3. Credit Card Receivables Transaction

On October 22, 2012, we reached an agreement to sell our entire consumer credit card portfolio to TD Bank Group (TD) for cash consideration equal to the gross (par) value of the outstanding receivables at the time of closing. The sale, which is subject to regulatory approval and other customary closing conditions, is expected to close in the first half of 2013. Following close, TD will underwrite, fund and own Target Credit Card and Target Visa receivables in the U.S. TD will control risk management policies and regulatory compliance, and we will perform account servicing and primary marketing functions. We will earn a substantial portion of the profits generated by the Target Credit Card and Target Visa portfolios.

Historically, our credit card receivables were recorded at par value less an allowance for doubtful accounts. With this agreement, our receivables are now classified as held for sale and recorded at the lower of cost (par) or fair value. As a result of this change, we recorded a gain of $156 million in the third quarter of 2012. At closing, this transaction is expected to be accounted for as a sale, and the receivables will no longer be reported on our Consolidated Statements of Financial Position.