As filed with the Securities and Exchange Commission on July 14, 2006

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 20-F

o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended:  December 31, 2005

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Transition Period from            to

OR

o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Date of event requiring this shell company report

001-14908(Commission file number)

Ducati Motor Holding
S.p.A.(Exact name of
registrant as specified in its charter)

Ducati Motor Holding S.p.A.(Translation of registrants name into English)

Italy(Jurisdiction of incorporation or organization)

Via A. Cavalieri Ducati 3, 40132 Bologna, Italy(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

|Title of   each class                                               |  | Name of   each exchange   on which registered
|------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                    |  |                                              
|American Depositary Shares, each   representing ten Ordinary Shares |  | New   York Stock Exchange                    
|Ordinary Shares*                                                    |  | New   York Stock Exchange                    

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.

159,360,037 Ordinary Shares

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

|Yes
o | No
x
|----- | ----

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act of 1934.

|Yes
o | No
x
|----- | ----

Note  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes
x | No
o
|----- | ----

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated   filer
o |  | Accelerated filer
x |  | Non-accelerated filer
o
|--------------------------- |  | ------------------- |  | -----------------------

Indicate by check mark which financial statement item the registrant has elected to follow.

|Item 17
o | Item 18
x
|--------- | ---------

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

|Yes
o | No
x
|----- | ----

* Not for trading, but only in connection with the registration of the American Depositary Shares

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TABLE OF CONTENTS

|                                                                 |  |   
|---------------------------------------------------------------- |  | --
|PART I                                                           |  | 2 
|                                                                 |  |   
|Item 1.  Identity of Directors, Senior Management   and Advisors |  | 2 
|                                                                 |  |   
|Item 2.  Offer Statistics and Expected Timetable                 |  | 2 
|                                                                 |  |   
|Item 3.  Key Information                                         |  | 2 
|Selected Consolidated Financial Data                             |  | 3 
|Exchange Rates                                                   |  | 5 
|Risk Factors                                                     |  | 6 
|Forward-Looking Statements                                       |  | 14
|                                                                 |  |   
|Item 4.  Information on the Company                              |  | 14
|History and Development of the Company                           |  | 14
|Business Overview                                                |  | 16
|Organizational Structure                                         |  | 19
|Products and Distribution                                        |  | 20
|Description of Property                                          |  | 34
|Capital Expenditures                                             |  | 35
|                                                                 |  |   
|Item 4A.  Unresolved Staff Comments                              |  | 35
|                                                                 |  |   
|Item 5.  Operating and Financial Review and   Prospects          |  | 35
|Introduction                                                     |  | 35
|Critical Accounting    Estimates                                 |  | 38
|Trend Information                                                |  | 42
|Results of Operations                                            |  | 42
|2005 Compared to 2004                                            |  | 43
|Liquidity and Capital Resources                                  |  | 46
|Research and Development                                         |  | 54
|                                                                 |  |   
|Item 6.  Directors, Senior Management and Employees              |  | 54
|Directors                                                        |  | 54
|Board Committees                                                 |  | 57
|Senior Management                                                |  | 57
|Statutory Auditors                                               |  | 58
|Compensation of Directors and Senior Management                  |  | 59
|Employees                                                        |  | 60
|                                                                 |  |   
|Item 7.  Major Shareholders and Related Party   Transactions     |  | 61
|Major Shareholders                                               |  | 61
|Related Party Transactions                                       |  | 64
|                                                                 |  |   
|Item 8.  Financial Information                                   |  | 66
|Consolidated Financial Statements                                |  | 66
|Other Financial Information                                      |  | 66
|Dividend Policy                                                  |  | 67
|Significant Changes                                              |  | 67

i

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|Item 9.  The Offer and Listing                                                           |  | 68 
|---------------------------------------------------------------------------------------- |  | ---
|Trading Markets and Share Prices                                                         |  | 68 
|                                                                                         |  |    
|Item 10.  Additional Information                                                         |  | 68 
|Share Option Plans                                                                       |  | 68 
|Buy Back Plan                                                                            |  | 70 
|Employee Stock Ownership Plan                                                            |  | 71 
|By-Laws                                                                                  |  | 71 
|Significant Differences with Corporate Governance Practices under NYSE   Rules           |  | 86 
|Material Contracts                                                                       |  | 91 
|Exchange Controls                                                                        |  | 91 
|Documents on Display                                                                     |  | 96 
|                                                                                         |  |    
|Item 11.  Quantitative and Qualitative Disclosures   About Market Risk                   |  | 96 
|                                                                                         |  |    
|Item 12.  Description of Securities Other than Equity   Securities                       |  | 98 
|                                                                                         |  |    
|PART II                                                                                  |  | 99 
|                                                                                         |  |    
|Item 13.  Defaults, Dividend Arrearages and   Delinquencies                              |  | 99 
|                                                                                         |  |    
|Item 14.  Material Modifications to the Rights of   Security Holders and Use of Proceeds |  | 99 
|                                                                                         |  |    
|Item 15.  Disclosure Controls and Procedures                                             |  | 99 
|                                                                                         |  |    
|Item 16.  [Reserved]                                                                     |  | 99 
|                                                                                         |  |    
|Item 16A.  Audit Committee Financial Expert                                              |  | 99 
|                                                                                         |  |    
|Item 16B.  Code of Ethics                                                                |  | 99 
|                                                                                         |  |    
|Item 16C.  Principal Accountant Fees and Services                                        |  | 100
|                                                                                         |  |    
|Item 16D.  Exemptions from the Listing Standards for   Audit Committees                  |  | 100
|                                                                                         |  |    
|Item 16E.  Purchases of Equity Securities by the   Issuer and Affiliated Purchaser       |  | 101
|                                                                                         |  |    
|Item 17.  Financial Statements                                                           |  | 101
|                                                                                         |  |    
|Item 18.  Financial Statements                                                           |  | 101
|                                                                                         |  |    
|Item 19.  Exhibits                                                                       |  | 102
|                                                                                         |  |    
|SIGNATURES                                                                               |  | 103

ii

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated, our audited financial statements and other financial information contained in this annual report on Form 20-F for the fiscal year ended December 31, 2005 (the annual report) have been prepared in conformity with International Financial Reporting Standards as adopted by the European Union (IFRS), which differ in certain significant respects from United States generally accepted accounting principles (U.S. GAAP).  For a discussion of the significant differences between IFRS and U.S. GAAP, see Notes 38, 39, 40 to our audited financial statements included in Item 18.

We adopted IFRS for the first time in our annual audited financial statements for the year ended December 31, 2005, which included comparative financial statements for the year ended December 31, 2004. IFRS 1, First-time Adoption of International Financial Reporting Standards, requires that an entity develop accounting policies based on the standards and related interpretations effective at the reporting date of its first annual IFRS financial statements (i.e., for Ducati, December 31, 2004). IFRS 1 also requires that those policies be applied as of the date of transition to IFRS (i.e., for Ducati, January 1, 2004) and throughout all periods presented in the first IFRS financial statements.  See Note 37 to our audited financial statements included in Item 18.

In this annual report, references to we, us, our, Ducati, Group and the Company are to Ducati Motor Holding S.p.A. and its subsidiaries and, unless the context otherwise requires, to their predecessors.  References to DMH are to Ducati Motor Holding S.p.A. only.  References to Lit., lira, lire and Italian lire are to Italian lire, references to US$, $, dollars and U.S. dollars are to United States dollars and references to  or euro are to the euro, the single currency established for certain members of the European Union (the EU), including Italy, upon the commencement of the third stage of the European Monetary Union (EMU) on January 1, 1999.  References to
CONSOB are references to the Commissione Nazionale per le Società e la Borsa (the Italian National Commission for Companies and the Stock Exchange).

Beginning with fiscal year ended December 31, 2001, we have published our audited financial statements in euro.  For fiscal years ending before 2001, we published our audited financial statements in Italian lire.  From January 1, 1999 to February 28, 2002 (the last day in which the lira was legal tender in Italy), we carried out non-cash transactions in euro as well as lire.  For ease of comparison, we have presented in this annual report any amounts formerly stated in Italian lire in euro and/or in dollars, as applicable, as follows: converting the lire amounts into euro at the fixed conversion rate of Lit. 1,936.27 per euro established in connection with the commencement of the third stage of the EMU; and converting the euro amount into U.S. dollars at the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York (the Noon Buying Rate) for euro on December 30, 2005, of US$1.1842 per euro.

Our restated euro financial information depicts the same trends as would have been presented if we had continued to present our financial information in lire.

In this annual report, references to the term cc are to cubic centimeters, a measure of engine displacement.  References to the terms introduce or launch in respect of a model or line of Ducati motorcycles are to the presentation of such model or line at international trade shows held in September of each year for sale the year thereafter.  References to the term registrations are to the number of newly produced motorcycles registered with governmental authorities over the relevant period, and are a standard industry measure of retail motorcycle sales that generally excludes sales in countries in which government registration systems are nonexistent or unreliable.  Unless otherwise indicated, registrations of Ducati motorcycles include our estimates of sales in countries where government registration data is not yet available or is otherwise
nonexistent or unreliable.

1

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Market data used throughout this annual report was obtained from our internal dealer data, surveys commissioned by us or industry publications.  Registration data is based on our analysis of the following published sources:

| | ACEM (Association   des Constructeurs Européens de Motocycles) and GIRAL (General   Research International Associates Ltd.), an independent Swiss motorcycle   consultancy, for the Western European markets;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                              
| | ANCMA (Associazione Nazionale Ciclo Motociclo Accessori),   for Italy;                                                                                                                                       
|  |                                                                                                                                                                                                              
| | MIC (Motorcycle Industry Council), for the United   States;                                                                                                                                                  
|  |                                                                                                                                                                                                              
| | Nirinsha Shinbun,   for Japan; and                                                                                                                                                                           
|  |                                                                                                                                                                                                              
| | the Australian Bureau of Statistics, for Australia.                                                                                                                                                          

Although we believe that these sources are reliable, we have not independently verified the information they have provided to us.  We have also not sought the consent of any of these entities to refer to their data in this annual report.

Ducati is our registered trademark.  This annual report also includes the trademarks of other companies.

PART I

Item 1.  Identity of Directors, Senior Management and Advisors

Not applicable.

Item 2.  Offer Statistics and Expected Timetable

Not applicable.

Item 3.  Key Information

Selected Consolidated Financial Data

The following table sets forth selected historical consolidated financial data derived from our audited financial statements included in Item 18 of this annual report, which have been prepared on the basis of IFRS.  Our consolidated financial statements as of and for the two years ended December 31, 2005, would not have had a material effect if presented under International Financial Reporting Standards as issued by the International Accounting Standards Board.

In addition, the following table sets forth certain selected financial data prepared in conformity with U.S. GAAP.  For information concerning differences between IFRS and U.S. GAAP as applied to our audited financial statements, see Notes 38, 39 and 40 to the audited financial statements included in Item 18.

The selected consolidated financial data set forth below (except for other financial data) should be read in conjunction with Item 5. Operating and Financial Review and Prospects and with our audited financial statements.

2

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Selected Consolidated Financial Data in Conformity with IFRS

|                                                      |  | Year Ended   December 31,                                                 |         
|----------------------------------------------------- |  | ------------------------------------------------------------------------- | --------
|                                                      |  |                                                                           |         
|                                                      |  | 2004                                                                      |         
|                                                      |  |                                                                           |         
|                                                      |  | (euro in   thousands, except per share and ADS   data which are in euros) |         
|                                                      |  |                                                                           |         
|CONSOLIDATED   STATEMENT OF INCOME DATA               |  |                                                                           |         
|Revenues                                              |  |                                                                          | 363,359 
|Cost of sales                                         |  |                                                                           | (276,708
|                                                      |  |                                                                           |         
|Gross profit                                          |  |                                                                           | 86,651  
|Other income                                          |  |                                                                           | 30,810  
|Distribution costs                                    |  |                                                                           | (87,490 
|General and administrative   expenses                 |  |                                                                           | (19,564 
|Other expenses                                        |  |                                                                           | (1,226  
|Restructuring reserve                                 |  |                                                                           |        
|Operating profit (loss)                               |  |                                                                           | 9,181   
|Interest expense, net                                 |  |                                                                           | (8,516  
|Foreign exchange   gain/(loss), net                   |  |                                                                           | 4,690   
|Profit/(loss) before income   taxes                   |  |                                                                           | 5,355   
|Income taxes                                          |  |                                                                           | (8,824  
|Net profit/(loss) before   minority interest          |  |                                                                           | (3,469  
|Net profit/(loss)   attributable to minority interest |  |                                                                           |        
|Net profit/(loss)   attributable to the Group         |  |                                                                           | (3,469  
|Net profit/(loss) per share   (5)                     |  |                                                                           | (0.022  
|Net profit/(loss) per   ADS(5)                        |  |                                                                           | (0.22   
|CASH FLOW   AND OTHER FINANCIAL DATA                  |  |                                                                           |         
|Capital expenditures                                  |  |                                                                           | (25,493 
|Cash flows from operating   activities                |  |                                                                           | 23,442  
|Cash flows from (used in)   investing activities      |  |                                                                           | (25,354 
|Cash flows from financing   activities                |  |                                                                           | 17,266  

|                
|----------------
|See notes below.

3

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|                                   |  | As of   December 31,                                                        |        
|---------------------------------- |  | --------------------------------------------------------------------------- | -------
|                                   |  |                                                                             |        
|                                   |  | 2004                                                                        |        
|                                   |  |                                                                             |        
|                                   |  | (euro in   thousands, except per share and ADS
    data which are in euros) |        
|                                   |  |                                                                             |        
|CONSOLIDATED BALANCE SHEET DATA    |  |                                                                             |        
|Cash and cash equivalents          |  |                                                                            | 49,327 
|Property, plant and equipment, net |  |                                                                             | 70,288 
|Total assets                       |  |                                                                             | 502,723
|Total indebtedness(2)              |  |                                                                             | 214,862
|Total shareholders equity         |  |                                                                             | 157,778

Selected Consolidated Financial Data in Conformity with U.S. GAAP (in thousands)(3)

|                                                                                                                  |  | Year Ended   December 31,                                               |       
|----------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- | ------
|                                                                                                                  |  |                                                                         |       
|                                                                                                                  |  | 2001                                                                    |       
|                                                                                                                  |  |                                                                         |       
|                                                                                                                  |  | (euro in   thousands, except per share and ADS data which are in euros) |       
|                                                                                                                  |  |                                                                         |       
|CONSOLIDATED   STATEMENT OF OPERATIONS DATA                                                                       |  |                                                                         |       
|Operating income (loss) (4)                                                                                       |  |                                                                        | 33,691
|Profit (loss) before income   taxes, minority interest and cumulative effect of change in accounting   principles |  |                                                                         | 20,308
|Net profit/(loss)                                                                                                 |  |                                                                         | 14,178
|Net profit/(loss) per share   (basic)(5)                                                                          |  |                                                                         | 0.077 
|Net profit/(loss) per ADSs   (basic)                                                                              |  |                                                                         | 0.77  
|Net profit/(loss) per share   (diluted)                                                                           |  |                                                                         | 0.076 
|Net profit/(loss) per ADSs   (diluted)                                                                            |  |                                                                         | 0.76  
|OTHER   FINANCIAL DATA                                                                                            |  |                                                                         |       
|Stock-based compensation                                                                                          |  |                                                                        | 204   
|Depreciation and   amortization                                                                                   |  |                                                                         | 17,625

|                
|----------------
|See notes below.

4

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|                                  | As of December 31,                                   |     
|--------------------------------- | ---------------------------------------------------- | ----
|                                  |                                                      |     
|                                  |                                                      | 2001
|                                  |                                                      |     
|                                  | (euro in   thousands, except per share and ADS data) |     
|                                  |                                                      |     
|CONSOLIDATED   BALANCE SHEET DATA |                                                      |     
|Total assets                      |                                                      |    
|Total shareholders equity        |                                                      |     

|   
|---
|(1)
|(2)
|(3)
|(4)
|(5)

Exchange Rates

Fluctuations
in the exchange rate between the euro and the U.S. dollar will affect the U.S.
dollar equivalent of euro prices of DMHs shares listed on the Mercato
Telematico Azionario (Telematico), the automated screen-based
trading system managed by Borsa Italiana S.p.A. (the Italian Stock
Exchange) and, as a result, are likely to affect the market price of the
ADSs in the United States.  Exchange rate fluctuations will also affect the
U.S. dollar amounts received by holders of ADSs on the conversion into U.S.
dollars by the ADS depositary of any cash dividends declared and paid in euro on
the shares represented by the ADSs.

The following table sets forth the Noon Buying Rate for euro expressed in U.S. dollars per euro rounded to the nearest one hundredth of a U.S. cent for the periods indicated.

|Year: |  | Average
(1) |         | At Period End | 
|----- |  | ----------- | ------- | ------------- | 
|      |  |             |         |               | 
|2001  |  |             | 0.8909  |               | 
|2002  |  |             | 0.9495  |               | 
|2003  |  |             | 1.1411  |               | 
|2004  |  |             | 1.2478  |               | 
|2005  |  |             | 1.24001 |               | 

|Month ending:     |  | High |        | Low | 
|----------------- |  | ---- | ------ | --- | 
|                  |  |      |        |     | 
|December 31, 2005 |  |      | 1.2041 |     | 
|January 31, 2006  |  |      | 1.2287 |     | 
|February 28, 2006 |  |      | 1.2100 |     | 
|March 31, 2006    |  |      | 1.2197 |     | 
|April 30, 2006    |  |      | 1.2824 |     | 
|May 31, 2006      |  |      | 1.2888 |     | 

| |                                                                                                        
| | -------------------------------------------------------------------------------------------------------
| | (1)  Average   of the Noon Buying Rate for euro on the last business day of each month in   the period.

The effective Noon Buying Rate for euro on June 26, 2006, was US$1.2554 per 1.00.

5

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Risk Factors

Investing in our shares or ADSs involves certain risks.  You should carefully consider each of the following risks and all of the information included in this annual report.

We have a recent history of losses

We
experienced net losses of 41.5 million in 2005 and 3.5 million in
2004. We attribute these losses in part to general economic conditions, which
resulted in decreased motorcycle registrations in the markets in which we
operate, to increased raw material costs and to the weakening of the dollar
against the euro.  These macroeconomic factors hurt our financial
condition, already weakened by a delay in the rotation of our product portfolio
and by deterioration in our product mix, which had an increased percentage of
sales of lower-margin motorcycles.  See Item 5.  Operating and
Financial Review and ProspectsLiquidity and Capital
Resources.  There can be no assurance that the macroeconomic factors
described above will improve, that raw material costs will not remain at
todays historical high levels or even further increase, or that we will be
able to effect a timely rotation of our product portfolio or improve our product
mix.

Our financial results in 2005 were also affected by a 13 million restructuring reserve, the write-down of discontinued research and development projects and inventories for a total of 14.3 million and the payment of penalties in connection with our cancellation of supply orders for a total of 0.9 million, all contemplated in our business plan for 2006-2008.

We prepared our financial statements for the year ended December 31, 2005 assuming that we will continue as a going concern, based on our belief that our business plan for 2006-2008 will result in satisfactory economic results for us in the future.  There can be no assurance that these assumptions and beliefs based on the successful implementation of our business plan are correct or that our future financial results will be satisfactory.  For more information on the 2006-2008 business plan, see Item 4.  Information on the CompanyBusiness OverviewBusiness Strategy2006-2008 Business Plan.  For more information on our capital increase, see Item 8.  Financial InformationSignificant Changes.

Our future profitability and financial condition depend on the successful implementation of the 2006-2008 Business Plan and the validation of the assumptions and expectations on which it is based

Our future operating and financial performance and business prospects will depend in large part on the successful implementation of our business plan for 2006-2008. Following the purchase of 30% less one share of our share capital by World Motors S.A. (WM), World Motors Red S.c.A. (WM II) and World Motors White S.c.A. (WM III) in March 2006, our board of directors, appointed at an ordinary shareholders meeting on April 10, 2006, approved the 2006-2008 business plan on April 13, 2006.  The business plan focuses on improving profit margins and generating cash flows by increasing sales of motorcycle models in the high-end our of product price range and decreasing overhead costs.  The plan also called for a capital increase, which was successfully completed in June 2006.

We have formulated the 2006-2008 business plan on the basis of assumptions about
several factors that are beyond our control, including: (i) the evolution of the
motorcycle market; (ii) inflation rates; (iii) the euro/US dollar exchange rate;
(iv) financial expenses; (v) tax rates; and (vi) labor union relations.  If
one or more of the assumptions turns out to be incorrect, in whole or in part,
our actual results may differ, possibly significantly, from the targets in the
business plan and there could be a material adverse effect on our financial
conditions, results of operations and business prospects. For more information
about our business plan, see Item 4.  Information on the
CompanyBusiness OverviewBusiness Strategy2006-2008 Business
Plan.

6

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We have incurred significant indebtedness and depend on external financing to help fund our working capital needs

In May 2005, DMH and Ducati Corse S.r.l. (Ducati Corse) entered into a syndicated loan facility for up to 100 million (the Syndicated Loan Facility), which includes a five-year term loan for up to 63.6 million and a renewable, 364-day revolving credit line for up to 36.4 million.  In connection with the Syndicated Loan Facility, DMH and Ducati Corse have granted the lending banks security interests in a significant portion of their assets.  Under the terms of this facility, we are required to comply with certain financial covenants and are subject to covenants that restrict our ability, among other things, to pay dividends, make certain asset sales and incur additional indebtedness. In addition, events of default under the facility, including failure to pay any interest or principal when due, failure to comply with certain financial
covenants, failure to pay other indebtedness when due, the occurrence of a change of control and the occurrence of certain bankruptcy or other insolvency events, entitles the lenders to declare any outstanding loans immediately due and payable, terminate the facility and foreclose on the collateral.  See Item 5. Operating and Financial Review and ProspectsOther Financial TransactionsSyndicated Loan Facility.  In the first half of 2006 DMH entered into three additional loan facilities:  with UniCredit Banca dImpresa S.p.A. for up to 35 million; with Banca Intesa S.p.A. for up to 10 million; and with Banca Popolare di Verona and Novara S.c.r.l. for up to 10 million.  The terms of these facilities are substantially the same as the Syndicated Loan Facility, including the requirement to comply with certain financial covenants, and entitle the lenders to declare any outstanding loans immediately due and payable and terminate the facility
upon any event of default.  See Item 5. Operating and Financial Review and ProspectsOther Financial Transactions.  As of June 23, 2006, 98 million was outstanding under the Syndicated Loan Facility.  There were no outstanding amounts under our other loan facilities at that time.

Based on our expected results for 2005, we anticipated that we were not going to be in compliance with certain financial covenants in our loan facilities and we obtained a waiver of those financial covenants from the syndicate of lending banks.  The lending banks also agreed to amend those financial covenants in order to adapt them to the 2006-2008 Business Plan and to take into account the fact that we will prepare our consolidated financial statements in accordance with IFRS starting with the financial statements for the year ended December 31, 2005.  We cannot assure you that our operating cash flow and capital resources will allow us to meet our repayment obligations in the future and cannot assure you that future requests to waive any non-compliance or to amend any of our loan facilities will be granted by the lending banks or that we will be able to continue to draw on our current
sources of liquidity.

We expect to finance our future working capital requirements using both cash generated by our operations and the available credit lines described above.  In addition, we successfully completed an  80,000,000 capital increase in June 2006.  See Item 4.  Information on the CompanyHistory and Development of the Company. Absent sufficient operating cash flow and capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations, or to reduce or delay planned expansion and capital expenditures, restructure or refinance our indebtedness or seek additional equity capital.  We cannot assure you that any of these transactions could be effected on satisfactory terms, if at all, or that having to engage in any such transaction would not have a material adverse



effect on our business, prospects, results of operations or financial condition.

The world motorcycle market is highly competitive

The world motorcycle market is highly competitive.  Our principal competitors are four Japanese manufacturers (Honda, Suzuki, Yamaha and Kawasaki), two European manufacturers (Triumph and BMW) and, to a more limited extent, Harley-Davidson of the United States.  Additional competitors, including MV Agusta and Aprilia of Italy, also produce motorcycles that compete with ours.  Motorcycles produced by Harley-Davidsons Buell subsidiary also compete with our Sport Naked motorcycles.

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Most of our competitors have substantially greater financial resources, are more diversified and have significantly higher sales volumes (allowing for greater economies of scale) and market share than us.  Certain of our competitors may also have shorter product development cycles and may be able to bring new products to market more quickly than we can.  Like other manufacturers in the motorcycle industry, our competitiveness is also influenced by our performance on international professional racing circuits.  Racing success may also be affected by events outside of our control, such as injuries or accidents involving our riders.  The retention and renewal of sponsorship agreements, the most significant source of income for Ducati Corse, are dependent on our racing success, so we cannot assure you that an unsuccessful racing performance will not affect our financial results.  We cannot assure you that Ducati motorcycles will have continued



success in the World Superbike Championship or the MotoGP.  We are also subject to potential price pressure from our competitors, including price pressure that may result from appreciation of the euro relative to other currencies, in particular the U.S. dollar, the U.K. pound sterling and the Japanese yen.  Based on available registration data, motorcycle registrations for Ducati motorcycles in 2005 decreased 3.54% compared to 2004.  Our market share, based on available registration data, decreased during 2005 in some of our principal markets, including Italy (down 15%), Germany (down 15%) and the United Kingdom (down 16%).  In general, we cannot assure you that, in the future, we will be able to maintain our present competitive position.  See Item 4. Information on the Company Products and DistributionMarket Share and Competition.

Our future performance depends on our ability to innovate and on market acceptance of new and existing products

Our ability to develop new products and improve existing ones through research will have a significant effect on our future performance.  Failure to develop and offer products that compare favorably to those of our competitors, in terms of price, quality, styling, reliability, safety, functionality or otherwise, may result in lower market share, lower sales volumes and margins, and may have a material adverse effect on our operational and financial results.  In particular, whether we optimize engine performance and develop new motorcycle models may determine how well we perform against competitors.  Moreover, the lack of market acceptance of new motorcycle models, potential delays in bringing new products to market or any inability to achieve efficiency targets without suffering quality losses could adversely affect our overall profitability.  See Item 4.  Information on the



Company Products and DistributionProduct Research and Development.

Demand for motorcycles is cyclical

The motorcycle industry is subject to significant changes in demand due to changing social and economic conditions affecting discretionary consumer income, such as employment levels, business conditions, taxation rates, fuel costs, interest rates and other factors.  In our target market (the Sport sub-segment of the market for road motorcycles with engine displacements of 500cc or greater (the >500cc Road Market)), we have experienced periods of material decreases in demand, which have had a material effect on our results of operations for such periods. Most recently, demand for our motorcycles (as measured by unit sales) decreased in 2005 in a number of our principal geographic markets.  See Item 5.  Operating and Financial Review and Prospects2005 Compared to 2004.  The factors underlying such changes in demand are beyond our control, and demand for
our products may again decline in the future, which could have a further negative impact on our business, prospects, results of operations or financial condition.

Our business is seasonal and we are required to predict levels of demand in advance and provide current motorcycle models to the market on a timely basis

Our operations, like those of other competitors in the motorcycle industry, are characterized by seasonal fluctuations in demand and a stable production level (although we shut down production each year during the month of August and the last two weeks of December).  Annual retail demand for motorcycles is highest during April, May and June, resulting in peak factory sales during March, April and May and a build-up of inventory from September to February.

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As a result, we must plan overall annual production levels based on predicted levels of demand for our products, which we derive in part from our own market assessments and long-term, non-binding purchase commitments from our distributors.  We must also provide current models to the market during the critical annual spring season as demand typically shifts in the second half of the year to models introduced for the following year.  Mismanagement of our production levels or delayed delivery of current models can result in excess inventories and resulting promotional expenses (i.e., rebates, discounts, complimentary accessories and other incentives) that we incur to reduce the same.  In addition, a number of factors could cause dealers to delay or cancel orders already placed with us, including general economic conditions, competitive factors and changes in governmental regulation such as import/export rules and tariff rates.  We cannot
assure you that we will accurately predict annual and long-term demand in the future or in any event provide our current motorcycles to the market on a timely basis.  Any failure to do so may have a material adverse effect on our business, prospects, results of operations or financial condition.

We are dependent on our suppliers, and increases in component prices may negatively affect our operations

We purchase virtually all of our motorcycle parts and components from third-party suppliers.  With the exception of a limited number of long-term component supply contracts for periods ranging from one to three years, we enter only into short-term, rolling contracts with suppliers.  In addition, we typically contract with our suppliers on a non-exclusive basis, which allows us to replace our suppliers at any time.  Generally, individual motorcycle components are available from a variety of sources, and our policy is to identify at least two sources of supply for each component.  However, we rely upon single-source suppliers for certain components, including platform components (such as those relating to the brake and injection systems).  See Item 4. Information on the Company Products and DistributionProduction.  Our assembly operations may



be interrupted or otherwise adversely affected by delays in the supply of parts and components from third-party suppliers.  They may also be interrupted if parts or components become unavailable on commercially reasonable terms in the future.  Even if parts and components are available from alternative sources, we may face increased costs and production delays in connection with the replacement of an existing supplier with one or more alternative suppliers.  These factors could have a material adverse effect on our business, prospects, results of operations or financial condition.

Like other competitors in the motorcycle industry, our operations are affected by the prices of motorcycle components.  The prices of motorcycle components have been subject to fluctuations in the past and may be subject to fluctuations in the future.  These fluctuations may result from fluctuations in the prices of raw materials (including commodities such as steel, aluminum, energy and oil-related products) from which these components are manufactured.  During 2004 and 2005, the price of steel increased between 20% and 60% (depending on the type of steel), resulting in an average increase in per-motorcycle production cost of approximately two percent.  In the first quarter of 2006, the price of aluminum rose by 30% compared to 2005, resulting in an average increase in per-motorcycle production cost of approximately one percent.  Any material increase in the prices of motorcycle
components may have a material adverse effect on our business, prospects, results of operations or financial condition.

We have made significant investments and capital expenditures as to which we may not receive a return

In 2004 and 2005, our capital expenditures on property, plant and equipment were 10.4 million and 10.6 million, respectively, and our investments in intangible assets were 15.1 million and 20.5 million, respectively.  Our capital expenditures in 2004 and 2005 mainly related to development expenses in connection with our new Sportclassic motorcycle model line and the development of the commercial version of the Desmosedici, the motorcycle used in the MotoGP World Championship.  If any of these or similar initiatives is unsuccessful, our related past and anticipated future capital expenditures and research and development expenditures may not result in any return or material benefit to us, which could have a material adverse effect on our business, prospects, results of operations or financial condition.

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Our racing activities are subject to strict regulations

Participation in the Moto GP and Superbike world racing championships is subject to strict regulation.  Any change in the regulations and/or the interpretation of the regulations could adversely affect the management of Ducati Corse, resulting in increased costs of managing the team and reduced income, and we could be obliged to modify our strategic choices regarding participation in these competitions.  As a result, regulations in the racing sector could have a material adverse effect on our financial conditions, results of operations and business prospects and those of Ducati Corse.

We may be subject to significant product liability claims

Like our competitors, we are exposed to possible claims for personal injury from the use of our motorcycles, particularly in the United States, where product liability claims grounded on personal injuries are more common than in other countries.  Although no claims of this kind have been made against us that are not covered by our existing product liability insurance coverage, such claims may arise in the future.  A partially or completely uninsured claim, if successful and of significant magnitude, could have a material adverse effect on our business, prospects, results of operations or financial condition.  See Item 4. Information on the Company Products and DistributionInsurance and Product Liability.

Our motorcycles may contain defects

Like competing motorcycles, our products may have unanticipated defects.  Product defects have given rise to recalls of our motorcycles in the past and may do so again in the future.  Any unanticipated defects in our motorcycles or recalls could be costly to us and may have a material adverse effect on the Ducati brand and our business, prospects, results of operations and financial condition.

We rely on a single manufacturing facility

Ducati motorcycles are manufactured at our sole production facility located in Borgo Panigale outside Bologna, Italy.  All manufacturing and assembly, as well as warehousing of certain components, is performed at this site.  A significant interruption of production at this facility would have a material adverse effect on our business, prospects, results of operations and financial condition.

Strikes and other labor disturbances may negatively impact our operations

We operate in a heavily unionized industry and are subject to the risk of strikes and other work stoppages.  Our employees in Italy are subject to national and company-specific bargaining agreements.  The national collective bargaining agreement applicable to us and our employees was renewed in May 2003 and will expire on June 30, 2007.  Our company-specific collective bargaining agreement was signed on December 19, 2003 and expires on December 31, 2007.

Our operations have not suffered material disruption as a result of strikes or work stoppages in the recent past.  However, we have been, and in the future may be, subject to strikes and work stoppages in connection with the negotiation of company-specific or national labor contracts.  Any strikes, work stoppages or other industrial actions may interrupt the production of motorcycles and could have a material adverse effect on our business, prospects, results of operations and financial condition.

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Our motorcycle design and technology are not protected by intellectual property rights

The design and technology of our motorcycles, including the Desmodromic valve control system, are not protected by any material patent, trademark or other intellectual property rights, other than the registered trademarks associated with the Ducati brand itself.  In particular, the technical features that distinguish Ducati motorcycles are not protected by material patents or other intellectual property rights.  The component parts of our motorcycles are manufactured according to well-known techniques and include components that are not unique to our products.  As a result, the design and technology of our motorcycles are vulnerable to being copied or imitated by competitors, and certain of our competitors have copied our technology and design features in the past.  Our competitors may have or develop equivalent or superior manufacturing and design skills, and may develop an
enhancement that will be patentable or otherwise protected from duplication by others.  These events could have a material adverse effect on our business, prospects, results of operations and financial condition.

We are dependent on qualified personnel

Like our competitors, our commercial success depends in part upon our ability to continue to attract and retain highly qualified design, technical and commercial management and other personnel.    In 2003, 2004 and 2005, none of our managers earned performance bonuses because of our failure to meet certain financial targets. See Item 6. Directors, Senior Management and EmployeesCompensation of Directors and Senior Management.  As a result, we may have increased difficulty in retaining such personnel, especially if the labor market in general improves, and cannot assure you that the members of our management team will continue working for us in the long term.  Competition in general for qualified personnel in the motorcycle industry is intense and we could be materially adversely affected by the loss of key employees.  We cannot assure you that we will be
able to attract, recruit and retain sufficient qualified personnel to remain competitive.

The international nature of our operations exposes us to risks

Like our competitors, we distribute motorcycles and other products in many countries and face risks related to our international operations, including: changes in governmental regulations; tariffs or taxes and other trade barriers; trends in prices, salaries interest rates and exchange rates; political, social and economic instability; and inflation.

Any of these factors could materially adversely affect our business, prospects, results of operations and financial condition.

We are subject to foreign currency exchange rate fluctuations, particularly with respect to the U.S. dollar, and to interest rate fluctuations

We are exposed to foreign exchange rate risks.  Our sales and operating profits are affected by fluctuations in currency exchange rates between the euro and certain foreign currencies, principally the U.S. dollar, the U.K. pound sterling and the Japanese yen, because of both the impact on product prices and operating expenses, as well as the effect of such fluctuations on the translation into euros of the foreign currency-denominated results of operation of our foreign subsidiaries operating outside the euro zone.  In 2005, we had revenues denominated in U.S. dollars, Japanese yen and U.K. pounds sterling that together exceeded 33.3% of our total revenues for the year (with sales in U.S. dollars accounting for approximately 18.8% of our total revenues), while our costs are principally denominated in euros.

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We are also subject to potential price pressure from our competitors that may result from appreciation of the euro relative to these other currencies.  In 2003 and 2004, the euros appreciation against other currencies (including the U.S. dollar, where the appreciation was approximately 19.4% on average, and 20.4% at year end in 2003, and 9.9% on average, and 7.8% at year end in 2004), contributed to the decline in our sales and operating results.  More recently, during the first two quarters of 2006, the euro has once again shown a general upward trend in value against the U.S. dollar.  We engage in foreign exchange transactions to hedge portions of our transactional exposure to fluctuations in exchange rates between the euro and various foreign currencies, including the U.S. dollar, the U.K. pound sterling and the Japanese yen.  Our hedging policy until the end of 2003 consisted



in covering, during the last quarter of each year, the sales of the coming year.  Beginning in January 2004, we shifted to 18-month rolling coverage.  However, at the end of 2004, we revised our currency exchange rate hedging policy; our new currency exchange rate hedging policy consists of six-month rolling coverage that is consistent with the amount of our orders and receivables in currencies that we normally have in place.  We cannot assure you that the foregoing will adequately protect us from the effects of future exchange rate fluctuations.  See Item 11. Quantitative and Qualitative Disclosures About Market Risk.

Similarly, changes in interest rates may affect our results by increasing or decreasing our borrowing costs.  Our current interest rate hedging policy consists in covering exclusively long-term contracts, having duration greater than 18 months.  However, we cannot assure you that changes in the interest rates relating to short-term contracts will not have an adverse effect on our operating results.

We are subject to strict environmental, safety and other governmental regulations

Motorcycles sold in the United States, the European Union countries and other countries are subject to environmental emissions regulations and safety standards.  For example, applicable regulations in the United States include the emissions and noise standards of the U.S. Environmental Protection Agency and, in the State of California, the more stringent emissions standards of the State of California Air Resources Board.  Ducati motorcycles sold in the United States are also subject to the National Traffic and Motor Vehicle Safety Act and the rules promulgated thereunder by the National Highway Traffic Safety Administration.  In addition, all of our motorcycle models are required to comply with applicable homologation regulations in the countries in which they are distributed.  As these laws and regulations become increasingly stringent, future compliance requirements may result in
increased costs or the withdrawal of our motorcycles from certain markets.  As a result, future environmental, safety and other regulations may have a material adverse effect on our business, prospects, results of operations and financial condition.

We are also subject to a number of domestic Italian governmental regulations relating to the use and storage of materials, discharge and disposal of wastes from the factory and safety standards of facilities and processes.  We have not been subject to material environmental or safety claims in the past and believe that our activities conform in all material respects to presently applicable environmental and safety regulations.  However, the failure to comply with present or future regulations could result in damages or fines, suspension of production or cessation of certain activities.  New regulations could require us to incur significant expenses that could have an adverse effect on our results of operations.  Any failure to control the use of, or adequately restrict the discharge of, hazardous substances or to comply with safety requirements and legislation could subject us to
significant liabilities.  See Item 4. Information on the CompanyProducts and DistributionGovernmental and Environmental Regulation.

Our ability to pay dividends is subject to limitations

DMH has not paid any cash dividends on its shares since its formation in 1996.

Italian law imposes certain restrictions on the distribution of dividends by Italian companies.  In particular, Italian law prohibits distributing dividends other than from net income or distributable reserves set forth in a companys statutory accounts approved by a meeting of shareholders and after the establishment of certain compulsory reserves.  In addition, if losses from previous fiscal years have reduced a companys capital, dividends may not be paid until the capital is reconstituted or its stated amount is reduced by the amount of such losses.

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Further, our Syndicated Loan Facility, New Loan, Banca Intesa Loan and BPVN Loan (as defined below) restrict our ability to pay dividends if a dividend distribution would cause DMH to be in violation of its financial covenants under the loan.  The application of these restrictions limits our ability to make distributions to holders of the shares and ADSs.  Even if we meet the statutory requirements and would be able to pay dividends in compliance with our loans we cannot assure you that we will decide to pay dividends.

You may face difficulties in protecting your rights as holders of ADSs

DMH is
incorporated under the laws of the Republic of Italy.  As a result, certain
rights and obligations of holders of our ADSs are governed by Italian law and
DMHs Statuto (By-Laws).  These rights and obligations are
different from those that apply to U.S. corporations.  For example, under
Italian law, an investor that has acquired more than 30.0% of the shares of a
company (or that already holds more than 30.0%, and acquires more than an
additional 3.0% of such shares during a 12-month period) whose shares are listed
on the Telematico is required to launch a tender offer for all of the shares of
such company.  Further, under Italian law, holders of ADSs have no right to
vote the shares underlying their ADSs, although under the deposit agreement
governing our ADSs, ADS holders have the right to give instructions to The Bank
of New York, the ADS depositary, as to how they wish such shares to be
voted.  For these reasons, our ADS holders may find it more difficult to
protect their interests against actions of our management, board of directors or
other shareholders than they would as shareholders of a corporation incorporated
in the United States.

The price of our shares and ADSs may be volatile

No predictions can be made as to the effect, if any, that sales of our shares or the availability of our shares for sale will have on the market price of our shares or ADSs prevailing from time to time.  Future sales of our shares by shareholders, the issue and sale of new shares by us, or the perception that such sales could occur may adversely affect prevailing market prices for our shares and ADSs.  You may not be able to resell your shares or ADSs at or above the price at which you purchased them due to a number of factors, including: a possible lack of liquidity in the market for our shares or ADSs; differences between our actual financial or operating results and those expected by investors and analysts; changes in analysts recommendations or projections; pricing and competition in the motorcycle industry; new statutes or regulations or changes in interpretations of existing statutes



and regulations affecting our business; and changes in general market conditions.

Control by certain shareholders

According to information provided to CONSOB and other information available to us, as of June 23, 2006, WM, WM II and WM III owned in the aggregate 29.82% of our outstanding shares and four other shareholders each held more than 1.0%  (see Item 7. Major Shareholders and Related Party TransactionsMajor Shareholders); the remainder of our shares are widely held.  As a result, WMI, WMII and WMIII have the power to determine (or hold a veto right in respect of) matters requiring shareholder approval, including the appointment of all but one member of our board of directors.  For information about the shareholder agreement among WM, WM II and WM III, see Item 7.  Major Shareholders and Related Party TransactionsMajor ShareholdersShareholder Agreement.  The concentration of our beneficial ownership may also have the effect of delaying, deterring



or preventing a change in our control, may discourage bids for our shares or ADSs at a premium over the market price of the shares and ADSs or may adversely affect the market price of our shares and ADSs.

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Forward-Looking Statements

We make forward-looking statements in this annual report.  Examples of such forward-looking statements include, but are not limited to:  (i) projections or expectations of revenues, income (or loss), earnings (or loss) per share, dividends, capital structure or other financial terms or ratios; (ii) our statements of plans, objectives or goals, including those related to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements.  Words such as believes, anticipates, expects, intends and plans and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved.  We caution readers that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.  These factors include: the effects of our leverage on our operating results; the effects of external economic factors on the motorcycle industry; the effects of competition in the geographic and business areas in which we conduct operations; the many interrelated factors that affect consumer confidence and demand for motorcycles; production difficulties, which may arise from capacity and supply constraints, excess inventory levels, labor shortages
or slowdowns; the effects of, and changes in, regulation and government policy; other changes in our operating environment; and our success in managing the risks associated with these and other factors.

We caution that the foregoing list of important factors is not exhaustive.  When relying on forward-looking statements to make decisions with respect to Ducati, investors and others should carefully consider the foregoing factors and other uncertainties and events.  Such forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as result of new information, future events or otherwise.

Item 4.  Information on the Company

History and Development of the Company

We are one of the worlds leading manufacturers of high-performance sport motorcycles.  Founded in 1926, we are widely recognized among motorcycle enthusiasts for producing racing-inspired motorcycles characterized by unique engine features, innovative design, advanced engineering and overall technical excellence.  With an extensive racing pedigree dating to the 1950s, our motorcycles have dominated the World Superbike Championship, where we have won 13 manufacturers titles since 1990 and more single race victories than all other manufacturers combined.  In 2003, after an absence of over 30 years, we resumed participation in the MotoGP Championship, placing second in the manufacturers ranking of the Championship in 2004; in 2005, we finished third in the manufacturers ranking.We believe that our globally recognized brand, unique product
characteristics and proven racing success provide us with a loyal and enthusiastic customer base and enable us to position our motorcycles as premium price products primarily within the Sport sub-segment of the large-displacement motorcycle market.

DMH, which operates under the trademark Ducati, was incorporated in Italy on May 29, 1996, as a società per azioni, or a company whose capital is represented by shares.  Our registered and administrative office is located at Via A. Cavalieri Ducati 3, 40132 Bologna, Italy.  Our telephone number at this office is +39-051-641-3111.  Our agent in the United States is Ducati North America, Inc. (Ducati North America).  Ducati North Americas address is 10443 Bandley Drive, Cupertino, CA 95014-1912, and its telephone number is (408) 253-0499.

Our predecessor was founded on July 4, 1926, when Antonio Cavalieri Ducati and his three sons established one of the first companies in Italy to manufacture radios and electrical components.  In 1935, Ducati moved his company to a modern, purpose-built factory at Borgo Panigale, outside Bologna, where we manufacture motorcycles today.  In 1947, our predecessor began production and distribution of motorcycles, which rapidly developed a reputation for high-performance, technical excellence and racing success.  During the 1950s, Ducati manufactured a series of increasingly powerful motorcycles, including a number of models developed by the famous Ducati engineer, Fabio Taglioni.  Taglioni adapted for use on motorcycles the Desmodromic valve control system, a signature (although unpatented) Ducati technical feature that can be found on every motorcycle we produce today.

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As a result of their superior performance characteristics, Ducati motorcycles rapidly achieved success in international racing competitions.  A 125cc Grand Prix was runner-up in the 1958 World Championship and the 250cc Mach 1 motorcycle, introduced in 1964, was among the fastest 250cc roadsters available at the time.  In 1972, a Ducati 750 GT prototype won a dramatic victory in the Imola 200 race, establishing the reputation of a new Ducati engine for high-performance and racing success.  This engine, called the L-twin, was comprised of two cylinders mounted at a 90-degree angle to form a unique L-shaped design, a configuration that, combined with a Formula One-inspired tubular trestle frame, proved successful in racing and in road use.  Following the Imola victory, Ducati commenced production of a series of larger displacement motorcycles using the L-twin engine.  These
motorcycles formed the foundation of the modern Ducati motorcycle lines and enjoyed a high degree of success on world racing circuits, culminating in Mike Hailwoods historic 1978 victory on a Ducati 900 Super Sport in the Isle of Man race.  Despite its technical excellence and racing success, Ducatis fortunes declined sharply in the early 1980s, primarily as a result of the decision by the major shareholder at the time, a state-owned industrial concern, to shift Ducatis focus to products other than motorcycles, principally small diesel engines.

In 1985, Cagiva S.p.A., an Italian manufacturing conglomerate (together with its subsidiaries, Cagiva) acquired the Ducati brand and related business.  Cagiva reinvigorated the Ducati brand by refocusing on Ducatis tradition of building high-performance racing motorcycles.  Under Cagivas ownership, Ducati motorcycles reinforced their reputation for excellence on and off the racetrack.  In March 1987, Marco Lucchinelli triumphed on a Ducati Ottovalvole 851 prototype in the Daytona Battle of the Twins competition.  In 1990, Raymond Roche rode a Ducati 888 to victory in the World Superbike Championship, the first time a Ducati two-cylinder engine motorcycle successfully challenged a four-cylinder engine produced by our Japanese competitors.  Beginning in 1995, however, liquidity problems at Cagiva unrelated to the Ducati motorcycle business
resulted in significant production delays and reduced sales.

In 1996, DMH was formed by a group of investment funds known as Texas Pacific Group (TPG) and Deutsche Morgan Grenfell (DMG) to acquire the Ducati brand name, trademark and related intellectual property rights from Cagiva.  Cagiva contributed the other assets and liabilities associated with the Ducati business to DMH in exchange for shares issued to Cagiva representing 49.0% of DMHs total issued and outstanding shares.  Following these transactions, TPG and DMG indirectly owned, in the aggregate, 51.0% of the shares of DMH.  On July 30, 1998, TPG and DMG through their affiliates, together with a third investor, acquired the remaining 49.0% of the shares of DMH owned by Cagiva.

Beginning in late 1996, we successfully implemented a focused turnaround program, which included:  restarting the supply process; substantially increasing our investment in working capital to increase production and relaunch our research and development efforts; installing a new management team; rebuilding our sales, marketing and public relations departments and revamping our corporate image; initiating plans to streamline our assembly process; establishing a quality control process; taking control of distribution in key markets; and successfully introducing new models and new versions of our motorcycles.

In March 1999, DMH completed an initial public offering of 90,200,000 shares, of which 17,000,000 shares were issued by DMH and 73,200,000 shares were sold by the selling shareholders in the initial public offering.  As a result of the initial public offering, TPG reduced its holdings in DMH from 72.0% to 34.8%.  In connection with the initial public offering, our shares were listed on Telematico and our ADSs were listed on the New York Stock Exchange.

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In April
2001, our shares began trading on the Segmento Titoli con Alti
Requisiti (the Segment for Equity with High Standards, or STAR)
of Telematico.  This segment was created by Borsa Italiana S.p.A. for
small- and medium-sized companies that operate in traditional sectors of the
economy and meet stricter requirements relating to transparency, liquidity and
corporate governance than those usually required for listing on the Telematico
so that such companies can achieve greater market visibility.  As part of
the STAR admission requirements, we appointed Mediobanca to act as specialist
for our shares.  The specialist is required to take a number of actions
intended to support the market for our shares and to facilitate the
communication of information about us to investors.

On February 28, 2006, TPG Motorcycle Acquisition L.P. (TPG Acquisition), a limited partnership that is part of TPG, agreed to sell to Investindustrial Holdings S.A. (Invind Holdings) (or companies designated by it) a stake representing 30% less one share of our share capital at a price per share of 0.85 euro.  After the designation by Invind Holdings on March 27, 2006, the shares were purchased by WM (24,821,919 shares, equivalent to 15.58% of our share capital), WM II (11,144,047 shares, equivalent to 6.99% of our share capital) and WM III (11,842,044 shares, equivalent to 7.43% of our share capital).  For more information about Invind Holdings and WM, WM II and WM III, see Item 7.  Major Shareholders and Related Party TransactionsMajor Shareholders.  On April 4, 2006, TPG Acquisition sold its remaining stake in Ducati (approximately 3% of
our share capital) in open market transactions.

Following the purchase by WM, WM II and WM III and in light of negative market developments and unsatisfactory results, our management formulated a three-year business plan, which was approved by our board of directors on April 13, 2006.  The primary objective of this plan is to improve our margins and generate cash flow by increasing sales of motorcycles in the high end of our product range and reducing our overhead and operating costs.  For a description of the 2006-2008 business plan, see 
Business Overview
Business Strategy
2006-2008 Business Plan.

As contemplated in our 2006-2008 business plan and approved by the board of directors at its meetings on April 13 and May 4, 2006, we successfully completed an  80,000,000 capital increase in June 2006.  This capital increase was achieved through an offering of 160,343,960 subscription rights (representing the right to subscribe for 160,343,960 shares) to shareholders of DMH.  From May 8 to May 26, 2006, DMH shareholders exercised a total of 158,579,839 subscription rights and subscribed for the related 158,579,839 shares.  The 1,764,121 subscription rights that remained unexercised at the end of this period were sold on the Borsa Italiana between June 5 and June 9, 2006, and the related 1,764,121 shares were subsequently subscribed.

Following the completion of the capital increase, as of June 23, 2006, 320,687,920 of our ordinary shares were outstanding.

Business Overview

We produce motorcycles in six model lines, which vary in their technical and design features and intended customers:  Superbike, Super Sport, Sport Naked, Sport Touring, Multistrada and Sport Classic.  We sell our motorcycles and related products in 61 countries worldwide, with a primary focus on the Western European and North American markets, which together accounted for approximately 84.0% of our revenues in each of the last two years.  In 2005, no single country accounted for more than 15.0% of our revenues from motorcycles and related products, with the exception of Italy, which accounted for 27.8%.  The United States and Canada accounted for 18.8% of our revenues from motorcycles and related products.  We have a global distribution network directly controlling our Italian sales and operating wholly owned distribution subsidiaries in North America, France, Germany, the
Benelux countries (also responsible for Sweden and Norway), Japan and the United Kingdom.  Our manufacturing operations, based in Bologna, Italy, consist primarily of engine and motorcycle assembly and are not vertically integrated, resulting in a relatively low fixed cost structure.

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Competitive Strengths

We believe that the following competitive strengths should be the basis for our future strategies:

Focused Market Niche Strategy.  Founded in the Ducati racing heritage, our product development effort is primarily focused on racing-derived motorcycles.  This focus gives us a strong competitive position in our targeted market niche of high-performance sport motorcycles.  We estimate that our worldwide market share in our target market has grown from 4.0% in 1996 to 4.4% in 2005.  We remain loyal to our original market for uncompromised, high-performance sport motorcycles, a position recognized by our customers, motorcycle enthusiasts, the press and the industry at large.

Global Brand Strength.Our well-defined market positioning and unique brand character, combined with the international success of our motorcycles in the World Superbike Championships, the MotoGP Championship and other international racing events, promote awareness of the Ducati brand around the world.  The Ducati brand is recognized globally for large-displacement, high-performance sport motorcycles and is associated with innovative design, advanced engineering and racing success.  We also reach Ducati enthusiasts all over the world through our website.

Technical Excellence and Performance Superiority.Ducati motorcycles excel on the racetrack because of their superior handling characteristics and usable power.  We believe that our motorcycles have a reputation for advanced engineering and overall technical excellence.  This reputation has developed as a result of decades of consistent design and technical innovation at Ducati, including such signature features as the Desmodromic valve control system, the L-twin engine and the tubular trestle frame.

Strong Manufacturing Fundamentals.Our manufacturing operations are not vertically integrated and have a relatively low fixed cost structure.  We assemble our motorcycles and engines and manufacture only two strategically important components, crank cases and cylinder heads.  We also use a relatively large number of key common components, particularly high-cost engine components, and employ flexible production processes that we believe are well suited to our current and anticipated production volumes.

Business Strategy

Our business plan for 2006-2008 and other strategic initiatives to increase our sales and profitability, are described below.

2006-2008 Business Plan.

The 2006-2008 business plan focuses on offering high-end motorcycle models and reducing our overhead and operating costs.  The plan also calls for improvements to our production plant and its technological research facilities, as well as to our computerized resource planning system (ERP).  The principal strategies outlined in the 2006-2008 business plan are discussed below.  For discussion of the financial aspects of the plan and the financial projections contained therein, see Item 5.  Operating and Financial Review and ProspectsTrend Information.

During the three-year period covered by the business plan, we intend to renovate our product offering by: (i) launching five new models; (ii) continuously renovating existing models; and (iii) eliminating several models that have reached the end of their product lifecycle.  We also plan to attract new customers using the Monster 695 as an entry model to Ducati motorcycles.  In order to improve the financial capacity of dealers and encourage the launch of new models, the business plan calls for a reduction in the inventory held by our distribution network.  As a result of this reduction, we anticipate that sales of Ducati motorcycles will be below the number of motorcycles registered in 2006 and 2007.  In addition to this focus on our product offering, the 2006-2008 business plan calls for the reduction of operating costs through the implementation of new global sourcing
policies.  These policies are aimed at reducing product costs and improving quality through the careful selection of suppliers.  The plan also provides for corporate restructuring in order to reduce personnel costs.

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We formulated our 2006-2008 business plan, and the forward-looking data it contains, on the basis of certain assumptions about external factors that are beyond the control of our management, as well as assumptions about the feasibility of certain strategic operating measures that management has some ability to control.  For a description of the risks relating to the implementation of the 2006-2008 business plan and the uncertainties surrounding the assumptions on which this plan is based, as well as the forward-looking data contained in the 2006-2008 business plan, see Item 3.  Key InformationRisk Factors.

Other Strategies

In addition to the 2006-2008 business plan, Ducati plans to undertake other strategic initiatives to increase its financial outcome and economic position.  These measures are described below.

Maintaining our market position.  We intend to maintain our strong niche position in the Sport segment of the >500cc Market, which is due to our great tradition of technical excellence, innovative design, advanced engineering solutions and racing success.

Strengthen our distribution network.  Our distribution strategy is aimed at improving our wholesale and retail distribution networks while increasing our contact with retail customers and better understanding their needs.  In carrying out our strategy, we:  (i) have taken direct control of distribution in strategic markets by establishing wholly owned sales and marketing subsidiaries; (ii) have appointed new distributors in markets in which we have previously been inactive and evaluate each year whether to further expand our distribution network to new markets; (iii) have implemented regular efficiency controls of our distributors and replace on an on-going basis those under-performing distributors; and (iv) have introduced Ducati stores in selected markets throughout the world (160 Ducati stores were open at December 31, 2005, as compared with 151 Ducati stores open at December 31, 2004).  We believe that a more efficient
and competitive distribution network will be a key factor driving future increases in our market share.

Strengthen OurGlobal Brand.  We intend to continue to pursue a coordinated marketing effort to reinforce the traditional strengths of the Ducati brand and to increase the visibility of the Ducati name.  We have adopted internationally uniform corporate logos, graphics and lettering, and marketing and promotional materials and have launched a number of international advertising campaigns, set up the Ducati Museum at its headquarters in Bologna, established an official Internet site and organized the World Ducati Week in Bologna in 2004 with more than 45,000 Ducati enthusiasts attending.  We also intend to continue to seek to extend media coverage of the Ducati brand beyond the traditional motorcycle sector press.  We believe that our marketing strategy will further increase brand awareness and customer loyalty.

Expand Our Product Offering.  We intend to continue to develop and expand our offering of motorcycle-related products.  These products include technical riding gear (such as helmets, leather suits and gloves), apparel (such as T-shirts, sweatshirts and leather jackets), performance and custom accessories and a wide range of other merchandise.

Increase Our Production Efficiency.  We are continuing to rationalize our manufacturing processes to reduce complexity and increase production efficiency.  In particular, we have continued to refine our production process to increase the use of components common to multiple models and to reduce costs through purchasing leverage and component co-design with key suppliers.

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Growth of Our Internet Business.  We intend to increase revenue through the on-line sale of Ducati products.  We also intend to continue improving the function and content of our website, which is an important means of communication and marketing for us.

Organizational Structure

DMH designs, manufactures and distributes Ducati-branded motorcycles, spare parts and apparel.  DMH has six direct, wholly owned subsidiaries engaged in the regional distribution of Ducati motorcycles and other products:  Ducati North America, Ducati France S.A.S. (Ducati France), Ducati Motor Deutschland GmbH (Ducati Motor Deutschland), Ducati North Europe B.V. (Ducati North Europe), Ducati Japan Ltd. (Ducati Japan) and Ducati U.K. Limited (Ducati U.K.).  In addition, DMH owns Ducati Corse, the Ducati racing subsidiary, as well as Ducati Retail S.r.l. (Ducati Retail) and Ducati Consulting S.r.l. (Ducati Consulting), all as described in more detail below.

The following chart illustrates our organizational structure as of the date of this annual report, including the country of incorporation of each subsidiary.

Message

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We renamed our subsidiary Ducati Benelux B.V. as Ducati North Europe as of February 11, 2004.

On April 14, 2004, we formed Ducati Retail, a subsidiary held 99.0% by DMH and 1% by Enrico DOnofrio, Finance Director of DMH.  Ducati Retail makes retail sales of Ducati-branded clothing, accessories, spare parts and other items in areas not covered by the traditional distribution network and also provides mechanic services and sells spare parts.

On May 6, 2004, we formed Ducati Consulting, a majority-owned subsidiary (85% held by DMH, with the remaining interests held by two then-DMH executives and a then-member of DMHs board of directors) that provides consulting and logistics services to all of the Ducati Group companies, as well as to our suppliers and other manufacturers.

In December 2004, Ducati.Com S.r.l., a subsidiary formed in July 2000 to focus on our internet initiatives, was merged into DMH with the aim of making organization and management more efficient (in particular, in respect of treasury management, legal and administrative functions).  As a result of this merger, Ducati Corse, which had been held 99% by DMH and 1% by Ducati.Com S.r.l., became a wholly owned subsidiary of DMH.

Products and Distribution

The World Motorcycle Market

In 2005, total world motorcycle registrations were estimated at 1.2 million units, including all motorcycles and scooters with engine displacements greater than 500cc registered in the United States, Western Europe, Japan and Australia.  We view the world motorcycle market as divided into four main segments:  motor scooters, off-road motorcycles, road motorcycles with engine displacements of less than 500cc and road motorcycles with engine displacements of 500cc or greater.  Other subdivisions of the world motorcycle market exist and there is no universally recognized system for classifying this market.

We believe that the >500cc Road Market may be further segmented into Cruiser, Touring, Dual, Naked and Sport sub-segments.  The Cruiser sub-segment comprises heavy motorcycles with a classic American design typically featuring heavy use of chrome components and twin-cylinder V engines.  The Touring sub-segment comprises motorcycles designed for comfortable, long-distance travel, while the Dual sub-segment comprises motorcycles designed for on and off-road riding.  The Naked sub-segment comprises motorcycles totally or partially without body panels.  The Sport sub-segment principally comprises motorcycles built for, or, inspired by, racing.

We currently compete primarily in the Sport sub-segments of the >500cc Road Market.

The Sport sub-segment is divided into four main groupings:  Superbike, Sport Naked, Super Sport and Sport Touring.  Superbike motorcycles are racing-derived and equipped with the most powerful engines and the latest technical advances and are targeted at riders desiring a bike that is similar to those used on international professional racing circuits.  Sport Naked motorcycles are principally characterized by the absence of fairing so as to leave the engine exposed and reduce overall weight of the motorcycle.  Super Sport motorcycles feature classic design and are targeted at riders interested in balancing horsepower with greater rideability.  Sport Touring motorcycles combine the engine power of motorcycles in the Sport sub-segment, with the long-range driveability and features of Touring motorcycles, and are targeted at customers who are interested in comfortable, one- or
two-rider bikes for traveling over relatively longer distances.

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Motorcycle Lines

We manufacture and distribute six high-performance lines of motorcycles across the Naked, Sport and Dual sub-segments of the >500cc Road Market:  Superbike, Super Sport, Sport Naked, Sport Touring, Multistrada and Sportclassic.  Motorcycle sales accounted for 77% of our revenues in 2005, as compared to 79% in 2004 and 81% in 2003.  We manufacture multiple models within our six product lines, which are differentiated primarily by their engine capacity, fairing and color schemes.

All of our motorcycles share several design features that are closely associated with the Ducati brand and serve to distinguish Ducati motorcycles from those of our competitors.  All Ducati motorcycles are equipped with the Desmodromic valve control system, a dual camshaft mechanism that we believe allows more precise control of engine valves than traditional spring-based systems, improving power output and overall engine efficiency.  The Desmodromic system, which is not patented, eliminates valve float that can occur at very high engine speeds, thereby improving engine breathing and increasing engine performance.  The Desmodromic system also delivers power more smoothly over a broader revolutions per minute (rpm) range than traditional engines, which endows Ducatis two-cylinder engines with a key benefit of four-cylinder units  namely
consistent, usable power.  Ducati motorcycle engines are also built to the unique L-twin design, comprising two cylinders mounted at a 90-degree angle, a configuration that we believe allows for lighter weight and improved aerodynamics over the four-cylinder configurations of our competitors.  As a result of the engine design and the Desmodromic system, all Ducati motorcycles produce a deep, resonant engine sound that is a noted Ducati characteristic.

In addition, all Ducati motorcycles employ the tubular trestle frame traditionally associated with Ducati motorcycles.  We believe that the tubular trestle frame, which is inspired by Formula One automotive racing technology, increases the rigidity and strength of our motorcycles and allows for a more compact design architecture that facilitates greater speed and more precise handling.  We believe that these features, among others, contribute to the superior and distinctive performance of our motorcycles.  As part of our business strategy, all motorcycle models introduced in the future will likely maintain these signature technical characteristics.

Although they share the common characteristics described above, our individual product lines are distinguished by the following features:

Superbike.The Superbike is closely derived from the Ducati motorcycles currently competing in the World Superbike Championship.  Since the introduction of the first Ducati Superbike, the 851, in 1987, we have continuously upgraded the technology and power of this motorcycle.  The 851 was based on custom-built championship racing bikes modified to meet government safety and noise standards.  With the success of the 851, we extended the Superbike range to include the 916 and the 748, introduced in 1993 and 1994.  The 916 won several worldwide awards, including four motorcycle of the year awards from Motor Cycle News (MCN) magazine.  For model year 1999, we launched the 996 to replace the 916.  The 996 features a 996cc liquid-cooled, four-valve twin engine.  For model year 2000, we introduced two new versions of the 748 Superbike,
one with a more powerful engine and another in a special racing version.  For model year 2001, we introduced the 996R Testastretta (meaning compact head), which features a 998cc engine.  For sale in model year 2002, we launched the 998R Testastretta, a radically redesigned Superbike that offers a more powerful engine and is more aerodynamic that its predecessors.  The 998R Testastretta was nominated Sports Motorcycle of the Year by German magazine Motorrad, Europes leading motorcycle publication.  For model year 2003, we launched the new 999, a radically redesigned Superbike with an improved Testastretta series engine, which is lighter and more aerodynamic than its predecessors.  For model year 2004, we launched the 749R, with a Testastretta series engine and chassis specifically developed to ensure top competitiveness on the racetrack.  The 749R completes the Superbike range and marks Ducatis return to the World Supersport
Championship.  All Superbike motorcycles can reach speeds in excess of 250-270 kilometers (155-170 miles) per hour and have a compact design and slim silhouette designed to provide superior handling at such speeds.

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For model year 2005, the Superbike family received a facelift which included a new front fairing, new side fairing and front shield and a new mudguard. With regards to technical changes, the 999 model received an upgraded engine, previously only mounted on the 999S, while the 999S received an upgrade in its suspension system.  We sold 6,094 Superbike motorcycles in 2005, representing 17.6% of total units sold and 27.8% of total revenues from motorcycles, compared to 10,213 Superbike motorcycles in 2004, representing 27.9% of total units sold and 40.6% of total revenues from motorcycles. The decrease in revenues of Superbike motorcycles is attributable primarily to the decrease in sales in the low end of the range of this product line, in particular the 749 model, and to the absence of the 998 Final Edition model, which was sold only in 2004.

Super
Sport.Our Super Sport motorcycles are characterized by their light
weight, superior handling and tight cornering ability, as well as by their
classic design and engineering features.  Ducati Super Sport motorcycles
are fitted with our traditional two-valve twin engine, nicknamed the
Pompone (which means strong pump) by Ducati enthusiasts,
and are aimed at riders that prefer improved handling and smooth power delivery
to maximum horsepower.  Ducati launched its first Super Sport motorcycle in
1973.  Over two decades, the Super Sport line has undergone a series of
design and technical updates while retaining its essential
characteristics.  In April 1998, we launched a new model in the Super Sport
line, the 900SSie, for sale the following year.  In January 2000, we sold
2000 units of the limited edition MH900 evoluzione exclusively
over the internet (all of which were delivered by the spring of 2003).  In
addition, we launched a 750cc version of the 900SS for model year 1999 and, for
2001 and 2002, respectively, we launched new, matte black versions called the
750 and 900 Sport.For model year 2003, we introduced a 620cc
version and upgraded the 750cc and 900cc engines of our Super Sport motorcycles
to 800cc and 1000cc dual spark engines, which have two spark plugs per cylinder,
offering extra reliability, increased power and lower emissions.  However,
for model years 2004 and 2005, following a decline in demand and sales volumes
for this line, we eliminated all models in this line other than the
1000cc.  We sold 1,030 Super Sport motorcycles in 2005, representing 3.0%
of total units sold and 2.5% of revenues from motorcycles, compared to 1,426
Super Sport motorcycles in 2004, representing 3.9% of total units sold and 3.0%
of total revenues from motorcycles. The decrease in revenues of Super Sport
motorcycles is attributable primarily to the mature stage in the product
lifecycle of the models in this product line.

Sport Naked (or Monster).The motorcycles in the Sport Naked  or Monster  line are designed for the urban rider seeking superior bike performance.  The principal design characteristic of the Monster is its total absence of any fairing so as to leave the engine exposed and reduce the overall weight of the motorcycle.  The Sport Naked line was launched in 1993 and was an immediate success.  The Monster 620 i.e., featuring unusual lightness and an engine with electronic injection, was introduced in 2001 to renovate the Monster 600.  In 2003, we further updated the engines in the Monster bikes by introducing the 800cc and 1000cc to replace the previous 750cc and 900cc.  The Monster line was subsequently expanded to include new models designed to meet special market needs: the Monster Dark and the Monster S4 model with a 916cc engine.  The
Monster S4R was also subsequently introduced with the 996 Desmoquattro water-cooled engine taken from the competition 996, which is the most powerful engine ever made, and a frame modified to radically differentiate the it from the Monster S4.  At the end of 2004, the S2R was launched with the 800cc engine originating directly from the Monster S4R.  The S2R 1000 model, the sporty and powerful model in the SR series, was presented in September 2005 and followed by the S4Rs Testastretta and Monster 695 in early 2006.  The S4Rs Testastretta boasts a more powerful engine resulting directly from our experience in the Superbike World Championship, and the Monster 695 is an evolution of the basic 620 version.  We sold 16,585 Sport Naked motorcycles in 2005, representing 48% of total units sold and 38.7% of total revenues from motorcycles, compared to 18,027 Sport Naked motorcycles sold in 2004, representing 49.3% of total units sold and 37.8% of total revenues from motorcycles.  The
decrease in revenues of Sport Naked motorcycles is attributable primarily to the drop in sales of the M620 and S4R models, which was partly set off by the success of the new S2R model, which recorded sales of more than 9,700 units in 2005.

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Sport Touring.Our Sport Touring line serves a group of consumers who desire the speed, handling and styling of a Ducati, but prefer a more comfortable ergonomic configuration for longer rides.  In addition, the ST2 has a more comfortable second seat to accommodate a passenger and is equipped with two side bags.  We introduced the Sport Touring line in April 1997 with the ST2, which won the 1997 MCN magazine Sport Tourer of the Year award.  For model year 1999, we launched the ST4, a more powerful and technically advanced four-valve per cylinder version of the ST2.  For model year 2001, we introduced the ST4S with a 996cc engine, and for model year 2002, we introduced a version with an Anti-lock Brake System (ABS).  For model year 2004, we launched the ST3, which features a new three-valve engine.  For model year 2005, we made only minor adjustments
to the Sport Touring family, such as a new, easier-to-use wet clutch and an additional available color, black.  We sold 1,397 Sport Touring motorcycles in 2005, representing 4% of total units sold and 4.5% of total revenues from motorcycles, compared to 2,996 Sport Touring motorcycles in 2004, representing 8.2% of total units sold and 8.1% of total revenues from motorcycles. The decrease in revenues of Sport Touring motorcycles is attributable primarily to reduced sales of the ST3, whose launch in 2004 had generated high demand among dealerships and retail customers.

Multistrada.In September 2001, we first showed a prototype of our fifth family of motorcycles called the Multistrada.  The first model, the Multistrada 1000 Dual Spark, went into production in April 2003.  The motorcycle is a multipurpose sportsbike offering Superbike performance in a more comfortable design with a more upright position and a new dual spark, air-cooled 1000cc engine.  Following the success of the initial Multistrada model, 2005 saw the introduction of a smaller version equipped with a two-valve 620cc engine, as well as an improved 1000 version with an upgraded suspension system and higher quality components. In addition, smaller technical changes were made in an effort to further improve overall comfort and versatility.  We sold 6,156 Multistrada in 2005, representing 17.8% of total units sold and 15.8% of total revenues from motorcycles, compared to
3,898 Multistrada in 2004, representing 10.7% of total units sold and 10.5% of total revenues from motorcycles.  The increase in sales of the Multistrada motorcycles in 2005 as compared to 2004 was primarily attributable to the introduction of the new MTS 620 and MTS 1000S models.

Sport Classic.We presented the prototypes of the Sport Classic, our sixth line of motorcycles, to the press and public in October 2003.  This motorcycle line, which is reminiscent of classic Ducati motorcycles but features todays technology, was conceived and developed based on online research of the interests of Ducatis fans.  The first Sport Classic is the Paul Smart 1000 Limited Edition, which went into production in September 2005.  This motorcycle, featuring front and rear Ohlins suspension and painted in the silver and green color scheme similar to the original Ducati 750 Super Sport, is inspired by the bike that Paul Smart rode to victory in the Imola 200 race in 1974.  It shares the same technology as our other motorcycles, distinguishing itself by its 1970s look.  The Paul Smart 1000 was followed by the 1000 Sport and the 1000 GT, which
went into production in October 2005 and in April 2006, respectively.

The gross profit (in thousands of euro) and the gross profit margin (in percent) for the years 2004 and 2005 for each of our motorcycle lines is listed below.  The gross profit margin is a percentage calculated by dividing gross profit by related revenues:

|                                          |  | Year Ended December 31, |       
|----------------------------------------- |  | ----------------------- | ------
|                                          |  |                         |       
|                                          |  | 2004   Gross Profit     |       
|                                          |  |                         |       
|                                          |  | /000                   |       
|Superbike                                 |  |                         | 25,465
|Super Sport                               |  |                         | 881   
|Sport Naked                               |  |                         | 10,988
|Sport Touring                             |  |                         | 3,215 
|Multistrada                               |  |                         | 4,275 
|Sport   Classic                           |  |                         |      
|Total Motorcycle Product   Lines /Average |  |                         | 44,824
|Total Gross Profit/Average                |  |                         | 86,651

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The current suggested retail prices in Italy for our motorcycles range from 6,995 for the Monster Dark 620cc motorcycle to 30,000 for the Superbike 999R.  Each Ducati motorcycle sold is covered by a two-year warranty.

In addition to these six motorcycle lines, we manufacture custom racing motorcycles for our official teams, as well as for private race teams, professional riders and racing enthusiasts who compete without direct factory support.  We sold 12 custom racing motorcycles in 2005, 14 in 2004 and 18 in 2003.  We continue to believe that selling racing motorcycles serves to reinforce Ducatis reputation as a leader in high-performance motorcycle technology.  The design and manufacturing of racing motorcycles allow our experienced research and development team to test new technical innovations and design features.

Motorcycle-Related Products, Services and Licensing

In addition to our high performance motorcycles, we offer spare parts, Ducati Performance accessories, technical riding gear and enthusiast apparel and merchandising.  We also organize a number of events to encourage fans to join the World of Ducati, such as riding schools, classic rallies around Italy, online competitions, and Ducati tour and rental programs.

Spare Parts.We produce spare parts to service Ducati motorcycles in circulation.  We have outsourced the physical movement and storage of our spare parts in Europe to Saima Avandero S.p.A., an Italian logistics company.  We manage our spare parts catalogue and order processing electronically.

Ducati Performance Accessories.A popular trend among many Ducati owners is to replace motorcycle components with custom-made accessories to increase the individuality of their motorcycles.  We currently design and distribute a wide range of Ducati parts and accessories (some of which are approved only for racing use) under the Ducati Performance trade name, including custom-painted gasoline tanks, specialized exhaust systems, fenders, fairings and carbon fiber parts and accessories.

Technical Riding Gear and Enthusiast Apparel.Ducati entered into collaboration and supply agreements with leading companies in the motorcycle apparel sector, including Dainese and Suomy, to develop a line of apparel with the Ducati trademark.  The line includes jackets, suits, gloves, boots, helmets and protective garments, in addition to other sport wear.  The Company also markets a line of products of motorcycling enthusiasts, including T-shirts, caps and other items.  These articles are all sold through the Ducati distribution network and in Ducati Stores.  The same products are also sold at stores at the Ducati museum, the Bologna airport and the Ducati Factory Outlet at Borgo Panigale through the Ducati Retail subsidiary company.  Furthermore, in line with our strategy to expand into new selected markets, in April 2005 we announced our entry into the Chinese
market through a long-term partnership agreement with a Chinese company that has started to distribute Ducati articles of clothing through a newly opened store in Shanghai.

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Licensing.We license the Ducati trademark and other trademarks to leading companies selected to manufacture and sell products inspired by the world of Ducati motorcycles.  We have entered into a number of contracts with companies working in various sectors, including publishing, apparel and accessories, perfumery, models, stationery and school supplies, toys and videogames.  We have entered into an agreement with the licensee of the Ermenegildo Zegna trademark for the production and sale of a Zegna-Ducati fragrance; with the holder of the Costume National trademark for production of the CNC line, which is designed for the urban rider; with Tumi Inc. to create a collection of luggage and accessories bearing the Ducati and Ducati Corse trademarks; with Rockstar Games NYC for the creation of videogames; with Ride Now
Motorcycle Tour Operator to organize motorcycle trips and outings under the name Ducati Tours; with Oakley Sales Corp. for the production of Oakley eyewear bearing the Ducati trademark; with the holder of the CHICCO trademark, Sonic International Toys Ltd., Maisto (May Cheong Toy Products Ltd.), New-Ray Toys Development Ltd., Pauls Model Art Gmbh, Peg Perego S.p.A. and Italeri S.p.A. to manufacture toys and models bearing the Ducati trademark; with Ediciones Altaya S.A. and Hachette Fascicoli S.r.l. to produce publications on Ducati motorcycles; with Accademia S.r.l. and Aquila Brand S.p.A. to manufacture stationery and school products with the Ducati trademark; and with Vir2 Studios LLC and Spike CO Ltd. for the production of videogames in which images of Ducati motorcycles are used and reproduced.  These licenses are intended to increase awareness of the Ducati brand and to provide an expanded source of revenue.

Events and services.  A small part of our income is related to events that we organize to encourage fans to join the World of Ducati, such as riding schools, classic motorcycle rallies around Italy, online competitions and Ducati promotional tours.  See Marketing activities.

The gross profit (in thousands of euro) and the gross profit margin (in percent) for the years 2004 and 2005 for our motorcycle-related products, services and licensing is listed below.  The gross profit margin is a percentage calculated by dividing gross profit by related revenues.

|                                                      |  | Year Ended December 31, |       
|----------------------------------------------------- |  | ----------------------- | ------
|                                                      |  |                         |       
|                                                      |  | 2004   Gross Profit     |       
|                                                      |  |                         |       
|                                                      |  |                         | /000 
|Motorcycle-Related   Products, Services and Licensing |  |                         | 41,827
|Total Gross Profit/Average                            |  |                         | 86,651

Market Share and Competition

We compete primarily in the Sport sub-segment of the >500cc Road Market.  Our principal competitors are four Japanese manufacturers (Honda, Suzuki, Yamaha and Kawasaki), two European manufacturers (BMW and Triumph) and, to a more limited extent, Harley-Davidson of the United States.  Harley-Davidsons Buell subsidiary produces motorcycles that compete with our Sport Naked motorcycles.

Our Japanese competitors are generalist manufacturers competing in all segments of the motorcycle market, from scooters to large-displacement off-road and on-road motorcycles.  BMW and Triumph manufacture motorcycles for various sub-segments of the >500cc Road Market.  Like Ducati, Harley-Davidson focuses on a niche market, in particular the Cruiser sub-segment of the >500cc Road Market, although it also has a limited offering of Sport Naked motorcycles through its Buell subsidiary.

Worldwide registrations of Ducati motorcycles were 35,887 in 2004 and 34,631 in 2005.  The historical worldwide trend of Ducati registrations can mask significant regional variations.  From 2004 to 2005, Ducati registrations increased significantly in the United States (up 26%) and Spain (up 43%) and more modestly in those countries not served by commercial subsidiaries (up 4.5%) and France (up 1.5%), and decreased in Germany (down 15%), Japan (down 5.5%), the Benelux countries (down 17%), the United Kingdom (down 16%) and Italy (down 15%). For a discussion of the relationship between registrations and retail sales, see Item 5. Operating and Financial Review and Prospects Introduction.

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Honda, Suzuki, Yamaha and Kawasaki all have substantially greater worldwide market shares than we do.  Based on available registration data, we estimate that these companies had approximately the following market shares of the Sport segment of the >500cc Road Market worldwide in 2005:

|         |  | 2005   worldwide %
       of Sport sub-segment   of >500cc Road Market |     
|-------- |  | ---------------------------------------------------------------------- | ----
|         |  |                                                                       
|Company  |  |                                                                       
|         |  |                                                                        |     
|Suzuki   |  |                                                                        | 25.1
|Honda    |  |                                                                        | 19.9
|Yamaha   |  |                                                                        | 18.6
|Kawasaki |  |                                                                        | 14.0

We estimate that Triumph and BMW have a market share of approximately 3.2% and 9.1%, respectively.

Our market share varies among our motorcycle lines comprising the Sport sub-segment of the >500cc Road Market.  In 2005, we estimate that we had approximately a 2.8% global share of our historical core market for Superbike and Super Sport motorcycles, as compared to 3.7% in 2004, reflecting the fact that we did not launch any new Superbike nor Super Sport models in 2005, and approximately a 6.1% global share of the market for Naked motorcycles, compared to 6.4% in 2004, reflecting increased competition from new models launched by our Japanese competitors.  We estimate that we had approximately a 5.9% global share of the market for Sport Touring motorcycles in 2005, compared to 7.4% in 2004, decreased demand for the ST3 model following its launch in 2004.  We estimate that we had approximately a 3.9% global share of the market for dual motorcycles in 2005, compared to 2.8% in 2004, due to



the success of the new models introduced in the Multistrada family.

Our market share also varies significantly across geographical areas.  We estimate that we had the following market shares in 2005 in markets in which we have a commercial subsidiary: 8.5% in Italy, 3.4% in the United States, 4.5% in Japan, 2.8% in Germany, 4.0% in France, 3.3% in Great Britain, 5.1% in the Netherlands and 6.0% in Belgium.

Unit sales showed varying trends in our principal geographic markets, with increases in the United States (up 33.4%), Japan (up 9.7%) and France (up 9.3%), substantially unchanged sales in Germany (up 0.3%) and decreases in the countries served by importers (down 4.5%), the United Kingdom (down 6.9%), the Benelux countries (down 16.3%) and Italy (down 27.4%).

Market estimates in this annual report are based on our analysis of registration data obtained from published sources, as well as of our internal dealer data and surveys commissioned by us.  See Presentation of Financial and Other Information, at the beginning of this annual report.

The following
table gives a breakdown of the revenues from motorcycles and related products in
our principal markets in the last two financial years:

|                        |  | Year Ended   December 31,     |        
|----------------------- |  | ----------------------------- | -------
|                        |  |                               |        
|                        |  | 2004                          |        
|                        |  |                               |        
|                        |  | (euro   amounts in thousands) |        
|Italy                   |  |                               | 120,070
|United States           |  |                               | 56,051 
|Germany                 |  |                               | 27,284 
|Japan                   |  |                               | 26,364 
|United Kingdom          |  |                               | 23,370 
|France                  |  |                               | 29,507 
|Other foreign countries |  |                               | 80,713 
|Total                   |  |                               | 363,359

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Seasonality of Our Business

Worldwide motorcycle sales and registrations are seasonal, peaking during March through May and April through June, respectively.  During 2005, we recorded 59.6% of our revenues during the first six months of the year.  Our motorcycle production levels are relatively stable throughout the year (excluding annual shutdown periods for the month of August and the last two weeks of December).  Consequently, we experience periods of inventory build up from September through February in anticipation of the spring selling season.  Depending on market conditions and our commercial strategy, the level of inventory we hold or sell to importers and dealers at any time may change, as a result of which unit sales may be less seasonal than registrations.

Product Research and Development

The fundamentals of our product development include technical excellence, consistent use of Ducatis signature features, styling and continual innovation.  We believe that we can continue successful product development by leveraging an experienced engineering team, which spans three generations of engineering talent dating back to the Taglioni era, with recently acquired state-of-the-art technology.

Since 2003, our policy regarding research and development has been marked by continuity, consisting of studies and design activities aimed at acquiring knowledge and tangibly applying it to the creation and implementation of new products and to the technological improvement of existing products.

As part of our research and development program, we have adopted the following strategies: reducing, through the use of innovative materials, the weight of our motorcycles in order to reduce fuel consumption and polluting emissions, while at the same time increasing safety standards; improving the aerodynamics of our motorcycles in order to reduce fuel consumption and polluting emissions, while preserving the characteristic style and design that distinguish the Ducati brand; improving engine performance, while at the same time achieving a reduction of the noise level of fuel feed and exhaust systems; and researching new technical solutions relating to motorcycle bodies and engines in order to improve performance.

As part of our research and development program, we have entered into two research and development contracts with our subsidiary Ducati Corse.  These contracts deal specifically with the development of technical solutions for racing activities that can also be used for the production of Ducati motorcycles intended for retail sale.

In 2005, our research and development expenditures (capitalized and expensed) were 26.5 million (as compared to 19.3 million in 2004).

In connection with our research and development activities, we also received capital grants totaling approximately 3.7 million and subsidized loans for a total amount of approximately 9.6 million from the Italian Ministry for Productive Activities during 2004 and 2005.  These loans have a five-year term starting at the time of final approval of the technical and financial statements presented with regard to the period of validity authorized for each project.  These loans are found in a pre-amortization phase from the date of disbursement until the date of final approval of the technical and financial statements, generating interest payable for the Company but not the obligation repay the principal.

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Distribution

Distribution is a key element of our business and is crucial to increase market share and profitability.  Historically, Ducati distributed its motorcycles in Italy directly, through a network of retail dealers (typically multi-brand dealers), in the United States through a wholly-owned subsidiary and abroad through a series of independent distributors, each responsible for establishing its own network of retail dealers.  Dealers outside Italy and the United States would contract with a distributor rather than with Ducati.  In 1997 we implemented a distribution strategy aimed at both improving our wholesale and retail distribution networks and increasing our contact with, and understanding of our retail customer.  To achieve these objectives, we acquired direct control of wholesale distribution in strategic markets by forming wholly owned subsidiaries in charge of sales and marketing,
replaced certain wholesale distributors whose results were unsatisfactory and began commercial relationships with distributors in markets in which we were previously not present.  We also launched a restructuring of our dealer network in Italy and backed the opening of Ducati Stores in selected markets throughout the world.

Wholesale Distribution.Our wholesale distribution model is based
primarily on forming wholly owned distribution and sales subsidiaries, and we
now have wholly owned subsidiaries for the United States and Canada, France,
Germany, Belgium, Netherlands, Sweden, Norway, Japan, United Kingdom and
Ireland.  The establishment of additional wholly owned subsidiaries has a
number of important benefits, including (i) acquisition of profits that had
previously been earned by the independent distributors; (ii) formation of a
closer relationship with consumers, allowing us to better understand the needs
of our consumers and the motorcycle market in general; (iii) increased control
over the distribution process and more effective and coordinated marketing
activities; and (iv) because motorcycles are stored at, and shipped directly
from, our factory to retail dealers or distributors (except for the United
States and Japan), enhanced ability to redistribute inventory among various
markets and to meet demand peaks for the various models while reducing overall
logistical costs.

We sell our products through independent distributors in countries in which we do not have a wholly owned subsidiary.  We are normally bound to these distributors by exclusive distribution agreements, pursuant to which we grant the distributor exclusive rights to distribute Ducati products in the relevant territory.  The importer in turn undertakes (i) not to sell Ducati products outside the assigned territory; (ii) not to compete with Ducati by manufacturing or selling competing products, unless permitted by contract; (iii) to reach defined sales goals; and (iv) to provide Ducati with data concerning sales to dealers and retail customers, the official registration data in the relevant territory and information about trade policies and market data.  We continue to appoint new distributors in markets in which we have previously been inactive, and evaluate each year whether to further expand
our distribution network to new markets.

Retail Distribution.We intend to organize our retail distribution network around a centralized direct control hub in all countries where we are currently present and to expand our retail distribution network range of action abroad.

In Italy, we have restructured our retail distribution network, reducing the number of Ducati dealers, from 165 in 1996 to 64 in December 2005, while offering enhanced marketing and merchandising support.  The enhanced support for these activities is designed to encourage dealers to invest in and transform their dealerships into Ducati Stores, following the model discussed below.  This strategy is intended for our benefit and for the benefit of the dealers.  The dealers benefit from increased sales volume and improved profitability while we expect to benefit from a stronger and more uniform retail sales network for our motorcycles and other products.  This restructuring in Italy has also contributed to boosting sales and profits in Italy.  Based on this success in Italy, we have decided to adopt a similar model in foreign markets as well, commencing with in France, Germany and
Japan.  For geographic reasons, we have adopted a different strategy in the United States aimed at strengthening our wholesale distribution network.  As of December 31, 2005, there are approximately 800 Ducati dealers in operation around the world.

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Our relationships with Italian dealers are currently governed by standard contracts based on partial exclusivity and multi-brand arrangements.  Under these agreements, the dealer is awarded the right to distribute to a pre-determined number of parties within a given territory in exchange for its undertaking not to make or sell competing products and guarantee that certain sales volumes will be attained.  We are entitled to examine each dealers book and records regarding Ducati products in order to monitor the dealers efficiency and compliance with the terms of the distribution agreement.

Finally, we have developed a special design concept for dealers wanting to open Ducati Stores in selected markets around the world.  The Ducati Stores are centered on the Ducati brand and offer a customized and characteristic retail space as well as a high level of service and technical support.  Ducati motorcycles are the primary focus in the Ducati Stores and are supported by displays of Ducati Performance spare parts and accessories and the Ducati line of apparel.  In some Ducati Stores a History Wall displays images of Ducatis racing heritage and an Engineering Wall shows a large-scale engineering drawing of the 916 Superbike.  We provide Ducati Stores with a specialized design consultancy service but do not own any direct interest in the stores; Ducati Stores are operated pursuant to franchising agreements.  As of December 31, 2005, approximately



160 Ducati Stores are in operation around the world, 49 of which are in Italy.

Marketing Activities

While Ducati is fundamentally a motorcycle manufacturer, we are also the custodian of a valuable global brand.

Brand Development.We hold several important trademarks, including the world-famous Ducati trademark.  As early as 1996, we hired communication, public relations, advertising and marketing specialists and centralized coordination of marketing activities at our headquarters in Bologna.  In 2003, we created a dedicated marketing department within DMH to improve the organization and management of on-line, as well as traditional, marketing activities.  The department works to develop strategies to meet the needs of the growing number of Ducati fans around the world.  In 2004, we re-launched our Ducati People global advertising campaign (launched initially in 1998) with Ducati Club members cast in the spotlight.  The campaign is intended to communicate the authenticity and uniqueness of the Ducati brand.

Since we attract media attention through our international racing activities and product innovations, our marketing strategy does not require large investments in advertising.  The primary source of advertising comes from Ducati motorcycles on racing circuits around the world and articles published in a broad range of motorcycle publications.  Thanks to the strength of the Ducati brand, media coverage of Ducati extends beyond the traditional motorcycle press.  Articles featuring Ducati have appeared in the financial sections of Financial Times, Forbes, The Wall Street Journal and Barrons, and features dedicated to Ducati have also appeared in Vogue and on CNN, CNBC and Bloomberg Television.  Ducati enthusiasts, including Formula One drivers, models, international athletes and film. celebrities, have also contributed to our brands fame and
dissemination.

We intend to continue taking part in initiatives that support the Ducati brand in the world of art, design and fashion.  Ducati motorcycles were recently used for the advertising campaigns of a large number of fashion designers, including Versace, Dior and Donna Karan, and a Ducati motorcycle was used in shooting the films Matrix Reloaded and Catwoman.

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We have also sponsored the Motogiro dItalia, a historical motorcycle rally that takes place along the picturesque roads of Central Italy, since its revival in 2001.  Participants ride motorcycles produced before 1957, the last year of the original Motogiro, as well as other recent motorcycle models, primarily Ducati.  The event has drawn enormous media interest and has attracted hundreds of enthusiasts and journalists from the world over.  Another marketing activity, which began in 2003, is the Centopassi, a competitive motorcycle tour in which participant Ducati owners and enthusiasts challenge Ducati test riders on the new Multistrada on the roads of the Italian Alps.  A final marketing activity is the World Ducati Week, which has become an important event for Ducati enthusiasts.  The third World Ducati Week, in May 2004, attracted more than 45,000
Ducati enthusiasts from 30 countries to the Misano Adriatico racetrack.

On March 18, 2002, Ducati entered into an agreement with Linea S.p.A. to launch the Ducati Desmo Finance Program in support of its sales activities in Italy.  The agreement concerns (i) consumer financial services for purchasers of Ducati products; (ii) financial services for Ducati retail stores and dealers, and (iii) the issue and management of credit cards bearing the Ducati trademark.  The agreement has been renewed until August 31, 2006, awaiting the result of negotiations for a new joint venture for the supply of the same financial services, which should be jointly formed and owned by Ducati and Linea S.p.A.

Racing.The performance of Ducati motorcycles on international racing circuits helps sustain high demand for Ducati products.  Participation in racing increases visibility of Ducati motorcycles through media coverage of the races and serves as a practical demonstration of the high-performance characteristics of Ducati motorcycles.  Our racing activities also support our research and development activities, as many innovations developed for, and implemented in, racing motorcycles are later introduced in the production of Ducati motorcycles intended for the retail consumer.

Ducati motorcycles compete with official teams in the MotoGP World Championship, the Superbike World Championship, the Supersport World Championship and the AMA Superbike Championship (U.S.-based).  We made our return to the MotoGP World Championship in 2003 after an absence of more than 30 years, and have been rewarded with a second place finish in the manufacturers ranking in the 2004 season and a third place finish in the manufacturers ranking in the 2005 season.  Loris Capirossi and Sete Gibernau are competing with the new GP6 in the 2006 season.  We compete in the Superbike World Championship with our official Ducati teams and by selling motorcycles to other private teams.  Since 1990 we have won more single race victories than all other manufacturers combined and a total of 13 manufacturers titles.

The Superbike World Championship and the AMA Superbike Championship require participation using motorcycles derived from roadsters (also called current production models).  They are converted for racing through a series of modifications allowed by the relevant regulations, which require, however, that the design and basic technical features remain unaltered.  Regulations in force in the MotoGP World Championship for the 2006 season require that prototype motorcycles be used (use of basic components of current production motorcycles is prohibited).  These prototype motorcycles must be equipped with 4-stroke engines up to 990cc in size and with fuel tanks having a maximum capacity of 22 liters.  Starting with the 2007 season, the maximum piston displacement is expected to be lowered to 800cc, with the concomitant reduction of the maximum fuel tank capacity to 21 liters, in an



effort to limit excessive improvement in performances.

Ducati Corse, our subsidiary dedicated to racing activities founded in January 1999, manages the activities of the Ducati racing teams and designs and manufactures motorcycles and engines exclusively for racing use.  Ducati Corse also locates sponsors and engages in marketing and promotional activities designed to increase awareness of the Ducati brand.

Sponsors of the Ducati racing team participating in the MotoGP World Championship include: Charles Stewart & Company Limited (displaying the Marlboro trademark); Telecom Italia S.p.A. (displaying the Alice trademark); Binda S.p.A. (displaying the Breil trademark); and Fiat Auto, S.p.A. (displaying the Alfa Romeo trademark).  Sponsors of the Ducati racing team participating in the Superbike World Championship include Binda S.p.A. (displaying the Breil trademark); Xerox Ltd.; and Fiat Auto, S.p.A. (displaying the Alfa Romeo trademark).  Ducati Corse has also entered into a sponsorship and technical partnership agreement with Shell International Petroleum Company Ltd. (Shell) pursuant to which Shell sponsors Ducatis participation in the MotoGP World Championship and the Superbike World Championship and undertakes to supply fuel and lubricants developed and produced
specifically for the world of racing.

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In December 2005 Ducati Corse entered into a contract with DAntin Pramac S.r.l (DAntin), pursuant to which Ducati Corse has agreed to supply DAntin motorcycles, engines and spare parts, in addition to technical support, so that DAntin can take part in the MotoGP World Championship with a satellite Ducati Corse team called DAntin Pramac.  DAntin has undertaken to participate in all of the MotoGP World Championship races during the 2006, 2007 and 2008 seasons with two riders and allows DAntin to renew the contract for the 2009 season.

Internet.  The Internet represents our most important tool of communication with Ducati enthusiasts and customers, as well as a vital element for innovating corporate processes and brand recognition. Re-launched in 2000, the website www.ducati.com today receives more than 9,200,000 visitors from all over the world (150,000 of which are registered users), who in 2005 viewed approximately 217 million pages.  With 15 gigabytes of data, texts and images, the website offers complete information about all of the models the Ducati Group makes, constant coverage of the race activities in the various national and international championships, news about all events and initiatives of interest for its fans and Ducati clubs around the world.  It also provides information about the network of dealers and Ducati branches in the world, and various features of interest for all riders and those who
aspire to become such.  More than 1500 garments, accessories and
merchandising items bearing the Ducati trademark are in the extensive on-line
store catalogue.  Moreover, on-line sales of limited edition motorcycles,
such as the MH900e, 996R and 998S Bayliss, have made the Ducati web site one of
the greatest e-commerce successes anywhere in Italy and around the world. 
Of the web sites visitors, 40% are in the United States, 43% in Europe
(mainly Italy), and the remaining 16% are in Japan and other Asian
countries.  The enthusiasm and support of its community of fans enabled
Ducati.com to win the prestigious WWW2004 award in 2004 as the best Italian
Internet site in the Automotive and Engines category, according to Il Sole 24
Ore.  In order to achieve an even closer relationship with its fans
around the world, in 2006 the Company also launched a blog (on-line
diary) on its web site managed by Chairman of the Board and CEO Federico Minoli,
where he communicates with the web sites visitors and describes, in
person, the news regarding Ducatis activity around the world.

Production

Our manufacturing operations are not vertically integrated and are characterized by a relatively low fixed cost structure.  Our production is primarily focused on engine and motorcycle assembly and the machining of two strategic components, engine blocks and cylinder heads.  Our strategic goal with regards to production is to continually improve the integration of our in-house production operations with the assembly work performed by a network of select suppliers in an effort to reduce complexity in the production process and improve efficiency.

All Ducati motorcycles are manufactured at a single industrial facility located in Borgo Panigale, outside Bologna, Italy.  The facility consists of 124,487 square meters of land and contains plants, warehouses and offices (approximately 36,000 square meters of indoor space), test tracks and parking areas.  All manufacturing and assembly, as well as warehousing of certain components, are performed on site.

We outsource the production of the majority of our parts and components to third-party suppliers.  As a result, the functions we perform at our facility in Borgo Panigale are basically those of assembly and quality control.  As part of the production process each engine and each finished motorcycle is subjected to rigorous quality controls, including static and dynamic tests during the various stages of production.

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We have implemented
several initiatives to improve our production processes and reduce costs. 
In January 1999, we introduced a new software system to monitor the flow of all
production-related information, from the initial order to delivery of the
finished product.  This system is an important and effective planning tool
that allows the user to automatically generate production schedules based on
sales forecasts, optimize warehouse stock volume levels, generate orders for
purchasing materials and organize the flow of materials needed for
production.

We are able to
maintain relatively high production efficiency, even with relatively low volumes
of production, primarily due to the fact that the various models produced have a
large number of common components, especially engine components.  In 1999,
we embarked on a project to simplify production, aiming at improving quality and
reducing production costs.  In 2000, we commenced another project called
Desmo (Ducati Evolution and Supply Management Optimization), aimed at
eliminating the inefficiencies in the production process.  In 2005, we
produced 17 different models using only two engine blocks and three cylinder
heads.  In order to simplify production and reduce costs, we have adopted a
platform approach to production, the purpose of which is to avoid
the assembly of numerous individual components.  Under the platform
approach, a motorcycle is divided into a discrete number of key components (or
platforms) that are in turn made up of a number of
sub-components.  One key supplier is made responsible for provision of a
platform and managing suppliers of the sub-components that go into the
platform.  The platform assembly approach has reduced the number of our
suppliers and increased the volume of components provided by each supplier,
thereby improving our ability to negotiate competitive prices.  It has also
provided an opportunity to develop jointly new components with key suppliers at
the research and development stage.  We have already implemented platform
production processes for 83 assembly groups (including forks, clutch covers and
fuel pumps), thereby significantly reducing the number of parts required to be
assembled directly.

As part of our
initiative to outsource non-strategic activities to third parties, we outsource
our packaging, shipping and logistics functions to Saima Avandero S.p.A., which
allows us to respond more quickly to requests from our dealers.  Saima
Avandero S.p.A. also manages the packaging and distribution of spare parts at
its dedicated center in Modena.

The present maximum
production capacity of our production facility is approximately 48,000
motorcycles a year, compared to a yearly average of approximately 35,000
motorcycles produced during the last three-year period.  We do not foresee
having to bear costs for increasing our production capacity should demand come
back into line with the higher volumes of the past.

Supplies and Suppliers

We currently buy
from third-party suppliers the majority of the single motorcycle parts and
components that we use in our production process.  In 2005, approximately
91% of our total costs of goods sold were for parts and components purchased
from third parties, while approximately 9% were for direct labor costs.

While we currently
purchase our parts and components from a large number of suppliers, our top ten
parts and components suppliers accounted for approximately 40% of our parts and
components procurements spending in 2005.  Our largest suppliers include
Brembo (brake systems), Magneti Marelli (injection systems), Mahle (pistons),
Michelin and Pirelli (tires) and Showa and Ohlins (suspensions).

Except for a limited
number of mid-term supply contracts (generally for three years), we only enter
into short-term, renewable contracts with our suppliers.  We typically
contract with our suppliers on a non-exclusive basis, which allows us to replace
suppliers at any time.  Our policy is to identify at least two sources for
each component so as to be able to switch promptly to the alternative supplier
if necessary. Although for certain key components we rely upon single-source
suppliers, we believe these suppliers can also be replaced if
necessary.

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Among the supply
contracts that play a major role in Ducatis production activity are the
three-year contracts the Company has with Brembo and Magneti Marelli Power
Training for the supply of the braking system platforms and injection system
platforms of its motorcycles, respectively.

Intellectual Property

The design, main
technical features and the most important technology of Ducati motorcycles,
including the Desmodromic valve control system, are not protected by any
intellectual property rights.  Only a few non-aesthetic technical features
of marginal importance of Ducati products are protected by patents.  With
the exception of these limited technical characteristics, the Ducati motorcycle
components are manufactured according to known technologies and include
components not supplied to Ducati on an exclusive basis.  See Item 3.
Key InformationRisk FactorsOur motorcycle design and technology are
not protected by intellectual property rights.

Our patents and
rights to use intellectual property had a total net value equivalent to
approximately 4.3 million as of December 31, 2005, and consist of software
licenses that Ducati North America and Ducati have purchased from third
parties.

Our expenses for
grants, licenses, trademarks and similar rights concern almost exclusively the
Ducati trademark, purchased at the time of our acquisition from
Ducati Motorcycles S.p.A. in 1996.

We own the
Ducati trademark and other trademarks associated with Ducati
motorcycles. The Ducati trademark is registered in all countries
that are signatory to the Madrid Agreement concerning the International
Registration of Marks and is registered as a European Community trademark in all
countries that are part of the European Union.  This trademark has also
been registered in 44 additional countries on an ad hoc basis for motor
vehicles.  In addition, we have registered the Ducati trademark
in other classes of products, including toys, apparel, eyewear and watches in
most of the countries in which the trademark for motors and vehicles is
registered.

On December 10,
2004, DMH sold the Ducati Corse trademark, one of the other
trademarks associated with Ducati products, to its subsidiary, Ducati Corse, for
the purchase price of 23 million, the value determined by independent
professionals, plus VAT.  The transfer was made to allow Ducati Corse to
develop the Ducati Corse brand separately from the
Ducati brand, increasing its value by using it in the international
racing competitions in which it participates.

On December 11,
2004, DMH entered into a license agreement with Ducati Corse pursuant to which
Ducati Corse grants Ducati the right to use (i) the Ducati Corse
trademark for the manufacture and distribution of the Replica Corse
motorcycle models and (ii) the Ducati Corse racing activities images for
promotional and advertising purposes for a fee made up of a fixed part and a
variable component (royalty) calculated as a percentage of the price of the
Replica Corse products sold.

On November 11,
2005, DMH entered into a license agreement with Fiat Auto S.p.A. pursuant to
which DMH grants Fiat Auto S.p.A. the right to use the Monster
trademark to market a new version of its car Panda called the
Panda Monster.  Fiat Auto S.p.A. may also register the
Panda Monster trademark for use in the automobile sector.

Governmental and Environmental Regulation

Like other
motorcycle manufacturers, we incur substantial costs in designing and testing
products to comply with domestic and foreign safety and emissions
requirements.

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Motorcycles sold in
the United States, the European Union countries and other countries are subject
to environmental emissions regulations and safety standards with which we must
comply in order to sell products in these countries.  Applicable
regulations in the United States include the emissions and noise standards of
the U.S. Environmental Protection Agency and the more stringent emissions
standards of the State of California Air Resources Board.  Ducati
motorcycles sold in the United States are also subject to the National Traffic
and Motor Vehicle Safety Act and the rules promulgated thereunder by the
National Highway Traffic Safety Administration.  Regulations applicable to
us in Italy include EU directives relating to emissions, pollution and noise, as
well as national rules on emissions, pollution, noise and safety issued by the
Ministry of Transport (Ministero delle Infrastrutture e dei
Trasporti).  All of our motorcycle models are required to comply with
applicable homologation regulations in the countries in which they are
distributed.  We are also subject to a number of Italian governmental
regulations relating to the use and storage of materials, discharge and disposal
of factory waste and safety standards of facilities and processes.

Insurance and Product Liability

We maintain
insurance against a number of risks.  We insure against loss or damage to
our facilities, against loss or damage to our products while they are in transit
to customers, against certain potential environmental liabilities and against
product liability claims.  While we do not cover 100% of these risks with
insurance, we believe that our present level of insurance is adequate in the
light of past experience.  We expect that our present insurance levels will
be maintained on substantially the same terms and conditions in the
future.

We are engaged in a
business that exposes us to possible claims for personal injury from the use of
our products.  We currently maintain liability insurance with a
per-occurrence limit of 20.0 million and an aggregate liability cap of
20.0 million per year.  See Item 3. Key InformationRisk
FactorsWe may be subject to significant product liability
claims.

Description of Property

The following table
sets forth the principal properties in our use as of the date of this annual
report.

|Location                   |  | Approximate   Square   Meters |  | Principal Use                          |  | Status  
|-------------------------- |  | ----------------------------- |  | -------------------------------------- |  | --------
|                           |  |                               |  |                                        |  |         
|Bologna, Italy(1)          |  | 124,487                       |  | Headquarters, production facility      |  | See note
|Cupertino, California, USA |  | 1,161                         |  | Headquarters, Ducati North America     |  | Leased  
|Paris, France              |  | 260                           |  | Headquarters, Ducati France            |  | Leased  
|Cologne, Germany           |  | 408                           |  | Headquarters, Ducati Motor Deutschland |  | Leased  
|Tokyo, Japan               |  | 121                           |  | Headquarters, Ducati Japan             |  | Leased  
|The Hague, Holland         |  | 400                           |  | Headquarters, Ducati North Europe      |  | Leased  
|Marsta, Sweden             |  | 225                           |  | Offices and warehouse                  |  | Leased  
|Milton Keynes, England     |  | 450                           |  | Headquarters, Ducati U.K.              |  | Leased  

|                                                                                                                                                                                                                                                                                     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)     On June 29, 2001, we entered into a sale and
leaseback transaction with Locafit S.p.A. with respect to a portion of our
production facility.  See Note 5 to our audited consolidated financial
statements included in Item 18 for additional information on this
transaction.

In addition to the
above properties, we lease space in various other locations in the United States
and Western Europe on a regular basis for warehouse storage of motorcycles and
parts.

We believe that our
operating facilities are in good condition and are adequate, considered in light
of our capital expenditure plans, for the development, manufacture and marketing
of our current and anticipated products.  For addition information on our
property and capital expenditures in our property, see
Production and Capital
Expenditures.

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Capital Expenditures

Our capital
expenditures in property, plant and equipment were, 10.4 million in 2004
and 10.6 million in 2005.  Capital expenditures in each of the years
were principally related to our development initiatives.

Investments in
intangible assets, which include our capitalized development expenditures for
these new models, amounted to  15.1 million in 2004 and 20.5 million
in 2005.  See Products and DistributionProduct Research
and Development.

Our capital
expenditures currently in progress relate principally to our continuing
development initiatives related to new motorcycles and the Desmosedici, which we
developed and began using in 2003 to compete in the MotoGP Championship. 
We believe that competing in the MotoGP Championship will further enhance
recognition of the Ducati brands for innovative design, advanced engineering and
racing success and spur further innovation in the design and engineering of our
motorcycles that will ultimately improve the quality and performance of our road
models.  We spent 7.4 million during 2004 in connection with this
project (of which 3.3 million were capitalized and are included in the
total investments in intangible assets in 2004 described above), and 8.6
million (entirely capitalized) in 2005.  The expected cost for 2006 is
7.5 million.

Item 4A.   Unresolved Staff Comments

None.

Item 5.   Operating and Financial Review and Prospects

You should read the
following discussion in connection with the audited consolidated financial
statements included in Item 18 of this annual report.

Our audited
consolidated financial statements have been prepared in conformity with IFRS,
which differs in certain significant respects from U.S. GAAP.  For a
discussion of significant differences between IFRS and U.S. GAAP and the related
reconciliation of net profit/(loss) and shareholders equity in our audited
consolidated financial statements, refer to Notes 38, 39, and 40 to the audited
consolidated financial statements.

Introduction

Our revenues are
derived principally from sales of motorcycles and, to a lesser extent, spare
parts and engines, performance accessories and technical riding gear and
enthusiast apparel.  Revenues and other income, costs and charges are
accounted for net of returns, discounts, allowances and rebates.  In
addition, although under IFRS the classification of dealer incentives (usually
based on volume sold) is not specifically addressed, we have classified these
costs as a reduction in revenues rather than as distribution costs, which is
consistent with the approach followed by other companies operating in the
automotive sector in the first-time adoption of IFRS.  Revenues from the
sale of goods are recognized when the goods are delivered to the freight
forwarder, at which time, under the related contractual terms, ownership passes
to the purchaser, or, in the case of sales with title retention clauses, when
the purchaser has assumed substantially all risks and rewards associated with
ownership of the goods.  Sponsorship revenues are recognized as other
income on an accrual basis over the lives of the related contracts, which
usually reflect the length of the sporting season; the remuneration of the
riders and the racing team is recognized on an accrual basis, with reference to
the duration of the related contracts.

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We produce
motorcycles in six model lines, which vary in their technical and design
features and intended customers: Superbike, Super Sport, Sport Naked, Sport
Touring, Multistrada and Sportclassic.  We sell our motorcycles and related
products in 61 countries worldwide, with a primary focus on the Western European
and North American markets, which together accounted for approximately 85% of
our revenues in each of the last two years.  In 2005, no single country
accounted for more than 15.0% of our revenues of motorcycles and related
products, with the exception of Italy, which accounted for 27.8% and  the
United States and Canada  which accounted for 18.8% of our revenues from
motorcycles and related products.  This provides us with significant
geographical diversity of revenues.  We have a global distribution network,
directly controlling our sales in Italy and operating wholly owned distribution
subsidiaries in North America, France, Germany, the Benelux countries (which is
also responsible for Sweden and Norway), Japan and the United Kingdom.  Our
manufacturing operations, based in Bologna, Italy, consist primarily of engine
and motorcycle assembly and are not vertically integrated, resulting in a
relatively low fixed cost structure.

We use motorcycle
registrations as an indicator of retail sales.  Motorcycle registrations
reflect registrations with governmental authorities upon sales to end
users.  Because we generally sell our motorcycles to importers and dealers,
revenues are normally recognized upon sale to our importers and dealers before
such motorcycles are bought and registered by end users.  The differences
between our unit sales to our importers and dealers and registrations for
corresponding periods reflect the increases and decreases in the inventories of
our importers and dealers.  Registration data is unavailable or unreliable
in certain of our less important markets, and even where reliable information is
available, there is typically some delay in its publication by governmental
authorities.  Accordingly, we estimate registrations based on information
obtained from importers and dealers in the relevant markets where applicable and
adjust such estimates as official data is published.

Worldwide motorcycle
sales and registrations are seasonal, peaking during the months of March through
May (sales) and April through June (registrations).  Our motorcycle
production levels are relatively stable throughout the year (excluding annual
shutdown periods for the month of August and the last two weeks of
December).  Consequently, we experience periods of inventory buildup from
September through February in anticipation of the spring selling season. 
Depending on market conditions and our commercial strategy, the level of
inventory we hold or sell to importers and dealers at any time may change, as a
result of which unit sales may be less seasonal than registrations.  See
Item 3. Key InformationRisk FactorsOur business is seasonal
and we are required to predict levels of demand in advance and provide current
motorcycle models to the market on a timely basis.

Motorcycle
manufacturers typically present new models once a year at international trade
shows held in September of each year.  Following these trade shows, we work
closely with our distributors and dealers to anticipate demand for our
motorcycles in the following year.  We endeavor to adjust the start of our
new model year production to avoid a buildup in inventory of the previous
years models.  Any such buildup can result in additional promotional
expenses (e.g., rebates, discounts, complimentary accessories and other
incentives) that we incur to reduce excess inventories (and which we account for
as a reduction of revenues).

Certain additional
factors that adversely affected our results of operations over the last two
years include: the strengthening of the euro against most other currencies, in
particular the U.S. dollar (appreciation of approximately 9.9% on average and
7.8% at year end in 2004, with our revenues in U.S. dollars accounting for
approximately 15.6% of our total revenues in 2004), the U.K. pound sterling and
the Japanese yen.  See Item 3. Key InformationExchange
Rates.  This strengthening of the euro has principally impacted
product prices.  In an effort to preserve our market share, we have
generally kept unchanged our sale prices in the relevant local currency, with a
consequent reduction in our gross margin.  We have engaged in foreign
exchange transactions to hedge portions of our transactional exposure to such
fluctuations in exchange rates, although such transactions protect us only from
short-term fluctuations and not long-term variances.

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For further information on our foreign exchange transactions, see Item 11.
Quantitative and Qualitative Disclosures About Market Risk.  Although
the euro weakened in 2005, it has appreciated again in the first half of 2006
and we expect that its continued relative strength will impact our results of
operations in 2006. our renewed participation in the MotoGP Championship
starting in 2003.  We incurred approximately 8.6 million in research
and development expenses and capital expenditures in connection with this
participation in 2005, and expect to continue to incur a similar level of
expenses for these purposes in the future;  the launch in 2005 of our sixth
motorcycle line, the Sport Classic, in connection with which we incurred
1.4 million in research and development expenses and capital expenditures
for fiscal year 2004 and 3.8 million for fiscal year 2005.  In 2005,
we sold 3,274 Sport Classic motorcycles, or 9.5% of our total unit
sales.

Cost of sales
consists primarily of variable costs, such as the cost of parts, components and
labor, as well as depreciation of property, plant and equipment, amortization of
capitalized development costs and research and development expenses that are not
capitalized or included under distribution costs or general and administrative
expenses.  In each of the last two years, approximately 75% of the total
cost of sales incurred by Ducati was for parts and components.  Cost of
sales is allocated to each product class (motorcycles, spare parts, accessories
and apparel and other) as follows:  purchased materials and the cost of
external processing are allocated to a product class (and to each motorcycle
line within the motorcycle product class) based on the specific bills for
materials of the products concerned; direct production costs for the motorcycle
product class, made up of the cost of the workshops dedicated to each specific
motorcycle line (including labor), are allocated 100% to the relevant motorcycle
line to which such costs relate; indirect production costs, such as the
warehousing of raw materials and finished motorcycles, logistics and general
factory services are allocated 100% to the motorcycle product class (and, in
turn, to each motorcycle line within the motorcycle product class based on the
share of direct production costs allocated to that line); and development
expenses that are not capitalized, making up approximately 30% of our
development expenses, are allocated 100% to the motorcycle product class (and,
in turn, to each motorcycle line within the motorcycle product class based on
the share of direct production costs allocated to that line).

Other income is from
sponsorship income, licensing revenues, rental and the sale of scrap, sundry
components and materials.

Distribution costs
primarily include personnel costs, advertising and promotion costs, expenses
relating to our racing program, charges for accrued warranty expenses and
charges for doubtful accounts.  Distribution costs also include expenses
relating to marketing and distribution, including certain expenses associated
with our wholly owned distribution subsidiaries.  Costs for services are
recognized on an accrual basis at the time the service is received.  Costs
relating to remuneration for motorcycle racing drivers and racing teams are
recognized according to the length of their respective contracts.

General and
administrative expenses primarily include personnel costs, depreciation of
property, plant and equipment, amortization of intangible assets, charges for
legal, administration and tax consultancy, telephone, cleaning , insurance
costs, audit fees and other minor charges.

Other expenses is a
residual category and includes all expenses not included in other line
items.

Provisions for
restructuring charges are recorded when: (i) there is a legal or constructive
obligation to third parties; (ii) it is likely that resources will have to be
used to settle the obligation; (iii) the amount of the obligation concerned can
be estimated reliably; (iv) a formal program identifies the principal
characteristics of the restructuring plan; and (v) interested third parties have
a valid expectation that the Group will carry out the restructuring work because
implementation has already started or because the salient points have already
been communicated to them.

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Interest income
represents financial income, primarily arising from bank deposits.

Interest expense
represents the financial cost of borrowing as well as other financial charges,
primarily charges and commissions on ordinary current accounts,
export/import-related charges and commissions, bond repurchase premiums and
financial charges on forward contracts.

Foreign exchange
gain/(loss), net, consists primarily of the translation differences from
conversion into euro of monetary assets and liabilities denominated in a
currency other than the euro.  See Item 3. Key InformationRisk
FactorsWe are subject to foreign currency exchange rate fluctuations,
particularly with respect to the U.S. dollar, and to interest rate
fluctuations. Also included in foreign exchange gain/(loss), net, are the
results of our forward contract hedging activities (forward currency contracts
we enter into against future commitments to hedge the risk of currency
fluctuations between the date of such a contract and the performance of the
related commitment).  For further information on our hedging activities,
see Item 11. Quantitative and Qualitative Disclosures About Market
Risk.

Income taxes
comprise the current and deferred taxes that arise from our activities in the
relevant period based on tax regimes applicable to us at the end of each
accounting period.  DMH and its Italian subsidiaries are subject to two
income taxes:  (i) corporate income tax (IRPEG until 2003 and IRES as of
2004) and (ii) local income tax (IRAP). The ordinary IRES tax rate for fiscal
years 2004 and 2005 is 33%. The IRAP rate is equal to 4.25%.  See Note 31
to our audited consolidated financial statements included in Item 18 for further
information.

Intangible assets
include capitalized development costs, comprised principally of the cost of
personnel employed in development functions and the cost of materials and
external consultants, where the expenditure is incurred for specific product
development.  Research expenses and development costs that are not
capitalized are expensed under cost of sales or, in the case of a portion of the
costs related to the development of the double twin engine for the
Desmosedici motorcycle developed to compete in the MotoGP Championship, general
and administrative expenses.

For a more detailed
description of the line items in the consolidated statement of income prepared
in conformity with IFRS that form part of our audited consolidated financial
statements, see Note 31 to our audited consolidated financial statements
included in Item 18.

Critical Accounting Policies and Estimates

Our reported
financial condition and results of operations are affected by accounting
methods, assumptions and estimates that we are required to make in preparing our
consolidated financial statements.  We base our estimates on historical
experience and various other assumptions.  The selection of critical
accounting policies, the judgments and other uncertainties affecting application
of those policies and the sensitivity of reported results to changes in
conditions and assumptions should be considered in reviewing the discussion and
analysis of our financial condition and results of operations below, as well as
our audited consolidated financial statements.  Our significant accounting
policies are disclosed in Note 1.c to our audited consolidated financial
statements included in Item 18.  We believe the following critical
accounting policies involve the most significant judgments and estimates used in
the preparation of our audited consolidated financial statements.

Inventories

Inventories are
stated at the lower of purchase or production cost and the estimated realizable
value, based on market conditions, taking account of related selling
expenses.  Purchase costs include the amounts paid to suppliers and any
directly attributable related charges.  Manufacturing costs include the
expenses incurred to bring the goods to their state at the balance sheet
date.  These include both costs specific to individual goods and the costs
incurred by the entire production process allocable to the goods.  In
particular, all types of inventory are valued on the first in/first out (FIFO)
method.  Inventories are stated net of an allowance that reflects losses on
obsolete and slow-moving items.  The determination of estimated realizable
value and the allowance for losses on obsolete or slow-moving items are based
upon our historical experience and assumptions about future demand and market
conditions.

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Accounting for Long-Lived Assets

Property, plant and
equipment are recorded at purchase cost, including any directly related charges.
Ordinary maintenance and repair expenditure that does not increase the value of
the assets is expensed as incurred. Improvement expenditure that increases the
useful lives of the assets is capitalized and depreciated over the residual
lives of the assets. All other costs are charged to the statement of income as
incurred.

Assets under
construction are recorded at cost and classified as Construction in
progress until the work has been completed; upon completion, the cost is
reclassified to the appropriate caption and subjected to
depreciation.

As required by IAS
17, fixed assets acquired under finance leasing contracts that, in substance,
transfer all the risks and benefits of ownership to us, are recorded using
finance lease accounting methodology. This involves capitalization of the
original value of the asset and recognition of the outstanding principal due to
the provider of finance, as well as the depreciation of the asset over its
estimated economic and technical useful life. The principal element of lease
installments is deducted from the outstanding liability to the lessor, while the
interest element is charged to the statement of operations.

Leased assets for
which the lessor retains substantially all the risks and benefits of ownership
are classified as operating leases. The costs of operating leases are charged to
the statement of operations over the lives of the related lease
contracts.

At the time of the
transition to IFRS on January 1, 2004, the exemption allowed by IFRS 1 (IFRS
1.16) was applied to the valuation of Buildings which, accordingly,
were recorded at deemed cost, being their fair value on that date as determined
by an independent appraisal.

Goodwill is deemed
to be an asset with an indefinite life and is not amortized, but subjected to
annual impairment testing, or more frequently if there is evidence (specific
events, changed circumstances) of a possible loss of value, as required by IAS
36  Impairment of assets, to identify any losses of value at the level of
the cash-generating unit to which such goodwill has been allocated by
management. Any write-downs are not subject to reinstatement in the
future.  On disposal of all or part of a previously-acquired business
involving the recognition of purchased goodwill, the extent of the disposal gain
or loss is determined having regard for the residual value of such goodwill.

On the first-time
adoption of IFRS, we elected not to apply IFRS 3  Business combinations
with retroactive effect for the businesses acquired before January 1, 2004;
accordingly, the goodwill arising on acquisitions prior to the IFRS transition
date is stated at the value previously determined under Italian accounting
standards, subject to recognition of any losses in value identified.

The brand name is
deemed to be an intangible asset with an indefinite useful life and is not
amortized, but subjected to annual impairment testing, or more frequently if
there is evidence (specific events, changed circumstances) of a possible loss of
value, as required by IAS 36  Impairment of assets to identify any losses
of value at the level of the cash-generating unit to which the brand name has
been allocated by management.

Other purchased or
internally-produced intangible assets are recorded, in accordance with IAS 38
 Intangible assets, when it is likely that their use will generate future
economic benefits and their cost can be determined on a reliable basis. 
These assets are recorded at purchase or production cost and amortized on a
straight-line basis over their estimated useful lives.

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Gains and losses
arising on the disposal of intangible assets comprise the difference between
their disposal and book values, and are reflected in the statement of income at
the time of disposal.

Intangible assets
not yet ready are recorded at cost and classified as Assets in
progress until the work has been completed; upon completion, the cost is
reclassified to the appropriate caption and subjected to
amortization.

Research costs are
expensed to the statement of income as incurred.

The costs of
development projects for the production of motorcycles and engines are only
capitalized if the conditions specified in IAS 38  Intangible assets (IAS
38. 57), are met, namely:  demonstrable technical feasibility of the
product; intention of the company to complete the development project; reliable
determination of the costs incurred for the project; and recoverability of the
amounts recorded from the future economic benefits expected to derive from the
development project.

Capitalized
development costs comprise solely the costs incurred that are directly
attributable to the development process and are amortized on a systematic basis,
commencing from the start of production, over the expected life of the product,
which is usually five years.

Development projects
in progress are recorded at cost and classified as Intangible assets in
progress until the project has been completed; upon completion, the cost
is reclassified to the appropriate caption and subjected to
amortization.

At least once each
year, we consider the recoverability of our tangible and intangible assets
(including capitalized development costs), in order to determine if there is any
evidence that such assets may have suffered a loss in value. If there is any
such evidence, the recoverable value of the assets concerned is estimated to
determine the extent of the related loss in value. Intangible assets with an
indefinite useful life and intangible assets not yet available for use are
subjected to an impairment test each year, or more frequently if there is
evidence of a possible loss of value (IAS 36.10a).

When the recoverable
value of an individual asset cannot be estimated, we estimate the recoverable
value of the cash-generating unit to which the asset belongs.

The recoverable
value of an asset is the greater of its fair value net of selling costs or its
value in use. The value in use of an asset is determined with reference to its
detailed income stream (layer valuation), gross of taxation, applying an
after-tax discounting rate that reflects current market assessments of the time
value of money and the risks specific to the asset. A loss in value is
recognized if recoverable value is lower than book value. If, subsequently, an
impairment loss other than for goodwill is recovered, in whole or in part, the
book value of the asset or cash-generating unit is increased to reflect the new
estimated recoverable value, without exceeding the value that would have been
reported had no losses in value been recorded previously. The recovery of an
impairment loss is recognized immediately in the statement of income.

Accounting for
long-lived and intangible assets involves the use of estimates for determining
the fair value at the acquisition date, and the useful lives of the assets over
which the costs of acquiring these assets are charged to the income
statement.  The allocation of development expenses to be capitalized
involves assumptions as to the recoverability of such costs from revenues
generated by the relevant projects.

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Commitments and contingencies

We are involved in
various claims and legal actions arising in the ordinary course of
business.  Litigation is subject to many uncertainties, and the outcome of
individual matters is not predictable with assurance.  We establish
provisions for contingent liabilities in such matters when: (i) there is a legal
or constructive obligation to third parties, (ii) it is likely that resources
will have to be used to settle the obligation and (iii) the amount of the
obligation concerned can be estimated reliably; and monitor such provisions on
an ongoing basis.  It is possible that the final resolution of some of
these matters may require us to make expenditures in excess of established
reserves.

Product warranty

Product warranty
obligations are estimated on the basis of a time-series analysis of labor and
material costs incurred in connection with each individual model.  These
estimates are established using historical information on the nature, frequency,
and average cost of warranty claims, taking into account the registrations over
the last 24 months and estimated costs for future recall campaigns.  We
actively study trends of warranty claims and take action to improve vehicle
quality and minimize warranty claims.  Actual costs against warranties,
which cover both the cost of the parts under warranty and reimbursements to
dealers of the margin previously paid to us on those parts and recorded within
our revenues, totaled 13.4 million, or 4.2% of revenues, in 2005 and
14.4 million, or 4.0% of revenues, in 2004.  At December 31, 2005, we
had a provision in our financial statements of  5,8 million (6.3
million in 2004) to cover future product warranty costs, which we estimate based
our expected costs for the parts and related labor.  We believe that the
warranty reserve is appropriate: however, actual claims incurred could differ
from the original estimates.

Taxation

Income taxes include
all the taxes charged on our taxable income. Income taxes are recorded in the
statement of income, except for those relating to items credited or debited
directly to shareholders equity, in which case the related tax effect is
recognized directly as part of shareholders equity. Provisions for
taxation that might arise on the transfer of undistributed retained earnings
from subsidiary companies are only recorded if there is a real intention to
transfer such earnings. Other taxes unrelated to earnings, such as property and
capital taxes, are recorded as other operating expenses. Deferred tax
assets/liabilities are recorded using the full liability method. These are
calculated on all the timing differences between the fiscal value of assets and
liabilities and the book value recorded in the consolidated financial
statements, with the exception of non-deductible goodwill and the differences
arising on investments in subsidiary companies that are not expected to reverse
in the foreseeable future, and on carried-forward tax losses. Deferred tax
assets are recognized to the extent that it is probable that taxable profit will
be available against which the deductible temporary difference can be utilized.
In particular, given the history of recent losses, these estimates are primarily
based on the scheduled reversal of taxable temporary differences and available
tax planning opportunities.  The recoverability of deferred tax assets is
reviewed at the end of each accounting period and any amounts whose recovery is
no longer deemed probable are charged to the statement of income.

Current, prepaid and
deferred tax assets and liabilities are offset when the related income taxes are
charged by the same tax authority and a legal right of offset exists. Deferred
tax assets and liabilities are determined using the tax rates that are expected
to apply in the various tax areas in which we operate when the related timing
differences become deductible or taxable or expire in accordance with current
legislation.

Significant
management judgment is required in determining our provision for deferred tax
assets and liabilities.  The analysis is based on the estimates of taxable
income in the jurisdictions in which we operate, the period over which the
deferred tax assets and liabilities will be recoverable and available tax
planning opportunities.  If actual results differ from these estimates, or
we adjust these estimates in future periods, our financial position and results
of operations may be affected.

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Allowance for Doubtful Accounts

We maintain an
allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments.  We base our
estimates on the aging of our accounts receivable balances and our historical
write-off experience, customer credit-worthiness and changes in our customer
payment terms when evaluating the adequacy of the allowance for doubtful
accounts.  If the financial condition of our customers were to deteriorate,
actual write-offs may be higher than expected.

Licensing

Our sponsorship
agreements are generally for a period of two to three racing seasons, and are
related to Ducati Corses participation in the MotoGP Championship, the
World Superbike Championship, or in some cases both.  Each contract
specifies the amount of the overall sponsorship fee to be paid for Ducati
Corses participation in each racing season for the relevant championship;
such amounts are equal from year to year over the life of the sponsorship
agreement.  There are no up-front payments; rather, payments are made upon
Ducati Corses participation in each season.

Almost all of the
contracts include a clause pursuant to which the sponsor is entitled to
terminate the contract and have no further obligation to make any future
payments in the event that Ducati Corse does not register in the related
championship.  While each contract differs as to the remedy available to
the counterparty in the unlikely event that Ducati Corse withdraws during the
course of a season, all contracts state that sponsors will not be reimbursed for
amounts already paid if Ducati Corse completes the relevant racing season. 
Only one of the sponsorship contracts includes an indemnity clause that requires
Ducati Corse to make a payment to the sponsor in the event of early termination
of the contract due to Ducati Corses failure to participate in (or
withdrawal from) the relevant championship.  The full amount potentially
due under such indemnity is disclosed in Note 18 to our audited consolidated
financial statements included in Item 18.

The racing season in
the MotoGP Championship and the World Superbike Championship runs from March to
November.  We recognize all amounts due under our sponsorship contracts
with respect to a given season as other income for the year ended
December 31 in which such season falls under IFRS.  We believe that, in
accordance with FASB Concept Statement No. 6, para. 79, these sponsorship
activities do not constitute Ducati Corses ongoing major or central
operations and that the amounts classified under other income under
IFRS should be classified as other operating income under U.S.
GAAP.

Trend Information

Following negative
results in 2005, our business continued to slow in the first quarter of
2006.  Since the end of 2005, no particularly significant trends have been
seen in production or in costs or selling prices and no trends have been seen
that are capable of positively or negatively conditioning our activities. 
Compared to the same period of the previous year, our motorcycle registrations
have remained stable during the first quarter of 2006, while sales have dropped,
as expected, as a consequence of our policy aimed at reducing inventory at the
Ducati retail stores and dealerships.  The 2006-2008 Business Plan
described in Item 4.  Information on the CompanyBusiness
OverviewBusiness Strategy 2006-2008 Business Plan. is mainly
aimed at restoring our profitability and cash generating capacity by reducing
overhead and promoting models in the high-end of our product range, which offer
the highest margins.  Our 2006-2008 Business Plan, as well other strategic
decisions we may make, may have a material effect on our future
results.

Results of Operations

The following table
sets forth certain statement of income data expressed as a percentage of our
revenues for the periods indicated:

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|                                                             |  | Year ended   December 31, |        
|------------------------------------------------------------ |  | ------------------------- | -------
|                                                             |  |                           |        
|                                                             |  | 2004                      |        
|                                                             |  |                           |        
|                                                             |  | (Under IFRS)              |        
|                                                             |  |                           |        
|Revenues                                                     |  |                           | 100%   
|Cost of sales                                                |  |                           | (76.2)%
|Gross profit                                                 |  |                           | 23.8%  
|Other income                                                 |  |                           | 8.5%   
|Distribution costs and   general and administrative expenses |  |                           | (29.5)%
|Other expenses                                               |  |                           | (0.3)% 
|Provisions for   restructuring reserve                       |  |                           |       
|Operating profit (loss)                                      |  |                           | 2.5%   

2005 Compared to 2004

Revenues

Revenues were
320.8 million in 2005, compared to 363.4 million in 2004, a decrease
of 42.6 million, or 11.7%.  This decrease in revenues was
attributable principally to a decrease in sales of motorcycles of approximately
37.3 million (-13.1%), which was primarily due to a deterioration in the
mix of motorcycle models sold, with a higher proportion of sales of lower-price
models, and a decrease in motorcycle unit sales.  The decrease was also
attributable to a decrease in revenues from sales of accessories and apparel of
2.6 million (-8.1%), due to reduced motorcycle sales and to a decrease in
other revenues of approximately 2.4 million due to a decrease in revenues
from racing activities.

In 2005, motorcycle
sales accounted for 77.1% of revenues (78.3% in 2004).  Sales of spare
parts accounted for 12.9% of revenues (11.4% in 2004) and sales of performance
accessories, technical riding gear and enthusiast apparel accounted for 9.1% of
revenues (8.7% in 2004).  Revenues from non-core activities represented
1.0% of revenues (1.5% in 2004).

In 2005, we produced
motorcycles in six different model lines, which vary in their technical and
design features and intended customers:  Superbike, Super Sport, Sport
Naked, Sport Touring, Multistrada and Sport Classic, introduced for sale in
2005. We produced 33,581 Ducati motorcycles in 2005, down 5.5% from 35,538
produced in 2004.  This decrease was due primarily to our strategic
decision to align production with market demand in order to prevent excess
inventory at Ducati dealers and retail stores.

The 5.5% decline in
unit sales of Ducati motorcycles, from 36,560 in 2004 to 34,536 in 2005,
resulted principally from:  a 40.0% decrease in unit sales of our Superbike
motorcycles, which was primarily attributable to the decrease in sales in the
low end of the range of this product line, in particular the 749 model, and to
the absence of the 998 Final Edition model, which was sold only in 2004; a 53.0%
decrease in unit sales of our Sport Touring motorcycles mainly resulting from
reduced sales of the ST3, for which there had been significantly high demand in
2004 from both dealerships and retail customers in connection with its launch; a
8.0% decrease in unit sales of our Sport Naked motorcycles, mainly due to the
drop in sales of the M620 and S4R models, which was partly set off by the
success of the new S2R model, which recorded sales of more than 9,700 units in
2005; a 28.0% decrease in unit sales of Super Sport motorcycles, mainly due to
the mature stage in the product lifecycle of this product line.

These decreases were
partially offset by: a 58.0% increase in unit sales of our Multistrada
motorcycles due primarily to the introduction of the new MTS 620 model; and
sales of 3,274 motorcycles belonging to our new Sport Classic line, which sales
amounted to 9% of our total sales.

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Unit sales showed
varying trends in our principal geographic markets.  Sales increased in the
United States (+33.4%), Japan (+9.7%) and France (+9.3%) and remained
substantially unchanged in Germany (+0.3%).  In Italy, our principal
market, sales decreased (-27.4%).  Sales also decreased in the United
Kingdom (-6.9%), the Benelux countries (-16.3%), and the countries served by
importers (-4.5%).  These decreases reflect a general decline in demand in
the respective local markets, which are related to macroeconomic factors as well
as factors specific to the motorcycle sector.

Ducati motorcycle
registrations were 34,631 in 2005 compared to 35,887 in 2004, a decrease of
approximately 3.5%.  In particular, registrations declined 15.0% in Italy
(our principal market), 15.0% in Germany, 5.5% in Japan, 17.0% in the Benelux
countries, and 16.0% in the United Kingdom, while they increased by 43.0% in
Spain and 26.0% in the United States.  Our market share throughout the
world decreased from 4.7% of our target market in 2004 to 4.4% in
2005.

Cost of
sales

Cost of sales
decreased from 276.7 million in 2004 to 262.4 million in 2005, a
decrease of 14.3 million, or 5.2%, as a result of the decrease in total
motorcycle units produced, decreased sales of accessories and apparel and other
revenues, an increase in the capitalization of development costs (and a
resulting decrease in uncapitalized development expenses included in cost of
sales) and the extraordinary write-down of inventory, as contemplated in the
2006-2008 Business Plan.  As a percentage of revenues, cost of sales
increased to 81.8% in 2005, compared to 76.2% in 2004, as a result of a
worsening in the mix of motorcycle models sold, and a lower proportion of sales
of other Ducati products that generate higher margins than motorcycle
sales.  The increase also reflects the greater impact of our fixed costs on
lower sales volumes.

Gross profit

Gross profit was
58.5 million in 2005 compared to 86.7 million in 2004, a decrease of
28.2 million, or 32.5%, as a result of the trends in revenues and cost of
sales described above.  As percentage of revenues, gross profit was 18.2%
in 2005 compared to 23.8% in 2004.

Other income

Other income was
34.2 million in 2005 compared to 30.8 million in 2004, an increase
of 3.4 million, or 11.0%. This increase was primarily attributable to
increased income from sponsorship agreements, which increased from 22.5
million in 2004 to 25.2 million in 2005, as well as to Government
contributions not received in 2004.

Distribution costs

Distribution costs
were 89.4 million in 2005, compared to 87.5 million in 2004, an
increase of 1.9 million, or 2.2%.  This increase was principally a
result of higher personnel costs, which increased from 15.1 million in
2004 to 17.1 million in 2005, higher racing costs, including compensation
to racing pilots and team management expenses, which increased from 11.6
million in 2004 to 13.5 million in 2005, and higher product delivery
costs, which increased from 4.9 million in 2004 to 6.5 million euro
in 2005.

General and administrative expenses

General and
administrative expenses were 21.9 million in 2005, compared to 19.6
million  in 2004, an increase of 2.3 million, or 11.7%.  This
increase was principally attributable to increased other general and
administrative expenses (from 9.0 million in 2004 to 10.9
million in 2005) resulting from increased legal expenses relating to the
implementation of relevant market regulations, and greater accruals and
amortizations.

44

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Other expenses

Other expenses were
2.0 million in 2005 compared to 1.2 million in 2004, an increase of
0.8 million, or 66.6%.

Restructuring reserve

Our board of
directors approved a 13.0 million provision for restructuring charges on
December 16, 2005 (no reserves had been set aside in 2004), which is intended to
allow for a reduction in dealer and retail store inventories as well as our
corporate restructuring.

Operating profit(loss)

We had an operating
loss of 33.6 million in 2005 compared to an operating profit of 9.2
million in 2004, a decrease of 42.8 million, principally for the reasons
stated above.

Interest
income

Interest income was
3.2 million in 2005 compared to 2.3 million in 2004, an increase of
0.9 million euro, or 39.1%, principally due to the higher interest rates
we received in 2005.

Interest expense

Interest expense was
9.4 million in 2005 compared to 10.8 million in 2004, a decrease of
1.4 million, or 13.0%, principally as a result of our repayment of the
6.50% notes at maturity in May 2005 and our securing amendments to the
Syndicated Loan Facility.

Foreign exchange gains and losses, net

We had a net foreign
exchange loss of 1.2 million in 2005 compared to a net gain of 4.7
million in 2004, principally reflecting the trend of the exchange rate market
and the adoption of new accounting principles in accordance with the IFRS
starting on January 1, 2005.  See Note I.C. to our consolidated financial
statements for a description of accounting principles relating to our currency
swap agreements.

Income taxes

Our income tax
charge was 0.5 million in 2005 compared to 8.8 million in 2004, a
decrease of 8.3 million, or 94.3%.  This decrease was primarily
attributable to a decrease, from 3.1 million in 2004 to 1.9 million
in 2005, in current taxes and the posting of net deferred tax assets of
1.4 million (compared to net tax liabilities of 5.7 million in
2004).  The decrease in current taxes was due to the reduction in our tax
base for 2005 compared to 2004, which occurred even though DMH and Ducati Corse
had benefited from a reduced tax base in 2004 resulting from the implementation
of the so-called Tecno Tremonti Law.  The net deferred tax assets in 2005
were partially related to the establishment of our restructuring
reserve.

Net profit (loss) attributable to the Group

We had a net loss
attributable to the Group of 41.5 million in 2005, compared to a net loss
of 3.5 million in 2004, an increase of 38.0 million, principally due
to the reasons stated above.

U.S. GAAP Reconciliation

The principal
differences between IFRS and U.S. GAAP as they affect our audited consolidated
financial statements for the years ended December 31, 2004 and 2005 were the
accounting treatment of:  (i) the acquisition of the Ducati motorcycle
business, (ii) deemed cost revaluation on buildings written off under US GAAP,
(iii) development costs capitalized and reflected as part of investing
activities under IFRS and expensed as incurred and reflected as part of
operating activities under US GAAP (iv) derivative financial instruments and own
shares accounting for the year ended December 31, 2004 as IAS 32 and 39 were
adopted at January 1, 2005, (v) deferred taxes, (vi) stock-based compensation,
and (vii) earnings per share.

45

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Notes 38, 39 and 40
to the audited consolidated financial statements contain a detailed description
of the differences between IFRS and U.S. GAAP, as well as a reconciliation of
net profit and shareholders equity between IFRS and U.S. GAAP.

Under IFRS, net loss
was approximately 3.5 million in 2004 and 41.5 million in
2005.  Under U.S. GAAP, net loss approximated 2.1 million in 2004 and
74.8 in 2005.  Under IFRS, shareholders equity was approximately
157.8 million at December 31, 2004 and 118.7 million at December 31,
2005.  Under U.S. GAAP, shareholders equity approximated 74.4
million at December 31, 2004 and 4.0 million at December 31,
2005.

For a description of
new accounting pronouncements under U.S. GAAP, see Note 38 to our consolidated
financial statements.

International Financial Reporting Standards

Like all EU
companies with shares listed on a regulated market in the EU, we are required to
prepare our consolidated financial statements for each fiscal year starting on
or after January 1, 2005, in accordance with IFRS.  We prepared our
consolidated financial statements for the first time in accordance with IFRS for
the year ended December 31, 2005.  In accordance with IFRS 1 (First Time
Adoption of International Financial Reporting Standards), January 1, 2004, is
the date of transition to IFRS, and we are required to restate our 2004 results
in accordance with IFRS for comparative purposes.

The preparation of
the consolidated financial statements for the year ended December 31, 2005 in
accordance with IFRS involved a change in our accounting policies.  As
required by IFRS 1, the accounting policies adopted for the preparation of the
consolidated financial statements as at December 31, 2005, have been
consistently applied to the restatement of the consolidated financial statements
as at December 31, 2004, presented for comparative purposes, and the balance
sheet as at January 1, 2004, except for the application of IAS 32 and 39,
relating, inter alia, to the recognition of financial instruments (hedging of
exchange rate and interest rate risks, own shares and transaction costs), the
effects of which, calculated retrospectively, have been applied starting from
January 1, 2005, in accordance with IFRS 1.

For a description of
new accounting pronouncements under IFRS, see Note 1(c.xv) to our consolidated
financial statements.

Liquidity and Capital Resources

At December 31,
2005, the financial resources available to us from working capital and our
financial arrangements were not sufficient to meet our working capital needs and
fund our capital expenditure requirements. In response to our negative results
for the year ended December 31, 2005, our board of directors approved a business
plan for 2006-2008 in April 2006.  The board of directors also approved an
80 million capital increase to provide us the financial resources needed
to implement our business plan, which was completed in June 2006.

Based on our results
for the year ended December 31, 2005, we were not in compliance with certain
financial covenants contained in the Syndicated Loan Facility, which provides us
with an aggregate of 100 million in available lines of credit.  We
obtained a waiver of our non-compliance from the lending banks and also obtained
the agreement of the lending banks to amend the financial covenants contained in
the Syndicated Loan Facility to reflect the financial targets contained in our
2006-2008 business plan.  During the first half of 2006, we also entered
into the New Loan, the Banca Intesa Loan and the BPVN Loan, which provided us
with an aggregate of 55.0 million in available lines of credit.  At
June 23, 2006, we had 220 million of available funds under the Syndicated
Loan Facility, the New Loan, the Banca Intesa Loan and the BPVN Loan.

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We believe that the
financial resources available to us following our capital increase and from our
current financial arrangements and working capital will be sufficient to meet
our working capital needs and capital expenditure requirements during the
implementation of our 2006-2008 business plan.  Any reduction in our
financial resources from our operations or an inability to comply with the
financial covenants contained in our loan agreements could impair our ability to
fund our future liquidity needs and implement the 2006-2008 Business
Plan.

We had cash and cash
equivalents at December 31, 2005, of 53.0 million, compared to 49.3
million at year-end 2004.  The increase of approximately 3.7 million
reflected the following changes in our cash flows during the year:

Cash provided by
operating activities. Our principal ongoing source of liquidity is cash
provided by operating activities.  Cash provided by operating activities
increased by approximately 18.6 million from approximately 23.4
million in 2004 to approximately 42.0 million for the year ended December
31, 2005.  This increase primarily reflected:

| |  | a 41.3 million decrease in net working capital (defined as accounts
receivable plus inventories less accounts payable) from (6.3) million in
2004 to  35.0 million in 2005;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                               
| |  | the recording of a 13.0 million
provision for restructuring made in 2005 that has not yet affected our cash
position;                                                        
| |   |                                                                                                                                                                               
| |  | the recording of a write-down of
intangible assets of approximately 9.3 million in 2005;                                                                                     
| |   |                                                                                                                                                                               
| |  | a 4.2 million increase in other current   liabilities; and                                                                                                                   
| |   |                                                                                                                                                                               
| |  | a 2.8 million change in foreign exchange   translation adjustment.                                                                                                           

These increases in cash were partly offset by:

| |  | a negative change of 38.0 million in our net result for the year, to a net
loss of 41.5 million in 2005, compared to a net loss of 3.5 million
in 2004;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                           
| |  | a negative change of 6.6 million in deferred tax   assets;                                                                                               
| |   |                                                                                                                                                           
| |  | a 3.2 million decrease in depreciation and   amortization;                                                                                               
| |   |                                                                                                                                                           
| |  | a 2.5 million decrease in other payables to tax   authorities;                                                                                           
| |   |                                                                                                                                                           
| |  | a 1.0 million decrease in other current assets; and                                                                                                      
| |   |                                                                                                                                                           
| |  | a 0.7 million decrease in deferred tax liabilities.                                                                                                      

Our working capital is broken down as follows (in millions):

|                    |  | 2004 |       | 2005 |  
|------------------- |  | ---- | ----- | ---- | -
|                    |  |      |       |      |  
|Accounts receivable |  |     | 118.6 |      | 
|Inventories         |  |      | 92.3  |      |  
|Accounts payable    |  |      | (77.5 | )    |  
|                    |  |      |       |      |  
|Total               |  |     | 133.4 |      | 
|                    |  |      |       |      |  

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Our accounts
receivable at December 31, 2005, were 102.2 million, a decrease of 13.8%
compared to December 31, 2004, primarily due to the decline in our sales during
the year.

Our inventories at
December 31, 2005, were 81.4 million, a decline of nearly 11.8% compared
to December 31, 2004, as a result of our stock reduction policy as well as the
write-down of inventory for an amount equal to 5 million pursuant to the
2006-2008 Business Plan.

Our accounts payable
at December 31, 2005, were 85.2 million, an increase of nearly 9.9%
compared to December 31, 2004, primarily reflecting the extensions in the
payment terms obtained from the suppliers.

Cash used in
investing activities.  We used approximately 31.0 million for
investing activities in 2005 (compared to 25.4 million in 2004), including
10.6 million for investments in property, plant and equipment (compared to
10.4 million in 2004) and 20.5 million for investments in intangible
assets (compared to 15.1 million in 2004).  The increase in cash used
for investments in intangible assets was mainly due to the capitalization of
development costs relating to the competition motorcycles designed for the
MotoGP World Championship and specifically those costs incurred in connection
with technical solutions that will directly impact the development of the road
version of the competition motorcycle, which is already part of our production
plans and which was presented to the public during World Ducati Week in May
2004.

Cash provided by
(used in) financing activities.  We used 7.3 million cash in
financing activities in 2005, compared to 17.3 million provided by
financing activities in 2004.  The increased use of cash was primarily due
to cost of the refinancing of the bond issue at maturity on May 31, 2005, in
connection with which Ducati Motor Holding S.p.A. entered into the Syndicated
Loan on May 9, 2005, and was only partially offset by 2.6 million cash
generated from increases in share capital and reserves in connection with our
stock option plans and as a result of our sale in March 2006 of 1,844,669 DMH
shares owned by us.  See Item 10.  Additional
InformationShare Option Plans and Buy Back
Plan.

At December 31,
2005, we had available lines of credit of 100 million under the Syndicated
Loan Facility, of which approximately 2.0 million had not been drawn
down.    At December 31, 2005, our total long-term debt was
125.8 million, which included 62.1 million of long-term debt
outstanding under the Syndicated Loan Facility; 45.0 million relating to
securities issued by DDF1 in connection with our securitization program;
9.1 outstanding under our sale-and-lease-back transaction; and an
aggregate of 9.6 million in subsidized loans from the Italian Ministry for
Productive Activities.  For a more detailed description of each of these
transactions, see Other Financial Transactions
below.

Other Financial Transactions

Syndicated Loan Facility

On May 9, 2005, DMH
and Ducati Corse entered into the 100.0 million Syndicated Loan Facility
with a syndicate of seven Italian banks, arranged by Unicredit Banca
Mobiliare.

Under the Syndicated
Loan Facility, 63.6 million of funds are available to DMH under a
five-year credit line, and 36.4 million are available to DMH and Ducati
Corse under a renewable one-year revolving credit line.  The long-term
credit line currently bears interest at three-month Euribor plus 150 basis
points.  The revolving credit line will bear interest at one-month,
three-month or six-month Euribor, as determined by us, plus a current spread of
120 basis points.  The interest rate on both the long-term credit line and
the revolving credit line provide for step-up/step-down mechanisms that are
triggered by changes in the levels of our economic and financial
results.

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As of December 31,
2005, 62.1 million and 35.9 million were outstanding under the
5-year credit line and the revolving credit line, respectively.  We have
used funds from the Syndicated Loan Facility primarily to repay the outstanding
54.2 million aggregate principal amount of our notes maturing on May 31,
2005, and loans taken out to fund prior repurchases of some of our 6.50% notes
(see Notes Due May 31, 2005, below), as well as to fund
additional working capital requirements.  Ducati Corse borrowed the
16.0 million available to it in order to help fund its purchase from DMH
of the Ducati Corse trademark.  See Item 4. 
Information on the CompanyProducts and DistributionIntellectual
Property for a discussion of this transaction.

The obligations of
DMH and the obligations of Ducati Corse under the Syndicated Loan Facility are
guaranteed by DMH.  In connection with the Syndicated Loan Facility, DMH
has granted the lending banks security interests in all present and future
shares of Ducati Corse and Ducati North America owned by it and the
Ducati trademark, as well as a floating lien on its equipment and
inventory; Ducati Corse has secured the amounts borrowed by it with a pledge on
the Ducati Corse trademark.  The Syndicated Loan Facility
includes certain restrictions on our ability to pay dividends, make certain
sales of assets, issue guarantees or make loans to third parties.  Events
of default under the syndicated loan, which entitle the syndicate of banks to
declare any amounts outstanding to be due and payable, include, but are not
limited to, failure to pay interest or principal when due, failure to comply
with certain financial covenants and other obligations under the Syndicated Loan
Agreement, failure to pay other indebtedness when due, the occurrence of a
change of control and the occurrence of certain bankruptcy or other insolvency
events.

Based on our
preliminary results in 2005, we did not expect to be in compliance with the
financial covenants regarding the Net Debt to EBITDA ratio and the EBITDA to Net
Interest Expense.  In December 2005 the syndicate of lending banks agreed
not to accelerate repayment under the Syndicated Loan Facility and to negotiate
a waiver of our non-compliance.  We also requested amendments to the
financial covenants to align them with the 2006-2008 Business Plan and to take
into account that we will prepare our consolidated financial statements in
accordance with IFRS starting with the financial statements for the year ended
December 31, 2005.

The waiver and
amendments were agreed to by the lending banks and became effective upon the
purchase by WM, WM II and WM III of 30% less one share of our share capital and
their commitment to exercise the subscription rights granted to it in connection
with our 80,000 capital increase in the second quarter of 2006, and our
entering into of an underwriting agreement with UBM, pursuant to which UBM
agreed to purchase, or arrange for the purchase of, any subscription rights
outstanding at the end of our offering of subscription rights to our
shareholders and on the Italian Stock Exchange.  See Item 4. 
Information on the CompanyHistory and Development of the Company for
a description of the purchase of our shares by WM, WM II and WM III and our
capital increase and related offering of subscription rights.

The amended
financial covenants in the Syndicated Loan Facility require us to maintain for
each quarter, with reference to the four previous quarters:

(i)  a Net Debt to EBITDA ratio of not greater than 3.5 until December 31,
2006, 3.0 from January 1, 2007, until December 31, 2007, 2.5 from January 1,
2008, until December 31, 2008, and 2.0 thereafter;

(ii)  an EBITDA to Net Interest Expense ratio of not less than 5.0 until
December 31, 2006, and 7.5 thereafter; and

(iii)  maximum capital expenditures of 40 million in 2006 and 2007
and 36 million in 2008, 2009 and 2010.

49

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The terms used in
these ratios, including Net Debt, EBITDA and Net Interest Expense, are subject
to specific definitions set forth in the Syndicated Loan Agreement.  For
more detail, see the Summary in the English language of the Syndicated Loan
Facility, as amended, incorporated by reference to Exhibit 4.1 of this
document.

For further detail
of the changes to the financial covenants see Note 16 to our consolidated
financial statements.

The New Loan

On February 23,
2006, DMH entered into the 35 million New Loan with UniCredit Banca
dImpresa S.p.A.

Under the New Loan,
15 million of funds are available to DMH for working capital and 20
million of funds are available to DMH for advance payment of commercial paper,
with up to 10 million available for advance payment on orders and
contracts.  The 15 million of funds for working capital is available
under a renewable one-year revolving credit line that will bear interest at
one-month, three-month or six-month Euribor, as determined by us, plus a current
spread of 175 basis points.  The 20 million of funds available for
advance payment of commercial paper is available under a renewable one-year
revolving credit line that will bear interest at one-month, three-month or
six-month Euribor, as determined by us, plus a current spread of 75 basis
points, while the 10 million available for orders and contracts will bear
interest at one-month, three-month or six-month Euribor, as determined by us,
plus a current spread of 150 basis points.

In addition to
standard termination and default clauses, the New Loan includes certain
restrictions on our ability to pay dividends, make certain sales of assets,
issue guarantees or make loans to third parties and includes a cross
default clause that is triggered by a default in any other loan to which
we are a party (including the Syndicated Loan Facility, the Banca Intesa Loan
and the BPVN Loan).  The New Loan also requires that we comply with the
same financial covenants contained in the Syndicated Loan Facility.  See
Syndicated Loan Facility and Note 16 to our consolidated
financial statements for more detail about the financial covenants contained in
the Syndicated Loan Facility.

The Banca Intesa Loan

On March 27, 2006,
DMH entered into the 10 million Banca Intesa Loan.

Under the Banca
Intesa Loan, 3.5 million of funds are available to DMH for working capital
and 6.5 million of funds are available to DMH for advance payment of
commercial paper, with up to 3.5 million available for advance payment on
orders and contracts.  The 3.5 million of funds for working capital
is available under a renewable one-year revolving credit line that will bear
interest at one-month, three-month or six-month Euribor, as determined by us,
plus a current spread of 175 basis points.  The 6.5 million of funds
available for advance payment of commercial paper is available under a renewable
one-year revolving credit line that will bear interest at one-month, three-month
or six-month Euribor, as determined by us, plus a current spread of 75 basis
points, while the 3.5 million available for orders and contracts will bear
interest at one-month, three-month or six-month Euribor, as determined by us,
plus a current spread of 150 basis points.

In addition
to standard termination and default clauses, the Banca Intesa Loan includes
certain restrictions on our ability to pay dividends, make certain sales of
assets, issue guarantees or make loans to third parties and includes a
cross default clause that is triggered by a default in any other
loan to which we are a party (including the Syndicated Loan Facility, the New
Loan and the BPVN Loan).  The Banca Intesa also requires that we comply
with the same financial covenants contained in the Syndicated Loan
Facility.  See Syndicated Loan Facility and Note 16 to
our consolidated financial statements for more detail about the financial
covenants contained in the Syndicated Loan Facility.

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The BPVN Loan

On April 13,
2006, DMH entered into the 10 million BPVN Loan.

Under the BPVN Loan,
5 million of funds are available to DMH for working capital and 5
million of funds are available to DMH for advance payment of commercial paper,
with up to 2 million available for advance payment on orders and
contracts.  The 5 million of funds for working capital is available
under a renewable one-year revolving credit line that will bear interest at
one-month, three-month or six-month Euribor, as determined by us, plus a current
spread of 175 basis points.  The 5 million of funds available for
advance payment of commercial paper is available under a renewable one-year
revolving credit line that will bear interest at one-month, three-month or
six-month Euribor, as determined by us, plus a current spread of 75 basis
points, while the 2 million available for orders and contracts will bear
interest at one-month, three-month or six-month Euribor, as determined by us,
plus a current spread of 150 basis points.

In addition to
standard termination and default clauses, the BPVN Loan includes certain
restrictions on our ability to pay dividends, make certain sales of assets,
issue guarantees or make loans to third parties and includes a cross
default clause that is triggered by a default in any other loan to which
we are a party (including the Syndicated Loan Facility, the New Loan and the
Banca Intesa Loan).  The BPVN also requires that we comply with the same
financial covenants contained in the Syndicated Loan Facility.  See
Syndicated Loan Facility and Note 16 to our consolidated
financial statements for more detail about the financial covenants contained in
the Syndicated Loan Facility.

Notes due May 31, 2005

We repaid the
54.2 million of our then-outstanding 6.50% notes at maturity on May 31,
2005.  These notes had been issued in an original principal amount of
100 million on May 31, 2000.  Prior to 2003, we used proceeds from
the sale and lease-back transaction of our Bologna property to repurchase
9.0 million in aggregate principal amount of the notes.  In 2003, we
bought back on the market 15.3 million in aggregate principal amount of
the notes (at an average purchase price equal to 102.8% of their original par
value), and in 2004, we bought back on the market 21.5 million in
aggregate principal amount of our notes (at an average purchase price of 101.1%
of their original par value).  We funded these repurchases through proceeds
of corresponding committed bank loans.  Please see Item 11.
Quantitative and Qualitative Disclosures about Market RiskInterest Rate
Sensitivity for additional details on these loans.  All repurchased
notes were cancelled.

On July 2, 2001, we
entered into a Credit-Linked transaction, in which we acquired a
15.0 million note (the Credit-Linked Note) issued by the
London branch of Banca Nazionale del Lavoro.  The Credit-Linked Note
yielded an annual coupon of 5.89% and was repaid to us in full after it matured
on May 31, 2005.

Short-term lines of credit

We also have the
possibility of using short-term credit lines.  As of December 31, 2005,
67.5 million was available under these short-term lines of credit and
24.5 million was outstanding under these short-term lines of
credit.

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Securitization

In 2005, we assigned
to Ducati Desmo Finance 1 S.r.l. (DDF1)  a special purpose
entity owned by two Italian companies in which we have no voting interest or
ability to control management or board decisions  approximately 110
million of our trade receivables, as compared with approximately 127
million in 2004.  Of the receivables assigned in 2005, we have collected
102.7 million from DDF1 (and 117.3 million for 2004).  Of the
remaining 7.4 million for 2005, 1.4 million is related to interest
and expenses and 6.0 million is a so-called deferred purchase
price payable by DDF1 to us to the extent that DDF1 has available funds
based on the performance of the assigned receivables.  The securitization
essentially exposes us to the risk of not collecting this deferred amount which
is subordinated to the collection by DDF1 of the assigned receivables.  In
addition, we are obligated to compensate DDF1 for any amounts (which typically
are approximately 1 to 2 million per year) for rebates claimed by dealer
debtors on receivables assigned and are committed to covering the operating
costs of DDF1.  We continue to assign receivables to DDF1 on an ongoing
basis.

The receivables we
assigned to DDF1 are part of our non-recourse roll-over securitization program,
and we intend to assign additional receivables in similar transactions in 2006
and in subsequent years.  Our securitization program reflects a change in
our credit management practices in Italy and Europe to benefit from savings
relative to the cost of non-recourse factoring and interest income on planned
financing activities previously carried out by third party factoring
companies.  A number of foreign subsidiaries have also been gradually
involved in the securitization program.  Currently, Ducati France, Ducati
UK and Ducati Motor Deutschland sell receivables without recourse to DMH, which
subsequently sells them to DDF1.  Ducati North America Inc.  and
Ducati North Europe B.V. continue to enter into non-recourse factoring
agreements.

DDF1 initially
financed the purchase of our receivables through a bridge loan from Banca
Intesa, and thereafter through the issuance of 43 million in aggregate
principal amount of bonds (33 million of Class A bonds and 10
million of Class B bonds), which also served to replace the bridge loan granted
by Banca Intesa.   The Class A bonds were taken up entirely by Banca
Intesa, which then sold 99.5% of them to Romulus Funding Inc.
(Romulus), a U.S. finance company that is wholly owned by Global
Securitization Services LLC. We have no economic or voting interest in, or
ability to control management or board decisions of, these companies. On
December 21, 2004, DDF1 issued an additional 12 million in aggregate
principal amount of Class A bonds, which were taken up entirely by
Romulus.  On June 30, 2003, our North American subsidiary, Ducati North
America Inc., purchased all of the Class B bonds as the principal manner in
which we retain a certain degree of risk in our securitization financing as
required by rating agencies and market practice. The bonds mature on July 28,
2009, earn interest at 3-month Euribor (paid quarterly in arrears), and are
subordinated to the Class A bonds.  To finance the purchase of Class B
bonds, DMH made a non-refundable payment of 10 million to Ducati North
America Inc.

As part of the
securitization program, San Paolo IMI guaranteed on behalf of DMH in favor of
DDF1, for a maximum of 5.8 million, any amounts that might be deducted by
debtors, on the settlement of amounts already securitized, in recognition of
rebates granted by the company on the achievement of their sales
targets.

In accordance with
SIC-12ConsolidationSpecial-purpose entities (SPE), DDF1 has been
consolidated at December 31, 2005 and 2004, because the purchase by the seller
of the asset-backed junior notes results, in substance, in the acquisition of
control over DDF1, even though we have not equity interest in, or any legal
right of control over, DDF1.

Loans from the Italian Ministry for Productive Activities

We entered into
several long-term loans with interest-relief with the Ministry for Productive
Activities for projects linked with the Technological Innovation Fund (F.I.T.)
for a total amount of 9.6 million.  These loans have a 5-year
duration starting from the date on which technical and financial reports
submitted in connection with the authorized duration of each project are
approved.  These loans are in a pre-amortization phase from the
date of the drawdown until the date on which the technical and financial reports
are approved, so they generate interest payable by us, but not the obligation to
repay the principal.

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Derivative Financial Instruments for Hedging Purposes

Our primary market
risk exposure is foreign currency risk.  To manage this risk, we enter into
derivative financial instruments (i.e., forward exchange contracts).  At
December 31, 2005, we had 39.7 million in forward exchange contracts,
compared to 23.9 million at December 31, 2004; this reduction reflects the
fact that our board of directors decided upon a new hedging policy in December
2004.  Our currency exchange rate hedging policy in 2004 consisted of
18-month rolling coverage; our new currency exchange rate hedging policy
consists of six-month rolling coverage that is consistent with the amount of our
orders and receivables in currencies that we normally have in place.  We
are also exposed to interest rate risk associated with short and long-term bank
financings on which we pay a variable interest rate.  To manage this risk,
we enter into interest rate swap agreements.  Our current interest rate
hedging policy consists in covering exclusively long-term contracts, having
duration greater than 18 months.

For more information
on our derivative financial instruments, see Item 11. Quantitative and
Qualitative Disclosures About Market Risk.

Contractual Obligations

We have various
contractual obligations arising from our continuing operations.  The
following represents our contractual obligations as of December 31, 2005, in
thousands of euro:

Contractual Obligations:

|                                                    |  | Payments   Due by Period |        
|--------------------------------------------------- |  | ------------------------ | -------
|                                                    |  |                          |        
|Contractual   Obligations                           |  | Total                    |        
|                                                    |  |                          |        
|                                                    |  | (in thousands of euro)   |        
|Long-Term Debt (1)                                  |  |                          | 116,703
|Capital Lease Obligations (production facility) (2) |  |                          | 12,401 
|Operating Leases                                    |  |                          |       
|Unconditional Purchase Obligations                  |  |                          |       
|Other Long-Term Obligations                         |  |                          |       
|                                                    |  |                          |        
|Total Contractual Cash Obligations                  |  |                          | 129,104
|                                                    |  |                          |        

|                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) Long-term debt includes the 62.1 million outstanding under the
long-term line of credit under the Syndicated Loan Facility; loans with
interest-relief totaling 9.6 million from the Italian Ministry for
Productive Activities for projects linked to the Technological Innovation Fund
(F.I.T.); and 45 million relating to securities issued by Ducati Desmo
Finance 1 S.r.l.
|                                                                                                                                                                                                                                                                                                                                                                                       
|(2) This amount excludes aggregate interest as at December 31, 2005, of
0.8 million.  See Note 40 to our audited financial statements for
additional information.                                                                                                                                                                                                                     

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Research and Development

Intangible assets include capitalized development costs, comprised principally
of the cost of personnel employed in development functions and the cost of
materials and external consultants, where the expenditure is incurred for
specific product development.  Otherwise, research and development costs
are expensed under cost of sales or, in the case of part of the costs related to
the development of a four-stroke double twin cylinder engine to
compete in the MotoGP Championship, under distribution costs, together with all
other costs related to racing activities.Our capitalized
development costs were 19.9 million in 2005 and 14.1 million in
2004.  Our expensed research and development costs were 6.6 million
and 5.2 million for the same years.  These expensed costs included
research expenses for specific projects on our racing program, which amounted to
2 million for 2005 and 1.0 million for 2004.  Amortization
charges relating to our capitalized development costs were 7.9 million and
10.5 million in 2005 and 2004, respectively.  These amortization
charges relate only to development costs capitalized since our September 1996
acquisition of the Ducati business, and may increase in future periods as a
result of new capitalizations. In relation to our research and
development activity, we have benefited from financial assistance from the
Italian Government, amounting to 0.1 million in 2004 and 2.5 million
in 2005.  Such assistance is expected to continue in 2006.  See
Item 4.  Information on the CompanyProducts and
DistributionProduct Research and Development.

Item 6.  Directors, Senior Management and Employees

Directors

The following table
sets forth the names of the members of the current board of directors, their
positions, year of initial appointment and date of birth.
All members of the board were appointed at the
shareholders meeting held on April 10, 2006, and will serve until the
shareholders meeting that approves our financial statements for the year
ending December 31, 2006 is convened.

|Name                   |  | Position                       |  | Year First   Appointed to   board of directors |  | Date of   birth
|---------------------- |  | ------------------------------ |  | ---------------------------------------------- |  | ---------------
|                       |  |                                |  |                                                |  |                
|Federico Minoli        |  | Chairman and Managing Director |  | 1996                                           |  | 1949           
|Carlo Campanili Bonomi |  | Vice Chairman                  |  | 2006                                           |  | 1940           
|Mauro Benetton         |  | Director                       |  | 1998                                           |  | 1962           
|Massimo Bergami        |  | Director                       |  | 2005                                           |  | 1964           
|Roberto Consonni       |  | Director                       |  | 2006                                           |  | 1948           
|Marco Giovannini       |  | Director                       |  | 2006                                           |  | 1955           
|Roberto Maestroni      |  | Director                       |  | 2006                                           |  | 1975           
|Giampiero Paoli        |  | Director                       |  | 2006                                           |  | 1944           
|Antonio Perricone      |  | Director                       |  | 2006                                           |  | 1954           
|Dante Razzano          |  | Director                       |  | 1996                                           |  | 1948           
|Matteo Tamburini       |  | Director                       |  | 2006                                           |  | 1957           
|Ulrich Weiss           |  | Director                       |  | 1998                                           |  | 1936           

We have briefly
summarized below the principal business activities, experience and other
principal directorships, if any, of our current directors.

Mauro
Benetton was the Marketing Manager of Benetton Group S.p.A. from 1992 to
2003. Born in 1962, the eldest son of Luciano Benetton, he began working for the
Benetton Group as a student, first in London and then in Paris.  In 1985,
Mr. Benetton moved to Ponzano Veneto, Italy, to begin working at Benettons
headquarters, where he was in charge of marketing for one of the Benettons
main lines, Sisley.  Mr. Benetton planned and oversaw this brands
successful re-launch.

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Massimo
Bergami has been a Full Professor of Management and Human Resource
Management at the University of Bologna  School of Business since 2003,
and Dean and Deputy Chief Executive Officer of Alma Graduate School of
Information Technology, Management and Communication since 2000. He currently
serves on the board of directors of Ferretti S.p.A. From 1999 to 2001, Mr.
Bergami was advisor of the Italian Ministry of Industry and Foreign Commerce,
and from 1996 to 1999 he was advisor of the Italian Ministry of Defense. Mr.
Bergami graduated from the University of Bologna  School of Economics in
1990. He holds a Ph.D. in Management and has been Visiting Researcher and
Visiting Professor at the New York University, University of Michigan,
University of Florida and Bocconi University of Milan.

Carlo Campanini
Bonomiis Chairman of Investindustrial Ltd., Deputy Chairman of
Investindustrial Partners Spain S.A. and a member of the board of directors of
Recoletos S.A. He has been General Manager and Managing Director of
International Chemical Cosmetics Co. S.p.A., a lecturer in Industrial Techniques
at the Faculty of Business and Economics at the University of Pavia, Managing
Director and subsequently Deputy Chairman and Chairman of Saffa S.p.A., Managing
Director and subsequently Chairman of Mira Lanza S.p.A., Chairman of Invest,
Chairman of Beni Immobili Italia, Chairman of Bi-Invest, Deputy Chairman of La
Fondiaria S.p.A., director of Ebro Agricolas S.A. and Chairman of Sartiò
S.A. Mr. Bonomi graduated in Economics and Business from the Bocconi University
in Milan.

Roberto
Consonni is on the board of directors of Radici Film S.p.A and Ampere S.p.A.
In the past, he was a director of Carapelli Firenze S.p.A. and of the
associations Centromarca, UPA and Ecr-Indicod. He was previously General Manager
of Lavazza S.p.A., a Division Manager at Chiari & Forti, Managing Director
of Lever Italia and Europe General Manager of the Domestic Detergents division
of Unilever HomeCare Europe, Marketing Director of Van den Berg Food Italy and
Sales and Marketing Manager within the Personal Care Division of Unilever
Italia. Mr. Consonni graduated in Economics and Business from the Bocconi
University of Milan.

Marco
Giovannini is Chairman, Managing Director and majority shareholder of Guala
Closures S.p.A., a company listed on the STAR segment of the Italian Stock
Exchange. He is also a member of the board of directors of Pelliconi S.p.A.,
Unione Industriale di Alessandria and Consorzio Proplast, where he supports the
R&D department of the Politecnico di Alessandria. In the past, Mr.
Giovannini was Senior Vice-President of Carnaud Metalbox, now Crown Holdings,
and a member of the board of directors of Carapelli S.p.A. and Pelliconi
International Machinery. Mr. Giovannini graduated with a degree in Nuclear and
Mechanical Engineering from Rome University.

Roberto Maestroni  is a member of the board of directors of Gardaland S.p.A. He is
Vice-President of Investindustrial S.p.A., a private equity company mainly
active in southern Europe. He was formerly a consultant for the Australian
market at Cavanna Olii, involved in international trade of olive oil. Mr.
Maestroni holds a degree in Economics and Business from Bocconi University of
Milan.

Federico
Minoli has been a director of DMH since September 1996 and Chairman since
July 1998.  Mr. Minoli has been our Managing Director since March 2003, a
position that he had previously held from April 1997 to July 2000.  He
holds several other board level positions within the Ducati Group, including the
position of Chairman of Ducati North America.  Mr. Minoli is a founding
partner of HMD Partners (founded in 2003) and serves on the board of directors
of Bally Shoefactories Ltd. and Mantero Finanziaria S.p.A. He is also a member
of the supervisory board of Escada AG and SinnLeffers AG and is trustee of the
Riders for Health Association.  Prior to joining DMH, Mr. Minoli was a
partner and vice president of Bain & Co., the international management
consulting firm.  From 1987 to 1989, Mr. Minoli held a number of senior
positions at Benetton S.p.A., the international clothing retailer, including
general manager of Benetton for Canada, the United States and Central
America.  Prior to 1987, Mr. Minoli was a consultant with McKinsey &
Co. and served with Playtex International and Procter & Gamble S.p.A. 
He has also been a member of the board of directors of Bally International AG,
Mantero Seta S.p.A., Almaweb and Gori & Zucchi Inc., the holding company of
Uno A Erre Italia S.p.A., of which he was Chairman from November 2000 to March
2004.  He was also temporary Chief Executive Officer of Bally International
AG from May 2001 to April 2002.  See also Item 7.  Major
Shareholders and Related Party TransactionsRelated Party
Transactions.

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Giampiero Paoliis an attorney and has been a member of the Bar in Italy since January 22,
1970. He holds management positions in the company Pin Up Stars. He was a
Professor of Commercial Law at the Law Faculty of the University of Macerata
from 1976 until 1990. He has been Chairman and Managing Director of various
companies, which recently included being a member of the board of directors of
G.D. S.p.A. from June 2000 until March 2002 and of Rimini Fiera S.p.A. from
September 2004 until February 2006. He has written essays on bankruptcy and
banking law.

Antonio Perriconeis Chairman of BS Investimenti SGR S.p.A. and BS Private Equity S.p.A. He is
also a director of Electronics Futura S.p.A., Klopman International S.r.l.,
Segesta S.p.A., Quidnovi S.p.A. and World Motors S.A. In the past, Mr. Perricone
was director of Carapelli Firenze S.p.A., Logic Control S.A., Guala Closures
S.p.A., Salmoiraghi e Viganò S.p.A., as well as Managing Director of CCF
Charterhouse, manager of Olivetti and Vice-President of American Express Bank.
Mr. Perricone  graduated in Economics and Business from the University of
Palermo and received a Masters Degree from the Business Management School at the
Bocconi University of Milan.

Dante Razzano
is a principal and senior partner of InvestIndustrial S.p.A. He has been
director of Ducati since September 1996 and holds management positions in
Permasteelisa S.p.A. and Sistemi Tecnologici S.p.A. as well. Mr. Razzano was
head of the Italian private equity division of Deutsche Morgan Grenfell from
1992 to 2003.  He was also managing director of Citibank NA and Chief
Executive Officer of Citicorps Italian merchant bank from 1988 to 1992
(Citinvest S.p.A.), as well as responsible for southern European M&A for
Citicorp, based in New York, in 1987.  From 1970 to 1986, he was Vice
Chairman and manager of the Manufacturers Hanover Trust Co., New York.  Mr.
Razzano also served on the board of directors of Sistemi Tecnologici Holding
S.p.A. and Gardaland S.p.A.

Matteo Tamburiniis a chartered public accountant and auditor. He has been a partner of
Studio Gnudi since 1998, and had previously been associated with Studio Gnudi
since 1983. From 1981 until 1983 he worked for Grandi Lavori S.p.A. as an
assistant to the Finance and Audit Director. He is a director of the Ordine
dei Dottori Commercialisti (Association of Chartered Accountants) in
Bologna. He holds management positions in Adaltis Inc., Adaltis Italia S.p.A.,
Alerion Industries S.p.A., Beghelli S.p.A., Ds-Data Systems S.p.A., Gnudi-Guatri
Consulenti Associati S.r.l., IBS-Istituto Bancario Sanmarinese S.p.A., Marcolin
S.p.A., Martelli Lavorazioni Tessili S.p.A., N.C.H. Network Computer House
S.p.A., Promotor International S.p.A., Risanamento S.p.A., TAS Tecnologia
Avanzata dei Sistemi S.p.A. He held supervisory positions with Ballantyne
Cashmere S.r.l., CERMET S.c.a.r.l., Ciba Speciality Chemicals S.p.A., Ducati
Corse S.r.l., Ferrari S.p.A., Gemmo S.p.A., Gruppo Concorde S.p.A., Imprenditori
Associati S.p.A., Investitori & Partner Immobiliari S.p.A.  INPARTNER
S.p.A., Kartogroup S.p.A., Mirage Granito Ceramico S.p.A. (Concorde Group),
Olympic R.E. S.p.A., Serenissima SGR S.p.A. and Wrap S.p.A. (Merloni Group). He
was Chairman of Ducatis Board of Statutory Auditors from April 2000 until
April 2006.

Ulrich
Weiss is a member of the board of directors of AFS International New York,
Benetton Group S.p.A., the European Business School and Stiftung
Marktwirtschaft. For 19 years, until May 1998, Mr. Weiss served in various
capacities as a member of the board of directors of Fiat S.p.A. and Deutsche
Bank AG. He was also responsible for Deutsche Banks business in Italy and
was President of Deutsche Bank S.p.A., Milan. Dr. Weiss is currently a member of
the supervisory boards of Bego Bremer Goldschlagerei, Bego Medical AG and
Capital Partners S.p.A.

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Board Committees

Our Board of
directors established a compensation committee in 1999.  The compensation
committee proposes to the board the remuneration of our directors with special
delegated powers, including the chairman and managing director, and has the
authority to determine the remuneration of our managers.  Meetings of the
compensation committee may be called by any member in accordance with the rules
applicable to the board of directors.  Resolutions of the committee must be
adopted by the vote of a majority of those present. The committee has the right
to use external consultants at our expense. Messrs. Razzano, Perricone, 
Bergami and Campanini Bonomi are currently the members of the compensation
committee.

To comply with the
code of corporate governance issued by Borsa Italiana S.p.A., our board of
directors established an internal control committee, which was mainly
responsible for assessing the adequacy of the internal control system through an
evaluation of work programs and reports prepared by those responsible for
internal control, and for relations with external auditors.  The internal
control committee reported to the board of directors about the work performed
and the adequacy of the internal control system at least every six months, at
the time of approving the annual financial statement and the semi-annual report.
Starting  July 31, 2005, the internal control committee served as our audit
committee for purposes of Rule 10A-3 (Rule 10A-3) under the
Securities Exchange Act of 1934, as amended (the Exchange Act).
Following the adoption of the one-tier corporate system, the functions of audit
committee for purposes of Rule 10A-3 have been carried out by the Management
Control Committee. See Item 10. Additional
InformationBy-LawsCorporate Governance SystemManagement
Control Committee for more information.

As of the date of
this filing, our new board of directors, appointed on April 10, 2006, 
decided not to establish an executive committee.

Senior Management

The following table
sets forth the names of our senior officers who are not also directors, their
respective positions, the year they were appointed to such positions and their
date of birth.

|Name                |  | Position                                                                  |  | Year   Appointed |  | Date of   birth
|------------------- |  | ------------------------------------------------------------------------- |  | ---------------- |  | ---------------
|                    |  |                                                                           |  |                  |  |                
|Danilo Bernardini   |  | Manager, Human Resources                                                  |  | 1995             |  | 1948           
|Claudio Domenicali  |  | Managing Director of Ducati Corse and   Manager, Research and Development |  | 1999   2005      |  | 1967           
|Enrico DOnofrio    |  | Manager, Finance, Investor   Relations and Internal Controls              |  | 2000             |  | 1957           
|Gianfranco Giorgini |  | Manager, Operations                                                       |  | 1999             |  | 1953           
|Cristiano Silei     |  | Manager, Sales                                                            |  | 2005             |  | 1968           

We have briefly
summarized below the principal functions and experience of our senior
officers.

Danilo
Bernardini has been the manager of personnel and human resources since
1995.  Prior to joining Ducati, Mr. Bernardini was responsible for
personnel at various units of Cagiva (including CRC) from 1987 and at our
predecessor company from 1983 to 1987.  From 1977 to 1983, Mr. Bernardini
held a number of positions at the Zanussi Group, an Italian appliance
manufacturer.  In addition, Mr. Bernardini had previous experience as a
sport journalist for the Italian motorcycling magazine,
Motociclismo-Edisport. He holds a degree in Mechanical
Engineering.

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Claudio
Domenicali has been Managing Director of Ducati Corse S.r.l. since April
1999.  Mr. Domenicali is responsible for all Ducati Corse operations,
including overseeing the hiring policies for riders, research and development,
logistics, commercial and marketing activities, administration and information
technology. Since January 2005 he has also been R&D Manager of DMH, with
responsibilities relating to product design and marketing. He is also
responsible for defining and developing new products, and, specifically, for
defining and monitoring performance targets, quality, lead times and costs. Mr.
Domenicali joined our predecessor company (Ducati Motorcycles S.p.A.) in
1991.  From 1994 to 1996, Mr. Domenicali was responsible for the technical
office.  From 1996 to 1999, he was deputy technical manager of research and
development while managing all the racing technical matters.  Mr.
Domenicali holds a degree in Mechanical Engineering from the University of
Bologna.

Enrico
DOnofrio has been our manager of finance and manager of investor
relations and internal controls since October 2000.  Prior to that, Mr.
DOnofrio worked for 17 years at Procter & Gamble, where he held a
number of finance positions, including Finance Manager in Portugal and Director
of Finance & Accounting at P&G headquarters in Belgium.  He began
his career at Olivetti as a research and development analyst.  Mr.
DOnofrio holds a degree in Mechanical Engineering and a M.B.A. from
Bocconi University in Milan.

Gianfranco
Giorgini has been the manager of operations since May 1999.  Among other
things, Mr. Giorgini is responsible for purchasing, warehousing, production
planning and distribution.  Prior to joining us, Mr. Giorgini held a
variety of positions in a 25 year career with Lombardini Motori S.p.A.,
including serving as logistics manager from 1992 to 1997.

Cristiano
Silei joined DMH as sales manager in April 1997.  In the course of his
career at Ducati, Mr. Silei has assumed a number of different responsibilities,
including the development of our strategic plan, reorganization of our
commercial department, general management of our North American subsidiary,
evaluation of acquisition opportunities and start up of our website,
Ducati.com.  In November 2004, Mr. Silei was appointed manager of sales of
the Group.  Prior to joining Ducati, Mr. Silei was at the Paris and Milan
offices of the Bain & Co. management consulting firm, where he specialized
in business restructuring.  Mr. Silei also worked at the Rome office of
Andersen Consulting in the area of business process reengineering.  Mr.
Silei holds a degree in business administration from the Bocconi University in
Milan.

Management Control Committee and Board of Statutory Auditors

Following the
adoption of the one-tier corporate system as our new corporate governance system
on April 13, 2006, the board of directors appointed a Management Control
Committee (instead of the board of statutory auditors), composed of
non-executive and independent directors that will remain in office until the
financial statements for the period ending December 31, 2006, are approved.

In accordance with
Article 15 of our By-Laws, the Management Control Committee is currently
composed of three members, listed in the table below.

|Name             |  | Position |  | Year   Appointed |  | Born
|---------------- |  | -------- |  | ---------------- |  | ----
|                 |  |          |  |                  |  |     
|Roberto Consonni |  | Member   |  | 2006             |  | 1948
|Giampiero Paoli  |  | Chairman |  | 2006             |  | 1944
|Matteo Tamburini |  | Member   |  | 2006             |  | 1958

In terms of the
compensation paid to members of the Management Control Committee for the 2006
financial year, the Company has estimated that these will amount to
120,000 (40,000 for each member and the chairman) See Item 10.
Additional InformationBy-LawsCorporate Governance
SystemManagement Control Committee, for more details.

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The following table
sets forth the names of the three members of the Board of Statutory Auditors,
their respective positions, the year of their appointment and date of birth.
These members were in office until the adoption of the one-tier corporate
system, on April 10, 2006.

|Name                   |  | Position  |  | Year   Appointed |  | Born
|---------------------- |  | --------- |  | ---------------- |  | ----
|                       |  |           |  |                  |  |     
|Salvatore Lantino      |  | Alternate |  | 2004             |  | 1959
|Italo Giorgio Minguzzi |  | Member    |  | 1998             |  | 1945
|Gianluca Nanni Costa   |  | Alternate |  | 1998             |  | 1959
|Francesco Serantoni    |  | Member    |  | 1998             |  | 1941
|Matteo Tamburini       |  | Chairman  |  | 1998             |  | 1958

During 2005, our
statutory auditors received in the aggregate 166,000 in compensation for
their services as statutory auditors to DMH and its subsidiaries.

See Item 10.
Additional InformationBy-LawsManagement Control
Committee.

Compensation of Directors and Senior Management

Each of our
directors is entitled to an annual compensation in return for his services as
director equal to 15,000, in addition to reimbursement of expenses
incurred in connection with the performance of their functions.

In 2005, Mr. Minoli
received cash compensation of $400,000 as annual base compensation for his
services as chairman of Ducati North America and 250,000 as annual base
compensation as Chairman and Managing Director of DMH.  For the year 2006,
Mr. Minoli is entitled to receive $200,000 in annual base compensation for his
services as chairman of Ducati North America and 250,000 and $200,000 in
annual base compensation as Chairman and Managing Director of DMH.

Mr. Minoli was also
granted 500,000 share options during 2004, and 500,000 share options rights
during 2005, in connection with our stock option plan approved in 1999. As of
the date of this filing, no stock options have been granted for 2006.

None of our other
directors are beneficiaries under that plan.  See Item 10. Additional
InformationShare Option Plans.

On March 10, 2005,
at the proposal of the compensation committee, the board of directors extended
for the years 2005, 2006 and 2007 a retention plan already in effect for the
years 1999 to 2004 (the Retention Plan).  The beneficiaries of
the Retention Plan are Mr. Minoli and up to four additional senior officers of
Ducati designated by the Managing Director, who may change them from year to
year.  The Managing Director has identified the following beneficiaries for
2005: Enrico DOnofrio, Claudio Domenicali and Filippo Preziosi. Under the
Retention Plan, the beneficiaries are entitled to an extraordinary bonus ranging
from 0% to 300% of their base salary, determined based on the annual percentage
increase in certain measures of our financial performance. Bonuses under the
Retention Plan vest on the date of approval of the consolidated financial
statements for the year of reference and are payable in one lump sum within
twelve months of such vesting, provided that the beneficiaries are our employees
on the payment date.  In case of termination by us of a beneficiarys
employment for reasons other than just cause (giusta causa or
giustificato motivo soggettivo), unvested bonuses are terminated but we
are obligated to pay each such senior officer three times the amount of the
vested bonus. On the basis of Ducatis 2003, 2004 and 2005 results, no
extraordinary bonuses have vested for those years under the Retention Plan.

On March 23, 2006,
at the proposal of the compensation committee, the board of directors approved
the granting to Enrico DOnofrio, manager of finance, investor relations
and internal controls of DMH, of a bonus equal to the termination indemnity
(corresponding to two times his annual salary) that he would be entitled to
receive in the event of his resignation following a change of control of
DMH.

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Our board of
directors has also approved an end-of-term payment obligation of $1.2 million
for Federico Minoli, which will be payable if he is removed or is not
re-appointed as our managing director for reasons other than just cause before
his sixtieth birthday in 2009.

During the year
ended December 31, 2005, the aggregate compensation paid to the senior officers
listed above, exclusive of compensation to Mr. Minoli, was approximately
1.05 million.  This aggregate compensation does not include an
additional 83,450 of compensation in the form of mandatory leaving
entitlements to which our employees are entitled under Italian law (under
Italian law, an employee is entitled to an end-of-employment payment which is
accrued each year based on such employees annual salary).

At December 31,
2005, we did not have any pensions and similar obligations for our directors and
members of senior management, as they were only entitle to the reserve for
mandatory leaving entitlements described above.

Pursuant to our
established management bonus plan, each of our managers, including the senior
managers listed above and Mr. Minoli, is entitled to an annual bonus if certain
conditions relating to our financial performance are met. Based on our results
for 2003 and 2004, none of our executives earned a bonus for that year under
this management bonus plan. In 2005, the board of directors agreed to suspend
the management bonus plan and to replace it with an alternative plan. Pursuant
to this alternative plan, if our earnings before interest, taxes, depreciation
and amortization (EBITDA) exceeds 50 million, a bonus will be
awarded to each manager who would have received a bonus pursuant to our
management bonus plan had our results met the criteria specified for 2004. 
The aggregate principal amount of bonuses available under this plan will be
equal to the amount by which our EBITDA exceeds 50 million, with a maximum
aggregate principal amount available of 2.5 million.  Individual
performance will be considered in determining the amount of each individual
managers bonus and will be assessed by senior management responsible for
each individual manager and, in the case of Mr. Minoli, by the Compensation
Committee. No bonus was earned in 2005 under this alternative plan.

In addition, Ducati
senior officers, including those listed above, received in the aggregate 920,000
share option rights during 2004, and 1,895,000 share option rights during 2005,
in connection with our 1999 Stock Option Plan.  As of the date of this
filing, no share option rights have been granted for 2006. See Item 10.
Additional InformationShare Option Plans, for more
information.

Based on information
provided to CONSOB, which is publicly available, and other information available
to us, as of June 23, 2006, Mr. Minoli owned 450,000 of our outstanding shares
and Mr. Seragnoli, a member of our board of directors from 1998 to 2006, owned
(directly and indirectly) 9,860,132 of our outstanding shares.  At June 23,
2006, Mr. Minoli held 2,560,185 share option rights in connection with our 1997
Stock Option Plan and 2,500,000 share option rights in connection with our 1999
Stock Option Plan.  At June 23, 2006, none of our other directors owned any
of our shares or share option rights.  See Item 10. Additional
InformationShare Option Plans for a description of our stock option
plans.

Employees

As of December 31,
2005, we employed 1,134 persons worldwide (of which 1,005 were employed in
Italy, 43 in the United States, 16 in the United Kingdom, 18 in France, 20 in
Germany, 18 in Japan and 14 in the Netherlands), as compared to 1,139 at
December 31, 2004 and 1,162 at December 31, 2003.  Of our employees, 898
were employed by DMH, of whom 550 were employed in operations and the remainder
in research and development, sales, marketing and central functions. Our
employees outside Bologna are engaged primarily in sales and marketing.  At
December 31, 2005, our employees included 51 managers worldwide, as compared to
59 and 60 at December 31, 2004 and 2003, respectively.

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We believe that our
relations with our employees are good.

Under Italian law,
employees are entitled to amounts based on salary and years of service upon
leaving their employment.  We had a liability for such termination
indemnities of  9.7 million at December 31, 2005.  See Note 14 to our
audited consolidated financial statements included in Item 18.  Under
Italian law, we make social security and national healthcare contributions for
our employees to the Italian government, which provides pension and healthcare
insurance benefits.

Employees in Italy
are subject to national and company-specific collective bargaining
agreements.  National agreements are negotiated collectively between the
national associations of companies within a given industry and the respective
national unions.  National agreements provide a basic framework on working
conditions, including, among other things, pay, security and other
provisions.  Our employees in Italy are principally subject to the National
Metalworkers and Installers collective bargaining agreement, which was renewed
in May 2003 and expires in December 2006 (except for its economic aspects, which
were re-negotiated in January 2006 and expire in June 2007).

Company-specific
agreements are negotiated between individual companies and union
representatives.  These agreements address issues of special importance to
the relevant company and may supplement the basic provisions of the national
framework contract.  Our company-specific agreement was signed in December
2003 and will expire in December 2007. This agreement affects approximately 450
of our employees at DMH and stipulates a wage increase in return for flexible
working hours during the peak production season (January-May), subject to a
maximum of 85 hours per week, which may be offset during the rest of the year
(typically June-September). The terms of this agreement also provide for covered
employees to be paid an annual performance bonus based on collective
productivity, profitability and quality targets.

We have not
experienced any significant work stoppages due to strikes since 1996.

We have approved an
employee stock ownership plan.  For more information about this plan, see
Item 10. Additional InformationEmployee Stock Ownership
Plan.

Item 7.   Major Shareholders and Related Party Transactions

Major Shareholders

The following table
sets forth information regarding the beneficial ownership of our shares by each
shareholder known by us to be the beneficial owner of more than 2.0% of our
shares and by each shareholder we expect to be the beneficial owner of more than
2.0% of our shares after the capital increase.  This information is based
on information provided to CONSOB, which is publicly available, and other
information available to us as of June 23, 2006.  As of that time, only WM,
WM II, WM III and Giorgio Seragnoli had informed us of the amount of their
participation in the capital increase.  As a result, the information in the
following table regarding the number of shares beneficially owned by our other
major shareholders does not reflect their participation in the capital increase,
if any, and the related percentage data, which is based on our outstanding share
capital following the capital increase, may differ substantially from the actual
percentages of shares owned by these shareholders.

The shareholders
listed below do not hold any different voting rights from those held by other
ordinary shareholders.

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|Name of Shareholder                     |  | Number of   Shares Owned |            | Percent of   Shares Owned | 
|--------------------------------------- |  | ------------------------ | ---------- | ------------------------- | 
|                                        |  |                          |            |                           | 
|World Motors S.A.                       |  |                          | 49,643,838 |                           | 
|World Motors White S.c.A.               |  |                          | 23,684,088 |                           | 
|World   Motors Red S.c.A.               |  |                          | 22,288,094 |                           | 
|Columbia   Wanger Asset Management L.P. |  |                          | 10,273,335 | (1)                       | 
|Giorgio   Seragnoli                     |  |                          | 9,860,132  |                           | 
|Amber   Capital L.P.                    |  |                          | 4,547,075  | (2)                       | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) As of May 4, 2006, the date of the commencement of our subscription rights
offering in connection with our capital increase, Columbia Wanger Asset
Management L.P. (Columbia Wanger) beneficially owned 10,028,936 of
our shares (equal to 6.29% of our then-outstanding share capital).  As of
June 23, 2006, Columbia Wanger had not yet informed us of the amount, if any, of
its participation in the capital increase.  If Columbia Wanger had
exercised all of the subscription rights it received, its total number of shares
would be 21,446,670, and its percent of shares owned would be 6.69%.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(2) As of May 4, 2006, the date of the commencement of our subscription rights
offering in connection with our capital increase, Amber Capital L.P.
beneficially owned 4,547,075 of our shares (equal to 2.85% of our
then-outstanding share capital).  As of June 23, 2006, Amber Capital L.P.
had not yet informed us of the amount, if any, of its participation in the
capital increase.  If Amber Capital L.P. had exercised all of the
subscription rights it received, its total number of shares would be 9,094,150,
and its percent of shares owned would be 2.84%.                                   

On February 28,
2006, TPG Acquisition, the relative majority shareholder of the Company since
1996, agreed to sell to Invind Holdings (or its designee) a stake representing
30% less one share of our share capital held by TPG Acquisition.  Following
Invind Holdings designation on March 27, 2006, the shares were purchased
by WM (24,821,919 shares, equivalent to 15.58% of our share capital), WM II
(11,144,047 shares, equivalent to 6.99% of our share capital ) and WM III
(11,842,044 shares, equivalent to 7.34% of our share capital).  On April 4,
2006, TPG Acquisition sold its remaining stake in the Company (equivalent to
approximately 3% of our share capital) on the market.

WM is owned entirely
by World Motor Holding S.à r.l.  (WM Holding), a company
controlled by the same shareholder that controls Invind Holdings, except for two
preferred shares, one of which is held by BS Investimenti S.g.r.  S.p.A.,
on behalf of the closed investment fund BS Investimenti IV
(BS1), and one of which is held by the Canadian pension fund
Hospitals of Ontario Pension Plan (HOOPP).  WM II. is owned by
BS1 and BS Private Equity S.p.A. (BS2, together with BS1,
BS), except for one class B share, which is held by WM.  WM and
BS1 are general partners of WM II.  WM III is owned by HOOPP, except for
one class B share, which is held by WM.  WM is a general partner of WM
III.

As of June 15, 2006,
we had 320,687,920 shares outstanding, of which 137,195 were in the form of ADSs
(equivalent to 1,371,850 shares) held by 573 registered holders in the United
States.

Because brokers or
other nominees hold certain shares and ADSs, the number of direct record holders
in the United States may not be fully indicative of the number of direct
beneficial owners in the United States or wherever the direct beneficial owners
of such shares are resident.

Shareholder Agreement

As of June 23, 2006,
WM, WM II, and WM III (collectively, the Luxcos), owned in the
aggregate 95,616,020 shares, or 29.82% of our outstanding shares, and, as a
result, WMI, WMII and WMIII have the power to determine (or hold a veto right in
respect of) matters requiring shareholder approval, including the appointment of
our board of directors.  The Luxcos and and WM Holding, BS and HOOPP
(collectively, the Investors) are parties to a three-year
shareholder agreement, dated as of March 27, 2006, that regulates certain
aspects of the corporate governance of DMH and the restrictions on transfers on
the DMH shares held by each of the Luxcos.

The information
provided below about the shareholder agreement, based on the abstract of the
shareholder agreement has been derived from publicly available information filed
by the Luxcos and the Investors with regulatory authorities.

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Corporate
governance of DMH

The list of
directors to be presented to the shareholder meeting convened to appoint members
to our board of directors will be comprised of a number of directors which, at
WMs discretion, may not be more than 12 nor less than 11, nominated as
follows:

(i)     60%
of the candidates (rounded up to the nearest whole number) will be nominated by
the directors of WM appointed by WM Holding;

(ii)     30%
of the candidates (rounded down to the nearest whole number) will be nominated
by the director of WM appointed by BS1;

(iii)     10%
of the candidates (rounded down to the nearest whole number) will be nominated
by the director of WM appointed by HOOPP, provided that at least one director
must be one of those nominated by the WM director appointed by HOOPP.

One of the directors
nominated by the directors of WM appointed by WM Holding will be the last on the
list submitted.  Independent directors will be 50% appointed by the
directors of WM appointed by WM Holding and 50% by the director of WM appointed
by BS1.

The Luxcos and the
Investors will use their best efforts, within the limits of the law, to ensure
that the first candidate on the sub-list proposed by the directors of WM
nominated by WM Holding is appointed as the Managing Director of the
Company.  If the directors of WM appointed by BS and HOOPP disagree, and
this disagreement is justified, WM will ask an executive search agency to draw
up a list of candidates from which the directors of WM will be required to
select a Managing Director.

Transfer
restrictions on the DMH shares held by the Luxcos

Lock-up period

The Luxcos and the
Investors have agreed that the DMH shares held by each of the Luxcos are subject
to a lock-up period, which will end:

(i)     on
the first anniversary of the shareholder agreement (i.e., March 27, 2007) for
transfers of DMH shares by WM;

(ii)     on
the fifth anniversary of the shareholder agreement (i.e., March 27, 2011), or on
the third anniversary of the shareholder agreement (i.e., March 27, 2009) if the
Agreement was not renewed on its expiry date, for transfers of DMH shares by WM
II and WM III.

Right of first refusal

At the end of the
respective lock-up periods, if any Luxco decides to sell its DMH shares, it must
first offer such shares on a pro rata basis to the other Luxcos at the price
determined by it.

Tag-Along rights

Without prejudice to
the right of first refusal described above, if, at the end of the relevant
lock-up period, WM intends to sell all or a portion of its DMH shares to a third
party, WM II and WM III will have the right to insist that WM include, on a pro
rata basis, the shares held by each of them.

Drag-Along rights

If WM receives an
offer from a third party for no less than 90% of the DMH shares held by the
Luxcos, at a share price above a predetermined threshold, WM II and WM III will
be required to sell to that third party all the DMH shares held by
them.

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Standstill

For the duration of
the shareholder agreement, each of the Luxcos and the Investors, on its own
account or for each of its affiliates, undertakes, inter alia, not to (i)
effect, participate in or propose to effect any purchase of DMH shares, (ii)
enter into other shareholder agreements relating to DMH shares or (iii) act,
along or in concert with others, to seek to take control or influence the board
of directors or management of DMH.

Related Party Transactions

Following is a brief
description of various contractual relationships with associates, senior
officers and members of our board of directors (see also Item 6.
Directors, Senior Management and EmployeesCompensation of Directors and
Senior Management).

In 2004, we entered
into two commercial services agreements with Dream Engine S.r.l., whose sole
director and indirect controlling owner at December 31, 2004, was Mr. Minoli,
who, together with our then-Creative Director, David Gross, indirectly owned
99.9% of the company.  These agreements concern, respectively, the
organization of the Motogiro dItalia, a promotional tour of vintage
motorbikes held in July 2004, the Centopassi, a five-day amateur
motorcycle competition in northern Italy held in September 2004, and the 2004
World Ducati Weekend.  The aggregate invoices recorded for these events as
of December 31, 2004, totaled 566,000.  On February 10, 2005, Mr.
Minoli informed the board of directors that he has transferred his entire
interest, directly and indirectly held, in Dream Engine S.r.l. to Mr. Gross in
order to avoid his having any potential conflicts of interest in future
transactions between Dream Engine and DMH.  In 2005, we entered into
sponsorship agreements with Dream Engine S.r.l. regarding the 2005 and 2006
Centopassi and Motogiro dItalia.

In 2004, we paid
Paolo Pietrogrande, a member of our board of directors from 1999 until 2006,
135,150 in compensation for consulting services.  We have also
entered into commercial services agreements with Contemporanea Progetti S.r.l.,
a company in which a relative of Mr. Pietrogrande holds a 30% interest.  In
2004, we entered into an agreement with Contemporanea Progetti S.r.l., pursuant
to which Contemporanea Progetti S.r.l. developed architectural projects to
renovate the assembly line at Borgo Panigale production facility.  The
value of the work completed by December 31, 2004, under this agreement totaled
98,000, which has been paid.  On January 19, 2005, we entered into an
agreement with Contemporanea Progetti S.r.l. for the development of a new Ducati
stand for fairs and other shows.  The value of this work, completed by
October 2005, totaled 40 thousand plus VAT (including
expenses).

The above
transactions were arranged on arms length terms.

On April 14, 2004,
we formed Ducati Retail S.r.l. a majority owned subsidiary (99.0% held by DMH
and 1.0% held by Enrico DOnofrio, our manager of finance).  Ducati
Retail S.r.l. makes retail sales of Ducati products, including spare parts, and
offers services in areas not served by our current distribution network as well
as repair services and spare parts.

On May 6, 2004, we
formed Ducati Consulting S.r.l. to provide consulting and logistics services to
all of the Ducati Group companies as well as to our suppliers and other
manufacturers. Ducati Consulting S.r.l. is 85% held by DMH, with the remaining
interests held by Messrs. Contino (5.0%), Pellerey (5.0%) and Lipparini
(5.0%).  Until June 30, 2004, Mr. Contino was responsible for procurement
at DMH, and Mr. Pellerey was responsible for a program to improve the efficiency
of our plant.  Since July 2004, Messrs. Contino and Pellerey have been
managing directors of Ducati Consulting S.r.l.  Mr. Lipparini was a
director on the board of DMH until 2005.

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DMH has commercial
relationships with other companies of the Ducati Group that handle product sales
in specific countries (i.e., the United States, Germany, France, Japan,
Netherlands and the United Kingdom).  These relationships include sales by
DMH of motorcycles and related Ducati products to these companies (at prices
reflecting the local market and competitive environment in the countries in
which the purchasing companies operate) as well as after sales services (mainly
warranties) carried out by those companies on DMHs behalf.  Trade
receivable and payable balances for those sales and other services in the amount
of approximately 78.9 million and 15.3 million, respectively,
existed as of March 31, 2006, between our subsidiaries and DMH.

Financially, these
companies operate independently, although some benefit from particular forms of
centralized financing or loans granted by DMH, mostly in certain stages of
growth (i.e., start-up) or during difficult market conditions.  The
other subsidiaries involved in distribution self-finance their operations out of
profits, and, if they need additional financing, by factoring their trade
receivables without recourse.

At December 31,
2005, the only significant debt payable that DMH owed to any of its subsidiaries
was to Ducati Corse S.r.l. in the amount of approximately 1.9 million for
Ducati Corses yet-to-be-paid-in share capital, which debt was satisfied as
part of Ducati Corses purchase of the Ducati Corse trademark
(discussed in further detail below), and to Ducati Consulting S.r.l. in the
amount of approximately 64,000 for Ducati Consultings yet-to-be-paid
in share capital.

Ducati Corse was set
up so that all aspects related to the racing division, including R&D, could
be handled separately from the production and sales side of the business, which
is handled by DMH.  In particular, DMH and Ducati Corse entered into the
following agreements:

| | Right to use and manage DMHs racing business as a going concern
(affitto di ramo di azienda);                                                                                                                                                                                                                                                    
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                     
| | Sponsorship agreement pursuant to which DMH sponsors Ducati Corses racing
activities; and R&D agreement pursuant to which Ducati Corse agreed to carry
out R&D for DMH for sporting activities related to the MotoGP and Superbike
Championships, management of a number of private teams in the Superbike
Championship, and motorcycle production.

The 1 million
sponsorship contract entered into between DMH and Ducati Corse was mutually
terminated in January 2004.  This decision reflects Ducati Corses
greater operational autonomy in the world of racing following its receipt of
increased financing from third-party sponsors, especially in connection with the
companys debut in the world MotoGP championships.  Increased
sponsorship revenues have enabled Ducati Corse to forsake the start-up
contributions initially needed from DMH.  Ducati Corses success is
primarily due to the R&D agreement with DMH, which has enabled it to develop
a MotoGP bike that provides considerable returns in terms of corporate
image.

On November 25,
2004, our board of directors and the board of directors of Ducati Corse approved
the intercompany sale of the Ducati Corse brand name (name and team
logo) by DMH to Ducati Corse for 23 million, the price determined by
independent professionals, plus VAT.

This decision was
made to allow Ducati Corse to develop the Ducati Corse brand
separately from the Groups other brands using activities that it is
directly involved in to enhance the brands value.  On May 19, 2005,
Ducati Corse paid DMH 15.7 million in cash for the brand, with the balance
of the purchase price covered by offset of the 7.4 million in unpaid
capital due from DMH, as well as 4.5 million in account receivables due
from DMH.

In December 2004,
DMH and Ducati Corse entered into a license agreement pursuant to which Ducati
Corse grants to DMH the right to use (i) the Ducati Corse trademark
on the Ducati Corse replica bikes manufactured by DMH and (ii) the Ducati Corse
racing activities images in promotional materials.  As consideration, DMH
will pay Ducati Corse an annual fee of 1.0 million plus VAT, as well as a
royalty equal to 5% of the FOB price of each replica bike
distributed.

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Item 8.   Financial Information

Consolidated Financial Statements

Please refer to Item 18. Financial Statements of this annual report.

Other Financial Information

Export Sales

Export sales from
Italy were approximately 231.8 million in 2005, as compared with
243.3 million in 2004, and represented 72.2% of our revenues in 2005
(66.7% in 2004).

Legal Proceedings

We are party to
various claims and legal actions arising in the ordinary course of
business.  We do not believe that any litigation to which we are a party is
likely, individually or in the aggregate, to have a material adverse effect on
our business, financial condition or results of operations.

We are engaged in
litigation with our former distributor in Belgium in connection with our
decision not to renew our distributorship agreement and an alleged failure by
our predecessor to deliver motorcycles in 1996.  On September 14, 1998, the
Commercial Court of Liege found in favor of the distributor and awarded
provisional damages of approximately 50.575 million Belgian francs
(BEF) (approximately 1.25 million).  On September 21,
1998, we appealed this decision.  Notwithstanding our appeal, on February
24, 1999, the former distributor enforced the prior judgment by selling an
inventory of Ducati motorcycles which it had previously attached in
Belgium.  The proceeds of the sale were BEF 27,835,078 (approximately
690,013).  On May 27, 1999, the Court of Appeal of Liege found that
Belgian courts lacked jurisdiction over the case and set aside the prior
judgment.  The former distributor was adjudicated bankrupt on October 14,
1999.  Bankruptcy trustees of the former distributor appealed the May 27,
1999 judgment before the Supreme Court of Belgium, which rejected the appeal on
June 21, 2001.  We have taken various steps to recover the proceeds of the
sale and part of our legal expenses, which are equal to approximately BEF 23
million (approximately 570,000).  However, given the existence of
secured creditors of the former distributors bankruptcy estate, we are
unlikely to be successful in our efforts to recover these proceeds. 
Although we have recorded provisions for this litigation in prior years
(23,000 in 2003), we have utilized these provisions in full and have
recorded no provision in 2004 or 2005 because we do not expect to incur further
costs in relation to this dispute.

We are also engaged
in litigation with Virginio Ferrari, the manager of one of the two racing teams
sponsored by Ducati in the 1998 World Superbike Championship.  In December
1998, Mr. Ferrari filed a claim against us in the Italian courts in the amount
of approximately 6.7 million, alleging that he had a three year agreement
with Ducati for the sponsorship of a racing team and that we breached this
agreement in electing not to sponsor Mr. Ferraris team for the 1999 World
Superbike Championship.  The Court of first instance ordered us to pay
damages of 310,000, plus interest and an additional amount to adjust for
inflation, and legal expenses of 12,600.  Although we have appealed
this decision, we recorded a provision for the entire amount of this judgment in
our 2005 financial statements.

In 2001, Michael
Hailwoods widow, individually and in her capacity as beneficiary of his
estate, filed a claim before the Federal District Court of New Jersey against us
and Ducati North America Inc. alleging trademark infringement, violation of a
purported right of publicity and other claims with regard to the sale of MH 900e
motorcycle.  We settled these claims in April 2003, agreeing to pay
approximately 375,000 to Michael Hailwoods widow, of which
349,000 has already been paid, and to enter into future agreements for the
use of Michael Hailwoods name.

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Dividend Policy

DMH has not paid any
cash dividends on its shares since its formation in 1996.  The payment by
us of any annual dividend must be proposed by the board of directors and is
subject to the approval of the shareholders at the annual shareholders
meeting.  Before dividends may be paid out of our unconsolidated net income
in any year, an amount equal to 5.0% of such net income must be allocated to our
legal reserve until such reserve is at least equal to one-fifth of the value of
our issued share capital.  If our capital is reduced as a result of
accumulated losses, dividends may not be paid until the capital is reconstituted
or its stated amount is reduced by the amount of such losses.  Further, the
Syndicated Loan Facility, the New Loan, the Banca Intesa Loan and BPVN Loan
restrict our ability to pay dividends if a dividend distribution would cause DMH
to be in violation of its financial covenants under these loan facilities. 
The board of directors may authorize the distribution of interim dividends,
subject to certain statutory limitations.

Dividends are
payable to those persons who hold the shares through an intermediary on the
dividend payment date declared by the shareholders meeting.  Payments
with respect to dividends are distributed through Monte Titoli on behalf of each
shareholder with whom the shareholder has deposited his or her shares. 
Holders of ADSs will be entitled to receive payments in respect of dividends on
the underlying shares through The Bank of New York, as depositary for our ADSs,
in accordance with the deposit agreement.

Significant Changes

On February 28, 2006, TPG Acquisition agreed to sell to Invind Holdings (or
companies designated by it) a stake representing 30% less one share of our share
capital at a price per share of 0.85 euro.  After the designation by Invind
Holdings on March 27, 2006, the shares were purchased by WM (24,821,919 shares,
equivalent to 15.58% of our share capital), WM II (11,144,047 shares, equivalent
to 6.99% of our share capital) and WM III (11,842,044 shares, equivalent to
7.43% of our share capital).  For more information about Invind Holdings
and WM, WM II and WM III, see Item 7.  Major Shareholders and Related
Party TransactionsMajor Shareholders.  On April 4, 2006, TPG
Acquisition sold its remaining DMH shares (approximately 3% of our share
capital) on the market.  For more information, see Item 4. 
Information on the CompanyHistory and Development of the
Company.

At their April 10,
2006, meeting, our shareholders approved the appointment of a new board of
directors, which is composed of Matteo Tamburini, Massimo Bergami, Roberto
Consonni, Ulrich Weiss, Dante Razzano, Mauro Benetton, Federico Minoli, Carlo
Pasquale Campanini Bonomi, Antonio Perricone, Marco Giovannini, Roberto
Maestroni and Giampiero Paoli.  These board members will remain in office
until the approval of our financial statements for December 31, 2006.

In light of recent negative market developments and unsatisfactory results, our
management formulated a business plan for 2006-2008, which was approved by our
board of directors on April 13, 2006.  The business plan focuses on
improving profit margins and generating cash flows by increasing sales of
motorcycle models in the high-end of our product price range and decreasing
overhead costs.  For a description of the 2006-2008 Business Plan, see
Item 4.  Information on the Company Business Overview
Business Strategy2006-2008 Business Plan.

As contemplated in
the 2006-2008 Business Plan and approved by the board of directors at its
meetings on April 13 and May 4, 2006, we successfully completed an 
80,000,000 capital increase on June 23, 2006.  This capital increase
was achieved through an offering of 160,343,960 subscription rights
(representing the right to subscribe for 160,343,960 shares) to shareholders of
DMH.  From May 8 to May 26, 2006, DMH shareholders exercised a total of
158,589,839 subscription rights and subscribed for the related 158,589,839
shares.  The 1,744,121 subscription rights that remained unexercised at the
end of this period were sold on the Borsa Italiana between June 5 and June 9,
2006, and the related 1,754,121 were subsequently subscribed.

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Item 9.  The Offer and Listing

Trading Markets and Share Prices

The principal
trading markets are Telematico for our shares and the New York Stock Exchange
for our ADSs (each representing ten shares).  Our ADSs have been listed on
the New York Stock Exchange and our shares have been listed on the Telematico
since our initial public offering in March 1999.  The Bank of New York is
our depositary for purposes of issuing the American Depositary Receipts
(ADRs) evidencing the ADSs.  The following table sets forth the
high and low closing prices of our ADSs as recorded on the New York Stock
Exchange Composite Tape and the high and low closing prices of our shares as
recorded on the Telematico, for the quarters and months indicated (source: 
Bloomberg).

|                    |  | Mercato Telematico   Azionario Price perShare |       | New York StockExchange   Price per ADS | 
|------------------- |  | --------------------------------------------- | ----- | -------------------------------------- | 
|                    |  |                                               |       |                                        | 
|                    |  | High                                          |       | Low                                    | 
|                    |  |                                               |       |                                        | 
|                    |  | (in euro)                                     |       | (in U.S.   dollars)                    | 
|2001                |  |                                               | 2.222 |                                        | 
|2002                |  |                                               | 2.031 |                                        | 
|2003                |  |                                               | 1.799 |                                        | 
|2004                |  |                                               | 1.420 |                                        | 
|2005                |  |                                               | 1.245 |                                        | 
|First Quarter 2004  |  |                                               | 1.420 |                                        | 
|Second Quarter 2004 |  |                                               | 1.360 |                                        | 
|Third Quarter 2004  |  |                                               | 1.167 |                                        | 
|Fourth Quarter 2004 |  |                                               | 1.130 |                                        | 
|First Quarter 2005  |  |                                               | 1.135 |                                        | 
|Second Quarter 2005 |  |                                               | 1.066 |                                        | 
|Third Quarter 2005  |  |                                               | 1.245 |                                        | 
|Fourth Quarter 2005 |  |                                               | 1.176 |                                        | 
|December 2005       |  |                                               | 1.039 |                                        | 
|January 2006        |  |                                               | 0.944 |                                        | 
|February 2006       |  |                                               | 0.911 |                                        | 
|March 2006          |  |                                               | 1.063 |                                        | 
|April 2006          |  |                                               | 1.050 |                                        | 
|May 2006            |  |                                               | 0.742 |                                        | 

In April 2001, our
shares began trading on the Segmento Titoli con Alti Requisiti (or
STAR) of Telematico.  This segment was created recently by
Borsa Italiana S.p.A. for small- and medium-sized companies operating in
traditional sectors of the economy and meeting stricter requirements relating to
transparency, liquidity and corporate governance than those usually required for
listing on the Telematico.  As part of the STAR admission requirements, we
appointed Mediobanca to act as specialist for our shares.  The specialist
is required to take a number of actions intended to support the market for our
shares and to facilitate the communication of information about us to
investors.

Item 10.  Additional Information

Share Option Plans

1998 Stock Option
Plan

In September 1998,
our shareholders approved a capital increase, to be completed by August 4, 2007,
of up to 8,148,148 shares in connection with a share option plan approved by our
board of directors in August 1998 for our then Managing Director and certain
senior officers and independent consultants (the 1998 Stock Option
Plan).

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Pursuant to the 1998 Stock Option Plan, options to purchase 8,148,148 shares at
an exercise price of euro 0.723 per share were assigned to beneficiaries. 
Once the options to purchase have vested and the conditions to exercise have
been satisfied, the options to purchase may be exercised only during a 30-day
period following the date of shareholder approval of our financial
statements.  The options to purchase expire on August 4, 2007.  Our
capital is increased each year by the number of shares underlying the options to
purchase exercised in that year.  Options are forfeited if the beneficiary
is terminated for cause.

Prior to 2004,
options to purchase 1,500,963 shares had been exercised.  Options to
purchase 325,444 shares were exercised in May and June 2004; options to purchase
533,630 shares were exercised in May and June 2005; and options to purchase
983,923 shares were exercised in May 2006.  As of June 23, 2006, 109,592
options had been cancelled, and options to purchase 4,694,596 shares remained
exercisable.

In May 2006,
following the exercise by the relevant beneficiaries of the share option rights
granted under the 1998 Stock Option Plan and in accordance with the resolutions
taken by the shareholders meeting on September 7, 1998, the share capital of DMH
increased to 160,343,960 shares.

1999 Stock Option Plan

In September 1999,
our board of directors also approved a stock option/stock appreciation rights
plan (the 1999 Stock Option Plan) for certain of our executive
directors, officers and independent consultants designated by the compensation
committee of the board of directors.  On March 11, 2004, our board of
directors amended the 1999 Stock Option Plan to include expressly high-level
employees of companies of the Ducati Group as covered by the plan.  Under
1999 Stock Option Plan, the board of directors may grant in any year, upon its
approval of our preliminary consolidated income statement and balance sheet for
the prior fiscal year (which approval typically occurs by February 15 of each
year), stock options or stock appreciation rights (each such option or right, a
Right) in respect of not more than 2.0% of our outstanding share
capital.  The Rights expire seven years after the date of grant. 
Unless otherwise determined by the board of directors, Rights vest in three
equal annual installments starting on December 31 of the year following the year
of grant, but are forfeited, whether or not vested, if the employee is
terminated for cause.

Upon exercise, our
obligation in respect of the Rights may be satisfied in shares or, if the Shares
are no longer listed on the Telematico or the issuance of new shares or the buy
back of existing shares have not been approved, in cash (calculated with
reference to the market value of the shares at the time of exercise).  To
exercise Rights, participants in the 1999 Stock Option Plan must pay us a strike
price that is the greater of (i) our consolidated per share net worth at the
time of exercise and (ii) the value of the shares on the grant date as
determined in accordance with the tax provisions in force on such grant date
(currently the average official price for the shares in the month preceding the
grant date).  Based on the criterion described under (ii) above, the strike
price would be 2.879 per share, 2.81 per share, 1.99 per
share, 1.80 per share, 1.317 per share and 1.065 per share for
Rights granted in 1999, 2000, 2001, 2002, 2004, and 2005, respectively. 
Other than in the event of death or disability of a participant in the 1999
Stock Option Plan, once vested, rights granted prior to 2002 may be exercised
only during a 30-day period following the approval by the board of directors of
our consolidated financial statements for the prior fiscal year, and rights
granted beginning in 2002 may be exercised only during a 30-day period following
the approval by the board of directors of our preliminary consolidated income
statement and balance sheet for the prior fiscal year.

In each of 1999 and
2000, our board of directors granted an aggregate of 3,159,259 Rights under the
1999 Stock Option Plan to beneficiaries (53 in 1999 and 72 in 2000) selected by
our compensation committee, including 500,000 Rights granted to Mr. Minoli each
year.  In 2001, our board of directors granted an aggregate of 3,165,000
Rights to 75 beneficiaries, including 500,000 Rights granted to Mr. Minoli, and
in 2002, our board of directors granted an aggregate of 3,960,000 Rights to 92
beneficiaries, including 500,000 Rights granted to Mr. Minoli.  Our board
of directors did not grant any Rights in 2003.

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In 2004, our board of directors granted an aggregate of 3,170,000 Rights to 66
beneficiaries, including 500,000 Rights granted to Mr. Minoli, and in 2005, our
board of directors granted an aggregate of 3,170,000 Rights to 66 beneficiaries,
including 500,000 Rights granted to Mr. Minoli. As of June 23, 2006, no Rights
have been granted under the 1999 Stock Option Plan for 2006.

As determined by the
board of directors, Rights granted in the years 1999 through 2005 vest in annual
installments beginning on December 31 of the year following the year of grant,
with 50% vesting in the first year and 25% vesting in each of the two subsequent
years.  As of June 30, 2006, 14,540,000 Rights had been granted and had
vested under the 1999 Stock Option Plan but none of these Rights had been
exercised.  A total of 5,243,518 of these Rights had been cancelled, and
10,100,000 Rights remained exercisable, subject to the conditions set forth
above.

On May 2, 2000, our
shareholders meeting approved a capital increase of up to 12 million
shares in connection with Rights granted from 1999 to 2002 under the 1999 Stock
Option Plan.

On May 6, 2004, our
shareholders meeting approved a capital increase of up to 1,585,000 shares
in connection with Rights granted in 2004 to beneficiaries who are employees of
the Ducati Group.

On May 5, 2005, our
shareholders meeting approved a capital increase of up to 1,588,000 shares
in connection with Rights granted in 2005 to beneficiaries who are employees of
the Ducati Group.

As of June 23, 2006,
the capital increases described above have not been executed.

Buy Back Plan

At the May 5, 2005,
annual meeting, our shareholders approved a plan (the 2005 Buy Back
Plan) pursuant to which, at the direction of our Chairman or of our chief
financial officer, severally, duly empowered by our board of directors, we may:
repurchase on the Telematico up to 12,110,000 of our shares (representing
approximately 7.6% of our then issued and paid-in share capital); retain such
shares as treasury shares; transfer such shares either to beneficiaries of (i)
the 1999 Stock Option Plan, (ii) the Employee Stock Ownership Plan (See
Employee Stock Ownership Plan) and (iii) the 1997 Stock Option
Plan, as required thereunder; or dispose, subject to applicable laws and
regulations, of such shares on the Telematico to maintain liquidity of our
shares on such stock exchange.

Under the 2005 Buy
Back Plan, we may repurchase these shares in one or more transactions over an
18-month period from May 5, 2005, at a per-share purchase price of not more than
10% above or below the market price for the shares on the Telematico on the day
prior to any purchase.  There is no time limit under the 2005 Buy Back Plan
in respect of the disposal of any shares repurchased before the end of this
18-month period.  Repurchases and disposals of our shares under the 2005
Buy Back Plan shall be carried out in accordance with applicable Italian law
relating to buy back plans in Italy, as more fully described in
By-LawsPurchase by Us of Our Own Shares, as well as
certain conditions relating to the 1997 Stock Option Plan, the ESOP and the 1999
Stock Option Plan as more fully described in Share Option
Plans.

During 2005 and the
first half of 2006, we sold 3,769,249 of our own shares and, as of June 23,
2006, do not hold any of our own shares.

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Employee Stock Ownership Plan

On February 14,
2002, the board approved an Employee Stock Ownership Plan (ESOP) to
facilitate the purchase of our ordinary shares by non-director Ducati employees
(including part-time employees) under indefinite contracts who are resident in
Italy.  In each year, our Managing Director must decide to implement the
ESOP for it to be effective.  Under the ESOP, each employee in any year
through 2006 in which the ESOP is implemented can request to purchase, at a
discount, a number of our ordinary shares not to exceed an amount equal to
3,000.  The request must be submitted within 20 days after the
approval of our annual unconsolidated financial statements.

To satisfy purchases
of shares made under the ESOP, we would instruct a broker appointed by us to
purchase on the Telematico on our behalf the number of shares equal to the total
euro amount so requested for purchase by employees under the ESOP.  On the
same day of such purchase, we assign the shares to employees upon payment of the
purchase price minus a discount (funded by us) of one-third of such purchase
price.  To be able to purchase our shares for delivery to the employees
under the ESOP, we must obtain authorization by our shareholders of a buy back
plan pursuant to which we may repurchase shares for purposes of the ESOP. 
On May 5, 2005, the shareholders authorized us to purchase up to 12,110,000
shares on the Telematico within the subsequent 18 months, including shares to be
delivered to employees under the ESOP.  See Buy Back
Plan.  Shares are purchased at current market prices within 20 days
of receiving an employees request, provided that such prices are not more
than 10.0% above or below the market price of the shares on the Telematico on
the day prior to such purchase.  Only shares purchased as described above
are used to satisfy purchases of shares under the ESOP.  The shares
purchased by the employees under the ESOP may not be transferred for a period of
three years; as a result, under Italian tax law, the discount we offer under the
ESOP is not considered taxable income for the employees.

Pursuant to the
provisions applicable to share buy back plans, we may not purchase our shares,
including those for delivery under the ESOP, unless, among other things, the
amount of distributable or available reserves in our unconsolidated financial
statements as approved for the prior year (after any distribution of dividends
or repurchase of our shares for purposes other than as related to the ESOP that
we may decide to make) is equal to or greater than the aggregate euro amount
that represents all shares that ESOP beneficiaries would be entitled to
purchase.  If the amount of distributable and available reserves is less
than such aggregate euro amount, we may, at our discretion, implement the ESOP
at a per-beneficiary subscription limit that is less than
3,000.

The ESOP has not
been implemented since its inception in 2002.

By-Laws

The following is a
summary of certain information concerning our shares and By-laws
(Statuto) and of Italian law applicable to Italian companies whose shares
are listed in a regulated market in the European Union.  The summary
contains all the information that we consider to be material regarding the
shares but does not purport to be complete and is qualified in its entirety by
reference to the By-laws or Italian law, as the case may be.

Italian companies
whose shares are listed on a regulated market of the European Union are
principally governed by two sets of rules  the Italian Civil Code
(applicable to all Italian companies), and the Unified Financial Act (Testo
Unico dellIntermediazione Finanziaria,or TUF) of February
24, 1998, No.58, as amended, and implementing regulations thereof (applicable to
listed companies).  In January 2003, the Italian government approved a
wide-ranging reform of the corporate law provisions of the Italian Civil Code,
which came into force on January 1, 2004.  In February 2004, the Italian
government amended the TUF to coordinate it with the new corporate law
provisions of the Italian Civil Code.  The amendments to the Italian Civil
Code and to the TUF constitute the so-called 2004 corporate law reform.  On
May 6, 2004, and on May 5, 2005, our shareholders approved a number of
amendments to our By-laws required or made possible by the 2004 corporate law
reform.  The amendments to our governance system adopted by our
shareholders on May 5, 2005, entered into force at the time of our ordinary
shareholders meeting held on April 10, 2006.  See also
Corporate Governance System.  In December 2005, the
Italian parliament adopted the Investor Protection Act, which sets forth rules
on corporate governance for listed companies aimed at preventing financial
scandals.

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Our shareholders
approved, on January 26, 2006, the proposal of our board of directors to further
amend the By-laws (i) to amend and extend our corporate purpose, and (ii) to
increase our share capital by up to 80,000,000 through a rights offer to
our shareholders.  See also General and
Authorization of Shares.

General

Our issued share
capital consisted of 159,360,037 shares with no par value as of December 31,
2005, and 320,687,920 shares with no par value as of June 23, 2006.  All of
the issued shares are fully paid, non-assessable and in registered
form.

We are registered
with the Companies Registry of the Court of Bologna at n. 59309/98, with
registered office at 3, Via A. Cavalieri Ducati, Bologna, Italy.

As set forth in
Article 4 of the By-laws, our corporate purpose is the production and sale of
motorcycles, engines and other parts and components, including any type of
accessories, tools and other products of any type whatsoever relating to the
production and sale of these motorcycles, engines, parts and components. 
We are also generally authorized to take any actions necessary or useful to
achieve our corporate purpose.  On January 26, 2006, our shareholders
amended Article 4 of our By-laws by expressly including financing activities,
including granting collateral security and surety for third parties, and
technical and financial coordination of companies or organizations in which we
have an interest, amongst the secondary activities that we may conduct to
accomplish our corporate purpose.

Authorization of Shares

Additional shares
may be authorized in connection with capital increases approved by our
shareholders in an extraordinary meeting, but this authorization would generally
be given only after recommendation by our board of directors.

At a meeting on
September 7, 1998, our shareholders authorized the issuance of up to 8,148,148
shares that are reserved for distribution to beneficiaries of the 1998 Stock
Option Plan.  Our share capital increases each year as Rights are exercised
Rights in accordance with the 1998 Stock Option Plan. As of June 23, 2006,
3,343,960 shares had been issued upon exercise of options by beneficiaries under
the 1998 Stock Option Plan and options to purchase 4,694,596 shares remained
exercisable.  See also Share Option Plans.

At a meeting on May
2, 2000, our shareholders authorized the issuance of up to 12 million shares,
not subject to pre-emptive rights, in connection with the granting of Rights in
the years 1999 through 2002 to beneficiaries of the 1999 Stock Option
Plan.  At a meeting on May 6, 2004, our shareholders authorized the
issuance of up to 1,585,000 shares, not subject to preemptive rights, in
connection with the Rights granted in 2004 to beneficiaries of the 1999 Stock
Option Plan.  At a meeting on May 5, 2005, our shareholders authorized the
issuance of up to 1,588,000 shares, not subject to preemptive rights, in
connection with the Rights granted in 2005 to beneficiaries of the 1999 Stock
Option Plan.  As of June 23, 2006, no shares had been issued for
implementation of the 1999 Stock Option Plan.  See also Share
Option Plans.

As contemplated in
the 2006-2008 Business Plan and approved by the board of directors at its
meetings on April 13 and May 4, 2006, we successfully completed an 
80,000,000 capital increase on June 23, 2006. See Item 4. 
Information on the CompanyHistory and Development of the
Company.

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Form and Transfer of Shares

Pursuant to the TUF,
Legislative Decree No. 213 of June 24, 1998 (Decree No. 213) and
implementing Regulation No. 11768 of December 23, 1998 (Regulation No.
11768) of the CONSOB, since January 1, 1999, it is no longer possible for
a shareholder to obtain the physical delivery of share certificates representing
shares of Italian listed companies.  Shares of Italian listed companies are
no longer represented by paper certificates and the transfer and exchange of
shares takes place exclusively through an electronic book-entry system. 
All shares must, accordingly, be deposited by their owners with an intermediary
(each an Intermediary), which is defined by Regulation No. 11768
as:

| |  | an Italian or EU bank;                                                                                                                                                                 
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                        
| |  | a non-EU bank authorized by the Bank of Italy to   operate in the Italian market;                                                                                                      
| |   |                                                                                                                                                                                        
| |  | a Società di Intermediazione   Mobiliare, or SIM;                                                                                                                                      
| |   |                                                                                                                                                                                        
| |  | an EU investment company;                                                                                                                                                              
| |   |                                                                                                                                                                                        
| |  | a non-EU investment company authorized by CONSOB to   provide investment services in Italy;                                                                                            
| |   |                                                                                                                                                                                        
| |  | an Italian asset management company;                                                                                                                                                   
| |   |                                                                                                                                                                                        
| |  | a stock broker; the company which has issued the   shares;                                                                                                                             
| |   |                                                                                                                                                                                        
| |  | the controlling shareholder of the company which has   issued the shares;                                                                                                              
| |   |                                                                                                                                                                                        
| |  | the Bank of Italy;                                                                                                                                                                     
| |   |                                                                                                                                                                                        
| |  | an EU or non-EU entity operating a centralized   clearing system;                                                                                                                      
| |   |                                                                                                                                                                                        
| |  | a financial intermediary operating a clearing system governed by art. 69 (2) and
70 of the TUF;                                                                                        
| |   |                                                                                                                                                                                        
| |  | a financial intermediary registered on the list kept by the Bank of Italy under
art. 107 of Legislative Decree No. 385 of September 1, 1993;                                           
| |   |                                                                                                                                                                                        
| |  | the Italian Post Office (Poste Italiane S.p.A.);                                                                                                                                       
| |   |                                                                                                                                                                                        
| |  | Cassa   Depositi e Prestiti S.p.A.;                                                                                                                                                    
| |   |                                                                                                                                                                                        
| |  | The Italian Ministry of Economics and Finance; and                                                                                                                                     
| |   |                                                                                                                                                                                        
| |  | the managers of foreign clearing, settlement and guarantee systems for financial
instruments, provided that they are subject to supervision equivalent to that
provided by Italian law.

The Intermediary in
turn deposits the shares with Monte Titoli or with another company authorized by
CONSOB to operate a centralized clearing system.

To transfer shares
under the system introduced by Decree No. 213, the owners of shares are required
to give instructions to their Intermediaries.  If the transferee is a
client of the transferors Intermediary, the Intermediary simply transfers
the shares from the transferors account to the account of the
transferee.  If, however, the transferee is a client of another
Intermediary, the transferors Intermediary instructs the company operating
a centralized clearing system to transfer the shares to the account of the
transferees Intermediary, which then registers the shares on the
transferees account.

Each Intermediary
maintains a custody account for each of its clients setting out the financial
instruments of such client and keeps a record of all transfers, payment of
dividends, exercise of rights attributable to such instruments, charges or other
encumbrances on the instruments.

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The account holder or any other eligible party (for example, in the case of a
charge over the financial instrument, the chargee) may submit a request to the
Intermediary for the issue of a certified statement of account.  The
request must indicate the quantity of the financial instruments in respect of
which the statement is requested, the rights which the applicant intends to
exercise and the duration in respect of which the certificates validity is
required.  Within two business days from the receipt of such request, the
Intermediary shall issue a certified statement of account which constitutes
evidence of the account holders ownership of the financial instruments
indicated.  Once a certificate has been issued, the Intermediary may not
effect any transfer of the corresponding securities until the certificate loses
its validity or is returned.

The new book-entry
system commenced operations on October 5, 1998, when Monte Titoli cancelled all
certificates representing listed financial instruments in its possession and
returned them to the issuing companies.  At the same time, Monte Titoli
registered the shares in accounts held under the name of the depositing
Intermediaries and gave them and the issuing companies notice of the
registration.  The Intermediaries, in turn, registered the shares in the
shareholders accounts.  Since January 1, 1999, shareholders of listed
companies have been allowed to exercise their rights only after they have
deposited their share certificates with an Intermediary and authorized it to
deposit the shares with a company operating a centralized clearing
system.

As a result of the
foregoing, it is not possible for a shareholder to obtain physical delivery of
share certificates representing shares.  Instead, transfers of shares are
possible only using the procedures described above.

The shares have been
accepted for clearance through Euroclear and Clearstream.  Purchasers of
shares may elect to hold such shares through Euroclear and Clearstream. 
Persons owning a beneficial interest in shares held through Monte Titoli,
Euroclear and Clearstream must rely on the procedures of Monte Titoli, Euroclear
and Clearstream, respectively, and of the Intermediaries that have accounts with
Monte Titoli, Euroclear and Clearstream, to exercise their rights as holders of
shares.

Dividend Rights

The payment by us of
any annual dividend is proposed by the board of directors and is subject to the
approval of the shareholders at the annual shareholders meeting. 
Before dividends may be paid out of our unconsolidated net income in any year,
an amount equal to 5.0% of such net income must be allocated to our legal
reserve until such reserve is at least equal to 20% of the amount of our issued
share capital.  If our capital is reduced as a result of accumulated
losses, dividends may not be paid until the capital is reconstituted or reduced
by the amount of such losses.  Further, the Syndicated Loan Facility, the
New Loan, the Banca Intesa Loan and the BPVN Loan restrict our ability to pay
dividends if a dividend distribution would cause DMH to violate its financial
covenants under those loan facilities.  See Item 5.  Operating
and Financial Review and ProspectsOther Financial
Transactions.  The board of directors may authorize the distribution
of interim dividends, subject to certain statutory limitations.

Dividends are
payable to those persons who hold the shares through an Intermediary on the
dividend payment date declared by the shareholders meeting. 
Dividends not collected within five years from the dividend payment date are
forfeited to our benefit.  Payments in respect of dividends are distributed
through Monte Titoli on behalf of each shareholder by the Intermediary with
which the shareholder has deposited its shares.  Holders of ADSs are
entitled to receive payments in respect of dividends on the underlying shares
through The Bank of New York, as ADR depositary, in accordance with the deposit
agreement relating to the ADRs.  See Item 8. Financial
InformationDividend Policy.

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Voting Rights

Shareholders are
entitled to one vote per share.  A cumulative voting system applies in case
of appointment of members of the board of directors under our new corporate
governance system.  See Corporate Governance System.

Proxy solicitation
may be carried out by certain professional investment and financial
intermediaries, as well as certain companies whose sole purpose is to carry out
proxy solicitation, on behalf of a qualified soliciting shareholder (generally,
one or more shareholders who have owned at least 1.0% of our shares for more
than six months and who have been so registered with us for the same period of
time).

Proxies may be
collected by a shareholders association provided that such association has
been formed by notarized private agreement, does not carry out business
activities and is made up of at least 50 individuals, each of whom owns not more
than 0.1% of our voting capital.  Members of the shareholders
association may, but are not obliged to, grant proxies to the legal
representative of the association, and proxies may also be granted in respect of
only certain of the matters to be discussed at the relevant shareholders
meeting.  The association may vote in different manners in compliance with
the instructions expressed by each member who has granted a proxy to the
association.

As a registered
shareholder, The Bank of New York, as ADR depositary, or its nominee is entitled
to vote the shares underlying the ADSs.  The Deposit Agreement requires The
Bank of New York (or its nominee) to accept voting instructions from owners of
ADSs and to execute such instructions to the extent permitted by law. 
Neither Italian law nor our By-laws limit the right of non-resident or foreign
owners to hold or vote the shares.

Corporate Governance System

Effective January 1,
2004, Italian stock corporations (società per azioni) may adopt one
of two different corporate governance structures, as an alternative to the
current traditional Italian model based on a board of directors (consiglio di
amministrazione) and a board of statutory auditors (collegio
sindacale).  The alternatives include (i) a one-tier model with a
single board of directors, including a management control committee (comitato
per il controllo sulla gestione) composed of independent non-executive
directors (in lieu of the board of statutory auditors), or (ii) a two-tier
model, with a management board entrusted with management responsibilities, and a
supervisory board entrusted mainly with control and supervisory
responsibilities, appointing and removing the members of the management board
and approving the corporations annual financial statements.

At an extraordinary
meeting on May 5, 2005, our shareholders amended our By-laws, effective as of
the ordinary meeting of shareholders held on April 10, 2006, to change our
corporate governance system from the traditional Italian model and to adopt a
one-tier system.  On April 10, 2006, (i) the terms of office of our former
directors expired and new directors were appointed pursuant to the procedures
described below in Corporate Governance SystemBoard of
Directors; (ii) the terms of office of the members of our former board of
statutory auditors expired, and we no longer have a board of statutory auditors;
and (iii) the board of directors has appointed the Management Control Committee
from among its members.

Board of Directors

Since our adoption
of a one-tier corporate governance system, our board of directors must consist
of seven to fifteen individuals, who are elected by our shareholders at an
ordinary meeting according to the cumulative voting system described
below.  Members of our board of directors, who may be, but are not required
to be, our shareholders, are elected for up to three fiscal years, as determined
by the shareholders from time to time, and may be reappointed for successive
terms.

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Pursuant to our
By-Laws, each shareholder or group of shareholders holding at least 2.0% of our
shares may present a slate, listing in progressive order at least seven and up
to fifteen individuals.  Slates must be presented at least ten days prior
to the date set for the meeting of shareholders on first call.  Each
shareholder (or shareholders under common control) may present and vote for only
one slate, and each candidate may appear on only one slate.

In order to be
eligible as members of the management control committee at least three members
of the canditates on the slate, must be independent according to the criteria
described in Significant Differences with Corporate Governance
Practices under NYSE RulesIndependent Directors below and must
provide evidence of good standing.  Pursuant to our  By-laws, at least
one of the first three candidates on each slate must be enrolled in the Italian
registry of chartered accountants and have at least three years experience as an
accountant.  If the other two candidates of the first three on a slate are
not registered chartered accountants, they must either (i) have held for at
least three years managerial or control positions in companies whose share
capital amounts to at least 2 million, or within governmental entities
active in the banking, financial or insurance sectors or in sectors which are
closely connected to our business sector, or have had professional or academic
experience in legal, economic, financial or technical matters closely connected
to our business sector; or (ii) be chosen from individuals who have served as
members of our board of directors or board of statutory auditors.

If only one slate is
presented, our board of directors will be composed of the individuals listed on
such slate.  If more than one slate is presented, all of the candidates
appearing on the slate that obtains the largest number of votes, except for the
last one, will be elected as directors; the first candidate on the slate
receiving the second-largest number of votes who meets the requirements
described above for appointment as member of the Management Control Committee by
the board of directors shall be elected as director and appointed as chairman of
the Management Control Committee.

In accordance with
the By-laws, the board of directors has complete power of ordinary and
extraordinary administration of our business (including the issuance of debt
securities not convertible into our shares) and may perform all acts it deems
advisable for the achievement of our corporate purposes, except for the actions
reserved by applicable law or the By-laws to a vote of the shareholders at an
ordinary or extraordinary shareholders meeting.  See also
Meetings of Shareholders.

The board of
directors must appoint a chairman (presidente) and may appoint a
vice-chairman to replace the chairman when he is absent or unavailable. 
The chairman of the board of directors and, in his absence, the vice-chairman
and the managing directors, if any, are severally our legal
representatives.  The board of directors may delegate powers to one or more
managing directors (amministratori delegati), and/or to an executive
committee composed of directors, and/or to one or more ad hoc committees of
directors, determine the nature and scope of the delegated powers of each
director and committee and revoke such delegation at any time.  Our By-laws
provide that the chairman of the board of directors and, if any, the managing
directors are members of the executive committee.  Our executive directors
must ensure, under the supervision of the Management Control Committee, that our
organizational and accounting structure is appropriate to our business and must
report to the board of directors and to the Management Control Committee at
least quarterly on the Companys business and the main transactions carried
out by us or by our subsidiaries.

In accordance
with Italian law and the By-laws, the board of directors may not delegate
certain of its responsibilities, including those relating to the approval of the
draft financial statements, the approval of merger and de-merger plans to be
presented to shareholders meetings, increases in the amount of our share
capital or the issuance of convertible debentures (if any such power has been
delegated to the board of directors by vote of the extraordinary
shareholders meeting) and the calling of an ordinary or an extraordinary
shareholders meeting to resolve upon the actions to be taken by us in case
of decrease of our shareholders equity to less than two thirds of our
paid-in capital as a result of accumulated losses.  See also
Meetings of Shareholders.

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The board of
directors may also appoint a general manager (direttore generale) and one
or more senior managers (direttori) who report directly to the board and
confer powers for single acts or categories of acts to our employees or persons
unaffiliated with us.

Meetings of the
board of directors are called by written notice by the chairman on his own
initiative and must be called upon the request of the vice-chairman, any
managing director or at least two other directors or upon the request of our
Management Control Committee.  Meetings may be held in person, or by
video-conference or tele-conference, in any member state of the European Union,
the United States and Switzerland.  The quorum for meetings of the board of
directors is a majority of the directors in office.  Resolutions are
adopted by the vote of a majority of the directors present at the
meeting.

Under Italian law,
directors having any interest in a proposed transaction must disclose their
interest to the board, even if such interest is not in conflict with the
interest of the company in the same transaction.  The interested director
is not required to abstain from voting on the resolution approving the
transaction, but the resolution must state explicitly the reasons for, and the
benefit to the company of, the approved transaction.  In the event that
these provisions are not complied with, or that the transaction would not have
been approved without the vote of the interested director, the resolution may be
challenged by a director if the approved transaction may be prejudicial to the
company.  A managing director having any such interest in a proposed
transaction within the scope of his powers must solicit prior board approval of
such transaction.  The interested director may be held liable for damages
to us resulting from a resolution adopted in breach of the above rules. 
Finally, directors may be held liable for damages to their company if they
illicitly profit from insider information or corporate opportunities.

Under Italian law,
directors may be removed from office at any time by the vote of shareholders at
an ordinary shareholders meeting although, if removed in circumstances
where there was no just cause, such directors may have a claim for
indemnification against us.  Directors may resign at any time by written
notice to the board of directors.  The board of directors must appoint
substitute directors to fill vacancies arising from removals or resignations to
serve until the next ordinary shareholders meeting.  If at any time
more than half of the members of the board of directors appointed at a
shareholders meeting resign or otherwise cease to be directors, the entire
board of directors will be considered to have lapsed and the remaining members
of the board of directors must promptly call an ordinary shareholders
meeting to appoint a new board of directors.

The remuneration of
directors is determined by shareholders at ordinary shareholders
meetings.  The board of directors or a committee of such board may
determine the remuneration of directors that perform management or other special
services for us, such as the Managing Director.  Directors are entitled to
reimbursement for expenses reasonably incurred in connection with their
functions.

Management Control Committee

Since our adoption
of a one-tier corporate governance system, a management control committee
replaced our board of statutory auditors, which under the traditional corporate
governance model was the supervisory board entrusted mainly with control and
supervisory responsibilities, appointing and removing the members of the
management board and approving the companys annual financial statements.

Our first Management
Control Committee was appointed by the current board of directors at its first
meeting and is composed of three independent directors who comply with the
membership requirements described above (see Board of
Directors), one of whom must come from the slate that obtains the
second-largest number of votes, if any such slate has been presented.  The
remuneration of the members of the Management Control Committee must be decided
by the board of directors if it is not resolved upon by shareholders at the
meeting appointing the directors.

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Pursuant to the TUF,
the by-laws of listed companies adopting the one-tier governance system must (i)
limit the number of mandates that members of a management control committee may
have in other companies, and (ii) include clauses ensuring that minority
shareholders may elect one member who will be appointed to be part of the
management control committee (or two members if the committee is composed of
more than three members).  Pursuant to our By-laws, our Management Control
Committee must be composed of three directors who may not hold similar positions
in more than three other listed companies (not counting our
subsidiaries).

Our By-laws provide
for mechanisms to ensure that if a member of the Management Control Committee
ceases to be a member of such committee, or of the board of directors, or no
longer complies with the requirements described above, that member must be
replaced on the Management Control Committee in such a way as to ensure that the
membership requirements, and the minority shareholders rights as to the
appointment, as described above, are satisfied.

The duties of our
Management Control Committee are to verify that we (i) maintain adequate
organizational structure, internal controls and administrative and accounting
systems and (ii) adequately instruct our subsidiaries to transmit to us
information relevant to our disclosure obligations.  Our board of directors
may delegate further tasks to the Management Control Committee, in particular
with respect to the relationships with our external auditors.

Our Management
Control Committee must also carry out the functions of internal control
committee pursuant to the STAR Governance Rules and, to the extent permitted by
Italian law, audit committee pursuant to Rule 10A-3.  See
Significant Differences with Corporate Governance Practices under
NYSE RulesOverview below.

Our Management
Control Committee is required to meet at least once every ninety days. 
Meetings of the Management Control Committee must be called by written notice by
the chairman of the Management Control Committee at his own initiative or at the
request of any other member, in which case the chairman must call the meeting
without delay unless there are valid reasons not to convene it.  Meetings
may be held in person, or by video-conference or teleconference.  The
quorum for meetings of the Management Control Committee is a majority of its
members.  Resolutions must be adopted by the vote of a majority of the
members present at the meeting.

In addition, the
members of our Management Control Committee must attend shareholders
meetings and the meetings of our executive committee if the latter is
established.  Our Management Control Committee or two of its members may
decide, upon informing the Chairman of the board of directors, to call a meeting
of the board of directors or of the executive committee, if the latter is
established.  Each member of our Management Control Committee may ask the
other directors for information about our business or that of our
subsidiaries.  Our Management Control Committee may carry out inspections
and verifications on our premises and exchange information with the supervisory
bodies of our subsidiaries or our external auditors.

Our Management
Control Committee must report its review activities and any irregularities
detected during its review activities at the shareholders meeting convened
to approve our annual unconsolidated financial statements.  Our executive
directors must report to the Management Control Committee at least quarterly the
Companys business and the main transactions carried out by us or by our
subsidiaries.

Any shareholder may
submit a complaint to our Management Control Committee regarding facts that such
shareholder believes should be subject to scrutiny by the Management Control
Committee, which must take any such complaint into account in its report to the
shareholders meeting.

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If shareholders collectively representing 2.0% of our share capital submit such
a complaint, the Management Control Committee must promptly undertake an
investigation and present its findings and any recommendations to a
shareholders meeting (which it shall convene if the complaint concerns
serious irregularities and there is an urgent need to take action).

The Management
Control Committee may report to the court having jurisdiction over the Company
serious breaches of the duties of the directors which may be prejudicial to us
or to our subsidiaries.  Our Management Control Committee is also required
to notify CONSOB without delay of any irregularities found during its review
activities.  CONSOB may report to the competent court serious breaches of
the duties of the members of our Management Control Committee.

External Auditors

The TUF requires
companies whose shares are listed on regulated markets of EU Member States to
appoint a firm of external auditors that shall verify (i) during the fiscal
year, that the companys accounting records are correctly kept and
accurately reflect the companys activities, and (ii) that the financial
statements correspond to the accounting records and the verifications conducted
by the external auditors and comply with applicable rules.  The external
auditors express their opinion on the financial statements in a report that may
be consulted by the shareholders prior to the annual shareholders
meeting.

Under the TUF, as
amended in December 2005 by the Investor Protection Act, the external auditors
are appointed by the ordinary shareholders meeting for a six-year term
(which may not be renewed more than once and which may not be further renewed
until three years have elapsed from the termination of the previous
appointment).  If the appointment is renewed, the person responsible for
the audit must be replaced by another person.  Such appointment must be
notified to CONSOB.

On May 6, 2004, our
shareholders appointed KPMG S.p.A., with legal offices at Via Vittor Pisani 25,
Milan, Italy, as our external auditors for a third consecutive three-year term,
in compliance with the law in force at the time.

Meetings of Shareholders

Shareholders are
entitled to attend and vote at ordinary and extraordinary shareholders
meetings.  Votes may be cast personally or by proxy. 
Shareholders meetings may be called by our board of directors and must be
called if requested by holders of at least 10% of the issued shares. 
Shareholders are not entitled to request that a meeting of shareholders be
convened to resolve upon matters which as a matter of law shall be resolved upon
on the basis of a proposal, plan or report by our board of directors.  If
the shareholders meeting is not called despite the request by shareholders
and such refusal is unjustified, the competent court may call the
meeting.

Shareholders are
informed of all shareholders meetings to be held by publication of a
notice in the MF  Milano Finanzaor Finanza & Mercatidaily newspapers or in the Official Journal of the Italian Republic
(Gazzetta Ufficiale) at least 30 days before the date fixed for the
meeting (20 days if the meeting is called at the request of holders of at least
10% of the issued shares).  The above formalities and terms regarding the
call notice may be reduced in other very limited circumstances.  As a
matter of practice, we publish the notice in a national daily newspaper, as
recommended by CONSOB.  Shareholders who, separately or jointly, represent
at least 2.5% of our share capital may request, within five days of the
publication of the notice convening the meeting, additions to the agenda,
specifying in the request the additional items they propose. Such additions to
the agenda may not be made for matters on which the shareholders meeting is
required by law to resolve on proposals put forward by the directors or on the
basis of a plan or report they have prepared.

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Shareholders
meetings must be convened at least once a year.  Our annual unconsolidated
financial statements are prepared by our board of directors and submitted for
approval to the ordinary shareholders meeting which must be convened
within 120 days after the end of the fiscal year to which such financial
statements relate.  This term may be extended to up to 180 days after the
end of the fiscal year, as long as we are bound by law to draw up consolidated
financial statements or if particular circumstances concerning our structure or
our purposes so require.  At ordinary shareholders meetings,
shareholders also appoint the external auditors, approve the distribution of
dividends, appoint the members of the board of directors, determine their
remuneration and vote on any business matter the resolution or authorization of
which is entrusted to them by law.

Extraordinary
shareholders meetings may be called to pass upon the dissolution of the
company, the appointment of receivers and similar extraordinary actions. 
Extraordinary shareholders meetings may also be called to resolve upon
proposed amendments to the By-laws, issuance of convertible debt securities,
mergers and de-mergers, capital increases and reductions, where such resolutions
may not be taken by our board of directors.  In particular, our board of
directors may transfer our registered office within Italy or resolve upon other
amendments to our By-laws when these amendments are required by law, resolve
upon mergers by absorption into us of our subsidiaries in which we hold at least
90% of the issued share capital and reductions of our share capital in case of
withdrawal of a shareholder.  Moreover, if, as a result of accumulated
losses, our shareholders equity decreases to less than two-thirds of our
paid-in capital but not below 120,000, and this decrease is not reduced
within one-third of our paid-in capital in the fiscal year following that of the
original decrease, the corresponding reduction of our share capital is resolved
upon by our board of directors and not by our shareholders meeting. 
Our board of directors may also resolve upon the issuance of shares or
convertible debt securities if such powers have been previously delegated to the
board of directors by a vote of the extraordinary shareholders
meeting.

The notice of a
shareholders meeting may specify up to two meeting dates for an ordinary
or extraordinary shareholders meeting; such meeting dates are generally
referred to as calls.  The extraordinary meeting may be
convened on third call through a new notice if the quorum required for
shareholder action on second call is not reached.

The quorum required
for shareholder action at an ordinary shareholders meeting on first call
is at least 50% of the total number of issued shares, while on second call there
is no quorum requirement.  In either case, resolutions may be approved by
holders of the majority of the shares present or represented at the
meeting.  The quorum required at an extraordinary shareholders
meeting on first, second and third call is at least 50%, more than one-third and
at least one-fifth, respectively, of our issued shares.  Resolutions of any
extraordinary shareholders meeting require the approval of at least
two-thirds of the holders of shares present or represented at such
meeting.  See also Pre-emptive Rights.

A shareholders
meeting may be attended only by shareholders with voting rights, whose financial
intermediary shall have delivered to us, at least two days prior to the date of
the meeting on first call, a notice entitling the shareholder to attend the
meeting.  Once the above notice is communicated to us by the relevant
intermediary the shares cannot be disposed of until the meeting has taken
place.

Shareholders may
attend the shareholders meeting by proxy.  A proxy may be given only
for a single shareholders meeting (including, however, the first, second
and third calls of such meeting), except as part of a general power of attorney
or a power of attorney granted by a corporation, association, foundation or any
other legal entity to one of its employees.  A proxy may be exercised only
by the person expressly named in the applicable form.

The person
exercising the proxy cannot be our subsidiary, a director, auditor or employee
of ours or of any of our subsidiaries. Any one proxy cannot represent more than
200 of our shareholders.  See Voting Rights.

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Pre-emptive Rights

Pursuant to Italian
law, holders of shares (and holders of convertible bonds) are entitled to
subscribe for new issuances of shares, debt securities convertible into shares
and any other warrants, rights or options entitling the holders to subscribe for
shares in proportion to their holdings, unless such issues are for non-cash
consideration or pre-emptive rights are waived or limited by a resolution
adopted at an extraordinary shareholders meeting by holders of a majority
of the issued shares.  There can be no assurance that the U.S. resident
owners of shares or owners of ADSs will be able to exercise fully any
pre-emptive rights to which the holders of shares are entitled.  Pursuant
to our Depositary Agreement with our ADR Depositary, the ADR Depositary, if
requested by us, will use its best efforts to sell such warrants, rights or
options and will allocate the proceeds of such sale for the account of the ADR
owners.

Reports to Shareholders

We are required to
publish, in the Italian language, audited annual unconsolidated financial
statements of DMH and our audited annual consolidated financial
statements.  We also produce an annual report to shareholders in the
Italian language which contains a directors report together with audited
financial statements (consolidated and unconsolidated) of DMH.

We are required to
produce semi-annual and quarterly reports to shareholders in the Italian
language which contain a directors report as well as our unaudited
semi-annual and quarterly condensed financial statements (consolidated and, in
the case of semi-annual statements only, unconsolidated).

We prepare our
financial statements in accordance with IFRS.  See Presentation Of
Financial and Other Information and Item 5. Operating and Financial
Review and ProspectsInternational Financial Reporting Standards
(IFRS).

We are also required
to prepare annual reports on Form 20-F to be filed with the U.S. Securities and
Exchange Commission containing, among other matters, our audited consolidated
financial statements.

Preference Shares or Savings Shares; Other Securities

We are permitted in
accordance with Italian law to issue preference shares or savings shares. 
Preference shares would typically not be entitled to vote in an ordinary
shareholders meeting, but would be entitled to vote together with the
shares in extraordinary shareholders meetings and could be entitled to
vote in ordinary shareholders meetings as well if their terms so
provided.  Savings shares are entitled to vote in neither ordinary nor
extraordinary shareholders meetings.  However, Italian law provides
for special meetings of holders of each class of shares for the approval of
resolutions adopted by the shareholders which affect their rights
vis-à-vis the other classes of shares.  Preference shares would
have preferential rights to the payment of dividends and to the repayment of
capital in the event of liquidation.  Savings shares typically have
preferential rights to the payment of dividends, but the by-laws may provide for
different or additional preferential rights.

We have no currently
authorized or outstanding preference shares or savings shares.  The
authorization of preference shares and of savings shares requires an amendment
to the By-laws and is thus subject to the approval by an extraordinary
shareholders meeting.  See Meetings of
Shareholders.

Pursuant to the 2004
corporate law reform, effective January 1, 2004, Italian companies are permitted
to issue other classes of equity securities with different economic and voting
rights, so-called participation certificates with limited voting rights, as well
as so-called tracking stock, if their by-laws permit such issuance.  Our
By-laws do not currently permit such issuance.

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The power to issue
debt securities not convertible into our shares is vested in our board of
directors.

Liquidation Rights

Pursuant to Italian
law and subject to the satisfaction of the claims of all other creditors,
shareholders are entitled to a distribution in liquidation that is equal to the
value of their shares (to the extent available out of our net assets). 
Holders of preference shares, if any such shares are issued in the future by us,
would be entitled to a priority right to any such distribution from liquidation
up to their par value.  Holders of saving shares, if any such shares are
issued in the future by us and if our By-laws so provide, would be entitled to a
priority right to any distribution from liquidation.  Thereafter, all
shareholders would rank equally in their claims to the distribution or surplus
assets, if any.  Ordinary shares rank pari passu among
themselves in liquidation.

Purchase by Us of Our Own Shares

We are permitted to
purchase shares, provided we receive necessary authorization from the ordinary
shareholders meeting and meet certain other conditions and limitations
provided by Italian law.  Shares may only be purchased out of profits
available for dividends or out of distributable reserves, in each case as
appearing on the latest shareholder-approved unconsolidated financial
statements.  Further, we may only repurchase fully paid-in shares. 
The number of shares to be acquired, together with any shares previously
acquired by us or any of our subsidiaries may not (except in limited
circumstances) exceed in aggregate 10% of the total number of shares then issued
and the aggregate purchase price of such shares may not exceed the earnings
reserve specifically approved by shareholders.  Shares held in excess of
such 10% limit must be sold within one year of the date of purchase. 
Similar limitations apply with respect to purchases of our shares by our
subsidiaries.

A corresponding
reserve equal to the purchase price of such shares must be created in the
balance sheet, and such reserve is not available for distribution, unless such
shares are sold or cancelled.  Shares purchased and held by us may be
resold only pursuant to a resolution of our shareholders adopted at an ordinary
shareholders meeting.  The voting rights attached to the shares held
by us or our subsidiaries cannot be exercised, but the shares can be counted for
quorum purposes in shareholders meetings.  Dividends and other
rights, including pre-emptive rights, attached to such shares will accrue to the
benefit of other shareholders.  However, our shareholders may authorize the
exercise of pre-emptive rights relating to shares owned by us or our
subsidiaries.

The TUF provides
that the purchase by a listed company of its own shares and the purchase of
shares of a listed company by its subsidiaries must be carried out so as to
ensure the equality of treatment among shareholders.  Subject to certain
limitations, the foregoing does not apply to shares being purchased by a company
from its employees or from the employees of its controlling company or
subsidiaries.

At a meeting held on
May 5, 2005, our shareholders approved a buy back plan for the repurchase of up
to 12,110,000 of our shares over an 18-month period, replacing the plan approved
on May 6, 2004.  See Buy Back Plan.

As of June 23, 2006,
we do not hold any of our own shares.

Notification of the Acquisition of Shares and Voting Rights

Pursuant to Italian
securities laws, including the TUF and CONSOB Regulation No. 11971 of May 14,
1999 as subsequently amended (Regulation No. 11971), any acquisition
of any interest in excess of 2.0% in the voting shares of a listed company must
be notified to CONSOB and the company whose shares are acquired.  The
voting rights attributable to the shares in respect of which such notification
has not been made may not be exercised.  Any resolution taken in violation
of the foregoing may be annulled if the resolution would not have been adopted
in the absence of such votes.

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In addition, any
person whose aggregate interest in the voting shares of a listed company exceeds
or falls below 2%, 5%, 7.5%, 10% and successive percentages being multiples of
5, respectively, of the listed companys voting share capital, is obliged
to notify CONSOB and the issuer.  For the purpose of calculating these
ownership thresholds, shares owned by any person, irrespective of whether the
voting rights attributable thereto are exercisable by such person or by a third
party, are taken into consideration and, except in certain circumstances,
account should also be taken of shares held through, or shares the voting rights
of which are exercisable by, subsidiaries, fiduciaries or intermediaries. 
For the purpose of calculating the ownership thresholds of 5%, 10%, 25%, 50% and
75%, shares should also be taken into account that: (i) a person has an option
to, directly or indirectly, acquire or sell; and (ii) a person may acquire
further to the exercise of a warrant or conversion right which is exercisable
within 60 days.  The notification must be repeated when such person, upon
the exercise of the right referred to in (i) or (ii) above, acquires or sells
shares which cause his aggregate ownership in the listed company to exceed or
fall below the relevant thresholds.  Notification should be made (except in
certain circumstances) within five trading days of the event which gives rise to
the notification obligation.

Cross-ownership of
listed companies may not exceed 2.0% of their respective voting shares and
cross-ownership between a listed company and an unlisted company may not exceed
2.0% of the voting shares of the listed company and 10.0% of the voting shares
of the unlisted company.  If the relative threshold is exceeded, the
company which is the latter to exceed such threshold may not exercise the voting
rights attributable to the shares in excess of the threshold and must sell the
excess shares within a period of 12 months.  If such company does not sell
the excess shares, it may not exercise the voting rights in respect of its
entire shareholding.  If it is not possible to ascertain which is the
latter company to exceed the threshold, subject to a different agreement between
the two companies, the limitation on voting rights and the obligation to sell
the excess shares applies to both of the companies concerned.  The 2.0%
limit for cross-ownership is increased to 5.0% on the condition that such limit
is exceeded by the two companies concerned only following an agreement
authorized in advance by an ordinary shareholders meeting of each of
them.  Furthermore, if a party holds an interest in excess of 2.0% of a
listed companys share capital, such listed company or the party which
controls the listed company may not purchase an interest above 2.0% in a listed
company controlled by the first party.  In case of non-compliance, voting
rights attributable to the shares held in excess may not be exercised.  If
it is not possible to ascertain which is the latter party to exceed the limit,
the limitation on voting rights applies to both, subject to any different
agreement between the two parties.  Any shareholders resolution taken
in violation of the limitation on voting rights may be annulled if the
resolution would not have been adopted in the absence of such votes.  The
foregoing provisions in relation to cross-ownership do not apply when the
thresholds are exceeded following a public tender offer aimed at acquiring at
least 60% of a companys ordinary shares or when a controlled company
purchases shares of a controlling company within the limits set forth in Article
2359 bis of the Italian Civil Code and following the procedures described
under Purchase by Us of Our Own Shares; however, certain
restrictions on the manner of purchase apply.

Pursuant to the TUF,
agreements among shareholders of a listed company or of its parent company, must
be notified to CONSOB (within 5 days), published in summary form in the press
(within 10 days) and filed with the Chamber of Commerce (within 15 days). 
Failure to comply with the above rules renders the agreements null and void and
the shares cannot be voted.  These rules apply to shareholders
agreements which:

| | (i)          concern
(including prior consultation for) the exercise of voting rights in a listed
company or its controlling company;                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                  
| | (ii)          contain
limitations on the transfer of shares of the companies under point (i), above,
or of securities which grant the right to purchase or subscribe said
shares;

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| | (iii)          provide for the
purchase of shares or securities mentioned in point (ii), above; or                                                     
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                        
| | (iv)          have as their
object or effect the exercise (including joint exercise) of a dominant influence
over the companies under point (i), above.

Any
shareholders agreement of the nature described above may have a maximum
term of three years or, if executed for an unlimited term, can be terminated by
a party upon six months prior notice.  In case of a public tender
offer, shareholders who intend to participate in the tender offer may withdraw
from the agreement without notice, such withdrawal being effective only in the
event that the relevant shares are actually sold.

Regulation No. 11971
contains provisions which govern the method and content of the notification and
publication of the agreements as well as of subsequent amendments thereto. 
The regulation also provides that any party to an agreement referred to in (i)
and (iv) above concerning more than 5% of the listed companys share
capital is obliged to notify CONSOB and the listed company in question of its
overall shareholding in the listed company, unless such information has already
been notified in compliance with other provisions of the TUF.

In accordance with
Italian anti-trust laws, the Italian anti-trust authority may prohibit the
acquisition of control in a company which would thereby create or strengthen a
dominant position in the domestic market or a significant part thereof and which
would result in the elimination or substantial reduction, on a lasting basis, of
competition, provided that certain turnover thresholds are exceeded. 
However, if the turnover of the acquiring party and the company to be acquired
exceed certain higher turnover thresholds, the anti-trust review of the
acquisition falls within the exclusive jurisdiction of the European
Commission.

Minority Shareholders Rights

Shareholders
resolutions which are not adopted in conformity with applicable law or our
By-laws may be challenged (with certain limitations and exceptions) within
ninety days by absent, dissenting or abstaining shareholders representing
individually or in the aggregate at least 0.1% of our share capital (as well as
by our board of directors or our board of statutory auditors). 
Shareholders not reaching this threshold or shareholders not entitled to vote at
our meetings may only claim damages deriving from the resolution.

Dissenting or absent
shareholders may require us to buy back their shares for the average closing
price of the previous six months as a result of shareholders resolutions
approving, among other things, material modifications to our corporate purpose
or of the voting rights of our shares, our transformation from a stock
corporation into a different legal entity, the transfer of our registered seat
outside Italy or the de-listing of our shares from Telematico.

Each shareholder may
bring to the attention of our Management Control Committee facts or acts which
are deemed wrongful.  If such shareholders represent more than 2.0% of our
share capital, our Management Control Committee must investigate without delay
and report its findings and recommendations to the shareholders
meeting.

Shareholders
representing more than 2.5% of our share capital have the right to report to the
court having jurisdiction over us serious breaches of the duties of our
directors which may be prejudicial to us or to our subsidiaries.  In
addition, shareholders representing at least 2.5% of our share capital may
commence derivative suits before the court having jurisdiction over us against
our directors, statutory auditors and general managers.  We may waive or
settle the suit unless shareholders holding at least 2.5% of the shares vote
against such waiver or settlement.  We will reimburse the legal costs of
such action in the event that the claim of such shareholders is successful and
the court does not award such costs against the relevant directors, statutory
auditors or general managers.

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Minority
shareholders may appoint a member of our board of directors pursuant to the
cumulative voting system described in Corporate Governance System
 Board of Directors above.  The director appointed by the
minority shareholders will then be appointed by the board of directors as
chairman of our Management Control Committee.

Tender Offer Rules

Pursuant to the TUF,
a public tender offer must be made by any person that, by reason of its
purchases of shares, holds more than 30% of the shares of an Italian company
listed on an Italian regulated market entitling their holders to vote on the
appointment or revocation of the directors or the commencement of derivative
suits against them (for purposes of this section, and as applicable to our
shares, the Ordinary Shares).  The tender offer must cover all
the Ordinary Shares of the listed company.  Similarly, a tender offer for
all the Ordinary Shares of a listed company must be made by any person who,
having more than 30% of the Ordinary Shares without exercising majority voting
rights at ordinary shareholders meetings, acquires  by way of
acquisition or exercise of subscription or conversion rights  during a
12-month period more than an additional 3% of the Ordinary Shares. 
Moreover, according to a release issued by CONSOB if, as a result of a share buy
back effected by a listed company, the controlling shareholder of that company
holds more than 30% of the outstanding Ordinary Shares (i.e., exclusive
of treasury stock), the obligation to launch a tender offer is triggered. 
Likewise, the obligation to launch a tender offer is triggered when a share buy
back results in an increase of more than 3% of the outstanding Ordinary Shares
owned by the controlling shareholder originally holding more than 30% but less
than 50% of the companys outstanding Ordinary Shares.  The offer must
be launched within thirty days from the date on which the relevant threshold was
exceeded, at a price not lower than the average of the weighted average of the
market price for the shares in the previous twelve months, and the highest price
paid for the Ordinary Shares by the offeror in the same period.

Under Regulation No.
11971, a purchaser is exempted from the tender offer obligation when:  (i)
the purchasers equity interest, as a result of an acquisition, does not
exceed the 30% threshold by more than 3% (provided that the purchaser commits
(a) not to exercise the voting rights pertaining to any Ordinary Shares
exceeding the 30% threshold and (b) to sell any shares exceeding the 30%
threshold within 12 months from the date of purchase); (ii) another person (or
several persons acting jointly) already owns more than 50% of the outstanding
Ordinary Shares, (iii) the 30% threshold is exceeded as a result of a capital
increase in connection with a debt restructuring plan approved by CONSOB, (iv)
the 30% threshold is exceeded as a result of transfers of Ordinary Shares among
related persons, (v) the 30% threshold is exceeded as a result of the exercise
of pre-emptive rights, (vi) the 30% threshold is exceeded through mergers or
demergers having an industrial purpose, approved by the shareholders of the
company whose shares would otherwise be the target of the tender offer. 
The TUF provides further that the acquisition of an interest above 30% of the
Ordinary Shares of a company does not trigger the obligation to launch a 100%
tender offer if the person concerned has exceeded the threshold as a result of a
public tender offer launched on all of the Ordinary Shares of the company. 
If a person exceeds the above 30% threshold as a result of a public tender offer
launched on 60% or more, but on less than all, of the Ordinary Shares of the
company, the person concerned is exempted from the obligation to launch a 100%
tender offer if (i) the tender offer has been approved by shareholders of the
company holding a majority of the Ordinary Shares (excluding the offeror and the
current majority shareholder), and (ii) the offeror (its subsidiaries,
controlling person, related companies and other person connected to it by
virtue, inter alia, of shareholders agreements) has not
acquired more than 1% of the Ordinary Shares of the company in the preceding 12
months; CONSOB shall ensure compliance with these conditions before allowing the
offer to be launched.  After such an offer has been completed, the offeror
nevertheless becomes subject to the duty to launch an offer for 100% of the
Ordinary Shares if, in the course of the subsequent 12 months, (i) it (or its
affiliates) purchases more than an additional 1% of the Ordinary Shares of the
company, or (ii) if the company approves a merger or split-up.

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Finally, the TUF
provides that anyone holding 90% or more of the voting shares of a company must
launch an offer for the remaining voting shares unless an adequate distribution
is restored so as to ensure proper trading within a period of 120 days. 
Any shareholder holding more than 98% of the voting shares of a listed company
following a tender offer for all such shares issued by the company, has the
right to obtain title to the remaining shares within four months after the end
of the tender offer if it has stated in the offer document its intention to make
such an acquisition at a price set by a court-appointed expert.

Liability for Mismanagement of Subsidiaries

Pursuant to the 2004
corporate law reform, companies and other entities that, acting in their own
interest or the interest of third parties, mismanage a company subject to their
direction and coordination powers are liable to such companys shareholders
and creditors for ensuing damages.  This liability is excluded if (i) the
ensuing damage is fully eliminated, including through subsequent transactions,
or (ii) the damage is effectively offset by the global benefits deriving in
general to the company from the continuing exercise of such direction and
coordination powers.  Direction and coordination powers are presumed to
exist, among other things, with respect to consolidated subsidiaries.  As
of June 23, 2006, we are not subject to the direction and coordination powers of
any entity because we actually independently take all the decisions regarding
the management of our company.  However, we exercise direction and
coordination power over our subsidiaries Ducati Retail S.r.l., Ducati Corse
S.r.l. and Ducati Consulting S.r.l.

Significant Differences with Corporate Governance Practices under NYSE Rules

Overview

Corporate governance
rules for Italian stock corporations whose shares are listed on the Italian
Stock Exchange (the ISE), are set forth in the Italian Civil Code,
in the TUF and in the corporate governance rules set forth by the voluntary code
of corporate governance issued by the ISE (the Corporate Governance
Code).  As described in more detail below, these Italian corporate
governance rules differ in a number of ways from those applicable to U.S.
domestic companies under NYSE listing standards, as set forth in the NYSE Listed
Company Manual.

As a general rule,
our main corporate bodies are governed by the Italian Civil Code and the TUF and
are assigned specific powers and duties that are legally binding and from which
there can be no derogation.  The Corporate Governance Code builds on this
general framework and sets forth recommendations for responsible corporate
governance intended to reflect generally accepted best practice.  While
these recommendations are not legally binding, the regulations issued by the ISE
require that its listed companies issue an annual compliance report disclosing
which recommendations, if any, are not being followed and why, and as part of
the STAR admission requirements set forth by the ISE regulations, we are
required to comply with certain rules contained in the Corporate Governance Code
(the STAR Governance Rules).  The annual compliance report must
also contain a general description of our corporate governance system.  As
stated in our annual compliance report to the ISE, issued on March 24, 2006, we
comply with the STAR Governance Rules and are substantially in compliance with
the other rules set forth in the Corporate Governance Code.

Recently ISE has
issued and published a new Code of Corporate Governance: the listed companies
are invited to comply with the new Code of Corporate Governance by the end of
the current fiscal year and to state said compliance in the annual compliance
report to the ISE to be issued in 2007.

We currently follow
a one-tier corporate governance system, with a board of directors (consiglio
di amministrazione), including a Management Control Committee (comitato
per il controllo sulla gestione).  See
By-LawsCorporate Governance System for a description of
the powers and duties of our board of directors and of our Management Control
Committee.

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The members of the board of directors owe duties of loyalty and care to
us.  As required by Italian law, a firm of external auditors is in charge
of auditing our financial statements.  See
By-LawsExternal Auditors.  The members of our board
of directors and the firm of external auditors are directly and separately
appointed by shareholder resolution at our general shareholders
meetings.

Our Management
Control Committee must carry out the functions of internal control committee
established by our board of directors as required by the Star Governance Rules.
As internal control committee, our Management Control Committee is mainly
responsible for assessing the adequacy of our internal control system and for
relations with our external auditors.  See Item 6. Directors, Senior
Management and EmployeesBoard Committees.  Our Management
Control Committee also serves as our audit committee for purposes of complying
with Rule 10A-3 and NYSE listing standards, to the extent permitted by Italian
law.  See By-LawsCorporate Governance
System.

Following is a
summary of the significant differences between Italian corporate governance
rules and practices as we have implemented them and those applicable to U.S.
issuers under NYSE listing standards, as set forth in the NYSE Listed Company
Manual.

Independent Directors

NYSE domestic
company standards.  The NYSE listing standards applicable to U.S.
companies provide that independent directors must comprise a
majority of the board.  In order for a director to be considered
independent, the board of directors must affirmatively determine
that the director has no material direct or indirect relationship
with the company.  These relationships can include commercial,
industrial, banking, consulting, legal, accounting, charitable and familial
relationships, among others.  More specifically, a director is not
independent if such director or an immediate family member, has certain
specified relationships with the company, its parent, any consolidated
subsidiary, its internal or external auditors, or any company that has
significant business relationships with the company, its parent or any
consolidated subsidiary. Ownership of a significant amount of stock is not a per
se bar to independence.  In addition, a three-year cooling off
period following the termination of any relationship that compromised a
directors independence must lapse before that director can again be
considered independent.

Our
practice.  Pursuant to the STAR Governance Rules, our board of
directors must include an adequate number (at least three out of eleven) of
non-executive independent directors, such that their views carry significant
weight in the adoption of the boards resolutions.

Under the STAR
Governance Rules, a director is not independent if he or she (i) has significant
relationships of an economic nature, directly, indirectly or on behalf of third
parties, with the issuer or its affiliates (that is, its subsidiaries, executive
directors or controlling shareholder(s)); (ii) holds, directly, indirectly or on
behalf of third parties, an equity interest affording control or a significant
influence over the issuer; (iii) is a party to a shareholders agreement for the
control of the issuer; or (iv) has close family relations with an executive
director, controlling shareholder or other persons who do not themselves qualify
as independent.  The following economic relationships are deemed
significant for purposes of the director independence requirements: (a) business
relationships entertained in the current or the previous year, including through
companies which the director controls or is an executive director of, unless the
relationships are at market conditions, are not such as to influence the
directors autonomous judgment and do not have a value exceeding 5% of the
annual turnover of either party to the transaction;  (b) professional
services rendered, including through a partnership, in the current or the
previous year, unless the services are rendered at market conditions, are not
such as to influence the directors autonomous judgment and the
consideration does not exceed 5% of the directors annual income or
200,000; and (c) employment relationships or serving as an executive
director in the previous three years.

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Compliance with the
independence requirements is assessed periodically by our board of
directors.  As of March 24, 2006, the date of this years annual
compliance report to the ISE, our board consisted of 11 directors, seven of whom
qualified as independent directors under the STAR Governance Rules.

The members of our
Management Control Committee must meet independence requirements mandated by
Italian law.  Their independence is assessed on the basis of a few general
principles, rather than detailed rules.  In particular, a person who (i) is
a director, or the spouse or a close relative of a director, of our company or
any of our affiliates; (ii) has an employment or consulting or similar
relationship with our company or any of our affiliates; or (iii) has an economic
relationship with us or any of our affiliates which might compromise his/her
independence, cannot be appointed to our Management Control Committee. 
Although there is no formal cooling off requirement, if a member of the
Management Control Committee who is a registered chartered accountant (i) during
his term entertains, or entertained in the two years prior to the appointment, a
regular or material consulting relationship with the company that appointed him
as member of the Management Control Committee or with any of its subsidiaries,
or (ii) during his term is employed by, or serves as a director of  or was
employed or served as a director in the three years prior to the appointment
 the company that appointed him as member of the Management Control
Committee or any of its controlling entities, such members license may be
suspended or withdrawn.]  Finally, we are required to provide in our
By-laws a mechanism to permit minority shareholders to elect one member of the
Management Control Committee who shall also be appointed chairman.  See
By-LawsCurrent Corporate Governance SystemStatutory
Auditors.

At least three
members of our board of directors have to meet the independence requirements
applicable to the members of our Management Control Committee described
above.  See also Audit Committee and Internal Audit
Function below for a description of further independence requirements of
the members of our Management Control Committee.

Executive Sessions

NYSE domestic
company standards.  In order to empower non-management directors of
U.S. companies listed on the NYSE to serve as a more effective check on
management, non-management directors must meet regularly in executive sessions,
and, if the board includes directors who are not independent, the independent
directors must meet alone in an executive session at least once a year.

Our
practice.  In Italy, neither non-executive directors nor
independent directors are required to meet in executive sessions.  The
members of our Management Control Committee are required to meet at least once
every 90 days.

Audit Committee and Internal Audit Function

NYSE domestic
company standards.  U.S. companies listed on the NYSE are required
to establish an audit committee that satisfies the requirements of Rule 10A-3
and certain additional requirements set by the NYSE.  In particular, all
members of this committee must be independent and the committee must adopt a
written charter.  The committees prescribed responsibilities include
(i) the appointment, compensation, retention and oversight of the external
auditors; (ii) establishing procedures for the handling of
whistleblower complaints; (iii) discussion of financial reporting
and internal control issues and critical accounting policies (including through
executive sessions with the external auditors); (iv) the approval of audit and
non-audit services performed by the external auditors and (v) the adoption of an
annual performance evaluation.  A company must also have an internal audit
function, which may be out-sourced, except to the independent
auditor.

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Our
practice.  Our Management Control Committee serves as our
audit committee for purposes of complying with Rule 10A-3, to the
extent permitted by Italian law.  See By-LawsCorporate
Governance System. In order to comply with Rule 10A-3 our Management
Control Committee has assumed the following functions: approve procedures, which
may include delegation of pre-approval authority to one or more designated
members of the committee, for the retention of the External Auditors for any
permitted audit service other than the audit of our financial statements and any
permitted non-audit service, and determine the fees for such services; 
oversee, to the extent permitted under Italian law, the work of the External
Auditors, including (i) resolution of disagreements between management and the
External Auditors regarding financial reporting, and (ii) assessment of the
External Auditors work plan concerning the carrying out of the
Companys audit and their audit reports and letters of recommendations;
exchange information and consult with the External Auditors, including with
respect to obtaining, reviewing and discussing reports from the External
Auditors regarding:  (1) all critical accounting policies and practices to
be used; (2) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with our
management officials, ramifications of the use of these alternative disclosures
and treatments, and the treatment preferred by the External Auditors and the
reasons for favoring that treatment; and (3) other material written
communications between the External Auditors and our management, such as any
management letter or schedule of unadjusted differences; establish procedures
for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters and the confidential, anonymous
submission by our employees of concerns regarding questionable accounting or
auditing matters; review with the Chief Executive Officer and the Chief
Financial Officer our disclosure controls and procedures on an annual basis,
including managements conclusions about the effectiveness of such
disclosure controls and procedures and any material non-compliance with them;
review with management and the External Auditors the financial information to be
included in the Companys Annual Report on Form 20-F;

The three members of
our Management Control Committee comply with the independence requirements set
out in Rule 10A-3 in addition to those set out under the STAR Governance
Rules.

We have an internal
audit function, which we have not outsourced.

Compensation Committee

NYSE domestic
company standards.  Under NYSE standards, the compensation of the
chief executive officer of a U.S. domestic company must be approved by a
compensation committee (or equivalent) composed entirely of independent
directors.  The compensation committee must also make recommendations to
the board of directors with regard to the compensation of other executive
officers, incentive compensation plans and equity-based plans that are subject
to board of directors approval.  Disclosure of individual management
compensation information for these companies is mandated by the Exchange
Acts proxy rules, from which foreign private issuers are generally
exempt.

Our
practice.  As a matter of Italian law, the compensation of
executive directors is determined by the board of directors, while our
shareholders determine the compensation of non-executive directors.  The
compensation of our executive directors, including the chairman and the Managing
Director, is proposed by our compensation committee and approved by our board of
directors.  See Item 6. Directors, Senior Management and
EmployeesBoard Committees.  Our equity-based compensation plans
are proposed by our board of directors, after consultation with our compensation
committee, and approved by our shareholders.  The Corporate Governance Code
recommends that a majority of the members of the compensation committee be
non-executive directors.  All of the four members of our compensation
committee are non-executive directors (one of whom qualifies as independent
under the STAR Governance Rules).  Our compensation committee does not
produce a compensation report.  We disclose the compensation of each of the
members of our board of directors (including our Managing Director) in our
annual financial statements prepared in accordance with Italian law as well as
in Item 6 of this annual report on Form 20-F.

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Nominating Committee

NYSE domestic
company standards.  Under NYSE standards, a U.S. domestic company
must have a nominating/corporate governance committee (or equivalent) composed
entirely of independent directors that, among other things, is responsible for
nominating directors and board committee members.

Our
practice.  We do not have a nominating/corporate governance
committee (or equivalent) responsible for nominating our directors or our board
committee members.  Directors may be nominated by any of our shareholders,
and the board of directors appoints the members of its committees and our
Managing Director without prior nomination by any committee.  Members of
our board of directors are elected according to a cumulative voting system, with
slates presented by shareholders holding, individually or collectively, at least
2.0% of our shares, so as to allow our minority shareholders to elect one member
of our board of directors, who will also be appointed as the chairman of the
Management Control Committee.  See By-LawsCorporate
Governance SystemBoard of Directors.

Corporate Governance Guidelines/Code of Business Conduct and Ethics

NYSE domestic
company standards.  Under NYSE standards, a company must adopt
governance guidelines and a code of business conduct and ethics for directors,
officers and employees.  A company must also publish these items on its
website and provide printed copies on request.  Section 406 of the
Sarbanes-Oxley Act of 2002 requires a company to disclose whether it has adopted
a code of ethics for its principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions, and if not, the reasons why it has not done so.  The
NYSE listing standards applicable to U.S. companies provide that codes of
conduct and ethics should address, at a minimum, conflicts of interest;
corporate opportunities; confidentiality; fair dealing; protection and proper
use of company assets; legal compliance; and encouraging the reporting of
illegal and unethical behavior.  Corporate governance guidelines must
address, at a minimum, director qualification standards, responsibilities and
compensation; directors access to management and independent advisers;
management succession; director orientation and continuing education; and an
annual performance evaluation of the board.

Our
practice.  We have adopted certain corporate governance guidelines
(including with respect to our internal control system and internal
dealing).  As noted in Item 16B of this annual report, we have also adopted
a code of conduct and a code of ethics for our directors, employees and others
acting on our behalf which, together with our guidelines for the treatment of
confidential information, constitute a code of ethics as defined in
Section 406 of the Sarbanes-Oxley Act.  We refer to these documents,
collectively, as our code of ethics.

We believe that our
code of ethics addresses the relevant issues contemplated by the NYSE standards
applicable to U.S companies noted above.  Our corporate governance
guidelines, on the other hand, do not address all of the issues contemplated by
the NYSE standards.

As noted above, we
are required to issue an annual report describing our corporate governance
system and disclosing the level of our compliance with the recommendations of
the Corporate Governance Code.

As of April 1, 2006,
we have adopted (i) the Companys internal dealing code drafted in
accordance with section 114 comma 7 TUF, as amended, and sections from
152-sexies to 152-octies Regulation No. 11971, and (ii) the procedure for the
holding of the Group Register of persons and/or entities having access to
privileged information, pursuant to section 115-bis TUF and sections 152-bis and
following Regulation No. 11971.

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Certifications as to Violations of NYSE Standards

NYSE domestic
company standards.  Under NYSE listing standards, the chief
executive officer of a U.S. company listed on the NYSE must certify annually to
the NYSE that he or she is unaware of any violation by the company of the NYSE
corporate governance listing standards, and to disclose that such certification
has been made in the companys annual report to shareholders (or, if no
annual report to shareholders is prepared, its annual report on Form 10-K). The
chief executive officer must also promptly notify the NYSE in writing if any
executive officer of the company becomes aware of any material non-compliance
with the NYSE corporate governance listing standards.  A U.S. company
listed on the NYSE must also submit an annual written affirmation to the NYSE,
within 30 days of its annual shareholders meeting and in a form specified
by the NYSE, regarding its compliance with applicable NYSE corporate governance
standards. A U.S. company listed on the NYSE is further required to submit an
interim written affirmation to the NYSE upon the occurrence of specified events,
including changes to the board of directors or its audit, nominating/corporate
governance or compensation committees and changes in the status of independent
directors.

Our
practice.  Under the NYSE rules, as of July 31, 2005, we are
required to submit an annual written affirmation to the NYSE, within 30 days of
the filing of our annual report on Form 20-F with the U.S. Securities and
Exchange Commission, regarding our compliance with applicable NYSE corporate
governance standards.  We are also required to submit to the NYSE an
interim written affirmation any time we are no longer eligible to rely on, or
choose to no longer rely on, a previously applicable exemption provided by Rule
10A-3, or if a member of our audit committee ceases to be deemed independent or
an audit committee member had been added.  In addition, under NYSE rules,
our chief executive officer must notify the NYSE in writing if any executive
officer becomes aware of any material non-compliance by us with NYSE corporate
governance standards.

Material Contracts

On May 9, 2005, DMH
and Ducati Corse entered into a 100.0 million Syndicated Loan Facility,
with a syndicate of seven Italian banks, under which we have borrowed 63.6
million that is available to us under a five-year credit line, and 36.4
million (of which 16 million was borrowed by Ducati Corse) that is
available under a renewable one-year revolving credit line.  The Syndicated
Loan Facility is described in more detail in Item 5. Operating and
Financial Review and ProspectsOther Financial
Transactions.

Exchange Controls

No exchange control
consent is required in Italy for the transfer to persons outside of Italy of
dividends or other distribution with respect to, or of the proceeds from the
sale of, shares of an Italian company.

However, Italian
resident and non-resident investors who transfer, directly or indirectly
(through banks or other intermediaries) into or out of Italy, cash, investments
or other securities in excess of 12,500 must report all such transfers to
the Italian Exchange Office (Ufficio Italiano Cambi or
UIC).  In the case of indirect transfers, banks or other
intermediaries are required to maintain records of all such transfers for five
years for inspection by Italian tax and judicial authorities. 
Non-compliance with these reporting and record-keeping requirements may result
in administrative fines or, in the case of false reporting or in certain cases
of incomplete reporting, criminal penalties.  The UIC is required to
maintain reports for a period of ten years and may use such reports, directly or
through other government offices, to police money laundering, tax evasion and
any other crime or violation.

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Individuals,
non-profit entities and partnerships that are residents of Italy must disclose
on their annual tax returns all investments and financial assets held outside
Italy, as well as the total amount of transfers to, from, within and between
countries other than Italy relating to such foreign investments or financial
assets, even if at the end of the taxable period foreign investments or
financial assets are no longer owned.  No such tax disclosure is required
if (i) the foreign investments or financial assets are exempt from income tax;
or (ii) the total value of the foreign investments or financial assets at the
end of the taxable period or the total amount of the transfers effected during
the fiscal year does not exceed 12,500.  Corporate residents of Italy
are exempt from these tax disclosure requirements with respect to their annual
tax returns because this information is required to be discussed in their
financial statements.

We cannot assure you
that the present regulatory environment in or outside Italy will continue or
that particular policies presently in effect will be maintained, although Italy
is required to maintain certain regulations and policies by virtue of its
membership in the European Union and other international organizations and its
adherence to various bilateral and multilateral international
agreements.

Taxation

Taxation

The following is a
summary of certain United States federal and Italian tax matters.  The
summary contains a description of the principal United States federal and
Italian tax consequences of the purchase, ownership and disposition of ordinary
shares or ADSs by a holder who is a citizen or resident of the United States or
who otherwise will be subject to United States federal income tax on a net
income basis in respect of the ordinary shares or ADSs.  This summary does
not purport to be a comprehensive description of all of the tax considerations
that may be relevant to a decision to purchase, hold or dispose ordinary shares
or ADSs.  In particular, the summary deals only with beneficial owners who
will hold ordinary shares or ADSs as capital assets and does not address the tax
treatment of a beneficial owner who owns 10.0% or more of the voting shares of
DMH or who may be subject to special tax rules, such as banks, tax-exempt
entities, insurance companies or dealers in securities or currencies, or persons
that will hold ordinary shares or ADSs as a position in a straddle
for tax purposes or as part of a constructive sale or a
conversion transaction or other integrated investment comprised of
ordinary shares or ADSs and one or more other investments.  Nor does this
summary discuss the treatment of ordinary shares or ADSs that are held in
connection with a permanent establishment through which a non-resident
beneficial owner carries on or performs personal services in Italy.

The summary is based
upon tax laws and practice of the United States and Italy as in effect on the
date of this annual report.  Prospective purchasers and current holders of
ordinary shares or ADSs are advised to consult their own tax advisors as to the
U.S., Italian or other tax consequences of the purchase, beneficial ownership
and disposition of ordinary shares or ADSs, including, in particular, the effect
of any state, local or national tax laws.

For purposes of the
summary, beneficial owners of ordinary shares or ADSs who are considered
residents of the United States for purposes of the current income tax convention
between the United States and Italy (the Treaty), and are not
subject to an anti-treaty shopping provision that applies in limited
circumstances, are referred to as U.S. holders.  Beneficial
owners who are citizens or residents of the United States, corporations
organized under U.S. law and U.S. partnerships, estates or trusts (to the extent
their income is subject to U.S. tax either directly or in the hands of partners
or beneficiaries) generally will be considered to be residents of the United
States under the Treaty.  Special rules apply to U.S. holders that are also
residents of Italy.  A new tax treaty to replace the current Treaty was
signed on August 25, 1999, but has not yet been ratified by Italy. The new
treaty would not change significantly the provisions of the current Treaty that
are discussed below (except that it would clarify the availability of benefits
to certain tax-exempt organizations).  These laws are subject to change,
possibly on a retroactive basis. Unless otherwise stated, this summary assumes
that a U.S. holder is eligible for the benefits of the Treaty.

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For purposes of the
Treaty and the United States Internal Revenue Code of 1986, holders of American
Depositary Receipts evidencing ADSs will be treated as the beneficial owners of
the underlying shares represented by those ADSs.

Tax on Dividends

Italian law provides
for the withholding of income tax at a 27.0% rate on dividends paid by Italian
companies to shareholders who are not residents of Italy for tax purposes. 
Accordingly, the amount initially made available to the Depositary for payment
to U.S. holders will reflect withholding at the 27.0% rate.

Under domestic
Italian law, a non-resident holder of shares of common stock may recover up to
four-ninths of the tax withheld on dividends by presenting evidence to the
Italian tax authorities that income tax has been fully paid on the dividends in
the non-resident holders country of residence in an amount at least equal
to the total refund claimed. Non-resident holders seeking such payments from the
Italian tax authorities have experienced extensive delays and incurred
expenses.

Alternatively, the
27.0% withholding tax may be reduced pursuant to an income tax convention
between Italy and the non-resident holders country of residence. The
Treaty provides for a 15.0% withholding tax.

Under current
Italian law, all shares of Italian listed companies (including DMHs
shares) must be held in a centralized clearing system authorized by
CONSOB.  Under applicable tax provisions, if the ordinary shares are held
through the centralized clearing system managed by Monte Titoli (the only such
system currently authorized in Italy), no withholding tax on dividends is
applied by DMH.  Instead of the withholding tax, a substitute tax
(imposta sostitutiva) is applied on dividend distributions to
non-resident holders of ordinary shares (or ADSs relating to such shares) at a
rate equal to the withholding tax that would otherwise be due.  The
substitute tax is applied by the resident or non-resident Intermediary (as
defined by CONSOB Regulation 11768 of December 23, 1998) with which the ordinary
shares are deposited and which participates in the Monte Titoli system (directly
or through a foreign centralized clearing system participating in the Monte
Titoli system).  The procedures to be followed by a non-resident holder in
order for the Intermediary with which the ordinary shares are deposited to apply
a reduced rate of tax pursuant to an applicable income tax convention are as
follows: the Intermediary must receive (i) a declaration of the non-resident
holder that contains certain data identifying the non-resident holder and
indicating the existence of all the conditions necessary for the application of
the relevant income tax convention and the determination of the applicable
treaty rate of withholding and (ii) a certification by the tax authorities of
the non-resident holders country of residence that the holder is a
resident of that country for purposes of the income tax convention and, as far
as it is known to such authorities, the holder has no permanent establishment in
Italy (which certificate will be effective until March 31 of the year following
submission).  If the ordinary shares are deposited with a non-resident
Intermediary, such Intermediary must appoint as its fiscal representative in
Italy a bank or an investment services company that is resident in Italy, or the
permanent establishment in Italy of a non-resident bank or investment services
company, or a company licensed to manage a centralized depository and clearing
system, to carry out all duties and obligations relating to the application and
administration of the substitute tax.

Since the shares
underlying the ADSs will be held by the custodian in the centralized clearing
system managed by Monte Titoli, the substitute tax regime described above will
apply to the ADSs.  In order to enable eligible U.S. holders to obtain a
reduction at source or a refund of withholding tax under the Treaty, DMH and the
Depositary have agreed to certain procedures.  According to such
procedures, the Depositary will send holders of the ADSs certain instructions
before the dividend payment date specifying the documentation required and the
deadlines for submission.  The documentation generally will include the
holders declaration and the tax certification specified under points (i)
and (ii) in the preceding paragraph. In order to comply with the documentation
described under point (ii) above, eligible U.S. holders must obtain a
certificate of residence from the U.S.

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Internal Revenue Service (IRS) (Form 6166) with respect to each
dividend payment, unless a previously filed certification will be effective on
the dividend payment date, and produce it together with a statement whereby such
holder represents to be a U.S. resident individual or corporation and not to
maintain a permanent establishment in Italy. IRS Form 6166 may be obtained by
filing a request for certification on IRS Form 8802. (Additional information,
including IRS Form 8802, can be obtained from the IRS website at www.irs.gov.
Information appearing on the IRS website is not incorporated by reference into
this document.) The time for processing requests for certification by the IRS
normally is six to eight weeks.  Accordingly, holders requiring this
certification should submit their requests to the IRS as soon as possible after
receiving instructions from the Depositary.  In the case of ADSs held
through a broker or other financial intermediary, the required documentation
should be delivered to such financial intermediary for transmission to the
Depositary.  In all other cases, eligible U.S. holders should deliver the
required documentation directly to the Depositary at least five business days
prior to the date set for the payment of dividends.

If the documentation
is not provided in the time allotted, or if the Intermediary (i.e., the
custodian in the case of the ADSs) determines that the documentation does not
satisfy the prescribed requirements or that applicable law does not permit it to
apply directly the reduced Treaty rate, the Intermediary will withhold tax at
the 27.0% rate, and eligible U.S. holders may claim a Treaty refund of 12.0% of
the dividend (representing the difference between 27.0% and the 15.0% Treaty
rate) directly from the Italian tax authorities. U.S. residents seeking
refunds from the Italian tax authorities have encountered extensive delays and
incurred expenses.

Distributions of
profits in kind will be subject to withholding tax.  In that case, prior to
receiving the distribution, the holder will be required to provide DMH with the
funds to pay the relevant withholding tax.

The gross amount of
dividends (that is, the amount before reduction for Italian withholding tax)
paid to U.S. holders of ordinary shares or ADSs will be subject to U.S. federal
income taxation as dividend income and will not be eligible for the
dividends-received deduction allowed to domestic corporations. The Italian
withholding tax (less any refunds to which such holder is entitled under the
Treaty) will be treated as a foreign income tax which such holders may elect to
deduct in computing their taxable income or, subject to the limitations on
foreign tax credits generally, credit against their U.S. federal income tax
liability.

Subject to certain
exceptions for short-term and hedged positions, the U.S. dollar amount of
dividends received by an individual prior to January 1, 2011 with respect to our
ADSs will be subject to taxation at a maximum rate of 15% if the dividends are
qualified dividends. Dividends paid on the ADSs will be treated as
qualified dividends if (i) the ADSs are readily tradable on an established
securities market in the United States, and (ii) we were not, in the year prior
to the year in which the dividend was paid, and are not, in the year in which
the dividend is paid, a passive foreign investment company
(PFIC).  The ADSs are listed on the New York Stock Exchange,
and will qualify as readily tradable on an established securities market in the
United States so long as they are so listed.  Based on our audited
financial statements and relevant market and shareholder data, we believe that
we were not treated as a PFIC for U.S. federal income tax purposes with respect
to our 2004 or 2005 taxable year.  In addition, based on our audited
financial statements and our current expectations regarding the value and nature
of our assets, the sources and nature of our income, and relevant market and
shareholder data, we do not anticipate becoming a PFIC for our 2006 taxable
year.

The U.S. Treasury
has announced its intention to promulgate rules pursuant to which holders of
ADSs or common stock and intermediaries through whom such securities are held
will be permitted to rely on certifications from issuers to establish that
dividends are treated as qualified dividends.  Because such procedures have
not yet been issued, it is not clear whether the Company will be able to comply
with them.  Holders of ADSs and common shares should consult their own tax
advisors regarding the availability of the reduced dividend tax rate in the
light of their own particular circumstances.

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Tax on Capital Gains

Capital gains
realized by non-resident shareholders on the disposal of a qualified
shareholding held as a capital asset and not in connection with a permanent
establishment through which such shareholders carry on or perform business
services in Italy are subject to Italian personal or corporate income tax, for
an amount equal to 40% of the overall gain.  Losses can be offset against
taxable gains for a corresponding amount and, if in excess, can be carried
forward up to four years.  A qualified shareholding is
constituted by ordinary shares or ADSs and/or rights representing more than 5.0%
of a listed companys total share capital or more than 2.0% of its share
capital voting in the ordinary shareholders meeting.  A disposal of a
qualified shareholding occurs if in any 12-month period immediately
following the date when a shareholding reaches one of the thresholds illustrated
above, the shareholder engages in disposals of ordinary shares or ADSs that,
individually or in aggregate, constitute a qualified
shareholding.  The taxable gain realized by a non-resident shareholder who
is an individual would be subject to progressive personal income tax rates
(currently, the marginal tax rate is equal to 43.0%, plus a surcharge generally
of up to 1.9%, depending on the municipality in which such non-resident
shareholder earns the highest Italian-source income).  The taxable gain
realized by a non-resident corporate shareholder would be subject to corporate
income tax, currently levied at a rate of 33.0%.

Generally, a capital
gains tax (CGT), levied at a rate of 12.5%, is imposed on gains
realized upon the transfer or sale of non-qualified shareholdings
whether held within or outside Italy.  A non-qualified
shareholding is constituted by an interest in DMH which does not reach the
thresholds described above.  However, under domestic law, an exemption
applies to gains realized on the disposal of non-qualified
shareholdings in an Italian company the shares of which are listed on a
regulated market, such as the DMH shares, even when such shareholdings are held
in Italy. A statement whereby the holder declares to be a non-Italian resident
may be required in order to benefit from this exemption.

Furthermore,
pursuant to the Treaty, a U.S. holder will not be subject to Italian tax on any
realized gains unless such U.S. holder has a permanent establishment in Italy to
which the ordinary shares or ADSs are effectively connected.  To this end,
U.S. holders selling ordinary shares or ADSs and claiming Treaty benefits may be
required to produce appropriate documentation establishing that the above
mentioned conditions have been met.  Other countries have executed income
tax conventions with Italy providing for a similar treatment of Italian tax on
capital gains.  No tax on capital gains will be imposed on the deposit or
withdrawal of shares in return for ADSs.  U.S. holders of ordinary shares
or ADSs will be subject to U.S. federal income tax on any capital gains to the
same extent as on other gains from the disposition of stock.

Gains realized by
U.S. holders on the sale or other disposition of ADSs or shares generally will
be subject to U.S. federal income tax as capital gains.  Such gain will be
long-term capital gain if the ADSs or shares were held for more than one
year.  The net amount of long-term capital gain recognized by an individual
U.S. holder generally is subject to taxation at a maximum rate of 20.0%;
however, net long-term capital gain recognized by an individual U.S. holder
after May 5, 2003 and before January 1, 2011 generally is subject to taxation at
a maximum rate of 15.0%.  Deposits and withdrawals of shares by a U.S.
holder in exchange for ADSs will not result in the realization of gain or loss
for U.S. federal income tax purposes.

Taxation of
Distributions from Capital Reserves

Special Italian tax
rules apply to the distribution of capital reserves. Under certain
circumstances, such a distribution may be considered as taxable income in the
hands of the recipient depending on the reserves of the distributing company
outstanding at the time of distribution and the actual nature of the reserves
distributed. The application of such rules may also have an impact on the tax
basis in the ordinary shares or ADSs held and/or the characterization of any
taxable income received and the tax regime applicable to it. Non-resident
shareholders may be subject to withholding tax and CGT as a result of such
rules. You should consult your tax advisor in connection with any distribution
of capital reserves.

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Transfer Tax

An Italian transfer
tax is normally payable on the transfer of shares in an Italian company. 
The transfer tax will not be payable with respect to any transfer of ordinary
shares or ADSs involving non-Italian residents concluded either on a regulated
market or with a bank or an investment services company.

Estate and Gift
Tax

As of October 25,
2001, the Italian estate and gift tax has been abolished and consequently any
transfer of ordinary shares or ADSs occurring by reason of death or gift as of
that date is no longer subject to any Italian estate and gift tax.

However, should a
gift of ordinary shares or ADSs for a value exceeding the materiality threshold
of 180,759.91 occur and the relationship between the donor and the
beneficiary not qualify for the exemption regime applicable to gifts made in
favor of certain family members (e.g., spouse, parents, children,
grandchildren), a registration tax of 168 would be due insofar as the gift
agreement is either executed or registered in Italy.  The materiality
threshold is increased to 516,456.91 in case the beneficiary is a person
with a handicap recognized pursuant to applicable law.

Documents on Display

We are subject to
the information reporting requirements of the Exchange Act applicable to foreign
private issuers.  In accordance therewith, we file reports, including
annual reports on Form 20-F, periodic reports on Form 6-K and other information
with the U.S. Securities and Exchange Commission.  These materials,
including this annual report on Form 20-F, are available for inspection and
copying at the Commissions Public Reference Room at 100 F Street, N.W.,
Washington D.C. 20549.  Please call the Commission at 1-800-SEC-0330 for
further information on the public reference room.  As a foreign private
issuer, we were not required to make filings with the Commission by electronic
means prior to November 4, 2002.  Any filings we make electronically will
be available to the public over the Internet at the Commissions website at
www.sec.gov.  Information appearing on the Commissions website is not
incorporated by reference into this annual report.  This annual report and
other reports and information filed by us with the Commission will also be
available for inspection by ADS holders at the Corporate Trust Office of The
Bank of New York at 101 Barclay Street, New York, New York 10286.

Item 11.  Quantitative and Qualitative Disclosures About Market
Risk

Our primary market
risk exposure is foreign currency risk, which can adversely affect our revenues
and operating profits.  To manage this risk, we enter into forward exchange
contracts.  At December 31, 2005, we had 39.7 million net in forward
exchange contracts (both sales and purchases), compared to 23.9 million at
December 31, 2004.  We are also exposed to interest rate risk associated
with short and long-term bank loans bearing variable interest rates.  To
manage this interest rate risk exposure, we enter into interest rate swap
agreements.

The following
discussion should be read in conjunction with Notes 34 to our audited financial
statements, which provide more information on our derivative
instruments.

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Exchange Rate Sensitivity

As our sales are
denominated in various foreign currencies (primarily the U.S. dollar, Japanese
yen and U.K. pound sterling, in which collectively 33.3% of our sales were
denominated in 2005), our sales and operating results are affected by the impact
of fluctuations in foreign currency exchange rates on product prices and certain
operating expenses as well as the effect of such fluctuations on the translation
into the euro of the foreign currency  denominated results of operation of
our foreign subsidiaries operating outside the euro zone.

We engage in certain
foreign exchange transactions to hedge portions of our transactional exposure to
fluctuations in exchange rates between the euro and these foreign
currencies.  Our currency exchange rate hedging policy until December 2003
was to cover, during the last quarter of each year, the sales in the coming
year.  Beginning January 2004, we hedged the expected cash flow from sales
denominated in foreign currencies for the subsequent 18 months on a rolling
basis.  However, at the end of 2004, we revised our hedging policy; our new
hedging policy consists of six-month rolling coverage that is consistent with
the amount of our orders and receivables in currencies that we normally have in
place.  We are not a party to leveraged derivatives and do not hold or
issue derivative instruments for speculative purposes.

The table below
provides information at December 31, 2005, about our receivables and derivative
financial instruments by functional currency and presents such information in
euro.  The table summarizes information on instruments and transactions
that are sensitive to foreign currency exchange rates.  The estimated fair
value of receivables is considered to approximate their carrying value because
receivables have a short maturity.  For foreign currency forward exchange
agreements, the table presents the notional amounts and weighted average
exchange rates by expected (contractual) maturity dates.  These notional
amounts generally are used to calculate the contractual payments to be exchanged
under the contract.

|                                 |  | Expected   Maturity Date                                           |            | Total |  | Fair Value | 
|-------------------------------- |  | ------------------------------------------------------------------ | ---------- | ----- |  | ---------- | 
|                                 |  |                                                                    |            |       | 
|At December 31, 2005             |  | 2006                                                               |            | 2007  |  | 2008       | 
|                                 |  |                                                                    |            |       |  |            | 
|                                 |  | (euro   equivalent in thousands, except exchange rate information) |            |       |  |            | 
|Receivables                      |  |                                                                    |            |       |  |            | 
|U.K.   Pound Sterling            |  |                                                                    | 5,263,292  |       |  |            | 
|U.S.   Dollar                    |  |                                                                    | 24,962,221 |       |  |            | 
|Japanese   Yen                   |  |                                                                    | 30,689,082 |       |  |            | 
|Australian   Dollar              |  |                                                                    | 4,479,008  |       |  |            | 
|CHF   (Swiss francs)             |  |                                                                    | 2,713,475  |       |  |            | 
|Forward Exchange Contracts       |  |                                                                    |            |       |  |            | 
|U.K.   Pound Sterling            |  |                                                                    |            |       |  |            | 
|Notional   Amount                |  |                                                                    | 17,627     |       |  |            | 
|Average   contract exchange rate |  |                                                                    | 0.6907     |       |  |            | 
|U.S.   Dollar                    |  |                                                                    |            |       |  |            | 
|Notional   Amount                |  |                                                                    | 27,294     |       |  |            | 
|Average   contract exchange rate |  |                                                                    | 1.2054     |       |  |            | 
|Japanese   Yen                   |  |                                                                    |            |       |  |            | 
|Notional   Amount                |  |                                                                    | 3,630      |       |  |            | 
|Average   contract exchange rate |  |                                                                    | 137.7284   |       |  |            | 
|Australian   Dollar              |  |                                                                    |            |       |  |            | 
|Notional   Amount                |  |                                                                    | 8,516      |       |  |            | 
|Average   contract exchange rate |  |                                                                    | 1.6234     |       |  |            | 
|CHF                              |  |                                                                    |            |       |  |            | 
|Notional   Amount                |  |                                                                    | 5,628      |       |  |            | 
|Average   contract exchange rate |  |                                                                    | 1.5391     |       |  |            | 
|Options                          |  |                                                                    |            |       |  |            | 
|U.S.   Dollar                    |  |                                                                    |           |       |  |            | 
|Japanese   Yen                   |  |                                                                    |           |       |  |            | 

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At December 31,
2005, the aggregate notional amount of our outstanding forward exchange
contracts was 62.7 million.  We had forward exchange contracts
denominated in U.K. pounds sterling with a notional amount of 17.6 million
(with an average contract exchange rate of £0.69); in U.S. dollars with a
notional amount of 27.3 million (with an average contract exchange rate of
US$1.2054); in Australian dollars with a notional amount of 8.5 million
(with an average contract exchange rate of AUD 1.6234); in Japanese yen with a
notional amount of 3.6 million (with an average contract exchange rate of
JPY 137.7284); and in Swiss franc with a notional amount of 5.6 million
(with an average contract exchange rate of CHF 1.5391).

Interest Rate Sensitivity

In 2005, our primary
source of debt financing was the Syndicated Loan Facility, which we entered into
on May 9, 2005.

We used the
63.6 million, five-year credit line under the facility to repay the
54.2 million outstanding principal amount of our notes due May 31, 2005
and to repay loans taken out to repurchase part of the Notes.  The Notes
had been our primary source of financing before we repaid them with the proceeds
from the Syndicated Loan Facility.  The Notes were subject to a fixed
interest rate of 6.50% per annum and did not expose us to substantial market
risk for changes in interest rates.  See Item 5.  Operating and
Financial Review and ProspectsOther Financial TransactionsSyndicated
Loan Facility.  The Syndicated Loan Facility bears interest at
variable interest rates, which exposes us to greater market risk for changes in
interest rates.  However, as described below, by using interest rate swaps
related to these loans, we effectively converted our debt under these loan
agreements into fixed rate debt to minimize our interest rate risks.]  We
are managing our interest rate exposure under the five-year credit line of
63.6 million through the use of an interest rate swap entered into on
May19, 2005, that effectively fixes the interest rate on the five-year credit
line at 2.755.

A hypothetical,
instantaneous increase of one percentage point in the interest rates applicable
to our variable interest rate debt would have increased our interest expense for
the year ended December 31, 2005 by approximately 1.2 million.  This
sensitivity analysis is calculated for the drawn down credit lines with variable
interest rates (drawn down credit lines with fixed interest and drawn down
credit lines with variable interest rates with collateral interest rate swap
transactions are not included).

Actual results in
the future may differ materially from these estimated results due to actual
developments in global financial markets.  The analysis methods we used to
assess and mitigate the risks discussed above should not be considered
projections of future events or losses.

Item 12.  Description of Securities Other than Equity Securities

Not applicable.

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PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15.  Disclosure Controls and Procedures

We have evaluated
under the supervision and with the participation of our management, including
our managing director and manager of finance, the effectiveness of our
disclosure controls and procedures as of December 31, 2005.  There are
inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures.  Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their control objectives.  Based upon our evaluation, our
managing director and manager of finance concluded that our disclosure controls
and procedures were effective to provide reasonable assurance that information
required to be disclosed in the reports we file and submit under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the applicable rules and forms, and that it is accumulated and
communicated to our management, including our managing director and manager of
finance, as appropriate to allow timely decisions regarding required
disclosure.

There was no change
in our internal control over financial reporting during 2005 that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

Item 16.  [Reserved]

Item 16A.  Audit Committee Financial Expert

Our Management
Control Committee fulfils the role of audit committee for purposes of complying
with Rule 10A-3, to the extent permitted by Italian law.  Our board of
directors has determined that a member of our management control committee,
Matteo Tamburini, is an audit committee financial expert within the
meaning of this Item 16A.  Gianpiero Paoli, Matteo Tamburini and Roberto
Consonni are independent as defined by Rule 10A-3 of the Securities
Exchange Act of 1934, as amended.

Item 16B.  Code of Ethics

We have adopted a
code of ethics, made up of a code of conduct, a code of ethics and our
guidelines for the treatment of confidential information, that, collectively,
constitute a code of ethics as defined in Item 16B of Form 20-F
under the Exchange Act.  Our code of ethics applies to our managing
director, to our manager of finance and to persons performing similar functions,
as well as to our directors, other officers and employees.  Our code of
ethics is available on our website at www.ducati.com. If we amend the
provisions of our code of ethics that apply to our managing director and to our
manager of finance and persons performing similar functions, or if we grant any
waiver of such provisions, we will disclose such amendment or waiver on our
website at the same address.  Information appearing on the website is not
incorporated by reference into this annual report.

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Item 16C.  Principal Accountant Fees and Services Audit and Non-Audit Fees

The following table
sets forth the fees billed to us by our independent auditors, KPMG S.p.A.
(KPMG), during the fiscal years ended December 31, 2004 and
2005:

|                   |  | Year ended   December 31, |    
|------------------ |  | ------------------------- | ---
|                   |  |                           |    
|                   |  | 2004                      |    
|                   |  |                           |    
|                   |  | (in   thousand of euro)   |    
|Audit fees         |  |                           | 513
|Audit-related fees |  |                           | 317
|Tax fees           |  |                           | 40 
|Other fees         |  |                           |   
|                   |  |                           |    
|Total   fees       |  |                           | 870

Audit fees in the
above table are the aggregate fees billed by KPMG to the various companies of
the Group in connection with the audit of our annual financial statements and
the review of our interim financial statements.  Audit-related fees in the
above table are the aggregate fees billed by KPMG for other services, primarily
provided in relation to accounting due diligence to support our evaluation of
potential acquisitions, the transition to IFRS, and the opinion we are required
by law to obtain in connection with the increase in capital relating to our
stock option plans and the Capital Increase.  Tax fees in the above table
are fees billed by KPMG for tax compliance and other tax advice.  All audit
and non-audit services were pre-approved by our internal control
committee.

Audit Committee Approval Policies and Procedures

For the appointment
of our independent auditor, as required under Italian law, our board of
directors submits a resolution to our shareholders meeting, which is
responsible for the appointment.  On May 6, 2004, our shareholders
appointed KPMG as our independent auditors for a third consecutive three-year
term.  See Item 10. Additional InformationBy-LawsExternal
Auditors.

Following the
shareholders meeting of April 10, 2006, and the entry into force of the
one-tier corporate governance system, the Management Control Committee has
replaced the internal control committee and serves as our audit committee. 
See Item 10. Additional InformationBy-LawsOne-Tier Corporate
Governance System

Item 16D.  Exemptions from the Listing Standards for Audit Committees

Not applicable.

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Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchaser

The following table
provides information on Ducatis purchases of its shares in
2005:

|2005           |  | Total   Number of   Shares   Purchased    (a) |   | Average   Price   Paid per   Share in euro   (b) |  | Total   Number of   Shares Purchased as   Part of Publicly   Announced Plans or   Programs    (c) |  | Maximum   Number of   Shares that May Yet   Be Purchased Under   the Plans or Programs   (d) |  
|-------------- |  | --------------------------------------------- | - | ------------------------------------------------ |  | ------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- | -
|               |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|January 1-31   |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|February 1-29  |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|March 1-31     |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|April 1-30     |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|May 1-31       |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|June 1-30      |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|July 1-31      |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|August 1-31    |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|September 1-30 |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|October 1-31   |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|November 1-30  |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|December 1-31  |  |                                               |   |                                                  |  |                                                                                                   |  |                                                                                              |  
|Total          |  |                                               |  |                                                  |  |                                                                                                  |  |                                                                                              | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) At a May 5, 2005, meeting, our shareholders approved a plan (the 2005
Buy Back Plan) pursuant to which, at the direction of our Managing
Director or our Manager of Finance, Investor Relations and Internal Controls,
severally, duly empowered by our board of directors, we were authorized to
repurchase on the Telematico up to 12,110,000 of our shares (representing
approximately 7.6% of our then issued and paid-in Share Capital, in order to:
retain such shares as treasury shares; transfer such shares either to
beneficiaries of the Employee Stock Ownership Plan or the 1999 Stock Option
Plan, as required thereunder; or dispose, subject to applicable law, of such
shares on the Telematico to maintain liquidity of our shares on such stock
exchange.

See Item 10.
Additional InformationBuy Back Plan.

Item 17.  Financial Statements

Not applicable.

Item 18.  Financial Statements

|Independent Auditors Report of July 7, 2006                                                              | F-1  
|--------------------------------------------------------------------------------------------------------- | -----
|Consolidated Balance Sheets as of   December 31, 2004 and 2005                                            | F-2  
|Consolidated Statements of   Operations for the years ended December 31, 2004 and 2005                    | F-3  
|Consolidated Statements of Changes of Shareholders Equity for the years
ended December 31, 2004 and 2005 | F-4  
|Consolidated Statements of Cash   Flows for the Years Ended December 31, 2004 and 2005                    | F-5  
|Notes to Consolidated Financial   Statements                                                              | F-6  
|                                                                                                          |      
|Schedules:                                                                                                |      
|                                                                                                          |      
|Schedule II  Valuation and Qualifying Accounts For the Years Ended
December 31, 2004 and 2005            | F-113

101

---



Item 19.  Exhibits

|Exhibit 
        Number |  | Description                                                                                                                                                                                                                                                 
|----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |  |                                                                                                                                                                                                                                                             
|1.1                     |  | By-laws of the Company, amended and restated as of June23, 2006 (in English translation).                                                                                                                                                                   
|                        |  |                                                                                                                                                                                                                                                             
|2.1                     |  | Deposit Agreement among Ducati Motor Holding S.p.A. and The Bank of New York, as Depositary, and the owners of American Depositary Receipts, dated March 31, 1999 (incorporated by reference to our Registration Statement on Form F-6, File No. 333-10026).

|4.1  |  | Summary in the English language of the Syndicated Loan Facility among Ducati
Motor Holding S.p.A., Ducati Corse S.r.l., UniCredit Banca Mobiliare S.p.A., as
Administrative Agent, and the lenders named therein, dated May 9, 2005, and
amended as of February 13, 2006, in the aggregate principal amount of
100,000,000.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                             
|8    |  | Subsidiaries as of the end of the year covered by this annual report:  see
Item 4. Information on the CompanyOrganizational
Structure.                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                             
|12.1 |  | Certification by Federico Minoli, Managing Director, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                             
|     |  |                                                                                                                                                                                                                                                                                                                             
|12.2 |  | Certification by Enrico DOnofrio, Manager of Finance, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                             
|13.1 |  | Certification Pursuant to Section 906 of the   Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                  

102

---



Signatures

The registrant
hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.

| |  | DUCATI MOTOR HOLDING S.P.A.
| |  | ---------------------------
| |  |                            
| |  | /s/ Federico Minoli        
| |  |                            
| |  | Federico Minoli            
| |  | Managing Director          
| |  |                            
| |  |                            
| |  | /s/ Enrico DOnofrio       
| |  |                            
| |  | Enrico DOnofrio           
| |  | Manager of Finance         
| |  |                            
| |  |                            
| |  | Date:  July 14, 2006       

103

---



Report of Independent Registered Public Accounting Firm

To the Shareholders of

Ducati Motor Holding S.p.A.

We have audited the accompanying consolidated balance sheets of Ducati Motor Holding S.p.A. and subsidiaries (the Ducati Group) at December 31, 2005 and 2004, and the related consolidated statements of income, shareholders equity and cash flows for each of the years in the two year period ended December 31, 2005. In connection with our audits of the consolidated financial statements, we have also audited the related financial statement schedule (Schedule II  Valuation and Qualifying Accounts). These consolidated financial statements and the financial statement schedule are the responsibility of the management of Ducati Motor Holding S.p.A. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ducati Motor Holding S.p.A. and subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the two year period ended December 31, 2005 in conformity with International Financial Reporting Standards as adopted by the European Union. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 37 to the consolidated financial statements, in 2005 the Ducati Group changed its basis of accounting from accounting principles generally accepted in Italy to International Financial Reporting Standards as adopted by the European Union.

International Financial Reporting Standards as adopted by the European Union vary in certain respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Notes 38, 39 and 40 to the consolidated financial statements.

/s/ KPMG S.p.A.

Bologna, Italy

July 7, 2006

F-1

---



Ducati Motor Holding S.p.A. and subsidiaries Consolidated Balance Sheets(expressed in  000)

|                                                         |  | Notes |    | Year ended   December 31,   2005 |  | Year ended   December 31,   2004 |  
|-------------------------------------------------------- |  | ----- | -- | -------------------------------- |  | -------------------------------- | -
|                                                         |  |       |    |                                  |  |                                  |  
|Current assets                                           |  |       |    |                                  |  |                                  |  
|Cash   and cash equivalents                              |  |       | 16 |                                  |  | 53,017                           |  
|Accounts   receivable, net                               |  |       | 2  |                                  |  | 102,232                          |  
|Inventories,   net                                       |  |       | 3  |                                  |  | 81,380                           |  
|Other   current assets                                   |  |       | 4  |                                  |  | 9,217                            |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total current assets                                     |  |       |    |                                  |  | 245,846                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Non-current assets                                       |  |       |    |                                  |  |                                  |  
|Property,   plant and equipment, net                     |  |       | 5  |                                  |  | 66,556                           |  
|Goodwill   and intangible assets with an indefinite life |  |       | 6  |                                  |  | 86,050                           |  
|Other   intangible assets, net                           |  |       | 7  |                                  |  | 39,665                           |  
|Equity   investments                                     |  |       | 8  |                                  |  | 20                               |  
|Deferred   income tax assets                             |  |       | 9  |                                  |  | 24,662                           |  
|Other   non-current assets                               |  |       |    |                                  |  | 386                              |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total non-current assets                                 |  |       |    |                                  |  | 217,339                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total assets                                             |  |       |    |                                  |  | 463,185                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Current liabilities                                      |  |       |    |                                  |  |                                  |  
|Short   term bank borrowings                             |  |       | 16 |                                  |  | 64,148                           |  
|Accounts   payable                                       |  |       | 10 |                                  |  | 85,203                           |  
|Income   and other taxes payable                         |  |       | 11 |                                  |  | 5,537                            |  
|Other   current liabilities                              |  |       | 12 |                                  |  | 20,202                           |  
|Provisions   for risks and charges - current portion     |  |       | 13 |                                  |  | 18,621                           |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total current liabilities                                |  |       |    |                                  |  | 193,711                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Long-term liabilities                                    |  |       |    |                                  |  |                                  |  
|Long-term   debt, net of current portion                 |  |       | 16 |                                  |  | 125,824                          |  
|Employees   leaving entitlements                        |  |       | 14 |                                  |  | 9,669                            |  
|Deferred   income taxes                                  |  |       | 15 |                                  |  | 13,697                           |  
|Income   and other taxes payable                         |  |       | 11 |                                  |  |                                 |  
|Provisions   for risks and charges - long-term portion   |  |       | 13 |                                  |  | 1,525                            |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total long-term liabilities                              |  |       |    |                                  |  | 150,715                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total liabilities                                        |  |       |    |                                  |  | 344,426                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Shareholders equity                                     |  |       | 17 |                                  |  |                                  |  
|Share   capital                                          |  |       |    |                                  |  | 82,867                           |  
|Reserves                                                 |  |       |    |                                  |  | 75,559                           |  
|Retained   earnings (losses)                             |  |       |    |                                  |  | 1,780                            |  
|Profit   (loss) for the period                           |  |       |    |                                  |  | (41,464                          | )
|                                                         |  |       |    |                                  |  |                                  |  
|Total shareholders equity attributable to the Group     |  |       |    |                                  |  | 118,742                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Shareholders equity attributable to minority interest   |  |       |    |                                  |  | 17                               |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total shareholders equity                               |  |       |    |                                  |  | 118,759                          |  
|                                                         |  |       |    |                                  |  |                                  |  
|Total liabilities and shareholders equity               |  |       |    |                                  |  | 463,185                          |  
|                                                         |  |       |    |                                  |  |                                  |  

See accompanying notes to consolidated financial statements

F-2

---



Ducati Motor Holding S.p.A. and subsidiaries Consolidated Statements of Income(expressed in  000, except per share data which is stated in )

|                                                      |  | Note |    | Year ended   December 31,   2005 |  | Year ended   December 31,   2004 |  
|----------------------------------------------------- |  | ---- | -- | -------------------------------- |  | -------------------------------- | -
|                                                      |  |      |    |                                  |  |                                  |  
|Revenues                                              |  |      | 22 |                                  |  | 320,847                          |  
|Cost   of sales                                       |  |      | 23 |                                  |  | (262,392                         | )
|                                                      |  |      |    |                                  |  |                                  |  
|Gross   profit                                        |  |      |    |                                  |  | 58,455                           |  
|Other   income                                        |  |      | 25 |                                  |  | 34,184                           |  
|Distribution   costs                                  |  |      | 26 |                                  |  | (89,443                          | )
|General   and administrative expenses                 |  |      | 27 |                                  |  | (21,855                          | )
|Other   expenses                                      |  |      |    |                                  |  | (1,978                           | )
|Restructuring   reserve                               |  |      | 13 |                                  |  | (13,000                          | )
|                                                      |  |      |    |                                  |  |                                  |  
|Operating   profit (loss)                             |  |      |    |                                  |  | (33,637                          | )
|Interest   income                                     |  |      | 28 |                                  |  | 3,242                            |  
|Interest   expense                                    |  |      | 29 |                                  |  | (9,366                           | )
|Foreign   exchange gain (loss), net                   |  |      | 30 |                                  |  | (1,191                           | )
|                                                      |  |      |    |                                  |  |                                  |  
|Profit   (loss) before income taxes                   |  |      |    |                                  |  | (40,952                          | )
|Income   taxes                                        |  |      | 31 |                                  |  | (511                             | )
|                                                      |  |      |    |                                  |  |                                  |  
|Net   profit (loss)                                   |  |      |    |                                  |  | (41,463                          | )
|Net   profit (loss) attributable to minority interest |  |      |    |                                  |  | (1                               | )
|                                                      |  |      |    |                                  |  |                                  |  
|Net   profit (loss) attributable to the Group         |  |      |    |                                  |  | (41,464                          | )
|Net   profit (loss) per share, basic                  |  |      |    |                                  |  | (0.26                            | )
|Net   profit (loss) per share, diluted                |  |      |    |                                  |  | (0.26                            | )
|Number   of shares outstanding                        |  |      |    |                                  |  | 159,360,037                      |  

See accompanying notes to consolidated financial statements

F-3

---



Ducati Motor Holding S.p.A. and subsidiaries Consolidated Statements of Shareholders Equityfor the years ended December 31, 2005 and 2004(expressed in  000, except share data which is stated in number of shares)

|                                                                          |  | Shares   Number |         | issued   Amount |        | Share   premium |  | Transition   reserve to   IFRS |        | Cumulative translation adjustment |       | Reserve  for own shares |  | Other   reserves |       | Retained   earnings   (losses) |       | Total  |   | Minority   interest |       | Total   Shareholders    equity |        
|------------------------------------------------------------------------- |  | --------------- | ------- | --------------- | ------ | --------------- |  | ------------------------------ | ------ | --------------------------------- | ----- | ----------------------- |  | ---------------- | ----- | ------------------------------ | ----- | ------ | - | ------------------- | ----- | ------------------------------- | -------
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Balance at December 31, 2003 in   accordance with Italian GAAP            |  | 158,500,963     |         |                 | 82,420 |                 |  | 19,488                         |        |                                   |      |                         |  | 534              |       |                                | 391   |        |   | 49,518              |       |                                 | 6,048  
|Adoption of IFRS January 1, 2004                                          |  |                 |        |                 |        |                |  |                                |       |                                   |       | 3,577                   |  |                  | (534  | )                              |       |       |   |                     | -3    |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Balance at December 31, 2003 in   accordance with IFRS                    |  | 158,500,963     |         |                 | 82,420 |                 |  | 19,488                         |        |                                   | 3,577 |                         |  |                 |       |                                | 391   |        |   | 49,515              |       |                                 | 6,051  
|(Note 37)                                                                 |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Changes in shareholders equity   during 2004:                            |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Loss of the year                                                          |  |                 |        |                 |        |                |  |                                |       |                                   |       |                        |  |                  |      |                                |       |       |   |                     |      |                                 |        
|Items recognized directly in equity                                       |  |                 |        |                 |        |                |  |                                | (2,892 | )                                 |       |                        |  |                  | (989  | )                              |       | 2,892  |   |                     |      |                                 |        
|Other                                                                     |  |                 |        |                 |        |                |  |                                | (1     | )                                 |       | 1                       |  |                  |      |                                |       |       |   |                     |      |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Total changes in shareholders   equity due to operations                 |  |                 |        |                 |        |                |  |                                | (2,893 | )                                 |       | 1                       |  |                  | (989  | )                              |       | 2,892  |   |                     |      |                                 |        
|Increase in capital                                                       |  |                 | 325,444 |                 |        | 170             |  |                                | 66     |                                   |       |                        |  |                  |      |                                |       |        |   |                     |      |                                 |        
|Stock option compensation                                                 |  |                 |        |                 |        |                |  |                                |       |                                   |       |                        |  |                  |      |                                |       |       |   |                     | 558   |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Total changes in shareholders   equity attributable to equity holders    |  |                 | 325,444 |                 |        | 170             |  |                                | 66     |                                   |       | 0                       |  |                  | 0     |                                |       | 0      |   |                     | 558   |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Balance at December 31, 2004                                              |  | 158,826,407     |         |                 | 82,590 |                 |  | 16,661                         |        |                                   | 3,578 |                         |  | (989             | )     |                                | 3,283 |        |   | 50,073              |       |                                 | 2,582  
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|(note 37)                                                                 |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Adoption of IAS 32,39 at January 1, 2005                                  |  |                 |        |                 |        |                |  |                                |       |                                   |       | 64                      |  |                  |      |                                |       | (3,283 | ) |                     |      |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Balance at January 1, 2005                                                |  | 158,826,407     |         |                 | 82,590 |                 |  | 16,661                         |        |                                   | 3,642 |                         |  | (989             | )     |                                |      |        |   | 50,073              |       |                                 | 2,582  
|Changes in shareholders equity   during 2005:                            |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Allocation of result of the year 2004                                     |  |                 |        |                 |        |                 |  |                                |       |                                   |       |                        |  |                  |      |                                |       |       |   |                     | 802   |                                 |        
|Loss of the year                                                          |  |                 |        |                 |        |                |  |                                |       |                                   |       |                        |  |                  |      |                                |       |       |   |                     |      |                                 |        
|Items recognized directly in equity                                       |  |                 |        |                 |        |                |  |                                | 2,225  |                                   |       |                        |  |                  | 1,799 |                                |       |       |   |                     |      |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Total changes in   shareholders  equity due to   operations              |  |                 |        |                 |        |                |  |                                | 2,225  |                                   |       |                        |  |                  | 1,799 |                                |       |       |   |                     | 802   |                                 |        
|Increase in capital                                                       |  |                 | 533,630 |                 |        | 277             |  |                                | 108    |                                   |       |                        |  |                  |      |                                |       |       |   |                     |      |                                 |        
|Stock option compensation                                                 |  |                 |        |                 |        |                |  |                                |       |                                   |       |                        |  |                  |      |                                |       |       |   |                     | 1,238 |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Total changes in   shareholders  equity attributable to   equity holders |  |                 | 533,630 |                 |        | 277             |  |                                | 108    |                                   |       |                        |  |                  |      |                                |       |       |   |                     | 1,238 |                                 |        
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        
|Balance at December 31, 2005                                              |  | 159,360,037     |         |                 | 82,867 |                 |  | 18,994                         |        |                                   | 3,642 |                         |  | 810              |       |                                |      |        |   | 52,113              |       |                                 | (39,684
|                                                                          |  |                 |         |                 |        |                 |  |                                |        |                                   |       |                         |  |                  |       |                                |       |        |   |                     |       |                                 |        

See accompanying notes to consolidated financial statements.

F-4

---



Ducati Motor Holding S.p.A. and subsidiaries Consolidated Statements of Cash Flows(expressed in  000)

|                                                                                                      |                                           | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 |  
|----------------------------------------------------------------------------------------------------- | ----------------------------------------- | -------------------------------- | ------- | -------------------------------- | -
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow form operating activities                                                                   |                                           |                                  |         |                                  |  
|Net   profit (loss)                                                                                   |                                           |                                  | (41,464 | )                                |  
|Adjustment   to reconcile net profit (loss) to net cash provided by (used in) operating   activities: |                                           |                                  |         |                                  |  
|-                                                                                                     | Non-cash   items for stock options        |                                  |         | 1,238                            |  
|-                                                                                                     | Foreign   exchange translation adjustment |                                  |         | 1,799                            |  
|-                                                                                                     | Depreciation   and amortisation           |                                  |         | 24,094                           |  
|-                                                                                                     | Write   down of intangible assets         |                                  |         | 9,270                            |  
|-                                                                                                     | Income   taxes paid                       |                                  |         | (4,230                           | )
|Changes   in operating assets and liabilities:                                                        |                                           |                                  |         |                                  |  
|-                                                                                                     | Working   capital                         |                                  |         | 35,043                           |  
|-                                                                                                     | Other   current assets                    |                                  |         | 1,570                            |  
|-                                                                                                     | Other   current liabilities               |                                  |         | 4,266                            |  
|-                                                                                                     | Other   payable to tax authorities        |                                  |         | 177                              |  
|-                                                                                                     | Deferred   tax assets                     |                                  |         | (2,997                           | )
|-                                                                                                     | Deferred   tax liabilities                |                                  |         | 1,490                            |  
|-                                                                                                     | Employees   leaving entitlement          |                                  |         | 1,187                            |  
|-                                                                                                     | Provisions   for risks and charges        |                                  |         | 757                              |  
|-                                                                                                     | Restructuring   Reserve                   |                                  |         | 13,000                           |  
|-                                                                                                     | Other   changes                           |                                  |         | (3,219                           | )
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow provided by operating activities (A)                                                        |                                           |                                  | 41,981  |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow provided by (used in)  investing activities                                                 |                                           |                                  |         |                                  |  
|Purchase   of property, plant and equipment                                                           |                                           |                                  | (10,928 | )                                |  
|Purchase   of intangible fixed assets                                                                 |                                           |                                  | (20,455 | )                                |  
|Disposals   of property, plant and equipment                                                          |                                           |                                  | 354     |                                  |  
|Disposals   of other long-term assets                                                                 |                                           |                                  | 17      |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow used in investing activities (B)                                                            |                                           |                                  | (31,012 | )                                |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow from operating activities, net of cash used in   investing activities (A-B)                 |                                           |                                  | 10,969  |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow from financing activities                                                                   |                                           |                                  |         |                                  |  
|Syndicated   loan                                                                                     |                                           |                                  | 62,123  |                                  |  
|Increase   (decrease) in other long term debts                                                        |                                           |                                  | (81     | )                                |  
|Bond   repayment                                                                                      |                                           |                                  | (54,164 | )                                |  
|Credit   link cashed                                                                                  |                                           |                                  | 15,000  |                                  |  
|Increase   (decrease) in other short-term borrowings                                                  |                                           |                                  | (30,711 | )                                |  
|Interest   paid                                                                                       |                                           |                                  | (3,358  | )                                |  
|Interest   received                                                                                   |                                           |                                  | 1,301   |                                  |  
|Changes   in minority interest                                                                        |                                           |                                  | 1       |                                  |  
|Increase   in share capital and reserves                                                              |                                           |                                  | 2,610   |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash flow provided (used) by financing activities                                                     |                                           |                                  | (7,279  | )                                |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Net increase (decrease) in cash and cash equivalents                                                  |                                           |                                  | 3,690   |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash and cash equivalents at beginning of year                                                        |                                           |                                  | 49,327  |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  
|Cash and cash equivalents at end of year                                                              |                                           |                                  | 53,017  |                                  |  
|                                                                                                      |                                           |                                  |         |                                  |  

See accompanying notes to consolidated financial statements

F-5

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Ducati Motor Holding S.p.A. and subsidiaries

Notes to consolidated financial statements

1. Organization and summary of significant accounting policies

Ducati Motor Holding S.p.A. (the Company) is a limited liability share capital company registered in Italy.

Ducati Motor Holding S.p.A. and subsidiaries (Ducati or the Group) operate in more than 8 countries and are engaged in the production and sale of motorcycles, spare parts, accessories and clothing under the Ducati brand name. The Company is based in Bologna (Italy).

Ducati Motor Holding S.p.A. was incorporated as TPG S.p.A. on May 29, 1996 to acquire the Ducati motorcycles business (the Predecessor Business) in a leverage buyout. The Ducati motorcycle business had been previously carried out by certain subsidiaries of Cagiva S.p.A. (Cagiva Group).

On July 25 and September 26, 1996, the Company entered into certain agreements with Cagiva Group to acquire the Predecessor Business (the Acquisition) for consideration of both cash and 49% of the share capital of Holding (6,860,000 ordinary shares, without giving effect to the subsequent share split, with a nominal value of  35,429 thousand). The Acquisition was accounted for as a purchase. Accordingly, the purchase consideration was allocated to the assets acquired and the liabilities assumed based on their fair values as determined by a court appointed expert. The excess of the purchase consideration (excluding incidental acquisition costs) over the fair value of the net assets acquired, as calculated under Italian GAAP, was allocated, first, to identifiable intangible assets (trademark and the Cagiva Group agreement not to compete) with the remainder to goodwill. The allocation of the total purchase consideration was as
follows (in thousand of Euro):

|                                                         |  | Initial |         | Adjustments |  | Total   |  
|-------------------------------------------------------- |  | ------- | ------- | ----------- |  | ------- | -
|                                                         |  |         |         |             |  |         |  
|Book value of liabilities in excess of assets   acquired |  |         | (39,020 | )           |  |        |  
|Adjustments:                                             |  |         |         |             |  |         |  
|- Property, plant and equipment                          |  |         | 19,847  |             |  |        |  
|- Ducati trademark                                     |  |         | 99,263  |             |  | 12,911  |  
|- Other intangible assets, principally goodwill          |  |         | 20,475  |             |  | (2,034  | )
|Total adjustments                                        |  |         | 139,585 |             |  | 10,877  |  
|Amounts owed to Cagiva Group, settled subsequently       |  |         | (65,136 | )           |  | (10,877 | )
|Ordinary shares issued as consideration (thousand)       |  |         | 68,600  |             |  |        |  

On July 30, 1998, the majority shareholders and other parties acquired the 49% interest held by Cagiva Group. Concurrent with this transaction, the Company entered into certain agreements with the Cagiva Group which provided for, among other matters, the release of the cash held in escrow ( 16,527 thousand) and the settlement of a contingent payment due to Cagiva Group ( 12,911 thousand) and amounts owed to the Company for the purchase price adjustment and other claims under the representation and warranty provisions of the acquisition agreements ( 4,395 thousand).

F-6

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In connection with a re-organization of the Ducati distributorships and in addition to Ducati North America Inc. already existing at the time of the acquisition, certain subsidiaries were incorporated (Ducati Motor Deutschland GmbH and Ducati France S.A.S. during 1997, Ducati Japan KK and Ducati North Europe B.V. during 1998 and Ducati U.K. Limited during 1999), to manage distribution directly in those markets, when the distributorship rights and inventories were acquired from the third party distributors; these subsidiaries are all wholly owned. Another subsidiary, Ducati Corse S.r.l., currently 100% owned, was formed in 1998 to manage motor racing activity.

Considering the new opportunities offered by the Internet and the success of the MH900 Evoluzione, on July 14, 2000, the Company incorporated a new subsidiary, Ducati.Com S.r.l., merged in 2004 into Ducati Motor Holding S.p.A. The sole director was Federico Minoli.

On April 14, 2004, Ducati Retail S.r.l. was incorporated, and capital quotas were held 99% by Ducati Motor Holding S.p.A. and 1% by third parties. This new subsidiary is responsible for the retail sales of Ducati products in areas not served by the established distribution network. The activity principally consists in selling motorcycles used by journalists at shows and trade fairs, as well as the retailing of clothes and accessories in the shop located at Bologna airport.

On  May  6,  2004, Ducati Consulting S.r.l. was incorporated,  and capital quotas were held 85% by Ducati Motor Holding S.p.A. and 15% by third parties. This new subsidiary provides consultancy and logistic services to all businesses within the Ducati Group, as well as to their suppliers and third parties in general.

The consolidated financial statements as of December 31, 2005 and 2004 include the financial statements of Ducati Motor Holding S.p.A. and the following subsidiary companies:

|                                |  |          |                      |                 |  |          |  | % held |     | % held by Group   | 
|------------------------------- |  | -------- | -------------------- | --------------- |  | -------- |  | ------ | --- | ----------------- | 
|                                |  |          |                      |                 |  |          |  |        |     |                   | 
|Company                         |  | Location |                      | Share   Capital |  | directly |  | ind.   |     | December
31, 2005 | 
|                                |  |          |                      |                 |  |          |  |        |     |                   | 
|                                |  |          |                      |                 |  |  000    |  |        |     |                   | 
|Ducati Deutschland G.m.b.H.     |  |          | Cologne (D)          |                 |  | 256      |  |        | 100 | %                 | 
|Ducati France S.A.S.            |  |          | Paris (F)            |                 |  | 605      |  |        | 100 | %                 | 
|Ducati Japan K.K.               |  |          | Tokyo (J)            |                 |  | 134      |  |        | 100 | %                 | 
|Ducati North Europe B.V.        |  |          | The Hague (N)        |                 |  | 19       |  |        | 100 | %                 | 
|Ducati U.K. Limited             |  |          | Milton Keynes (U.K.) |                 |  | 79       |  |        | 100 | %                 | 
|Ducati North America Inc.       |  |          | Cupertino   (USA)    |                 |  | 352      |  |        | 100 | %                 | 
|Ducati   Corse S.r.l.           |  |          | Bologna   (I)        |                 |  | 15,000   |  |        | 100 | %                 | 
|Ducati   Retail S.r.l.          |  |          | Bologna   (I)        |                 |  | 110      |  |        | 99  | %                 | 
|Ducati   Consulting S.r.l.      |  |          | Bologna   (I)        |                 |  | 100      |  |        | 85  | %                 | 
|Ducati   Desmo Finance 1 S.r.l. |  |          | Conegliano (I)       |                 |  | 10       |  |        |    |                   | 

The share capital of Ducati Japan K.K., Ducati North America Inc. and Ducati U.K. Limited has been translated to euro using the historical exchange rates.

There were no changes in the area of consolidation in 2005 with respect to 2004.

F-7

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Ducati Desmo Finance 1 S.r.l. has been included within the scope of consolidation in accordance with SIC 12, for the reasons described in notes (1.b.i) and (1.c.viii), even though the Group has no equity interest in this company or any legal right of control.

1.a Principles of preparation

European Parliament and Commission Regulation EC 1606/2002 of July 19, 2002 has come into force and, effective from 2005, companies listed on a regulated market within the European Union must, for the first time, prepare consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and endorsed by the European Commission.

The consolidated financial statements as of December 31, 2005 have therefore been prepared in accordance with the IFRS in force at the balance sheet date, issued by the International Accounting Standards Board and adopted by the European Commission. The IFRS include all the revised International Accounting Standards (IAS) and all the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), which was previously known as the Standing Interpretations Committee (SIC). As of December 31, 2005 and 2004, the Groups consolidated financial statements would not have had a material effect if presented under IFRS as issued by the IASB.

Up to and including the year ended December 31, 2004, the consolidated financial statements of the Group were prepared in accordance with the principles required by Italian statutory regulations, as interpreted and integrated by the accounting standards issued by the Italian Accounting Profession and the documents issued by the O.I.C. (Italian Accounting Board) or, in the absence thereof, by the International Accounting Standards Board (collectively defined as Italian GAAP).

Preparation of the consolidated financial statements as of December 31, 2005 in accordance with IFRS has involved a change in accounting policies with respect to those used to prepare the consolidated financial statements in accordance with Italian GAAP.

The Group, in order to ensure comparability with the prior year, has also prepared the document Appendix  Transition to International Accounting Standards (IFRS), as required by IFRS 1 First-Time Adoption of International Financial Reporting Standards, which describes the methodology applied and quantifies the effects of the transition to IFRS on the consolidated financial statements as of December 31, 2004 prepared under Italian GAAP; this document is presented in note 37.

These information, required by Consob decision 14490 dated April 14, 2005, were also included in the Half-Yearly Report as of June 30, 2005, in the discussion document Appendix  Transition to International Accounting Standards (IFRS), which includes:

|- | a   description of the accounting policies adopted by the Ducati Group as from   January 1, 2004;                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                             
|- | the approach to and   quantification of the effects of the transition to IFRS on the consolidated   financial statements as of December 31, 2004, with respect to the financial   statements previously prepared under Italian GAAP, as a consequence of the   application of IFRS 1 (First-Time Adoption of International Financial   Reporting Standards).

In order to improve the presentation, certain reclassifications to the consolidated statement of income for the year ended December 31, 2004 included in the discussion document Appendix  Transition to International Accounting Standards (IFRS) attached to the Half-Yearly Report as of June 30, 2005, have been made, which had no effect on net loss for the period, as described below:

F-8

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|- | reduction of other income and cost of sales   for  2,776 thousand, including costs of  1,430 thousand recharged to   suppliers which represent, in substance, an adjustment to the costs   originally incurred, and other classification improvements for  1,346   thousand;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                
|- | reduction of other income and distribution   costs by  39 thousand;                                                                                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                
|- | reduction of other income and general and   administrative expenses by  114 thousand.                                                                                                                                                                                         

In addition, although the IFRS do not specifically cover the classification of dealer incentives (essentially based on volume sold), these costs, amounting to  17,898 thousand as of December 31, 2004, have been classified as a reduction of revenues rather than as distribution costs, having regard for the approach taken by other companies operating in the automotive sector upon transition to IFRS. The above mentioned reclassifications had no effect on the net result for the year ended December 31, 2004.

The accounting policies adopted for the preparation of the consolidated financial statements as of  December 31, 2005 have also been applied on a consistent basis to the consolidated financial statements as of December 31, 2004, presented for comparative purposes, and to the opening consolidated balance sheet as of January 1, 2004 (prepared for the transition to IFRS as requested by IFRS 1), with the sole exception of the retrospective application of IAS 32 and IAS 39 relating, in particular, to financial instruments (exchange and interest-rate hedges, own shares and loan-arrangement costs), the effects of which have been recognised starting from January 1, 2005, as allowed by IFRS 1.

The accounting policies have been applied on a consistent basis by all Group companies.

The consolidated financial statements as of December 31, 2005 and 2004 have been prepared on an historical cost basis, except with regard to the following assets and liabilities: derivative financial instruments stated at their fair value as of December 31, 2005, buildings valued at deemed cost and other financial assets and equity investments stated at their fair value.

The Group has reported a significant loss of  41.5 million in 2005 and net financial indebtedness as of December 31, 2005 is approximately 1.15 times shareholders equity.

In view of recent market developments and these unsatisfactory results, management has prepared during the last months of 2005 a plan for the period 2006-2010; this plan was presented to the Companys Board of Directors on December 16, 2005. The principal objective of this plan is to improve margins and cash generation, rather than pursuing an aggressive sales growth policy, by repositioning towards the models at the top end of the range, which provide higher margins, while also working to reduce overhead costs. Management believes that the Group has the ability to compete successfully at the top end of the market, although modified competitive and market conditions require plans for a reduced presence at lower levels.

The plan forecasts a further loss in 2006, a breakeven position in 2007 and a return to profitability from 2008 onwards. In order to achieve this objective, it will be necessary to obtain additional financial resources via an increase in share capital by  80.0 million, and to produce new top-end models from 2007.

At the meeting held on December 16, 2005, the Board of Directors decided and communicated to the market:

F-9

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|- | to call for an Extraordinary Shareholders Meeting   to examine a proposal to authorise the Board of Directors to increase share   capital for cash on one or more occasions over a period of five years, by a   maximum of Euro 80.0 million, via the issue of ordinary shares of the Company   carrying the same rights as those already in circulation, to be offered first   to existing shareholders. The Extraordinary Shareholders Meeting held on   January 26, 2006 approved the Boards proposal;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | to record in the consolidated financial statements   as of December 31, 2005 a provision for restructuring totalling  13.0   million, in order to facilitate a reduction in the motorcycle inventories   held by the network of dealers and to modify and improve the Groups   organisational structure.                                                                                                                                                                                                  

As a consequence of the forecasted results for the year 2005, certain financial covenants indicated by the loan contract for  100.0 million signed in May 2005 (note 16) could have been breached. Failure to comply with these covenants could have given the financial institutions the right to request repayment of the loan. The Lead Bank agreed before year end on a period of grace to rectify the possible breach and during which immediate repayment cannot be demanded.

In addition, on December 16, 2005, in light of the above mentioned plan 2006-2010 and of the possible change of the major shareholder of the Company, management informed the financial institutions involved in the loan contract about the main features of the plan that could impact the contract loan, and certain changes in the financial covenants and other conditions in order to align them with the new plan, including the possible change in the major shareholder of the Company and the fact that the financial covenants should take into account that the Group, starting from 2005, will prepare its consolidated financial statements under IFRS instead of under Italian GAAP.

Agreement from the Lead Bank and the Financing Banks to the proposed changes was received on February 13, 2006. This agreement is subject to completion of the following:

| | (a) | purchase by Investindustrial Holdings S.A. of a 30%   interest, less one share, in the share capital of Ducati Motor Holding   S.p.A.;                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (b) | acceptance by Investindustrial Holdings S.A. of a   commitment to take up its option rights arising under the terms of the Offer,   as defined below;                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (c) | formal approval by Unicredit Banca Mobiliare S.p.A.   (UBM), no later than May 31, 2006, of an underwriting contract intended to   guarantee and/or obtain guarantees for the successful outcome of the share   capital increase for cash totalling  80 million, to be offered under option   to existing shareholders, which will be authorised by Ducati Motor Holding   S.p.A. (the Offer) net of the commitment to take up all the option rights   directly or indirectly available to Investindustrial Holdings S.A.

On March 1, 2006, Texas Pacific Group (TPG) and Investindustrial Holdings S.A. made separate press releases to announce signature of the final agreement for the purchase by Investindustrial Holdings S.A. from TPG of 30% less one share of the share capital of Ducati Motor Holding S.p.A. (without taking account of any own shares held by Ducati Motor Holding S.p.A.). As explained in the above press releases from TPG and Investindustrial Holdings S.A., the transaction was due to be completed during March 2006, subject to: (i) approval from the German anti-trust authorities, (ii) the absence  between  the date of signing and the date of completing the transaction  of events with a significant adverse effect on the activities of Ducati or actions that prevent the closing, and (iii) the non-withdrawal, or the absence of significantly worse terms and conditions, of the consent given by the
banks pool leader and the financing banks to the proposals presented by Ducati Motor Holding S.p.A. or make modifications and allow exceptions to the May 2005 loan contract.

F-10

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The completion of the transaction between TPG and Investindustrial Holdings S.A. is also subject to the maintenance, or absence of changes unfavourable to Ducati Motor Holding S.p.A., of the loan contract signed on February 23, 2006 (and communicated to the market by a press release on March 1, 2006), whereby Ducati has obtained a new line of credit of  35 million from Unicredit Banca DImpresa, for a guaranteed period of 5 years, and to the arrangement by Ducati Motor Holding S.p.A. of one or more additional loan contracts totalling  25 million on terms and conditions that are essentially not less favourable to Ducati than those applying to the above loan agreement for  35 million. In this regard, negotiations are currently in progress with other banks to obtain this
additional loan of  25 million.

As communicated in the above press release from Investindustrial Holdings S.A. on March 1, 2006, the transaction also envisages that Investindustrial Holdings S.A. will exercise its option rights to subscribe the planned share capital increase by a maximum of  80 million. With reference to the Offer, UBM signed a preliminary agreement with Ducati Motor Holding S.p.A. and Investindustrial Holdings S.A. on February 28, 2006, effective until May 31, 2006, to underwrite the issue and subscribe for any shares that are not exercised in the context of the Offer (after the exercise in full of the option rights due to Investindustrial Holdings S.A. on completion of the acquisition).

See also note 36 for significant events subsequent to December 31, 2005.

In view of the change in Group strategy to focus on top-end models, the plan referred to above has resulted in the following provisions and write-downs being recorded in the consolidated financial statements as of December 31, 2005, with a significant impact on the results for the year:

|                                                             |  | Effect on ( million) |     
|------------------------------------------------------------ |  | --------------------- | ----
|                                                             |  |                       |     
|                                                             |  | Gross   profit        |     
|                                                             |  |                       |     
|Provision for restructuring (note 13)                        |  |                       |    
|Write-down of capitalised development projects (note   7)    |  |                       | 9.3 
|Write-down of inventories (note 3)                           |  |                       | 5.0 
|Supplier penalties for cancelling orders (notes 13   and 23) |  |                       | 0.9 
|                                                             |  |                       |     
|Total effect                                                 |  |                       | 15.2

The consolidated financial statements as of December 31, 2005 have been prepared on a going-concern basis since management believes that the plan prepared for the period 2006-2010 will allow the Group to return to financial balance and satisfactory economic results; management believes that the Ducati Group has the potential to compete at the top-end of the market.

1.b  Principles of consolidation

(b.i) Subsidiaries

Subsidiaries are companies over which the Group exercises control and are consolidated on a line-by-line basis. Such control exists when the Group has the power, directly or indirectly, to determine the financial and operating policies of a company in order to benefit from its activities. Ducati Desmo Finance 1 S.r.l., the special-purpose entity incorporated specifically for the securitisation transaction arranged in accordance with Law 130/99 and described in note 21, has been consolidated since, as established by SIC-12  Consolidation  Special Purpose Entities (SPE), subscription by the seller for asset-backed junior securities results, in substance, in the acquisition of control over the SPE.

F-11

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When businesses are acquired, their identifiable assets, liabilities and contingent liabilities are recorded at the fair value at the time of acquisition. The positive difference between purchase cost and the Groups interest in the fair value of such assets and liabilities is recorded in the balance sheet and classified as goodwill. Any negative difference (negative goodwill) is credited to the statement of income at the time of acquisition.

The financial statements of subsidiaries are included in the consolidated financial statements from the time that control is established until the moment in which such control ceases to exist. Minority interests in shareholders equity and net results are classified separately in the consolidated balance sheet and statement of income.

All Group companies close their statutory accounts at 31 December.

(b.ii) Associated companies and companies under joint control

The Group does not hold any equity interests in associated companies or companies under joint control.

(b.iii) Transactions eliminated on consolidation

All balances and transactions between Group companies, including revenues, costs and dividends, are eliminated on consolidation together with any unrealised profits and losses on intercompany transactions. Unrealised gains and losses arising from transactions with consolidated companies are eliminated in proportion to the Groups equity interest in such companies.

(b.iv) Consolidation of foreign subsidiaries

The financial statements of Ducati North America Inc., Ducati Japan K.K. and Ducati U.K. Ltd, are prepared in dollars, yen and pounds sterling, respectively. These statements are translated using the year-end exchange rates for assets and liabilities and the transaction-date exchange rates for the statement of income.  For practical reasons, the statement of income is translated using the average rates for the period, if this does not result in significant differences with respect to using the transaction-date exchange rates. The resulting translation differences are reflected in the Cumulative translation adjustment within consolidated shareholders equity. If an equity investment is sold, the related cumulative translation adjustment is released to the statement of income. Goodwill and adjustments to the fair value identified on the acquisition of a foreign company are recorded in the currency concerned and translated using the year-end
exchange rate.

The following exchange rates have been applied:

|             |  | December 31, 2005 |        | December 31, 2004 | 
|------------ |  | ----------------- | ------ | ----------------- | 
|             |  |                   |        |                   | 
|Currency     |  | year end          |        | average           | 
|             |  |                   |        |                   | 
|US dollar    |  |                   | 1.1797 |                   | 
|Japanese yen |  |                   | 138.9  |                   | 
|UK pound     |  |                   | 0.6853 |                   | 

F-12

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On the first-time adoption of IFRS, the cumulative translation adjustments arising from the consolidation of foreign companies located outside of the Euro area were eliminated, as allowed by IFRS 1 (IFRS 1.21); accordingly, the gains or losses deriving from the subsequent sale of such companies will only include the translation adjustments generated subsequent to January 1, 2004.

1.cSignificantaccounting policies

(c.i) Foreign currency transactions

Transactions in foreign currencies are recorded initially using the exchange rates of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated using the exchange rates applying on that date. The foreign exchange differences arising on the settlement of monetary items, or on their translation using rates other than those used at the time they were initially recorded in the current or prior years, are reflected in the statement of income. Non-monetary foreign currency items stated at historical cost are translated using the exchange rates applying at the time the related transactions were initially recorded. Non-monetary foreign currency items stated at fair value are translated using the exchange rates applying at the time such values were determined.

(c.ii) Own shares

Starting from January 1, 2005, own shares are recorded as a deduction from shareholders equity, as required by IAS 32.  This deduction is based on their market value at the time of acquisition, determined with reference to the stock market price for the shares. Revenues deriving from any subsequent sales are recorded as changes in shareholders equity.

Given that the Ducati Group has applied IAS 32 with effect from January 1, 2005, the own shares held as of December 31, 2004 have been classified in accordance with the previous Italian GAAP as assets in the Cash and cash equivalents caption of the balance sheet, and stated at the lower of purchase cost or market value determined with reference to the stock market price for the shares at the balance sheet date. A corresponding reserve has also been recorded as part of shareholders equity.

(c.iii) Inventories

Inventories are stated at the lower of purchase and/or production cost or their corresponding net realisable value, which is determined based on market conditions having regard for the related selling expenses. Purchasing costs include the amounts paid to suppliers and any directly related charges. Manufacturing costs include the expenses incurred to bring products to their present state and condition at the balance sheet date. These include both specific product costs and the general production overheads that are attributable to them. In particular, all types of inventory are valued on a F.I.F.O. cost basis. Inventories are stated net of an allowance that reflects estimated losses on obsolete and slow-moving items.

F-13

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(c.iv) Property, plant and equipment

(c.iv. 1) Cost

Property, plant and equipment are recorded at purchase cost, including any directly related charges. Ordinary maintenance and repair expenditure that does not increase the value of the assets concerned is expensed as incurred. Improvement expenditure that increases the useful lives of property, plant and equipment is capitalised and depreciated over the residual lives of the assets concerned. All other costs are charged to the statement of income as incurred.

Assets under construction are recorded at cost and classified as Construction in progress until the work has been completed; upon completion, the cost is reclassified to the appropriate caption and depreciated.

As required by IAS 17, fixed assets acquired under finance leasing contracts which, in substance, transfer all the risks and benefits of ownership to the Group, are recorded using finance lease accounting methodology. This involves capitalisation of the original value of the asset and recognition of the outstanding principal due to the lessor, as well as the depreciation of the asset over its estimated economic and technical useful life. The principal element of lease payments is deducted from the outstanding liability to the lessor, while the interest element is charged to the statement of income.

Leased assets for which the lessor retains substantially all the risks and benefits of ownership are classified as operating leases. The costs of operating leases are charged to the statement of income over the lives of the related lease contracts.

At the time of the transition to IFRS on January 1, 2004, the exemption allowed by IFRS 1 (IFRS 1.16) was applied to the valuation of Buildings which, accordingly, were recorded at deemed cost, being their fair value on that date determined by an independent appraisal.

(c.iv. 2) Depreciation

Property, plant and equipment are systematically depreciated on a straight-line basis using rates considered to reflect fairly the residual, economic and technical useful lives of the related assets. The following annual depreciation rates are used:

|                                    |  | Annual   depreciation rates |        
|----------------------------------- |  | --------------------------- | -------
|                                    |  |                             |        
|Buildings                           |  |                             | 3-10   
|Plant and machinery                 |  |                             | 6.6-8.3
|Industrial and commercial equipment |  |                             | 25-30  
|Other assets                        |  |                             | 10-25  

(c.v) Intangible assets

(c.v. 1) Goodwill

Goodwill is deemed to be an asset with an indefinite life and is not amortised, but subjected to annual impairment testing, or more frequently if there is evidence (specific events, changed circumstances) of a potential impairment, as required by IAS 36  Impairment of assets, to identify any losses of value at the level of the cash-generating unit to which such goodwill has been allocated by management. Impairment losses are not reversed.

On disposal of all or part of a previously-acquired business involving the recognition of purchased goodwill, the extent of the disposal gain or loss is determined having regard for the residual value of such goodwill.

F-14

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On the first-time adoption of IFRS, the Group elected not to apply IFRS 3  Business combinations with retroactive effect for the businesses acquired before January 1, 2004; accordingly, the goodwill arising on acquisitions prior to the IFRS transition date is stated at the value previously determined under Italian GAAP, and has been tested for impairment.

(c.v. 2) Brand name

The brand name is deemed to be an intangible asset with an indefinite useful life and is not amortised, but subjected to annual impairment testing, or more frequently if there is evidence (specific events, changed circumstances) of a potential impairment, as required by IAS 36  Impairment of assets, to identify any losses of value at the level of the cash-generating unit to which the brand name has been allocated by management.

(c.v. 3) Other intangible assets

Other purchased or internally-produced intangible assets are recorded, in accordance with IAS 38  Intangible assets, when it is likely that their use will generate future economic benefits and their cost can be determined on a reliable basis.

These assets are recorded at purchase or production cost and amortised on a straight-line basis over their estimated useful lives.

The costs of arranging loans and issuing bonds were recorded as intangible assets as of December 31, 2004, in accordance with Italian GAAP, and amortised over the lives of the related loans. IAS 39 has been applied from January 1, 2005 and the residual book value of these deferred costs at that date has been eliminated and considered in the valuation, on an amortised-cost basis, of the related loans and bonds.

The other intangible assets recorded on the acquisition of a business are classified separately from goodwill, if their fair value can be determined on a reliable basis.

Gains and losses arising on the disposal of intangible assets include the difference between their disposal and book values, and are reflected in the statement of income at the time of disposal.

Assets not yet completed are recorded at cost and classified as Assets in progress until the work has been completed; upon completion, the cost is reclassified to the appropriate caption and amortised.

Research costs are expensed to the statement of income as incurred.

Development costs for the production of motorcycles and engines are only capitalised if the conditions specified in IAS 38  Intangible assets (IAS 38. 57), are met, namely:

|- | demonstrable technical feasibility of the product;                                                                         
|- | ---------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                            
|- | intention of the company to complete the development   project;                                                            
|  |                                                                                                                            
|- | reliable determination of the costs incurred for the   project;                                                            
|  |                                                                                                                            
|- | recoverability of the amounts recorded from the   future economic benefits expected to derive from the development project.

F-15

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Capitalised development costs include solely the costs incurred that are directly attributable to the development process and are amortised on a systematic basis, commencing from the start of production, over the expected life of the product which is usually five years.

Development projects in progress are recorded at cost and classified as Intangible assets in progress until the project has been completed; upon completion, the cost is reclassified to the appropriate caption and amortised.

Other intangible assets are amortised on a straight-line basis over the following periods:

|- | development costs: five years;
|- | ------------------------------
|  |                               
|- | software: two / five years.   

(c.vi) Impairment of assets

At least once each year, the Group considers the recoverability of its tangible and intangible assets (including capitalised development costs), in order to determine if there is any evidence that such assets may have suffered a loss in value. If there is any such evidence, the recoverable value of the assets concerned is estimated to determine the extent of the related loss in value. Intangible assets with an indefinite useful life and intangible assets not yet available for use are subjected to an impairment test each year, or more frequently if there is evidence of a possible loss of value (IAS 36.10a).

When the recoverable value of an individual asset cannot be estimated, the Group estimates the recoverable value of the cash-generating unit to which the asset belongs.

The recoverable value of an asset is the greater of its fair value net of selling costs or its value in use. The value in use of an asset is determined with reference to its detailed income stream (layer valuation), gross of taxation, applying an after-tax discounting rate that reflects current market assessments of the time value of money and the risks specific to the asset. A loss in value is recognised if recoverable value is lower than book value. If, subsequently, an impairment loss other than for goodwill is recovered, in whole or in part, the book value of the asset or cash-generating unit is increased to reflect the new estimated recoverable value, without exceeding the value that would have been reported had no losses in value been recorded previously. The recovery of an impairment loss is recognised immediately in the statement of income.

(c.vii) Financial instruments

The provisions of IAS 39 are applied to all financial assets and liabilities and all financial instruments, except for certain categories specified in IAS 39. IAS 32 applies to all financial assets and indicates the criteria to be applied for their fair presentation in the financial statements.

Since the international accounting standards relating to these transactions (IAS 39 and 32) have been applied with effect from January 1, 2005, the consolidated balance sheet as of December 31, 2004 and the consolidated statement of income for 2004, presented for comparative purposes, continue to present the effects of these transaction in accordance with Italian GAAP. With regard to the Ducati Group, the financial instruments for which IAS 32 and 39 have only been applied with effect from January 1, 2005 are: own shares, derivatives that hedge exchange-rate and interest-rate risk, and bank loans.

The Ducati Groups main financial instruments include:

F-16

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(c.vii. 1) Cash and cash equivalents

Cash and cash equivalents include bank deposits and cash on hand stated at nominal value equivalent to fair value. As of December 31, 2004, they also include own shares valued on the basis described in note 1.c.ii Own shares.

(c.vii. 2) Trade receivables

Trade receivables collectible on normal trade terms are stated at the fair value of the initial consideration given in exchange plus the related transaction costs. The value of unrecoverable amounts is estimated with reference to the present value of expected cash flows.

(c.vii. 3) Equity Investments

Investments in other companies (namely those where Ducatis interest is less than 20%) are initially recorded at cost and subsequently measured at fair value at the balance-sheet date, with changes in fair value recorded directly in shareholders equity. In case quotations in an active market are not available and their fair value cannot be determined on a reliable basis, they are measured at purchase cost. Valuations are performed on a regular basis in order to determine if there is any objective evidence that such equity investments may have suffered a loss of value. If such objective evidence is identified, the impairment is charged to the statement of operations.

(c.vii. 4) Securities held-to-maturity

Securities for which there is both the intention and the ability to retain them until maturity (held-to-maturity securities) are recorded with reference to the trade date and measured, at that time, at acquisition cost including any transaction charges. Subsequently, given their pre-determined maturity dates, they are measured at amortised cost, using the effective interest method. At December 31, 2005 the Group does not have securities held to maturity.

(c.vii. 5) Trade payables

Trade payables due on normal trade terms are stated at the fair value of the initial consideration received in exchange, plus the related transaction costs.

(c.vii. 6) Other financial assets and liabilities

Other financial assets that the Group intends and is able to hold until maturity are recorded at amortised cost, including the related transaction costs. Financial assets held for sale are initially recorded at cost, including transaction costs, and adjusted to their fair value at the balance-sheet date with a matching entry to shareholders equity. At December 31, 2005 the Group does not have financial assets held for sale with fair value adjustment taken to shareholders equity.

F-17

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Financial assets with a pre-determined maturity date that are not listed in an active market, and whose fair value cannot be determined on a
reliable basis, are measured at amortised cost, while those without a pre-determined maturity date are measured at purchase cost. Amortised cost is determined using the effective interest method. Valuations are performed on a regular basis in order to determine if there is any evidence that a financial asset or group of assets may have suffered a loss of value. If such evidence is identified, the impairment is charged to the statement of operations.

With the exception of derivative financial instruments, financial liabilities are initially recorded at cost, net of any transaction costs directly attributable to them. Following initial recognition, financial liabilities are measured at amortised cost, using the original effective interest method. As required by IAS 39, at the date of the first time adoption of IAS 32 and IAS 39, the effective interest method has been applied retrospectively.

(c.vii. 7) Derivative financial instruments

Derivative financial instruments are only used for hedging purposes, in order to reduce exchange rate, interest rate and market price risks. As required by IAS 39, derivative financial instruments are only recorded on a hedge-accounting basis when, at the inception of the hedge, they are formally designated as such, the hedge relationship is documented, the hedge is expected to be highly effective, such effectiveness can measured reliably and the hedge proves highly effective over the various accounting periods it is designated to cover.

In order to hedge exchange-rate and interest-rate risk, the Group arranges derivative contracts to cover expected total orders and contracts to hedge the effect of interest-rate fluctuations. Although the Group considers these contracts to be hedges, they do not meet all the conditions established in IAS 39; accordingly, these derivative financial instruments are stated at their fair value and the changes in fair value are recognized immediately in the statement of income.

(c.viii) Sale of receivables

The Ducati Group securitizes a significant portion of its trade receivables; the details of this programme are described in note 21 Securitisation of receivables.

Securitisation involves the sale without recourse of a portfolio of receivables to a vehicle company (Ducati Desmo Finance 1 S.r.l., also referred to as the SPE  special-purpose entity) established specifically for the securitisation transaction pursuant to Law 130/99.

The vehicle company finances the purchase of these receivables via the issue of securities guaranteed by the receivables (asset-backed securities); the repayment and interest flows on these securities depend on the cash flows generated by the portfolio of receivables. The asset-backed securities are divided into classes depending on their seniority and rating: the senior class securities (senior notes) are placed in the market and purchased by investors; the junior class securities (junior notes), whose repayment is subordinated to that of the senior notes, are normally purchased by the seller. Accordingly, the residual involvement of the seller in the receivables sold is limited to the value of the junior notes subscribed.

In accordance with SIC-12  Consolidation - Special-purpose entities (SPE), the vehicle company is included within the scope of consolidation since subscription by the seller for the asset-backed junior notes results, in substance, in the acquisition of control over the SPE.

F-18

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Receivables sold without recourse to factoring companies, excluding those covered by the securitisation contract, are derecognized from the balance sheet at the time of the sale since they meet the derecognition criteria established by IAS 39.

(c.ix) Provisions for risks and charges

Provisions for risks and charges are recorded by the Group when:

|- | there is a legal or constructive obligation to third   parties;             
|- | ----------------------------------------------------------------------------
|  |                                                                             
|- | it is likely that resources will have to be used to   settle the obligation;
|  |                                                                             
|- | the amount of the obligation concerned can be   estimated reliably.         

A constructive obligation is an obligation that arises at the time the Group, in accordance with consolidated practice, public business policies or a sufficiently specific announcement, makes it known to other parties that it will accept the obligation, such that as a result an expectation arises in the minds of third parties that the Group will honour such obligation.

Provisions for restructuring charges are recorded by the Group when:

|- | there is a legal or constructive obligation to third   parties;                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                 
|- | it is likely that resources will have to be used to   settle the obligation;                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                 
|- | the amount of the obligation concerned can be   estimated reliably;                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                 
|- | a formal programme identifies the principal   characteristics of the restructuring plan;                                                                                                                                                        
|  |                                                                                                                                                                                                                                                 
|- | third parties that are affected by the plan have a   valid expectation that the Group will carry out the restructuring work   because implementation has already started or because the salient points have   already been communicated to them.

Changes in estimates such provisions are recorded in the statement of income in the period in which the need for such changes is identified.

Provisions represents the best estimate of the amount the Group would have to pay at year end to settle the obligation or transfer it to third parties. If the discounting effect on the value of money is significant, these provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects current market assessments of the time value of money. In case the provision is discounted to its present value, the increase in the provision due to the passage of time is recorded as a financial charge.

(c.x) Employees benefits

(c.x. 1) Employees leaving entitlements

The employees leaving entitlements recorded by the Groups Italian companies in accordance with the Italian Civil Code (TFR) are deemed to represent a defined benefit plan pursuant to IAS 19.  The benefits guaranteed to employees in the form of their leaving entitlement, and paid to them upon termination of the employment relationship, are accrued over the service period. The liability for benefits to be paid on the termination of employment is determined based on actuarial assumptions; the amount of the liability is determined by independent actuaries. The gains and losses determined by the actuarial calculations are recognised in the statement of income when the cumulative net value of the actuarial gains and losses not recorded in relation to each plan at the end of the prior year exceeds, by more than 10%, the higher of the obligations under the TFR plan or the fair value of the plans assets at that date (the so-called
corridor method).

F-19

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On the first-time adoption of IFRS, the Group decided to record all the actuarial gains and losses accumulated until January 1, 2004, despite having elected to apply the corridor method in relation to subsequent actuarial gains and losses.

The Groups foreign companies do not have any significant pension plans.

(c.x. 2) Share based compensation

The Group recognises share based compensation benefits to certain managers, staff and consultants. In accordance with IFRS 2  Share-based payments, these are deemed to be equity-settled plans and, accordingly, the total fair value of stock options at the grant date represents the compensation cost . The compensation cost is recognised as a payroll cost on a straight-line basis during the period between the grant date and the vesting date (the vesting period), with a direct offset to shareholders equity. Changes in the fair value of stock options, subsequent to the grant date, do not alter the total compensation cost.

The Group has applied the exemption allowed by IFRS 1 (IFRS 1.25b) and, accordingly, has applied IFRS 2 to all stock option plans granted after November 7, 2002 that had not already vested on the date that IFRS 2 came into force (January 1, 2005).

(c.xi) Revenuesand costs

Costs and revenues are recorded by the Group to the extent that an inflow or outflow of economic benefits is likely, and their amount can be estimated on a reliable basis. Revenues and other income, costs and charges are recorded net of returns, discounts, allowances and rebates.

Revenues from the sale of goods are recognised at the time of delivery to the freight forwarders when, under the related contract terms, ownership passes to the purchaser or, in the case of sales with title retention clause, the purchaser essentially accepts all the risks and rewards normally associated with ownership. Title retention clauses are used by Ducati solely as a mean to enable the recovery of goods in the event of customer default on payment.

In addition, although the IFRS do not specifically cover the classification of dealer incentives (usually based on volume sold), these costs have been classified as a reduction of revenues rather than as distribution costs, having regard for the approach taken by other companies operating in the automotive sector upon transition to IFRS.

Sponsorship revenues are recognised as other revenues on an accruals basis over the lives of the related contracts, which usually reflect the length of the sporting season; the remuneration of the riders and the racing team is recognised on an accruals basis, with reference to the duration of the related contracts.

The cost of services is recognised on an accruals basis at the time services are received.

Grants from the Ministry for Productive Activities are recorded as other revenues when it becomes certain that the Group will comply with the conditions included in the grant decree, and that the related grants will be collected, which generally coincides with the approval received by the Ministry for Productive Activities. After this approval, the Group is entitled to collect the grants and the revenue has become certain, even though the amounts will only be paid out when the related liquidity becomes available to the programme manager.

F-20

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If the grants relate to capitalised charges, they are deferred and amortized based upon the lives of the related capitalized costs.

Financial income and expense is recognised on an accruals basis with reference to the interest accrued on the net value of the related financial assets and liabilities, determined using the effective interest rate.

(c.xii) Income Taxes

Income taxes include all the taxes charged on the Groups taxable income. Income taxes are recorded in the statement of income, except for those relating to items credited or debited directly to shareholders equity, in which case the related tax effect is recognised directly as part of shareholders equity. Deferred taxes that might arise upon transfer of undistributed retained earnings from subsidiaries are only recorded if there is a real intention to distribute such dividends. Other taxes unrelated to earnings, such as property and capital taxes, are recorded as other operating expenses. Deferred tax assets/liabilities are recorded using the full liability method. These are calculated on all the timing differences between the tax basis of assets and liabilities and the net book value recorded in the consolidated financial statements, with the exception of non-deductible goodwill, the differences arising on investments in subsidiary companies
that are not expected to reverse in the foreseeable future, and on carried-forward tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. The recoverability of deferred tax assets is reviewed at the end of each accounting period and any amounts whose recovery is no longer deemed probable are written off to the statement of income.

Current and deferred tax assets and liabilities are offset when the related income taxes are charged by the same tax authority and a legal right of offset exists. Deferred tax assets and liabilities are determined using the tax rates that are expected to apply, in the various tax areas in which the Group operates, when the related timing differences become deductible or taxable or expire, in accordance with current legislation.

(c.xiii) Dividends

Dividends payable are deducted from shareholders equity in the period in which they are authorised by the shareholders meeting.

Dividends receivable are recorded on the date of the related shareholders resolution.

(c.xiv) Earnings per share

Basic earnings per share is calculated by dividing the Groups net result by the weighted-average number of ordinary shares outstanding during the year, excluding own shares.

Diluted earnings per share is determined by adjusting the weighted-average number of ordinary sharesoutstanding assuming that all options granted with a diluting effect will be converted into ordinary shares. Ducati has a stock option plan with a potentially dilutive effect.

F-21

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(c.xv) Use of estimates

The preparation of the consolidated financial statements and related notes in accordance with IFRS requires management to make estimates and assumptions which affect the reported value of assets and liabilities, as well as the information provided in relation to contingent assets and liabilities at the balance sheet date. The actual results to be recorded in future may differ from these estimates. Estimates are used in many areas, including accounting for bad debts, obsolete inventories, depreciation and amortisation, impairment of assets, employee benefits, taxation, restructuring and other expected losses. Estimates and assumptions are reviewed periodically and the effects of any changes are recorded immediately in the statement of income.

(c.xv) New accounting policies

No accounting standards or interpretations with a significant impact on the consolidated financial statements have been issued or revised with effect from January 1, 2005.

The IASB issued an amendment to IAS 19  Employee Benefits in December 2004, allowing actuarial gains and losses to be recognised immediately, in the period they arise, as an adjustment to a specific equity account, rather than directly to the statement of operations. This amendment also provides a guide to the allocation among the various Group companies of a Group defined-benefits plan. This amendment is effective from January 1, 2006.  The Group is assessing the impact that such changes might have.

The IASB issued an amendment to IAS 39  Financial Instruments: Recognition and Measurement in April 2005 that permits the foreign currency risk of a highly probable intragroup forecasted transaction to qualify as the hedged item in a cash-flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and the foreign currency risk will affect the consolidated financial statements. The amendment also specifies that if the hedge of a forecast intragroup transaction qualifies for hedge accounting, any gain or loss that is recognised directly in equity in accordance with IAS 39 must be reclassified to the statement of operations in the period in which the foreign currency risk of the hedged transaction affects the consolidated statement of operations.

The IASB issued an amendment to IAS 39  Financial Instruments: Recognition and Measurement in June 2005 to restrict the use of the option to designate any financial asset or liability to be measured at fair value through the statement of operations (the so-called fair value option). This revision of the standard allows the use of this option only to the financial instruments that meet the following conditions:

|- | the fair value option designation eliminates or   significantly reduces an accounting mismatch;                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                
|- | a group of financial assets, financial liabilities   or both are managed and their performance is evaluated on a fair value basis   in accordance with a documented risk management or investment strategy, and
|  |                                                                                                                                                                                                                
|- | an instrument contains an embedded derivative that   meets particular conditions.                                                                                                                              

These amendments to IAS 39 are effective from January 1, 2006. The Group is assessing the impact that such changes might have.

The IASB issued a new standard, IFRS 7  Financial Instruments: Disclosures, in August 2005 together with a complementary amendment to IAS 1  Presentation of Financial Statements: Capital Disclosures. IFRS 7 requires disclosures about the significance of financial instruments for an entitys financial position and performance. These disclosures incorporate many of the requirements previously contained in IAS 32  Financial Instruments: Disclosure and Presentation. The new accounting standard also requires information about the exposure to risks deriving from the use of financial instruments, and a description of managements objectives, policies and processes for managing such risks. The amendment to IAS 1 introduces requirements for disclosures about an entitys capital.

F-22

---



IFRS 7 will be effective from January 1, 2007. The Group is assessing the impact that such changes might have.

The IASB issued an amendment to IAS 39 and IFRS 4 in August 2005 covering the accounting treatment of guarantees given. Under this amendment, financial guarantee contracts must be included in the issuers balance sheet:

|- | initially at fair value;                                                                                                                                                                                                                                                                                                                                     
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                              
|- | subsequently, at the higher of (i) the best estimate   of the amount required to meet the obligation at the reference date,   determined in accordance with IAS 37 Provisions,   Contingent Liabilities and Contingent Assets, and (ii) the amount   initially recognised less any accumulated amortisation recognised in   accordance with IAS 18  Revenue.

The amendment to IAS 39 is effective from January 1, 2006. The Group is assessing the impact that such changes might have.

2.     Accounts receivable, net

Accounts receivable, net are analysed as follows:

|                                  |  | December
  31, 2005 |         | December
31, 2004 | 
|--------------------------------- |  | ------------------- | ------- | ----------------- | 
|                                  |  |                     |         |                   | 
|                                  |  | ( 000)            |         | ( 000)          | 
|Domestic customers                |  |                     | 41,107  |                   | 
|Foreign customers                 |  |                     | 66,558  |                   | 
|                                  |  |                     |         |                   | 
|Total, gross                      |  |                     | 107,665 |                   | 
|Allowance for doubtful   accounts |  |                     | (5,433  | )                 | 
|                                  |  |                     |         |                   | 
|Total, net                        |  |                     | 102,232 |                   | 

The reduction in trade receivables is directly related to the decrease in sales.

The changes in the allowance for doubtful accounts for the periods presented were as follows:

|                                       |  | December   31, 2005 |          | December   31,2004 | 
|-------------------------------------- |  | ------------------- | -------- | ------------------ | 
|                                       |  |                     |          |                    | 
|                                       |  |                     | ( 000) |                    | 
|Balance at the beginning of   the year |  |                     | 3,691    |                    | 
|Charge for the year                    |  |                     | 2,371    |                    | 
|Foreign exchange and other   movements |  |                     | 70       |                    | 
|Decrease                               |  |                     | (699     | )                  | 
|                                       |  |                     |          |                    | 
|Balance at the end of the year         |  |                     | 5,433    |                    | 

Provisions were made during 2005 to
cover collection risks relating, in particular, to the customers of Ducati Corse
S.r.l., Ducati North America Inc. and Ducati France S.A.S.

F-23

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Gross trade receivables are analysed below by geographical area:

|                |  |          | December   31, 2005 |          |  | December   31,2004 | 
|--------------- |  | -------- | ------------------- | -------- |  | ------------------ | 
|                |  |          |                     |          |  |                    | 
|                |  | ( 000) |                     | ( 000) | 
|Italy           |  |          | 41,107              |          |  | 49,008             | 
|United States   |  |          | 6,480               |          |  | 7,078              | 
|Japan           |  |          | 9,362               |          |  | 7,100              | 
|United Kingdom  |  |          | 7,489               |          |  | 8,834              | 
|Germany         |  |          | 18,447              |          |  | 22,203             | 
|France          |  |          | 11,178              |          |  | 11,660             | 
|Benelux         |  |          | 2,202               |          |  | 2,859              | 
|Austria         |  |          | 3,426               |          |  | 2,704              | 
|Spain           |  |          | 839                 |          |  | 1,371              | 
|Switzerland     |  |          | 4,125               |          |  | 6,215              | 
|Other countries |  |          | 3,010               |          |  | 3,281              | 
|                |  |          |                     |          |  |                    | 
|Total           |  |          | 107,665             |          |  | 122,313            | 

3.     Inventories, net

Inventories are analysed as follows:

|                                                   |  | December
31, 2005 |            | December
31, 2004 | 
|-------------------------------------------------- |  | ----------------- | ---------- | ----------------- | 
|                                                   |  |                   |            |                   | 
|                                                   |  |                   | (   000) |                   | 
|Raw material, ancillary and consumable materials   |  |                   | 6,375      |                   | 
|Allowance for slow moving and obsolete inventories |  |                   | (1,134     | )                 | 
|                                                   |  |                   |            |                   | 
|                                                   |  |                   | 5,241      |                   | 
|Work in process and semi-finished products         |  |                   | 12,520     |                   | 
|Allowance for slow moving and obsolete inventories |  |                   | (2,482     | )                 | 
|                                                   |  |                   |            |                   | 
|                                                   |  |                   | 10,038     |                   | 
|Finished products                                  |  |                   | 76,080     |                   | 
|Allowance for slow moving and obsolete inventories |  |                   | (9,979     | )                 | 
|                                                   |  |                   |            |                   | 
|                                                   |  |                   | 66,101     |                   | 
|                                                   |  |                   |            |                   | 
|Total                                              |  |                   | 81,380     |                   | 

Spare parts are classified within finished products in order to reflect more closely the way they are used, given that they are mostly held for sale.

The decrease in closing inventories since December 31, 2004 was mainly due to reduced production following the decline in demand, as well as to the obsolescence provision recorded for those motorcycles that according to the new strategic plan will no longer be manufactured.

F-24

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The movements in allowance for slow moving and obsolete inventories for the periods presented were as follows:

|                                     |  | Year ended    December 31, 2005 |        | Year ended    December 31, 2004 | 
|------------------------------------ |  | ------------------------------- | ------ | ------------------------------- | 
|                                     |  |                                 |        |                                 | 
|                                     |  |  000                           |        |  000                           | 
|Balance at the beginning of the year |  |                                 | 7,436  |                                 | 
|Charge for the year, net             |  |                                 | 6,061  |                                 | 
|Foreign exchange and other movements |  |                                 | 98     |                                 | 
|                                     |  |                                 |        |                                 | 
|Balance at the end of the year       |  |                                 | 13,595 |                                 | 

The increase in the net charge recorded in 2005 is attributable to the recovery plan described in note 1a.

4.     Other current assets

Other current assets include:

|                                    |  | December      31,2005 |       | December      31,2004 | 
|----------------------------------- |  | --------------------- | ----- | --------------------- | 
|                                    |  |                       |       |                       | 
|                                    |  | (000)               |       | (000)               | 
|VAT receivable                      |  |                       | 3,622 |                       | 
|Tax advances to tax authorities     |  |                       | 2,433 |                       | 
|Advances to suppliers               |  |                       | 1,605 |                       | 
|Credit Link                         |  |                       |      |                       | 
|Other amounts receivable            |  |                       | 859   |                       | 
|Accrued income and prepaid expenses |  |                       | 698   |                       | 
|                                    |  |                       |       |                       | 
|Total                               |  |                       | 9,217 |                       | 

The significant decrease in accrued income and prepaid expenses as of December 31, 2005 with respect to the prior year mainly reflects the valuation of derivative financial instruments in accordance with IAS 39 from January 1, 2005, as allowed by IFRS 1.

The Credit Link for  15,000 thousand at December 31, 2004 was closely connected with the Bond and, in particular, with the related risk of default. Since the Bond was repaid on May 31, 2005, the Credit Link was also repaid on the same date.

5.     Property, plant and equipment, net

Property, plant and equipment as of December 31, 2005, amounting to  66,556 thousand, is stated net of accumulated depreciation totalling  88,197 thousand, of which  14,306 thousand was charged in the year ended December 31, 2005.

Land and buildings include leasehold improvements of  2,110 thousand. These improvements relate to a building involved in a sale and lease-back arrangement, as explained further below, and are being amortised over their estimated useful lives.

F-25

---



At December 31, property, plant and equipment, net, were included of the following items:

|                                       |  | December 31,   2005 |         | December 31,   2004 | 
|-------------------------------------- |  | ------------------- | ------- | ------------------- | 
|                                       |  |                     |         |                     | 
|                                       |  | (
 000)           |        
|Land and buildings                     |  |                     |         |                     | 
|Cost                                   |  |                     | 39,162  |                     | 
|Accumulated depreciation               |  |                     | (9,014  | )                   | 
|Net book value                         |  |                     | 30,148  |                     | 
|Plant and machinery                    |  |                     |         |                     | 
|Cost                                   |  |                     | 36,383  |                     | 
|Accumulated depreciation               |  |                     | (19,761 | )                   | 
|Net book value                         |  |                     | 16,622  |                     | 
|Industrial and sales tooling/equipment |  |                     |         |                     | 
|Cost                                   |  |                     | 66,073  |                     | 
|Accumulated depreciation               |  |                     | (50,880 | )                   | 
|Net book value                         |  |                     | 15,193  |                     | 
|Other                                  |  |                     |         |                     | 
|Cost                                   |  |                     | 12,234  |                     | 
|Accumulated depreciation               |  |                     | (8,542  | )                   | 
|Net book value                         |  |                     | 3,692   |                     | 
|Assets in progress                     |  |                     | 901     |                     | 
|                                       |  |                     |         |                     | 
|Total                                  |  |                     | 66,556  |                     | 

F-26

---



The changes in property, plant and equipment, net for the years presented are summarised below:

|                                       |  | December 31,   2005 |        | December, 31   2004 | 
|-------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                       |  |                     |        |                     | 
|                                       |  | ( 000)            |        | ( 000)            | 
|Land and buildings                     |  |                     |        |                     | 
|Balance at the   beginning of the year |  |                     | 31,210 |                     | 
|Additions                              |  |                     | 251    |                     | 
|Depreciation                           |  |                     | (1,313 | )                   | 
|Reclassifications                      |  |                     |       |                     | 
|Disposals, net                         |  |                     |       |                     | 
|                                       |  |                     |        |                     | 
|Balance at the end of the year         |  |                     | 30,148 |                     | 
|Plant and machinery                    |  |                     |        |                     | 
|Balance at the   beginning of the year |  |                     | 14,756 |                     | 
|Additions                              |  |                     | 2,729  |                     | 
|Depreciation                           |  |                     | (1,640 | )                   | 
|Reclassifications                      |  |                     | 826    |                     | 
|Disposals, net                         |  |                     | (49    | )                   | 
|                                       |  |                     |        |                     | 
|Balance at the end of the year         |  |                     | 16,622 |                     | 
|Industrial and commercial equipment    |  |                     |        |                     | 
|Balance at the   beginning of the year |  |                     | 18,003 |                     | 
|Additions                              |  |                     | 6,162  |                     | 
|Depreciation                           |  |                     | (9,790 | )                   | 
|Reclassifications                      |  |                     | 879    |                     | 
|Disposals, net                         |  |                     | (61    | )                   | 
|                                       |  |                     |        |                     | 
|Balance at the end of the year         |  |                     | 15,193 |                     | 
|Other assets                           |  |                     |        |                     | 
|Balance at the   beginning of the year |  |                     | 4,380  |                     | 
|Additions                              |  |                     | 1,020  |                     | 
|Depreciation                           |  |                     | (1,563 | )                   | 
|Reclassifications                      |  |                     | 99     |                     | 
|Disposals, net                         |  |                     | (244   | )                   | 
|                                       |  |                     |        |                     | 
|Balance at the end of the year         |  |                     | 3,692  |                     | 
|Construction in progress               |  |                     | 901    |                     | 
|                                       |  |                     |        |                     | 
|Total                                  |  |                     | 66,556 |                     | 

Construction in progress reclassified to other categories during the years ended December 31, 2005 and 2004 amount to  1,847 thousand and  503 thousand, respectively. Additions to construction in progress during the years ended December 31, 2005 and 2004 amount to  809 thousand and  1,390 thousand, respectively.

F-27

---



The depreciation of property, plant and equipment has been charged to the statement of income as follows:

|                                                |  |  | December   31, 2005 |  |  | December   31, 2004 | 
|----------------------------------------------- |  |  | ------------------- |  |  | ------------------- | 
|                                                |  |  |                     |  |  |                     | 
|                                                |  |  | ( 000)            |  |  | ( 000)            | 
|Cost of sales (note 23)                         |  |  | 11,705              |  |  | 12,544              | 
|General and administrative   expenses (note 27) |  |  | 2,601               |  |  | 2,404               | 
|                                                |  |  |                     |  |  |                     | 
|Total                                           |  |  | 14,306              |  |  | 14,948              | 

As of December 31, 2005, the Group is party to leasing contracts for industrial buildings, machinery and robotised workstations.

Ducati Motor Holding S.p.A. has entered into a sale and lease-back transaction involving an industrial building located within the factory at Via A. Cavalieri Ducati 3, Bologna.

The transaction involved selling the building at approximately book value to Locafit Locazione Macchinari Industriali S.p.A., a leasing company, in 2001 for  20,710 thousand, and then signing a lease-back contract with the same company.

This contract has a duration of 8 years from the date it was signed.

By way of consideration for the finance lease on the building, Ducati Motor Holding S.p.A. will pay Locafit S.p.A. a total of 32 quarterly lease instalments, as established in the contract.

Finance lease liability relating to leasing contracts is analysed below:

|                                                      |  | December   31, 2005 |        | December   31, 2004 | 
|----------------------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                                      |  |                     |        |                     | 
|                                                      |  | ( 000)            |        | ( 000)            | 
|Current portion                                       |  |                     | 3,612  |                     | 
|Long-term portion                                     |  |                     | 9,518  |                     | 
|                                                      |  |                     |        |                     | 
|Total minimum lease payments                          |  |                     | 13,130 |                     | 
|Less amount representing   interest                   |  |                     | (729   | )                   | 
|                                                      |  |                     |        |                     | 
|Present value of the minimum   capital lease payments |  |                     | 12,401 |                     | 
|Current portion (note 16)                             |  |                     | 3,280  |                     | 
|Long-term portion (note 16)                           |  |                     | 9,121  |                     | 
|                                                      |  |                     |        |                     | 
|Total                                                 |  |                     | 12,401 |                     | 

F-28

---



6.     Goodwill and intangible assets with an indefinite life

Goodwill and intangible assets with an indefinite life include:

|                     |  | December 31, 2005 |        | December 31, 2004 | 
|-------------------- |  | ----------------- | ------ | ----------------- | 
|                     |  |                   |        |                   | 
|                     |  | (000)           |        | (000)           | 
|Brand name           |  |                   | 71,249 |                   | 
|Goodwill             |  |                   | 14,801 |                   | 
|                     |  |                   |        |                   | 
|Total net book value |  |                   | 86,050 |                   | 

The brand name consists of the Ducati name, which was purchased for the amount established at the time the motorcycle division was acquired from Ducati Motorcycles S.p.A. in 1996.

As of December 31, 2005, the brand name is pledged to secure the syndicated loan arranged on May 9, 2005 by Ducati Motor Holding S.p.A., as described further in note 16.

Goodwill mainly reflects the amount recognised at the time of purchase of the motorcycles business in 1996, which was determined with reference to market conditions and expectations for the duration and development of the business. This balance also includes the goodwill paid in 1998 on the reorganisation of the French and German distribution networks and the difference between the book value of equity investments and the related interest in their shareholders equity at the time of acquisition.

The Group elected not to apply IFRS 3  Business Combinations retrospectively with regard to the businesses acquired prior to the IFRS transition date. Accordingly, on the transition to IFRS, goodwill and the brand name with an indefinite life were stated at the carrying value previously determined under Italian GAAP.

The intangible assets with an indefinite life were subject to an impairment test (recoverable value) as of December 31, 2005, as required by IAS 36.

Goodwill was allocated in full to the High Margin Motorcycles cash-generating unit (CGU), consisting of the Superbike and Sportclassic motorcycles, while the Ducati brand name was allocated as follows:

|Cash Generating Unit    |  | Segment |                         | Amount Allocated | 
|----------------------- |  | ------- | ----------------------- | ---------------- | 
|                        |  |         |                         |                  | 
|                        |  |         |                         |                  | 
|High Margin Motorcycles |  |         | Motocycles              |                  | 
|Spare parts             |  |         | Spare parts             |                  | 
|Accessories and Apparel |  |         | Accessories and Apparel |                  | 
|Other                   |  |         | Other                   |                  | 
|                        |  |         |                         |                  | 
|Total                   |  |         |                         |                  | 

The allocation was based on the sales of the individual CGUs /segments.

The recoverable value of the brand name has been estimated using the so-called Royalty Relief Method. The level of royalties (gross of taxation) in the automotive sector normally ranges between 5% and 9%.

F-29

---



The royalty rate applied to the sales of the High Margin Motorcycles CGU is 7.40%, while the rate applied to the sales of other segments is 5%. The use of a royalty rate of 7.40% for the High Margin Motorcycles CGU is justified by a score analysis of brand strength, performed on 4 market profiles and 9 specific profiles, which gave Ducati a rating of 0.60 (minimum 0 - maximum 1), which translates to a rate of 7.40%.

The recoverable value of goodwill has been estimated using criteria based on the forecasted future profits. The related profit streams were considered net of a normal level of remuneration for tangible fixed assets and the brand name, and their present value was compared with the book value of goodwill. This criterion is based on the capitalisation of the normalised higher-than-average profits that the Group is able to generate.

The recoverable value of goodwill estimated in this manner exceeds its book value.

The earnings streams used to estimate the recoverable value of the brand name and goodwill are those reflected in the 2006 Budget, which increased the estimated result included in the initial 2006-2008 plan, and in 2007-2010 plan. These flows represent normalised average expected earnings and derive from managements forecasts, based on the Groups past experience and the expectations generated by the new strategic plan. The earnings denominated in foreign currencies ($ flows) were translated using a $/ exchange rate of 1.18, being the ruling rate as of December 31, 2005. The earnings used did not include the margins expected in 2009 and 2010 from the XL and GP families of motorcycle, since these will derive from future investments and, as such, must not be considered for impairment test purposes.

The after tax, weighted-average cost of capital (WACC) is 6.45%. This was determined using a risk-free rate of 3.5%, a credit spread of 2.5%, a beta of 1, an equity risk premium (E.R.P.) of 4%, a target borrowing ratio of 30% (Total Borrowing/Total Assets) and, lastly, the full IRES corporate tax rate of 33%. In order to calculate the value-in-use of the Ducati brand name and goodwill, the earnings expected in 2010, adjusted for the exchange effect and to exclude the new models of motorcycle, were projected forward in perpetuity at 2.5%.

Based on the methodology applied, the value-in-use of the Ducati brand name and goodwill is slightly higher than their book value. In particular, the value-in-use of goodwill is  17.1 million, while the value of that part of the brand name attributable to the High Margin Motorcycles CGU is  59.6 million (carrying value,  54.9 million). The value-in-use of that part of the brand name attributable to the other segments is considerably greater than its book value.

7.     Other intangible assets, net

Other intangible assets, principally relating to the parent company, are stated net of accumulated amortisation and include:

|                     |  | December   31, 2005 |         |  | December   31, 2004 |        
|-------------------- |  | ------------------- | ------- |  | ------------------- | -------
|                     |  |                     |         |  |                     |        
|                     |  |                     | (000) |  |                     | (000)
|Development costs    |  |                     | 14,368  |  |                     | 20,150 
|Software             |  |                     | 4,301   |  |                     | 2,470  
|Assets in progress   |  |                     | 20,996  |  |                     | 15,450 
|Other                |  |                     |        |  |                     | 198    
|                     |  |                     |         |  |                     |        
|Total net book value |  |                     | 39,665  |  |                     | 38,268 

F-30

---



The changes in other intangible assets for the years presented are summarized below:

|                                                |  | December   31, 2005 |        | December   31, 2004 | 
|----------------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                                |  |                     |        |                     | 
|                                                |  | (000)             |        | (000)             | 
|Development   costs                             |  |                     |        |                     | 
|Balance at the beginning of the year            |  |                     | 20,150 |                     | 
|Additions                                       |  |                     | 6,119  |                     | 
|Reclassifications from projects in   progress   |  |                     | 3,095  |                     | 
|Depreciation                                    |  |                     | (7,928 | )                   | 
|Write-downs                                     |  |                     | (7,063 | )                   | 
|Other                                           |  |                     | (5     | )                   | 
|                                                |  |                     |        |                     | 
|Balance   at the end of the year                |  |                     | 14,368 |                     | 
|                                                |  |                     |        |                     | 
|Software                                        |  |                     |        |                     | 
|Balance at the beginning of the year            |  |                     | 2,470  |                     | 
|Additions                                       |  |                     | 503    |                     | 
|Reclassifications from projects in   progress   |  |                     | 3,163  |                     | 
|Other                                           |  |                     | 25     |                     | 
|Depreciation                                    |  |                     | (1,860 | )                   | 
|                                                |  |                     |        |                     | 
|Balance   at the end of the year                |  |                     | 4,301  |                     | 
|                                                |  |                     |        |                     | 
|Other                                           |  |                     |        |                     | 
|Balance at the beginning of the year            |  |                     | 198    |                     | 
|Additions                                       |  |                     |       |                     | 
|Depreciation                                    |  |                     |       |                     | 
|Writedowns                                      |  |                     |       |                     | 
|Other                                           |  |                     | (198   | )                   | 
|                                                |  |                     |        |                     | 
|Balance   at the end of the year                |  |                     |       |                     | 
|                                                |  |                     |        |                     | 
|Deveolpment   projects in progress and advances |  |                     |        |                     | 
|Balance at the beginning of the year            |  |                     | 12,296 |                     | 
|Additions                                       |  |                     | 13,738 |                     | 
|Reclassifications to the relevant caption       |  |                     | (3,095 | )                   | 
|Writedowns                                      |  |                     | (2,208 | )                   | 
|                                                |  |                     |        |                     | 
|Balance   at the end of the year                |  |                     | 20,731 |                     | 
|                                                |  |                     |        |                     | 
|Other  projects in progress and advances        |  |                     |        |                     | 
|Balance at the beginning of the year            |  |                     | 3,154  |                     | 
|Additions                                       |  |                     | 359    |                     | 
|Reclassifications to the relevant caption       |  |                     | (3,163 | )                   | 
|Other                                           |  |                     | (85    | )                   | 
|                                                |  |                     |        |                     | 
|Balance   at the end of the year                |  |                     | 265    |                     | 
|                                                |  |                     |        |                     | 
|Total                                           |  |                     | 39,665 |                     | 

F-31

---



Capitalised development costs essentially relate to projects for the development of engines and new models of motorcycle. Development projects have, in particular, determined to:

|1. | reduce motorcycle weight by using   innovative materials and, at the same time, increase safety standards,   thereby reducing fuel consumption and lowering the release of pollution into   the atmosphere;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                            
|2. | improve motorcycle aerodynamics, in order   to reduce fuel consumption and the level of pollution, while retaining the   Ducati brands distinctive style;                                                 
|   |                                                                                                                                                                                                            
|3. | optimise engine performance, while reducing   the noise of the intake and exhaust systems, partly through the use of   highly-advanced simulation software.                                                

Development projects in progress and advances to suppliers totalling  20,996 thousand as of December 31, 2005 ( 15,450 thousand as of December 31, 2004) include  20,731 thousand in relation to development projects that have not yet entered the industrialisation stage, of which about  13,524 thousand regarding the Grand Prix (GP) motorcycle which will be industrialised and sold during 2007. The other  7,207 thousand relates to new models that will enter into production during 2007 and 2008. Consistent with the new strategy of focusing on top-end models, during 2005 the Group decided to expense in full certain development projects associated with the Super Sport model totalling  2,207 thousand, mainly included among development projects in progress and not yet amortised, and a further  7,063 thousand relating to both the new Super Sport (which will not enter into production) and the previous Super Sport (which will leave the
range), as well as certain Sport Touring ST4s (which will leave the range), for which the industrialisation process had begun together with the related amortisation, but which will no longer be useable given that the models will be taken out of production.  In addition, certain development costs relating to the Superbike have been written off ahead of the restyling and the introduction of new engines consistent with the new focus for the range. The new plan envisages focusing on mid and top-end motorcycles offering high margins, and on the simplification of the range. The total write-downs charged to cost of sales in the 2005 statement of income amounted to  9,270 thousand (note 23).

The amortisation of intangible assets has been charged to the statement of income as follows:

|                                                |  | December   31, 2005 |          |  | December   31, 2004 |         
|----------------------------------------------- |  | ------------------- | -------- |  | ------------------- | --------
|                                                |  |                     |          |  |                     |         
|                                                |  |                     | ( 000) |  |                     | ( 000)
|Cost of sales (note 23)                         |  |                     | 7,928    |  |                     | 10,473  
|General and administrative   expenses (note 27) |  |                     | 1,860    |  |                     | 1,840   
|Financial charges (note 29)                     |  |                     |         |  |                     | 69      
|                                                |  |                     |          |  |                     |         
|Total                                           |  |                     | 9,788    |  |                     | 12,382  



8.     Equity investments

Investments in other companies include the quotas held in ACMA (Manufacturers Association), the Diamante Consortium and Emittente Titoli.

F-32

---



9.     Deferred income tax assets

Deferred income tax assets include:

|                                          |  | December   31, 2005 |        | December   31, 2004 | 
|----------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                          |  |                     |        |                     | 
|                                          |  | (000)             |        | (000)             | 
|Deferred tax assets - Italian   companies |  |                     | 24,550 |                     | 
|Deferred tax assets - Foreign   companies |  |                     | 112    |                     | 
|                                          |  |                     |        |                     | 
|Total                                     |  |                     | 24,662 |                     | 

Deferred tax assets relating to Italian companies as of December 31, 2005 mainly reflect provisions that are not tax deductible recorded in the statutory financial statements of individual companies, together with recognition of the effect of the tax losses carried forward by Ducati Motor Holding S.p.A.

Deferred tax assets relating to foreign companies as of December 31, 2005mainly relate to recognition of the effect of the tax losses carried forward by Ducati UK Ltd. and Ducati North Europe B.V.

The changes in deferred tax assets for the years presented are shown below:

|                                             |  | December   31, 2005 |        | December   31, 2004 | 
|-------------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                             |  |                     |        |                     | 
|                                             |  | (000)             |        | (000)             | 
|Balance at the beginning of the year         |  |                     | 21,665 |                     | 
|Charges to the statement of income (note 31) |  |                     | 2,909  |                     | 
|Foreign exchange and other movements         |  |                     | 88     |                     | 
|                                             |  |                     |        |                     | 
|Balance at the end of year                   |  |                     | 24,662 |                     | 

F-33

---



Deferred tax assets include:

|Nature   of timing difference                                 |  | As of    December   31, 2004 |         | IFRS adj.   January   1, 2005 * |  | Reclass. of   opening bal.   ** |   | Increases   and decreases   P/L |         | Trans. adj.   and other |  | As of   December   31, 2005 |  
|------------------------------------------------------------- |  | ---------------------------- | ------- | ------------------------------- |  | ------------------------------- | - | ------------------------------- | ------- | ----------------------- |  | --------------------------- | -
|                                                              |  |                              |         |                                 |  |                                 |   |                                 |         |                         |  |                             |  
|                                                              |  |                              | (000) |                                 |  | (000)                         |   |                                 | (000) |                         |  | (000)                     |  
|Unrealised intragroup   profits                               |  |                              | 5,480   |                                 |  |                                |   |                                 | (42     | )                       |  | (367                        | )
|Losses   carried forward by DMH                               |  |                              | 4,023   |                                 |  |                                 |   |                                 | 179     |                         |  | 248                         |  
|Losses   carried forward by other companies                   |  |                              | 14      |                                 |  |                                |   |                                 |        |                         |  | (14                         | )
|Provisions   deductible in future years (DMH)                 |  |                              | 7,171   |                                 |  |                                 |   |                                 | 5       |                         |  | 5,418                       |  
|Provisions deductible in future years   (Ducati Corse S.r.l.) |  |                              | 936     |                                 |  |                                |   |                                 |        |                         |  | 623                         |  
|Intangible   assets                                           |  |                              | 933     |                                 |  |                                |   |                                 |        |                         |  | (161                        | )
|Other                                                         |  |                              | 303     |                                 |  | (109                            | ) |                                 | (184    | )                       |  | 74                          |  
|                                                              |  |                              |         |                                 |  |                                 |   |                                 |         |                         |  |                             |  
|Total Italian companies                                       |  |                              | 18,860  |                                 |  | (109                            | ) |                                 | (42     | )                       |  | 5,821                       |  
|Losses   carried forward by:                                  |  |                              |         |                                 |  |                                 |   |                                 |         |                         |  |                             |  
|Ducati   North America                                        |  |                              | 2,159   |                                 |  |                                |   |                                 |        |                         |  | (2,363                      | )
|Ducati   North Europe                                         |  |                              | 31      |                                 |  |                                 |   |                                 | 2       |                         |  | (22                         | )
|Ducati   Japan                                                |  |                              | 530     |                                 |  |                                |   |                                 |        |                         |  | (541                        | )
|Ducati   UK Ltd                                               |  |                              | 85      |                                 |  |                                |   |                                 |        |                         |  | 14                          |  
|                                                              |  |                              |         |                                 |  |                                 |   |                                 |         |                         |  |                             |  
|Total foreign companies                                       |  |                              | 2,805   |                                 |  |                                |   |                                 | 2       |                         |  | (2,912                      | )
|                                                              |  |                              |         |                                 |  |                                 |   |                                 |         |                         |  |                             |  
|Total deferred tax assets                                     |  |                              | 21,665  |                                 |  | (109                            | ) |                                 | (40     | )                       |  | 2,909                       |  

|  
|--
|* 
|**

The Directors believe that it is probable that sufficient future taxable income will be available in the future against which the temporary differences recorded as of December 31, 2005 will be utilized. In particular, given the history of recent losses, these estimates are primarily based on the scheduled reversal of taxable temporary differences and available tax planning opportunities.

The timing differences and tax losses carried forward that give rise to deferred tax assets for the years presented are summarised below:

|                                           |  | December 31 ,2005    |          | December 31, 2004 | 
|------------------------------------------ |  | -------------------- | -------- | ----------------- | 
|                                           |  |                      |          |                   | 
|Timing   differences                       |  | Timing   differences |          | Tax   rate        | 
|                                           |  |                      |          |                   | 
|                                           |  |                      | ( 000) |                   | 
|Warranty provision                         |  |                      | 5,778    |                   | 
|Allowance for inventory                    |  |                      | 10,605   |                   | 
|Maintenance expenses                       |  |                      | 3,540    |                   | 
|Entertaining expenses                      |  |                      | 366      |                   | 
|Write-down of equity investments           |  |                      | 2,143    |                   | 
|Write-down of own shares                   |  |                      | 381      |                   | 
|Allowance for doubtful accounts            |  |                      | 1,605    |                   | 
|Unrealised intragroup profits              |  |                      | 4,950    |                   | 
|Write-down of development costs            |  |                      | 7,064    |                   | 
|Gain on intragroup sale of brand name      |  |                      | 8,663    |                   | 
|Tax losses carried forward                 |  |                      | 13,484   |                   | 
|Provision for restructuring                |  |                      | 13,000   |                   | 
|Provisions and others                      |  |                      | 2,596    |                   | 
|Losses carried forward - foreign companies |  |                      |          |                   | 
|                                           |  |                      |          |                   | 
|Total deferred tax assets                  |  |                      | 74,175   |                   | 

F-34

---



As of December 31, 2005, deferred tax assets have not been recognised in relation to tax losses carried forward totalling approximately  42.4 million; this corresponds to deferred tax assets of about  14.0 million.

10.     Accounts payable

Accounts payable are analysed as follows

|                        |  | December   31, 2005 |          | December   31, 2004 | 
|----------------------- |  | ------------------- | -------- | ------------------- | 
|                        |  |                     |          |                     | 
|                        |  |                     | ( 000) |                     | 
|Domestic suppliers      |  |                     | 60,809   |                     | 
|Foreign suppliers       |  |                     | 12,851   |                     | 
|Invoices to be received |  |                     | 11,543   |                     | 
|                        |  |                     |          |                     | 
|Total                   |  |                     | 85,203   |                     | 

Trade payables reflect the liability to suppliers of goods and consultancy services. The increase with respect to last year mainly reflects the deferred payment terms obtained from certain suppliers.

Accounts payable are analysed below by geographical area:

|                |  | December   31, 2005 |         | December   31, 2004 | 
|--------------- |  | ------------------- | ------- | ------------------- | 
|                |  |                     |         |                     | 
|                |  |                     | (000) |                     | 
|Italy           |  |                     | 69,612  |                     | 
|United States   |  |                     | 2,680   |                     | 
|Japan           |  |                     | 1,426   |                     | 
|United Kingdom  |  |                     | 980     |                     | 
|Germany         |  |                     | 1,900   |                     | 
|France          |  |                     | 559     |                     | 
|Benelux         |  |                     | 1,219   |                     | 
|Austria         |  |                     | 2,849   |                     | 
|Sweden          |  |                     | 1,267   |                     | 
|Spain           |  |                     | 1,198   |                     | 
|Other countries |  |                     | 1,513   |                     | 
|                |  |                     |         |                     | 
|Total           |  |                     | 85,203  |                     | 

11.     Income and other taxes payable

Amounts due to the tax authorities are analysed as follows:

F-35

---



|                                       |  | December    31, 2005 |          | December    31, 2004 | 
|-------------------------------------- |  | -------------------- | -------- | -------------------- | 
|                                       |  |                      |          |                      | 
|                                       |  |                      | ( 000) |                      | 
|VAT payable                            |  |                      | 1,275    |                      | 
|Tax on revaluation of brand   name     |  |                      | 1,292    |                      | 
|Taxes withheld - employees             |  |                      | 1,576    |                      | 
|Taxes withheld - freelance   personnel |  |                      | 151      |                      | 
|IRES-IRAP                              |  |                      | 355      |                      | 
|Taxes payable by foreign   companies   |  |                      | 862      |                      | 
|Other                                  |  |                      | 26       |                      | 
|                                       |  |                      |          |                      | 
|Total                                  |  |                      | 5,537    |                      | 

Amounts due to the tax authorities mainly include the direct and indirect taxes payable by individual Group companies, net of advance payments, as well as taxes withheld by Group companies on the remuneration of employees and free-lance personnel.  Current taxes payable are estimated based on the best interpretation of the law relating to such taxes.

Income and other taxes payable  non current as of December 31, 2004 for  1,292 thousand represent the residual balance of the 19% flat-rate taxation of the surplus arising on the revaluation of the brand name in 2003, recorded in the financial statement of the parent company and payable in July 2006. This amount is classified as short term as of December 31, 2005 since it will be paid over in July 2006.

Taxes payable by foreign companies reflect the corporate income tax liabilities of Ducati France S.A., Ducati Japan K.K., Ducati North Europe BV and Ducati North America.

The following years are still subject to inspection by the Tax authorities, for direct and indirect taxes: from 2000 for Ducati Motor Holding S.p.A., Ducati North America Inc., Ducati G.m.b.H., Gio.ca Moto International S.r.l., Ducati France S.A., Ducati Japan K.K., Ducati North Europe B.V. and Ducati UK Ltd.; from 2002 for Ducati Corse S.r.l. and from 2004 for the newly-formed Ducati Retail S.r.l. and Ducati Consulting S.r.l.

The Group is not involved in any significant tax disputes as of December 31, 2005.

12.     Other current liabilities

Other current liabilities are analysed as follows:

|                                       |  | December   31, 2005 |          | December   31, 2004 | 
|-------------------------------------- |  | ------------------- | -------- | ------------------- | 
|                                       |  |                     |          |                     | 
|                                       |  |                     | ( 000) |                     | 
|Advances                               |  |                     | 5,585    |                     | 
|Due to employees                       |  |                     | 4,247    |                     | 
|Due to social security   institutions  |  |                     | 2,808    |                     | 
|Accrued expenses and deferred   income |  |                     | 2,207    |                     | 
|Miscellaneous payables                 |  |                     | 5,355    |                     | 
|                                       |  |                     |          |                     | 
|Total                                  |  |                     | 20,202   |                     | 

Amounts due to employees at year end relate to remuneration earned that has not yet been paid (wages and salaries, bonuses, holidays still to be taken). The increase mainly relates to the higher provisions for deferred remuneration, such as accrued vacation and regular bonuses, that had already been paid as of December 31, 2004.

F-36

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The increase in advances with respect to last year relates to a substantial advance made to Ducati Motor Holding S.p.A. by an importer.

13.     Provisions for risks and charges

Provisions for risks and charges are analysed as follows:

|                                               |  | As of    December    31, 2004 |          | Increases |  | Decreases |  | As of    December    31, 2005 |         
|---------------------------------------------- |  | ----------------------------- | -------- | --------- |  | --------- |  | ----------------------------- | --------
|                                               |  |                               |          |           |  |           |  |                               |         
|                                               |  |                               | ( 000) |           |  | ( 000)  |  |                               | ( 000)
|Provision   for product warranties, short term |  |                               | 4,633    |           |  | 4,061     |  |                               | (4,431  
|Provision   for product warranties, long term  |  |                               | 1,663    |           |  |          |  |                               | (138    
|Provision   for legal disputes                 |  |                               | 86       |           |  | 1,300     |  |                               | (35     
|                                               |  |                               |          |           |  |           |  |                               |         
|Total                                          |  |                               | 6,382    |           |  | 5,361     |  |                               | (4,604  
|Provision   for restructuring                  |  |                               | 7        |           |  | 13,000    |  |                               |        
|                                               |  |                               |          |           |  |           |  |                               |         
|Total provisions for risks and charges         |  |                               | 6,389    |           |  | 18,361    |  |                               | (4,604  

The provision for product warranties,  5,788 thousand as of December 31, 2005, of which  1,525 thousand relates to medium/long-term amounts, derives from an historical analysis of the labour and material costs incurred in relation to individual models, having regard for the related number of motorcycles still under warranty (sold to the end market over the last 24 months), and from an estimate of the cost of recall campaigns that might be required in future.

The provisions for legal disputes,  1,351 thousand as of December 31, 2005, are analysed as follows:

|1. |  25 thousand ( 60 thousand as of December 31,   2004) for legal risks recorded by the German subsidiary in relation to a   dispute with a dealer.  This provision   was utilized during 2005 for  35 thousand.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. |  26 thousand ( 26 thousand as of December 31,   2004) representing the residual provision in relation to the M. Hailwood   agreement. Ducati Motor Holding S.p.A. and its subsidiary Ducati North   America Inc. were called before the New Jersey District Court by the widow of   the champion motorcyclist Mike Hailwood, acting as the alleged trustee of his   estate. Mrs Hailwood maintained that by marketing and selling a model called   the MH900e, using Mike Hailwoods initials as a tribute to his memory and   his career, the Company has violated the brand license that protected his   name and initials, and the related promotion rights, both of which belong to   Mr Hailwoods estate. Mrs Hailwood asked for compensation for the damages   resulting from this alleged violation, together with an injunction to prevent   the Company from using Mike Hailwoods name and initials any more. In order   to settle the dispute, an agreement was
reached between the Company and the   counterparty.

F-37

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|   | This agreement envisages paying  375 thousand to   the counterparty for the definitive closure of the dispute, in addition to   other agreements for future collaboration with the heir D. Hailwood.    349 thousand has already been paid to the counterparty, while the   remaining  26 thousand is awaiting payment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|3. |  50 thousand ( 0 as of December 31, 2004) provided   by Ducati Motor Holding S.p.A. to cover legal risks in relation to minor   disputes with employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4. |  350 thousand ( 0 as of December 31, 2004) for   risks relating to the dispute with Virginio Ferrari Racing, one of the two   racing teams sponsored by Ducati in the 1998 Superbike World Championship.   Ducati Motor Holding S.p.A. decided not to sponsor the Virginio Ferrari   Racing team for the 1999 Superbike World Championship. Virginio Ferrari   Racing served a writ on the company claiming around  6,714 thousand in   alleged damages suffered by Virginio Ferrari Racing and by Mr. Virginio   Ferrari following the claimed failure of the company to honour its supposed   obligation to sponsor the racing team for three years. The first-level court   has decided the ensuing dispute by sentencing Ducati Motor Holding S.p.A. to   pay  310 thousand, plus inflation adjustment and legal interest, in   consideration of its pre-contractual responsibility to Virginio Ferrari and   Virginio Ferrari Racing, as well as  12.6 thousand for legal
expenses. The   Group has therefore recorded a provision for the amount that the company has   been sentenced to pay by the first-level court, together with the related   legal expenses. It is likely that both parties will file appeals against this   decision; however the Group does not believe that additional liabilities will   emerge in this regard, over and above the related provisions recorded in the   consolidated financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. |  750 thousand ( 0 as of December 31, 2004) for an   agreement with a supplier regarding the cancellation of orders for materials   due to the elimination of certain models from the product range, consistent   with the new Group strategy of focusing on the production of top-end   motorcycles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|6. |  150 thousand ( 0 as of December 31, 2004) mostly   provided in relation to Ducati UK to cover risks associated with a claim for   VAT not reimbursed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

The provision for restructuringamounts to  13,007 thousand.

Following the plan presented by management to refocus the business on top-end motorcycles, on  December 16, 2005 the Board of Directors:

|- | approved and, via a press release, informed the   market about a provision for restructuring of  13,000 thousand to facilitate   a reduction in the motorcycle inventories held by the network of dealers and   to modify and improve the Companys organisational structure;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | called an Extraordinary Shareholders Meeting for   January 24 (first calling) and for January 26 (second calling), 2006 with the   proposal to authorise the Board of Directors to increase share capital for   cash by a maximum of  80 million.                           

F-38

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The above provision includes:

|- |  8,000 thousand associated with the need   for action to significantly reduce the inventories of low-end motorcycles   held by the dealer network, based on an analysis of the inventories held by   leading dealers;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- |  5,000 thousand for a simultaneous and   complex reorganisation involving the repositioning of personnel in relation   to product innovation, ahead of the forthcoming re-launch of the business.                    

The provision for restructuring has been recorded in 2005 since the requirements of IAS 37 have been met, given that prior to year end:

|- | the Board of Directors approved the plan on December   16, 2005 and informed the market via a press release;                                                                                                                                                                                                                                              
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | on December 16, 2005, the Board of Directors called   an Extraordinary Shareholders Meeting with the proposal to authorise the   Board to increase share capital for cash by a maximum of  80 million, to   raise the financial resources needed to implement the plan and re-launch the   Group with a new strategy of focusing on top-end motorcycles;
|- | the intention of the Board is to implement the plan   and increase share capital in order to obtain the financial resources needed   for the new strategy;                                                                                                                                                                                                
|- | management informed the financing banks on December   9, 2005 of its intention to implement the plan and requested them to align   the loan contract to the new plan;                                                                                                                                                                                     
|- | given the external communications (to dealers and   trade unions) made prior to the balance sheet date, it is considered that the   Group has a constructive obligation to proceed, having generated a valid   expectation in the minds of the groups of persons to whom such obligation   relates;                                                       
|- | a reliable    estimate of the amount of this constructive obligation has been made;                                                                                                                                                                                                                                                                       
|- | meeting this obligation is likely (mainly certain)   to require financial outflows;                                                                                                                                                                                                                                                                       
|- | a detailed plan identifies the approximate number of   motorcycles held by the dealers and employees concerned, the costs to be   incurred and the timing of implementation, thus generating a valid   expectation that the Group will actually implement the restructuring plan.                                                                         

The financial resources needed to implement the above restructuring plan depend on a capital increase, for which the Extraordinary Shareholders Meeting has been requested to authorise the Board of Directors to increase share capital for cash by a maximum of Euro 80.0 million over a period of five years, via the issue of ordinary shares of the Company to be offered first under option to existing shareholders. The Shareholders Meeting held on January 26, 2006 delegated this authority to the Board.

14.     Employees leaving entitlements

The provision includes the employees leaving entitlements recorded by the Groups Italian companies and the provision recorded by Ducati Japan K.K.,  246 thousand.

The changes in the provision for the years presented are as follows:

F-39

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|                                        |  | December   31, 2005 |          | December   31, 2004 | 
|--------------------------------------- |  | ------------------- | -------- | ------------------- | 
|                                        |  |                     |          |                     | 
|                                        |  |                     | ( 000) |                     | 
|Balance at the beginning of   the year  |  |                     | 8,482    |                     | 
|Charge to income statements   (note 24) |  |                     | 2,379    |                     | 
|Payments                                |  |                     | (1,192   | )                   | 
|                                        |  |                     |          |                     | 
|Balance at the end of the year          |  |                     | 9,669    |                     | 

The principal actuarial assumptions used to estimate the leaving entitlements to be paid on the termination of employment are set out below:

|(a) Discount rate (annual): | 2004: 5.00%
|--------------------------- | -----------
|                            | 2005: 4.50%
|                            | 2006: 4.00%

(b) Expected increase in remuneration: estimated by company and by grade within the following bands:

|- Managers: 4% - 5%         
|----------------------------
|- Supervisors: 2.25% - 6.5% 
|- Factory workers: 3.5% - 4%

(c) Turnover: 5% on average.

The cumulative loss as of December 31, 2005,  136 thousand, deriving from the actuarial calculation has not been charged to the statement of income since the cumulative net amount falls within the limits set by the corridor method.

15.     Deferred income taxes

The changes in deferred taxes for the years presented, which mainly relates to the Groups Italian companies, are shown below:

|                                             |  | December   31, 2005 |          | December   31, 2004 | 
|-------------------------------------------- |  | ------------------- | -------- | ------------------- | 
|                                             |  |                     |          |                     | 
|                                             |  |                     | ( 000) |                     | 
|Balance at the beginning of the year         |  |                     | 12,207   |                     | 
|Charged to the statement of income (note 31) |  |                     | 1,514    |                     | 
|Exchange differences and other movements     |  |                     | (24      | )                   | 
|                                             |  |                     |          |                     | 
|Balance at the end of the year               |  |                     | 13,697   |                     | 

The movements in the individual captions during 2005 are analysed below:

F-40

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|Timing   differences                   |  | December   31, 2004 |          | Reclass. of    opening   bal. * |  | Charge to income statement |  | Trans. adj.   and other |          | December   31, 2005 | 
|-------------------------------------- |  | ------------------- | -------- | ------------------------------- |  | -------------------------- |  | ----------------------- | -------- | ------------------- | 
|                                       |  |                     |          |                                 |  |                            |  |                         |          |                     | 
|                                       |  |                     | ( 000) |                                 |  | ( 000)                   |  |                         | ( 000) |                     | 
|Accelerated   depreciation             |  |                     | (4,510   | )                               |  |                            |  |                         | 1,395    |                     | 
|Leasing   and other                    |  |                     | (2,185   | )                               |  | 42                         |  |                         | (509     | )                   | 
|Revaluation   of building              |  |                     | (2,773   | )                               |  |                           |  |                         | 86       |                     | 
|Elimination   of goodwill amortisation |  |                     | (2,618   | )                               |  |                           |  |                         | (2,486   | )                   | 
|Deferred   tax of foreign companies    |  |                     | (121     | )                               |  | 2                          |  |                         |         |                     | 
|                                       |  |                     |          |                                 |  |                            |  |                         |          |                     | 
|Total deferred tax                     |  |                     | (12,207  | )                               |  | 44                         |  |                         | (1,514   | )                   | 

The timing differences that give rise to deferred taxes are summarised below:

|                                             |  | December 31, 2005    |          | December 31, 2004 | 
|-------------------------------------------- |  | -------------------- | -------- | ----------------- | 
|                                             |  |                      |          |                   | 
|                                             |  | Timing   differences |          | Tax   Rate        | 
|                                             |  |                      |          |                   | 
|                                             |  |                      | ( 000) |                   | 
|Accelerated   depreciation                   |  |                      | 8,362    |                   | 
|Flooring                                     |  |                      | 406      |                   | 
|Revaluation of buildings                     |  |                      | 7,213    |                   | 
|Actuarial adjustment to leaving entitlements |  |                      | 530      |                   | 
|Elimination of goodwill amortisation         |  |                      | 13,702   |                   | 
|Leasing and other                            |  |                      | 6,654    |                   | 
|                                             |  |                      |          |                   | 
|Total                                        |  |                      | 36,867   |                   | 

|                                  
|----------------------------------
|* Using tax rate of the US company

F-41

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16.     Net financial indebtedness

The consolidated net financial indebtedness is analysed below:

|                                             |  | December   31, 2005 |          | December   31, 2004 |  | * January   1, 2005 |  
|-------------------------------------------- |  | ------------------- | -------- | ------------------- |  | ------------------- | -
|                                             |  |                     |          |                     |  |                     |  
|                                             |  |                     | ( 000) |                     |  | ( 000)            |  
|Cash and cash equivalents                    |  |                     | 53,017   |                     |  | 46,044              |  
|Own shares                                   |  |                     |         |                     |  | 3,283               |  
|Credit Link                                  |  |                     |         |                     |  | 15,000              |  
|Short term bank borrowings                   |  |                     | (60,850  | )                   |  | (93,738             | )
|Bonds                                        |  |                     |         |                     |  | (54,164             | )
|Current portion of leasing installments      |  |                     | (3,298   | )                   |  | (3,178              | )
|                                             |  |                     |          |                     |  |                     |  
|Net short-term financial   indebtedness      |  |                     | (11,131  | )                   |  | (86,753             | )
|Syndicated loan                              |  |                     | (62,123  | )                   |  |                    |  
|Long-term debts, net of current portion      |  |                     | (54,580  | )                   |  | (51,913             | )
|Leasing installments, net of current portion |  |                     | (9,121   | )                   |  | (11,869             | )
|                                             |  |                     |          |                     |  |                     |  
|Total financial indebtedness                 |  |                     | (136,955 | )                   |  | (150,535            | )
|                                             |  |                     |          |                     |  |                     |  

|                                                                                                                                                                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   Net financial indebtedness as of January 1, 2005, adjusted with respect to   December 31, 2004 due to the adoption of IAS 39 and 32, the principal effect   of which was to reclassify own shares as a deduction from shareholders   equity.

The net financial indebtedness is composed by:

a. Cash and cash equivalents: include cash and unrestricted deposits on bank current accounts, except for the amounts of  15,591 thousand as of December 31, 2005 and  16,000 thousand as of  December 31, 2004 which are not freely available to the Ducati Group since they relate to Ducati Desmo Finance 1 S.r.l. (D.D.F.1), as described in note 21.

b. Own shares: as of December 31, 2005, the Company holds a total of 1,844,669 own shares (3,769,249 as of 31 December 2004), since 1,924,580 own shares were sold during 2005. As already mentioned, starting from January 1, 2005 own shares are classified as a deduction from shareholders equity in accordance with IFRS while, previously, they were classified together with cash and cash equivalents in accordance with Italian GAAP.

F-42

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c. Credit Link: during the year ended December 31, 2001, a financial transaction denominated Credit Link was put in place for  15.0 million; this was closely connected with the Bond issue and, in particular, with the related risk of default. Since the Bond was repaid on 31 May 2005, the Credit Link was also paid on the same date.

d. Short-term bank loans:  60,850 thousand which include:

|- |  35,880 thousand relating to a short-term revolving   line of credit arranged in May 2005 to refinance the bond, which matures   after 364 days and is renewable for further periods under the terms of the loan   contract;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- |  24,970 thousand due to banks in the form of   ordinary bank overdrafts.                                                                                                                                                    

e. Current portion of leasing instalments:  3,298 thousand which includes:

|- | amounts due to leasing companies,  3,280 thousand   (note 5);
|- | --------------------------------------------------------------
|- | amounts due by the Japanese subsidiary,  18   thousand.      

f. Bonds: there are no outstanding bonds as of December 31, 2005 since this liability was repaid in full on May 31, 2005.

g. Syndicated loan: in order to refinance the bond repayment on May 31, 2005 and other working capital requirements, Ducati Motor Holding S.p.A. obtained a syndicated loan totalling  100 million on May 9, 2005.

This loan, arranged by Unicredit Banca Mobiliare and granted by a banking syndicate to Ducati Motor Holding S.p.A. and Ducati Corse s.r.l., includes the following lines of credit:

|- | a principal, long-term line of credit for  63.6   million, expiring 5 years from the date of signing the loan contract, with a   floating interest rate linked to 3-month Euribor plus a spread of 150 basis   points;       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | a revolving line of credit for  36.4 million,   renewable upon expiry after one year, with a floating interest rate linked to   Euribor plus a spread of 120 basis points, which is classified among   short-term bank loans.

The balances as of December 31, 2005 are  62.1 million (long term) and  35.9 million (short term), respectively.

For both the lines of credit, the mechanism for the interest-rate calculation envisages an improvement/deterioration in the spread based on the economic and financial results reported by the Group.

The loan is guaranteed by Ducati Motor Holding S.p.A. and Ducati Corse s.r.l. and, among other matters, includes certain restrictions concerning:

|- | the distribution of dividends and/or equity   reserves;
|- | -------------------------------------------------------
|- | the sale of assets by the Group;                       
|- | the giving of guarantees;                              
|- | the granting of loans to third parties.                

F-43

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The following guarantees have been given in relation to this syndicated loan:

| | °pledge of all present and future quotas in Ducati Corse held now and   at any time in the future by Ducati Motor Holding;                                                                                                               
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | °pledge of all present and future shares in Ducati North America Inc.   held now and at any time in the future by Ducati Motor Holding;                                                                                                  
| | °pledge of the Ducati brand name owned by Ducati Motor Holding;                                                                                                                                                                        
| | °pledge of the Ducati Corse brand name owned by Ducati Corse;                                                                                                                                                                          
| | °special privileges pursuant to art. 46.1 a) and b) of the   Consolidated Banking Law over the fungible operating assets of Ducati Motor   Holding;                                                                                      
| | °guarantee given by Ducati Motor Holding to the Lending Banks,   concerning the proper and timely performance by Ducati Corse of its   obligations under the contract, in return for a payment to Ducati Motor   Holding by Ducati Corse.

In relation to the above loan, the Ducati Group has agreed to comply at a consolidated level with the following financial covenants:

| | 1) | Ratio Net Financial Position/EBITDA                                                | < 3.5 (until 31/12/2005)           
| | -- | ---------------------------------------------------------------------------------- | -----------------------------------
| |    |                                                                                    | < 3.2 (from 1/1/2006 to 31/12/2006)
| |    |                                                                                    | < 2.5 subsequently                 
| |    |                                                                                    |                                    
| | 2) | Ratio EBITDA/Net Financial Charges                                                 | > 5.0 (until 31/12/2005)           
| |    |                                                                                    | > 6.5 (from 1/1/2006 to 31/12/2006)
| |    |                                                                                    | > 7.5 subsequently                 
| |    |                                                                                    |                                    
| | 3) | Maximum Capex:  34 million in 2005,  32 million in each of the   following years

The above financial covenants were agreed with reference to Italian GAAP.

EBITDA is defined in the loan contract as: results before taxation, financial income and expense, exchange differences, depreciation, amortisation, write-downs of tangible and intangible fixed assets and extraordinary items (all of them as defined by Italian GAAP).

As a consequence of the results reported for 2005, the Group has not complied with certain financial covenants contained in the loan contract. Failure to comply with these covenants could give the financial institutions the right to request repayment of the loan. However, the Lead Bank has agreed before year end on a period of grace of at least twelve months to rectify the breach and during which immediate repayment cannot be demanded.

In addition, on December 16, 2005, in light of the plan 2006-2010 indicated in note 1.a and of the possible change of the major shareholder of the Company, management informed the financial institutions involved in the loan contract about the main features of the plan that could impact the contract loan and certain other changes in the financial covenants and other conditions in order to align them with the new plan, including the fact that the financial covenants should take into account the fact that the Group, starting from 2005, will prepare its consolidated financial statements under IFRS and not under Italian GAAP on which the contract was based.

F-44

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Agreement fro the Lead Bank and the Financing Banks to the proposed changes was received on February 13, 2006.

This agreement is subject to completion of the following:

| | (a) | purchase by Investindustrial Holdings S.A. of a 30%   interest, less one share, in the share capital of Ducati Motor Holding   S.p.A.;                                                                                                                                                                                                                                                                                                                                             
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | acceptance by Investindustrial Holdings S.A. of a   commitment to take up its option rights arising under the terms of the Offer,   as defined below;                                                                                                                                                                                                                                                                                                                              
| | (c) | signature by UBM, no later than May 31, 2006, of an   underwriting contract intended to guarantee and/or obtain guarantees for the   successful outcome of the share capital increase for cash totalling  80   million, to be offered under option to existing shareholders, which will be   authorised by Ducati Motor Holding S.p.A. (the Offer) net of the commitment   to take up all the option rights directly or indirectly available to   Investindustrial Holdings S.A.

As a consequence of the above and of the plan indicated in note 1.a,, the Group agreed to comply with the following consolidated financial covenants:

| | 1) | Ratio Net Financial Position/EBITDA                                                | < 3.5 (2006)               
| | -- | ---------------------------------------------------------------------------------- | ---------------------------
| |    |                                                                                    | < 3.0 (2007)               
| |    |                                                                                    | < 2.5 (2008)               
| |    |                                                                                    | < 2.0 (2009 and 2010)      
| |    |                                                                                    |                            
| | 2) | Ratio EBITDA/Net Financial Charges                                                 | > 5.0 (2006 and 2007)      
| |    |                                                                                    | > 7.5 (2008, 2009 and 2010)
| |    |                                                                                    |                            
| | 3) | Maximum capex:  40 million in 2006 and 2007, and  36 million from   2008 to 2010

Following the adoption of IFRS by the Group, the relevant definitions for the calculation of covenants, previously based on Italian GAAP, have been replaced by new definitions based on IFRS. Nevertheless, although based on a different method of classification, the new definitions are essentially consistent with those previously agreed under Italian GAAP.

EBITDA is defined in the loan contract as: results before taxation, financial income and expense, exchange differences, depreciation, amortisation, write-downs of tangible and intangible fixed assets and extraordinary items (as defined by Italian GAAP). The net financial position (net indebtedness) should exclude the effect of the consolidation of the SPE (securitization program), which was not consolidated under Italian GAAP.

On March 1, 2006, Texas Pacific Group (TPG) and Investindustrial Holdings S.A. made separate press releases to announce signature of the final agreement for the purchase by Investindustrial Holdings S.A. from TPG of 30% less one share of the share capital of Ducati Motor Holding S.p.A. (without taking account of any own shares held by Ducati Motor Holding S.p.A.). As explained in the above press releases from TPG and Investindustrial Holdings S.A, the transaction is due to be completed during March 2006, subject to: (i) approval from the German anti-trust authorities, (ii) the absence  between  the date of signing and the date of completing the transaction  of events with a

F-45

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significant adverse effect on the activities of Ducati or actions that prevent the closing, and (iii) the non-withdrawal, or the absence of significantly worse terms and conditions, of the consent given by the Lead Bank and the financing banks to the proposals presented by Ducati Motor Holding S.p.A. or make modifications and allow exceptions to the May 2005 loan contract. The completion of the transaction between TPG and Investindustrial Holdings S.A. is also subject to the maintenance, or absence of changes unfavourable to Ducati Motor Holding S.p.A., of the loan contract signed on February 23, 2006 (and communicated to the market by a press release on March 1, 2006), whereby Ducati has obtained a new line of credit of  35 million from Unicredit Banca DImpresa, for a guaranteed period of 5 years, and to the arrangement by Ducati Motor Holding S.p.A. of one or more additional loan contracts totalling  25 million on terms and conditions that are
essentially no less favourable to Ducati than those applying to the above loan agreement for  35 million. In this regard, negotiations are currently in progress with other banks to obtain this additional loan of  25 million.

As communicated in the above press release from Investindustrial Holdings S.A. on March 1, 2006, the transaction also envisages that Investindustrial Holdings S.A. will take up its option rights to subscribe the planned share capital increase by a maximum of  80 million. With reference to the Offer, UBM signed a preliminary agreement with Ducati Motor Holding S.p.A. and Investindustrial Holdings S.A. on February 28, 2006, effective until May 31, 2006, to underwrite the issue and subscribe for any shares that are not taken up in the context of the Offer (after the exercise in full of the option rights due to Investindustrial Holdings S.A. on completion of the acquisition).

See also note 36 for significant events subsequent to December 31, 2005.

h. Long-term debts, net of current portion:   54,580 thousand includes:

|- |  45,000 thousand relating to securities issued by   the vehicle company Ducati Desmo Finance 1 S.r.l., placed in the market and   taken up by third-party investors, expiring in 2009 (Senior Notes Notes Class   A  note 21). The Class A bonds ( 45,000,000) carry a quarterly coupon   payable on 28 January, 28 April, 28 July and 28 October each year. The annual   interest rate is 3-month Euribor plus 0.42%;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | ten long-term loans totalling  9,580 thousand.   These are loans with interest-relief obtained under contracts between Ducati   Motor Holding S.p.A. and the Ministry for Productive Activities for projects   linked with the Technological Innovation Fund (F.I.T.), as uplifted by the   interest accumulated during the year.                                                                                       

i. Leasing instalments, net of current portion:  9,121 thousand relates to the long-term portion of leasing liabilities (note 5).

17.     Shareholders equity

(i) Share capital

At December 31, 2005 the share capital of Ducati Motor Holding S.p.A. is composed by  159,360,037 ordinary shares without par value for a total amount of  82,867,219.24.

The increases in share capital during 2005 are analysed below:

|Unit value            |  | No. of shares |         | Par value |  | Share premium |  | Total per share |      
|--------------------- |  | ------------- | ------- | --------- |  | ------------- |  | --------------- | -----
|                      |  |               |         |           |  |               |  |                 |      
|Stock Option shares |  |               | 533,630 |           |  | 0.52          |  |                 | 0.203

F-46

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|Amount collected by the   Company |  | Par value |         | Share
premium |  | Total 
per share | 
|--------------------------------- |  | --------- | ------- | ------------- |  | ---------------- | 
|                                  |  |           |         |               |  |                  | 
|Stock Option shares             |  |           | 277,488 |               |  | 108,327          | 

(ii) Share premium

The share premium reserve amounts to  18,994 thousand as of December 31, 2005.

The movements in the share premium reserve for the period presented are as follows:

|                                  |  | Par value |        | Share premium |  | Total  |  
|--------------------------------- |  | --------- | ------ | ------------- |  | ------ | -
|                                  |  |           |        |               |  |        |  
|Balance as of December 31,   2003 |  |           | 10,117 |               |  | 19,488 |  
|                                  |  |           |        |               |  |        |  
|Shares issued for stock option    |  |           | 169    |               |  | 66     |  
|Purchase of own shares            |  |           |       |               |  | (2,892 | )
|                                  |  |           |        |               |  |        |  
|Balance as of December 31,   2004 |  |           | 10,286 |               |  | 16,661 |  
|                                  |  |           |        |               |  |        |  
|Shares issued for stock option    |  |           | 277    |               |  | 108    |  
|                                  |  |           |        |               |  |        |  
|Own shares sold                   |  |           |       |               |  | 2,225  |  
|                                  |  |           |        |               |  |        |  
|Balance as of December 31,   2005 |  |           | 10,563 |               |  | 18,994 |  

(iii) Other reserves

Other reserves include legal reserves and the revaluation reserve according to Law 342 - 21/11/2000 and Law 350  24/12/2003. The revaluation reserve was recorded by Ducati Motor Holding S.p.A. in its stand alone statutory financial statements on the two revaluations of its brand name in 2000 and 2003 by  24,238 thousand and  22,027 thousand, respectively. These amounts reflect the resulting revaluation surpluses, stated net of the related flat-rate taxation. Although this reserve is stated net of flat-rate taxation, it remains in suspense for tax purposes. This is because on distribution to the shareholders, the amounts concerned, grossed up by the flat-rate taxation, would form part of the taxable income of the company (with a tax credit equal to the amount of the above flat-rate taxation) and of the shareholders (as earnings). The revaluation recorded in the statutory financial statements of the parent company has not affected the net
book value of the brand name reported in the consolidated financial statements.

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(iv) Transition reserve to IFRS

This reserve, totalling  3,642 thousand at December 31, 2005, include the effects of all the adjustments for the transition to IFRS.

(v) Reserve for own shares

The Company did not purchase any own shares during the year ended December 31, 2005. Own shares were however sold on a number of occasions during the year.In particular, the Company sold 1,924,580 own shares as part of legitimate activity to stabilise the share price, pursuant to the shareholders resolution adopted in May 5, 2005. As of December 31, 2005, the parent company holds a total of 1,844,669 own shares. Following the adoption of IAS 32, these shares are classified as a deduction from shareholders equity.

Ducati Motor Holding S.p.A. made purchases of its own shares during 2005, in full compliance with the applicable regulations, in order to support trading in Ducati shares on the Italian stock market.

These purchases were made in accordance with the shareholders authorisations dated May 7, 2002, May 6, 2004 and May 5, 2005 and were disclosed to Consob on a timely basis. The following information is provided with regard to the changes in own shares held:

|Own shares held as of December 31, 2004         |  |  | 3,769,249  |  
|----------------------------------------------- |  |  | ---------- | -
|Purchases during 2005                           |  |  |           |  
|Disposals during 2005                           |  |  | (1,924,580 | )
|                                                |  |  |            |  
|Total own shares held as of   December 31, 2005 |  |  | 1,844,669  |  

(vi) Reconciliation of statutory net profit / (loss) and shareholders equity of the Parent Company to consolidated net profit / (loss) and shareholders equity

The statutory financial statements of the Parent Company, stated in accordance with IFRS, indicate distributable reserves which differ from retained earnings / (losses) as presented in the consolidated statements. The principal adjustments made in the consolidation of Ducati Motor Holding and its subsidiaries are shown in the following reconciliation of net profit/(loss) and shareholders equity.

18.     Guarantees

|                                                                                                  |  | Net profit (loss)   for the   year ended   December 31, 2005 |          | Shareholders   equity as of
December 31, 2005 |  | Net profit (loss)   for the   year ended   December 31, 2004 |   | Shareholders   equity as of
      December 31, 2004 |         
|------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------ | -------- | ---------------------------------------------- |  | ------------------------------------------------------------ | - | ---------------------------------------------------- | --------
|                                                                                                  |  |                                                              |          |                                                |  |                                                              |   |                                                      |         
|                                                                                                  |  |                                                              | ( 000) |                                                |  | ( 000)                                                     |   |                                                      | ( 000)
|Financial statements of Ducati Motor Holding   S.p.A.                                             |  |                                                              | (46,768  | )                                              |  | 134,567                                                      |   |                                                      | 11,560  
|                                                                                                  |  |                                                              |          |                                                |  |                                                              |   |                                                      |         
|Elimination of tax driven items                                                                   |  |                                                              |         |                                                |  | 3,405                                                        |   |                                                      | (10,714 
|Elimination of unrealised intragroup profits                                                      |  |                                                              | 427      |                                                |  | (4,028                                                       | ) |                                                      | 3,901   
|Higher (Lower) value of consolidated equity   investments with respect to their carrying value    |  |                                                              | 5,247    |                                                |  | 2,753                                                        |   |                                                      | (2,575  
|Other adjustments                                                                                 |  |                                                              | (1,350   | )                                              |  | (1,067                                                       | ) |                                                      | 10,324  
|Leasing accounting                                                                                |  |                                                              | (54      | )                                              |  | (254                                                         | ) |                                                      | (63     
|Intragroup sale of Ducati Corse brand name                                                      |  |                                                              | 1,150    |                                                |  | (21,850                                                      | ) |                                                      | (23,000 
|Tax effect of consolidation adjustments                                                           |  |                                                              | (116     | )                                              |  | 5,216                                                        |   |                                                      | 7,098   
|                                                                                                  |  |                                                              |          |                                                |  |                                                              |   |                                                      |         
|Group shareholders equity and   net results as reported in the consolidated financial statements |  |                                                              | (41,464  | )                                              |  | 118,742                                                      |   |                                                      | (3,469  
|                                                                                                  |  |                                                              |          |                                                |  |                                                              |   |                                                      |         

F-48

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Guarantees include:

|                        |  |  | December   31, 2005 |  |  | December   31, 2004 | 
|----------------------- |  |  | ------------------- |  |  | ------------------- | 
|                        |  |  |                     |  |  |                     | 
|                        |  |  | ( 000)            |  |  | ( 000)            | 
|Guarantees              |  |  | 6,777               |  |  | 6,222               | 
|Contractual commitments |  |  | 636                 |  |  | 1,101               | 
|                        |  |  |                     |  |  |                     | 
|Total                   |  |  | 7,413               |  |  | 7,323               | 

Guarantees at December 31, 2005 include
 5,800 thousand relating to a guarantee released by San Paolo IMI S.p.A.
in favour of Ducati Desmo Finance 1 S.r.l. as part of the securitisation of trade receivables, to guarantee any amounts
that might be deducted by debtors, on the settlement of amounts already
securitised, in recognition of rebates granted by the Group on the achievement
of their sales targets.
This solely relates to the bonus due to dealers that meet their sales targets.

Contractual commitments relate to a contract entered into by Ducati Corse S.r.l. that involves commitments over a period of time which, if not honoured, could give rise to a liability to the contractual counterparty. Based on forecasts made, the Group believes that it will undoubtedly be able to honour these commitments and that, therefore, no liability will crystallise.

In addition, the guarantees described in
note 16 were given in relation to the loan obtained on May 9, 2005.

19.     Other commitments

On March 5, 2003, the Board of Directors of Ducati Motor Holding S.p.A. granted to Federico Minoli, as approved by the Compensation Committee and the Board of Directors on June 17, 1999, of a termination indemnity of US$ 1.2 million, to be paid if his appointment as Chairman and Managing Director is not renewed or is revoked without just cause prior to his sixtieth birthday.

On March 10, 2005, the Board of Directors of Ducati Motor Holding S.p.A. approved, pursuant to art. 2389 of the Italian Civil Code, the Compensation Committees proposal to extend to 2005, 2006 and 2007 the retention bonus plan of certain senior managers (including the Chairman and Managing Director), previously in force for the years from 1999 to 2004, on the basis and terms approved by the Committee on March 2, 2000 and by the Board of Directors on February 14, 2002. The existence and amount of any bonuses due under this plan will be determined on a variable basis, commencing from the annual base remuneration of the beneficiaries, with reference to the consolidated EBITDA reported for 2005, 2006 and 2007. Any bonuses earned will only be paid if the beneficiaries are still senior managers of the Group 12 months after approval of the consolidated financial statements for the years to which such bonuses relate. Should the employment of the beneficiaries
concerned be terminated by the Company without just cause or good reason, or in the event that their resignation is requested (with incentives) by the Company, then they will be entitled to receive three times the amount of the bonuses earned by them at the time of termination. On March 10, 2005, the Board of Directors resolved (i) the possibility of bonuses to the Chairman and Managing Director, to be determined with reference to the plan described above for the years 2005, 2006 and 2007, and (ii) to grant express authorisation to the Chairman and Managing Director to include among the beneficiaries of these bonuses up to four senior managers of the Company and the Ducati Group, who may differ year by year.

F-49

---



No bonuses were earned under the above plan in 2005 or in prior years and, accordingly, no provision has been recorded in this regard in the financial statements as of December 31, 2005.

On December 13, 2005, the Compensation Committee authorised the Managing Director to grant a bonus to a senior manager, dependent on the outcome of certain events including the successful completion of the sale by TPG Motorcycle Acquisition, L.P., of a 30% interest, less one share, in the Company to Invest Industrial Holdings S.A., for which a non-binding agreement in principle has been reached at this time. The conditions for making the payment described above have not occurred as of December 31, 2005 and, accordingly, no related provision has been recorded in the consolidated financial statements at that date.

See notes 32 and 36 for information on the stock option plans, the employee share purchase plan and any commitments deriving from events occurring subsequent to year end.

20.     Legal proceedings

The parent company is involved in a dispute with a Belgian importer. A temporary executive order dated September 14, 1998 from the Commercial Court of Liege ordered the Company to pay 50,575,794 Belgian Francs (equal to  1,254 thousand) to its previous distributor, Performance S.A. (Performances), following the cancellation of the distribution contract. In execution of this requirement, Performances seized and sold at auction 106 motorcycles belonging to the Company that were in its possession. The proceeds of the sale were 27,835,078 Belgian Francs, including expenses and VAT (equal to  690 thousand). With a ruling dated May 27, 1999, later confirmed by an un-appealable judgement from the Belgian Supreme Court dated June 21, 2001, the Appeal Court of Liege declared that the Belgian judge had no jurisdiction and annulled the sentence of the Commercial Court dated September 14, 1998. As a consequence, the Company took a series of actions
against Performances designed to recover the proceeds of the auction sale, excluding VAT and part of the legal expenses, totalling about 23 million Belgian Francs (about  570 thousand). Performances and Jet Set Car were declared bankrupt on October 14, 1999 and October 23, 2000, respectively. Today, it appears very probable that, in consideration of the presence of privileged creditors in the allocation of the bankruptcy assets, the Company will not recover the proceeds mentioned. For this reason, no receivables have been recorded in relation to the counterparty since the likelihood of recovering the auction proceeds is considered remote. The provision recorded in prior years has been utilised in full, but no further provisions have been made since the Group does not envisage incurring any further costs in relation to this dispute.

21.     Securitisation of receivables

Ducati Motor Holding S.p.A. has signed a five-year contract, pursuant to Law 130/99, for the disposal of trade receivables under revolving securitisation arrangements (asset-backed securities). The securitisation of trade receivables was arranged in prior years as part of changes to the administration of customer credit, involving a move from factoring to the direct management of both the collection risk and the financing of the commercial network. These activities were previously carried out by a factoring company. In this way, the Ducati Group has achieved considerable savings on commissions and charges for the without-recourse disposal of receivables, and earns interest income on dealer financing activities.

F-50

---



The following information is provided in compliance with Consob communication no. DAC/RM/97003369 of 9 April 1997 regarding the accounting recognition of transactions involving the disposal of receivables.

Each month, in general, receivables are sold without recourse to a special-purpose vehicle called Ducati Desmo Finance 1 S.r.l. (D.D.F.1 or the SPE)) which is owned by SVM Securitisation Vehicles Management S.r.l. and Finanziaria Internazionale Securitisation Group S.p.A., both based in Conegliano (Treviso). The Ducati Group is not linked with these companies by any form of ownership interest, pact and/or agreement that would require, from a legal standpoint, the recognition of the SPE and its parent companies as subsidiaries and/or related parties.

This purchase of receivables was initially financed via the issue of bonds by D.D.F.1 S.r.l. with a nominal value of  43 million, of which  33 million are Class A and  10 million are Class B. Subsequently, on December 21, 2004, D.D.F. 1 issued additional Class A bonds totalling  12 million.

The Class A bonds were purchased entirely by Banca Intesa, which then sold almost all of them (99.5% of the first issue and all of the second issue) to Romulus Funding Inc., a finance company registered in Delaware (U.S.A.) that is wholly owned by Global Securitization Services LLC. The Ducati Group is not linked to these companies by any form of ownership interest, pact and/or agreement that would require their recognition as related parties. Romulus Funding Inc. financed the transaction by issuing Asset-backed Commercial Paper.

The Class B bonds were purchased in full,  10 million, by Ducati North America Inc., the Ducati Groups subsidiary operating in the Canadian and American markets. The bonds taken up by Ducati North America Inc. were issued with a maturity date of July 28, 2009 and earn interest at 3-month Euribor, paid quarterly in arrears on 28 January, April, July and October of each year. Interest payments are subordinate to the cash requirements of the vehicle company for the monthly purchase of receivables. These bonds are classified as financial fixed assets in the balance sheet of the subsidiary since they mature in 2009. The repayment of these bonds is subordinated with respect to the Class A bonds (issued by D.F.F.1 and mostly taken up by Romulus Funding Inc.).

Beginning from 2003, a number of foreign subsidiaries have also been gradually involved in the securitisation programme. Currently, four Ducati Group companies are involved (Ducati Motor Holding, Ducati France, Ducati UK and Ducati Motor Deutschland).

In operational terms, sale of receivables by the foreign branches involve the sale without recourse of their receivables to Ducati Motor Holding, which then sells them to the special-purpose vehicle.

F-51

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The total nominal value of the receivables sold, the amount collected and the deferred portion are indicated below:

|                                                                                         |  | December 31,    2005 |          | December 31,    2004 | 
|---------------------------------------------------------------------------------------- |  | -------------------- | -------- | -------------------- | 
|                                                                                         |  |                      |          |                      | 
|                                                                                         |  |                      | ( 000) |                      | 
|Nominal   value of receivables sold to the SPE (turnover)                                |  |                      | 110.12   |                      | 
|Payments   received from the SPE                                                         |  |                      | 102.72   |                      | 
|Interest   and expenses                                                                  |  |                      | 1.37     |                      | 
|Amount   deferred                                                                        |  |                      | 6.03     |                      | 
|*   inc. AUD 3.0 million, CHF 0.5 million and GBP 5.7 million                            |  |                      |          |                      | 
|EFFECT ON THE FINANCIAL POSITION                                                         |  |                      |          |                      | 
|Receivables   not collected by the SPE and not yet due                                   |  |                      | 33.35    |                      | 
|Receivables   not collected by the SPE but due                                           |  |                      | 12.08    |                      | 
|                                                                                         |  |                      |          |                      | 
|Total receivables to be collected by the SPE                                             |  |                      | 45.43    |                      | 
|Amount   deferred                                                                        |  |                      | (6.03    | )                    | 
|Receivables collected by DMH on behalf of the   SPE but not yet paid over to that entity |  |                      | (3.17    | )                    | 
|                                                                                         |  |                      |          |                      | 
|Total effect on the financial position                                                   |  |                      | 36.23    |                      | 

The amount of  36.23 million as of December 31, 2005 ( 34.29 million as of December 31, 2004) represents the total already collected by the Group in relation to receivables that the vehicle company has not yet collected from customers. No collection difficulties are foreseen on these receivables.

Exchange differences and commissions associated with the securitisation are reflected in the statement of income.

The securitisation essentially exposes the Ducati Group to the risk of not collecting the deferred amount which, under agreements between the vehicle company and all its creditors, is subordinated to the repayment of the bonds and the reimbursement of all its operating costs and, therefore, to the collection of the sold receivables. In addition, Ducati North America Inc. is also exposed to the risk that the Class B bonds might not be repaid if the sold receivables are not collected, since Class B bonds are subordinate to Class A bonds. This risk is currently considered remote by the Group in view of the high quality of the portfolio sold. Under a commitment letter in favour of the vehicle company signed by Ducati Motor Holding S.p.A., the latter is committed to covering the operating costs of Ducati Desmo Finance 1 S.r.l. and to taking all necessary action to ensure that it is not declared bankrupt and/or wound-up, excluding any failure to collect
receivables.

As part of the securitisation of trade receivables, San Paolo IMI S.p.A. has given a guarantee on behalf of Ducati Motor Holding S.p.A. in favour of D.D.F.1, for a maximum of  5,800,000, to guarantee any amounts that might be deducted by debtors, on the settlement of amounts already securitised, in recognition of rebates granted by the company on the achievement of their sales targets (note 18).

F-52

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| | As already mentioned in the note on accounting policies, SIC 12    Consolidation - Special-purpose entities (SPE) establishes that an SPE must   be consolidated when the substance of the relationship between a company and   the vehicle company suggests that the latter is effectively controlled by the   former; the vehicle company has therefore been consolidated in accordance   with IFRS.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The effect of consolidating the vehicle company and of the other IFRS adjustments to shareholders equity and net results is not significant, other than the effect on the net financial indebtedness. In particular, these relate to the reversal of capitalised costs regarding the securitisation transaction and the associated amortisation with a net effect of  346 thousand and  514 thousand, respectively, as of December 31, 2005 and 2004.

The consolidation of the vehicle company has had the following effects:

|                                        |  | December, 31,    2005 |           | December, 31,    2004 | 
|--------------------------------------- |  | --------------------- | --------- | --------------------- | 
|                                        |  |                       |           |                       | 
|                                        |  |                       | (  000) |                       | 
|Increase   in cash and cash equivalents |  |                       | 15,591    |                       | 
|Increase   in trade receivables         |  |                       | 36,243    |                       | 
|Reversal   of Junior notes              |  |                       | (10,000   | )                     | 
|Increase   in financial payables        |  |                       | (41,834   | )                     | 
|Reveral   of capitalised costs          |  |                       | (346      | )                     | 
|                                        |  |                       |           |                       | 
|Total effect on net assets              |  |                       | (346      | )                     | 

Liquid assets totalling  15,591 thousand as of December 31, 2005 and  16,000 thousand as of December 31, 2004 are not freely available to the Ducati Group since they are controlled by Ducati Desmo Finance 1 S.r.l. (D.D.F.1).

22.     Revenues

The Group operates principally in one industrial segment, being the design, manufacture and sale of motorcycles and related products, offering in addition a wide range of articles for sale and services.

Revenues are analysed by category of product and service below:

|                       |  | Year ended   December 31,   2005 |          | Year ended   December 31,   2004 | 
|---------------------- |  | -------------------------------- | -------- | -------------------------------- | 
|                       |  |                                  |          |                                  | 
|                       |  |                                  | ( 000) |                                  | 
|Motorcycles            |  |                                  | 247,236  |                                  | 
|Other related products |  |                                  | 70,397   |                                  | 
|Services               |  |                                  | 3,214    |                                  | 
|                       |  |                                  |          |                                  | 
|Total                  |  |                                  | 320,847  |                                  | 

F-53

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Revenues are analysed below by geographical area:

|                  |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|----------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                  |  |                                   |          |                                   | 
|                  |  |                                   | ( 000) |                                   | 
|Italy             |  |                                   | 89,075   |                                   | 
|United   States   |  |                                   | 60,168   |                                   | 
|France            |  |                                   | 30,788   |                                   | 
|United   Kingdom  |  |                                   | 19,498   |                                   | 
|Germany           |  |                                   | 22,936   |                                   | 
|Japan             |  |                                   | 27,227   |                                   | 
|Other   countries |  |                                   | 71,155   |                                   | 
|                  |  |                                   |          |                                   | 
|Total             |  |                                   | 320,847  |                                   | 



Although the IFRS do not specifically cover the classification of dealer incentives (essentially based on volume sold), these costs, totalling  18,471 thousand and  17,898 thousand respectively as of December 31, 2005 and 2004, have been classified as a reduction of revenues rather than as distribution costs, having regard for the approach taken by other companies operating in the automotive sector upon transition to IFRS.

23.     Cost of sales

The cost of sales consists of the cost of producing or purchasing the products and goods that have been sold. This includes all the costs of materials, external processing, direct and indirect production labour, inward logistics and internal movements, and direct production overheads. The cost of sales also includes: research expenses, development costs not capitalized, amortisation of capitalised development costs, depreciation of property, plant and equipment used for production and the write-down of inventories. The research and development costs charged to the statements of income for the year ended December 31, 2005 and 2004 amounted to  6,594 thousand and  5,203 thousand respectively.

The cost of sales is analysed below:

|                                                |  | Year ended December  31,    2005 |          | Year ended December  31, 
2004 | 
|----------------------------------------------- |  | -------------------------------- | -------- | ------------------------------ | 
|                                                |  |                                  |          |                                | 
|                                                |  |                                  | ( 000) |                                | 
|Cost   of raw materials                         |  |                                  | 164,942  |                                | 
|Change   in inventories                         |  |                                  | 12,262   |                                | 
|Payroll   costs (note 24)                       |  |                                  | 31,019   |                                | 
|Depreciation   and amortisation (notes 5 and 7) |  |                                  | 19,633   |                                | 
|Write-downs   (note 7)                          |  |                                  | 9,270    |                                | 
|Other                                           |  |                                  | 25,266   |                                | 
|                                                |  |                                  |          |                                | 
|Total                                           |  |                                  | 262,392  |                                | 

F-54

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The caption Other has decreased significantly with respect to the
prior year due to the reduction in outsourcing by about  8.5 million,
linked to the decline in production, and an increase in the capitalisation of
development costs by about  5.5 million. This caption also includes (i)
 0.7 million provided to cover penalty charges from a supplier under a
agreement, and (ii)  0.2 million incurred to terminate a supply contract
with a different supplier that has already been paid; both penalties relate to
the cancellation of orders for production materials that are no long required
due to the elimination of certain models from the product range, consistent with
the new Group strategy of focusing on top-end motorcycles.

24.     Personnel costs

Personnel costs are analysed below:

|                                           |  | Year ended   December 31, 2005 |          | Year ended   December 31,    2004 | 
|------------------------------------------ |  | ------------------------------ | -------- | --------------------------------- | 
|                                           |  |                                |          |                                   | 
|                                           |  |                                | ( 000) |                                   | 
|Wages   and salaries                       |  |                                | 37,565   |                                   | 
|Social   security contributions            |  |                                | 11,462   |                                   | 
|Employees   leaving entitlement (note 14) |  |                                | 2,379    |                                   | 
|Other   costs:                             |  |                                |          |                                   | 
|Canteen                                    |  |                                | 927      |                                   | 
|Health   and social insurance              |  |                                | 118      |                                   | 
|Recruitment                                |  |                                | 138      |                                   | 
|Other                                      |  |                                | 798      |                                   | 
|Stock   Option compensation (note 32)      |  |                                | 1,238    |                                   | 
|                                           |  |                                |          |                                   | 
|Total                                      |  |                                | 54,625   |                                   | 

The Ducati Groups workforce includes:

|                |  | December 31, 2005 |       | December 31, 2004 | 
|--------------- |  | ----------------- | ----- | ----------------- | 
|                |  |                   |       |                   | 
|                |  | year end          |       | average           | 
|                |  |                   |       |                   | 
|Managers        |  |                   | 51    |                   | 
|Office staff    |  |                   | 537   |                   | 
|Foremen         |  |                   | 19    |                   | 
|Factory workers |  |                   | 527   |                   | 
|                |  |                   |       |                   | 
|Total           |  |                   | 1,134 |                   | 

The Ducati Group employed 1,134 persons as of December 31, 2005, down by 5 from 1,139 employees at the end of 2004.

F-55

---



Personnel costs are classified as follows:

|                                                |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|----------------------------------------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                                                |  |                                   |          |                                   | 
|                                                |  |                                   | ( 000) |                                   | 
|Cost   of sales (note 23)                       |  |                                   | 31,019   |                                   | 
|Distribution   costs (note 26)                  |  |                                   | 17,071   |                                   | 
|General   and administrative expenses (note 27) |  |                                   | 6,535    |                                   | 
|                                                |  |                                   |          |                                   | 
|Total                                           |  |                                   | 54,625   |                                   | 

25.     Other income

Other income is analysed below:

|             |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|------------ |  | --------------------------------- | -------- | --------------------------------- | 
|             |  |                                   |          |                                   | 
|             |  |                                   | ( 000) |                                   | 
|Sponsorships |  |                                   | 25,180   |                                   | 
|Royalties    |  |                                   | 1,724    |                                   | 
|Other        |  |                                   | 7,280    |                                   | 
|             |  |                                   |          |                                   | 
|Total        |  |                                   | 34,184   |                                   | 



Sponsorship revenues were mostly earned by Ducati Corse S.r.l. for taking part in Motorcycle Grand Prix and included:  10.1 million from Charles Stewart & Company Ltd,  4.0 million from Telecom Italia S.p.A,  2.8 million from Shell International Oil Prod.,  1.0 million from Bridgestone Corporation,  1.3 million from Xerox Ltd and  1.2 million from IRTA SA.

26.     Distribution costs

Distribution costs are analysed below:

|                                   |  | Year ended   December 31,    2005 |          | Year ended   December 31,  2004 | 
|---------------------------------- |  | --------------------------------- | -------- | ------------------------------- | 
|                                   |  |                                   |          |                                 | 
|                                   |  |                                   | ( 000) |                                 | 
|Personnel   costs (note 24)        |  |                                   | 17,071   |                                 | 
|Advertising   and public relations |  |                                   | 2,612    |                                 | 
|Other   commercial costs           |  |                                   | 69,760   |                                 | 
|                                   |  |                                   |          |                                 | 
|Total                              |  |                                   | 89,443   |                                 | 

F-56

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Other commercial costs include about  27.0 million relating to foreign affiliates, ( 29.3 million as of December 31, 2004),  13.5 million ( 11.6 million as of December 31, 2004) for the compensation to pilots and team management expenses of Ducati Corse S.r.l.,  4.1 million ( 5.3 million as of December 31, 2004) for product warranty costs and  6.5 million ( 4.9 million as of December 31, 2004) for product delivery costs.

27.     General and administrative expenses

General and administrative expenses are analysed below:

|                                                |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|----------------------------------------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                                                |  |                                   |          |                                   | 
|                                                |  |                                   | ( 000) |                                   | 
|Personnel   costs (note 24)                     |  |                                   | 6,535    |                                   | 
|Other   general and administrative expenses     |  |                                   | 10,859   |                                   | 
|Depreciation   and amortisation (notes 5 and 7) |  |                                   | 4,461    |                                   | 
|                                                |  |                                   |          |                                   | 
|Total                                           |  |                                   | 21,855   |                                   | 

28.     Interest income

Interest income is analysed below:

|                         |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|------------------------ |  | --------------------------------- | -------- | --------------------------------- | 
|                         |  |                                   |          |                                   | 
|                         |  |                                   | ( 000) |                                   | 
|Bank   interest          |  |                                   | 829      |                                   | 
|Other   financial income |  |                                   | 2,413    |                                   | 
|                         |  |                                   |          |                                   | 
|Total                    |  |                                   | 3,242    |                                   | 

29.     Interest expense

Interest expense is analysed below:

|                                         |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|---------------------------------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                                         |  |                                   |          |                                   | 
|                                         |  |                                   | ( 000) |                                   | 
|Bank   interest                          |  |                                   | 4,600    |                                   | 
|Depreciation   and amortisation (note 7) |  |                                   |         |                                   | 
|Other   financial charges                |  |                                   | 4,766    |                                   | 
|                                         |  |                                   |          |                                   | 
|Total                                    |  |                                   | 9,366    |                                   | 

F-57

---



Bank interest expense represents the financial cost of borrowing.

Other financial charges mainly reflect charges and commission on ordinary current accounts, export/import-related charges and commission, bond repurchase premiums and the charges on forward contracts.

The reduction in Other financial charges in 2005 mainly reflects repayment of the bond and the arrangement of a syndicated loan on more favourable terms.

30.     Foreign exchange gain (loss)

Foreign exchange gain (losses) were generated by the cash collection of amounts denominated in foreign currencies during 2005, and by the adjustment of trade receivables and payables denominated in foreign currencies using the year-end rates of exchange.

Exchange differences are analysed below:

|Exchange gains        |  | Year ended   December 31,   2005 |          | Year ended   December 31,    2004 | 
|--------------------- |  | -------------------------------- | -------- | --------------------------------- | 
|                      |  |                                  |          |                                   | 
|                      |  |                                  | ( 000) |                                   | 
|Valuation differences |  |                                  | 144      |                                   | 
|Realised differences  |  |                                  | 4,902    |                                   | 
|                      |  |                                  |          |                                   | 
|Total exchange gains  |  |                                  | 5,046    |                                   | 



|Exchange losses       |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|--------------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                      |  |                                   |          |                                   | 
|                      |  |                                   | ( 000) |                                   | 
|Valuation differences |  |                                   | (2,735   | )                                 | 
|                      |  |                                   |          |                                   | 
|Realised differences  |  |                                   | (3,502   | )                                 | 
|                      |  |                                   |          |                                   | 
|Total exchange losses |  |                                   | (6,237   | )                                 | 

F-58

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31.     Income Taxes

Income taxes are analysed below:

|                                               |  | Year ended   December 31,    2005 |          | Year ended   December 31,    2004 | 
|---------------------------------------------- |  | --------------------------------- | -------- | --------------------------------- | 
|                                               |  |                                   |          |                                   | 
|                                               |  |                                   | ( 000) |                                   | 
|Ires and other income taxes                    |  |                                   | (556     | )                                 | 
|Irap                                           |  |                                   | (1,193   | )                                 | 
|Prior-period taxes                             |  |                                   | 57       |                                   | 
|Income taxes of foreign   companies            |  |                                   | (214     | )                                 | 
|                                               |  |                                   |          |                                   | 
|Total current income taxes                     |  |                                   | (1,906   | )                                 | 
|                                               |  |                                   |          |                                   | 
|Deferred tax assets (note 9)                   |  |                                   | 2,909    |                                   | 
|                                               |  |                                   |          |                                   | 
|Deferred taxes (note 15)                       |  |                                   | (1,514   | )                                 | 
|                                               |  |                                   |          |                                   | 
|Total deferred tax assets   (liabilities), net |  |                                   | 1,395    |                                   | 
|                                               |  |                                   |          |                                   | 
|Total income taxes                             |  |                                   | (511     | )                                 | 

The current taxes of Italian companies include IRAP and IRES in relation to
Ducati Corse S.r.l., Ducati Retail S.r.l. and Ducati Consulting S.r.l. There is
no IRES tax charge for Ducati Motor Holding S.p.A.

The income tax calculations prepared for 2004 by Ducati Motor Holding S.p.A. and Ducati Corse S.r.l. took advantage of the incentives for investment in research and development envisaged by art. 1 of Decree 269 dated 30/09/2003 as converted, with modifications, into Law 320 dated 24/11/2003 (the so-called Techno-Tremonti law).

Ducati Motor Holding S.p.A. also decided to file a supplementary return (article 8 of the above law).

The difference between the theoretical taxation determined by applying the current tax rate to the reported results before tax and the net taxation actually recorded in the consolidated statement of operations is analysed below:

F-59

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|                                                      |  | Year ended December 31, 2005 |         | Year ended December 31, 2004 | 
|----------------------------------------------------- |  | ---------------------------- | ------- | ---------------------------- | 
|                                                      |  |                              |         |                              | 
|                                                      |  | ( 000)                     |         | ( 000)                     | 
|                                                      |  | Ires                         |         | Irap                         | 
|                                                      |  |                              |         |                              | 
|Profit (loss) before tax                              |  |                              | (40,952 | )                            | 
|Timing differences                                    |  |                              | 22,280  |                              | 
|Permanent differences                                 |  |                              | 21,005  |                              | 
|Taxable income before carry-forward tax losses        |  |                              | 2,333   |                              | 
|Utilisation of tax losses carried forward             |  |                              |         |                              | 
|Taxable income                                        |  |                              | 2,333   |                              | 
|Current income taxes                                  |  |                              | 770     |                              | 
|Taxes relating to prior years and other   adjustments |  |                              | (85     | )                            | 
|                                                      |  |                              |         |                              | 
|Total current income taxes                            |  |                              | 685     |                              | 
|                                                      |  |                              |         |                              | 
|Income tax on timing differences                      |  |                              | (5,844  | )                            | 
|Tax on timing differences due to IFRS adoption        |  |                              | 2,151   |                              | 
|                                                      |  |                              |         |                              | 
|Tax on losses carried forward                         |  |                              |        |                              | 
|                                                      |  |                              |         |                              | 
|Tax on utilisation of losses carried forward          |  |                              | 2,925   |                              | 
|                                                      |  |                              |         |                              | 
|                                                      |  |                              | (768    | )                            | 
|                                                      |  |                              |         |                              | 
|Total actual tax charge                               |  |                              | (83     | )                            | 

32.     Stock option plans

32.a   First Plan

On September 7, 1998, the extraordinary meeting of Ducati Motor Holding S.p.A. approved a divisible share capital increase with the waiver of pre-emption rights pursuant to art. 2441 of the Italian Civil Code in order to service a Stock Option Plan. Under this authorisation, share capital will be increased by a maximum nominal value of Lire 8,148,148,000 on several, independent occasions with an annual frequency, by and not after August 4, 2007, via the issue of a maximum of 8,148,148 new ordinary shares, carrying dividend rights from 1 January of the year in which they are subscribed for and become fully paid, with a nominal value of Lire 1,000 each ( 0,516) plus a share premium of Lire 400 each ( 0,206). These new shares may only be offered for subscription by managers, employees and consultants of the Company ( the Beneficiaries), as part of the stock option plan described in more detail below. The list of Beneficiaries,
together with the exact number of new ordinary shares available to each of them and the timetable for the vesting of the respective subscription rights, was approved by the Board of Directors on August 4, 1998 and has been filed with the Companys official documents. Taken together, the specific dynamics of this capital increase, the long period allowed for the exercise of the option rights and the fact that the increase is divisible, mean that for all legal effects this capital increase is completed year by year for the amount that, year by year, has been properly subscribed for, with the consequent modification of the related clause in the articles of association and the acquisition of voting and dividend rights by the newly-issued shares.

F-60

---



The regulations of the first Stock Option Plan state as follows:

Vesting of the options to subscribe for ordinary shares in the Company. The options to subscribe for ordinary shares in the Company (as granted above to the Beneficiaries) (the Options) vest (i.e. the individual Beneficiary has earned the right to exercise them, but solely on the conditions set out in the following paragraph) on December 31, 2001. The extraordinary meeting held on September 7, 1998 also adopted resolutions regarding the expiry and transferability of the Options.

Exercise of the Options. Without prejudice to the situations involving the expiry of Options envisaged by the Plan, once they have vested, the Options may be exercised (since the conditions for such exercise are already satisfied) all together or in part (and, therefore, the Beneficiary may subscribe for and pay for all or a part of the ordinary shares offered to him under option), by giving notice of this to the Company during the period of 30 days subsequent to the date of approval at the shareholders meeting of the financial statements for each year, and in any case by and no later than August 4, 2007.

Should the Company not be listed at the time the corresponding options are exercised, or should the Company, at his exclusive choice, merely wish to satisfy its obligation by paying sums of money, then the beneficiaries will receive a cash amount equal to the difference between the market value per share (determined by multiplying the EBITDA resulting from the latest approved financial statements prepared in accordance with US GAAP by 5.0, subtracting net debt, and then dividing by the number of shares outstanding as of the exercise date) and the exercise price, multiplied by the number of vested Options exercised. Should the Company decide to satisfy in cash, in whole or in part, its obligations deriving from the exercise of Option Rights, then the Company will pay any additional amounts necessary to guarantee that the value received by the beneficiary after deduction of the related personal income taxes is not less than the net value that he would have received
had the Company decided to deliver the shares and (where relevant under the applicable fiscal legislation) had the beneficiary sold such shares on the Stock Exchange on a timely basis.

The situation regarding the first Stock Option Plan is summarised below:

F-61

---



|Stock   Option Plans - First Plan                |  | Year ended December 31, 2005 |           | Year ended December 31, 2004         | 
|------------------------------------------------ |  | ---------------------------- | --------- | ------------------------------------ | 
|                                                 |  |                              |           |                                      | 
|                                                 |  | Number of   shares           |           | Average   Exercise   price   in Euro | 
|                                                 |  |                              |           |                                      | 
|Options outstanding at the beginning of the year |  |                              | 6,212,149 |                                      | 
|New options granted during the year              |  |                              |          |                                      | 
|Options exercised during the year                |  |                              | -533,630  |                                      | 
|Options expiring during the year                 |  |                              |          |                                      | 
|Options outstanding at the end  of the year      |  | *                            | 5,678,519 |                                      | 
|of which: vested                                 |  |                              | 5,678,519 |                                      | 

|                                
|--------------------------------
|* to be exercised by August 2007

32.b   Second Plan

In order to reward the results obtained and, at the same time, provide an incentive for the management of the Company, a resolution of the Compensation Committee on September 6, 1999 (adopted to the extent necessary by the Board of Directors at its meeting on September 13, 1999), set down the regulations (the Plan) regarding the granting of additional stock appreciation rights and/or rights to subscribe for or purchase shares in the Company with the following main characteristics:

a) the beneficiaries of the Plan are the executive directors and managers (employees or consultants and freelance personnel) of the Company and its subsidiaries identified by the Compensation Committee in compliance with the requirements of art. 2389 of the Italian Civil Code;

b) the beneficiaries are granted: rights (Options) which enable them on the conditions described below to subscribe for or acquire ordinary shares in the Company, on condition that it continues to be listed on the Italian Stock Exchange, and subject to a shareholders resolution to increase share capital or acquire own shares; or, in the absence of a shareholders resolution or if the Company is no longer listed, a sum of money or a combination of these two factors;

c) the number of Options to be granted each year is established by the Board of Directors. Commencing from 2002, the Options may be granted to the beneficiaries by the Compensation Committee or by the Board in compliance with art. 2381.2 of the Italian Civil Code, by resolution to be adopted within 60 days of the approval of the draft consolidated balance sheet and statement of operations for the prior year (the Consolidated Financial Statements), on condition that the maximum number of Options granted in any one year may not exceed two percent of the Companys outstanding share capital (the Shares). However, following the expiry of Options granted but not exercised due to the termination of employment, or to the termination of collaboration or consultancy agreements with certain employees, consultants and/or freelance collaborators of the Company or its subsidiaries who became beneficiaries in prior years, the Compensation Committee
and the Board of Directors have decided that the conditions in 2002 were such that a higher number of Options could be granted with respect to the Options granted in prior years;

F-62

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d) the Options granted vest in three equal instalments, unless decided otherwise by the Board of Directors or the Compensation Committee, at annual intervals, commencing from 31 December of the year immediately subsequent to the year of granting; these Options can be exercised by the beneficiaries year by year, by sending a related communication to the Company within thirty days of the date of approval of the latest Consolidated Financial Statements. With regard to Options relating to the years 1999, 2000 and 2001, the communication must be sent within thirty days of the approval and publication of the Consolidated Financial Statements accompanied by the related Explanatory Notes and Report on Operations. Options expire if they are not exercised within 7 years of their grant date;

e) at a meeting held on March 3, 2000, the Board of Directors approved a modification to the Plan adopted by the Compensation Committee in September 1999 in order to take account of changes in the income tax regulations applying to employees with regard to stock option plans.

In particular, it was established with regard to the determination of the Exercise Price (as defined in the Plan, i.e. the strike price), that the value of the Shares is defined from that date forward to be the value of the Companys ordinary Shares at the date of granting the related Options, as determined in accordance with the fiscal regulations current at the grant date (without prejudice however to the requirement of the Plan that the Exercise Price may not be lower than the consolidated shareholders equity per Share at the date the Options are exercised by the beneficiaries.

The value of the Shares determined in accordance with current fiscal regulations is now based on the arithmetic average of the stock market prices struck during the last month prior to the grant (where, as clarified by the Ministry of Finance, last month is understood to be the period from the reference date (i.e. the grant date of the Options) to the same day in the preceding calendar month), while the previous text of the Plan made reference to the average of the monthly average listed prices for the Shares on the Italian Stock Exchange for the three months prior to the month of granting.

The change was therefore necessary in order to avoid the situation whereby fixing the Exercise Price in a different manner to that prescribed by fiscal regulations might inadvertently give rise to a taxable situation for beneficiaries who, as employees, could otherwise benefit from the tax exemption available under art. 48.2, g-bis of Consolidated Income Tax Legislation. This change applies to Options granted subsequent to those granted for 1999.

f) should the Company not be listed at the time the corresponding Options are exercised, or should the Company, at his exclusive choice, merely wish to satisfy its obligation by paying sum of money, then the beneficiaries will receive a cash amount equal to the difference between the market value per Share (determined by multiplying the EBITDA resulting from the latest approved financial statements prepared in accordance with Italian GAAP by 10, subtracting consolidated net debt, and then dividing by the number of shares outstanding as of the exercise date) and the exercise price, multiplied by the number of options exercised). The above calculation will continue to make reference to the latest approved financial statements prepared in accordance with Italian GAAP until a change in the regulations is approved.

Should the Company satisfy in cash, in whole or in part, its obligations deriving from the exercise of Options, then the Company (or the subsidiary for which the beneficiary works) will pay any additional amounts necessary to guarantee that the value received by the beneficiary after the deduction of the related personal income taxes is not less than the net value that he would have received had the Company decided to deliver the shares and (where relevant under the applicable fiscal legislation) had the beneficiary sold such shares at the market value per share described above.

F-63

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As part of the above-mentioned resolutions of the Compensation Committee and the Board of Directors dated, respectively, September 6 and 13, 1999, the Company granted a total of 1,250,000 Options to three beneficiaries (Federico Minoli, Carlo Di Biagio and Massimo Bordi) with regard to 1999, on the terms and conditions set out in the Plan. Subsequently, in compliance with those resolutions, the Managing Director granted a total of 1,909,259 Options to 50 further beneficiaries prior to 31 December 1999, as reported on the related list filed with the Companys official papers. The exercise price established for all the Options granted in relation to 1999 is permanently fixed at  2.879, which was the average of the monthly average official prices for the shares of the Company listed on the Italian Stock Exchange for the months of June, July and August 1999.

At a meeting held on March 3, 2000, the Board of Directors decided to grant Options for 2000 on the terms and conditions set out in the Plan, as described above, and, in particular, to the maximum extent envisaged therein of 3,159,259 Options. The Options were granted with a permanently fixed exercise price of  2.810 as follows: 500,000 Options granted by the Board to the Managing Director at that time, Federico Minoli, with the remainder, 2,659,259 Options, at the discretion of the Compensation Committee (on the understanding that no beneficiary could receive more than 500,000 Options), which granted them to a further 71 beneficiaries. The Options granted in accordance with the resolution vest in three annual instalments commencing from December 31, 2001 in the following proportions: 50%, 25% and 25%.

Partly as a consequence of the granting of Options in relation to 1999 and 2000, as described above, on May 2, 2000 the Shareholders Meeting approved an increase in share capital to service the Options already granted for 1999 and 2000, as well as the Options to be granted in relation to 2001 and 2002 in accordance with the terms of the Plan. This increase was approved with the total waiver of pre-emption rights pursuant to art. 2441.5 and .8 of the Italian Civil Code, since its purpose was to facilitate share ownership by employees as well as being, with regard to beneficiaries who are consultants or freelance collaborators of the Group, in the corporate interest. In particular, this is a divisible increase in capital, for payment, by a maximum of 12 million ordinary shares in the Company (and therefore with a maximum increase in the nominal value of share capital of  6,197,482) to be issued subsequent to the exercise of the Options granted to the
respective beneficiaries, with dividend rights from 1 January of the year in which each of the related shares is subscribed for and paid for, as defined by current legislation; this increase may be made by the Board on several, independent occasions at annual intervals, on the terms and conditions described in the Plan. It was also established that this capital increase must be made by and no later than July 31, 2009, in order to allow for the issue of Shares to service the exercise (within the deadline of 7 years from the grant date) of Options granted in 2002. The total number of Option beneficiaries in each year from 1999 to 2002 did not exceed 200 persons.

The Shareholders Meeting held on May 2, 2000 in both ordinary and extraordinary session also granted a mandate to the Board of Directors, or to an ad hoc committee appointed by the Board or by the articles of association, to do everything necessary in order to implement the capital increase described above.

F-64

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On March 15, 2001, the Board of Directors authorised the granting of 3,165,000 Options in relation to 2001, on the terms described above. These Options were granted with an exercise price of  1.9882 as follows:

|- | 500,000 Options to the Chairman of the Board of   Directors, Federico Minoli, and 500,000 Options to the previous Managing Director,   Carlo Di Biagio;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                        
|- | with the remainder, 2,165,000 Options, at the   discretion of the Compensation Committee which granted them to a further 73   beneficiaries.           

These Options vest in three annual instalments commencing from December 31, 2002 in the following proportions: 50%, 25% and 25%.

On February 14, 2002, the Board of Directors authorised the granting of 3,960,000 Options in relation to 2002, on the terms described above. These Options were granted with an exercise price of  1.8069 as follows:

|- | 500,000 Options to the Chairman of the Board of   Directors, Federico Minoli, and 500,000 Options to the previous Managing   Director, Carlo Di Biagio;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                        
|- | the remainder, 2,960,000 Options, were granted to a   further 90 beneficiaries.                                                                        

These Options vest in three annual instalments commencing from December 31, 2003 in the following proportions: 50%, 25% and 25%.

On February 13, 2003, in view of the stock market prices for the Companys shares, the Board of Directors resolved to replace by a multiple of 5 the multiple of 10 used in the formula to calculate the value of Ducati shares should the Options be paid out in cash with the Company no longer listed on the Stock Exchange. This modification relates to Options granted subsequent to the date of the above resolution.

The Board of Directors did not authorise any grant of Options in relation to 2003.

On March 11, 2004, the Board of Directors authorised the granting of 3,170,000 Options in relation to 2004, on the terms described above. These Options were granted with an exercise price of  1.3170 as follows:

|- | 500,000 Options to the Chairman of the Board of   Directors and Managing Director, Federico Minoli;
|- | ---------------------------------------------------------------------------------------------------
|  |                                                                                                    
|- | the remainder, 2,670,000 Options, were granted to   approximately a further 65 beneficiaries.      

These Options vest in three annual instalments commencing from December 31, 2005 in the following proportions: 50%, 25% and 25%.

F-65

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On May 6, 2004, the Shareholders Meeting in extraordinary session approved a proposed divisible share capital increase for cash, with premium if appropriate, with the waiver of pre-emption rights pursuant to para. 8 of art. 2441 of the Italian Civil Code, to service the companys stock option plan reserved solely for employees of the Ducati Group, up to a maximum value of  824,200 and therefore not exceeding 1% of the current share capital, to be implemented by and not after July 31, 2011 via the issue of a maximum of 1,585,000 ordinary shares carrying dividend rights from 1 January of the year in which they are subscribed for and become fully paid, as defined by current legislation. This increase is subject to all the conditions specified in the Plan and the following additional requirements: (i) the new shares may only be issued to service, in part or in full, the option rights granted for 2004 to those Employee Beneficiaries whose names have
already been identified by the special Committee appointed by the Board, on the terms and conditions established in the Plan; (ii) the shares will be issued at the overall price of  1.3170 each; (iii) in view of the special dynamics of this capital increase, the length of the implementation period available and its divisibility, the capital increase will be deemed, for all legal effects, to be completed year by year for the amount which, year by year, is properly subscribed and simultaneously paid in.

On March 10, 2005, the Board of Directors authorised the granting of 3,170,000 Options in relation to 2005, on the terms described above. These Options were granted with an exercise price of  1.0650 as follows:

|- | 500,000 Options to the Chairman of the Board of   Directors and Managing Director, Federico Minoli;
|- | ---------------------------------------------------------------------------------------------------
|  |                                                                                                    
|- | the remainder, 2,670,000 Options, were granted to   approximately a further 65 beneficiaries.      

These Options vest in three annual instalments commencing from December 31, 2006 in the following proportions: 50%, 25% and 25%.

The extraordinary session of the Shareholders Meeting held on May 5, 2005 approved an increase in share capital by a maximum of 1,588,000 shares.

The situation regarding this second plan is summarised below:

|Stock   Option Plans - second plan           |  | Year ended December 31, 2005 |            | Year ended December 31, 2004         | 
|-------------------------------------------- |  | ---------------------------- | ---------- | ------------------------------------ | 
|                                             |  |                              |            |                                      | 
|                                             |  | Number of   shares           |            | Average   Exercise   price   in Euro | 
|                                             |  |                              |            |                                      | 
|Options granted at the beginning of the year |  |                              | 14,356,630 |                                      | 
|Options granted during the year              |  |                              | 3,170,000  |                                      | 
|Options exercised during the year            |  |                              |           |                                      | 
|Options expired during the year              |  |                              | -65,000    |                                      | 
|Options outstanding at the end of the year   |  | *                            | 17,461,630 |                                      | 
|of which: vested                             |  |                              | 10,453,505 |                                      | 

| 
|-
|*

F-66

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Evidently, in addition to the exercise of all the Options, the development of the Stock Option Plans will depend on the decisions to be taken by the Company each year, at his choice, with regard to the granting of options to subscribe for new shares, as against the alternative of making cash payments. The Company, for both plans, does not intend to use the cash out provision.

The provisions of IFRS 2 relating to share-based payments were applied on preparation of the consolidated financial statements as of December 31, 2005. In accordance with these provisions, the total fair value of stock options at the grant date must be charged to the statement of operations. Changes in their fair value subsequent to the grant date do not alter their initial valuation. The cost of compensation corresponding to the fair value of the options is recognised as a payroll cost on a straight-line basis during the period between the grant date and the vesting date, and the matching entries are credited directly to shareholders equity.

The Group has adopted the transitional provisions envisaged by IFRS 2 and, accordingly, has applied the standard to all stock option plans granted after 7 November 2002 that had not already vested on the date that IFRS 2 came into force (January 1, 2005). As allowed under the transitional provisions for IFRS 2, no compensation costs have been recognised in relation to stock options granted prior to 7 November 2002.

The effect of adopting this IFRS has been to recognise additional costs of  1,238 thousand as of December 31, 2005 (note 24).

The Group used the following assumptions to make the actuarial calculations:

|Plan             |  | Expected    volatility |    | Risk-free % |  | Expected    dividends |   | Exercise % |      | Strike price | 
|---------------- |  | ---------------------- | -- | ----------- |  | --------------------- | - | ---------- | ---- | ------------ | 
|                 |  |                        |    |             |  |                       |   |            |      |              | 
|2004 - Tranche 1 |  |                        | 35 | %           |  | 3.72                  | % |            | 0.00 | %            | 
|2004 - Tranche 2 |  |                        | 35 | %           |  | 3.72                  | % |            | 0.00 | %            | 
|2004 - Tranche 3 |  |                        | 35 | %           |  | 3.72                  | % |            | 0.00 | %            | 
|2005 - Tranche 1 |  |                        | 34 | %           |  | 3.78                  | % |            | 0.00 | %            | 
|2005 - Tranche 2 |  |                        | 34 | %           |  | 3.78                  | % |            | 0.00 | %            | 
|2005 - Tranche 3 |  |                        | 34 | %           |  | 3.78                  | % |            | 0.00 | %            | 



|Plan             |  | Grant Date |            | Vesting Date |  | Maturity Date |  | Granted   Options |            | Option expected   to Vest |  | Share Price |  | Strike Price |         
|---------------- |  | ---------- | ---------- | ------------ |  | ------------- |  | ----------------- | ---------- | ------------------------- |  | ----------- |  | ------------ | --------
|                 |  |            |            |              |  |               |  |                   |            |                           |  |             |  |              |         
|                 |  |            |            |              |  |               |  |                   |            |                           |  | ( 000)    |  |              | ( 000)
|2004 - Tranche 1 |  |            | 03/11/2004 |              |  | 12/31/2005    |  |                   | 12/31/2011 |                           |  | 1,585       |  |              | 1,448   
|2004 - Tranche 2 |  |            | 03/11/2004 |              |  | 12/31/2006    |  |                   | 12/31/2011 |                           |  | 793         |  |              | 689     
|2004 - Tranche 3 |  |            | 03/11/2004 |              |  | 12/31/2007    |  |                   | 12/31/2011 |                           |  | 793         |  |              | 655     
|2005 - Tranche 1 |  |            | 03/10/2005 |              |  | 12/30/2006    |  |                   | 12/31/2012 |                           |  | 1,585       |  |              | 1,448   
|2005 - Tranche 2 |  |            | 03/10/2005 |              |  | 12/30/2007    |  |                   | 12/31/2012 |                           |  | 793         |  |              | 689     
|2005 - Tranche 3 |  |            | 03/10/2005 |              |  | 12/29/2008    |  |                   | 12/31/2012 |                           |  | 793         |  |              | 655     
|                 |  |            |            |              |  |               |  |                   |            |                           |  |             |  |              |         
|                 |  |            |            |              |  |               |  |                   |            |                           |  | 6,342       |  |              | 5,584   

F-67

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|Plan             |  | Binominal   Value |        | Expected   Term   (years) |  | Project expense   2005 |  | True up as of    December  31,   2005 |          | Balance as of   December 31,   2005 | 
|---------------- |  | ----------------- | ------ | ------------------------- |  | ---------------------- |  | ------------------------------------- | -------- | ----------------------------------- | 
|                 |  |                   |        |                           |  |                        |  |                                       |          |                                     | 
|                 |  |                   |        |                           |  |                        |  |                                       | ( 000) |                                     | 
|2004 - Tranche 1 |  |                   | 0.5679 |                           |  | 5.35                   |  |                                       | 455      |                                     | 
|2004 - Tranche 2 |  |                   | 0.5977 |                           |  | 5.84                   |  |                                       | 147      |                                     | 
|2004 - Tranche 3 |  |                   | 0.6254 |                           |  | 6.32                   |  |                                       | 108      |                                     | 
|2005 - Tranche 1 |  |                   | 0.4085 |                           |  | 5.56                   |  |                                       | 265      |                                     | 
|2005 - Tranche 2 |  |                   | 0.4293 |                           |  | 5.99                   |  |                                       | 85       |                                     | 
|2005 - Tranche 3 |  |                   | 0.4492 |                           |  | 6.43                   |  |                                       | 63       |                                     | 
|                 |  |                   |        |                           |  |                        |  |                                       |          |                                     | 
|Total            |  |                   |        |                           |  |                        |  |                                       | 1,123    |                                     | 

32.c   Employee share purchase plan

The employee share purchase plan was approved by the Board of Directors on
February 14, 2002, which delegated all necessary powers for its implementation
to the Managing Director. This plan is intended to facilitate the purchase of
shares by the permanent employees of the Ducati Group resident in Italy,
including part-timers and excluding those employees who are also directors of
Group companies, (the Employees), and is summarised as follows (the
Share Plan).

The Share Plan is intended to build the loyalty of the Employees by enabling them to receive at a discounted price (1/3 of the purchase price to be paid by the Company, up to a maximum of  1,000 paid by each Employee in each calendar year), ordinary shares in Ducati Motor Holding (the Shares) acquired in the Screen-traded Market administered by Borsa Italiana S.p.A. (the Market).

In particular, the Share Plan confers on the Employees the right, to be exercised by a certain date in each year, to inform the Company of the total value of Shares that they intend to purchase, up to the maximum annual limit established in the Share Plan ( 3,000 per employee per calendar year).

Based on the applications received, the Company instructs an intermediary to acquire the above shares in the Market on behalf of the Company. On the day of the purchase, the Company - via the intermediary - allocates the Shares to the Employees at the discounted price referred to above. The Shares acquired on this basis cannot be sold by the Employees for a period of 3 years. Specific regulations cover the termination of employment relationships with the Employees.

With regard to the application of company law, the implementation of the Share Plan is subject to the authorisation of the purchase of own shares by the shareholders at an ordinary meeting. In addition, the value of the assistance provided as a result of implementing the Share Plan cannot exceed the Companys distributable earnings and reserves.

As of December 31, 2005, the Share Plan has not been activated.

F-68

---



33.     Related Parties

The main transactions with related parties are shown below, pursuant to CONSOB communication DEM 2064231 of 30 September 2002 and in accordance with IAS 24.

(a) Year ended December 31, 2005

Transactions with members of the Board of Directors during the year ended December 31, 2005 were as follows:

|                      |  | Directors  fees |          | Collaboration    and/or remuneration |  | Reimbursement    of expenses | 
|--------------------- |  | ---------------- | -------- | ------------------------------------ |  | ---------------------------- | 
|                      |  |                  |          |                                      |  |                              | 
|Federico Minoli       |  |                  | *250,000 |                                      |  | 339,069                      | 
|Giorgio Seragnoli     |  |                  | 15,000   |                                      |  |                             | 
|Mauro Benetton        |  |                  | 15,000   |                                      |  |                             | 
|Massimo Bergami       |  |                  | 10,000   |                                      |  |                             | 
|David Bonderman       |  |                  | 15,000   |                                      |  |                             | 
|Alessandro M. M. Foti |  |                  | 5,000    |                                      |  |                             | 
|Abel Halpern          |  |                  | 15,000   |                                      |  |                             | 
|Andrea Lipparini      |  |                  | 15,000   |                                      |  | 9,158                        | 
|Paolo Pietrogrande    |  |                  | 15,000   |                                      |  |                             | 
|Dante Razzano         |  |                  | 15,000   |                                      |  |                             | 
|Giles Thorley         |  |                  | 15,000   |                                      |  |                             | 
|Ulrich Weiss          |  |                  | 15,000   |                                      |  |                             | 

|                                                  
|--------------------------------------------------
|* Waived annual directors emoluments of  15,000.

At the meeting of the parent companys Board of Directors held on February 10, 2005, Federico Minoli informed the Board that he had sold all his direct and indirect interests in Dream Engine S.r.l., thereby eliminating any potential economic interest in the companys future transactions, if any, with Dream Engine S.r.l., and stated in this regard that the company had signed a sponsorship agreement with Dream Engine S.r.l. concerning the Motogiro dItalia 2005.

On January 19, 2005, Paolo Pietrogrande, director, explained to the Board his potential conflict of interest with reference to a service agreement between the company and Contemporanea Progetti S.r.l., in which one of his relations owns a 30% interest, for the design of Ducatis new stand for trade fairs and other events at a cost of  40,000.00 + VAT (including expenses).

F-69

---



All the above transactions were arranged on arms-length terms. See also note 32 with reference to the Stock Option plans.

The directors direct interests in the shares of Ducati Motor Holding S.p.A. are detailed below:

|Directors         |  | Number of shares    held as of    December 31, 2005 |          
|----------------- |  | --------------------------------------------------- | ---------
|                  |  |                                                     |          
|Giorgio Seragnoli |  |                                                     | 7,815,692
|Federico Minoli   |  |                                                     | 225,000  

There are no significant transactions with other related parties, other than those disclosed above.

(b) Year ended December 31, 2004

Relations with members of the Board of Directors during the year ended December 31, 2004 were as follows:

|                      |  | Directors fees |          | Payments for    prior years |  | Collaboration and/or remuneration |  | Reimbursement    of expenses |        
|--------------------- |  | --------------- | -------- | --------------------------- |  | --------------------------------- |  | ---------------------------- | -------
|                      |  |                 |          |                             |  |                                   |  |                              |        
|Federico Minoli       |  |                 | *250,000 |                             |  |                                  |  |                              | 310,753
|Giorgio Seragnoli     |  |                 | 15,000   |                             |  |                                  |  |                              |       
|Mauro Benetton        |  |                 | 15,000   |                             |  |                                  |  |                              |       
|David Bonderman       |  |                 | 15,000   |                             |  | 30,000                            |  |                              |       
|Alessandro M. M. Foti |  |                 | 15,000   |                             |  |                                  |  |                              |       
|Abel Halpern          |  |                 | 15,000   |                             |  | 30,000                            |  |                              |       
|Andrea Lipparini      |  |                 | 15,000   |                             |  |                                  |  |                              | 1,695  
|Paolo Pietrogrande    |  |                 | 15,000   |                             |  |                                  |  |                              |       
|Dante Razzano         |  |                 | 15,000   |                             |  | 7,500                             |  |                              |       
|Giles Thorley         |  |                 | 15,000   |                             |  | 10,000                            |  |                              |       
|Ulrich Weiss          |  |                 | 15,000   |                             |  | 30,000                            |  |                              |       

|                                           
|-------------------------------------------
|* Waived directors emoluments of  15,000.

Two commercial services agreements have been signed with Dream Engine S.r.l., whose sole director and indirect controlling quotaholder until December 31, 2004 was Federico Minoli. These agreements involved, respectively, the organisation of the Motogiro dItalia and the Centopassi events which were held during the months of July and September 2004. The invoices recorded as of December 31, 2004 totalled  566 thousand.

F-70

---



At the meeting of the parent companys Board of Directors held on February
10, 2005, Federico Minoli stated that he had resolved the potential conflict of
interest regarding Dream Engine S.r.l. and that companys relations with
Ducati Motor Holding S.p.A.

Considering the interest of Ducati Motor Holding S.p.A. in the activities of
Dream Engine S.r.l., linked in particular with the rights to use the
Motogiro brand owned by the latter, Federico Minoli had decided to
sell all his direct and indirect interests in Dream Engine S.r.l.

A commercial services agreement was signed in 2003 with Contemporanea Progetti S.r.l., in which a relation of Paolo Pietrogrande holds a 30% interest. The value of the work completed by December 2004, under this agreement to brighten up the assembly line, totalled  98 thousand.

The Board of Directors previously granted Knowledge Lab S.r.l., in which A. Lipparini holds a 22.5% interest, a contract for the training of personnel which expired in December 2004. The value of this work was about  12,000. The invoices recorded as of December 31, 2004 totalled  8 thousand.

All the above transactions were arranged on arms-length terms.

34.     Financial instruments

Hedging of financial risk deriving from exchange-rate fluctuations

The Ducati Group operates in international markets and is therefore exposed to exchange risk.

Group policy in this regard is described below:

|- | objective: hedge expected financial flows for a period of about six   months and/or a similar amount of receivables in the various currencies   concerned;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                           
|- | approach: rolling, every three months;                                                                                                                    
|  |                                                                                                                                                           
|- | time horizon: six months;                                                                                                                                 
|  |                                                                                                                                                           
|- | instruments used: forward sales of currency against euro; swaps;   zero-cost options without leverage and without knockout;                               
|  |                                                                                                                                                           
|- | additional strategy: seek natural hedges via purchases denominated in   the currencies to be hedged.                                                      

Hedging of financial risk deriving from interest-rate fluctuations

The Ducati Groups exposure to interest-rate fluctuations is principally related to the loan arranged in May 2005.

Group policy is described below:

|- | objective: obtain certainty about the financial charges deriving from   medium/long-term funding;                                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                          
|- | approach: all funding transactions with a duration of more than 18   months are arranged with reference to a fixed rate of interest, regardless of   whether they are ordinary loans or leasing transactions.                                            
|  |                                                                                                                                                                                                                                                          
|- | instruments used: interest-rate swaps (IRS) are used if the   transactions are arranged with floating rates.                                                                                                                                             
|  |                                                                                                                                                                                                                                                          
|- | additional strategy: if the changes in funding rates can be reflected   in the way funds are employed, then borrowing can be arranged at floating   rates even in relation to long-term transactions (such as the securitisation   of trade receivables).

F-71

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Hedging of risk deriving from the management of trade receivables

The Ducati Group manages the collection risk relating to trade receivables directly, with the exception of Ducati North America and Ducati North Europe, which factor without recourse the majority of their trade receivables.

In Italy and the other European nations served by commercial branches, credit management is based on a system of credit limits for dealers. This system includes the charging interest when payments are received after the due date.

Except in special cases, the policy with regard to nations served by importers is not to accept risk and to cover the deferral of payments with letters of credit or bank guarantees.

In order to hedge exchange-rate and interest-rate risk, the Group arranges derivative contracts to cover expected total orders and contracts to hedge the effect of exchange-rate and interest-rate fluctuations. The following instruments are used:

|Forward Exchange Contracts |  | Nominal value   in  000 |        | Fair value   in  000 | 
|-------------------------- |  | ------------------------ | ------ | --------------------- | 
|                           |  |                          |        |                       | 
|Pounds sterling            |  |                          | 9,934  |                       | 
|US dollars                 |  |                          | 27,295 |                       | 
|Australian dollars         |  |                          | 7,343  |                       | 
|Japanese yen               |  |                          | 3,630  |                       | 
|Swiss francs               |  |                          | 3,933  |                       | 
|                           |  |                          |        |                       | 
|Total                      |  |                          | 52,135 |                       | 

|IRS (Interest Rate Swaps) |  |  |        |  |  |     | 
|------------------------- |  |  | ------ |  |  | --- | 
|                          |  |  |        |  |  |     | 
|                          |  |  | 63,363 |  |  | 515 | 

|Forward Currency Contracts    DDF1 |  |  |        |  |  |      |  
|---------------------------------- |  |  | ------ |  |  | ---- | -
|                                   |  |  |        |  |  |      |  
|Australian dollars                 |  |  | 1,172  |  |  | 3    |  
|Swiss francs                       |  |  | 1,695  |  |  | 5    |  
|Pounds sterling                    |  |  | 7,693  |  |  | (225 | )
|                                   |  |  |        |  |  |      |  
|Total                              |  |  | 10,560 |  |  | (217 | )

The Group only arranges derivative contracts with counterparts deemed solvent by the market; accordingly, the Group does not envisage any collection risks in relation to such counterparts.

As mentioned in note 1.c.vii, although the Group considers these contracts to be hedges, they do not meet all the conditions established in IAS 39; accordingly, these derivative financial instruments are stated at their fair value at the balance sheet date.

As of December 31, 2005, the Group does not have any financial assets or liabilities whose fair value differs significantly from their carrying value.

F-72

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35.     Segment information

The activities of the Ducati Group are organised into the following segments: Motorcycles, Spare parts, Apparel and Accessories, Other activities. The segment information for the years ended December 31, 2005 and 2004 is presented below in accordance with IAS 14.

|                                                    |  | MOTORCYCLES |          | SPARE PARTS |  | ACCESSORIES &   APPAREL |   | OTHER   |         | TOTAL   | 
|--------------------------------------------------- |  | ----------- | -------- | ----------- |  | ----------------------- | - | ------- | ------- | ------- | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  | Dec. 05     |          | Dec. 04     |  | Dec. 05                 |   | Dec. 04 |         | Dec. 05 | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Revenue                                             |  |             | 247,236  |             |  | 284,570                 |   |         | 41,340  |         | 
|% of total revenues                                 |  |             | 77.1     | %           |  | 78.3                    | % |         | 12.9    | %       | 
|Cost of sales                                       |  |             | (228,832 | )           |  | (239,746                | ) |         | (14,976 | )       | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Gross   profit                                      |  |             | 18,404   |             |  | 44,824                  |   |         | 26,364  |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|% of revenues                                       |  |             | 7.4      | %           |  | 15.8                    | % |         | 63.8    | %       | 
|% of gross profit                                   |  |             | 31.5     | %           |  | 51.7                    | % |         | 45.1    | %       | 
|Other income                                        |  |             | 26,414   |             |  | 23,556                  |   |         | 3,373   |         | 
|Distribution costs                                  |  |             | (54,987  | )           |  | (54,099                 | ) |         | (24,215 | )       | 
|General and   administrative expenses               |  |             | (17,252  | )           |  | (15,600                 | ) |         | (2,669  | )       | 
|Provisions for   restructuring charges              |  |             | (13,000  | )           |  | 0                       |   |         | 0       |         | 
|Other income (charges)                              |  |             | (1,556   | )           |  | (972                    | ) |         | (248    | )       | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Operating   profit (loss)                           |  |             | (41,977  | )           |  | (2,291                  | ) |         | 2,605   |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|% of revenues                                       |  |             | -17.0    | %           |  | -0.8                    | % |         | 6.3     | %       | 
|% of total operating   profit                       |  |             | 124.8    | %           |  | -25.0                   | % |         | -7.7    | %       | 
|Financial income and   expense                      |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Profit   (loss) before taxes and minority interests |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Minority interest                                   |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Profi   (loss) before taxex                         |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Income taxes                                        |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Net   profit (loss) for the year                    |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Other   information                                 |  |             |          |             |  |                         |   |         |         |         | 
|Segment assets                                      |  |             |          |             |  |                         |   |         |         |         | 
|Trade receivables                                   |  |             | 78,821   |             |  | 92,881                  |   |         | 13,188  |         | 
|Inventories                                         |  |             | 52,617   |             |  | 59,679                  |   |         | 18,313  |         | 
|Property, plant and   equipment                     |  |             | 51,315   |             |  | 55,035                  |   |         | 8,586   |         | 
|Goodwill and brands                                 |  |             | 86,050   |             |  | 86,050                  |   |         | 0       |         | 
|Total unallocated assets                            |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Total   assets                                      |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Segment liabilities                                 |  |             |          |             |  |                         |   |         |         |         | 
|Trade payables                                      |  |             | 74,306   |             |  | 67,116                  |   |         | 4,863   |         | 
|Provisions for risks and   charges                  |  |             | 19,835   |             |  | 6,369                   |   |         | 175     |         | 
|Provisions relating to   employees                  |  |             | 3,824    |             |  | 3,542                   |   |         | 3,283   |         | 
|Due to employees                                    |  |             | 1,680    |             |  | 1,261                   |   |         | 1,442   |         | 
|Other unallocated   liabilities                     |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Total   liabilities                                 |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 
|Capital   investment during the year                |  |             |          |             |  |                         |   |         |         |         | 
|Investment in PPE and   development costs           |  |             | 12,586   |             |  | 11,122                  |   |         | 1,639   |         | 
|Unallocated investment in   fixed assets            |  |             |          |             |  |                         |   |         |         |         | 
|                                                    |  |             |          |             |  |                         |   |         |         |         | 

F-73

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The following table indicates the contribution made by each business sector within the Ducati Group to total revenues and gross profit:

|               |  | Motor-   cycles |      | Spare   parts |  | Accessories   and Apparel |   | Other |      | Total | 
|-------------- |  | --------------- | ---- | ------------- |  | ------------------------- | - | ----- | ---- | ----- | 
|               |  |                 |      |               |  |                           |   |       |      |       | 
|Revenue        |  |                 | 77.1 | %             |  | 12.9                      | % |       | 9.1  | %     | 
|Gross   profit |  |                 | 31.5 | %             |  | 45.1                      | % |       | 21.1 | %     | 

The criteria adopted for the allocation to each segment are set out below:

(a) Revenues and costs

In general, unless stated otherwise, allocation on the basis of revenues refers to those of the motorcycle, spare parts, and accessories and apparel sectors, excluding engine revenues and other revenues.

Revenues are allocated on a detailed basis with reference to the specific segment of the individual products sold.

The cost of sales is allocated on the following basis:

|-                                            | purchased materials and the cost of external processing are allocated   on a specific basis with reference to the bills of materials of the products   concerned;                                                                                        
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                             |                                                                                                                                                                                                                                                          
|-                                            | direct production costs, comprising the cost of the direct workshops   including labour, are allocated 100% to the motorcycle segment;                                                                                                                   
|                                             |                                                                                                                                                                                                                                                          
|-                                            | indirect production costs, comprising the total cost of the indirect   production departments such as the warehouses of raw materials and finished   motorcycles, logistics and general factory services, are allocated 100% to   the motorcycle segment;
|                                             |                                                                                                                                                                                                                                                          
|-                                            | expensed development costs, comprising 30% of the technical office   costs and the associated departments, are allocated 100% to the motorcycle   segment.                                                                                               
|                                             |                                                                                                                                                                                                                                                          
|-                                            | Other income are allocated as follows:                                                                                                                                                                                                                   
|                                             |                                                                                                                                                                                                                                                          
|                                             | 1.                                                                                                                                                                                                                                                       
|                                             |                                                                                                                                                                                                                                                          
|                                             | 2.                                                                                                                                                                                                                                                       
|                                             |                                                                                                                                                                                                                                                          
|                                             | 3.                                                                                                                                                                                                                                                       
|                                             |                                                                                                                                                                                                                                                          
|Distribution costs are allocated as follows:
|                                             |                                                                                                                                                                                                                                                          
|-                                            | warranty provision: allocated 100% to the motorcycle segment;                                                                                                                                                                                            
|                                             |                                                                                                                                                                                                                                                          
|-                                            | carriage out and packaging: allocated with reference to the costs   actually incurred to transport the products of the various segments;                                                                                                                 
|                                             |                                                                                                                                                                                                                                                          
|-                                            | provision for doubtful accounts: allocated in proportion to the   revenues of the individual segments;                                                                                                                                                   
|                                             |                                                                                                                                                                                                                                                          
|-                                            | factoring commission expense: allocated 100% to the motorcycle   segments;                                                                                                                                                                               
|                                             |                                                                                                                                                                                                                                                          
|-                                            | the costs of the commercial function including the related payroll   costs are allocated as follows:                                                                                                                                                     

F-74

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|- | on a specific basis as far as possible (motorcycle shipping department,   merchandising office, spare parts inventory, etc.);                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                    
|- | and with reference to revenues of the individual segments for all the   other departments;                                                         
|  |                                                                                                                                                    
|- | commercial costs of advertising, promotion and special projects   managed on a contract basis, as well as racing costs: on the basis of   revenues;
|  |                                                                                                                                                    
|- | commercial costs recovered: these relate solely to the motorcycle   segment;                                                                       
|  |                                                                                                                                                    
|- | branch costs: based on revenues of the segment concerned, except for   the cost of sales which is allocated on a specific basis;                   
|  |                                                                                                                                                    
|- | Development costs related to the MotoGP: based on revenues, since   this activity benefits sales in all segments.                                  

General and administrative costs relate to the functioning of the individual companies regardless of their business segment and, accordingly, cannot be related directly to a specific sector. These costs are allocated on the basis of revenues, including revenues from the sale of engines. Similarly, other income and charges cannot be attributed to specific segment and, accordingly, they are allocated based on revenues; non-operating costs are allocated based on motorcycles and spare parts revenues.

Depreciation and amortisation are allocated as follows:

|- | depreciation of property, plant and equipment: based on revenues of   the motorcycle, spare parts and engine segments;
|- | ----------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                       
|- | amortisation of development costs: based on revenues of the   motorcycle and spare parts segments;                    
|  |                                                                                                                       
|- | amortisation of other intangible assets: based on sales of the   various segments.                                    

Financial income and expense and taxation are not allocated.

(b) Assets and liabilities

Assets and liabilities are allocated as follows:

|-                                                                                                                            | trade receivables: allocated on the basis of revenues, in a manner   consistent with the allocation of revenues in the statement of income;                                                                                      
|---------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                             |                                                                                                                                                                                                                                  
|-                                                                                                                            | inventories: allocated with reference to the actual inventories of   the individual segments at the end of the year; property, plant and   equipment, net: allocated based on revenues as allocated in the statement of   income;
|                                                                                                                             |                                                                                                                                                                                                                                  
|-                                                                                                                            | goodwill and brand name: allocated to the various sectors on the   basis of revenues;                                                                                                                                            
|                                                                                                                             |                                                                                                                                                                                                                                  
|-                                                                                                                            | trade payables: allocated on the basis of the cost of sales;                                                                                                                                                                     
|                                                                                                                             |                                                                                                                                                                                                                                  
|due to employees and leaving entitlements: allocated on a basis   consistent with the payroll costs charged to the segments;
|                                                                                                                             |                                                                                                                                                                                                                                  
|-                                                                                                                            | provisions for charges are allocated as follows:                                                                                                                                                                                 
|                                                                                                                             |                                                                                                                                                                                                                                  
|                                                                                                                             | -                                                                                                                                                                                                                                
|                                                                                                                             |                                                                                                                                                                                                                                  
|                                                                                                                             | -                                                                                                                                                                                                                                

F-75

---



|- | investments in fixed assets are allocated as follows:
|- | -----------------------------------------------------
|  |                                                      
|  | -                                                    
|  |                                                      
|  | -                                                    
|  |                                                      
|  | -                                                    

36.     Significant events subsequent to December 31, 2005

On January 26, 2006, the Extraordinary Shareholders Meeting of Ducati Motor Holding S.p.A. authorised:

(i) the expansion of the corporate objectives indicated in art. 4 of the Articles of Association to include, among the activities that may be performed by companies in which the Company may hold interests and/or equity investments, the provision of certain financial services to the general public including, in particular, the granting of loans in any form and the provision of payment services, as specified in Section V of Decree 385/1993;

(ii) the modification of the Articles of Association to authorise the Board of Directors to increase share capital for cash on one or more occasions over a period of five years from the date of the related resolution (and therefore by and no later than January 25, 2011), pursuant to art. 2443 of the Italian Civil Code, by a maximum of Euro 80.0 million, via the issue of ordinary shares of the Company carrying the same rights as those already issued, to be offered first to existing shareholders.

On March 27, 2006 TPG Acquisition, the relative majority shareholder of the Company, sold to companies designated by Investindustrial Holdings S.A., 30% less one share of the shares of the Company held by TPG Acquisition. Following the designation by Investindustrial Holdings S.A. the shares were purchased by: (i) World Motors S.A. (24,821,919 shares, equivalent to 15.58% of the share capital) (ii) World Motors Red S.c.A. (11,144,047 shares, equivalent to 6.99% of the share capital) and (iii) World Motors White S.c.A. (11,842,044 shares, equivalent to 7.43% of the share capital).

On April 13, 2006 the Board of Directors approved to increase share capital for
cash via the issue of 160,343,960 ordinary shares, for a price of  0.4985
each, carrying the same rights as those already issued and to be offered first
under to existing shareholders. After the approval of Consob, the relevant
prospectus has been published on May 4, 2006. On this date, UBM signed an
underwriting contract intended to guarantee and/or obtain guarantees for the
successful outcome of the share capital increase for cash totalling  80.0
million, net of the commitment, subscribed on the same date, by Investindustrial
Holdings S.A. and by the companies designated by it to take up all the option
rights directly or indirectly available to them. As a consequence, all the
conditions indicated in note 1a have occurred at May 4, 2006. At June 23, 2006
the increase in capital was successfully completed. This capital increase was
achieved through an offering of 160,343,960 subscription rights (representing
the right to subscribe for 160,343,960 shares) to shareholders of DMH. DMH
shareholders exercised a total of 158,589,839 subscription rights and subscribed
for the related 158,589,839 shares.  The 1,754,121 subscription rights that
remained unexercised were sold on the Borsa Italiana between June 5 and June 9,
2006, and the related 1,754,121 were subscribed. The total amount cashed for the
capital increase, before expenses,  totalled  80.3
million.

F-76

---



37.     Transition to International Financial Reporting Standards (IFRS)

Introduction

Following the European Regulation n. 1606 dated July 2002, Ducati has adopted the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as endorsed by the European Commission.

This footnote describes:

|- | the basis of transition for the first time application of IFRS;                                                                                                                                                                                                                     
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                     
|- | the reconciliations required by IFRS 1   First adoption of IFRS between shareholders equity  as of January 1, 2004 and December 31,   2004 and net result for the year ended December 31, 2004 as previously   reported under Italian GAAP to those restated on the basis of IFRS.

These information and reconciliations have been prepared solely for purpose of preparing the first complete consolidated financial statements in accordance with IFRS.

General Principle

The current/non current classification has been adopted for the balance sheet, which is generally applied by industrial and commercial enterprises, while the classification of expenses by destination has been elected for the statement of income. This has required the reclassification of the historical consolidated financial statements prepared in accordance with Italian GAAP.

The Group has retroactively applied IFRS as endorsed by the European Commission and in affect on December 31, 2005, which have been used for the preparation of the consolidated opening balance sheet at January 1, 2004 and the consolidated financial statements restated in accordance with IFRS, with the exception of certain optional exemptions adopted by the Group in accordance with IFRS 1, described below, and of the application of IFRS 32 and 39 which are effective from January 1, 2005, as published prior to December 31, 2004.

The opening balance sheet at January 1, 2004, reflects the following valuation differences with respect to the consolidated financial statements as of December 31, 2003 previously reported in accordance with Italian GAAP:

|- | all assets and liabilities which the IFRS require to be recorded,   including those which are not required when applying Italian GAAP, have been   recorded and valued in accordance with the IFRS;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                    
|- | all assets and liabilities which Italian GAAP require to be recorded,   but are not allowed by the IFRS, have been eliminated;                                                                     
|  |                                                                                                                                                                                                    
|- | certain financial statement items have been reclassified in   accordance with the provisions of the IFRS.                                                                                          

The effects of these adjustments have been directly recorded to the shareholders equity at January 1, 2004.

F-77

---



Optional exemptions adopted by the Group

Business combinations: the Group elected not to retroactively apply IFRS 3for businesses acquired  before  January 1, 2004, transition date to the IFRS. Consequently, businesses acquired before January 1, 2004 have been accounted for under Italian GAAP. IFRS 3 is applied prospectively and this has led to the cessation of amortization of intangible assets with an indefinite useful life recorded at January 1, 2004.

Employee benefits: the Group elected to book all cumulative actuarial profits and losses as of January 1, 2004, despite having adopted the corridor method for the actuarial profits and losses which will be generated after that date.

Cumulative translation differences: the cumulative translation differences deriving from the consolidation of foreign subsidiaries have been eliminated at January 1, 2004. Profits or losses from future sales of foreign subsidiaries will only include translation differences which arose after January 1, 2004.

Deemed Cost: at the date of transition to IFRS the Group has valued land and buildings at their fair value, considered as deemed cost on the basis of a third party appraisal. The Group has verified, also on the basis of an appraisal conducted by an external independent company, the breakdown of the cost between the categories land and buildings. On the basis of this review, the Group has more accurately allocated the cost of the categories land and buildings.

Share based payments: The Group has elected to apply IFRS 2 to all stock option plans granted after November 7, 2002 that had not already vested on the date that IFRS 2 became effective (January 1, 2005).

Reconciliations required by IFRS 1

The reconciliations requested by IFRS 1 and the description of the most important adjustments made with respect to the previously reported amounts on the basis of Italian GAAP are described below.

The consolidated balance sheets as of January 1, 2004 and December 31, 2004 and the consolidated statement of income for the year ended December 31, 2004 have been prepared on the basis required by IFRS 1  First-Time Adoption of IFRS. IFRS 32 and 39 were not applied when preparing the above consolidated statements, since they are effective from January 1, 2005, as published prior to December 31, 2004. In this regard, the information presented include also the reconciliation between amounts as of December 31, 2004 prepared on the basis of IFRS  with those as of January 1, 2005, also prepared on the basis of IFRS, which include the adjustments required by IFRS 32 and 39 as from that date.

The application of IFRS 32 and 39 essentially involved reclassifying own shares as a deduction from shareholders equity, the valuation of financial debts using the amortised-cost method and the valuation of financial instruments that hedge exchange-rate and interest-rate risk using the fair-value method.

F-78

---



Consolidated balance sheet at January 1, 2004

|                                                         |  | Italian GAAP Reclassified January 1, 2004 |         | Reclassifications |  | Adjustments |   | IFRS January 1, 2004 |        
|-------------------------------------------------------- |  | ----------------------------------------- | ------- | ----------------- |  | ----------- | - | -------------------- | -------
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|                                                         |  |                                           |   000  |                   |  |   000      |   |                      |   000 
|Current   assets                                         |  |                                           |         |                   |  |             |   |                      |        
|Cash and cash equivalents                                |  |                                           | 23,973  |                   |  |            |   |                      | 10,000 
|Accounts receivable, net                                 |  |                                           | 80,421  |                   |  |            |   |                      | 31,700 
|Inventories, net                                         |  |                                           | 104,774 |                   |  |            |   |                      |       
|Other current assets                                     |  |                                           | 25,810  |                   |  | (12,506     | ) |                      |       
|Total   current assets                                   |  |                                           | 234,978 |                   |  | (12,506     | ) |                      | 41,700 
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Non-current   assets                                     |  |                                           |         |                   |  |             |   |                      |        
|Property, plant and   equipment, net                     |  |                                           | 67,167  |                   |  |            |   |                      | 7,675  
|Goodwill and intangible   assets with indefinite life    |  |                                           |        |                   |  | 86,501      |   |                      |       
|Other intangible assets,   net                           |  |                                           | 124,721 |                   |  | (86,501     | ) |                      | (3,120 
|Equity investments                                       |  |                                           | 12      |                   |  |            |   |                      |       
|Deferred income tax   assets                             |  |                                           |        |                   |  | 24,052      |   |                      | 1,241  
|Other non-current assets                                 |  |                                           | 37,096  |                   |  | (11,546     | ) |                      | (10,000
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   non-current assets                               |  |                                           | 228,996 |                   |  | 12,506      |   |                      | (4,204 
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   assets                                           |  |                                           | 463,974 |                   |  |            |   |                      | 37,496 
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Current   liabilities                                    |  |                                           |         |                   |  |             |   |                      |        
|Short term bank   borrowings                             |  |                                           | 69,327  |                   |  |            |   |                      |       
|Accounts payable                                         |  |                                           | 89,503  |                   |  |            |   |                      | 233    
|Income and other taxes   payable                         |  |                                           | 13,432  |                   |  | (3,803      | ) |                      |       
|Other current liabilities                                |  |                                           | 15,930  |                   |  |            |   |                      |       
|Provisions for risks and   charges-current portion       |  |                                           | 4,011   |                   |  |            |   |                      |       
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   current liabilities                              |  |                                           | 192,203 |                   |  | (3,803      | ) |                      | 233    
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Long-term   liabilities                                  |  |                                           |         |                   |  |             |   |                      |        
|Long-term debt, less   current portion                   |  |                                           | 96,821  |                   |  |            |   |                      | 31,700 
|Employees leaving   entitlements                        |  |                                           | 8,277   |                   |  |            |   |                      | (506   
|Deferred income taxes                                    |  |                                           | 3,173   |                   |  | 3,803       |   |                      | 3,026  
|Income and other taxes   payable                         |  |                                           | 2,583   |                   |  |            |   |                      |       
|Provisions for risks and   charges-long-term portion     |  |                                           | 2,518   |                   |  |            |   |                      |       
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   long-term liabilities                            |  |                                           | 113,372 |                   |  | 3,803       |   |                      | 34,220 
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   liabilities                                      |  |                                           | 305,575 |                   |  |            |   |                      | 34,453 
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Shareholders   equity                                   |  |                                           |         |                   |  |             |   |                      |        
|Share capital                                            |  |                                           | 82,420  |                   |  |            |   |                      |       
|Share premium                                            |  |                                           | 19,488  |                   |  |            |   |                      |       
|Reserves                                                 |  |                                           | 50,440  |                   |  | (534        | ) |                      |       
|IFRS Transition Reserve                                  |  |                                           |        |                   |  | 534         |   |                      | 3,043  
|Retained earnings   (losses)                             |  |                                           | 6,011   |                   |  |            |   |                      |       
|Profit (loss) for the   period                           |  |                                           | 40      |                   |  |            |   |                      |       
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   shareholders equity attributable to the Group   |  |                                           | 158,399 |                   |  |            |   |                      | 3,043  
|Shareholders   equity attributable to minority interest |  |                                           |        |                   |  |            |   |                      |        
|                                                         |  |                                           |         |                   |  |             |   |                      |        
|Total   shareholders equity                             |  |                                           | 158,399 |                   |  |            |   |                      | 3,043  
|Total   liabilities and shareholders equity             |  |                                           | 463,974 |                   |  |            |   |                      | 37,496 
|                                                         |  |                                           |         |                   |  |             |   |                      |        

F-79

---



Consolidated balance sheet at December 31, 2004

|                                                         |  | Italian GAAP Reclassified December 31, 2004 |         | Reclassifications |  | Adjustments |   | IFRS December 31, 2004 |        
|-------------------------------------------------------- |  | ------------------------------------------- | ------- | ----------------- |  | ----------- | - | ---------------------- | -------
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|                                                         |  |                                             |   000  |                   |  |   000      |   |                        |   000 
|Current   assets                                         |  |                                             |         |                   |  |             |   |                        |        
|Cash and cash equivalents                                |  |                                             | 33,327  |                   |  |            |   |                        | 16,000 
|Accounts receivable, net                                 |  |                                             | 84,332  |                   |  |            |   |                        | 34,290 
|Inventories, net                                         |  |                                             | 92,293  |                   |  |            |   |                        |       
|Other current assets                                     |  |                                             | 29,805  |                   |  | (4,018      | ) |                        |       
|Total   current assets                                   |  |                                             | 239,757 |                   |  | (4,018      | ) |                        | 50,290 
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Non-current   assets                                     |  |                                             |         |                   |  |             |   |                        |        
|Property, plant and   equipment, net                     |  |                                             | 62,843  |                   |  |            |   |                        | 7,445  
|Goodwill and intangible   assets with indefinite life    |  |                                             |        |                   |  | 78,878      |   |                        | 7,172  
|Other intangible assets,   net                           |  |                                             | 119,650 |                   |  | (78,878     | ) |                        | (2,504 
|Equity investments                                       |  |                                             | 20      |                   |  |            |   |                        |       
|Deferred income tax   assets                             |  |                                             |        |                   |  | 20,613      |   |                        | 1,052  
|Other non-current assets                                 |  |                                             | 26,998  |                   |  | (16,595     | ) |                        | (10,000
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   non-current assets                               |  |                                             | 209,511 |                   |  | 4,018       |   |                        | 3,165  
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   assets                                           |  |                                             | 449,268 |                   |  |            |   |                        | 53,455 
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Current   liabilities                                    |  |                                             |         |                   |  |             |   |                        |        
|Short term bank   borrowings                             |  |                                             | 155,587 |                   |  | (4,507      | ) |                        |       
|Accounts payable                                         |  |                                             | 77,112  |                   |  |            |   |                        | 351    
|Income and other taxes payable                           |  |                                             | 11,730  |                   |  | (3,432      | ) |                        |       
|Other current liabilities                                |  |                                             | 15,936  |                   |  |            |   |                        |       
|Provisions for risks and   charges-current portion       |  |                                             | 4,726   |                   |  |            |   |                        |       
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   current liabilities                              |  |                                             | 265,091 |                   |  | (7,939      | ) |                        | 351    
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Long-term   liabilities                                  |  |                                             |         |                   |  |             |   |                        |        
|Long-term debt, less   current portion                   |  |                                             | 18,985  |                   |  | 4,507       |   |                        | 40,290 
|Employees leaving   entitlements                        |  |                                             | 9,253   |                   |  |            |   |                        | (771   
|Deferred income taxes                                    |  |                                             | 3,130   |                   |  | 3,432       |   |                        | 5,645  
|Income and other taxes   payable                         |  |                                             | 1,292   |                   |  |            |   |                        |       
|Provisions for risks and   charges-long-term portion     |  |                                             | 1,663   |                   |  |            |   |                        |       
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   long-term liabilities                            |  |                                             | 34,323  |                   |  | 7,939       |   |                        | 45,164 
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   liabilities                                      |  |                                             | 299,414 |                   |  |            |   |                        | 45,515 
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Shareholders   equity                                   |  |                                             |         |                   |  |             |   |                        |        
|Share capital                                            |  |                                             | 82,590  |                   |  |            |   |                        |       
|Share premium                                            |  |                                             | 16,662  |                   |  |            |   |                        |       
|Reserves                                                 |  |                                             | 52,326  |                   |  | (534        | ) |                        | 574    
|IFRS Transition Reserve                                  |  |                                             |        |                   |  | 534         |   |                        | 3,044  
|Retained earnings   (losses)                             |  |                                             | 6,049   |                   |  |            |   |                        | 2      
|Profit (loss) for the   period                           |  |                                             | (7,789  | )                 |  |            |   |                        | 4,320  
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   shareholders equity attributable to the Group   |  |                                             | 149,838 |                   |  |            |   |                        | 7,940  
|Shareholders   equity attributable to minority interest |  |                                             | 16      |                   |  |             |   |                        |        
|                                                         |  |                                             |         |                   |  |             |   |                        |        
|Total   shareholders equity                             |  |                                             | 149,854 |                   |  |            |   |                        | 7,940  
|Total   liabilities and shareholders equity             |  |                                             | 449,268 |                   |  |            |   |                        | 53,455 
|                                                         |  |                                             |         |                   |  |             |   |                        |        

F-80

---



Consolidated balance sheet at January 1, 2005

|                                                         |  | IFRS    December 31, 2004 |         | Adjustments |  | IFRS    January 1,    2005 |  
|-------------------------------------------------------- |  | ------------------------- | ------- | ----------- |  | -------------------------- | -
|                                                         |  |                           |         |             |  |                            |  
|                                                         |  |                           |   000  |             |  |   000                     |  
|Current   assets                                         |  |                           |         |             |  |                            |  
|Cash and cash equivalents                                |  |                           | 49,327  |             |  | (3,283                     | )
|Accounts receivable, net                                 |  |                           | 118,622 |             |  |                            |  
|Inventories, net                                         |  |                           | 92,293  |             |  |                            |  
|Other current assets                                     |  |                           | 25,787  |             |  | 355                        |  
|Total   current assets                                   |  |                           | 286,029 |             |  | (2,928                     | )
|                                                         |  |                           |         |             |  |                            |  
|Non-current   assets                                     |  |                           |         |             |  |                            |  
|Property, plant and   equipment, net                     |  |                           | 70,288  |             |  |                           |  
|Goodwill and intangible   assets with indefinite life    |  |                           | 86,050  |             |  |                           |  
|Other intangible assets,   net                           |  |                           | 38,268  |             |  | (198                       | )
|Equity investments                                       |  |                           | 20      |             |  |                           |  
|Deferred income tax   assets                             |  |                           | 21,665  |             |  | 14                         |  
|Other non-current assets                                 |  |                           | 403     |             |  |                           |  
|                                                         |  |                           |         |             |  |                            |  
|Total   non-current assets                               |  |                           | 216,694 |             |  | (184                       | )
|                                                         |  |                           |         |             |  |                            |  
|Total   assets                                           |  |                           | 502,723 |             |  | (3,112                     | )
|                                                         |  |                           |         |             |  |                            |  
|Current   liabilities                                    |  |                           |         |             |  |                            |  
|Short term bank   borrowings                             |  |                           | 151,080 |             |  | (58                        | )
|Accounts payable                                         |  |                           | 77,463  |             |  |                           |  
|Income and other taxes   payable                         |  |                           | 8,298   |             |  |                           |  
|Other current liabilities                                |  |                           | 15,936  |             |  | 42                         |  
|Provisions for risks and   charges-current portion       |  |                           | 4,726   |             |  |                           |  
|                                                         |  |                           |         |             |  |                            |  
|Total   current liabilities                              |  |                           | 257,503 |             |  | (16                        | )
|                                                         |  |                           |         |             |  |                            |  
|Long-term   liabilities                                  |  |                           |         |             |  |                            |  
|Long term debts, less   current portion                  |  |                           | 63,782  |             |  |                           |  
|Employees  leaving entitlements                         |  |                           | 8,482   |             |  |                           |  
|Deferred income taxes                                    |  |                           | 12,207  |             |  | 123                        |  
|Income and other taxes   payable                         |  |                           | 1,292   |             |  |                           |  
|Provisions for risks and   charges-long-term portion     |  |                           | 1,663   |             |  |                           |  
|                                                         |  |                           |         |             |  |                            |  
|Total   long-term liabilities                            |  |                           | 87,426  |             |  | 123                        |  
|                                                         |  |                           |         |             |  |                            |  
|Total   liabilities                                      |  |                           | 344,929 |             |  | 107                        |  
|                                                         |  |                           |         |             |  |                            |  
|Shareholders   equity                                   |  |                           |         |             |  |                            |  
|Share capital                                            |  |                           | 82,590  |             |  |                           |  
|Share premium                                            |  |                           | 16,662  |             |  |                           |  
|Reserves                                                 |  |                           | 52,366  |             |  | (3,283                     | )
|IFRS Transition Reserve                                  |  |                           | 3,578   |             |  | 64                         |  
|Retained earnings   (losses)                             |  |                           | 6,051   |             |  |                           |  
|Profit (loss) for the   period                           |  |                           | (3,469  | )           |  |                           |  
|                                                         |  |                           |         |             |  |                            |  
|Total   shareholders equity attributable to the Group   |  |                           | 157,778 |             |  | (3,219                     | )
|Shareholders   equity attributable to minority interest |  |                           | 16      |             |  |                            |  
|                                                         |  |                           |         |             |  |                            |  
|Total   shareholders equity                             |  |                           | 157,794 |             |  | (3,219                     | )
|Total   liabilities and shareholders equity             |  |                           | 502,723 |             |  | (3,112                     | )
|                                                         |  |                           |         |             |  |                            |  

F-81

---



The reclassifications indicated in the
above balance sheets, made as a consequence of the transition to IFRS with
respect to Italian GAAP, are mainly related to the following:

|- | goodwill and other intangible assets with indefinite life as   identified by the Group have been shown in a separate line;                                                          
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                     
|- | deferred tax assets/liabilities were broken down into current and   non-current according to Italian GAAP; these have been classified as  non-current assets/liabilities under IFRS.

The summary of adjustments relating to each caption of the balance sheets at January 1, 2004, December 31, 2004 and January 1, 2005, together with references to the notes that explain the adjustments made, follows:

F-82

---



|Cash and   cash equivalents                     |  | Note |   | January 1,    2004 |  | December 31,    2004 |  | January 1,     2005 |       
|----------------------------------------------- |  | ---- | - | ------------------ |  | -------------------- |  | ------------------- | ------
|                                                |  |      |   |                    |  |                      |  |                     |       
|Consolidation of SPE   (securitization program) |  |      | B |                    |  | 10,000               |  |                     | 16,000
|Own shares accounting   under IAS 32            |  |      | A |                    |  |                     |  |                     |      
|                                                |  |      |   |                    |  |                      |  |                     |       
|Total                                           |  |      |   |                    |  | 10,000               |  |                     | 16,000

|Accounts   receivable, net                      |  | Note |   | January 1,    2004 |  | December 31, 2004 |  | January 1,    2005 |       
|----------------------------------------------- |  | ---- | - | ------------------ |  | ----------------- |  | ------------------ | ------
|                                                |  |      |   |                    |  |                   |  |                    |       
|Consolidation of SPE   (securitization program) |  |      | B |                    |  | 31,700            |  |                    | 34,290
|                                                |  |      |   |                    |  |                   |  |                    |       
|Total                                           |  |      |   |                    |  | 31,700            |  |                    | 34,290

|Property,   plan and equipment, net |  | Note |   | January 1,   2004 |  | December 31,    2004 |  | January 1,    2005 |      
|----------------------------------- |  | ---- | - | ----------------- |  | -------------------- |  | ------------------ | -----
|                                    |  |      |   |                   |  |                      |  |                    |      
|Deemed cost of buildings            |  |      | C |                   |  | 7,675                |  |                    | 7,675
|Amortization of deemed   cost       |  |      | C |                   |  |                     |  |                    | (230 
|                                    |  |      |   |                   |  |                      |  |                    |      
|Total                               |  |      |   |                   |  | 7,675                |  |                    | 7,445

|Goodwil   and other assets with indefinite useful life |  | Note |   | January 1,    2004 |  | December 31, 2004 |  | January 1,    2005 |      
|------------------------------------------------------ |  | ---- | - | ------------------ |  | ----------------- |  | ------------------ | -----
|                                                       |  |      |   |                    |  |                   |  |                    |      
|Reversal of goodwill   amortization                    |  |      | L |                    |  |                  |  |                    | 1,595
|Reversal of brand name   amortization                  |  |      | L |                    |  |                  |  |                    | 5,577
|                                                       |  |      |   |                    |  |                   |  |                    |      
|Total                                                  |  |      |   |                    |  |                  |  |                    | 7,172

|Other   intangible assets, net                  |  | Note |   | January 1,     2004 |  | December 31,    2004 |   | January 1,   2005 |       
|----------------------------------------------- |  | ---- | - | ------------------- |  | -------------------- | - | ----------------- | ------
|                                                |  |      |   |                     |  |                      |   |                   |       
|Write-off of capitalized   securitization costs |  |      | B |                     |  | (772                 | ) |                   | (514  
|Write off of other   capitalized costs          |  |      | D |                     |  | (2,348               | ) |                   | (1,990
|                                                |  |      |   |                     |  |                      |   |                   |       
|Total                                           |  |      |   |                     |  | (3,120               | ) |                   | (2,504

|Other   current assets                           |  | Note |   | January 1,    2004 |  | December 31, 2004 |  | January 1,    2005 |  
|------------------------------------------------ |  | ---- | - | ------------------ |  | ----------------- |  | ------------------ | -
|                                                 |  |      |   |                    |  |                   |  |                    |  
|Amortized cost of bond                           |  |      | E |                    |  |                  |  |                    | 
|Fair value of derivative   financial instruments |  |      | H |                    |  |                  |  |                    | 
|                                                 |  |      |   |                    |  |                   |  |                    |  
|Total                                            |  |      |   |                    |  |                  |  |                    | 
|                                                 |  |      |   |                    |  |                   |  |                    |  

F-83

---



|Other   non-current assets                      |  |   | Note |         |   | January 1,    2004 |   |   | December 31, 2004 |   |  | January 1, 2005 | 
|----------------------------------------------- |  | - | ---- | ------- | - | ------------------ | - | - | ----------------- | - |  | --------------- | 
|                                                |  |   |      |         |   |                    |   |   |                   |   |  |                 | 
|Consolidation of SPE   (securitization program) |  | B |      | (10,000 | ) | (10,000            | ) |  |                  
|                                                |  |   |      |         |   |                    |   |   |                   |   |  |                 | 
|Total                                           |  |   |      |         |   | (10,000            | ) |   | (10,000           | ) |  |                | 

|Short   term bank borrowings                    |  | Note |   | January 1,    2004 |  | December 31, 2004 |  | January 1,    2005 |       
|----------------------------------------------- |  | ---- | - | ------------------ |  | ----------------- |  | ------------------ | ------
|                                                |  |      |   |                    |  |                   |  |                    |       
|Consolidation of SPE   (securitization program) |  |      | B |                    |  | 31,700            |  |                    | 40,290
|Amortized cost of bond                          |  |      | E |                    |  |                  |  |                    |      
|                                                |  |      |   |                    |  |                   |  |                    |       
|Total                                           |  |      |   |                    |  | 31,700            |  |                    | 40,290
|                                                |  |      |   |                    |  |                   |  |                    |       

F-84

---



|Accounts   payable |  | Note |   | January 1,   2004 |  | December 31,   2004 |  | January 1,   2005 |    
|------------------ |  | ---- | - | ----------------- |  | ------------------- |  | ----------------- | ---
|                   |  |      |   |                   |  |                     |  |                   |    
|Flooring           |  |      | G |                   |  | 233                 |  |                   | 351
|                   |  |      |   |                   |  |                     |  |                   |    
|Total              |  |      |   |                   |  | 233                 |  |                   | 351

|Employees   leaving entitlements |  | Note |   | January 1,   2004 |  | December 31,   2004 |   | January 1,   2005 |     
|--------------------------------- |  | ---- | - | ----------------- |  | ------------------- | - | ----------------- | ----
|                                  |  |      |   |                   |  |                     |   |                   |     
|Effect of actuarial   assumptions |  |      | F |                   |  | (506                | ) |                   | (771
|                                  |  |      |   |                   |  |                     |   |                   |     
|Total                             |  |      |   |                   |  | (506                | ) |                   | (771

|Other   current liabilities        |  | Note |   | January 1,   2004 |  | December 31,   2004 |  | January 1,   2005 |  
|---------------------------------- |  | ---- | - | ----------------- |  | ------------------- |  | ----------------- | -
|                                   |  |      |   |                   |  |                     |  |                   |  
|Derivative financial   instruments |  |      | H |                   |  |                    |  |                   | 
|                                   |  |      |   |                   |  |                     |  |                   |  
|Total                              |  |      |   |                   |  |                    |  |                   | 

|Deferred   income tax assets          |  | Note |   | January 1,   2004 |  | December 31,   2004 |  | January 1,   2005 |      
|------------------------------------- |  | ---- | - | ----------------- |  | ------------------- |  | ----------------- | -----
|                                      |  |      |   |                   |  |                     |  |                   |      
|Tax effect of:                        |  |      |   |                   |  |                     |  |                   |      
|Reversal of other capitalized   costs |  |      | I |                   |  | 1,162               |  |                   | 933  
|Flooring                              |  |      | I |                   |  | 79                  |  |                   | 119  
|Derivative financial   instruments    |  |      | I |                   |  |                    |  |                   |     
|                                      |  |      |   |                   |  |                     |  |                   |      
|Total                                 |  |      |   |                   |  | 1,241               |  |                   | 1,052

|Deferred   income taxes                                   |  | Note |   | January 1, 2004 |  | December 31, 2004 |   | January 1, 2005 |       
|--------------------------------------------------------- |  | ---- | - | --------------- |  | ----------------- | - | --------------- | ------
|                                                          |  |      |   |                 |  |                   |   |                 |       
|Tax effect on:                                            |  |      |   |                 |  |                   |   |                 |       
|Reversal of goodwill   amortization                       |  |      | I |                 |  |                  |   |                 | (541  
|Reversal of brand name   amortization                     |  |      | I |                 |  |                  |   |                 | (2,077
|Deemed cost of buildings                                  |  |      | I |                 |  | (2,859            | ) |                 | (2,859
|Amortization of deemed   cost                             |  |      | I |                 |  |                  |   |                 | 86    
|Derivative  financial instruments                         |  |      | I |                 |  |                  |   |                 |      
|Effect of actuarial   assumptions an leaving entitlements |  |      | I |                 |  | (167              | ) |                 | (254  
|                                                          |  |      |   |                 |  |                   |   |                 |       
|Total                                                     |  |      |   |                 |  | (3,026            | ) |                 | (5,645
|                                                          |  |      |   |                 |  |                   |   |                 |       

F-85

---



The reconciliation of shareholders equity attributable to the Group at January 1, 2004, December 31, 2004 and January 1, 2005 is summarized below:

|                                                            |  | January 1,   2004 |         | December 31,   2004 |  | January 1,   2005 |  
|----------------------------------------------------------- |  | ----------------- | ------- | ------------------- |  | ----------------- | -
|                                                            |  |                   |         |                     |  |                   |  
|                                                            |  |   000            |         |   000              |  |   000            |  
|Shareholders equity -   Italian GAAP                       |  |                   | 158,399 |                     |  | 149,838           |  
|Adjustments made:                                           |  |                   |         |                     |  |                   |  
|Cash and cash equivalents                                   |  |                   |        |                     |  |                  |  
|Property, plant and   equipment, net                        |  |                   | 7,675   |                     |  | 7,445             |  
|Goodwill and other intangible   assets with indefinite life |  |                   |        |                     |  | 7,172             |  
|Other intangible assets,   net                              |  |                   | (3,120  | )                   |  | (2,504            | )
|Other current assets                                        |  |                   |        |                     |  |                  |  
|Short term bank   borrowings                                |  |                   |        |                     |  |                  |  
|Other current liabilities                                   |  |                   |        |                     |  |                  |  
|Employees leaving   entitlements                           |  |                   | 506     |                     |  | 771               |  
|Accounts payable                                            |  |                   | (233    | )                   |  | (351              | )
|Deferred tax asset   (liability)                            |  |                   | (1,785  | )                   |  | (4,593            | )
|                                                            |  |                   |         |                     |  |                   |  
|Shareholders   equity  IFRS                               |  |                   | 161,442 |                     |  | 157,778           |  

The transition to IFRS had no significant effect on the consolidated statement of cash flow for the year ended December 31, 2004, except for the effects on net financial debts and working capital relating to the consolidation of the SPE used for the securitization program (see note B).

The reconciliation of net financial indebtedness at December 31, 2004 as determined under Italian GAAP with that as determined under IFRS is as follow:

|                                            |  | December 31, 2004 |         
|------------------------------------------- |  | ----------------- | --------
|                                            |  |                   |         
|                                            |  |   000            |         
|Net financial   indebtedness - Italian GAAP |  |                   | (116,246
|Effect of SPE   consolidation on:           |  |                   |         
|-Cash and cash   equivalents                |  |                   | 16,000  
|-Short term bank   borrowings               |  |                   | (40,290 
|-Assets Back Securities                     |  |                   | (10,000 
|                                            |  |                   |         
|Net   financial indebtedness - IFRS         |  |                   | (150,536

F-86

---



Consolidated statement of income for the year ended December 31, 2004

|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|--------------------------------------------- |  | -------------------------------------------------------------- | - | ---------------------------------------------------------------------------- | - | --------------------------------- | - | -------------------------- | - | -------- | - | ------------------------------------------- | 
|Italian GAAP classification                   |  | Italian 
        GAAP as 
        previously 
        reported |   | Reclassification 
        of Depreciation 
        and 
        amortization |   | Other  
        reclassifications |   | IFRS  
        Adjustments |   | IFRS     |   | IFRS Classification                         | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|                                              |  | 000                                                          |   | 000                                                                        |   |                                   |   | 000                      |   | 000    |   |                                             | 
|Net sales                                     |  | 382,762                                                        |   |                                                                              |   |                                   |   | (19,403                    | ) | 363,359  |   | Revenues                                    | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |         |   |                                             | 
|Cost of goods sold (excluding depreciation)   |  | (244,846                                                       | ) | (22,912                                                                      | ) | (9,118                            | ) | 168                        |   | (276,708 | ) | Cost of sales                               | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|Gross profit (excluding depreciation)         |  | 137,916                                                        |   | (22,912                                                                      | ) | (9,118                            | ) | (19,235                    | ) | 86,651   |   | Gross profit                                | 
|Other operating revenues                      |  | 24,718                                                         |   |                                                                              |   | 6,092                             |   |                            |   | 30,810   |   | Other income                                | 
|Selling, general and administrative           |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|expenses (excluding depreciation)             |  | (123,550                                                       | ) | (12,538                                                                      | ) | 23,617                            |   | 24,981                     |   | (87,490  | ) | Distribution costs                          | 
|                                              |  |                                                                |   |                                                                              |   | (20,561                           | ) | 997                        |   | (19,564  | ) | General and administrative                  | 
|Depreciation of property, plant and equipment |  | (14,718                                                        | ) | 14,718                                                                       |   |                                   |   |                            |   |         |   | expenses                                    | 
|Amortization of intagible assets              |  | (20,801                                                        | ) | 20,801                                                                       |   |                                   |   |                            |   |         |   |                                             | 
|                                              |  |                                                                |   |                                                                              |   | (594                              | ) | (632                       | ) | (1,226   | ) | Other expenses                              | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|Operating income                              |  | 3,565                                                          |   | 69                                                                           |   | (564                              | ) | 6,111                      |   | 9,181    |   | Operating profit                            | 
|Interest income                               |  | 2,320                                                          |   |                                                                              |   |                                   |   |                            |   | 2,320    |   | Interest income                             | 
|Interest expense                              |  | (11,774                                                        | ) | (69                                                                          | ) |                                   |   | 1,007                      |   | (10,836  | ) | Interest expense                            | 
|Foreign exchange gain (loss), net             |  | 4,690                                                          |   |                                                                              |   |                                   |   |                            |   | 4,690    |   | Foreign exchange gain(loss), net            | 
|Other non-operating income (expense), net     |  | (564)                                                          |   |                                                                              |   | 564                               |   |                            |   |         |   |                                             | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|Profit (loss) before income taxes             |  | (1,763                                                         | ) |                                                                             |   |                                  |   | 7,118                      |   | 5,355    |   | Profit (loss) before income taxes           | 
|Income taxes                                  |  | (6,026                                                         | ) |                                                                              |   |                                   |   | (2,798                     | ) | (8,824   | ) | Income taxes                                | 
|                                              |  |                                                                |   |                                                                              |   |                                   |   |                            |   |          |   |                                             | 
|Net profit (loss)                             |  | (7,789                                                         | ) |                                                                             |   |                                  |   | 4,320                      |   | (3,469   | ) | Net profit (loss) attributable to the Group | 

The reclassifications indicated above are mainly due to:

|- | allocation of depreciation and amortization expenses between cost of sales, distribution costs and general and administrative expenses; under Italian GAAP these expenses were classified in a separate line;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                              
|- | other reclassification made as a consequence of the transition to the IFRS presentation of the statement of income.                                                                                          

F-87

---



The summary of adjustments relating to each caption of the income statement for the year ended December 31, 2004, together with references to the notes that explain the adjustments made, follows ( 000):

|Revenues                              |  | Note |   | Year ended   December 31,   2004 | 
|------------------------------------- |  | ---- | - | -------------------------------- | 
|                                      |  |      |   |                                  | 
|Classification of dealers   incentive |  |      | N |                                  | 
|Classification of cash   discounts    |  |      | G |                                  | 
|Flooring                              |  |      | G |                                  | 
|                                      |  |      |   |                                  | 
|Total                                 |  |      |   |                                  | 

|Cost of   sales                                 |  | Note |   | Year ended   December 31,   2004 | 
|----------------------------------------------- |  | ---- | - | -------------------------------- | 
|                                                |  |      |   |                                  | 
|Depreciation on deemed   cost of buildings      |  |      | C |                                  | 
|Actuarial assumptions on   leaving entitlements |  |      | F |                                  | 
|Share based compensation                        |  |      | M |                                  | 
|                                                |  |      |   |                                  | 
|Total                                           |  |      |   |                                  | 

|Distribution   costs                            |  | Note |   | Year ended   December 31,
2004 | 
|----------------------------------------------- |  | ---- | - | ------------------------------ | 
|                                                |  |      |   |                                | 
|Classification of dealers   incentives          |  |      | N |                                | 
|Reversal of goodwill   amortization             |  |      | L |                                | 
|Reversal of brand name   amortization           |  |      | L |                                | 
|Share based compensation                        |  |      | M |                                | 
|Actuarial assumptions on   leaving entitlements |  |      | F |                                | 
|                                                |  |      |   |                                | 
|Total                                           |  |      |   |                                | 

|General   and administrative expenses                 |  | Note |   | Year ended   December 31,   2004 | 
|----------------------------------------------------- |  | ---- | - | -------------------------------- | 
|                                                      |  |      |   |                                  | 
|Depreciation on deemed   cost of buildings            |  |      | C |                                  | 
|Cosnolidation of SPE   (securitization program)       |  |      | B |                                  | 
|Share based compensation                              |  |      | M |                                  | 
|Amortization of other   capitalized costs written-off |  |      | D |                                  | 
|Actuarial assumptions on   leaving entitlements       |  |      | F |                                  | 
|                                                      |  |      |   |                                  | 
|Total                                                 |  |      |   |                                  | 

|Other   expenses                      |  | Note |   | Year ended   December 31,   2004 | 
|------------------------------------- |  | ---- | - | -------------------------------- | 
|                                      |  |      |   |                                  | 
|Other capitalized costs   written-off |  |      | D |                                  | 
|                                      |  |      |   |                                  | 
|Total                                 |  |      |   |                                  | 

F-88

---



|Interest   expense                              |  | Note |   | Year ended   December 31,    2004 | 
|----------------------------------------------- |  | ---- | - | --------------------------------- | 
|                                                |  |      |   |                                   | 
|Actuarial assumptions on   leaving entitlements |  |      | F |                                   | 
|Classificasion of cash   discounts              |  |      | G |                                   | 
|Flooring                                        |  |      | G |                                   | 
|                                                |  |      |   |                                   | 
|Total                                           |  |      |   |                                   | 

|Income   taxes                                        |  | Note |   | Year ended   December 31,    2004 | 
|----------------------------------------------------- |  | ---- | - | --------------------------------- | 
|                                                      |  |      |   |                                   | 
|Tax effect on:                                        |  |      |   |                                   | 
|Reversal of goodwill   amortization                   |  |      | I |                                   | 
|Reversal of brand name   amortization                 |  |      | I |                                   | 
|Depreciation on deemed   cost of buildings            |  |      | I |                                   | 
|Reversal of amortization   of securitization costs    |  |      | I |                                   | 
|Reversal of other   capitalized costs                 |  |      | I |                                   | 
|Reversal of amortization   of other capitalized costs |  |      | I |                                   | 
|Depreciation on buildings                             |  |      |   |                                   | 
|Actuarial assumptions on   leaving entitlements       |  |      | I |                                   | 
|Flooring                                              |  |      | I |                                   | 
|                                                      |  |      |   |                                   | 
|Total                                                 |  |      |   |                                   | 

F-89

---



The reconciliation of net loss attributable to the Group for the year ended December 31, 2004 is as follows:

|                                      |  | Year ended   Decemebr 31,   2004 |       
|------------------------------------- |  | -------------------------------- | ------
|                                      |  |                                  |       
|                                      |  |                                  |   000
|Net loss   - Italian GAAP             |  |                                  | (7,789
|Adjustments made:                     |  |                                  |       
|Revenues                              |  |                                  | (1,505
|Cost of sales                         |  |                                  | 168   
|Distribution costs                    |  |                                  | 7,083 
|General and   administrative expenses |  |                                  | 997   
|Other expenses                        |  |                                  | (632  
|Interest expenses                     |  |                                  | 1,007 
|Income taxes                          |  |                                  | (2,798
|                                      |  |                                  |       
|Net loss   - IFRS                     |  |                                  | (3,469

Notes to the principal IFRS adjustments to the consolidated  balance sheets at January 1, 2004, December 31, 2004 and January 1, 2005 and to the consolidated income statement for the year ended December 31, 2004

A.     Own shares

Under Italian GAAP own shares are recognized as assets and carried at the lower of cost or market value; profits or losses on sales of own shares as well as valuation adjustments are recognized in the income statement.

Under IFRS own shares are recorded as a deduction from shareholders equity, as required by IAS 32. This deduction is based on their market value at the time of acquisition, determined with reference to the stock market price for the shares. Subsequent changes in the carrying value of own shares and the revenues deriving from any subsequent sales are recorded as changes in shareholders equity.

IAS 32 is effective as of January 1, 2005; as a result, a reduction in shareholders equity and cash and cash equivalents for  3,283 was recorded in the balance sheet at January 1, 2005 prepared according to IFRS.

B.     Scope of consolidation and securitization of receivables

The Group securitize a significant portion of its trade receivables through a program (securitization) as per Law 130/99.

The securitization operation involves the transfer (without recourse) of part of the client portfolio to a special purpose entity (SPE), specifically created for this operation. The special purpose entity finances the acquisition of the receivables by issuing securities whose repayment and interest flow depend on the cash flow generated by the portfolio of receivables. The issued securities are broken

F-90

---



down into two classes with different characteristics in terms of degree of privilege and rating: the senior notes are placed on the market and undersigned by the investors; the junior notes, which are subordinate with respect to the senior notes, and are undersigned by the Group. The degree of residual involvement which is maintained by the Group on the transferred receivables is therefore limited to the value of the juniorsecurities which are undersigned.

Under Italian GAAP receivables transferred without recourse through securitization operations are derecognized at the time of the receivable transfers and are offset by the receivables due from the factoring company or from the special purpose entity. Payments received from the special purpose entity are therefore debited to the bank balances and receivables from the SPE are credited. In addition the SPE is not considered a subsidiary company and therefore is not consolidated. In addition, initial expenses incurred for the securitization program are capitalized among intangible assets and amortized over their estimated useful life.

Under IFRS, the SPE has been treated as a subsidiary company and therefore consolidated since, as established by SIC-12  Consolidation  Special Ppurpose Entities (SPE), subscription by the seller for junior securities results, in substance, in the acquisition of control over the SPE. In addition, expenses incurred for the securitization program are debited to the income statement as incurred.

The consolidation of the SPE essentially had the effect of restoring all securitization operations within the consolidated financial statements; in practice, the effect was to write-off the receivables at the time of payment from the original debtor and not at the time of the transfer of the receivables to the SPE. The consolidation of the SPE had the following effects on the balance sheets at January, 1 and December 31, 2004:

|                                                    |  | January 1,   2004 |         | December 31,   2004 | 
|--------------------------------------------------- |  | ----------------- | ------- | ------------------- | 
|                                                    |  |                   |         |                     | 
|                                                    |  |                   |   000  |                     | 
|Increase in cash and cash   equivalents             |  |                   | 10,000  |                     | 
|Increase in accounts receivable                     |  |                   | 31,700  |                     | 
|Write-off of Junior notes(other non current assets) |  |                   | (10,000 | )                   | 
|Increase in short term   borrowings                 |  |                   | (31,700 | )                   | 
|Write-off of capitalized   costs                    |  |                   | (772    | )                   | 
|                                                    |  |                   |         |                     | 
|Total   effect on shareholders equity              |  |                   | (772    | )                   | 

Consolidation of the SPE resulted in an increase in general and administrative expenses for the year ended December 31, 2004 by  258 thousand.

C.     Property, plant and equipment, net (IAS 16)

Under Italian GAAP property, plant and equipment are valued at cost.

At the time of the transition to IFRS on January 1, 2004, the exemption allowed by IFRS 1 (IFRS 1.16) was applied to the valuation of Buildings which, accordingly, were recorded at deemed cost, being their fair value on that date determined by an independent appraisal.

F-91

---



As a consequence, the carrying value of land and buildings increased by  7,675 thousand and  7,445 thousand at January 1, 2004 and December 31, 2004, respectively and depreciation expenses for the year ended December 31, 2004 increased by  230 thousand.

D.     Other intangible assets, net (IAS 38)

Under Italian GAAP, the Group has capitalized as intangible assets certain costs such as: start-up and expansion costs, costs associated with the initial public offering, financial charges relating to long term debts, cost associated to securitization program and co-ownership.

Under IFRS these costs should be recognized in the statement of income when incurred. The net book value of these intangible assets at January 1, 2004 was therefore written off directly to shareholders equity. As a consequence, intangible assets decreased by  2,348 thousand,  1,990 thousand and  198 thousand at January 1, 2004, December 31, 2004 and January 1, 2005, respectively; amortization expenses and other expenses for the year ended December 31, 2004 decreased and increased by  989 thousand and  632 thousand, respectively.

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E.     Financial instruments (IAS 32,39)

Under Italian GAAP financial liabilities with fixed maturity are valued at their nominal value; interest are debited to the statement of income as matured.

Under IFRS (IAS 32 and 39), financial liabilities with fixed maturity are valued at their amortized cost, using the effective interest method. IAS 32 and 39 are effective from January 1, 2005; consequently other current assets and short term bank borrowings at January 1, 2005 decreased by  18 thousand and  58 thousand, respectively and shareholders equity increased by  40 thousand.

F.     Employees leaving entitlements (IAS 19)

Leaving entitlements principally reflect the liability to employees in Italy when they leave their employment, calculated in conformity with current Italian legislation, and are based on a percentage of remuneration, adjusted each year on the basis of the official inflation rate; there is no funding requirement associated with this liability.

Under Italian GAAP the full amount of the employees vested benefit is accrued.

Under IFRS the employees leaving entitlements are deemed to represent a defined-benefits plan pursuant to IAS 19.  The benefits guaranteed to employees in the form of their leaving entitlement, and paid to them upon termination of the employment relationship, are accrued over the service period. The liability for benefits to be paid on the termination of employment is determined based on actuarial assumptions; the amount of the liability is determined by independent actuaries. The gains and losses determined by the actuarial calculations are recognised in the statement of income when the cumulative net value of the actuarial gains and losses not recorded in relation to each plan at the end of the prior year exceeds, by more than 10%, the higher of the obligations under the TFR plan or the fair value of the plans assets at that date (the so-called corridor method).

On the first-time adoption of IFRS, the Group decided to record all the actuarial gains and losses accumulated until January 1, 2004, despite having elected to apply the corridor method in relation to subsequent actuarial gains and losses.

As a consequence, employees leaving entitlements decreased by  506 thousand and  771 thousand at January 1, 2004 and December 31, 2004, respectively; cost of sales, distribution costs and general and administrative expenses for the year ended December 31, 2004 decreased by  426 thousand,  102 thousand and  88 thousand, respectively and interest expense for the year ended December 31, 2004 increased by  351 thousand.

G.     Flooring  Cash discounts  (IAS 18)

Flooring represents an incentive to dealers in terms of payment extensions. Under Italian GAAP this incentive is recognized on an accruals basis as an interest expense.

Under IFRS flooring incentives are estimated and accrued at the time of grant
and are classified as a reduction of revenues.  As a consequence, accounts
payable increased by  233 thousand and  351 thousand at January 1
2004 and December 31, 2004, respectively; revenues for the year ended December
31, 2004 decreased by  999 thousand and interest expense decreased by
 852 thousand.

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In addition, under Italian GAAP cash discounts are recorded as interest expense.

Under IFRS cash discounts are classified as a reduction of revenues. Consequently, revenues for the year ended December 31, 2004 decreased by  506 thousand and interest expense decreased by the same amount.

H.     Derivative financial instruments  (IAS 32,39)

The Group utilizes forward exchange contracts to hedge foreign currency risks on export sales and forecasted transactions. Under Italian GAAP, gains and losses on forward exchange contracts are deferred where the contract is designated to be a forecasted transaction. In addition, the Group utilizes interest rate swaps to hedge the risk associated with variability in interest rates associated to its short term borrowings; under Italian GAAP, interest cost is calculated and charged to the income statement at the hedged interest rate, while the derivative instrument is recorded as an off-balance sheet item. Also, under Italian GAAP, premiums/discounts are amortized on a straight line basis.

Under IFRS, although the Group considers these contracts to be hedges, they do not meet all the conditions established in IAS 39; accordingly, these derivative financial instruments are stated at their fair value and the changes in fair value are recognized immediately in the statement of income.

Since IAS 39 is effective from January 1, 2005, derivative financial instruments were accounted for in the consolidated financial statements as of December 31, 2004 in accordance with Italian GAAP. Starting form January 1, 2005 the provision of IAS 39 has been applied. Consequently, other current assets  and other current liabilities at January 1, 2005 increased by  373 thousand and  42 thousand, respectively and shareholders equity at January 1, 2005 increased by  331 thousand.

I.     Deferred income tax assets/liability

Deferred income tax assets/liability have been recognized on the above adjustments relating to the transition of IFRS. This resulted in an increase of deferred tax assets of  1,241 thousand,  1,052 thousand and  14 thousand at January 1, 2004, December 31, 2004 and January 1, 2005, respectively.

Deferred income taxes increased by  3,026 thousand,  5,645 thousand and  123 thousand at January 1, 2004, December 31, 2004 and January 1, 2005, respectively and income taxes for the year ended December 31, 2004 increased by  2,798 thousand.

L.     Business combinations

Under Italian GAAP business combinations were accounted for as a purchase. Accordingly, the purchase consideration was allocated to the assets acquired and the liabilities assumed based on their fair values. The excess of the purchase consideration (excluding incidental acquisition costs) over the fair value of the net assets acquired, as calculated under Italian GAAP, was allocated, first, to identifiable intangible assets with the remainder to goodwill. The brand name and goodwill were amortized over their estimated useful life and the amortization charged to the income statement.

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On the first-time adoption of IFRS, the Group elected not to apply IFRS 3  Business combinations with retroactive effect for the businesses acquired before January 1, 2004; accordingly, the goodwill arising on acquisitions prior to the IFRS transition date is stated at the value previously determined under Italian GAAP, and has been tested for impairment.

Under IFRS, goodwill and brand name is deemed to be an asset with an indefinite life and is not amortised, but subjected to annual impairment testing, or more frequently if there is evidence (specific events, changed circumstances) of a potential impairment, as required by IAS 36  Impairment of assets, to identify any losses of value at the level of the cash-generating unit to which such goodwill and brand name has been allocated by management. Impairment losses on goodwill are not reversed while those relating to brand name are reversed to the statement of income without exceeding the value that would have been reported had no impairment losses been recorded previously.

On disposal of all or part of a previously-acquired business involving the recognition of purchased goodwill and brand name, the extent of the disposal gain or loss is determined having regard for their residual value.

Amortization of goodwill and brand name charged to the statement of income for the year ended December 31, 2004 under Italian GAAP has been reversed; consequently, goodwill and other assets with indefinite useful life at December 31, 2004 increased by  7,172 thousand and distribution costs for the year then ended decreased by the same amount.

M.     Share based compensation

Under Italian GAAP, compensation expense related to share based compensation plans is only recorded in the Companys statement of income when it is probable that a cash payment will occur. In relation to the Companys share option plans, no compensation is recorded at either the date of grant or at the date when such options are exercised once the Company will serve the plans from share capital increases approved by the Companys shareholders and, consequently, no cash payment will occur.

Under IFRS, in accordance with IFRS 2 share based compensation plans are deemed to be equity-settled plans and, accordingly, the total fair value of stock options at the grant date represents the compensation cost. The compensation cost is recognized as a payroll cost on a straight-line basis during the period between the grant date and the vesting date (the vesting period) with a direct offset to shareholders equity. Changes in the fair value of stock option, subsequent to the grant date, do not alter the total compensation cost.

The Group has applied the exemption allowed by IFRS 1 (IFRS 1.25b) and, accordingly, has applied IFRS 2 to all stock option plans granted after November 7, 2002 that had not already vested on the date that IFRS 2 came into force (January 1, 2005).

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Consequently, cost of sales, distribution costs and general and administrative expenses for the year ended December 31, 2004 increased by  153 thousand,  191 thousand and  213 thousand, respectively.

N.     Dealer incentives

Dealer incentives are usually based on volume sold.

Under Italian GAAP, they are recorded as a cost of services received.

Under IFRS, although they do not specifically cover the classification of dealer incentives based on volume sold, these costs have been classified as a reduction of revenues rather than as distribution costs, having regard for the approach taken by other companies operating in the automotive sector upon transition to IFRS. Consequently, revenues and distribution costs for the year ended December 31, 2004 decreased by  17,898 thousand.

38. Application of generally accepted accounting principles in the United States of America as of December 31, 2005

As described in Note 1a, the consolidated financial statements of the Company as presented have been prepared in conformity with IFRS as adopted by the European Union (EU GAAP), which differ in certain limited respects from IFRS as issued by the International Accounting Standards Board, and also in certain significant respects from U.S. GAAP. As of December 31, 2005 and 2004, the Groups consolidated financial statements would not have had a material effect if presented under IFRS as issued by the IASB. Following is a description of the principal valuation and measurement differences between IFRS and U.S. GAAP. Due to the transition of the Group financial statements to IFRS in 2004, a certain number of adjustments previously recorded between Italian GAAP and U.S. GAAP are no longer relevant. However, certain new adjustments between EU GAAP and U.S. GAAP have been recorded and are described below.

(a) Business combination

Pursuant to an exemption provided by IFRS 1 First time adoption of International Financial Reporting Standards the Group elected not to restate business combinations completed prior to January 1, 2004 in accordance with IFRS 3 Business Combinations.

Consequently, the acquisition, performed on 1996, and therefore before January 1, 2004, has been accounted for under Italian GAAP, as allowed by IFRS 1 and IFRS 3, as a purchase. Accordingly, the purchase consideration was allocated to the assets acquired and the liabilities assumed based on their fair values as determined by a court appointed expert. The excess of the purchase consideration over the fair value of the net assets acquired, as calculated under Italian GAAP, was allocated, first, to identifiable intangible assets with the remainder to goodwill.

Under U.S. GAAP, the acquisition has been accounted for under the purchase method and in conformity with the provisions of EITF Issue No. 88-16, Basis in Leverage Buyout Transactions. Acquisition costs are considered part of the purchase consideration in the calculation of the excess of purchase consideration over the fair value of the net assets acquired. Under U.S. GAAP, the total purchase consideration consisted of the following:

|                                               |  | Initial |         | Adjustment |  | Total   | 
|---------------------------------------------- |  | ------- | ------- | ---------- |  | ------- | 
|                                               |  |         |         |            |  |         | 
|                                               |  |         |         |            |  | ( 000) | 
|Ordinary   shares issued                       |  |         | 35,429  |            |  |        | 
|Cash   paid                                    |  |         | 72,253  |            |  |        | 
|                                               |  |         |         |            |  |         | 
|                                               |  |         | 107,682 |            |  |        | 
|Subsequent   purchase price adjustments        |  |         | (2,034  | )          |  | 12,911  | 
|                                               |  |         |         |            |  |         | 
|Purchase   consideration                       |  |         | 105,648 |            |  | 12,911  | 
|Incidental   costs of the Acquisition          |  |         | 14,048  |            |  |        | 
|                                               |  |         |         |            |  |         | 
|Total   purchase consideration under U.S. GAAP |  |         | 119,696 |            |  | 12,911  | 
|                                               |  |         |         |            |  |         | 

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Under the provisions of EITF Issue No. 88-16, the accounting basis of the assets and liabilities of the Ducati motorcycle business has been assigned a value that is part fair value (51%) and part predecessor cost (49%). The effect of the U.S. GAAP accounting is to eliminate the fair value adjustment under Italian GAAP (primarily relating to buildings, goodwill and trademark) associated with the 49% interest in the Company retained by Cagiva and established related deferred taxes. For U.S. GAAP purposes, the allocation of Companys investment in the individual assets and liabilities of the Predecessor Business has been determined in accordance with EITF Issue No. 90-12, Allocating Basis to Individual Assets and Liabilities for Transactions Within the Scope of Issue No. 88-16.

The allocation of the total purchase consideration under U.S. GAAP is as follows:

|                                                                               |  | Initial |         | Adjustment |  | Total    | 
|------------------------------------------------------------------------------ |  | ------- | ------- | ---------- |  | -------- | 
|                                                                               |  |         |         |            |  |          | 
|                                                                               |  |         |         |            |  | ( 000
) | 
|Book   valueliabilities in excess of assets at September 25, 1996  under IFRS |  |         | (39,020 | )          |  |         | 
|U.S.   GAAP adjustments                                                        |  |         | (2,086  | )          |  |         | 
|Book   value of liabilities in excess of assets acquired                       |  |         | (41,106 | )          |  |         | 
|Adjustments:                                                                   |  |         |         |            |  |          | 
|o    Property,   plant and equipment                                           |  |         | 10,122  |            |  |         | 
|o
Non-compete agreement                                                        |  |         | 7,746   |            |  |         | 
|o       Deferred taxes                                                         |  |         | 3,899   |            |  |         | 
|o       Brand name                                                           |  |         | 67,793  |            |  | 6,585    | 
|o       Predecessor basis adjustment                                           |  |         | 71,242  |            |  | 6,326    | 
|                                                                               |  |         |         |            |  |          | 
|                                                                               |  |         | 119,696 |            |  | 12,911   | 
|                                                                               |  |         |         |            |  |          | 

This accounting under U.S. GAAP has resulted in a book value of the brand name lower than its basis for Italian tax purposes. Over subsequent accounting periods, the tax benefit associated with deducting the excess of tax-deductible brand name is recognized when realized in the tax return as a reduction to the carrying value of the brand name.

(b) Revaluation of Property, Plant and Equipment

At the time of conversion to IFRS as of January 1, 2004, as allowed by the IFRS 1, par. 16, the Group elected to measure certain categories of property, plant and equipment at fair value, which was then used as their deemed cost. This resulted in an increase in the book value of tangible fixed assets of  7,675 thousand at January 1, 2004. U.S. GAAP does not allow the revaluation of property, plant and equipment and requires depreciation to be based on historical cost. Consequently, the fair value revaluation of property, plant and equipment assets has been reversed for U.S. GAAP purposes.

(c) Research and development costs

Under IFRS, research costs are expensed as incurred, while the cost of development projects for the production of motorcycles and engines are capitalized if certain conditions specified in IAS 38, par. 57, are met.

Under U.S. GAAP, the costs of research and developments are expensed as incurred, as these costs do not meet the requirement of capitalization under U.S. GAAP.

In addition, the Group obtains certain government grants on development projects for which costs are capitalized. Under IFRS, government grants are deferred and credited to the income statement over the corresponding period of amortization of the related development projects; under U.S. GAAP, development costs are expensed and the related government grants are credited to the income statement as the costs are incurred.

(d) Syndicated Loan and Debt Issuance Costs

Under IFRS, the syndicated loan obtained in May 2005 is initially recorded at cost, net of any transaction costs directly attributable to the loan, and subsequently measured at amortized cost, using the effective interest method. Debt issuance costs are included within the amortized cost calculation, and are therefore recorded as a deduction of the syndicated loan. Upon adoption of IAS 32 and IAS 39 on January 1, 2005, the book value of the Bond measured at amortized cost was  158 thousand lower than face value, which amount was subsequently reversed in May 2005 upon repayment of the Bond.

Under U.S. GAAP, debt issuance costs are recorded as deferred charges, in accordance with APB 21, and amortized over the life of the related debt obligation. Therefore, the gross carrying amount of debt issuance costs have been reclassified as deferred charges, with a corresponding increase in the reported amount of the syndicated loan.

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(e) Derivative financial instruments

As described in Note 37, the Company adopted IAS 32 and IAS 39 effective January 1, 2005, as permitted by IFRS 1. Therefore, derivative financial instruments in the 2004 comparative figures have been accounted for in accordance with Italian GAAP. Under Italian GAAP, gains and losses on forward exchange contracts are deferred where the contract is designated to be a forecasted transaction. In addition, with regard to interest rate hedging instrument, interest cost is calculated and charged to the income statement at the hedged interest rate, while the derivative instrument is recorded as an off-balance sheet item. Also, under Italian GAAP, premiums/discounts are amortized on a straight line basis.

Under IFRS, as required by IAS 39, derivative financial instruments are only recorded on a hedge-accounting basis when they are formally designated as hedges at the inception date, the hedge relationship is documented, the hedge is expected to be highly effective, such effectiveness can measured reliably and the hedge proves highly effective over the various accounting periods it is designated to cover. Although the Group considers these contracts to be hedges, they do not meet all the conditions established by IAS 39; accordingly, in the consolidated financial statements for the year ended December 31, 2005 these derivative financial instruments are stated at their fair value and the gains and losses arising from the changes in fair value are recorded immediately in the statement of income.

Under U.S. GAAP, the Company has adopted SFAS No. 133, as amended by SFAS No. 138 and SFAS No. 149, Accounting for Derivative Financial Instruments, (SFAS 133) as of January 1, 2001, as required. The Company, including DDF1 which is consolidated as described in note 1.a, does not qualify for hedge accounting provisions in accordance with SFAS 133 for its hedging derivatives, as it does not have the required contemporaneous documentation; therefore all derivative instruments (forward contracts and interest rate swaps) are recorded at fair value, with adjustments to fair value at each reporting date recorded in the consolidated statement of income, similarly to IAS 39.

(f) Deferred taxes

Under IFRS 3, deferred taxes are recognized on the entire difference between the reported amount of the brand name (see note (a)) and its tax basis, following a business combination.

Under U.S. GAAP, the reported amount of a brand name and its tax basis are separated into two components as of the date of the acquisition. The first component of each equals the amount of a brand name for financial reporting purposes. The second component equals the remainder of the amount of tax-deductible brand name. Any difference that arises between the amount for financial reporting and the tax basis of the first component in future years is considered a temporary difference. The second component is an excess of tax-deductible brand name over its reported amount for which no deferred taxes have been recognized. The tax benefit for the excess of a tax-deductible brand name is recognized when realized, first, to reduce the carrying value of brand name, then, to reduce the carrying value of other non-current intangible assets related to the acquisition.

Under IFRS, IAS 12 allows, under certain circumstances, for deferred income taxes on tax suspension equity reserves not to be recorded. Therefore, upon conversion to IFRS, no deferred tax liability is recorded on the reserves which would be taxable upon distribution arising from the trademark revaluation recognized in 2000 and in 2003.

Under U.S. GAAP, in accordance with EITF 93-16, a deferred tax liability of  4,189 thousand was recorded for the amount of taxes to be paid in case of distribution of the revaluation reserve or liquidation of the Company, created as a result of the trademark revaluation recognized in 2000, and an additional deferred tax liability of  3,807 was recorded for the amount of taxes to be paid in case of distribution of the revaluation reserve or liquidation of the Company, created as a result of the trademark revaluation recognized in 2003.

Under IFRS, unrealized profits on transaction between consolidated companies are eliminated and the corresponding tax effect are recorded as deferred tax assets; such assets are then subject to valuation.

F-98

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Under U.S. GAAP, in accordance with ARB 51, income taxes paid on intercompany profits must be deferred and recognized as tax expense as the asset is depreciated; in addition, no deferred tax assets can be created for the difference between the tax basis of the asset and the carrying amount on the consolidated financial statements. The use of existing net operating loss carry forwards generally has the same effect as if taxes were paid with cash; therefore, net operating loss carry forwards used should be deferred as well. Such deferred income taxes are not classified as deferred tax assets, and are not subject to valuation, nor should they be adjusted for changes in tax rates. Thus due to this difference, a deferred tax asset of  7,710 and  6,939 thousand has been recognized under U.S. GAAP at December 31, 2004 and 2005, respectively, while only  3,696 and 3,326 thousand have been recognized under IFRS at the respective dates.

(g) Stock Based Compensation

Under IFRS the Group has applied the exemption allowed by IFRS 1 (IFRS 1.25b) and, accordingly, has applied the standard to all stock option plans granted after 7 November 2002 that had not already vested on the date that IFRS 2 came into force (January 1, 2005).

In accordance with IFRS 2  Share-based payments, these are deemed to be equity-settled plans and, accordingly, the total fair value of stock options at the grant date is charged to the statement of income as a cost. The compensation cost is recognized as a payroll cost on a straight-line basis during the period between the grant date and the vesting date (the vesting period), with a direct offset to shareholders equity. Changes in the fair value of stock options, subsequent to the grant date, do not alter the total compensation cost.

For U.S. GAAP purposes, the Company has elected to apply the provisions of APB Opinion No. 25 and related interpretations and provide the pro-forma disclosure provisions of SFAS No. 123, as amended, for its share option plans. Compensation expense is recorded in the financial statements, for a fixed plan, only if the market value of the underlying shares exceeds the exercise price on the grant date (which is also the measurement date), and for a variable plan, only if the market value of the underlying shares at each reporting period exceeds exercise price.

Under the terms of the 1997 Plan (First Plan), 8,148,148 options were granted during 1997 with an exercise price of  0.723 per share. The terms of the 1997 Plan provide a cash-out provision until such time the Companys shares are traded in a recognized stock market. As a result, the Company has accounted for the 1997 Plan under U.S. GAAP in a manner similar to the accounting for stock appreciation rights. No compensation expense was recorded in the financial statements for the accounting periods up to and including December 31, 1998, as the formula price did not exceed the exercise price per share. Upon the Companys initial public offering, the 1997 Plan was considered to be a fixed plan. However, the Companys initial public offering resulted in a measurement date and a non-cash compensation expense of  17,641 thousand, which was amortized over the vesting period. All the options granted under this plan are vested and

exercisable as of December 31, 2005 and 2004.

Under the terms of the 1999 Plan (Second plan), the Company issued options to various employees during 1999, 2000, 2001, 2002, 2004 and 2005.  No options were issued under this Plan during 2003.  The options issued in 1999 and 2000 were accounted as stock appreciation rights under U.S. GAAP until the shareholders have approved both the share capital increase to satisfy these options.  The shareholders approval in 2000 also resulted in fixing the exercise price for the options issued in 1999 and 2000. The approval resulted in a measurement date for these options and stock compensation expense of  413, amortized over the vesting period. The options issued in 1999 and 2000 were accounted as fixed stock options.  By December 31, 2005, all the options granted in 1999 and 2000 were fully vested. The options granted in 2001, 2002, 2004 and 2005 are considered variable as the exercise price cannot be lower than the consolidated net

worth per share at the time of exercise; hence the company accounted for these options in accordance with the variable method. Under this method, compensation expense is measured at each reporting date and calculated as the difference between the market price of the shares at the reporting date and the exercise price. No compensation expense relating to these options was recorded, as the exercise price is higher than the market value of the underlying shares as of December 31, 2004 and 2005.

With regard to the 1999 and 2000 stock option grants, the stock options plans provide the Company the discretion to cash-out the stock options and for all the reporting periods the Company has determined not to use cash-out provisions, therefore no further compensation expense shall be recorded in future periods in relation to these options. In addition, the Company has evaluated, in accordance with EITF 00-23, the mandatory cash-out provisions in the event of the contingency that the Companys share are not traded on the Italian Stock Market on the date of relevant stock exercise. Based on the guidance of EITF 00-23, the Company does not believe the existence of cash-out provisions based on the occurrence of the contingency is probable and the Company will continuously evaluate the probability during the contingency period.

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Under current Italian tax legislation, issuance of shares to satisfy stock based compensation plans does not result in a deduction for tax purposes and, as such, no deferred taxation impacts have been recognized for U.S. GAAP.

Compensation costs expensed in the statement of income for the years ended December 31, 2004 and 2005 under IFRS, amounting to  557 and  1,238 thousand, respectively, have been reversed for U.S. GAAP purposes.

(h) Goodwill and Brand Name

Under IFRS, the brand name is deemed to be an intangible asset with an indefinite useful life and is not amortized, but subjected to annual impairment testing, or more frequently if there is evidence (specific events, changed circumstances) of a potential impairment, as required by IAS 36  Impairment of assets to identify any losses of value at the level of the cash-generating unit to which the brand name has been allocated by management. In addition, under IFRS, goodwill is deemed to be an asset with an indefinite life and is not amortized, but subjected to annual impairment testing, or more frequently if there is evidence (specific events, changed circumstances) of a potential impairment, as required by IAS 36  Impairment of assets, to identify any losses of value at the level of the cash-generating unit to which such goodwill has been allocated by management. Impairment losses on goodwill are not reversed.

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also specifies the criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocated to an assembled workforce may not be accounted separately.

On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. Adoption of SFAS No. 142 did not result in reclassification of existing goodwill and intangible assets.

As required by SFAS No. 142, the Company identified its reporting units and assigned assets and liabilities, including goodwill to the reporting units on the date of adoption. Subsequently, the Company compared the fair value of the reporting unit to its carrying value, to determine whether goodwill is impaired at the date of adoption. This transitional impairment evaluation did not indicate an impairment loss.

Subsequent to the adoption of SFAS No. 142, the Company does not amortize goodwill but instead tests goodwill for impairment at least annually. The carrying value of the goodwill for U.S. GAAP purposes on the date of adoption was  1,100 thousand. In addition, the goodwill that is being reflected in IFRS financial statements relating to the 1996 transaction (see note 38(a) and 1.a) is not considered as goodwill under U.S. GAAP but is reflected as part of Brand name. In addition, following the conversion to IFRS, the Group updated its analysis of the brand name carried out at the time of adoption of SFAS 142, and determined that also for U.S. GAAP purposes the brand name is deemed to have an indefinite life.

(i) Own shares

As described in Note 37, the Company adopted IAS 32 and IAS 39 effective January 1, 2005, as permitted by IFRS 1. Therefore, derivative financial instruments in the 2004 comparative figures have been accounted for in accordance with Italian GAAP. Under Italian GAAP, own shares are classified as current assets and stated at the lower of purchase cost and market value at the end of the period, while a corresponding reserve is identified as part of shareholders equity which cannot be distributed.  Gains and losses on disposals of own shares, as well as changes in fair value, are recorded in the statement of income. Under Italian GAAP, a negative change in fair value of  984 thousand was recognized in the statement of income for the year ended December 31, 2004.

Effective 1 January 2005, own shares are recorded as a deduction from shareholders equity, as required by IAS 32, par. 33. This deduction is based on their market value at the time of acquisition, determined with reference to the stock market price for the shares. Revenues deriving from any subsequent sales are recorded as changes in shareholders equity.

Under U.S. GAAP, own shares are classified as a reduction of equity, and recorded at cost.

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(k) Employees leaving entitlements

Under IFRS, employees leaving entitlements, to be accrued by Italian companies in accordance with the Italian Civil Code (TFR), are deemed to represent a defined benefit plan pursuant to IAS 19. The benefits guaranteed to employees in the form of their leaving entitlement, and paid to them upon termination of the employment relationship, are accrued over the service period. The liability for benefits to be paid on the termination of employment is determined based on actuarial assumptions; the amount of the liability is determined by independent actuaries. The gains and losses determined by the actuarial calculations are recognised in the statement of income when the cumulative net value of the actuarial gains and losses not recorded in relation to each plan at the end of the prior year exceeds, by more than 10%, the higher of the obligations under the TFR plan or the fair value of the plans assets at that date (the so-called corridor
method). Upon conversion to IFRS the Group elected to apply the exemption allowed by IAS 19 and has recorded the obligation without considering the past actuarial gains and losses ( so called fresh start).

Under U.S. GAAP, based on EITF 88-1 Determination of Vested Benefit Obligation for a Defined Benefit Pension Plan, the Group could elect whether to account for such benefits as defined benefit plans or as defined contribution plans; until December 31, 2004 the Group elected to account for them as defined contribution plans, similarly to the Italian accounting policies.

However, following the transition to IFRS, the Group has changed the accounting policy and elected to record such benefits as defined benefit plans. The Group has determined that  the obligation calculated without taking into account the fresh start provision allowed by IAS 19 would not have been materially different from that presented under IFRS. As a consequence, there is no reconciling entry between IFRS and U.S. GAAP at December 31, 2005.

The effect of the cumulative change in accounting principle of  517 thousand, net of the related tax effect, is separately disclosed in the U.S. GAAP reconciliation in accordance with APB 20 Accounting Changes.

(j) Classification of Warranty Expense

In the IFRS consolidated financial statements, the Company classifies warranty expense as part of Distribution costs . Under U.S.  GAAP those costs would be classified as part of Costs of sales .

(l)   New Accounting Standards Not Yet Adopted

In December 2004, FASB Statement No. 123 (revised 2004), Share-Based Payment was issued.  Statement 123(R) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. Statement 123(R) requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees in the income statement.  The revised Statement generally requires that an entity account for those transactions using the fair-value-based method, and eliminates an entitys ability to account for share-based compensation transactions using the intrinsic value method of accounting in APB Opinion No. 25, Accounting for Stock Issued to Employees, which was permitted
under Statement 123, as originally issued. The revised Statement requires both public and nonpublic entities to disclose information about the nature of the share-based payment transactions and the effects of those transactions on the financial statements. Statement 123(R) is effective for public companies that do not file as small business issuers as of the beginning of the next fiscal year that begins after June 15, 2005 (i.e, January 1, 2006 for Ducati).  All public companies, including small business issuers, and those nonpublic entities that adopted the fair-value-based method of accounting, rather than the minimum-value method, must use either the modified prospective or the modified retrospective transition method. Early adoption of this Statement for interim or annual periods for which financial statements or interim reports have not been issued is encouraged. The group do not expect that the adoption of SFAS 123(R) will have a material impact on the consolidated financial position or
results or operations.

In November 2004, the FASB issued Statement No. 151, Inventory Costs, to amend the guidance in Chapter 4, Inventory Pricing, of FASB Accounting Research Bulletin No. 43, Restatement and Revision of Accounting Research Bulletins.  Statement 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage).  The Statement requires that those items be recognized as current-period charges.  Additionally, Statement 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The issuance of this Statement is a result of efforts by the FASB and the International Accounting Standards Board (IASB) to improve the comparability of cross-border financial reporting.  The amending language in Statement 151 improves the consistency between ARB No. 43, Chapter 4, and International
Accounting Standard No. 2, Inventories.  Statement 151 is effective for fiscal years beginning after June 15, 2005 (i.e. January 1, 2006).  Adoption of this standard will not have an impact on the Groups inventory costs.

F-101

---



In December 2004, FASB issued Statement No. 153, Exchanges of Productive Assets: an Amendment of APB Opinion No. 29.  As part of its short-term international convergence project with the IASB, on December 16, 2004, the FASB issued Statement 153 to address the accounting for nonmonetary exchanges of productive assets.  Statement 153 amends APB No. 29, Accounting for Nonmonetary Exchanges, which established a narrow exception for nonmonetary exchanges of similar productive assets from fair value measurement.  This Statement eliminates that exception and replaces it with an exception for exchanges that do not have commercial substance.  Under Statement 153 nonmonetary exchanges are required to be accounted for at fair value, recognizing any gains or losses, if the fair value is determinable within reasonable limits and the transaction has commercial substance.  The Statement specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  An entity should apply the provisions of Statement 153 prospectively for nonmonetary asset exchange transactions in fiscal periods beginning after June 15, 2005 (i.e. January 1, 2006 for Ducati). The Group do not expect that the adoption of SFAS 153 will have a material impact on the consolidated financial position or results or operations.

In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154 (SFAS 154), Accounting Changes and Error Corrections. Statement 154 replaces APB Opinion No.20, Accounting Changes and FASB Statement No.3,  Reporting Accounting Changes in Interim Financial Statements. SFAS 154 applies to all voluntary change in accounting principles, and requires the retrospective application to prior periods financial statements of a voluntary change in accounting principles unless it is impracticable. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 will only have an effect when Ducati Group implements changes in accounting principles that are addressed by the standard or corrects accounting errors in future periods.

F-102

---



39.     Reconciliation of net profit/(loss) and shareholders equity determined under IFRS with those under U.S. GAAP

Certain reclassifications have been made to the prior year amounts to conform them to the current year.

The calculation of net profit/(loss) and shareholders equityin conformity with U.S. GAAP is as follows:

Reconciliation of net profit/(loss):

|                                                                                            |  | Year ended   December 31,   2005 |             | Year ended   December 31,   2004 | 
|------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | -------------------------------- | 
|                                                                                            |  |                                  |             |                                  | 
|Net   profit (loss) under IFRS                                                              |  |                                  | (41,464     | )                                | 
|Adjustments   increasing (decreasing)  net profit (loss) under IFRS:                        |  |                                  |             |                                  | 
|o   Depreciation of property, plant and equipment (i)                                       |  |                                  | 418         |                                  | 
|o   Amortization of intangible assets (ii)                                                  |  |                                  | (2,950      | )                                | 
|o   Stock-based compensation (see note 38(g))                                               |  |                                  | 1,238       |                                  | 
|o   Grants related to development costs    (see 38(c)                                       |  |                                  | 208         |                                  | 
|o   Derivative financial instruments (see note 38(e))                                       |  |                                  |            |                                  | 
|o   Own shares write down (see note 38 (i))                                                 |  |                                  |            |                                  | 
|o   Employees leaving entitlements (see note 38 (k))                                       |  |                                  |            |                                  | 
|o   Amortized cost of the bond (see note 38(d))                                             |  |                                  | (158        | )                                | 
|o   Reclassification of out of period taxation (iii)                                        |  |                                  |            |                                  | 
|o   Cumulative effect of a change in accounting principle, net of taxes (see note   38 (k)) |  |                                  | 517         |                                  | 
|o Income taxes (iii)                                                                        |  |                                  | (32,614     | )                                | 
|                                                                                            |  |                                  |             |                                  | 
|Net   profit/(loss) under U.S. GAAP                                                         |  |                                  | (74,805     | )                                | 
|                                                                                            |  |                                  |             |                                  | 
|Net   profit /(loss) per share  basic                                                      |  |                                  | (0.482      | )                                | 
|Weighted   average number of shares (basic)                                                 |  |                                  | 155,147,729 |                                  | 
|Net   profit/(loss) per share - diluted                                                     |  |                                  | (0.482      | )                                | 
|Weighted   average number of shares (diluted)                                               |  |                                  | 155,147,729 |                                  | 

The dilutive effect of the share equivalents under the 1997 share option plan is not considered in 2005 and 2004, due to the net loss for those years.

F-103

---



|(i) | The breakdown of the adjustments to depreciation of property, plant   and equipment is summarized below:
|--- | --------------------------------------------------------------------------------------------------------

|                                                                 |  | Year ended   December 31,   2005 |     | Year ended   December 31,   2004 | 
|---------------------------------------------------------------- |  | -------------------------------- | --- | -------------------------------- | 
|                                                                 |  |                                  |     |                                  | 
|                                                                 |  | ( 000)                         |    
|Revaluation on business combination (see note   38(a))           |  |                                  | 188 |                                  | 
|Revaluation   of property, plant and equipment (see note 38 (b)) |  |                                  | 230 |                                  | 
|                                                                 |  |                                  |     |                                  | 
|                                                                 |  |                                  | 418 |                                  | 

|(ii) | The breakdown of the adjustments to amortization of intangible assets   is summarized below:
|---- | --------------------------------------------------------------------------------------------

|                                                              |  | Year ended   December 31,   2005 |        | Year ended   December 31,   2004 | 
|------------------------------------------------------------- |  | -------------------------------- | ------ | -------------------------------- | 
|                                                              |  |                                  |        |                                  | 
|                                                              |  | ( 000)                         |       
|Brand   name on business combination (see note 38(a) and (h)) |  |                                  |        |                                  | 
|Research   and development (see note 38 (c))                  |  |                                  | (2,658 | )                                | 
|Other                                                         |  |                                  | (292   | )                                | 
|                                                              |  |                                  |        |                                  | 
|                                                              |  |                                  | (2,950 | )                                | 

|(iii) | The breakdown of the adjustments to income taxes is summarized below:
|----- | ---------------------------------------------------------------------

|                                                                               |  | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 | 
|------------------------------------------------------------------------------ |  | -------------------------------- | ------- | -------------------------------- | 
|                                                                               |  |                                  |         |                                  | 
|                                                                               |  | ( 000)                         |        
|Reclassification   out of period  taxation                                     |  |                                  |         |                                  | 
|Deferred   income taxes on intercompany transfer of trademark (see note 38(f)) |  |                                  | (401    | )                                | 
|Income   tax effect of US GAAP adjustments                                     |  |                                  | (4,046  | )                                | 
|Additional   U.S. GAAP  valuation allowance                                    |  |                                  | (28,167 | )                                | 
|                                                                               |  |                                  |         |                                  | 
|                                                                               |  |                                  | (32,614 | )                                | 

F-104

---



Reconciliation of shareholders equity:

|                                                                          |  | As of   December 31,   2005 |          | As of   December 31,   2004 | 
|------------------------------------------------------------------------- |  | --------------------------- | -------- | --------------------------- | 
|                                                                          |  |                             |          |                             | 
|                                                                          |  | ( 00)                     |         
|Shareholders   equity under IFRS                                         |  |                             | 118,742  |                             | 
|Adjustments   increasing (decreasing) shareholders equity under IFRS:    |  |                             |          |                             | 
|o   Property, plant and equipment (iv)                                    |  |                             | (13,671  | )                           | 
|o   Intangible assets (v)                                                 |  |                             | (104,989 | )                           | 
|o Grants   related to development costs (see 38(c))                       |  |                             |         |                             | 
|o Derivatives (see note 34,   note 38(e) and vii))                        |  |                             |         |                             | 
|o   Employees  leaving entitlements (see   note 38 (k))                  |  |                             |         |                             | 
|o   Deferred tax assets and deferred tax charge (see note 38(f) and (vi)) |  |                             | 3,985    |                             | 
|o   Own shares (see note 38 (i))                                          |  |                             |         |                             | 
|o   Other                                                                 |  |                             | (40      | )                           | 
|                                                                          |  |                             |          |                             | 
|Shareholders   equity under U.S. GAAP                                    |  |                             | 4,027    |                             | 

|(iv) | The breakdown of the adjustments to property, plant and equipment is   summarized below:
|---- | ----------------------------------------------------------------------------------------

|                                                        |  | As of   December 31,   2005 |         | As of   December 31,   2004 | 
|------------------------------------------------------- |  | --------------------------- | ------- | --------------------------- | 
|                                                        |  |                             |         |                             | 
|                                                        |  | ( 000)                    |        
|Revaluation   on business combination (see note 38(a))  |  |                             |         |                             | 
|-   cost                                                |  |                             | (9,156  | )                           | 
|-   accumulated depreciation                            |  |                             | 2,700   |                             | 
|Write   off of deemed cost revaluation (see note 38(b)) |  |                             |         |                             | 
|-   cost                                                |  |                             | (7,675  | )                           | 
|-   accumulated depreciation                            |  |                             | 460     |                             | 
|                                                        |  |                             |         |                             | 
|                                                        |  |                             | (13,671 | )                           | 
|                                                        |  |                             |         |                             | 

|(v) | The breakdown of the adjustments to intangible assets is summarized   below:
|--- | ----------------------------------------------------------------------------

|                                                      |  | As of   December 31,   2005 |          | As of   December 31,   2004 | 
|----------------------------------------------------- |  | --------------------------- | -------- | --------------------------- | 
|                                                      |  |                             |          |                             | 
|                                                      |  | ( 000)                    |         
|Brand   name on business combination (see note 38(a)) |  |                             |          |                             | 
|-   cost                                              |  |                             | (72,968  | )                           | 
|-   tax benefit on brand name (see note 38(f))        |  |                             | (44,891  | )                           | 
|-   accumulated amortization                          |  |                             | 46,276   |                             | 
|Research   and development (see note 38(c))           |  |                             | (35,104  | )                           | 
|Other   intangibles                                   |  |                             | 1,698    |                             | 
|                                                      |  |                             |          |                             | 
|                                                      |  |                             | (104,989 | )                           | 

|(vi) | The breakdown of the adjustments to income taxes is summarized below:
|---- | ---------------------------------------------------------------------

|                                                                                  |  | As of   December 31,   2005 |         | As of   December   31,2004 | 
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------------------------- | 
|                                                                                  |  |                             |         |                            | 
|                                                                                  |  | ( 000)                    |        
|-   Deferred taxes related to revaluation surplus                                 |  |                             | (7,996  | )                          | 
|-   Deferred income taxes on intercompany transfer of trademark (see note 38(f))  |  |                             | 3,612   |                            | 
|-   Income tax effects of US GAAP adjustments, including tax effect on brand name |  |                             | 36,536  |                            | 
|Additional   U.S. GAAP valuation allowance                                        |  |                             | (28,167 | )                          | 
|                                                                                  |  |                             |         |                            | 
|                                                                                  |  |                             | 3,985   |                            | 

F-105

---



|(vii) | The breakdown of the adjustments to derivatives is summarized below:
|----- | --------------------------------------------------------------------

|                                                      |  | As of   December 31,   2005 |   | As of   December 31,   2004 | 
|----------------------------------------------------- |  | --------------------------- | - | --------------------------- | 
|                                                      |  |                             |   |                             | 
|                                                      |  | ( 000)                    |  
|-   Unamortized premium under Italian GAAP            |  |                             |  |                             | 
|-   Fair value of Ducatis derivatives other than IRS |  |                             |  |                             | 
|-   Fair value of IRS                                 |  |                             |  |                             | 
|-   Fair value of derivatives of DDF1                 |  |                             |  |                             | 
|                                                      |  |                             |   |                             | 
|                                                      |  |                             |  |                             | 

F-106

---



Condensed consolidated balance sheetU.S. GAAP

|                                                                              |  | December 31,   2005 |         | December 31,   2004 | 
|----------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | 
|                                                                              |  |                     |         |                     | 
|                                                                              |  | ( 000)            |        
|Assets                                                                        |  |                     |         |                     | 
|Current   assets                                                              |  |                     | 251,640 |                     | 
|Property,   plant and equipment, net                                          |  |                     | 57,247  |                     | 
|Intangible   assets, net                                                      |  |                     | 18,320  |                     | 
|Deferred   tax assets, net of valuation allowance (excluding current portion) |  |                     | 9,156   |                     | 
|Other   long-term assets                                                      |  |                     | 406     |                     | 
|                                                                              |  |                     |         |                     | 
|Total Assets                                                                  |  |                     | 336,769 |                     | 
|                                                                              |  |                     |         |                     | 
|Liabilities and Shareholders Equity                                          |  |                     |         |                     | 
|Current   liabilities                                                         |  |                     | 194,194 |                     | 
|Long   term debt, less current installments                                   |  |                     | 118,216 |                     | 
|Obligations   under capital leases, excluding current Installments            |  |                     | 9,121   |                     | 
|Other   long-term liabilities                                                 |  |                     | 11,211  |                     | 
|                                                                              |  |                     |         |                     | 
|Total Liabilities                                                             |  |                     | 332,742 |                     | 
|Shareholders   equity                                                        |  |                     |         |                     | 
|Share   capital                                                               |  |                     | 82,867  |                     | 
|Additional   Paid in Capital                                                  |  |                     | 31,595  |                     | 
|Treasury   stock                                                              |  |                     | (1,607  | )                   | 
|Predecessor   basis adjustment                                                |  |                     | (77,568 | )                   | 
|Retained   earnings (losses)                                                  |  |                     | (32,734 | )                   | 
|Accumulated   other comprehensive income                                      |  |                     | 1,474   |                     | 
|Total Shareholders Equity                                                    |  |                     | 4,027   |                     | 
|                                                                              |  |                     |         |                     | 
|Total Liabilities and Shareholders Equity                                    |  |                     | 336,769 |                     | 
|                                                                              |  |                     |         |                     | 

Condensed consolidated statement of incomeU.S. GAAP

With regard to the consolidated statements of income, the Companys operating income, profit before income taxes, income taxes and net profit/(loss) as determined under U.S. GAAP would have been as follows:

|                                                                                              |  | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 | 
|--------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | 
|                                                                                              |  |                                  |         |                                  | 
|                                                                                              |  | ( 000)                         |        
|Operating   income/(loss)                                                                     |  |                                  | (34,724 | )                                | 
|Profit/(loss)   before income taxes and cumulative effect of a change in accounting principle |  |                                  | (42,197 | )                                | 
|Cumulative   effect of a change in accounting principle, net of taxes (see  note 38(k))       |  |                                  | 517     |                                  | 
|Income   taxes                                                                                |  |                                  | (33,125 | )                                | 
|                                                                                              |  |                                  |         |                                  | 
|Net   loss                                                                                    |  |                                  | (74,805 | )                                | 
|                                                                                              |  |                                  |         |                                  | 

F-107

---



Statement of comprehensive income/(loss)

|                                          |  | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 | 
|----------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | 
|                                          |  |                                  |         |                                  | 
|                                          |  | ( 000)                         |        
|Net   loss                                |  |                                  | (74,805 | )                                | 
|Foreign   currency translation adjustment |  |                                  | 1,799   |                                  | 
|                                          |  |                                  |         |                                  | 
|Comprehensive income/(loss)               |  |                                  | (73,006 | )                                | 
|                                          |  |                                  |         |                                  | 

40.     Additional Financial Statements Disclosures required by U.S. GAAP

The following information is presented on a U.S. GAAP basis.

Income taxes

Profit/(loss) before income taxes consists of:

|         |  | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 | 
|-------- |  | -------------------------------- | ------- | -------------------------------- | 
|         |  |                                  |         |                                  | 
|         |  | ( 000)                         |        
|Domestic |  |                                  | (37,298 | )                                | 
|Foreign  |  |                                  | (4,382  | )                                | 
|         |  |                                  |         |                                  | 
|         |  |                                  | (41,680 | )                                | 

Income tax (expense)/benefit consists of:

|                                |  | Current  |        | Deferred |  | Current tax benefit   applied to reduce   brand name |   | Total |       
|------------------------------- |  | -------- | ------ | -------- |  | ---------------------------------------------------- | - | ----- | ------
|                                |  |          |        |          |  |                                                      |   |       |       
|                                |  | ( 000) |       
|Year   ended December 31, 2004: |  |          |        |          |  |                                                      |   |       |       
|Domestic                        |  |          | (2,967 | )        |  | 1,229                                                |   |       | (3,201
|Foreign                         |  |          | (131   | )        |  | 75                                                   |   |       |      
|                                |  |          |        |          |  |                                                      |   |       |       
|                                |  |          | (3,098 | )        |  | 1,304                                                |   |       | (3,201
|Year   ended December 31, 2005: |  |          |        |          |  |                                                      |   |       |       
|Domestic                        |  |          | (1,692 | )        |  | (26,346                                              | ) |       | (1,961
|Foreign                         |  |          | (214   | )        |  | (2,912                                               | ) |       |       
|                                |  |          |        |          |  |                                                      |   |       |       
|                                |  |          | (1,906 | )        |  | (29,258                                              | ) |       | (1,961

The significant components of deferred income tax (expense)/benefit consist of:

|                                                                                      |  | Year ended   December 31,   2005 |         | Year  ended   December 31,   2004 | 
|------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | --------------------------------- | 
|                                                                                      |  |                                  |         |                                   | 
|                                                                                      |  | ( 000)                         |        
|Deferred   tax (expense)/benefit (exclusive of the effects of other components below) |  |                                  | 3,780   |                                   | 
|Benefits   of operating loss carry forwards                                           |  |                                  |        |                                   | 
|Change   in beginning of the year valuation allowance                                 |  |                                  | (33,038 | )                                 | 
|                                                                                      |  |                                  |         |                                   | 
|                                                                                      |  |                                  | (29,258 | )                                 | 

F-108

---



The reported amount of income taxes differs from the amount that would result from applying the statutory IRES tax rate of 33% to profit before income taxes as a result of the following:

|                                                                           |  | Year ended   December 31,   2005 |         | Year ended   December 31,   2004 | 
|-------------------------------------------------------------------------- |  | -------------------------------- | ------- | -------------------------------- | 
|                                                                           |  |                                  |         |                                  | 
|                                                                           |  | ( 000)                         |        
|Computed   expected tax (expense)/benefit                                |  |                                  | 13,754  |                                  | 
|Non   deductible expenses                                                  |  |                                  | (8,977  | )                                | 
|Tax   rate differential for foreign subsidiaries                           |  |                                  | 112     |                                  | 
|Regional corporate income   tax (IRAP)                                     |  |                                  | (1,193  | )                                | 
|Change   in valuation allowance                                            |  |                                  | (35,641 | )                                | 
|Tremonti   law investment incentive                                        |  |                                  |        |                                  | 
|Deferred   income taxes on intercompany transfer of Ducati Corse trademark |  |                                  | (856    | )                                | 
|Other   minor adjustments                                                  |  |                                  | (324    | )                                | 
|                                                                           |  |                                  |         |                                  | 
|Actual   income taxes                                                      |  |                                  | (33,125 | )                                | 
|                                                                           |  |                                  |         |                                  | 

The tax effects of each type of temporary differences and carry forward that gives rise to significant portions of the deferred tax assets and liabilities at December 31, are presented below:

|                                                                           |  |                                                |         | December 31,   2005   Total |        | December 31,   2004   Total |  
|-------------------------------------------------------------------------- |  | ---------------------------------------------- | ------- | --------------------------- | ------ | --------------------------- | -
|                                                                           |  |                                                |         |                             |        |                             |  
|                                                                           |  |                                                |         | ( 000)                    |       
|Deferred   tax assets:                                                     |  |                                                |         |                             |        |                             |  
|                                                                           |  | -   Inventories                                |         |                             | 3,950  |                             |  
|                                                                           |  | -   Brand name                                 |         |                             | 17,861 |                             |  
|                                                                           |  | -   Accrued liabilities and other              |         |                             | 6,964  |                             |  
|                                                                           |  | -   Net operating loss                         |         |                             | 18,456 |                             |  
|                                                                           |  | -   Deferred research and development expenses |         |                             | 15,708 |                             |  
|                                                                           |  |                                                |         |                             |        |                             |  
|Deferred   tax assets before valuation allowance                           |  |                                                | 62,939  |                             |        | 55,749                      |  
|Valuation   allowance                                                      |  |                                                | (48,691 | )                           |        | (13,050                     | )
|                                                                           |  |                                                |         |                             |        |                             |  
|Total   deferred tax assets                                                |  |                                                | 14,248  |                             |        | 42,699                      |  
|Deferred   tax liabilities:                                                |  |                                                |         |                             |        |                             |  
|                                                                           |  | -   Revaluation reserve                        |         |                             | (7,996 | )                           |  
|                                                                           |  |                                                |         |                             |        |                             |  
|Net   deferred tax assets                                                  |  |                                                | 6,252   |                             |        | 34,703                      |  
|                                                                           |  |                                                |         |                             |        |                             |  
|Deferred   income taxes on intercompany transfer of Ducati Corse trademark |  |                                                | 8,698   |                             |        | 9,493                       |  
|                                                                           |  |                                                |         |                             |        |                             |  

The valuation allowance for deferred tax assets as of January 1, 2004 was  13,220 thousand. The net change in the total valuation allowance for the years ended December 31, 2004 and 2005 was a decrease of  170 thousand and an increase of  35,641 thousand, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and net operating loss utilized. Given the cumulative loss position of the Group at December 31, 2005, management considered the scheduled reversal of deferred tax liabilities and tax planning strategies, in making this assessment. At December 31, 2005, total amount of future taxable income necessary to realize deferred tax asset, net of the existing valuation allowance, is approximately  19.0 million. Based upon this analysis, the management believes it is more likely than not the Ducati Group will realize the benefits of these deductible differences and net operating
loss carry forwards, net of the existing valuation allowance at December 31, 2005.

Deferred taxes have not been provided on the excess in the amount of approximately  1,6 million for financial reporting over the tax basis of investments in foreign subsidiaries, as the company considers the earnings to be permanently reinvested.

F-109

---



At December 31, 2005, the Company had net operating loss carry forwards for Italian, Japanese, U.S. and U.K. income taxes of approximately  55,9 million, which are available to offset future taxable income. Of this amount,  7.3 million have no expiry, while the remainder expire as follows:

| | 2006         |  0 million    | 
| | ------------ | -------------- | 
| | 2007         |  2.6 million  | 
| | 2008         |  6.2 million  | 
| | 2009 to 2022 |  39.8 million | 

Under Italian and U.S. GAAP, the Company effected a quasi reorganization as of January 1, 2000, by eliminating the deficit in retained earnings as of January 1, 2000 of  4,057 thousand with a corresponding reduction in contributed capital. Under U.S. GAAP, the tax benefits that had not been recognized at the date of the quasi reorganization, amounting to  2,125 thousand, will be booked as direct addition to contributed capital when realized.

The deferred income tax related to the intercompany transfer of the Ducati Corse trademark is classified within other long term assets, and is recognized as tax expense as the assets is amortized, over a period of 10 years, starting in 2004.

Business segments and foreign operations

The following table provides information about long-lived assets by geographical location. Long-lived assets comprise property, plants and equipment as calculated under U.S. GAAP.

|                |  | December 31,   2005 |        | December 31,   2004 | 
|--------------- |  | ------------------- | ------ | ------------------- | 
|                |  |                     |        |                     | 
|                |  | ( 000)            |       
|Italy           |  |                     | 56,323 |                     | 
|United   States |  |                     | 422    |                     | 
|France          |  |                     | 239    |                     | 
|Germany         |  |                     | 31     |                     | 
|Holland         |  |                     | 79     |                     | 
|Japan           |  |                     | 28     |                     | 
|UK              |  |                     | 125    |                     | 
|                |  |                     |        |                     | 
|                |  |                     | 57,247 |                     | 

Similar information is presented under note 22 for revenues which have been attributed to countries based on the location of the customer.

Leasing

The Company is obliged under capital leases for buildings, machinery and equipment that expire at various dates through 2009. At December 31, 2004 and 2005, the gross amount and related accumulated amortization of such leases amounted to  30.7 million and  31,2.million, and  10.0 million and  11,2.million, respectively.  20,0.million has been included in property, plant and equipment, net, as of December 31, 2005 (2004:  20.7 million) in the IFRS consolidated balance sheet. Future minimum capital lease payments as of December 31 are:

|                                                      |  | December 31,   2005 |        | December 31,   2004 | 
|----------------------------------------------------- |  | ------------------- | ------ | ------------------- | 
|                                                      |  |                     |        |                     | 
|                                                      |  | ( 000)            |       
|-   2005                                              |  |                     |       |                     | 
|-   2006                                              |  |                     | 3,612  |                     | 
|-   2007                                              |  |                     | 3,722  |                     | 
|-   2008                                              |  |                     | 3,432  |                     | 
|-   2009                                              |  |                     | 2,273  |                     | 
|-   2010 and subsequent years                         |  |                     | 91     |                     | 
|                                                      |  |                     |        |                     | 
|Total   minimum lease payments                        |  |                     | 13,130 |                     | 
|Less   amount representing interest                   |  |                     | (729   | )                   | 
|Present   value of the minimum capital lease payments |  |                     | 12,401 |                     | 
|Current   installments                                |  |                     | 3,280  |                     | 
|Long-term   portion                                   |  |                     | 9,121  |                     | 
|                                                      |  |                     |        |                     | 
|                                                      |  |                     | 12,401 |                     | 

F-110

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Concentration of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. Management believes, however, that the loss due to credit risk to be incurred by the Company if parties to these financial instruments fail completely to perform according to the terms of the contracts is not material. Cash is placed with high-credit quality financial institutions in Italy and the United States. The Company does not require collateral and all their accounts receivable are unsecured; while management believes the trade receivables will be collected, it anticipates that in the event of default they will follow normal collection procedures. The Company estimates an allowance for doubtful accounts based on the credit worthiness of its customers as well as general economic conditions. Consequently, an adverse change in those factors could affect estimates of bad debts. Sales to
the Companys two largest customers accounted for approximately 5.2% and 7,8%of  2004 and 2005 revenues, respectively. However, management believes that overall credit risk related to the Company is limited due to its broad customer base in different geographic areas.

Share option plans

In relation to the 1997 Plan, pursuant to the provisions of SFAS No. 123, the Company calculated the estimated fair value of the options granted during 1997 using the minimum value method. This calculation did not result in any value attributable to the options on their original grant date. As discussed in note 38(g), under APB Opinion No. 25, as a consequence of the Companys initial public offering, the 1997 Plan is deemed to have become a fixed plan under US GAAP, resulting in a new measurement date on the date of the initial public offering. As such, a non-cash compensation expense was recorded in the US GAAP reconciliation for the year ended December 31, 1999. As compensation costs related to the 1997 Plan determined pursuant to the provisions of SFAS No. 123 is based upon the original grant date, compensation expense recognized on the new measurement date under APB Opinion No. 25 would not be
recognized under SFAS 123. The outstanding share options under the 1997 Plan have a weighted average remaining contractual life of approximately 1.6 years as at December 31, 2005.

In relation to the 1999 Plan, pursuant to the provisions of SFAS No. 123, the fair value of these options has been estimated on the grant date using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 2.5%  4.6%, dividend yield of 0%  0.13%, volatility factors of the expected market price of the Companys share of 30%  50% and expected life of the options of 4.5  7  years. On this basis, the weighted average fair value of these outstanding options amounted to  0.51 per share as of December 31, 2005. The outstanding share options have a weighted average remaining contractual life of approximately 2.6 years as of December 31, 2005.

The Black Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because of the Companys employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion the existing models do not necessarily provide a reliable single measure of the fair value of the employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized over their vesting period.

F-111

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The following table illustrates the effect on net loss had compensation cost related to the options granted  under the 1999 Plan been based on the fair value at the grant date, pursuant to the provisions of SFAS No.123 :

|                                                                                                         |  | Year ended December 31 |        
|-------------------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                                         |  |                        |        
|                                                                                                         |  | 2005                   |        
|                                                                                                         |  |                        |        
|Net   loss, as reported                                                                                  |  |                        | (74,805
|Add:   stock based employee compensation    expense included in reported net loss                       |  |                        |       
|Deduct:   total stock-based employee compensation expense determined under the   fair-value based method |  |                        |        
|For   all awards                                                                                         |  |                        | (968   
|Pro-forma   net loss                                                                                     |  |                        | (75,773
|Basic   EPS as reported                                                                                  |  |                        | (0.482 
|Basic   EPS pro-forma                                                                                    |  |                        | (0.488 

F-112

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Schedule II

Ducati Motor Holding S.p.A. Valuation and Qualifying Accounts For the Years Ended December 31, 2004, 2005

|                                              |  |                                      |       |                            | Additions |                                            |  |            |    |                                |  |       
|--------------------------------------------- |  | ------------------------------------ | ----- | -------------------------- | --------- | ------------------------------------------ |  | ---------- | -- | ------------------------------ |  | ------
|                                              |  |                                      |       |                            |           |                                            |  |            |    |                                |  |       
|Description                                   |  | Balance atthe beginning ofthe period |       | Charged tocost andexpenses |           | Charged toother accounts(foreign exchange) |  | Deductions |    | Balance atthe end ofthe period | 
|                                              |  |                                      |       |                            |           |                                            |  |            |    |                                |  |       
|                                              |  | ( 000
)                             |      
|Allowance for doubtful accounts:              |  |                                      |       |                            |           |                                            |  |            |    |                                |  |       
|Year   ended December 31, 2004                |  |                                      | 3,314 |                            |           | 1,176                                      |  |            | (3 | )                              |  | (796  
|Year   ended December 31, 2005                |  |                                      | 3,691 |                            |           | 2,371                                      |  |            | 70 |                                |  | (699  
|Allowance for obsolete/slow moving inventory: |  |                                      |       |                            |           |                                            |  |            |    |                                |  |       
|Year   ended December 31, 2004                |  |                                      | 7,061 |                            |           | 1,656                                      |  |            | 11 |                                |  | (1,292
|Year   ended December 31, 2005                |  |                                      | 7,436 |                            |           | 6,363                                      |  |            | 98 |                                |  | (302  

F-113

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