Target 2007 Annual Report Download - page 60

In addition, we maintain nonqualified, unfunded deferred compensation plans for approximately 4,500
current and retired team members whose participation in our 401(k) plan is limited by statute or regulation.
These team members choose from a menu of crediting rate alternatives that are the same as the investment
choices in our 401(k) plan, including Target common stock. Through the end of 2005, we credited an
additional 2 percent per year to the accounts of all active participants, in part to recognize the risks inherent to
their participation in a plan of this nature. Effective in 2006, the additional 2 percent per year was credited only
to the accounts of active participants who were not executive officers. We also maintain a nonqualified,
unfunded deferred compensation plan that was frozen during 1996, covering 15 current and 49 retired
participants. In this plan deferred compensation earns returns tied to market levels of interest rates plus an
additional 6 percent return, with a minimum of 12 percent and a maximum of 20 percent, as determined by the
plan’s terms.
The American Jobs Creation Act of 2004 added Section 409A to the Internal Revenue Code, changing the
federal income tax treatment of nonqualified deferred compensation arrangements. Failure to comply with the
new requirements would result in early taxation of nonqualified deferred compensation arrangements, as well
as a 20 percent penalty tax and additional interest payable to the IRS. In response to these new requirements,
we enacted a change to our deferred compensation plans that allowed participants an election to accelerate
the distribution dates for their account balances. Participant elections resulted in payments of $74 million in
January 2008.
We control some of our risk of offering the nonqualified plans through investing in vehicles, including
prepaid forward contracts in our own common stock, that offset a substantial portion of our economic
exposure to the returns of these plans. These investment vehicles are general corporate assets and are
marked-to-market with the related gains and losses recognized in the Consolidated Statements of Operations
in the period they occur. The total change in fair value for contracts indexed to our own common stock
recorded in earnings was pre-tax income of $6 million in 2007, $37 million in 2006 and $7 million in 2005.
During 2007 and 2006, we invested approximately $164 million and $111 million, respectively, in such
investment instruments, and these investments are included in the Consolidated Statements of Cash Flows
within other investing activities. Adjusting our position in these investment vehicles may involve repurchasing
shares of Target common stock when settling the forward contracts. In 2007, 2006 and 2005, these
repurchases totaled 3.4 million, 1.6 million and 1.5 million shares, respectively, and are included in the total
share repurchases described in Note 24.
Prepaid Forward Contracts on Target Common Stock
(dollars in millions, except per share data)
Number of Shares Current Fair Value at
Contractual Contract Price
Settlement Date February 2, 2008 February 3, 2007 per Share February 2, 2008 February 3, 2007
October 2007 —257,000 $38.95 $ — $16
October 2007 —516,033 29.07 — 32
October 2007 —228,276 43.81 — 14
October 2007 —189,479 52.78 — 12
October 2007 —250,000 53.41 — 15
October 2007 —250,000 53.41 — 15
May 2008 250,000 1,025,400 48.76 14 64
July 2008 72,832 —62.46 4 —
August 2008 57,331 —62.25 3 —
August 2008 145,894 —61.69 9 —
August 2008 371,262 —61.95 21 —
October 2008 247,524 —60.60 14 —
November 2008 288,001 —59.03 17 —
February 2008 177,085 —56.47 10 —
February 2008 157,960 —50.65 9 —
January 2009 400,000 —48.11 23 —
2,167,889 2,716,188 $124 $168
The settlement dates of these instruments are regularly renegotiated with the counterparty, so settlement
may not occur during the months listed on the table above.
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