DAYTON HUDSON CORP, 10-K405, 1997-04-16

DAYTON HUDSON CORP
10-K405, 1997-04-16
VARIETY STORES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
---------------

(MARK ONE)

<TABLE>
<S> <C>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1997

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
</TABLE>

FOR THE TRANSITION PERIOD FROM
--------- TO
---------

COMMISSION FILE NUMBER 1-6049
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DAYTON HUDSON CORPORATION

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
MINNESOTA 41-0215170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

777 NICOLLET MALL, MINNEAPOLIS, 55402-2055
MINNESOTA
(Address of principal executive (Zip Code)
offices)
</TABLE>

Registrant's telephone number, including area code: 612/370-6948
------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------- --------------------------------------
<S> <C>
Common Stock, par value $.3333 per New York Stock Exchange
share Pacific Stock Exchange

Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

Aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 21, 1997 was $9,811,287,151.97, based on the closing price
of $42.625 per share of Common Stock as reported on the New York Stock
Exchange--Composite Index and $1,428.75 per share of Series B ESOP Convertible
Preferred Stock as determined by Duff & Phelps. (Excluded from this figure is
the voting stock held by Registrant's Directors and Executive Officers.)

Indicate the number of shares outstanding of each of Registrant's classes of
common stock, as of the latest practicable date. March 21, 1997: 217,555,475
shares of common stock, par value $.3333.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Registrant's 1996 Annual Report to Shareholders are
incorporated into Parts I and II.

2. Portions of Registrant's Proxy Statement dated April 14, 1997 are
incorporated into Part III.

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PART I

ITEM 1. BUSINESS.

The first paragraph of Fourth Quarter Results, Page 18; Analysis of
Financial Condition, Page 19; Performance Objectives, Page 20; Internal Credit,
Page 21; Business Segment Comparisons, excluding years 1991-1993, Page 23; first
textual paragraph of Summary of Accounting Policies--Organization, Page 24;
Quarterly Results, Page 33 and the information relating to store locations on
Page 14 of Registrant's 1996 Annual Report to Shareholders are incorporated
herein by reference. Registrant was incorporated in Minnesota in 1902.

ITEM 2. PROPERTIES.

Leases, Page 27 and the list of store locations on Page 14 of Registrant's
1996 Annual Report to Shareholders are incorporated herein by reference.

ITEM 3. LEGAL PROCEEDINGS.

Commitments and Contingencies, Page 27 of Registrant's 1996 Annual Report to
Shareholders is incorporated herein by reference.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

Not Applicable.

1
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ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT.

The executive officers of the Registrant as of April 1, 1997 and their
positions and ages, are as follows:

<TABLE>
<CAPTION>
NAME TITLE AGE
- ---------------------------------------------- ---------------------------------------------- ---
<S> <C> <C>
Robert J. Ulrich.............................. Chairman, Chief Executive Officer, Chairman of 53
the Executive Committee and Director of
Registrant; Chairman and Chief Executive
Officer of Target (a division of Registrant)

Kenneth B. Woodrow............................ President of Target 52

Larry V. Gilpin............................... Executive Vice President Team, Guest and 53
Community Relations of Target

Robert G. McMahon............................. Senior Vice President, Property Development of 48
Target

John E. Pellegrene............................ Executive Vice President, Marketing of Target 60

Gregg W. Steinhafel........................... Executive Vice President, Merchandising of 42
Target

Bart Butzer................................... President of Mervyn's (a subsidiary of 41
Registrant)

Shannon M. Buscho............................. Executive Vice President, Stores of Mervyn's 45

Linda L. Ahlers............................... President of the Department Store Division (a 46
division of Registrant)

James T. Hale................................. Senior Vice President, General Counsel and 56
Secretary of Registrant

Douglas A. Scovanner.......................... Senior Vice President and Chief Financial 41
Officer of Registrant

Vivian M. Stephenson.......................... Senior Vice President and Chief Information 59
Officer of Registrant

Gerald L. Storch.............................. Senior Vice President, Credit and Strategic 40
Planning of Registrant

Edwin H. Wingate.............................. Senior Vice President, Personnel of Registrant 64

JoAnn Bogdan.................................. Controller and Chief Accounting Officer of 44
Registrant
</TABLE>

Each officer is elected by and serves at the pleasure of the Board of
Directors. There is no family relationship between any of the officers named nor
is there any arrangement or understanding pursuant to which any person was
selected as an officer. The period of service of each officer in the positions
listed and other business experience as of April 1, 1997 is set forth below.

ROBERT J. ULRICH Chairman of the Board, Chief Executive Officer, Chairman of
the Executive Committee and Director of Registrant since 1994. Chairman and
Chief Executive Officer of Target since 1987.

KENNETH B. WOODROW President of Target since 1994, Vice Chairman of Target
from 1993 to 1994 and Executive Vice President of Target from 1989 to 1993.

2
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LARRY V. GILPIN Executive Vice President of Target since 1995 and Senior
Vice President of Target from 1981 to 1995.

ROBERT G. MCMAHON Senior Vice President of Target since 1991 and Vice
President of Target from 1990 to 1991.

JOHN E. PELLEGRENE Executive Vice President of Target since 1995 and Senior
Vice President of Target from 1988 to 1995.

GREGG W. STEINHAFEL Executive Vice President of Target since 1994 and Senior
Vice President and General Merchandise Manager of Target from 1987 to 1994.

BART BUTZER President of Mervyn's since March 1997 and Regional Senior Vice
President of Target from 1991 to 1997.

SHANNON M. BUSCHO Executive Vice President, Stores of Mervyn's since
December 1996 and Senior Vice President, Stores of Mervyn's from January 1996 to
December 1996. She has held various management positions at Mervyn's for over
five years and was first elected a Vice President in 1994.

LINDA L. AHLERS President of the Department Store Division since February
1996 and Executive Vice President, Merchandising of the Department Store
Division from August 1995 to February 1996. Senior Vice President of Target from
1989 to 1995.

JAMES T. HALE Senior Vice President, Secretary and General Counsel of
Registrant since 1981.

DOUGLAS A. SCOVANNER Senior Vice President and Chief Financial Officer of
Registrant since 1994. Treasurer of Registrant in 1994. Senior Vice President,
Finance of Fleming Companies, Inc. (a food wholesaler) from 1992 to 1994. Vice
President and Treasurer of Coca-Cola Enterprises, Inc. (a soft drink bottler)
from 1986 to 1992.

VIVIAN M. STEPHENSON Senior Vice President of Registrant since 1995. Senior
Vice President, MIS of Mervyn's from 1994 to 1995 and Vice President, MIS of
Mervyn's from 1990 to 1994.

GERALD L. STORCH Senior Vice President of Registrant since 1993. Principal
with McKinsey & Company (a consulting firm) from 1982 to 1993.

EDWIN H. WINGATE Senior Vice President of Registrant since 1980.

JOANN BOGDAN Controller and Chief Accounting Officer of Registrant since
1993. Assistant Controller of Registrant from 1988 to 1993.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

Dividends Declared Per Share and Common Stock price, Page 33 of Registrant's
1996 Annual Report to Shareholders are incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA.

The Data on years 1992-1996 in the Summary Financial and Operating Data
(excluding 1991 and Other Data), Page 35; Notes to Consolidated Financial
Statements, Pages 23, 24, 25, 27, 29 and 31-33 (excluding years 1991-1993 on
page 23) and the Report of Independent Auditors, Page 34 of Registrant's 1996
Annual Report to Shareholders are incorporated herein by reference.

3
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Management's Discussion and Analysis, Pages 15-21 and the second textual
paragraph of Post-retirement Health Care Benefits, Page 32 of Registrant's 1996
Annual Report to Shareholders are incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Pages 23-33 and 35 (excluding years 1991-1993 on Page 23 and 1991 and Other
Data in the Summary Financial and Operating Data on Page 35) and the Report of
Independent Auditors, Page 34 of Registrant's 1996 Annual Report to Shareholders
are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not Applicable

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Election of Directors, Pages 1-6 of Registrant's Proxy Statement dated April
14, 1997, is incorporated herein by reference. See also Item X of Part I hereof.

ITEM 11. EXECUTIVE COMPENSATION.

Executive Compensation, Pages 7-12, Report of the Compensation Committee on
Executive Compensation, pages 13-17 and Director Compensation, Pages 18-19 of
Registrant's Proxy Statement dated April 14, 1997, are incorporated herein by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Outstanding Shares and Voting Rights, Pages 27-28 of Registrant's Proxy
Statement dated April 14, 1997, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Not Applicable.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

a) FINANCIAL STATEMENTS:

Consolidated Results of Operations for the Years Ended February 1, 1997,
February 3, 1996 and January 28, 1995.

Consolidated Statements of Financial Position at February 1, 1997 and
February 3, 1996.

Consolidated Statements of Cash Flows for the Years Ended February 1, 1997,
February 3, 1996 and January 28, 1995.

Consolidated Statements of Shareholders' Investment for the Years Ended
February 1, 1997, February 3, 1996 and January 28, 1995.

Information which is an integral part of the financial statements: Notes to
Consolidated Financial Statements on Pages 23, 24, 25, 27, 29 and 31-33
(excluding years 1991-1993 on Page 23) and the Report of Independent
Auditors on Page 34 in Registrant's 1996 Annual Report to Shareholders.

4
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The Registrant, through its special purpose subsidiary, Dayton Hudson
Receivables Corporation ("DHRC") entered into a securitization transaction under
which it transfers, on an ongoing basis, substantially all of its credit card
receivables to a trust. Separate financial statements are filed for DHRC in its
separate Annual Reports on Form 10-K.

FINANCIAL STATEMENT SCHEDULE:

For the Years Ended February 1, 1997, February 3, 1996 and January 28, 1995.

II--Valuation and Qualifying Accounts.

b) REPORTS ON FORM 8-K

None

c) EXHIBITS

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<C> <S>
(2) Not applicable

(3)A. Restated Articles of Incorporation (as amended July 17, 1996). Incorporated by
reference to Exhibit (3)A. to Registrant's Form 10-Q Report for the quarter
ended August 3, 1996.

B. By-Laws (as amended through September 13, 1995). Incorporated by reference to
Exhibit (3)B. to Registrant's Form 10-K Report for the year ended February 3,
1996.

(4)A. Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, as amended. Incorporated by reference to Exhibit
A to Exhibit 1 to Registrant's Form 8-K Report dated September 12, 1996.

B. Certificate of Designation, Preference and Rights of Series B ESOP Convertible
Preferred Stock. Incorporated by reference to Exhibit (3)A. to Registrant's
Form 10-K Report for the year ended January 30, 1993.

C. Instruments defining the rights of security holders, including indentures.
Registrant agrees
to furnish the Commission on request copies of instruments with respect to
long-term
debt.

(9) Not applicable

(10)A. Executive Incentive Plan (PTOC&EVA-Registered Trademark-) (a)

B. Director Stock Option Plan of 1995 (b)

C. Executive Incentive Plan (Personal Score) (c)

D. Excess Benefit Plan (d)

E. Supplemental Pension Plan I

F. Executive Long-Term Incentive Plan of 1981, as amended and restated (e)

G. Supplemental Pension Plan II

H. Supplemental Pension Plan III

I. Deferred Compensation Plan Senior Management Group

J. Deferred Compensation Plan Directors

K. Income Continuance Policy (f)
</TABLE>

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- -Registered Trademark-EVA is a registered trademark.

5
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<TABLE>
<C> <S>
L. SMG Income Continuance Policy (g)

M. SMG Executive Deferred Compensation Plan

N. Director Deferred Compensation Plan

(11) Statements re Computations of Per Share Earnings

(12) Statements re Computations of Ratios

(13) 1996 Annual Report to Shareholders (only those portions specifically
incorporated by
reference herein shall be deemed filed with the Commission)

(16) Not applicable

(18) Not applicable

(19) Not applicable

(21) List of Subsidiaries

(22) Not applicable

(23) Consent of Independent Auditors

(24) Powers of Attorney

(27) Financial Data Schedule

(28) Not applicable

(99)(I) Registrant's Form 11-K Report

(II) Registrant's Proxy Statement dated April 14, 1997 (only those portions
specifically
incorporated by reference shall be deemed filed with the Commission)(h)
</TABLE>

Copies of Exhibits (10)A.-(10)D., (10)F., (10)K., (10)L., (21) and (99)(I)
will be furnished upon written request and payment of Registrant's reasonable
expenses in furnishing the exhibits.

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(a) Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated
April 19, 1995.

(b) Incorporated by reference to Exhibit B to Registrant's Proxy Statement dated
April 19, 1995.

(d) Incorporated by reference to Exhibit (10)D. to Registrant's Form 10-K Report
for the year ended January 30, 1993 (the "1992 10-K").

(e) Incorporated by reference to Exhibit(10)B. to Registrant's Form 10-Q Report
for the quarter ended October 29, 1994.

(f) Incorporated by reference to Exhibit(10)A. to Registrant's 1992 10-K.

(g) Incorporated by reference to Exhibit(10)B. to Registrant's 1992 10-K.

(h) Incorporated by reference to Registrant's Proxy Statement dated April 14,
1997 (only those portions specifically incorporated by reference shall be
deemed filed with the Commission).

6
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
DAYTON HUDSON CORPORATION

By: /s/ DOUGLAS A. SCOVANNER
-----------------------------------------
Douglas A. Scovanner
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
Dated: April 16, 1997 OFFICER
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<S> <C>
/s/ BOB ULRICH
--------------------------------------
Robert J. Ulrich
CHAIRMAN OF THE BOARD AND CHIEF
Dated: April 16, 1997 EXECUTIVE OFFICER

/s/ DOUGLAS A. SCOVANNER
--------------------------------------
Douglas A. Scovanner
SENIOR VICE PRESIDENT AND CHIEF
Dated: April 16, 1997 FINANCIAL OFFICER

/s/ J.A. BOGDAN
--------------------------------------
JoAnn Bogdan
CONTROLLER AND CHIEF ACCOUNTING
Dated: April 16, 1997 OFFICER
</TABLE>

<TABLE>
<S> <C> <C>
LIVIO D. DESIMONE JAMES A. JOHNSON
ROGER A. ENRICO RICHARD M. KOVACEVICH
WILLIAM W. GEORGE STEPHEN W. SANGER
ROGER L. HALE SOLOMON D. TRUJILLO Directors
BETTY RUTH HOLLANDER ROBERT J. ULRICH
MICHELE J. HOOPER JOHN R. WALTER
</TABLE>

Douglas A. Scovanner, by signing his name hereto, does hereby sign this
document pursuant to powers of attorney duly executed by the Directors named,
filed with the Securities and Exchange Commission on behalf of such Directors,
all in the capacities and on the date stated, such persons being all of the
Directors of the Registrant.

<TABLE>
<S> <C> <C>
By: /s/ DOUGLAS A. SCOVANNER
-----------------------------------------
Douglas A. Scovanner
Dated: April 16, 1997 ATTORNEY-IN-FACT
</TABLE>

7
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DAYTON HUDSON CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS 1996, 1995 AND 1994
(MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>
COLUMN C
COLUMN B ------------- COLUMN E
------------- ADDITIONS COLUMN D -------------
COLUMN A BALANCE AT CHARGED TO ------------- BALANCE AT
- ---------------------------------------------------------------- BEGINNING COSTS AND (1) END OF
DESCRIPTIONS OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ---------------------------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
1996.......................................................... $ 69 $ 124 $ 74 $ 119
1995.......................................................... 46 93 70 69
1994.......................................................... 35 66 55 46
</TABLE>

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(1) Accounts determined to be uncollectible are charged against reserve, net of
collections on accounts previously charged against reserve.

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11-29-94
Date Adopted: 12-14-94
Effective: 1-1-95
Amended and Restated 1-8-97

DAYTON HUDSON CORPORATION

SUPPLEMENTAL PENSION PLAN I

ARTICLE I

GENERAL

Sec. 1.1 NAME OF PLAN. The name of the pension plan set forth herein is
"Dayton Hudson Corporation Supplemental Pension Plan I" (the "Plan").

Sec. 1.2 PURPOSE. The Plan has been established by Dayton Hudson
Corporation (the "Company") to provide retirement income that the Dayton Hudson
Corporation Employees' Retirement Plan (the "DHC Plan") as in effect from time
to time, The Retirement Plan of The J. L. Hudson Company (the "Hudson Plan") as
in effect from time to time, the Mervyn's Pension Plan (the "Mervyn's Plan") as
in effect from time to time, and the Dayton Hudson Corporation Excess Benefit
Plan (the "Excess Plan") as in effect from time to time cannot provide to
certain Participants in such plans because of the limitations imposed by the
Internal Revenue Code of 1986, as amended from time to time, relative to
compensation above a certain maximum in connection with computing pension
benefits under qualified plans. The Plan is intended to be a "top hat plan" as
defined in Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement
Income Security Act of 1974, as amended from time to time, ("ERISA") and shall
be interpreted and administered accordingly.

<PAGE>

Sec. 1.3 QUALIFIED PLAN. Each of the DHC Plan, the Hudson Plan and the
Mervyn's Plan is sometimes referred to herein as a "Qualified Plan".

Sec. 1.4 PARTICIPATION. An employee of the Company or a subsidiary of the
Company becomes and remains a Participant in this Plan only if he is a
Participant in the DHC Plan and/or the Hudson Plan and/or the Mervyn's Plan, and
only if he is a member of a select group of management of the Company or a
subsidiary of the Company and is a highly compensated employee of the Company or
a subsidiary of the Company. In order to meet the criteria of being a member of
a select group of management of the Company or a subsidiary of the Company and
being a highly compensated employee of the Company or a subsidiary of the
Company, the employee must be designated a member of the Senior Management Group
("SMG") by the Chief Executive Officer of the Company or of an equivalent rank
on any revised classification system.

Sec. 1.5 MISCELLANEOUS. The terms in this Plan shall have the same
meaning as those used in the Qualified Plans unless the context clearly
indicates the contrary.

ARTICLE II
PENSION BENEFITS

Sec. 2.1 AMOUNT OF PENSION. Each Participant in this Plan shall be
entitled to a pension under this Plan that is the actuarial equivalent of the
excess, if any, of (a) the pension the Participant would be entitled under the
benefit formula of the Qualified Plans applied (i) without respect to the
maximum benefit limitations in said Plans required by Section 415 of the
Internal Revenue Code of 1986, as amended from time to time, (ii) as if Section
4.7(b) of the Qualified Plans read as follows:

"Any bonus earned by a Participant pursuant to a plan or policy of the
Company, that is paid in a calendar year other than the calendar year in
which such bonus would normally be

<PAGE>

paid under such plan or policy, shall be included in Certified Earnings in
the year it normally would be paid, be valued at the amount of bonus that
would have been paid in that year and shall not be included in Certified
Earnings in the year it is paid",

for each year the Participant was a Participant in this Plan, and (iii) without
respect to the maximum compensation limitation in said Qualified Plans required
by Section 401(a)(17) of the Internal Revenue Code of 1986, as amended from time
to time, over (b) the pension the Participant is entitled to receive from the
Qualified Plans and the Excess Plan.

Sec. 2.2 METHOD OF PAYMENT. The pension payable under this Plan shall be
paid in a single sum at such time during the calendar year next following the
calendar year in which the Participant's Termination of Employment occurs as may
be determined by the administrative committee under the DHC Plan. Actuarial
equivalents under this Plan shall be determined by the Actuary for the Qualified
Plans using such factors and assumptions as the Actuary considers appropriate
for the purpose.
ARTICLE III

MISCELLANEOUS

Sec. 3.1 UNFUNDED. Pensions under this Plan shall be unfunded. No person
entitled to a benefit under this Plan shall, by virtue of this Plan, have any
interest in any specific asset or assets of the Company. Such persons have only
an unsecured contract right to receive payments in accordance with this Plan.

Sec. 3.2 BENEFITS MAY NOT BE ASSIGNED OR ALIENATED. Except as required by
law, the interests of persons entitled to benefits under this Plan may not in
any manner whatsoever be assigned or alienated, whether voluntarily or
involuntarily, or directly or indirectly.

<PAGE>

Sec. 3.3 NOT EMPLOYMENT AGREEMENT. This Plan is not an employment
agreement and does not assure the continued employment of any employee or
Participant for any time or period.

Sec. 3.4 ADMINISTRATION. The administrative committee under the DHC Plan
shall control and manage the operations and administration of this Plan and make
all decisions and determinations incident thereto.

Sec. 3.5 CLAIMS PROCEDURE. The administrative committee under the DHC
Plan shall establish a claims procedure consistent with ERISA requirements.

ARTICLE IV

AMENDMENT, TERMINATION AND APPLICABLE LAW

Sec. 4.1 AMENDMENT AND TERMINATION. This Plan may be amended or
terminated by the Board of Directors of the Company at any time. No amendment
or termination shall adversely affect a benefit to which a Participant is
entitled under Article II prior to the effective date of such amendment or
termination, unless the Participant becomes entitled to an amount equal to or
greater than such benefit under another plan or practice adopted by the Company,
as a substitute to this Plan.

Sec. 4.2 APPLICABLE LAW. The provisions of this Plan shall be construed
and enforced according to the laws of the State of Minnesota to the extent that
such laws are not preempted by the laws of the United States of America. All
controversies, disputes, and claims arising hereunder shall be submitted to the
United States District Court for the District of Minnesota.

<PAGE>
ARTICLE V

DEATH BENEFITS

Sec. 5.1 DEATH WHILE EMPLOYED. If a Participant dies prior to incurring
any other type of Termination of Employment, and if the Participant would have
been entitled to a payment under Article II of this Plan if the Participant's
Termination of Employment had occurred on the date of his or her death for a
reason other than death, death benefits shall be payable as follows:

(a) If the Participant is survived by a qualified spouse, the spouse shall
be entitled to the benefit that would have been paid under Article II
if the Participant had a Termination of Employment on the date of
death and survived until the date the benefit would have been paid to
the Participant.

(b) If the Participant is survived by a qualified spouse but the spouse
dies before the payment is made under subsection (a), the payment
shall instead be made to the Participant's estate.

(c) If the Participant is not survived by a qualified spouse, the payment
under section (a) shall instead be made to the Participant's estate.

(d) For purposes of this Section, a person is a "qualified spouse" of a
Participant if, and only if, such person is the opposite sex of the
Participant and such person and the Participant are legally married to
each other at the time of the Participant's death.

Sec. 5.2 DEATH FOLLOWING TERMINATION OF EMPLOYMENT. If a Participant's
Termination of Employment occurs for a reason other than death, and if the
Participant is entitled to a benefit

<PAGE>

under Article II of this Plan due to the Termination of Employment but dies
prior to receiving that benefit, a death benefit shall be payable as follows:

(a) If the Participant is survived by a qualified spouse, the spouse shall
receive the payment that would have been made to the Participant if
the Participant had lived. However, if the spouse dies prior to
receiving that payment, the payment shall instead be made to the
Participant's estate.

(b) If the Participant is not survived by a qualified spouse, the
Participant's estate shall receive the payment that would have been
made if the Participant had lived.

<PAGE>
11-28-94
Date Amended: 12-14-94
Effective: 1-1-95
Amended and Restated 1-8-97

DAYTON HUDSON CORPORATION

SUPPLEMENTAL PENSION PLAN II

ARTICLE I

GENERAL

Sec. 1.1 NAME OF PLAN. The name of the pension plan set forth herein is
"Dayton Hudson Corporation Supplemental Pension Plan II" (the "Plan").

Sec. 1.2 PURPOSE. The Plan has been established by Dayton Hudson
Corporation (the "Company") to provide retirement income that the Dayton Hudson
Corporation Employees' Retirement Plan (the "DHC Plan") as in effect from time
to time, The Retirement Plan of The J. L. Hudson Company (the "Hudson Plan") as
in effect from time to time, the Mervyn's Pension Plan (the "Mervyn's Plan") as
in effect from time to time, the Dayton Hudson Corporation Excess Benefit Plan
(the "Excess Plan") as in effect from time to time, and the Dayton Hudson
Corporation Supplemental Pension Plan I ("Supplemental Pension Plan I") as in
effect from time to time cannot provide to certain Participants in such plans
because of the limitations imposed by the Internal Revenue Code of 1986, as
amended from time to time, relative to using deferred compensation in connection
with computing pension benefits under qualified plans. The Plan is intended to
be a "top hat plan" as defined in Sections 201(2), 301(a)(3) and 401(a)(1) of
the Employee Retirement Income Security Act of 1974, as amended from time to
time, ("ERISA") and shall be interpreted and administered accordingly.

<PAGE>

Sec. 1.3 QUALIFIED PLAN. Each of the DHC Plan, the Hudson Plan and the
Mervyn's Plan is sometimes referred to herein as a "Qualified Plan".

Sec. 1.5 MISCELLANEOUS. The terms in this Plan shall have the same
meaning as those used in the Qualified Plans unless the context clearly
indicates the contrary.

ARTICLE II

PENSION BENEFITS

"Any bonus earned by a Participant pursuant to a plan or policy of the
Company, that is paid in a calendar year other than the calendar year in
which such bonus would normally be

<PAGE>

for each year the Participant was a Participant in this Plan, (iii) as if there
were no maximum compensation limits in said Qualified Plans required by Section
401(a)(17) of the Internal Revenue Code of 1986, as amended from time to time,
and (iv) as if Section 4.7 of the Qualified Plans included in Certified Earnings
for a Plan Year compensation that would have been paid in that year in the
absence of an election to defer payment of the compensation to a later date
pursuant to the provisions of a deferred compensation plan, over (b) the pension
the Participant is entitled to receive from the Qualified Plans, the Excess Plan
and Supplemental Pension Plan I.

Sec. 2.3 VESTING. A Participant is entitled to benefits under this Plan
for deferrals of compensation made after January 1, 1993 only if:

a) The Participant has a termination of employment after age 55 and
is entitled to a pension under the DHC Plan, the Hudson's Plan or the
Mervyn's Plan; or

b) The Participant's termination of employment occurred because of a
reduction in force; or

<PAGE>

c) The Participant's termination of employment is a result of a
written mutual agreement that contains a release in the form determined by
the Company.

ARTICLE III

MISCELLANEOUS

Sec. 3.3 NOT EMPLOYMENT AGREEMENT. This Plan is not an employment
agreement and does not assure the continued employment of any employee or
Participant for any time or period.

Sec. 3.5 CLAIMS PROCEDURE. The administrative committee under the DHC
Plan shall establish a claims procedure consistent with ERISA requirements.

ARTICLE IV

AMENDMENT, TERMINATION AND APPLICABLE LAW

Sec. 4.1 AMENDMENT AND TERMINATION. This Plan may be amended or
terminated by the Board of Directors of the Company at any time. No amendment
or termination shall adversely

<PAGE>

affect a benefit to which a Participant is entitled under Article II prior to
the effective date of such amendment or termination, unless the Participant
becomes entitled to an amount equal to or greater than such benefit under
another plan or practice adopted by the Company, as a substitute to this Plan.

ARTICLE V

DEATH BENEFITS

(b) If the Participant is survived by a qualified spouse but the spouse
dies before the payment is made under subsection (a), the payment
shall instead be made to the Participant's estate.

<PAGE>

(c) If the Participant is not survived by a qualified spouse, the payment
under section (a) shall instead be made to the Participant's estate.

Sec. 5.2 DEATH FOLLOWING TERMINATION OF EMPLOYMENT. If a Participant's
Termination of Employment occurs for a reason other than death, and if the
Participant is entitled to a benefit under Article II of this Plan due to the
Termination of Employment but dies prior to receiving that benefit, a death
benefit shall be payable as follows:

(b) If the Participant is not survived by a qualified spouse, the
Participant's estate shall receive the payment that would have been
made if the Participant had lived.

<PAGE>

11-29-94
Date Amended: 12-14-94
Effective: 1-1-95
Amended and Restated 1-8-97

DAYTON HUDSON CORPORATION

SUPPLEMENTAL PENSION PLAN III

ARTICLE I

GENERAL

Sec. 1.1 NAME OF PLAN. The name of the pension plan set forth herein is
"Dayton Hudson Corporation Supplemental Pension Plan III" (the "Plan").

Sec. 1.2 PURPOSE. The Plan has been established by Dayton Hudson
Corporation (the "Company") to provide retirement income in addition to the
retirement income provided by the Dayton Hudson Corporation Employees'
Retirement Plan (the "DHC Plan") as in effect from time to time, The Retirement
Plan of The J. L. Hudson Company (the "Hudson Plan") as in effect from time to
time, the Mervyn's Pension Plan (the "Mervyn's Plan") as in effect from time to
time, the Dayton Hudson Corporation Excess Benefit Plan (the "Excess Plan") as
in effect from time to time, the Dayton Hudson Corporation Supplemental Pension
Plan I ("Supplemental Pension Plan I") as in effect from time to time, and the
Dayton Hudson Corporation Supplemental Pension Plan II ("Supplemental Pension
Plan II") as in effect from time to time to certain Participants in such plans.
The Plan is intended to be a "top hat plan" as defined in Sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974,
as amended from time to time, ("ERISA") and shall be interpreted and
administered accordingly.

<PAGE>

Sec. 1.3 QUALIFIED PLAN. Each of the DHC Plan, the Hudson Plan and the
Mervyn's Plan is sometimes referred to herein as a "Qualified Plan".

Sec. 1.4 PARTICIPATION. An employee of the Company or a subsidiary of the
Company becomes and remains a Participant in this Plan only if he is a
Participant in the DHC Plan and/or the Hudson Plan and/or the Mervyn's Plan,
only if he is at least age 55 and only if he is a member of a select group of
management of the Company or a subsidiary of the Company and is a highly
compensated employee of the Company or a subsidiary of the Company. In order to
meet the criteria of being a member of a select group of management of the
Company or a subsidiary of the Company and being a highly compensated employee
of the Company or a subsidiary of the Company, the employee must be designated a
member of the Senior Management Group ("SMG") by the Chief Executive Officer of
the Company or of an equivalent rank on any revised classification system and
have a grade 32 or higher under the Company's compensation grading system or an
equivalent grade on any revised grading system.

Sec. 1.5 MISCELLANEOUS. The terms in this Plan shall have the same
meaning as those used in the Qualified Plans unless the context clearly
indicates the contrary.

ARTICLE II

PENSION BENEFITS

Sec. 2.1 AMOUNT OF PENSION. Each Participant in this Plan who has a
Termination of Employment under a Qualified Plan after age 55, who is not
entitled to payments under an Income Continuance Plan or Policy of the Company
and/or a subsidiary of the Company and who is approved for benefits under this
Plan by the Board of Directors of Dayton Hudson Corporation, shall be entitled
to a pension under this Plan that is the actuarial equivalent of the excess, if
any, of

<PAGE>

(a) the pension the Participant would be entitled under the benefit formula of
the Qualified Plans applied (i) without respect to the maximum benefit
limitations in said Plans required by Section 415 of the Internal Revenue Code
of 1986, as amended from time to time, (ii) as if Section 4.7(b) of the
Qualified Plans read as follows:

"Any bonus earned by a Participant pursuant to a plan or policy of the
Company, that is paid in a calendar year other than the calendar year in
which such bonus would normally be paid under such plan or policy, shall be
included in Certified Earnings in the year it normally would be paid, be
valued at the amount of bonus that would have been paid in that year and
shall not be included in Certified Earnings in the year it is paid",

for each year the Participant was a Participant in the Supplemental Pension Plan
I, (iii) as if Section 4.7 of the Qualified Plans included in Certified Earnings
for a Plan Year compensation that would have been paid in that year in the
absence of an election to defer payment of the compensation to a later date
pursuant to the provisions of a deferred compensation plan, (iv) without respect
to the maximum compensation limitation in said Qualified Plans required by
Section 401(a)(17) of the Internal Revenue Code of 1986, as amended from time to
time, and (v) as if the Participant at Termination of Employment was, for
purposes of applying Appendix B of the Qualified Plans, five years older than
his actual age (except that no Participant shall be deemed at Termination of
Employment to be older than his age on the 65th anniversary of the date of his
birth) over (b) the pension the Participant is entitled to receive from the
Qualified Plans, the Excess Plan, Supplemental Pension Plan I and Supplemental
Pension Plan II.

Sec. 2.2 METHOD OF PAYMENT. The pension payable under this Plan shall be
paid in a single sum at such time during the calendar year next following the
calendar year in which the

<PAGE>

Participant's Termination of Employment occurs as may be determined by the
administrative committee under the DHC Plan. Actuarial equivalents under this
Plan shall be determined by the Actuary for the Qualified Plans using such
factors and assumptions as the Actuary considers appropriate for the purpose.

ARTICLE III

MISCELLANEOUS

Sec. 3.3 NOT EMPLOYMENT AGREEMENT. This Plan is not an employment
agreement and does not assure the continued employment of any employee or
Participant for any time or period.

Sec. 3.5 CLAIMS PROCEDURE. The administrative committee under the DHC
Plan shall establish a claims procedure consistent with ERISA requirements.

<PAGE>

ARTICLE IV

AMENDMENT, TERMINATION AND APPLICABLE LAW

ARTICLE V

DEATH BENEFITS

<PAGE>

(b) If the Participant is survived by a qualified spouse but the spouse
dies before the payment is made under subsection (a), the payment
shall instead be made to the Participant's estate.

(c) If the Participant is not survived by a qualified spouse, the payment
under section (a) shall instead be made to the Participant's estate.

(b) If the Participant is not survived by a qualified spouse, the
Participant's estate shall receive the payment that would have been
made if the Participant had lived.

<PAGE>
5-24-94
Adopted: 6-8-94
Effective: 8-1-94
Amended 4-10-96
Amended 9-11-96

DAYTON HUDSON CORPORATION
DEFERRED COMPENSATION PLAN
SENIOR MANAGEMENT GROUP

ARTICLE 1
PURPOSE

The purpose of this Deferred Compensation Plan (the "Plan") is to provide a
means whereby Dayton Hudson Corporation (the "Company") may afford financial
security to a select group of employees who are in the Senior Management Group
of the Company and its subsidiaries and who have rendered and continue to render
valuable services to the Company or its subsidiaries and who make an important
contribution towards the Company's continued growth and success, by providing
for additional future compensation so that such employees may be retained and
their productive efforts encouraged.

ARTICLE 2
DEFINITIONS AND CERTAIN PROVISIONS

BENEFICIARY. "Beneficiary" means the person or persons designated as such
in accordance with Article 6.

BENEFIT DEFERRAL PERIOD. "Benefit Deferral Period" means that period of
one (1) or four (4) Plan Years as determined pursuant to Article 4 over which a
Participant defers a portion of such Participant's Earnings.

COMMITTEE. "Committee" means the plan administration committee appointed
to administer the Plan pursuant to Article 3.

CUMULATIVE DEFERRAL AMOUNT. "Cumulative Deferral Amount" means the total
cumulative amount by which a Participant's Earnings must be reduced over the
period prescribed in Section 4.1. If for a Plan Year a Matching Allocation for
an Employee who is a member of the Senior Management Group of the Company
pursuant to the Dayton Hudson Corporation Supplemental Retirement, Savings and
Employee Stock Ownership Plan ("SRSP") cannot be made because the Before Tax
Deposits or After Tax Deposits elected by the Employee are reduced to comply
with the provisions of the SRSP, "Cumulative Deferral Amount" also includes the
amount of the Matching Allocation that cannot be made.

<PAGE>

DECLARED RATE. "Declared Rate" means with respect to any Plan Year the
applicable rate announced in advance by the Committee for such Plan Year. Under
no circumstances shall the minimum rate be less than twelve percent (12%) per
annum and the maximum rate shall not exceed twenty percent (20%) per annum. The
rate to be announced, subject to the minimum and maximum percentages referenced
above, shall be a calculated rate using the following formula:

Moody's Corporate Bond Yield Average - Monthly Average Corporates as
published by Moody's Investors Service, Inc. or its successor (or if said index
is no longer available, its successor index, or if no successor index exists,
such other index as selected by the Committee as most closely replicates the
measure produced by said Moody index) for the month of June for the year
preceding the subject Plan Year to which the Declared Rate shall apply, said
rate of return to be rounded to the nearest .10% of said reported rate, to which
percentage rate shall be added six (6) percentage points (e.g. an index of
7.16% rounded to 7.20% plus 6% equals a 13.2% "Declared Rate"). PROVIDED
HOWEVER, if any tax or insurance change shall occur which in the reasoned
judgment of the Committee shall have an ongoing adverse economic effect on the
underlying COLI financing assumptions related to the Plan, then the Committee
may adjust said Declared Rate to reflect such adverse economic impact but in no
event below the twelve percent (12%) minimum referenced in the first paragraph
hereof.

DEFERRAL ACCOUNT. "Deferral Account" means the account maintained on the
books of account of the Company pursuant to Section 4.4.

EARLY RETIREMENT. "Early Retirement" means the termination of a
Participant's employment with the Employer for a reason other than death on or
after the date the Participant attains age 55.

EARNINGS. "Earnings" means the base pay and incentive pay paid to a
Participant by the Company or a subsidiary, excluding car and other allowances
and other cash and non-cash compensation.

ELIGIBLE EMPLOYEE. "Eligible Employee" means each Employee in the Senior
Management Group of the Company who executes an Enrollment Agreement to
participate in the Plan.

EMPLOYEE. "Employee" means any person employed by the Employer on a
regular full-time salaried basis, including officers of the Employer.

EMPLOYER. "Employer" means the Company and any of its wholly owned
subsidiaries.

ENROLLMENT AGREEMENT. "Enrollment Agreement" means the written agreement
entered into by the Employer and an Eligible Employee pursuant to which the
Eligible Employee becomes a Participant in the Plan. In the sole discretion of
the Company, authorization forms filed by any Participant by which the
Participant makes the elections provided for by this Plan may be treated as a
completed and fully executed Enrollment Agreement for all purposes under the
Plan.

<PAGE>

NORMAL RETIREMENT. "Normal Retirement" means the termination of a
Participant's employment with the Employer for reasons other than death on or
after the date the Participant attains age 65.

PARTICIPANT. "Participant" means an Eligible Employee who has filed a
completed and executed Enrollment Agreement or authorization form with the
Committee and is participating in the Plan in accordance with the provisions of
Article 4. "Participant" also means an Employee who is a member of the Senior
Management Group of the Company who has a Cumulative Deferral Amount based on
Matching Allocation that could not be made to the SRSP.

PLAN YEAR. "Plan Year" means the calendar year beginning January 1 and
ending December 31.

ARTICLE 3
ADMINISTRATION OF THE PLAN

A Committee shall be appointed by the Chief Executive Officer of the
Company to administer the Plan and to establish, adopt or revise such rules and
regulations as it may deem necessary or advisable for the administration of the
Plan. The Committee shall have discretionary authority to determine eligibility
for benefits and to construe the terms of the Plan. Interpretations of the Plan
by the Committee shall be conclusive. Members of the Committee shall be
eligible to participate in the Plan while serving as members of the Committee,
but a member of the Committee shall not vote or act upon any matter which
relates solely to such member's interest in the Plan as a Participant.

ARTICLE 4
PARTICIPATION

4.1 ELECTION TO PARTICIPATE. Any Employee who is a member of the
Senior Management Group of the Company may enroll in the Plan by filing a
completed and fully executed Enrollment Agreement or authorization form with the
Committee. Pursuant to said Enrollment Agreement or authorization form, the
Employee shall irrevocably designate a dollar amount by which the aggregate
Earnings of such Participant would be reduced over one (1) or four (4) Plan
Years next following the execution of the Enrollment Agreement (the "Benefit
Deferral Period"), provided, however, that:

(a) MINIMUM DEFERRAL. The reduction for any Plan Year shall not
be less than Five Thousand Dollars ($5,000.00)

(b) REDUCTION IN EARNINGS.

<PAGE>

(i) IN GENERAL. Except as otherwise provided in this
Section 4.1, the Earnings of the Participant for each of the Plan
Years in the Benefit Deferral Period shall be reduced by the amount
specified in the Enrollment Agreement (including any authorization
form) applicable to such Plan Year.

(ii) ACCELERATED REDUCTION. A Participant may elect in a
written notice with the consent of the Committee to increase the
amount of the reduction of Earnings otherwise provided for by Section
4.1(b)(i) for any of the Plan Years remaining in the Benefit Deferral
Period, provided, however, that any such increase in the reduction of
Earnings for any remaining Plan Years in the Benefit Deferral Period
shall not increase the Cumulative Deferral Amount, but shall act to
shorten the length of the Benefit Deferral Period.

(c) MAXIMUM REDUCTION IN EARNINGS. A Participant may not elect
a Cumulative Deferral Amount or an increase in reduction of Earnings
pursuant to Section 4.1(b)(ii), or any combination of the two, that would
cause the aggregate total reduction in Earnings in any Plan Year to exceed
twenty-five percent (25%) of the base pay and one hundred percent (100%) of
the incentive pay payable during such Plan Year up to a total of $250,000
per year plus the amount of any payout made pursuant to Section 5.4, or
such greater percent of base pay and/or incentive pay or greater total
amount as the Committee may permit in its sole discretion. In the event
that a Participant elects a Cumulative Deferral Amount or increase in
reduction of Earnings that would violate the limitation described in this
paragraph (c), the election shall be valid except that the Cumulative
Deferral Amount or increase in reduction of Earnings so elected shall
automatically be reduced to comply with such limitation, whichever is most
appropriate in the sole discretion of the Committee.

4.2 DEFERRAL ACCOUNTS. The Committee shall establish and maintain a
separate Deferral Account for each Participant. The amount by which a
Participant's Earnings are reduced pursuant to Section 4.1 shall be credited by
the Employer to the Participant's Deferral Account on the fifteenth (15th) day
of the month in which such Earnings would otherwise have been paid. The
Participant's Deferral Account shall be credited with the annual SRSP lost
Matching Allocation on January 15 following the year of the lost Matching
Allocation. Such Deferral Account shall be debited by the amount of any
payments made by the Employer to the Participant or the Participant's
Beneficiary pursuant to this Plan.

(a) NORMAL AND EARLY RETIREMENT INTEREST. Each Deferral Account
of a Participant who attains Normal or Early Retirement shall be deemed to
bear interest from the date such Deferral Account was established through
the date of commencement of payment of the Normal or Early Retirement
Benefit at a rate equal to the Declared Rate which is announced by the
Committee for each Plan Year, compounded annually, on the balance from
month-to-month in such Deferral Account. Following the date of
commencement of payment of the Normal or Early Retirement Benefit, a
Participant's Deferral Account shall be deemed to bear interest on the
balance of such Deferral Account from month to month at a rate equal to the
Declared Rate, compounded annually.

<PAGE>

(b) OTHER INTEREST. In the case of any termination of a
Participant's employment with the Employer other than by Normal or Early
Retirement or upon the Participant's termination of enrollment in this Plan
pursuant to Section 5.2(b), the Participant's Deferral Account shall be
deemed to bear interest from the date such Deferral Account was established
through the date of the earlier of termination of employment or termination
of enrollment in this Plan on the balance from month-to-month in such
Deferral Account at a rate equal to ten percent (10%) per annum, compounded
annually, provided, however, that if more than five (5) years have elapsed
since the first day of the Benefit Deferral Period, the Participant's
Deferral Account shall be deemed to bear interest from the date such
Deferral Account was established through the date of the earlier of
termination of employment or termination of enrollment in this Plan on the
balance from month-to-month in such Deferral Account at a rate equal to the
Declared Rate which is announced by the Committee for each Plan Year,
compounded annually. Following the earlier of the date of commencement of
payment of the Termination Benefit or the date of termination of enrollment
in this Plan, a Participant's Deferral Account shall be deemed to bear
interest on the balance in such Deferral Account from month-to-month at a
rate equal to twelve percent (12%) per annum, compounded annually.

4.3 ROLLOVER DEFERRED COMPENSATION ACCOUNT. In its sole discretion,
the Committee may permit a Participant to make a special rollover election to
transfer any amounts which were previously deferred under the Company's existing
deferred compensation plans to this Plan.

In such event, the Committee shall establish and maintain a
separate Rollover Deferral Account for each Participant who makes a rollover
transfer to this Plan. Such Rollover Deferral Account shall be deemed to bear
interest at the same rate and subject to the same conditions as other Deferral
Accounts pursuant to Section 4.2. Each Participant who makes a rollover
transfer to a Rollover Deferral Account shall be treated for purposes of
determining benefits under the Plan as having a separate Cumulative Deferral
Amount and Deferral Account which shall initially be in the amount of the
rollover transfer. A Participant who makes a rollover transfer shall be deemed
to waive all rights under the Company's existing deferred compensation plans
from which rollover transfers are made with respect to the amounts transferred
to this Plan, including the right to make elections regarding the time or manner
of payment as permitted thereunder. Rollover transfers shall be subject to the
minimum deferral amount set forth in Section 4.1(a), but shall not be subject to
any maximum deferral limitation.

4.4 VALUATION OF ACCOUNTS. The value of a Deferral Account as of any
date shall equal the amounts theretofore credited to such account less any
payments debited to such account plus the interest deemed to be earned on such
account in accordance with Section 4.2. Interest shall be credited monthly on
the fifteenth (15th) day of each month.

4.5 STATEMENT OF ACCOUNTS. The Committee shall submit to each
Participant, within one hundred twenty (120) days after the close of each Plan
Year, a statement in such form as the Committee deems desirable setting forth
the balance standing to the credit of each Participant in his Deferral Account.

<PAGE>

ARTICLE 5
BENEFITS

5.1 NORMAL OR EARLY RETIREMENT. Upon Normal or Early Retirement, the
payment of benefits shall commence on the first day of the month following
retirement, or following such later date which the Participant elected in his
Enrollment Agreement (including any authorization form). A Participant may
elect in his Enrollment Agreement (including any authorization form) to have
payments commence from one (1) to ten (10) years following retirement, but not
later than age 65 (or five (5) years after the first day of the Benefit Deferral
Period, if later).

(a) SINGLE PARTICIPANT. In the case of a Participant who is
single when payments commence, the Employer shall pay to the Participant an
amount each month for the life of the Participant, but not less than one
hundred eighty (180) months. The payments shall be the actuarial
equivalent of the aggregate of the Participant's Deferral Account at the
time payments commence and the interest that will accrue on the unpaid
balance in such Deferral Account during the payment period pursuant to
Section 4.2(a). The monthly amount of payments will be redetermined
annually to reflect the changes in the Declared Rate.

(b) MARRIED PARTICIPANT. In the case of a Participant who is
married when payments commence, the Employer shall make actuarially reduced
monthly payments to the Participant for his life and thereafter, if the
Participant is survived by a spouse who was married to the Participant when
Normal or Early Retirement Benefit payments commenced, shall continue to
make monthly payments to the Participant's spouse for her life, with
payments to be made for an aggregate period of not less than one hundred
eighty (180) months. The payments shall be the actuarial equivalent of the
payments which would be made to the Participant pursuant to Section 5.1(a)
if he were single. The monthly amount of payments will be redetermined
annually to reflect changes in the Declared Rate.

5.2 TERMINATION BENEFIT.

(a) TERMINATIONS OF EMPLOYMENT. If a Participant shall cease to
be an Employee for any reason other than death or Normal or Early
Retirement or Certain Terminations of Employment under Section 5.2(b), the
Employer shall pay to the Participant in one lump sum an amount (the
"Termination Benefit") equal to the value of the Deferral Account as of the
date of payment and such Participant shall be entitled to no further
benefits under this Plan, provided, however, at the sole discretion of the
Committee, no lump sum shall be payable and, instead, the Employer shall
pay to the Participant an equal amount each month for a period not to
exceed forty-eight (48) months beginning on the first day of the month next
following the date of termination of employment, the sum of which payments
shall equal (a) the value as of the date of termination of employment of
the Deferral Account, plus (b) the interest that will accrue on the unpaid
balance in such Deferral Account during such period at the rate of twelve
percent (12%) per annum, compounded annually. Upon termination of
employment the Participant shall immediately cease to be eligible for any
benefits under the

<PAGE>

Plan other than the Termination Benefit. No other benefit shall be payable
to either the Participant or any Beneficiary of such Participant.

(b) CERTAIN TERMINATIONS OF EMPLOYMENT. If a Participant shall
cease to be an Employee for any reason other than death or Normal or Early
Retirement and shall be at least age 50, have worked for the Company for at
least 10 years and has received an ICP Contract under the Company's Income
Continuance Policy that is signed by Participant and Company and not
rescinded, the payment of benefits shall commence on the first day of the
month following termination, or following such later date which the
Participant elected in his Enrollment Agreement (including any
authorization form). A Participant may elect in his Enrollment Agreement
(including any authorization form) to have payments commence from one (1)
to ten (10) years following retirement, but not later than age 65 (or five
(5) years after the first day of the Benefit Deferral Period, if later).

(i) SINGLE PARTICIPANT. In the case of a Participant who
is single when payments commence, the Employer shall pay to the
Participant an amount each month for the life of the Participant, but
not less than one hundred eighty (180) months. The payments shall be
the actuarial equivalent of the aggregate of the Participant's
Deferral Account at the time payments commence and the interest that
will accrue on the unpaid balance in such Deferral Account during the
payment period pursuant to Section 4.2(a). The monthly amount of
payments will be redetermined annually to reflect changes in the
Declared Rate.

(ii) MARRIED PARTICIPANT. In the case of a Participant who
is married when payments commence, the Employer shall make actuarially
reduced monthly payments to the Participant for his life and
thereafter, if the Participant is survived by a spouse who was married
to the Participant when Normal or Early Retirement Benefit payments
commenced, shall continue to make monthly payments to the
Participant's spouse for her life, with payments to be made for an
aggregate period of not less than one hundred eighty (180) months.
The payments shall be the actuarial equivalent of the payments which
would be made to the Participant pursuant to Section 5.1(a) if he were
single. The monthly amount of payments will be redetermined annually
to reflect changes in the Declared Rate.

(c) TERMINATION OF ENROLLMENT IN PLAN. With the written consent
of the Committee, a Participant may terminate his enrollment in the Plan by
filing with the Committee a written request to terminate enrollment. The
Committee will consent to the termination of a Participant's enrollment in
the Plan in the event of an unforeseeable financial emergency of the
Participant. An unforeseeable financial emergency shall mean an unexpected
need for cash arising from an illness, casualty loss, sudden financial
reversal or other such unforeseeable occurrence. Cash needs arising from
foreseeable events such as the purchase of a house or education expenses
for children shall not be considered to be the result of an unforeseeable
financial emergency. Upon termination of enrollment, no further reductions
shall be made in the Participant's Earnings pursuant to his Enrollment
Agreement, and the

<PAGE>

Participant shall immediately cease to be eligible for any benefits under
the Plan other than the Termination Benefit. No other benefit shall be
payable to either the Participant or any Beneficiary of such Participant.
In its sole discretion, the Committee may pay the Termination Benefit on a
date earlier than the Participant's termination of employment with the
Employer, in which event the Termination Benefit shall be calculated as if
the Participant had terminated employment with the Employer on the date of
such payment. Following termination of enrollment in the Plan, a
Participant's Deferral Account shall be deemed to bear interest on the
balance in such Deferral Account from month-to-month at a rate equal to
twelve percent (12%) per annum, compounded annually.

5.3 LUMP SUM ELECTION. Other provisions of Section 5.1 and Section
5.2 notwithstanding, if a Participant in his Enrollment Agreement (including any
authorization form) has elected a lump sum payment to be made after his
retirement, the amount of his Deferral Account (including interest) for the
Benefit Deferral Period covered by that Agreement shall be paid to the
Participant in a lump sum at the time specified in that Agreement.

5.4 EARLY PAYMENT OPTION. The Employer shall pay to the Participant,
if he is an Employee of the Company, the amount by which the Participant's
Earnings were reduced in any Plan Year pursuant to Section 4.1 during the eighth
(8th) year following the Plan Year ("Early Payment"), provided that such amount
has not previously been paid out under other provisions of the Plan. Such Early
Payment shall not include any interest credited to the Participant's Deferral
Account pursuant to Section 4.2. Notwithstanding any other provisions of this
Plan, the Participant may elect prior to the beginning of any year in which such
an Early Payment will be made to him to reduce his Earnings during the year in
which such Early Payment is made by an amount equal to the Early Payment. An
Early Payment shall not result in any change in the Survivor Benefits payable
pursuant to Section 5.5, other than as a result of the reduction in the
Participant's Cumulative Deferral Account and Deferral Account balance by the
amount of the Early Payment.

5.5 SURVIVOR BENEFITS.

(a) If a Participant dies while employed with an Employer prior
to Early or Normal Retirement, the Employer will pay to the Participant's
Beneficiary an annual benefit for the greater of:

(i) ten (10) years, or

(ii) until the Participant would otherwise have attained age
65,

equal to fifty percent (50%) of the Cumulative Deferral Amount. However,
if the Committee determines that a distribution of the Participant's
Deferral Account would produce a greater benefit, such Deferral Account
balance shall be paid to the Participant's Beneficiary in equal annual
installments over the same period as specified above based on crediting the
balance from month-to-month in such Deferral Account at a rate equal to
twelve percent (12%) per annum, compounded annually.

<PAGE>

(b) If a Participant dies after Early or Normal Retirement, but
prior to commencement of payment of any Early or Normal Retirement Benefit
under the Plan, the Employer will pay to the Participant's Beneficiary the
benefit that such Participant would have received had the Participant
retired on the day prior to such Participant's death, provided, however,
that if the present value of the benefit described in this Section 5.5(b)
is less than the present value of the benefit described in Section 5.5(a),
using in each case twelve percent (12%) as the discount factor, then the
Beneficiary described in this Section 5.5(b) shall receive the benefit
described in Section 5.5(a) and not the benefit described in this Section
5.5(b).

(c) If a Participant (who was unmarried at the commencement of
the payment of any Early or Normal Retirement Benefit, or whose spouse who
was married to the Participant at the time of commencement of payment of
any Early or Normal Retirement Benefit predeceases the Participant) dies
after the commencement of the payment of any Early or Normal Retirement
Benefit, the Employer will pay to the Participant's Beneficiary the
remaining installments of any such benefit for the balance of the one
hundred eighty (180) months minimum payment period. If a spouse who was
married to the Participant at the time of commencement of payment of the
Early or Normal Retirement Benefit survives beyond such one hundred eighty
(180) months minimum payment period, payments shall continue to be made to
the spouse until the spouse's death. If the spouse who was married to the
Participant at the time of commencement of payment of the Early or Normal
Retirement Benefit survives the Participant, but does not survive past the
one hundred eighty (180) months minimum payment period, the Employer will
pay to the Participant's Beneficiary the remaining installments of any such
benefit for the balance of the one hundred eighty (180) months minimum
payment period. In computing any benefits to be paid following the
Participant's death pursuant to this paragraph (c), the Participant's
Deferral Account shall be deemed to bear interest following the
Participant's death on the balance in such Deferral Account from month-to-
month at a rate equal to the Declared Rate, compounded annually.

(d) If a Participant, who does not receive a lump sum Termination
Benefit, dies prior to the time he has received the forty-eight (48) months
payments referred to in Section 5.2(a), the remaining payments for such 48
month period shall be paid to the Participant's Beneficiary.

(e) Notwithstanding other provisions of the Plan, if the
Beneficiary is not a spouse, the present value of the installments shall be
paid as soon as administratively feasible after the death of the
Participant. The interest rate used to compute the present value shall be
the average of the Declared Rate for the Plan Year in which the Participant
dies and twelve percent (12%).

(f) Solely for purposes of this Section 5.5, a Participant who
has a Certain Termination of Employment as defined in Section 5.2(b) shall
be deemed to have had an Early Retirement and the benefit payable under
Section 5.2(b) shall be deemed to be an Early Retirement Benefit.

<PAGE>

5.6 SMALL BENEFIT. In the event that the Committee determines in its
sole discretion that the amount of any benefit is too small to make it
administratively convenient to pay such benefit over time, the Committee may pay
the benefit in the form of a lump sum, notwithstanding any provision of this
Article 5 to the contrary. Such lump sum shall be computed as the net present
value of the benefit otherwise payable using a twelve percent (12%) per annum
discount factor.

5.7 WITHHOLDING. To the extent required by the law in effect at the
time payments are made, the Employer shall withhold from payments made hereunder
the minimum taxes required to be withheld by the federal or any state or local
government.

5.8 LUMP SUM PAYOUT OPTION. Notwithstanding any other provisions of
the Plan, at any time after retirement, but not later than ten (10) years after
retirement of the Participant, a Participant or a Beneficiary of a deceased
Participant may elect to receive an immediate lump sum payment of 50% or 100% of
the balance of his Deferral Account, reduced by a penalty, which shall be
forfeited to the Company, equal to eight percent (8%) of the amount of his
Deferral Account he elected to receive, in lieu of payments in accordance with
the form previously elected by the Participant, or provided elsewhere in this
Plan. Such election, if not 100%, may be made only twice. If less than 100% of
his Deferral Account is paid out, the remainder of his Deferral Account will be
paid in accordance with the form previously elected by the Participant, or
provided elsewhere in this Plan. However, the penalty shall not apply if the
Committee determines, based on advice of counsel or a final determination by the
Internal Revenue Service or any court of competent jurisdiction, that by reason
of the foregoing provision any Participant or Beneficiary has recognized or will
recognize gross income for federal income tax purposes under this Plan in
advance of payment to him of Plan benefits. The Company shall notify all
Participants (and Beneficiaries of deceased Participants) of any such
determination. Whenever any such determination is made, the Company shall
refund all penalties which were imposed hereunder on account of making lump sum
payments at any time during or after the first year to which such determination
applies (i.e., the first year when gross income is recognized for federal income
tax purposes). Interest shall be paid on any such refunds at ten percent (10%)
for each Plan Year, compounded annually. The Committee may also reduce or
eliminate the penalty if it determines that this action will not cause any
Participant or Beneficiary to recognize gross income for federal income tax
purposes under this Plan in advance of payment to him of Plan benefits.

ARTICLE 6
BENEFICIARY DESIGNATION

Each Participant shall have the right, at any time, to designate any
person or persons as Beneficiary or Beneficiaries to whom payment under this
Plan shall be made in the event of the Participant's death prior to complete
distribution to the Participant of the benefits due under the Plan. Each
Beneficiary designation shall become effective only when filed in writing with
the Committee during the Participant's lifetime on a form prescribed by the
Committee.

<PAGE>

designation unless in the case of divorce the previous spouse was not designated
as Beneficiary and unless in the case of marriage the Participant's new spouse
had previously been designated as Beneficiary. The spouse of a married
Participant domiciled in a community property jurisdiction shall join in any
designation of Beneficiary or Beneficiaries other than the spouse.

If a Participant fails to designate a Beneficiary as provided above,
or if his Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Committee shall direct the distribution of such
benefits to the Participant's estate.

ARTICLE 7
AMENDMENT AND TERMINATION OF PLAN

7.1 AMENDMENT. The Board of Directors of the Company may at any time
amend the Plan , in whole or in part for any reason, including but not limited
to tax, accounting or insurance changes, a result of which may be to terminate
the Plan for future deferrals (excluding from such power to terminate future
deferrals those future deferrals provided for in Section 5.4 EARLY PAYOUT
OPTION); provided, however, that no amendment shall be effective to decrease the
benefits, nature or timing thereof payable under the Plan to any Participant
with respect to deferrals made (and benefits thereafter accruing) prior to the
date of such amendment. Written notice of any amendment shall be given each
Participant then participating in the Plan.

7.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate only under
the following circumstances. The Plan shall automatically terminate upon (a) a
determination by the Company that a final decision of a court of competent
jurisdiction or the U. S. Department of Labor holding that the Plan is not
maintained "primarily for the purpose of providing deferred compensation for a
select group of management or highly-compensated employees," and therefore is
subject to Parts 2, 3 and 4 of Title I of ERISA, would require that the Plan be
funded and would result in immediate taxation to Participants of their vested
Plan benefits, or (b) a determination by the Company that a final decision of a
court of competent jurisdiction has declared that the Participants under the
Plan are in constructive receipt under the Internal Revenue Code of their vested
Plan benefits.

7.3 PAYMENTS UPON AUTOMATIC TERMINATION. Upon any Plan termination under
Section 7.2, the Participants will be deemed to have terminated their enrollment
under the Plan as of the date of such termination. The Employer will pay all
Participants the value of each Participant's Deferral Accounts in a lump sum,
determined as if each Participant had a Termination of Employment on the date of
such termination of the Plan as provided under Section 5.2(a) hereof.

ARTICLE 8
MISCELLANEOUS

<PAGE>

8.1 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, claims, or interests in any specific property or assets of Employer, nor
shall they be beneficiaries of, or have any rights, claims, or interests in any
life insurance policies, annuity contracts, or the proceeds therefrom owned or
which may be acquired by Employer ("Policies"). Such Policies or other assets
of Employer shall not be held under any trust for the benefit of Participants,
their Beneficiaries, heirs, successors, or assigns, or held in any way as
collateral security for the fulfilling of the obligations of Employer under this
Plan. Any and all of Employer's assets and Policies shall be, and remain, the
general, unpledged, unrestricted assets of Employer. Employer's obligation
under the Plan shall be merely that of an unfunded and unsecured promise of
Employer to pay money in the future.

8.2 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof, or interest
therein which are, and all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.

8.3 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan nor
any action taken hereunder shall be construed as a contract of employment or as
giving any Employee any right to be retained in the employ of the Employer.

8.4 PROTECTIVE PROVISIONS. Each Participant shall cooperate with
the Employer by furnishing any and all information requested by the Employer in
order to facilitate the payment of benefits hereunder, taking such physical
examinations as the Employer may deem necessary and taking such other relevant
action as may be requested by the Employer. If a Participant refuses so to
cooperate, the Employer shall have no further obligation to the Participant
under the Plan, other than payment to such Participant of the cumulative
reductions in Earnings theretofore made pursuant to this Plan. If a Participant
commits suicide during the two (2) year period beginning on the later of (a) the
date of adoption of this Plan or (b) the first day of the first Plan Year of
such Participant's participation in the Plan, or if the Participant makes any
material misstatement of information or nondisclosure of medical history, then
no benefits will be payable hereunder to such Participant or his Beneficiary,
other than payment to such Participant of the cumulative reductions in Earnings
theretofore made pursuant to this Plan, provided, that in the Employer's sole
discretion, benefits may be payable in an amount reduced to compensate the
Employer for any loss, cost, damage or expense suffered or incurred by the
Employer as a result in any way of such misstatement or nondisclosure.

8.5 GENDER, SINGULAR AND PLURAL. All pronouns and any variations
thereof shall be deemed to refer to the masculine or feminine as the identity of
the person or persons may require. As the context may require, the singular may
be read as the plural and the plural as the singular.

<PAGE>

8.6 CAPTIONS. The captions of the articles, sections, and
paragraphs of this Plan are for convenience only and shall not control or affect
the meaning or construction of any of its provisions.

8.7 VALIDITY. In the event any provision of this Plan is held
invalid, void, or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.

8.8 NOTICE. Any notice or filing required or permitted to be given
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Employer, directed to the attention of the President of the Employer. Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.

8.9 APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Minnesota as applied to contracts
executed and to be wholly performed in such state.

<PAGE>
Restated 4-8-92
Amended 4-10-96
Amended 9-11-96

DAYTON HUDSON CORPORATION
DEFERRED COMPENSATION PLAN
DIRECTORS

ARTICLE 1
PURPOSE

The purpose of this Deferred Compensation Plan (the "Plan") is to provide a
means whereby Dayton Hudson Corporation (the "Company") may afford additional
financial security to directors of the Company and its subsidiaries who have
rendered and continue to render valuable services to the Company or its
subsidiaries and who make an important contribution towards the Company's
continued growth and success by providing for additional future compensation so
that such directors may be retained and their productive efforts encouraged.

ARTICLE 2
DEFINITIONS AND CERTAIN PROVISIONS

BENEFICIARY. "Beneficiary" means the person or persons designated as such
in accordance with Article 6.

COMMITTEE. "Committee" means the plan administration committee appointed
to administer the Plan pursuant to Article 3.

CUMULATIVE DEFERRAL AMOUNT. "Cumulative Deferral Amount" means the total
cumulative amount by which a Participant's Earnings must be reduced over the
period prescribed in Section 4.1.

<PAGE>

RESOLVED FURTHER that "Article 7 Amendment and Termination of Plan" be
amended in its entirety to read as follows:

DEFERRAL ACCOUNT. "Deferral Account" means the account maintained on the
books of account of the Company pursuant to Section 4.4.

DIRECTOR. "Director" means any director of the Company or a subsidiary.

EARNINGS. "Earnings" means the total fees paid to a Participant for
service on the Board of Directors (or any committee thereof) of the Company or a
subsidiary.

EMPLOYER. "Employer" means the Company and any of its wholly owned
subsidiaries.

ENROLLMENT AGREEMENT. "Enrollment Agreement" means the written agreement
entered into by the Employer and a Director pursuant to which the Director
becomes a Participant in the Plan. In the sole discretion of the Company,
authorization forms filed by any Participant by which the Participant makes the
elections provided for by this Plan may be treated as a completed and fully
executed Enrollment Agreement for all purposes under the Plan.

PARTICIPANT. "Participant" means a Director who has filed a completed and
executed Enrollment Agreement or authorization form with the Committee and is
participating in the Plan in accordance with the provisions of Article 4.

PLAN YEAR. "Plan Year" means the fiscal year beginning February 1 and
ending January 31.

RETIREMENT. "Retirement" means termination of service as a Director for
any reason whatsoever, whether voluntarily or involuntarily, except death.

<PAGE>

ARTICLE 3
ADMINISTRATION OF THE PLAN

ARTICLE 4
PARTICIPATION

4.1 ELECTION TO PARTICIPATE. Any Director may enroll in the Plan by
filing a completed and fully executed Enrollment Agreement or authorization form
with the Committee. Pursuant to said Enrollment Agreement or authorization
form, the Director shall irrevocably designate a dollar amount (the "Cumulative
Deferral Amount") by which the aggregate Earnings of such Participant would be
reduced over one (1) or four (4) Plan Years next following the execution of the
Enrollment Agreement (the "Benefit Deferral Period"), provided, however, that:

(a) MINIMUM DEFERRAL. The reduction for any Plan Year shall not be
less than Five Thousand Dollars ($5,000.00).

(b) REDUCTION IN EARNINGS.

(i) IN GENERAL. Except as otherwise provided in this Section
4.1, the Earnings of the Participant for each of the Plan Years in the
Benefit Deferral Period shall be reduced by the amount specified in
the Enrollment Agreement (including any authorization form) applicable
to such Plan Year.

(ii) ACCELERATED REDUCTION. A Participant may elect in a written
notice with the consent of the Committee to increase the amount of the
reduction of Earnings otherwise provided for by Section 4.1(b) (i) for
any of the Plan Years remaining in the Benefit Deferral Period,
provided, however, that any such increase in the reduction of Earnings
for any remaining Plan Years in the Benefit Deferral Period shall not
increase the Cumulative Deferral Amount, but shall act to shorten the
length of the Benefit Deferral Period.

<PAGE>

(c) MAXIMUM REDUCTION IN EARNINGS. A Participant may not elect a
Cumulative Deferral Amount or an increase in reduction of Earnings pursuant
to Section 4.1(b) (ii), or any combination of the two, that would cause the
aggregate total reduction in Earnings in any Plan Year to exceed one
hundred percent (100%) of the Earnings payable during such Plan Year. In
the event that a Participant elects a Cumulative Deferral Amount or
increase in reduction of Earnings that would violate the limitation
described in this paragraph (c), the election shall be valid except that
the Cumulative Deferral Amount or increase in reduction of Earnings so
elected shall automatically be reduced to comply with such limitation,
whichever is most appropriate in the sole discretion of the Committee.

4.2 DEFERRAL ACCOUNTS. The Committee shall establish and maintain a
separate Deferral Account for each Participant. The amount by which a
Participant's Earnings are reduced pursuant to Section 4.1 shall be credited by
the Employer to the Participant's Deferral Account on the fifteenth (15th) day
of the month in which such Earnings would otherwise have been paid. Such
Deferral Account shall be debited by the amount of any payments made by the
Employer to the Participant or the Participant's Beneficiary pursuant to this
Plan.

(a) INTEREST. Each Deferral Account of a Participant shall be deemed
to bear interest from the date such Deferral Account was established
through the date of commencement of payment of the Retirement Benefit at a
rate equal to the Declared Rate which is announced by the Committee for
each Plan Year, compounded annually, on the balance from month-to-month in
such Deferral Account. Following the date of commencement of payment of
the Retirement Benefit, a Participant's Deferral Account shall be deemed to
bear interest on the balance in such Deferral Account from month to month
at a rate equal to Declared Rate, compounded annually.

4.3 ROLLOVER DEFERRED COMPENSATION ACCOUNT. In its sole discretion, the
Committee may permit any Participant to make a special rollover election to
transfer any amounts which were previously deferred under any existing deferred
compensation plans of the Company to this Plan.

In such event, the Committee shall establish and maintain a separate
Rollover Deferral Account for each Participant who makes a rollover transfer to
this Plan. Such Rollover Deferral Account shall be deemed to bear interest at
the same rate and subject to the same conditions as other Deferral Accounts
pursuant to Section 4.2. Each Participant who makes a rollover transfer to a
Rollover Deferral Account shall be treated for purposes of determining benefits
under the Plan as having a separate Cumulative Deferral Amount which shall
initially be in the amount of the rollover transfer. A Participant who makes a
rollover transfer shall be deemed to waive all rights under the Company's
existing deferred compensation plans from which rollover transfers are made with
respect to the amounts transferred to this Plan, including the right to make
elections regarding the time or manner of payment as permitted thereunder.
Rollover transfers shall be subject to the minimum deferral amount set forth in
Section 4.1(a), but shall not be subject to any maximum deferral limitation.

<PAGE>

4.4 VALUATION OF ACCOUNTS. The value of a Deferral Account as of any date
shall equal the amounts theretofore credited to such account less any payments
debited to such account plus the interest deemed to be earned on such account in
accordance with Section 4.2. Interest shall be credited monthly on the
fifteenth (15th) day of each month.

ARTICLE 5
BENEFITS

5.1 RETIREMENT. Upon Retirement, the payment of benefits shall commence
on the first day of the month following retirement, or following such later date
which the Participant elected in his Enrollment Agreement (including any
authorization form). A Participant may elect in his Enrollment Agreement
(including any authorization form) to have payments commence from one (1) to ten
(10) years following retirement, but not later than age 65 (or five (5) years
after the first day of the Benefit Deferral Period, if later).

(a) SINGLE PARTICIPANT. In the case of a Participant who is single
when payments commence, the Employer shall pay to the Participant an amount
each month for the life of the Participant, but not less than one hundred
eighty (180) months. The payments shall be the actuarial equivalent of the
aggregate of the Participant's Deferral Account at the time payments
commence and the interest that will accrue on the unpaid balance in such
Deferral Account during the payment period pursuant to Section 4.2(a). The
monthly amount of payment will be redetermined annually to reflect changes
in the Declared Rate.

(b) MARRIED PARTICIPANT. In the case of a Participant who is married
when payments commence, the Employer shall make actuarially reduced monthly
payments to the Participant for his life and thereafter, if the Participant
is survived by a spouse who was married to the Participant when Retirement
Benefit payments commenced, shall continue to make monthly payments to the
Participant's spouse for her life, with payments to be made for an
aggregate period of not less than one hundred eighty (180) months. The
payments shall be the actuarial equivalent of the payment which would be
made to the Participant pursuant to Section 5.1(a) if he were single. The
monthly amount of payments will be redetermined annually to reflect the
change in the Declared Rate.

<PAGE>

5.2 SURVIVOR BENEFITS.

(a) If a Participant dies prior to Retirement, the Employer will pay
to the Participant's Beneficiary an annual benefit for the greater of:

(i) ten (10) years, or

(ii) until the Participant would otherwise have attained age 65,

(b) If a Participant dies after Retirement, but prior to commencement
of payment of any Retirement Benefit under the Plan, the Employer will pay
to the Participant's Beneficiary the benefit that such Participant would
have received had the Participant retired on the day prior to such
Participant's death, provided, however, that if the present value of the
benefit described in this Section 5.2(b) is less than the present value of
the benefit described in Section 5.2(a), using in each case twelve percent
(12%) as the discount factor, then the Beneficiary described in this
Section 5.2(b) shall receive the benefit described in Section 5.2(a) and
not the benefit described in this Section 5.2(b).

(c) If a Participant (who was unmarried at the commencement of the
payment of any Retirement Benefit, or whose spouse who was married to the
Participant at the time of commencement of payment of any Retirement
Benefit predeceases the Participant) dies after the commencement of the
payment of any Retirement Benefit, the Employer will pay to the
Participant's Beneficiary the remaining installments of any such benefit
for the balance of the one hundred eighty (180) months minimum payment
period. If a spouse who was married to the Participant at the time of
commencement of payment of the Retirement Benefit survives beyond such one
hundred eighty (180) months minimum payment period, payments shall continue
to be made to the spouse until the spouse's death. If the spouse who was
married to the Participant at the time of commencement of payment of the
Retirement Benefit survives the Participant, but does not survive past the
one hundred eighty (180) months minimum payment period, the Employer will
pay to the Participant's Beneficiary the remaining installments of any such
benefit for the balance of the one hundred eighty (180) months minimum
payment period. In computing any benefits to be paid following the
Participant's death pursuant to this paragraph (c), the Participant's
Deferral Account shall be deemed to bear interest following the
Participant's death on the balance in such

<PAGE>

Deferral Account from month-to-month at a rate equal to the Declared Rate,
compounded annually.

(d) Notwithstanding other provisions of the Plan, if the Beneficiary
is not a spouse, the present value of the installments shall be paid as
soon as administratively feasible after the death of the Participant. The
interest rate used to compute the present value shall be the average of the
declared rate for the Plan Year in which the Participant dies and twelve
percent (12%).

5.3 SMALL BENEFIT. In the event that the Committee determines in its sole
discretion that the amount of any benefit is too small to make it
administratively convenient to pay such benefit over time, the Committee may pay
the benefit in the form of a lump sum, notwithstanding any provision of this
Article 5 to the contrary. Such lump sum shall be computed as the net present
value of the benefit otherwise payable using a twelve percent (12%) per annum
discount factor.

5.4 WITHHOLDING. To the extent required by the law in effect at the time
payments are made, the Employer shall withhold from payments made hereunder the
minimum taxes required to be withheld by the federal or any state or local
government.

5.5 LUMP SUM ELECTION. Other provisions of Section 5.1 notwithstanding,
if a Participant in his Enrollment Agreement (including any authorization form)
has elected a lump sum payment to be made after his Retirement, the amount of
his Deferral Account (including interest) for the Benefit Deferral Period
covered by that Agreement shall be paid to the Participant in a lump sum at the
time specified in that Agreement.

5.6 LUMP SUM PAYOUT OPTION. Notwithstanding any other provisions of the
Plan, at any time after Retirement, but not later than ten (10) years after
Retirement of the Participant, a Participant or a Beneficiary of a deceased
Participant may elect to receive an immediate lump sum payment of 50% or 100% of
the balance of his Deferral Account, reduced by a penalty, which shall be
forfeited to the Company, equal to eight percent (8%) of the amount of his
Deferral Account he elected to receive, in lieu of payments in accordance with
the form previously elected by the Participant, or provided elsewhere in this
Plan. Such election, if not 100%, may be made only twice. If less than 100% of
his Deferral Account is paid out, the remainder of his Deferral Account will be
paid in accordance with the form previously elected by the Participant, or
provided elsewhere in this Plan. However, the penalty shall not apply if the
Committee determines, based on advice of counsel or a final determination by the
Internal Revenue Service or any court of competent jurisdiction, that by reason
of the foregoing provision any Participant or Beneficiary has recognized or will
recognize gross income for federal income tax purposes under this Plan in
advance of payment to him of Plan benefits. The Company shall notify all
Participants (and Beneficiaries of deceased Participants) of any such
determination. Whenever any such determination is made, the Company shall
refund all penalties which were imposed hereunder on account of making lump sum
payments at any time during or after the first year to which such determination
applies (i.e., the first year when gross income is recognized for federal income
tax

<PAGE>

purposes). Interest shall be paid on any such refunds at ten percent (10%) for
each Plan Year, compounded annually. The Committee may also reduce or eliminate
the penalty if it determines that this action will not cause any Participant or
Beneficiary to recognize gross income for federal income tax purposes under this
Plan in advance of payment to him of Plan benefits.

ARTICLE 6
BENEFICIARY DESIGNATION

Each Participant shall have the right, at any time, to designate any person
or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall
be made in the event of the Participant's death prior to complete distribution
to the Participant of the benefits due under the Plan. Each Beneficiary
designation shall become effective only when filed in writing with the Committee
during the Participant's lifetime on a form prescribed by the Committee.

The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. Any finalized divorce or marriage
(other than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary designation form shall revoke such designation unless in
the case of divorce the previous spouse was not designated as Beneficiary and
unless in the case of marriage the Participant's new spouse had previously been
designated as Beneficiary. The spouse of a married Participant domiciled in a
community property jurisdiction shall join in any designation of Beneficiary or
Beneficiaries other than the spouse.

If a Participant fails to designate a Beneficiary as provided above, or if
his Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Committee shall direct the distribution of such
benefits to the Participant's estate.

ARTICLE 7
AMENDMENT AND TERMINATION OF PLAN

7.1 AMENDMENT. The Board of Directors of the Company may at any time
amend the Plan , in whole or in part for any reason, including but not limited
to tax, accounting or insurance changes, a result of which may be to terminate
the Plan for future deferrals; provided, however, that no amendment shall be
effective to decrease the benefits, nature or timing thereof payable under the
Plan to any Participant with respect to deferrals made (and benefits thereafter
accruing) prior to the date of such amendment. Written notice of any amendment
shall be given each Participant then participating in the Plan.

<PAGE>

7.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate only under
the following circumstances. The Plan shall automatically terminate upon a
determination by the Company that a final decision of a court of competent
jurisdiction has declared that the Participants under the Plan are in
constructive receipt under the Internal Revenue Code of their vested Plan
benefits.

7.3 PAYMENTS UPON AUTOMATIC TERMINATION. Upon any Plan termination under
Section 7.2, the Participants will be deemed to have terminated their enrollment
under the Plan as of the date of such termination. The Company will pay all
Participants the value of each Participant's Deferral Accounts in a lump sum.
The interest rate used to compute the present value shall be the average of the
declared rate for the Plan Year in which the lump sum is to be paid and twelve
percent (12%).

ARTICLE 8
MISCELLANEOUS

8.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors, and assigns shall have no legal or equitable rights, claims,
or interests in any specific property or assets of Employer, nor shall they be
beneficiaries of, or have any rights, claims, or interests in any life insurance
policies, annuity contracts, or the proceeds therefrom owned or which may be
acquired by Employer ("Policies"). Such Policies or other assets of Employer
shall not be held under any trust for the benefit of Participants, their
Beneficiaries, heirs, successors, or assigns, or held in any way as collateral
security for the fulfilling of the obligations of Employer under this Plan. Any
and all of Employer's assets and Policies shall be, and remain, the general,
unpledged, unrestricted assets of Employer. Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of Employer to
pay money in the future.

8.2 NONASSIGNABILITY. Neither a Participant nor any other person shall,
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, hypothecate or convey in advance of actual receipt the
amounts, if any, payable hereunder, or any part thereof, or interest therein
which are, and all rights to which are, expressly declared to be unassignable
and non-transferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, nor be transferable by operation of law in the event of a Participant's
or any other person's bankruptcy or insolvency.

8.3 SERVICE NOT GUARANTEED. Nothing contained in this Plan nor any action
taken hereunder shall be construed as a contract of employment or as giving any
Director any right to be retained as a Director of the Employer.

8.4 PROTECTIVE PROVISIONS. Each Participant shall cooperate with the
Employer by furnishing any and all information requested by the Employer in
order to facilitate the payment of

<PAGE>

benefits hereunder, taking such physical examinations as the Employer may deem
necessary and taking such other relevant action as may be requested by the
Employer. If a Participant refuses so to cooperate, the Employer shall have no
further obligation to the Participant under the Plan, other than payment to such
Participant of the cumulative reductions in Earnings theretofore made pursuant
to this Plan. If a Participant commits suicide during the two (2) year period
beginning on the later of (a) the date of adoption of this Plan or (b) the first
day of the first Plan Year of such Participant's participation in the Plan, or
if the Participant makes any material misstatement of information or
nondisclosure of medical history, then no benefits will be payable hereunder to
such Participant or his Beneficiary, other than payment to such Participant of
the cumulative reductions in Earnings theretofore made pursuant to this Plan,
provided, that in the Employer's sole discretion, benefits may be payable in an
amount reduced to compensate the Employer for any loss, cost, damage or expense
suffered or incurred by the Employer as a result in any way of such misstatement
or nondisclosure.

8.5 GENDER, SINGULAR AND PLURAL. All pronouns and any variations thereof
shall be deemed to refer to the masculine or feminine as the identity of the
person or persons may require. As the context may require, the singular may be
read as the plural and the plural as the singular.

8.6 CAPTIONS. The captions of the articles, sections, and paragraphs of
this Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.

8.7 VALIDITY. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.

8.8 NOTICE. Any notice or filing required or permitted to be given to the
Committee under the Plan shall be sufficient if in writing and hand delivered,
or sent by registered or certified mail, to the principal office of the
Employer, directed to the attention of the President of the Employer. Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.

8.9 APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Minnesota as applied to contracts
executed and to be wholly performed in such state.

<PAGE>
11-29-94
Adopted: 12-14-94
Effective: 1/1/97
Amended 4-10-96
Amended and Restated
Effective: 1-1-97

DAYTON HUDSON CORPORATION
SMG EXECUTIVE DEFERRED COMPENSATION PLAN

ARTICLE I
GENERAL

Sec. 1.1 NAME OF PLAN. The name of the Plan set forth herein is the
Dayton Hudson Corporation SMG Executive Deferred Compensation Plan. It is
referred to herein as the "Plan".

Sec. 1.2 PURPOSE. The purpose of the Plan is to provide a means whereby
Dayton Hudson Corporation (the "Company") may afford financial security to a
select group of employees of the Company and its subsidiaries who have rendered
and continue to render valuable services to the Company or its subsidiaries and
who make an important contribution towards the Company's continued growth and
success, by providing for additional future compensation so that such employees
may be retained and their productive efforts encouraged.

Sec. 1.3 EFFECTIVE DATE. The Effective Date of the Plan is January 1,
1997.

Sec. 1.4 COMPANY. "Company" means all of the following:

(a) Dayton Hudson Corporation, a Minnesota corporation.

(b) Any successor of Dayton Hudson Corporation (whether direct or
indirect, by purchase of a majority of the outstanding voting stock of
Dayton Hudson Corporation or all or substantially all of the assets of
Dayton Hudson Corporation, or by merger, consolidation or otherwise).

(c) Any person that becomes liable for the obligations hereunder of the
entities specified in (a) and (b) above by operation of law.

Sec. 1.5 PARTICIPATING EMPLOYERS. The Company is a Participating Employer
in the Plan. With the consent of the Company, by action of the Board or any
duly authorized officer, any wholly-owned subsidiary of the Company may, by
action of its board of directors or any duly authorized officer, also become a
Participating Employer in the Plan effective as of the date specified by it in
its adoption of the Plan; but the subsidiary shall cease to be a Participating

<PAGE>

Employer on the date it ceases to be a wholly-owned subsidiary of the Company.
The other Participating Employers on the Effective Date are:

Dayton's Commercial Interiors, Inc. (Minnesota)
Dayton's Travel Service, Inc. (Minnesota)
Mervyn's (California)
DHC Milwaukee, Inc. (Wisconsin)
DHC Wisconsin, Inc. (Wisconsin)
Marshall Field & Company (Delaware)
Marshall Field Stores, Inc. (Delaware)
Retailers National Bank

Sec. 1.6 CONSTRUCTION AND APPLICABLE LAW. The Plan is intended to be an
unfunded benefit plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
subject to the applicable requirements of ERISA. The Plan shall be administered
and construed consistently with said intent. It shall also be construed and
administered according to the laws of the State of Minnesota to the extent such
laws are not preempted by laws of the United States of America. All
controversies, disputes, and claims arising hereunder shall be submitted to the
United States District Court for the District of Minnesota.

Sec. 1.7 RULES OF CONSTRUCTION. The Plan shall be construed in accordance
with the following:

(a) Headings at the beginning of articles and sections hereof are for
convenience of reference, shall not be considered as part of the text
of the Plan, and shall not influence its construction.

(b) Capitalized terms used in the Plan shall have their meaning as defined
in the Plan unless the context clearly indicates to the contrary.

(c) All pronouns and any variations thereof shall be deemed to refer to
the masculine or feminine as the identity of the person or persons may
require. As the context may require, the singular may be read as the
plural and the plural as the singular.

(d) Use of the words "hereof", "herein", "hereunder" or similar compounds
of the word "here" shall mean and refer to the entire Plan unless the
context clearly indicates to the contrary.

(e) The provisions of the Plan shall be construed as a whole in such
manner as to carry out the provisions thereof and shall not be
construed separately without relation to the context.

<PAGE>

ARTICLE II
DEFINITIONS

Sec. 2.1 BASE SALARY. "Base Salary" is the salary an Employee is expected
to earn in a Benefit Deferral Period, assuming the Employee is employed for the
full Benefit Deferral Period.

Sec. 2.2 BENEFICIARY. "Beneficiary" means the person or persons
designated as such in accordance with Article VI.

Sec. 2.3 BENEFIT DEFERRAL PERIOD. "Benefit Deferral Period" means that
period of one Plan Year as determined pursuant to Article IV over which a
Participant defers a portion of such Participant's Base Salary and/or Bonus.

Sec. 2.4 BONUS. "Bonus" is the bonus, under any bonus plan of a
Participating Employer. Any part of a "Bonus" earned in a Benefit Deferral
Period, but otherwise payable in the year following the Benefit Deferral Period
is governed by the deferral election made for the Benefit Deferral Period.

Sec. 2.5 BOARD. "Board" means the board of directors of the Company, and
includes any committee thereof authorized to act for said board of directors.

Sec. 2.6 CONTINUING PARTICIPATING SALARY. "Continuing Participating
Salary" shall be the amount of compensation during the previous Plan Year
necessary to make a Participant a Highly Compensated Employee for the current
Plan Year.

Sec. 2.7 CREDITED SERVICE. "Credited Service" of a Participant means the
number of years of service for vesting purposes a Participant would have under
the applicable defined benefit pension plan of the Company and/or a
Participating Employer.

Sec. 2.8 CREDITING RATE ALTERNATIVE. "Crediting Rate Alternative" means
the S&P Crediting Rate or the Variable Interest Crediting Rate.

Sec. 2.9 CUMULATIVE DEFERRAL AMOUNT. "Cumulative Deferral Amount" means
the total cumulative amount by which a Participant's Base Salary and/or Bonus
must be reduced over the period prescribed in Section 4.1. If for a Plan Year a
Matching Allocation for a Participant pursuant to the SRSP cannot be made
because the Before Tax Deposits or After Tax Deposits elected by the Employee
are reduced to comply with the provisions of the SRSP, "Cumulative Deferral
Amount" also includes the amount of the Matching Allocation that cannot be made.
"Cumulative Deferral Amount" also includes amounts transferred from the HCCAP.

<PAGE>

Sec. 2.10 DEFERRAL ACCOUNT. "Deferral Account" means the accounts
maintained on the books of account of the Company pursuant to Section 4.2.

Sec. 2.11 EMPLOYEE. "Employee" means any person employed by a
Participating Employer on a salaried basis.

Sec. 2.12 ENHANCEMENT. "Enhancement" means an additional .1667% per month
added to the S&P Crediting Rate and the Variable Interest Crediting Rate.

Sec. 2.13 ENROLLMENT AGREEMENT. "Enrollment Agreement" means the written
agreement entered into by the Company and an Employee pursuant to which the
Employee becomes a Participant in the Plan. In the sole discretion of the
Company, authorization forms filed by any Participant by which the Participant
makes the elections provided for by this Plan may be treated as a completed and
fully executed Enrollment Agreement for all purposes under the Plan.

Sec. 2.14 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974 as from time to time amended.

Sec. 2.15 HCCAP. "HCCAP" is the Company's Highly Compensated Capital
Accumulation Plan.

Sec. 2.16 HIGHLY COMPENSATED EMPLOYEE. "Highly Compensated Employee"
means a "Highly Compensated Employee" as that term is defined in the SRSP.

Sec. 2.17 NAMED FIDUCIARY. The Company and the Vice President of
Personnel are a "Named Fiduciary" for purposes of ERISA with authority to
control and manage the operation and administration of the Plan. Other persons
are also Named Fiduciaries under ERISA if so provided thereunder or if so
identified by the Company, by action of the Board or the Chief Executive
Officer. Such other person or persons shall have such authority to control or
manage the operation and administration of the Plan as may be provided by ERISA
or as may be allocated by the Company, by action of the Board or the Chief
Executive Officer or the Vice President of Personnel.

Sec. 2.18 PARTICIPANT. "Participant" means an eligible Employee who has
filed a completed and executed Enrollment Agreement or authorization form with
the Company and is participating in the Plan in accordance with the provisions
of Article IV. "Participant" also means an Employee of the Company who has a
Cumulative Deferral Amount based on Matching Allocation that could not be made
to the SRSP.

Sec. 2.19 PERSON. "Person" means an individual, partnership, corporation,
estate, trust, or other entity.

<PAGE>

Sec. 2.20 PLAN YEAR. "Plan Year" means the period commencing with the
Effective Date and ending December 31, 1997 and each subsequent calendar year.

Sec. 2.21 S&P CREDITING RATE. "S&P Crediting Rate" means the earnings or
losses for a month on the S&P Index Fund of the SRSP, or if such Index Fund
ceases to exist, such other index as selected by the Board as most closely
replicates the measure produced by the S&P Index Fund of the SRSP.

Sec. 2.22 SMG. A "SMG" is a member of the Senior Management Group of the
Company or a Participating Employer, as that term is defined by the Vice
President of Personnel.

Sec. 2.23 SRSP. "SRSP" is the Dayton Hudson Corporation Supplemental
Retirement, Savings, and Employee Stock Ownership Plan.

Sec. 2.24 TERMINATION OF EMPLOYMENT. The "Termination of Employment" of
an employee from his Participating Employer for purposes of the Plan shall be
deemed to occur upon his or her resignation, discharge, retirement, death,
failure to return to active work at the end of an authorized leave of absence or
the authorized extension or extensions thereof, failure to return to work when
duly called following a temporary layoff, or upon the happening of any other
event or circumstance which, under the policy of his Participating Employer as
in effect from time to time, results in the termination of the employer-employee
relationship; provided, however, that "Termination of Employment" shall not be
deemed to occur upon a transfer between any combination of Participating
Employers, affiliates, and predecessor employers.

Sec. 2.25 VARIABLE INTEREST CREDITING RATE. "Variable Interest Crediting
Rate" means the earnings or losses for a month on the Variable Interest Fund of
the SRSP, or if such fund ceases to exist, such other index as selected by the
Board as most closely replicates the measure produced by the Variable Interest
Fund of the SRSP.

Sec. 2.26 VICE PRESIDENT OF PERSONNEL. "Vice President of Personnel"
means the most senior officer of the Company who is assigned responsibility for
compensation and benefits matters or such other officer as may be designated
from time to time by the Board of Directors.

Sec. 2.27 YEAR OF VESTING. A "Year of Vesting" is a full year of
participation under HCCAP or a full year of participation in a deferred
compensation plan of the Company.

ARTICLE III
ELIGIBILITY

Sec. 3.1 ELIGIBILITY. An Employee shall be a Participant while, and only
while, he or she is a regular employee of a Participating Employer, subject to
the following:

<PAGE>

(a) An Employee will become a Participant on the first day of the first
Plan Year in which he or she is a Highly Compensated Employee.

(b) An Employee must be an SMG on the first day of the Plan Year, or he or
she cannot become a Participant.

(c) If an employee's Base Salary is below the Continuing Participating
Salary, he or she will continue to be a Participant, but no further
deferrals will be allowed and no SRSP match will be added to the
Cumulative Deferral Amount.

(d) The employee must sign an enrollment and insurance consent form, in
the form that the Company determines in order to defer Base Salary
and/or Bonus. The insurance consent form will allow Company to
purchase life insurance on the employee with the Company as
beneficiary.

Sec. 3.2 NO GUARANTEE OF EMPLOYMENT. Participation in the Plan does not
constitute a guarantee or contract of employment with any Participating
Employer. Such participation shall in no way interfere with any rights a
Participating Employer would have in the absence of such participation to
determine the duration of the employee's employment.

ARTICLE IV
PARTICIPATION AND BENEFITS

Sec. 4.1 ELECTION TO PARTICIPATE. Any Employee of a Participating
Employer who is eligible to participate may enroll in the Plan by filing a
completed and fully executed Enrollment Agreement or authorization form with the
Company. Pursuant to said Enrollment Agreement or authorization form, the
Employee shall irrevocably designate a dollar amount by which the Base Salary
and/or the percentage of the Bonus of such Participant would be reduced over the
Benefit Deferral Period next following the execution of the Enrollment
Agreement, provided, however, that:

(a) REDUCTION IN EARNINGS. Except as otherwise provided in this Section
4.1, the Base Salary and/or Bonus of the Participant for the Benefit
Deferral Period shall be reduced by the amount specified in the
Enrollment Agreement (including any authorization form) applicable to
such Plan Year.

(b) MAXIMUM REDUCTION IN EARNINGS. A Participant may not elect a
Cumulative Deferral Amount that would cause the reduction in Base
Salary in any Plan Year to exceed eighty percent (80%) of the Base
Salary and eighty percent (80%) of the Bonus payable during such Plan
Year or such greater amount or percent of base pay and/or incentive
pay or greater total amount as the Company may permit in its sole

<PAGE>

discretion. In no event can Base Salary be reduced below one hundred
and ten percent (110%) of the Continuing Participating Salary in the
previous Plan Year. In the event that a Participant elects a
Cumulative Deferral Amount that would violate the limitation described
in this paragraph (b), the election shall be valid except that the
Cumulative Deferral Amount so elected shall automatically be reduced
to comply with such limitation, whichever is most appropriate in the
sole discretion of the Company.

Sec. 4.2 DEFERRAL ACCOUNTS. The Company shall establish and maintain
separate Deferral Accounts for each Participant. The amount by which a
Participant's Base Salary or Bonus are reduced pursuant to Section 4.1 shall be
credited by the Company to the Participant's Deferral Accounts at the end of the
month in which such Base Salary or Bonus would otherwise have been paid. The
Participant's Deferral Account shall be credited with the annual SRSP lost
Matching Allocation on the last day of February following the year of the lost
Matching Allocation. Such Deferral Accounts shall be debited by the amount of
any payments made by the Company to the Participant or the Participant's
Beneficiary pursuant to this Plan. A separate Deferral Account shall be
maintained for each type of deferral election made and for each Crediting Rate
Alternative.

Sec. 4.3 HCCAP. All persons who become Participants in this Plan on
January 1, 1997 will have the balance of their HCCAP Account transferred to this
Plan effective January 1, 1997. All persons who become Participants in this
Plan after January 1, 1997 will have the balance in their HCCAP account
transferred on the January 1 they become Participants. The Deferral Accounts
transferred from HCCAP will be paid in immediate lump sum payouts after
Termination of Employment.

Sec. 4.4 CREDITING RATE ALTERNATIVES. The Participant shall select the
Crediting Rate Alternatives, using full percentages, that are to be applied to
his or her Deferral Accounts. Participants may change their Crediting Rate
Alternatives quarterly (January, April, July or October) by completing a Rate of
Return Alternative Change Form. The Change Form must be received by the
Compensation Department of the Company at least fifteen days and not more than
forty days before the beginning of the applicable quarter. If a Participant
does not make an election, the Crediting Rate Alternative will be the S&P
Crediting Rate.

Sec. 4.5 BENEFIT PAYMENT ELECTIONS. At the time a Participant executes an
Enrollment Agreement, he or she must also elect the method of benefit payment
and the time to start the benefit. The elections are to be made for each Plan
Year.

(a) METHOD OF BENEFIT PAYMENT. Benefits for each Plan Year can be paid in
a lump sum, five annual installments or ten annual installments.

<PAGE>

(b) COMMENCEMENT OF BENEFIT. The benefit for each Plan Year may be
started as soon as possible following Termination of Employment or
one year following Termination of Employment.

Sec. 4.6 CREDITING. Each Deferral Account will be credited at the end of
a month at the following rates on the balance in the Deferral Account on the
first day of the month.

(a) EMPLOYEE. Each Deferral Account of an Employee will be credited using
the Crediting Rate Alternative plus the Enhancement.

(b) TERMINATED EMPLOYEE. Each Deferral Account of an Employee who has had
a Termination of Employment will be credited using the Crediting Rate
Alternative.

(c) VESTING. Each Employee who has a Termination of Employment and does
not have five Years of Vesting will have his or her Deferral Accounts
revalued using only the Crediting Rate Alternative and not receiving
the Enhancement. Provided, however, if an Employee's Termination of
Employment is because of death or permanent and total disability, the
Employee will be treated as if he or she have five years of vesting.

Sec. 4.7 TIME OF PAYMENT. If a Participant has a Termination of
Employment after age fifty-five or an involuntary termination after age fifty
with ten years of Credited Service, the participant's Deferral Accounts will be
paid pursuant to his or her elections. If a Participant has a Termination of
Employment that does not qualify under the first sentence of this section, the
Participant's Deferral Accounts will be paid in a lump sum as soon as possible
following Termination of Employment.

Sec. 4.8 STATEMENT OF ACCOUNTS. The Company shall submit to each
Participant, within one hundred twenty days after the close of each Plan Year, a
statement in such form as the Company deems desirable, setting forth the balance
standing to the credit of each Participant in his Deferral Accounts.

ARTICLE V
CERTAIN BENEFIT PAYMENTS

<PAGE>

be considered to be the result of an unforeseeable financial emergency. Upon
termination of enrollment, no further reductions shall be made in the
Participant's Base Salary or Bonus pursuant to his or her Enrollment Agreement,
and the Participant shall immediately cease to be eligible for any benefits
under the Plan other than payments from his or her Deferral Accounts. In its
sole discretion, the Committee may pay the Deferral Accounts on a date earlier
than the Participant's Termination of Employment with the Participating
Employer, in which event the amounts shall be calculated as if the Participant
had a Termination of Employment with the Participating Employer on the date of
such payment. Following termination of enrollment in the Plan, a Participant's
Deferral Account shall be credited at the Crediting Rate Alternative with no
Enhancement.

Sec. 5.2 SURVIVOR BENEFITS

(a) DEATH WHILE EMPLOYED. If a Participant dies while employed by a
Participating Employer, the Company will pay the amount in his or her
Deferral Accounts to the Participant's Beneficiary as soon as possible
after death in a lump sum.

(b) DEATH AFTER TERMINATION OF EMPLOYMENT. If a Participant dies after
Termination of Employment, and has not received all of his or her
payments, and the Participant's Beneficiary is his or her spouse,
payments shall be made to the spouse pursuant to the Participant's
payout elections. If the Participant's spouse dies before receiving
all payments, the remaining amount in the Deferral Accounts will be
paid in a lump sum as soon as possible after the spouse's death to the
spouse's estate. If a Participant dies after Termination of
Employment, has not received all of his or her payments, and the
Participant's Beneficiary is a Person other than his or her spouse,
then payment shall be made in a lump sum as soon as possible after the
Participant's death.

Sec. 5.3 SMALL BENEFIT. In the event that the Company determines in its
sole discretion that the amount of any benefit is too small to make it
administratively convenient to pay such benefit over time, the Company may pay
the benefit in the form of a lump sum, notwithstanding any provision of this
Article or Article IV to the contrary.

Sec. 5.4 WITHHOLDING. To the extent required by the law in effect at the
time payments are made, the Company shall withhold from payments made hereunder
or any other payment owing by the Company to the Participant the taxes required
to be withheld by the federal or any state or local government.

Sec. 5.5 LUMP SUM PAYOUT OPTION. Notwithstanding any other provisions of
the Plan, at any time after Termination of Employment, but not later than ten
years after Termination of Employment of the Participant, a Participant or a
Beneficiary of a deceased Participant may elect to receive an immediate lump sum
payment of 100% of the balance of his or her Deferral Accounts, if any, reduced
by a penalty, which shall be forfeited to the Company, equal to eight percent of
the

<PAGE>

amount of his or her Deferral Accounts he or she elected to receive, in lieu of
payments in accordance with the form previously elected by the Participant, or
provided elsewhere in this Plan. However, the penalty shall not apply if the
Company determines, based on advice of counsel or a final determination by the
Internal Revenue Service or any court of competent jurisdiction, that by reason
of the foregoing provision any Participant or Beneficiary has recognized or will
recognize gross income for federal income tax purposes under this Plan in
advance of payment to him of Plan benefits. The Company shall notify all
Participants (and Beneficiaries of deceased Participants) of any such
determination. Whenever any such determination is made, the Company shall
refund all penalties which were imposed hereunder on account of making lump sum
payments at any time during or after the first year to which such determination
applies (i.e., the first year when gross income is recognized for federal income
tax purposes). Interest shall be paid on any such refunds at Variable Interest
Crediting Rate for each Plan Year, compounded annually. The Committee may also
reduce or eliminate the penalty if it determines that this action will not cause
any Participant or Beneficiary to recognize gross income for federal income tax
purposes under this Plan in advance of payment to him of Plan benefits.

ARTICLE VI
BENEFICIARY DESIGNATION

Each Participant shall have the right, at any time, to designate any person
or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall
be made in the event of the Participant's death prior to complete distribution
to the Participant of the benefits due under the Plan. Each Beneficiary
designation shall be come effective only when filed in writing with the Company
during the Participant's lifetime on a form prescribed by the Company.

If a Participant fails to designate a Beneficiary as provided above, or if
his or her Beneficiary designation is revoked by marriage, divorce, or otherwise
without execution of a new designation, or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's benefits, then the Company shall direct the distribution of such
benefits to the Participant's spouse, if any, and if there is no spouse to the
Participant's estate.

ARTICLE VII
ADMINISTRATION OF PLAN

Sec. 7.1 ADMINISTRATION BY COMPANY. The Company is the "administrator" of
the Plan for

<PAGE>

purposes of ERISA. Except as expressly otherwise provided herein, the Company
shall control and manage the operation and administration of the Plan, make all
decisions and determinations incident thereto, and construe the provisions
thereof. In carrying out its Plan responsibilities, the Company shall have
discretionary authority to construe the terms of the Plan. Except in cases
where the Plan expressly requires action on behalf of the Company to be taken by
the Board, action on behalf of the Company may be taken by any of the following:

(a) The Board.

(b) The Chief Executive Officer of the Company.

(d) Any person or persons, natural or otherwise, or committee, to whom
responsibilities for the operation and administration of the Plan are
allocated by the Company, by resolution of the Board or by written
instrument executed by the Chief Executive Officer or the Vice
President of Personnel of the Company and filed with its permanent
records, but action of such person or persons or committee shall be
within the scope of said allocation.

Sec. 7.2 CERTAIN FIDUCIARY PROVISIONS. For purposes of the Plan:

(a) Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.

(b) A Named Fiduciary, or a fiduciary designated by a Named Fiduciary
pursuant to the provisions of the Plan, may employ one or more persons
to render advice with regard to any responsibility such fiduciary has
under the Plan.

(c) Any time the Plan has more than one Named Fiduciary, if pursuant to
the Plan provisions fiduciary responsibilities are not already
allocated among such Named Fiduciaries, the Company, by action of the
Board or its chief executive officer, may provide for such allocation.

(d) Unless expressly prohibited in the appointment of a Named Fiduciary
which is not the Company acting as provided in Sec. 7.1, such Named
Fiduciary by written instrument may designate a person or persons
other than such Named Fiduciary to carry out any or all of the
fiduciary responsibilities under the Plan of such Named Fiduciary.

<PAGE>

(e) A person who is a fiduciary with respect to the Plan, including a
Named Fiduciary, shall be recognized and treated as a fiduciary only
with respect to the particular fiduciary functions as to which such
person has responsibility.

Sec. 7.3 EVIDENCE. Evidence required of anyone under this Plan may be by
certificate, affidavit, document, or other instrument which the person acting in
reliance thereon considers to be pertinent and reliable and to be signed, made,
or presented by the proper party.

Sec. 7.4 RECORDS. Each Participating Employer, each fiduciary with
respect to the Plan, and each other person performing any functions in the
operation or administration of the Plan shall keep such records as may be
necessary or appropriate in the discharge of their respective functions
hereunder, including records required by ERISA or any other applicable law.
Records shall be retained as long as necessary for the proper administration of
the Plan and at least for any period required by ERISA or other applicable law.

Sec. 7.5 GENERAL FIDUCIARY STANDARD. Each fiduciary shall discharge his
duties with respect to the Plan solely in the interests of Participants and with
the care, skill, prudence, and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like
aims.

Sec. 7.6 WAIVER OF NOTICE. Any notice required hereunder may be waived by
the person entitled thereto.

Sec. 7.7 AGENT FOR LEGAL PROCESS. The Company shall be the agent for
service of legal process with respect to any matter concerning the Plan, unless
and until the Company designates some other person as such agent.

Sec. 7.8 INDEMNIFICATION. In addition to any other applicable provisions
for indemnification, the Participating Employers jointly and severally agree to
indemnify and hold harmless, to the extent permitted by law, each director,
officer, and employee of the Participating Employers against any and all
liabilities, losses, costs, or expenses (including legal fees) of whatsoever
kind and nature which may be imposed on, incurred by, or asserted against such
person at any time by reason of such person's services as a fiduciary in
connection with the Plan, but only if such person did not act dishonestly, or in
bad faith, or in willful violation of the law or regulations under which such
liability, loss, cost, or expense arises.

ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN

Sec. 8.1 AMENDMENT. The Board may at any time amend the Plan , in whole or
in part for any reason, including but not limited to tax, accounting or
insurance changes, a result of which may be to terminate the Plan for future
deferrals; provided, however, that no amendment shall be effective to decrease
the benefits, nature or timing thereof payable under the Plan to any Participant
with respect to deferrals made (and benefits thereafter accruing)

<PAGE>

prior to the date of such amendment. Written notice of any amendment shall be
given each Participant then participating in the Plan.

Sec. 8.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate only
under the following circumstances. The Plan shall automatically terminate upon
(a) a determination by the Company that a final decision of a court of competent
jurisdiction or the U. S. Department of Labor holding that the Plan is not
maintained "primarily for the purpose of providing deferred compensation for a
select group of management or highly-compensated employees," and therefore is
subject to Parts 2, 3 and 4 of Title I of ERISA, would require that the Plan be
funded and would result in immediate taxation to Participants of their vested
Plan benefits, or (b) a determination by the Company that a final decision of a
court of competent jurisdiction has declared that the Participants under the
Plan are in constructive receipt under the Internal Revenue Code of their vested
Plan benefits.

Sec. 8.3 PAYMENTS UPON AUTOMATIC TERMINATION. Upon any Plan termination
under Sec. 8.2, the Participants will be deemed to have terminated their
enrollment under the Plan as of the date of such termination. The Company will
pay all Participants the value of each Participant's Deferral Accounts in a lump
sum, determined as if each Participant had a Termination of Employment on the
date of such termination of the Plan and elected to be paid as soon as possible
following Termination of Employment."

ARTICLE IX
MISCELLANEOUS

Sec. 9.1 UNSECURED GENERAL CREDITOR. Participants and their
Beneficiaries, heirs, successors, and assigns shall have no legal or equitable
rights, claims, or interests in any specific property or assets of the Company
or a Participating Employer, nor shall they be beneficiaries of, or have any
rights, claims, or interests in any life insurance policies, annuity contracts,
or the proceeds therefrom owned or which may be acquired by Company
("Policies"). Such Policies or other assets of Participating Employers shall
not be held under any trust (except they may be placed in a Rabbi Trust) for the
benefit of Participants, their Beneficiaries, heirs, successors, or assigns, or
held in any way as collateral security for the fulfilling of the obligations of
Participating Employers under this Plan. Any and all of a Participating
Employer's assets and Policies shall be, and remain, the general, unpledged,
unrestricted assets of the Participating Employer. Participating Employers
obligations under the Plan shall be merely that of an unfunded and unsecured
promise of a Participating Employer to pay money in the future.

Sec. 9.2 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to sell, assign, transfer, pledge, anticipate, mortgage,
commute or otherwise encumber, hypothecate

<PAGE>

or convey in advance of actual receipt the amounts, if any, payable hereunder,
or any part thereof, or interest therein which are, and all rights to which are,
expressly declared to be unassignable and non-transferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, not be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.

Sec. 9.3 PROTECTIVE PROVISIONS. Each Participant shall cooperate with the
Company by furnishing any and all information requested by the Company in order
to facilitate the payment of benefits hereunder, taking such physical
examinations as the Company may deem necessary and taking such other relevant
action as may be requested by the Company. If a Participant refuses so to
cooperate, the Company shall have no further obligation to the Participant under
the Plan, other than payment to such participant of the cumulative reductions in
base salary and or bonus theretofore made pursuant to this Plan. If a
Participant commits suicide during the two (2) year period beginning on the
later of (a) the date of adoption of this Plan or (b) the first day of the first
Plan Year of such Participant's participation in the Plan, or if the Participant
makes any material misstatement of information or nondisclosure of medical
history, then no benefits will be payable hereunder to such Participant or his
Beneficiary, other than payment to such Participant of the cumulative reductions
in Base Salary and or Bonus theretofore made pursuant to this Plan, provided,
that in the Company's sole discretion, benefits may be payable in an amount
reduced to compensate the Company for any loss, cost, damage or expense suffered
or incurred by the Company as a result in any way of such misstatement or
nondisclosure.

Sec. 9.4 VALIDITY. In the event any provision of this Plan is held
invalid, void, or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.

Sec. 9.5 NOTICE. Any notice or filing required or permitted to be given
to the Company under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
the Company, directed to the attention of the President of the Company. Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.

Sec. 9.6 APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Minnesota as applied to contracts
executed and to be wholly performed in such state.

<PAGE>
12-10-94
Adopted: 12-14-94
Effective: 1-1-97
Amended: 4-10-96

DAYTON HUDSON CORPORATION
DIRECTOR DEFERRED COMPENSATION PLAN

ARTICLE I
GENERAL

Sec. 1.1 NAME OF PLAN. The name of the Plan set forth herein is the
Dayton Hudson Corporation Director Deferred Compensation Plan. It is referred
to herein as the "Plan".

Sec. 1.2 PURPOSE. The purpose of the Plan is to provide a means whereby
Dayton Hudson Corporation (the "Company") may allow certain directors a way to
defer compensation.

Sec. 1.3 EFFECTIVE DATE. The Effective Date of the Plan is January 1,
1997.

Sec. 1.4 COMPANY. "Company" means all of the following:

(a) Dayton Hudson Corporation, a Minnesota corporation.

(c) Any person that becomes liable for the obligations hereunder of the
entities specified in (a) and (b) above by operation of law.

Sec. 1.6 CONSTRUCTION AND APPLICABLE LAW. The Plan is intended to be an
unfunded benefit plan maintained for the purpose of providing deferred
compensation for certain directors. The Plan

<PAGE>

shall be construed and administered according to the laws of the State of
Minnesota. All controversies, disputes, and claims arising hereunder shall be
submitted to the United States District Court for the District of Minnesota.

Sec. 1.7 RULES OF CONSTRUCTION. The Plan shall be construed in accordance
with the following:

(a) Headings at the beginning of articles and sections hereof are for
convenience of reference, shall not be considered as part of the text
of the Plan, and shall not influence its construction.

(b) Capitalized terms used in the Plan shall have their meaning as defined
in the Plan unless the context clearly indicates to the contrary.

(d) Use of the words "hereof", "herein", "hereunder" or similar compounds
of the word "here" shall mean and refer to the entire Plan unless the
context clearly indicates to the contrary.

(e) The provisions of the Plan shall be construed as a whole in such
manner as to carry out the provisions thereof and shall not be
construed separately without relation to the context.

ARTICLE II
DEFINITIONS

Sec. 2.1 BENEFICIARY. "Beneficiary" means the person or persons
designated as such in accordance with Article VI.

Sec. 2.2 BENEFIT DEFERRAL PERIOD. "Benefit Deferral Period" means that
period of one Plan Year as determined pursuant to Article IV over which a
Participant defers a portion of such Participant's Earnings.

Sec. 2.3 BOARD. "Board" means the board of directors of the Company, and
includes any committee thereof authorized to act for said board of directors.

Sec. 2.4 CREDITING RATE ALTERNATIVE. "Crediting Rate Alternative" means
the S&P Crediting Rate or the Variable Interest Crediting Rate.

<PAGE>

Sec. 2.5 CUMULATIVE DEFERRAL AMOUNT. "Cumulative Deferral Amount" means
the total cumulative amount by which a Participant's Earnings must be reduced
over the period prescribed in Section 4.1.

Sec. 2.6 DEFERRAL ACCOUNT. "Deferral Account" means the accounts
maintained on the books of account of the Company pursuant to Section 4.2.

Sec. 2.7 DIRECTOR. "Director" means any person who is a director of the
Company or another Participating Employer but is not an Employee of a
Participating Employer.

Sec. 2.8 EARNINGS. "Earnings" means the total fees paid to a Participant
for service on the Board (or any committee thereof) or a board of a
Participating Employer.

Sec. 2.9 EMPLOYEE. "Employee" means any person employed by a
Participating Employer.

Sec. 2.10 ENHANCEMENT. "Enhancement" means an additional .1667% per month
added to the S&P Crediting Rate and the Variable Interest Crediting Rate.

Sec. 2.11 ENROLLMENT AGREEMENT. "Enrollment Agreement" means the written
agreement entered into by the Company and a Director pursuant to which the
Director becomes a Participant in the Plan. In the sole discretion of the
Company, authorization forms filed by any Participant by which the Participant
makes the elections provided for by this Plan may be treated as a completed and
fully executed Enrollment Agreement for all purposes under the Plan.

Sec. 2.12 PARTICIPANT. "Participant" means an eligible Director who has
filed a completed and executed Enrollment Agreement or authorization form with
the Company and is participating in the Plan in accordance with the provisions
of Article IV.

Sec. 2.13 PERSON. "Person" means an individual, partnership, corporation,
estate, trust, or other entity.

Sec. 2.14 PLAN YEAR. "Plan Year" means the period commencing with the
Effective Date and ending December 31, 1997 and each subsequent calendar year.

Sec. 2.15 RETIREMENT. "Retirement" shall mean when the Director ceases to
be a director of all Participating Employers.

Sec. 2.16 S&P CREDITING RATE. "S&P Crediting Rate" means the earnings or
losses for a month on the S&P Index Fund of the SRSP, or if such Index Fund
ceases to exist, such other index as selected by the Board as most closely
replicates the measure produced by the S&P Index Fund of the SRSP.

<PAGE>

Sec. 2.17 SRSP. SRSP is the Dayton Hudson Corporation Supplemental
Retirement, Savings, and Employee Stock Ownership Plan.

Sec. 2.18 VARIABLE INTEREST CREDITING RATE. "Variable Interest Crediting
Rate" means the earnings or losses for a month on the Variable Interest Fund of
the SRSP, or if such fund ceases to exist, such other index as selected by the
Board as most closely replicates the measure produced by the Variable Interest
Fund of the SRSP.

ARTICLE III
ELIGIBILITY

Sec. 3.1 ELIGIBILITY. A Director shall be a Participant while, and only
while, he or she is a director of a Participating Employer, subject to the
following:

(a) The Director must sign an enrollment and insurance consent form, in
the form that the Company determines in order to defer Earnings. The
insurance consent form will allow Company to purchase life insurance
on the Director with the Company as beneficiary.

Sec. 3.2 NO GUARANTEE OF CONTINUED DIRECTORSHIP. Participation in the
Plan does not constitute a guarantee or contract with any Participating Employer
guaranteeing that the Director will continue to be a director. Such
participation shall in no way interfere with any rights the shareholders of a
Participating Employer would have in the absence of such participation to
determine the duration of the director's service.

ARTICLE IV
PARTICIPATION AND BENEFITS

Sec. 4.1 ELECTION TO PARTICIPATE. Any Director of a Participating
Employer who is eligible to participate may enroll in the Plan by filing a
completed and fully executed Enrollment Agreement or authorization form with the
Company. Pursuant to said Enrollment Agreement or authorization form, the
Director shall irrevocably designate a dollar amount by which the Earnings of
such Participant would be reduced over the Benefit Deferral Period next
following the execution of the Enrollment Agreement, provided, however, that:

(a) MINIMUM DEFERRAL. The reduction of Earnings for any Plan Year shall
not be less than Five Thousand Dollars ($5,000.00).

<PAGE>

(b) REDUCTION IN EARNINGS. Except as otherwise provided in this Section
4.1, the Earnings of the Participant for the Benefit Deferral Period
shall be reduced by the amount specified in the Enrollment Agreement
(including any authorization form) applicable to such Plan Year.

(c) MAXIMUM REDUCTION IN EARNINGS. A Participant may not elect a
Cumulative Deferral Amount that would cause the reduction in Earnings
to exceed one hundred percent (100%) of Earnings payable during such
Plan Year. In the event that a Participant elects a Cumulative
Deferral Amount that would violate the limitation described in this
paragraph (c), the election shall be valid except that the Cumulative
Deferral Amount so elected shall automatically be reduced to comply
with such limitation.

Sec. 4.2 DEFERRAL ACCOUNTS. The Company shall establish and maintain
separate Deferral Accounts for each Participant. The amount by which a
Participant's Earnings are reduced pursuant to Section 4.1 shall be credited by
the Company to the Participant's Deferral Accounts at the end of the month in
which such Earnings would otherwise have been paid. Such Deferral Accounts
shall be debited by the amount of any payments made by the Company to the
Participant or the Participant's Beneficiary pursuant to this Plan. A separate
Deferral Account shall be maintained for each type of deferral election made and
for each Crediting Rate Alternative.

Sec. 4.3 CREDITING RATE ALTERNATIVES. The Participant shall select the
Crediting Rate Alternatives, using full percentages, that are to be applied to
his or her Deferral Accounts. Participants may change their Crediting Rate
Alternatives quarterly (January, April, July or October) by completing a Rate of
Return Alternative Change Form. The Change Form must be received by the
Compensation Department of the Company at least fifteen days and not more than
forty days before the beginning of the applicable quarter. If a Participant
does not make an election, the Crediting Rate Alternative will be the S&P
Crediting Rate.

Sec. 4.4 BENEFIT PAYMENT ELECTIONS. At the time a Participant executes an
Enrollment Agreement, he or she must also elect the method of benefit payment
and the time to start the benefit. The elections are to be made for each Plan
Year.

(a) METHOD OF BENEFIT PAYMENT. Benefits for each Plan Year can be paid in
a lump sum, five annual installments or ten annual installments.

(b) COMMENCEMENT OF BENEFIT. The benefit for each Plan Year may be
started as soon as possible following Retirement or one year following
Retirement.

Sec. 4.5 CREDITING. Each Deferral Account will be credited at the end of
a month at the following rates on the balance in the Deferral Account on the
first day of the month.

<PAGE>

(a) DIRECTOR. Each Deferral Account of Director will be credited using
the Crediting Rate Alternative plus the Enhancement.

(b) FORMER DIRECTOR. Each Deferral Account of a Director who has had a
Retirement will be credited using the Crediting Rate Alternative.

Sec. 4.6 STATEMENT OF ACCOUNTS. The Company shall submit to each
Participant, within one hundred twenty days after the close of each Plan Year, a
statement in such form as the Company deems desirable, setting forth the balance
standing to the credit of each Participant in his Deferral Accounts.

ARTICLE V
CERTAIN BENEFIT PAYMENTS

Sec. 5.1 TERMINATION OF ENROLLMENT IN PLAN. With the written consent of
the Company, a Participant may terminate his or her enrollment in the Plan by
filing with the Company a written request to terminate enrollment. The Company
will consent to the termination of a Participant's enrollment in the Plan in the
event of an unforeseeable financial emergency of the Participant. An
unforeseeable financial emergency shall mean an unexpected need for cash arising
from an illness, casualty loss, sudden financial reversal or other such
unforeseeable occurrence. Cash needs arising from foreseeable events such as
the purchase of a house or education expenses for children shall not be
considered to be the result of an unforeseeable financial emergency. Upon
termination of enrollment, no further reductions shall be made in the
Participant's Earnings pursuant to his or her Enrollment Agreement, and the
Participant shall immediately cease to be eligible for any benefits under the
Plan other than payments from his or her Deferral Accounts. In its sole
discretion, the Committee may pay the Deferral Accounts on a date earlier than
the Participant's Retirement with the Participating Employer, in which event the
amounts shall be calculated as if the Participant had a Retirement with the
Participating Employer on the date of such payment. Following termination of
enrollment in the Plan, a Participant's Deferral Account shall be credited at
the Crediting Rate Alternative with no Enhancement.

Sec. 5.2 SURVIVOR BENEFITS

(a) DEATH WHILE EMPLOYED. If a Participant dies while a Director of a
Participating Employer, the Company will pay the amount in his or her
Deferral Accounts to the Participant's Beneficiary as soon as possible
after death in a lump sum.

(b) DEATH AFTER RETIREMENT. If a Participant dies after Retirement, and
has not received all of his or her payments, and the Participant's
Beneficiary is his or her spouse, payments shall be made to the spouse
pursuant to the Participant's payout elections. If the Participant's
spouse dies before receiving all payments, the remaining amount

<PAGE>

in the Deferral Accounts will be paid in a lump sum as soon as
possible after the spouse's death to the spouse's estate. If a
Participant dies after Retirement, has not received all of his or her
payments, and the Participant's Beneficiary is a Person other than his
or her spouse, then payment shall be made in a lump sum as soon as
possible after the Participant's death.

Sec. 5.5 LUMP SUM PAYOUT OPTION. Notwithstanding any other provisions of
the Plan, at any time after Retirement, but not later than ten years after
Retirement of the Participant, a Participant or a Beneficiary of a deceased
Participant may elect to receive an immediate lump sum payment of 100% of the
balance of his or her Deferral Accounts, if any, reduced by a penalty, which
shall be forfeited to the Company, equal to eight percent of the amount of his
or her Deferral Accounts he or she elected to receive, in lieu of payments in
accordance with the form previously elected by the Participant, or provided
elsewhere in this Plan. However, the penalty shall not apply if the Company
determines, based on advice of counsel or a final determination by the Internal
Revenue Service or any court of competent jurisdiction, that by reason of the
foregoing provision any Participant or Beneficiary has recognized or will
recognize gross income for federal income tax purposes under this Plan in
advance of payment to him of Plan benefits. The Company shall notify all
Participants (and Beneficiaries of deceased Participants) of any such
determination. Whenever any such determination is made, the Company shall
refund all penalties which were imposed hereunder on account of making lump sum
payments at any time during or after the first year to which such determination
applies (i.e., the first year when gross income is recognized for federal income
tax purposes). Interest shall be paid on any such refunds at the Variable
Interest Crediting Rate for each Plan Year, compounded annually. The Committee
may also reduce or eliminate the penalty if it determines that this action will
not cause any Participant or Beneficiary to recognize gross income for federal
income tax purposes under this Plan in advance of payment to him of Plan
benefits.

ARTICLE VI
BENEFICIARY DESIGNATION

Each Participant shall have the right, at any time, to designate any person
or persons as Beneficiary or Beneficiaries to whom payment under this Plan shall
be made in the event of the

<PAGE>

Participant's death prior to complete distribution to the Participant of the
benefits due under the Plan. Each Beneficiary designation shall be come
effective only when filed in writing with the Company during the Participant's
lifetime on a form prescribed by the Company.

ARTICLE VII
ADMINISTRATION OF PLAN

Sec. 7.1 ADMINISTRATION BY COMPANY. The Company is the "administrator" of
the Plan. Except as expressly otherwise provided herein, the Company shall
control and manage the operation and administration of the Plan, make all
decisions and determinations incident thereto, and construe the provisions
thereof. In carrying out its Plan responsibilities, the Company shall have
discretionary authority to construe the terms of the Plan. Except in cases
where the Plan expressly requires action on behalf of the Company to be taken by
the Board, action on behalf of the Company may be taken by any of the following:

(a) The Board.

(b) The Chief Executive Officer of the Company.

<PAGE>

Sec. 7.2 CERTAIN FIDUCIARY PROVISIONS. For purposes of the Plan:

(a) Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan.

Sec. 7.4 RECORDS. Each Participating Employer, each fiduciary with
respect to the Plan, and each other person performing any functions in the
operation or administration of the Plan shall keep such records as may be
necessary or appropriate in the discharge of their respective functions
hereunder, including records required by applicable law. Records shall be
retained as long as necessary for the proper administration of the Plan and at
least for any period required by applicable law.

Sec. 7.6 WAIVER OF NOTICE. Any notice required hereunder may be waived by
the person entitled thereto.

<PAGE>

ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN

Sec. 8.1 AMENDMENT. The Board may at any time amend the Plan , in whole
or in part for any reason, including but not limited to tax, accounting or
insurance changes, a result of which may be to terminate the Plan for future
deferrals; provided, however, that no amendment shall be effective to decrease
the benefits, nature or timing thereof payable under the Plan to any Participant
with respect to deferrals made (and benefits thereafter accruing) prior to the
date of such amendment. Written notice of any amendment shall be given each
Participant then participating in the Plan.

Sec. 8.2 AUTOMATIC TERMINATION OF PLAN. The Plan shall terminate only
under the following circumstances. The Plan shall automatically terminate upon
a determination by the Company that a final decision of a court of competent
jurisdiction has declared that the Participants under the Plan are in
constructive receipt under the Internal Revenue Code of their vested Plan
benefits.

<PAGE>

ARTICLE IX
MISCELLANEOUS

Sec. 9.2 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to sell, assign, transfer, pledge, anticipate, mortgage,
commute or otherwise encumber, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof, or interest
therein which are, and all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of any
debts, judgements, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency

Sec. 9.3 PROTECTIVE PROVISIONS. Each Participant shall cooperate with the
Company by furnishing any and all information requested by the Company in order
to facilitate the payment of benefits hereunder, taking such physical
examinations as the Company may deem necessary and taking such other relevant
action as may be requested by the Company. If a Participant refuses so to
cooperate, the Company shall have no further obligation to the Participant under
the Plan, other than payment to such participant of the cumulative reductions in
Earnings theretofore made pursuant to this Plan. If a Participant commits
suicide during the two (2) year period beginning on the later of (a) the date of
adoption of this Plan or (b) the first day of the first Plan Year of such
Participant's participation in the Plan, or if the Participant makes any
material misstatement of information or nondisclosure of medical history, then
no benefits will be payable hereunder to such Participant or his Beneficiary,
other than payment to such Participant of the cumulative reductions in Earnings
theretofore made pursuant to this Plan, provided, that in the Company's sole
discretion, benefits may be payable in an amount reduced to compensate the
Company for any loss, cost, damage or expense suffered or incurred by the
Company as a result in any way of such misstatement or nondisclosure.

<PAGE>

Sec. 9.6 APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Minnesota as applied to contracts
executed and to be wholly performed in such state.

<PAGE>
EXHIBIT (11)
DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF PER SHARE EARNINGS
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
FEBRUARY 1, 1997 February 3, 1996 January 28, 1995
------------------- ------------------- -------------------
EARNINGS SHARES Earnings Shares Earnings Shares
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Primary Computations
- ---------------------
Earnings before extraordinary charge . . . . . . . . . . . $ 474 $ 311 $ 434
Extraordinary charge, net of tax . . . . . . . . . . . . . (11) 0 0
------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . 463 311 434
Less: Dividend requirements on ESOP
preferred shares, net of tax benefit on
unallocated shares . . . . . . . . . . . . . . . . . . . (20) (20) (19)
------- ------- -------
Adjusted net earnings. . . . . . . . . . . . . . . . . . . $ 443 $ 291 $ 415
------- ------- -------
------- ------- -------
Average common shares outstanding. . . . . . . . . . . . . 216.7 215.5 214.8
Average number of common share equivalents:
Stock options. . . . . . . . . . . . . . . . . . . . . . 1.2 0.4 0.6
Performance shares . . . . . . . . . . . . . . . . . . . 0.8 0.9 0.6
------- ------- -------
Adjusted common equivalent shares
outstanding-primary. . . . . . . . . . . . . . . . . . . 218.7 216.8 216.0
------- ------- -------
------- ------- -------
Primary earnings per share before
extraordinary charge . . . . . . . . . . . . . . . . . . $ 2.07 $ 1.34 $ 1.92
Extraordinary Charge . . . . . . . . . . . . . . . . . . . (0.05) 0.00 0.00
------- ------- -------
PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . . $ 2.02 $ 1.34 $ 1.92
------- ------- -------
------- ------- -------
Fully Diluted Computations
- --------------------------
Earnings before extraordinary charge . . . . . . . . . . . $ 474 $ 311 $ 434
Extraordinary charge, net of tax . . . . . . . . . . . . . (11) 0 0
------- ------- -------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . 463 311 434
Less: Earnings impact of assumed ESOP
preferred share conversion, net of tax benefit
on unallocated shares. . . . . . . . . . . . . . . . . . (14) (14) (13)
------- ------- -------
Adjusted net earnings. . . . . . . . . . . . . . . . . . . $ 449 $ 297 $ 421
------- ------- -------
------- ------- -------
Average common and common equivalent
shares-primary . . . . . . . . . . . . . . . . . . . . . 218.7 216.8 216.0
Additional common share equivalents attributable to
application of the treasury stock method . . . . . . . . 0.2 0.1 0.3
Assumed conversion of ESOP preferred shares. . . . . . . . 11.7 12.3 12.6
------- ------- -------
Adjusted common equivalent shares
outstanding-fully diluted. . . . . . . . . . . . . . . . 230.6 229.2 228.9
------- ------- -------
------- ------- -------
Fully diluted earnings per share before extraordinary
charge . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.00 $ 1.30 $ 1.84
Extraordinary Charge . . . . . . . . . . . . . . . . . . . (0.05) 0.00 0.00
------- ------- -------
FULLY DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . $ 1.95 $ 1.30 $ 1.84
------- ------- -------
------- ------- -------
</TABLE>

<PAGE>

EXHIBIT (12)

DAYTON HUDSON CORPORATION AND SUBSIDIARIES
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES AND
RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

(Millions of Dollars)

<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
Feb.1, Feb.3, Jan. 28, Jan. 29, Jan. 30,
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:

Earnings:
Consolidated net earnings before
extraordinary charge. . . . . . . . . . $ 474 $ 311 $ 434 $ 375 $ 383
Income taxes. . . . . . . . . . . . . . . . 309 190 280 232 228
---------- ---------- ---------- ---------- ----------
Total earnings before extraordinary
charge . . . . . . . . . . . . . . . 783 501 714 607 611
---------- ---------- ---------- ---------- ----------

Fixed charges:
Interest expense. . . . . . . . . . . . . . 464 461 439 459 454
Interest portion of rental expense. . . . . 59 59 56 45 43
---------- ---------- ---------- ---------- ----------
Total fixed charges. . . . . . . . . . . 523 520 495 504 497
---------- ---------- ---------- ---------- ----------

Less:
Capitalized interest. . . . . . . . . . . . (16) (14) (7) (5) (6)
---------- ---------- ---------- ---------- ----------

Fixed charges in earnings. . . . . . . . 507 506 488 499 491
---------- ---------- ---------- ---------- ----------

Earnings available for fixed charges . . . . $ 1,290 $ 1,007 $ 1,202 $ 1,106 $ 1,102
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Ratio of earnings before extraordinary
charge to fixed charges. . . . . . . . . 2.46 1.94 2.43 2.19 2.22
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends:

Total fixed charges, as above. . . . . . . . $ 523 $ 520 $ 495 $ 504 $ 497
Dividends on preferred stock
(pre-tax basis). . . . . . . . . . . . . 37 37 39 39 39
---------- ---------- ---------- ---------- ----------
Total fixed charges and preferred
stock dividends. . . . . . . . . . . . . 560 557 534 543 536
---------- ---------- ---------- ---------- ----------

Earnings available for fixed charges
and preferred stock dividends. . . . . . $ 1,290 $ 1,007 $ 1,202 $ 1,106 $ 1,102
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Ratio of earnings before extraordinary
charge to fixed charges and preferred
stock dividends. . . . . . . . . . . . . 2.30 1.81 2.25 2.04 2.06
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

</TABLE>

<PAGE>

Exhibit 13

MEASURING OUR PERFORMANCE 1996 RESULTS

TARGET

(in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Revenues $ 17,853 $ 15,807 $ 13,600
- --------------------------------------------------------------------------------
Operating $ 1,042 $ 719 $ 732
Profit
- --------------------------------------------------------------------------------
Stores 736 670 611
- --------------------------------------------------------------------------------
Retail
Square 79,360 71,108 64,446
Feet*

* In thousands, reflects total square feet, less office, warehouse and vacant
space.

TARGET LOCATIONS (at year end)

Retail Sq Ft. No. of
in Thousands Stores

AL 117 1
AZ 2,453 23
AR 186 2
CA 14,530 133
CO 2,334 22
FL 6,605 60
GA 2,439 23
ID 309 3
IA 1,760 17
IL 5,245 46
IN 2,858 31
KS 738 7
KY 800 8
LA 203 2
MD 1,421 12
MI 4,780 45
MN 4,879 42
MS 116 1
MO 1,368 13
MT 299 3
NE 1,074 9
NV 841 8
NM 490 5
NY 473 4
NC 1,530 15
ND 424 4
OH 2,004 18
OK 791 8
OR 1,157 11
SC 393 4
SD 391 4
TN 1,830 18
TX 8,356 78
UT 534 3
VA 1,053 9
WA 2,307 22
WI 2,090 20
WY 182 2

TOTAL 79,360 736

MAJOR MARKETS

Greater Los Angeles 68
Chicago 31
Minneapolis/St. Paul 30
San Francisco Bay Area 25
Detroit 23
Dallas/Ft. Worth 21
Houston 21
Atlanta 20
Greater Miami 18
Denver/Boulder 15
Phoenix 15
San Diego 12
Seattle/Tacoma 12
Indianapolis 11
St. Louis 11
Tampa/St. Petersburg 11
Greater Cleveland 9
Milwaukee 8
Washington, D.C. 8
Baltimore 7

EMPLOYEES: 149,000

MERVYN'S

(in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Revenues $ 4,369 $ 4,516 $ 4,561
- --------------------------------------------------------------------------------
Operating $ 153 ** $ 100 $ 206
Profit
- --------------------------------------------------------------------------------
Stores 300 295 286
- --------------------------------------------------------------------------------
Retail
Square 24,518 24,113 23,130
Feet*

** Net of a real estate repositioning charge of $114 million at Mervyn's and
$20 million at DSD

MERVYN'S LOCATIONS (at year end)

Retail Sq. Ft. No. of
in Thousands Stores
AZ 1,208 15
CA 9,949 128
CO 936 12
FL 1,611 18
GA 555 7
ID 83 1
LA 538 7
MI 1,176 15
MN 1,050 8
NV 499 7
NM 266 3
OK 270 3
OR 551 7
TX 3,637 45
UT 760 8
WA 1,429 16

TOTAL 24,518 300

MAJOR MARKETS

Greater Los Angeles 51
San Francisco Bay Area 29
Dallas/Ft. Worth 13
San Diego 12
Houston 11
Phoenix 11
Detroit 9
Seattle/Tacoma 9
Minneapolis/St. Paul 8
Greater Salt Lake City 8
Denver 7

EMPLOYEES: 32,000

DEPARTMENT STORES

(in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
Revenues $ 3,149 $ 3,193 $ 3,150
- --------------------------------------------------------------------------------
Operating $ 108 ** $ 184 $ 270
Profit
- --------------------------------------------------------------------------------
Stores 65 64 63
- --------------------------------------------------------------------------------
Retail
Square 14,111 13,870 13,587
Feet*

Retail Sq. Ft. No. of
in Thousands Stores
Dayton's
MN 3,072 13
ND 297 3
SD 102 1
WI 373 3

Hudson's
IN 246 2
MI 4,516 19
OH 187 1

Marshall Field's
IL 4,289 18
OH 204 1
TX 155 1
WI 670 3

TOTAL
DSD 14,111 65

MAJOR MARKETS

Chicago 17
Minneapolis/St. Paul 11
Detroit 10

EMPLOYEES: 37,000

TOTAL STORES: 1,101
TOTAL RETAIL SQUARE FEET: 117,989,000

14 DAYTON HUDSON CORPORATION

<PAGE>

ANALYSIS OF OPERATIONS

Our net earnings were $463 million in 1996, compared with $311 million in 1995
and $434 million in 1994. Earnings per share were $1.95 in 1996, $1.30 in 1995
and $1.84 in 1994. (References to earnings per share relate to fully diluted
earnings per share.) In 1996, earnings were reduced by two unusual items, a real
estate repositioning charge of $.35 per share and an extraordinary charge for
the purchase and redemption of debt of $.05 per share.

Operating profit in 1996 improved 30 percent to $1,303 million in 1996,
compared with $1,003 million in 1995 and $1,208 million in 1994. Operating
profit is last-in, first-out (LIFO) earnings from operations before corporate
expense, interest and income taxes. Target and Mervyn's operating profit
improved 45 percent and 53 percent, respectively, compared with the prior year,
while the Department Store Division (DSD) reported a decline of 41 percent.
Mervyn's and DSD's 1996 operating profit results include real estate
repositioning charges of $114 million and $20 million, respectively.

We undertook several strategic initiatives that improved overall
profitability in 1996. Continued growth in profitability is expected in 1997,
particularly early in the year:

- - TARGET attained record levels of operating margin (operating profit as a
percentage of revenues) through strong sales momentum, improvement in its gross
margin rate and significant operating expense savings related to a broad-based
productivity improvement program. Target expects continued mid-single digit
comparable-sales increases combined with further expense savings initiatives to
generate continued operating profit growth in 1997.

- - MERVYN'S operating profit improved by $167 million in 1996 before the real
estate repositioning charge of $114 million, through a combination of
substantial expense reduction efforts and gross margin improvement. Mervyn's
focus in 1997 will be on producing positive comparable-store sales growth for
the year and continuing to improve its overall financial performance. We expect
operating profit at Mervyn's to be up only modestly from 1996 results before the
real estate charge, through continued gross margin expansion partially offset by
the lost profit from 25 to 35 fewer stores.

- - DSD's sales and operating profit were lower in 1996 than 1995 due to sales
declines and an unfavorable expense rate. DSD's 1996 results reflect the
transition to its new strategy which includes substantially fewer storewide
promotional events, a greater emphasis on better and more unique merchandise
assortments and improved guest service. As a result of this strategy, DSD
expects positive comparable-store sales growth combined with a significant
expense reduction program to produce substantial growth in 1997 operating
profit.

REAL ESTATE REPOSITIONING CHARGE

As a result of actions and decisions made in fourth quarter 1996, we recorded a
pre-tax charge of $134 million, $81 million after-tax, for the real estate
repositioning at Mervyn's and DSD to strengthen competitive positions and
achieve improved long-term results. The charge includes $114 million for
Mervyn's to sell or close its 25 stores in Florida and Georgia and approximately
10 other underperforming stores throughout the chain. Also included is a net
charge of $20 million for DSD's disposition of its four Texas stores and the
sale or closure of two other stores.

In fourth quarter 1996, DSD sold three of its four Texas stores. In first
quarter 1997, Mervyn's exited the Florida and Georgia markets and DSD closed one
store. All remaining properties are expected to be sold or closed within
approximately 12 to 18 months.

Real estate repositioning actions at Mervyn's will reduce annualized
revenue and operating profit by approximately $375 million and $15 million,
respectively. At DSD, annualized revenues and operating profit will be reduced
by approximately $130 million and $15 million, respectively.

15 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

ANALYSIS OF OPERATIONS

EARNINGS PER SHARE

The following earnings per share variance analysis and associated discussion
represent management's view of the business and, in certain respects, differ
from the classifications used in the Consolidated Results of Operations. In both
cases, revenues include sales, as well as finance charges, late fees and other
revenues. The gross margin rate, as shown in the table below and as further
discussed, includes cost of retail sales and excludes buying and occupancy
costs. The operating expense rate, in the table and as further discussed,
includes selling, publicity and administrative expenses (excluding start-up and
corporate and other expenses), depreciation and amortization, taxes other than
income taxes and buying and occupancy costs. Start-up expenses, disclosed and
further discussed separately, are costs associated primarily with opening new
stores and distribution centers, and remodeling existing stores. Corporate and
other expense includes corporate headquarters expense, corporate charitable
contributions that support our annual giving program of five percent of federal
taxable income and a variety of other items.

Strong sales growth at Target, our lowest gross margin and expense rate
division, continues to impact our business mix. As a result, our overall revenue
growth and operating expense rate were favorably affected, while the total gross
margin rate was unfavorably affected. If the revenue mix had remained constant
with 1995, the gross margin rate variance would have been $.14 more favorable
and the operating expense rate variance would have been $.21 less favorable.
Looking forward, Target is expected to continue to have an increasing impact on
our overall gross margin and expense rate structure reflecting our strategy to
grow Target more rapidly than our other divisions.

The following table illustrates the impact of the major factors causing the
change in earnings per share:

- --------------------------------------------------------------------------------
EARNINGS PER SHARE VARIANCE ANALYSIS 1996 VS. 1995 1995 vs. 1994
- --------------------------------------------------------------------------------
Prior year's earnings per share $1.30 $1.84
Change due to:
Revenues .27 .54
Gross margin rate:
FIFO .55 (.65)
LIFO provision .02 .57 (.10) (.75)
---- ----
Operating expense rate .33 (.27)
Real estate repositioning charge (.35) -
Start-up expenses - (.06)
Interest expense, net - (.04)
Corporate and other expense, net (.07) .01
Income tax rate (.05) .03
Extraordinary charge from
purchase and redemption of debt (.05) -
- --------------------------------------------------------------------------------
EARNINGS PER SHARE $1.95 $1.30
- --------------------------------------------------------------------------------

REVENUES

In 1996, our total and comparable-store revenues increased 8 percent and 3
percent, respectively. Comparable-store revenues are revenues from stores open
longer than a year. Target's 13 percent total revenue increase reflects a 6
percent comparable-store revenue increase and new store expansion. Mervyn's
total revenue decline of 3 percent resulted primarily from a 4 percent
comparable-store revenue decline, slightly offset by revenues from new stores.
DSD's total revenue declined 1 percent due to a 4 percent comparable-store
revenue decline, primarily reflecting the reduction in promotional days.
Increased finance charge and late fee revenues at all three operating divisions
also contributed to revenue growth.

We expect positive comparable-store revenue growth at all divisions in
1997. This growth is expected to result from a continuation of existing trends
at Target, an improvement of in-stock performance and other marketing
refinements at Mervyn's and the annualization of promotional calendar changes
and merchandise enhancements at DSD.

Revenue growth in 1995 reflected a combination of new and comparable-store
growth at Target as well as higher sales, finance charge and late fee revenues
due to expansion of the Target Guest Card. Mervyn's total and comparable-store
revenues declined reflecting low sales volume in the first half of the year and
the transition to the new, more-promotional strategy. DSD's comparable-store
revenues declined primarily due to reduced guest response to promotional events.

The impact of inflation on our consolidated operations was minimal and,
as a result, the overall comparable-store revenue increase closely
approximates real growth.

- --------------------------------------------------------------------------------
REVENUE GROWTH (52-week basis) 1996 1995
- --------------------------------------------------------------------------------
ALL COMP. All Comp.
STORES STORES Stores Stores
- --------------------------------------------------------------------------------
Target 13% 6% 15% 6%
Mervyn's (3) (4) (2) (4)
DSD (1) (4) - (1)
- --------------------------------------------------------------------------------
Total 8% 3% 9% 3%
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
REVENUES PER SQUARE FOOT* (52-week basis)
(Dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
Target $235 $230 $222
Mervyn's 179 190 200
DSD 223 230 232
- --------------------------------------------------------------------------------
* Thirteen-month average retail square feet.

16 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

ANALYSIS OF OPERATIONS

GROSS MARGIN RATE

In 1996, strong gross margin rate improvement at Target and Mervyn's, offset
somewhat by a slight deterioration at DSD, resulted in an overall gross margin
rate improvement. This improvement was partially offset by the effect of
Target's larger growth and lower gross margin rate structure.

- - TARGET'S strong gross margin improvement resulted from favorable markup and
very favorable promotional markdowns. Target's 1997 gross margin rate may be
adversely affected by cycling against the unusually favorable markdown
experience in 1996.

- - MERVYN'S gross margin rate improved substantially for the year, reflecting
improved markup and significantly lower markdowns. In 1997, we expect modest
improvement in Mervyn's gross margin rate.

- - DSD'S gross margin rate declined slightly in 1996. Higher clearance
markdowns were partially offset by improved markup and lower promotional
markdowns. In 1997, we anticipate a somewhat improved gross margin rate,
principally due to lower clearance markdowns.

The 1995 gross margin rate declined at all three operating divisions from
1994. Target's gross margin rate decrease reflected the strength of the
low-margin commodity businesses in the fourth quarter and a highly competitive
pricing environment. Mervyn's gross margin rate decline reflected significantly
higher promotional markdowns without offsetting markup improvement during the
first half of 1995. DSD's significant gross margin rate decrease was caused by
substantially higher clearance markdowns and the year-over-year increase in the
LIFO provision, partially offset by improved markup.

The LIFO provision was as follows:

- --------------------------------------------------------------------------------
LIFO PROVISION: (EXPENSE)/CREDIT
(Millions of Dollars, except Per Share Data) 1996 1995 1994
- --------------------------------------------------------------------------------
Target $ - $ - $ -
Mervyn's 5 (12) 8
DSD (14) (5) 11
- --------------------------------------------------------------------------------
Total $ (9) $ (17) $ 19
- --------------------------------------------------------------------------------
Per Share $(.02) $(.05) $.05
- --------------------------------------------------------------------------------

The LIFO provision is calculated based on inventory levels, markup rates and
internally generated retail price indices. In 1996, the LIFO credit at Mervyn's
resulted principally from higher markup and lower inventory levels while the
LIFO charge at DSD resulted primarily from exiting the electronics business and
the disposition of the Texas stores. The 1995 LIFO charge reflected retail price
inflation, particularly associated with Mervyn's change to a more promotional
strategy, partially offset by higher markup rates.

OPERATING EXPENSE RATE

The overall operating expense rate improved in 1996, due to significant cost
reductions at Mervyn's and Target and the favorable effect of Target's
increasing impact on the overall expense rate structure. In 1997, we expect
additional operating expense rate improvement, particularly at Target and DSD.

- - TARGET'S operating expense rate improved in 1996, reflecting savings of
approximately $60 million in the first year of a three-year program to eliminate
at least $200 million from operating expenses by improving store productivity
and reducing headquarters and marketing costs. In 1997, we expect to eliminate
a similar amount.

- - MERVYN'S operating expense rate improved significantly in 1996, as a result
of more than $100 million in savings realized through an extensive expense
reduction program, particularly in the areas of stores and marketing. Although
expense control remains a priority in 1997, no new major expense reduction
initiatives are planned.

- - DSD'S operating expense rate rose in 1996 principally as a result of
unfavorable sales leverage. In 1997, DSD will implement a significant expense
reduction program to eliminate $50 million or more in costs.

The 1995 operating expense rate increased over 1994 at all three operating
divisions. Mervyn's and DSD experienced lower sales leveraging and higher
marketing and other costs. Target's operating expense rate increase resulted
principally from higher store expenses associated with starting wage-rate
increases.

17 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

ANALYSIS OF OPERATIONS

START-UP EXPENSES

Start-up expenses were essentially flat in 1996. Increased spending at Target
due to its entrance into more expensive markets in the mid-Atlantic and
Northeast was offset by savings from fewer Mervyn's store openings in 1996. We
opened 75 new stores in 1996 compared with 76 stores in 1995 and 69 stores in
1994. Start-up expenses are generally recognized evenly throughout the year in
which the expenses are incurred.

INTEREST EXPENSE

In 1996, interest expense was equal to 1995 as higher average debt balances were
offset by a lower average portfolio rate. Interest expense in 1995 increased $16
million over 1994 as higher average debt balances were only partially offset by
a lower portfolio interest rate. Interest expense in 1997 is expected
to be similar to 1996.

During 1996, we repurchased $325 million of sinking fund debentures for
$340 million, resulting in an extraordinary charge of $.05 per share. As a
result of these transactions, future annual interest expense is expected to be
reduced by approximately $.03 per share over the period of time the debentures
would have otherwise remained outstanding.

INCOME TAX RATE

The effective tax rates were 39.5 percent, 38.0 percent and 39.2 percent in
1996, 1995 and 1994, respectively. The 1996 effective tax rate reflects a more
normalized rate, while lower earnings in 1995 caused permanent differences to
have a greater impact. Our 1997 tax rate is expected to approximate
the 1996 rate.

FOURTH QUARTER RESULTS

Due to the seasonal nature of the retail industry, fourth quarter operating
results represent a substantially larger share of the total year earnings due to
the inclusion of the holiday shopping season.

Fourth quarter 1996 net earnings were $214 million, compared with $228
million in 1995. The fourth quarter earnings comparison was unfavorably affected
by the real estate repositioning charge previously discussed. Earnings per share
were $.91 for the quarter, compared with $.98 last year.

- - TARGET'S operating profit increased 26 percent over fourth quarter 1995,
reflecting a 7 percent total revenue increase and an improved gross margin rate,
offset by a slightly higher operating expense rate. Comparable-store revenues
increased 3 percent. The gross margin rate improvement was driven by improved
markup. The operating expense rate increased slightly due in part to lower sales
leveraging in a shortened holiday selling season and higher advertising
expenditures.

- - MERVYN'S operating profit increased $46 million before the $114 million
real estate charge. Total revenues for the quarter declined 9 percent and
comparable-store revenues decreased 7 percent. The gross margin rate was
substantially better than last year primarily due to significantly lower
markdowns and slightly higher markup. The operating expense rate deteriorated
slightly as expense reductions were offset by lower sales leverage and higher
bad debt expense.

- - DSD's fourth quarter operating profit declined $47 million, partially due
to the real estate repositioning charge of $20 million. Total revenues decreased
4 percent and comparable-store revenues were down 5 percent. The gross margin
rate improved reflecting lower promotional markdowns and higher markup,
principally offset by costs associated with exiting the Texas market. DSD's
operating expense rate was substantially higher due to lower sales leverage and
higher bad debt expense.

18 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

ANALYSIS OF FINANCIAL CONDITION

Our financial condition remains strong. Cash flow from operations was $1,458
million, driven by earnings growth, excellent inventory control and improved
accounts payable leveraging. Internally generated funds continue to be the most
important component of our capital resources and, along with our ability
to access a variety of financial markets, provide funding for our expansion
plans. Our strong cash flow from operations in 1996 allowed us to reduce total
debt by $100 million. In 1997, we expect cash flow to remain strong.

During 1996, accounts receivable increased 14 percent, or $210 million,
principally due to the expansion of the Guest Card, Target's proprietary credit
card. In 1997, we expect to continue the growth of the Target Guest Card, which
will benefit sales, accounts receivable and credit profitability.

A strong inventory/accounts payable equation generated $268 million in cash
flow for the Corporation in 1996. Inventory levels increased only $13 million,
reflecting tight inventory control at all three divisions, offset by new store
growth at Target, while accounts payable grew by $281 million over last year.

Capital expenditures in 1996 were $1,301 million, compared with $1,522
million in 1995.Target's growth in store count and square footage was
essentially the same in both years, while the reduction in capital expenditures
was principally due to Mervyn's 1995 entry into the Minneapolis market.
Investment in Target comprised 81 percent of 1996 capital expenditures, while 6
percent and 13 percent were made by Mervyn's and DSD, respectively. Net property
and equipment increased $173 million, reflecting capital invested offset by
depreciation and the effect of real estate repositioning. During 1996, Target
added 66 net new stores, Mervyn's opened five new stores and DSD opened four new
stores. Approximately 71 percent of total capital expenditures was for new
stores. Other investments were for distribution, information systems and other
infrastructure to support our growth. Over the past five years, Target's square
footage has grown at a compound annual rate of approximately 10 percent, and
this growth rate is expected to continue into the foreseeable future.

Capital expenditures in 1997 are expected to approximate $1,500 million for
the construction of new stores, remodeling of existing stores and other capital
support. The majority of new store capital continues to be invested in Target.
In the upcoming year, Target plans to open approximately 65 stores in new and
existing markets and to construct two new distribution centers. Expansion plans
for Target in 1997 include new stores in California, New York, New Jersey, North
Carolina and Virginia. Mervyn's will open one new store and DSD plans to open
two new stores, all in existing markets.

The Corporation's financing strategy is to ensure liquidity and access to
capital markets, to manage the amount of floating rate debt and to maintain a
balanced spectrum of debt maturities. Within these parameters, we seek to
minimize our cost of borrowing. The average rate on our financings, including
the sale of securitized accounts receivable, decreased to 8.3 percent in 1996
from 8.5 percent in 1995. The average portfolio rate is expected to decline
further in 1997.

A key to the Corporation's liquidity and capital markets access is
maintaining strong investment-grade debt ratings. Our long-term debt ratings are
A-, Baa1 and BBB+ as rated by Duff & Phelps, Moody's and Standard & Poor's,
respectively. Those agencies rate our commercial paper as D-1-, P-2 and A-2,
respectively. These ratings were sufficient to support commercial paper levels
well in excess of our $532 million outstanding at year end. Going forward, we
expect that continued profit increases and cash flow from operations will allow
us to fund our planned capital expenditures while maintaining or improving our
debt ratings.

In addition to the unsecured debt markets, we accessed the secured debt
market in 1995 through a securitization of our accounts receivable. Accounts
receivable securitization represents an attractive alternative for financing
accounts receivable growth and other liquidity needs. In 1996, we expanded our
securitization program by issuing a $300 million, Variable Funding Certificate,
backed by credit card receivables. The outstanding certificate amount fluctuates
based on financing needs and was $100 million at year end 1996. Further
liquidity is provided by $1,600 million of committed lines of credit obtained
through a group of 28 domestic and international banks.

19 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

PERFORMANCE OBJECTIVES

SHAREHOLDER RETURN

Our primary objective is to maximize shareholder value over time through a
combination of dividend income and share price appreciation while maintaining a
prudent and flexible capital structure.

Our total return to shareholders approximated 55 percent in 1996 and has
averaged 14 percent and 13 percent per year over the last five and ten years,
respectively.

MEASURING VALUE CREATION

We internally measure value creation using a form of Economic Value Added -
Registered Trademark- (EVA - Registered Trademark-), which we define generally
as after-tax operating profit less a capital charge for all investment employed.
We calculate EVA before LIFO and non-recurring charges. The capital charge is an
estimate of our after-tax cost of capital adjusted for the age of our stores,
recognizing that mature stores should inherently have higher returns than newly
opened stores. We estimate that the after-tax cost of capital for our retail
business is 10 percent, while our credit operations' after-tax cost of capital
is estimated to be 6 percent as a result of its ability to support higher debt
levels. We expect to generate returns in excess of these costs of capital,
thereby producing EVA.

There is generally a high correlation between generation of EVA and the
creation of shareholder value. Maximizing EVA is the key to maximizing
shareholder value over time. EVA is used to evaluate our performance and to
guide capital investment decisions. A significant portion of executive incentive
compensation is tied to the achievement of targeted levels of annual EVA.

FINANCIAL OBJECTIVES

We believe that managing our business with a focus on EVA helps achieve our
objective of annual earnings per share growth of 15 percent or more over time.
We intend to produce these results, while maintaining a year-end debt ratio for
our retail operations within a range of 45 percent to 55 percent, which will
allow efficient capital market access to fund our growth. Our cash flows during
1996 allowed us to reduce our retail debt ratio to 50 percent, the mid-point of
our target range. We expect to further reduce our leverage in 1997.

In evaluating our debt level, we separate retail operations from credit
operations due to their inherently different financial characteristics. We view
the appropriate capitalization of our credit business to be 88 percent debt and
12 percent equity, similar to ratios of comparable credit card businesses.

- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
DEBT RATIO*:
Retail 50% 53% 50%
- --------------------------------------------------------------------------------
Credit 88 88 88
- --------------------------------------------------------------------------------
Total 57% 60% 57%
- --------------------------------------------------------------------------------
BALANCE SHEET DEBT RATIO 53% 56% 55%
- --------------------------------------------------------------------------------
* Includes the impact of off-balance sheet operating leases and $400 million
of securitized accounts receivable sold, as if they were debt.

- - Registered Trademark- Economic Value Added and EVA are registered trademarks.

20 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

INTERNAL CREDIT

Internal credit strategically supports our core retail operations and has
contributed significantly to our earnings growth. The operating margin of our
credit operations increased by 18 percent in 1996 to $210 million compared with
growth in average accounts receivable serviced of 11 percent. Improved credit
performance was driven by continued expansion of the Target Guest Card, changes
in payment terms at all three divisions and development of guest loyalty
programs. The increase in the bad debt provision over the prior year was
principally associated with additional reserves to cover potential increases in
delinquency rates, given national industry trends.

In 1997, we plan to continue growing the credit business by generating new
accounts and further implementing guest relationship programs. In addition, we
intend to reduce expenses by improving productivity through further development
of common credit information systems. As a result, we expect continued growth in
operating profit and EVA.

- --------------------------------------------------------------------------------
CREDIT OPERATING PROFIT
(Millions of Dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
REVENUES:
Finance charge revenues and late fees $ 403 $ 313 $ 248
Merchant and deferred billing fees 72 75 65
- --------------------------------------------------------------------------------
Total revenues 475 388 313
- --------------------------------------------------------------------------------
EXPENSES:
Bad debt provision 149 104 66
Operating expenses 116 105 77
- --------------------------------------------------------------------------------
Total expenses 265 209 143
- --------------------------------------------------------------------------------
OPERATING MARGIN 210 179 170
Net impact from securitization (25) (10) -
- --------------------------------------------------------------------------------
OPERATING PROFIT, NET $ 185 $ 169 $ 170
- --------------------------------------------------------------------------------
Average accounts receivable serviced:
Target $ 453 $ 313 $ 190
Mervyn's 799 791 765
DSD 663 615 549
--------------------------
Total average accounts receivable serviced $1,915 $1,719 $1,504
Average accounts receivable owned $1,515 $1,558 $1,504
- --------------------------------------------------------------------------------

In the Credit Operating Profit table, revenues, expenses and operating
margin are associated with accounts receivable serviced. Merchant fees are the
fees charged to our retail operations on a basis similar to fees charged by
third-party credit cards. Deferred billing fees are charges for carrying
non-revenue-earning revolving balances. Both the merchant and deferred billing
fees are intercompany transfer prices that are eliminated in consolidation.
Operating expenses are those associated with granting and servicing credit. The
net impact from the 1995 sale of $400 million of securitized accounts receivable
is a reduction of revenues, as well as a reduction in the bad debt provision.
Average accounts receivable serviced represents an average of all accounts
receivable, including the securitized accounts receivable sold, while the
calculation of average accounts receivable owned reflects a reduction for the
sale of securitized accounts receivable.

Credit revenue, operating profit and EVA continue to be recorded in each of
the operating divisions' results to recognize credit's strategic support of our
core retail operations.

21 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
BUSINESS SEGMENT COMPARISONS (Millions of Dollars) 1996 1995* 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Target $17,853 $15,807 $13,600
Mervyn's 4,369 4,516 4,561
Department Store Division 3,149 3,193 3,150
- -------------------------------------------------------------------------------------------
Total revenues $25,371 $23,516 $21,311
- -------------------------------------------------------------------------------------------
OPERATING PROFIT
Target $ 1,042 $ 719 $ 732
Mervyn's 153 100 206
Department Store Division 108 184 270
- -------------------------------------------------------------------------------------------
Total operating profit 1,303 1,003 1,208
Interest expense, net 442 442 426
Corporate and other 78 60 68
- -------------------------------------------------------------------------------------------
Earnings before income taxes and extraordinary charge $ 783 $ 501 $ 714
- -------------------------------------------------------------------------------------------
ASSETS
Target $ 8,257 $ 7,330 $ 6,247
Mervyn's 2,658 2,776 2,917
Department Store Division 2,296 2,309 2,392
Corporate and other 178 155 141
- -------------------------------------------------------------------------------------------
Total assets $13,389 $12,570 $11,697
- -------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Target $ 377 $ 328 $ 294
Mervyn's 151 150 145
Department Store Division 119 113 108
Corporate and other 3 3 1
- -------------------------------------------------------------------------------------------
Total depreciation and amortization $ 650 $ 594 $ 548
- -------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Target $ 1,048 $ 1,067 $ 842
Mervyn's 79 273 146
Department Store Division 173 161 96
Corporate and other 1 21 11
- -------------------------------------------------------------------------------------------
Total capital expenditures $ 1,301 $ 1,522 $ 1,095
- -------------------------------------------------------------------------------------------

</TABLE>
* Consisted of 53 weeks.

In 1996, operating profit includes real estate repositioning charges of $114
million and $20 million at Mervyn's and DSD, respectively.

In 1996, operating profit is net of reductions of $6 million, $10 million and $9
million for Target, Mervyn's and DSD, respectively, related to the sale of
securitized accounts receivable. In 1995, the net reductions were $2 million, $5
million and $3 million for Target, Mervyn's and DSD, respectively.

Each operating division's assets and operating results include the undivided
interest in the accounts receivable held by Dayton Hudson Receivables
Corporation (in 1995 and 1996) and Retailers National Bank (1993 to 1996), as
well as related income and expenses.

23 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

CONSOLIDATED RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
(Millions of Dollars, Except Per Share Data) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $25,371 $23,516 $21,311
COSTS AND EXPENSES
Cost of retail sales, buying and occupancy 18,628 17,527 15,636
Selling, publicity and administrative 4,289 4,043 3,614
Depreciation and amortization 650 594 548
Interest expense, net 442 442 426
Taxes other than income taxes 445 409 373
Real estate repositioning charge 134 - -
- -----------------------------------------------------------------------------------------------------
Total Costs and Expenses 24,588 23,015 20,597
- -----------------------------------------------------------------------------------------------------
Earnings Before Income Taxes and Extraordinary Charge 783 501 714
Provision for Income Taxes 309 190 280
- -----------------------------------------------------------------------------------------------------
NET EARNINGS BEFORE EXTRAORDINARY CHARGE $ 474 $ 311 $ 434
Extraordinary Charge from Purchase and Redemption of Debt, Net of Tax 11 - -
- -----------------------------------------------------------------------------------------------------
NET EARNINGS $ 463 $ 311 $ 434
- -----------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE:
Earnings Before Extraordinary Charge $ 2.07 $ 1.34 $ 1.92
Extraordinary Charge .05 - -
- -----------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE $ 2.02 $ 1.34 $ 1.92
- -----------------------------------------------------------------------------------------------------
FULLY DILUTED EARNINGS PER SHARE:
Earnings Before Extraordinary Charge $ 2.00 $ 1.30 $ 1.84
Extraordinary Charge .05 - -
- -----------------------------------------------------------------------------------------------------
FULLY DILUTED EARNINGS PER SHARE $ 1.95 $ 1.30 $ 1.84
- -----------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING (Millions):
Primary 218.7 216.8 216.0
Fully Diluted 230.6 229.2 228.9
- -----------------------------------------------------------------------------------------------------

</TABLE>
See Notes to Consolidated Financial Statements on pages 23-34.

SUMMARY OF ACCOUNTING POLICIES

ORGANIZATION Dayton Hudson Corporation is a general merchandise retailer. Our
operating divisions consist of Target, Mervyn's and the Department Store
Division (DSD). Target, an upscale discount chain located in 38 states,
generated 70 percent of our 1996 revenues. Mervyn's, a middle-market promotional
department store located in 16 states in the West, South and Midwest,
contributed 17 percent of revenues. DSD offers trend leadership, quality
merchandise and superior service throughout its department stores located in
nine states in the Midwest, and produced 13 percent of revenues.

CONSOLIDATION The financial statements include the accounts of the Corporation
after elimination of material intercompany balances and transactions. All
subsidiaries are wholly owned.

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

FISCAL YEAR Our fiscal year ends on the Saturday nearest January 31. Unless
otherwise stated, references to years in this report relate to fiscal years
rather than to calendar years.

- --------------------------------------------------------------------------------
Fiscal Year Ended Weeks
- --------------------------------------------------------------------------------
1996 February 1, 1997 52
1995 February 3, 1996 53
1994 January 28, 1995 52
- --------------------------------------------------------------------------------

24 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REVENUES

Finance charge revenues and late fees on internal credit sales were $346 million
on sales of $3.8 billion in 1996, $292 million on sales of $3.8 billion in 1995
and $248 million on sales of $3.6 billion in 1994. Leased department sales were
$162 million, $153 million and $156 million in 1996, 1995 and 1994,
respectively.

EARNINGS PER SHARE

Primary earnings per share equals net earnings, less dividend requirements on
the Employee Stock Ownership Plan (ESOP) preferred stock, divided by the average
number of common shares and common share equivalents outstanding during the
period. Fully diluted earnings per share assumes conversion of the ESOP
preferred stock into common stock. Net earnings are adjusted for the additional
expense required to fund the ESOP debt service, which results from the assumed
replacement of the ESOP preferred dividends with common stock dividends.
References to earnings per share relate to fully diluted earnings per share.

During 1996, the Corporation distributed to shareholders two additional
shares of common stock for each share owned, resulting in a three-for-one common
stock split. All earnings per share, dividends per share and common shares
outstanding reflect the stock split.

ADVERTISING COSTS

Advertising costs, included in selling, publicity and administrative expenses,
are expensed as incurred and were $634 million, $670 million and $604 million
for 1996, 1995 and 1994, respectively.

REAL ESTATE REPOSITIONING CHARGE

As a result of actions and decisions made in fourth quarter 1996 to sell or
close stores, we recorded a pre-tax real estate repositioning charge of $134
million ($.35 per share). The charge includes $114 million for Mervyn's to sell
or close its 25 stores in Florida and Georgia, and approximately 10 other
underperforming stores throughout the chain. Also included is a net charge of
$20 million for DSD's exit from the Texas market and the sale or closure of two
other stores.

The real estate repositioning charge reflects a $87 million charge for the
write-down of property and equipment to its net realizable value, which includes
the net gain realized on the December 1996 sale of the DSD Texas stores. In the
first quarter 1997, Mervyn's exited the Florida and Georgia markets and DSD
closed one store. All remaining properties are expected to be sold or closed
within approximately 12 to 18 months. At year end 1996, properties held for sale
are classified in other current assets at their net realizable value.

The charge also includes $47 million for exit costs associated with the
real estate repositioning effort, including expected cash outlays for lease
liabilities and other real estate costs, occupancy costs during the shut-down
period and incremental bad debt expense related to the exit of specific markets.
There were no material charges against the reserve for exit costs in 1996, which
is included in accrued liabilities at February 1, 1997.

INCOME TAXES

Reconciliation of tax rates is as follows:

- --------------------------------------------------------------------------------
PERCENT OF EARNINGS BEFORE
INCOME TAXES 1996 1995 1994
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.6 4.9 4.7
Dividends on preferred stock (.8) (1.1) (.6)
Targeted Jobs Tax Credits - (.5) (.7)
Other .7 (.3) .8
- --------------------------------------------------------------------------------
Effective tax rate 39.5% 38.0% 39.2%
- --------------------------------------------------------------------------------

The components of the provision for income taxes were:

- --------------------------------------------------------------------------------
INCOME TAX PROVISION EXPENSE/(BENEFIT)
(Millions of Dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
Current:
Federal $ 344 $158 $262
State 72 38 59
- --------------------------------------------------------------------------------
416 196 321
- --------------------------------------------------------------------------------
Deferred:
Federal (89) (5) (34)
State (18) (1) (7)
- --------------------------------------------------------------------------------
(107) (6) (41)
- --------------------------------------------------------------------------------
Total $ 309 $190 $280
- --------------------------------------------------------------------------------

The components of the net deferred tax asset/(liability) were:

- --------------------------------------------------------------------------------
NET DEFERRED TAX ASSET/(LIABILITY) FEBRUARY 1, February 3,
(Millions of Dollars) 1997 1996
- --------------------------------------------------------------------------------
Gross deferred tax assets:
Self-insured benefits $109 $ 99
Deferred compensation 85 74
Postretirement health care obligation 44 44
Allowance for doubtful accounts 49 28
Other 108 98
- --------------------------------------------------------------------------------
395 343
- --------------------------------------------------------------------------------
Gross deferred tax liabilities:
Property and equipment (288) (319)
Inventory (15) (27)
Other (35) (47)
- --------------------------------------------------------------------------------
(338) (393)
- --------------------------------------------------------------------------------
Net $ 57 $ (50)
- --------------------------------------------------------------------------------

25 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

FEBRUARY 1, February 3,
(Millions of Dollars) 1997 1996
- --------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 201 $ 175
Accounts receivable 1,720 1,510
Merchandise inventories 3,031 3,018
Other 488 252
- --------------------------------------------------------------------------------
Total Current Assets 5,440 4,955

PROPERTY AND EQUIPMENT
Land 1,557 1,496
Buildings and improvements 5,943 5,812
Fixtures and equipment 2,652 2,482
Construction-in-progress 317 434
Accumulated depreciation (3,002) (2,930)
- --------------------------------------------------------------------------------
Property and Equipment, net 7,467 7,294

OTHER 482 321
- --------------------------------------------------------------------------------
TOTAL ASSETS $13,389 $12,570
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT

CURRENT LIABILITIES
Accounts payable $ 2,528 $ 2,247
Accrued liabilities 1,168 957
Income taxes payable 182 137
Current portion of long-term debt and notes payable 233 182
- --------------------------------------------------------------------------------
Total Current Liabilities 4,111 3,523

LONG-TERM DEBT 4,808 4,959

DEFERRED INCOME TAXES AND OTHER 630 623

CONVERTIBLE PREFERRED STOCK, NET 50 62

SHAREHOLDERS' INVESTMENT
Convertible preferred stock 271 257
Common stock 72 72
Additional paid-in capital 146 110
Retained earnings 3,348 3,044
Loan to ESOP (47) (80)
- --------------------------------------------------------------------------------
Total Shareholders' Investment 3,790 3,403
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $13,389 $12,570
- --------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements on pages 23-34.

26 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CASH EQUIVALENTS

Cash equivalents represent short-term investments with a maturity of three
months or less from the time of purchase.

ACCOUNTS RECEIVABLE

Accounts receivable are written off when the required payments have not been
received for six consecutive months. Prior to an account being written-off, an
allowance is established for potential losses. The allowance for doubtful
accounts was $119 million and $69 million at year-end 1996 and 1995,
respectively.

In September 1995, the Corporation, through its special-purpose subsidiary,
Dayton Hudson Receivables Corporation (DHRC), entered into a securitization
transaction under which it transfers, on an ongoing basis, substantially all of
its credit card receivables to a trust in return for certificates representing
undivided interests in the trust's assets. At that time DHRC sold to the public
$400 million of three-year Class A certificates, with a fixed rate of 6.1
percent, backed by the credit card receivables. The issuance of such
certificates was recorded as a sale and no gain or loss was recorded. DHRC
retained a $123 million issue of subordinated Class B asset-backed certificates,
which is classified in accounts receivable. Retailers National Bank (the Bank),
a national credit card bank and wholly owned subsidiary of the Corporation,
holds a 5 percent undivided interest in the accounts receivable of the trust.
DHRC owns the remaining undivided interest in the trust's assets. The Bank
continues to generate and service all receivables for the trust. The undivided
interests in the accounts receivable held by DHRC and the Bank, as well as
related income and expenses, are reflected in each operating division's assets
and operating results.

During 1996, we adopted Statement of Financial Accounting Standards (SFAS)
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings and prescribes the measurement of assets obtained and liabilities
incurred in a sale. SFAS No. 125, effective for transfers of accounts receivable
after December 31, 1996, was not material to the financial statements in 1996
and is not expected to be material going forward.

INVENTORIES

Inventories and the related cost of sales are accounted for by the retail
accounting method using the last-in, first-out (LIFO) basis and are stated at
the lower of LIFO cost or market. The LIFO reserve was $86 million and $77
million at February 1, 1997 and February 3, 1996, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over estimated useful
lives. Buildings and improvements are depreciated over eight to 55 years.
Furniture and fixtures are depreciated over three to eight years. Accelerated
depreciation methods are generally used for income tax purposes.

In first quarter 1996, we adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The impairment loss recorded upon adoption was not material to the financial
statements.

ACCOUNTS PAYABLE

Outstanding drafts included in accounts payable were $414 million and $344
million at year-end 1996 and 1995, respectively.

LEASES

Assets held under capital leases are included in property and equipment, and are
charged to depreciation and interest over the life of the lease. Operating
leases are not capitalized and lease rentals are expensed. Rent expense on
buildings, classified in buying and occupancy, includes percentage rents that
are based on a percentage of retail sales over stated levels. Total rent expense
was $146 million, $144 million and $123 million in 1996, 1995 and 1994,
respectively. Most of the long-term leases include options to renew, with terms
varying from five to 30 years. Certain leases also include options to purchase
the property.

Future minimum lease payments required under noncancelable lease agreements
existing at February 1, 1997 were:

- --------------------------------------------------------------------------------
FUTURE MINIMUM LEASES PAYMENTS Operating Capital
(Millions of Dollars) Leases Leases
- --------------------------------------------------------------------------------
1997 $ 117 $ 20
1998 111 19
1999 103 19
2000 80 18
2001 77 18
After 2001 658 146
- --------------------------------------------------------------------------------
Total future minimum lease payments 1,146 240
Less: Interest* (500) (114)
- --------------------------------------------------------------------------------
Present value of minimum lease payments $ 646 $ 126**
- --------------------------------------------------------------------------------
* Calculated using the interest rate at inception for each lease (the
weighted average interest rate was 9.4 percent.)
** Includes current portion of $7 million.

COMMITMENTS AND CONTINGENCIES

Commitments for the purchase, construction, lease or remodeling of real estate,
facilities and equipment were approximately $261 million at February 1, 1997.
The Corporation is exposed to claims and litigation arising out of the ordinary
course of business. Management, after consulting with legal counsel, believes
that the currently identified claims and litigation will not have a material
adverse effect on our results of operations or its financial condition taken as
a whole.

27 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(Millions of Dollars) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings before extraordinary charge $ 474 $ 311 $ 434
Reconciliation to cash flow:
Depreciation and amortization 650 594 548
Deferred tax provision (107) (6) (41)
Other noncash items affecting earnings 11 52 38
Changes in operating accounts providing/(requiring) cash:
Accounts receivable (210) (100) (274)
Sale of securitized accounts receivable - 400
Merchandise inventories (13) (241) (280)
Accounts payable 281 286 307
Accrued liabilities 275 (88) 147
Income taxes payable 55 (38) 30
Other 42 (9) (17)
- ----------------------------------------------------------------------------------------------------
Cash Flow Provided by Operations 1,458 1,161 892
- ----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditures for property and equipment (1,301) (1,522) (1,095)
Proceeds from disposals of property and equipment 103 17 89
- ----------------------------------------------------------------------------------------------------
Cash Flow Required for Investing Activities (1,198) (1,505) (1,006)
- ----------------------------------------------------------------------------------------------------
Net Financing Sources/(Requirements) 260 (344) (114)
- ----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
(Decrease)/increase in notes payable, net (416) 501 247
Additions to long-term debt 700 150 -
Reductions of long-term debt (414) (210) (199)
Principal payments received on loan to ESOP 40 57 58
Dividends paid (155) (148) (144)
Other 11 22 (22)
- ----------------------------------------------------------------------------------------------------
Cash Flow (Used for)/Provided by Financing Activities (234) 372 (60)
- ----------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Cash and Cash Equivalents 26 28 (174)
Cash and Cash Equivalents at Beginning of Year 175 147 321
- ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 201 $ 175 $ 147
- ----------------------------------------------------------------------------------------------------

</TABLE>

Amounts in these statements are presented on a cash basis and therefore may
differ from those shown in other sections of this Annual Report.
Cash paid for income taxes was $352 million, $229 million and $292 million for
1996, 1995 and 1994, respectively. Cash paid for interest (including interest
capitalized) was $434 million, $451 million and $431 million for 1996, 1995 and
1994, respectively.

See Notes to Consolidated Financial Statements on pages 23-34.

28 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LINES OF CREDIT

At February 1, 1997, two committed credit agreements totaling $1.6 billion were
available from various lending institutions at specified rates. There were no
balances outstanding at any time during the year related to these agreements.

LONG-TERM DEBT AND NOTES PAYABLE

At February 1, 1997, $532 million of notes payable were outstanding, $432
million of which were classified as long-term debt as they were supported by the
Corporation's $800 million committed credit agreement that expires in the year
2001. The average amount of notes payable outstanding during 1996 was $877
million at a weighted-average interest rate of 5.6 percent.

During 1996, the Dayton Hudson Credit Card Master Trust issued, for cash, a
$300 million Series 1996-1 Class A Variable Funding Certificate backed by credit
card receivables. The outstanding Certificate amount fluctuates based on
financing needs and was $100 million at February 1, 1997. The Class A
Certificate is debt of DHRC and is classified in the current portion of
long-term debt and notes payable in the Corporation's Consolidated Statement of
Financial Position.

In 1996, we issued the following long-term debt: $200 million at 6.8
percent maturing in 2001; $300 million at 6.4 percent, maturing in 2003; and
$200 million at 7.5 percent, maturing in 2006. The proceeds from these issuances
were used for general corporate purposes.

Also during 1996, we repurchased for $340 million the following sinking
fund debentures: $112 million of 9.5 percent, due in 2016; $148 million of 9.25
percent, due in 2016; and $65 million of 9.875 percent, due in 2017. An
extraordinary charge, net of tax, of $11 million ($.05 per share) for early
extinguishment of debt was recorded related to these transactions.

At year-end the debt portfolio was as follows:

- --------------------------------------------------------------------------------
LONG-TERM DEBT FEBRUARY 1, 1997 February 3, 1996
AND NOTES PAYABLE ---------------- ----------------
(Millions of Dollars) RATE* BALANCE Rate* Balance
- --------------------------------------------------------------------------------
Notes payable 5.6% $ 532 5.6% $ 948
Notes and debentures:
Due 1996-2000 9.3 836 8.9 878
Due 2001-2005 7.6 1,149 8.4 649
Due 2006-2010 9.0 648 9.7 448
Due 2011-2015 8.9 379 8.9 379
Due 2016-2020 9.6 436 9.6 787
Due 2021-2023 8.5 935 8.5 935
- --------------------------------------------------------------------------------
Total notes payable, notes and debentures** 4,915 5,024
Capital lease obligations 126 117
Less: current portion (233) (182)
- --------------------------------------------------------------------------------
Long-term debt and notes payable $4,808 $4,959
- --------------------------------------------------------------------------------
* Reflects the weighted-average stated interest rate as of year end.
** The estimated fair value of total notes payable, notes and debentures,
using discounted cash flow analysis based on the Corporation's incremental
interest rates for similar types of financial instruments, was $5,246
million at February 1, 1997 and $5,460 at February 3, 1996.

Required principal payments on long-term debt and notes payable over the
next five years, excluding capital lease obligations, are $226 million in 1997,
$170 million in 1998, $152 million in 1999, $388 million in 2000 and $795
million in 2001.

29 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

Convertible Additional
Preferred Common Paid-in Retained Loan to
(Millions of Dollars, Except Per Share Data) Stock Stock Capital Earnings ESOP Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JANUARY 29, 1994 $273 $72 $ 73 $2,592 $(161) $2,849
Consolidated net earnings - - - 434 - 434
Dividends declared - - - (144) - (144)
Tax benefit on unallocated preferred
stock dividends - - 6 - - 6
Conversion of preferred stock and other 4 - 7 - - 11
Net reduction in loan to ESOP - - - - 34 34
Stock option activity - - 3 - - 3
- -----------------------------------------------------------------------------------------------------------------------------------
JANUARY 28, 1995 277 72 89 2,882 (127) 3,193
Consolidated net earnings - - - 311 - 311
Dividends declared - - - (149) - (149)
Tax benefit on unallocated preferred
stock dividends - - 5 - - 5
Conversion of preferred stock and other (20) - 11 - - (9)
Net reduction in loan to ESOP - - - - 47 47
Stock option activity - - 5 - - 5
- -----------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 3, 1996 257 72 110 3,044 (80) 3,403
Consolidated net earnings - - - 463 - 463
Dividends declared - - - (159) - (159)
Tax benefit on unallocated preferred
stock dividends - - 7 - - 7
Conversion of preferred stock and other 14 - 16 - - 30
Net reduction in loan to ESOP - - - - 33 33
Stock option activity - - 13 - - 13
- -----------------------------------------------------------------------------------------------------------------------------------
FEBRUARY 1, 1997 $271 $72 $146 $3,348 $ (47) $3,790
- -----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

COMMON STOCK

Authorized 1,500,000,000 shares, $.3333 par value; 217,205,226 shares issued and
outstanding at February 1, 1997; 215,894,520 shares issued and outstanding at
February 3, 1996.

PREFERRED STOCK

Authorized 5,000,000 shares; Series B ESOP Convertible Preferred Stock $.01 par
value, 382,921 shares issued and outstanding at February 1, 1997; 401,494 shares
issued and outstanding at February 3, 1996. Each share converts into 30 shares
of the Corporation's common stock, has voting rights equal to the equivalent
number of common shares and is entitled to cumulative annual dividends of
$56.20. Under certain circumstances, the shares may be redeemed at the election
of the Corporation or the ESOP.

JUNIOR PREFERRED STOCK RIGHTS

In September 1996, the Corporation declared a distribution of preferred share
purchase rights. Terms of the plan provide for a distribution of one preferred
share purchase right for each outstanding share of the Corporation's common
stock. Each right will entitle shareholders to buy one three-hundredth of a
share of a new series of junior participating preferred stock at an exercise
price of $100, subject to adjustment. The rights will be exercisable only if a
person or group acquires ownership of 20 percent or more of the Corporation's
common stock or announces a tender offer to acquire 30 percent or more of the
common stock.

See Notes to Consolidated Financial Statements on pages 23-34.

30 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK OPTION PLAN

The Corporation has a stock option plan for key employees. Options have included
Incentive Stock Options, Non-Qualified Stock Options or a combination of the
two. A majority of the options contain a vesting schedule so that 12 months
after the grant date, 25 percent of the options granted become exercisable, with
another 25 percent vesting after each succeeding 12 months. These options are
cumulatively exercisable and expire no later than ten years after the date of
the grant. In 1995, we adopted a non-qualified stock option plan for nonemployee
members of the Board of Directors. Such options become exercisable after one
year and have a ten year term. The 1997 grant was moved up to January 1997 and
fell within 1996, resulting in two grants in the same fiscal year. The typical
frequency of stock option grants is once each year.

The Corporation has had a performance share and restricted stock award plan
for key employees. Performance shares are earned to the extent certain financial
goals are met over a four-year period. Performance shares and restricted stock
awards are placed in escrow until retirement, subject to certain further
restrictions, and result in compensation expense.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
OPTIONS, PERFORMANCE SHARES AND
RESTRICTED STOCK AWARDS OUTSTANDING
- -------------------------------------------------------------------------------------------
Options
---------------------------------------------
Shares Outstanding Shares Exercisable
--------------------- ----------------------
Weighted Weighted
Number Average Number Average Perform- Restricted
of Exercise of Exercise ance Stock
Shares Price Shares Price Shares Awards
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January 29, 1994 3,818,463 $19.89 1,963,872 $17.35 743,067 91,482
Granted 602,658 25.39
Canceled (208,614) 22.54
Exercised (234,507) 13.98
- -------------------------------------------------------------------------------------------
January 28, 1995 3,978,000 20.93 2,513,169 18.87 743,868 130,686
Granted 1,492,377 23.50
Canceled (104,190) 23.93
Exercised (382,758) 13.96
- -------------------------------------------------------------------------------------------
February 3, 1996 4,983,429 22.17 2,685,945 20.59 803,703 179,619
Granted 3,269,923 32.17
Canceled (72,630) 24.37
Exercised (875,580) 19.35
- -------------------------------------------------------------------------------------------
FEBRUARY 1, 1997 7,305,142 $26.97 2,391,183 $21.77 632,028 155,308
- -------------------------------------------------------------------------------------------

</TABLE>

As of February 1, 1997, there were 935,639 options outstanding with
exercise prices between $10.08 and $19.94, 1,890,109 options with exercise
prices between $20.85 and $24.83, 2,594,160 options with exercise prices between
$25.04 and $28.35 and 1,885,234 options with an exercise price of $37.38. As of
February 1, 1997, outstanding options had a weighted-average remaining
contractual life of 7.5 years. The number of shares of unissued common stock
reserved for future grants under the stock option plans were 4,564,547 at
February 1, 1997 and 7,631,415 at February 3, 1996.

The Corporation applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations to
account for its stock option plans. Under APB No. 25, no compensation expense is
recognized if the exercise price of the Corporation's employee stock options
equals the market price on the grant date. SFAS No. 123, "Accounting for
Stock-Based Compensation" requires that the fair value of options granted during
1996 and 1995 and the pro forma impact on earnings to be disclosed when
material. The pro forma impact was not material for 1996 and 1995.

PENSION PLANS

The Corporation has three defined benefit pension plans that cover all employees
who meet certain requirements of age, length of service and hours worked per
year. Benefits are provided based upon years of service and the employee's
compensation. Contributions to the pension plans, which are made solely by the
Corporation, are determined by an outside actuarial firm. To compute net pension
cost, the actuarial firm estimates the total benefits that will ultimately be
paid to eligible employees and then allocates these costs to service periods.
The period over which unrecognized pension costs and credits are amortized,
including prior service costs and actuarial gains and losses, is based on the
remaining service period for those employees expected to receive pension
benefits.

31 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------
NET PENSION EXPENSE
(Millions of Dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost-benefits earned during the period $ 26 $ 21 $ 25
Interest cost on projected benefit obligation 37 35 33
Return on assets-current (78) (87) (10)
-deferred 36 47 (26)
- --------------------------------------------------------------------------------
Total $ 21 $ 16 $ 22
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ACTUARIAL ASSUMPTIONS 1996 1995 1994
- --------------------------------------------------------------------------------
Discount rate 7 3/4% 7 1/2% 8 1/2%
Expected long-term rate of return on plans' assets 9 9 9
Average assumed rate of compensation increase 4 3/4 4 1/2 5 1/2
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
December 31,
FUNDED STATUS 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of
Vested benefit obligation $428 $412
Accumulated benefit obligation 455 438
Projected benefit obligation 523 503
Fair market value of plans' assets* 587 518
- --------------------------------------------------------------------------------
Plans' assets in excess of projected
benefit obligation 64 15
Unrecognized prior service cost 2 2
Unrecognized net actuarial (gain)/loss (21) 21
- --------------------------------------------------------------------------------
Prepaid pension assets $ 45 $ 38
- --------------------------------------------------------------------------------
* Plans' assets consist primarily of equity and fixed-income securities.

EMPLOYEE STOCK OWNERSHIP PLAN

The Corporation sponsors a defined contribution employee benefit plan. Employees
who meet certain eligibility requirements may participate by investing up to 15
percent of their compensation. We match 100 percent of each employee's
contribution up to 5 percent of each participant's total compensation. Our
contribution to the plan is invested in the ESOP. It is anticipated that all
available ESOP shares will be allocated to participants by early 1998. At that
time, management intends to provide new ESOP shares for funding the employer
match.

In 1989, we loaned $379 million to the ESOP at a 9 percent interest rate.
Proceeds from the loan were used by the ESOP to purchase 438,353 shares of
Series B ESOP Convertible Preferred Stock of the Corporation. The original issue
value of the ESOP preferred stock of $864.60 per share is guaranteed by the
Corporation.

Our contributions to the ESOP, plus dividends paid on all preferred stock
held by the ESOP, are used to repay the loan principal and interest. Cash
contributed by us to the ESOP was $23 million in 1996, $45 million in 1995 and
$50 million in 1994. Dividends earned on shares held by the ESOP were $22
million in 1996, $23 million in 1995 and $24 million in 1994. The dividends on
allocated preferred stock are paid to participants' accounts in additional
shares of preferred stock. Benefits expense, calculated based on the shares
allocated method, was $31 million in 1996, $39 million in 1995 and $33 million
in 1994.

Upon a participant's termination, we are required to exchange at fair value
each share of preferred stock for 30 shares of common stock and cash, if any. At
February 1, 1997, 319,527 shares of the ESOP preferred stock were allocated to
participants and had a fair value of $411 million.

The convertible preferred stock and related loan to ESOP are classified as
Shareholders' Investment to the extent the preferred stock is permanent equity.
The remaining convertible preferred stock of $60 million, net of the related
loan to ESOP of $10 million at February 1, 1997, represents our maximum cash
obligation at year-end, measured by the market value difference between the
preferred stock and common stock, and is excluded from Shareholders' Investment.

POSTRETIREMENT HEALTH CARE BENEFITS

Employees eligible for retirement become eligible for certain health care
benefits if they meet minimum age and service requirements, and agree to
contribute a portion of the cost.
We have the right to modify or terminate these benefits.

ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION December 31
(Millions of Dollars) 1996 1995
- --------------------------------------------------------------------------------
Retirees $ 48 $ 51
Fully eligible active plan participants 18 18
Other active plan participants 10 11
Prior service cost (4) (4)
Unrecognized gain 31 27
- --------------------------------------------------------------------------------
Total $103 $103
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
NET PERIODIC COST 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost -- benefits earned during the period $1 $1 $2
Interest cost on accumulated benefits 5 5 6
- --------------------------------------------------------------------------------
Total $6 $6 $8
- --------------------------------------------------------------------------------

An increase in the cost of covered health care benefits of 7 percent is
assumed for fiscal 1997. The rate is assumed to decrease to 6 percent in the
year 2000 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, a 1
percent increase in the health care trend rate would increase the accumulated
postretirement benefit obligation by $5 million at February 1, 1997 and the net
periodic cost by $.4 million for the year. The discount rate used in determining
the accumulated postretirement benefit obligation was 7 3/4 percent for 1996,
7 1/2 percent for 1995 and 8 1/2 percent for 1994.

32 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

QUARTERLY RESULTS (Unaudited)

The same accounting policies are followed in preparing quarterly financial data
as are followed in preparing annual data. Costs directly associated with
revenues, such as cost of goods sold and percentage rent on leased stores, are
allocated based on revenues. Certain other costs not directly associated with
revenues, such as benefit plan expenses and real estate taxes, are allocated
evenly throughout the year.

The table below summarizes results by quarter for 1996 and 1995:

<TABLE>
<CAPTION>
(Millions of Dollars, except Per Share Data) First Quarter Second Quarter Third Quarter
- -------------------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $5,380 $4,757 $5,751 $5,236 $6,073 $5,573
Gross Profit (a) $1,431 $1,253 $1,554 $1,340 $1,621 $1,460
Net Earnings Before
Extraordinary Charge (b) $ 42 $ 11 $ 101 $ 28 $ 116 $ 44
Net Earnings (b) (c) $ 41 $ 11 $ 101 $ 28 $ 107 $ 44
Primary Earnings
Per Share (b) (c) (d) $ .17 $ .03 $ .44 $ .11 $ .47 $ .18
Fully Diluted Earnings
Per Share (b) (c) (d) $ .16 $ .03 $ .42 $ .11 $ .45 $ .17
- -------------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share (d) $ .15 $ .15 $ .16 $ .15 $ .16 $ .15
Common Stock Price (e)
High $ 32 5/8 $ 24 7/8 $ 36 5/8 $ 26 1/4 $ 36 $ 26 1/2
Low 24 1/2 21 7/8 29 1/8 21 1/2 30 3/4 23 1/4
- -------------------------------------------------------------------------------------------------------------------------

<CAPTION>
(Millions of Dollars, except Per Share Data) Fourth Quarter Total Year
- -----------------------------------------------------------------------------------------------
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $8,167 $7,950 $25,371 $23,516
Gross Profit (a) $2,137 $1,936 $ 6,743 $ 5,989
Net Earnings Before
Extraordinary Charge (b) $ 215 $ 228 $ 474 $ 311
Net Earnings (b) (c) $ 214 $ 228 $ 463 $ 311
Primary Earnings
Per Share (b) (c) (d) $ .95 $ 1.03 $ 2.02 $ 1.34
Fully Diluted Earnings
Per Share (b) (c) (d) $ .91 $ .98 $ 1.95 $ 1.30
- -----------------------------------------------------------------------------------------------
Dividends Declared Per Share (d) $ .16 $ .15 $ .63 $ .59
Common Stock Price (e)
High $ 39 7/8 $ 25 7/8 $ 39 7/8 $ 26 1/2
Low 34 5/8 22 7/8 24 1/2 21 1/2
- -----------------------------------------------------------------------------------------------

</TABLE>

(a) Gross profit is revenues less cost of retail sales, buying and occupancy.
The LIFO provision, included in gross profit, is adjusted each quarter for
estimated changes in year-end inventory levels, markup rates and internally
generated retail price indices. A final adjustment is recorded in the
fourth quarter for the difference between the prior quarters' estimates and
the actual total year LIFO provision.

(b) Fourth quarter and total year 1996 net earnings before extraordinary charges
and earnings per share reflect a pre-tax real estate repositioning charge
of $134 million ($81 million after tax), or $.35 per primary and fully
diluted share.

(c) In 1996, first, third and fourth quarter net earnings reflect extraordinary
charges related to the purchase and redemption of debt, net of tax, of $1
million, $9 million and $1 million, respectively, or $.00, $.04 and $.01
per primary and fully diluted share.

(d) Per share amounts are computed independently for each of the quarters
presented. The sum of the quarters may not equal the total year amount due
to the impact of changes in average quarterly shares outstanding and/or
rounding caused by the 1996 three-for-one common stock split.

(e) The Corporation's common stock is listed on the New York Stock Exchange and
Pacific Stock Exchange. At March 21, 1997 there were 10,958 shareholders of
record and the common stock price closed at $42 5/8 per share.

33 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Dayton Hudson Corporation

We have audited the accompanying consolidated statements of financial
position of Dayton Hudson Corporation and subsidiaries as of February 1, 1997
and February 3, 1996 and the related consolidated results of operations, cash
flows and shareholders' investment for each of the three years in the period
ended February 1, 1997. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 Dayton Hudson
Corporation and subsidiaries at February 1, 1997 and February 3, 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended February 1, 1997 in conformity with generally
accepted accounting principles.

/s/ Ernst & Young LLP

Ernst & Young LLP
Minneapolis, Minnesota
March 3, 1997

34 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>

SUMMARY FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
(Millions of Dollars, Except Per Share Data) 1996 1995(a) 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
- ----------------------------------------------------------------------------------------------------------------------
Revenues $ 25,371 23,516 21,311 19,233 17,927
- ----------------------------------------------------------------------------------------------------------------------
Cost of retail sales, buying and occupancy $ 18,628 17,527 15,636 14,164 13,129
- ----------------------------------------------------------------------------------------------------------------------
Selling, publicity and administrative $ 4,289 4,043 3,614 3,158 2,961
- ----------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 650 594 548 515 476
- ----------------------------------------------------------------------------------------------------------------------
Interest expense, net $ 442 442 426 446 437
- ----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes
and extraordinary charge (b) $ 783 501 714 607 611
- ----------------------------------------------------------------------------------------------------------------------
Income taxes $ 309 190 280 232 228
- ----------------------------------------------------------------------------------------------------------------------
Net earnings (b)(c) $ 463 311 434 375 383
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION DATA
- ----------------------------------------------------------------------------------------------------------------------
Working capital $ 1,329 1,432 1,569 1,436 1,450
- ----------------------------------------------------------------------------------------------------------------------
Property and equipment, net $ 7,467 7,294 6,385 5,947 5,563
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 13,389 12,570 11,697 10,778 10,337
- ----------------------------------------------------------------------------------------------------------------------
Long-term debt $ 4,808 4,959 4,488 4,279 4,330
- ----------------------------------------------------------------------------------------------------------------------
Shareholders' investment $ 3,790 3,403 3,193 2,849 2,566
- ----------------------------------------------------------------------------------------------------------------------

PER COMMON SHARE DATA
- ----------------------------------------------------------------------------------------------------------------------
Fully diluted earnings per share (b)(c) $ 1.95 1.30 1.84 1.59 1.61
- ----------------------------------------------------------------------------------------------------------------------
Cash dividend declared $ .63 .59 .56 .54 .51
- ----------------------------------------------------------------------------------------------------------------------
Market price -- high $ 39 7/8 26 1/2 28 5/8 27 7/8 26 3/8
Market price -- low $ 24 1/2 21 1/2 21 3/4 21 1/8 19 5/8
Market price -- year-end close $ 37 5/8 25 23 22 25 7/8
- ----------------------------------------------------------------------------------------------------------------------
Common shareholders' investment $ 16.42 14.94 14.15 12.76 11.61
- ----------------------------------------------------------------------------------------------------------------------

</TABLE>

The Summary Financial and Operating Data should be read in conjunction with the
Notes to Consolidated Financial Statements on pages 23-34.
Per share amounts and shares outstanding for 1995 and earlier are restated to
reflect a three-for-one Common Stock split effective July 17, 1996.

(a) Consisted of 53 weeks.

(b) 1996 includes a pre-tax real estate repositioning charge of $134 million
($81 million after-tax), or $.35 per share.

(c) 1996 includes an extraordinary charge, net of tax, of $11 million, or $.05
per share, related to purchase and redemption of debt.

35 DAYTON HUDSON CORPORATION AND SUBSIDIARIES

<PAGE>
EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

As of April 1, 1997, the following are wholly-owned subsidiaries of the
Registrant and are Minnesota corporations, except as otherwise indicated:

Bullseye Corporation (DE)
Dayton Credit Company
Dayton Development Company
Dayton Hudson Capital Corporation
Dayton Hudson Receivables Corporation
Dayton's Commercial Interiors, Inc.
Dayton's Iron Horse Liquors, Inc.
Dayton's Sioux Falls, Inc. (SD)
Dayton's Travel Service, Inc.
Eighth Street Development Company
Mervyn's (CA)
Mervyn's, Inc. (DE)
Retailer's National Bank, N.A. (a national association)
Rooftop, Inc.
Seatamatic, Inc. (NV)
STL of Nebraska, Inc.
Target Services, Inc.
Target Stores, Inc.

Capitol Lounge Corp. (WI)
Clybourn Trading Corp. (WI)
DHC Milwaukee, Inc. (WI)
DHC Wine & Liquor Shop, Inc. (WI)
Marshall Field & Company (DE)
Marshall Field of Columbus, Inc. (OH)
Marshall Field Stores, Inc. (DE)
Marshall Field's Chicago, Inc. (DE)
Marshall Field's Direct Response Company, Inc. (DE)
Marshall Field's Mayfair, Inc. (WI)

<PAGE>
EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Annual Report (Form
10-K) of Dayton Hudson Corporation of our report dated March 3, 1997 included in
the 1996 Annual Report to Shareholders of Dayton Hudson Corporation.

Our audits also included the financial statement schedule of Dayton Hudson
Corporation listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

We also consent to the incorporation by reference in Registration Statement
Numbers 33-42364, 333-389 and 333-12915 on Form S-3 and Post-Effective Amendment
No. 1 to Registration Statement Number 2-72549 and Registration Statement
Numbers 33-6918, 33-66050 and 33-64013 on Form S-8 of our report dated March 3,
1997 with respect to the consolidated financial statements incorporated herein
by reference and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) of
Dayton Hudson Corporation.

/s/ ERNST & YOUNG LLP
---------------------------------------
Ernst & Young LLP

Minneapolis, Minnesota
April 16, 1997

<PAGE>
EXHIBIT 24

DAYTON HUDSON CORPORATION