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**UNITED STATES**

##### **SECURITIES ANDEXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

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**FORM 10-K**

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**ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF1934**

** **

**FOR THE FISCAL YEAR ENDED OCTOBER 31, 2008**

 

**Commission file number 1-6458**

 

**JOHN DEERE CAPITAL CORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Delaware**(State of  incorporation) | ** ** | **36-2386361**(IRS Employer  Identification No.) |
|---------------------------------------|------------|--------------------------------------------------|

 

| **1 East First Street, Suite 600  Reno, Nevada** | ** ** | **89501**  | ** ** | **(775) 786-5527** |
|-------------------------------------------------------|------------|------------|------------|--------------------|
| (Address of principal executive offices)              | ** ** | (Zip Code) | ** ** | (Telephone number) |

 

**SECURITIES REGISTERED PURSUANT TOSECTION 12(b) OF THE ACT:**

** **
| **Title of each class** | ** ** | **Name of each exchange on which registered** |
|-------------------------|------------|-----------------------------------------------|
| 6 % Debentures Due 2009 | ** ** | New York Stock Exchange                       |

 

**SECURITIESREGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE**

 

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.

Yes  o    No  x

 

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act.

Yes  o    No  x

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

Yes  x    No  o

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,”  “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
| Large  accelerated filer    o                                                                                            |                       | Accelerated  filer | o |
|-----------------------------------------------------------------------------------------------------------------------------------------|----------------------------|--------------------|---|
| Non-accelerated  filer      x    (Do not check if  smaller reporting company)    | Smaller  reporting company | o                  |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).

Yes  o    No  x

 

At November 30,2008, 2,500 shares of common stock, without par value, of the registrant wereoutstanding, all of which were owned by John Deere Credit Company.

 

The registrantmeets the conditions set forth in General Instruction I(1)(a) and (b) ofForm 10-K and is therefore filing this Form with certain reduceddisclosures as permitted by Instruction I(2).

 

 

 

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**PART I**

 

**Item 1****.  Business.**

 

The Company

 

John Deere Capital Corporation (Capital Corporation) and its subsidiariesare collectively called the Company. John Deere Credit Company, a wholly-owned finance holding subsidiary ofDeere & Company, owns all of the outstanding common stock of theCapital Corporation. See “Relationships of the Company with John Deere” foradditional information regarding agreements between the Company and Deere &Company. The Company conducts business in Australia, New Zealand, the U.S., andin several countries in Europe and Latin America.

 

The Company provides and administers financing forretail purchases of new equipment manufactured by Deere & Company’sagricultural equipment, commercial and consumer equipment and construction andforestry divisions and used equipment taken in trade for this equipment. TheCompany generally purchases retail installment sales and loan contracts (retailnotes) from Deere & Company and its wholly-owned subsidiaries(collectively called John Deere). John Deere generally acquires these retailnotes through John Deere retail dealers. The Company also purchases andfinances a limited amount of non-Deere retail notes and continues to service asmall portfolio of recreational products and other retail notes. In addition,the Company leases John Deere equipment and a limited amount of non-Deereequipment to retail customers (financing and operating leases). The Companyalso finances and services revolving charge accounts, in most cases acquired from and offered through merchants in the agricultural,commercial and consumer and construction and forestry markets (revolving chargeaccounts). Further, the Company finances and services operating loans, in mostcases offered through and acquired from farm input providers, through directrelationships with agricultural producers or through agribusinesses (operatingloans). The Company also provides wholesale financing for inventories of JohnDeere agricultural, commercial and consumer and construction and forestryequipment owned by dealers of those products (wholesale receivables). TheCompany also offers credit enhanced international export financing to selectcustomers and dealers which generally involves John Deere products and offerscertain crop risk mitigation products in the U.S. In addition, the Companymakes loans to certain affiliated companies that directly invest in wind energyprojects. Retail notes, revolving charge accounts, operating loans, financingleases and wholesale receivables are collectively called “Receivables.”Receivables and operating leases are collectively called “Receivables andLeases.”

 

The Capital Corporation was incorporated under thelaws of Delaware and commenced operations in 1958. At November 30, 2008,the Company had 1,668 full-time and part-time employees.

 

Business of John Deere

 

John Deere’s operations are categorized into four major business segments:

 

The *agricultural equipment* segment manufactures and distributesa full line of farm equipment and related service parts – including tractors;combine, cotton and sugarcane harvesters; tillage, seeding, nutrient managementand soil preparation machinery; sprayers; hay and forage equipment; integratedagricultural management systems technology; and precision agriculturalirrigation equipment and supplies.

 

The *commercial and consumer equipment*segment manufactures anddistributes equipment, products and service parts for commercial andresidential uses – including tractors for lawn, garden, commercial and utilitypurposes; mowing equipment, including walk-behind mowers; golf courseequipment; utility vehicles; landscape and nursery products; irrigationequipment; and other outdoor power products.

 

The *construction and forestry*segment manufactures, distributesto dealers and sells at retail a broad range of machines and service parts usedin construction, earthmoving, material handling and timber harvesting –including backhoe loaders; crawler dozers and loaders; four-wheel-driveloaders; excavators; motor graders; articulated dump trucks; landscape loaders;skid-steer loaders; and log skidders, feller bunchers, log loaders, logforwarders, log harvesters and related attachments.

 

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John Deere’sworldwide agricultural equipment, commercial and consumer equipment, andconstruction and forestry operations are commonly referred to as the EquipmentOperations. The products and services produced by the segments above aremarketed primarily through independent retail dealer networks and major retailoutlets.

 

The *credit*segment includesthe operations of the Company (described herein), John Deere Credit Company,John Deere Credit Inc. (Canada), Banco John Deere, S.A. (Brazil), John DeereCredit Oy (Finland) and John Deere Renewables, LLC, and primarily financessales and leases by John Deere dealers of new and used agricultural, commercialand consumer, and construction and forestry equipment. In addition, it provideswholesale financing to dealers of the foregoing equipment, provides operatingloans, finances retail revolving charge accounts, offers certain crop riskmitigation products and invests in wind energy generation.

 

John Deere had net income of $2,053 million, or $4.70per share diluted ($4.76 basic), in 2008, compared with $1,822 million, or$4.00 per share diluted ($4.05 basic), in 2007.

 

John Deere’s net sales and revenues from continuingoperations increased 18 percent to $28,438 million in 2008, compared with$24,082 million in 2007. Net sales of the Equipment Operations increased20 percent in 2008 to $25,803 million from $21,489 million last year.This included a positive effect for currency translation of 4 percent and pricechanges of 2 percent.  Net sales in theU.S. and Canada increased 9 percent in 2008. Net sales outside the U.S. andCanada increased by 40 percent, which included a positive effect of 10percent for currency translation.

 

The agriculturalequipment segment had net sales of $16,572 million in 2008, compared to $12,121million in 2007. The commercial and consumer equipment segment had net sales of$4,413 million in 2008, compared to $4,333 million in 2007. Theconstruction and forestry segment had net sales of $4,818 million in 2008, comparedto $5,035 million in 2007. The credit segment had revenues of $2,190million in 2008, compared to $2,094 million in 2007.

 

Outlook for JohnDeere

 

Given the sudden, sharpdownturn in global economic activity, and the ongoing turmoil in world financialmarkets, the outlook for the year ahead is highly uncertain and its impact onJohn Deere’s operations is difficult to assess. Subject to the economicuncertainties, Deere & Company’s equipment sales are projected to beabout the same for the full year of 2009 and up about 7 percent for thefirst quarter, compared to the same periods in 2008. Included in the forecastis a negative currency translation impact of about 6 percent for both the fullyear and first quarter. Deere & Company’s net income is forecast to beabout $1.9 billion for 2009 and about $275 million for the first quarter.

 

*Agricultural Equipment.*  Worldwide sales of Deere & Company’sagricultural equipment are forecast to increase by about 5 percent forfull-year 2009. This includes a negative currency translation impact of about 8percent.

 

Farm-machinery industry sales in the U.S. and Canadaare forecast to be up about 5 percent for the year, led by an increase in largetractors and combines. Deere & Company expects agricultural commodityprices to remain at healthy levels in 2009, though below the previous year,while costs moderate for key inputs such as fuel and fertilizer. Sales ofcotton equipment, small tractors, and equipment commonly used by livestockproducers are expected to be lower.

 

Industry sales in Western Europe are forecast to bedown 5 to 10 percent for the year. Sales are expected to be down moderately inCentral Europe and the CIS (Commonwealth of Independent States) countries,including Russia. While demand in these areas for highly productive farmequipment remains good, sales will depend on the availability and cost ofcredit. Sales in South American markets are expected to be down 10 to 20percent in 2009, with the decline related to credit access in Brazil anddrought conditions in Argentina.

 

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* *

*Commercialand Consumer Equipment*.  Reflecting the U.S. housingmarket decline and recessionary economic conditions, Deere & Company’scommercial and consumer equipment sales are projected to be down about6 percent for the year. The segment expects sales gains from new productsto partly offset the impact of the economic decline.

 

*Constructionand Forestry.*  U.S. markets for construction and forestryequipment are forecast to remain under pressure due to further deterioration inthe already weakened housing sector, a steep decline in nonresidentialconstruction, and negative economic growth. The global economic slowdown isexpected to lead to a lower level of forestry equipment sales in both the U.S.and Europe. Subject to the economic uncertainties discussed earlier, Deere & Company’sworldwide sales of construction and forestry equipment are forecast to declineby approximately 12 percent for the year. Despite the poor economic climate,Deere & Company sales are expected to benefit from innovative newproducts.

 

*Credit*. Subject to the uncertainty associated with present economic conditions,net income for 2009 for the creditoperations, which includes the Company, is forecast to be approximately$300 million. The forecast decrease from 2008 is primarily due tonarrower financing spreads related to the current funding environment. TheCompany’s net income for 2009, which does not include the credit operations inCanada, Brazil and Finland or the wind energy operations in the U.S., isprojected to be approximately $250 million for 2009.

 

Relationships of the Company with John Deere

 

The results of operations of the Company are affectedby its relationships with John Deere, including among other items, the terms onwhich the Company acquires Receivables and Leases and borrows funds from JohnDeere, the reimbursement for interest waiver and low-rate finance programs fromJohn Deere, the compensation paid by John Deere in connection with the Company’spurchase of trade receivables from John Deere and the payment to John Deere forvarious expenses applicable to the Company’s operations. The Company also makesloans to certain affiliated companies that directly invest in wind energyprojects. In addition, the Company and John Deere have joint access to certainlines of credit of the Company.

 

The Company’s acquisition volume of Receivables andLeases is largely dependent upon the level of retail sales and leases of JohnDeere products. The level of John Deere retail sales and leases is responsiveto a variety of economic, financial, climatic, legislative and other factorsthat influence demand for its products. The majority of the Company’sbusinesses are affected by changes in interest rates, demand for credit andcompetition.

 

The Company bears substantially all of the credit risk(net of recovery from withholdings from certain John Deere dealers, and FarmPlanä and PowerPlanâmerchants) associated with its holding of Receivables and Leases. A smallportion of the Receivables and Leases held (less than 5 percent) is guaranteedby certain subsidiaries of Deere & Company. The Company alsoperforms substantially all servicing and collection functions. Servicing andcollection functions for a small portion of the Receivables and Leases held(less than 5 percent) are provided by John Deere. John Deere is reimbursed forstaff and other administrative services at estimated cost, and for credit linesprovided to the Company based on utilization of those lines.

 

The terms and the basis on which the Company acquiresretail notes and certain wholesale receivables from John Deere are governed byagreements with John Deere, generally terminable by either John Deere or theCompany on 30 days notice. As provided in these agreements, the Company agreesto the terms and conditions for purchasing the retail notes and wholesalereceivables from John Deere. Under these agreements, John Deere is notobligated to sell notes to the Company, and the Company is obligated topurchase notes from John Deere only if the notes comply with the terms andconditions set by the Company.

 

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The basis on which John Deere acquires retail notesand wholesale receivables from the dealers is governed by agreements with theJohn Deere dealers, terminable at will by either the dealers or John Deere. Inacquiring these notes from dealers, the terms and conditions, as set forth inagreements with the dealers, conform with the terms and conditions adopted bythe Company in determining the acceptability of retail and certain wholesalenotes to be purchased from John Deere. The dealers are not obligated to sellthese notes to John Deere and John Deere is not obligated to accept these notesfrom the dealers. In practice, retail and wholesale notes are acquired fromdealers only if the terms of these notes and the creditworthiness of thecustomers are acceptable to the Company. The Company acts on behalf of bothitself and John Deere in determining the acceptability of the notes and inacquiring acceptable notes from dealers.

 

The basis on which the Company enters into leases withretail customers through John Deere dealers is governed by agreements betweendealers and the Company. Leases are accepted based on the terms and conditions,the lessees’ creditworthiness, the anticipated residual values of the equipmentand the intended uses of the equipment.

 

Deere & Company has an agreement with theCompany pursuant to which it has agreed to continue to own at least 51 percentof the voting shares of capital stock of the Company and to maintain theCompany’s consolidated tangible net worth at not less than $50 million. Thisagreement also obligates Deere & Company to make income maintenancepayments to the Company such that its consolidated ratio of earnings to fixedcharges is not less than 1.05 to 1 for each fiscal quarter. For 2008 and2007, the Company’s ratios were 1.52 to 1 and 1.54 to 1, respectively, andnever less than 1.43 to 1 and 1.54 to 1 for any fiscal quarter of 2008 and2007, respectively. Deere & Company’s obligations to makepayments to the Company under the agreement are independent of whether theCompany is in default on its indebtedness, obligations or other liabilities.Further, Deere & Company’s obligations under the agreement are notmeasured by the amount of the Company’s indebtedness, obligations or otherliabilities. Deere & Company’s obligations to make payments under thisagreement are expressly stated not to be a guaranty of any specificindebtedness, obligation or liability of the Company and are enforceable onlyby or in the name of the Company. No payments were required under thisagreement during the periods included in the consolidated financial statements.

 

The Company purchases certain wholesale receivables(trade receivables) from John Deere. These trade receivables arise from JohnDeere’s sales of goods to dealers. Under the terms of the sales to dealers,interest is charged to dealers on outstanding balances, from the earlier of thedate when goods are sold to retail customers by the dealer or the expiration ofcertain interest-free periods granted to the dealer at the time of the sale,until payment is received by the Company. Dealers cannot cancel purchases after goods are shipped and areresponsible for payment even if the equipment is not sold to retail customers.The interest-free periods are determined based on the type of equipment soldand the time of year of the sale. These periods range from one to twelve monthsfor most equipment. Interest-free periods may not be extended. Interest chargedmay not be forgiven and the past due interest rates exceed market rates. TheCompany receives compensation from John Deere equal to competitive marketinterest rates for these interest-free periods. The Company computes thecompensation from John Deere for interest-free periods based on the Company’sestimated funding costs, administrative and operating expenses, credit losses,and required return on equity. The finance income earned following theinterest-free period is not significantly different from the compensationearned from John Deere.

 

# Description of Receivables and Leases

#  

Receivables and Leases arise mainly from retail andwholesale sales and leases of John Deere products and used equipment acceptedin trade for them, and from retail sales of equipment of unrelatedmanufacturers. Receivables and Leases also include revolving charge accountsreceivable and operating loans. At October 31, 2008 and 2007,approximately 90 percent of the Receivables and Leases administered by theCompany were for financing John Deere products.

 

FPC Financial, f.s.b. (Thrift), a wholly-owned subsidiary of the Company,holds a federal charter issued by the Office of Thrift Supervision. The Thriftis headquartered in Madison, Wisconsin and offers revolving charge productssuch as John Deere Credit Revolving Plan, Farm Planä and PowerPlanâ on a nationwide basis. John DeereCredit Revolving Plan is used primarily by retail customers of John Deere dealersto finance purchases of commercial and consumer equipment. Through its FarmPlanä product, the Thriftfinances revolving charge accounts offered by 

 

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approximately5,000 participating agribusinesses to their retail customers for the purchaseof goods and services. Farm Planä account holders purchase equipment parts and service atimplement dealerships and farm inputs such as feed, seed, fertilizer, bulk fueland building supplies from other agribusinesses. The PowerPlanâ revolving charge account is usedby construction and forestry customers to finance the purchase of parts andservice work performed at John Deere construction and forestry dealers. SeeNote 2 to the consolidated financial statements under “Revolving ChargeAccounts Receivable.”

 

The Company also works with several leading farm inputproviders to offer crop input production loans for materials such as seeds andfertilizer. Additionally, the Company provides production loans directly to farmersfor their total operating needs. Generally, these loans are secured by cropsand equipment.

 

The Company finances wholesale inventories of JohnDeere agricultural equipment, commercial and consumer equipment andconstruction and forestry equipment. A large portion of the wholesale financingprovided by the Company is with dealers from whom it also purchasesagricultural, commercial and consumer and construction and forestry retailnotes. See Note 2 to the consolidated financial statements under “WholesaleReceivables.”

 

The Company requires that theft and physical damageinsurance be carried on all goods leased or securing retail notes and wholesalereceivables. The customer may, at his own expense, have the Company or theseller of the goods purchase this insurance or obtain it from other sources.Insurance is not required for goods purchased under revolving charge accounts.

 

Receivables and Leases are eligible for acceptance ifthey conform to prescribed finance and lease plan terms. Guidelines relating todown payments and contract terms on retail notes and leases are described inNote 2 and Note 5 to the consolidated financial statements.

 

In limited circumstances, Receivables and Leases maybe accepted and acquired even though they do not conform in all respects to theestablished guidelines. The Company determines whether Receivables and Leasesshould be accepted and how they should be serviced. Acceptance of theseReceivables and Leases is dependent on having one or more of the following riskmitigation enhancements: the pledge of additional collateral as security, theassignment of specific earnings to the Company or the acceptance of acceleratedpayment schedules. Officers of the Company are responsible for establishingpolicies and reviewing the performance of the Company in accepting andcollecting Receivables and Leases. The Company normally makes all of its ownroutine collections, settlements and repossessions on Receivables and Leases.

 

John Deere retail notes andwholesale receivables are supported by perfected security interests in goodsfinanced under laws such as the Uniform Commercial Code (UCC), certain federalstatutes and state motor vehicle laws. UCC financing statements are alsoprepared and filed on leases; however, filings for operating leases are madefor informational purposes only.

 

Finance Rates on Retail Notes

 

As of October 31, 2008 and 2007, approximately 90percent of the retail notes held by the Company bore a fixed finance rate. Aportion of the finance income earned by the Company arises from reimbursementsfrom John Deere in connection with financing the retail sales of John Deereequipment on which finance charges are waived or reduced by John Deere for aperiod from the date of sale to a specified subsequent date. See Note 2 to theconsolidated financial statements for additional information.

 

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Average Original Term and Average Actual Life of Retail Notes andLeases

 

Due to prepayments (often from trade-ins andrefinancing), the average actual life of retail notes and financing leases isconsiderably shorter than the average original term. The following table showsthe average original term for retail notes and leases acquired and the averageactual life for retail notes and leases liquidated (in months):

 
| ** **                           | ** ** | **Average Original Term** | ** ** | **Average Actual Life** | ** ** |
|--------------------------------------|------------|-------------------------------------|------------|-----------------------------------|------------|
| ** **                           | ** ** | **2008**                            | ** ** | **2007**                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Retail notes                         |       | 54                                  |       | 52                                |       | 34 |   | 35 |   |
| New equipment:                       |       |                                |       |                              |       |   |   |   |   |
| Agricultural  equipment              |       | 55                                  |       | 55                                |       | 33 |   | 34 |   |
| Construction and  forestry equipment |       | 45                                  |       | 45                                |       | 35 |   | 33 |   |
| Commercial and  consumer equipment   |       | 50                                  |       | 48                                |       | 38 |   | 37 |   |
| Used equipment:                      |       |                                |       |                              |       |   |   |   |   |
| Agricultural  equipment              |       | 57                                  |       | 57                                |       | 34 |   | 38 |   |
| Construction and  forestry equipment |       | 44                                  |       | 43                                |       | 35 |   | 32 |   |
| Commercial and  consumer equipment   |       | 54                                  |       | 54                                |       | 39 |   | 36 |   |
| Financing leases                     |       | 41                                  |       | 42                                |       | 32 |   | 34 |   |
| Equipment on  operating leases       |       | 35                                  |       | 36                                |       | 31 |   | 32 |   |

 

# Maturities

#  

# The followingtable presents the contractual maturities of net Receivables and Leases ownedby the Company at October 31, 2008 (in millions of dollars), and a summaryof net Receivables and Leases owned by the Company at the end of the last fiveyears (in millions of dollars):

 
| ** **                           | ** ** | **One year  or less** | ** ** | **One to five years** | ** ** | **Over five years** | ** ** | ** **      | ** ** | ** **         | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------|------------|---------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|-----------------|------------|--------------------|------------|-----------------|------------|------------|------------|------------|------------|
| ** **                           | ** ** | ** **                      | ** ** | **Fixed  rate**                      | ** ** | **Variable  rate**            | ** ** | **Fixed  rate** | ** ** | **Variable  rate** | ** ** | **2008  Total** | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                 |       |                            |       |                                 |       |                          |       |            |       |               |       |            |       |       |       |       |       |   |   |   |   |
| Retail notes:                        |       |                            |       |                                 |       |                          |       |            |       |               |       |            |       |       |       |       |       |   |   |   |   |
| Agricultural  equipment              |       | $                               | 2,797      |                                 | $          | 5,108                         |       | $               | 731        |               | $          | 167             |       | $          | 34         |       | $          | 8,837 |   | $ | 8,536 |   | $ | 7,331 |   | $ | 6,209 |   | $ | 4,451 |   |
| Construction and forestry  equipment |       | 867                             |       | 1,119                                |       |                          |       |            |       |               |       | 1,986           |       | 2,409      |       | 2,388      |       | 1,980 |   | 1,406 |   |
| Commercial and  consumer equipment   |       | 351                             |       | 530                                  |       | 1                             |       | 15              |       |               |       | 897             |       | 1,004      |       | 1,022      |       | 1,022 |   | 984 |   |
| Recreational  products               |       | 2                               |       | 4                                    |       |                          |       | 3               |       |               |       | 9               |       | 12         |       | 17         |       | 23 |   | 33 |   |
| Total retail  notes                  |       | 4,017                           |       | 6,761                                |       | 732                           |       | 185             |       | 34                 |       | 11,729          |       | 11,961     |       | 10,758     |       | 9,234 |   | 6,874 |   |
| Revolving charge  accounts           |       |                            |       |                                 |       |                          |       |            |       |               |       | 1,825           |       | 1,553      |       | 1,512      |       | 1,527 |   | 1,444 |   |
| Operating loans                      |       |                            |       |                                 |       |                          |       |            |       |               |       | 358             |       | 287        |       | 379        |       | 384 |   | 380 |   |
| Wholesale  receivables               |       |                            |       |                                 |       |                          |       |            |       |               |       | 3,571           |       | 3,521      |       | 3,699      |       | 3,651 |   | 3,480 |   |
| Financing leases                     |       |                            |       |                                 |       |                          |       |            |       |               |       | 418             |       | 430        |       | 421        |       | 412 |   | 406 |   |
| Equipment on  operating leases       |       |                            |       |                                 |       |                          |       |            |       |               |       | 1,053           |       | 995        |       | 900        |       | 794 |   | 758 |   |
| Total Receivables  and Leases        |       |                            |       |                                 |       |                          |       |            |       |               |       | $               | 18,954     |       | $          | 18,747     |       | $ | 17,669 |   | $ | 16,002 |   | $ | 13,342 |   |
|                                      |            |                                 |            |                                      |            |                               |            |                 |            |                    |            |                 |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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Total Receivables and Leases by geographic area are asfollows (in millions of dollars):

 
| ** **                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| U.S.                          |       | $        | 16,562     |     | $          | 16,199   |       | $        | 15,378     |     | $          | 13,753 |   | $ | 11,145 |   |
| Outside the U.S.              |       | 2,392    |       | 2,548    |       | 2,291    |       | 2,249    |       | 2,197    |       |
| Total  Receivables and Leases |       | $        | 18,954     |     | $          | 18,747   |       | $        | 17,669     |     | $          | 16,002 |   | $ | 13,342 |   |

 

Delinquencies

 

Total Receivable amounts 60 days or more past duerepresenting the amount of all customer payments past due 60 days or more areas follows (in millions of dollars):

 
| ** **       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| U.S.             |       | $        | 38.9       |     | $          | 39.7     |       | $        | 39.5       |     | $          | 27.1 |   | $ | 36.2 |   |
| Outside the U.S. |       | 5.9      |       | 4.0      |       | 3.8      |       | 5.5      |       | 4.2      |       |
| Total            |       | $        | 44.8       |     | $          | 43.7     |       | $        | 43.3       |     | $          | 32.6 |   | $ | 40.4 |   |

 

Total non-performing Receivables, which representloans the Company has ceased accruing interest for are as follows (in millionsof dollars):

 
| ** **       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| U.S.             |       | $        | 63.2       |     | $          | 31.1     |       | $        | 22.7       |     | $          | 55.4 |   | $ | 48.0 |   |
| Outside the U.S. |       | 16.4     |       | 17.1     |       | 9.6      |       | 11.7     |       | 8.9      |       |
| Total            |       | $        | 79.6       |     | $          | 48.2     |       | $        | 32.3       |     | $          | 67.1 |   | $ | 56.9 |   |

 

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Write-offs and Recoveries

 

Total Receivable write-offs and recoveries, byproduct, were as follows (in millions of dollars):

 
| ** **                                                   | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| **Allowance  for credit losses, beginning of year**          |       | $        | 99.2       |     | $          | 92.8     |       | $        | 96.4       |     | $          | 112.6 |   | $ | 123.8 |   |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Provision for  credit losses                                 |       | 66.8     |       | 53.7     |       | 30.5     |       | 5.9      |       | 32.3     |       |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Write-offs:                                                  |       |     |       |     |       |     |       |     |       |     |       |
| Retail notes:                                                |       |     |       |     |       |     |       |     |       |     |       |
| Agricultural  equipment                                      |       | (3.7     | )          | (1.5     | )          | (1.1     | )          | (1.4     | )          | (5.3     | )          |
| Construction and  forestry equipment                         |       | (30.9    | )          | (18.9    | )          | (11.2    | )          | (4.2     | )          | (7.0     | )          |
| Commercial and  consumer equipment                           |       | (1.9     | )          | (1.3     | )          | (.8      | )          | (.9      | )          | (.9      | )          |
| Recreational  products                                       |       | (.8      | )          | (.9      | )          | (.6      | )          | (1.3     | )          | (1.7     | )          |
| Total retail  notes                                          |       | (37.3    | )          | (22.6    | )          | (13.7    | )          | (7.8     | )          | (14.9    | )          |
| Revolving charge  accounts                                   |       | (39.8    | )          | (36.0    | )          | (33.3    | )          | (29.7    | )          | (21.5    | )          |
| Operating loans                                              |       | (.3      | )          | (3.7     | )          | (2.9     | )          | (3.0     | )          | (6.5     | )          |
| Wholesale  receivables                                       |       | (1.0     | )          | (2.8     | )          | (1.9     | )          | (2.4     | )          | (8.1     | )          |
| Financing leases                                             |       | (2.3     | )          | (3.2     | )          | (2.5     | )          | (1.3     | )          | (5.0     | )          |
| Total write-offs                                             |       | (80.7    | )          | (68.3    | )          | (54.3    | )          | (44.2    | )          | (56.0    | )          |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Recoveries:                                                  |       |     |       |     |       |     |       |     |       |     |       |
| Retail notes:                                                |       |     |       |     |       |     |       |     |       |     |       |
| Agricultural  equipment                                      |       | 2.7      |       | 2.8      |       | 3.2      |       | 3.3      |       | 3.6      |       |
| Construction and  forestry equipment                         |       | 3.3      |       | 1.5      |       | 2.1      |       | 2.1      |       | 2.2      |       |
| Commercial and  consumer equipment                           |       | .7       |       | .5       |       | .5       |       | .4       |       | .5       |       |
| Recreational  products                                       |       | .3       |       | .3       |       | .6       |       | .6       |       | .7       |       |
| Total retail  notes                                          |       | 7.0      |       | 5.1      |       | 6.4      |       | 6.4      |       | 7.0      |       |
| Revolving charge  accounts                                   |       | 12.4     |       | 11.8     |       | 10.4     |       | 9.3      |       | 7.7      |       |
| Operating loans                                              |       | 1.0      |       | 1.1      |       | .5       |       | 3.3      |       | 3.8      |       |
| Wholesale  receivables                                       |       | .6       |       | 1.4      |       | 2.5      |       | 2.0      |       | 1.3      |       |
| Financing leases                                             |       | .1       |       | .2       |       | .2       |       | .9       |       | 1.9      |       |
| Total recoveries                                             |       | 21.1     |       | 19.6     |       | 20.0     |       | 21.9     |       | 21.7     |       |
| Total net  write-offs                                        |       | (59.6    | )          | (48.7    | )          | (34.3    | )          | (22.3    | )          | (34.3    | )          |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Other changes  (primarily translation adjustments)           |       | (1.2     | )          | 1.4      |       | .2       |       | .2       |       | (9.2     | )          |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| **Allowance  for credit losses, end of year**                |       | $        | 105.2      |     | $          | 99.2     |       | $        | 92.8       |     | $          | 96.4 |   | $ | 112.6 |   |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Total net  write-offs as a percentage of average Receivables |       | .33      | %          | .29      | %          | .22      | %          | .16      | %          | .30      | %          |
|                                                         |       |     |       |     |       |     |       |     |       |     |       |
| Allowance as a  percentage of total Receivables, end of year |       | .59      | %          | .56      | %          | .55      | %          | .63      | %          | .89      | %          |

 

8

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Total Receivablewrite-offs and recoveries from outside the U.S. were as follows (in millions ofdollars):

 
| ** **                                                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| **Allowance  for credit losses, beginning of year**                                |       | $        | 9.6        |     | $          | 9.2      |       | $        | 9.6        |     | $          | 17.0 |   | $ | 16.0 |   |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| Provision for  credit losses                                                       |       | 1.3      |       | .5       |       | (.2      | )          | (5.7     | )          | (.7      | )          |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| Write-offs                                                                         |       | (1.6     | )          | (1.5     | )          | (1.1     | )          | (1.8     | )          | (1.5     | )          |
| Recoveries                                                                         |       | .4       |       | .4       |       | .7       |       | .5       |       | 1.1      |       |
| Total net  write-offs                                                              |       | (1.2     | )          | (1.1     | )          | (.4      | )          | (1.3     | )          | (.4      | )          |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| Other changes  (primarily translation adjustments)                                 |       | (1.5     | )          | 1.0      |       | .2       |       | (.4      | )          | 2.1      |       |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| **Allowance  for credit losses, end of year**                                      |       | $        | 8.2        |     | $          | 9.6      |       | $        | 9.2        |     | $          | 9.6 |   | $ | 17.0 |   |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| Total net  write-offs as a percentage of average Receivables from outside the U.S. |       | .05      | %          | .05      | %          | .02      | %          | .06      | %          | .02      | %          |
|                                                                               |       |     |       |     |       |     |       |     |       |     |       |
| Allowance as a  percentage of total Receivables from outside the U.S., end of year |       | .35      | %          | .38      | %          | .41      | %          | .43      | %          | .78      | %          |

 

Allowance for Credit Losses

 

**The total Receivable allowance for creditlosses, by product, at October 31, and the Receivable portfolio, byproduct, as a percent of total portfolio is presented below (in millions ofdollars):**

 
| ** **                           | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|--------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                           | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| Retail notes:                        |       |        |       |        |       |        |       |        |       |        |       |   |   |   |   |   |   |   |   |   |   |
| Agricultural  equipment              |       | $           | 15.8       |        | 50         | %           | $          | 17.8        |       | 48          | %          | $ | 17.7 |   | 44 | % | $ | 17.2 |   | 41 | % | $ | 19.3 |   | 36 | % |
| Construction and  forestry equipment |       | 43.3        |       | 11          |       | 40.9        |       | 13          |       | 34.9        |       | 14 |   | 32.1 |   | 13 |   | 30.9 |   | 11 |   |
| Commercial and  consumer equipment   |       | 2.5         |       | 5           |       | 2.6         |       | 6           |       | 2.6         |       | 6 |   | 3.1 |   | 7 |   | 3.7 |   | 8 |   |
| Recreational  products               |       | 1.8         |       |        |       | 2.2         |       |        |       | 1.1         |       |   |   | 1.3 |   |   |   | 2.1 |   |   |   |
| Total retail  notes                  |       | 63.4        |       | 66          |       | 63.5        |       | 67          |       | 56.3        |       | 64 |   | 53.7 |   | 61 |   | 56.0 |   | 55 |   |
| Revolving charge  accounts           |       | 21.2        |       | 10          |       | 19.1        |       | 9           |       | 17.3        |       | 9 |   | 16.9 |   | 10 |   | 22.3 |   | 11 |   |
| Operating loans                      |       | 8.1         |       | 2           |       | 3.7         |       | 2           |       | 3.8         |       | 2 |   | 9.1 |   | 2 |   | 9.1 |   | 3 |   |
| Wholesale  receivables               |       | 7.0         |       | 20          |       | 7.7         |       | 20          |       | 7.5         |       | 22 |   | 7.6 |   | 24 |   | 15.1 |   | 28 |   |
| Financing leases                     |       | 5.5         |       | 2           |       | 5.2         |       | 2           |       | 7.9         |       | 3 |   | 9.1 |   | 3 |   | 10.1 |   | 3 |   |
| Total                                |       | $           | 105.2      |        | 100        | %           | $          | 99.2        |       | 100         | %          | $ | 92.8 |   | 100 | % | $ | 96.4 |   | 100 | % | $ | 112.6 |   | 100 | % |

 

**The total Receivable allowance for creditlosses, by geographic area, at October 31, and the Receivable portfolio,by geographic area, as a percent of total portfolio is presented below (inmillions of dollars):**

** **
| ** **       | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **       | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| U.S.             |       | $           | 97.0       |        | 87         | %           | $          | 89.6        |       | 86          | %          | $ | 83.6 |   | 87 | % | $ | 86.8 |   | 86 | % | $ | 95.6 |   | 84 | % |
| Outside the U.S. |       | 8.2         |       | 13          |       | 9.6         |       | 14          |       | 9.2         |       | 13 |   | 9.6 |   | 14 |   | 17.0 |   | 16 |   |
| Total            |       | $           | 105.2      |        | 100        | %           | $          | 99.2        |       | 100         | %          | $ | 92.8 |   | 100 | % | $ | 96.4 |   | 100 | % | $ | 112.6 |   | 100 | % |

 

9

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The allowance for creditlosses is an estimate of the losses expected from the Company’s Receivableportfolio.  The level of the allowance isbased on many quantitative and qualitative factors, including historical lossexperience by product category, portfolio duration, delinquency trends,economic conditions and credit risk quality. The Company has an establishedprocess to calculate a range of possible outcomes and determine the adequacy ofthe allowance. No single statistic or measurement determines the adequacy ofthe allowance. Historical receivable recoveries and charge-offs are consideredas part of the loss experience by product category.  The adequacy of the allowance is assessedquarterly in accordance with Financial Accounting Standards Board (FASB)Statement No. 5, Accounting for Contingencies, and FASB Statement No. 114,Accounting by Creditors for Impairment of a Loan. Different assumptions orchanges in economic conditions would result in changes to the allowance forcredit losses and provision for credit losses.

 

The allowance isdetermined at an aggregate level by product category for all Receivables thatare performing in accordance with payment terms and are not materially pastdue. The Company assigns loss factors to each aggregation and loss factors areapplied to the applicable Receivable balance to determine the allowance levelfor each product category. The loss factors are determined based onquantitative and qualitative factors, including historical loss experience byproduct category, portfolio duration, delinquency trends, economic conditionsand credit risk quality.

 

The Company alsoseparately reviews non-performing Receivables for impairment based ondelinquencies and changes in cash flows or collateral. These non-performingReceivables consist of materially past due Receivables, customers that haveprovided bankruptcy notification and other Receivables requiring significantcollection efforts including litigation. The Company identifies theseReceivables during reviews of portfolio credit quality. The Company includesthe impairment on non-performing Receivables as a separate component includedin the allowance unless it has already been recognized as a loss.

 

In addition to thecalculations discussed above, other qualitative factors are taken into accountto arrive at the allowance balance. The total allowance reflects management’sestimate of credit losses inherent in the Receivables portfolio at the balancesheet date. See further discussion of the allowance for credit losses in theCritical Accounting Policies.

 

Competition

 

The businesses in which the Company is engaged arehighly competitive. The Company competes for customers with commercial banksand finance and leasing companies based upon its service, finance rates chargedand other finance terms. The proportion of John Deere equipment retail salesand leases financed by the Company is influenced by conditions prevailing inthe agricultural equipment, commercial and consumer equipment, and constructionand forestry equipment industries, in the financial markets, and in businessgenerally. The Company financed a significant portion of John Deere equipmentretail sales and leases in the U.S. during 2008 and 2007.

 

The Company emphasizes convenient service to customersand endeavors to offer terms desired in its specialized markets such asseasonal schedules of repayment and rentals. The Company’s retail note financerates and lease rental rates are generally believed to be in the range offeredby other sales finance and leasing companies, although not as low as those ofsome banks and other lenders and lessors.

 

Regulation

 

In a number of states, state law limits the maximumfinance rate on receivables. The present state limitations have not, thus far,significantly limited variable-rate finance charges or the fixed-rate financecharges established by the Company. However, if interest rate levels shouldincrease significantly, maximum state rates could affect the Company bypreventing the variable rates on outstanding variable-rate retail notes fromincreasing above the maximum state rate, and by limiting the fixed rates on newnotes. In some states, the Company may be able to qualify new retail notes fora higher maximum rate limit by using retail installment sales contracts (ratherthan loan contracts) or by using fixed-rate rather than variable-ratecontracts.

 

10

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In addition to rate regulation, various state andfederal laws and regulations apply to some Receivables and Leases, principallyretail notes for goods sold for personal, family or household use and Farm Planä,PowerPlanâ and John Deere Credit Revolving Planaccounts receivable for such goods. To date, these laws and regulations havenot had a significant adverse effect on the Company.

 

The Thrift holds a federal charter issued by theOffice of Thrift Supervision (OTS) and is subject to federal regulation andexamination by the OTS. The Thrift is headquartered in Madison, Wisconsin andoffers revolving charge products such as John Deere Credit Revolving Plan, FarmPlanä and PowerPlanâ on anationwide basis.

 

Financing outside the U.S. is affected by a variety oflaws, customs and regulations.

 

**Item 1A****.  Risk Factors.**

 

The Company is a subsidiary of John Deere Credit Company,a wholly-owned finance holding subsidiary of Deere & Company. Theresults of operations of the Company are affected by its relationships withDeere & Company. See “Relationships of the Company with John Deere” onpage 3 for additional information regarding the relationship between theCompany and Deere & Company.

 

*Governmental Actions. *With respect to the current global economic downturn,changes in governmental banking, monetary and fiscal policies to restoreliquidity and increase the availability of credit may not be effective andcould have a material impact on the Company’s business.

 

In addition, to the extentthat the Company participates in governmental programs designed to addresscurrent conditions, both in the U.S. and outside the U.S., there is noassurance such programs will remain available for sufficient periods of time oron acceptable terms to benefit the Company, and the expiration of such programscould have unintended adverse effects. In addition, certain competitors may beeligible for certain programs that the Company is ineligible for, which maycreate a competitive disadvantage.

 

The Emergency EconomicStabilization Act of 2008 (the “EESA”) was signed into law on October 3,2008 to stabilize and provide liquidity to U.S. financial markets. There can beno assurance as to the actual impact of the implementing regulations of theEESA, or any other governmental program, on the financial markets. The Company’sbusiness, financial condition, results of operations and access to credit couldbe materially and adversely affected if the financial markets fail tostabilize, or if current financial market conditions worsen.

 

The Company may also becomesubject to additional restrictions pursuant to participation in the EESA’sspecific programs. For example, the Company’s participation in the FederalDeposit Insurance Corporation (FDIC) Temporary Liquidity Guarantee Program willrequire the payment of certain fees to the FDIC. The costs of participation ornon-participation in any such program, as well as the effect of such programson the Company’s results of operations, cannot be reliably determined at thistime.

 

*Economic Condition andOutlook.*  Recentsignificant changes in market liquidity conditions could impact access tofunding and associated funding costs, which could reduce the Company’s earningsand cash flows. The Company’s operations could be adversely impacted by changesin the equity and bond markets, which would negatively affect earnings. Generaleconomic conditions can affect the demand for John Deere’s equipment. Currentnegative economic conditions and negative outlook have decreased housing startsand other construction and dampened demand for certain construction equipment.John Deere’s commercial and consumer equipment and construction and forestrysegments are dependent on construction activity and general economicconditions. A significant or prolonged decline in  construction activity and housing startscould have a material adverse effect on John Deere’s results of operations ifcurrent economic difficulties, as well as depressed housing markets, continueinto the foreseeable future.  If thecurrent economic conditions extend to the overall farm economy, there could bea similar effect on John Deere’s agricultural equipment sales.

 

11

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The volatility in globalfinancial markets has reached unprecedented levels. Global financial marketdownturns began in the second half of 2007, and significantly increased duringthe fourth quarter of 2008. Volatile oil prices, falling equity market values,declining business, weakened consumer confidence, and risks of increasedinflation and deflation and increased unemployment rates have created fears ofa severe recession. Conditions in the global financial markets and generaleconomy materially affect John Deere’s results of operations. The demand forJohn Deere’s products and services could be adversely affected in an economiccrisis characterized by higher unemployment, lower consumer spending, lowercorporate earnings and lower business investment.

 

The current economicdownturn and market volatility have adversely affected the financial industryin which the Company operates. The Company’s liquidity and ongoingprofitability depend largely on timely access to capital to meet future cashflow requirements and fund operations and the costs associated with engaging indiversified funding activities. In recent weeks, the credit markets havereached unprecedented levels of volatility, resulting in reduced levels ofliquidity and disruption of domestic and foreign financial markets. If currentlevels of market disruption and volatility continue or worsen, funding could beunavailable or insufficient. Additionally, under current market conditions customerconfidence levels may result in declines in credit applications and increasesin delinquencies and default rates, which could materially impact the Company’swrite-offs and provisions for credit losses.

 

*Currency Fluctuations.* The reporting currency for the Company’sconsolidated financial statements is the U.S. dollar.  Certain of the Company’s assets, liabilities,expenses and revenues are denominated in other countries’ currencies. Thoseassets, liabilities, expenses and revenues are translated into U.S. dollars atthe applicable exchange rates to prepare our consolidated financial statements.Therefore, increases or decreases in exchange rates between the U.S. dollar andthose other currencies affect the value of those items as reflected in the Company’sconsolidated financial statements, even if their value remains unchanged intheir original currency. Substantial fluctuations in the value of the U.S.dollar could have a continuing and significant impact on the Company’s results.

 

*Consumer Attitudes.*  The confidence John Deere’s customers have inthe general economic outlook can have a significant effect on their propensityto purchase equipment and, consequently, on Deere & Company’s sales.Current negative economic conditions could significantly impair customerconfidence making them reluctant to purchase equipment or borrow the funds forsuch purchases, which could have a negative impact on Deere & Company’sequipment sales and the Company’s financing revenues. John Deere’s ability tomatch its new product offerings to its customers’ anticipated preferences fordifferent types and sizes of equipment is important as well.

 

*Interest Rates and CreditRatings.*  If interestrates rise, they could have a dampening effect on overall economic activity andcould affect the demand for John Deere’s equipment. In addition, credit marketdislocations could have an impact on funding costs which are very important tothe Company. Decisions and actions by credit rating agencies can affect theavailability and cost of funding for the Company.  Credit rating downgrades or negative changesto ratings outlooks can increase the Company’s cost of capital and hurt itscompetitive position. Guidance from rating agencies as to acceptable leveragecan affect the Company’s returns as well.

 

The risks identified aboveshould be considered in conjunction with “Management’s Discussion and Analysis”beginning on page 13, and, specifically, the other risks described in the “SafeHarbor Statement” on page 21. The Company’s results of operations may beaffected by these identified risks and/or by risks not currently contemplated.

 

**Item 1B****.  Unresolved Staff Comments.**

 

None.

 

**Item 2****.  Properties.**

 

The Company’s properties principally consist of officeequipment, Company-owned office buildings in Johnston, Iowa and Madison,Wisconsin; and leased office space in Urbandale, Iowa; Reno, Nevada; Rosario,Argentina; Brisbane, Australia; Gloucester, England; Langar, England; Bruchsal,Germany; Vignate, Italy; Luxembourg City, Luxembourg; Monterrey, Mexico; andGetafe, Spain.

 

12

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**Item 3****.  Legal Proceedings.**

 

The Company is subject to various unresolved legalactions which arise in the normal course of its business, the most prevalent ofwhich relate to state and federal laws and regulations concerning retailcredit. Although it is not possible to predict with certainty the outcome ofthese unresolved legal actions or the range of possible loss, the Companybelieves these unresolved legal actions will not have a material effect on itsconsolidated financial statements.

 

**Item 4****.  Submission of Matters to aVote of Security Holders.**

 

Omitted pursuant to instruction I(2).

 

**PART II**

 

**Item 5****.  Market for Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities.**

 

(a)          All of the Company’s common stock isowned by John Deere Credit Company, a finance holding company that iswholly-owned by Deere & Company. In 2008, Deere & Companyincreased its investment in John Deere Credit Company by $400 million. In turn,John Deere Credit Company increased its investment in the Company by $400million. The Company declared and paid cash dividends to John Deere CreditCompany of $465 million in 2008 and $525 million in 2007. In each case,John Deere Credit Company paid comparable dividends to Deere &Company.

 

(b)         Not applicable.

 

(c)          Not applicable.

 

**Item 6****.  Selected Financial Data.**

 

Omitted pursuant to instruction I(2).

 

**Item 7****.  Management’s Discussion andAnalysis of Financial Condition and Results of Operations.**

 

Results of Operations

 

Overview

 

Organization

 

The Company primarily generates revenues and cash byfinancing John Deere dealers’ sales and leases of new and used agricultural,commercial and consumer, and construction and forestry equipment. In addition,the Company also provides wholesale financing to dealers of the foregoingequipment, provides operating loans, finances retail revolving charge accounts,offers certain crop risk mitigation products and makes loans to certainaffiliated companies that directly invest in wind energy projects.

 

Trends and Economic Conditions

 

The Company’s business is currently affected by thefollowing key trends and economic conditions. The Company’s business is closelyrelated to John Deere’s business. Demand for productive agricultural machineryhas continued to be strong due in large part to the financial health of thefarm sector. Industry sales of farm machinery in the U.S. and Canada in 2009are expected to be up about 5 percent for the year, led by an increase in largetractors and combines. Industry sales in Western Europe are forecast to be down5 to 10 percent. Sales in South American markets are expected to be down 10 to20 percent in 2009. John Deere’s agricultural equipment net sales were up 

 

13

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37 percentfor 2008 and are forecast to be up approximately 5 percent in 2009. John Deere’scommercial and consumer equipment net sales were up 2 percent in 2008,including an increase of about 6 percent from a landscapes acquisition in May 2007.John Deere’s commercial and consumer equipment sales are forecast to be downabout 6 percent in 2009, reflecting the U.S. housing decline andrecessionary economic conditions. U.S. markets for construction and forestryequipment are forecast to remain under pressure in 2009 due to furtherdeterioration in the housing sector, declines in nonresidential constructionand negative economic growth. John Deere’s construction and forestry net salesdecreased 4 percent in 2008 and are forecast to be down approximately 12percent in 2009. Net income for the Company in 2009 is expected to decrease toapproximately $250 million. The forecast decrease from 2008 is primarily due tonarrower financing spreads related to the current funding environment.

 

Items of concern for theCompany include the sharp downturn in global economic activity and the turmoilin financial markets. Significant fluctuations in currency translation ratescould also impact the Company’s results.

 

In spite of the presenteconomic situation, Deere & Company remains encouraged by its growthprospects and believes that trends favorable to its businesses remain intact.These trends include increasing global demand for farm commodities and renewablefuels, as well as a growing need over time for housing and infrastructure.

 

2008 Compared with 2007

 

Consolidated net income was $282.4 million for theyear, compared with $311.2 million last year. The lower results for the yearwere primarily due to an increase in average leverage, higher administrativeand operating expenses, foreign exchange losses and an increase in theprovision for credit losses, partially offset by growth in the portfolio andincreased commissions from crop insurance. The ratio of earnings to fixedcharges was 1.52 to 1 for 2008, compared with 1.54 to 1 for 2007.

 

Revenues totaled $1,967 million in 2008 and 2007.Finance income earned on retail notes totaled $861 million in 2008,compared to $852 million in 2007. The increase was primarily due to a 6percent increase in the average retail note portfolio balances, partiallyoffset by lower financing rates. Lease revenues increased $13 million to$332 million in 2008, primarily due to a 4 percent increase in the averagebalance of leases. Revenues earned on revolving charge accounts amounted to$227 million in 2008, a 2 percent increase over revenues of$222 million earned during 2007. The increase was primarily due to anincrease in the average balance of revolving charge accounts, partially offsetby lower financing rates. Finance income earned on wholesale receivablesdecreased $62 million, to $303 million in 2008, from$365 million in 2007. The decrease was primarily due to lower financingrates and a 3 percent decrease in the average balance of wholesale receivables.Revenues earned on operating loans amounted to $23 million in 2008, comparedwith $27 million in 2007. The decrease was primarily due to lower financingrates. Revenues earned from Deere & Company totaled $542 millionin 2008 compared to $555 million a year ago.

 

Income on receivables sold totaled $6 million in 2008,compared with $22 million in 2007. Income on receivables sold relates toReceivables sold to other financial institutions or limited-purpose business trustsand primarily includes the interest earned on interests that continue to beheld by the Company, reimbursed administrative expenses received and the netgain on Receivables sold, including adjustments to prior sales related tocleanup calls and revaluations of interests that continue to be held and therelated permanent impairments.

 

Crop insurance commissions totaled $139 million in2008, compared with $76 million in 2007. The increase was primarily due toincreased crop insurance sales to producers as a result of expanded marketcoverage and increased commodity prices causing higher insurance premiums.

 

Interest expense totaled $839 million in 2008,compared with $878 million in 2007. The decrease was primarily due to adecrease in the weighted-average annual interest rate incurred on allborrowings from 5.4 percent in 2007 to 4.7 percent in 2008, partiallyoffset by higher average borrowings.

 

14

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Administrative and operating expenses totaled $373million in 2008, compared with $308 million in 2007. The increase was primarilydue to higher crop insurance commission expenses and higher employment costsassociated with administering a larger Receivable and Lease portfolio.

 

The provision for credit losses was $67 million in2008, compared with $54 million in 2007. The Company has experienced higherwrite-offs of construction and forestry retail notes and revolving chargeaccounts. Total net write-offs of Receivables financed were $60 million during2008, compared with $49 million in 2007. The provision for credit losses,as a percentage of the total average balance of Receivables financed, was..37 percent for 2008 and .31 percent for 2007.

 

Depreciation of equipment on operating leases totaled$216 million in 2008, compared with $212 million in 2007. The increase was primarily the result ofhigher average amounts of equipment on operating leases.

 

Receivables and Leases Acquired and Held

 

Receivables and Leases acquired by the Company during2008 totaled $33,404 million, compared with volumes of $29,548 million during2007. Excluding the trade receivables acquired from John Deere, acquisitions ofReceivables and Leases were 13 percent higher in 2008 compared to lastyear. Receivables and Leases held by the Company at October 31, 2008totaled $18,954 million, compared with $18,747 million at October 31,2007. For the 2008 and 2007 fiscal years, Receivable and Lease acquisitionvolumes and balances held were as follows (in millions of dollars):

 
| ** **                           | ** ** | **Fiscal Year Volumes** | ** ** | **Balance at October 31,** | ** ** |
|--------------------------------------|------------|-----------------------------------|------------|-------------------------------------------|------------|
| ** **                           | ** ** | **2008**                          | ** ** | **2007**                                  | ** ** | **% Change** | ** ** | **2008** | ** ** | **2007** | ** ** | **% Change** | ** ** |
| Retail notes:                        |       |                              |       |                                      |       |   |   |   |   |   |   |   |   |
| Agricultural  equipment              |       | $                                 | 5,055.2    |                                      | $          | 4,476.2 |   | 13 | % | $ | 8,836.6 |   | $ | 8,535.8 |   | 4 | % |
| Construction and  forestry equipment |       | 953.6                             |       | 1,372.1                                   |       | (31 | ) | 1,986.5 |   | 2,409.1 |   | (18 | ) |
| Commercial and  consumer equipment   |       | 433.9                             |       | 524.4                                     |       | (17 | ) | 896.8 |   | 1,003.5 |   | (11 | ) |
| Recreational  products               |       |                              |       |                                      |       |   |   | 9.2 |   | 12.3 |   | (25 | ) |
| Total retail  notes                  |       | 6,442.7                           |       | 6,372.7                                   |       | 1 |   | 11,729.1 |   | 11,960.7 |   | (2 | ) |
| Revolving charge  accounts           |       | 4,352.8                           |       | 3,603.1                                   |       | 21 |   | 1,825.1 |   | 1,553.3 |   | 17 |   |
| Operating loans                      |       | 2,187.2                           |       | 1,382.8                                   |       | 58 |   | 357.9 |   | 286.5 |   | 25 |   |
| Wholesale  receivables               |       | 19,610.9                          |       | 17,431.0                                  |       | 13 |   | 3,570.6 |   | 3,521.3 |   | 1 |   |
| Financing leases                     |       | 254.0                             |       | 221.1                                     |       | 15 |   | 417.9 |   | 430.3 |   | (3 | ) |
| Equipment on  operating leases       |       | 556.3                             |       | 537.7                                     |       | 3 |   | 1,053.4 |   | 995.2 |   | 6 |   |
| Total  Receivables and Leases        |       | $                                 | 33,403.9   |                                      | $          | 29,548.4 |   | 13 | % | $ | 18,954.0 |   | $ | 18,747.3 |   | 1 | % |

 

Retail note volumes for agricultural equipmentincreased primarily due to increases in retail sales of John Deere agriculturalequipment. Retail note volumes for construction and forestry equipment andcommercial and consumer equipment decreased primarily due to decreases inretail sales of John Deere construction and forestry equipment and John Deerecommercial and consumer equipment. Revolving charge account volumes increasedprimarily as a result of increased market coverage and increased farm inputcosts. Operating loan volumes increased primarily due to increased borrowingsby farm input providers as a result of higher commodity prices. Wholesalereceivable volumes increased primarily due to increased shipments of John Deereequipment as a result of increased retail sales activity in the agriculturalmarkets.

 

15

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Receivables and Leases administered by the Companywere as follows (in millions):

 
| ** **                                                    | ** ** | **October 31,  2008** | ** ** | **October 31,  2007** | ** ** |
|---------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Receivables  and Leases administered:**                     |       |                       |       |                       |       |
| Owned by the  Company                                         |       | $                          | 17,361.5   |                       | $          | 16,596.9 |   |
| Owned by the  Company – restricted due to securitization |       | 1,592.5                    |       | 2,150.4                    |       |
| Total  Receivables and Leases owned by the Company            |       | 18,954.0                   |       | 18,747.3                   |       |
| Administered -  with limited recourse*                        |       | 118.7                      |       | 177.9                      |       |
| Administered -  without recourse**                            |       | 44.0                       |       | 44.6                       |       |
| Total  Receivables and Leases administered                    |       | $                          | 19,116.7   |                       | $          | 18,969.8 |   |

 

----

*                                         The Company’s maximumexposure under all Receivable and Lease recourse provisions at October 31,2008 and 2007 was $8 million and $25 million, respectively. The Company doesnot record the recourse obligations as liabilities as they are contingentliabilities that are remote at this time. However, the probable loss onreceivables that have been sold was accrued at the time of sale, and anysubsequent necessary adjustments are made as part of ongoing reviews.

 

**                                  Represents Receivables and Leases thatthe Company has sold but continues to administer for a fee.

 

Retail notes bearing fixed finance rates totaled 90percent of the total retail note portfolio at October 31, 2008 and2007.

 

Total Receivable amounts 60 days or more past duerepresent the amount of all customer payments past due 60 days or more.These amounts were $45 million at October 31, 2008, compared with $44million at October 31, 2007. In addition, these past due amountsrepresented .25 percent of the total Receivables held at those respectivedates. The balance of retail notes held (principal plus accrued interest) withany installment 60 days or more past due represents the total retail notebalance for a customer that has any portion of his note 60 days or more pastdue. These amounts were $163 million and $170 million at October 31, 2008and 2007, respectively. The balances of retail notes held on which anyinstallment was 60 days or more past due as a percentage of the ending retailnotes receivable was 1.39 percent at October 31, 2008 and1.42 percent at October 31, 2007. See Note 3 to the consolidatedfinancial statements for additional past due information.

 

Deposits withheld from dealers and merchants,representing mainly the aggregate dealer retail note and lease withholdingaccounts from individual John Deere dealers to which losses from retail notesand leases originating from the respective dealers can be charged, amounted to$174 million at October 31, 2008 and 2007. The Company’s allowance forcredit losses on all Receivables financed at October 31, 2008 totaled $105million and represented .59 percent of the total Receivables financed,compared with $99 million and .56 percent, respectively, one year earlier.The allowance is subject to an ongoing evaluation based on many quantitativeand qualitative factors, including historical loss experience by productcategory, portfolio duration, delinquency trends, economic conditions andcredit risk quality. The Company believes its allowance is sufficient toprovide for losses in its existing receivable portfolio.

 

2007 Compared with 2006

 

Consolidated net income was $311.2 million for thefiscal year ended October 31, 2007, compared with $291.2 million in 2006.The higher results for 2007 were primarily due to growth in the portfolio,partially offset by higher administrative and operating expenses and higherprovision for credit losses. The ratio of earnings to fixed charges was 1.54 to1 for 2007, compared with 1.60 to 1 for 2006.

 

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Revenues totaled $1,967 million in 2007, compared to$1,705 million in 2006. Revenues increased primarily due to a 7 percentincrease in the average balance of Receivables and Leases financed and higherfinancing rates. Finance income earned on retail notes totaled $852 million in2007, up $139 million compared to $713 million in 2006. The increase was primarily dueto a 12 percent increase in the average retail note portfolio balances andhigher financing rates. Lease revenues increased $33 million to$319 million in 2007, primarily due to a 12 percent increase in theaverage balance of equipment on operating leases. Revenues earned on revolvingcharge accounts amounted to $222 million in 2007, a 6 percent increaseover revenues of $210 million earned during 2006. The increase was primarilydue to an increase in Farm Planä and PowerPlanâaverage receivables in 2007, compared with 2006. Finance income earned onwholesale receivables increased $10 million, to $365 million in 2007,from $355 million in 2006. The increase was primarily due to higherfinancing rates. Revenues earned on operating loans amounted to $27 million in2007 and 2006. Revenues earned from Deere & Company totaled$555 million in 2007 compared to $468 million in 2006.

 

Income on receivables sold totaled $22 million in2007, compared with $29 million in 2006. Income on receivables sold relates toReceivables sold to other financial institutions or limited-purpose businesstrusts and primarily includes the interest earned on interests that continue tobe held by the Company, reimbursed administrative expenses received and the netgain on Receivables sold, including adjustments to prior sales related tocleanup calls and revaluations of interests that continue to be held and therelated permanent impairments.

 

Crop insurance commissions totaled $76 million in2007, compared with $35 million in 2006. The increase was primarily due toincreased crop insurance sales to producers as a result of expanded marketcoverage.

 

Other income totaled $85million in 2007, compared with $51 million in 2006. The increase was primarilydue to increased interest income as a result of higher average loans to certainaffiliated companies that have directly invested in wind energy projects.

 

Interest expense totaled $878 million in 2007,compared with $727 million in 2006. The increase was primarily due to anincrease in the weighted-average annual interest rate incurred on allborrowings from 5.0 percent in 2006 to 5.4 percent in 2007 and higheraverage borrowings.

 

Administrative and operating expenses totaled $308million in 2007, compared with $274 million in 2006. The increase was primarilydue to higher employment costs associated with administering a largerReceivable and Lease portfolio and higher costs in support of the Company’sgrowth initiatives.

 

The provision for credit losses was $54 million in2007, compared with $31 million in 2006. The Company has experienced higherwrite-offs of construction and forestry retail notes, wholesale receivables,revolving charge accounts and financing leases. Total net write-offs ofReceivables financed were $49 million during 2007, compared with$34 million in 2006. The provision for credit losses, as a percentage ofthe total average balance of Receivables financed, was .31 percent for2007 and .19 percent for 2006. Although the provision for credit lossesincreased from the same period last year, it continues to be comparable torecent years. Over the last five fiscal years, the provision for credit losses,as a percentage of the total average balance of Receivables financed, averaged..29 percent

 

Interest and support feespaid to John Deere were $36 million in 2007, compared with $42 million in2006. The decrease was primarily due to lower average borrowings from JohnDeere.

 

Depreciation of equipment on operating leases totaled$212 million in 2007, compared with $190 million in 2006. The increase was primarily the result ofhigher average amounts of equipment on operating leases.

 

17

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Receivables and Leases Acquired and Held

 

Receivables and Leases acquired by the Company during2007 totaled $29,548 million, compared with volumes of $29,557 million during2006. Excluding the trade receivables acquired from John Deere, acquisitions ofReceivables and Leases were 2 percent higher in 2007 compared to 2006.Receivables and Leases held by the Company at October 31, 2007 totaled$18,747 million, compared with $17,669 million at October 31, 2006.For the 2007 and 2006 fiscal years, Receivable and Lease acquisition volumesand balances held were as follows (in millions of dollars):

 
| ** **                           | ** ** | **Fiscal Year Volumes** | ** ** | **Balance at October 31,** | ** ** |
|--------------------------------------|------------|-----------------------------------|------------|-------------------------------------------|------------|
| ** **                           | ** ** | **2007**                          | ** ** | **2006**                                  | ** ** | **% Change** | ** ** | **2007** | ** ** | **2006** | ** ** | **% Change** | ** ** |
| Retail notes:                        |       |                              |       |                                      |       |   |   |   |   |   |   |   |   |
|                                 |       |                              |       |                                      |       |   |   |   |   |   |   |   |   |
| Agricultural  equipment              |       | $                                 | 4,476.2    |                                      | $          | 3,910.2 |   | 14 | % | $ | 8,535.8 |   | $ | 7,330.8 |   | 16 | % |
| Construction and  forestry equipment |       | 1,372.1                           |       | 1,545.5                                   |       | (11 | ) | 2,409.1 |   | 2,387.5 |   | 1 |   |
| Commercial and  consumer equipment   |       | 524.4                             |       | 545.0                                     |       | (4 | ) | 1,003.5 |   | 1,021.8 |   | (2 | ) |
| Recreational  products               |       |                              |       |                                      |       |   |   | 12.3 |   | 17.5 |   | (30 | ) |
| Total retail  notes                  |       | 6,372.7                           |       | 6,000.7                                   |       | 6 |   | 11,960.7 |   | 10,757.6 |   | 11 |   |
| Revolving charge  accounts           |       | 3,603.1                           |       | 3,345.0                                   |       | 8 |   | 1,553.3 |   | 1,512.4 |   | 3 |   |
| Operating loans                      |       | 1,382.8                           |       | 1,437.7                                   |       | (4 | ) | 286.5 |   | 378.7 |   | (24 | ) |
| Wholesale  receivables               |       | 17,431.0                          |       | 18,038.6                                  |       | (3 | ) | 3,521.3 |   | 3,699.0 |   | (5 | ) |
| Financing leases                     |       | 221.1                             |       | 227.8                                     |       | (3 | ) | 430.3 |   | 420.8 |   | 2 |   |
| Equipment on  operating leases       |       | 537.7                             |       | 507.2                                     |       | 6 |   | 995.2 |   | 900.1 |   | 11 |   |
| Total Receivables  and Leases        |       | $                                 | 29,548.4   |                                      | $          | 29,557.0 |   | 0 | % | $ | 18,747.3 |   | $ | 17,668.6 |   | 6 | % |

 

Retail note volumes for agricultural equipmentincreased primarily due to increases in retail sales of John Deere agriculturalequipment. Retail note volumes for construction and forestry equipmentdecreased primarily due to decreases in retail sales of John Deere constructionand forestry equipment. Wholesale receivable volumes decreased primarily due todecreased shipments of John Deere equipment as a result of decreased retailsales activity in the construction and forestry markets.

 

Receivables and Leases administered by the Companywere as follows (in millions):

 
| ** **                                                    | ** ** | **October 31,  2007** | ** ** | **October 31,  2006** | ** ** |
|---------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **Receivables  and Leases administered:**                     |       |                       |       |                       |       |
| Owned by the  Company                                         |       | $                          | 16,596.9   |                       | $          | 15,495.2 |   |
| Owned by the  Company – restricted due to securitization |       | 2,150.4                    |       | 2,173.4                    |       |
| Total  Receivables and Leases owned by the Company            |       | 18,747.3                   |       | 17,668.6                   |       |
| Administered -  with limited recourse*                        |       | 177.9                      |       | 932.3                      |       |
| Administered -  without recourse**                            |       | 44.6                       |       | 21.4                       |       |
| Total  Receivables and Leases administered                    |       | $                          | 18,969.8   |                       | $          | 18,622.3 |   |

 

----

*                                         The Company’s maximumexposure under all Receivable and Lease recourse provisions at October 31,2007 and 2006 was $25 million and $105 million, respectively. In addition, theCompany has provided letters of credit for John Deere Credit Inc., the JohnDeere finance subsidiary in Canada, as part of retail note sales. At October 31, 2007and 2006, the Company’s maximum exposure under these agreements was approximately$3 million and $7 million, respectively. The Company does not recordthe recourse obligations as liabilities as they are contingent liabilities thatare remote at this time. However, the probable loss on receivables that havebeen sold was accrued at the time of sale, and any subsequent necessaryadjustments are made as part of ongoing reviews.

 

**                                  Represents Receivables and Leases thatthe Company has sold but continues to administer for a fee.

 

18

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Retail notes bearing fixed finance rates totaled 90percent of the total retail note portfolio at October 31, 2007,compared with 85 percent at October 31, 2006.

 

Total Receivable amounts 60 days or more past duerepresent the amount of all customer payments past due 60 days or more.These amounts were $44 million at October 31, 2007, compared with $43million at October 31, 2006. In addition, these past due amountsrepresented .25 percent and .26 percent of the total Receivables held at thoserespective dates. The balance of retail notes held (principal plus accruedinterest) with any installment 60 days or more past due represents the totalretail note balance for a customer that has any portion of his note 60 days ormore past due. These amounts were $170 million and $116 million at October 31, 2007and 2006, respectively. The balances of retail notes held on which anyinstallment was 60 days or more past due as a percentage of the ending retailnotes receivable was 1.42 percent at October 31, 2007 and 1.08 percentat October 31, 2006. See Note 3 to the consolidated financial statementsfor additional past due information.

 

Deposits withheld from dealers and merchants,representing mainly the aggregate dealer retail note and lease withholdingaccounts from individual John Deere dealers to which losses from retail notesand leases originating from the respective dealers can be charged, amounted to$174 million at October 31, 2007, compared to $177 million at October 31,2006. The Company’s allowance for credit losses on all Receivables financed at October 31,2007 totaled $99 million and represented .56 percent of the total Receivablesfinanced, compared with $93 million and .55 percent, respectively, at October 31,2006. The allowance is subject to an ongoing evaluation based on manyquantitative and qualitative factors, including historical loss experience byproduct category, portfolio duration, delinquency trends, economic conditionsand credit risk quality. The Company believes its allowance is sufficient toprovide for losses in its existing receivable portfolio.

 

Capital Resources and Liquidity

 

The aggregate cash provided by operating and financingactivities was used primarily to increase Receivables and Leases. Net cashprovided by operating activities was $598 million in 2008. Net cash provided byfinancing activities totaled $1,427 million resulting from a net increasein external borrowings and a capital investment from Deere & Company,partially offset by dividends paid to John Deere Credit Company, which in turnpaid comparable dividends to Deere & Company. Net cash used forinvesting activities totaled $1,163 million in 2008, primarily due to the costof Receivables and Leases acquired exceeding collections and the cost of notesreceivable with John Deere exceeding collections. Cash and cash equivalentsincreased $892 million during 2008.

 

Over the last three years, operating activities haveprovided $1,674 million in cash. In addition, the sale of Receivables andLeases provided $461 million, an increase in total net borrowings provided$4,289 million and a capital investment from Deere & Company provided$400 million. These amounts have been used mainly to fund Receivable and Leaseacquisitions, which exceeded collections by $4,751 million, and to pay$1,075 million in dividends. Cash and cash equivalents also increased $832million over the three-year period.

 

The financing of retail purchases and leases of JohnDeere products and of wholesale receivables owed by John Deere dealersrepresented approximately 80 percent and 85 percent of the Company’sacquisition volume for 2008 and 2007, respectively. Any extended reduction orsuspension of John Deere’s sale or production of products due to a decline indemand or production, governmental actions or other events could have anadverse effect on the Company’s acquisition volume of Receivables and Leases.

 

The Company relies on its ability to raise substantialamounts of funds to finance its Receivable and Lease portfolios. Given thedownturn in global economic activity and the recent significant changes incredit market liquidity, sources of funds for the Company have been impacted.However, because of the funding sources that are available, the Company expectsto have sufficient sources of liquidity to meet its funding needs. The Company’sability to meet its debt obligations is supported in a number of ways. Theassets of the Company are self-liquidating in nature. A solid equity positionis available to absorb unusual losses on these assets and all commercial paperis backed by unsecured, committed borrowing lines from various banks. Liquidityis also provided by the Company’s ability to securitize these assets andthrough the issuance of term debt. Additionally, liquidity may also be providedthrough loans from John Deere. At October 31, 2008, $2,082 million ofcommercial paper of the Capital Corporation was 

 

19

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guaranteedby the FDIC under its Temporary Liquidity Guarantee Program (see Notes 7 and 22of the consolidated financial statements). If the Capital Corporation issuescertain maturities of commercial paper and senior unsecured debt issued followingyear end, that debt would also be guaranteed under the same program. TheCompany’s commercial paper outstanding at October 31, 2008 and 2007 wasapproximately $2,814 million and $2,679 million, respectively, whilethe total cash and cash equivalents position was $1,083 million and$191 million, respectively.

 

During 2008, the Company issued $5,542 million ofmedium-term notes, obtained $644 million of secured borrowings, maintained anaverage commercial paper balance of $2,732 million and received proceeds of$89 million from sales of Receivables. At October 31, 2008, theCompany’s funding profile included $2,814 million of commercial paper,$1,618 million of notes payable related to on-balance sheet securitizationfunding, $316 million of intercompany loans from Deere & Company,$13,672 million of unsecured term debt, and $2,065 million of equity capital. TheCompany’s funding profile may be altered to reflect such factors as relativecosts of funding sources, assets available for securitizations and capitalmarket accessibility.

 

The Company issued $5,559 million and retired$3,876 million of long-term borrowings during the year. The issuances wereprimarily medium-term notes. The retirements included $850 million of 3.90%Notes due 2008 and the remainder consisted primarily of medium-term notes.

 

Total interest-bearing indebtedness amounted to$18,424 million at October 31, 2008, compared with $17,118 million atOctober 31, 2007. Included in this debt are secured borrowings of $1,618million and $2,192 million for the same periods. Total external borrowings haveincreased generally corresponding with the level of the Receivable and Leaseportfolio, the level of cash and cash equivalents and the change in payable toDeere & Company. Total short-term indebtedness amounted to $7,894million at October 31, 2008, which included $1,618 million of securedborrowings, compared with $8,842 million at October 31, 2007, whichincluded $2,192 million of secured borrowings, while total long-termindebtedness amounted to $10,530 million at October 31, 2008 and $8,276million at October 31, 2007. The ratio of total interest-bearingdebt, including securitization indebtedness, to stockholder’s equity was 8.9 to1 and 8.8 to 1 at October 31, 2008 and 2007, respectively.

 

Stockholder’s equity was $2,065 million at October 31,2008, compared with $1,955 million and $2,154 million at October 31,2007 and 2006, respectively.  Theincrease in 2008 was primarily due to Deere & Company’s additional$400 million investment in John Deere Credit Company, which in turn increasedits investment in the Capital Corporation, net income of $282 million,partially offset by dividend payments of $465 million, a reduction of retainedearnings of $22 million resulting from adoption of FIN No. 48, Accountingfor Uncertainty in Income Taxes and an unrealized loss on derivatives of $32million, and a decrease in the cumulative translation adjustment of $53million.

 

The Capital Corporation declared and paid cashdividends to John Deere Credit Company of $465 million in 2008 and $525 millionin 2007. In each case, John Deere Credit Company paid comparable dividends toDeere & Company.

 

*Lines of Credit*

 

The Company also has access to bank lines of creditwith various banks throughout the world. Some of the lines are available toboth the Company and Deere & Company. Worldwide lines of credittotaled $4,508 million at October 31, 2008, $1,534 million of which wasunused. For the purpose of computing unusedcredit lines, commercial paper and short-term bank borrowings, excludingsecured borrowings and the current portion of long-term borrowings, of theCompany and Deere & Company were considered to constitute utilization.Included in the total credit lines at October 31, 2008 was a long-termcredit facility agreement of $3,750 million, expiring in February 2012. The creditagreement requires the Company to maintain its consolidated ratio of earningsto fixed charges at not less than 1.05 to 1 for each fiscal quarter and itsratio of senior debt, excluding securitization indebtedness, to capital base(total subordinated debt and stockholder’s equity excluding accumulated othercomprehensive income (loss)) at not more than 11 to 1 at the end of anyfiscal quarter. All of these requirements of the credit agreement have been metduring the periods included in the consolidated financial statements. For information regarding Deere &Company and its business, see Business of John Deere, Outlook for John Deere,Relationships of the Company with John Deere above and Exhibit 99.

 

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* *

*Debt Ratings*

 

The Company’s ability to obtain funding is affected byits debt ratings, which are closely related to the outlook for and thefinancial condition of John Deere, and the nature and availability of supportfacilities, such as its lines of credit and the support agreement from Deere &Company.

 

To access public debt capital markets, the Companyrelies on credit rating agencies to assign short-term and long-term creditratings to the Company’s securities as an indicator of credit quality for fixedincome investors. A credit rating agency may change or withdraw Company ratingsbased on its assessment of the Company’s current and future ability to meetinterest and principal repayment obligations. Each agency’s rating should beevaluated independently of any other rating. Lower credit ratings generallyresult in higher borrowing costs and reduced access to debt capital markets.

 

The senior long-term and short-termdebt ratings and outlook currently assigned to unsecured Company securities bythe rating agencies engaged by the Company are the same as those for JohnDeere. Those ratings are as follows:

 
| ** **                                 | ** ** | **Senior Long-Term** | ** ** | **Short-Term** | ** ** | **Outlook** | ** ** |
|--------------------------------------------|------------|---------------------------|------------|----------------|------------|-------------|------------|
| Moody’s  Investors Service, Inc. |       | A2                        |       | Prime-1        |       | Stable      |       |
| Standard &  Poor’s           |       | A                         |       | A-1            |       | Stable      |       |

 

# Safe Harbor Statement

#  

*Safe Harbor Statement under thePrivate Securities Litigation Reform Act of 1995:*Statementsunder “Overview,” “Outlook for John Deere” and other statements herein thatrelate to future operating periods are subject to important risks anduncertainties that could cause actual results to differ materially.Forward-looking statements involve certain factors that are subject to change,including changing worldwide economic conditions. Actions by the U.S. FederalReserve Board and other central banks may affect the costs and expenses offinancing the Company and the rates it is able to offer. The Company’s businessis affected by general economic conditions in and the political instability ofthe global markets in which the Company operates because deteriorating economicconditions and political instability can result in decreased customerconfidence, lower demand for equipment, higher loan losses and greater currencyrisk. The Company’s business is also affected by actions of banks, financingand leasing companies and other lenders that compete with the Company forcustomers; governmental banking, monetary and fiscal policies; capital marketdisruptions; significant changes in capital market liquidity and associatedfunding costs; interest rates and foreign currency exchange rates; and thesub-prime credit market crisis.

 

With respect to the current global economic downturn,changes in governmental banking, monetary and fiscal policies to restoreliquidity and increase the availability of credit may not be effective andcould have a material impact on the Company’s business.  Recent significant changes in marketliquidity conditions could impact access to funding and associated fundingcosts, which could reduce the Company’s earnings and cash flows. The Company’soperations could be adversely impacted by changes in the equity and bondmarkets, which could negatively affect earnings.

 

The current economic downturn and market volatilityhave adversely affected the financial industry in which the Company operates.The Company’s liquidity and ongoing profitability depend largely on timelyaccess to capital to meet future cash flow requirements and fund operations andthe costs associated with engaging in diversified funding activities. Ifcurrent levels of market disruption and volatility continue or worsen, fundingcould be unavailable or insufficient. Additionally, under current marketconditions customer confidence levels may result in declines in creditapplications and increases in delinquencies and default rates, which couldmaterially impact the Company’s write-offs and provision for credit losses.

 

In addition, the Company’s business is closely relatedto John Deere’s business. Further information, including factors thatpotentially could materially affect the Company’s and John Deere’s financialresults, is included in the most recent Deere & Company Form 10-K(including the factors discussed in Item 1A) and other 

 

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Deere &Company and Capital Corporation filings with the Securities and ExchangeCommission.

 

# Off-Balance Sheet Arrangements

#  

At October 31, 2008,the Company had $197 million of guarantees issued to turbine manufacturers forJohn Deere Renewables, LLC wind turbine purchases. John Deere Renewables, LLCis an affiliated company that has commitments to purchase wind turbines relatedto its direct investments in wind energy projects. The maximum remaining termof these purchase commitments was approximately one year.

 

The Company’s subsidiary,John Deere Risk Protection, Inc., offers crop insurance products through amanaging general agency agreement (Agreement) with an insurance company(Insurance Carrier) rated “Excellent” by A.M. Best Company. As a managinggeneral agent, John Deere Risk Protection, Inc. will receive commissionsfrom the Insurance Carrier for selling crop insurance to producers.  The Company has guaranteed certainobligations under the Agreement, including the obligation to pay the InsuranceCarrier for any uncollected premiums. At October 31, 2008 the maximumexposure for uncollected premiums was approximately $60 million. Substantiallyall of the Company’s crop insurance risk under the Agreement has been mitigatedby a syndicate of private reinsurance companies. These reinsurance companiesare rated “Excellent” or higher by A.M. Best Company. In the event of awidespread catastrophic crop failure throughout the U.S. and the default ofthese highly rated private reinsurance companies on their reinsuranceobligations, the Company would be required to reimburse the Insurance Carrierfor exposure under the Agreement of approximately $824 million at October 31,2008. The Company believes that the likelihood of the occurrence of the eventsthat give rise to the exposures under this Agreement is substantially remoteand as a result, at October 31, 2008, the Company’s accrued liabilityunder the Agreement was not material.

 

The Company also had othermiscellaneous contingent liabilities totaling approximately $11 million at October 31,2008, for which it believes the probability for payment is substantiallyremote. The Company’s accrued liability at October 31, 2008 related tothese contingencies was not material.

 

# Aggregate Contractual Obligations

#  

The payment schedule for theCompany’s contractual obligations at October 31, 2008 in millions ofdollars is as follows:

 
| ** **            | ** ** | **Total** | ** ** | **Less than 1  year** | ** ** | **2 & 3  years** | ** ** | **4 & 5  years** | ** ** | **More than 5  years** | ** ** |
|-----------------------|------------|-----------|------------|---------------------------------|------------|--------------------------------|------------|--------------------------------|------------|----------------------------------|------------|
| Total debt*           |       | $         | 18,230     | **                              | $          | 7,174                          |       | $                              | 5,508      |                             | $          | 3,998 |   | $ | 1,550 |   |
| Interest on debt      |       | 1,887     |       | 610                             |       | 720                            |       | 275                            |       | 282                              |       |
| Purchase  obligations |       | 15        |       | 4                               |       | 5                              |       | 4                              |       | 2                                |       |
| Operating leases      |       | 5         |       | 3                               |       | 2                              |       |                           |       |                             |       |
| Total  obligations    |       | $         | 20,137     |                            | $          | 7,791                          |       | $                              | 6,235      |                             | $          | 4,277 |   | $ | 1,834 |   |

 

----

*                                         Principalpayments.

 

**                                  Notespayable of $1,618 million classified as short-term on the balance sheet relatedto securitization of retail notes are included in this table based on theexpected payment schedule (see Note 7).

 

The table above does not include unrecognized tax benefit liabilitiesof approximately $35 million at October 31, 2008 since the timing offuture payments is not reasonably estimable at this time (see Note 14 to theconsolidated financial statements). It also does not include unused commitmentsto extend credit to customers and John Deere dealers as discussed in Note 17 tothe consolidated financial statements. For additional information regardingshort-term borrowings, long-term borrowings and lease obligations, see Notes 7,8 and 9, respectively, to the consolidated financial statements.

 

22

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CriticalAccounting Policies

 

The preparation of the Company’sconsolidated financial statements in conformity with accounting principlesgenerally accepted in the U.S. requires management to make estimates andassumptions that affect reported amounts of assets, liabilities, revenues andexpenses. Changes in these estimates and assumptions could have a significanteffect on the financial statements. The accounting policies below are thosemanagement believes are the most critical to the preparation of the Company’sfinancial statements and require the most difficult, subjective or complexjudgments. The Company’s other accounting policies are described in the Notesto the consolidated financial statements.

 

Allowance for Credit Losses

 

The allowance for credit losses represents an estimate of the lossesexpected from the Company’s Receivable portfolio. The level of the allowance isbased on many quantitative and qualitative factors, including historical lossexperience by product category, portfolio duration, delinquency trends,economic conditions and credit risk quality. The adequacy of the allowance isassessed quarterly.  Differentassumptions or changes in economic conditions would result in changes to theallowance for credit losses and the provision for credit losses.

 

The totalallowance for credit losses at October 31, 2008, 2007, and 2006 were $105million, $99 million, and $93 million, respectively. The increases in 2008 and2007 were primarily due to the growth in the Receivable portfolio.

 

The assumptionsused in evaluating the Company’s exposure to credit losses involve estimatesand significant judgment. The historical loss experience on the Receivableportfolios represents one of the key assumptions involved in determining theallowance for credit losses. Over the last five fiscal years, the average lossexperience has fluctuated between 3 basis point and 16 basis points in anygiven fiscal year over the applicable prior period. Holding other estimatesconstant, a 10 basis point increase or decrease in estimated loss experience onthe Receivable portfolios would result in an increase or decrease ofapproximately $18 million to the allowance for credit losses at October 31,2008.

 

Operating Lease Residual Values

 

The carrying value of the equipment on operating leases is affected by theestimated fair values of the equipment at the end of the lease (residualvalues).  Upon termination of the lease,the equipment is either purchased by the lessee or sold to a third party, inwhich case the Company may record a gain or a loss for the difference betweenthe estimated residual value and the sales price.  The residual values are dependent on currenteconomic conditions and are reviewed quarterly. Changes in residual valueassumptions would affect the amount of depreciation expense and the amount ofinvestment in equipment on operating leases.

 

The totaloperating lease residual values at October 31, 2008, 2007 and 2006 were$663 million, $587 million and $511 million, respectively.  The increases in 2008 and 2007 were primarilydue to the higher levels of operating leases.

 

Estimates used indetermining end of lease market values for equipment on operating leasessignificantly impact the amount and timing of depreciation expense.  If future market values for this equipmentwere to decrease 5 percent from the Company’s present estimates, the totalimpact would be to increase the Company’s annual depreciation for equipment onoperating leases by approximately $13 million.

 

**Item 7A.  Quantitative and Qualitative DisclosuresAbout Market Risk.**

 

# Financial Instrument RiskInformation

#  

The Company is naturally exposed to various interestrate and foreign currency risks. As a result, the Company enters intoderivative transactions to manage certain of these exposures that arise in thenormal course of business and not for the purpose of creating speculativepositions or trading. The Company manages the relationship of the types and

 

23

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amountsof its funding sources to its Receivable and Lease portfolios in an effort todiminish risk due to interest rate and foreign currency fluctuations, whileresponding to favorable financing opportunities. Accordingly, from time totime, the Company enters into interest rate swap agreements to manage itsinterest rate exposure. The Company also has foreign currency exposures at someof its foreign and domestic operations related to buying, selling and financingin currencies other than the local currencies. The Company has entered intoagreements related to the management of these currency transaction risks. Thecredit risk under these interest rate and foreign currency agreements is notconsidered to be significant. See Note 19 to the consolidated financial statementsfor additional detailed financial instrument information.

 

# Interest Rate Risk

#  

Quarterly, the Company uses a combination of cash flowmodels to assess the sensitivity of its financial instruments with interestrate exposure to changes in market interest rates. The models calculate theeffect of adjusting interest rates as follows. Cash flows for Receivables arediscounted at the current prevailing rate for each Receivable portfolio. Cashflows for unsecured borrowings are discounted at the applicable benchmark yieldcurve plus market credit spreads for similarly rated borrowers. Cash flows forsecuritized borrowings are discounted at the swap yield curve plus a marketcredit spread for similarly rated borrowers. Cash flows for interest rate swapsare projected and discounted using forecasted rates from the swap yield curveat the repricing dates. The net loss in these financial instruments’ fair valuewhich would be caused by decreasing the interest rates by 10 percent from themarket rates at October 31, 2008 would have been approximately $25million. The net loss in these financial instruments’ fair values which wouldbe caused by increasing the interest rates by 10 percent from the market ratesat October 31, 2007 would have been approximately $66 million.

 

# Foreign Currency Risk

#  

The Company’s policy is to hedge the foreign currencyrisk if the currency of the borrowings does not match the currency of theReceivable portfolio.  As a result, ahypothetical 10 percent adverse change in the value of the U.S. dollar relativeto all other foreign currencies would not have a material effect on the Company’scash flows.

 

**Item 8.  Financial Statements and SupplementaryData.**

 

See accompanying table of contents of financialstatements.

 

**Item 9.  Changes in and Disagreements withAccountants on Accounting and Financial Disclosure.**

 

Not applicable.

 

**Item 9A(T).  Controls and Procedures.**

 

**Disclosure Controls and Procedures**

 

The Company’s principal executive officer and itsprincipal financial officer have concluded that the Company’s disclosurecontrols and procedures (as defined in Rules 13a-15(e) and 15d-15(e) ofthe Securities Exchange Act of 1934, as amended (“the Act”)) were effective asof October 31, 2008, based on the evaluation of these controls andprocedures required by Rule 13a-15(b) or 15d-15(b) of the Act.****During the fourth quarter, there were no changes that havematerially affected or are reasonably likely to materially affect the Company’sinternal controls over financial reporting.

 

**Management’s Report on Internal Control OverFinancial Reporting**

 

The Company’s management isresponsible for establishing and maintaining adequate internal control overfinancial reporting. John Deere Capital Corporation’s internal control systemwas designed to provide reasonable assurance regarding the preparation and fairpresentation of published financial statements in accordance with generallyaccepted accounting principles.

 

24

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All internal controlsystems, no matter how well designed, have inherent limitations. Therefore,even those systems determined to be effective can provide only reasonableassurance with respect to financial statement preparation and presentation inaccordance with generally accepted accounting principles.

 

Management assessed theeffectiveness of the Company’s internal control over financial reporting as of October 31,2008, using the criteria set forth in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on that assessment, management believes that, as of October 31,2008, the Company’s internal control over financial reporting was effective.

 

This annual report does notinclude an attestation report of the Company’s independent registered publicaccounting firm regarding internal control over financial reporting. Management’sreport was not subject to attestation by the Company’s independent registeredpublic accounting firm pursuant to temporary rules of the Securities andExchange Commission that permit the Company to provide only management’s reportin this annual report.

 

**Item 9B.  Other Information.**

 

 Not applicable.

 

**PART III**

 

**Item 10.  Directors, Executive Officers andCorporate Governance.**

 

 Omitted pursuant to instruction I(2).

 

**Item 11.  Executive Compensation.**

 

 Omitted pursuant to instruction I(2).

 

**Item 12.  Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters.**

 

 Omitted pursuant to instruction I(2).

 

**Item 13.  Certain Relationships and RelatedTransactions, and Director Independence.**

 

 Omitted pursuant to instruction I(2).

 

**Item 14.  Principal Accountant Fees and Services.**

 

For the years ended October 31,2008 and 2007, professional services were performed by Deloitte & ToucheLLP, the member firms of Deloitte Touche Tohmatsu, and their respectiveaffiliates (collectively, “Deloitte & Touche”).

 

Audit Fees

 

The aggregate fees billed includeamounts for the audit of the Company’s annual financial statements, the reviewsof the financial statements included in the Company’s Quarterly Reports on Form 10-Q,including services related thereto such as comfort letters, statutory audits,attest services, consents, and assistance with and review of documents filedwith the SEC and other regulatory bodies. Audit fees for the fiscal years endedOctober 31, 2008 and 2007, were $2,575 thousand and $2,196 thousand,respectively.

 

25

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Audit-Related Fees

 

During the last two fiscal years,Deloitte & Touche has provided the Company with assurance and relatedservices that are reasonably related to the performance of the audit of ourfinancial statements. The aggregate fees billed for such audit-related servicesfor the fiscal years ended October 31, 2008 and 2007, were $236 thousandand $228 thousand, respectively. These services included various attestservices.

 

Tax Fees

 

There were no aggregate fees billedfor professional services provided by Deloitte & Touche in connectionwith tax advice and tax planning services for the fiscal years ended October 31,2008 and 2007.

 

All Other Fees

 

There were no aggregate fees billed for services notincluded above for the fiscal years ended October 31, 2008 and 2007.

 

Pre-approval of Services by the External Auditor

 

As a wholly-owned subsidiary ofDeere & Company, audit and non-audit services provided by the Company’sexternal auditor are subject to Deere & Company’s Audit ReviewCommittee pre-approval policies and procedures as described in the Deere &Company 2008 proxy statement.  During thefiscal year ended October 31, 2008, all services provided by the externalauditor were pre-approved by Deere & Company’s Audit Review Committeein accordance with such policy.

 

## **PART IV**

## ** **

**Item 15.  Exhibits and Financial Statement Schedules.**

 

(1)           FinancialStatements

 

(2)           FinancialStatement Schedules

 

See the table ofcontents to financial statements and schedules immediately preceding thefinancial statements and schedules to consolidated financial statements.

 

(3)           Exhibits

 

See the index toexhibits immediately preceding the exhibits filed with this report.

 

26

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**SIGNATURES**

 

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

 

 
|   | JOHN DEERE  CAPITAL CORPORATION |
|--------|---------------------------------|
|   |                            |   |
|   | By:                             | */s/  R. W. Lane* |
|   |                            | R. W. Lane |
|   |                            | Chairman and Principal Executive Officer |

 

 

Date:                    December 18,2008

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dateindicated.

 

Each personsigning below also hereby appoints Robert W. Lane, James A. Israel and GregoryR. Noe, and each of them singly, his or her lawful attorney-in-fact with fullpower to execute and file any and all amendments to this report together withexhibits thereto and generally to do all such things as such attorney-in-factmay deem appropriate to enable John Deere Capital Corporation to comply withthe provisions of the Securities Exchange Act of 1934 and all requirements ofthe Securities and Exchange Commission.

 

 
| **Signature**                 | ** ** | **Title**                    | ** ** | **Date**               |
|-------------------------------|------------|------------------------------|------------|------------------------|
|                          |       |                         |       |                   |
|                          |       |                         |       |                   |
| * /s/  R. W. Lane*       |       | Director,  Chairman and      | )          |                   |
| * *R. W. Lane            |       | Principal  Executive Officer | )          |                   |
|                          |       |                         | )          |                   |
|                          |       |                         | )          |                   |
| * /s/  Samuel R. Allen*  |       | Director                     | )          |                   |
| * *Samuel R.  Allen      |       |                         | )          |                   |
|                          |       |                         | )          |                   |
|                          |       |                         | )          |                   |
| * /s/  David C. Everitt* |       | Director                     | )          | December 18, 2008 |
| * *David C.  Everitt     |       |                         | )          |                   |
|                          |       |                         | )          |                   |
|                          |       |                         | )          |                   |
| * /s/  James M. Field*   |       | Director                     | )          |                   |
| * *James M.  Field       |       |                         | )          |                   |
|                          |       |                         | )          |                   |
|                          |       |                         | )          |                   |
| * /s/  James A. Israel*  |       | Director and  President      | )          |                   |
| * *James A. Israel       |       |                         | )          |                   |

* *

27

----

 
| **Signature**                     | ** ** | **Title**                           | ** ** | **Date**               |
|-----------------------------------|------------|-------------------------------------|------------|------------------------|
| * *                          | * *   | * *                            |       | * *               |
| * *                          | * *   | * *                            |       | * *               |
| * /s/  M. J. Mack, Jr.* |       | Director, Senior  Vice President    | )          |                   |
| * *M. J.  Mack, Jr.     |       | and Principal  Financial Officer    | )          |                   |
|                              |       | (and Principal  Accounting Officer) | )          |                   |
|                              |       |                                | )          |                   |
| * /s/  Daniel C. McCabe*     |       | Director                            | )          |                   |
| * *Daniel C.  McCabe         |       |                                | )          |                   |
|                              |       |                                | )          |                   |
|                              |       |                                | )          |                   |
| * /s/  Stephen Pullin*       |       | Director                            | )          | December 18, 2008 |
| * *Stephen  Pullin           |       |                                | )          |                   |
|                              |       |                                | )          |                   |
|                              |       |                                | )          |                   |
| * /s/  Lawrence W. Sidwell*  |       | Director                            | )          |                   |
| * *Lawrence  W. Sidwell      |       |                                | )          |                   |
|                              |       |                                | )          |                   |
|                              |       |                                | )          |                   |
| * /s/  Markwart von Pentz*   |       | Director                            | )          |                   |
| * *Markwart  von Pentz       |       |                                | )          |                   |

 

28

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## ** **

## **Table of Contents**

 
|                                                               | **Page** |
|--------------------------------------------------------------------|----------|
|                                                               |     |
| **Financial  Statements:**                                         |     |
|                                                               |     |
| John Deere Capital Corporation and Subsidiaries:                   |     |
|                                                               |     |
| Report of Independent Registered Public Accounting  Firm           | 30       |
|                                                               |     |
| Statements  of Consolidated Income and Retained Earnings           |     |
| For the  Years Ended October 31, 2008, 2007 and 2006          | 31       |
|                                                               |     |
| Consolidated Balance Sheets, as of October 31,  2008 and 2007 | 32       |
|                                                               |     |
| Statements  of Consolidated Cash Flows                             |     |
| For the  Years Ended October 31, 2008, 2007 and 2006          | 33       |
|                                                               |     |
| Statement  of Changes in Consolidated Stockholder’s Equity    |     |
| For the  Years Ended October 31, 2006, 2007 and 2008          | 34       |
|                                                               |     |
| Notes to Consolidated Financial Statements                         | 35       |

 

**SCHEDULES OMITTED**

 

The followingschedules are omitted because of the absence of conditions under which they arerequired or because the required information is included in the Notes to theConsolidated Financial Statements:

 

I, II, III,IV, and V.

 

29

----

 

Deloitte &Touche LLP

111 S. WackerDrive

Chicago, Illinois 60606

 

REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

JohnDeere Capital Corporation:

 

We have audited theaccompanying consolidated balance sheets of John Deere Capital Corporation andsubsidiaries (the “Company”) as of October 31, 2008 and 2007 and therelated statements of consolidated income and retained earnings, of changes inconsolidated stockholder’s equity and of consolidated cash flows for each ofthe three years in the period ended October 31, 2008.  These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States).  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  The Company is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting.  Our audits includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

 

In our opinion, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of the Company at October 31, 2008 and 2007 and theresults of its operations and its cash flows for each of the three years in theperiod ended October 31, 2008 in conformity with accounting principlesgenerally accepted in the United States of America.

 

DELOITTE &TOUCHE LLP

Chicago, Illinois

 

December 18, 2008

 

30

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### **John Deere Capital Corporation andSubsidiaries**

**Statementsof Consolidated Income and Retained Earnings**

**For theYears Ended October 31, 2008, 2007 and 2006**

(in millions)

 
| ** **                                            | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Revenues**                                          |       |     |       |     |       |     |       |
| Finance income  earned on retail notes                |       | $        | 860.5      |     | $          | 851.9    |       | $ | 713.4 |   |
| Lease revenues                                        |       | 331.7    |       | 318.7    |       | 285.7    |       |
| Revolving charge  account income                      |       | 227.2    |       | 222.1    |       | 210.2    |       |
| Finance income  earned on wholesale receivables       |       | 302.5    |       | 364.8    |       | 354.5    |       |
| Operating loan  income                                |       | 22.9     |       | 26.8     |       | 26.6     |       |
| Income on  receivables sold                           |       | 6.3      |       | 22.3     |       | 28.7     |       |
| Crop insurance  commissions                           |       | 139.1    |       | 75.5     |       | 35.3     |       |
| Other income                                          |       | 77.2     |       | 84.8     |       | 51.0     |       |
| Total revenues                                        |       | 1,967.4  |       | 1,966.9  |       | 1,705.4  |       |
| **Expenses**                                          |       |     |       |     |       |     |       |
| Interest expense                                      |       | 838.7    |       | 877.9    |       | 726.9    |       |
| Operating  expenses:                                  |       |     |       |     |       |     |       |
| Administrative  and operating expenses                |       | 373.0    |       | 307.6    |       | 273.9    |       |
| Provision for  credit losses                          |       | 66.8     |       | 53.7     |       | 30.5     |       |
| Fees paid to  John Deere                              |       | 35.8     |       | 36.0     |       | 41.6     |       |
| Depreciation of  equipment on operating leases        |       | 216.0    |       | 212.1    |       | 189.8    |       |
| Total operating  expenses                             |       | 691.6    |       | 609.4    |       | 535.8    |       |
| Total expenses                                        |       | 1,530.3  |       | 1,487.3  |       | 1,262.7  |       |
| **Income  of consolidated group before income taxes** |       | 437.1    |       | 479.6    |       | 442.7    |       |
| **Provision  for income taxes**                       |       | 155.7    |       | 168.7    |       | 151.8    |       |
| **Income  of consolidated group**                     |       | 281.4    |       | 310.9    |       | 290.9    |       |
| **Equity  in income of unconsolidated affiliates**    |       | 1.0      |       | .3       |       | .3       |       |
| **Net  income**                                       |       | 282.4    |       | 311.2    |       | 291.2    |       |
| **Dividends  paid**                                   |       | (465.1   | )          | (525.0   | )          | (85.0    | )          |
| **Retained  earnings at beginning of the year**       |       | 1,065.6  |       | 1,300.9  |       | 1,094.7  |       |
| **Retained  earnings at end of the year**             |       | $        | 882.9      |     | $          | 1,087.1  |       | $ | 1,300.9 |   |

 

The accompanyingNotes to Consolidated Financial Statements are an integral part of thesestatements.

 

31

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**John Deere Capital Corporation and Subsidiaries**

**Consolidated Balance Sheets**

**As of October 31, 2008 and 2007**

(in millions)

 
| ** **                                                                                                   | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **Assets**                                                                                                   |       |     |       |     |       |
| Cash and cash  equivalents                                                                                   |       | $        | 1,082.6    |     | $          | 190.8 |   |
| Receivables:                                                                                                 |       |     |       |     |       |
| Retail notes                                                                                                 |       | 10,136.6 |       | 9,810.3  |       |
| Restricted securitized  retail notes                                                                         |       | 1,592.5  |       | 2,150.4  |       |
| Revolving charge  accounts                                                                                   |       | 1,825.1  |       | 1,553.3  |       |
| Operating loans                                                                                              |       | 357.9    |       | 286.5    |       |
| Wholesale  receivables                                                                                       |       | 3,570.6  |       | 3,521.3  |       |
| Financing leases                                                                                             |       | 417.9    |       | 430.3    |       |
| Total  receivables                                                                                           |       | 17,900.6 |       | 17,752.1 |       |
| Allowance for  credit losses                                                                                 |       | (105.2   | )          | (99.2    | )          |
| Total  receivables – net                                                                                |       | 17,795.4 |       | 17,652.9 |       |
| Other  receivables                                                                                           |       | 25.4     |       | 35.8     |       |
| Equipment on  operating leases – net                                                                    |       | 1,053.4  |       | 995.2    |       |
| Notes receivable  from John Deere                                                                            |       | 799.3    |       | 586.5    |       |
| Investments in  unconsolidated affiliates                                                                    |       | 5.4      |       | 5.2      |       |
| Other assets                                                                                                 |       | 552.1    |       | 295.1    |       |
| **Total  Assets**                                                                                            |       | $        | 21,313.6   |     | $          | 19,761.5 |   |
|                                                                                                         |       |     |       |     |       |
| **Liabilities  and Stockholder’s Equity**                                                               |       |     |       |     |       |
| Short-term  borrowings:                                                                                      |       |     |       |     |       |
| Commercial paper                                                                                             |       | $        | 2,814.5    |     | $          | 2,679.2 |   |
| Other notes  payable                                                                                         |       | 1,622.2  |       | 2,199.0  |       |
| John Deere                                                                                                   |       | 315.6    |       | 127.8    |       |
| Current  maturities of long-term borrowings                                                                  |       | 3,141.9  |       | 3,835.9  |       |
| Total short-term  borrowings                                                                                 |       | 7,894.2  |       | 8,841.9  |       |
| Accounts payable  and accrued expenses                                                                       |       | 583.4    |       | 455.6    |       |
| Deposits  withheld from dealers and merchants                                                                |       | 173.5    |       | 174.4    |       |
| Deferred income  taxes                                                                                       |       | 67.9     |       | 59.0     |       |
| Long-term  borrowings                                                                                        |       | 10,529.7 |       | 8,276.1  |       |
| Total  liabilities                                                                                           |       | 19,248.7 |       | 17,807.0 |       |
| Commitments and  contingencies (Note 17)                                                                     |       |     |       |     |       |
| Stockholder’s  equity:                                                                                  |       |     |       |     |       |
| Common stock,  without par value (issued and outstanding - 2,500 shares owned by John Deere  Credit Company) |       | 1,212.8  |       | 812.8    |       |
| Retained  earnings                                                                                           |       | 882.9    |       | 1,087.1  |       |
| Accumulated  other comprehensive income (loss):                                                              |       |     |       |     |       |
| Cumulative  translation adjustment                                                                           |       | 9.2      |       | 61.7     |       |
| Unrealized gain  on investments                                                                              |       |     |       | 1.2      |       |
| Unrealized loss  on derivatives                                                                              |       | (40.0    | )          | (8.3     | )          |
| Total  accumulated other comprehensive income (loss)                                                         |       | (30.8    | )          | 54.6     |       |
| Total  stockholder’s equity                                                                             |       | 2,064.9  |       | 1,954.5  |       |
| **Total  Liabilities and Stockholder’s Equity**                                                         |       | $        | 21,313.6   |     | $          | 19,761.5 |   |

 

The accompanying Notes to Consolidated FinancialStatements are an integral part of these statements.

 

32

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**John Deere Capital Corporationand Subsidiaries**

**Statementsof Consolidated Cash Flows**

**For the Years Ended October 31,2008, 2007 and 2006**

(in millions)

 
| ** **                                                                                     | ** ** | **2008**  | ** ** | **2007**  | ** ** | **2006**  | ** ** |
|------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| **Cash  Flows from Operating Activities:**                                                     |       |      |       |      |       |      |       |
| Net income                                                                                     |       | $         | 282.4      |      | $          | 311.2     |       | $ | 291.2 |   |
| Adjustments to  reconcile net income to net cash provided by operating   activities: |       |      |       |      |       |      |       |
| Provision for  credit losses                                                                   |       | 66.8      |       | 53.7      |       | 30.5      |       |
| Provision for  depreciation and amortization                                                   |       | 224.0     |       | 218.5     |       | 194.5     |       |
| Provision  (credit) for deferred income taxes                                                  |       | 36.3      |       | (37.9     | )          | (3.7      | )          |
| Undistributed  earnings of unconsolidated affiliates                                           |       | (1.0      | )          | (.3       | )          | (.3       | )          |
| Change in  accounts payable and accrued expenses                                               |       | 54.4      |       | 44.6      |       | 23.1      |       |
| Change in  accrued income taxes payable/receivable                                             |       | 9.9       |       | 15.2      |       | (15.5     | )          |
| Other                                                                                          |       | (74.9     | )          | (9.9      | )          | (38.9     | )          |
| Net cash  provided by operating activities                                                     |       | 597.9     |       | 595.1     |       | 480.9     |       |
|                                                                                           |       |      |       |      |       |      |       |
| **Cash  Flows from Investing Activities:**                                                     |       |      |       |      |       |      |       |
| Cost of  receivables acquired                                                                  |       | (32,847.6 | )          | (29,010.7 | )          | (29,049.8 | )          |
| Collections of  receivables                                                                    |       | 32,119.3  |       | 28,160.1  |       | 27,478.6  |       |
| Cost of  equipment on operating leases acquired                                                |       | (556.3    | )          | (537.7    | )          | (507.2    | )          |
| Proceeds from  sales of equipment on operating leases                                          |       | 286.2     |       | 201.3     |       | 163.3     |       |
| Purchases of  property and equipment                                                           |       | (9.2      | )          | (2.1      | )          | (153.8    | )          |
| Cost of notes  receivable with John Deere                                                      |       | (398.1    | )          | (521.4    | )          | (110.8    | )          |
| Collection of  notes receivable with John Deere                                                |       | 185.3     |       | 173.5     |       |      |       |
| Proceeds from  sales of receivables                                                            |       | 88.9      |       | 228.8     |       | 143.2     |       |
| Change in  restricted cash                                                                     |       | (7.2      | )          | 74.3      |       | (49.1     | )          |
| Other                                                                                          |       | (24.7     | )          | 11.3      |       | 7.8       |       |
| Net cash used  for investing activities                                                        |       | (1,163.4  | )          | (1,222.6  | )          | (2,077.8  | )          |
|                                                                                           |       |      |       |      |       |      |       |
| **Cash  Flows from Financing Activities:**                                                     |       |      |       |      |       |      |       |
| Increase in  commercial paper – net                                                       |       | 219.0     |       | 284.4     |       | 575.4     |       |
| Increase  (decrease) in other notes payable – net                                         |       | (576.3    | )          | (7.9      | )          | 843.0     |       |
| Increase  (decrease) in payable with John Deere – net                                     |       | 188.9     |       | (50.4     | )          | (96.8     | )          |
| Proceeds from  issuance of long-term borrowings                                                |       | 5,558.6   |       | 3,513.8   |       | 2,669.7   |       |
| Payments of  long-term borrowings                                                              |       | (3,876.2  | )          | (2,513.2  | )          | (2,442.6  | )          |
| Dividends paid                                                                                 |       | (465.1    | )          | (525.0    | )          | (85.0     | )          |
| Capital  investment                                                                            |       | 400.0     |       |      |       |      |       |
| Other                                                                                          |       | (22.3     | )          | (11.6     | )          |      |       |
| Net cash  provided by financing activities                                                     |       | 1,426.6   |       | 690.1     |       | 1,463.7   |       |
|                                                                                           |       |      |       |      |       |      |       |
| **Effect  of exchange rate changes on cash and cash equivalents**                              |       | 30.7      |       | 9.0       |       | 2.2       |       |
| **Net  increase (decrease) in cash and cash equivalents**                                      |       | 891.8     |       | 71.6      |       | (131.0    | )          |
| **Cash and  cash equivalents at the beginning of year**                                        |       | 190.8     |       | 119.2     |       | 250.2     |       |
| **Cash  and cash equivalents at the end of year**                                              |       | $         | 1,082.6    |      | $          | 190.8     |       | $ | 119.2 |   |

 

The accompanyingNotes to Consolidated Financial Statements are an integral part of thesestatements.

 

33

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**John Deere Capital Corporationand Subsidiaries**

**Statementsof Changes in Consolidated Stockholder’s Equity**

**For the Years Ended October 31,2006, 2007 and 2008**

(in millions)

 
| ** **                           | ** ** | **Total  Equity** | ** ** | **Common  Stock** | ** ** | **Retained  Earnings** | ** ** | **Other  Comprehensive  Income (Loss)** | ** ** |
|--------------------------------------|------------|-------------------|------------|-------------------|------------|------------------------|------------|----------------------------------------------|------------|
|                                 |       |              |       |              |       |                   |       |                                         |       |
| **Balance  October 31, 2005**   |       | $                 | 1,940.0    |              | $          | 812.8                  |       | $                                            | 1,094.7    |   | $ | 32.5 |   |
| Comprehensive  income                |       |              |       |              |       |                   |       |                                         |       |
| Net income                           |       | 291.2             |       |              |       | 291.2                  |       |                                         |       |
| Other  comprehensive income (loss)   |       |              |       |              |       |                   |       |                                         |       |
| Cumulative  translation adjustment   |       | 9.7               |       |              |       |                   |       | 9.7                                          |       |
| Unrealized loss  on investments      |       | (3.3              | )          |              |       |                   |       | (3.3                                         | )          |
| Unrealized gain  on derivatives      |       | 1.1               |       |              |       |                   |       | 1.1                                          |       |
| **Total  comprehensive income**      |       | 298.7             |       |              |       |                   |       |                                         |       |
| Dividends paid                       |       | (85.0             | )          |              |       | (85.0                  | )          |                                         |       |
| **Balance  October 31, 2006**   |       | 2,153.7           |       | 812.8             |       | 1,300.9                |       | 40.0                                         |       |
| Comprehensive  income                |       |              |       |              |       |                   |       |                                         |       |
| Net income                           |       | 311.2             |       |              |       | 311.2                  |       |                                         |       |
| Other  comprehensive income (loss)   |       |              |       |              |       |                   |       |                                         |       |
| Cumulative  translation adjustment   |       | 33.6              |       |              |       |                   |       | 33.6                                         |       |
| Unrealized loss  on investments      |       | (2.3              | )          |              |       |                   |       | (2.3                                         | )          |
| Unrealized loss  on derivatives      |       | (16.7             | )          |              |       |                   |       | (16.7                                        | )          |
| **Total  comprehensive income**      |       | 325.8             |       |              |       |                   |       |                                         |       |
| Dividends paid                       |       | (525.0            | )          |              |       | (525.0                 | )          |                                         |       |
| **Balance  October 31, 2007**   |       | 1,954.5           |       | 812.8             |       | 1,087.1                |       | 54.6                                         |       |
| Comprehensive  income                |       |              |       |              |       |                   |       |                                         |       |
| Net income                           |       | 282.4             |       |              |       | 282.4                  |       |                                         |       |
| Other  comprehensive income (loss)   |       |              |       |              |       |                   |       |                                         |       |
| Cumulative  translation adjustment   |       | (52.5             | )          |              |       |                   |       | (52.5                                        | )          |
| Unrealized loss  on investments      |       | (1.2              | )          |              |       |                   |       | (1.2                                         | )          |
| Unrealized loss  on derivatives      |       | (31.7             | )          |              |       |                   |       | (31.7                                        | )          |
| **Total  comprehensive income**      |       | 197.0             |       |              |       |                   |       |                                         |       |
| Adjustment to  adopt FIN No. 48 |       | (21.5             | )          |              |       | (21.5                  | )          |                                         |       |
| Dividends paid                       |       | (465.1            | )          |              |       | (465.1                 | )          |                                         |       |
| Capital  investment                  |       | 400.0             |       | 400.0             |       |                   |       |                                         |       |
| **Balance  October 31, 2008**   |       | $                 | 2,064.9    |              | $          | 1,212.8                |       | $                                            | 882.9      |   | $ | (30.8 | ) |

 

The accompanying Notes to Consolidated FinancialStatements are an integral part of these statements.

 

34

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**John Deere Capital Corporation and Subsidiaries**

**Notes toConsolidated Financial Statements**

 

**Note 1****.   Summary of SignificantAccounting Policies**

 

The following are significant accounting policies inaddition to those included in other notes to the consolidated financialstatements.

 

Corporate Organization

 

John Deere Capital Corporation (Capital Corporation)and its subsidiaries are collectively called the Company. John Deere CreditCompany, a wholly-owned finance holding subsidiary of Deere & Company,is the parent of the Company. The Company conducts business in Australia, NewZealand, the U.S., and in several countries in Europe and Latin America. Deere &Company and its wholly-owned subsidiaries are collectively called John Deere.

 

Retail notes, revolving charge accounts, operatingloans, financing leases and wholesale receivables are collectively called “Receivables.”Receivables and operating leases are collectively called “Receivables andLeases.”

 

The Company bears substantially all of the credit risk(net of recovery from withholdings from certain John Deere dealers, andcustomer guarantees from certain John Deere dealers and Farm Planä andPowerPlanâ merchants) associated with its holdingof Receivables and Leases. A small portion of the Receivables and Leases held(less than 5 percent) is guaranteed by certain subsidiaries of Deere &Company. The Company also performs substantially all servicing and collectionfunctions. Servicing and collection functions for a small portion of theReceivables and Leases held (less than 5 percent) are provided by John Deere.John Deere is reimbursed for staff and other administrative services atestimated cost, and for credit lines provided to the Company based onutilization of those lines.

 

# Principles of Consolidation

#  

The consolidated financial statements include thefinancial statements of the Capital Corporation and its subsidiaries. Theconsolidated financial statements represent the consolidation of all companiesin which the Capital Corporation has a controlling interest. Certain variableinterest entities (VIEs) primarily related to the securitization of financingreceivables for secured borrowings are consolidated since the Company is theprimary beneficiary. The Capital Corporation records its investment in eachunconsolidated affiliated company at its related equity in the net assets ofsuch affiliate.

 

# Use of Estimates in Financial Statements

#  

The preparation of financial statements in conformitywith accounting principles generally accepted in the U.S. requires managementto make estimates and assumptions that affect the reported amounts and relateddisclosures. Actual results could differ from those estimates.

 

Revenue Recognition

 

Financing revenue is recorded over the lives of the related receivablesusing the interest method. Deferred costs on the origination of receivables arerecognized as a reduction in finance revenue over the expected lives of thereceivables using the interest method. Income from operating leases isrecognized on a straight-line basis over the scheduled lease terms. Cropinsurance commissions are recorded on a straight-line basis over the coverageperiod of the crop insurance policy.

 

35

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Securitizationof Receivables

 

Certainfinancing receivables are periodically transferred to special purpose entities(SPEs) in securitization transactions (see Note 4). These securitizationsqualify as collateral for secured borrowings and no gains or losses arerecognized at the time of securitization. The receivables remain on the balancesheet and are classified as “Restricted securitized retail notes.”  The Company recognizes finance income overthe lives of these retail notes using the interest method.

 

# Depreciation

#  

Equipment on operating leases is depreciated over theterms of the leases using the straight-line method (see Note 5).

 

Derivative FinancialInstruments

 

It is the Company’s policy that derivativetransactions are executed only to manage exposures arising in the normal courseof business and not for the purpose of creating speculative positions ortrading. The Company manages the relationship of the types and amounts offunding sources to its receivable and lease portfolio in an effort to diminishrisk due to interest rate and foreign currency fluctuations, while respondingto favorable financing opportunities. The Company also has foreign currencyexposures at some of its foreign and domestic operations related to financingin currencies other than the local currencies.

 

Allderivatives are recorded at fair value on the balance sheet. Each derivative isdesignated as either a cash flow hedge, a fair value hedge, or remainsundesignated. Changes in the fair value of derivatives that are designated andeffective as cash flow hedges are recorded in other comprehensive income andreclassified to the income statement when the effects of the item being hedgedare recognized in net income. Changes in the fair value of derivatives that aredesignated and effective as fair value hedges are recognized currently in netincome. These changes are offset to the extent the hedge was effective by fairvalue changes related to the risk being hedged on the hedged item. Changes inthe fair value of undesignated hedges are recognized currently in the incomestatement. All ineffective changes in derivative fair values are recognizedcurrently in net income.

 

Alldesignated hedges are formally documented as to the relationship with thehedged item as well as the risk-management strategy. Both at inception and onan ongoing basis the hedging instrument is assessed as to its effectiveness,when applicable. If and when a derivative is determined not to be highlyeffective as a hedge, or the underlying hedged transaction is no longer likelyto occur, or the derivative is terminated, the hedge accounting discussed aboveis discontinued (see Note 18).

 

# Foreign Currency Translation

#  

The functional currencies for most of the Company’sforeign operations are their respective local currencies. The assets andliabilities of these operations are translated into U.S. dollars at the end ofthe period exchange rates. The revenues and expenses are translated atweighted-average rates for the period. The gains or losses from thesetranslations are included in other comprehensive income. Gains or losses fromtransactions denominated in a currency other than the functional currency ofthe subsidiary involved and foreign exchange forward contracts and options areincluded in net income or other comprehensive income as appropriate. The totalforeign exchange pretax net gain (loss) for 2008, 2007 and 2006 was $(13.3)million, $1.3 million and $(.5) million, respectively.

 

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New Accounting Standard Adopted

 

In the first quarter of2008, the Company adopted FASB Interpretation (FIN) No. 48, Accounting forUncertainty in Income Taxes. This Interpretation clarifies that the recognitionfor uncertain tax positions should be based on a more-likely-than-not thresholdthat the tax position will be sustained upon audit. The tax position ismeasured as the largest amount of benefit that has a greater than 50 percentprobability of being realized upon settlement. The standard was adopted at thebeginning of fiscal year 2008 with the cumulative effect reported as anadjustment to beginning retained earnings as required. The cumulative effect ofadoption increased assets by $13.2 million, increased liabilities by $34.7million and decreased retained earning by $21.5 million (see Note 14).

 

New Accounting Standards to be Adopted

 

In September 2006, the FASB issued Statement No. 157,Fair Value Measurements. This Statement defines fair value and expandsdisclosures about fair value measurements. These methods will apply to otheraccounting standards that use fair value measurements and may change theapplication of certain measurements used in current practice. The effectivedate is the beginning of fiscal year 2009 for financial assets and liabilities.For nonfinancial assets and liabilities, the effective date is the beginning offiscal year 2010, except items that are recognized or disclosed on a recurringbasis (at least annually). The adoption will not have a material effect on theCompany’s consolidated financial statements.

 

In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities. ThisStatement permits entities to measure most financial instruments at fair valueif desired. It may be applied on a contract by contract basis and is irrevocableonce applied to those contracts.  Thestandard may be applied at the time of adoption for existing eligible items, orat initial recognition of eligible items. After election of this option,changes in fair value are reported in earnings. The items measured at fairvalue must be shown separately on the balance sheet. The effective date is thebeginning of fiscal year 2009. The cumulative effect of adoption would bereported as an adjustment to beginning retained earnings. The adoption will nothave a material effect on the Company’s consolidated financial statements.

 

In December 2007, theFASB issued Statement No. 141 (revised 2007), Business Combinations, andStatement No. 160, Noncontrolling Interests in Consolidated FinancialStatements. Statement No. 141 (revised 2007) requires an acquirer tomeasure the identifiable assets acquired, the liabilities assumed and anynoncontrolling interest in the acquiree at their fair values on the acquisitiondate, with goodwill being the excess value over the net identifiable assetsacquired. This standard also requires the fair value measurement of certainother assets and liabilities related to the acquisition such as contingenciesand research and development. Statement No. 160 clarifies that anoncontrolling interest in a subsidiary be reported as equity in theconsolidated financial statements. Consolidated net income should include thenet income for both the parent and the noncontrolling interest with disclosureof both amounts on the consolidated statement of income. The effective date forboth Statements is the beginning of fiscal year 2010. The Company has currentlynot determined the potential effects on the consolidated financial statements.

 

In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities. This Statementincreases the disclosure requirements for derivative instruments. The newrequirements include the location and fair value amounts of all derivatives bycategory reported in the consolidated balance sheet; the location and amount ofgains or losses of all derivatives and designated hedged items by categoryreported in the consolidated income statement or in other comprehensive incomein the consolidated balance sheet; and measures of volume such as notionalamounts. For derivatives designated as hedges, the gains or losses must bedivided into the effective portions and the ineffective portions. The Statementalso requires the disclosure of group concentrations of credit risk bycounterparties, including the maximum amount of loss due to credit risk andpolicies concerning collateral and master netting arrangements. Mostdisclosures are required on an interim and annual basis. The effective date isthe second quarter of fiscal year 2009. The adoption will not have a materialeffect on the Company’s consolidated financial statements.

 

37

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In May 2008, the FASB issued Statement No. 162,The Hierarchy of Generally Accepted Accounting Principles. This Statementidentifies the sources for generally accepted accounting principles (GAAP) inthe U.S. and lists the categories in descending order. An entity should followthe highest category of GAAP applicable for each of its accountingtransactions. The adoption will not have a material effect on the Company’sconsolidated financial statements.

 

Variable Interest Entities

 

The Company is the primary beneficiary of certainVIEs that are SPEs related to the securitization of receivables. Under FASBInterpretation No. 46 (revised December 2003), Consolidation ofVariable Interest Entities, these SPEs were consolidated. The SPEs includedassets (restricted retail notes) of $1,259 million and $1,494 million at October 31,2008 and 2007, respectively. These restricted retail notes are included in therestricted securitized retail notes related to securitizations shown in thetable in Note 4.

 

**Note 2****.   Receivables**

 

Retail Notes Receivable

 

The Company provides and administers financing forretail purchases of new equipment manufactured by John Deere’s agricultural,construction and forestry, and commercial and consumer equipment divisions andused equipment taken in trade for this equipment. The Company purchases retailinstallment sales and loan contracts (retail notes) from John Deere. Theseretail notes are acquired by John Deere through John Deere equipment retaildealers. The Company also purchases and finances a limited amount of retailnotes unrelated to John Deere.

 

Retail notes receivable by product category at October 31are as follows (in millions of dollars):

 
| ** **                                       | ** ** | **2008**         | ** ** | **2007**       | ** ** |
|--------------------------------------------------|------------|------------------|------------|----------------|------------|
| ** **                                       | ** ** | **Unrestricted** | ** ** | **Restricted** | ** ** | **Unrestricted** | ** ** | **Restricted** | ** ** |
| Agricultural  equipment – new               |       | $                | 5,252.0    |           | $          | 536.6 |   | $ | 4,904.8 |   | $ | 843.5 |   |
| Agricultural  equipment – used              |       | 3,265.0          |       | 783.4          |       | 2,844.5 | ** ** | 1,045.4 |   |
| Construction and  forestry equipment – new  |       | 1,589.9          |       | 374.7          |       | 1,993.8 |   | 456.2 |   |
| Construction and  forestry equipment – used |       | 152.9            |       | 50.4           |       | 126.7 |   | 85.3 |   |
| Commercial and  consumer equipment – new    |       | 935.6            |       |           |       | 1,052.4 |   |   |   |
| Commercial and  consumer equipment – used   |       | 61.2             |       |           |       | 72.8 |   |   |   |
| Recreational  products                           |       | 13.0             |       |           |       | 16.6 |   |   |   |
| Total                                            |       | 11,269.6         |       | 1,745.1        |       | 11,011.6 |   | 2,430.4 |   |
| Unearned finance  income:                        |       |             |       |           |       |   |   |   |   |
| Equipment                                        |       | (1,129.2         | )          | (152.6         | )          | (1,195.9 | ) | (280.0 | ) |
| Recreational  products                           |       | (3.8             | )          |           |       | (5.4 | ) |   |   |
| Total                                            |       | (1,133.0         | )          | (152.6         | )          | (1,201.3 | ) | (280.0 | ) |
| Retail notes  receivable                         |       | $                | 10,136.6   |           | $          | 1,592.5 |   | $ | 9,810.3 |   | $ | 2,150.4 |   |

 

Retail notes acquired by the Company during the yearsended October 31, 2008, 2007 and 2006 had an average original term (basedon dollar amounts) of 54, 52 and 53 months, respectively. Historically, becauseof prepayments, the average actual life of retail notes has been considerablyshorter than the average original term. The average actual life for retailnotes liquidated in 2008, 2007 and 2006 was 34, 35 and 34 months,respectively.

 

38

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Gross retail note installments at October 31 arescheduled to be received as follows (in millions of dollars):

 
| ** **     | ** ** | **2008**         | ** ** | **2007**       | ** ** |
|----------------|------------|------------------|------------|----------------|------------|
| ** **     | ** ** | **Unrestricted** | ** ** | **Restricted** | ** ** | **Unrestricted** | ** ** | **Restricted** | ** ** |
| Due in:        |       |             |       |           |       |   |   |   |   |
| 0-12 months    |       | $                | 3,800.7    |           | $          | 708.6 |   | $ | 3,826.2 |   | $ | 782.4 |   |
| 13-24 months   |       | 2,973.8          |       | 557.8          |       | 2,994.8 |   | 713.7 |   |
| 25-36 months   |       | 2,128.6          |       | 316.0          |       | 2,047.6 |   | 558.2 |   |
| 37-48 months   |       | 1,368.6          |       | 131.4          |       | 1,247.9 |   | 287.3 |   |
| 49-60 months   |       | 767.0            |       | 29.5           |       | 691.0 |   | 82.9 |   |
| Over 60 months |       | 230.9            |       | 1.8            |       | 204.1 |   | 5.9 |   |
| Total          |       | $                | 11,269.6   |           | $          | 1,745.1 |   | $ | 11,011.6 |   | $ | 2,430.4 |   |

 

Company guidelines relating to down paymentrequirements and contract terms on retail notes are generally as follows:

 
| ** **                                         | ** ** | **Down  Payment** | ** ** | **Contract  Terms** | ** ** |
|----------------------------------------------------|------------|-------------------|------------|---------------------|------------|
| Agricultural  equipment (new and used):            |       |              |       |                |       |
| Seasonal  payments                                 |       | 30                | %          | 3-7 crop years      |       |
| Monthly payments                                   |       | 20                | %          | 36-84 months        |       |
| Construction and  forestry equipment:              |       |              |       |                |       |
| New                                                |       | 10                | %          | 48-60 months        |       |
| Used                                               |       | 15                | %          | 36-48 months        |       |
| Commercial and  consumer equipment (new and used): |       |              |       |                |       |
| Seasonal  payments                                 |       | 10                | %          | 3-7 years           |       |
| Monthly payments                                   |       | 10                | %          | 36-84 months        |       |

 

During 2008, 2007 and 2006, the Company receivedproceeds from the sale of Receivables of $89 million, $229 million and$143 million, respectively. The Company acts as agent for the buyers incollection and administration for virtually all of the Receivables it has sold.All Receivables sold are collateralized by security agreements on the relatedequipment. The Company’s maximum exposure under all Receivable and Leaserecourse provisions at October 31, 2008, 2007 and 2006 was $8 million, $25million and $105 million, respectively. The Company does not record therecourse obligations as liabilities as they are contingent liabilities that areremote at this time. However, the probable loss on receivables that have beensold was accrued at the time of sale, and any subsequent necessary adjustmentsare made as part of ongoing reviews. At October 31, 2008, 2007 and 2006,the balance of all Receivables and Leases administered, but not owned by theCompany, was $163 million, $223 million and $954 million, respectively.

 

Finance income is recognized over the lives of theretail notes using the interest method. During 2008, the average effectiveyield on retail notes held by the Company was approximately 7.4 percent,compared with 7.7 percent in 2007 and 7.3 percent in 2006. Unearnedfinance income on variable-rate retail notes is adjusted monthly based onfluctuations in the base rate of a specified bank. Costs incurred in theacquisition of retail notes are deferred and recognized over the expected livesof the retail notes using the interest method.

 

A portion of the finance income earned by the Companyarises from financing of retail sales of John Deere equipment on which financecharges are waived or reduced by John Deere for a period from the date of saleto a specified subsequent date. The Company receives compensation from JohnDeere equal to competitive market interest rates for periods during whichfinance charges have been waived or reduced on retail notes and leases.  The Company computes the compensation fromJohn Deere for waived or reduced finance charges based on the Company’sestimated funding costs, administrative and operating expenses, credit losses,and required return on equity. The finance income earned following the waiveror interest reduction period is not significantly different 

 

39

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fromthe compensation earned from John Deere. The portions of the Company’s financeincome earned that were received from John Deere on retail notes containingwaiver of finance charges or reduced rates were 25 percent in 2008, 25 percentin 2007 and 22 percent in 2006. During 2008, 2007 and 2006, the financeincome earned from Deere & Company on retail notes containing waiverof finance charges or reduced rates was $215 million, $215 million and$158 million, respectively.

 

A deposit equal to one percent of the face amount ofcertain John Deere agricultural and commercial and consumer equipment retailnotes originating from each dealer is withheld by the Company from that dealer.Any subsequent retail note losses are charged against the withheld deposits. Atthe end of each calendar quarter, the balance of each dealer’s withholdingaccount in excess of a specified percent (ranging from one to three percentbased on dealer qualifications) of the total balance outstanding on retailnotes originating with that dealer is remitted to the dealer. To the extentthat these deposits withheld from the dealer from whom the retail note wasacquired cannot absorb a loss on a retail note, it is charged against theCompany’s allowance for credit losses. There is no withholding of dealerdeposits on John Deere construction and forestry equipment retail notes orrecreational product retail notes.

 

The Company requires that theft and physical damageinsurance be carried on all goods leased or securing retail notes and wholesalereceivables. The customer may, at his own expense, have the Company or theseller of the goods purchase this insurance or obtain it from other sources.

 

Revolving Charge Accounts Receivable

 

Revolving charge account income is generated primarilyby three revolving credit products: Farm Planä,PowerPlanâ and the John Deere Credit RevolvingPlan. Farm Planä is primarily used by farmers andranchers to finance day-to-day operating expenses, such as parts and services.Merchants offer Farm Planä as an alternative to carrying in-houseaccounts receivable, and can initially sell existing balances to the Companyunder a recourse arrangement. Farm Planä income includes a discount paid bymerchants for transaction processing and support, and finance charges paid bycustomers on their outstanding account balances. PowerPlanâ isprimarily used by construction companies to finance day-to-day operatingexpenses, such as parts and service, and is otherwise similar to Farm Planä.  Merchants offer PowerPlanâ asan alternative to carrying in-house accounts receivable, and can initially sellexisting balances to the Company under a recourse arrangement. PowerPlanâincome includes a discount paid by merchants for transaction processing andsupport and finance charges paid by customers on their outstanding accountbalances.  The John Deere CreditRevolving Plan is used primarily by retail customers of John Deere dealers tofinance commercial and consumer equipment. Income includes a discount paid bydealers on most transactions and finance charges paid by customers on theiroutstanding account balances. Revolving charge accounts receivable at October 31,2008 and 2007 totaled $1,825 million and $1,553 million, respectively.Generally, account holders may pay the account balance in full at any time, ormake payments over a number of months according to a payment schedule.

 

# Operating Loans

#  

Operating loan income is generated primarily byoperating loans that are offered through several leading farm input providers,through direct relationships with agricultural producers to finance theacquisition of materials such as seeds and fertilizers or throughagribusinesses. Income on this product is generated from finance charges paidby customers on their outstanding account balances. Operating loan receivablestotaled $358 million and $287 million at October 31, 2008 and2007, respectively.

 

40

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Financing Leases

 

The Company leases agricultural, construction andforestry and commercial and consumer equipment directly to retail customers. Atthe time of accepting a lease that qualifies as a financing lease under FASBStatement No. 13, Accounting for Leases, the Company records the grossamount of lease payments receivable, estimated residual value of the leasedequipment and unearned finance income. The unearned finance income is equal tothe excess of the gross lease receivable plus the estimated residual value overthe cost of the equipment. The unearned finance income is recognized as revenueover the lease term using the interest method. Lease acquisition costs areaccounted for in a manner similar to the procedures for retail notes.

 

Financing leases receivable by product category at October 31are as follows (in millions of dollars):

 
| ** **                           | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|
| Agricultural  equipment              |       | $        | 180.9      |     | $          | 220.9 |   |
| Construction and  forestry equipment |       | 149.9    |       | 122.1    |       |
| Commercial and  consumer equipment   |       | 108.2    |       | 108.4    |       |
| Total                                |       | 439.0    |       | 451.4    |       |
| Estimated  residual values           |       | 43.3     |       | 48.5     |       |
| Unearned finance  income             |       | (64.4    | )          | (69.6    | )          |
| Financing leases  receivable         |       | $        | 417.9      |     | $          | 430.3 |   |

 

Initial lease terms for financing leases generallyrange from 4 months to 60 months. Payments on financing leases receivable at October 31are scheduled as follows (in millions of dollars):

 
| ** **     | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------|------------|----------|------------|----------|------------|
| Due in:        |       |     |       |     |       |
| 0-12 months    |       | $        | 173.2      |     | $          | 189.9 |   |
| 13-24 months   |       | 120.2    |       | 123.7    |       |
| 25-36 months   |       | 81.0     |       | 79.5     |       |
| 37-48 months   |       | 45.1     |       | 42.5     |       |
| Over 48 months |       | 19.5     |       | 15.8     |       |
| Total          |       | $        | 439.0      |     | $          | 451.4 |   |

 

Deposits withheld from John Deere dealers and relatedlosses on financing leases are handled in a manner similar to the proceduresfor retail notes. As with retail notes, there are no deposits withheld fromdealers on financing leases related to construction and forestry equipment. Inaddition, a lease payment discount program, allowing reduced payments over theterm of the lease, is administered in a manner similar to finance waiver onretail notes.

 

Equipment returned to the Company upon termination ofleases and held for subsequent sale or lease is recorded at the lower of netbook value or estimated market value of the equipment.

 

Wholesale Receivables

 

The Company also finances wholesale inventories of John Deere agriculturalequipment, commercial and consumer equipment and construction and forestryequipment owned by dealers of those products in the form of wholesalereceivables. Wholesale finance income related to these notes is generallyrecognized monthly based on the daily balance of wholesale receivablesoutstanding and the applicable effective interest rate. Interest rates varywith a bank base rate, the type of equipment financed and the balanceoutstanding. Substantially all of wholesale receivables are secured byequipment financed. The average actual life for wholesale receivables is lessthan 12 months.

 

41

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The Company purchases certain wholesale receivables(trade receivables) from John Deere. These trade receivables arise from JohnDeere’s sales of goods to independent dealers. Under the terms of the sales todealers, interest is charged to dealers on outstanding balances, from theearlier of the date when goods are sold to retail customers by the dealer orthe expiration of certain interest-free periods granted at the time of the saleto the dealer, until payment is received by the Company. Dealers cannot cancelpurchases after the equipment is shipped and are responsible for payment evenif the equipment is not sold to retail customers. The interest-free periods aredetermined based on the type of equipment sold and the time of year of thesale. These periods range from one to twelve months for most equipment.Interest-free periods may not be extended. Interest charged may not be forgivenand the past due interest rates exceed market rates. The Company receivescompensation from John Deere equal to competitive market interest rates forthese interest-free periods. The Company computes the compensation from JohnDeere for interest-free periods based on the Company’s estimated funding costs,administrative and operating expenses, credit losses, and required return onequity. The finance income earned following the interest-free period is notsignificantly different from the compensation earned from John Deere. During2008, 2007 and 2006, the compensation earned from John Deere was $222 million,$242 million and $240 million, respectively.

 

Concentration of Credit Risk

 

Receivables have significant concentrations of creditrisk in the agricultural, construction and forestry, and commercial andconsumer business sectors as shown in the previous tables. On a geographicbasis, there is not a disproportionate concentration of credit risk in any areain which the Company operates. The Company retains as collateral a securityinterest in the goods associated with Receivables other than certain revolvingcharge accounts.

 

**Note 3****.   Allowance for CreditLosses, Delinquencies and Write-offs**

 

Allowance for Credit Losses

 

Allowances for credit losses on Receivables aremaintained in amounts considered to be appropriate in relation to theReceivables outstanding based on collection experience, economic conditions andcredit risk quality.

 

An analysis of the allowance for credit losses ontotal Receivables follows (in millions of dollars):

 
| ** **                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Balance,  beginning of the year                    |       | $        | 99.2       |     | $          | 92.8     |       | $ | 96.4 |   |
| Provision for  credit losses                       |       | 66.8     |       | 53.7     |       | 30.5     |       |
| Total net  write-offs                              |       | (59.6    | )          | (48.7    | )          | (34.3    | )          |
| Other changes  (primarily translation adjustments) |       | (1.2     | )          | 1.4      |       | .2       |       |
| Balance, end of  the year                          |       | $        | 105.2      |     | $          | 99.2     |       | $ | 92.8 |   |

 

The allowance for credit losses represented .59percent, .56 percent and .55 percent of Receivables financed at October 31,2008, 2007 and 2006, respectively. In addition, the Company had $174 million,$174 million and $177 million at October 31, 2008, 2007 and2006, respectively, of deposits primarily withheld from John Deere dealersavailable for certain potential credit losses originating from those dealers.

 

42

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Delinquencies

 

Generally, when retail notes become 120 daysdelinquent, accrual of finance income is suspended, the collateral isrepossessed or the account is designated for litigation and the estimateduncollectible amount, after charging the dealer’s withholding account, if any,is written off to the allowance for credit losses. Accrual of revolving chargeaccount income is suspended generally when the account becomes 120 daysdelinquent. Accounts are deemed to be uncollectible and written off to theallowance for credit losses when delinquency reaches 120 days for a Farm Planä,PowerPlanâ or John Deere Credit Revolving Planaccount. When a financing lease account becomes 120 days delinquent, theaccrual of lease revenue is suspended, the equipment is repossessed or theaccount is designated for litigation, and the estimated uncollectible amount,after charging the dealer’s withholding account, if any, is written off to theallowance for credit losses. Generally, when a wholesale receivable becomes 60days delinquent, the Company determines whether the accrual of finance incomeon interest-bearing wholesale receivables should be suspended, the collateralshould be repossessed or the account should be designated for litigation andthe estimated uncollectible amount written off to the allowance for creditlosses.

 

Total Receivable amounts 60 days or more past due inthe table below represent the amount of all customer payments past due 60 daysor more, by product, and as a percent of the respective receivables. They areas follows (in millions of dollars):

 
| ** **                           | ** ** | **October 31,  2008** | ** ** | **October 31,  2007** | ** ** | **October 31,  2006** | ** ** |
|--------------------------------------|------------|----------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                           | ** ** | **Dollars**                | ** ** | **Percent**                | ** ** | **Dollars**                | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| Retail notes:                        |       |                       |       |                       |       |                       |       |   |   |   |   |   |   |
| Agricultural  equipment              |       | $                          | 11.9       |                       | .13        | %                          | $          | 14.4 |   | .17 | % | $ | 10.2 |   | .14 | % |
| Construction and  forestry equipment |       | 8.3                        |       | .42                        |       | 6.9                        |       | .29 |   | 6.3 |   | .26 |   |
| Commercial and  consumer equipment   |       | 1.8                        |       | .20                        |       | 1.5                        |       | .15 |   | 1.3 |   | .13 |   |
| Recreational  products               |       |                       |       |                       |       |                       |       |   |   |   |   |   |   |
| Total retail  notes                  |       | 22.0                       |       | .19                        |       | 22.8                       |       | .19 |   | 17.8 |   | .17 |   |
| Revolving charge  accounts*          |       | 14.6                       |       | .80                        |       | 15.3                       |       | .98 |   | 21.1 |   | 1.40 |   |
| Operating loans                      |       | .5                         |       | .14                        |       |                       |       |   |   |   |   |   |   |
| Wholesale  receivables               |       | 2.3                        |       | .06                        |       | .9                         |       | .03 |   | .9 |   | .02 |   |
| Financing leases                     |       | 5.4                        |       | 1.29                       |       | 4.7                        |       | 1.09 |   | 3.5 |   | .83 |   |
| Total  Receivables                   |       | $                          | 44.8       |                       | .25        |                       | $          | 43.7 |   | .25 |   | $ | 43.3 |   | .26 |   |

 

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*              Due to the nature ofrevolving charge accounts, the customer payments past due 60 days or more alsorepresent the total balance.

 

43

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Total non-performing Receivables, which representloans the Company has ceased accruing interest for, by product, and as apercent of the respective receivables were as follows (in millions of dollars):

 
| ** **                           | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** |
|--------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                           | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| Retail notes:                        |       |        |       |        |       |        |       |   |   |   |   |   |   |
| Agricultural  equipment              |       | $           | 17.7       |        | .20        | %           | $          | 21.6 |   | .25 | % | $ | 13.2 |   | .18 | % |
| Construction and  forestry equipment |       | 15.4        |       | .78         |       | 2.2         |       | .09 |   | 5.0 |   | .21 |   |
| Commercial and  consumer equipment   |       | 4.8         |       | .54         |       | 1.8         |       | .18 |   | 2.3 |   | .23 |   |
| Recreational  products               |       | .2          |       | 2.17        |       | .1          |       | .81 |   | .2 |   | 1.14 |   |
| Total retail  notes                  |       | 38.1        |       | .32         |       | 25.7        |       | .21 |   | 20.7 |   | .19 |   |
| Revolving charge  accounts           |       | .7          |       | .04         |       | 1.2         |       | .08 |   | .8 |   | .05 |   |
| Operating loans                      |       | 27.6        |       | 7.71        |       | 3.5         |       | 1.22 |   | 3.9 |   | 1.03 |   |
| Wholesale  receivables               |       |        |       |        |       | 4.5         |       | .13 |   | .4 |   | .01 |   |
| Financing leases                     |       | 13.2        |       | 3.16        |       | 13.3        |       | 3.09 |   | 6.5 |   | 1.54 |   |
| Total  Receivables                   |       | $           | 79.6       |        | .44        |        | $          | 48.2 |   | .27 |   | $ | 32.3 |   | .19 |   |

 

The increase in the balance of non-performingconstruction and forestry equipment retail notes at October 31, 2008 was primarilydue to the continued weak U.S. construction market. The increase innon-performing operating loans at October 31, 2008 was due to a paymentdefault on an operating loan to a commercial and consumer equipment customer. Aloan-loss provision was recorded for the estimated uncollectible amount.

 

Write-offs

 

Total Receivable write-off amounts, net of recoveries,by product, and as a percentage of average balances held during the year, wereas follows (in millions of dollars):

 
| ** **                           | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** |
|--------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                           | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** | **Dollars** | ** ** | **Percent** | ** ** |
| Retail notes:                        |       |        |       |        |       |        |       |   |   |   |   |   |   |
| Agricultural  equipment              |       | $           | 1.0        |        | .01        | %           | $          | (1.3 | ) | (.02 | )% | $ | (2.1 | ) | (.03 | )% |
| Construction and  forestry equipment |       | 27.6        |       | 1.27        |       | 17.4        |       | .72 |   | 9.1 |   | .41 |   |
| Commercial and  consumer equipment   |       | 1.2         |       | .13         |       | .8          |       | .08 |   | .3 |   | .03 |   |
| Recreational  products               |       | .5          |       | 4.72        |       | .6          |       | 4.05 |   |   |   |   |   |
| Total retail  notes                  |       | 30.3        |       | .26         |       | 17.5        |       | .16 |   | 7.3 |   | .07 |   |
| Revolving charge  accounts           |       | 27.4        |       | 1.75        |       | 24.2        |       | 1.73 |   | 22.9 |   | 1.66 |   |
| Operating loans                      |       | (.7         | )          | (.17        | )          | 2.6         |       | .77 |   | 2.4 |   | .69 |   |
| Wholesale  receivables               |       | .4          |       | .01         |       | 1.4         |       | .04 |   | (.6 | ) | (.01 | ) |
| Financing leases                     |       | 2.2         |       | .51         |       | 3.0         |       | .74 |   | 2.3 |   | .57 |   |
| Total  Receivables                   |       | $           | 59.6       |        | .33        |        | $          | 48.7 |   | .29 |   | $ | 34.3 |   | .22 |   |

 

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**Note 4.   Retail Note Securitizations**

 

The Company, as a part of its overall fundingstrategy, periodically transfers certain receivables (retail notes) intospecial purpose entities (SPEs) as part of its asset-backed securities programs(securitizations).  The structure ofthese transactions is such that the transfer of the retail notes did not meetthe criteria of sales in accordance with FASB Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishmentof Liabilities, and are, therefore, accounted for as secured borrowings. SPEs utilized in securitizations of retailnotes differ from other entities included in the Company’s consolidatedstatements because the assets they hold are legally isolated. For bankruptcyanalysis purposes, the Capital Corporation has sold the receivables to the SPEsin a true sale and the SPEs are separate legal entities. Use of the assets heldby the SPEs is restricted by terms of the documents governing thesecuritization transaction.

 

In securitizations of retail notes related tosecured borrowings, the retail notes are transferred to certain SPEs which inturn issue debt to investors. The resulting secured borrowings are included inshort-term borrowings on the balance sheet as shown in the following table. Thesecuritized retail notes are recorded as “Restricted securitized retail notes”on the balance sheet. The total restricted assets on the balance sheet relatedto these securitizations include the restricted securitized retail notes lessan allowance for credit losses, and other assets primarily representingrestricted cash as shown in the following table. The SPEs supporting thesecured borrowings to which the retail notes are transferred are consolidatedunless the Company is not the primary beneficiary.

 

Thecomponents of consolidated restricted assets related to secured borrowings insecuritization transactions at October 31 were as follows (in millions ofdollars):

 
| ** **                           | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|
| Restricted  securitized retail notes |       | $        | 1,592.5    |     | $          | 2,150.4 |   |
| Allowance for  credit losses         |       | (10.9    | )          | (11.3    | )          |
| Other assets                         |       | 55.0     |       | 44.0     |       |
| Total restricted  securitized assets |       | $        | 1,636.6    |     | $          | 2,183.1 |   |

 

Thecomponents of consolidated secured borrowings and other liabilities related tosecuritizations at October 31 were as follows (in millions of dollars):

 
| ** **                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|
| Other notes  payable                                        |       | $        | 1,618.3    |     | $          | 2,191.6 |   |
| Accounts payable  and accrued expenses                      |       | 3.0      |       | 4.4      |       |
| Total  liabilities related to restricted securitized assets |       | $        | 1,621.3    |     | $          | 2,196.0 |   |

 

Thesecured borrowings related to these restricted securitized retail notes areobligations that are payable as the retail notes are liquidated. Repayment ofthe secured borrowings depends primarily on cash flows generated by therestricted assets. Due to the Company’s short-term credit rating, cashcollections from these restricted assets do not need to be placed into asegregated collection account until immediately prior to the time payment isrequired to the secured creditors. At October 31, 2008, the maximumremaining term of all restricted receivables was approximately five years.

 

  **Note 5. Equipment on OperatingLeases**

 

Rental paymentsapplicable to equipment on operating leases are recorded as income on astraight-line method over the lease terms. Operating lease assets are recordedat cost and depreciated to their estimated residual value generally on astraight-line method over the terms of the leases. Residual values representestimates of the value of the leased assets at the end of the contract termsand are initially determined based upon appraisals and estimates. The Companyevaluates the carrying value of our operating lease assets and tests forimpairment in accordance with FASB Statement No. 144, Accounting for theImpairment or Disposal of Long-Lived Assets, when events or circumstancesnecessitate the evaluation. Generally, impairment is determined to exist if theundiscounted expected future cash flows are lower than the carrying value ofthe asset.

 

45

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The cost of equipment on operating leases by productcategory at October 31 is as follows (in millions of dollars):

 
| ** **                                | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|
| Agricultural  equipment                   |       | $        | 511.1      |     | $          | 408.1 |   |
| Construction and  forestry equipment      |       | 748.9    |       | 774.0    |       |
| Commercial and  consumer equipment        |       | 165.1    |       | 161.5    |       |
| Total                                     |       | 1,425.1  |       | 1,343.6  |       |
| Accumulated  depreciation                 |       | (371.7   | )          | (348.4   | )          |
| Equipment on  operating leases – net |       | $        | 1,053.4    |     | $          | 995.2 |   |

 

Initial lease terms for equipment on operating leasesgenerally range from 4 months to 60 months. Rental payments for equipment onoperating leases at October 31 are scheduled as follows (in millions ofdollars):

 
| ** **     | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------|------------|----------|------------|----------|------------|
| Due in:        |       |     |       |     |       |
| 0-12 months    |       | $        | 234.9      |     | $          | 229.2 |   |
| 13-24 months   |       | 140.1    |       | 144.1    |       |
| 25-36 months   |       | 69.5     |       | 74.6     |       |
| 37-48 months   |       | 28.2     |       | 30.6     |       |
| Over 48 months |       | 7.0      |       | 8.6      |       |
| Total          |       | $        | 479.7      |     | $          | 487.1 |   |

 

As with construction and forestry retail notes, thereare no deposits withheld from dealers on operating leases related toconstruction and forestry equipment. In addition, a lease payment discountprogram, allowing reduced payments over the term of the lease, is administeredin a manner similar to finance waiver on retail notes.

 

Equipment returned to the Company upon termination ofleases and held for subsequent sale or lease is recorded at the lower of netbook value or estimated market value of the equipment.

 

Total operating lease amounts 60 days or morepast due represent the amount of all customer payments past due 60 days ormore. These amounts were $2 million, $2 million and $1 million at October 31,2008, 2007 and 2006, respectively.

 

**Note 6.   Notes Receivable from John Deere**

 

The Company makes loans to John Deere Renewables, LLC,an affiliated company that directly invests in wind energy projects. Notesreceivable from John Deere related to wind energy loans at October 31,2008 and 2007 were $799 million and $587 million, respectively. The Companyreceives interest from John Deere equal to competitive market interest rates.The Company has received security interests in the assets of John DeereRenewables, LLC as collateral on these loans. During 2008, 2007 and 2006, theinterest earned from John Deere was $37 million, $26 million and $3 million,respectively.

 

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**Note 7.   Short-Term Borrowings**

 

Short-termborrowings of the Company at October 31 consisted of the following (inmillions of dollars):

 
| ** **                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|
| Commercial paper                                            |       | $        | 2,814      |     | $          | 2,679 |   |
| Other notes  payable to banks                               |       | 4        |       | 7        |       |
| Other notes  payable related to securitizations (see below) |       | 1,618    |       | 2,192    |       |
| John Deere                                                  |       | 316      |       | 128      |       |
| Current  maturities of long-term borrowings                 |       | 3,142    |       | 3,836    |       |
| Total                                                       |       | $        | 7,894      |     | $          | 8,842 |   |

 

At October 31, 2008, the Capital Corporation had$2,082 million of commercial paper guaranteed by the Federal Deposit InsuranceCompany (FDIC) under its Temporary Liquidity Guarantee Program (TLGP) (see Note22).

 

The other notes payable related to securitizations aresecured by restricted securitized retail notes on the balance sheet (see Note4). Although these notes payable are classified as short-term since payment isrequired if the retail notes are liquidated early, the payment schedule forthese borrowings of $1,618 million at October 31, 2008 based on theexpected liquidations of the retail notes in millions of dollars is as follows:2009 - $900, 2010 - $496, 2011 - $178 and 2012 - $44. The Company’s short-termdebt also includes amounts borrowed from John Deere. The Company pays intereston a monthly basis to John Deere for these borrowings based on a current marketrate. The weighted-average interest rate on total short-term borrowings,excluding current maturities of long-term borrowings, at October 31, 2008and 2007, was 3.0 percent and 5.0 percent, respectively.

 

Lines of credit available from U.S. and foreign bankswere $4,508 million at October 31, 2008. Some of these credit lines areavailable to both the Company and Deere & Company. At October 31,2008, $1,534 million of these worldwide lines of credit were unused. For the purpose of computing unused credit lines,commercial paper and short-term bank borrowings, excluding secured borrowingsand the current portion of long-term borrowings, of the Company and John Deerewere considered to constitute utilization.

 

Included in the above lines ofcredit was a long-term credit facility agreement for $3,750 million, expiringin February 2012. The agreement is mutually extendable and theannual facility fee is not significant. The credit agreement requires theCompany to maintain its consolidated ratio of earnings to fixed charges at notless than 1.05 to 1 for each fiscal quarter and the ratio of senior debt,excluding securitization indebtedness, to capital base (total subordinated debtand stockholder’s equity excluding accumulated other comprehensive income(loss)) at not more than 11 to 1 at the end of any fiscal quarter. “Seniordebt” consists of the Company’s total interest-bearing obligations, excludingsubordinated debt and certain securitization indebtedness, but includingborrowings from John Deere. All of these requirements of the credit agreementhave been met during the periods included in the financial statements. Thefacility fee on these lines of credit is divided between Deere &Company and the Company based on the proportion of their respective commercialpaper outstanding.

 

Deere & Company has an agreement with the Company pursuant towhich it has agreed to continue to own at least 51 percent of the voting sharesof capital stock of the Company and to maintain the Company’s consolidated tangiblenet worth at not less than $50 million. This agreement also obligates Deere &Company to make income maintenance payments to the Company such that itsconsolidated ratio of earnings to fixed charges is not less than 1.05 to 1for each fiscal quarter. Deere & Company’s obligations to makepayments to the Company under the agreement are independent of whether theCompany is in default on its indebtedness, obligations or other liabilities.Further, Deere & Company’s obligations under the agreement are notmeasured by the amount of the Company’s indebtedness, obligations or otherliabilities. Deere & Company’s obligations to make payments underthis agreement are expressly stated not to be a guaranty of any specificindebtedness, obligation or liability of the Company and are enforceable onlyby or in the name of the Company. No payments were required under thisagreement during the periods included in the financial statements.

 

47

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**Note 8.   Long-Term Borrowings**

 

Long-termborrowings of the Company at October 31 consisted of the following (inmillions of dollars):

 
| ** **                                                                                                                    | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Senior Debt:**                                                                                                                |       |     |       |     |       |
| Medium-term  notes due 2009-2018 (principal $8,169- 2008, $5,730 - 2007):   Average interest rate of 4.6% - 2008, 5.2% - 2007 |       | $        | 8,241      | *        | $          | 5,738 | * |
| 6% Notes due  2009 ($300 principal)                                                                                           |       |     |       | 303      | *          |
| 7% Notes due  2012 ($1,500 principal):   Swapped $1,225 million to variable interest rate of 2.8% - 2008, 6.7% - 2007         |       | 1,618    | *          | 1,580    | *          |
| 5.10% Debentures  due 2013 ($650 principal):   Swapped to variable interest rate of 4.8% - 2008, 5.9% - 2007                  |       | 668      | *          | 640      | *          |
| Other Notes                                                                                                                   |       | 19       |       | 24       |       |
| Total senior  debt                                                                                                            |       | 10,546   |       | 8,285    |       |
| Unamortized debt  discount                                                                                                    |       | (16      | )          | (9       | )          |
| Total                                                                                                                         |       | $        | 10,530     |     | $          | 8,276 |   |

 

 

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*              Includes fair value adjustmentsrelated to interest rate swaps.

 

**           All interest rates are as ofyear-end.

 

The approximate principal amounts of long-termborrowings maturing in each of the next five years, in millions of dollars, areas follows: 2009 - $3,140, 2010 - $2,284, 2011 - $2,551, 2012 - $1,804 and 2013- $2,150.

 

**Note 9.   Leases**

 

Total rental expense for operatingleases was $3 million, $3 million and $4 million for 2008, 2007 and 2006,respectively. At October 31, 2008, future minimum lease paymentsunder operating leases amounted to $5 million as follows (in millions ofdollars): 2009 - $3, 2010 - $1 and 2011 and later years - $1.

 

**Note 10. Common Stock**

 

All of the Company’s common stock is owned by JohnDeere Credit Company, a wholly-owned finance holding subsidiary of Deere &Company. No shares of common stock of the Company were reserved for officers oremployees or for options, warrants, conversions or other rights at October 31,2008 or 2007. At October 31, 2008, the Company had authorized, but notissued, 10,000 shares of $1 par value preferred stock.  In addition, in 2008, Deere &Company increased its investment in John Deere Credit Company by $400 million.In turn, John Deere Credit Company increased its investment in the Company by$400 million.

 

**Note 11. Dividends**

 

The Capital Corporation declared and paid $465 millionin dividends to John Deere Credit Company in 2008 and $525 million in2007.  In each case, John Deere CreditCompany paid comparable dividends to Deere & Company.

 

**Note 12. Pension and OtherRetirement Benefits**

 

The Company is a participatingemployer in certain Deere & Company sponsored defined benefit pensionplans for employees in the U.S. and certain defined benefit pension plansoutside the U.S. These pension plans provide for benefits that are basedprimarily on years of service and employee compensation. Pension expense isactuarially determined based on the Company’s employees included in the plan.The Company’s pension expense amounted to $4.7 million in 2008, $6.1million in 2007 and $5.3 million in 2006. The accumulated benefit obligationand plan net assets for the employees of the Company are not determinedseparately from Deere & Company. The 

 

48

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Company generally provides defined benefit health care and life insuranceplans for retired employees in the U.S. as a participating employer in Deere &Company’s sponsored plans. Health care and life insurance benefits expense isactuarially determined based on the Company’s employees included in the plansand amounted to $4.1 million in 2008, $5.9 million in 2007 and $6.0million in 2006. Further disclosure for these plans is included in the notes tothe Deere & Company 2008 Annual Report on Form 10-K.

 

**Note 13. Stock Option Awards**

 

Certain employees of the Companyparticipate in Deere & Company shared-based compensation plans. During2008 and 2007, the total share-based compensation expense was $4.9 million and$5.3 million, respectively, with an income tax benefit recognized in net incomeof $1.8 million and $2.0 million, respectively. Further disclosure for theseplans is included in Deere & Company’s Form 10-K for the yearended October 31, 2008.

 

**Note 14. Income Taxes**

 

The taxable income of the Company is included in theconsolidated U.S. income tax return of Deere & Company.Provisions for income taxes are made generally as if the Capital Corporationand each of its subsidiaries filed separate income tax returns.

 

The provision for incometaxes by taxing jurisdiction and by significant component consisted of thefollowing (in millions of dollars):

 
| ** **                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current:                          |       |     |       |     |       |     |       |
| U.S.:                             |       |     |       |     |       |     |       |
| Federal                           |       | $        | 105.5      |     | $          | 185.6    |       | $ | 144.3 |   |
| State                             |       | 7.4      |       | 3.6      |       | 1.2      |       |
| Foreign                           |       | 6.5      |       | 17.4     |       | 10.0     |       |
| Total current                     |       | 119.4    |       | 206.6    |       | 155.5    |       |
|                              |       |     |       |     |       |     |       |
| Deferred:                         |       |     |       |     |       |     |       |
| U.S.:                             |       |     |       |     |       |     |       |
| Federal                           |       | 31.2     |       | (33.7    | )          | (6.0     | )          |
| State                             |       | .6       |       | .3       |       | .3       |       |
| Foreign                           |       | 4.5      |       | (4.5     | )          | 2.0      |       |
| Total deferred                    |       | 36.3     |       | (37.9    | )          | (3.7     | )          |
|                              |       |     |       |     |       |     |       |
| Total provision  for income taxes |       | $        | 155.7      |     | $          | 168.7    |       | $ | 151.8 |   |

 

A comparison of the statutory and effective income taxprovisions and reasons for related differences follows (in millions ofdollars):

 
| ** **                                                           | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| U.S. federal  income tax provision at a statutory rate of 35 percent |       | $        | 153.0      |     | $          | 167.9    |       | $ | 154.9 |   |
| Municipal lease  income not taxable                                  |       | (1.4     | )          | (1.3     | )          | (1.2     | )          |
| Taxes on foreign  activities                                         |       | (5.7     | )          | (2.9     | )          | (2.1     | )          |
| Nondeductible  costs and other – net                            |       | 9.8      |       | 5.0      |       | .2       |       |
| Total provision  for income taxes                                    |       | $        | 155.7      |     | $          | 168.7    |       | $ | 151.8 |   |

 

49

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Deferred income taxes arise because there are certainitems that are treated differently for financial accounting than for income taxreporting purposes. An analysis of deferred income tax assets and liabilitiesat October 31 is as follows (in millions of dollars):

 
| ** **                                      | ** ** | **2008**                  | ** ** | **2007**                       | ** ** |
|-------------------------------------------------|------------|---------------------------|------------|--------------------------------|------------|
| ** **                                      | ** ** | **Deferred  Tax  Assets** | ** ** | **Deferred  Tax  Liabilities** | ** ** | **Deferred  Tax  Assets** | ** ** | **Deferred  Tax  Liabilities** | ** ** |
| Lease  transactions                             |       |                      |       | $                              | 179.0      |   |   |   | $ | 127.2 |   |
| Deferred retail  note finance income            |       |                      |       | 5.4                            |       |   |   | 4.5 |   |
| Tax over book  depreciation                     |       |                      |       | 6.3                            |       |   |   | 2.4 |   |
| Allowance for  credit losses                    |       | $                         | 56.6       |                           |       |   | $ | 43.8 |   |   |   |
| Accrual for  retirement and other benefits      |       | 23.5                      |       |                           |       | 19.1 |   |   |   |
| Unrealized  gain/loss on derivatives            |       | 21.3                      |       |                           |       | 5.1 |   |   |   |
| Net operating  loss carryforward                |       | 2.6                       |       |                           |       | 2.7 |   |   |   |
| Income and gains  from securitizations          |       |                      |       |                           |       | .4 |   |   |   |
| Federal taxes on  deferred state tax deductions |       | 8.8                       |       |                           |       |   |   |   |   |
| Miscellaneous  accruals and other               |       | 10.0                      |       |                           |       | 4.0 |   |   |   |
| Total                                           |       | $                         | 122.8      |                           | $          | 190.7 |   | $ | 75.1 |   | $ | 134.1 |   |

 

At October 31, 2008, certain tax loss and tax creditcarryforwards for $2.6 million were available, expiring from 2013 through 2028.

 

The Company adopted FASB Interpretation (FIN) No. 48,Accounting for Uncertainty in Income Taxes, at the beginning of 2008. As aresult of the adoption, the Company recorded an increase in its liability forunrecognized tax benefits of $23.7 million, an increase in accrued interest andpenalties payable of $10.1 million, an increase in deferred tax liabilities of$.9 million, a reduction in the beginning retained earnings balance of $21.5million, an increase in tax receivables of $1.9 million and an increase indeferred tax assets of $11.3 million.

 

A reconciliation of the total amounts of unrecognizedtax benefits at October 31 is as follows (in millions of dollars):

 
| ** **                                                | ** ** | **2008** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|
| Beginning of  year balance                                |       | $        | 23.7       |   |
| Increases to tax  positions taken during the current year |       | 11.1     |       |
| Increases to tax  positions taken during prior years      |       | 8.9      |       |
| Decreases to tax  positions taken during prior years      |       | (7.4     | )          |
| Decreases due to  lapse of statute of limitations         |       | (.9      | )          |
| Foreign exchange                                          |       | (.4      | )          |
| End of year balance                                       |       | $        | 35.0       |   |

 

The amount of unrecognized tax benefits at October 31,2008 that would affect the effective tax rate if the tax benefits wererecognized was $11.6 million. The remaining liability was related to taxpositions for which there are offsetting tax receivables, or the uncertaintywas only related to timing. The Company does not believe it is reasonablypossible that the amounts of unrecognized tax benefits will significantly increaseor decrease over the next twelve months.

 

50

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The Company files its tax returns according to the taxlaws of the jurisdictions in which it operates, which includes the U.S. federaljurisdictions, and various state and foreign jurisdictions. The Company isincluded in the consolidated U.S. income tax return and various state returnsof Deere & Company. The U.S. Internal Revenue Service has completedits examination of the Company’s federal income tax returns for periods priorto 2001, and for the years 2002, 2003, and 2004. The year 2001 and 2005 through2007 federal income tax returns are either currently under examination orremain subject to examination. Various state and foreign income tax returns alsoremain subject to examination by taxing authorities.

 

The Company’s continuing policy is to recognizeinterest related to income taxes in interest expense and other income, andrecognize penalties in administrative and operating expenses. During 2008, thetotal amount of expense from interest and penalties was $2.3 million and theinterest income was $.1 million. At October 31, 2008, the liability foraccrued interest and penalties totaled $12.5 million.

 

**Note 15****. Administrative and Operating Expenses**

 

The major components ofadministrative and operating expenses are as follows (in millions of dollars):

 
| ** **                          | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Compensation and  benefits          |       | $        | 207.2      |     | $          | 185.4    |       | $ | 177.6 |   |
| Crop insurance  commission expenses |       | 71.6     |       | 43.8     |       | 23.0     |       |
| Other                               |       | 94.2     |       | 78.4     |       | 73.3     |       |
| Total                               |       | $        | 373.0      |     | $          | 307.6    |       | $ | 273.9 |   |

 

**Note 16.  Cash Flow Information**

 

For purposes of thestatements of consolidated cash flows, the Company considers investments withpurchased maturities of three months or less to be cash equivalents. Substantiallyall of the Company’s short-term borrowings, excluding the current maturities oflong-term borrowings, mature or may require payment within three months orless.

 

Cash payments by the Company for interest in 2008,2007 and 2006 were $829 million, $881 million and $742 million,respectively. Cash payments for income taxes during these same periods were $111million, $194 million and $161 million, respectively.

 

The Company had non-cash investing activities notincluded in the statements of consolidated cash flows of $128 million forreceipt of notes receivable with John Deere in exchange for property andequipment in 2006.

 

**Note 17.  Commitments and Contingent Liabilities**

 

At October 31, 2008, JohnDeere Credit Inc., the John Deere finance subsidiary in Canada, had $22 millionof commercial paper and $1,415 million of medium-term notes outstanding thatwere guaranteed by the Company.

 

At October 31, 2008, the Company had $197million of guarantees issued to turbine manufacturers for John Deere Renewables,LLC wind turbine purchases. John Deere Renewables, LLC is an affiliated companythat has commitments to purchase wind turbines related to its directinvestments in wind energy projects. The maximum remaining term of thesepurchase commitments was approximately one year.

 

51

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The Company’s subsidiary,John Deere Risk Protection, Inc., offers crop insurance products through amanaging general agency agreement (Agreement) with an insurance company(Insurance Carrier) rated “Excellent” by A.M. Best Company. As a managinggeneral agent, John Deere Risk Protection, Inc. will receive commissionsfrom the Insurance Carrier for selling crop insurance to producers.  The Company has guaranteed certainobligations under the Agreement, including the obligation to pay the InsuranceCarrier for any uncollected premiums. At October 31, 2008 the maximumexposure for uncollected premiums was approximately $60 million. Substantiallyall of the Company’s crop insurance risk under the Agreement has been mitigatedby a syndicate of private reinsurance companies. These reinsurance companiesare rated “Excellent” or higher by A.M. Best Company. In the event of awidespread catastrophic crop failure throughout the U.S. and the default ofthese highly rated private reinsurance companies on their reinsuranceobligations, the Company would be required to reimburse the Insurance Carrierfor exposure under the Agreement of approximately $824 million at October 31,2008. The Company believes that the likelihood of the occurrence of the eventsthat give rise to the exposures under this Agreement is substantially remoteand as a result, at October 31, 2008, the Company’s accrued liabilityunder the Agreement was not material.

 

The Company has commitments to extend credit tocustomers and John Deere dealers through lines of credit and other pre-approvedcredit arrangements. The Company applies the same credit policies and approvalprocess for these commitments to extend credit as it does for itsReceivables.  Collateral is not requiredfor these commitments, but if credit is extended, collateral may be requiredupon funding. The amount of unused commitments to extend credit to John Deeredealers was $3.6 billion at October 31, 2008. The amount of unusedcommitments to extend credit to customers was $49.5 billion at October 31,2008. A significant portion of these commitments is not expected to be fullydrawn upon; therefore, the total commitment amounts do not represent a futurecash requirement. The Company generally has the right to unconditionallycancel, alter, or amend the terms of these commitments at any time. Over 95percent of these unused commitments to extend credit to customers relate torevolving charge accounts.

 

At October 31, 2008,the Company had restricted other assets of $9 million. In addition, see Note 4for restricted assets associated with borrowings related to securitizations.

 

The Company also had other miscellaneous contingentliabilities totaling approximately $11 million at October 31, 2008, forwhich it believes the probability for payment is substantially remote. TheCompany’s accrued liability at October 31, 2008 related to thesecontingencies was not material.

 

The Company is subject to various unresolved legalactions which arise in the normal course of its business, the most prevalent ofwhich relate to state and federal laws and regulations concerning retailcredit. Although it is not possible to predict with certainty the outcome ofthese unresolved legal actions or the range of possible loss, the Companybelieves these unresolved legal actions will not have a material effect on itsconsolidated financial statements.

 

52

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**Note 18. Other ComprehensiveIncome Items**

 

Other comprehensive income items under FASB Statement No. 130,Reporting Comprehensive Income, are transactions recorded in stockholder’sequity during the year, excluding net income and transactions with thestockholder. Following are the items included in other comprehensive income(loss) and the related tax effects in millions of dollars:

 
| ** **                                            | ** ** | **Before Tax  Amount** | ** ** | **Tax  (Expense)  Credit** | ** ** | **After Tax  Amount** | ** ** |
|-------------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|----------------------------|------------|
| **2006**                                              |       |                        |       |                       |       |                       |       |
| Change in  cumulative translation adjustment          |       | $                           | 9.7        |                       |       |                       | $          | 9.7 |   |
| Unrealized  holding loss and net loss on investments* |       | (4.9                        | )          | $                          | 1.6        |                       | (3.3       | ) |
| Unrealized gain  on derivatives:                      |       |                        |       |                       |       |                       |       |
| Hedging gain                                          |       | 5.5                         |       | (1.8                       | )          | 3.7                        |       |
| Reclassification  of realized gain to net income      |       | (4.4                        | )          | 1.8                        |       | (2.6                       | )          |
| Net unrealized  gain on derivatives                   |       | 1.1                         |       |                       |       | 1.1                        |       |
| Total other  comprehensive income                     |       | $                           | 5.9        |                       | $          | 1.6                        |       | $ | 7.5 |   |
| ** **                                            | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** **                 | ** ** |
| **2007**                                              |       |                        |       |                       |       |                       |       |
| Change in  cumulative translation adjustment          |       | $                           | 33.6       |                       |       |                       | $          | 33.6 |   |
| Unrealized  holding loss and net loss on investments* |       | (3.7                        | )          | $                          | 1.4        |                       | (2.3       | ) |
| Unrealized loss  on derivatives:                      |       |                        |       |                       |       |                       |       |
| Hedging loss                                          |       | (15.2                       | )          | 5.5                        |       | (9.7                       | )          |
| Reclassification  of realized gain to net income      |       | (10.5                       | )          | 3.5                        |       | (7.0                       | )          |
| Net unrealized  loss on derivatives                   |       | (25.7                       | )          | 9.0                        |       | (16.7                      | )          |
| Total other  comprehensive income                     |       | $                           | 4.2        |                       | $          | 10.4                       |       | $ | 14.6 |   |
|                                                  |       |                        |       |                       |       |                       |       |
| **2008**                                              |       |                        |       |                       |       |                       |       |
| Change in  cumulative translation adjustment          |       | $                           | (52.5      | )                          |       |                       | $          | (52.5 | ) |
| Unrealized  holding loss and net loss on investments* |       | (1.8                        | )          | $                          | .6         |                       | (1.2       | ) |
| Unrealized loss  on derivatives:                      |       |                        |       |                       |       |                       |       |
| Hedging loss                                          |       | (73.5                       | )          | 25.6                       |       | (47.9                      | )          |
| Reclassification  of realized gain to net income      |       | 25.6                        |       | (9.4                       | )          | 16.2                       |       |
| Net unrealized  loss on derivatives                   |       | (47.9                       | )          | 16.2                       |       | (31.7                      | )          |
| Total other  comprehensive income (loss)              |       | $                           | (102.2     | )                          | $          | 16.8                       |       | $ | (85.4 | ) |

 

----

*                                         Reclassificationof realized gains or losses to net income were not material.

 

**Note 19.  Financial Instruments**

 

The fair values of financial instruments that do notapproximate the carrying values in the financial statements at October 31are as follows (in millions of dollars):

 
| ** **                                         | ** ** | **2008**            | ** ** | **2007**        | ** ** |
|----------------------------------------------------|------------|---------------------|------------|-----------------|------------|
| ** **                                         | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** | **Carrying  Value** | ** ** | **Fair  Value** | ** ** |
| ** **                                         | ** ** | ** **          | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Receivables  financed (excluding restricted) - net |       | $                   | 16,213     |            | $          | 15,815 |   | $ | 15,514 |   | $ | 15,367 |   |
|                                               |       |                |       |            |       |   |   |   |   |
| Restricted  securitized retail notes - net         |       | $                   | 1,582      |            | $          | 1,578 |   | $ | 2,139 |   | $ | 2,136 |   |
|                                               |       |                |       |            |       |   |   |   |   |
| Short-term  secured borrowings*                    |       | $                   | 1,618      |            | $          | 1,583 |   | $ | 2,192 |   | $ | 2,204 |   |
|                                               |       |                |       |            |       |   |   |   |   |
| Long-term  borrowings                              |       | $                   | 10,530     |            | $          | 9,749 |   | $ | 8,276 |   | $ | 8,346 |   |

 

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*                                         SeeNotes 4 and 7.

 

53

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Fair Value Estimates

 

Fair values of the long-term Receivables were based onthe discounted values of their related cash flows at current market interestrates. The fair values of the remaining Receivables approximated the carryingamounts.

 

Fair values of long-term borrowingsand short-term secured borrowings were based on the discounted values of theirrelated cash flows at current market interest rates. Certain long-termborrowings have been swapped to current variable interest rates. The carryingvalues of these long-term borrowings include adjustments related to fair valuehedges.

 

Derivatives

 

All derivative instruments are recorded at fair valuesand classified as either other assets or accounts payable and accrued expenseson the balance sheet (see Note 1). The total amounts of the Company’sderivatives at October 31, 2008 and 2007 that were recorded in otherassets at fair value were $280 million and $92 million, respectively. The totalamounts recorded in accounts payable and accrued expenses at fair value for thesame periods were $87 million and $43 million, respectively.

 

Interest Rate Swaps

 

The Company enters into interest rate swap agreementsprimarily to more closely match the fixed or floating interest rates of theborrowings to those of the assets being funded. For interest rate swaps notdesignated as hedges under FASB Statement No. 133, Accounting forDerivative Instruments and Hedging Activities, the fair value gains or lossesfrom these interest rate swaps are recognized currently in interest expense,generally offsetting the interest expense on the exposures being hedged.

 

Certain interest rate swaps weredesignated as hedges of future cash flows from variable interest rateborrowings.  The effective portion of thefair value gains or losses on these cash flow hedges are recorded in othercomprehensive income and subsequently reclassified into interest expense aspayments are accrued and the swaps approach maturity. These amounts offset theeffects of interest rate changes on the related borrowings. Gains or losses in othercomprehensive income related to cash flow hedges that have been discontinuedare amortized to interest expense over the remaining duration of the originalforecasted transaction that will still occur. The total amount of loss recordedin other comprehensive income at October 31, 2008 that is expected to bereclassified to interest expense in the next twelve months if interest ratesremain unchanged is approximately $12 million after-tax. These swaps mature inup to thirty-one months.

 

Certain interest rate swaps were designated as fairvalue hedges of fixed-rate, long-term borrowings. The effective portion of thefair value gains or losses on these swaps was offset by fair value adjustmentsin the underlying borrowings.

 

Any ineffective portions of the gains or losses on allcash flow and fair value interest rate swaps designated as hedges wererecognized currently in interest expense and were not material. There were nogains or losses reclassified from unrealized in other comprehensive income torealized in earnings as a result of the discontinuance of cash flow hedgesbecause it is probable that the original forecasted transaction will not occur.There were no components of cash flow or fair value hedges that were excludedfrom the assessment of effectiveness. The cash flows from interest rate swapsare recorded in operating activities in the consolidated statements of cashflows.

 

# Foreign Exchange Forward Contracts and Swaps

#  

The Company has entered intoforeign exchange forward contracts and swaps in order to manage the currencyexposure of certain receivables, liabilities and intercompany loans. Thesetransactions are not designated as hedges under FASB Statement No. 133 andthe fair value gains or losses from these foreign currency derivatives are recognizedcurrently in earnings, generally offsetting the foreign exchange gains orlosses on the exposures being managed. The cash flows from foreign exchangeforward contracts and swaps are recorded in operating activities in theconsolidated statement of cash flows.

 

54

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**Note 20.  Geographic Area Information**

 

Based on the way the operations are managed andevaluated by management and materiality considerations, the Company is viewedas one operating segment. However, geographic area information for revenues andoperating profit, which is net income before income taxes, attributed to theU.S. and countries outside the U.S. is disclosed below. Geographic areainformation for the years ended October 31, 2008, 2007 and 2006 ispresented below (in millions of dollars):

 
| ** **             | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Revenues:**          |       |     |       |     |       |     |       |
| U.S.                   |       | $        | 1,742      |     | $          | 1,769    |       | $ | 1,529 |   |
| Outside the U.S.       |       | 226      |       | 198      |       | 176      |       |
| Total                  |       | $        | 1,968      |     | $          | 1,967    |       | $ | 1,705 |   |
|                   |       |     |       |     |       |     |       |
| **Operating  profit:** |       |     |       |     |       |     |       |
| U.S.                   |       | $        | 391        |     | $          | 437      |       | $ | 405 |   |
| Outside the U.S.       |       | 47       |       | 43       |       | 38       |       |
| Total                  |       | $        | 438        |     | $          | 480      |       | $ | 443 |   |
|                   |       |     |       |     |       |     |       |
| **Receivables:**       |       |     |       |     |       |     |       |
| U.S.                   |       | $        | 15,527     |     | $          | 15,224   |       | $ | 14,497 |   |
| Outside the U.S.       |       | 2,374    |       | 2,528    |       | 2,272    |       |
| Total                  |       | $        | 17,901     |     | $          | 17,752   |       | $ | 16,769 |   |

 

**Note 21.  Unconsolidated Affiliated Companies**

 

The Capital Corporation’saffiliated companies are those in which it generally maintains 20 to50 percent ownership. The Capital Corporation does not control thesecompanies and accounts for its investments in them on the equity method. TheCompany’s equity in the income of these affiliates is reported in theconsolidated income statement under “Equity in income of unconsolidatedaffiliates.” The investment in these companies is recorded in the consolidatedbalance sheet under “Investments in unconsolidated affiliates.”

 

Summarized financial information ofthe affiliated companies is as follows (in millions of dollars):

 
| ** **                               | ** ** | **Year Ended October 31,** | ** ** |
|------------------------------------------|------------|-------------------------------------------|------------|
| ** **                               | ** ** | **2008**                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Operations:**                          |       |                                      |       |   |   |   |   |
| Finance income                           |       | $                                         | 9.1        |   | $ | 6.1 |   | $ | 4.9 |   |
| Net income                               |       | 2.0                                       |       | .7 |   | .7 |   |
| The Company’s  equity in net income |       | 1.0                                       |       | .3 |   | .3 |   |
|                                          |            |                                           |            |  |  |  |  |  |  |  |

 
|                                    |   | **October 31,** |   |     |   |
|-----------------------------------------|--------|----------------------|--------|----------|--------|
|                                    |   | **2008**             |   | **2007** |   |   |   |
| **Financial  Position:**                |   |                 |   |     |   |   |   |
| Total assets                            |   | $                    | 72.1   |     | $      | 65.5 |   |   |   |
| Total external  debt                    |   | 59.1                 |   | 43.4     |   |   |   |
| Total net assets                        |   | 10.9                 |   | 10.5     |   |   |   |
| The Company’s  share of net assets |   | 5.4                  |   | 5.2      |   |   |   |
|                                         |        |                      |        |          |        |  |  |  |  |

 

55

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**Note 22.  Supplemental Information (Unaudited)**

 

Quarterly Information

 

TheCompany’s fiscal year ends in October and its interim periods (quarters)end in January, April, July and October. Supplemental quarterly information for the Company follows (in millionsof dollars):

 
| ** **                                     | ** ** | **First  Quarter** | ** ** | **Second  Quarter** | ** ** | **Third  Quarter** | ** ** | **Fourth  Quarter** | ** ** | **Fiscal  Year** | ** ** |
|------------------------------------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|------------------|------------|
| 2008:                                          |       |               |       |                |       |               |       |                |       |             |       |
| Revenues                                       |       | $                  | 496.5      |                | $          | 487.2              |       | $                   | 483.6      |             | $          | 500.1 |   | $ | 1,967.4 |   |
| Interest expense                               |       | 223.6              |       | 205.0               |       | 193.9              |       | 216.2               |       | 838.7            |       |
| Operating  expenses                            |       | 158.7              |       | 161.1               |       | 181.3              |       | 190.5               |       | 691.6            |       |
| Provision for  income taxes                    |       | 37.2               |       | 44.1                |       | 38.5               |       | 35.9                |       | 155.7            |       |
| Equity in income  of unconsolidated affiliates |       | .2                 |       | .3                  |       | .2                 |       | .3                  |       | 1.0              |       |
| Net income                                     |       | $                  | 77.2       |                | $          | 77.3               |       | $                   | 70.1       |             | $          | 57.8 |   | $ | 282.4 |   |
|                                           |       |               |       |                |       |               |       |                |       |             |       |
| 2007:                                          |       |               |       |                |       |               |       |                |       |             |       |
| Revenues                                       |       | $                  | 450.7      |                | $          | 483.1              |       | $                   | 506.3      |             | $          | 526.8 |   | $ | 1,966.9 |   |
| Interest expense                               |       | 201.9              |       | 215.1               |       | 226.1              |       | 234.8               |       | 877.9            |       |
| Operating  expenses                            |       | 136.3              |       | 151.3               |       | 156.9              |       | 164.9               |       | 609.4            |       |
| Provision for  income taxes                    |       | 39.4               |       | 40.5                |       | 44.4               |       | 44.4                |       | 168.7            |       |
| Equity in income  of unconsolidated affiliates |       | .1                 |       | .1                  |       | .1                 |       |                |       | .3               |       |
| Net income                                     |       | $                  | 73.2       |                | $          | 76.3               |       | $                   | 79.0       |             | $          | 82.7 |   | $ | 311.2 |   |

 

OtherEvents

 

On December 4, 2008, Capital Corporation andFPC Financial, f.s.b., a wholly-owned subsidiary of Capital Corporation,elected to continue to participate in the debt guaranty program that is part ofthe FDIC’s Temporary Liquidity Guarantee Program (TLGP). Under the terms of theTLGP, the FDIC guarantees certain senior unsecured debt, including term debtwith maturities on or before June 30, 2012 and certain commercial paperissued from October 13, 2008 through and including June 30, 2009.

 

On December 16, 2008, Capital Corporation enteredinto an agreement to issue $2 billion of fixed-rate medium-term notes due 2012at a rate of 2.875%. These notes are guaranteed by the FDIC under the TLGP.

 

56

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|                                                                                                                                                                                                                                                                                                     |   | **Index to Exhibits**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.                                                                                                                                                                                                                                                                                                       |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1                                                                                                                                                                                                                                                                                                      |   | Certificate of Incorporation, as amended  (Exhibit 3.1 to Form 10-K of the registrant for the year ended  October 31, 1999, Securities and Exchange Commission File  No. 1-6458*)                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2                                                                                                                                                                                                                                                                                                      |   | Bylaws, as amended (Exhibit 3.2 to  Form 10-K of the registrant for the year ended October 31, 1999,  Securities and Exchange Commission File No. 1-6458*)                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.1                                                                                                                                                                                                                                                                                                      |   | Five-Year Credit Agreement among registrant,  Deere & Company, various financial institutions, JPMorgan Chase Bank  N.A. as administrative agent, Citibank N.A. and Credit Suisse as  documentation agents, Merrill Lynch Bank USA as co-documentation agent, and  Bank of America, N.A. and Deutsche Bank AG, as syndication agents, et al,  dated February 28, 2007 (Exhibit  4.1 to Form 10-Q of  Deere & Company for the quarter ended April 30, 2007,  Securities and Exchange Commission file number 1-4121*) |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.2                                                                                                                                                                                                                                                                                                      |   | Senior Indenture dated as of March 15, 1997  between the registrant and The Bank of New York Mellon (successor Trustee to  The Chase Manhattan Bank National Association), as Trustee (Exhibit 4.1  to registration statement on Form S-3 no. 333-68355, filed  December 4, 1998, Securities and Exchange Commission file number 1-6458*)                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.3                                                                                                                                                                                                                                                                                                      |   | Subordinated Indenture dated as of September 1,  2003 between the registrant and U.S. Bank National Association, as Trustee  (Exhibit 4.3 to registration statement on Form S-3 no. 333-108705,  filed September 11, 2003*)                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.4                                                                                                                                                                                                                                                                                                      |   | Terms and Conditions of the Notes, published on  May 31, 2002, applicable to the U.S. $3,000,000,000 Euro Medium Term  Note Programme of registrant, John Deere Capital Corporation, John Deere Bank  S.A., John Deere Credit Limited, John Deere B.V., John Deere Credit Inc. and  John Deere Limited. (Exhibit 4.5 to Form 10-K of Deere &  Company for the year ended October 31, 2002, Securities and Exchange  Commission file number 1-4121*)                                                                          |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Certain instruments relating to long-term debt  constituting less than 10% of the registrant’s total assets may not be filed  as exhibits herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation  S-K. The registrant will file copies of such instruments upon request of the  Commission. |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 9.                                                                                                                                                                                                                                                                                                       |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.1                                                                                                                                                                                                                                                                                                     |   | Agreement as amended November 1, 1994 between  the registrant and Deere & Company concerning agricultural retail  notes (Exhibit 10.1 to Form 10-K of Deere & Company for  the year ended October 31, 1998, Securities and Exchange Commission file  number 1-4121*)                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.2                                                                                                                                                                                                                                                                                                     |   | Agreement as amended November 1, 1994 between  the registrant and Deere & Company concerning lawn and grounds care  retail notes (Exhibit 10.2 to the Form 10-K of Deere &  Company for the year ended October 31, 1998, Securities and Exchange  Commission file number 1-4121*)                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.3                                                                                                                                                                                                                                                                                                     |   | Agreement as amended November 1, 1994 between  the registrant and John Deere Industrial Equipment Company concerning  industrial retail notes (Exhibit 10.3 to the Form 10-K of  Deere & Company for the year ended October 31, 1998, Securities  and Exchange Commission file number 1-4121*)                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.4                                                                                                                                                                                                                                                                                                     |   | Agreement dated November 1, 2003 between the  registrant and Deere & Company relating to fixed charges ratio,  ownership and minimum net worth (Exhibit 10.5 to Form 10-K of  Deere & Company for the year ended October 31, 2003, Securities  and Exchange Commission File No. 1-4121*)                                                                                                                                                                                                                       |

 

57

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| 10.5       |   | Agreement dated July 14, 1997 between the  registrant and John Deere Construction Equipment Company concerning  construction retail notes (Exhibit 10.4 to Form 10-K of  Deere & Company for the year ended October 31, 2003, Securities  and Exchange Commission File No. 1-4121*)                                                                                      |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|  10.6 |   | Asset Purchase Agreement dated October 29, 2001  between Deere & Company and Deere Capital, Inc. concerning the  sale of trade receivables (Exhibit 10.6 to Form 10-K of the  registrant for the year ended October 31, 2001*)                                                                                                                                           |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|  10.7 |   | Asset Purchase Agreement dated October 29, 2001  between John Deere Construction & Forestry Company and Deere  Capital, Inc. concerning the sale of trade receivables (Exhibit 10.7  to Form 10-K of the registrant for the year ended October 31, 2001*)                                                                                                                |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|  10.8 |   | Factoring Agreement between John Deere Bank S.A. (as  successor by merger in interest to John Deere Finance S.A.) and John  Deere Vertrieb, a branch of Deere & Company, concerning the sale of  trade receivables (Exhibit 10.21 to the Form 10-K of  Deere & Company for the year ended October 31, 2002, Securities  and Exchange Commission file number 1-4121*) |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|  10.9 |   | Receivables Purchase Agreement between John Deere  Bank S.A. (as successor by merger in interest to John Deere Finance S.A.) and  John Deere Limited (Scotland) concerning the sale of trade receivables  (Exhibit 10.22 to the Form 10-K of Deere & Company for the  year ended October 31, 2002, Securities and Exchange Commission file  number 1-4121*)                        |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 11.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 12.        |   | Computation of  Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                         |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 13.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 14.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 16.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 18.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 21.        |   | Omitted pursuant to instruction I(2)                                                                                                                                                                                                                                                                                                                                                                       |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 22.        |   | Not applicable                                                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 23.        |   | Consent of  Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                 |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 24.        |   | Power of Attorney (included on signature page)                                                                                                                                                                                                                                                                                                                                                             |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1       |   | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                                                                                                                                                                                                           |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2       |   | Rule 13a-14(a)/15d-14(a) Certification                                                                                                                                                                                                                                                                                                                                                           |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.        |   | Section 1350  Certifications                                                                                                                                                                                                                                                                                                                                                                          |
|       |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
| 99         |   | Parts I and II of the Deere & Company  Form 10-K for the fiscal year ended October 31, 2008 (Securities  and Exchange Commission file number 1-4121*)                                                                                                                                                                                                                                   |

 

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* Incorporated byreference. Copies of these exhibits are available from the Company uponrequest.

 

58

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