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Achieving Genuine ValueFor Customers Worldwide

Deere & Company1 9 9 9

A N N U A L R E P O R T

contents

Net Sales

(in billions)

97 98 99

$2.0$2.3

$1.9

Operating Profit

(in millions)

97 98 99

$245

$326

$149

W o r l d w i d e A g r i c u l t u r a l E q u i p m e n t

Net Sales

(in billions)

97 98 99

$7.3$7.5

$5.1

Operating Profit(Loss)

(in millions)97 98 99

$1,048$941

$51

W o r l d w i d e C o n s t r u c t i o n E q u i p m e n t

1 9 9 9 A N N U A L R E P O R TD E E R E & C O M P A N Y

11

Chairman’s Message ..................................4Interview .............................................6

Business Overview.....................................8

Equipment Operations

Agricultural Equipment ..........................10Construction Equipment .........................14Commercial & Consumer Equipment .........17

Credit Operations

John Deere Credit .................................20

Other Operations

Special Technologies ..............................22Parts .................................................22Power Systems .....................................23Health Care ........................................23

People & Citizenship

Environment .......................................24Safety................................................25Employee & Community Involvement .......26

Financial Review .....................................27Corporate Data .......................................57Officer Changes.......................................59Stockholder Information .............................59

One of the world’s oldest and most respected

enterprises, Deere & Company manufactures,

distributes and finances a full line of

agricultural equipment, as well as a broad

range of construction and forestry equipment,

commercial and consumer equipment, and

other technological products and services.

Support operations provide parts and

engines. Additionally, the company offers

credit services and managed health-care plans.

F I N A N C I A L S U M M A RY

W o r l d w i d e C o m m e r c i a l & C o n s u m e r E q u i p m e n t

Net Sales

(in billions)

97 98 99

$1.8$2.2

$2.6

Operating Profit

(in millions)97 98 99

$115

$213 $213

W o r l d w i d e C r e d i t O p e r a t i o n s

Revenues

(in billions)

97 98 99

$.8$1.0

$1.1

Operating Profit

(in millions)97 98 99

$232

$256

$274

1 9 9 9 A N N U A L R E P O R TD E E R E & C O M P A N Y

3

Dollars in millions except per share amounts 1999 1998 1997Net Sales and RevenuesNet sales and revenues ......................................................................................... $ 11,751 $ 13,822 $ 12,791Net sales of equipment.......................................................................................... $ 9,701 $ 11,926 $ 11,082

Income and DividendsNet Income:

Equipment operations....................................................................................... $ 43 $ 831 $ 817Financial services operations ........................................................................... 187 175 139Other affiliates................................................................................................... 9 15 4

Total.................................................................................................................. $ 239 $ 1,021 $ 960Return on net sales ............................................................................................... 2.5% 8.6% 8.7%Return on average assets*..................................................................................... 2.2% 9.7% 10.6%Return on beginning stockholders’ equity ............................................................. 5.9% 24.6% 27.0%Per share:

Net income – basic........................................................................................... $ 1.03 $ 4.20 $ 3.78Net income – diluted ........................................................................................ $ 1.02 $ 4.16 $ 3.74Dividends declared ........................................................................................... $ .88 $ .88 $ .80Stock price range.............................................................................................. $297⁄16-4515⁄16 $ 283⁄8-641⁄8 $ 391⁄8-601⁄2

AssetsEquipment operations ........................................................................................... $ 8,702 $ 9,099 $ 7,728Financial services operations................................................................................ 8,876 8,903 8,592

Total.................................................................................................................. $ 17,578 $ 18,002 $ 16,320

* Average assets are based on Deere & Company with Financial Services on the equity basis.

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Company Stays On Profitable Ground Despite Trying Year:

Growth and Efficiency Efforts Make Strong AdvanceWhile challenging by financial standards, 1999 was a break-through year for John Deere. Not only did our operationsrecord a meaningful profit in the face of a major downturnin the farm economy, but our actions of recent years tocreate a more resilient world-class enterprise successfullyfaced their first severe test.

Despite the impact of depressed farm conditions,our operations continued to move strongly ahead. In thisregard, scores of new products from our various equipmentdivisions received a positive response from customers;modern, new production facilities took root; and severalinternational ventures made solid headway.What’s more,pacesetting asset-management techniques yielded impressiveresults.Also, our ambitious business-process excellenceinitiatives continued on a successful course with theirpromise of cost savings, quality improvement, and furthergains in customer loyalty and satisfaction.

Conclusion? Our performance in 1999 — during oneof the sharpest farm downturns on record — offers clearproof that our actions to create a new kind of company,one of greater depth, breadth and balance, are having the intended effect.These measures, as well, point to avigorous level of growth and improved performanceonce the agricultural economy resumes its growth.

Deere’s financial results for 1999 further attest to thetransformation our company has undergone. Indeed, netincome declined 77 percent, to $239 million, and totalnet sales and revenues fell 15 percent, to $11.8 billion. Bythe same token, however, we manifested a new resilienceby booking significant net income in spite of a 35 to 40 percent decline in the sale of large farm equipment.Equally important, we surpassed our primary financial goal,of managing for cash flow, by reducing field inventories bysome $800 million.This was a result of our commitmentto hold farm- and construction-equipment productionwell below levels of retail demand. Such an action putsus in a better position to capitalize on any upswing inretail demand and to further refine processes for tailoringproduction to individual-customer orders

Positioned for Consistent Growth

All in all, our businesses are making solid progress in theirpursuit of continuous improvement, profitable growth and innovation — the strategies underlying our corporatevision of genuine value. Indeed, continuing investments in new products, as well as expanded markets and technologies, are positioning these operations for more consistent growth and financial success over the long term.

• Amid a deteriorating farm sector, Deere’s agricultural-equipment business had an exciting product introductionin 1999, headlined by an important family of combineharvesters that set new productivity standards for the industry.The division also achieved a huge one-yearreduction in receivables and made significant stridestoward global growth.

• Deere’s construction-equipment business againposted the highest return on assets among our equipmentdivisions.The operation also successfully launched an innovative order-fulfillment process that builds machinesin more rapid response to individual customer orders. Inaddition, an important strategic initiative targeting large-contractor customers moved into high gear, resulting in asignificant addition to our customer base.

• In pursuing a strategic intent of having a presence onevery landscape, the commercial and consumer equipmentdivision saw sales gain 21 percent. Profits equaled last year’srecord total in spite of higher growth-related expenses.Moreover, substantial market-share growth was reported invirtually every product class.

• John Deere Credit posted record net income —$175 million — while bringing more focus to leasing,international expansion and agribusiness. Credit addedover $1 billion to company earnings in the 1990s and hadrecord yearly profits eight times.

Genuine Value: Setting Stage for Further Gains

In Efficiency, Customer Satisfaction

This year’s annual report spotlights some of the waysgenuine value, represented in large part by innovativenew products, and customer-focused processes and services, is helping John Deere gain market share andcement buyer loyalty.

Continuous Improvement. Highlighting our pursuit ofgenuine value through continuous improvement is anaggressive series of process-based initiatives targeting six-sigma levels of performance and customer satisfaction.During the year, some 900 projects involving the effortsof several thousand employees, were completed or inprogress.Their goal: Streamlining business processes, largeand small, and pursuing operational excellence throughoutthe company. Besides bringing substantial financial benefits, notably in areas such as supply management,

C H A I R M A N ’ S M E S S AG E

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these efforts often lead to cycle-time and defect-rateimprovements of 30 to 40 percent as well as higher levelsof customer satisfaction. In support of the initiative stressingcustomer focus, our operating divisions are structuringtheir activities around the core processes of customeracquisition, order fulfillment, product development andcustomer support.

Profitable Growth. At the same time, actions to profitably grow and expand our businesses gained furthermomentum. As detailed in this year’s report, our growthefforts are centered around international expansion in agricultural equipment, a focus on large customers inconstruction equipment, an unprecedented period ofinvestment in commercial and consumer equipment,as well as a stepped-up emphasis on agribusiness andoverseas markets in credit.Acquisitions and joint venturesare playing an increasingly important role in our growthplans as well, with those made or entered into since1994 representing $1.2 billion in sales last year.

Business Innovation. Innovation, the third leg of genuinevalue, was much in evidence last year.The company spentmore than $700 million on new products and facilitiesdesigned to provide customers with greater productivity,value and convenience.While all our operations arebringing out innovative products at an impressive rate,our 50-series combines mark true breakthroughs in productivity and technology. Innovation is also expected tospur the performance of the newly created John DeereSpecial Technologies Group. Its purpose includes developingadvanced software, electronics, and communications solutions for John Deere customers, as well as creatingnew revenue streams by serving outside companies andcustomer groups.

Farm Economy Still Under Pressure,

But Long-Range Picture Bright

Deere expects to see better results in the year 2000 due inlarge part to our improved ability to align farm-machineryproduction with retail demand.This should be possibleeven in the absence of a recovery in commodity prices.At the same time, our long-term future remains highlypromising.Worldwide demand for grain is expected to triple in the next 50 years due to global populationgrowth and better diets. At the same time, industrialgrowth and the rapid disappearance of premium farmlandare themselves boosting farm mechanization. In such an environment, there’s little question that Deere canmove toward global leadership on the same scale it hasenjoyed for so long in North America. Similarly, positivefundamentals — namely, growing world economies and

moderate interest rates — are expected to support theperformance of our other businesses.After tripling in the1990s, commercial and consumer-equipment sales seempoised to continue growing at double-digit rates for sometime. Deere’s construction-equipment business is primedfor substantial growth as well, through new products, anexpanding global presence, and through acquisitions suchas that of Timberjack Group, announced this month.

Setting Pace in Information-Driven Farming

While important, quality products and a venerable brandare only a start.We must remain passionate about enhancingquality, improving cycle times and embracing technologyin order to keep our journey to preeminence on a steadycourse. Just as John Deere’s steel plow revolutionized farming 160 years ago, Deere today is setting the pace ininformation-driven agriculture with an exciting array of global-positioning applications and advanced communi-cations technologies.These are being made available tocustomers through enhancements in our own equipmentas well as through products such as the Internet-basedVantagePoint network, which recently went online.It gives farmers information to manage inputs more successfully and thus maximize productivity and profit.

Nothing is likely to mean more to our future thanhow effectively we adapt information technology and,specifically, use the Internet as a springboard to promoteour brand and sell our products.To date, Deere has nearly200 separate Internet applications in place, including avery successful site for dealers to feature used equipment.All our business units are developing strategies that outlinetheir commitment to information technology and theirambitious plans for its pursuit.

H a n s W. B e c h e r e rC h a i r ma n a n d C h i e f E x e c u t i v e O f f i c e r

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Transformation Making Major Impact

John Deere’s transformation over the past decade isproof that our efforts to create a more diversified world-class company have made quite an impact. During thistime, Deere has introduced hundreds of new products,greatly expanded its operations, established a moreprominent global footprint, streamlined businessprocesses, adopted a host of leading-edge technologiesand set new competitive standards in asset management.We’ve also continued to invest aggressively in the futurethrough capital projects and research initiatives. Deere, asa result, has become a far more formidable organization,which can maintain a profitable stance throughout thebusiness cycle.

Just as important, Deere has assumed a more aggressive, forward-looking mindset.Today we are driven to achieve superior levels of business excellence,reach out to new customers worldwide and seek leadership positions wherever crops are grown, lawns aretended or structures built.These priorities are made evenmore powerful in the context of our traditional value system, which stresses high quality, honest value and customer service.The combination of a new-found zealfor excellence and innovation, resting on a time-honoredfoundation of integrity known the world-over, givesDeere a tremendous sense of competitive momentummoving into the new millennium.

People Are Key

For all their importance, products, processes and tech-nology mean little without the right people behind them.Deere is fortunate in this regard: Our emphasis on build-ing relationships has earned a loyal customer following,as well as a dedicated team of employees and dealers.Inasmuch as genuine value is truly a reciprocal process,their contributions and continued allegiance are crucialto the attainment of consistent world-class performance.

In our view, those with an eye for enduring valuewill realize substantial benefit as Deere stakeholders and share in the excitement of raising genuine value to new heights.That is our foremost mission — and your management team is working with passionand enthusiasm to see it successfully carried out.

Very truly yours, December 13, 1999

Hans W. Becherer,Chairman and Chief Executive Officer

’90s Brought Dramatic Transformation,Becherer StatesIf a single day makes a difference, as the saying goes, think of the

impact that a decade’s worth — 3,652 of them — might have. In

John Deere’s case, the 1990s brought about a dramatic transformation,

as the company achieved a greater sense of financial stability as

well as increased product breadth and geographic reach. Below

Deere CEO Hans Becherer talks about some of the most significant

developments of the period and other topics, from the vantage point

of one who led the company the entire time.

John Deere today versus ten years ago...Although the U.S. farmer remains our largest customer, we’remuch less dependent on the North American agricultural cycletoday. Our overseas sales, primarily of farm equipment, nearlydoubled in the 1990s and, equally important, these operationsbecame far more profitable. By the same token, our other businesses have seen major growth. Commercial and consumerequipment has become our fastest-growing operation and our second-largest in sales. It didn’t even exist as a separatebusiness unit until 1991. Construction equipment has emergedas our most profitable business relative to asset size and a realforce in its industry. Roughly half of our capital budget is beingdevoted to growing these operations, while, overall, one-fourth of our capital dollars are spent on projects outside of NorthAmerica. Result? A far-richer, more diverse, and increasinglyresilient product and geographic presence than in the past.

Role of Genuine Value…The birth of an abiding vision in genuine value has been asimportant as anything to Deere’s success. Genuine valuecaptures the qualities we have been known for all along suchas quality and integrity. But it also codifies the John Deereway of doing things and, thus, gives us a special identity.The basis of genuine value is that stakeholder value andstockholder value are interconnected.To this end, we believethat our strategies of continuous improvement, profitablegrowth and business innovation will lead to superior returnsfor our owners through the benefits provided to our customers,employees and neighbors.

Genuine value stresses planning for the long term aswell.We’re continuing to invest heavily in new products andproduction facilities, have completed some very attractiveacquisitions, and are progressing with an ambitious set ofteam-based initiatives that are improving quality andrefining key business processes across the enterprise. Such along-term commitment is the best way to develop a broaderbusiness and geographic platform, as well as to achieve moreconsistent financial performance.

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Enriching the business platform…We’ve enriched our business platform in a way that will makeDeere far more successful for the long run.As an example,we’re more active on the international front than ever before, withprojects planned or under way in China, India and Turkey,among many other places. Our international possibilities are virtually limitless considering that we’re thought of as the worldleader in farm machinery — yet, globally, our market share isrelatively small. In my opinion, the company could double insize and double again by replicating what we’ve accomplishedin North America throughout the world.

At the same time, we’ve greatly expanded our product lineup beyond farm machinery to include an array of excitingequipment in the construction, grounds-care and utility-vehiclemarkets.Also important, we’ve grown from offering a singlebrand in a single channel — John Deere through John Deeredealers — to a point today of offering multiple brands through avariety of distribution channels.

Successfully applying technology is another way we’reenriching our business lineup. Knowledge-based customer solutionsand “smart” machines are the next frontier in agriculture. Deereis determined to set the pace through our special-technologiesgroup and communications technologies such as those based onglobal-positioning satellites and the Internet.

On the people side, we’re aggressively recruiting the mostpromising talent to share in the excitement of John Deere’s future,and are doing so with a particular eye on diversity.Attractingpeople from different backgrounds and cultures is simply goodbusiness. It’s the best way to adopt a global perspective and facilitate our moves toward international leadership.

Importance of divisionalization… In large part by linking employee compensation to divisionalprofitability, we’ve unlocked efficiency and creativity that hashelped these units secure positions of leadership.What’s particularlyspecial about Deere’s divisional structure is the way our businesseswork together, and support each other, in creating an enterpriseof far greater value than the sum of its parts.While these operations function on a largely independent basis, they alsocollaborate and leverage their strengths in engineering, informationsystems, parts and components, logistics, supply management and technology.The result is an organization with the flexibility,speed and entrepreneurial flair of a smaller company, combinedwith the financial and technological muscle of a larger enterprise.Synergies of this sort are supportive of more consistent operatingperformance and a more balanced financial contribution from all our businesses.

Asset management…More-astute asset management has had a big impact on ourpursuit of operational excellence.Today we can successfully manageour businesses with a smaller portfolio of assets.We’re also better at adjusting production more directly in line with shifts indemand.With our new order-fulfillment effort in constructionequipment, we can deliver a machine in response to a customerorder, equipped exactly as specified, within about 20 days.It took several months only a little while ago, meaning that customers who couldn’t wait either took delivery of a machine instock not equipped as needed, or they went elsewhere to fulfilltheir requirements.

Through its Estimate to Cash initiative, construction equipment is setting the standard for working-capital managementand customer responsiveness. Our intent is to bring similardemand-flow techniques to our ag-equipment operations in the future.The journey will be challenging, but the rewardsare likely to be quite substantial.

Consolidation in the farm-machinery market…Deere traditionally has benefited from consolidation in theindustry and I don’t see that changing.As a matter of fact, ourown growth and success have probably served as a catalyst forthe consolidation trend now in place. How are we responding?By accelerating the steps we’ve been taking all along — namely,continuing to invest aggressively in new products, services andtechnologies aimed at improved customer value and productivity.As examples, our 50-series combines are setting new industrystandards in helping farmers get more done in less time.Our VantagePoint network promises to help customers take full advantage of the information age by putting critical data attheir fingertips.

We’re confident Deere can continue growing, and gainingmarket share, regardless of what happens with other companies.Plus, we’re gaining new customers among those who view industry consolidation as unsettling and appreciate the rock-solidstability of John Deere.

New paradigm…Deere has made great progress crafting a new paradigm in ourtransition from being a largely domestic farm-equipment makerto a world leader in advanced machinery, software and servicesolutions.At the same time, we’ve adopted a passion for businessexcellence and high-caliber performance that promises to take our performance to new levels in the future. John Deere has beenwell-known and highly regarded for well over a century now.Our actions of the last decade should ensure that this reputationis carried to a larger, broader, more-global audience in the years ahead. There’s no doubt the future will be an excitingtime for our customers, employees and others with a stake inDeere’s well-being.

C O N S T RU C T I O NE Q U I P M E N T

PA RT S P OW E R S Y S T E M S

A G R I C U LT U R A L E Q U I P M E N T

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As a global enterprise with its roots in the practical processes of caring

for and utilizing the land, John Deere has grown and prospered through

a long-standing partnership with the world’s most productive farmers and

other customer groups. As a result, Deere has developed closely related,

interdependent operations, which involve the manufacturing and marketing

of equipment, plus various support operations, and financial services.

All of Deere’s businesses are committed to providing Genuine Value

to our stakeholders — customers, dealers, shareholders, employees

World’s premier producer of agricultural equipment.

Key Products — Full line of farm machinery, including four-

wheel-drive, row-crop and utility tractors; combine and sugarcane

harvesters; cotton pickers; seeding, tillage and hay equipment.

Major Customers — Farmers around the world, including

commercial, or custom, harvesting and baling operations.

1999 Highlights — Sales slump due to depressed farm conditions.

Aggressive steps to curtail production result in an $800 million

reduction of receivables. New 50-series combines introduced,

featuring Deere-patented technology in STS models.

Leader in forestry equipment; among leaders in many types

of construction equipment.

Key Products — Construction and forestry equipment, such

as backhoes, crawler dozers, four-wheel-drive loaders, excavators

and log skidders.

Major Customers — Utility, underground and earthmoving

contractors – both large and small – as well as rental companies,

municipalities, loggers and other forestry specialists.

1999 Highlights — Sales decline 18 percent to $1.9 billion;

operating profit off 54 percent to $149 million.

Market share gained despite competitive sales

environment. Innovative order-fulfillment program

launched, resulting in major reductions of machine

delivery times and dealer inventories.

Major provider of repair parts, accessories

and aftermarket support.

Key Products — Warehouses and distributes more than

350,000 different parts for John Deere and other makes

of equipment.

Major Customers — Owners/operators of

John Deere and other makes of farm,

construction and lawn-care equipment.

1999 Highlights — Sales reach

$1.9 billion, up slightly. John Deere

Personal Service program fully

converted for Web-based access.

“Dress Up a Deere Friend”

parts kits introduced for

reconditioning and updating

older John Deere tractors.

Leading manufacturer of off-highway diesel engines for

internal use; growing presence in original equipment

manufacturer markets.

Key Products — Diesel and

natural-gas engines, transmissions

and powertrain components.

Major Customers — John Deere

equipment divisions, other OEMs and

makers of stationary equipment such

as irrigation pumps and generator sets.

1999 Highlights — Overall sales decline

24 percent.Worldwide sales to OEMs

decrease slightly; sales to OEMs in Europe

up 30 percent. Joint venture ReGen

Technologies begins operation of engine-

remanufacturing facility. New engines

introduced in tractor, combine and

cotton-harvesting equipment lines.

Achieving Genuine Value for Customers Worldwide

C O M M E R C I A L & C O N S U M E RE Q U I P M E N T

C R E D I T

S P E C I A L T E C H N O L O G I E S H E A LT H C A R E

World leader in premium turf-care equipment and work vehicles.

Key Products — Lawn and garden tractors, commercial- and

homeowner-mowing equipment, utility tractors and vehicles, skid-

steer loaders, golf and turf equipment, handheld power products.

Major Customers — Homeowners, commercial-mowing and

grounds-care operations, golf courses and farmers.

1999 Highlights — Sales increase 21 percent to $2.6 billion;

operating profit maintained at $213 million. Market share improves in

every significant product category. Heavy growth spending continues;

construction under way for two more production facilities.

Major provider of financing and leasing to agricultural,

construction and grounds-care customers.

Key Products — Retail and wholesale financing, leasing,

revolving credit and crop-production loans.

Major Customers — On retail level, owners of agricultural,

construction and grounds-care equipment, as well as motor-

home owners. At wholesale, dealers of agricultural and

construction machinery, engines, manufactured housing and

recreational vehicles.

1999 Highlights — Solid growth continues with net income

reaching record $175 million.Administered portfolio increases

14 percent to approximately $11 billion.

Loan volumes for ag equipment steady

despite big drop in farm-machinery

sales across industry. International

growth continues.

Five operating units, providing range of electronics-related

products and services.

Key Products — Agribusiness information-management systems,

mobile-equipment control and monitoring devices, Internet-based

agribusiness data collector, vehicle-tracking systems.

Major Customers — John Deere equipment divisions, other

equipment and vehicle manufacturers.

1999 Highlights — First year of operation; strong revenue

growth shown.

Health-benefits provider that plays key role in containing

Deere health-care expenses.

Key Products — Managed health-care services, including John

Deere Health Plan, Inc., a health maintenance organization, and

John Deere Health Care, Inc., a manager of health-benefit services.

Major Customers — John Deere employees, as well as employees of

some 1,600 other companies and government agencies in four states.

1999 Highlights — Continued improvement results in increased

profitability. Former HMO Heritage National Healthplan, Inc.

changes name to John Deere Health Plan, Inc. to reflect long-standing

association with Deere & Company.

and communities. In support of that commitment, the company seeks

to achieve profitable growth on a global scale, enhance efficiency

through continuous improvement, and provide products and services

of distinction, through business innovation.

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A G R I C U LT U R A L E Q U I P M E N T

Ag Weathers Tough Conditions,Moves Ahead With New Products, Global Growth

• Advanced combine line highlights new products

• Market-share gains recorded

• Global growth continues

John Deere’s new 50-series combines are

sure to make quite a mark in farm circles.

Introduced late in the year, the combines provide

for improved grain quality, increased threshing

and separating capacity, easier servicing —

and even more operator comfort.

The 50-series lineup comprises six all-new

models — three with the traditional cylinder/

walker technology; a CTS (cylinder-tine separator)

model, ideal for rice; plus two totally new STS

models, featuring the patented John Deere single-

tine separator system that is unlike any other

harvesting concept.

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Although financial results suffered due to depressed farmconditions, Deere’s worldwide agricultural-equipmentoperations introduced important new products in 1999 andstrengthened their overseas performance with significantnew initiatives.The division also took aggressive steps to curtail production in the course of reducing U.S.field inventories by $800 million for the year.With thismeasure, Deere’s farm-machinery production should begin approximating retail demand in the year 2000. SaysRobert Lane, agricultural-equipment division president:“Although such a substantial cutback in production had a negative impact on our results in 1999, it puts us in a better position to respond to changes in the retail climatemoving forward.”

Results Decline on Farm Slowdown

Overall sales were down 31 percent and the divisionreported an operating loss of $51 million. Industry-wide,U.S. retail sales for large tractors and combines fell about35 percent, one of the steepest-ever single-year declines.

Prices of farm commodities such as corn, soybeansand wheat showed continued weakness in 1999 and, insome cases, are down by as much as half from peak levelsof mid-decade.“Farm income and farmer confidence areprimary drivers of U.S. farm machinery sales, and bothweakened through the year,” Lane notes.The downturn inthe U.S. agricultural economy is expected to continue in the year 2000 with a further decline in demand of 5 to 10 percent expected in North America. Despite theweakness, John Deere sales grew in several product categories and market share rose for four-wheel-driveand row-crop tractors, combines and certain hay tools.

It was a big year for new products, highlighted by anall-new family of combines. Innovations in products andservices are becoming more important in the face ofincreasingly higher customer expectations and needs.“In thisage of increased customer sovereignty, we are redoubling our commitment to offering the most innovative, productiveequipment available,” says Lane.“Our new combine andother products introduced during the year are evidence ofjust how seriously we take our commitment.”

Deere’s 50-series combines include two new STSmodels based on Deere-patented technology. The single-tine separation system has unique features making it superior to conventional rotary concepts.“We expect thesenew machines, particularly the 9750 STS, to help us substantially increase our leading market-share position inthe U.S., and to make significant gains in other key grainproducing countries,” Lane states. Other new productsinclude a rubber-track version of four-wheel-drive 9000-series tractors, as well as updated versions of the 7000- and8000-series tractors, and two lower-priced models of thepopular 5000 series. Comments Lane,“The introductionof these and other innovative products puts Deere in aneven stronger position for further profitable growth on a global scale.”

John Deere dealers — with 1,600 locations in NorthAmerica alone — remained at the heart of the company’ssuccess in farm equipment. Unparalleled in experience andproximity to the customer, Deere’s North American dealershave $6 billion in assets and employ some 25,000 people.“Highly productive ag equipment requires the finest inproduct support to assure uptime during critical periods,”says Bud Porter, senior vice president.“Our dealer network

really impressed with the way the STS handled such

demanding conditions. In fact, with the STS we could

probably harvest twice as many acres of oats in a day,

under extreme conditions, than with other combines.”

One STS model of particular note is the 9750,

Deere’s first-ever machine in the class-seven capacity

category. Powered by a 325-hp John Deere engine,

it also has a massive (300-bushel) grain tank.

Already the U.S. market leader in combines

by a wide margin, John Deere expects to achieve

substantial market-share growth with the 50 series.

In addition, the machines’ advanced features are seen

setting the pace for substantial global expansion.

The STS models use a unique feeding and crop-

flow principle that involves the crop being “pulled

and released” as it spirals through the combine.

This allows superior material handling and more

separating capacity — up to 25 percent more in small

grains than conventional rotaries — and makes the

STS uniquely well-suited for all crops and conditions.

That’s exactly what impresses Canadian grain

farmer Gary Petrie, right, who has 4,000 acres of

wheat, oats and other crops in Lintlaw, Saskatchewan.

“Farming in a high-moisture area, we get a lot of

oat straw,” he says. “It’s tough to get this through a

combine and threshing can be difficult. We were

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is in solid financial condition and is well-positioned to takeadvantage of Deere’s growth opportunities.”

Although farm-economic conditions throughout theworld have been afflicted by low commodity prices, machinerysales in many international markets, particularly in Europe,have declined less than in North America. Deere’s overseassales of farm machinery were down 15 percent for the yearand remained profitable. A stepped-up level of global growthlies at the heart of Deere’s strategy for expansion, Lane says.“While we have every intention of furthering our position asthe farmer’s first choice in North America, our greatest growthpotential lies overseas, particularly in developing nations.”

Indian Venture Advances

In this respect, a tractor manufacturing facility in India nearedcompletion. Production of smaller tractors, initially based on theJohn Deere 5000 series (45-75 hp), is expected to begin earlynext year at a joint-venture facility in Pune, located in westernIndia. In Deere’s view, this popular, versatile tractor makes an ideal platform for global markets.An additional joint venture inTurkey will produce similar-size tractors and distribute Deereagricultural equipment in that country. Other ventures formedduring the year will pursue opportunities to expand Deere’sbusiness in countries of the former Soviet Union and easternEurope, especially in Poland.

In South America, Deere increased its ownership to 100 per-cent in the Brazilian farm machinery maker, SLC-John Deere.Deere also opened a new factory in Brazil to produce Cameco-designed sugarcane-harvesting products. Brazil and the neighboringarea represent the world’s largest sugarcane-producing regionand are moving rapidly to adopt mechanical harvesting methods.

Extending John Deere’s Leadership in North America

Besides international expansion, agricultural equipment’s growthplan focuses on increasing Deere’s leading market share in NorthAmerica. This is being done in two ways — through productsfor market segments in which Deere has traditionally been asmall player, such as large-scale haying and commercial spraying,as well as through a stream of innovative products for the traditional customer base — the new STS combines being acase in point. In addition, the division is working closely withother units within Deere, such as the special-technologiesgroup, to develop advancements to help make all customersmore productive and profitable. Examples include precision-farming packages and global-vehicle communications systems.

At the same time, the organization is revising key processes,notably those concerning customer acquisition, order fulfillment,product development and customer support. Such steps areexpected to bring about increases in efficiency and quality,and further enhance customer satisfaction. Says Lane,“We’reconfident these actions will dramatically alter the way we dobusiness and enhance customer satisfaction in a manner thatbrings substantive value to shareholders.”

For all their promise, business ventures in developing

nations usually take years to pay off, many companies

find. Not so with Deere’s Jialian Harvester Co. (JDL)

in China, which was profitable in its first full year of

existence (1998) and again in 1999. The operation’s

1,500-employee production facility in the northern city of

Jiamusi manufactures nearly 2,500 combines annually.

These include a small (55-hp) model, above, preferred

by custom harvesters as well as a larger (150-hp)

combine for use on state-managed farms. According to

Doug Schenk, who manages Deere’s operations in

China, JDL’s profitability has been enhanced by effective

cost management and a compensation plan that

bases production-worker pay in part on the venture’s

financial results.

JDL is only the start. Deere is also exploring a

tractor-manufacturing arrangement with a major producer

of over 50-hp tractors. Exports to China are gaining as

well. A newly opened sales outlet in Urumuqi, in the

western province of Xinjiang, recently delivered more

than 100 new row-crop tractors to state-owned farms in

the region.

Although two-thirds of China’s 1.2 billion people live

or work on farms, many are migrating to jobs in the cities.

Result? A growing need for mechanization on Chinese

farms. “We see significant potential for sales of our large

ag machinery,” says Sam Allen, the Deere vice president

responsible for operations in China and many other

emerging areas.

JDL’s sales in China increased significantly in

1999 and are expected to increase again over the next

year. Although the nation is a giant market in itself,

export opportunities from China exist in Southeast Asia

and could add growth to Deere’s ventures in the near

future, Allen believes.

13

Call it the answer to a farmer’s dreams — no matter in

which part of the world he lives. A tractor faster,

smarter and more comfortable than anything else on the

market. Indeed, the newly introduced 8000 Ten-series

tractors (and the rubber-track 8000T Tens) have created a

lot of excitement among those looking for more productivity,

while retaining the best features of the popular 8000 series.

“This tractor will make you a better operator,” says

Johnny Dickinson, marketing manager for the 8000 Ten

series. A case in point is the new

Implement Management System (IMS),

allowing control of up to 12 separate

tractor functions at the single push

of a button. No longer must farmers

remember to perform multiple,

repetitious procedures that can lead

to fatigue and error, Dickinson says.

Another new feature, the Automatic

PowerShift, monitors the engine load,

throttle position and transmission gear to

shift up or down, optimizing speeds in varying

conditions, and creating maximum productivity.

Besides a 5- to 10-hp boost, 8000 Ten-series

models also have 11 percent more powerful

hydraulics, an automatic tractor-shutdown feature,

smoother PTO engagement and an improved centerlink.

Then there’s the roomy cab and totally new seat, which

make long hours behind the wheel more comfortable.

Bottom line? According to Dickinson, the 8000 Ten

line has “leading-edge features and technology that

will keep customers at the peak of productivity well into

the next century.”

Farmer John Hoffman, below, agrees. An enthu-

siastic user of an 8000 Ten tractor on his farm

near Waterloo, Iowa, Hoffman gives a hearty

thumbs-up to the new model and is particularly

impressed by the implement-management

system. “Once you get familiar with the IMS,

you’ll never want to be

without it,” Hoffman

says. “It’s a real time-

saver, too. My guess

is that it lets me cover

5 to 10 percent more

acres a day.”

14

Driven by its customer-focused, process-driven manage-ment philosophy and the success of many new products,John Deere’s Worldwide Construction Equipment Division(CED) posted another solid performance in a tough market during 1999.

Sales for the year moved down 18 percent, to $1.9 billion, while operating profit declined 54 percent,to $149 million.The declines were largely due to dealerinventory adjustments associated with a new order-fulfillment effort.“In spite of the most competitive salesenvironment in some time, our products have gained market share, and we’ve continued to make importantgains with key customer groups such as large contractors,”notes Pierre Leroy, division president.

CED has targeted two primary customer groups —large contractors and the rental channel — as a means ofmeeting its growth objectives.These segments alreadyaccount for the vast majority of industry sales, and theirimportance is expected to grow. During the year, CEDformed a new division to gain large-customer business,with impressive initial results: Almost half of those identified as potential new customers purchased Deereconstruction equipment in 1999, resulting in a sales increaseof about $100 million.“Although we have traditionallydone well with smaller customers — and will most certainly continue serving them — we are stepping upour commitment to large contractors,” Leroy says.

Commitment to Customer Value Drives Construction-Equipment Performance

C O N S T RU C T I O N E Q U I P M E N T

• Products gain market share,despite keen competition

• Large contractors, rental channels targeted

• Breakthrough order-fulfillment effort off to fast start

15

Another way to capture new business is by demon-strating superior product support.To this end, the division’s all-makes replacement parts program, enablingDeere dealers to service competing equipment of alltypes, has proved highly successful.“Fast, reliable serviceis one of the best ways we can differentiate ourselvesfrom the competition and showcase our capabilities toowners of competitive machines,” Leroy says.

Serving a Market of One

CED is also focusing on delivering what the customervalues and offering individualized solutions.“We haveto supply a market of one,” Leroy says. Such efforts arebeing highlighted by the division’s innovative Estimateto Cash (ETC) order-fulfillment program, in whichequipment is built in response to specific customerorders rather than being produced months in advance.ETC was launched for all manufactured products in1999, leading to as much as a 90 percent decline inmachine-delivery times and a nearly 20 percent reductionin dealer inventories. In one particularly striking success,

Deere was able to cut log-skidder supplies by half andgain market share for one of its leading products whileindustry skidder inventories ballooned. According to H. J. Markley, senior vice president of manufacturing,ETC “puts us in position to link production schedulesmore directly to demand and be even more responsive to customer needs.”

In 1999, CED also continued bringing out newproducts for customers of all sizes. Among the most important products to debut last year were the H-seriescrawler dozers (sidebar, p. 16).The three new models offersuperior levels of operating ease and control as well asexceptional visibility.“The H-series gives customersimportant new product solutions in the small-crawler category,” an area in which Deere has long held a leadingposition, Leroy says.

Alliance Formed With Bell

During the year, Deere formed a strategic alliance withBell Equipment of South Africa to distribute articulated

It takes large product solutions to gain the

confidence of large contractor customers.

That’s why some of the biggest Deere

machines ever offered were rolled out in

1999 under the leaping-deer brand.

Through an existing partnership with

Hitachi Construction Machinery, Deere added

the model-550LC and -750 excavators, the

largest members of the Deere construction

family. They offer the same smooth control-

lability and reliability as existing units —

but with more horsepower (361-and 434-hp,

respectively), plus added bucket capacity. In

combination with higher operating weight —

up to 75 metric tons — the result is a more

stable machine that can move a lot more dirt

in less time.

“More customers are requiring

equipment with power and capabilities that

go beyond those of smaller machines,”

says James White, senior vice president of

marketing and sales. “We’ve also seen

enthusiastic support from dealers who want

to grow the heavy end of their business, as

well as from customers who really appreciate

Deere’s product support.”

With customers and dealers wanting

a wider range of equipment, it was a natural

move to add trucks to the CED product

lineup — in this case, a line of articulated

dump trucks (ADTs) manufactured by

Bell Equipment. The trucks (237-to 410-hp)

are particularly suited for off-highway and

mining uses.

ADTs feature a frame with a swivel

joint so all six wheels stay planted on the

ground in the most rugged off-road terrain.

Matched with large excavators and loaders,

ADTs can cost-effectively move large volumes

of material, with help from full-time six-

wheel-drive and oversized tires that are

perfect for soft or muddy ground conditions.

Bell manufactures the Deere-branded

trucks at its facility in Richards Bay, South

Africa. In addition to having exclusive

distribution rights in the Americas, Deere

provides service support.

Start with best-in-class features, add a generous amount of

customer input, and you get the new H-series crawler

dozer line. “Customer focus groups worked with our engineers

from day one,” says Max Guinn, manager of the Dubuque Works,

which builds the crawlers. “Using virtual-reality technology,

we were able to test design options with customers before

the actual prototype was built.” The H-series line is equipped

with a Deere-made 4.5 L engine, producing 70- to 90-hp.

Customer reaction to the new crawlers has been

outstanding — likely the best-ever for a new CED product.

“We are taking customers from a ‘doubting Thomas’ mentality

to ‘You have a real winner here,’ within the first few minutes

of operation,” says Guinn.

Two important features of the H-series reflect those

customer suggestions. First, the new cab-forward design gives

the operator a commanding view of the blade. The operator

station and seat are set low to enhance confidence on slopes

without sacrificing visibility. In addition, the crawlers are

distinctive in their controllability. All models feature a dual-path,

hydrostatic-drive transmission, which is controlled electronically

or by a computer-control module. “This module gives us

almost endless capability to precisely control the machine,

making it intuitive, smooth and easy to operate,” notes Guinn.

Kevin Coopman, shown below at far left, of Coopman

Trucking and Excavating in Moline, Illinois, liked what he saw

when he tried out an H-series dozer recently. “I appreciate the

way it keeps pushing at a low idle. You can maneuver around

obstacles without losing anything off the blade,” he said.

A longtime Deere customer, Coopman currently owns a G-series

model but plans on trading up soon. “There’s no comparison

between the two; I could really tell the difference.”

dump trucks in North America.“This agreementenhances our efforts to provide total equipment, serviceand support solutions for a broader range of customers,”says Leroy.The massive trucks are well-matched toDeere’s largest-ever excavators in the 55- and 75-metric-ton classes. On the other end of the scale, the nimbleZTS compact-excavator line (22-38 hp) was introducedto serve landscape and residential needs.The “Zero TailSwing” design allows the rear of the machine to rotatewithin the width of the tracks, and permits excavationwork in close quarters.

Another key to CED’s long-term success will beforging a greater worldwide presence.According toLeroy, global growth is being pursued through the samestrategies working so well at home — namely, establishinga relationship with customers, listening to their needs, andthen using that knowledge to create a superior productwith customer value.“Customers everywhere are lookingfor the same thing — a solution for their needs,” saysLeroy.“How well we provide that solution, regardless of where our customers happen to be, will determinethe ultimate size and success of our division.”

17

Deere’s Worldwide Commercial & Consumer EquipmentDivision (C&CE) continued its pattern of double-digit salesgrowth in 1999. Consistent with the division’s strategic intentof producing a John Deere machine for “every landscape,”net sales grew 21 percent, to $2.6 billion. Operating profitequaled the previous year’s $213 million. Market shareimproved for every significant product category.

According to Fred Korndorf, division president, C&CE’ssubstantial growth is a result of a continued aggressive investment in new products and capacity — nearly $600 millionover the past four years.“We are now at the point where our investments are paying off in a substantial growth insales,” says Korndorf.“We’re achieving major market-sharegains in virtually every category.”

• Retail sales in the rapidly expanding business of ridinglawn equipment were up almost 40 percent, comparedwith a growth rate of about 5 percent industry-wide.This is a result of well-received new products and newsales channels, including a successful first year private-label relationship with The Home Depot (sidebar, p.18).The lawn and garden segment also benefited from

C O M M E R C I A L & C O N S U M E R E QU I P M E N T

Compact Tractors,Riding Lawn Equipment

Lead to Another YearOf Double-Digit Growth

While sales may be slumping for large farm tractors,

just the opposite is true with compact utility tractors

(CUTs), of 40-hp or less. John Deere’s CUT retail sales

increased 50 percent in 1999 thanks to the success of the

recently introduced 4000 series. “Small-tractor sales track with

Wall Street and general business conditions as much as with

the ag economy,” notes Jim Spear, marketing manager for

the 4000 series. A healthy economy has made CUTs attractive

to a broad group, he points out, notably weekend farmers.

John Deere dealer Annette Davidson, above in fore-

ground, agrees. Co-owner of a second-generation dealership

in Rhome, Texas, her store’s sales of CUTs tripled in 1999.

“Many customers are those who’ve moved out of the city to

small acreages. They like the 4000’s operator station, easy

maintenance and convenient operation,” she adds. “Deere did

a really good job of researching and coming out with a tractor

that fits customer needs.”

One such customer is Linda Shipp, owner of a horse

ranch northwest of Dallas. Shown above driving her John

Deere 4600 compact utility model, she found everything she

needed in the versatile tractor. “I needed something small

enough to work in a 50-foot pen yet big enough to mow

50 acres of grass,” she says. So far, Shipp has used her

tractor to mow pastures, smooth out horse arenas, haul dirt

and even build a parking lot.

Having dealer Davidson just five minutes away is a

plus, too. “I like the quality of Deere tractors,” Shipp says.

“Besides, when customers visit the ranch, I want everything

neat and pretty. That shiny green tractor is part of our image.”

• Sales grow 21 percent

• Major market-share gains across board

• Successful first year of private-label brands

They aren’t green and yellow, but if The Home

Depot’s Scotts-brand tractors seem to run like

a Deere, there’s a good reason: They’re made like

one. Beginning in 1999, Deere started manufac-

turing five models of riding lawn equipment under

the Scotts label through a partnership with The

Home Depot. Result? A 45 percent increase in

sales plus a big drop in return rates compared

with the previous supplier.

Key to the success of the Scotts arrange-

ment has been the involvement of 1,200 John

Deere dealers, who are providing extensive

sales and marketing support. Among their roles,

Deere dealers are functioning as manufacturer’s

reps inside The Home Depot stores, helping

train sales people and co-sponsoring promotions.

They also perform pre-delivery inspections with

technicians like Tom Ackerman, left, of Consumer

Tractor in Franklin, Tennessee. He services

Scotts tractors through Deere’s mobile lawn care

equipment service, Ready to Mow. “This really

is a win-win situation for both parties,” Ackerman

says. “We provide Home Depot the service

component they lack, while they serve as an

additional sales outlet for our product.”

Deere expects Scotts sales to double in

2000 thanks to positive customer acceptance,

expanded capacity at the Horicon factory, and the

addition of John Deere-produced walk-behind

mowers to the Scotts lineup.

18

strong response to the new LX-, GT- and LTR-serieslawn tractors, and solid growth of Sabre products,which became exclusively a John Deere dealer brand in 1999.

• Commercial operations were helped by outstandingsales of compact tractors and utility vehicles. Sales ofGator utility vehicles — which added heavy-duty,electric and military models — were up 25 percenton a retail basis. Compact utility tractors produced by the Augusta, Georgia, factory had a 50 percentincrease in retail sales, twice as much as the industry.

Golf and turf equipment also had a substantial salesgain as more of the world’s premier golf coursesbought or leased John Deere equipment.The company’sline of skid-steer products received a positive customerresponse in their first year of sales due to innovativedesign features and marketing efforts by dealers fromall three Deere equipment divisions.

• Sales were up sharply in the consumer category,which manufactures and distributes handheld products under the Homelite brand through massmerchandisers and the John Deere brand throughcompany dealers.The Homelite segment has undergone a dramatic financial turnaround, according to Korndorf, due to new products and incorporationof Deere quality standards.

When Home Depot officials checked

out possible suppliers for the

Scotts-brand lawn tractors, they paid

a visit to Deere’s Horicon, Wisconsin,

riding lawn-equipment production facility, shown below. Apparently,

they liked what they saw. The trip helped clinch what is proving to

be a very important partnership. “The Home Depot was impressed

with the Horicon organization, the attitude of the employees and the

attention to high quality paid by everyone,” comments Mark Rostvold,

C&CE senior vice president.

The state of Wisconsin feels likewise. Late in the year, the efforts of

Horicon’s 1,788 employees were recognized with the 1999 Wisconsin

Forward Award of Excellence — the first John Deere production facility to

receive quality-excellence recognition on a statewide level. The Wisconsin

award is patterned after the Malcolm Baldrige National Quality Award

and is based on identical criteria and scoring.

According to Hank Martens, Horicon general manager, the facility

got involved as a way to bring an outside perspective to its own quality

self-assessments. “We knew this would give us external feedback for our

efforts to strive for performance excellence,” he says. While proud of

their accomplishment, Horicon officials are more interested in the long-

term impact. “Achieving the award is not as important as the insight

we receive,” Martens notes. “It’s an extremely valuable benchmark

that assists us as we continuously improve all facets of our operation.”

Needless to say, the Wisconsin award does not mark the end of

Horicon’s quest for performance excellence. Based on its success in the

Wisconsin competition, and the knowledge gained in the process, the plant

is preparing to compete for the Baldrige national award in the year 2000.

19

Promoting Deere-made products through the masschannel is a strategy that has taken hold faster than expected,says Mark Rostvold, senior vice president.“Sales of our ridinglawn equipment through non-dealer outlets have greatlyexceeded our expectations,” he says in reference to sales of Scotts-brand products.“The use of multiple brands inmultiple channels, all being supported and serviced by John Deere dealers, is a good, long-term business move.”

Building to Meet Growing Market Acceptance

C&CE’s intensive, multiyear development of new facilitiesalso moved ahead in 1999. Ground was broken for two majornew production facilities, including a 300,000-square-footfactory in Williamsburg,Virginia, that will triple capacity forthe popular Gator utility vehicles. In addition, capacity at the Augusta, Georgia, plant is being doubled for small tractorproduction as a result of strong retail demand and marketshare increases. In other locations, Deere has expandedcapacity through efficiency improvements and adoption ofstate-of-the-art manufacturing techniques.

6x6 Plan Charts Course for Growth

After an expected near-doubling in sales between 1995and 2000 from internal growth, C&CE operations are following a plan that calls for sales to increase to $6 billionby 2006.The “6x6” plan also targets achievement of twiceas much market share in traditional sectors, such as ridinglawn equipment, and higher operating margins despitecontinued heavy growth expenditures.“John Deere has theresources, competencies, scope and scale that are unmatchedin the markets we serve,” says Korndorf.“Thus we are in a unique position to achieve tremendous growth, and adominant position, in practically all our businesses in a very short time.”

Credit Broadens Services, Has Record Earnings

20

• Net income rises to $175 million

• Worldwide expansion supports Deere equipment sales

• Lease products continue growth

J O H N D E E R E C R E D I T

John Deere Credit ( JDC) maintained its sound growthrecord in 1999 despite the depressed farm economy,continuing growth expenditures and competitive marketconditions. Operations benefited from the strength of the construction and consumer markets, as well as thesale of non-strategic business units.

Net income rose to a record $175 million and newbusiness volume increased 8 percent. Net receivables andleases administered grew 14 percent to approximately $11 billion. A substantial share of that growth was theresult of John Deere Credit’s decision to expand itsoperations worldwide as a means of supporting theinternational sales of John Deere equipment.Worldwide,about two-thirds of JDC new-business volume in 1999was related to the sale or lease of John Deere equipment.

Loan Volumes Steady, Leases Grow

Loan volumes for agricultural equipment remained about the same in spite of a large decline in the sale offarm machinery industry-wide, which resulted in animprovement in JDC’s market share.

Moreover, delinquencies and write-offs were relativelylow considering the weakness of the farm economy.According to Jon Volkert, JDC president, the division isbenefiting from its long experience serving the farmcommunity.“We’re seeing clear benefits from our knowledge of the farm market, both in terms of volumeand the quality of business,” he states.

Lease volume rose 8 percent as each of the company’slease products showed solid growth.The golf and turfbusiness, with a $134 million portfolio and dominantmarket position, grew by 28 percent as it continued to provide creative leasing products to golf courses in the U.S. and Canada. At the same time, construction

Just four years ago, John Deere Credit existed only in the

United States and Canada. Since then, operations have

expanded to Mexico, Germany, France, the United Kingdom

and Australia. JDC’s international portfolio, excluding Canada,

approached $550 million in 1999.

More specifically, 1999 saw John Deere Credit acquire the

remaining 50 percent of a venture in the United Kingdom and

begin a new partnership with the largest cooperative bank in France,

Credit Agricole. Award-winning French farmers Dominique and

Olivier Guenier turned to JDC to finance equipment for their nearly

600-acre operation in the Normandy region. “We were very pleased

with the low interest rate JDC provided us for a new 2256 combine,”

noted Olivier (above). The father-son team grows wheat, flax,

sugarbeets, peas and other crops on their fourth-generation farm.

John Deere Credit’s total international business volumes

surpassed projections while the European operations performed

as anticipated. JDC expects to enter the South American market

in 2000. The division’s international business focuses primarily

on John Deere-equipment financing.

21

Operating a profitable 2000-acre grain farm takes both dependable

equipment and a stable, competitive source of credit. Triple R, Inc.,

a family farm operation near Gibbon, Nebraska, depends on its John Deere

tractors, combine and tillage equipment to get the fieldwork done —

and on John Deere Credit for production- and equipment-financing needs.

Triple R keeps its equipment line current by purchasing a new

John Deere tractor and combine every five years or so. “When it comes time

to purchase big-ticket items and we don’t have the cash, we appreciate

doing business with John Deere Credit,” says Shawn Reiber (above, right).

“Our John Deere 4960 tractor and 9600 combine were purchased and financed

using JDC installment loans. In most every case, John

Deere Credit’s rates and terms were better than the rest.”

This year, Triple R took advantage of two additional

JDC credit products — an annual production loan and

an intermediate term capital loan. “The way grain

markets were this year, the production loan really

helped out with our cash flow,” notes Steve Rogers,

Reiber’s cousin (above, left). The two men operate

Triple R along with their fathers, Dick Rogers Jr. and

Tom Reiber. “The intermediate term loan was the perfect

solution for setting up affordable payments on our new

irrigation system,” Rogers adds. John Deere Credit

provides direct on-farm credit solutions, like the loans to Triple R, through

a team of veteran JDC finance specialists, as well as farm-input loans

delivered through several leading farm-input suppliers.

To the Reiber and Rogers family, these JDC credit products ensure

continued operations for a farm that has been in the family since 1906. To

John Deere Credit, these solutions are another way of meeting the broadening

range of customer-credit needs.

equipment leasing continued its consistent growth with a 38 percent gain.To further enhance the leasing side of the business, JDC acquired Senstar Capital Corporation,a management group with extensive experience in largelease transactions.

John Deere Credit’s quality initiatives shifted into highgear in 1999. By taking an innovative approach to processmanagement, JDC refocused its worldwideoperations on improving quality and customerservice.As a result, the business is creating moreefficiencies while providing better and more distinctive products.

Broader Offerings Ahead

What’s ahead for JDC’s operations, whichgenerated more than $1 billion of net incomein the decade? A broader slate of services, forone thing.“We’re directing our efforts towardgrowing our agricultural financial-services lines,which include loans to agribusinesses and productionloans to farmers,” says Volkert. Production-loan volumedoubled in 1999, to $260 million.

According to Volkert, growth plans are focused onagribusiness and international initiatives, while theoperation “never loses sight of our primary purpose —to lend support to the sale of John Deere equipment inall markets, throughout the world.”

2222

NEW TECHNOLOGY GROUP FORMED

While the latest in innovationand technology is helping

drive sales in Deere’s equip-ment divisions, it presents

a business opportunity in its own right for the

John Deere SpecialTechnologies Group.Formed during the

year, JDSTG consists offive operating units that

offer a range of electronic,wireless-communication, informa-

tion-system and Internet-related productsand services to Deere and outside customers.

According to Charlie Stamp, JDSTG president,the group’s purpose is to integrate the most advanced

technology into John Deere equipment and, in other cases, tomake such advancements directly available to external customersthrough a variety of business relationships and ventures.

One JDSTG unit, Phoenix International, makes electronicdevices (like the one above) that control and monitor a variety of mobile-equipment functions. Another, AGRISCorporation, is the world’s leading supplier of information-management systems for agribusinesses. A third unit,VantagePoint Network, offers a Web site for collecting, storingand interpreting data generated by farming operations.NavCom develops systems for tracking the exact position ofvehicles ranging from golf carts to construction equipment,and for transmitting data to and from vehicles on the move.John Deere Information Systems ( JDIS) provides information-technology products and services to John Deere dealers.

“Through our efforts,” Stamp says,“each of the company’sequipment divisions will be able to accelerate the adoption of critical electronic and communication technologies. Inaddition, offerings such as those from JDIS,VantagePoint andAGRIS provide customers with the competitive edge theyneed to manage their business operations more effectively.”

22

PARTS DIVISION

SALES INCREASE

Despite an abrupt downturn in the farm economy,

1999 sales of Deere’s Worldwide Parts Division —

$1.9 billion — were up slightly from the previous

year. Making it easier for customers to buy parts,

and getting parts to customers sooner, helped the

division maintain its performance, says Dick Yahnke,

director of parts marketing.

One example: The John Deere Personal Service

program was fully converted for Web-based access.

Through this program, which is being renamed Web

JD Parts, agricultural- and construction-equipment

customers in North America can check dealers’ parts

inventories, price parts and order them from the com-

fort of their homes, offices or shops. Several hundred

customers are signing up for the new service each

week. “Web JD Parts is much more user-friendly than

the old system,” Yahnke says.

During the year, the division also began offering

“Dress Up a Deere Friend” parts kits for reconditioning

and updating older John Deere tractor models, such

as the venerable 4020. “Customer reaction has

been very positive,” Yahnke says. “With commodity

prices as low as they’ve been, customers appreciate

our acknowledging that not everyone can buy a

new tractor until the farm economy recovers.”

Other, ongoing customer-focused initiatives in

the parts division are aimed at further reducing

parts-delivery times and increasing availability of

all-makes parts at John Deere dealerships. “Offering

parts for other brands puts dealers in a position to

serve more customers,” Yahnke says. “We can also

offer alternatives to existing customers.”

O T H E R O P E R A T I O N S

23

Continuing its strong focus on customer service,

John Deere Health achieved dramatically better

results in 1999. Membership in JDH managed-care

plans totaled nearly 414,000, including almost

85 percent of Deere’s North American workforce.

Improving business processes to increase

efficiency, while at the same time maintaining high

quality standards, contributed to the better financial

performance, according to JDH president John

Jenkins. One quality indicator: John Deere Health

ranked in the top 10 percent nationally in a 1999

survey used as an industry benchmark for measuring

overall consumer satisfaction with health plans.

Meanwhile, JDH continued to fulfill

its historical mission of limiting escalation of

Deere’s health-care costs.

During the year, JDH launched an initiative

to leverage the power of the John Deere brand.

John Deere Health consolidated and renamed all

of its health plans under the John Deere brand to

attract new customers and strengthen relationships

with existing customers.

In addition, JDH continued to evolve a

pilot project initiated in 1998 in Waterloo, Iowa,

aimed at making health-care access both more

convenient for patients and more efficient for

providers and for John Deere Health. Initial

results in Waterloo have been favorable, and

similar projects have been launched in two other

core markets, the Iowa-Illinois Quad Cities and

Kingsport-Bristol-Johnson City, Tennessee.

OEM SALES HELP POWER SYSTEMS WEATHER AG DOWNTURN

Due to sharply lower demand for John Deere agricultural equipmentin North America, Deere Power Systems Group (DPSG) volumesdeclined in 1999. Overall sales of engines and powertrain componentswere down 24 percent.Worldwide sales to original equipment manufacturers decreased slightly, but sales to OEMs in Europe rose 30 percent as new external customers began using Deere engines.Worldwide sales to non-agricultural OEMs increased 5 percent.Thisgain also resulted from bringing new customers on board, according to Ron McDermott, DPSG senior vice president.

ReGen Technologies, a joint venture between Deere andSpringfield Remanufacturing Corporation, completed construction of an engine-remanufacturing facility in Springfield, Missouri. ReGenremanufactures complete engines, as well as fuel systems and otherengine components, in a controlled factory environment.Theseremanufactured products offer Deere customers quick-turnaroundrepair options and increase shop throughput for dealers.

New, more-powerful John Deere PowerTech engines were introduced in the company’s latest row-crop tractors, combines andcotton-harvesting equipment. In addition, Deere’s all-new 9000T-seriestrack tractors feature PowerTech 12.5 L engines that use electronics to increase power output during steering maneuvers and maintainconstant power to the tracks.This industry first significantly improvescustomer satisfaction.

DPSG also introduced new, higher-horsepower marine versions ofPowerTech 4.5 L and 6.8 L engines for commercial boats and pleasurecraft, the PowerTech 12.5 L engine for commercial-boat applications,and a 225-hp PowerTech 6.8 L natural-gas engine. PowerTech 6.8 L and 8.1 L natural-gas engines have been certified to meet stringentCalifornia Air Resources Board emissions standards.

During the year, Deere continued to demonstrate its leadership in emissions compliance by introducing 15 new engine applications that were certified at exhaust-emissions levels 8 percent lower than those required by theU.S. Environmental Protection Agency.

JOHN DEERE HEALTH

POSTS IMPROVED RESULTS

24

P E O P L E & C I T I Z E N S H I P

ENVIRONMENTAL GOALS

STAY ON TRACK

Progress continued through the year to

implement the company’s new environmental

management system, first introduced in 1998.

Sixty percent of the system’s elements have

been implemented at units in North America

and Europe. Units in the U.S. and Canada

are now being audited for conformance to the

new standards.

In the past year, a support program for

the company’s 37 smaller factories and parts

depots was unveiled to help them reach long-

term corporate environmental goals. Corporate

staff supplied additional training and guidance

during site visits to the units.

Major environmental-related projects

completed in 1999 include a new paint system

at the company’s combine factory in East Moline,

Illinois, (above) and improved wastewater

treatment processes at both that facility and

one in Horicon, Wisconsin.

PRODUCTS STRESS SUSTAINABILITY

A number of new products and materials for 1999 are bringingenvironmental benefits to Deere customers.

In a critical area affecting groundwater quality, Deere’s low-drift nozzles for new and existing chemical sprayers were namedto the American Society of Agricultural Engineers list of top-50new products for 1999. By producing fewer small droplets, thenozzles reduce the risk of drift while spraying.This results in morechemical reaching the intended target.

In a related breakthrough, an exclusive Deere winterizerfluid is replacing the conventional recreational-vehicle antifreezeused to protect delicate sprayer components from damage during winter storage.The fluid complies with federal codesand, unlike regular antifreeze, can be safely drained and reusedor disposed of during normal spraying operations.

In another environmental milestone, some 1,000 dealers and customers were added to Deere’s bulk-oil program thatbegan in 1992. It now includes more than 600 agricultural- and construction-equipment dealers and 2,000 equipment customers.The program eliminates thousands of individual plasticcontainers and drums that otherwise would end up in landfills.

In addition, some of Deere’s new 50-series combines werefitted on an experimental basis with special rear panels (below),molded from a renewable soybean-based plastic. The material alsoreduces weight. Use of the plastic resultedprimarily from the teamwork of Deere’stechnical center, the United SoybeanBoard and the University of Delaware.Work is progressing to apply this new material to productionmodels both in the U.S.and Europe in the future.

Work also continuedon Deere’s cleaner burn-ing, two-cycle engines,which are being readiedfor initial use next year in power string trimmersand backpack blowers.Recently developedcompression-wave technology adds little cost or weight, yet results in a 75 percent emission reduction anda 30 percent increase in energy efficiency over earlier designs.The two-cycle engines are scheduled for use in most Deerehandheld equipment by 2001.

PRODUCT SAFETY REMAINS A TOP PRIORITY

In keeping with Deere’s commitment to employ themost advanced safety technology available, product safetyinnovation continued and three safety-related patentswere awarded to the company in 1999:

The potential for accidental skid-steer loader movementwas addressed with a circuit that requires the operator tobe in the seat with the seat belt connectedbefore the machine will run;

An innovative safety stop helps prevent raised cabs (right) on skid-steer loaders from accidentally lowering during maintenance;

A reverse-implement optionrequires manual activation to operate a mower or otherPTO-powered implementwhen in reverse.This remindsthe operator to use extracaution and to look behind before backing up.

The power-packed ZTS-series compact excavator(below, left) is a formidable new product that offers a distinct safety advantage: It can work in very confined construction, residential, utility and highway spaces.

Unlike standard configurations, Deere cabsrotate within the width of their tracks,preventing an accidental swing into traffic,obstacles and other nearby hazards.

As a means of promoting machinerysafety to children, Deere has introducedtwo new cartoon characters that willappear in company publications and safety-oriented videos.Both will help children recognize the dangers of playing around farm equipment.Another cartoon character, Ready Rooster, has promotedagricultural safety for the past two years.

25

DEERE UNITS SET SAFETY MARKS

Safety-process activities involving management and

employees continued tomake Deere factories

some of the safest work-places in their industries.

Company-wide, the lost-time frequency ratein 1999 was reduced by 11 percent from the previousyear and the severity rate saw a 14 percent improvement,to the best-ever levels for both categories.

In the U.S., several factories have registered significantimprovement in their lost-time frequency rates sinceadopting DuPont’s Safety Training Observation Program,including a 100 percent improvement over a three-yearperiod at the Deere-Hitachi facility in Kernersville,North Carolina.

In all, 21 domestic Deere units earned 29 safety awardsfrom the National Safety Council in 1999. Eight units hold industry-best records for workplace safety – five ofwhich were established in the past year. Notably, Deere’s East Moline factory holds both company and industry safety records, by recording nearly 8 million hours workedwithout a lost-time injury or illness. Safety gains were not limited to the U.S. Deere’s Monterrey and Saltillo,Mexico, facilities reduced their occupational lost-timeinjury rates by more than one-third in 1999.

•

•

•

BPE PROMOTES INNOVATION, CONTINUOUS IMPROVEMENT

As a means of formalizing the concept of continuous improvement,John Deere has adopted four ambitious quality initiatives. All apply the principles of business process excellence in dealing withemployee, customer and supply-chain issues. BPE techniques targetways to improve efficiency and effectiveness, reduce defects and cycletimes, and enhance customer satisfaction. During the year, some 900team projects, involving several thousand employees, were completedor in progress.

Here is a sampling of the results attained by Deere BPE teams recognized in 1999:

A team from Deere’s credit operations, based in Des Moines, Iowa,reduced the time for a customer to obtain financing by up to 78 percent and cut already-low contract errors by a further 50 percent.

At the Parts Distribution Center, Milan, Illinois, a team reduced the time to get parts into storage by 30 percent and storage-locationdefects by 77 percent, thereby helping customers get parts faster.

East Moline Harvester Works team members developed ways to bettersupport dealers and their customers during the critical harvest period,saving customers an estimated $3 million in downtime each season.

Delivery times for tractors exported from Deere’s Waterloo factory were improved more than 50 percent, with an annualized cost reductionof $1 million, thanks to the efforts of an 11-person international team.

Through such team efforts, business process excellence “promotescompetitiveness, enhances quality, defines distinction and furthers the creation of genuine value,” noted Deere’s chairman and chiefexecutive officer Hans Becherer, in comments made during the yearto the top BPE teams.

26

CORPORATE CITIZENSHIP

KEY PART OF VISION

Genuine value, Deere’s corporate vision,

stresses the importance of responsible

corporate citizenship. To this end, Deere

continued its active support of community and

social service organizations. As an example,

in 1999, the company and its employees

contributed more than $3.5 million to support

local United Way campaigns. In addition,

employees donated countless volunteer hours

to help these agencies fulfill their goals.

The company also supported education,

the arts and community improvement, mainly in

locations where Deere has a significant presence.

One particularly noteworthy program, Renew

Moline, has reclaimed the area in downtown

Moline, Illinois, adjoining the site of John

Deere’s first plow factory. A number of business

establishments and offices have opened in the

area due to Renew’s efforts, notably a John Deere

visitors’ center and retail store. Additionally,

work began during the year on a collectors’

center for vintage agricultural equipment.

By helping communities and organizations

reach such well-aimed goals, John Deere people

are enhancing the quality of life for company

neighbors and customers throughout the world.

•

•

•

•

Deere & CompanyA N N U A L R E P O R T

1 9 9 9

Financial Statements ...............................................28-34Report of Management and Independent Auditors’ Report......35Management’s Discussion and Analysis.........................36-41Notes to Consolidated Statements ...............................42-54Ten-Year Summaries ...............................................55-56

Financial Review Contents

27

STATEMENT OF CONSOLIDATED INCOME

CONSOLIDATED(Deere & Company and Consolidated Subsidiaries)

Year Ended October 31(In millions of dollars except per share amounts) 1999 1998 1997

Net Sales and RevenuesNet sales of equipment......................................................................................................................... $ 9,701.2 $11,925.8 $11,081.7Finance and interest income................................................................................................................. 1,104.4 1,007.1 867.4Insurance and health care premiums .................................................................................................... 716.1 692.9 668.1Investment income............................................................................................................................... 61.4 73.1 67.2Other income ....................................................................................................................................... 167.8 122.6 107.0________ ________ ________

Total................................................................................................................................................ 11,750.9 13,821.5 12,791.4________ ________ ________

Costs and ExpensesCost of goods sold................................................................................................................................ 8,177.5 9,233.7 8,481.1Research and development expenses ................................................................................................... 458.4 444.4 412.3Selling, administrative and general expenses......................................................................................... 1,362.1 1,309.4 1,320.7Interest expense................................................................................................................................... 556.6 519.4 422.2Insurance and health care claims and benefits ...................................................................................... 594.9 579.0 554.0Other operating expenses..................................................................................................................... 236.3 175.6 94.0________ ________ ________

Total................................................................................................................................................ 11,385.8 12,261.5 11,284.3________ ________ ________

Income of Consolidated Group before Income Taxes................................................................. 365.1 1,560.0 1,507.1Provision for income taxes .................................................................................................................... 134.7 553.9 550.9________ ________ ________Income of Consolidated Group....................................................................................................... 230.4 1,006.1 956.2________ ________ ________

Equity in Income of Unconsolidated Subsidiaries and Affiliates Credit .............................................................................................................................................. (.3) .1 (1.4)Other............................................................................................................................................... 9.1 15.2 5.3________ ________ ________

Total............................................................................................................................................ 8.8 15.3 3.9________ ________ ________

Net Income........................................................................................................................................ $ 239.2 $ 1,021.4 $ 960.1________ ________ ________________ ________ ________

Per Share DataNet income – basic .............................................................................................................................. $ 1.03 $ 4.20 $ 3.78Net income – diluted ............................................................................................................................ $ 1.02 $ 4.16 $ 3.74Dividends declared............................................................................................................................... $ .88 $ .88 $ .80

The “Consolidated” (Deere & Company and Consolidated Subsidiaries) data in this statement conform with the requirements of FASB Statement No. 94. In the supplemental consolidating data in this statement, “Equipment Operations” (Deere & Company with Financial Services on the Equity Basis) reflect the basis of consolidation described on page 42 of the notes to the consolidated financial statements. The consolidated group data in the “Equipment Operations” income statementreflect primarily the results of the agricultural equipment, construction equipment and commercial and consumer equipment operations. The supplemental “Financial Services” consolidating data in this statement includes primarily Deere & Company’s credit operations. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the “Consolidated” data.

The notes to consolidated financial statements on pages 42 through 54 are an integral part of this statement.

Deere & Company

28

EQUIPMENT OPERATIONS FINANCIAL SERVICES(Deere & Company with Financial Services on the Equity Basis)

Year Ended October 31 Year Ended October 311999 1998 1997 1999 1998 1997

$ 9,701.2 $11,925.8 $11,081.792.5 131.1 114.8 $1,027.1 $ 887.0 $ 757.6

741.9 720.8 697.21.1 60.3 73.1 67.2

86.1 40.4 47.6 110.2 85.9 63.1_______ ________ ________ _______ ______ ______9,880.9 12,097.3 11,244.1 1,939.5 1,766.8 1,585.1_______ ________ ________ _______ ______ ______

8,193.1 9,252.7 8,499.3458.4 444.4 412.3953.6 932.5 940.3 411.4 382.8 388.9161.9 128.0 80.8 409.9 402.3 346.4

602.8 585.8 560.228.6 50.4 19.5 235.6 125.2 74.4_______ ________ ________ _______ ______ ______

9,795.6 10,808.0 9,952.2 1,659.7 1,496.1 1,369.9_______ ________ ________ _______ ______ ______

85.3 1,289.3 1,291.9 279.8 270.7 215.242.1 458.1 475.2 92.6 95.8 75.7_______ ________ ________ _______ ______ ______43.2 831.2 816.7 187.2 174.9 139.5_______ ________ ________ _______ ______ ______

174.9 162.8 147.2 (.3) .1 (1.4)21.1 27.4 (3.8) .1 .2_______ ________ ________ _______ ______ ______

196.0 190.2 143.4 (.2) .3 (1.4)_______ ________ ________ _______ ______ ______

$ 239.2 $ 1,021.4 $ 960.1 $ 187.0 $ 175.2 $ 138.1_______ ________ ________ _______ ______ _____________ ________ ________ _______ ______ ______

29

CONSOLIDATED BALANCE SHEET

CONSOLIDATED(Deere & Company and Consolidated Subsidiaries)

(In millions of dollars except per share amounts) October 31ASSETS 1999 1998

Cash and short-term investments......................................................................................................... $ 295.5 $ 309.7Cash deposited with unconsolidated subsidiaries................................................................................... ________ ________

Cash and cash equivalents ............................................................................................................... 295.5 309.7Marketable securities ........................................................................................................................... 315.5 867.3Receivables from unconsolidated subsidiaries and affiliates ................................................................... 30.2 36.2Trade accounts and notes receivable - net ............................................................................................ 3,251.1 4,059.2Financing receivables - net ................................................................................................................... 6,742.6 6,332.7Other receivables.................................................................................................................................. 273.9 536.8Equipment on operating leases - net..................................................................................................... 1,654.7 1,209.2Inventories............................................................................................................................................ 1,294.3 1,286.7Property and equipment - net ............................................................................................................... 1,782.3 1,700.3Investments in unconsolidated subsidiaries and affiliates ....................................................................... 151.5 172.0Intangible assets - net .......................................................................................................................... 295.1 217.6Prepaid pension costs ................................................................................................................... 619.9 674.3Other assets................................................................................................................................. 185.5 109.7Deferred income taxes.......................................................................................................................... 598.1 396.3Deferred charges.................................................................................................................................. 88.0 93.5________ ________

Total .................................................................................................................................................... $17,578.2 $ 18,001.5________ ________________ ________

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIESShort-term borrowings.......................................................................................................................... $ 4,488.2 $ 5,322.1Payables to unconsolidated subsidiaries and affiliates............................................................................ 15.5 31.1Accounts payable and accrued expenses .............................................................................................. 2,432.8 2,853.2Insurance and health care claims and reserves...................................................................................... 55.4 411.3Accrued taxes ...................................................................................................................................... 144.8 144.9Deferred income taxes.......................................................................................................................... 63.0 19.7Long-term borrowings.......................................................................................................................... 3,806.2 2,791.7Retirement benefit accruals and other liabilities ..................................................................................... 2,478.0 2,347.7________ ________

Total liabilities .................................................................................................................................. 13,483.9 13,921.7________ ________

STOCKHOLDERS’ EQUITYCommon stock, $1 par value (authorized – 600,000,000 shares;

issued – 265,760,670 shares in 1999 and 263,852,871 shares in 1998), at stated value................ 1,850.4 1,789.8Common stock in treasury, 31,995,775 shares in 1999 and 31,542,845 shares in 1998, at cost ......... (1,469.4) (1,467.6)Unamortized restricted stock compensation........................................................................................... (21.3) (7.2)Retained earnings................................................................................................................................. 3,855.3 3,839.5________ ________

Total................................................................................................................................................ 4,215.0 4,154.5________ ________Minimum pension liability adjustment.................................................................................................... (18.9) (18.7)Cumulative translation adjustment ........................................................................................................ (107.4) (80.5)Unrealized gain on marketable securities............................................................................................... 5.6 24.5________ ________

Accumulated other comprehensive income (loss) .............................................................................. (120.7) (74.7)________ ________Total stockholders’ equity................................................................................................................. 4,094.3 4,079.8________ ________

Total .................................................................................................................................................... $17,578.2 $ 18,001.5________ ________________ ________

The “Consolidated” (Deere & Company and Consolidated Subsidiaries) data in this statement conform with the requirements of FASB Statement No. 94. In the supplementalconsolidating data in this statement, “Equipment Operations” (Deere & Company with Financial Services on the Equity Basis) reflect the basis of consolidation described on page 42 of the notes to the consolidated financial statements. The supplemental “Financial Services” consolidating data in this statement includes primarily Deere & Company’s credit operations. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the “Consolidated” data.

The notes to consolidated financial statements on pages 42 through 54 are an integral part of this statement.

Deere & Company

30

EQUIPMENT OPERATIONS FINANCIAL SERVICES(Deere & Company with Financial Services on the Equity Basis)

October 31 October 311999 1998 1999 1998

$ 111.7 $ 68.3 $ 183.8 $ 241.5117.4 139.6________ ________ _______ _______229.1 207.9 183.8 241.5205.3 110.1 867.3266.0 95.5 4.8

3,251.1 4,059.2118.4 85.8 6,624.2 6,246.9129.4 139.4 144.5 397.3

2.6 218.6 1,652.2 990.61,294.3 1,286.71,738.8 1,653.9 43.5 46.41,362.8 1,620.4 9.9 20.3

294.8 210.1 .3 7.6619.9 674.395.7 78.3 89.8 31.4

592.9 372.6 5.2 23.780.8 63.3 7.2 30.1________ ________ _______ _______

$10,281.9 $10,766.0 $8,875.5 $8,903.1________ ________ _______ _______________ ________ _______ _______

$ 642.2 $ 1,512.4 $3,846.0 $3,809.715.5 43.0 358.1 187.0

1,891.9 2,098.1 540.8 755.155.4 411.3

138.1 142.1 6.8 2.87.2 19.7 55.8

1,036.1 552.9 2,770.1 2,238.82,456.6 2,318.0 21.3 29.7________ ________ _______ _______6,187.6 6,686.2 7,654.3 7,434.4________ ________ _______ _______

1,850.4 1,789.8 229.1 237.1(1,469.4) (1,467.6)

(21.3) (7.2)3,855.3 3,839.5 1,005.6 1,223.2________ ________ _______ _______4,215.0 4,154.5 1,234.7 1,460.3________ ________ _______ _______

(18.9) (18.7)(107.4) (80.5) (15.0) (16.1)

5.6 24.5 1.5 24.5________ ________ _______ _______(120.7) (74.7) (13.5) 8.4________ ________ _______ _______

4,094.3 4,079.8 1,221.2 1,468.7________ ________ _______ _______

$10,281.9 $10,766.0 $8,875.5 $8,903.1________ ________ _______ _______________ ________ _______ _______

31

STATEMENT OF CONSOLIDATED CASH FLOWS

CONSOLIDATED(Deere & Company and Consolidated Subsidiaries)

Year Ended October 31(In millions of dollars) 1999 1998 1997

Cash Flows from Operating ActivitiesNet income .......................................................................................................................................... $ 239.2 $1,021.4 $ 960.1Adjustments to reconcile net income to net cash provided by operating activities:

Provision for doubtful receivables ..................................................................................................... 73.5 57.0 51.0Provision for depreciation ................................................................................................................. 513.3 418.0 365.6Undistributed earnings of unconsolidated subsidiaries and affiliates................................................... (3.7) (9.7) (.3)Provision (credit) for deferred income taxes ...................................................................................... (162.4) 141.9 (6.9)Changes in assets and liabilities:

Receivables................................................................................................................................. 802.3 (724.6) (175.2)Inventories .................................................................................................................................. 50.7 (192.6) (255.2)Accounts payable and accrued expenses ..................................................................................... (170.8) (40.7) 186.3Insurance and health care claims and reserves ............................................................................ (8.5) (3.5) (22.9)Retirement benefit accruals ......................................................................................................... 215.7 (84.9) 41.0Other .................................................................................................................................. (114.8) (165.4) 13.2______ ______ ______

Net cash provided by operating activities.................................................................................. 1,434.5 416.9 1,156.7______ ______ ______

Cash Flows from Investing ActivitiesCollections of financing receivables....................................................................................................... 6,017.1 5,685.3 5,324.1Proceeds from sales of financing receivables ........................................................................................ 2,481.6 1,859.9 968.0Proceeds from maturities and sales of marketable securities ................................................................. 115.4 187.3 226.0Proceeds from sales of equipment on operating leases ......................................................................... 191.3 154.5 101.9Proceeds from sale of a business ........................................................................................................ 179.1Cost of financing receivables acquired .................................................................................................. (8,186.2) (7,521.5) (6,805.0)Purchases of marketable securities....................................................................................................... (92.9) (224.9) (166.7)Purchases of property and equipment................................................................................................... (315.5) (434.8) (484.9)Cost of operating leases acquired ......................................................................................................... (833.5) (752.3) (540.8)Acquisitions of businesses.................................................................................................................... (215.8) (103.0) (45.7)Other........................................................................................................................................... 7.6 27.6 39.0______ ______ ______

Net cash used for investing activities ....................................................................................... (651.8) (1,121.9) (1,384.1)______ ______ ______

Cash Flows from Financing ActivitiesIncrease (decrease) in short-term borrowings........................................................................................ (1,650.7) 802.3 524.5Change in intercompany receivables/payables.......................................................................................Proceeds from long-term borrowings .................................................................................................... 2,902.1 2,067.6 1,150.0Principal payments on long-term borrowings......................................................................................... (1,796.2) (1,106.4) (816.8)Proceeds from issuance of common stock ............................................................................................ 4.2 22.7 34.8Repurchases of common stock............................................................................................................. (49.0) (885.9) (419.1)Dividends paid ..................................................................................................................................... (205.4) (212.4) (204.3)Other........................................................................................................................................... (.1) (1.2) (.2)______ ______ ______

Net cash provided by (used for) financing activities................................................................... (795.1) 686.7 268.9______ ______ ______

Effect of Exchange Rate Changes on Cash .................................................................................. (1.8) (2.0) (3.0)______ ______ ______

Net Increase (Decrease) in Cash and Cash Equivalents............................................................. (14.2) (20.3) 38.5Cash and Cash Equivalents at Beginning of Year........................................................................ 309.7 330.0 291.5______ ______ ______Cash and Cash Equivalents at End of Year................................................................................... $ 295.5 $ 309.7 $ 330.0______ ______ ____________ ______ ______

The “Consolidated” (Deere & Company and Consolidated Subsidiaries) data in this statement conform with the requirements of FASB Statement No. 94. In the supplementalconsolidating data in this statement, “Equipment Operations” (Deere & Company with Financial Services on the Equity Basis) reflect the basis of consolidation described on page 42 of the notes to the consolidated financial statements. The supplemental “Financial Services” consolidating data in this statement includes primarily Deere & Company’s credit operations. Transactions between the “Equipment Operations” and “Financial Services” have been eliminated to arrive at the “Consolidated” data.

The notes to consolidated financial statements on pages 42 through 54 are an integral part of this statement.

32

Deere & Company

EQUIPMENT OPERATIONS FINANCIAL SERVICES(Deere & Company with Financial Services on the Equity Basis)

Year Ended October 31 Year Ended October 311999 1998 1997 1999 1998 1997

$ 239.2 $1,021.4 $ 960.1 $ 187.0 $ 175.2 $ 138.1

5.6 6.4 12.8 67.9 50.6 38.2269.9 282.6 272.0 243.4 135.4 93.5(115.3) (127.9) (3.0) (.4) (.2) 1.5(203.2) 115.3 (4.6) 40.8 26.6 (2.4)

802.4 (739.1) (232.8) 14.4 57.750.7 (192.6) (255.2)

(172.1) (70.0) 198.2 1.3 29.3 (11.9)(8.5) (3.5) (22.9)

222.0 (82.9) 26.7 (6.3) (2.1) 14.2(24.1) (101.3) 31.7 (90.7) (63.9) (18.4)______ ______ ______ _______ _______ _______

1,075.1 111.9 1,005.9 434.5 361.8 287.6______ ______ ______ _______ _______ _______

23.0 36.1 55.4 5,994.1 5,649.2 5,268.7.1 2,481.6 1,859.9 967.9

115.4 187.3 226.065.7 48.8 191.3 88.8 53.1

179.1(50.8) (41.0) (36.4) (8,135.4) (7,480.5) (6,768.6)

(92.9) (224.9) (166.7)(304.4) (421.6) (473.8) (11.1) (13.1) (11.2)

(2.7) (123.5) (111.4) (830.8) (628.8) (429.4)(151.9) (95.9) (37.2) (63.9) (7.2) (8.5)

19.7 13.3 2.0 (12.2) 15.6 8.0______ ______ ______ _______ _______ _______(288.0) (566.9) (552.5) (363.9) (553.7) (860.7)______ ______ ______ _______ _______ _______

(961.9) 1,184.8 (2.8) (688.8) (382.5) 527.3(32.5) (15.0) 55.5 10.2 (195.4) (250.4)

499.8 199.4 2,402.3 1,868.2 1,150.0(19.1) (38.9) (128.0) (1,777.0) (1,067.5) (688.8)

4.2 22.7 34.8 29.0(49.0) (885.9) (419.1)

(205.4) (212.4) (204.3) (75.0) (56.8) (136.8)(.2) (1.1) (.2) (1.3)______ ______ ______ _______ _______ _______

(764.1) 253.6 (664.1) (128.3) 164.7 630.3______ ______ ______ _______ _______ _______

(1.8) (1.9) (2.9) (.1)______ ______ ______ _______ _______ _______

21.2 (203.3) (213.6) (57.7) (27.3) 57.2207.9 411.2 624.8 241.5 268.8 211.6______ ______ ______ _______ _______ _______

$ 229.1 $ 207.9 $ 411.2 $ 183.8 $ 241.5 $ 268.8______ ______ ______ _______ _______ _____________ ______ ______ _______ _______ _______

33

Deere & CompanySTATEMENT OF CHANGES IN CONSOLIDATED STOCKHOLDERS’ EQUITY

Unamortized OtherTotal Common Treasury Restricted Retained Comprehensive

(In millions of dollars) Equity Stock Stock Stock* Earnings Income (Loss)

Balance October 31, 1996....................................... $ 3,557.2 $ 1,770.1 $ (265.9) $ (11.1) $ 2,299.5 $ (235.4)_______Comprehensive income (loss)

Net income............................................................ 960.1 960.1Other comprehensive income

Minimum pension liability adjustment................. 221.4 221.4Cumulative translation adjustment...................... (43.4) (43.4)Unrealized gain on marketable securities............ 8.2 8.2_______

Total comprehensive income.............................. 1,146.3_______Repurchases of common stock................................... (419.1) (419.1)Treasury shares reissued............................................ 71.9 71.9Dividends declared..................................................... (202.1) (202.1)Other stockholder transactions.................................... (7.0) 8.4 (6.3) (9.1)_______ _______ ________ ______ ________ _______Balance October 31, 1997....................................... 4,147.2 1,778.5 (613.1) (17.4) 3,048.4 (49.2)_______Comprehensive income (loss)

Net income............................................................ 1,021.4 1,021.4Other comprehensive income

Minimum pension liability adjustment................. (4.7) (4.7)Cumulative translation adjustment...................... (23.1) (23.1)Unrealized gain on marketable securities............ 2.3 2.3_______

Total comprehensive income.............................. 995.9_______Repurchases of common stock................................... (885.9) (885.9)Treasury shares reissued............................................ 31.4 31.4Dividends declared..................................................... (213.3) (213.3)Other stockholder transactions.................................... 4.5 11.3 10.2 (17.0)_______ _______ ________ ______ ________ _______Balance October 31, 1998 ...................................... 4,079.8 1,789.8 (1,467.6) (7.2) 3,839.5 (74.7)_______Comprehensive income (loss)

Net income............................................................ 239.2 239.2Other comprehensive income

Minimum pension liability adjustment................. (.2) (.2)Cumulative translation adjustment...................... (26.9) (26.9)Unrealized loss on marketable securities ............ (18.9) (18.9)_______

Total comprehensive income.............................. 193.2_______Repurchases of common stock................................... (49.0) (49.0)Treasury shares reissued............................................ 47.2 47.2Dividends declared..................................................... (204.2) (204.2)Other stockholder transactions.................................... 27.3 60.6 (14.1) (19.2)_______ _______ ________ ______ ________ _______Balance October 31, 1999 ...................................... $ 4,094.3 $ 1,850.4 $(1,469.4) $ (21.3) $ 3,855.3 $ (120.7)_______ _______ ________ ______ ________ ______________ _______ ________ ______ ________ _______

The notes to consolidated financial statements on pages 42 through 54 are an integral part of this statement.

*Unamortized restricted stock includes restricted stock issued at market price net of amortization to compensation expense.

34

The consolidated financial statements and other financial information of Deere & Company in this report were prepared by management, which is responsible for their contents. Theyreflect amounts based upon management’s best estimates andinformed judgments. In management’s opinion, the financialstatements present fairly the financial position, results of operationsand cash flows of the company in conformity with generallyaccepted accounting principles.

The company maintains a system of internal accounting controls and procedures which is intended, consistent withreasonable cost, to provide reasonable assurance that transactionsare executed as authorized, that they are included in the financialrecords in all material respects, and that accountability for assets ismaintained. The accounting controls and procedures are supportedby careful selection and training of personnel, examinations by an internal auditing department and a continuing managementcommitment to the integrity of the system.

The financial statements have been audited to the extentrequired by generally accepted auditing standards by Deloitte &Touche LLP, independent auditors. The independent auditors haveevaluated the company’s internal control structure and performedtests of procedures and accounting records in connection with theissuance of their report on the fairness of the financial statements.

The Board of Directors has appointed an Audit ReviewCommittee composed entirely of directors who are not employeesof the company. The Audit Review Committee meets with representatives of management, the internal auditing departmentand the independent auditors, both separately and jointly. TheCommittee discusses with the independent auditors and approvesin advance the scope of the audit, reviews with the independentauditors the financial statements and their auditors’ report, consults with the internal audit staff and reviews management’sadministration of the system of internal accounting controls. The Committee reports to the Board on its activities and findings.

Deere & Company:

We have audited the accompanying consolidated balance sheets of Deere & Company and subsidiaries as of October 31, 1999 and1998 and the related statements of consolidated income, changesin consolidated stockholders’ equity and consolidated cash flowsfor each of the three years in the period ended October 31,1999. These financial statements are the responsibility of thecompany’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audits in accordance with generallyaccepted auditing standards. Those standards require that we planand perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position ofDeere & Company and subsidiaries at October 31, 1999 and 1998 and the results of their operations and their cash flows foreach of the three years in the period ended October 31, 1999 inconformity with generally accepted accounting principles.

Chicago, IllinoisNovember 23, 1999

REPORT OF MANAGEMENT INDEPENDENT AUDITORS’ REPORT

35

RESULTS OF OPERATIONS FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997

Deere & Company and its subsidiaries manufacture, distributeand finance a full line of agricultural equipment; a broad range ofequipment for construction and forestry; a variety of commercialand consumer equipment; and other technological products andservices. The company also provides credit services and managedhealth care plans. Additional information on these business segments is presented beginning on page 42.

1999 COMPARED WITH 1998

CONSOLIDATED RESULTSNet income in 1999 totaled $239 million, or $1.02 per sharediluted ($1.03 basic), compared with $1,021 million, or $4.16 pershare diluted ($4.20 basic), in 1998. The decline in profits waslargely due to a continuation of weak demand for agriculturalequipment caused by depressed farm commodity prices. Cashflow from operations, however, was higher due to a reduction inagricultural equipment receivables of approximately $800 million,and a decline in construction equipment receivables of approxi-mately $200 million. During the year, the company implementedaggressive production schedule reductions in order to help balancereceivables and inventories with forecasted levels of demand.

Net sales and revenues decreased 15 percent to $11,751 millionin 1999, compared with $13,822 million in 1998. Net sales ofthe Equipment Operations decreased 19 percent in 1999 to$9,701 million from $11,926 million last year. Overseas net saleswere $2,678 million for the year, compared with $3,049 millionin 1998. Overall, the company’s worldwide physical volume of sales decreased 18 percent for the year.

The company’s Equipment Operations, which exclude theFinancial Services operations, had operating profit of $272 millionin 1999, compared with $1,476 million in 1998. Lower sales andproduction volumes of agricultural and construction equipment,an adverse sales mix and the cost of early-retirement programsaffected the 1999 results. Largely due to the reduction in agriculturaland construction trade receivables, equipment operations’ assetsended the year at $8,702 million, 4 percent below the previous year.

Net income of the company’s Financial Services operationsimproved in 1999 totaling $187 million, compared with $175 million in 1998. Finance and interest income increased to$1,027 million in 1999, compared with $887 million last year.Additional information for the credit operations is presented onpages 39 and 40.BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTSIn 1999, the company adopted FASB Statement No. 131,Disclosures about Segments of an Enterprise and RelatedInformation. Consequently, the operating segments have beenredefined to coincide with internal management reporting and previously reported operating results have been restated.The following discussion of operating results by reportable segmentand geographic area relates to information beginning on page 42.

Operating profit is income before interest expense, foreignexchange gains and losses, income taxes and corporate expenses. However, operating profit of the credit segmentincludes the effect of interest expense.

The agricultural equipment segment incurred an operatingloss of $51 million in 1999, compared with an operating profit of$941 million in 1998. Lower sales and production volumes, especially of high-horsepower, high-margin agricultural equipment,were primary reasons for the loss as sales decreased 31 percent in1999, compared with 1998. Lower production volumes, however,have helped achieve a substantial reduction in trade receivables andimproved cash flow. Results were also affected by the $68 millionpretax cost of early-retirement programs and higher sales incentivecosts, with an emphasis on used goods. Overseas operations, which experienced a more moderate decline in sales than in NorthAmerica, continued to be positive contributors to the segment’sresults. These operations, as well, are benefitting from increasedmarket shares and strong response to innovative products.

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)

WORLDWIDE CONSTRUCTION EQUIPMENT

OperatingProfit(in millions)

$245

$326

Net Sales(in billions)

$2.0

$149

$2.3

$1.9

AgriculturalEquipment 44%

Commercial & ConsumerEquipment 23%

Construction Equipment 16%

Other 7%

Credit 10%

1999 NET SALES AND REVENUESBY BUSINESS SEGMENT

WORLDWIDE AGRICULTURAL EQUIPMENT

Net Sales(in billions)

OperatingProfit (Loss)(in millions)

$7.3$1,048

$941

99

$7.5

$5.1

36

97 98 99 97 98$51

97 98 99 999897

The construction equipment segment had an operatingprofit of $149 million in 1999, compared to $326 million in1998. Sales decreased 18 percent in 1999, compared to lastyear. During the early part of 1999, the segment began imple-mentation of its Estimate to Cash order-fulfillment initiative,which is aimed at better matching product availability withcustomer requirements, while reducing field inventories.Although retail sales remained at favorable levels, companysales and production volumes declined as dealers reduced fieldinventories largely due to this initiative. The reduction, however, also reflects a weaker business outlook. In addition,the 1999 results were affected by higher sales incentive costs.

The commercial and consumer equipment segment had anoperating profit of $213 million in 1999 and 1998. The 1999 resultsbenefited from a 21 percent increase in sales and higher productionvolumes driven by strong retail demand and market-share gains,offset by higher expenses for the development and introduction ofnew products and the start-up of new facilities.

The operating profit of the credit operations improved to$274 million in 1999, compared with $256 million in 1998.Additional credit operations information is discussed on pages 39 and 40.

The company’s other operations had an aggregate operatingloss of $33 million for the year, compared with an operatingprofit of $11 million in 1998. These results reflected start-up costsand goodwill amortization at the newly formed John DeereSpecial Technologies Group, which encompasses communications,electronics, software and Internet-related products and services.Additionally, losses were incurred in the insurance subsidiaries,which were sold during the year. Partly offsetting these factorswere higher earnings from the company’s health care operations.

The United States and Canadian equipment operations had an operating profit of $48 million in 1999, compared with$1,177 million last year. The decrease was primarily due to significantly lower sales and production volumes of agriculturaland construction equipment, and early-retirement program costs. Sales decreased 21 percent in 1999 and the physical volume of sales decreased 19 percent, compared with last year.

The overseas equipment operations had an operating profitof $224 million in 1999, compared with $299 million last year,primarily due to lower sales and production volumes. As previ-ously mentioned, the decline in overseas sales has been moremoderate than in North America. In addition, these operationsbenefited from increased market shares and strong customerreception to innovative products. Overseas sales were 12 percentlower than last year, while the physical volume of sales decreased13 percent in 1999, compared with 1998.

MARKET CONDITIONS AND OUTLOOK

Agricultural EquipmentAs a result of continued weakness in farm commodity prices,industry retail sales of farm machinery in North America are currently expected to be off by 5 to 10 percent next year. Declinesof a similar nature are expected in other major markets. At thesame time, farmers are in relatively good financial condition dueto higher government payments. In light of this outlook, thecompany has adopted a cautious approach, expecting sales andproduction volumes to trail prior-year levels early in 2000, but tobe higher for the full year. The anticipated rise in sales is due toproduction being increased to track more closely with retaildemand than in 1999. Sales are also expected to benefit from apositive response to several important new products.

WORLDWIDE COMMERCIAL AND CONSUMER EQUIPMENT

Net Sales(in billions)

OperatingProfit(in millions)

$1.8

$115

$213 $213$2.2

$2.6

WORLDWIDE CREDIT OPERATIONS

Revenues(in billions)

OperatingProfit(in millions)

$.8$232

$256 $274$1.0

$1.1

UNITED STATES AND CANADA EQUIPMENT OPERATIONS

Net Sales(in billions)

OperatingProfit(in millions)

$8.0$1,101

$1,177

$48

$8.9

$7.0

OVERSEAS EQUIPMENT OPERATIONS

Net Sales(in billions)

OperatingProfit(in millions)

$3.1 $301 $299

$224

$3.0$2.7

37

97 98 99 97 98 99

97 98 99 97 98 99

97 98 99 97 98 99

98 99 97 98 9997

Construction EquipmentAlthough higher interest rates are expected to result in a moderateslowdown in industry sales next year, the company expects tohave higher sales in the year 2000 due largely to an expandedproduct line. Company sales in the early part of the year, however,are expected to be lower as a result of a continuation of dealerinventory adjustments. Made in conjunction with the Estimate toCash initiative, these reductions place the company in a favorableinventory position going into next year. Industry inventory levels,however, are a source of concern with respect to price realization.

Commercial and Consumer EquipmentFollowing strong gains this year, retail demand for the company’scommercial and consumer equipment is expected to achievefurther growth next year, assuming normal weather patterns and a continuation of current economic conditions. Theseoperations are expected to benefit from market-share growth,positive customer response to new products and continuedinternational expansion.

Credit OperationsCredit should continue to benefit from a larger receivable andlease portfolio next year. However, higher growth expenditures,lower gains on the sale of retail notes and a weakened agriculturaleconomy are expected to keep pressure on margins and bringabout a sizeable reduction in overall results.

Based on these conditions, the company’s worldwide physical volume of sales is currently expected to increase byapproximately 10 percent for the year 2000. First-quarter physicalvolumes are expected to be slightly higher than in the comparable1999 period. However, the mix of sales is expected to deteriorateand put significant downward pressure on profits for the quarter.

Despite the lower 1999 results, the company has put itselfin position to benefit from an upturn in the farm economy,whenever it occurs. At the same time, the company remains ontrack with its product development plans, and numerous growth,quality, technology and Internet-related initiatives. In addition,the company fulfilled its 1999 goal of generating strong cash flow and is setting the stage for markedly better results once theagricultural economy starts moving ahead and as other businessopportunities take shape.

YEAR 2000The company established a global program (the “Year 2000Program”) to address the inability of certain computer and infrastructure systems to process dates in the Year 2000 and later.The major assessment areas included information systems, mainframe and personal computers, software, the distributednetwork, the shop floor, facilities systems, the company’s products, product research and development facilities, and thereadiness of the company’s suppliers and distribution network.

All of the company’s systems identified as being missioncritical have been tested and verified as being Year 2000 ready.The company also assessed the Year 2000 readiness of its productsuppliers and dealers and developed contingency plans for its mission critical suppliers. Although there could be some inconveniences, the company believes the dealers will be able toservice their customers without any significant disruptions. Thetotal cost of the modifications and upgrades including internal costs

has been approximately $43 million pretax since the beginning of1997. The future costs to complete the Year 2000 Program areexpected to be approximately $4 million. These costs are expensedas incurred and do not include the cost of software replaced in the ordinary course of business. Other major systems projects havenot been deferred due to the Year 2000 compliance projects.

Although no assurances can be given as to the company’sreadiness at the time of this report, particularly as it relates to third-parties, based upon the progress to date, the company does notexpect the consequences of any of the company’s unanticipated orunsuccessful modifications to have a material adverse effect on itsfinancial position or results of operations. However, the failure tocorrect a material Year 2000 problem could result in lost sales orprofits. The company believes that its “most reasonably likely worstcase scenario” may involve the Year 2000 noncompliance of a critical third party causing that third party to fail to deliver, with theresult that production is interrupted at one or more facilities. Thecompany believes this risk is greater outside North America andEurope. The company has developed contingency plans in all of the assessment areas noted above that it believes will mitigatethe impact of any interruptions related to the Year 2000.

EURO CONVERSIONThe company is well advanced in the process of identification,implementation and testing of its systems to adopt the euro currency in its operations. The transition period for this changeis January 1, 1999 through January 1, 2002. The company’s affected suppliers, distribution network and financial institutionshave been contacted and to date the currency change has nothad a significant impact on these relationships. The cost of infor-mation systems modifications, effects on product pricing and purchase contracts, and the impact on foreign currency financialinstruments, including derivatives, are not expected to be material.

SAFE HARBOR STATEMENTSafe Harbor Statement under the Private Securities Litigation ReformAct of 1995: Statements under the “Market Conditions andOutlook”, “Year 2000” and “Euro Conversion” headings, the“Supplemental Information (Unaudited)” on pages 53 and 54and other statements herein that relate to future operating periodsare subject to important risks and uncertainties that could causeactual results to differ materially. Forward-looking statementsrelating to the company’s businesses involve certain factors thatare subject to change, including: the many interrelated factorsthat affect farmers’ confidence, including worldwide demand foragricultural products, world grain stocks, commodities prices,weather conditions, real estate values, animal diseases, crop pests,harvest yields, and government farm programs; general economicconditions and housing starts; legislation, primarily legislationrelating to agriculture, the environment, commerce and govern-ment spending on infrastructure; actions of competitors in thevarious industries in which the company competes; levels of newand used field inventories, production difficulties, includingcapacity and supply constraints; dealer practices; labor relations;interest and currency exchange rates (including conversion to theeuro); technological difficulties (including Year 2000 readiness);accounting standards; and other risks and uncertainties. Economicdifficulties in various parts of the world could continue toadversely affect North American grain and meat exports. Thenumber of housing starts is especially important to sales of con-struction equipment. Sales of commercial and consumer equip-ment during the winter are affected by the amount and timing ofsnowfall. The company’s outlook is based upon assumptions

38

relating to the factors described above, which are sometimesbased upon estimates and data prepared by government agencies.Such estimates and data are often revised. Further information,including factors that potentially could materially affect thecompany’s financial results, is included in the company’s filingswith the Securities and Exchange Commission.

1998 COMPARED WITH 1997

CONSOLIDATED RESULTSDeere & Company achieved record net income in 1998, totaling $1,021 million, or $4.16 per share diluted ($4.20 basic),compared with income of $960 million, or $3.74 per sharediluted ($3.78 basic) in 1997. The Equipment Operations andthe Financial Services operations both contributed to the higherlevel of earnings.

Net sales and revenues increased 8 percent to a record$13,822 million in 1998, compared with $12,791 million in 1997.Net sales of the Equipment Operations increased 8 percent in1998 to $11,926 million from $11,082 million in 1997. Export salesfrom the United States totaled $1,970 million for 1998, com-pared with $2,013 million in 1997. Overseas sales, which wereaffected by weaker economic conditions and adverse currencyfluctuations, were slightly lower in 1998. Overall, the company’sworldwide physical volume of sales increased 8 percent in 1998.

The company’s Equipment Operations, which excludeincome from the Financial Services operations and unconsoli-dated affiliates, had income of $831 million in 1998, comparedwith $817 million in 1997. The strong performances of the commercial and consumer equipment and construction equipmentoperations led to the record results. Overall, the improvementwas due to higher sales and production volumes, partially offset byhigher sales incentive costs, growth expenditures, interest expenseand unfavorable currency fluctuations. Operating profit of theEquipment Operations represented 12.4 percent of net sales in1998, compared to 12.6 percent in 1997.

Net income of the company’s Financial Services operationsimproved in 1998 totaling $175 million, compared with$138 million in 1997. Finance and interest income increasedto $887 million in 1998, compared with $758 million in 1997.Additional information for the credit operations is presented onpages 39 through 40.BUSINESS SEGMENT RESULTSOperating profit of the agricultural equipment segmentdecreased to $941 million in 1998, compared with $1,048 millionin 1997, as a result of higher sales incentive costs, an unfavorablesales mix and inefficiencies associated with production cuts,partially offset by an increase in sales. Agricultural equipmentsales increased 2 percent in 1998, compared with 1997.However, during the fourth quarter of 1998, sales of agriculturalequipment decreased 18 percent compared with the fourthquarter of 1997, as lower farm commodity prices and weakerfarm economic conditions adversely affected retail demand. As a result, the company reduced production of large tractorsand combines in order to keep inventories in balance.

The construction equipment operations generated a significantly higher operating profit of $326 million in 1998,compared to $245 million in 1997. The increased operatingprofit in 1998 reflected higher sales and production volumes,lower operating expenses and improved operating efficiencies,partially offset by higher sales incentive costs and productionstart-up expenses at the engine facility in Torreon, Mexico. In 1998, construction equipment sales increased 14 percent,compared with 1997.

The commercial and consumer equipment segment’s operating profit increased significantly to $213 million in 1998,compared with $115 million in 1997, as a result of higher salesand production volumes driven by strong retail demand for thecompany’s products, as well as improved operating efficiencies.Partially offsetting these benefits were higher expenses for thepromotion of new products and the start-up of new facilities.The results in 1997 were adversely affected by write-offs relatedto the Homelite product line. Commercial and consumer equip-ment sales increased 22 percent in 1998, compared with 1997.

The operating profit of the credit operations improved to $256 million in 1998, compared with $232 million in 1997.The credit operations are discussed on pages 39 and 40.

CREDIT OPERATIONS

The credit operations primarily finance sales and leases byJohn Deere dealers of new and used agricultural, constructionand commercial and consumer equipment, and sales by non-Deere dealers of recreational products. In addition, theseoperations provide wholesale financing to dealers of the fore-going equipment and finance retail revolving charge accounts.

Condensed combined financial information of the creditoperations in millions of dollars follows:

October 31Financial Position 1999 1998

Cash and cash equivalents ................................ $ 149 $ 191_______ _______

Financing receivables and leases:Equipment retail notes................................... 3,962 3,658Recreational product retail notes.................... 253 684Revolving charge accounts............................ 918 764Wholesale notes ........................................... 1,052 894Financing leases........................................... 532 336Equipment on operating leases...................... 1,652 991_______ _______

Total financing receivables and leases....... 8,369 7,327Less allowance for credit losses .................... 93 90_______ _______

Total – net ............................................... 8,276 7,237_______ _______

Other receivables .............................................. 108 173_______ _______

Net property and other assets............................ 125 73_______ _______

Total assets.................................................. $8,658 $7,674_______ ______________ _______

Short-term borrowings ...................................... $3,846 $3,810Payables to Deere & Company........................... 318 144Deposits withheld from dealers and merchants... 139 176Other liabilities .................................................. 433 288Long-term borrowings....................................... 2,770 2,239Stockholder’s equity .......................................... 1,152 1,017_______ _______

Total liabilities and stockholder’s equity ......... $8,658 $7,674_______ ______________ _______

(continued)

39

Year Ended October 31Summary of Operations 1999 1998 1997

Revenues........................................................... $1,137 $973 $820______ _____ _____

Expenses:Interest.......................................................... 408 400 346Selling, administrative and general ................. 152 142 129Provision for credit losses............................... 68 50 38Depreciation and other................................... 234 125 74______ _____ _____

Total ........................................................ 862 717 587______ _____ _____

Income of consolidated groupbefore income taxes ...................................... 275 256 233

Provision for income taxes .................................. 100 93 85______ _____ _____

Income of consolidated group ............................. 175 163 148Equity in losses of unconsolidated affiliates.......... (1)______ _____ _____

Net income......................................................... $ 175 $163 $147______ _____ ___________ _____ _____

Ratio of earnings to fixed charges........................ 1.66 1.63 1.67

Acquisition volumes of financing receivables and leasesincreased 8 percent in 1999, compared with 1998. The volumesof revolving charge accounts, wholesale notes, leases and retailnotes increased 13 percent, 11 percent, 8 percent and 5 percent,respectively, driven primarily by the growth in construction equipment leasing and retail notes and agricultural revolvingcharge accounts. The credit operations also sold retail notesreceiving proceeds of $2,482 million during 1999, comparedwith $1,860 million last year. At October 31, 1999 and 1998, net financing receivables and leases administered, which include receivables previously sold but still administered, were$10,992 million and $9,625 million, respectively. The discussionof “Financing Receivables” on pages 47 and 48 presents additional information.

Net income of the credit operations was $175 million in1999, compared with $163 million in 1998 and $147 million in1997. Net income in 1999 was higher than in 1998 due primarilyto higher earnings from a larger average receivable and leaseportfolio, a reduction in leverage and a gain on the sale of the yacht retail note portfolio and related intangibles, partiallyoffset by higher receivable write-offs, lower financing spreads andhigher operating expenses. Total revenues of the credit operationsincreased in 1999, reflecting the larger average portfolio, comparedwith 1998. The average balance of receivables and leasesfinanced was 6 percent higher in 1999, compared with 1998.Higher average borrowings in 1999 resulted in a small increasein interest expense, compared with 1998.

Net income in 1998 was higher than in 1997 due primarilyto higher earnings from a larger average receivable and leaseportfolio and higher gains from the sales of retail notes, partiallyoffset by higher operating expenses. Total revenues of the creditoperations increased 19 percent in 1998, reflecting the largeraverage portfolio, compared with 1997. The average balance ofreceivables and leases financed was 13 percent higher in 1998,compared with 1997. Higher average borrowings in 1998 resultedin a 16 percent increase in interest expense, compared with 1997.

CAPITAL RESOURCES AND LIQUIDITY

The discussion of capital resources and liquidity has been organized to review separately, where appropriate, the company’sEquipment Operations, Financial Services operations and theconsolidated totals.

EQUIPMENT OPERATIONSThe company’s equipment businesses are capital intensive and are subject to large seasonal variations in financing requirementsfor receivables from dealers and inventories. Accordingly, to the extent necessary, funds provided by operations are supplemented from external borrowing sources.

Cash provided by operating activities during 1999 was$1,075 million, primarily resulting from the significant decreasein trade receivables and from net income. The operating cashflows and proceeds from the sale of a business of $179 million were used primarily to fund a decrease in borrowings of $481 million, purchases of property and equipment of $304 million, the payment of dividends to stockholders of$205 million, acquisitions of businesses for $152 million and an increase in cash and cash equivalents.

Over the last three years, operating activities have providedan aggregate of $2,193 million in cash. In addition, borrowingsincreased $733 million and cash and cash equivalents decreased$396 million. The aggregate amount of these cash flows was usedmainly to fund repurchases of common stock of $1,354 million,purchases of property and equipment of $1,200 million, stock-holders’ dividends of $622 million and acquisitions of businessesfor $285 million.

Trade accounts and notes receivable result mainly fromsales to dealers of equipment that is being carried in their inventories. Trade receivables decreased by $808 million during1999. North American agricultural equipment trade receivablesdecreased $753 million and construction equipment receivablesdecreased $206 million, while commercial and consumerequipment receivables increased $182 million and other equipment receivables increased $12 million. Total overseasequipment receivables were $43 million lower than one year ago.Agricultural equipment receivables decreased significantly in 1999

97 98 99

EquipmentOperations(in millions)

$1,006

$474$419

$886

$112

$304

$422

$1,075

Cash Provided by Operations

Purchases of Property and Equipment

Repurchases of Common Stock

$49

40

due to the aggressive production schedule reductions implementedby the company in order to help balance the levels of receivableswith forecasted demand. Construction equipment receivablesdeclined due to the Estimate to Cash order-fulfillment initiative.Commercial and consumer equipment receivables are higher than a year ago to support increased retail sales. The ratios ofworldwide trade accounts and notes receivable at October 31 tofiscal year net sales were 34 percent in 1999, compared with 34 percent in 1998 and 30 percent in 1997. Although receivablesdecreased significantly in 1999, the ratio was also affected by the decrease in net sales.

The collection period for trade receivables averages less than 12 months. The percentage of receivables outstanding fora period exceeding 12 months was 12 percent at October 31,1999, compared with 8 percent at October 31, 1998 and 5 percent at October 31, 1997.

Company-owned inventories were approximately thesame in 1999 as in 1998.

Total interest-bearing debt of the Equipment Operationswas $1,678 million at the end of 1999, compared with $2,065 million at the end of 1998 and $711 million at the end of 1997.The ratio of total debt to total capital (total interest-bearing debtand stockholders’ equity) at the end of 1999, 1998 and 1997was 29.1 percent, 33.6 percent and 14.6 percent, respectively.

During 1999, Deere & Company issued $250 million of6.55% notes due in 2004 and $250 million of medium-term notes.

FINANCIAL SERVICESThe Financial Services’ credit operations rely on their ability toraise substantial amounts of funds to finance their receivable andlease portfolios. Their primary sources of funds for this purposeare a combination of borrowings and equity capital. Additionally,the credit operations periodically sell substantial amounts of retail notes.

Cash flows from the company’s Financial Services operatingactivities were $435 million in 1999. The cash provided by operating activities was used primarily to increase total receivablesand leases. Cash used for investing activities totaled $364 millionin 1999, primarily due to acquisitions of receivables and leasesexceeding collections by $2,972 million, which was partially offset by proceeds of $2,482 million from the sale of receivablesand $191 million from the sale of equipment on operating leases.Acquisitions of businesses also totaled $64 million in the currentyear. Cash used for financing activities totaled $128 million in1999, representing mainly a decrease in total borrowings of $53 million and $75 million of dividends paid to the EquipmentOperations.

Over the past three years, the Financial Services operatingactivities have provided $1,084 million in cash. In addition, thesale of receivables and an increase in borrowings have provided$5,309 million and $908 million, respectively. These amountshave been used mainly to fund receivable and lease acquisitions,which exceeded collections by $7,362 million.

Marketable securities held by Financial Services decreased$757 million during 1999 primarily due to the sale of the insurance subsidiaries and the transfer of securities to Deere &Company before the sale. The remaining portfolio consists of

the securities held by the Financial Services’ health care subsidiaries and those transferred to Deere & Company.Additional information is presented on pages 46 and 47.

Financing receivables and leases increased by $1,039 millionin 1999, compared with 1998. The discussion of “CreditOperations” on pages 39 and 40 provides further information.

Total outside interest-bearing debt of the credit operationswas $6,616 million at the end of 1999, compared with $6,049million at the end of 1998 and $5,686 million at the end of 1997.The credit subsidiaries’ ratio of total interest-bearing debt to totalstockholder’s equity was 6.0 to 1 at the end of 1999, comparedwith 6.1 to 1 at the end of 1998 and 6.6 to1 at the end of 1997.

During 1999, the credit operations issued $300 millionof 6% notes due in 2009 and $300 million of 7% notes due in 2002. These operations also retired $150 million of 95⁄8 %subordinated notes, $97 million of 5% Swiss franc bonds,$200 million of 6% notes, $200 million of 6.3% notes and$99 million of other miscellaneous notes all due in 1999. The credit operations also issued $1,804 million and retired$1,031 million of medium-term notes in 1999.

CONSOLIDATEDThe company maintains unsecured lines of credit with variousUnited States and foreign banks. The discussion of “Short-TermBorrowings” on page 49 provides further information.

The company is naturally exposed to various interest rateand foreign currency risks. As a result, the company enters intoderivative transactions to hedge certain of these exposures thatarise in the normal course of business, and not for the purposeof creating speculative positions or trading. Similar to otherlarge credit companies, the company’s credit operations activelymanage the relationship of the types and amounts of their fundingsources to their receivable and lease portfolio in an effort todiminish risk due to interest rate fluctuations, while respondingto favorable financing opportunities. Accordingly, from time totime, these operations enter into interest rate swap agreementsto hedge their interest rate exposure. The company also hasforeign currency exposures at some of its foreign and domesticoperations related to buying, selling and financing in currenciesother than the local currencies. The company has enteredinto agreements related to the management of these currencytransaction risks. The credit and market risks under these interestrate and foreign currency agreements are not considered to besignificant. Additional detailed financial instrument informationis included on pages 52 through 54.

Stockholders’ equity was $4,094 million at October 31,1999, compared with $4,080 million and $4,147 million atOctober 31, 1998 and 1997, respectively. The increase in 1999 was caused primarily by net income of $239 million, partially offset by cash dividends declared of $204 million.

41

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements represent the consolidationof all companies in which Deere & Company has a majorityownership. Deere & Company records its investment in eachunconsolidated affiliated company (20 to 50 percent ownership)at its related equity in the net assets of such affiliate. Otherinvestments (less than 20 percent ownership) are recorded atcost. Consolidated retained earnings at October 31, 1999include undistributed earnings of the unconsolidated affiliatesof $58 million. Dividends from unconsolidated affiliates were $6 million in 1999, $6 million in 1998 and $4 million in 1997.

The company’s consolidated financial statements and some information in the notes and related commentary are presented in a format which includes data grouped as follows:Equipment Operations — These data include the company’sagricultural equipment, construction equipment, commercial andconsumer equipment and special technologies operations withFinancial Services reflected on the equity basis. Data relatingto the above equipment operations, including the consolidatedgroup data in the income statement, are also referred to as“Equipment Operations” in this report.Financial Services — These data include the company’s credit,insurance and health care operations The insurance operationswere sold in the fourth quarter of 1999.Consolidated — These data represent the consolidation of the Equipment Operations and Financial Services in conformitywith Financial Accounting Standards Board (FASB) StatementNo. 94. References to “Deere & Company” or “the company”refer to the entire enterprise.

The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to make estimates and assumptions that affect the reportedamounts and related disclosures. Actual results could differ from those estimates.

Sales of equipment and service parts are generally recordedby the company when they are shipped to independent dealers.Provisions for sales incentives and product warranty costs are recognized at the time of sale or at the inception of the incentiveprograms and are based on certain estimates the company believesare appropriate.

In 1999, the company adopted FASB Statements No. 130,Reporting Comprehensive Income, No. 131, Disclosures aboutSegments of an Enterprise and Related Information, and No. 132, Employers’ Disclosures about Pensions and OtherPostretirement Benefits. See information beginning on pages 34,42, and 44, respectively. These Statements had no effect on the company’s financial position or net income. In 1998, theFASB issued Statement No. 133, Accounting for DerivativeInstruments and Hedging Activities. Under the new standard, allderivatives will be recorded at fair value in the financial state-ments. The company will adopt this statement in fiscal year 2001.The effect on the company’s financial position or net income is not expected to be material. In 1998, the AICPA issuedStatement of Position (SOP) 98-1, Accounting for the Costs ofComputer Software Developed or Obtained for Internal Use.This SOP requires the capitalization of costs for software devel-oped for internal use, which were previously expensed. The SOPwill be adopted in fiscal year 2000 and the effect on the company’sfinancial position or net income is not expected to be material.

In 1999, the company completed the following acquisitionsand dispositions. The company purchased the remaining 60 percent interest in SLC-John Deere, a Brazilian farm

equipment manufacturer of combines, tractors and planters.The acquisition cost was $174 million, including $42 million ofgoodwill, which will be amortized over 20 years. The companypurchased the remaining 50 percent interest in InterAgTechnologies, Inc., a developer of electronic controls andagribusiness software, headquartered in Atlanta, Georgia for$55 million. The acquisition cost included 1.5 million shares ofDeere & Company common stock valued at $49 million withthe remainder in cash. The company purchased a 32 percentinterest in Bell Equipment Company, a manufacturer of articulated dump trucks, located in Richards Bay, South Africafor $29 million. The company’s subsidiary, John Deere CapitalCorporation, purchased Senstar Capital Corporation, locatedin Pittsburgh, Pennsylvania, for $41 million and the remaining50 percent interest in John Deere Credit Limited located inGloucester, England for $18 million. The company sold JohnDeere Insurance Group, Inc. (JDIG), which provides certain linesof property and casualty coverages. JDIG had a net loss of $.4 million in the first eleven months of 1999 compared with netincome of $8.9 million and $29.6 million during the years 1998and 1997, respectively. The gain on the sale was immaterial.Neither the acquisitions nor the sale had a material effect on thecompany’s financial position or results of operations.

Certain amounts for prior years have been reclassified to conform with 1999 financial statement presentations.

SEGMENT AND GEOGRAPHIC AREA DATA FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997In 1999, the company adopted FASB Statement No. 131,Disclosures about Segments of an Enterprise and RelatedInformation. Consequently, the segments have been redefinedto coincide with internal organizational structure, the way theoperations are managed and evaluated by management andmateriality considerations. The manufacture and distributionof engines and drivetrain components for the original equip-ment manufacturer market, previously aggregated with theconstruction equipment segment, are now allocated to allthree major equipment segments. In addition, the operationsof certain units involved in the development and marketing ofspecial technologies, which were previously aggregated withthe agricultural equipment and the commercial and consumerequipment segments, have been aggregated and included withthe health care and insurance operations in the “Other” cate-gory, as they do not meet the materiality threshold of FASBStatement No. 131. The insurance operations were sold in1999. Prior periods have been restated for the adoption of theStatement. The company’s operations are now organized andreported in four major business segments described as follows.

The company’s worldwide agricultural equipment segmentmanufactures and distributes a full line of farm equipment –including tractors; combine, cotton and sugarcane harvesters;tillage, seeding and soil preparation machinery; sprayers; hayand forage equipment; materials handling equipment; andintegrated precision farming technology.

The company’s worldwide construction equipment segmentmanufactures and distributes a broad range of machines used in construction, earthmoving and forestry – including backhoeloaders; crawler dozers and loaders; four-wheel-drive loaders;excavators; scrapers; motor graders; log skidders and forestry harvesters.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The company’s worldwide commercial and consumerequipment segment manufactures and distributes equipment for commercial and residential uses – including small tractors for lawn, garden, commercial and utility purposes; riding andwalk-behind mowers; golf course equipment; snowblowers; handheld products such as chain saws, string trimmers and leafblowers; skid-steer loaders; utility vehicles; and other outdoorpower products.

The products produced by the equipment segments are marketed primarily through independent retail dealer networksand major retail outlets.

The company’s credit segment primarily finances sales and leases by John Deere dealers of new and used agricultural,construction and commercial and consumer equipment and sales by non-Deere dealers of recreational products. In addition, it provides wholesale financing to dealers of the foregoing equipment and finances retail revolving charge accounts.

Corporate assets are primarily the EquipmentOperations’ prepaid pension costs, deferred income tax assets,other receivables and cash and short-term investments as disclosed in the financial statements, net of certain minorintercompany eliminations.

Because of integrated manufacturing operations and common administrative and marketing support, a substantial number of allocations must be made to determine operating segment and geographic area data. Intersegment sales and revenuesrepresent sales of components and finance charges which are generally based on market prices. Overseas operations are definedto include all activities of divisions, subsidiaries and affiliated companies conducted outside the United States and Canada.

Information relating to operations by operating segment in millions of dollars follows with related comments included inManagement’s Discussion and Analysis. In addition to the following unaffiliated sales and revenues by segment, intersegmentsales and revenues in 1999, 1998, and 1997 were as follows: agricultural equipment net sales of $106 million, $132 million and $103 million and credit revenues of $1 million, $2 million and $2 million, respectively.

OPERATING SEGMENTS 1999 1998 1997

Net sales and revenues Unaffiliated customers:

Agricultural equipment net sales............... $ 5,138 $ 7,463 $ 7,289Construction equipment net sales............. 1,880 2,281 1,998Commercial and consumer equipment

net sales ............................................. 2,648 2,182 1,795Other net sales ....................................... 35________ ________ ________

Total net sales ..................................... 9,701 11,926 11,082Credit revenues............................................ 1,136 971 818Other revenues ............................................ 914 925 891________ ________ ________

Total ........................................................... $11,751 $13,822 $12,791________ ________ ________________ ________ ________

(continued)

OPERATING SEGMENTS 1999 1998 1997

Operating profit (loss)Agricultural equipment* ................................ $ (51) $ 941 $ 1,048Construction equipment................................ 149 326 245Commercial and consumer equipment .......... 213 213 115Credit**........................................................ 274 256 232Other** ........................................................ (33) 11 (24)________ ________ ________

Total operating profit ................................ 552 1,747 1,616________ ________ ________

Interest income ............................................ 24 13 4Investment income ....................................... 1Interest expense........................................... (161) (126) (79)Foreign exchange gain (loss)......................... (7) (24) 7Corporate expenses — net........................... (35) (35) (37)Income taxes................................................ (135) (554) (551)________ ________ ________

Total........................................................ (313) (726) (656)________ ________ ________

Net income ............................................... $ 239 $ 1,021 $ 960________ ________ ________________ ________ ________

* Includes $68 million of early-retirement cost in 1999.**Operating profit of the credit business segment includes the effect of interest

expense, which is the largest element of its operating costs. Operating profitof the “other” category includes insurance and health care investment income.

Interest incomeAgricultural equipment ................................. $ 51 $ 43 $ 39Construction equipment................................ 9 11 13Commercial and consumer equipment .......... 8 8 8Credit .......................................................... 685 697 652Corporate..................................................... 24 13 4Intercompany ............................................... (15) (11) (5)________ ________ ________

Total........................................................ $ 762 $ 761 $ 711________ ________ ________________ ________ ________

Interest expense Agricultural equipment ................................. $ 1 $ 2 $ 2Credit .......................................................... 408 400 346Other ........................................................... 2 2Corporate..................................................... 161 126 79Intercompany ............................................... (15) (11) (5)________ ________ ________

Total........................................................ $ 557 $ 519 $ 422________ ________ ________________ ________ ________

Depreciation* and amortization expense

Agricultural equipment.................................. $ 193 $ 214 $ 195Construction equipment................................ 46 52 50Commercial and consumer equipment .......... 71 57 59Credit........................................................... 208 129 79Other ........................................................... 24 11 11________ ________ _______

Total........................................................ $ 542 $ 463 $ 394________ ________ ________________ ________ ________

* Includes depreciation for equipment on operating leases.

Equity in income (loss) of unconsolidated affiliates

Agricultural equipment ................................. $ 2 $ 2Construction equipment................................ 10 15 $ 11Commercial and consumer equipment .......... 1 1Credit .......................................................... (1)Other ........................................................... (3) (3) (7)________ ________ ________

Total........................................................ $ 9 $ 15 $ 4________ ________ ________________ ________ ________

(continued)

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OPERATING SEGMENTS 1999 1998 1997

Identifiable assetsAgricultural equipment ................................. $ 4,244 $ 5,324 $ 4,369Construction equipment................................ 757 950 956Commercial and consumer equipment .......... 1,948 1,574 1,253Credit .......................................................... 8,658 7,674 7,365Other ........................................................... 327 1,236 1,235Corporate..................................................... 1,644 1,244 1,142________ ________ ________

Total ......................................................... $17,578 $18,002 $16,320________ ________ ________________ ________ ________

Capital additionsAgricultural equipment.................................. $ 170 $ 261 $ 291Construction equipment................................ 42 71 71Commercial and consumer equipment .......... 80 97 117Credit........................................................... 5 9 6Other ........................................................... 12 4 7________ ________ _______

Total........................................................ $ 309 $ 442 $ 492________ ________ _______________ ________ _______

Investment in unconsolidatedaffiliates

Agricultural equipment.................................. $ 23 $ 57 $ 55Construction equipment................................ 116 92 77Commercial and consumer equipment .......... 2 1 5Credit........................................................... 9 20 13Other ........................................................... 2 2________ ________ _______

Total........................................................ $ 152 $ 172 $ 150________ ________ _______________ ________ _______

The company views and has historically disclosed its operations as consisting of two geographic areas, the United Statesand Canada, and overseas, shown below in millions of dollars.Operating income for these areas has been disclosed in addition tothe requirements under FASB Statement No. 131. No individualforeign country’s net sales and revenues were material for disclo-sure purposes. The percentages shown in the captions for net salesand revenues indicate the approximate proportion of each amountthat relates to the United States only. The percentages are basedupon a three-year average for 1999, 1998 and 1997.

GEOGRAPHIC AREAS 1999 1998 1997

Net sales and revenues Unaffiliated customers:

United States and Canada:Equipment operations net sales (91%)... $ 7,023 $ 8,877 $ 8,018Financial Services revenues (93%) ....... 1,873 1,737 1,554________ ________ ________

Total ................................................... 8,896 10,614 9,572________ ________ ________

Overseas:Equipment operations net sales............. 2,678 3,049 3,064Financial Services revenues*................ 40________ ________ ________

Total ............................................... 2,718 3,049 3,064________ ________ ________

Other revenues ............................................ 137 159 155________ ________ ________

Total ........................................................... $11,751 $13,822 $12,791________ ________ ________________ ________ ________

*Overseas Financial Services were not significant in 1998 and 1997.

(continued)

GEOGRAPHIC AREAS 1999 1998 1997

Operating profit United States and Canada:

Equipment operations........................... $ 48 $ 1,177 $ 1,101Financial Services................................ 277 271 214________ ________ ________

Total ............................................... 325 1,448 1,315________ ________ ________

Overseas:Equipment operations........................... 224 299 301Financial Services* .............................. 3________ ________ ________

Total ................................................ 227 299 301________ ________ ________

Total ........................................................... $ 552 $ 1,747 $ 1,616________ ________ ________________ ________ ________

*Overseas Financial Services were not significant in 1998 and 1997.

Property and equipmentUnited States ............................................... $ 1,267 $ 1,253 $ 1,123Mexico......................................................... 194 176 131Germany...................................................... 137 156 163Other countries ............................................ 184 115 107________ ________ ________

Total.................................................... $ 1,782 $ 1,700 $ 1,524________ ________ ________________ ________ ________

REINSURANCEThe company’s insurance subsidiaries, which were sold in 1999,utilized reinsurance to limit their losses and reduce their exposure to large claims. Insurance and health care premiumsearned consisted of the following in millions of dollars:

1999 1998 1997

Premiums earned:Direct from policyholders.............................. $ 766 $739 $ 711Reinsurance assumed.................................. 4 7 5Reinsurance ceded ...................................... (28) (25) (19)____ ____ ____

Financial Services premiums.................... 742 721 697Intercompany premiums................................... (26) (28) (29)____ ____ ____Premiums ...................................................... $ 716 $693 $ 668____ ____ ________ ____ ____

The difference between premiums earned and written was not material. Reinsurance recoveries on ceded reinsurance contracts during 1999, 1998 and 1997 totaled $14 million, $31 million and $13 million, respectively.

PENSION AND OTHER POSTRETIREMENT BENEFITSThe following disclosure has been revised in 1999 for the adoption of FASB Statement No. 132, Employers’ DisclosuresAbout Pensions and Other Postretirement Benefits. The companyhas several defined benefit pension plans covering its United Statesemployees and employees in certain foreign countries. The company also has several defined benefit health care and life insurance plans for retired employees in the United States and Canada.

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The worldwide components of net periodic pension costand the significant assumptions consisted of the following in millions of dollars and in percents:

1999 1998 1997

PensionsService cost.......................................................... $117 $102 $ 97Interest cost ........................................................ 396 386 366Expected return on assets..................................... (497) (456) (411)Amortization of actuarial loss ............................... 33 29 41Amortization of prior service cost.......................... 44 43 46Amortization of net transition asset....................... (8) (11) (12)Special termination benefits ................................. 29 5 5Settlements/curtailments ..................................... (2) 2 2______ _____ _____

Net cost............................................................. $112 $100 $134______ ______ ____________ ______ ______

Weighted-average AssumptionsDiscount rates for obligations................................ 7.4% 7.0% 7.5%Discount rates for expenses................................. 7.0% 7.5% 7.5%Assumed rates of compensation increases............. 4.9% 4.9% 4.9%Expected long-term rates of return ....................... 9.7% 9.7% 9.7%

The worldwide components of net periodic postretirementbenefits cost and the significant assumptions consisted of the following in millions of dollars and in percents:

1999 1998 1997

Health Care and Life InsuranceService cost.......................................................... $ 85 $ 74 $ 72Interest cost ........................................................ 188 172 166Expected return on assets..................................... (35) (31) (27)Amortization of actuarial loss ............................... 23 2 2Amortization of prior service cost.......................... (4) (6) (11)Special termination benefits ................................. 5Settlement .......................................................... 3______ _____ _____

Net cost............................................................. $265 $211 $202______ _____ ___________ _____ _____

Weighted-average AssumptionsDiscount rates for obligations................................ 7.75% 7.26% 7.76%Discount rates for expenses................................. 7.26% 7.76% 7.76%Expected long-term rates of return ....................... 9.7% 9.7% 9.7%

In addition to the special termination benefits included inthe pension and postretirement benefit plans shown above, thecompany provided $34 million of other special early-retirementbenefits to certain employees in 1999. These benefits and the special termination benefits included in the benefit plans totaled$68 million in 1999.

The annual rates of increase in the per capita cost of coveredhealth care benefits (the health care cost trend rates) used to determine 1999, 1998 and 1997 costs were assumed to be 6.0 percent for 2000, decreasing gradually to 4.5 percent by the year2003, 9.1 percent for 1999, decreasing gradually to 4.5 percent by the year 2003 and 9.0 percent for 1998, decreasing gradually to 4.5 percent by the year 2003, respectively. An increase of onepercentage point in the assumed health care cost trend rate wouldincrease the accumulated postretirement benefit obligations atOctober 31, 1999 by $269 million and the net periodicpostretirement benefits cost for that year by $35 million.A decrease of one percentage point would decrease the postretirement benefit obligations by $241 million and the cost by $31 million for the same period.

A worldwide reconciliation of the funded status of thebenefit plans at October 3l in millions of dollars follows:

Health Care and

Pensions Life Insurance1999 1998 1999 1998

Change in benefit obligationsBeginning of year balance..................... $(5,830) $ (5,343) $ (2,517) $(2,308)Service cost.......................................... (117) (102) (85) (74)Interest cost ......................................... (396) (386) (188) (172)Actuarial gain (loss)............................... 188 (336) (37) (106)Amendments........................................ (6) (8)Benefits paid ........................................ 364 351 164 141Settlements/curtailments ...................... 2 (2) (3)Special termination benefits .................. (29) (5) (5)Foreign exchange and other.................. 29 1 4 2______ ______ ______ ______End of year balance .............................. (5,795) (5,830) (2,667) (2,517)______ ______ ______ ______Change in plan assets (fair value)Beginning of year balance..................... 5,661 5,451 359 316Actual return on plan assets.................. 1,143 344 76 20Employer contribution ........................... 23 233 168 164Benefits paid ........................................ (364) (351) (158) (141)Foreign exchange and other.................. 9 (16)______ ______ ______ ______

End of year balance .............................. 6,472 5,661 445 359______ ______ ______ ______Plan obligation (more than)

less than plan assets........................ 677 (169) (2,222) (2,158)Unrecognized actuarial (gain) loss.......... (638) 231 295 330Unrecognized prior service

(credit) cost ...................................... 186 222 (8) (12)Remaining unrecognized

transition asset................................. (17) (23)______ ______ ______ ______Net amount recognized

in the balance sheet ..................... $ 208 $ 261 $(1,935) $ (1,840)______ ______ ______ ____________ ______ ______ ______Amounts recognized in

balance sheetPrepaid benefit cost .............................. $ 620 $ 674Accrued benefit liability ......................... (463) (461) $(1,935) $ (1,840)Intangible asset .................................... 25 22Accumulated pretax charge to

other comprehensive income............ 26 26______ ______ ______ ______Net amount recognized .................... $ 208 $ 261 $(1,935) $ (1,840)______ ______ ______ ____________ ______ ______ ______

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans withthe accumulated benefit obligations greater than plan assets at October 31, 1999 were $425 million, $385 million and $14 million, respectively, and at October 31, 1998 were $411 million, $374 million and $12 million, respectively.

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INCOME TAXES

The provision for income taxes by taxing jurisdiction and by significant component consisted of the following in millions of dollars:____________________________________________________

1999 1998 1997____________________________________________________Current:

United States:Federal ............................................................. $115 $216 $434State................................................................. 13 30 37

Foreign.................................................................. 166 164 88____ ____ ____Total current................................................. 294 410 559____ ____ ____

Deferred:United States:

Federal ............................................................. (143) 138 (22)State................................................................. (13) 10

Foreign.................................................................. (3) (4) 14____ ____ ____Total deferred............................................... (159) 144 (8)____ ____ ____

Provision for income taxes ................................. $135 $554 $551____ ____ ________ ____ ____

Based upon location of the company’s operations, the consolidated income before income taxes in the United Statesin 1999, 1998 and 1997 was $21 million, $1,158 million and$1,057 million, respectively, and in foreign countries was $344 million, $402 million and $450 million, respectively.Certain foreign operations are branches of Deere & Companyand are, therefore, subject to United States as well as foreignincome tax regulations. The pretax income by location and the preceding analysis of the income tax provision by taxingjurisdiction are, therefore, not directly related.

A comparison of the statutory and effective income tax provi-sion and reasons for related differences in millions of dollars follows:.

1999 1998 1997____________________________________________________United States federal income tax provisionat a statutory rate of 35 percent....................... $128 $546 $527Increase (decrease) resulting from:State and local income taxes, net of

federal income tax benefit...................................... 25 25Taxes on foreign income which differ from

the United States statutory rate .............................. 22 3 12Benefit of Foreign Sales Corporation........................... (11) (20) (15)Other adjustments – net ............................................ (4) 2____ ____ ____Provision for income taxes .................................. $135 $554 $551____ ____ ________ ____ ________________________________________________________

Deferred income taxes arise because there are certain itemsthat are treated differently for financial accounting than for incometax reporting purposes. An analysis of the deferred income taxassets and liabilities at October 31 in millions of dollars follows:

1999 1998______________ ______________Deferred Deferred Deferred Deferred

Tax Tax Tax TaxAssets Liabilities Assets Liabilities

Deferred installment sales income.... $ 317 $ 429Tax over book depreciation .............. 138 123Deferred lease income .................... 72 30Accrual for retirement and

postemployment benefits............$ 619 $ 546Accrual for sales allowances ........... 262 259Accrual for vacation pay.................. 54 51Allowance for doubtful receivables...... 48 47Tax loss and tax credit carryforwards... 12 19Minimum pension liability

adjustment................................. 10 10Other items .................................... 115 56 124 95Less valuation allowance................. (2) (2)_____ _____ _____ _____

Deferred income taxassets and liabilities ............$1,118 $ 583 $1,054 $ 677_____ _____ ______ __________ _____ ______ _____

At October 31, 1999, accumulated earnings in certainoverseas subsidiaries totaled $797 million for which no provi-sion for United States income taxes or foreign withholdingtaxes has been made, because it is expected that such earningswill be reinvested overseas indefinitely. Determination of theamount of unrecognized deferred tax liability on these unremittedearnings is not practical.

Deere & Company files a consolidated federal income taxreturn in the United States, which includes the wholly-owned Financial Services subsidiaries. These subsidiaries account forincome taxes generally as if they filed separate income tax returns.

At October 31, 1999, certain foreign tax loss and tax creditcarryforwards for $12 million were available with an unlimitedexpiration date.

MARKETABLE SECURITIESMarketable securities are held by Deere & Company and itshealth care subsidiaries. The securities held by Deere & Companyat October 31, 1999 are those transferred from John DeereInsurance Group, Inc. ( JDIG) prior to the sale of the subsidiary(see page 42). All marketable securities are classified as available-for-sale under FASB Statement No. 115, with unrealized gainsand losses shown as a component of stockholders’ equity. Realizedgains or losses from the sales of marketable securities are based onthe specific identification method.

46

The amortized cost and fair value of marketable securities in millions of dollars follow:

Amortized Gross GrossCost Unrealized Unrealized Fair

or Cost Gains Losses Value

October 31, 1999Equity securities............................ $ 86 $ 18 $ 9 $ 95U.S. government and agencies ....... 33 1 34Corporate ..................................... 129 1 2 128Mortgage-backed securities.......... 59 1 1 59____ ___ ___ ____Marketable securities ............. $307 $ 21 $12 $316____ ___ ___ ________ ___ ___ ____October 31, 1998Equity securities............................ $ 99 $ 5 $ 7 $ 97U.S. government and agencies....... 125 8 133States and municipalities .............. 175 11 186Corporate ..................................... 226 11 237Mortgage-backed securities.......... 203 10 213Other ........................................... 1 1____ ___ ___ ____Marketable securities ............. $829 $ 45 $ 7 $867____ ___ ___ ________ ___ ___ ____

The contractual maturities of debt securities at October 31,1999 in millions of dollars follow:

Amortized FairCost Value

Due in one year or less ..................................................... $ 34 $ 34Due after one through five years ....................................... 79 79Due after five through 10 years ......................................... 50 49Due after 10 years............................................................ 58 59____ ____Debt securities............................................................. $221 $221____ ________ ____

Actual maturities may differ from contractual maturitiesbecause some borrowers have the right to call or prepay obligations. Proceeds from the sales of available-for-sale securitieswere $19 million in 1999, $105 million in 1998 and $114 millionin 1997. Gross realized gains and losses on those sales were notsignificant. In addition, $502 million of marketable securitieswere included in the sale of JDIG in 1999. The increase(decrease) in the net unrealized holding gain after incometaxes was $(19) million, $3 million and $8 million during1999, 1998 and 1997, respectively.

TRADE ACCOUNTS AND NOTES RECEIVABLE

Trade accounts and notes receivable at October 31 consisted of the following in millions of dollars:

1999 1998

Trade accounts and notes:Agricultural ............................................................. $1,951 $2,756Construction ........................................................... 104 322Commercial and consumer...................................... 958 784_____ _____Total....................................................................... 3,013 3,862

Other receivables ........................................................ 272 228_____ _____Total....................................................................... 3,285 4,090

Less allowance for doubtful receivables........................ 34 31_____ _____Trade accounts and notes receivable–net ........ $3,251 $4,059_____ __________ _____

At October 31, 1999 and 1998, dealer notes included abovewere $856 million and $955 million, respectively.

Trade accounts and notes receivable arise from sales to dealers of John Deere agricultural, construction and commercialand consumer equipment. The company generally retains as collateral a security interest in the equipment associated with thesereceivables. Generally, terms to dealers require payments as theequipment which secures the indebtedness is sold to retail customers. Interest is charged on balances outstanding after certaininterest-free periods, which range from one to 12 months foragricultural tractors, one to five months for construction equip-ment, and from two to 24 months for most other equipment.Trade accounts and notes receivable have significant concentrationsof credit risk in the agricultural, construction and commercialand consumer business sectors as shown in the previous table.On a geographic basis, there is not a disproportionate concentrationof credit risk in any area.

FINANCING RECEIVABLES

Financing receivables at October 31 consisted of the following in millions of dollars:

1999 1998

Retail notes:Equipment:

Agricultural......................................................... $3,397 $3,030Construction....................................................... 854 953Commercial and consumer ................................. 457 351

Recreational products ............................................. 333 1,044_____ _____Total................................................................... 5,041 5,378

Revolving charge accounts .......................................... 918 764Financing leases.......................................................... 633 387Wholesale notes.......................................................... 1,052 894_____ _____

Total financing receivables ...................................... 7,644 7,423_____ _____Less:

Unearned finance income:Equipment notes ................................................ 626 590Recreational product notes ................................. 80 360Financing leases................................................. 102 50_____ _____

Total .............................................................. 808 1,000_____ _____Allowance for doubtful receivables........................... 93 90_____ _____

Financing receivables – net ................................. $6,743 $6,333_____ __________ _____

Financing receivables have significant concentrations ofcredit risk in the agricultural, construction, commercial andconsumer, and recreational product business sectors as shown inthe previous table. On a geographic basis, there is not a dispro-portionate concentration of credit risk in any area. The companyretains as collateral a security interest in the equipment associatedwith retail notes, wholesale notes and financing leases.

Financing receivable installments, including unearnedfinance income, at October 31 are scheduled as follows in millions of dollars:

1999 1998

Due in months:0 – 12................................................................... $3,432 $2,954

13 – 24 .................................................................. 1,670 1,58525 – 36.................................................................. 1,066 1,10037 – 48.................................................................. 781 72249 – 60.................................................................. 485 451Thereafter............................................................... 210 611_____ _____

Total.......................................................................... $7,644 $7,423_____ __________ _____

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The maximum terms for retail notes are generally eightyears for agricultural equipment, five years for constructionequipment, six years for commercial and consumer equipmentand 15 years for recreational products. The maximum term for financing leases is generally five years, while the maximumterm for wholesale notes is generally 12 months.

The company’s United States and Canadian credit sub-sidiaries received proceeds of $2,482 million in 1999, $1,860 million in 1998 and $968 million in 1997 from the sale of retailnotes. At October 31, 1999 and 1998, the unpaid balances ofretail notes previously sold were $2,716 million and $2,388 million,respectively. The company’s maximum exposure under all retailnote recourse provisions at October 31, 1999 and 1998 was$176 million and $193 million, respectively. There is no anticipatedcredit risk related to nonperformance by the counterparties.The retail notes sold are collateralized by security interests in therelated equipment sold to customers. At October 31, 1999 and1998, worldwide financing receivables administered, whichinclude financing receivables previously sold but still administered,totaled $9,459 million and $8,721 million, respectively.

Total financing receivable amounts 60 days or more past due were $35 million at October 31, 1999 compared with $29 million at October 31, 1998. These past-due amounts represented .52 percent of the receivables financed at October 31,1999 and .44 percent at October 31, 1998. The allowance fordoubtful financing receivables represented 1.36 percent and1.40 percent of financing receivables outstanding at October 31,1999 and 1998, respectively. In addition, at October 31, 1999and 1998, the company’s credit subsidiaries had $139 million and$176 million, respectively, of deposits withheld from dealers and merchants available for potential credit losses. An analysis ofthe allowance for doubtful credit receivables follows in millions of dollars:

1999 1998 1997______________________________________________Balance, beginning of the year ................................... $ 90 $ 94 $ 93Provision charged to operations.................................. 68 50 38Amounts written off.................................................... (44) (36) (31)Transfers related to retail note sales ........................... (21) (18) (6)____ ____ ____Balance, end of the year ..................................... $ 93 $ 90 $ 94____ ____ ________ ____ ____

OTHER RECEIVABLES

Other receivables at October 31 consisted of the following in millions of dollars:_______________________________________________________________

1999 1998_______________________________________________________________Insurance and health care premiums receivable ................ $ 42 $ 94Reinsurance receivables ................................................... 94Receivables relating to asset backed securitizations........... 89 162Taxes receivable............................................................... 115 129Other................................................................................ 28 58____ ____Other receivables ........................................................ $274 $537____ ________ ___________________________________________________________________

The credit subsidiaries’ receivables related to asset backedsecuritizations are equal to the present value of payments to bereceived for retained interests and deposits made with otherentities for recourse provisions under the retail note sales agreements.

EQUIPMENT ON OPERATING LEASES

Operating leases arise from the leasing of John Deere equipment to retail customers in the United States and Canada. Initiallease terms generally range from 36 to 60 months. The netvalue of equipment on operating leases was $1,655 million and$1,209 million at October 31, 1999 and 1998, respectively. Of these leases, at October 31, 1999, $3 million was financedby the Equipment Operations and $1,652 million by the creditsubsidiaries. The equipment is depreciated on a straight-linebasis over the terms of the leases. The accumulated depreciationon this equipment was $352 million and $226 million atOctober 31, 1999 and 1998, respectively. The correspondingdepreciation expense was $204 million in 1999, $146 millionin 1998 and $95 million in 1997.

Future payments to be received on operating leases totaled$648 million at October 31, 1999 and are scheduled as follows: 2000 – $260, 2001 – $189, 2002 – $102, 2003 – $69 and 2004 – $28.

INVENTORIES

Substantially all inventories owned by Deere & Company and its United States equipment subsidiaries are valued at cost, on the“last-in, first-out” (LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the “first-in, first-out”(FIFO) basis, or market. The value of gross inventories on theLIFO basis represented 77 percent and 84 percent of worldwidegross inventories at FIFO value on October 31, 1999 and 1998,respectively. If all inventories had been valued on a FIFO basis,estimated inventories by major classification at October 31 in millions of dollars would have been as follows:

1999 1998

Raw materials and supplies.......................................... $ 257 $ 250Work-in-process.......................................................... 370 475Finished machines and parts ....................................... 1,721 1,612_____ _____

Total FIFO value ...................................................... 2,348 2,337Adjustment to LIFO basis ............................................. 1,054 1,050_____ _____Inventories............................................................... $1,294 $1,287_____ ____________ _______

PROPERTY AND DEPRECIATION

A summary of property and equipment at October 31 in millions of dollars follows:

1999 1998

Land ........................................................................... $ 59 $ 56Buildings and building equipment................................. 1,124 1,042Machinery and equipment ........................................... 2,318 2,206Dies, patterns, tools, etc .............................................. 682 654All other....................................................................... 602 566Construction in progress.............................................. 105 164_____ _____

Total at cost............................................................ 4,890 4,688Less accumulated depreciation.................................... 3,108 2,988_____ _____Property and equipment – net ............................. $1,782 $1,700_____ __________ _____

Leased property under capital leases amounting to $5 million at both October 31, 1999 and 1998 is includedprimarily in machinery and equipment.

Property and equipment additions in 1999, 1998 and1997 were $309 million, $442 million and $492 million and depreciation was $281 million, $279 million and $265 million,

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respectively. Property and equipment expenditures for new andrevised products, increased capacity and the replacement or majorrenewal of significant items of property and equipment are capitalized. Expenditures for maintenance, repairs and minorrenewals are generally charged to expense as incurred. Most ofthe company’s property and equipment is depreciated usingthe straight-line method for financial accounting purposes.Depreciation for United States federal income tax purposes iscomputed using accelerated depreciation methods.

It is not expected that the cost of compliance with foreseeable environmental requirements will have a materialeffect on the company’s financial position or results of operations.

INTANGIBLE ASSETS

Net intangible assets totaled $295 million and $218 million at October 31, 1999 and 1998, respectively. The balance at October 31,1999 consisted primarily of unamortized goodwill, which resultedfrom the purchase cost of assets acquired exceeding their fair value,and an intangible asset of $25 million related to the additionalminimum pension liability required by FASB Statement No. 87.

Intangible assets, excluding the intangible pension asset, arebeing amortized over 25 years or less, and the accumulated amortization was $89 million and $66 million at October 31, 1999and 1998, respectively. The intangible pension asset is remeasuredand adjusted annually. The unamortized goodwill is reviewedperiodically for potential impairment.

SHORT-TERM BORROWINGS

Short-term borrowings at October 31 consisted of the following in millions of dollars:

1999 1998

Equipment OperationsCommercial paper...................................................... $ 316 $ 1,268Notes payable to banks .............................................. 121 44Long-term borrowings due within one year.................. 205 200______ ______

Total ..................................................................... 642 1,512______ ______Financial ServicesCommercial paper...................................................... 1,699 2,124Notes payable to banks .............................................. 9 7Long-term borrowings due within one year.................. 2,138 1,679______ ______

Total ..................................................................... 3,846 3,810______ ______Short-term borrowings......................................... $ 4,488 $5,322______ ____________ ______

The weighted average interest rates on total short-term borrowings, excluding current maturities of long-term borrowings,at October 31, 1999 and 1998 were 5.3 percent and 5.4 percent,respectively. All of the Financial Services’ short-term borrowingsrepresent obligations of the credit subsidiaries.

Unsecured lines of credit available from United States and foreign banks were $5,815 million at October 31, 1999.Some of these credit lines are available to both the EquipmentOperations and certain credit subsidiaries. At October 31, 1999,$3,647 million of the worldwide lines of credit were unused. For the purpose of computing the unused credit lines, total short-term borrowings, excluding the current maturities of long-term borrowings, were considered to constitute utilization.

Included in the above lines of credit is a long-term committed credit agreement expiring in February 2003 for$3,500 million. The agreement is mutually extendable and theannual facility fee is not significant. The credit agreement has

various requirements of John Deere Capital Corporation,including the maintenance of its consolidated ratio of earningsto fixed charges at not less than 1.05 to 1 for each fiscal quarter and the ratio of senior debt to total stockholder’s equity plus subordinated debt at not more than 8 to 1 at the end of any fiscal quarter. The credit agreement also contains a provisionrequiring Deere & Company to maintain consolidated tangiblenet worth of $500 million according to United States generallyaccepted accounting principles in effect at October 31, 1994.Under this provision, $3,299 million of the company’s retainedearnings balance was free of restriction at October 31, 1999.

Deere & Company has a contractual agreement to conduct business with the John Deere Capital Corporation onsuch terms that the Capital Corporation will continue to satisfythe ratio requirement discussed above for earnings to fixedcharges, the Capital Corporation’s tangible net worth will bemaintained at not less than $50 million and Deere & Companywill own at least 51 percent of Capital Corporation’s votingcapital stock. These arrangements are not intended to makeDeere & Company responsible for the payment of obligationsof this credit subsidiary.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at October 31 consisted of the following in millions of dollars:

1999 1998

Equipment OperationsAccounts payable:

Trade payables............................................................. $ 804 $ 913Dividends payable......................................................... 51 52Other............................................................................ 42 45

Accrued expenses:Employee benefits ........................................................ 189 177Dealer commissions ..................................................... 173 217Other............................................................................ 633 694_____ _____

Total......................................................................... 1,892 2,098_____ _____Financial Services Accounts payable:

Deposits withheld from dealers and merchants.............. 139 176Other............................................................................ 233 161

Accrued expenses:Unearned premiums ..................................................... 5 141Unpaid loss adjustment expenses.................................. 85Interest payable ............................................................ 39 57Other............................................................................ 125 135_____ _____

Total......................................................................... 541 755_____ _____Accounts payable and accrued expenses ............... $2,433 $2,853_____ __________ _____

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LONG-TERM BORROWINGS

Long-term borrowings at October 31 consisted of the following in millions of dollars:

1999 1998

Equipment Operations Notes and debentures:

Medium-term notes due 2001 – 2006:Average interest rate of 8.0% as of year end 1999 and 8.9% as of year end 1998 ........................ $ 181 $ 134

6.55% notes due 2004 ................................................ 2508.95% debentures due 2019* ...................................... 2008-1/2% debentures due 2022....................................... 200 2006.55% debentures due 2028........................................ 200 200Other............................................................................ 5 19_____ _____

Total................................................................ 1,036 553_____ _____*Reclassified to short-term borrowings in 1998 because the obligation was callable by creditors in 1999.

Financial ServicesNotes and debentures:

Medium-term notes due 2000 – 2007:Average interest rate of 6.1% as of year end1999 and 6.4% as of year end 1998........................ 1,373 1,549

5.85% notes due 2001 ................................................ 200 2005.35% notes due 2001 ................................................ 200 2007% notes due 2002: Swapped to

variable interest rate of 6.5% as of year end 1999................................................. 300

6.125% U.S. dollar notes due 2003: Swapped to Canadian dollars and a variable interest rate of 5.1% as of year end 1999 and6.3% as of year end 1998........................................ 147 140

Fixed rate notes due up to 2008: Average rate of 7.2% as of year end 1999.................................... 100

6% notes due 2009: Swapped to variable interest rate of 5.5% as of year end 1999 ................. 300_____ _____

Total notes and debentures.................................. 2,620 2,089Subordinated debt:

8-5/8% subordinated debentures due 2019.................. 150 150_____ _____Total ............................................................... 2,770 2,239_____ _____

Long-term borrowings................................................. $3,806 $2,792_____ __________ _____

All of the Financial Services’ long-term borrowings represent obligations of the credit subsidiaries.

The approximate amounts of the Equipment Operations’long-term borrowings maturing and sinking fund paymentsrequired in each of the next five years in millions of dollars are as follows: 2000 – $205, 2001 – $68, 2002 – $72, 2003 – $3and 2004 – $250. The approximate amounts of the credit subsidiaries’ long-term borrowings maturing and sinking fundpayments required in each of the next five years in millions ofdollars are as follows: 2000 – $2,138, 2001 – $1,226, 2002 – $768,2003 – $227 and 2004 – $1.

LEASES

At October 31, 1999, future minimum lease payments under capital leases totaled $4 million. Total rental expense for operating leases during 1999 was $73 million compared with $73 million in 1998 and $61 million in 1997. At October 31,1999, future minimum lease payments under operating leasesamounted to $151 million as follows: 2000 – $45, 2001 – $34,2002 – $21, 2003 – $13, 2004 – $21 and later years $17.

COMMITMENTS AND CONTINGENT LIABILITIES

On October 31, 1999, the company’s maximum exposure under all credit receivable recourse provisions was $176 million for retail notes sold by the Financial Services subsidiaries. Also, at October 31, 1999, the company had commitments ofapproximately $57 million for construction and acquisition ofproperty and equipment.

The company is subject to various unresolved legal actionswhich arise in the normal course of its business, the mostprevalent of which relate to product liability, retail credit,software licensing, patent and trademark matters. Although it is not possible to predict with certainty the outcome of theseunresolved legal actions or the range of possible loss, the company believes these unresolved legal actions will not have amaterial effect on its financial position or results of operations.

CAPITAL STOCK

Changes in the common stock account in 1997, 1998 and 1999in millions were as follows:

Number ofShares Issued Amount

Balance at October 31, 1996...................................... 263.8 $1,770Other......................................................................... 9________ _______

Balance at October 31, 1997 ..................................... 263.8 1,779Other......................................................................... .1 11________ _______

Balance at October 31, 1998 ..................................... 263.9 1,790Acquisition of a business............................................ 1.5 49Other......................................................................... .4 11________ _______

Balance at October 31, 1999................................ 265.8 $1,850________ _______________ _______

The number of common shares the company is authorizedto issue is 600 million and the number of authorized preferredshares, none of which has been issued, is 9 million.

The company has previously announced it would repurchase up to $1,500 million of Deere & Company commonstock. The stock repurchased under the program to date totals$1,308 million. In 1999, repurchases of 1.2 million shares of common stock at a cost of $46 million were related to therepurchase program.

A reconciliation of basic and diluted net income per sharefollows in millions, except per share amounts:

1999 1998 1997

Net income ................................................ $ 239.2 $1,021.4 $ 960.1Average shares outstanding........................ 232.9 243.3 253.7Basic net income per share ................... $ 1.03 $ 4.20 $ 3.78________ _________ ________________ _________ ________

Average shares outstanding........................ 232.9 243.3 253.7Effect of dilutive securities:

Stock options......................................... 1.5 2.1 2.7Other..................................................... .3 .2________ _________ ________

Total potential shares outstanding ...... 234.4 245.7 256.6________ _________ ________________ _________ ________

Diluted net income per share .............. $ 1.02 $ 4.16 $ 3.74________ _________ ________________ _________ ________

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Stock options to purchase 4.2 million shares, .5 millionshares and none during 1999, 1998 and 1997 were outstanding,but not included in the preceding diluted per share computationbecause the options’ exercise prices were greater than the average market price of the company’s common stock duringthe related periods.

STOCK OPTION AND RESTRICTED STOCK AWARDS

The company issues stock options and restricted stock to key employees under plans approved by stockholders. Restrictedstock is also issued to nonemployee directors. Options are generally awarded with the exercise price equal to the marketprice and become exercisable in one year. Certain other optionsare awarded with the exercise prices greater than the marketprice and become exercisable in one year or longer, dependingon the achievement of company performance goals. Options generally expire 10 years after the date of grant. The periods ofrestriction for restricted stock issued to employees range up toeight years, generally depending on the achievement of companyperformance goals. If the company exceeds these goals, additionalshares could be granted at the end of the restricted periods.According to these plans at October 31, 1999, the company isauthorized to grant stock options and restricted stock for anadditional 8.1 million and 2.8 million shares, respectively.

The company has retained the intrinsic value method ofaccounting for its plans in accordance with APB Opinion No. 25, and no compensation expense for stock options wasrecognized under this method. For disclosure purposes onlyunder FASB Statement No. 123, Accounting for Stock BasedCompensation, the Black-Scholes option pricing model wasused to calculate the “fair values” of stock options on the datethe options were awarded. Based on this model, the weighted-average fair values of stock options awarded during 1999, 1998and 1997 with the exercise price equal to the market price were$7.96, $19.84 and $13.70 per option, respectively. Stock optionsawarded during 1999 and 1998 with the exercise price greaterthan the market price were valued at $4.26 and $14.81 peroption, respectively.

Pro forma net income and earnings per share, as if the fairvalue method in FASB Statement No. 123 had been used toaccount for stock-based compensation, and the assumptions usedare as follow:

1999 1998 1997

Net income (in millions)As reported........................................ $ 239 $1,021 $ 960Pro forma .......................................... $ 216 $ 997 $ 948

Net income per shareAs reported – basic............................ $ 1.03 $ 4.20 $ 3.78Pro forma – basic .............................. $ .93 $ 4.10 $ 3.74As reported – diluted.......................... $ 1.02 $ 4.16 $ 3.74Pro forma – diluted ............................ $ .92 $ 4.06 $ 3.70

Black-Scholes assumptions*Risk-free interest rate......................... 4.6% 5.8% 6.2%Dividend yield..................................... 2.7% 1.6% 1.9%Stock volatility .................................... 27.9% 34.7% 30.0%Expected option life ............................ 5.0 years 5.3 years 5.3 years

*Weighted-averages

The pro forma stock-based compensation expense includedin net income above may not be representative of future years

since only awards of stock options and restricted stock afterNovember 1, 1995 have been included in accordance with FASBStatement No. 123.

During the last three fiscal years, changes in shares underoption in millions were as follows:

1999 1998 1997____________ ____________ ____________Exercise Exercise Exercise

Shares Price* Shares Price* Shares Price*

Outstanding at beginning of year...... 7.6 $39.95 6.2 $30.90 6.3 $26.54

Granted – at market..... 3.9 32.75 1.7 56.50 1.5 42.69Granted – at premium.. .7 50.97 .5 82.19Exercised ................... (.2) 21.35 (.7) 29.55 (1.5) 24.23Expired or forfeited ..... (.1) 40.62 (.1) 48.67 (.1) 28.70____ ____ ____Outstanding at

end of year............... 11.9 38.59 7.6 39.95 6.2 30.90Exercisable at

end of year............... 6.8 37.36 3.8 30.52 3.1 24.70

*Weighted-averages

Options outstanding and exercisable in millions at October 31, 1999 were as follows:

Options Outstanding Options Exercisable_______________________ ______________Remaining

Range of Contractual Exercise ExerciseExercise Prices Shares Life (yrs)* Price* Shares Price*

$13.63 - $23.56 ...... 1.5 4.21 19.91 1.5 19.91$28.39 - $34.13 ...... 6.0 7.68 32.50 2.4 32.44$38.47 - $47.36 ...... 1.5 7.23 42.42 1.2 42.69$50.97 - $56.50 ...... 2.4 8.39 54.80 1.7 56.50$82.19..................... .5 8.08 82.19____ ____Total......................... 11.9 6.8

*Weighted-averages

In 1999, 1998, and 1997, the company granted 703,914,33,239 and 292,681 shares of restricted stock with weighted-average fair values of $32.85, $55.60 and $43.14 per share,respectively. The total compensation expense for the restrictedstock plans, which are being amortized over the restricted periods, was $10 million, $2 million and $15 million in 1999,1998 and 1997, respectively.

EMPLOYEE STOCK PURCHASE AND SAVINGS PLANS

The company maintains the following significant plans for eligible employees:

John Deere Savings and Investment Plan, for salaried employeesJohn Deere Stock Purchase Plan, for salaried employeesJohn Deere Tax Deferred Savings Plan, for hourly and incentive

paid employees

Company contributions under these plans were $51 millionin 1999, $45 million in 1998 and $41 million in 1997.

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OTHER COMPREHENSIVE INCOME ITEMSOther comprehensive income items under FASB Statement No. 130 are transactions recorded in stockholders’ equity during the year, excluding net income and transactions withstockholders. Following are the items included in other comprehensive income (loss) and the related tax effects in millions of dollars:

Before Tax AfterTax (Expense) Tax

Amount Credit Amount

1997Minimum pension liability adjustment............ $ 350 $(129) $ 221______ ______ ______

Cumulative translation adjustment................. (37) (6) (43)______ ______ ______

Unrealized gain on marketable securities:Holding gain ............................................ 13 (4) 9Reclassification of realized gain

to net income ...................................... (1) (1)______ ______ ______

Net unrealized gain .................................. 12 (4) 8______ ______ ______

Total other comprehensive income ................. $ 325 $(139) $ 186______ ______ ____________ ______ ______

1998Minimum pension liability adjustment............ $ (8) $ 3 $ (5)______ ______ ______

Cumulative translation adjustment................. (21) (3) (24)______ ______ ______

Unrealized gain on marketable securities:Holding gain ............................................ 11 (4) 7Reclassification of realized gain

to net income ...................................... (7) 3 (4)______ ______ ______

Net unrealized gain .................................. 4 (1) 3______ ______ ______

Total other comprehensive loss ...................... $ (25) $ (1) $ (26)______ ______ ____________ ______ ______

1999Cumulative translation adjustment................. $ (24) $ (3) $ (27)______ ______ ______

Unrealized loss on marketable securities:Holding loss............................................. (28) 10 (18)Reclassification of realized gain

to net income ...................................... (1) (1)______ ______ ______

Net unrealized loss................................... (29) 10 (19)______ ______ ______

Total other comprehensive loss ...................... $ (53) $ 7 $ (46)______ ______ ____________ ______ ______

FINANCIAL INSTRUMENTS

The fair values of financial instruments which do not approximatethe carrying values in the financial statements at October 31 inmillions of dollars follow:

1999 1998____________ ____________Carrying Fair Carrying Fair

Value Value Value Value

Financing receivables............................. $ 6,743 $ 6,702 $ 6,333 $ 6,344______ ______ ______ ____________ ______ ______ ______

Long-term borrowings and related swaps:Equipment Operations borrowings ..... $ 1,036 $ 1,045 $ 553 $ 604Financial Services borrowings............ 2,773 2,748 2,249 2,307

Interest rate andforeign currency swaps ................. (3) 19 (10) (30)______ ______ ______ ______Total ............................................. $ 3,806 $ 3,812 $ 2,792 $ 2,881______ ______ ______ ____________ ______ ______ ______

Fair Value EstimatesFair values of the long-term financing receivables with fixedrates were based on the discounted values of their related cash flows at current market interest rates. The fair values of the remaining financing receivables approximated the carrying amounts.

Fair values of long-term borrowings with fixed rates were based on the discounted values of their related cash flows at current market interest rates. Certain long-term borrowings of thecredit operations have been swapped to current variable interestrates. Fair values of these swaps were also based on discounted values of their related cash flows at current market interest rates.

Fair values and carrying values of the company’s otherinterest rate swaps associated with short-term borrowings, foreignexchange forward contracts and options were not material.

DerivativesThe company enters into derivative transactions only to hedgeexposures arising in the normal course of business, and notfor the purpose of creating speculative positions or trading. Thefollowing notional or contract amounts do not represent amountsexchanged by the parties and, therefore, are not representative of the company’s risk. The net amounts exchanged are calculatedon the basis of the notional amounts and other terms of thederivatives such as interest rates and exchange rates, and representonly a small portion of the notional amounts. The credit andmarket risks under these agreements are not considered to besignificant since the counterparties have high credit ratings andthe fair values and carrying values are not material.

Interest Rate SwapsThe company’s credit operations enter into interest rate swapagreements related to their borrowings and certain asset backedsecuritizations. These swaps are utilized to more closely match thetype of interest rates of the borrowings to those of the assets beingfunded or to hedge interest rate exposures from securitizations.The differential to be paid or received on all swap agreements isaccrued as interest rates change and is recognized over the lives of the agreements in interest expense. The fair value adjustmentsfor swap agreements related to securitizations are recognized inother income.

At October 31, 1999 and 1998, the total notional principalamounts of interest rate swap agreements related to short-termborrowings were $1,037 million and $1,063 million, having ratesof 4.7 to 6.8 percent and 4.0 to 6.4 percent, terminating in up to 59 months and 58 months, respectively.

The credit operations have entered into interest rate swapagreements with independent parties that change the effectiverate of interest on certain long-term borrowings. The “Long-Term Borrowings” table on page 50 reflects the effectiveyear-end variable interest rates relating to these swap agreements.The notional principal amounts and maturity dates of these swapagreements are the same as the principal amounts and maturitiesof the related borrowings. The credit operations also haveinterest rate swap agreements associated with medium-termnotes. The “Long-Term Borrowings” table reflects the interestrates relating to these swap agreements. At October 31, 1999and 1998, the total notional principal amounts of these swapagreements were $540 million and $375 million, terminatingin up to 92 months and 104 months, respectively.

At October 31, 1999, the total notional principal amount ofinterest rate swap agreements related to asset backed securitizationswas $361 million, having rates of 4.7 percent to 5.9 percent, terminating in up to 68 months.

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Foreign Exchange Forward Contracts, Swaps and OptionsThe company has entered into foreign exchange forward contracts,swaps and purchased options in order to hedge the currency exposure of certain receivables, liabilities, expected inventory purchases and equipment sales. The foreign exchange forwardcontract and swap gains or losses are accrued as foreign exchangerates change for hedges of receivables and liabilities or deferreduntil expiration of the contract for hedges of future commitments.The contract gains or losses and premiums are recognized in otheroperating expenses, cost of sales or interest expense, and the premiums are either amortized or deferred over the terms of thecontracts depending on the items being hedged. The foreignexchange purchased option premiums and any gains are deferredand recognized in cost of sales for future inventory purchases orsales for future sales of equipment. At October 31, 1999 and 1998,the company had foreign exchange forward contracts of $778 million and $697 million maturing in up to 19 monthsand 12 months, respectively, and foreign currency swap agree-ments for $147 million and $237 million maturing in up to 43 months and 55 months, respectively. At October 31, 1999 and 1998, the company had purchased options for $131 million and $215 million maturing in up to 23 months and 27 months,respectively. The total deferred gains or losses on these foreignexchange hedges were not material at October 31, 1999 and 1998.

CASH FLOW INFORMATION

For purposes of the statement of consolidated cash flows, the company considers investments with original maturities ofthree months or less to be cash equivalents. Substantially all of the company’s short-term borrowings mature within threemonths or less.

Cash payments for interest and income taxes consisted ofthe following in millions of dollars:

1999 1998 1997

Interest:Equipment Operations............................................. $151 $126 $ 83Financial Services ................................................... 428 414 366Intercompany eliminations ....................................... (15) (11) (5)_____ _____ _____

Consolidated ............................................................ $564 $529 $444_____ _____ __________ _____ _____

Income taxes:Equipment Operations............................................. $135 $449 $522Financial Services ................................................... 55 80 112Intercompany eliminations ....................................... (43) (63) (97)_____ _____ _____

Consolidated ............................................................ $147 $466 $537_____ _____ __________ _____ _____

SUPPLEMENTAL INFORMATION (UNAUDITED)

Quarterly information with respect to net sales and revenues and earnings is shown in the following schedule. Such information isshown in millions of dollars except for per share amounts.

First Second Third FourthQuarter Quarter Quarter Quarter

1999Net sales and revenues .................. $2,459 $3,468 $3,036 $2,788Income (loss) before income taxes... 76 231 125 (67)Net income (loss) ........................... 50 150 69 (30)Net income (loss) per share – basic .21 .65 .30 (.13)Net income (loss) per share – diluted .21 .65 .29 (.13)Dividends declared per share ......... .22 .22 .22 .22Dividends paid per share................ .22 .22 .22 .22

1998Net sales and revenues .................. $2,846 $4,070 $3,694 $3,212Income before income taxes........... 321 567 437 235Net income ................................... 203 365 291 162Net income per share – basic......... .81 1.48 1.20 .71Net income per share – diluted....... .81 1.45 1.19 .71Dividends declared per share ......... .22 .22 .22 .22Dividends paid per share................ .20 .44 * .22

*The payment date was included in the second quarter.

Common stock per share sales prices from New York StockExchange composite transactions quotations follow:

First Second Third FourthQuarter Quarter Quarter Quarter

1999 Market priceHigh ............................................. $40.19 $45.94 $45.25 $43.44Low.............................................. $29.44 $31.56 $35.13 $35.131998 Market priceHigh.............................................. $59.88 $64.13 $59.50 $43.56Low .............................................. $49.38 $53.38 $39.69 $28.38

At October 31, 1999, there were 34,692 holders of recordof the company’s $1 par value common stock and 13 holders of record of the company’s 51⁄2% convertible subordinateddebentures due 2001.

Dividend and Other EventsA quarterly cash dividend of $.22 per share was declared at the board of directors’ meeting held on December 1, 1999,payable on February 1, 2000.

On December 13, 1999, the company announced anagreement to acquire Timberjack Group, headquartered inHelsinki, Finland for approximately $600 million. Subject toregulatory approvals, the transaction is expected to close in year2000. Timberjack Group, a leading manufacturer of forestryequipment, reported annual sales of $580 million in 1998. Thisacquisition will broaden the forestry product line and customerbase for the company’s construction equipment segment.

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FINANCIAL INSTRUMENT RISK INFORMATION (UNAUDITED)Sensitivity AnalysisThe following is a sensitivity analysis for the company’s derivatives and other financial instruments which have interest rate risk.These instruments are held for other than trading purposes. Thegains or losses in the following table represent the changes in thefinancial instruments’ fair values which would be caused bydecreasing the interest rates by 10 percent of the current marketrates at October 31,1999 and increasing the interest rates by 10 percent of the current market rates at October 31, 1998. The fair values were determined based on the discounted valuesof their related cash flows. The gains or losses in fair valueswould have been as follows in millions of dollars:

Fair ValueGains (Losses)

1999 1998Marketable securities .......................................... $ 10 $(13)Financing receivables .......................................... 40 (37)

Long-term borrowings and related swaps:Equipment Operations borrowings................... (48) 28Financial Services borrowings ......................... (39) 24

Interest rate andforeign currency swaps .............................. 23 (7)____ ____Total .......................................................... $ (14) $ (5)____ ________ ____

Tabular InformationThe following foreign exchange forward contracts were held by the company to hedge certain currency exposures. Substantiallyall contracts have maturity dates of less than one year. Thenotional amounts and fair values in millions of dollars follow:

Average Fair ValueContractual Notional Gains

Rate* Amount (Losses)

October 31, 1999Buy Deutsche Mark / Sell US$ .................... 1.8513 $157 $(1.3)Buy US$ / Sell British Pound ....................... .6314 133 1.2Buy US$ / Sell Brazilian Real....................... 1.9633 132 .7Buy US$ / Sell Deutsche Mark .................... 1.8404 120 1.8Buy US$ / Sell Canadian dollar.................... 1.4694 76Buy US$ / Sell Australian dollar ................... 1.5475 47 (.4)Other contracts........................................... 113 (.6)____ ____

Total .................................................. $778 $ 1.4____ ________ ____

October 31, 1998Buy US$ / Sell Canadian dollar.................... 1.5390 $240 $ 2.2Buy Deutsche Mark / Sell US$ .................... 1.6233 187 (1.7)Buy US$ / Sell Australian dollar................... 1.6189 86 (1.1)Buy British Pound / Sell US$ ....................... .5956 37 (.1)Buy French Franc / Sell US$ ....................... 5.6281 34 .5Buy Spanish Peseta / Sell US$.................... 140.44 28 (1.9)Other contracts........................................... 85 (3.1)____ ____

Total .................................................. $697 $(5.2)____ ________ ____

*Currency per United States dollar (US$)

At October 31, 1999 and 1998, the company had $131 million and $215 million of foreign exchange purchasedoptions with a deferred premium of $5 million in both years.The premium is the maximum potential loss on these options,which are primarily held as hedges of expected inventory purchases. See pages 41 and 52 through 54 for further discussionof financial instruments including derivatives.

54

TEN-YEAR SUMMARY OF CONSOLIDATED INCOME AND RETAINED EARNINGS

(In millions of dollars Year Ended October 31except per share amounts) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

Net Sales and RevenuesNet sales of equipment ........................................... $ 9,701 $11,926 $11,082 $ 9,640 $ 8,830 $ 7,663 $ 6,479 $ 5,723 $ 5,848 $6,779Finance and interest income.................................... 1,104 1,007 867 763 660 548 563 616 654 593Insurance and health care premiums....................... 716 693 668 658 628 609 497 465 424 366Investment income ................................................. 62 73 67 66 96 94 97 96 88 86Other income ......................................................... 168 123 107 102 77 63 60 30 21 33

Total .................................................................. 11,751 13,822 12,791 11,229 10,291 8,977 7,696 6,930 7,035 7,857

Costs and ExpensesCost of goods sold .................................................. 8,178 9,234 8,481 7,460 6,922 6,020 5,369 4,892 4,894 5,424Research and development expenses...................... 458 445 412 370 327 276 270 288 279 264Selling, administrative and general expenses ........... 1,362 1,309 1,321 1,147 1,002 907 844 843 840 792Interest expense ..................................................... 557 519 422 402 393 303 369 413 450 435Insurance and health care claims and benefits......... 595 579 554 502 499 512 428 410 385 317Other operating expenses ....................................... 236 176 94 61 55 38 37 40 31 38Restructuring costs................................................. 107 182

Total .................................................................. 11,386 12,262 11,284 9,942 9,198 8,056 7,424 6,886 7,061 7,270

Income (Loss) of Consolidated Group Before Income Taxes and Changes in Accounting ......................... 365 1,560 1,507 1,287 1,093 921 272 44 (26) 587

Provision (credit) for income taxes ........................... 135 554 551 480 398 332 97 15 (5) 182

Income (Loss) of Consolidated Group Before Changes in Accounting .................... 230 1,006 956 807 695 589 175 29 (21) 405

Equity in Income of Unconsolidated Affiliates ............................. 9 15 4 10 11 15 9 8 1 6

Income (Loss) Before Changes in Accounting ................................................. 239 1,021 960 817 706 604 184 37 (20) 411

Changes in Accounting ..................................... (1,105)

Net Income (Loss) for the Year ........................ $ 239 $1,021 $ 960 $ 817 $ 706 $ 604 $ (921) $ 37 $ (20) $ 411

Cash Dividends Declaredand Other Adjustments ................................. (224) (229) (212) (207) (195) (176) (157) (152) (152) (152)

Less transfer to common stock ($1 par valueper share) for three-for-one split effective November 17, 1995........................................... (175)

Retained Earnings at Beginning of Year......... 3,840 3,048 2,300 1,690 1,354 926 2,004 2,119 2,291 2,032

Retained Earnings at End of Year .................... $ 3,855 $3,840 $ 3,048 $ 2,300 $ 1,690 $ 1,354 $ 926 $ 2,004 $ 2,119 $ 2,291

Income (loss) per share before changesin accounting..................................................... $ 1.03 $ 4.20 $ 3.78 $ 3.14 $ 2.71 $ 2.34 $ .80 $ .16 $ (.09) $ 1.81

Net income (loss) per share – basic......................... $ 1.03 $ 4.20 $ 3.78 $ 3.14 $ 2.71 $ 2.34 $ (3.97) $ .16 $ (.09) $ 1.81Net income (loss) per share – diluted ...................... $ 1.02 $ 4.16 $ 3.74 $ 3.11 $ 2.69 $ 2.32 $ (3.97) $ .16 $ (.09) $ 1.79Dividends declared per share .................................. $ .88 $ .88 $ .80 $ .80 $ .75 $ .681⁄3 $ .662⁄3 $ .662⁄3 $ .662⁄3 $ .662⁄3Dividends paid per share......................................... $ .88 $ .86 $ .80 $ .80 $ .731⁄3 $ .662⁄3 $ .662⁄3 $ .662⁄3 $ .662⁄3 $ .612⁄3Average number of common

shares outstanding (in thousands) ...................... 232,874 243,315 253,723 260,547 260,494 258,438 231,874 228,822 228,493 227,648

Other Statistical DataCapital expenditures ............................................... $ 308 $ 438 $ 492 $ 277 $ 263 $ 230 $ 204 $ 279 $ 298 $ 292Property and equipment provision for depreciation ... $ 281 $ 279 $ 265 $ 262 $ 250 $ 231 $ 226 $ 217 $ 190 $ 177Number of employees (at year end)......................... 38,726 37,002 34,420 33,919 33,375 34,252 33,070 34,852 36,774 38,493

55

Deere & Company

TEN-YEAR SUMMARY OF CONSOLIDATED BALANCE SHEETS

(In millions of dollars except per share amounts) October 31Assets 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990

Cash and cash equivalents ....................................... $ 296 $ 310 $ 330 $ 291 $ 364 $ 245 $ 338 $ 217 $ 278 $ 185Marketable securities ............................................... 316 867 820 869 830 1,126 995 954 857 801Receivables from unconsolidated affiliates ................ 30 36 14 13 2 9 4 22 18 3Trade accounts and notes receivable – net ............... 3,251 4,059 3,334 3,153 3,260 2,939 2,794 2,946 2,958 3,100Financing receivables – net ...................................... 6,743 6,333 6,405 5,912 5,345 4,502 3,755 4,395 4,754 3,896Other receivables ..................................................... 274 537 413 550 492 430 393 179 109 142Equipment on operating leases – net ........................ 1,655 1,209 775 430 259 219 195 168 185 181Inventories ............................................................... 1,294 1,287 1,073 829 721 698 464 525 538 678Property and equipment – net .................................. 1,782 1,700 1,524 1,352 1,336 1,314 1,240 1,308 1,235 1,149Investments in unconsolidated affiliates .................... 151 172 150 127 115 154 141 118 106 85Intangible assets – net ............................................. 295 218 158 286 305 284 297 337 371 240Prepaid pension costs .............................................. 620 674 593 31 26 21 20 20 15 10Other assets ............................................................ 185 110 107 76 61 62 43 140 133 81Deferred income taxes ............................................. 598 396 543 653 640 680 682 24 17 12Deferred charges ..................................................... 88 94 81 81 91 98 106 93 75 101

Total ........................................................................ $17,578 $18,002 $16,320 $14,653 $13,847 $12,781 $11,467 $11,446 $11,649 $10,664

Liabilities and Stockholders’ Equity

LiabilitiesShort-term borrowings ............................................. $ 4,488 $ 5,322 $ 3,775 $ 3,144 $ 3,140 $ 2,637 $ 1,601 $ 3,080 $ 3,471 $ 2,892Payables to unconsolidated affiliates......................... 15 31 49 28 27 34 33 20 5 28Accounts payable and accrued expenses.................. 2,433 2,853 2,840 2,676 2,533 2,285 2,086 1,845 1,804 1,722Insurance and health care claims and reserves ......... 56 411 415 438 470 761 672 567 491 444Accrued taxes.......................................................... 145 145 117 133 73 80 71 69 85 66Deferred income taxes ............................................. 63 20 21 9 16 14 9 26 75 172Long-term borrowings.............................................. 3,806 2,792 2,623 2,425 2,176 2,054 2,548 2,473 2,206 1,786Retirement benefit accruals and other liabilities ......... 2,478 2,348 2,333 2,243 2,327 2,358 2,362 716 676 546

Total liabilities ...................................................... 13,484 13,922 12,173 11,096 10,762 10,223 9,382 8,796 8,813 7,656

Stockholders’ EquityCommon stock issued, at stated value...................... 1,850 1,790 1,779 1,770 1,729 1,491 1,437 840 839 831Common stock in treasury, at cost............................ (1,469) (1,468) (613) (266) (13) (12) (13) (12) (13) (10)Unamortized restricted stock compensation .............. (21) (7) (18) (11) (12) (9) (8) (7) (7) (5)Retained earnings .................................................... 3,855 3,840 3,048 2,300 1,690 1,354 926 2,004 2,119 2,291

Total .................................................................... 4,215 4,155 4,196 3,793 3,394 2,824 2,342 2,825 2,938 3,107Minimum pension liability adjustment ....................... (19) (19) (14) (236) (300) (248) (215) (156) (86) (88)Cumulative translation adjustment ............................ (108) (81) (57) (14) (12) (18) (42) (19) (16) (11)Unrealized gain on marketable securities .................. 6 25 22 14 3

Accumulated other comprehensive loss................ (121) (75) (49) (236) (309) (266) (257) (175) (102) (99)

Total stockholders’ equity ..................................... 4,094 4,080 4,147 3,557 3,085 2,558 2,085 2,650 2,836 3,008

Total ........................................................................ $17,578 $18,002 $16,320 $14,653 $13,847 $12,781 $11,467 $11,446 $11,649 $10,664

Book value per share................................................ $ 17.51 $ 17.56 $ 16.57 $ 13.83 $ 11.78 $ 9.87 $ 8.13 $ 11.58 $ 12.40 $ 13.17

Deere & Company

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57

AGRICULTURAL EQUIPMENT

Factories and Engineering CentersArc-les-Gray, France

balers, forage equipment, material-handling equipmentBruchsal, Germany

tractor and combine cabsCatalao, Brazil

sugarcane harvestersDes Moines, Iowa

cotton harvesting, tillage, and planting equipmentEast Moline and Silvis, Illinois

combine harvesters and engineering centerHorizontina, Brazil

agricultural tractors, combine harvesters, planting equipment

Horst, Netherlandsspraying equipment

Jiamusi, China*combine harvesters

Madrid, Spaincomponents

Mannheim, Germanyagricultural tractors

Moline, Illinoisplanting equipment and hydraulic cylinders

Monterrey, Mexicotillage tools, cultivating equipment

Nigel, South Africatillage and planting equipment

Ottumwa, Iowahay and forage equipment

Pune, India*tractors and engines

Rosario, Argentinaseeding equipment and components

Saltillo, Mexicoagricultural tractors

Stadtlohn, Germanyheaders for self-propelled forage harvesters

Thibodaux, Louisianasugarcane harvesters, spraying equipment

Valley City, North Dakotaair seeding equipment

Waterloo, Iowaagricultural tractors and major components; engineering center; foundry

Welland, Ontario, Canadamaterial-handling equipment, rotary cutters

Zweibrücken, Germanycombine harvesters, forage equipment

Sales and Administration OfficesNORTH AMERICA:

Atlanta, Georgia; Columbus, Ohio; Dallas, Texas;Davenport, Iowa; Grimsby, Ontario, Canada; Lenexa, Kansas; Moline, Illinois; Kansas City,Missouri; Minneapolis, Minnesota; Reno, Nevada

OVERSEAS: Beijing, China; Brisbane, Australia; Madrid, Spain;Mannheim, Germany; Milan, Italy; Monterrey, Mexico;Montevideo, Uruguay; Nigel, South Africa; Nottingham,England; Ormes, France; Rosario, Argentina

* owned by joint venture or affiliate** joint venture*** partnership

CONSTRUCTION EQUIPMENT

Factories and Engineering CentersDavenport, Iowa

construction and forestry equipmentDubuque, Iowa

construction equipmentEdmonton, Alberta

remanufactured componentsKernersville, North Carolina

Deere -Hitachi Construction Machinery Corporation**hydraulic excavators

Richards Bay, South Africa*articulated dump trucks

Saltillo, Mexicoexcavators

Vancouver, British Columbia*hydraulic excavators

Sales and Administration OfficesAtlanta, Georgia; Baltimore, Maryland; Dallas, Texas; Denver, Colorado; Grimsby, Ontario;Moline and Vernon Hills, Illinois; Phoenix, Arizona*;Seattle, Washington

COMMERCIAL & CONSUMER EQUIPMENT

Factories and Engineering CentersAugusta, Georgia

commercial utility tractorsChihuahua, Mexico

handheld power productsColumbia, South Carolina

saw chainEnschede, Netherlands

commercial riding mowers Greeneville, Tennessee

walk-behind mowers and lawn tractorsGreer, South Carolina

handheld power productsGummersbach, Germany

walk-behind mowersHoricon, Wisconsin

lawn and garden equipmentKnoxville, Tennessee

commercial productsRaleigh, North Carolina

commercial and golf and turf mowersWelland, Ontario, Canada

utility vehicles Williamsburg, Virginia

utility vehicles

Sales and Administration OfficesCharlotte and Raleigh, North Carolina; Knoxville, Tennessee

DEERE POWER SYSTEMS GROUP

Factories and Engineering CentersCoffeyville, Kansas

power transmission equipmentDubuque, Iowa

enginesRosario, Argentina

enginesSaran, France

enginesSpringfield, Missouri*

remanufactured enginesTorreon, Mexico

engines and axlesWaterloo, Iowa

engines

Sales and Administration OfficesSaran, France; Waterloo, Iowa

SPECIAL TECHNOLOGIES GROUP

Factories and Engineering CentersJohn Deere Special Technologies Group, Inc.

Atlanta, GeorgiaAGRIS Corporation

Atlanta, GeorgiaJohn Deere Information Systems (JDIS)

Moline, IllinoisNavCom Technology, Inc.

Redondo Beach, CaliforniaPhoenix International Corporation

Fargo, North DakotaVantagePoint Network

Fort Collins, Colorado

PARTS DISTRIBUTION CENTERS

Milan, Illinois; Indianapolis, Indiana;Bruchsal, Germany

EXPORT SALES BRANCHES

Mannheim, Germany; Moline, Illinois

JOHN DEERE CREDIT

John Deere Credit CompanyMoline, Illinois; West Des Moines, Iowa

John Deere Capital CorporationReno, Nevada

Deere Credit Services, Inc.Madison, Wisconsin; West Des Moines, Iowa

Farm Plan CorporationMadison, Wisconsin

Deere Credit, Inc.Bloomington, Illinois; Manasquan, New Jersey;West Des Moines, Iowa

John Deere Credit Inc.Burlington, Ontario and Edmonton, Alberta, Canada

Arrendadora John Deere S.A. de C.V.Monterrey, Nuevo Leon, Mexico

John Deere Credit Limited Brisbane, Australia

John Deere Credit LimitedGloucester, England

John Deere Credit Group PLCGloucester, England

John Deere Credit S.A.S.Ormes, France

John Deere Credit – Germany***Frankfurt, Germany

John Deere Funding CorporationReno, Nevada

John Deere Receivables, Inc.Reno, Nevada

Senstar Capital CorporationPittsburgh, Pennsylvania

JOHN DEERE HEALTH

John Deere Health Care, Inc.Moline, IllinoisJohn Deere Family Healthplan, Inc.John Deere Health Plan, Inc.

CORPORATE HEADQUARTERS

Deere & CompanyOne John Deere PlaceMoline, Illinois 61265-8098

Phone: (309) 765-8000

CORPORATE DATA — Major Factories and Facilities

From left : Arthur L. Kelly, John R. Block, Antonio Madero B., John R. Stafford, Regina E. Herzlinger, Hans W. Becherer, Samuel C. Johnson, John R. Walter, William A. Schreyer, Crandall C. Bowles, Leonard A. Hadley, and Arnold R. Weber.

DIRECTORS

COMMITTEES

AUDIT REVIEW COMMITTEELeonard A. Hadley, ChairRegina E. HerzlingerArthur L. KellyAntonio Madero B.

EXECUTIVE COMMITTEEHans W. Becherer, ChairLeonard A. HadleyArthur L. KellyWilliam A. SchreyerJohn R. Stafford

COMPENSATION COMMITTEEJohn R. Stafford, ChairJohn R. BlockSamuel C. JohnsonWilliam A. SchreyerJohn R. WalterArnold R. Weber

CORPORATE GOVERNANCE COMMITTEEWilliam A. Schreyer, ChairRegina E. HerzlingerSamuel C. JohnsonJohn R. StaffordJohn R. Walter

PENSION PLAN OVERSIGHT COMMITTEEArthur L. Kelly, ChairJohn R. BlockLeonard A. HadleyAntonio Madero B.Arnold R. Weber

Hans W. Becherer (13)*Chairman and Chief Executive OfficerDeere & Company

John R. Block (13) PresidentFood Distributors International

Crandall C. Bowles**Chairman, President and Chief Executive OfficerSprings Industries, Inc.textiles

Leonard A. Hadley (5)Retired Chairman and Chief Executive OfficerMaytag Corporationappliances

Regina E. Herzlinger (7)Professor of Business AdministrationHarvard University Graduate School of Business Administration

Samuel C. Johnson (26)ChairmanS. C. Johnson & Son, Inc.consumer, commercial, and industrial products

Arthur L. Kelly (7)Managing PartnerKEL Enterprises L.P.holding and investment partnership

Antonio Madero B. (2)Chairman, President and Chief Executive OfficerSANLUIS Corporación, S.A. de C.V., Mexicoauto parts and components; mining

William A. Schreyer (5)Chairman EmeritusMerrill Lynch & Co., Inc.financial services firm

John R. Stafford (2)Chairman, President and Chief Executive OfficerAmerican Home Products Corporationpharmaceuticals, consumer health care and agricultural products

John R. Walter (8)ChairmanManpower, Inc.temporary staffing

Arnold R. Weber (5)President EmeritusNorthwestern University

* years as a director

** elected effective 1 December 1999, previously served on the board from 5/90 – 2/94

58

CORPORATE OFFICERS

Hans W. Becherer (37) *Chairman and Chief Executive Officer

Frank S. Cottrell (32)Senior Vice President

Joseph W. England (37)Senior Vice President, Worldwide Parts and Corporate Administration

Nathan J. Jones (21)Senior Vice President, Finance and Accounting, and Chief Financial Officer

John K. Lawson (41)Senior Vice PresidentEngineering, Technology, and Human Resources

G. Bart Bontems (35)Vice President, Industrial Relations

Wade P. Clarke, Jr. (24)Vice President, Government Affairs

Mertroe B. Hornbuckle (24)Vice President, Human Resources

Will R. Hubbard (33)Vice President, Quality

Curtis G. Linke (2)Vice President, Corporate Communications

Robert E. Moulds (29)Vice President, Engineering

R. David Nelson (2)Vice President, Worldwide Supply Management

James S. Robertson (32)Vice President and Comptroller

James R. Jabanoski (19)Treasurer

Michael A. Harring (15)Corporate Secretary and Associate General Counsel

* years of company service

OFFICER CHANGES

Changes noted below were made during the year (through December 31):

Officers appointed to new positions:Robert W. Lane

President, Worldwide Agricultural Equipment Division

David C. EverittSenior Vice President and Managing Director, Region II (Europe, Africa, Middle East)

Newly appointed officers:Samuel R. Allen

Vice President, Region I (Asia, Australia, Latin America, South America)

Dean R. Dort IIVice President, InternationalWorldwide Agricultural Equipment Division

Michael A. HarringCorporate Secretary

Robert E. MouldsVice President, Engineering

Charles R. Stamp, Jr.President, John Deere Special Technologies Group

STOCKHOLDER INFORMATION

ANNUAL MEETINGThe annual meeting of company stockholders will be held at 10 a.m. on February 23, 2000, at the Deere & Company Administrative Center, One John Deere Place, Moline, Illinois.

TRANSFER AGENTSend address changes and certificates for transfer to:

Deere & Companyc/o The Bank of New YorkReceive & Deliver Dept. – 11WP.O. Box 11002, Church Street Station, New York, NY 10286

Direct other inquiries, including those concerninglost, stolen or destroyed stock certificates or dividend checks, to:

Deere & Companyc/o The Bank of New YorkShareholder Relations Dept. – 8WP.O. Box 11258, Church Street Station, New York, NY 10286

Phone toll-free: 1-800-268-7369From outside the U.S., call: 402-963-9394Internet: http://stkxfer.bankofny.com/home.htm

DIVIDEND REINVESTMENT/DIRECT PURCHASE PLANInvestors may purchase initial Deere & Company shares through The Bank of New York BuyDIRECT SM Plan. Optional monthly cash investments may be made automatically through electronic debits. For enrollment information or inquiries about existing reinvestment accounts, call the toll-free number above, or write to:

Deere & Company – DRPc/o The Bank of New YorkP.O. Box 1958Newark, NJ 07101-9774

STOCKHOLDER RELATIONSDeere & Company welcomes your comments:

Deere & CompanyStockholder Relations DepartmentOne John Deere Place, Moline, IL 61265-8098

Phone: (309) 765-4539 Fax: (309) 765-5671Internet: http://www.deere.com

INVESTOR RELATIONSSecurities analysts, portfolio managers and representatives of financial institutions may contact:

Marie ZieglerDirector, Investor RelationsDeere & CompanyOne John Deere Place, Moline, IL 61265-8098

Phone: (309) 765-4491Internet: http://www.deere.com

STOCK EXCHANGESDeere & Company common stock (DE) is listed on the New York, Chicago, and Frankfurt, Germany, stockexchanges.

FORM 10-KThe Form 10-K annual report to the Securities and Exchange Commission will be available to stockholders in February upon written request to Deere & Company Stockholder Relations.

AUDITORSDeloitte & Touche LLP

Chicago, Illinois

OPERATING OFFICERSWORLDWIDE AGRICULTURAL EQUIPMENT DIVISION

Robert W. Lane (18)President

David C. Everitt (24)Senior Vice President and Managing Director,Region II (Europe, Africa, Middle East)

Robert W. Porter (35)Senior Vice President, North American Marketing

Adel A. Zakaria (23)Senior Vice President, Worldwide Engineering and Manufacturing

Samuel R. Allen (24)Vice President, Region I(Asia, Australia, Latin America, South America)

Dean R. Dort II (19)Vice President, International

WORLDWIDE CONSTRUCTION EQUIPMENT DIVISION

Pierre E. Leroy (23)President

H. J. Markley (25)Senior Vice President, Manufacturing

James D. White (30)Senior Vice President, Marketing and Sales

WORLDWIDE COMMERCIAL & CONSUMER EQUIPMENT DIVISION,POWER SYSTEMS GROUP AND SPECIAL TECHNOLOGIES GROUP

Ferdinand F. Korndorf (26)President

Ronald R. McDermott (27)Senior Vice President, Deere Power Systems Group

Mark C. Rostvold (34)Senior Vice President, Commercial & Consumer Equipment Division

Charles R. Stamp, Jr. (1)President, John Deere Special Technologies Group

FINANCIAL SERVICES

Michael P. Orr (25)President, Financial Services

John J. Jenkins (32)President, John Deere Health Care, Inc.

Jon D. Volkert (5)President, John Deere Credit Company

AGRIS, Automatic Powershift, Bell Equipment, Cameco, CTS, Farm Plan,Gator, Heritage National Healthplan, Inc., Homelite, IMS, JDC, JDIS, JDL, John Deere, John Deere Health, John Deere Health Care, Inc.,John Deere Health Plan, Inc., John Deere Personal Service, John Deere Power Systems, NavCom, Phoenix International, PowerTech,Ready to Mow, Ready Rooster, Sabre, Senstar Capital Corporation,STS, VantagePoint, Web JD Parts, and ZTS are trademarks of Deere & Company’s products and services named in this report.

This annual report was printed with soy inks on recycled paper.

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Achieving Genuine ValueFor Customers Worldwide

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Deere & CompanyOne John Deere PlaceMoline, Illinois 61265

Phone: (309) 765-8000Internet: http://www.deere.com