Report of Independent Auditors Board of Directors and Shareholders Target Corporation We have audited the accompanying consolidated statements of financial position of Target Corporation and subsidiaries as of January 31, 2004 and February 1, 2003 and the related consolidated results of operations, cash flows and shareholdersGLYPH<213> investment for each of the three years in the period ended January 31, 2004. These financial statements are the responsibility of the CorporationGLYPH<213>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 stan- dards 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 consolidated financial position of Target Corporation and subsidiaries at January 31, 2004 and February 1, 2003 and the consolidated results of their operations and their cash flows for each of the three years in the period ended January 31, 2004 in conformity with accounting principles generally accepted in the United States. Minneapolis, Minnesota February 19, 2004 In addition, our consolidated financial statements have been audited by Ernst & Young LLP, independent auditors, whose report also appears on this page. As a part of its audit, Ernst & Young LLP develops and maintains an understanding of the CorporationGLYPH<213>s internal accounting controls and conducts such tests and employs such procedures as it considers necessary to render its opinion on the consolidated financial statements. Their report expresses an opinion as to the fair presentation, in all material respects, of the consolidated financial statements and is based on independent audits made in accordance with auditing standards generally accepted in the United States. Management is responsible for the consistency, integrity and presentation of the information in the Annual Report. The consoli- dated financial statements and other information presented in this Annual Report have been prepared in accordance with accounting principles generally accepted in the United States and include necessary judgments and estimates by management. To fulfill our responsibility, we maintain comprehensive systems of internal control designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with established procedures. The concept of reasonable assurance is based upon a recognition that the cost of the controls should not exceed the benefit derived. We believe our systems of internal control provide this reasonable assurance. The Board of Directors exercises its oversight role with respect to the CorporationGLYPH<213>s systems of internal control primarily through its Audit Committee, which is comprised of five independent directors. The Committee oversees the CorporationGLYPH<213>s systems of internal control, accounting practices, financial reporting and audits to assess whether their quality, integrity and objectivity are sufficient to protect shareholdersGLYPH<213> investments. The CommitteeGLYPH<213>s report appears on this page. Robert J. Ulrich Chairman of the Board and Chief Executive Officer February 19, 2004 Douglas A. Scovanner Executive Vice President and Chief Financial Officer Audit Committee results were reported to the full Board of Directors and the CorporationGLYPH<213>s annual financial statements were reviewed and approved by the Board of Directors before issuance. The Audit Committee also recommended to the Board of Directors that the independent auditors be reappointed for fiscal 2004, subject to the approval of the shareholders at the annual meeting. February 19, 2004 The Audit Committee met six times during fiscal 2003 to review the overall audit scope, plans for internal and independent audits, the CorporationGLYPH<213>s systems of internal control, emerging accounting issues, audit fees and benefit plans. The Committee also met individually with the independent auditors, without management present, to discuss the results of their audits. The Committee encourages the internal and independent auditors to communicate closely with the Committee. Report of Audit Committee Report of Management 40