transactions With Parties in Interest

During the years ended December 31, 2003 and 2002, the Plan engaged in the following transactions related to the Company's common stock:

	2003		2002
	(In 000s)
Number of common shares purchased		4,983		8,627
Cost of common shares purchased	$	173,356	$	325,270
Number of common shares sold		6,916		6,186
Market value of common shares sold	$	240,834	$	245,949
Cost of common shares sold	$	135,426	$	109,622
Number of common shares distributed in kind		306		378
Market value of common shares distributed in kind	$	10,797	$	14,307
Cost of common shares distributed in kind	$	6,005	$	6,787
Dividends received	$	16,266	$	14,956

During 2003 and 2002, the Plan received match-related dividends of $10.068 million and $9.237 million, respectively, on Target Corporation common stock.

5.     Reconciliation of Financial Statements to Form 5500 (in 000s)

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

	December 31
	2003			2002
Net assets available for benefits per the financial statements	$	3,823,741		$	3,071,765
Amounts payable to terminating participants		(843	)		(1,125	)
Net assets available for benefits per the Form 5500	$	3,822,898		$	3,070,640

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:

	Year Ended December 31, 2003
Benefits paid to participants per the financial statements	$	271,391
Subtract amounts payable to terminating participants at December 31, 2002		(1,125	)
Add amounts payable to terminating participants at December 31, 2003		843
Benefits paid to participants per the Form 5500	$	271,109

6.     Income Tax Status

The Plan has received a determination letter from the IRS dated September 12, 2001, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to this issuance of the determination letter, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes the Plan, as amended, is qualified and the related trust is tax-exempt.

Schedules

Target Corporation 401(k) Plan

EIN: 41-0215170
Plan #002

Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)

December 31, 2003

Face Amount or Number of Shares/Units		Identity of Issue and Description of Investment	Cost			Current Value
CASH EQUIVALENTS
6,090,408	*	State Street Bank & Trust Co. Short-Term Investment Fund	$	6,090,408		$	6,090,408
GROUP ANNUITY CONTRACTS
244,675,715		American International Life Group (AIG) Financial Products Group Annuity Contract No. 130221, 5.61%, due 7/1/04		260,086,237			260,086,237
234,675,715		Pacific Mutual Life Insurance Co. Group Annuity Contract No. 26255, 5.52%, due 1/1/10		242,721,173			242,721,173
		Global Wrap Managers for GAC No. 130221 and 26255 Blackrock Financial Management, Inc., Goldman Sachs, NISA Investment Advisors, The Uifton Group Investment Management Co.		(23,455,980	)		(23,455,980	)
		TOTAL GROUP ANNUITY CONTRACTS		479,351,430			479,351,430
COLLECTIVE INVESTMENT FUNDS
4,709,376		Wells Fargo Bank Minnesota, N.A. Stable Return Fund		163,420,924			168,350,779
1,731,389		Wells Fargo Bank Minnesota, N.A. Managed Synthetic Fund		20,000,000			24,975,163
1,251,032	*	State Street Bank & Trust Co. Flagship S&P 500 Index Fund		194,577,552			249,490,829
5,533,278	*	State Street Bank & Trust Co. Bond Market Index Fund		82,987,163			94,270,452
20,163		Barclays Global Investors BGI Real Estate Fund		2,415,993			2,491,540
233,180	*	State Street Bank & Trust Co. Treasury Inflation Index Fund		3,338,946			3,353,358
12,952,657	*	State Street Bank & Trust Co. Russell 3000 Fund		105,884,057			112,947,173

5,263,494	*	State Street Bank & Trust Co. Russell 2000 Fund		75,820,922		92,153,251
1,573,669	*	State Street Bank & Trust Co. EAFE Series A		13,297,918		15,192,199
2,892,322	*	State Street Bank & Trust Co. Daily EAFE		26,199,922		35,451,192
724,385		Barclays Global Investors U.S. Tactical Asset Allocation Fund F		11,335,388		12,075,499
2,057,103	*	State Street Bank & Trust Co. Emerging Market Stock Fund		18,663,492		21,214,905
4,621,112		Barclays Global Investors Growth Equity Fund F		40,733,801		37,939,330
2,791,348		Barclays Global Investors Value Equity Fund F		27,312,622		29,253,326
		TOTAL COLLECTIVE INVESTMENT FUNDS		785,988,700		899,158,996
COMMON STOCK
61,767,842	*	Target Corporation		1,257,896,234		2,371,885,133
PARTICIPANT LOANS
61,792,951		Participant loans, interest rates ranging from 5.00% to 5.25%		—		61,992,951
		TOTAL ASSETS HELD FOR INVESTMENT PURPOSES AT END OF YEAR	$	2,529,326,772	$	3,818,478,918

*Indicates a party in interest to the Plan.

Target Corporation 401(k) Plan

EIN: 41-0215170
Plan #002

Schedule H, Line 4j – Schedule of Reportable Transactions

Year Ended December 31, 2003

Identity of Party Involved	Description of Asset	Purchase Price		Selling Price		Cost of Asset		Current Value of Asset on Transaction Date		Net Gain/ (Loss)
Category (iii) – Series of Transactions in Excess of 5% of Plan Assets
Target Corporation common stock	4,983,347 units purchased in 56 transactions	$	173,356,073	$	—	$	173,356,073	$	—	$	—
	7,221,164 units sold in 212 transactions		—		251,631,565		141,430,731		251,631,565		110,200,834
State Street Bank & Trust Co. Short-Term Investment Fund	446,156,596 units purchased in 117 transactions		446,156,596		—		446,156,596		—		—
	448,351,207 units sold in 133 transactions		—		448,351,207		448,351,207		448,351,207		—

There were no category (i), (ii), or (iv) transactions for the year ended December 31, 2003.