Pershing Square has been a substantial shareholder of Target for more than two years. Based on recent market prices, we own approximately $1 billion of Target’s common stock (3.3% of the shares outstanding) and approximately $280 million in call options (4.5% of the shares outstanding)⁽¹⁾. Recently, we nominated five independent director candidates for election at Target’s upcoming 2009 Annual Meeting of Shareholders. We did so because we believe that adding individuals with directly relevant experience to Target’s board of directors will help make Target a stronger, more profitable, and more valuable company. We refer to our slate as the Nominees for Shareholder Choice.

Despite the fact that Target’s two principal business lines are retail and credit cards, Target in our view currently has no independent directors with senior, CEO-level operating experience dedicated to either of these two businesses.⁽²⁾ Similarly, despite the fact that Target is one of the largest owners of retail real estate in the country, we believe that there are no independent directors on the company’s board who have CEO-level real estate expertise. The board also has no significant shareholder representation, with the current directors owning less than 0.3% of the company’s outstanding common stock. As such, we believe that the current board is suboptimal from a shareholder and corporate governance perspective.

Target’s board is comprised of business professionals with experience in a variety of industries. We believe, however, that an effective board should be comprised not only of high quality individuals with diverse experience, but also those with specifically relevant expertise in the company’s core business lines and major assets. In our opinion, even with the best management team, a company must have directors who can draw upon their own experience to challenge, help shape, or otherwise add value to management’s operating or strategic plans. We also think it is essential that major owners are represented on a board so that the shareholder’s voice is adequately heard.

From the beginning of the fourth quarter of 2007 to the day prior to our announcement of our proposed slate, Target stock declined by 51% to $28.83. Over the same period, the stock of Wal-Mart, Target’s principal competitor, appreciated 11%, a 60 percentage point outperformance. We believe that Target’s substantial negative returns to its shareholders are reflective of its operating underperformance compared with Wal-Mart. Since the fourth quarter of 2007, Wal-Mart has outperformed Target on key operating metrics, including growth in retail revenues, same-store sales, and earnings per share.

While Wal-Mart has experienced strong results, Target has suffered same-store sales and profit declines. In addition, Target’s credit card performance has been poor with annual net write-offs rising to $811 million or approximately 9.3% of average receivables in 2008, compared to 5.9% of average receivables in 2007. In contrast, because Wal-Mart partnered with a financial institution for its store credit card years ago, it does not own credit card receivables, nor does it have the material credit and funding risks associated with these assets.

Wal-Mart operates in one principal line of business — general merchandise retailing. From the composition of Wal-Mart’s board, one can conclude that Wal-Mart believes that having independent directors with relevant experience is important. After being criticized for years for its apparel offering, in 2007 Wal-Mart appointed Allen Questrom, former CEO of JCPenney, to its board. Mr. Questrom is widely considered to be one of the country’s strongest apparel retail executives, having completed the successful turnarounds of JCPenney and Barney’s New York, as well as having served as Chairman and CEO of Federated Department Stores and Neiman Marcus. In 2006, Wal-Mart appointed Roger Corbett to its board. Mr. Corbett is the retired CEO and Group Managing Director of Woolworths Limited, the largest retail company in Australia whose principal business lines include food retailing, general merchandising, and consumer electronics.

While Wal-Mart owns a lower percentage of its stores than Target, its board includes an experienced real estate executive. Last year, Arne Sorenson, the EVP and CFO of Marriott International, became a director of Wal-Mart, bringing significant real estate expertise to Wal-Mart’s board.

While Wal-Mart has a number of independent directors with a wealth of retail and real estate knowledge, we believe that comparable expertise is notably absent on the Target board. In light of the difficult economic and competitive environment and the important strategic decisions the company will face in ensuing years, we believe that it is essential for Target’s board to include directors with relevant expertise. To that end, we have identified a number of independent directors to serve on Target’s board with expertise in each of the company’s principal business lines and assets.

Food retailing represents a critical strategic growth initiative for Target. In our view, Target’s more limited food offering partially explains why Target’s same-store-sales growth rate has been considerably weaker than Wal-Mart’s in every quarter since the fourth quarter of 2007. We and the company believe that an expanded food presence can help Target increase the frequency of visits from its customers and generate higher and more predictable sales.

Our nominee, Jim Donald, has over 30 years of experience in food retailing. Prior to becoming the CEO of Starbucks, Jim served as the Chairman and CEO of Pathmark and President and Manager of Safeway’s Eastern division. Jim began his grocery career from the ground floor, joining Albertson’s in 1976 where he quickly rose through its managerial ranks. In 1991, Jim was handpicked by Sam Walton to build out Wal-Mart’s presence in the grocery business. At Wal-Mart, Jim was a key executive in the development and expansion of the Wal-Mart Supercenter.

Given his leadership skills and his extensive career in food retailing, we believe that, if elected, Jim would be an ideal addition to Target’s board, particularly as the company expands its SuperTarget footprint and pursues its strategic objectives in the food category.

In early August 2007, we met with Target to discuss our concerns regarding the credit and funding risks associated with its credit card segment. Despite Target’s previous publicly stated resistance to selling its credit card assets, we encouraged the company to pursue a credit card partnership transaction with a large financial institution and transfer the substantial majority of the credit and funding risks associated with these assets. While the company ultimately completed a sale of 47% of its credit card receivables to JPMorgan Chase in May 2008, the transaction was, in economic substance, a non-recourse financing. As a result, Target remains exposed to first-loss credit risk on these “sold” assets. In addition,

the company retains 100% of the credit and funding risks of the 53% of receivables it continues to own in addition to the obligation to fund the future growth of these assets.

As such, we believe that credit risk and funding risk remain major concerns for the company. Despite these risks, we believe no one on the Target board has CEO-level credit card operating experience who can help the company assess these risks, develop alternative solutions to problems, and make suggestions to improve the operations of this segment.

Our nominee, Richard Vague, has over 30 years of experience in the credit card and payment processing business. Richard served as Chairman and CEO of First USA, a company that he co-founded in 1984, which grew from a start-up to the single largest Visa credit card issuer in the United States when it was sold to Bank One in 1997. Under his leadership, First USA grew from $200 million in loans and 250 employees to $70 billion in loans and 22,000 employees.

Richard also served as the CEO of Juniper Financial, a direct consumer credit card bank that he co-founded and later sold to Barclays Bank Delaware in 2004 where he served as CEO of the business subsequent to the sale. Both Juniper Financial and Barclays Bank Delaware became leaders in the credit card business under Richard’s leadership.

Based on his experience, we believe that Richard is one of the best credit card industry executives in the world. We are confident that, if elected, Richard’s extensive experience, judgment, and relationships would help Target navigate through the current financial crisis.

Target is one of the largest retail real estate owners in the country owning more than 200 million square feet of retail real estate. Compared with other major retailers, Target owns outright a substantially greater percentage of its stores. Because of the greater stability of the cash flows generated from real estate, real estate income typically receives a much higher valuation than retail income in the market.

We believe that the market does not assign Target a greater overall valuation than other retailers which own a much smaller percentage of their real estate. In our view, this presents a potential opportunity worthy of further exploration by the company, its board, and management. We believe, however, that Target’s board’s ability to assess potential real estate strategic alternatives is limited by the fact that no current member of the board has the CEO-level real estate expertise which is necessary to analyze these potential opportunities.

Our nominee, Michael Ashner, is a senior executive in the real estate investment and management businesses. He is currently the Chairman and CEO of Winthrop Realty Trust, a NYSE-listed REIT. In addition, Michael is Chairman and CEO of Winthrop Realty Partners, L.P., a privately held property management firm which manages more than 20 million square feet of commercial real estate, including over 11 million square feet owned by Michael and his affiliates.

Since 1991, Michael and his team have acquired and/or managed more than $12 billion of real estate in 45 states, including more than 85,000 apartment units, 50 million square feet of office, retail and industrial space, and 10,000 hotel rooms. Michael and his team have managed more than 500 partnerships, at least 40 of which were public companies with over 100,000 investors, including five separate publicly-traded REITs.

Previously, Michael served as Executive Chairman of Lexington Realty Trust, a NYSE-listed REIT, and was Chairman and CEO of Shelbourne Properties family of REITs. In addition, since 1981, Michael has been the President and principal shareholder of Exeter Capital Corporation, a real estate investment banking firm.

We believe that, if elected, Michael’s wealth of real estate investment and operating experience would help provide Target’s board with the knowledge it needs to evaluate Target’s real estate operations and strategy.

We believe that Pershing Square’s other two nominees including myself and Ronald Gilson would do much to improve Target’s governance. As the founder and manager of private investment funds whose largest investment is Target — Pershing Square is the third largest beneficial owner of the Company’s common stock with a 7.8% stake, consisting of 3.3% in shares of common stock (approximately $1 billion in market value) and 4.5% in stock-settled call options (approximately $280 million in market value)⁽³⁾ — I will bring the perspective of a large owner that is currently absent from Target’s board. In our view, Pershing Square has established a track record of creating shareholder value in publicly-held retail and consumer companies including Sears Roebuck & Company, Wendy’s International, McDonald’s Corporation, Sears Canada and most recently, Longs Drug Stores Corporation, as explained in more detail in the enclosed proxy statement.

We believe that Ron Gilson is one of our country’s preeminent thinkers on corporate governance. With a joint appointment at Stanford and Columbia University law schools, Ron has dedicated his career to the study and advancement of corporate governance. As a fellow of the American Academy of Arts and Sciences and the European Corporate Governance Institute, among other notable appointments, Ron has been recognized as a thought leader on corporate governance. Ron has significant board experience serving as the independent Chairman of the Boards of Directors for certain of the American Century Mutual Funds, with funds under management of more than $26 billion.

We believe that, if elected, Ron’s extensive academic and real world experience as an independent board chair would ensure fair process, fair dealing, and diligent care for the benefit of all shareholders.

We agree with management that Target’s strong investment grade credit ratings are an important strategic asset for the company. As such, if I am elected as a director, I do not intend to support any action that will impair the company’s credit ratings.

In our view, Target can be an enormously valuable company without the need to over-leverage its business. In fact, over the next several years, we believe that positioning the company so that it can increase its access to capital may allow it to take advantage of distressed real estate opportunities that could result from the current shakeout in the retail industry.

I have always found it astonishing that in the most democratic nation in the world, elections for the boards of U.S. public companies are generally uncontested. Shareholders are offered the opportunity to vote for one director for each seat handpicked by the incumbent board or by company management. Shareholders can typically vote only in favor of the selected director or withhold their vote.

In the political realm, we see analogous elections only in the Third World and in dictatorships. We are not going to solve this problem today, but at Pershing Square’s expense we have created the opportunity for shareholders to choose between the company’s incumbent directors and a new independent slate that we have identified.

I ask that you compare the relative merits of each of our proposed directors with the incumbents that are up for election. Please ask yourself whether the company will be best served with the incumbent directors, or with the fresh perspectives of five new independent directors with extensive expertise in each of Target’s main business lines and assets, or who otherwise bring a strong shareholder and corporate governance perspective to the company.

Based on our reading of Target’s Restated Articles of Incorporation, Target’s board has 13 seats of which 12 are currently occupied. At the upcoming meeting, based on our interpretation of Target’s Restated Articles of Incorporation, the company is asking shareholders to determine the size of the board by voting to reduce the size of the board from 13 to 12 seats. If shareholders were to accept management’s recommendation and reduce the size of the board, only four directors can be elected at this election. If the size of the board is reduced, shareholder votes for one of our nominees will not be counted, nor can this candidate be elected. We cannot conceive of a good reason to reduce the size of the board, for it will curtail the ability of shareholders to add strong board

 

 

⁽³⁾ Unless and until these options are exercised, the underlying shares do not carry voting rights.

candidates of their choosing to the current board. As such, we urge you to vote against Target’s board reduction proposal.

To assist you in assessing our candidates, we are offering you the opportunity to meet our proposed directors in person and ask them any questions that you may have. On Monday, May 11, 2009, we intend to hold a Town Hall Meeting at 11:00 a.m. Eastern Daylight Savings Time, at the AXA Equitable Auditorium, 787 Seventh Avenue (between 51^st and 52^nd Streets), New York, New York, where you can meet each of our nominees. If you cannot attend the Town Hall Meeting in person, a live webcast of the Town Hall Meeting will be available at www.TGTtownhall.com. This webcast will be available for replay until the Annual Meeting.

 

 

 

PERSHING SQUARE CAPITAL MANAGEMENT, L.P.

 

Sincerely,

 

William A. Ackman

 

 

PERSHING SQUARE PROXY STATEMENT
2009 ANNUAL MEETING OF SHAREHOLDERS OF TARGET CORPORATION

 

This proxy statement is being furnished to the shareholders of Target Corporation, a Minnesota corporation, with its principal executive offices at 1000 Nicollet Mall, Minneapolis, Minnesota 55403, which we sometimes refer to as Target or the company, in connection with the solicitation of GOLD proxies by Pershing Square for use at the 2009 Annual Meeting of Shareholders of Target (including any adjournments, continuations or postponements thereof and any meeting held in lieu thereof), which we refer to as the 2009 Annual Meeting, which is scheduled to be held at the Target Store, 1250 West Sunset Drive, Waukesha, Wisconsin on Thursday, May 28, 2009, at 1:00 p.m. Central Daylight Time.

 

We are soliciting your proxy for the 2009 Annual Meeting regarding the following proposals:

 

 

More information about the Nominees for Shareholder Choice can be found under “PROPOSAL 2A — ELECTION OF FOUR CLASS III DIRECTORS — The Nominees for Shareholder Choice” and “PROPOSAL 2B — ELECTION OF THE FIFTH CLASS III DIRECTOR” beginning on page 9 of this proxy statement. Pershing Square beneficially owns approximately 7.8% of the outstanding shares of Target common stock. Details of Pershing Square’s beneficial ownership of Target shares can be found under “PARTICIPANTS IN THE SOLICITATION — Certain Information About Pershing Square” beginning on page 16 of this proxy statement.

 

YOUR VOTE IS EXTREMELY IMPORTANT.  WE URGE YOU TO VOTE AGAINST THE BOARD REDUCTION PROPOSAL AND VOTE FOR THE NOMINEES FOR SHAREHOLDER CHOICE BY SIGNING, DATING AND RETURNING THE GOLD PROXY CARD. YOU MAY ALSO VOTE BY TELEPHONE USING THE TOLL-FREE NUMBER ON THE GOLD PROXY CARD OR VIA THE INTERNET USING THE INTERNET ADDRESS ON THE GOLD PROXY CARD.

 

The 2009 Annual Meeting is scheduled to be held on May 28, 2009 and only holders of record as of March 30, 2009 will be entitled to notice of, and be permitted to vote at, the 2009 Annual Meeting. A majority of the outstanding shares of Target common stock must be represented at the 2009 Annual Meeting in person or by proxy in order to satisfy applicable quorum requirements.

 

This Proxy Statement and the GOLD proxy card are first being furnished to shareholders on or about May 2, 2009. We are providing this proxy statement in definitive form to all Target shareholders to whom GOLD proxies

are furnished by Pershing Square, or from whom GOLD proxies are requested by Pershing Square, no later than the time that GOLD proxies are furnished or such requests are made.

 

As used in this proxy statement, the terms “we”, “us” and “our” refer to Pershing Square, L.P., Pershing Square II, L.P., Pershing Square IV Trade-Co, L.P., Pershing Square IV-I Trade-Co, L.P., Pershing Square International, Ltd., Pershing Square International IV Trade-Co, Ltd., Pershing Square International IV-I Trade-Co, Ltd., Pershing Square Capital Management, L.P., PS Management GP, LLC, Pershing Square GP, LLC and Pershing Square Holdings GP, LLC (which we collectively refer to as Pershing Square), William A. Ackman, Ali Namvar and Roy J. Katzovicz. Additional information about Pershing Square and the Nominees for Shareholder Choice, who are also participants in this solicitation, can be found below in the section titled “CERTAIN INFORMATION CONCERNING PERSHING SQUARE AND THE OTHER PARTICIPANTS IN THE SOLICITATION”.

 

THIS SOLICITATION IS BEING MADE BY PERSHING SQUARE AND NOT ON BEHALF OF THE BOARD OR THE MANAGEMENT OF TARGET.

 

Voting Methods

 

 

In order to vote by Internet or by telephone, you must vote by the following deadlines:

 

 

If you hold your shares through a bank, broker or other nominee holder and you do not intend to vote in person at the 2009 Annual Meeting, only that nominee holder can vote your shares, and only after receiving specific voting instructions from you. Please contact your bank, broker or nominee holder and instruct them to vote a GOLD proxy card “AGAINST” the board reduction proposal and “FOR” the Nominees for Shareholder Choice.

 

If Pershing Square receives GOLD proxies that have no explicit voting instructions, Pershing Square intends to vote such proxies (i) “AGAINST” the company’s proposal to determine that the number of directors constituting the board is 12, rather than 13, (ii) “FOR” the election of William A. Ackman, Michael L. Ashner, James L. Donald and Richard W. Vague as directors of the company, (iii) “FOR” the election of Ronald J. Gilson as a director of the company, (iv) “FOR” the ratification of the appointment of Ernst & Young LLP and (v) “FOR” the company’s proposal to approve the performance measures available under the Target Corporation Long-Term Incentive Plan, and to “ABSTAIN” from voting such proxies on the shareholder proposal regarding annual advisory vote on executive compensation.

 

If elected, consistent with their fiduciary duties, the Nominees for Shareholder Choice are committed to acting in the best interest of the shareholders of Target. We strongly urge you to vote “AGAINST” the board reduction proposal and vote “FOR” the election of William A. Ackman, Michael L. Ashner, James L. Donald, Richard W. Vague and Ronald J. Gilson.

 

Revocation of Proxies

 

Shareholders who have executed and delivered a proxy card may revoke it at any time before the proxy is exercised by:

 

 

We strongly urge you not to sign any proxy card sent to you by Target. If you have already voted for the board reduction proposal and/or the company’s nominees, you can change your vote by signing, dating and returning the GOLD proxy card to D.F. King & Co., Inc. at its address set forth below or by making use of the Internet or telephone voting facilities described above. If you hold your shares through a bank, broker or other nominee holder, you will need to contact your bank, broker or nominee and follow their instructions if you want to revoke a proxy or change your vote. Only your latest signed and dated proxy will count at the 2009 Annual Meeting.

 

If you have any questions, require assistance in voting your GOLD proxy card, or need additional copies of our proxy material, please contact our proxy solicitor at:

 

D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Toll-free: (800) 290-6427
Banks and brokers: (212) 269-5550

 

In addition to delivering printed versions of this proxy statement and the GOLD proxy card to all shareholders by mail, this proxy statement and the GOLD proxy card are also available on the Internet. You have the ability to access and print the proxy materials, including this proxy statement and the GOLD proxy card, at www.TGTtownhall.com.

 

BACKGROUND OF THE SOLICITATION

 

In February of 2009, Pershing Square discussed with Mr. Gregg W. Steinhafel, Chairman, President and Chief Executive Officer of Target, the possibility of appointing certain individuals nominated by Pershing Square as directors of the company. In response, Mr. Steinhafel asked us to schedule a meeting with the Nominating Committee of the board, which we did promptly. On March 3, 2009, Mr. William A. Ackman, the founder and managing member of the general partner of Pershing Square Capital Management, L.P., and one other individual suggested by Pershing Square for consideration met with the Nominating Committee at the company’s headquarters in Minneapolis. Subsequent to the March 3rd meeting, Pershing Square proposed three additional individuals for consideration by the Nominating Committee. On March 12, 2009, Target informed us that its board had declined to extend an invitation to any of the individuals identified by us as candidates for board membership.

 

On March 16, 2009, we delivered a notice of nomination to the company in accordance with the procedures set forth in the company’s Restated Articles of Incorporation, proposing to nominate the following five individuals for election as directors at the 2009 Annual Meeting: Messrs. William A. Ackman, Michael L. Ashner, James L. Donald, Ronald J. Gilson and Richard W. Vague.

 

On the same day, Target issued a press release indicating that the board is comprised of 12 directors and that the company is nominating four candidates for election at the 2009 Annual Meeting. We believe that while there are 12 sitting directors, the board consists of 13 seats with five Class III seats up for election at the 2009 Annual Meeting. When Target’s former Chairman and CEO resigned early this year, a vacancy was created, and the board was not subsequently decreased in the manner mandated by the company’s charter — which provides that any decrease of the size of the board to below 13 members requires the affirmative vote of its shareholders.

 

On March 24, 2009, the company filed a preliminary proxy statement with the Securities and Exchange Commission, which we refer to as the SEC, setting forth four specific proposals to be voted on by shareholders of the company at the 2009 Annual Meeting, including the election of four Class III directors.

 

On March 26, 2009, Mr. Ackman sent a letter to Mr. Steinhafel, setting forth the basis for our understanding that the board currently consists of 13 members and that five seats are up for election at the 2009 Annual Meeting. In the letter, Mr. Ackman suggested that Target could resolve this issue through a binding arbitration if it disagrees with our view.

 

On March 30, 2009, the company filed an amended preliminary proxy statement with the SEC, setting forth a new proposal to be voted on by shareholders of the company at the 2009 Annual Meeting. The new proposal would have the effect of reducing the size of the board to 12, resulting in only four seats being up for election at the 2009 Annual Meeting.

 

On April 6, 2009, Pershing Square filed a preliminary form of this proxy statement with the SEC.

 

Over the past two years, Pershing Square has had a number of discussions with Target’s management and advisors regarding different approaches to managing risk, optimizing the company’s capital structure and identifying opportunities to unlock long term value, including opportunities with respect to the company’s real estate holdings.

 

Target is one of the largest owners of retail real estate in the United States.  Real estate companies have historically traded at substantially higher multiples of EBITDA compared to retailers. There may be alternatives to Target’s current structure, including the creation of a real estate investment trust, to hold and operate real estate that would minimize corporate-level taxes. In light of these considerations, Pershing Square believes that there may be more efficient ways for Target to structure its business. Pershing Square does not currently have any specific plans or proposals with respect to Target’s real estate.

PERSHING SQUARE’S TRACK RECORD

 

Pershing Square is a research-intensive, fundamental investor in the public markets which seeks to identify investments where market prices exhibit significant valuation discrepancies compared to our assessment of fair value. In our view, Pershing Square has established a track record of creating shareholder value in retail, consumer and other businesses, including the cases set forth below. We note, however, that stock price performance is a function of a variety of factors including, among other things, the quality of the members of a company’s board of directors, the strength of its management team, the performance of its business, the quality of its assets, its competitive landscape, and micro and macro-economic factors, as well as the engagement of shareholders. It is therefore not feasible to determine the precise extent (if any) of responsibility for Pershing Square’s creation of value described in the examples listed below. In addition, we cannot determine whether Pershing Square was at all responsible for the creation of value described in the cases below because the level of Pershing Square’s involvement in each instance varies and there is no way of knowing whether Pershing Square’s involvement directly created shareholder value. In each of the cases set forth below, however, Pershing Square believes that its engagement was an important factor in achieving a positive outcome for all shareholders.

 

We note further that Pershing Square has invested in numerous other companies and not every investment has yielded a positive return to Pershing Square or to other shareholders who held the same stock during the same period as Pershing Square’s investment. In these other cases, however, Pershing Square was a passive investor and, to the extent the subject company performed poorly and Pershing Square’s investment did not yield a positive return, the negative consequences did not result from actions taken by Pershing Square with respect to the subject company, but rather due to various factors that affect stock performance generally, including the factors mentioned in the immediately preceding paragraph.

 

Sears

 

Pershing Square started purchasing the common stock of Sears Roebuck & Company (which we refer to as Sears) in June 2004. In addition to purchasing Sears common stock for its own account, Pershing Square approached Vornado Realty Trust (which we refer to as Vornado), a real estate investment company, to induce it to consider a potential strategic transaction with Sears. In that connection, Pershing Square began working with Vornado and purchased an equity stake in Sears for Vornado’s account as well, together acquiring a 4.9% economic stake through total return swaps, shares and options in the company.

 

On November 5, 2004, Vornado announced that it had acquired an approximately 4.3% economic interest in Sears. Following this announcement, the price of Sears common stock rose approximately 21% over the prior trading day’s closing price.

 

On November 17, 2004, Sears and Kmart Holding Corp. (which we refer to as Kmart) entered into a merger agreement to combine the two companies. Shareholders of Sears were given the option to elect to receive either $50.00 in cash or 0.5 of a share of the common stock for the combined company for each share of Sears common stock, representing a 36.5% premium to the trading price of Sears common stock on the day prior to Vornado’s announcement.

 

As outlined in the Registration Statement of Form S-4 filed by Sears and Kmart in connection with their merger, “as a result of Vornado’s announcement and other concerns including maintaining confidentiality of the discussions, Sears and Kmart decided to accelerate the timeframe for implementing the proposed business combination to minimize the period during which speculation or additional price volatility could impair the parties’ ability to reach an agreement on financial terms.” Pershing Square believes that its involvement enhanced both the speed and certainty of the merger between Sears and Kmart, hence contributed to the value creation for shareholders of Sears.

 

Wendy’s

 

Pershing Square started purchasing the stock of Wendy’s International, Inc. (which we refer to as Wendy’s) in December 2004 and by June 2005, had accumulated a 9.9% stake in Wendy’s, including shares of common stock and options. Pershing Square believed that Wendy’s stock was undervalued at the time and suggested certain

strategic initiatives to increase shareholder value. Specifically, Pershing Square proposed that the company (1) spin off Wendy’s Canadian-based Tim Hortons division, (2) refranchise a significant portion of Wendy’s company-operated restaurants, and (3) repurchase shares using the proceeds from refranchising. Pershing Square also retained The Blackstone Group L.P. (which we refer to as Blackstone) as its financial advisor to evaluate these strategic initiatives, and Blackstone arrived at similar conclusions as Pershing Square regarding the substantial unrealized value in Wendy’s stock.

 

Wendy’s eventually spun off the Tim Hortons division through an initial public offering in March 2006, raising approximately $670 million, which was returned to Wendy’s shareholders through share repurchases and higher dividends. The value of Wendy’s stock (including the value of the spun-off Tim Hortons) nearly doubled during the course of Pershing Square’s involvement with the company.

 

McDonald’s

 

Pershing Square took a stake in McDonald’s Corporation (which we refer to as McDonald’s) in 2005 and made a number of proposals to management that were designed to increase shareholder value. Specifically, in November 2005, Pershing Square made a proposal to sell 65% of McOpCo, a unit of McDonald’s which operated roughly 8,000 of McDonald’s 32,000 system-wide restaurants, to the public and accelerate an ongoing share repurchase program. Pershing Square later revised its proposal, urging McDonald’s to sell 20% of McOpCo to the public, commence a McOpCo refranchising program by selling company-operated restaurants directly to its franchisees, and increase share repurchases. As part of the plan, Pershing Square also proposed a three-fold increase in McDonald’s dividend.

 

McDonald’s eventually undertook a number of initiatives upon the urging of Pershing Square, including the sale of 1,600 McOpCo restaurants in Latin America and the Caribbean, a commitment to sell approximately 30% of its company-operated restaurants to franchisees over time, the repurchase of more than $5 billion of its stock, and an approximate three-fold increase in its dividend resulting in a sustained rise in its stock price. We believe our proposals helped McDonald’s highlight the value of its brand royalty business, improve overall capital allocation, increase same store sales and accelerate earnings growth. During the approximately two-year period of Pershing Square’s involvement with McDonald’s, McDonald’s stock price nearly doubled in price.

 

Sears Canada

 

Sears Canada Inc. (which we refer to as Sears Canada) was a majority-owned subsidiary of Sears Holdings Corporation (which we refer to as Sears Holdings). The remainder of its common stock was listed on the Toronto Stock Exchange and held by public stockholders. Pershing Square began investing in Sears Canada in February 2005.

 

In December 2005, Sears Holdings announced its intention to take Sears Canada private through a two-step process consisting of an offer of CAD$16.86 per share for the 46% that it did not already own, followed by a second-step transaction to cash out non-tendering holders. Sears Holdings also entered into a lock-up agreement with a shareholder with a 9.1% ownership stake in Sears Canada, providing for such shareholder to tender its shares into the offer. In response, the board of directors of Sears Canada formed a special committee, which retained an independent financial advisor. The independent financial advisor determined that the offer price was inadequate and valued the stock of Sears Canada at between $19.00 and $20.25 per share.

 

In February 2006, Sears Holdings commenced its offer. The independent directors of Sears Canada unanimously recommended that stockholders reject the offer. They stated that the bid was opportunistically timed and exerted pressure on Sears Canada and its minority shareholders.

 

After commencing the offer, Sears Holdings entered into support agreements with major Canadian banks whereby the banks agreed to vote their shares in favor of the second-step transaction rather than tendering into the offer and, in exchange, Sears Holdings agreed to extend the second-step process until December 2006 in order for these banks to receive certain significant tax benefits.

In April 2006, Sears Holdings entered into a deposit agreement with a significant stockholder whereby the stockholder agreed to deposit its shares with Sears Holdings in exchange for an increase of the offer price to CAD$18 per share and a litigation release.

 

Through the support agreements with the banks and the deposit agreement, Sears Holdings essentially guaranteed that its offer would be successful.

 

On April 14, 2006, Pershing Square joined with two other minority investors (which we refer to collectively as the SCC Investors) to halt the efforts of Sears Holdings to take Sears Canada private. Collectively these investors owned approximately 7.7% of the common stock of Sears Canada.

 

The efforts the SCC Investors lead to a hearing before the Ontario Securities Commission (which we refer to as the OSC). The OSC determined that the offer by Sears Holdings had been abusive and coercive. The OSC also found that Sears Holdings had provided prohibited collateral benefits to the banks and the major shareholder pursuant to the support agreements and the deposit agreement. Consequently, the OSC ruled that the shares that were subject to these agreements could not vote with the minority. The OSC ruling has been widely viewed as a vindication for the SCC Investors’ efforts to challenge the transaction.

 

Sears Holdings ultimately abandoned its attempt to take Sears Canada private after the offer failed to obtain the approval by a majority of Sears Canada’s minority shareholders. Despite substantial weakness in the retail market, Sears Canada stock continues to trade at a premium price to Sears Holdings’s offer for the company. Pershing Square remains the second largest shareholder of Sears Canada.

 

Ceridian

 

Pershing Square started purchasing the stock of Ceridian Corporation (which we refer to as Ceridian) in late 2006. By January 2007, Pershing Square held an 11.3% stake in Ceridian. At the inception of Pershing Square’s involvement with Ceridian, its stock was traded at approximately $23 per share.

 

After meeting the then-newly appointed CEO of Ceridian and understanding her strategy to extend the company well beyond its core businesses and fire the president of its Comdata division, Pershing Square became “active” with respect to its investment.

 

Pershing Square believed that Ceridian stock was undervalued and, in light of the newly conceived (and, in Pershing Square’s view, deeply flawed) corporate strategy, urged Ceridian to spin off its Comdata division. On January 18, 2007, Pershing Square delivered a written notice to Ceridian proposing to nominate a slate of alternative directors for election at Ceridian’s 2007 annual meeting of stockholders. The very next day, Ceridian engaged Greenhill & Co., LLC (which we refer to as Greenhill) to act as its financial advisor to explore strategic and business alternatives for Ceridian and subsequently commenced a process to seek a buyer for Ceridian. As a result of the sale process, Ceridian entered into a merger agreement with private equity firm Thomas H. Lee Partners, L.P. and title insurer Fidelity National Financial Inc. (which we refer to together as THL/FNF), which provided for the acquisition of Ceridian by THL/FNF at $36 per share.

 

Pershing Square believed that the $36 per share purchase price was inadequate and continued to consider with its advisors a variety of alternatives for Ceridian, including a potential sale of Ceridian, a sponsored spin-off or a recapitalization.

 

Pershing Square eventually supported the THL/FNF deal in light of the significant deterioration in the credit and broader markets that had made other alternatives less viable and the $36 per share offer more attractive. Pershing Square believes that its proposals and proxy contest contributed to the sale of Ceridian at approximately 56.5% above its share price at the inception of Pershing Square’s involvement with the company.

 

Longs Drug Stores

 

Pershing Square started purchasing common stock and options of Longs Drug Stores Corporation (which we refer to as Longs Drug) at the end of June 2008 and, by the end of July 2008, accumulated an 8.8% beneficial

ownership position and eventually obtained an approximately 25.8% economic stake in the company. On August 12, 2008, Longs Drug announced that it had entered into an agreement with CVS Caremark Corporation (which we refer to as CVS Caremark) at a price of $71.50 per share. Pershing Square believed that Longs Drug had engaged in a suboptimal sale process and sought to convince the board of directors of Longs Drug to open the process to additional bidders. Pershing Square also hired Blackstone as its own financial advisor and sought to attract competing bidders. In particular, Pershing Square and Blackstone approached Walgreen’s Corporation (which we refer to as Walgreen’s).

 

As a result of Pershing Square’s efforts, in September 2008, Walgreen’s offered a competing bid of $75 per share, which was rebuffed by Longs Drug. Walgreen’s later withdrew its bid in light of the repeated refusal of Longs Drug to engage in discussions with Walgreen’s and the deteriorating economic conditions. Longs Drug consummated the transaction with CVS Caremark in October 2008.

 

Pershing Square believes that its involvement enhanced both the speed and certainty of a sale of Longs Drug, hence contributed to the value creation for shareholders of Longs Drug.

 

Proposal 1: Determination of the Size of the Board

 

The company is soliciting proxies to determine that the number of directors constituting the Target board is 12, rather than 13. We believe that each Nominee for Shareholder Choice is highly qualified and should be elected to the board, and we believe that shareholders should have the opportunity to elect each of them.

 

Accordingly, we strongly urge you to vote “AGAINST” Proposal 1 by signing, dating and returning the enclosed GOLD proxy card in the enclosed postage paid envelope. You may also vote by telephone using the toll-free number on the GOLD proxy card or via the Internet using the Internet address on the GOLD proxy card.

 

The company has indicated that if the board reduction proposal is rejected by its shareholders, it will interpret the rejection as the shareholders’ decision to accept our position that the board currently consists of 13 directors and that five seats are up for election at the 2009 Annual Meeting.

 

The accompanying GOLD proxy card will be voted in accordance with your instruction on such card. You may vote for or vote against, or abstain from voting on Proposal 1 described above by marking the proper box on the GOLD proxy card. If you return a signed GOLD proxy card without providing voting instructions, your shares will be voted “AGAINST” the determination that the number of directors constituting the board is 12, rather than 13.

 

Proposal 2A: Election of Four Class III Directors

 

We intend to nominate William A. Ackman, Michael L. Ashner, James L. Donald and Richard W. Vague for election as Class III directors of Target at the 2009 Annual Meeting, regardless of whether the board reduction proposal described above is passed. If the board reduction proposal is rejected by the shareholders and all of the Nominees for Shareholder Choice (including Professor Ronald J. Gilson described in Proposal 2B below) are elected to the board, the Nominees for Shareholder Choice will hold five of 13 seats on the Target board.

 

The Nominees for Shareholder Choice

 

The Nominees for Shareholder Choice named in this Proposal 2A include business leaders of national and international standing. These are highly qualified individuals with extensive experience in key areas of Target’s business, including retail, credit cards and real estate. In contrast to the Nominees for Shareholder Choice, in our view the incumbent non-executive directors of Target do not have comparable executive experience in the company’s main lines of business.

 

We believe that, if elected, the Nominees for Shareholder Choice will bring significant operational experience, new insight and fresh and relevant perspectives to the Target board. If elected, we believe they will substantially improve Target’s ability to navigate through the current economic environment and in the future.

 

All four of the Nominees for Shareholder Choice named in this Proposal 2A are independent under Target’s board of director independence guidelines, the applicable rules of the New York Stock Exchange, referred to as the NYSE, and the independence standards applicable to Target under paragraph (a)(1) of Item 407 of Regulation S-K under the Securities Exchange Act of 1934, as amended. Furthermore, three of the four candidates — those other than Mr. Ackman — are independent of and unaffiliated with Pershing Square.

 

Each Nominee for Shareholder Choice named in this Proposal 2A has consented to be named in this proxy statement for the 2009 Annual Meeting and to serve as a director of Target, if elected. If the Nominees for Shareholder Choice are elected, they intend to discharge their duties as directors of the company consistent with all applicable legal requirements, including the general fiduciary obligations imposed upon corporate directors. If elected, each Nominee for Shareholder Choice named in this Proposal 2A would serve as a Class III director for a three-year term expiring in 2012 and until a successor has been duly elected.

 

 

We strongly urge you to vote “FOR” the election of the Nominees for Shareholder Choice named in this Proposal 2A by signing, dating and returning the enclosed GOLD proxy card in the enclosed postage paid envelope. You may also vote by telephone using the toll-free number on the GOLD proxy card or over the Internet using the Internet address on the GOLD proxy card.

 

Proposal 2B: Election of the Fifth Class III Director

 

We intend to nominate a fifth nominee, Ronald J. Gilson, for election as a Class III director of Target at the 2009 Annual Meeting assuming the board reduction proposal described above is rejected by the shareholders.

 

Ron is a leading scholar in the law of corporate acquisitions, finance and governance. We believe that, if elected, Ron will bring new ideas to the Target board and improve the company’s corporate governance.

 

Ron is independent under Target’s board of director independence guidelines, the applicable rules of the NYSE, and the independence standards applicable to Target under paragraph (a)(1) of Item 407 of Regulation S-K under the Exchange Act. Furthermore, Ron is independent of and unaffiliated with Pershing Square.

Ron has consented to be named in this proxy statement for the 2009 Annual Meeting and to serve as a director of Target, if elected. If Ron is elected, he intends to discharge his duties as a director of the company consistent with all applicable legal requirements, including the general fiduciary obligations imposed upon corporate directors. If elected, Ron would serve as a Class III director for a three-year term expiring in 2012 and until a successor has been duly elected.

 

 

We strongly urge you to vote “FOR” the election of Ronald J. Gilson by signing, dating and returning the enclosed GOLD proxy card in the enclosed postage paid envelop. You may also vote by telephone using the toll-free number on the GOLD proxy card or via the Internet using the Internet address on the GOLD proxy card.

 

Certain Additional Information Concerning Proposals 2A & 2B

 

Pershing Square does not intend to compensate the Nominees for Shareholder Choice in connection with this proxy solicitation. If elected, the Nominees for Shareholder Choice will be entitled to such compensation from Target as may be determined by the company for non-employee directors, and which is described in company’s proxy statement.

 

Except as disclosed in this proxy statement, (i) no Nominee for Shareholder Choice or any associate of any Nominee for Shareholder Choice is a party adverse to the company or any of its subsidiaries or has a material interest adverse to the company or any of its subsidiaries in any material proceeding and (ii) there is no event that occurred during the past five years with respect to any Nominee for Shareholder Choice that is required to be described under Item 401(f) of Regulation S-K. The information in this proxy statement regarding a particular nominee has been furnished to Pershing Square by such nominee.

 

Pershing Square beneficially owns approximately 7.8% of the outstanding shares of Target’s common stock, consisting of 3.3% in shares of common stock (approximately $1 billion in market value) and 4.5% in stock-settled call options (approximately $280 million in market value). Details of Pershing Square’s beneficial ownership of Target shares can be found under “PARTICIPANTS IN THE SOLICITATION — Certain Information About Pershing Square” beginning on page 16 of this proxy statement. All of the shares of Target common stock beneficially owned by Pershing Square will be voted “FOR” the election of the Nominees for Shareholder Choice. Stock-settled call options beneficially owned by Pershing Square do not have any voting rights. None of the

Nominees for Shareholder Choice (other than William A. Ackman) beneficially owns any interest in securities of Target.

 

Unless otherwise indicated, percentages of the outstanding shares of common stock reported in this proxy statement were computed based upon the 752,336,151 shares of common stock outstanding as of March 30, 2009, as disclosed in the company’s proxy statement for the 2009 Annual Meeting.

 

Agreements with the Nominees for Shareholder Choice

 

In connection with the proxy solicitation contemplated hereby, Pershing Square has entered into customary indemnification agreements with each Nominee for Shareholder Choice with respect to the nomination of such individual as a director of Target at the 2009 Annual Meeting. Additionally, each Nominee for Shareholder Choice has delivered a consent to Target, consenting to be named as a nominee and to serve as a director of Target, if elected. The indemnification agreement provides, among other things, that:

 

 

 

Other Matters To Be Considered At The Annual Meeting

 

According to the company’s proxy statement, Target is soliciting proxies with respect to three proposals other than the board reduction proposal and the election of directors. Please refer to the company’s proxy statement for a detailed discussion of these proposals, including various arguments in favor of and against such proposals. These proposals are outlined below.

 

If you have signed the GOLD proxy card and no marking is made, you will be deemed to have given a direction to vote (i) “FOR” Proposal 3 below all shares represented by your GOLD proxy card, (ii) “FOR” Proposal 4 below all shares represented by your GOLD proxy card, and (iii) vote “FOR” Proposal 5 below all shares presented by your GOLD proxy card. In addition, if you have signed the GOLD proxy card and no marking is made, you will be deemed to have given a direction to the proxy holders named on the enclosed GOLD proxy card to vote all shares represented by your GOLD proxy card on such other matters in accordance with their judgment.

 

Proposal 3: Ratification of Independent Registered Public Accounting Firm

 

The company is soliciting proxies to ratify the company’s independent registered public accounting firm for the 2009 fiscal year. We support the ratification of the company’s Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm.

 

The accompanying GOLD proxy card will be voted in accordance with your instruction on such card. You may vote for or vote against, or abstain from voting on Proposal 3 described above by marking the proper box on the GOLD proxy card. If you return a signed GOLD proxy card without providing voting instructions, your shares will be voted “FOR” the ratification of the Audit Committee’s appointment of Ernst & Young LLP as Target’s independent registered public accounting firm for the fiscal year ending January 30, 2010.

 

Proposal 4: Approval of the Performance Measures Available Under
the Target Corporation Long-Term Incentive Plan

 

As discussed in further detail in the company’s proxy statement, in March 2009 the board approved an amendment to the list of the performance measures for performance-based awards under the Target Corporation Long-Term Incentive Plan, subject to further approval by shareholders. According to the company’s proxy

statement, if this proposal is not adopted, the Compensation Committee of the board intends to continue to grant awards under the plan, but certain awards to executive officers would no longer be fully tax deductible by Target.

 

The accompanying GOLD proxy card will be voted in accordance with your instruction on such card. You may vote for or vote against, or abstain from voting on Proposal 4 described above by marking the proper box on the GOLD proxy card. If you return a signed GOLD proxy card without providing voting instructions, your shares will be voted “FOR” the company’s proposal to approve the performance measures available under the Target Corporation Long-Term Incentive Plan.

 

Proposal 5: Shareholder Proposal Regarding
Annual Advisory Vote on Executive Compensation

 

As discussed in further detail in the company’s proxy statement, Allen Edward Hancock, trustee of Allen Edward Hancock Revocable Living Trust, 2244 Alder Street, Eugene, Oregon 97405, has proposed that the shareholders of the company request that the board adopt a policy that provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory resolution, proposed by management, to ratify the compensation of the company’s named executive officers. The vote by the shareholders will be non-binding and would not affect any compensation paid or awarded to any named executive officer.

 

The accompanying GOLD proxy card will be voted in accordance with your instruction on such card. You may vote for or vote against, or abstain from voting on Proposal 5 described above by marking the proper box on the GOLD proxy card. If you return a signed GOLD proxy card without providing voting instructions, Pershing Square intends to “ABSTAIN” from voting your shares on the shareholder proposal described above.

 

Other Proposals

 

We are not aware of any other business to be presented at the 2009 Annual Meeting. If any other matters should properly come before the 2009 Annual Meeting, it is intended that the proxy holders named on the enclosed GOLD proxy card will vote the proxies on such other matters in accordance with their judgment.

 

Voting Procedures

 

Record Date; Vote Per Share

 

Target has one class of voting shares outstanding. Only shareholders of record at the close of business on March 30, 2009, the record date, are entitled to receive notice of the 2009 Annual Meeting and to vote the shares of common stock that they held on the record date. Each share of common stock will have one vote on each matter to be voted on.

 

Quorum

 

The presence at the meeting, in person or by proxy, of the holders of a majority of the company’s common stock outstanding on the record date will constitute a quorum, permitting the meeting to conduct its business. According to Target, as of the record date, 752,336,151 shares of the company’s 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.

 

Vote Required

 

Election of Directors — Because the number of director nominees exceeds the number of directors to be elected at the 2009 Annual Meeting, pursuant to Article VII of the company’s Restated Articles of Incorporation (as amended), directors shall be elected by a plurality of the votes present and entitled to vote on the election of directors at the Annual Meeting. This means that the director nominees who receive the highest number of “FOR” votes will be elected to fill the available seats on the Target board. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of any or all director nominees will be counted for purposes of

determining whether there is a quorum, but a proxy marked “WITHHOLD AUTHORITY” with respect to any specific director nominee will not be considered to have been voted for or against such director nominee. Therefore, a proxy marked “WITHHOLD AUTHORITY” with respect to a specific director nominee will result in such director nominee receiving fewer “FOR” votes.

 

Other Items — For all other proposals described in this proxy statement and any other matters that properly come before the meeting, the affirmative vote of the greater of (i) a majority of the outstanding shares of Target’s common stock entitled to vote on the item and present in person or by proxy at the 2009 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 2009 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.

 

Broker Non-Votes

 

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 case, 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 2009 Annual Meeting.

 

For the 2009 Annual Meeting, because of the solicitation of proxies described in this proxy statement, the election of directors at the 2009 Annual Meeting is a “non-routine matter” and brokers do not have discretionary authority to vote your shares on “non-routine matters.” Therefore, unless you provide specific voting instructions to your broker, they would not have discretionary authority to vote your shares for the election of directors at the 2009 Annual Meeting and your shares would not be voted for any of the nominees. If your shares are held in street name, your broker or nominee has enclosed a voting instruction card with this proxy statement. We strongly encourage you to vote your shares by following the instructions provided on the voting instruction card.

 

Shares Held in the Target 401(k) Plan

 

This proxy statement is being used to solicit voting instructions from participants in the Target 401(k) Plan with respect to shares of Target common stock that are held by the trustee of the plan for the benefit of plan participants. If you are a plan participant and also own shares as a record holder, you will separately receive proxy materials to vote the shares you hold as a record holder. Shares held in the plan that are entitled to vote will be voted by the plan trustee in proportion to participant instructions. If you are a plan participant, you must instruct the plan trustee to vote your shares by utilizing one of the methods described on the voting-instruction form that you receive in connection with your shares held in the plan. If you do not give voting instructions, the trustee will vote the shares allocated to your personal account in proportion to the instructions actually received by the trustee from participants who give voting instructions.

 

SOLICITATION OF PROXIES

 

Pershing Square has retained D.F. King & Co., Inc. to conduct the solicitation, for which D.F. King is to receive a fee not to exceed $650,000, plus reimbursement for its reasonable out-of-pocket expenses. We have agreed to indemnify D.F. King against certain liabilities and expenses, including certain liabilities under the federal securities laws. Proxies may be solicited by mail, courier services, Internet, advertising, telephone or telecopier or in person. It is anticipated that D.F. King will employ approximately 100 persons to solicit proxies from Target shareholders for the 2009 Annual Meeting.

 

In addition, Pershing Square, certain of its members and employees and the Nominees for Shareholder Choice may solicit the GOLD proxies by mail, telephone, telecopier, the Internet and personal solicitation. For example, it is expected that Ali Namvar and/or Roy J. Katzovicz and/or one or more of the Nominees for Shareholder Choice may attend in-person meetings with institutional shareholders and other significant shareholders. Any members or employees of Pershing Square and their affiliates who solicit GOLD proxies on behalf of Pershing Square will do so for no

additional compensation, and no Nominee for Shareholder Choice will receive any special compensation in connection with the solicitation. Banks, brokerage houses and other custodians, nominees and fiduciaries will be requested to forward Pershing Square’s solicitation materials to customers for whom such persons hold shares of Target common stock, and Pershing Square will reimburse them for their reasonable out-of-pocket expenses for doing so.

 

The entire expense of preparing, assembling, printing and mailing this proxy statement and related materials and soliciting GOLD proxies for the proposals endorsed by Pershing Square will be borne by Pershing Square. Although no precise estimate can be made at the present time, Pershing Square currently estimates such expenses to be $9.0 million (including professional fees and expenses, but excluding any costs represented by salaries and wages of regular employees of Pershing Square and its affiliates). The total expenditures incurred to date by Pershing Square have been approximately $1.85 million. To the extent legally permissible, Pershing Square retains the right to seek reimbursement of its expenses from Target if any Nominee for Shareholder Choice is elected. Pershing Square does not currently intend to submit the question of such reimbursement to a vote of the shareholders.

 

PARTICIPANTS IN THE SOLICITATION

 

The participants in this solicitation of proxies from Target shareholders include the following: (i) Pershing Square, L.P., Pershing Square II, L.P., Pershing Square IV Trade-Co, L.P., Pershing Square IV-I Trade-Co, L.P., Pershing Square International, Ltd., Pershing Square International IV Trade-Co, Ltd., Pershing Square International IV-I Trade-Co, Ltd., Pershing Square Capital Management, L.P., PS Management GP, LLC, Pershing Square GP, LLC and Pershing Square Holdings GP, LLC which we refer to collectively as Pershing Square, (ii) William A. Ackman, Ali Namvar and Roy J. Katzovicz, as members or employees of Pershing Square and (iii) William A. Ackman, Michael L. Ashner, James L. Donald, Ronald J. Gilson and Richard W. Vague, as director nominees, which we collectively refer to as the Nominees for Shareholder Choice.

 

The business address of Pershing Square and Messrs. Ackman, Namvar and Katzovicz is 888 Seventh Avenue, 42nd Floor, New York, NY 10019, and the business addresses of the Nominees for Shareholder Choice are as follows: Ashner — c/o Winthrop Realty Partners, L.P., Two Jericho Plaza Wing A, Suite 111, Jericho, NY 11753; Donald — 4315 NE 33rd St, Seattle, WA 98105; Gilson — Stanford Law School, 559 Nathan Abbott Way, Stanford, CA 94305 and Vague — 3711 Market St, 9th Floor, Philadelphia, PA 19104.

 

Certain Information About Pershing Square

 

Pershing Square has been a shareholder of the company since April 17, 2007. As of May 1, 2009, Pershing Square beneficially owns approximately 7.8% of the outstanding shares of Target common stock, consisting of 3.3% in shares common stock (approximately $1 billion in market value) and 4.5% in stock-settled call options (approximately $280 million in market value). Pershing Square also has economic exposure to approximately 1,250,766 notional shares of Target common stock subject to cash-settled call options (market value approximately $6.8 million), bringing its total economic exposure to 59,645,382 shares of Target common stock (approximately 7.9% of the outstanding shares of Target common stock). Detailed information on Pershing Square’s ownership is set forth below:

 

 

 

 

Each of Pershing Square, L.P., Pershing Square II, L.P., Pershing Square IV Trade-Co, L.P. and Pershing Square IV-I Trade-Co, L.P. is a Delaware limited partnership principally engaged in the business of investing in securities. Each of Pershing Square International, Ltd., Pershing Square International IV Trade-Co, Ltd. and Pershing Square International IV-I Trade-Co, Ltd is a Cayman Islands exempted company principally engaged in the business of investing in securities.

 

Pershing Square Capital Management, L.P., a Delaware limited partnership, serves as investment advisor to the Pershing Square funds listed above with respect to 58,394,616 shares of Target common stock (including shares of Target common stock and shares subject to stock-settled American-style call options) held for the accounts of these funds. PS Management GP, LLC, a Delaware limited liability company, serves as the general partner of Pershing Square Capital Management, L.P. Pershing Square GP, LLC, a Delaware limited liability company, serves as the general partner of each of Pershing Square, L.P. and Pershing Square II, L.P. Pershing Square Holdings GP, LLC, a Delaware limited liability company, serves as the general partner of each of Pershing Square IV Trade-Co, L.P. and Pershing Square IV-I Trade-Co, L.P.

 

William A. Ackman, Ali Namvar and Roy J. Katzovicz are employees of Pershing Square Capital Management, L.P. who may also participate in the solicitation of proxies described in this proxy statement. Mr. Ackman is also the managing member of each of PS Management GP, LLC, Pershing Square GP, LLC and Pershing Square Holdings GP, LLC. Messrs. Namvar and Katzovicz do not own beneficially any interest in securities of Target and will not receive any compensation in connection with the solicitation of proxies. In light of his managing member role in the controlling affiliates of Pershing Square Capital Management, L.P., investment advisor to the Pershing Square funds, Mr. Ackman may be deemed to be the beneficial owner of the shares of common stock held for the accounts of the Pershing Square funds. Mr. Ackman will not receive any compensation in connection with the solicitation of proxies.

 

Additional Information Concerning the Participants

 

Each participant in the solicitation of proxies described in this proxy statement has an interest in the election of directors and the adoption of additional proposal(s) at the 2009 Annual Meeting (i) indirectly through the beneficial ownership (if any) of Target common stock and options and (ii) pursuant to the indemnification agreement described under “Agreements with the Nominees for Shareholder Choice” beginning on page 13 of this proxy statement.

 

Other than as disclosed in this proxy statement, there are no arrangements or understandings between any Pershing Square Fund and any of the Nominees for Shareholder Choice or any other person or persons with respect to the nomination of the Nominees for Shareholder Choice.

 

Other than as disclosed in this proxy statement:

 

 

 

For the purposes of the foregoing, the term “associates” shall have the meaning as that term is defined in Rule 14a-1 of Regulation 14A under the Exchange Act.

 

Additional information regarding the participants, including transactions in the securities of Target effected during the past two years, is set forth on Appendix A.

 

ADDITIONAL INFORMATION

 

The company is subject to the periodic reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports, proxy statements and other information with the SEC. Reports, registration statements, proxy statements and other information filed by the company with the SEC may be inspected at, and copies may be obtained from, the public reference facilities maintained at the SEC at 100 F Street, N.E., Washington, DC 20549. Copies of such material can also be obtained upon written request addressed to the SEC, Public Reference Section, 100 F Street, N.E., Washington, DC 20549, at prescribed rates. You may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC at (800) SEC-0330. The SEC also maintains a web site on the Internet (http://www.sec.gov) where reports, proxy and information statements and other information regarding issuers and others that file electronically with the SEC may be obtained free of charge.

 

Pershing Square has omitted from this proxy statement certain disclosure required by applicable law to be included in the company’s proxy statement. Such disclosure includes, among other things, information regarding securities of Target beneficially owned by Target’s director’s, nominees and management; certain shareholder’s beneficial ownership of more than 5% of Target’s voting securities; information concerning executive compensation; and information concerning the procedures for submitting shareholder proposals and director nominations intended for consideration at the 2010 annual meeting of shareholders of Target and for consideration for inclusion in the proxy materials for that meeting. Please refer to the company’s proxy statement for such information. Pershing Square takes no responsibility for the accuracy or completeness of information contained in the company’s proxy statement. Pershing Square undertakes to provide you with such information if it is not timely provided by the company in its proxy statement.

 

If you would like additional copies of Pershing Square’s proxy materials, or if you would like assistance in completing and returning a GOLD proxy, please contact D.F. King at:

 

D.F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Toll-free: (800) 290-6427
Banks and brokers: (212) 269-5550

 

Dated: May 1, 2009

 

Sincerely,
Pershing Square

 

APPENDIX A

 

ADDITIONAL INFORMATION OF THE PARTICIPANTS

 

The following is a summary of all transactions in Target common stock over the last two years by Pershing Square.

 

Common Stock