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As filed with the Securities and Exchange Commission on June 30, 2003







SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




---

FORM 20-F

oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
(g) OF THE SECURITIES EXCHANGE ACT OF 1934
ORþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 2002

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.


|
|

|                                                                                    |  |                        
|----------------------------------------------------------------------------------- |  | -----------------------
|                                                                                    |  | Name of each exchange  
|Title of each class                                                                 |  | on which registered    
|                                                                                    |  |                        
|                                                                                    |  |                        
|American Depositary Shares, each
representing ten Ordinary Shares,  0.52 per share |  | New York Stock Exchange
|Ordinary Shares with a par value of  0.52 per share*                               |  | 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.

158,500,963 Ordinary Shares

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.

YesþNoo

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

Item 17oItem 18þ



---



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





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TABLE OF CONTENTS



|           |                                                                                       |                                                    |  |  |  |  |  | 
|---------- | ------------------------------------------------------------------------------------- | -------------------------------------------------- |  |  |  |  |  | 
|PART I    
|           | Item 1. Identity of Directors, Senior Management and Advisors                        
|           | Item 2. Offer Statistics and Expected Timetable                                      
|           | Item 3. Key Information                                                              
|           |                                                                                       | Selected Consolidated Financial Data              
|           |                                                                                       | Exchange Rates                                    
|           |                                                                                       | Risk Factors                                      
|           |                                                                                       | Forward-Looking Statements                        
|           | Item 1. Information on the Company                                                   
|           |                                                                                       | History and Development of the Company            
|           |                                                                                       | Business Overview                                 
|           |                                                                                       | Organizational Structure                          
|           |                                                                                       | Products and Distribution                         
|           |                                                                                       | Description of Property                           
|           |                                                                                       | Capital Expenditures                              
|           | Item 1. Operating and Financial Review and Prospects                                 
|           |                                                                                       | Introduction                                      
|           |                                                                                       | Critical Accounting Policies                      
|           |                                                                                       | Results of Operations                             
|           |                                                                                       | 2002 Compared to 2001                             
|           |                                                                                       | 2001 Compared to 2000                             
|           |                                                                                       | U.S. GAAP Reconciliation                          
|           |                                                                                       | Liquidity and Capital Resources                   
|           |                                                                                       | Financial Transactions                            
|           |                                                                                       | Contractual Obligations and Commercial Commitments
|           |                                                                                       | Research and Development                          
|           | Item 6. Directors, Senior Management and Employees                                   
|           |                                                                                       | Directors                                         
|           |                                                                                       | Board Committees                                  
|           |                                                                                       | Senior Management                                 
|           |                                                                                       | Statutory Auditors                                
|           |                                                                                       | Compensation of Directors and Senior Management   
|           |                                                                                       | Employees                                         
|           | Item 7. Major Shareholders and Related Party Transactions                            
|           |                                                                                       | Major Shareholders                                
|           |                                                                                       | Related Party Transactions                        
|           | Item 8. Financial Information                                                        
|           |                                                                                       | Consolidated Financial Statements                 
|           |                                                                                       | Other Financial Information                       
|           |                                                                                       | Dividend Policy                                   
|           |                                                                                       | Significant Changes                               
|           | Item 9. The Offer and Listing                                                        
|           |                                                                                       | Trading Markets and Share Prices                  
|           | Item 10. Additional Information                                                      
|           |                                                                                       | Share Option Plans                                
|           |                                                                                       | Buy Back Plan                                     
|           |                                                                                       | Employee Stock Ownership Plan                     
|           |                                                                                       | By Laws                                           
|           |                                                                                       | Material Contracts                                
|           |                                                                                       | Exchange Controls                                 
|           |                                                                                       | Taxation                                          
|           |                                                                                       | Documents on Display                              
|           | Item 11. Quantitative and Qualitative Disclosures About Market Risk                  
|           | Item 12. Description of Securities Other than Equity Securities                      
|PART II   
|           | Item 13. Defaults, Dividends Averages and Delinquencies                              
|           | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|           | Item 15. Disclosure Controls and Procedures                                          
|           | Item 16. [Reserved]                                                                  
|           | Item 17. Financial Statements                                                        
|           | Item 18. Financial Statements                                                        
|           | Item 19. Exhibits                                                                    
|           |                                                                                       | Signatures                                        
|           |                                                                                       | Principal Executive Officer Certification         
|           |                                                                                       | Principal Financial Officer Certification         
|EXHIBIT 10



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TABLE OF CONTENTS

|       |         |                                                       |   |      |    | 
|------ | ------- | ----------------------------------------------------- | - | ---- | -- | 
|       |         |                                                       |   | Page
|       |         |                                                       |   |     
|PART I |         |                                                       | 1 |     
|       | Item 1. | Identity of Directors, Senior Management and Advisors |   |      | 1  | 
|       | Item 2. | Offer Statistics and Expected Timetable               |   |      | 1  | 
|       | Item 3. | Key Information                                       |   |      | 2  | 
|       |         | Selected Consolidated Financial Data                  |   |      | 2  | 
|       |         | Exchange Rates                                        |   |      | 5  | 
|       |         | Risk Factors                                          |   |      | 6  | 
|       |         | Forward-Looking Statements                            |   |      | 12 | 
|       | Item 4. | Information on the Company                            |   |      | 13 | 
|       |         | History and Development of the Company                |   |      | 13 | 
|       |         | Business Overview                                     |   |      | 14 | 
|       |         | Organizational Structure                              |   |      | 19 | 
|       |         | Products and Distribution                             |   |      | 20 | 
|       |         | Description of Property                               |   |      | 33 | 
|       |         | Capital Expenditures                                  |   |      | 34 | 
|       | Item 5. | Operating and Financial Review and Prospects          |   |      | 35 | 
|       |         | Introduction                                          |   |      | 35 | 
|       |         | Critical Accounting Policies                          |   |      | 37 | 
|       |         | Results of Operations                                 |   |      | 40 | 
|       |         | 2002 Compared to 2001                                 |   |      | 40 | 
|       |         | 2001 Compared to 2000                                 |   |      | 42 | 
|       |         | U.S. GAAP Reconciliation                              |   |      | 45 | 
|       |         | Liquidity and Capital Resources                       |   |      | 45 | 
|       |         | Financial Transactions                                |   |      | 46 | 
|       |         | Contractual Obligations and Commercial Commitments    |   |      | 48 | 
|       |         | Research and Development                              |   |      | 49 | 
|       | Item 6. | Directors, Senior Management and Employees            |   |      | 51 | 
|       |         | Directors                                             |   |      | 51 | 
|       |         | Board Committees                                      |   |      | 53 | 
|       |         | Senior Management                                     |   |      | 54 | 
|       |         | Statutory Auditors                                    |   |      | 55 | 
|       |         | Compensation of Directors and Senior Management       |   |      | 55 | 
|       |         | Employees                                             |   |      | 57 | 
|       | Item 7. | Major Shareholders and Related Party Transactions     |   |      | 59 | 
|       |         | Major Shareholders                                    |   |      | 59 | 
|       |         | Related Party Transactions                            |   |      | 59 | 

-i-



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TABLE OF CONTENTS
(continued)

|        |                                           |                                                                              |    |      |    | 
|------- | ----------------------------------------- | ---------------------------------------------------------------------------- | -- | ---- | -- | 
|        |                                           |                                                                              |    | Page
|        |                                           |                                                                              |    |     
|        | Item 8.                                   | Financial Information                                                        |    |      | 61 | 
|        |                                           | Consolidated Financial Statements                                            |    |      | 61 | 
|        |                                           | Other Financial Information                                                  |    |      | 61 | 
|        |                                           | Dividend Policy                                                              |    |      | 62 | 
|        |                                           | Significant Changes                                                          |    |      | 62 | 
|        | Item 9.                                   | The Offer and Listing                                                        |    |      | 63 | 
|        |                                           | Trading Markets and Share Prices                                             |    |      | 63 | 
|        | Item 10.                                  | Additional Information                                                       |    |      | 64 | 
|        |                                           | Share Option Plans                                                           |    |      | 64 | 
|        |                                           | Buy Back Plan                                                                |    |      | 65 | 
|        |                                           | Employee Stock Ownership Plan                                                |    |      | 65 | 
|        |                                           | By Laws                                                                      |    |      | 66 | 
|        |                                           | Material Contracts                                                           |    |      | 79 | 
|        |                                           | Exchange Controls                                                            |    |      | 79 | 
|        |                                           | Taxation                                                                     |    |      | 80 | 
|        |                                           | Documents on Display                                                         |    |      | 83 | 
|        | Item 11.                                  | Quantitative and Qualitative Disclosures About Market Risk                   |    |      | 84 | 
|        | Item 12.                                  | Description of Securities Other than Equity Securities                       |    |      | 86 | 
|PART II |                                           |                                                                              | 86 |     
|        | Item 13.                                  | Defaults, Dividends Averages and Delinquencies                               |    |      | 86 | 
|        | Item 14.                                  | Material Modifications to the Rights of Security Holders and Use of Proceeds |    |      | 86 | 
|        | Item 15.                                  | Disclosure Controls and Procedures                                           |    |      | 86 | 
|        | Item 16.                                  | [Reserved]                                                                   |    |      | 86 | 
|        | Item 17.                                  | Financial Statements                                                         |    |      | 86 | 
|        | Item 18.                                  | Financial Statements                                                         |    |      | 87 | 
|        | Item 19.                                  | Exhibits                                                                     |    |      | 88 | 
|        | Signatures                                |                                                                              |    | 89   |   
|        | Principal Executive Officer Certification |                                                                              |    | 90   |   
|        | Principal Financial Officer Certification |                                                                              |    | 91   |   

-ii-



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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Our audited financial statements and other financial information contained
in this annual report on Form 20-F for the fiscal year ended December 31, 2002
(the annual report) have been prepared in conformity with generally accepted
accounting principles in Italy (Italian GAAP), except for certain items under
Item 3  Key Information  Selected Financial Data, which have been prepared
in conformity with United States generally accepted accounting principles
(U.S. GAAP). For a detailed discussion of the differences between Italian
GAAP and U.S. GAAP, see Notes 29, 30 and 31 to the audited financial
statements. All of our per share and per American Depositary Share (ADS)
information has been adjusted to reflect the ten-for-one split of our shares
that occurred on September 7, 1998.

In this annual report, references to we, us, our, Ducati 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 U.S.$, $, 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 (including Italy) upon the commencement of the third stage of
the European Monetary Union (EMU) on January 1, 1999.

Beginning with fiscal year ended December 31, 2001, we publish 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 (1) our audited
financial statements for fiscal years ending before 2001 and (2) other amounts
formerly stated in Italian lire in euro and 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;                                                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 31, 2002 of U.S.$1.0485
per euro; and                              
|
| |  |  | the Noon Buying Rate for euro on June 26, 2003 was U.S.$1.1429 per
euro. Foreign currency translations in this annual report should not
be taken as representations that the foreign currency amounts actually
represent the equivalent U.S. dollar amounts or could be converted
into U.S. dollars at the rates indicated.

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. Our consolidated financial information for the year ended 1998 (before
the adoption of the euro) may, however, not be comparable to the euro financial
information of other companies that previously reported their financial
information in a currency other than 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 family 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.





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##### Table of Contents



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 (Europe Motorcycle Manufacturing Association) and GIRAL (General
Research International Associates Ltd.), an independent Swiss
motorcycle consultancy, for the Western European markets;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ANCMA (Associazione Nazionale Costruttori Moto 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.

ii



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PART I




Item 1. Identity of Directors, Senior Management and Advisors

Not applicable.




Item 2. Offer Statistics and Expected Timetable

Not applicable.

1



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Item 3. Key Information




Selected Consolidated Financial Data

The following table sets forth our selected historical consolidated
financial data as of and for the years ended December 1998, 1999, 2000, 2001
and 2002, which have been derived from our audited financial statements
included in this annual report or in our previous filings with the Securities
and Exchange Commission. Our audited financial statements and the selected
financial data set forth below have been prepared in conformity with Italian
GAAP.

In addition, the following table sets forth certain selected financial
data prepared in conformity with U.S. GAAP. For information concerning
differences between Italian GAAP and U.S. GAAP as applied to our audited
financial statements, see Notes 29, 30 and 31 to the audited financial
statements.

The selected consolidated financial data set forth below (except for other
financial data) should be read in conjunction with the audited financial
statements and Item 5  Operating and Financial Review and Prospects included
elsewhere in this annual report.

2



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##### Table of Contents



Selected Consolidated Financial Data In Conformity with Italian GAAP

|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|------------------------------------------------------- |  | ------------------------------------------------------------------ | -------- | ------------ |  | ------------ | -------- | ------------ |  | ------------ | -------- | ------------ |  | - | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                                        |  | Year ended                                                         |          | Year ended   |  | Year ended   |          | Year ended   |  | Year ended   |          | Year ended  
|                                                        |  | December 31,                                                       |          | December 31, |  | December 31, |          | December 31, |  | December 31, |          | December 31,
|                                                        |  | 1998                                                               |          | 1999         |  | 2000         |          | 2001         |  | 2002         |          | 2002        
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |             
|                                                        |  | (euro and dollars in thousands, except per share and ADS data) (1)
|CONSOLIDATED STATEMENT OF OPERATIONS DATA               |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Net sales                                               |  |                                                                   | 240,203  |              |  |             | 294,527  |              |  |             | 379,534  |              |  |  | 407,815  |   |  |  | 412,971  |   |  | $ | 433,000  |  
|Cost of goods sold(2)                                   |  |                                                                    | (148,432 | )            |  |              | (176,540 | )            |  |              | (228,890 | )            |  |   | (241,266 | ) |  |   | (249,264 | ) |  |   | (261,353 | )
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Gross profit                                            |  |                                                                    | 91,771   |              |  |              | 117,987  |              |  |              | 150,644  |              |  |   | 166,549  |   |  |   | 163,707  |   |  |   | 171,647  |  
|Selling, general and administrative
expenses            |  |                                                                    | (52,410  | )            |  |              | (70,704  | )            |  |              | (95,604  | )            |  |   | (107,968 | ) |  |   | (122,032 | ) |  |   | (127,951 | )
|Depreciation of property, plant and equipment           |  |                                                                    | (5,043   | )            |  |              | (6,628   | )            |  |              | (7,446   | )            |  |   | (9,998   | ) |  |   | (11,993  | ) |  |   | (12,575  | )
|Amortization of intangible assets                       |  |                                                                    | (14,136  | )            |  |              | (17,623  | )            |  |              | (22,147  | )            |  |   | (24,582  | ) |  |   | (21,991  | ) |  |   | (23,057  | )
|Other operating revenues                                |  |                                                                    | 1,187    |              |  |              | 3,336    |              |  |              | 4,952    |              |  |   | 7,547    |   |  |   | 10,795   |   |  |   | 11,319   |  
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Operating income/(loss)                                 |  |                                                                    | 21,369   |              |  |              | 26,368   |              |  |              | 30,399   |              |  |   | 31,548   |   |  |   | 18,486   |   |  |   | 19,383   |  
|Interest expense, net                                   |  |                                                                    | (12,452  | )            |  |              | (11,886  | )            |  |              | (8,814   | )            |  |   | (12,750  | ) |  |   | (11,472  | ) |  |   | (12,028  | )
|Foreign exchange gain/(loss), net                       |  |                                                                    | (580     | )            |  |              | (2,427   | )            |  |              | (10,615  | )            |  |   | 677      |   |  |   | 1,363    |   |  |   | 1,429    |  
|Other non-operating income/(expense) net(3)             |  |                                                                    | (8,725   | )            |  |              | 172      |              |  |              | 6,702    |              |  |   | (28      | ) |  |   | 134      |   |  |   | 140      |  
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Profit/(loss) before income taxes and
minority interest |  |                                                                    | (388     | )            |  |              | 12,227   |              |  |              | 17,672   |              |  |   | 19,447   |   |  |   | 8,511    |   |  |   | 8,924    |  
|Income taxes                                            |  |                                                                    | (711     | )            |  |              | (3,179   | )            |  |              | (7,189   | )            |  |   | (8,894   | ) |  |   | (1,986   | ) |  |   | (2,083   | )
|Minority interest                                       |  |                                                                    | (143     | )            |  |              | (127     | )            |  |              | 0        |              |  |   | 0        |   |  |   | 0        |   |  |   | 0        |  
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Net profit/(loss)                                       |  |                                                                    | (1,242   | )            |  |              | 8,921    |              |  |              | 10,483   |              |  |   | 10,553   |   |  |   | 6,525    |   |  |   | 6,841    |  
|Net profit/(loss) per share(4)                          |  |                                                                   | (0.09    | )            |  |             | 0.056    |              |  |             | 0.066    |              |  |  | 0.066    |   |  |  | 0.041    |   |  | $ | 0,041    |  
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Net profit/(loss) per ADS(4)                            |  |                                                                   | (0.9     | )            |  |             | 0.56     |              |  |             | 0.66     |              |  |  | 0.66     |   |  |  | 0.41     |   |  | $ | 0,041    |  
|                                                        |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|OTHER FINANCIAL DATA                                    |  |                                                                    |          |              |  |              |          |              |  |              |          |              |  |   |          |   |  |   |          |   |  |   |          |  
|Capital expenditures                                    |  |                                                                    | 10,710   |              |  |              | 8,706    |              |  |              | 11,328   |              |  |   | 13,464   |   |  |   | 23,819   |   |  |   | 24,974   |  
|Cash flows from operating activities                    |  |                                                                    | 27,207   |              |  |              | 15,349   |              |  |              | 41,606   |              |  |   | 13,752   |   |  |   | 44,911   |   |  |   | 47,089   |  
|Cash flows from investing activities                    |  |                                                                    | (34,649  | )            |  |              | (27,336  | )            |  |              | (26,877  | )            |  |   | (29,302  | ) |  |   | (44,345  | ) |  |   | 46,496   |  
|Cash flows from financing activities                    |  |                                                                    | 10,943   |              |  |              | (15,371  | )            |  |              | (12,244  | )            |  |   | 25,491   |   |  |   | (310     | ) |  |   | (325     | )

|                                   |  |                    |         |      |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         | 
|---------------------------------- |  | ------------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                   |  | As of December 31,
|                                   |  |                   
|                                   |  | 1998               |         | 1999 |  | 2000 |         | 2001 |  | 2002 |         | 2002
|                                   |  |                    |         |      |  |      |         |      |  |      |         |     
|CONSOLIDATED BALANCE SHEET DATA    |  |                    |         |      |  |      |         |      |  |      |         |      |  |   |         |  |  |   |         |  |  |   |         | 
|Cash and cash equivalents          |  |                   | 7,896   |      |  |     | 11,279  |      |  |     | 13,764  |      |  |  | 23,705  |  |  |  | 23,960  |  |  | $ | 25,122  | 
|Net working capital(5)             |  |                    | 40,660  |      |  |      | 56,709  |      |  |      | 56,133  |      |  |   | 105,488 |  |  |   | 97,546  |  |  |   | 102,277 | 
|Property, plant and equipment, net |  |                    | 45,150  |      |  |      | 47,228  |      |  |      | 51,110  |      |  |   | 54,576  |  |  |   | 66,402  |  |  |   | 69,622  | 
|Total assets                       |  |                    | 312,267 |      |  |      | 349,934 |      |  |      | 389,573 |      |  |   | 447,732 |  |  |   | 459,242 |  |  |   | 481,515 | 
|Total indebtedness(6)              |  |                    | 157,894 |      |  |      | 123,595 |      |  |      | 111,129 |      |  |   | 136,625 |  |  |   | 136,315 |  |  |   | 142,926 | 
|Total shareholders equity         |  |                    | 71,816  |      |  |      | 131,077 |      |  |      | 143,039 |      |  |   | 154,597 |  |  |   | 159,741 |  |  |   | 167,488 | 

3



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##### Table of Contents



Selected Consolidated Financial Data In Conformity with U.S. GAAP (in thousands)(7)

|                                                                             |  |                                                                    |         |              |  |              |        |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------- |  | ------------------------------------------------------------------ | ------- | ------------ |  | ------------ | ------ | ------------ |  | ------------ | ------- | ------------ |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                             |  | Year ended                                                         |         | Year ended   |  | Year ended   |        | Year ended   |  | Year ended   |         | Year ended  
|                                                                             |  | December 31,                                                       |         | December 31, |  | December 31, |        | December 31, |  | December 31, |         | December 31,
|                                                                             |  | 1998                                                               |         | 1999         |  | 2000         |        | 2001         |  | 2002         |         | 2002        
|                                                                             |  |                                                                    |         |              |  |              |        |              |  |              |         |             
|                                                                             |  | (euro and dollars in thousands, except per share and ADS data) (1)
|CONSOLIDATED STATEMENT OF OPERATIONS DATA                                    |  |                                                                    |         |              |  |              |        |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Operating income(8)                                                          |  |                                                                   | 25,630  |              |  |             | 15,391 |              |  |             | 33,560  |              |  |  | 33,691 |   |  |  | 16,148  |   |  | $ | 6,931   |  
|Profit/(loss) before income taxes, minority interest and
extraordinary items |  |                                                                    | 7,841   |              |  |              | (418   | )            |  |              | 14,631  |              |  |   | 20,308 |   |  |   | 9,973   |   |  |   | 10,457  |  
|Net profit/(loss)                                                            |  |                                                                    | 779     |              |  |              | (4,438 | )            |  |              | 7,094   |              |  |   | 14,178 |   |  |   | 6,966   |   |  |   | 7,304   |  
|Net profit/(loss) per share (basic)(9)                                       |  |                                                                    | 6       |              |  |              | (29    | )            |  |              | 45      |              |  |   | 77     |   |  |   | 44      |   |  |   | 46      |  
|Net profit/(loss) per ADSs (basic)                                           |  |                                                                    | 60      |              |  |              | (290   | )            |  |              | 450     |              |  |   | 770    |   |  |   | 440     |   |  |   | 460     |  
|Net profit/(loss) per share (diluted)                                        |  |                                                                    |        |              |  |              |       |              |  |              | 43      |              |  |   | 76     |   |  |   | 43      |   |  |   | 45      |  
|Net profit/(loss) per ADSs (diluted)                                         |  |                                                                    |        |              |  |              |       |              |  |              | 430     |              |  |   | 760    |   |  |   | 430     |   |  |   | 450     |  
|OTHER FINANCIAL DATA                                                         |  |                                                                    |         |              |  |              |        |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Non-cash expense for stock-based
compensation                                |  |                                                                   |        |              |  |             | 14,543 |              |  |             | 2,997   |              |  |  | 204    |   |  |  | 101     |   |  | $ | 106     |  
|Depreciation and amortization(10)                                            |  |                                                                    | 9,844   |              |  |              | 11,985 |              |  |              | 13,187  |              |  |   | 17,625 |   |  |   | 16,975  |   |  |   | 17,798  |  
|Cash flows from operating
activities                                         |  |                                                                    | 20,863  |              |  |              | 11,074 |              |  |              | 27,364  |              |  |   | (3,444 | ) |  |   | 24,850  |   |  |   | 26,055  |  
|Cash flows from investing
activities                                         |  |                                                                    | (24,545 | )            |  |              | (9,840 | )            |  |              | (13,819 | )            |  |   | (9,759 | ) |  |   | (23,889 | ) |  |   | (29,048 | )
|Cash flows from financing
activities                                         |  |                                                                    | 10,050  |              |  |              | (2,439 | )            |  |              | (11,505 | )            |  |   | 23,093 |   |  |   | (338    | ) |  |   | (354    | )

|                                     |  |  |  |  |  |                    |             |      |  |      |          |      |  |      |          |      |  |  |          |  |  |  |          |  |  |   |         | 
|------------------------------------ |  |  |  |  |  | ------------------ | ----------- | ---- |  | ---- | -------- | ---- |  | ---- | -------- | ---- |  |  | -------- |  |  |  | -------- |  |  | - | ------- | 
|                                     |  |  |  |  |  |                    | The Company
|                                     |  |  |  |  |  |                   
|                                     |  |  |  |  |  | As of December 31,
|                                     |  |  |  |  |  |                   
|                                     |  |  |  |  |  | 1998               |             | 1999 |  | 2000 |          | 2001 |  | 2002 |          | 2002
|                                     |  |  |  |  |  |                    |             |      |  |      |          |      |  |      |          |     
|CONSOLIDATED BALANCE SHEET DATA      |  |  |  |  |  |                    |             |      |  |      |          |      |  |      |          |      |  |  |          |  |  |  |          |  |  |   |         | 
|Total assets                         |  |  |  |  |  |                    | 233,932    |      |  |      | 269,671 |      |  |      | 312,332 |      |  |  | 357,824 |  |  |  | 398,495 |  |  | $ | 396,618 | 
|Total shareholders (deficit)/equity |  |  |  |  |  |                    | (4,288      | )    |  |      | 50,369   |      |  |      | 62,346   |      |  |  | 77,717   |  |  |  | 83,483   |  |  |   | 87,532  | 



---

|(1)  |  | Amounts are translated into U.S. dollars by converting the resulting euro
amount into U.S. dollars at the Noon Buying Rate for euro on December 31,
2002 of U.S.$1.0485 per euro.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | These amounts exclude depreciation of property, plant and equipment and
amortization of intangible assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(3)  |  | For the year ended December 31, 1998, this item included non-operating
expenses of a non-recurring nature of  9.0 million, which related to the
cash settled warrant rights held by the arrangers of certain pre-existing
indebtedness that was repaid with borrowings under a credit agreement
dated July 8, 1998 with several banks and Credit Suisse First Boston
(London branch), as facility agent, security agent and issuing bank (the
Credit Agreement), and to the write-off of debt issuance costs in
connection with the extinguishment of this indebtedness. See Note 26 to
the audited financial statements. For the year ended December 31, 2000,
this item included a  6.7 million non-recurring gain recorded in
connection with a voluntary, tax-driven write-up of the book value of our
trademark in the statutory accounts of DMH. See Item 5  Operating and
Financial Review and Prospects  2000 Compared to 1999.                                                                                        
|    
|(4)  |  | For Italian GAAP purposes, the number of shares and ADSs is assumed to be
the shares and ADSs outstanding at the period-end; for U.S. GAAP purposes,
the number of shares has been calculated as the weighted average number of
shares and ADSs outstanding during the period. Italian per share numbers
do not reflect the effect of incremental shares, if any, that would have
been outstanding, assuming all options granted under our share option
plans were exercised during the relevant period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(5)  |  | Net working capital is calculated as total current assets less total
current liabilities. Cash and cash equivalents, non-commercial
receivables and payables with Cagiva S.p.A. and the current portion of
indebtedness (long-term debt and short-term bank borrowings) are excluded
from such calculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(6)  |  | Total indebtedness comprises long-term debt (including current portion)
and short-term bank borrowings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(7)  |  | Financial data prepared in conformity with U.S. GAAP is presented as
supplemental information for investors; our audited financial statements
included in this annual report are prepared in conformity with Italian
GAAP. For information concerning certain differences between Italian GAAP
and U.S. GAAP as applied to our audited financial statements, see Notes
29, 30 and 31 to the audited financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(8)  |  | Operating income, profit/(loss) before income taxes, minority interest
and extraordinary items and net profit/(loss) are stated after deducting a
non-cash expense for stock-based compensation of  14.5 million,  3.0
million,  0.2 million and  0.1 million for each of the years 1999
through 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(9)  |  | We have not paid any dividends for the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(10) |  | Depreciation and amortization excludes amortization of debt issuance
costs of  1.1 million for the year ended December 31, 1998,  0.8 million
for the year ended December 31, 1999,  2.1 million for the year ended
December 31, 2000,  2.0 million for the year ended December 31, 2001 and
 1.9 million for the year ended December 31, 2002. Effective January 1,
2002, we adopted the provisions of SFAS 142, Goodwill and Other
Intangible Assets. Subsequent to the adoption of SFAS 142, we do not
amortize goodwill for U.S. GAAP purposes, but do test for impairment. For
Italian GAAP purposes, we continue to amortize goodwill. In addition,
goodwill in our Italian GAAP financial statements relating to the 1996
acquisition of the Ducati brand name, trademark and related intellectual
property rights (see Notes 1(b) and 29 to our audited consolidated
financial statements) is not considered goodwill under U.S. GAAP, but is
reflected as part of Brand Name and therefore continues to be amortized.

4



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##### Table of Contents






Exchange Rates

Fluctuations in the exchange rate between euro and U.S. dollars will
affect the U.S. dollar equivalent of euro prices of the 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
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. Amounts for the year 1998 (before the adoption of the
euro) have been calculated based on the Noon Buying Rates for the Italian Lira,
converted into euro at the official fixed conversion rate of  1= Lit. 1,936.27
and expressed in dollars per 1.

|      |  |            |        |               |  |  |        | 
|----- |  | ---------- | ------ | ------------- |  |  | ------ | 
|Year: |  | Average(1) |        | At Period End
|      |  |            |        |              
|1998  |  |            | 1.1147 |               |  |  | 1.1707 | 
|1999  |  |            | 1.0588 |               |  |  | 1.0070 | 
|2000  |  |            | 0.9207 |               |  |  | 0.9388 | 
|2001  |  |            | 0.8909 |               |  |  | 0.8901 | 
|2002  |  |            | 0.9495 |               |  |  | 1.0485 | 

|                  |  |      |        |     |  |  |        | 
|----------------- |  | ---- | ------ | --- |  |  | ------ | 
|Month ending:     |  | High |        | Low
|                  |  |      |        |    
|December 31, 2002 |  |      | 1.0485 |     |  |  | 0.9927 | 
|January 30, 2003  |  |      | 1.0861 |     |  |  | 1.0361 | 
|February 28, 2003 |  |      | 1.0875 |     |  |  | 1.0708 | 
|March 31, 2003    |  |      | 1.1062 |     |  |  | 1.0545 | 
|April 30, 2003    |  |      | 1.1180 |     |  |  | 1.0621 | 
|May 31, 2003      |  |      | 1.1853 |     |  |  | 1.1200 | 



---

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

The effective Noon Buying Rate for euro on June 26, 2003 was U.S.$1.1429
per 1 euro.

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##### Table of Contents






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.

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. 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. Certain of our competitors may also have shorter product
development cycles and may be able to bring new products to the market more
quickly than we can. Like other competitors in the motorcycle industry, our
competitiveness is also influenced by our performance on international
professional racing circuits, and we cannot assure you that the racing success
of Ducati motorcycles will continue. Racing success may also be affected by
events outside of our control, such as injuries or accidents occurring to our
riders. We are also subject to potential price pressure from our competitors
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. In
general, we cannot assure you that we will be able to maintain our present
competitive position in the future. See Item 4  Information on the Company 
Products and Distribution  Market Share and Competition.

Demand for motorcycles is cyclical

In the past, the motorcycle industry has been 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 2002 and the
first quarter of 2003, there has been a significant decrease in demand 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))
relative to prior periods, which has had a material effect on our results of
operations. The factors underlying such changes in demand are beyond our
control, and demand for our products may continue to 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 our current motorcycle models to the market on a timely
basis

Like other competitors in the motorcycle industry, our operations are
characterized by seasonal fluctuations in demand and a stable production level
(except that 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 the months of April, May and June, resulting in peak factory
sales during the months of March, April and May and a build-up of inventory
from September to February. As a result, we must plan our 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
ensuing 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. See the discussion of our
selling, general and administrative expenses in Item 5  Operating and
Financial Review and Prospects. 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. In addition, a number of

6



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##### Table of Contents



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 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 only
enter 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. See Item 4  Information on the Company  Products and
Distribution  Assembly Operations. 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. See Item 4  Information on the
Company  Products and Distribution.

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.
Any increase in the prices of motorcycle components may have a material adverse
effect on our business, prospects, results of operations or financial
condition.

Our new line of motorcycles, the Multistrada, which we introduced in 2001 for
sale in 2003, may not be successful

In 2001, we introduced a fifth line of motorcycles, the Multistrada, for
sale in 2003. This line of motorcycles is intended for riders seeking
Superbike performance in a more comfortable design and is characterized by a
more upright position and a new dual spark (i.e., with two spark plugs per
cylinder), air-cooled 1000cc engine. The Multistrada represents an entirely
new concept and type of motorcycle compared to what is currently available on
the market. We cannot guarantee that the introduction of the Multistrada will
achieve market acceptance, or that any such acceptance will not take more time
or resources than we currently anticipate. Moreover, although the
Multistradas new engine has been thoroughly tested, problems may arise that
may compromise its success or result in additional expense to us. Any lack of
or delay in market acceptance in connection with the introduction of our
Multistrada motorcycles may have a material adverse affect 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 2002, our capital expenditures in property, plant and equipment were
approximately  23.8 million, a 76.9% increase over 2001. This increase was
principally due to our increased research and development initiatives (i.e.,
launch of the Multistrada). In 2002, we also invested in research and
development activities to develop the Ducati Desmosedici motorcycle in
connection with our participation in the Moto GP Championship (which are
included in our costs of goods sold for 2002). If any of the above initiatives
is unsuccessful, our related past and anticipated future capital expenditures
and several other 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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##### Table of Contents



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; 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. 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. Our national collective
bargaining agreement was renewed in May 2003, and expires in December 2006
generally, and in December 2004 as to the economic aspects. Our
company-specific collective bargaining agreement was signed in June 1998 and
expired in December 2001. We are currently negotiating the renewal of this
agreement, and meanwhile we continue to operate as regards our employees in
accordance with its terms (except as regards annual performance bonuses), see
Item 6  Directors, Senior Management and Employees  Employees. We expect
that the agreement, once renewed, will have a term of four years.

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.

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.

8



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##### Table of Contents



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. We cannot assure you that the
members of our management team will continue working for us in the long term.
See Item 6  Directors, Senior Management and Employees. Competition 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;       
| | - |  | -------------------------------------------
|
| |  |  | licensing requirements;                    
|
| |  |  | tariffs or taxes and other trade barriers; 
|
| |  |  | price, wage and exchange controls;         
|
| |  |  | political, social and economic instability;
|
| |  |  | inflation; and                             
|
| |  |  | interest rate fluctuations.                

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

We are exposed to foreign exchange rate risks. Our sales and operating
profits are affected by the impact of fluctuations in currency exchange rates
between the euro and certain foreign currencies on product prices and operating
expenses. In 2002, we had net sales denominated in U.S. dollars, Japanese yen
and U.K. pounds sterling that together exceeded 30.0% of our total net sales
for the year (with sales in U.S. dollars accounting for approximately 17.0% of
our total net sales), while our costs are principally denominated in euro.

Fluctuations in the exchange rates of certain foreign currencies,
principally the U.S. dollar, the U.K. pound sterling and the Japanese yen,
relative to the euro may adversely affect our sales and operating results and
the international competitiveness of our Italian-based manufacturing
operations. We are also subject to potential price pressure from our
competitors 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. In 2002, the euros appreciation over other currencies
(including relative to the U.S. dollar approximately 6.6% (comparing the
average of such currencies for 2001 and 2002) and 17.6% (comparing such
currencies as of December 21, 2001 and December 31, 2002)), contributed to the
decline in our sales and operating results. From time to time 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. We cannot assure you that these transactions will adequately protect us
from the effects of future exchange rate fluctuations. See Item 11 
Quantitative and Qualitative Disclosures About Market Risk.

9



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

Motorcycles sold in the United States, the European Union and all 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 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. 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.

We have incurred indebtedness

On May 31, 2000, we issued a series of Eurobond notes (the Notes) in the
aggregate principal amount of  100.0 million, which mature on May 31, 2005.
The terms and conditions of the Notes do not include any financial coverage
ratios or performance covenants, but do limit our ability to create liens on
assets to secure (i) indebtedness represented by bonds, notes, debentures or
other negotiable instruments or (ii) any guarantee of such indebtedness.
Events of default under the terms and conditions of the Notes, which would
entitle the noteholders to declare the Notes to be immediately due and payable,
include but are not limited to, failure to pay interest or principal under the
Notes when due, failure to comply with any obligations under or in respect of
the Notes, failure to pay other indebtedness when due, acceleration of other
indebtedness and the occurrence of certain bankruptcy or other insolvency
events. If the noteholders declare the Notes to be immediately due and
payable, our business, prospects, results of operations and financial condition
would be materially and adversely affected.

As a result of seasonal working capital requirements, our borrowings
fluctuate significantly during the year, generally peaking from February to
April. We expect to finance our working capital requirements by drawing on
credit lines that several Italian commercial banks have made available to us.
During 2002, our cash flow from operating activities was  44.9 million and our
interest payments on indebtedness during the period were  5.9 million,or
13.0% of our cash flow from operating activities.

We cannot assure you that our operating results, cash flow and capital
resources will be sufficient for payment of our indebtedness in the future.
Further, we cannot assure you that we will be able to continue to draw on bank
credit lines to meet our seasonal working capital requirements. Absent
sufficient operating results, 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. In
addition, we may be required 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 strategies could be
effected on satisfactory terms, if at all. One or more of these strategies may
have a material adverse effect on our business or the price of our shares and
ADSs.

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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. The application of these restrictions could limit our
ability to make distributions to holders of the shares and ADSs.

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

DMH is incorporated under the laws of the Republic of Italy. As a result,
the rights and obligations of our shareholders and certain rights and
obligations of holders of our ADSs are governed by Italian law and DMHs
Statuto(or By-Laws). These rights and obligations are different from those
that apply to U.S. corporations. 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, but an investor
may acquire up to a 30.0% interest without being subject to such an obligation.
Further, under Italian law, ADS 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 public share and ADS holders may find it more difficult to
protect their interests against actions of our management, board of directors
or 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 purchase 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

As of June 27, 2003, TPG Motorcycle Acquisition L.P. (TPG Acquisition),
a limited partnership controlled by Texas Pacific Group (TPG), owned 33.22%
of our outstanding shares and controls us. In addition, as of May 6, 2003,
Harris Associates, L.P. and Giorgio Seragnoli owned 4.97% and 4.93%,
respectively, of our outstanding shares. As a result, TPG controls our
management and policies, as well as

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determines (or holds a veto right in respect of) matters requiring
shareholder approval. 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 or ADSs and may otherwise adversely affect the market price of
our shares or ADSs.




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 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.

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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
eleven of thirteen 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 Moto GP Championship, and in the
first seven races we posted impressive results (including a first place finish in
June). 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 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, i.e., a joint stock 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, Inc.s address is
10443 Bandley Drive, Cupertino, CA 95014-1912 and its telephone number is
(408) 253-0499.

History

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.

As a result of their superior performance characteristics, Ducati
motorcycles rapidly achieved success in international racing competitions. A
125cc Grand Prixwas runner-up in the 1958 World Championship and the 250cc
Mach 1motorcycle, introduced in 1964, was among the fastest 250cc roadsters
available at the time. In 1972, a Ducati 750GT 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 900Super 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

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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 888to 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 affiliates of 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.

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.




Business Overview

We produce motorcycles in five model lines, which vary in their technical
and design features and intended customers: Superbike, Super Sport, Sport
Naked, Sport Touring and Multistrada. We sell our motorcycles and related
products in more than 45 countries worldwide, with a primary focus on the
Western European and North American markets, which together accounted for
approximately 85.0% of our net sales in each of the last three years. In 2002,
no single country accounted for more than 15.0% of our net sales of motorcycles
and related products, with the exception of Italy and the United States at
26.0% and 17.0%, respectively. We have a global distribution network directly
controlling our Italian sales and operating wholly owned distribution
subsidiaries in North America, France (99.9% owned),Germany, the Benelux
countries (which is also responsible for Sweden), 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 our position as one of the worlds leading manufacturers of
high-performance motorcycles is primarily attributable to the following
competitive strengths:

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 grew from 4.0% in 1996 to almost 7.0% in 2002. 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 and other international racing events
(including our recent success in the Moto GP Championship), 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 fans all over the world through our website.

Technical Excellence.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. We believe that
continued investment in research and development and closer integration of our
racing and product development efforts will enable us to maintain our technical
excellence, a key driver of demand across our global customer base.

Performance Superiority.Ducati motorcycles excel on the racetrack
because of their superior handling characteristics and usable power. Our
motorcycles have dominated the World Superbike Championship, where we have won
eleven of thirteen manufacturers titles since 1990 and more single race
victories than all other manufacturers combined. In 2002, after an absence of
over 30 years, we renewed participation in the Moto GP Championship, and in the
first seven races we posted impressive results (including a first place finish in
June). We believe that the superior performance of our motorcycles is the
result of the Ducati tradition of technical excellence.

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

Following our acquisition of the Ducati business in September 1996, we
implemented a series of strategic initiatives to increase our sales,
profitability and market share. Major components of our strategy include:

Strengthen Our Position in Our Core Market.We intend to maintain and
strengthen our niche position in our target market of high-performance sport
motorcycles. To this end, all of our motorcycles will continue to incorporate
signature Ducati features such as the Desmodromic valve control system, the
L-twin engine, the tubular trestle frame and the distinctive Ducati sound. We
continuously seek to strengthen our position in our core market by upgrading
our motorcycle lines with technical and design innovations as they become
available from racing experience or the product development process. In
particular, we have made the following important innovations in the recent
past:

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| |  |  | Superbike. Since the introduction of the 916Superbike in
1994, we have continuously upgraded the technology and power of this
motorcycle with the 996in 1998, the 996Rin 2000 (with a more
powerful Testastrettaengine) and the 998in 2001. In July 2002, we
introduced the 999, a radically redesigned Superbike, which is
lighter and more aerodynamic than its predecessors and is powered by
an improved Testastrettaengine.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Super Sport. In 2002, we introduced a 620cc version of the
Super Sport, and upgraded the 750cc and 900cc engines of our Super
Sport motorcycles to 800cc and 1000cc Dual Spark. Dual spark engines
have two spark plugs per cylinder, offering extra reliability and
power.                                                                                                                                                     
|
| |  |  | Sport Naked (or Monster). In 2001, we upgraded the Monster
600with the introduction of the fuel-injected Monster 620ie, and in
2002, we upgraded the 750cc and 900cc engines of the Monsterto
800cc and 1000cc Dual Spark. In 2003, we also introduced the
Monster S4R, our most powerful Monster, featuring a four-valve, 996
engine and new single-sided aluminum rear swing arm, an upgrade of
the Monster S4.             
|
| |  |  | Sport Touring. In 2001, in addition to the ST4and ST2, we
introduced the ST4SSport Touring motorcycle. This model features a
996cc engine, to which we added an Anti-Block Brake System (ABS) for
model year 2003.                                                                                                                                                                                                              
|
| |  |  | Multistrada. We presented a prototype of the Multistrada, our
fifth family of motorcycles to the press and public in September
2001. The first model, the Multistrada 1000 Dual Spark, featuring a
dual valve, air-cooled 1000cc engine, went into production in April
2003. This motorcycle is a multipurpose sportsbike offering
Superbike performance in a more comfortable design with a more
upright position.             

We also continue to participate in worldwide racing events, and, in particular,
the World Superbike Championship, through our racing subsidiary, Ducati Corse
S.r.l. We believe that racing is a critical aspect of our marketing and
research and development efforts and an important component of the Ducati
image. Following a change in the eligibility requirements for the Moto GP
Championship, we began participating in the newly established Moto GP
Championship in 2003, for which we have developed a new racing motorcycle
called the Ducati Desmosedici, which is powered by a four stroke double
twin cylinder engine, continuing our tradition of racing inspired product
development.

Expand Our Product Offering.We will continue to develop and introduce
new products to appeal to the changing needs of our customers and to bring new
customers to the Ducati brand. We have successfully expanded the boundaries of
our traditional market niche by combining the allure of our high-performance
racing heritage with distinctive style or functional features. In 1993, we
introduced the Sport Naked line (represented by the Monster), appealing to the
lifestyle of the urban customer and, in 1997, we introduced the Sport Touring
line (represented by the ST2, the ST4,the ST4Sand the ST4S ABS), appealing to
customers looking for a greater degree of riding comfort. These new product
lines significantly broadened the Ducati customer base. Since their launch, we
have continued to expand our product offering with marketing-driven initiatives
designed to meet specific consumer needs, such as the Monster Darkin 1997
(targeted at younger customers) and Monster Cityin 1998 (targeted at urban
commuters). Our introduction in 1999 of the Monster 900and the Monster
Metallic,the Monster 620in 2002 and the Monster S4Rin 2003, were targeted
at appealing to the diverse tastes of Monsterconsumers, with the S4Roffering
customers a more powerful engine and an experience more akin to riding a
Superbike. With the launch of our website in September 2000, we introduced and
sold the limited production 996RSuberbike motorcycle exclusively over the
internet, and for model year 2002, we launched the 998. In July 2002, we
launched the 999, a radically redesigned Superbike aimed at broadening the
appeal of the Superbike family by enhancing the functionality and accessibility
of the bike, while maintaining the intensity of the Superbike experience. In
2002, we launched a new motorcycle family for model year 2003, the Multistrada,
designed to attract new customers to the Ducati brand. This motorcycle offers
Superbike performance in a more comfortable design and is characterized by a
more upright position and a new dual spark, air-cooled 1000cc engine.

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Strengthen Our Distribution Network.Our distribution strategy is aimed
at maximizing sales and increasing our contacts with retail customers.Among
other things, in carrying out our strategy, we:



| |  |  | continue to consolidate our position in the six strategic
markets in which we have established wholly owned sales and
marketing subsidiaries;                                                                                                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | selectively replace on an ongoing basis under-performing
distributors in certain markets in which we do not carry out
distribution directly through wholly owned subsidiaries;                                                                                 
|
| |  |  | evaluate each year whether to appoint new distributors in
markets in which we have previously been inactive and whether to
introduce Ducati stores in selected markets throughout the world
(so that 111 Ducati stores were opened by December 31, 2002); and
|
| |  |  | continue to increase and develop the information and
activities on our website, through our subsidiary Ducati.Com, which
was created in July 2000 to build further our brand and broaden our
reach to Ducati fans and friends.                                 

We believe that a strong overall distribution network will be a key factor
in driving future increases in our market share.

Strengthen Our Global Brand.We have undertaken a coordinated marketing
effort to reinforce the traditional strengths of the Ducati brand and to
increase the visibility of the Ducati name. We have launched an international
advertising campaign presenting Ducati motorcycles and our people, established
the Ducati Museum at our Bologna headquarters and created an official Internet
site. We also hosted the first World Ducati Weekend in Bologna in June 1998,
which attracted more than 10,000 Ducati enthusiasts, a second World Ducati
Weekend in Misano in June 2000, which attracted over 20,000 enthusiasts and
World Ducati Week in Misano in June 2002, which attracted over 25,000
enthusiasts. In October 2001, over 5,000 enthusiasts attended a brand-building
rally in Las Vegas. We are actively exploiting the marketing opportunities
provided by our racing activities through several sponsorship agreements and
created a special purpose company, Ducati Corse Srl, dedicated to our
racing-related activities in the Moto GP Championship and the Superbike
Championship. We have also introduced VIP hospitality tents at Superbike and
Moto GP Championship racetracks to provide a focal point for Ducati riders,
dealers and enthusiasts. In addition, we organize a number of events to
encourage fans to join the World of Ducati, such as womens riding schools,
classic rallies around Italy and Ducati tour and rental programs. We have
sought to extend media coverage of the Ducati brand beyond the traditional
motorcycle sector press and have developed a new corporate identity by
standardizing our corporate logo, lettering and marketing material on a
worldwide basis. In 2000, we established a separate company (Ducati.Com) with
the mission of leveraging the Ducati brand and racing heritage into a vertical
internet portal dedicated to the Ducati life-style, the world of motor racing
and the world of motorcycle enthusiasts. We believe that our marketing
approach will further strengthen the brand recognition and customer loyalty
that we currently enjoy.

Expand Our Motorcycle-Related Product Offerings.We are leveraging the
strength of the Ducati brand name and our strong customer loyalty through a
targeted expansion of our product offering to include motorcycle-related
products. In 1997, we acquired a controlling stake in Gio.Ca.Moto, an Italian
company formed to take over the business of a well-established marketer of
performance and custom accessories dedicated to Ducati. Gio.Ca.Moto products
are currently marketed under the Ducati Performance brand name. In January
2000, we acquired substantially all of the shares that we did not already own
in Gio.Ca.Moto, which was subsequently merged into DMH as of December 31, 2001.
We have also entered the technical riding gear market with an exclusive line
of leather suits, jackets, boots and helmets created and produced by Dainese
and other leading manufacturers and sold under the Ducati Performance brand
name. All of these products are sold primarily through the Ducati distribution
network. We are also distributing a range of apparel (such as T-shirts, caps
and sweatshirts) for Ducati enthusiasts and have selectively licensed the
Ducati brand for use with appropriate products, such as model replicas, toys
and video games.

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Increase Our Production Efficiency.We are continuing to rationalize our
manufacturing processes to reduce complexity and increase production
efficiency. In particular, we implemented a platform approach to production
through which we are moving away from assembling 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 supplier is responsible for providing a
platform and managing the suppliers of the sub-components that comprise that
platform. By this approach, we intend to reduce costs through purchasing
leverage and component co-design with key suppliers, reduce inventories and
improve overall quality. In addition, we outsource all motorcycle warehousing,
delivery logistics and spare parts.

Develop Our Internet Business.We have established a dedicated Internet
homepage at www.ducati.com that includes a comprehensive catalogue of the
current motorcycle lines and related spare parts, the latest racing news, a
virtual Ducati museum and contacts for local dealerships. We intend to
continue developing our Internet and e-commerce operations. On July 24, 2000,
we incorporated our Internet business into a separate subsidiary (Ducati.Com)
focusing on these initiatives. Our on-line strategy aims to leverage the
Ducati brand and racing heritage with the goals of increasing sales
opportunities, improving operating efficiencies and providing information and
community space for Ducati enthusiasts. We believe our on-line operations also
help build overall greater brand awareness. More specifically, our website is
designed to address the following opportunities:



| |  |  | Commerce. We are developing three main channels of
e-commerce: Business-to-Business (Supplier-to-Ducati,
Ducati-to-Dealer, Dealer-to-Dealer and Supplier-to-Dealer),
Business-to-Consumers (for motorcycles, accessories and apparel) and
Consumer-to-Consumer (by allowing consumers to purchase and sell
second-hand Ducati motorcycles, spare parts and accessories).           
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Content. We offer coverage of the World Superbike
Championship, the Moto GP Championship and other motor racing or
special events, tips and software for the use and maintenance of
motorcycles, tickets for World Superbike Championship races and
other racing events and tours and travel services in connection with
the World Superbike Championship and Moto GP Championship.
|
| |  |  | Community. We also offer Ducati enthusiasts a combination of
club activities and chat rooms, e-mail capabilities, message boards
and the possibility to set up personal web pages.                                                                                                                                                                                                 

On December 31, 2002, Ducati.Com employed approximately 20 professionals.
The information displayed on our website is not incorporated by reference into
this annual report.

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Organizational Structure

DMH designs, manufactures and distributes Ducati-branded motorcycles,
spare parts and engines. DMH has six direct, wholly owned subsidiaries engaged
in the regional distribution of Ducati motorcycles and other products: Ducati
North America Inc., Ducati France S.A. (99.9% owned), Ducati Motor Deutschland
GmbH, Ducati Benelux B.V., Ducati Japan KK and Ducati U.K. Limited. In
addition, DMH owns Ducati Corse S.r.l., the Ducati racing subsidiary, as well
as Ducati.Com S.r.l., the Ducati company that focuses on our Internet and
e-commerce initiatives.

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

(DUCATI MOTOR HOLDING S.p.A. ORG. CHART)

In October 2000, Ducati Motor S.p.A. was merged into DMH to rationalize
and centralize Ducatis treasury and financial management functions, eliminate
duplication of legal and administrative functions and transform DMH into
Ducatis principal operating business. The merger had retroactive effect to
January 1, 2000 for accounting and tax purposes. Prior to the merger, DMH
operated exclusively as the holding company of the Ducati group.

In December 2001, Gio.Ca.Moto International s.r.l. was merged into DMH to
further rationalize and centralize treasury and financial management and to
eliminate duplication of legal and administrative functions and costs. The
merger became effective generally as of December 31, 2001, and had retroactive
effect to January 1, 2001 for accounting and tax purposes. Prior to the
merger, we owned 100% of the quotas of Gio.Ca.Moto after acquiring the 0.1% we
did not already own in March 2001.

On December 20, 2001, we sold our 40.0% equity interest in HPE
High-Performance Engineering S.r.l., a joint venture we entered into in 1998
with former director Piero Ferrari and others relating to advanced engine
technology. We sold our interest at a sale price equal to its book value of 
82,633.

On February 14, 2002, as a result of losses for the year ended 2001 and in
accordance with Italian law, the shareholders of Ducati.Com S.p.A. resolved to
decrease its share capital from  2,600,000 to zero.

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On such date, the shareholders of Ducati.Com S.p.A. also approved the
conversion of Ducati.Com from a joint stock company (società per azioni) whose
share capital is represented by shares to a limited liability company (società
a responsabilità limitata), and to set its paid-in capital at  10,000.




Products and Distribution

The World Motorcycle Market

In 2002, total world motorcycle registrations were estimated at over two
million units, which include all motorcycles and scooters with engine
displacements greater than 50cc 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 accounted for over one million
registrations in the United States, Western Europe, Japan and Australia in 2002
and may be further segmented into cruiser, touring, dual and sport
sub-segments. The touring sub-segment is comprised of motorcycles designed for
comfortable, long-distance travel, while the dual sub-segment is comprised of
motorcycles designed for on-road and off-road riding. The cruiser sub-segment
is comprised of heavy motorcycles with classic American design typically
featuring heavy use of chrome components and V-twin engines. The sport
sub-segment is principally comprised of motorcycles built for, or inspired by,
a racing environment.

We currently compete exclusively in the sport sub-segment of the >500cc
Road Market. In 2002, we estimate that total motorcycle registrations,
including those in the United States, Western Europe, Japan and Australia, were
approximately 550,000 units in the sport sub-segment, with approximately 20,000
additional sport motorcycles sold during 2002 in countries in which we compete
but for which registration data is not available.

We believe that four principal product groupings comprise the sport
sub-segment of the >500cc Road Market: Superbike motorcycles, Super Sport
motorcycles, Sport Naked motorcycles and Sport Touring motorcycles. In
addition, for model year 2003, we introduced a new, fifth, line of motorcycles,
the Multistrada. As was the case with the Monsterintroduced in 1993, we
believe that the Multistrada will create a fifth product group of motorcycles
in the sport sub-segment of the >500cc Road Market. Superbike motorcycles
are racing-derived motorcycles equipped with the most powerful engines and the
latest technical advances and are targeted at riders who desire a bike that is
similar to those used on international professional racing circuits. Super
Sport motorcycles feature classic design and are targeted at riders interested
in balancing horsepower with greater rideability. Sport Naked motorcycles are
characterized by the absence of fairing (body panels), a design feature which
leaves the engine exposed and reduces weight, and are targeted at customers who
are more interested in urban street riding. Sport Touring motorcycles combine
the powerful engine of sport motorcycles with the long-range driveability and
features of touring motorcycles, and are targeted at customers who are
interested in comfortable, one- or two-rider travelling over relatively longer
distances. We estimate that Superbike and Super Sport motorcycles collectively
represented approximately 44.0% of worldwide registrations in the sport
sub-segment in 2002. We estimate that Sport Naked and Sport Touring
motorcycles represented approximately 42.0% and 14.0%, respectively, of
worldwide registrations in the sport sub-segment during the same period.

We estimate that in 2002 the market for motorcycles in the sport
sub-segment of >500cc Road Market, as measured by registrations, was
approximately 360,000 in Western Europe, 140,000 in the United States, 40,000
in Japan and 10,000 in Australia. Within Western Europe, Germany was the
largest market for sport motorcycles in 2002 (85,000 registrations), followed
by Italy (80,000), France (75,000) and the United Kingdom (55,000).

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We estimate that the sport sub-segment of the >500cc Road Market
experienced a compound annual growth rate of over 5.0% in Western Europe during
the 1997 to 2001 period and grew, in aggregate, 2.0% in the United States,
Japan and Australia in 1997, 15.0% in each of 1998 through 2000, and 21.0% in
2001. However, in 2002, we estimate that the sport sub-segment of the >500cc
Road Market experienced a decrease worldwide of 5.0%, including a 4.6% decrease
in Western Europe, a 6.0% decrease in the United States and a 5.0% decrease in
Japan, partially offset by an 18.0% increase in Australia.

Motorcycle Lines

Consistent with the current segmentation of the sport sub-segment of the
>500cc Road Market, we manufacture and distribute five high-performance
lines of motorcycles: Superbike, Super Sport, Sport Naked, Sport Touring and
Multistrada. Motorcycle sales accounted for 83.0% of our net sales in 2002, as
compared to 85.0% in 2001 and 83.0% in 2000. We currently manufacture multiple
models within our five 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, comprised of 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 a tubular trestle frame, a
design feature 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, our flagship motorcycle, 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 851was 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 916and 748, introduced
in 1993 and 1994. The 916won several worldwide awards, including four
motorcycle of the year awards from Motor Cycle News (MCN) magazine. For
model year 1999, we launched the 996to replace the 916. The 996features a
996cc liquid-cooled, four-valve twin engine. For model year 2000, we
introduced two new versions of the 748Superbike, 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 Testastrettawas nominated Sports
Motorcycle of the Year by German magazine Motorrad, Europes leading
motorcycle publication. All Superbike motorcycles can reach speeds in excess of
250-270 kilometers per hour (155-170 miles per hour) and have a compact design
and slim silhouette designed to provide superior handling at such speeds. We
sold 12,641 Superbike motorcycles in 2002, representing 32.0% of total units
sold and 47.2% of net motorcycle sales,

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compared to 10,557 Superbike motorcycles in 2001, representing 26.4% of
total units sold and 38.0% of net motorcycle sales.

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, nick-named 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. Super Sport
motorcycles have been among our most popular and best selling for over two
decades, during which time 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 900Ssiefor
sale the following year. In January 2000, we sold 2000 limited edition
MH900evoluzionemotorcycles exclusively over the internet (all of which were
delivered by the spring of 2003). In addition, we launched a 750cc version of
the 900SSfor model year 1999 and, for 2001 and 2002, respectively, we launched
new, matte black versions called the 750and 900Sport. For Model Year 2003,
we also launched 1000cc and 800cc models to replace the 750cc and 900cc
versions. We sold 3,812 Super Sport motorcycles in 2002, representing 9.6% of
total units sold and 7.9% of net motorcycle sales, compared to 5,676 Super
Sport motorcycles in 2001, representing 14.2% of total units sold and 13.6% of
net motorcycle sales.

Sport Naked (or Monster).Our Sport Naked motorcycle line is aimed at
bringing the allure of sport bike performance to the urban rider. Utilizing
the engine and various other components of a Super Sport motorcycle, the
Monstersprincipal design characteristic is the absence of any fairing, which
leaves the engine exposed and reduces overall body weight. The Sport Naked
motorcycle line was launched in 1993 and became an immediate success, selling a
total of almost 11,500 units in its first two years of production. More
recently, we expanded the Sport Naked motorcycle line to include models
designed to meet particular market needs: the Monster City, which is primarily
a commuter motorcycle; the Monster Dark,a lower priced, stripped down version
which has reduced the median age of Ducati customers; and the limited edition,
premium priced Monster Chromoand Monster S. In September 1999, we further
expanded the Monsterrange by introducing the Monster 900with fuel injection
and the Monster Metallic, a new version of the Monsterbike with a colored
metallic gas tank, both for sale in 2000. For sale in model year 2002, we
introduced the fuel-injected Monster 620to replace the Monster 600. For 2003,
we also launched 1000cc Dual Spark and 800cc models to replace the 750cc and
900cc versions. In 2003, for sale in 2004, we introduced the Monster S4R, our
most powerful Monster, featuring a four-valve, 996 engine and a new,
single-sided aluminium rear swing arm. We sold 19,600 Sport Naked motorcycles
in 2002, representing 49.6% of total units sold and 35.8% of net motorcycle
sales, compared to 20,125 Sport Naked motorcycles sold in 2001, representing
50.3% of total units sold and 39.1% of net motorcycle sales. In 2002, we
produced the 100,000th Monsterand, in 2003, we celebrated the tenth
anniversary of the Monster.

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 ST2has
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 ST4Swith a 996cc engine, and for model year 2002, we introduced a version
with an Anti-block Brake System (ABS). We sold 3,481 Sport Touring motorcycles
in 2002, representing 8.8% of total units sold and 9.1% of net motorcycle
sales, compared to 3,638 Sport Touring motorcycles in 2001, representing 9.1%
of total units sold and 9.4% of net motorcycle sales.

Multistrada.In September 2001, we first showed a prototype of a 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.

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The gross profit and gross margin for the years 2000, 2001 and 2002 for
our motorcycle product lines are listed below (gross profit shown in euro in
thousands):

|              |  |                             |          |              |  |        |      |              |  |        |          |              |  |  |      |   |  |  |          |  |  |  |      |  
|------------- |  | --------------------------- | -------- | ------------ |  | ------ | ---- | ------------ |  | ------ | -------- | ------------ |  |  | ---- | - |  |  | -------- |  |  |  | ---- | -
|              |  | Year ended December 31,    
|              |  |                            
|              |  | 2000                        |          | 2001         |  | 2002  
|              |  |                             |          |              |  |       
|              |  | Gross                       |          | Gross Profit |  | Gross  |      | Gross Profit |  | Gross  |          | Gross Profit
|              |  | Profit                      |          | Margin       |  | Profit |      | Margin       |  | Profit |          | Margin      
|              |  |                             |          |              |  |        |      |              |  |        |          |             
|              |  | (euro amounts in thousands)
|Superbike     |  |                             |  58,517 |              |  |        | 41.3 | %            |  |        |  55,322 |              |  |  | 42.1 | % |  |  |  62,879 |  |  |  | 39.0 | %
|Super Sport   |  |                             | 10,249   |              |  |        | 34.4 |              |  |        | 16,043   |              |  |  | 34.2 |   |  |  | 8,569    |  |  |  | 31.8 |  
|Sport Naked   |  |                             | 35,036   |              |  |        | 29.9 |              |  |        | 44,116   |              |  |  | 32.7 |   |  |  | 35,470   |  |  |  | 29.0 |  
|Sport Touring |  |                             | 10,014   |              |  |        | 36.1 |              |  |        | 10,377   |              |  |  | 32.1 |   |  |  | 10,417   |  |  |  | 33.4 |  
|Multistrada   |  |                             |         |              |  |        |     |              |  |        |         |              |  |  |     |   |  |  |         |  |  |  |     |  
|Total/Average |  |                             | 113,816 |              |  |        | 35.4 | %            |  |        | 125,858 |              |  |  | 35.3 | % |  |  | 117,335 |  |  |  | 33.3 | %

The gross profit margin is calculated by dividing gross profit by related
net sales. Gross profit is equal to net sales for each product line less costs
of specific components of that product line and a portion of direct and
indirect costs of production. These direct and indirect costs of production
have been charged to each product line in proportion to total revenue (11.8% in
2000, 10.5% in 2001 and 10.8% in 2002).

The current suggested retail prices in Italy for our motorcycles range
from  7,000 for the Monster Dark620cc motorcycle to  30,000 for the limited
edition 999R.

In addition to these five motorcycle lines, we manufacture approximately
43 custom racing motorcycles per year for our official teams, as well as for
private race teams, professional riders and racing enthusiasts who compete
without direct factory support. We 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.

Each Ducati motorcycle sold is covered by a two-year warranty. Warranty
costs are accrued when a motorcycle is sold based on our previous claims
experience. Actual cash payments against warranties totaled  11.1 million in
2002, or 2.7 % of net sales,  9.1 million in 2001, or 2.2% of net sales and 
6.4 million in 2000, or 1.7% of net sales. At December 31, 2002, we had a
provision in our financial statements of  12.1 million to cover estimated
future product warranty costs. See Note 13 to the audited consolidated
financial statements.

Motorcycle Related Products, Services and Licensing

We are leveraging the strength of the Ducati name and the strong brand
loyalty of our customers through a targeted expansion of our product offering
in spare parts, Ducati Performance accessories, technical riding gear and
enthusiast apparel and licensing. In addition, we 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 and Engines.We have experienced continued growth in sales of
spare parts during the last three years, reflecting principally a higher number
of 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, and in the
United States to Excel Inc., a parts logistics company in Columbus, Ohio. We
manage our spare parts catalogue and order processing electronically. As unit
sales of motorcycles increase, we expect to leverage the growing base of
motorcycles in use so as to expand our spare parts business beyond the growth
related to future increases in net sales of our motorcycles.

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In addition to manufacturing engines for Ducati motorcycles, until the
first quarter of 2000 we produced a relatively small number of 900cc engines
for Italian manufacturers Bi.mo.ta and Cagiva for use in their own motorcycles.
We have discontinued engine sales to Cagiva and Bi.mo.ta.

Ducati Performance Accessories.A popular trend among many Ducati
owners is to replace bike components with custom-made accessories to increase
the individuality of their motorcycles. In 1997, to meet the demand for
customized accessories, we acquired a controlling stake in Gio.Ca.Moto, an
Italian company formed to take over the business of a well-established marketer
of performance and custom accessories dedicated to Ducati. In January 2000, we
acquired substantially all of the remaining shares that we did not previously
own in Gio.Ca.Moto, which was subsequently merged into DMH as of December 31,
2001. Gio.Ca.Motos predecessor began distributing parts and accessories for
Ducati motorcycles in 1983. Through this acquired business, we 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.We collaborate with a
number of leading manufacturers, including Dainese, Oakley, Fila and Suomy, in
the development of motorcycle suits, jackets, gloves, boots, helmets,
protective garments and other sports wear bearing the Ducati brand name. In
addition, we distribute an enthusiast line of apparel for sale to consumers,
including t-shirts, caps and memorabilia. Ducati branded apparel is primarily
sold through the Ducati distribution network, Ducati stores and at the Ducati
Museum retail outlet.

Licensing.We also license the Ducati name, logo and other trademarks for
use by third parties (such as Fila, Breil, Bianchi, Nikko, Minichamps, Mattel,
Maisto, New Ray, Protar-Italeri, Sonic-Ixo and Accademia) on a limited basis in
connection with the production of video games, toys, model replicas and
publishing. We recognize that third-party licensing has the potential to
increase awareness of the Ducati brand among the general public and to provide
an expanded source of revenue.

Market Share and Competition

We compete 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.
Additional competitors include MV Agusta and Aprilia of Italy.

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 its case, 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 38,130 in 2000, 38,969
in 2001 and 39,607 in 2002. The historical worldwide growth of Ducati
registrations masks significant regional variations in registrations growth.
For example, from 2001 to 2002 Ducati registrations increased in Japan (up
9.0%), United Kingdom (up 9.0%), and in Italy (up 2.0%), and decreased in
Germany (down 9.0%), France (down 7.0%), and in the United States (down 1.0%).
In France, the decline was due primarily to personnel changes. In Germany, the
decline was due primarily to a weak >500cc Road Market (down 10.0%) and
termination by us of a contract with a major importer of our motorcycles to
obtain full control over this territory. For a discussion of the relationship
between registrations and retail sales, see Item 5  Operating and Financial
Review and Prospects  Introduction.

We estimate that our worldwide market share in the sport sub-segment of
the >500cc Road Market was approximately 6.7% in 2000, 6.3% in 2001 and 6.6%
in 2002. Honda, Suzuki, Yamaha and Kawasaki all have substantially greater
worldwide market shares than we do. Based on available registration data,

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we estimate that these companies had approximately the following market
shares of the sport sub-segment of the >500cc Road Market worldwide in 2002:

|         |  |                       |      |  
|-------- |  | --------------------- | ---- | -
|         |  | 2002 worldwide %     
|         |  | of sport sub-segment 
|Company  |  | of >500cc Road Market
|         |  |                      
|Suzuki   |  |                       | 25.0 | %
|Honda    |  |                       | 24.0 | %
|Yamaha   |  |                       | 20.0 | %
|Kawasaki |  |                       | 12.0 | %

We estimate that Triumph and BMW have a market share of approximately 3.0%
and 4.0%, respectively, while Buell has a market share of approximately 2.0% of
the sport sub-segment worldwide.

Our market share varies among the motorcycle lines comprising the
sport-segment of the >500cc Road Market. In 2002, we estimate that we had
approximately a 6.0% global share of our historical core market for Superbike
and Super Sport motorcycles and approximately an 8.0% global share of the
market for Sport Naked motorcycles, reflecting the continued popularity of our
Monsterbikes. We estimate that we had approximately a 4.0% global share of
the market for Sport Touring motorcycles in 2002, reflecting our entry into
that market in April 1997 with the launch of the ST2,followed by the launch of
the ST4in 1998, the successful ST4Sin 2000, and the ST4Swith ABS in 2002.

Our market share also varies significantly across geographical areas. We
estimate that we had approximately a 15.0% share of the sport sub-segment of
the >500cc Road Market in Italy in 2002, fourth after Honda, Suzuki, and
Yamaha. For the same period, we estimate that we held approximately a 7.0%
share of the sport sub-segment in the larger Western European market,
reflecting our strong domestic Italian market share and approximately a 5.0%
share in France, Germany and the United Kingdom. In other countries, we
estimate that during 2002 we held approximately an 11.0% share of the sport
sub-segment in Australia, approximately a 4.0% share in the United States and
approximately a 5.0% share in Japan.

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

The following table gives a breakdown of the total revenues in our
principal markets in the last three financial years:

|                        |  |                         |           |      |  |                             |      |   |  |  |           |  |  |  |      |   |  |  |          |  |  |  |      |  
|----------------------- |  | ----------------------- | --------- | ---- |  | --------------------------- | ---- | - |  |  | --------- |  |  |  | ---- | - |  |  | -------- |  |  |  | ---- | -
|                        |  | Year ended December 31,
|                        |  |                        
|                        |  | 2000                    |           | 2001 |  | 2002                       
|                        |  |                         |           |      |  |                            
|                        |  |                         |           |      |  | (euro amounts in thousands) |      |   |  | 
|Italy                   |  |                         |   92,629 |      |  |                             | 24.4 | % |  |  |   92,448 |  |  |  | 22.7 | % |  |  | 106,595 |  |  |  | 25.8 | %
|United States           |  |                         | 97,515    |      |  |                             | 25.7 |   |  |  | 93,345    |  |  |  | 22.9 |   |  |  | 70,115   |  |  |  | 17.0 |  
|Germany                 |  |                         | 46,257    |      |  |                             | 12.2 |   |  |  | 46,453    |  |  |  | 11.4 |   |  |  | 49,773   |  |  |  | 12.1 |  
|France                  |  |                         | 30,294    |      |  |                             | 8.0  |   |  |  | 34,133    |  |  |  | 8.4  |   |  |  | 33,650   |  |  |  | 8.1  |  
|United Kingdom          |  |                         | 29,119    |      |  |                             | 7.7  |   |  |  | 34,614    |  |  |  | 8.5  |   |  |  | 31,716   |  |  |  | 7.7  |  
|Japan                   |  |                         | 25,633    |      |  |                             | 6.8  |   |  |  | 41,074    |  |  |  | 10.1 |   |  |  | 44,843   |  |  |  | 10.9 |  
|Other foreign countries |  |                         | 58,087    |      |  |                             | 15.2 |   |  |  | 65,748    |  |  |  | 16.0 |   |  |  | 76,279   |  |  |  | 18.4 |  
|                        |  |                         |           |      |  |                             |      |   |  |  |           |  |  |  |      |   |  |  |          |  |  |  |      |  
|Total                   |  |                         | 379,534  |      |  |                             | 100  | % |  |  | 407,815  |  |  |  | 100  | % |  |  | 412,971 |  |  |  | 100  | %
|                        |  |                         |           |      |  |                             |      |   |  |  |           |  |  |  |      |   |  |  |          |  |  |  |      |  

We believe that by strengthening our overall distribution network through,
among other things, the wholly owned sales and marketing subsidiaries we have
established in the United States, France (99.9% owned), Germany, the Benelux
countries (which is also responsible for Sweden), the United Kingdom and

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Japan, we will be able to increase significantly our market share in these
key markets. See   Business Strategy.

Seasonality of Our Business

Worldwide motorcycle sales and registrations are seasonal, peaking during
the months of March through May and April through June, respectively. During
2002, we recorded 56.0% of our sales 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.

Ducati models have traditionally enjoyed relatively long product
lifecycles and have been continually improved and upgraded throughout their
production lifetimes. For example, the Super Sport motorcycle line was
introduced in 1973 and has evolved considerably since that time. At the same
time, we believe that reducing the time-to-market for our new model launches
can be a significant competitive advantage. Following our September 1996
acquisition of the Ducati business, we increased investment in research and
development and initiated a substantial restructuring of our design processes
to respond to this challenge. Using new techniques, we have reduced our
development and launch time to three years for the Multistrada, compared with
an average of seven years for the development of previous models. Our research
and development expenditures (capitalized and expensed) were  12.7 million in
2000 and  17.1 million in 2001, an increase of 35.0%. In 2002, our research
and development expenditures (capitalized and expensed) were  23.9 million, an
increase of 40.0% over 2001. To support the more rapid introduction of future
motorcycle models, our research and development activities are evolving from a
self-sufficient operation to a networked unit in which Ducati research and
development will be responsible for the strategic coordination of multiple
external sources of technical and engineering skills. As an example, we have
entered into contracts with TWR, a leading Formula One engine development
center, and a strategic partnership with IDEA Institute, a leading design
engineering company that has extensive experience in the automotive sector.
Our partnership with IDEA allows us to take advantage of their design
technology to better integrate our supplier network in the manufacturing
process and reduces development time and the cost of new models.

In addition, we have begun the process of restructuring our design
processes to reduce the time and cost required to design a new motorcycle. In
the past, our motorcycle design process involved employing an external design
house, which worked from a technical and marketing brief prepared by Ducati.
To assume greater control over the design process and to exploit new
technologies in the design and tooling process, we developed an independent,
internal capacity for motorcycle design known as the Ducati Design Center
(DDC). The DDC operates within the Ducati organization and has creative
authority in the design and development of future models and coordinates with
the technical department and marketing functions to bring new products to
market. The DDC is intended to maintain and strengthen Ducatis reputation for
innovative design in the motorcycle industry, primarily by integrating
traditional motorcycle craftsmanship, advanced computer-aided design (CAD),
computer driven milling machines (CAM) and rapid prototyping technology. For
example, our design team can scan a preliminary design of a motorcycle under
development onto a computer attached to an automated milling machine, which in
turn can produce a physical prototype in clay or fiberglass. To make design
changes, our designers need only resculpt the prototype, the coordinates of
which can then be rescanned into the computer. Because the computer maintains
a fully updated engineering drawing of the motorcycle as

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design changes are processed, CAD/CAM technology saves significant time
and resources in connection with new model development and improves the quality
of new models. We are already using systems technology such as Computer
Numerically Controlled (CNC) milling machines and have hired initial staff
dedicated to DDC functions.

Our first practical example of a product developed using CAD/CAM
technology, the MH900evoluzione,was unveiled at the September 1998 INTERMOT
motorcycle trade show in Munich. The MH900evoluzionewas featured on the cover
of various motorcycle magazines and was exhibited at the Pitti Immagine design
exhibit in Florence, Italy in January 1999. At the beginning of 2000, we sold
2000 limited edition MH900evoluzionemotorcycles exclusively over the internet.
Since then, many engines and vehicles have been designed with CD/CAM technology
including the double twin engine for the Desmosedici racing motorcycle used in
the Moto GP Championship, the new 999Superbike and the Multistrada.

Distribution

Distribution is a key strategic element of our plans to grow market share
and profitability. Historically, Ducati distributed its motorcycles directly
through retail dealers (typically multi-franchise dealers) in Italy, through a
wholly owned subsidiary in North America and through a series of independent
distributors covering specific geographic territories internationally. Each
distributor was responsible for building its own network of retail dealers,
most of whom sold competing motorcycle brands. Individual dealers in countries
outside Italy and the United States entered into commercial relationships with
a relevant distributor rather than with Ducati.

During 1997, we put in place a distribution strategy aimed at maximizing
retail sales and increasing our contact with, and understanding of, our retail
customers. To achieve these objectives, we have acquired control of
distribution networks in strategic markets through the establishment of five
wholly owned sales and marketing subsidiaries, selectively replaced
under-performing distributors in certain markets, appointed new distributors in
markets in which we were previously inactive, launched a restructuring of our
dealer network in Italy and commenced the introduction of independent Ducati
stores in selected markets throughout the world. At December 31, 2002, there
were 111 independent Ducati stores worldwide.

Wholesale Distribution.Currently, we sell motorcycles and related
products directly to our retail dealers in Italy, and through wholly owned
subsidiaries in North America, Germany, France (99.9% owned), the Benelux
countries (which is also responsible for Sweden), the United Kingdom and Japan.
In all other countries, we sell our products through independent distributors.

We have followed a policy of replacing distributors in selected countries
with established motorcycle distributors with significant prior experience in
building unit sales for Harley-Davidson and other manufacturers. In addition,
we have entered new geographical markets through the appointment of
distributors in Cyprus, Costa Rica, Ecuador, Guatemala, Israel, Latvia,
Lithuania, Estonia, Panama, Romania and Taiwan, and we replaced distributors in
Brazil, South Korea and Portugal to protect our global quality standards. Our
distribution network currently covers 45 countries.

We believe that our wholesale distribution strategy and, in particular,
the establishment of wholly owned subsidiaries to control sales and marketing
in key markets, has a number of important benefits. First, it moves Ducati
further along the distribution value chain, allowing us flexibility in
controlling the profits previously earned by our independent distributors.
Second, it moves us closer to consumers, improving our understanding of the
marketplace and the needs of motorcycle riders. Third, it removes an
intermediary between Ducati and our dealers, increasing our control over the
sales process to consumers and allowing marketing initiatives to be better
coordinated. Fourth, since motorcycles are stocked and shipped directly from
the factory to the dealers (except in the United States and Japan), it enhances
our ability to redirect stock to meet peaks in demand for particular models in
different markets and reduces overall logistics costs.

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Retail Distribution.We sell motorcycles, parts and accessories to
consumers around the world through approximately 800 independent dealerships.
Prospective dealers are required to sign an agreement, usually on an annual
basis, with Ducati, the relevant subsidiary, or the local Ducati distributor to
become an authorized dealer. This agreement requires the dealer to provide
suitable space and staff devoted to the sale of Ducati motorcycles as well as
workshop facilities with adequate equipment, spare parts and qualified staff to
provide after-sales service.

In Italy, we have restructured our distribution network, reducing the
overall number of Ducati dealers from 165 in 1996 to 59 in December 2002, and
offering enhanced support to the remaining dealers. The enhanced marketing and
merchandising support is designed to encourage dealers to invest in and upgrade
their dealerships according to the model of the Ducati stores discussed below.
At the end of December 2002, there were over 45 Ducati stores operating in
Italy.

We believe that the restructuring of our Italian dealer network has a
number of benefits for Ducati and our dealers. Dealers can be expected to
realize greater net sales and improved profitability. We expect to gain a
superior and uniform retail environment for our motorcycles and other products.
Our registrations in Italy were 12,046 units in 2000 (up 14.0%), 11,701 units
in 2001 (down 3.0%) and 11,967 in 2002 (up 2.0%). Moreover, the average number
of motorcycles sold per Italian dealer increased to approximately 203 in 2002
from 194 in 2001 and 188 in 2000. We are implementing a similar strategy
regarding our dealer network in other major markets outside Italy, initially
France, Germany and the U.K. A different strategy is being pursued in the
United States where, for geographic reasons, we intend to improve the quality
of our dealer network by closing underperforming dealerships and opening
high-standard new ones.

Finally, we developed a design concept for Ducati stores to be implemented
by certain Ducati dealers in selected markets around the world. The Ducati
stores are positioned around the Ducati brand and offer a customized retail
environment and increased levels of service and technical support. Ducati
stores present Ducati motorcycles as their primary focus, supported by
merchandise areas dedicated to Ducati Performance parts and accessories and
lines of Ducati technical and enthusiast apparel. Within each store, a
History Wall provides images of Ducatis racing heritage and an Engineering
Wall shows a large scale engineering drawing of the 996,Ducatis flagship
Superbike motorcycle. We provide dealers operating the stores with a
specialized design consultancy service, but do not own an interest in the
stores. Outside Italy, we have launched Ducati stores in, among other
locations, New York, London, Vienna, Cape Town, Sydney, Seattle, Atlanta, Tokyo
and Frankfurt. As of December 31, 2002, there were 111 Ducati stores in
operation worldwide.

Marketing Activities

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

Brand Development.In early 1997, we developed a new corporate identity,
standardizing our corporate logo, lettering and promotional and marketing
material on a worldwide basis. The new hallmark D is a modern interpretation
of the logo that adorned many of the classic Ducati motorcycles of the past.
In 1998, we launched our first global corporate advertising campaign, which we
update annually. Entitled Ducati/People, the campaign features Ducati
workers and their motorcycles in and around Bologna, communicating the
authenticity and uniqueness of the Ducati brand. We have updated the campaign
for 2003 with images of our customers, chosen through an on-line global contest
set up by our website. We have lent active support to design museums around
the world to feature the design qualities of Ducati motorcycles. In
particular, the Ducati Monsterand 916were included in the The Art of the
Motorcycle exhibit at the Guggenheim Museum in New York and the Field Museum
in Chicago in 1998 and 1999. In 2002, the Guggenheim opened the same
exhibition at its new museum in Las Vegas. We were also recognized for our
lasting contribution to motorcycle design through a sport motorcycle auction
conducted by Sothebys in Chicago in September 1999, the largest such auction
to occur in North America. The MH900evoluzioneprototype appeared on the front
cover of the auction catalogue. We have worked with Sothebys on other Ducati
oriented auctions including those at Ducati Revs America in October 2001 and
World Ducati Week in June 2002. We intend to continue to support activities
that extend the Ducati brand

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into the worlds of art, design and fashion. For example, in 2001 Roberto
Cavalli designed a specialty Monstermotorcycle that was displayed at his
flagship stores in New York and Milan. In addition, we have established a
dedicated Internet homepage that includes a comprehensive catalogue of the
current motorcycle lines and related spare parts, the latest racing news, a
virtual Ducati museum and contacts for local dealerships (See  Internet).
The information on our websites is not incorporated by reference into this
annual report.

In May 2002, we launched the Ducati Desmo Finance Program through which we
offer financing, insurance and a personalized credit card in connection with
the purchase of our new or used motorcycles and related products in Italy. The
aim of the program is to increase motorcycle sales by improving the ease and
convenience of purchasing. We are pilot testing this program in Italy which,
if successful, we will roll-out in Europe, the U.S. and Japan. This program is
at no cost or financial risk to us.

We believe that there are in excess of 400 local Ducati clubs in
existence around the world. In 1999, recognizing the potential of these
enthusiast organizations to increase our access to consumers and to build the
global Ducati brand, we created the Desmo Owners Club (or D.O.C.), a global
Ducati owners club that serves as an umbrella organization for all individual
Ducati clubs. We have implemented a program to establish contact with local
clubs and to sponsor some of their activities. For example, we have introduced
a program that encourages Ducati dealers and store owners to sponsor and
coordinate enthusiast activities through their retail outlets, in cooperation
with Ducati. As a result of this program, Ducati enthusiasts are able to,
among other things, schedule motorcycle riding courses and other Ducati-related
activities through Ducati stores and local dealers.

In June 1998, we sponsored the first World Ducati Weekend in Bologna,
which was attended by an estimated 10,000 Ducati enthusiasts. The first World
Ducati Weekend marked the opening of the Ducati Museum at our Bologna
headquarters. Visitors to the museum are able to follow the history of the
Ducati brand to the present day, with examples of historic motorcycles
displayed in a custom-made venue, and then tour Ducatis production facilities.
The second World Ducati Weekend at the Misano, Italy racetrack in June 2000,
was attended by over 20,000 Ducati enthusiasts. The third such event, the
World Ducati Week in June 2002, attracted more than 25,000 participants. In
June 2002, we launched the second edition of the Motogiro dItalia, a
promotional tour in Italy of vintage Ducati motorcycles, which we revived in
2001 after it was suspended in 1957. The 2002 Motogiro attracted more than 350
participants from all over the world and was covered by more than 50
international journalists, and has become an annual event.

Other marketing initiatives include Centopassi, a five-day competitive
motorcycling tour through Alpine passes in northern Italy, in which
participants can challenge Ducati testers on the Multistrada. The winner of
this event is awarded a Multistrada. In 2003, we also launched the first-ever
online Ducati design competition, in which participants submit their vision of
Ducati motorcycles of the future and artwork or designs that recall Ducati and
its tradition of high-performance sport motorcycling.

Media.As we enjoy widespread media attention through our international
racing program and product innovations, we do not invest substantially in paid
advertising. We believe that our motorcycles are aspirational products that
create a significant demand pull. The primary source of publicity comes from

articles written about Ducati in a broad range of motorcycle publications and,
with the exception of the United States (where there is substantially less
following of professional racing than in other markets), the performance of
Ducati motorcycles on international racing circuits. We have also sought to
extend media coverage of Ducati beyond the traditional motorcycle press.
Articles and broadcast segments featuring Ducati have appeared in Forbes, The
New York Times, The Wall Street Journaland Financial Timesand on CNN and
Bloomberg News (although the contents of the articles and broadcasts mentioned
above are not part of this annual report). In addition, Ducati enthusiasts,
including Hollywood celebrities, Formula One drivers, music stars and
international athletes, add to the overall brand equity and exposure.

Racing.The performance of Ducati motorcycles on international
professional racing circuits helps to sustain and increase demand for Ducatis
products. Racing increases the 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 program
also supports our research and

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development function, as many features designed specifically for improving
performance on the racetrack are later introduced onto production Ducati
motorcycles.

Ducati competes in the World Superbike Championship, through its official
teams and other private teams. Since 1990, Ducati motorcycles have won eleven
of thirteen manufacturers titles (including in 2003) and more single race
victories than all other manufacturers combined. In the 2002 season, the
Ducati Infostrada team was comprised of 2001 champion Troy Bayliss as well as
Ruben Xaus. Both factory racers rode the Ducati 998R, featuring the 998R
Testastrettaengine. In 2003, racers Neil Hodgson and Ruben Xaus race on the
new 999 TestastrettaSuperbike for a Ducati team primarily sponsored by Fila.
Ducati Corse also supports the activities of the various Ducati racing teams,
manufactures and distributes specialized motorcycles exclusively for racing,
and engages in promotional and other activities designed to increase our
presence on international racing circuits and to improve awareness of the
Ducati brand.

In 2003, we entered a Ducati team in the Moto GP Championship for the
first time in three decades. Our decision was prompted by a change in the Moto
GP Championship rules allowing 1000cc four-stroke motorcycles to compete. The
motorcycle, called the Desmosedici, is powered by an innovative new
four-stroke, double-twin cylinder engine. In 2003, Loris Capirossi and Troy
Bayliss are the official racers for Ducati in the Moto GP Championship. In the
first seven Moto GP Championships races held in 2003, Ducati finished first in
June, once in second and twice in third place. We believe that competing in
the Moto GP Championship will strengthen awareness of the Ducati name as well
as allow us to carry out innovative research and development, which we hope to
apply to our racing motorcycles as well as the motorcycles that we sell
commercially. With our entry in the Moto GP Championship, we withdrew in 2001
our official teams from the Super Sport World Series, a championship featuring
750cc two-cylinder and 600cc four-cylinder production motorcycles.

Ducati Corse S.r.l., our subsidiary dedicated to racing activities, was
founded in 1999. Ducati Corse manages the activities of the Ducati racing
teams, manufactures and distributes specialized motorcycles and engines
exclusively for racing use and engages in promotional and other activities
designed to increase Ducatis presence on international racing circuits,
improve awareness of the Ducati brand and increase customer satisfaction with
our racing activities. In addition, we have signed a sponsorship and supply
agreement with Shell to expire in 2005 under which Shell acts as official
lubricant supplier to Ducati (and exclusive supplier of lubricants for the
Ducati racing program) and as sponsor of the Ducati Moto GP Championship and
World Superbike Championship teams. We have also entered into agreements with
Philip Morris, sponsor of the Moto GP Championship team, and Fila to sponsor
the World Superbike Championship team.

Internet.We have established a dedicated Internet homepage at
www.ducati.com that includes a comprehensive catalogue of our current
motorcycle lines and related spare parts, the latest racing news, a virtual
Ducati museum and contacts for local dealerships. We estimate that the site
attracts over 1.2 million unique visitors per month. We have also entered the
online auction business with the establishment of DucatiMemorabilia.com or
Desmobid, our first online auction site. Desmobid sells historic Ducati
memorabilia and used parts from racing bikes used in Ducatis racing
activities. The information on our websites is not incorporated by reference
into this annual report.

In 2000, we established a separate company (Ducati.Com) with the mission
of leveraging the Ducati brand and racing heritage into a vertical internet
portal dedicated to the Ducati life-style, the world of motor racing and the
world of motorcycle enthusiasts. The portal serves Ducati enthusiasts,
suppliers and dealers and is active in three main areas: commerce, content and
community.



| |  |  | Commerce. We are developing three main channels of e-commerce:
Business-to-Business (Supplier-to-Ducati, Ducati-to-Dealer,
Dealer-to-Dealer and Supplier-to-Dealer), Business-to-Consumers (for
bikes, accessories and apparel) and Consumer-to-Consumer (by allowing
consumers to purchase and sell second-hand Ducati bikes, spare parts
and accessories).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Content. We offer coverage of the World Superbike Championship, the
Moto GP Championship and other motor racing or special events, tips
and software for the use and maintenance of bikes, tickets for World
Superbike Championship races and other racing events and tours or
travel services in connection with the World Superbike Championship.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Community. We also offer Ducati enthusiasts a combination of club
activities and chat rooms, e-mail capabilities, message boards and the
possibility to set up personal web pages.                                                                                                                                                                 

Marketing Unit.In 2003, we created a dedicated marketing unit to carry
out customer service as well as online and traditional marketing activities
(advertising, direct marketing and events). The creation of this unit is
intended to increase our community marketing activities to meet the needs of
the growing number of Ducati fans 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, crank cases and cylinder heads. Our strategic goal is to
integrate a limited manufacturing operation with a network of sophisticated,
high value-added suppliers in order to reduce complexity and increase
production efficiency.

Assembly Operations.Our production facilities are located in Borgo
Panigale, outside Bologna, Italy. The facilities consist of 125,000 square
meters of land, including approximately 36,000 square meters (approximately
387,360 square feet) of covered manufacturing and office space as well as
parking areas and unused space and buildings. All of our manufacturing,
assembly and warehousing functions are currently performed on-site at Borgo
Panigale. During 2002, motorcycle production at our facility increased by 2.0%
to 41,411 units from 40,692 units produced in 2001. We outsource the
production of the majority of our parts and components to third-party
suppliers. In 2002, approximately 92.0% of our total costs of goods sold
(excluding depreciation) were for parts and components and approximately 8.0%
were for direct and indirect labor costs and research and development costs.
As a result, our motorcycle production is fundamentally an assembly and testing
process. As part of the production process each engine and each finished
motorcycle is subjected to rigorous quality checks, including static and
dynamic tests.

We have implemented a number of initiatives to improve our production
processes and reduce costs. In 1999, we introduced a production software
system that allows us to monitor the flow of all production-related information
from initial order to final motorcycle delivery. The key advantage of this
system is a customized material requirement planning system that automatically
generates production schedules from sales forecasts, helps to optimize
warehouse volume levels, generates orders for purchasing materials organizes
materials flow for production. In 2003, we began pilot testing a new inventory
management software system in the United States, which, if successful, we will
implement worldwide.

We are able to maintain efficiency even at relatively low volumes in large
part because many Ducati motorcycle models share common components. In 2002,
we produced 20 motorcycle models using only two types of crank cases and four
types of cylinder heads. To simplify further production and reduce costs, we
use a platform approach to production, and we are moving away from assembling
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
supplied 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 cylinder heads, clutch covers and fuel pumps), thereby

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significantly reducing the number of parts required to be assembled
directly on the motorcycle. In 1999, we also initiated an on-going Lean
Production Project with Porsche Consulting to improve the quality and to reduce
the costs of the production process. As a result of these initiatives, we have
made a significant reduction in our direct labor needs.

In 2000, we commenced a new project, known as Desmo (Ducati evolution and
supply management optimization), aimed at reducing inefficiencies in the supply
process. We estimate that this project resulted in  200,000 of cost savings
in 2001, and  60,000 in 2002.

As part of our initiative to out-source non-strategic activities, we have
retained Saima Avandero S.p.A. to assume our shipping and warehousing
functions. Saima Avandero is responsible for the shipping and logistics of
finished goods at our Borgo Panigale facility. As a result, we are able to
fill orders for less than a complete container or truckload of motorcycles,
increasing our responsiveness to dealers. Saima Avandero manages all our spare
parts management functions at a dedicated center in Modena. Saima Avanderos
state-of-the-art technology allows us to increase the speed and flexibility of
the management, packaging and distribution of Ducati spare parts.

Supplies and Suppliers

We require a wide variety of parts, components and tools to manufacture
our motorcycles. While we currently source our parts and components from a
broad range of suppliers, our top ten parts and components suppliers accounted
for approximately 45.0% of our parts and components procurement spending in
2002. The parts and components required from non-Italian suppliers accounted
for approximately 18.0% of the total value of parts and components acquired
from suppliers in 2002. Our largest suppliers include Brembo (brakes and
wheels), Eaton (cylinder heads), Magneti Marelli (body throttle and ignition
system), P.M. (machining of engine crankcases), Showa (suspensions), Remus
(exhaust systems), Verlicchi (body steel frame), CIAP (gears), ILAS (steel fuel
tanks), Nuova GM (painted plastic parts), Ohlins (suspensions), Mahle Mondial
(cylinders & pistons), Denso Europe (starters & generators), Zeuna Starker
(exhaust systems), Michelin (tires) and Pirelli (tires).

With the exception of a limited number of long term component supply
contracts for periods ranging from one to three years for strategic supplies,
we enter only into short-term, rolling contracts with our suppliers. We
typically contract with our suppliers on a non-exclusive basis, allowing us to
replace suppliers at any time. In November 1998, we signed a sponsorship and
supply agreement with Shell, to expire in 2005, under which, among other
things, Shell acts as an official lubricant supplier to Ducati (and as an
exclusive supplier of lubricants to the Ducati racing program).

Generally, motorcycle raw materials and components are available from a
variety of sources. Our policy has been to identify at least two sources of
supply for each component and to be able to switch promptly to the alternative
supplier should the need arise. However, we rely upon single-source suppliers
for certain high-tech components.

Nonetheless, 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 and aluminum) from which these components
are manufactured.

Intellectual Property

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. Ducati is also registered as a Community Trademark in all countries
that are part of the European Union and in 44 additional countries on an ad hoc
basis for motor vehicles. In addition, we have registered Ducati for toys,
apparel, glasses, watches and other sundries in the majority of the countries
in which the trademark for motors and vehicles is registered.

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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.

Motorcycles sold in the United States, the European Union and all other
countries are subject to environmental emissions regulations and safety
standards with which we must comply in order to sell products in such
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 E.U. directives relating to emissions, pollution, and
noise, as well as national rules on emissions, pollution, noise, and safety
issued by the Ministry of Transport (Ministro delle Infrastruture e dei
Transporti). 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; 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 maintain liability insurance
with a per-occurrence limit of 10.0 million and an aggregate liability cap of
 10 million
per year. See Item 2  Key Information  Risk Factors  We may
be subject to significant product liability claims.




Description of Property

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

|                              |  |                |           |               |  |                                             |  |          
|----------------------------- |  | -------------- | --------- | ------------- |  | ------------------------------------------- |  | ---------
|                              |  | Approximate    |           |               |  |                                            
|Location                      |  | Square Footage |           | Principal Use |  | Status                                     
|                              |  |                |           |               |  |                                            
|Bologna, Italy                |  |                | 1,339,966 |               |  | Headquarters, production facility           |  | See below
|Cupertino, California, USA(1) |  |                | 12,505    |               |  | Headquarters, Ducati North America          |  | Leased   
|Paris, France                 |  |                | 2,800     |               |  | Headquarters, Ducati France S.A.            |  | Leased   
|Cologne, Germany              |  |                | 4,390     |               |  | Headquarters, Ducati Motor Deutschland GmbH |  | Leased   
|Tokyo, Japan                  |  |                | 1,300     |               |  | Headquarters, Ducati Japan KK               |  | Leased   
|Rotterdam, Holland            |  |                | 1,100     |               |  | Headquarters, Ducati Benelux B.V            |  | Leased   
|Northampton, England          |  |                | 2,324     |               |  | Headquarters, Ducati U.K. Limited           |  | Leased   



---

|(1) |  | In January 2003, we relocated our North American headquarters from
Pompton Plains, New Jersey to Cupertino, California.
|--- |  | -----------------------------------------------------------------------------------------------------------------------

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. Please
read Item 5, Operating and Financial Review and Prospects  Liquidity and
Capital Resources for a description of the transaction.

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

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.




Capital Expenditures

The following table sets forth our capital expenditures, before
retirements, for each year in the three-year period ended December 31, 2002.

|                                                    |  |                         |        |      |  |      |        |  |  |  |        | 
|--------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                    |  | Year ended December 31,
|                                                    |  |                        
|                                                    |  | 2000                    |        | 2001 |  | 2002
|                                                    |  |                         |        |      |  |     
|                                                    |  | (euro thousands)       
|Plant equipment                                     |  |                         | 2,875  |      |  |      | 3,349  |  |  |  | 4,420  | 
|New product industrialization (molds)               |  |                         | 4,121  |      |  |      | 6,518  |  |  |  | 14,475 | 
|Technical investments (engine and vehicle tests)    |  |                         | 3,246  |      |  |      | 2,432  |  |  |  | 4,017  | 
|Investments in sales and administrative departments |  |                         | 4,494  |      |  |      | 4,894  |  |  |  | 5,716  | 
|Capitalized research and development                |  |                         | 8,626  |      |  |      | 11,803 |  |  |  | 15,200 | 
|Other                                               |  |                         | 3,557  |      |  |      | 384    |  |  |  | 500    | 
|                                                    |  |                         |        |      |  |     
|Total                                               |  |                         | 26,919 |      |  |      | 29,380 |  |  |  | 44,328 | 

Our capital expenditures in property, plant and equipment were  11.3
million, 13.5 million and  23.8 million in 2000, 2001 and 2002,
respectively. Capital expenditures in each of the years were made principally
to acquire equipment and tooling at our Bologna facility, as well as to develop
new motorcycle models (in particular, the Multistrada 1000DS which we began
developing in 2000, and the Desmosedici, which we began developing in 2001).
Investments in intangible assets, which include our capitalized research and
development expenditures for these new models, amounted to  15.6 million,
15.9 million and  20.5 million in 2000, 2001 and 2002, respectively. The
increase in capital expenditures and investments in intangible assets between
2001 and 2002 was mainly due to expenditures related to the production of the
Multistrada and the 999Superbike), as our expenditures for the development of
these models peaked in 2002. See   Products and Distribution  Product
Research and Development.

In addition, in January 2000 we acquired 49.9% of the shares of
Gio.Ca.Moto for  903,800, thereby raising our ownership interest to 99.9%. On
March 16, 2001, we acquired the remaining 0.1% of the shares of Gio.Ca.Moto,
which was subsequently merged into DMH as of December 31,
2001.

Our capital expenditures currently in progress relate principally to the
testing and (assuming the system is adopted after testing) implementation of a
new inventory management software system; the acquisition of equipment and
tooling at our Bologna facility; and our continuing research and development
initiatives related to the Multistrada and the Desmosedici, which we have
developed and began using in 2003 to compete in the Moto GP Championship. We
believe that competing in the Moto GP Championship will further enhance
recognition of the Ducati brand 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  8.0 million during 2002 in connection with this
project and we estimate that we will spend up to approximately  8.0 million in
each year through 2006. We plan to finance these expenditures from our
operating cash flow.

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Item 5.     Operating and Financial Review and Prospects

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

Our audited consolidated financial statements have been prepared in
conformity with Italian GAAP, which differs in certain significant respects
from U.S. GAAP. For a discussion of significant differences between Italian
GAAP and U.S. GAAP and the related reconciliation of net profit/(loss) and
shareholders equity in our audited consolidated financial statements, refer to
Notes 29, 30 and 31 to the audited consolidated financial statements.




Introduction

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
eleven of thirteen manufacturers titles since 1990 and more single race
victories than all other manufacturers combined. In 2003, we resumed
participating in the Moto GP Championship after an absence of over 30 years, in
which we have posted very good results (including a first place finish). 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 within the
sport sub-segment of the large-displacement motorcycle market.

Our net sales 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. Other revenues are from sponsorship
income, licensing revenues, rental and the sale of scrap, sundry components and
materials. Revenues and other income, costs and charges are accounted for net
of returns and discounts and are recognized on the date of shipment to the
dealer or importer (which normally coincides with passage of title, but before
sale to the end user). As a result of our strategy to develop our
motorcycle-related product offering, we expect that net sales attributable to
Ducati Performance accessories, technical riding gear and enthusiast apparel
may increase at a faster rate than motorcycle sales. We cannot assure you that
such increases in sales can be achieved.

We produce motorcycles in five model lines, which vary in their technical
and design features and intended customers: Superbike, Super Sport, Sport
Naked, Sport Touring and the Multistrada (introduced in 2001 for sale in 2003).
We sell our motorcycles and related products in 45 countries worldwide, with a
primary focus on the Western European and North American markets, which
together accounted for approximately 85.0% of our net sales in each of the last
three years. In 2002, no single country accounted for more than 15.0% of our
net sales of motorcycles and related products, with the exception of Italy and
the United States at approximately 25.8% and 17.0%, respectively. This
provides us with significant geographical diversity of sales. We have a global
distribution network, directly controlling our Italian sales and operating
wholly owned distribution subsidiaries in North America, France (99.9% owned),
Germany, the Benelux countries (which is also responsible for Sweden), 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, net sales are normally recognized upon sale to our
importers and dealers before such motorcycles are 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

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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 and April through June, respectively. 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.

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 in selling, general and administrative expenses (excluding depreciation)).
See  Results of Operations  2002 compared to 2001.

As part of our strategy to increase sales of performance accessories, in
July 1997 we established a performance accessories joint venture, Gio.Ca.Moto.
In January 2000, we acquired substantially all of the shares that we did not
already own in Gio.Ca.Moto, which was subsequently merged with DMH as of
December 31, 2001.

Cost of goods sold (excluding depreciation) is comprised primarily of
variable costs, such as the cost of parts, components and labor, as well as
costs relating to research and development that are not capitalized or included
under selling, general and administrative expenses (excluding depreciation).
In 2002, approximately 85.0% of the total cost of goods sold (excluding
depreciation) incurred by Ducati was for parts and components (approximately
85.0% in each of 2001 and 2000), and only approximately 15.0% was for direct
and indirect labor costs and research and development costs (approximately
15.0% in each of 2001 and 2000). See Item 4  Information on the Company 
Products and Distribution.

Selling, general and administrative expenses (excluding depreciation)
primarily include personnel costs, advertising and promotion costs, expenses
relating to the Ducati racing program, charges for accrued warranty expenses
and charges for doubtful accounts. Promotion costs include rebates, discounts,
complimentary accessories and other incentives. This item also includes
expenses relating to marketing and distribution, including certain expenses
associated with our wholly owned distribution subsidiaries. Costs for services
are recognized on the date in which 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. Beginning in 2001,
research and development expenses associated with development of a four-stroke
double twin cylinder engine used for the Desmosedici motorcycle to compete in
the Moto GP Championship are included in selling, general and administrative
expenses (excluding depreciation).

Depreciation of property, plant and equipment is comprised primarily of
charges over the estimated useful life for each class of assets against the
capitalized amount of these items.

Amortization of intangible assets primarily reflects amortization of the
Ducati brand name, as well as amortization of goodwill and Cagivas non-compete
agreement given in connection with our September 1996 acquisition of the Ducati
business (which expires in September 2003), as well as a non-competition
agreement entered into with the former U.K. importer (which expired in January
2003), following the creation of Ducati U.K. Amortization of intangible assets
includes amortization of certain capitalized debt issuance costs, certain
incidental costs of the initial public offering of our shares in March 1999 and
certain capitalized research and development expenditures.

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Other operating revenues are principally comprised of sales of scrap,
sundry components and materials, licensing revenues and rental and sponsorship
income.

Interest expense, net, principally reflects interest payments on our
financing arrangements, including the Notes and the Credit Agreement for the
relevant periods. See  Liquidity and Capital Resources.

Foreign exchange gain/(loss), net is comprised primarily of the
translation differences from conversion into euro of monetary assets and
liabilities denominated in a currency other than the euro, and does not include
unrealized foreign exchange gains on long-term assets and liabilities, which
are deferred at the balance sheet date under Italian GAAP. Foreign exchange
losses do include unrealized unrealized foreign exchange losses on long-term
assets and liabilities. See Item 3  Key Information  Risk Factors  We are
subject to foreign currency exchange rate fluctuations, particularly with
respect to the U.S. dollar. 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). Other non-operating income/(expense),
net comprises gains and losses of a non-operating nature, such as income from
the disposal of fixed assets and certain non-recurring expenses (e.g., disposal
costs for real estate in the United States in connection with the relocation of
our headquarters to California) that are considered to be incurred one-time
only due to their nature and magnitude.

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. Following our March 1999 initial public
offering, we qualified for certain income tax rate reductions in Italy.
Certain Italian tax regimes available to Ducati entail a reduction of the
corporate income tax (IRPEG) rate applicable in each of the three years
discussed in this section, depending on various factors. The ordinary IRPEG
tax rate was reduced from 37.0% applicable in fiscal years 1999 and 2000 to
36.0% for fiscal years 2001 and 2002 and is scheduled to decrease to 34.0%
thereafter. See Note 27 to the audited consolidated financial statements.

For a more detailed description of the line items in the consolidated
statement of operations prepared in conformity with Italian GAAP that form part
of our audited consolidated financial statements, see Note 1 to the audited
consolidated financial statements.

Intangible assets include capitalized research and development costs,
comprised principally of the cost of personnel employed in research and
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 goods sold (excluding
depreciation) or, in the case of costs related to the development of the
double twin engine for the Desmosedici motorcycle developed to compete in the
Moto GP Championship, selling, general and administrative expenses (excluding
depreciation).

Investments in tooling for new products are capitalized as property, plant
and equipment. Finally, a portion of the costs related to our racing program
(which are included in cost of goods sold (excluding depreciation)) are
associated with research and development, as many of Ducatis technical
innovations are derived from and tested in its racing program.




Critical Accounting Policies

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 to

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our consolidated financial statements. 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. This
allowance does not reflect obsolete or slow-moving items held by independent
dealers or importers.

Accounting for Long-Lived Assets

Property, plant and equipment are booked at purchase cost or valuation of
assets contributed in kind (for instance, upon the creation of a new Group
company such as Ducati Corse), including any directly related charges.
Ordinary maintenance and repair expenditure that does not increase the value of
the assets concerned is expensed as incurred. Extraordinary maintenance and
repair expenses that increase the useful life of property, plant and equipment
are capitalized and depreciated over the residual life of the assets concerned.
Property, plant and equipment are depreciated on a straight-line basis, using
the ordinary rates indicated by current tax legislation, which are considered
to reflect the estimated useful lives of the related assets. The annual rates
used are set out below in the note on depreciation.

As required by International Accounting Standards, fixed assets acquired
under finance leasing contracts, if significant, are booked according to the
finance lease accounting method. Beginning in 2001, the acquired assets are
treated as capital expenditures based on the original value of the asset, and
depreciated over the estimated useful life of the asset. Lease installments,
including principal and interest, are included in other borrowings. Given that
lease contracts were not significant to Ducati through December 31, 2000,
accrued lease installments were included in selling, general and administrative
expense (excluding depreciation), while liabilities for future installments
were recorded in the notes to the audited consolidated financial statements,
together with the effect that there would have been if the current method of
accounting for leases had been adopted.

Intangible fixed assets are booked at purchase cost or valuation of assets
contributed in kind (for instance, upon the creation of a new Group company
such as Ducati Corse), including any directly related charges. Those deriving
from Italian Group companies are also revalued, where applicable, on the basis
of applicable laws governing revaluation of assets. Intangible fixed assets
are directly amortized on a straight-line basis over their estimated economic
useful life. Costs incurred in obtaining long-term finance (debt capacity)
are amortized over the life of the related loan, according to the residual
balance method. Intangible fixed assets are fully written down if they no
longer have any future economic benefit.

Research and development costs are capitalized if applicable to specific
projects, where these are reasonably identifiable and quantifiable, and if
there is a reasonable certainty that they will be recoverable by means of the
revenues generated by such projects.

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 research and 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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When an impairment in the value of assets occurs, nonscheduled write-downs
are made. In the year in which the reasons for the write down no longer exist,
the value of the asset is reinstated and the related adjustment is recorded in
the income statement. We assess the impairment of identifiable intangibles and
long-lived assets whenever there is reason to believe that the carrying value
may exceed the fair value and where a permanent impairment in value is
anticipated. The determination of impairments of long-lived and intangible
assets involves the use of estimates, which include but are not limited to the
cause, the timing and the amount of the impairment.

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. Reserves
established for contingent liabilities in such matters are monitored on an
on-going 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. Our provision
for product warranty expense has increased in recent years due to the growing
number of units under warranty. We believe that the warranty reserve is
appropriate; however, actual claims incurred could differ from the original
estimates.

Deferred Taxation

Deferred taxes have been accounted for in accordance with Accounting
Principle No. 25, issued in March 1999 by the Italian Accounting Profession.
Deferred tax assets and liabilities are calculated using current tax rates
applying at the respective accounting reference dates in the countries where
Group companies are based. The statutory financial statements of Group
companies recognize deferred tax assets and liabilities arising from timing
differences between statutory and taxable income and on carried forward tax
losses, whose recovery is considered to be reasonably certain, based on
predictions of the particular companys current and expected results. Deferred
tax assets and liabilities have also been provided as a result of eliminating
tax-driven items from the individual financial statements of our consolidated
subsidiaries and making other consolidation adjustments (principally unrealized
intercompany profits), which represent timing differences between the
individual financial statements of our consolidated subsidiaries and our
consolidated financial statements. These taxes are reviewed every year to
reflect changes in tax rates and in the financial and economic situation of the
companies concerned.

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 the group operates
and the period over which the deferred tax assets and liabilities will be
recoverable. 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.

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.

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Results of Operations

The following table sets forth certain statement of operations data
expressed as a percentage of our net sales for the periods indicated:

|                                                                      |  |                         |       |      |  |      |       |   |  |  |       |  
|--------------------------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                                                      |  | Year ended December 31,
|                                                                      |  |                        
|                                                                      |  | 2000                    |       | 2001 |  | 2002
|                                                                      |  |                         |       |      |  |     
|Net sales                                                             |  |                         | 100   | %    |  |      | 100   | % |  |  | 100   | %
|Cost of goods sold (excluding depreciation)                           |  |                         | (60.3 | )    |  |      | (59.2 | ) |  |  | (60.4 | )
|Gross profit (excluding depreciation)                                 |  |                         | 39.7  |      |  |      | 40.8  |   |  |  | 39.6  |  
|Selling, general and administrative
expenses (excluding depreciation) |  |                         | (25.2 | )    |  |      | (26.5 | ) |  |  | (29.6 | )
|Depreciation of property, plant and
equipment                         |  |                         | (2.0  | )    |  |      | (2.4  | ) |  |  | (2.9  | )
|Amortization of intangible assets                                     |  |                         | (5.8  | )    |  |      | (6.0  | ) |  |  | (5.3  | )
|Other operating revenues                                              |  |                         | 1.3   |      |  |      | 1.8   |   |  |  | 2.6   |  
|Operating income                                                      |  |                         | 8.0   |      |  |      | 7.7   |   |  |  | 4.4   |  




2002 Compared to 2001

Net sales

Net sales were  413.0 million in 2002 compared to  407.8 million in
2001, an increase of  5.2 million, or 1.3%. The increase in net sales was
attributable principally to improvements in the mix of motorcycle models sold
of 2.9% and an increase in net sales of motorcycle-related products of 2.5%,
more than off-setting the adverse impact of foreign exchange losses of 2.1%, a
decrease in motorcycle unit sales of 1.0% and a negative country mix, or a
greater proportion of sales in countries in which average prices are lower of
1.0%. In 2002, motorcycle net sales accounted for 82.7% of net sales (84.7% in
2001), principally reflecting a decline in unit sales of 1.2% and negative
country mix, partially offset by the improvement in product mix. Sales of
spare parts accounted for 10.3% of net sales (9.5% in 2001) and sales of
performance accessories, technical riding gear and enthusiast apparel accounted
for 6.6% of net sales (5.5% in 2001). Revenues from other non-core activities
represented 0.4% of net sales in 2002.

As mentioned above, the increase in 2002 net sales compared to 2001 net
sales was partially offset by the net effect of the strengthening of the euro
against the U.S. dollar, the Japanese yen and the U.K. pound sterling during
2002 relative to 2001. We sell a significant number of units in those
currencies and fluctuations between the euro and those currencies may impact
our net sales during a given period. See Note 19 to our audited consolidated
financial statements.

In 2002, we produced motorcycles in four model lines, which vary in their
technical and design features and intended customers: Superbike, Super Sport,
Sport Naked, Sport Touring. A fifth product line, the Multistrada, was
introduced for sale in 2003. The 1.1% decline in motorcycle net sales between
2001 and 2002 resulted mainly from a 1.2% decline in unit sales
of Ducati
motorcycles, to 39,534 in 2002 from 40,016 in 2001. The decrease in unit sales
resulted principally from a 32.8% decrease in unit sales of our Super Sport
motorcycles (or, excluding the effect of the sale of the limited edition
MH900evoluzionein 2001 and 2002, a 14.6% decrease), a 2.6%
decrease in unit sales of Sport Naked motorcycles, and a 4.3%
decrease in unit sales of our
Sport Touring motorcycles, partially offset by a 19.5% increase in
unit sales of Superbike motorcycles (as customers warmly received the new 999 Superbike).
Unit sales showed varying trends in our principal geographic markets, with
increases in Japan (+10.6%); Italy (+6.5%); flat sales in the Benelux
countries; and decreases in the United States (-25.8%), the UK (-17.6%), France
(-9.1%), and Germany (-1.0%). The decline in unit sales resulted mainly from
declines in market demand
in certain of our key markets (in particular, the
United States and Germany), disruptions relating to the restructuring of our
U.S. operations, a global policy of reducing
sales into the dealer network to
reduce their inventory (in particular, the United States, the United Kingdom
and Germany) and vacancies in key management positions
in France (which have
since been filled).

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Ducati motorcycle registrations were 39,607 in 2002 compared to 38,969 in
2001, an increase of approximately 2.0%. In particular, registrations in Japan
and the UK grew 9.0%, the Benelux countries were up 6.0%, and Italy increased
2.0%, more than off-setting a decline in Germany of 9.0%, in France of 7.0% and
in the United States of 1.0%. We also estimate that we gained market share in
all of these countries, with the exception of France, where our results were
negatively affected by a vacancy in a key management position (which has since
been filled).

The increase in net sales of spare parts of 9.2% between 2002 and 2001
reflects principally the significant increase in motorcycle unit sales
experienced from 1996 to 2002.

Cost of goods sold (excluding depreciation)

Cost of goods sold (excluding depreciation) was  249.3 million in 2002
compared to  241.3 million in 2001, an increase of  8.0 million, or 3.3%,
principally as a result of increased materials and research and development
expenses associated with the new Superbike and Multistrada models. As a
percentage of net sales, cost of goods sold (excluding depreciation) increased
to 60.4% in 2002 compared to 59.2% in 2001.

Gross profit (excluding depreciation)

Gross profit (excluding depreciation) was  163.7 million in 2002 compared
to 
166.5 million in 2001, a decrease of
 2.8 million,
or -1.7%, principally as a result of factors mentioned above. As a percentage of net sales, gross
profit (excluding depreciation) was 39.6% in 2002 compared to 40.8% in 2001.

Selling, general and administrative expenses (excluding depreciation)

Selling, general and administrative expenses (excluding depreciation) were
 122.0 million in 2002 compared to  108.0 million in 2001, an increase of 
14.0 million, or 13.0%, principally as a result of the restructuring of our
U.S. operations, general promotional activities (e.g., the World Ducati Week),
higher warranty costs (due to the growing number of units under warranty),
increased sales personnel costs and expenses that we incurred in our effort to
reduce excess inventories (in particular in the United States). As a
percentage of net sales, selling, general and administrative expenses
(excluding depreciation) increased to 29.6% in 2002 compared to 26.5% in 2001.
Expenses incurred in connection with our racing program (excluding as regards
development of the Desmosedici to compete in the Moto GP Championship) were 
6.5 million and  6.1 million in 2002 and 2001, respectively. Research and
development expenses relating to our racing program are included under cost of
goods sold (excluding depreciation). See Notes 20 and 21 to our audited
consolidated financial statements.

Depreciation of property, plant and equipment

Depreciation of property, plant and equipment was  12.0 million in 2002
compared to  10.0 million in 2001, an increase of  2.0 million, or 20.0%,
principally reflecting increased capital investments.

Amortization of intangible assets

Amortization of intangible assets was  22.0 million in 2002 compared to 
24.6 million in 2001, a decrease of  2.6 million (or 10.6%), principally due
to the devaluation of software for Ducati.Com. As a percentage of net sales,
amortization of intangible assets decreased to 5.3% in 2002 compared to 6.0% in
2001.

Other operating revenues

Other operating revenues were  10.8 million in 2002 compared to  7.5
million in 2001, an increase of  3.3 million, or 44.0%, principally due to
higher sponsorship income. As a percentage of net sales, other operating
revenues increased to 2.6% in 2002 compared to 1.8% in 2001.

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Operating income

Operating income was  18.5 million in 2002 compared to  31.5 million in
2001, a decrease of  13.0 million, or 41.3%, principally for the reasons
stated above. As a percentage of net sales, operating income decreased to 4.4%
in 2002 compared to 7.7% in 2001.

Interest expense, net

Interest expense, net, was  11.5 million in 2002 compared to  12.8
million in 2001, a decrease of
 1.3 million,
or 10.2%, principally reflecting
reduced dealer inventory financing incentives.

Foreign exchange gain/(loss), net

We had a foreign exchange gain, net, of  1.3 million in 2002 compared to
a gain of  0.7 million in 2001, principally reflecting the strengthening of
the euro against the U.S. dollar and the U.K. pound sterling, which resulted in
foreign exchange gains in connection with currency hedging transactions entered
into to protect our operating results from currency variations.

Profit before income taxes and minority interest

Profit before income taxes and minority interest was  8.5 million in 2002
compared to  19.4 million in 2001, principally due to the reasons stated
above.

Income taxes

Our income tax charge was  2.0 million in 2002 compared to  8.9 million
in 2001, a decrease of
 6.9 million,
principally thanks to one-time tax
benefits resulting from the so-called Tremonti Law, which reduces taxation on
certain capital expenditures.

Net profit

We had a net profit of  6.5 million in 2002 compared to  10.6 million in
2001, principally due to the reasons stated above.




2001 Compared to 2000

Net sales

Net
sales were 
407.8 million in 2001 compared to
 379.5 million in
2000, an increase of
 28.3 million, or 7.5%. The increase in net sales was
attributable principally to increased net sales of Ducati motorcycles (up 7.2%,
or  22.8 million), an increase of sales of performance accessories, technical
riding gear and enthusiast apparel (up 3.0%, or
 0.7 million) and an increase
in sales of spare parts (up 14.2%, or
 4.8 million). In 2001, motorcycle
sales accounted for 84.7% of net sales (83.4% in 2000), sales of spare parts
accounted for 9.5% of net sales (9.0% in 2000) and sales of performance
accessories, technical riding gear and enthusiast apparel accounted for 5.5% of
net sales (5.7% in 2000). Revenues from other non-core activities represented
0.3% of net sales in 2001. In particular, engine sales were zero in 2001,
reflecting our decision to phase out this business.

The increase in 2001 net sales compared to 2000 net sales was partially
offset by the net effect of the strengthening of the euro against the Japanese
yen and the U.K. pound sterling during 2001 relative to 2000, which completely
offset the decline of the euro against the U.S. dollar. We sell a significant
number of units in those currencies and fluctuations between the euro and those
currencies may impact our net sales during a given period. See Note 19 to our
audited consolidated financial statements.

We produced motorcycles in four model lines in 2001 and 2000, varying in
their technical and design features and intended customers: Superbike, Super
Sport, Sport Naked and Sport Touring. The

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7.2% increase in motorcycle net sales between 2000 and 2001 resulted from
a 2.4% increase in unit sales of Ducati motorcycles, to 40,016 in 2001 from
39,087 in 2000, and from an increase of average selling price. The increase in
unit sales resulted principally from an 18.0% increase in unit sales of our
Sport Touring motorcycles, a 40.0% increase in unit sales of our Super Sport
motorcycles, and a 2.4% increase in unit sales of Sport Naked motorcycles.
Unit sale increases of Super Sport, Sport Naked and Sport Touring motorcycles
more than offset a 13.9% decrease in unit sales of Superbike motorcycles (which
we believe reflected customers deferral of purchases until the introduction of
the 999 Superbike in 2002). Unit sales increased in the majority of our
principal geographic markets, with particularly strong increases in Japan (up
73.0%), the UK (up 36.0%), Benelux (up 35.0%) and France (up 7.0%), partially
offset by decreases in the USA (down 11.0%), Germany (down 8.0%) and Italy
(down 4.0%). Ducati motorcycle registrations were 38,969 in 2001 compared to
38,130 in 2000, an increase of approximately 2.0%. The greatest increases in
registrations were recorded in Japan (up 51.0%), Holland (up 51.0%), Australia
(up 17.0%), the UK (up 10.0%) and France (up 8.0%), largely offset by
reductions in registrations in the USA (down 14.0%), Austria (down 20.0%) and
in Italy (down 3.0%).

The increase in net sales of spare parts of 14.2% between 2000 and 2001
reflects principally the significant increase in motorcycle unit sales
experienced from 1996 to 2001.

Cost of goods sold (excluding depreciation)

Cost of goods sold (excluding depreciation) was  241.3 million in 2001
compared to  228.9 million in 2000, an increase of  12.4 million, or 5.4%,
principally as a result of increased motorcycle unit sales and spare parts net
sales. As a percentage of net sales, cost of goods sold (excluding
depreciation) decreased to 59.2% in 2001 compared to 60.3% in 2000. This
decrease in the cost of goods sold (excluding depreciation) as a percentage of
net sales reflects principally increased average motorcycle sale prices and
improved production efficiency.

Gross profit (excluding depreciation)

Gross profit (excluding depreciation) was  166.5 million in 2001 compared
to  150.6 million in 2000, an increase of  15.9 million, or 10.6%,
principally as a result of increased motorcycle unit sales, increased spare
parts net sales, production efficiencies and a higher average unit sales price.
As a percentage of net sales, gross profit (excluding depreciation) increased
to 40.8% in 2001 compared to 39.7% in 2000.

Selling, general and administrative expenses (excluding depreciation)

Selling, general and administrative expenses (excluding depreciation) were
 108.0 million in 2001 compared to  95.6 million in 2000, an increase of 
12.4 million, or 13.0%, principally as a result of increased variable costs
(shipping costs and bonus payments) related to the growth in unit sales, costs
incurred in connection with the restructuring of Ducati North America and costs
related to the development of a four-stroke double twin cylinder engine to
compete in the Moto GP Championship. As a percentage of net sales, selling,
general and administrative expenses (excluding depreciation) increased to 26.5%
in 2001 compared to 25.2% in 2000.

Expenses incurred in connection with our racing program were  6.1 million
and  5.6 million in 2001 and 2000, respectively. Research and development
expenses relating to our racing program are included under cost of goods sold
(excluding depreciation). See Notes 20 and 21 to our audited consolidated
financial statements.

Depreciation of property, plant and equipment

Depreciation of property, plant and equipment was  10.0 million in 2001
compared to  7.4 million in 2000, an increase of  2.6 million, or 35.0%,
principally reflecting increased capital investments in 1999 and 2000 at our
Borgo Panigale facility.

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Amortization of intangible assets

Amortization of intangible assets was  24.6 million in 2001 compared to 
22.1 million in 2000, an increase of  2.5 million, or 11.3%, principally due
to the impact of our continued investments in research and development. As a
percentage of net sales, amortization of intangible assets increased slightly
to 6.0% in 2001 compared to 5.8% in 2000.

Other operating revenues

Other operating revenues were  7.5 million in 2001 compared to  5.0
million in 2000, an increase of  2.5 million, principally due to higher
sponsorship income. As a percentage of net sales, other operating revenues
increased to 1.8% in 2001 compared to 1.3% in 2000.

Operating income

Operating income was  31.5 million in 2001 compared to  30.4 million in
2000, an increase of  1.1 million, or 3.6%, principally for the reasons stated
above. As a percentage of net sales, operating income decreased to 7.7% in
2001 compared to 8.0% in 2000. This decrease was principally due to the
increase in selling, general and administrative expenses (excluding
depreciation).

Interest expense, net

Interest
expense, net, was 
12.8 million in 2001 compared to  8.8
million in 2000, an increase of
 4.0 million,
or 45.4%, principally reflecting
a greater usage of dealer inventory financing incentives at Ducati North
America.

Foreign exchange loss, net

We had a foreign exchange loss, net, of  1.7 million in 2001 compared to
a net foreign exchange loss of  10.6 million in 2000, a decrease of  8.9
million, principally reflecting the strengthening of the euro against the U.S.
dollar and the U.K. pound sterling, which resulted in foreign exchange gains in
connection with currency hedging transactions entered into to protect our
operating results from currency variations.

Other non-operating income, net

Other non-operating income, net, was equal to  (0.03) million in 2001
compared to  6.7 million in 2000, a difference reflecting principally a  6.6
million non-recurring gain recorded in 2000 in connection with a voluntary
write-up of the book value of our trademark in the statutory accounts of DMH.
In 2000, DMH took advantage of a change in Italian law to write-up the book
value of the Ducati trademark by
 29.9 million, which brought the net book
value of the trademark in DMHs statutory accounts in line with its net value
in our audited consolidated financial statements. In exchange for an up-front
tax payment of  5.7 million (19.0% of the amount of the write-up), DMH will be
allowed to amortize the restated value for tax purposes from 2000 to 2006 on a
straight-line basis. The  6.6 million non-recurring gain represented the
difference between the expected tax savings resulting from the write-up and the
 5.7 million up-front payment. See Note 7 to the audited consolidated
financial statements.

Profit before income taxes and minority interest

Profit before income taxes and minority interest was  19.4 million in
2001 compared to  17.7 million in 2000, principally due to the reasons stated
above.

Income taxes

Our income tax charge was  8.9 million in 2001 compared to  7.2 million
in 2000, an increase of  1.7 million, principally due to our higher profit
before income taxes.

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Net profit

We had a net profit of  10.6 million in 2001 compared to a net profit of
 10.5 million in 2000, principally for the reasons stated above.




U.S. GAAP Reconciliation

The principal differences between Italian GAAP and U.S. GAAP as they
affect the audited consolidated financial statements for the years ended
December 31, 2000, 2001 and 2002 were the accounting treatment of: (i)
acquisition of the Ducati motorcycle business, (ii) deferred costs, (iii) debt
issuance costs related to our Notes, (iv) foreign currency translation, (v)
derivative financial instruments, (vi) leases (in particular, cash discounts
and flooring incentives are classified under U.S. GAAP as a reduction of
revenue), (vii) financing of dealer incentives, (viii) costs related to
software projects, (ix) deferred taxes, (x) stock-based compensation, (xi)
earnings per share and (xii) securitization. Notes 29, 30 and 31 to the
audited consolidated financial statements contain a detailed description of the
differences between Italian GAAP and U.S. GAAP, as well as a reconciliation of
net profit and shareholders equity between Italian GAAP and U.S. GAAP.

Under Italian GAAP, net profit was approximately  10.5 million in 2000
and 2001 and  6.5 million in 2002. Under U.S. GAAP, net profit approximated 
7.1 million in 2000,  14.2 million in 2001 and  7.0 million approximately in
2002.

Under Italian GAAP, shareholders equity was approximately  154.6 million
as of December 31, 2001 and  159.7 million as of December 31, 2002. Under
U.S. GAAP, shareholders equity approximated  77.7 million and  83.5 million
at December 31, 2001 and 2002, respectively.

Under Italian GAAP, expenditure is capitalized and is reflected as part of
investing activities. Under U.S. GAAP, expenditure is expensed and reflected
as part of operating activities.




Liquidity and Capital Resources

Our principal sources of liquidity are primarily derived from cash flow
from operations. We generated approximately  44.9 million of cash flows from
operating activities for the year ended December 31, 2002 compared to  13.8
million in 2001. This increase of  31.1 million was due principally to an
improvement of  33.7 million in our working capital during 2002 as compared to
2001, reflecting principally a reduction in trade receivables. Our working
capital is broken down as follows (in thousands):

|                  |       |  |        |      |      |  |               |       |  |  |        |      | 
|----------------- | ----- |  | ------ | ---- | ---- |  | ------------- | ----- |  |  | ------ | ---- | 
|                  |       |  | 2002   |      | 2001 |  | 2002 vs. 2001
|                  |       |  |        |      |      |  |              
|Trade receivables |       |  |  82.0 |      |      |  |  98.0        |       |  |  |  16.0 |     
|Inventories       |       |  | 111.4  |      |      |  | 97.6          |       |  |  | (13.8  | )   
|Trade payables    |       |  | (95.1  | )    |      |  | (86.7         | )     |  |  | 8.4    |     
|                  |       |  |        |      |      |  |               |       |  |  |        |     
|                  | Total |  |        | 98.3 |      |  |               | 108.9 |  |  |        | 10.6 | 
|                  |       |  |        |      |      |  |               |       |  |  |        |     

Our trade receivables at December 31, 2002 of  82.0 million,
notwithstanding overall increased net sales, was primarily due to an overall
increase (relative to 2001) in sales of our trade receivables through our
December 2002 securitization transaction and continuing factoring transactions.
See  Other Financial Transactions.

Our inventories at December 31, 2002 of  111.4 was driven by our annual
buildup of finished products (i.e., finished motorcycles) to satisfy production
requirements during the spring of 2003 and to

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provide for potential union-related work stoppages which did not
materialize, as well as weak market demand (particularly in the fourth quarter
of 2002).

Our trade payables at December 31, 2002 of  -95.1 was mainly due to the
introduction of the new 999R and Multistrada models, partly for new plant and
equipment and, to a lesser extent, for the purchase of raw materials related to
the increased inventories for the year referenced above.

Of our  44.9 million of cash flows that we generated in 2002, we used
approximately  23.8 million in property, plant and equipment (compared to 
13.5 million in 2001) and  20.5 million in investments in intangible assets
(compared to  15.9 million in 2001). Our expenditures in property, plant and
equipment in 2001 and 2002 were principally to acquire equipment and tooling at
our Bologna facility. The increase between the two years reflected increased
investments related to the production of new and current models and our
execution of new leasing contracts for  0.8 million (accounted for using the
financial method). These expenditures were made to give Ducati Corse S.r.l.
the trucks and other equipment necessary to participate in the Moto GP
Championship for the first time in 2003. The increase in investments in
intangible assets between 2001 and 2002 was mainly due to higher expenditure on
research and development for new models.

We currently have levels of long-term debt and available lines of credit
of approximately  248.6 million, of which approximately  209.3 million
remained available at December 31, 2002. During 2002, we assigned  45.0
million of trade receivables in securitization and factoring transactions. See
 Other Financial Transactions.

We believe that the financial resources available to us from our
operations will be sufficient to meet our working capital needs and capital
expenditure requirements in the foreseeable future. Any reduction in our
financial resources from our operations could impair our ability to fund our
future liquidity needs.




Financial Transactions

Financing Activities

On May 31, 2000, DMH issued the Notes in the aggregate principal amount of
 100.0 million. The Notes, which mature on May 31, 2005, bear interest at a
fixed rate of 6.50% per annum, with the total principal amount being repayable
at maturity. The net proceeds to DMH from the sale of the Notes was 
99,186,000, after deduction of the issue price discount and the combined
management and underwriting commission and the selling concession. We used
these net proceeds to prepay in full all amounts owing under the Credit
Agreement, which was terminated. The terms and conditions of the Notes do not
include any financial coverage ratios or performance covenants, but do limit
our ability to create liens on assets to secure (i) indebtedness represented by
bonds, notes, debentures or other negotiable instruments or (ii) any guarantee
of such indebtedness. Events of default under the terms and conditions of the
Notes, which would entitle the noteholders to declare the Notes to be
immediately due and payable, include, but are not limited to, failure to pay
interest or principal under the Notes when due, failure to comply with any
obligations under or in respect of the Notes, failure to pay other indebtedness
when due, acceleration of other indebtedness and the occurrence of certain
bankruptcy or other insolvency events.

On July 31, 2001, we entered into a credit link transaction, in which we
acquired a  15.0 million note (the Credit Link Note) issued by a Dutch
subsidiary of Banca Nazionale del Lavoro (BNL). The Credit Link Note yields
an annual coupon of 5.89% and matures on May 31, 2005. BNL may prepay the
Credit Link Note, among other things, if we default on the Notes. We purchased
the Credit Link Note to maximize liquidity over its term. The transaction is
shown in the net financial position under long-term investments for  15.0
million. In the balance sheet, this item is reclassified to other non-current
assets.

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In December 2002, we assigned to Ducati Desmo Finance 1 S.r.l. (DDF1) 
a special purpose entity owned by two Dutch foundations (Stichting Syros and
Stichting Kea) in which we have no economic or voting interest or ability to
control management or board decisions  approximately  26.7 million of our
trade receivables. These receivables represent the first tranche of our
non-recourse roll-over securitization program. We intend to assign additional
receivables in similar transactions in 2003 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. Historically, we have entered
into non-recourse factoring agreements to manage the risk of non-payment of
these receivables. Pursuant to these agreements, we received approximately 
18.3 million and  43.0 million 2002 and 2001, respectively. We expect to
reduce further our factoring in 2003 as we transition to our securitization
program to manage our trade receivables.

For this first tranche of our securitization program, we received
approximately  20.0 million from DDF1 in December 2002, which DDF1 financed
through a bridge loan. We will receive approximately  6.5 million in
additional sales proceeds on a rolling monthly basis to the extent that DDF1
has available funds based on the performance of the assigned receivables and
the outstanding bridge loan has been repaid. The total costs of this roll-over
securitization transaction, approximately  115,000, have been capitalized
and will be amortized over five years, which is the anticipated duration of our
securitization program, as the quality of the receivables portfolio transferred
is considered high, and thus we consider it unlikely that we will terminate the
securitization beforehand.

Our receivables are recorded at face value, after providing for an
allowance for doubtful accounts to reflect their estimated realizable value.
For receivables that we sell in factoring arrangements, the amount due from the
principal debtor is paid by the factoring company, less a reduction for their
fees. For receivables that we have assigned in our December 2002 securitization
transaction, an amount equal to the amount collected for the receivables
assigned was deducted from trade receivables and credited to banks, while the
deferred amount from DDF1 remained as trade receivables (the risk of
non-payment of this deferred portion, which is based on the performance of the
underlying trade receivables, was taken into account in calculating the
allowance for doubtful accounts). Payables are recorded at face value, which is
considered to represent their settlement value.

As required by International Accounting Standards, fixed assets acquired
under finance leasing contracts, if significant, are booked according to the
finance lease accounting method. Beginning in 2001, the acquired assets are
treated as capital expenditures based on the original value of the asset, and
depreciated over the estimated useful life of the asset. Lease installments,
including principal and interest, are included in other borrowings. Given that
lease contracts were not significant to the Ducati Group through December 31,
2000, accrued lease installments were included in selling, general and
administrative expense (excluding depreciation), while liabilities for future
installments were recorded in the notes to the audited consolidated financial
statements, together with the effect that there would have been if the current
method of accounting for leases had been adopted.

Until December 31, 2000, minor leases for machinery and work stations were
accounted for in the same way as in the statutory financial statements (as they
were immaterial). In our audited consolidated financial statements for the
period ended December 31, 2001, we have chosen to use the financial method,
booking the leased assets and charging depreciation over their useful life in
the same way as property, plant and equipment, while booking the liability to
the leasing company and charging the financial expenses in the statement of
operations on an accruals basis, considering the importance of the sale and
lease-back operation. Following the adoption of this method, minor lease
contracts have also been accounted for in this way.

Repurchases

At a May 7, 2002 meeting, our shareholders approved a buy-back plan
pursuant to which we may repurchase on the Telematico up to  6.0 million of
our shares in one or more transactions by November 6, 2003 at a purchase price
of not more than 10.0% above or below the market price for our shares on the
Telematico on the day prior to any purchase. As of June 25, 2003, we have
purchased a total of 244,446

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shares for an aggregate price of  327,667 pursuant to the plan. For more
information on this buy-back plan, see Item 10  Additional Information  Buy
Back Plan.

On May 18, 2001, we repurchased  9.0 million in aggregate principal
amount of the Notes in two tranches ( 4.0 million in aggregate principal
amount at an aggregate purchase price equal to 101.23% of the original par
value of the Notes, and  5.0 million in aggregate principal amount at an
aggregate purchase price equal to 101.25% of the original par value of the
Notes). We partially funded these repurchases through advance proceeds from
the sale and lease-back transaction completed on June 29, 2001, through which
we sold, and leased back, part of our Bologna property. Proceeds from this
sale and leaseback transaction were also used to repurchase a portion of the
Notes and to finance our operations.




Contractual Obligations and Commercial Commitments

We have various contractual obligations and commercial commitments arising
from our continuing operations. The following represents our contractual
obligations and other commercial commitments as of December 31, 2002:

Contractual Obligations:

|                                   |  |                        |         |        |  |           |       |           |  |         |        |  |  |  |       |       |  |  |       |  | 
|---------------------------------- |  | ---------------------- | ------- | ------ |  | --------- | ----- | --------- |  | ------- | ------ |  |  |  | ----- | ----- |  |  | ----- |  | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|                                   |  |                        |         |        |  | Less than |       |           |  |         |        |  |  |  |       | After | 
|Contractual Obligations            |  | Total                  |         | 1 year |  | 1-3 years |       | 4-5 years |  | 5 years |       
|                                   |  |                        |         |        |  |           |       |           |  |         |       
|Long-Term Debt                     |  |                        | 91,000  |        |  |           |      |           |  |         | 91,000 |  |  |  |      |       |  |  |      |  | 
|Capital Lease Obligations          |  |                        | 20,199  |        |  |           | 3,230 |           |  |         | 5,652  |  |  |  | 5,758 |       |  |  | 5,559 |  | 
|Operating Leases                   |  |                        |        |        |  |           |      |           |  |         |       |  |  |  |      |       |  |  |      |  | 
|Unconditional Purchase Obligations |  |                        |        |        |  |           |      |           |  |         |       |  |  |  |      |       |  |  |      |  | 
|Other Long-Term Obligations        |  |                        |        |        |  |           |      |           |  |         |       |  |  |  |      |       |  |  |      |  | 
|                                   |  |                        |         |        |  |           |       |           |  |         |        |  |  |  |       |       |  |  |       |  | 
|Total Contractual Cash Obligations |  |                        | 111,199 |        |  |           | 3,230 |           |  |         | 97,014 |  |  |  | 5,758 |       |  |  | 5,559 |  | 
|                                   |  |                        |         |        |  |           |       |           |  |         |        |  |  |  |       |       |  |  |       |  | 

Other Commercial Commitments:

|                               |  |           |   |           |  |                                            |       |           |  |         |   |  |  |       |   |  |  |  |   | 
|------------------------------ |  | --------- | - | --------- |  | ------------------------------------------ | ----- | --------- |  | ------- | - |  |  | ----- | - |  |  |  | - | 
|                               |  |           |   |           |  | Amount of Commitment Expiration Per Period
|                               |  |           |   |           |  |                                           
|                               |  | Total     |   |           |  |                                            |       |           |  |         |   |  |  |       |   |  |  | 
|                               |  | Amounts   |   | Less than |  |                                            |       |           |  |         |   |  |  | After
|Other Commercial Commitments   |  | Committed |   | 1 year    |  | 1-3 years                                  |       | 4-5 years |  | 5 years
|                               |  |           |   |           |  |                                            |       |           |  |        
|Lines of Credit                |  |           |  |           |  |                                            | 157.6 |           |  |         |  |  |  |       |  |  |  |  |  | 
|Standby Letters of Credit      |  |           |  |           |  |                                            |      |           |  |         |  |  |  |       |  |  |  |  |  | 
|Guarantees                     |  |           |  |           |  |                                            |      |           |  |         |  |  |  |       |  |  |  |  |  | 
|Standby Repurchase Obligations |  |           |  |           |  |                                            |      |           |  |         |  |  |  |       |  |  |  |  |  | 
|Other Commercial Commitments   |  |           |  |           |  |                                            |      |           |  |         |  |  |  |       |  |  |  |  |  | 
|                               |  |           |   |           |  |                                            |       |           |  |         |   |  |  |       |   |  |  |  |   | 
|Total Contractual Commitments  |  |           |  |           |  |                                            | 157.6 |           |  |         |  |  |  |       |  |  |  |  |  | 
|                               |  |           |   |           |  |                                            |       |           |  |         |   |  |  |       |   |  |  |  |   | 

Implementation of New Accounting Pronouncements:

In July 2001, the FASB issued Statement No. 141, Business Combinations,
and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141
requires that the purchase method of

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accounting be used for all business combinations initiated after June 30,
2001 as well as all purchase method business combinations completed after June
30, 2001. Statement 141 also specifies criteria intangible assets acquired in
a purchase method business combination must meet to be recognized and reported
apart from goodwill. Statement 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of Statement
142. Statement 142 also requires that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with FAS
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. The Company is required to adopt the
provisions of Statement 141 immediately, and Statement 142 effective January 1,
2002. Since goodwill recorded under U.S. GAAP has been fully amortized at
December 31, 2001, the adoption of statement 141 and 142 will not result in any
significant impact.

In August 2001 the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Statement No. 143 requires an
enterprise to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets. Enterprises are required to
adopt Statement No. 143 for fiscal years beginning after June 15, 2002. Early
adoption is encouraged. This Statement amends FASB Statement No. 19, Financial
Accounting and Reporting by Oil and Gas Producing Companies.

In August 2001, the FASB issued Statement No. 144, Accounting For The
Impairment Or Disposal Of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
amends existing guidance on asset impairment and provides a single accounting
model for long-lived assets to be disposed of. SFAS No. 144 also changes the
criteria for classifying an asset as held-for-sale; and broadens the scope of
businesses to be disposed of that qualify for reporting as discontinued
operations and changes the timing of recognizing losses on such operations.
The Company adopted Statement No. 144 on January 1, 2002. The adoption of
Statement No. 144 did not effect the Companys financial statements.

In April 2002, the FASB issued Statement No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections.Statement No. 145 provides for the rescission of several
previously issued accounting standards, new accounting guidance for the
accounting for certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. Statement No.
145 will be adopted beginning January 1, 2003, except for the provisions
relating to the amendment of Statement No. 13, which will be adopted for
transactions occurring subsequent to May 15, 2002. Adoption of Statement No.
145 will not have a material impact on the consolidated financial statements.




Research and Development

Intangible assets include capitalized research and development costs, comprised
principally of the cost of personnel employed in research and 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 goods sold (excluding
depreciation) or, in the case of costs related to the development of a
four-stroke double twin cylinder engine to compete in the Moto GP
Championship, under selling, general and administrative expenses (excluding
depreciation). Recent increases in our research and development outlays
between 2002 and 2001, 2001 and 2000 and 2000 and 1999 reflect our continuing
policy to increase the resources we devote to the technical development of
Ducati motorcycles. Our capitalized research and development costs were 
16.5 million,  13.3 million and  8.6 million in 2002, 2001 and 2000,
respectively. Our expensed research and development costs were  4.9 million,
 3.8 million and  2.1 for the same years. These expensed costs include
research and development expenses for specific projects on our racing program,
which amounted to  1.4 million for 2002 and  1.5 million for each of 2001 and
2000. Amortization charges relating to our capitalized research and
development costs were  8.9 million,  7.6 million and  4.9 million in 2002,
2001 and

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2000, respectively. These amortization charges relate only to research and
development costs capitalized since our September 1996 acquisition of the
Ducati business, and will tend to increase in future periods as a result of new
capitalizations.

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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 other than Messrs. Foti, Lipparini and Thorley
were appointed at the shareholders meeting held on May 7, 2002 for a
three-year term to expire upon the approval by the shareholders (in the spring
of 2004) of our financial statements for fiscal year 2004. Messrs. Foti and
Lipparini were appointed as directors at the shareholders meeting held on May
6, 2003 to replace Messrs. Piero Ferrari and Carlo Di Biagio (our former
managing director), for a term to expire concurrently with the term of our
other directors. Mr. Thorley was named by the board in May 2003 to replace Mr.
Choi temporarily until our next shareholders meeting, at which the
shareholders will decide whether to confirm Mr. Thorleys appointment.

|                      |  |                                |  |                    |      |               |  |  |      | 
|--------------------- |  | ------------------------------ |  | ------------------ | ---- | ------------- |  |  | ---- | 
|                      |  |                                |  | Year First         |      |               |  | 
|                      |  |                                |  | Appointed to Board |      |               |  | 
|Name                  |  | Position                       |  | of Directors       |      | Date of birth
|                      |  |                                |  |                    |      |              
|Federico Minoli       |  | Chairman and Managing Director |  |                    | 1996 |               |  |  | 1949 | 
|Giorgio Seragnoli     |  | Vice-Chairman                  |  |                    | 1998 |               |  |  | 1955 | 
|David Bonderman       |  | Director                       |  |                    | 1996 |               |  |  | 1942 | 
|Mauro Benetton        |  | Director                       |  |                    | 1998 |               |  |  | 1962 | 
|Alessandro M. M. Foti |  | Director                       |  |                    | 2003 |               |  |  | 1960 | 
|Abel G. Halpern       |  | Director                       |  |                    | 1998 |               |  |  | 1967 | 
|Andrea Lipparini      |  | Director                       |  |                    | 2003 |               |  |  | 1960 | 
|Paolo Pietrogrande    |  | Director                       |  |                    | 1999 |               |  |  | 1957 | 
|Dante Razzano         |  | Director                       |  |                    | 1996 |               |  |  | 1948 | 
|Giles Thorley         |  | Director                       |  |                    | 2003 |               |  |  | 1967 | 
|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.

Federico Minolihas been a director of DMH since September 1996 and
chairman of DMH 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 chief executive officer of Ducati North
America. 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. Mr. Minoli is a founding partner of HMD Partners
(founded in 2003) and serves on the board of directors of Bally International
AG, Mantero Finanziaria S.p.A., Uno A Erre Italia S.p.A. and Gori & Zucchi
S.p.A. He is also temporary CEO of Bally International AG and Chairman and CEO
of Unoaerre S.p.A. He is a trustee of the Riders for Health Association and
the sole director of Dream Engine S.r.l. See Item 7  Major Shareholders and
Related Party Transactions  Related Party Transactions.

Giorgio Seragnoliis Vice Chairman of the Board of Directors of Ducati
Motor Holding. Mr. Seragnoli is Chairman of Fortitudo Pallacanestro S.r.l., a
basketball team based in Bologna, and of Ber Banca S.p.A. He also serves on
the board of numerous companies, including Compagnia Sviluppi

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Industriali ed Immobiliari S.p.A., a real estate holding company, Fonderie
Sabiem S.p.A., Cotton Club S.p.A. and BOPA S.r.l. Mr. Seragnoli is a past
director of G.D., Castelgarden, Mediaset, Olcese, Banca Fideuram and CAER
Gruppo Bancario. He was also a member of the Presidential Committee of the
Associazione degli Industrialiof Bologna.

David Bondermanis principal, general partner and founder of Texas Pacific
Group (TPG), a family of investment funds that invests primarily in
restructurings, recapitalizations and buyouts in the United States, Canada and
Western Europe. TPGs affiliates make similar investments in Latin America,
East Asia and Eastern Europe. The past and present portfolio of TPG and its
principals include: Continental Airlines, America West Airlines, Beringer Wine
Estates, J. Crew, Del Monte, Ducati Motor Holding, Globespan Technologies, ON
Semiconductor and Seagate Technology. Prior to forming TPG, Mr. Bonderman was
Chief Operating Officer of the Robert M. Bass Group, Inc. (now doing business
as Keystone, Inc.) in Fort Worth, Texas. RMBG is the personal investment
vehicle of Fort Worth, Texas-based investor, Robert M. Bass. Prior to joining
RMBG in 1983, Mr. Bonderman was a partner in the law firm of Arnold & Porter in
Washington, DC, where he specialized in corporate, securities, bankruptcy, and
antitrust litigation. From 1969 to 1970, Mr. Bonderman was a Fellow in Foreign
and Comparative Law in conjunction with Harvard University and from 1968 to
1969, he was Special Assistant to the U. S. Attorney General in the Civil
Rights Division. From 1967 to 1968, Mr. Bonderman was Assistant Professor at
Tulane University School of Law in New Orleans. Mr. Bonderman graduated Magna
Cum Laude from Harvard Law School in 1966. He was a member of the Harvard Law
Review and a Sheldon Fellow. He is a 1963 Phi Beta Kappa graduate of the
University of Washington in Seattle. Mr. Bonderman also serves on the Boards
of Continental Airlines, Inc.; ProQuest Company; Co-Star Group, Inc.; Denbury
Resources, Inc.; Ryanair Holdings, plc; ON Semiconductor Corporation; Magellan
Health Services, Inc., Paradyne Networks, Inc., Korea First Bank and Burger
King Corporation. He also serves on the Boards of The Wilderness Society, the
Grand Canyon Trust, and the American Himalayan Foundation. In addition, he
serves on the Board of Directors of the University of Washington Foundation as
well as the Harvard Law School Deans Advisory Board.

Mauro Benettonhas been the Marketing Director of Benetton Group S.p.A.
since December 1992. Born in 1962, the eldest son of Luciano Benetton, Mr.
Benetton began working for the Benetton Group as a student, first in London and
then in Paris. In 1985, he moved to Ponzano, 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.

Abel G. Halpernis a founding partner of HMD Partners (founded in 2003).
Prior to 2003, Mr. Halpern was Co-Head of TPGs European private equity and
investment activities, based in London since 1996. Previously, Mr. Halpern was
based in Mexico City, focusing on Latin American investments. Before joining
TPG, Mr. Halpern was a management and strategy consultant with Bain & Company,
an international strategic consultancy firm. Mr. Halpern received a Masters of
Business Administration from Harvard University and a Bachelor of Arts degree,
magna cum laude and with distinction, from Yale University. Mr. Halpern also
serves on the Board of Directors of Bally International AG and Gemplus
International, S.A.

Paolo Pietrograndehas been a director of DMH since January 1999. Mr.
Pietrogrande was chief executive officer of Enel GreenPower S.p.A. (a
subsidiary of Enel S.p.A.) from 1999 to 2003. Prior to joining Enel, Mr.
Pietrogrande was the director of business development of General Electric Nuovo
Pignone. Before joining General Electric in 1996, Mr. Pietrogrande was a
management and strategy consultant with Bain & Co., and prior to that served as
deputy director of KTI S.p.A., as vice president of marketing for KTI Group
B.V. Eastern Division and as business development manager of KTI Corporation.
Mr. Paolo Pietrogrande also serves on the board of Ryanair Holdings.

Dante Razzanoestablished the Italian private equity business for Deutsche
Morgan Grenfell in 1996 while he was CEO of Deutsche Morgan Grenfell in Italy
(1992 to 1998). He was Managing Director of Citibank NA and CEO of Citicorps
Italian merchant bank from 1988 to 1992 (Citinvest S.p.A.). Mr. Razzano was
responsible for Southern European M&A for Citicorp, based in New York, in 1987.
From 1970 to 1986, he was Vice President and Group Executive of Manufacturers
Hanover Trust Co., New

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York. Mr. Razzano also serves on the board of Gori & Zucchi S.p.A., Valli
Zabban S.p.A., Società Generale Distribuzione S.p.A. and Piaggio Holding S.p.A.

Ulrich Weisshas been a director of DMH since October 1998. Until May
1998, Dr. Weiss served in various capacities as a member of the board of
directors of Deutsche Bank AG for 19 years. While at Deutsche Bank, Dr. Weiss
was responsible for Deutsche Banks business in Italy and was president of
Deutsche Bank S.p.A., Milan. Dr. Weiss is a member of the Advisory Board of
Deutsche Bank, and of several supervisory Boards and Boards of Directors in
Germany and Italy, including Continental A.G., Benetton Group S.p.A. and
Piaggio Holding S.p.A.

Giles Thorleyis chief executive officer of Punch Taverns Plc.
Previously, Mr. Thorley was chief executive officer of the Unique Pub Company
Plc, and has been an executive officer of Nomura International Plc. Mr.
Thorley is a trained barrister, a member of the Bar of England and Wales, of
the British Institute of Innkeeping and a Supervisory Board member of the
British Beer and Pub Association. He is a trustee of the Rona Trust charitable
organization and holds a law degree from the University of London.

Andrea Lipparini, Ph.D., is a Full Professor of Strategy at the Università
Cattolicain Milan. He is the founder and director of Knowledge Lab Srl and
also serves on the board of Air Dolomiti S.p.A. Professor Lipparini has
published approximately 100 articles and six books in the area of competitive
business management and business strategy. Professor Lipparini is also a
training and management development consultant to various industrial companies,
including Ferrari, Maserati, Volkswagen and Eni.

Alessandro Fotiis chief executive officer Fin-Eco Bank S.p.A., a company
of the Capitalia Group. He is a member of the Board of Investment of Fin-Eco
Investimenti SGR S.p.A., a member of the supervisory board of directors of
Entrium Diect Bankers, and serves on the board of Assosim(the Association of
Italian Stock Intermediaries) and Netscalibur. Previously, Mr. Foti held
various financial positions at Montedison S.p.A. and IBM S.p.A. in Milan. He
holds a Business Administration degree from Bocconi University in Milan.




Board Committees

Our board of directors established an executive committee in 1999 that is
authorized to resolve on all matters that may be decided by our board other
than on those that may not be delegated by the board pursuant to Italian law,
such as the preparation of the financial statements and increases of the share
capital pursuant to delegations from shareholders. Meetings of the executive
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 its members. The current members of the executive
committee  Messrs. Minoli, Halpern, Razzano and Seragnoli  were appointed
on May 9, 2002 for a term to expire concurrently with the term of their
membership on the board, in the spring of 2004.

Our board of directors also 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 its members. On May
9, 2002, Messrs. Bonderman, Halpern, Pietrogrande, Razzano and Weiss were
re-appointed as members of the compensation committee for a term to expire
concurrently with the term of their membership on the board.

To comply with the code of corporate governance issued by Borsa Italiana
S.p.A., our board of directors also established an internal audit committee,
which is mainly responsible for assessing the adequacy of the internal control
system, including through an evaluation of work programs and reports prepared
by those responsible for internal control, and for relations with external
auditors. The internal audit committee reports 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

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and the semi-annual report. Of the three current members of the internal
audit committee, Messrs. Weiss and Pietrogrande were appointed on May 9, 2002,
and Mr. Foti was appointed on March 5, 2003 in substitution of Mr. Ferrari.
Their term expires concurrently with the term of their membership on the board.

See Item 10  Additional Information  By-laws  Board of Directors.




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.

|                    |  |                                                     |  |                    |      |               |  |  |      | 
|------------------- |  | --------------------------------------------------- |  | ------------------ | ---- | ------------- |  |  | ---- | 
|                    |  |                                                     |  | Year First         |      |               |  | 
|                    |  |                                                     |  | Appointed to Board |      |               |  | 
|Name                |  | Position                                            |  | of Directors       |      | Date of birth
|                    |  |                                                     |  |                    |      |              
|Gianluigi Mengoli   |  | Manager, Research and Development                   |  |                    | 1994 |               |  |  | 1948 | 
|Danilo Bernardini   |  | Manager, Personnel and Human Resources              |  |                    | 1995 |               |  |  | 1948 | 
|David Gross         |  | Creative Director                                   |  |                    | 2003 |               |  |  | 1966 | 
|Claudio Domenicali  |  | Managing Director of Ducati Corse                   |  |                    | 1999 |               |  |  | 1967 | 
|Gianfranco Giorgini |  | Manager, Operations                                 |  |                    | 1999 |               |  |  | 1953 | 
|Enrico DOnofrio    |  | Manager, Finance                                    |  |                    | 2000 |               |  |  | 1957 | 
|Cristiano Silei     |  | Manager, Strategic Planning and Product Development |  |                    | 2003 |               |  |  | 1968 | 
|Mirko Bordiga       |  | Manager, Sales                                      |  |                    | 2003 |               |  |  | 1968 | 

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

Claudio Domenicalihas 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. Mr. Domenicali joined our predecessor company in 1991. From 1994
to 1996, Mr. Domenicali was responsible for the technical office. From 1996 to
1999, he was deputy of technical director of research and development while
managing all the racing technical matters. Mr. Domenicali holds a degree in
Mechanical Engineering from the University of Bologna.

David Grosswas appointed as creative director in 2003, responsible for
overseeing Ducatis activities related to branding, image, alliances,
licensing, communications and marketing, after having been our manager of
strategic planning from April 1997. From 2001 to 2003, Mr. Gross was has also
responsible for the development of new motorcycle projects, including the
Multistrada 1000DS and MH900e. Prior to joining us, Mr. Gross was a corporate
finance lawyer with Simpson Thacher & Bartlett in New York from 1993 to 1997.
Mr. Gross also has over a decades experience as a financial journalist with
Time Magazine and other publications. See Item 7  Major Shareholders and
Related Party Transactions  Related Party Transactions.

Gianluigi Mengolihas been the manager of research and development since
1994. Mr. Mengoli joined our predecessor company in 1973 as a project designer
and, in 1980, became responsible for our research and development functions.
Prior to joining us, Mr. Mengoli was a technical designer for Simoncini, a
Bologna-based company.

Danilo Bernardinihas 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 has had previous experience as a sports journalist
for the Italian motorcycling magazine, Motociclismo.

Gianfranco Giorginihas been the manager of operations since May 1999. Among
other things, Mr. Giorgini is responsible for purchasing, warehouse, production
planning and distribution functions.

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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.

Enrico DOnofriohas been our manager of finance 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.

Cristiano Sileiwas appointed manager of strategic planning and product
development in 2003, after having held several senior positions, including
commercial director of DMH and head of our internet activities. Mr. Silei
holds a degree in political economics from Bocconi University in Milan.

Mirko Bordigahas been vice president in charge of sales since March 2003.
He has been general manager of our subsidiary Ducati Japan since 1999, prior
to which he was the area manager for Ducati for the Asia-Pacific area.




Statutory Auditors

The following table sets forth the names of the three members of our
current board of statutory auditors and the two alternate statutory auditors,
their respective positions, the year of their appointment and date of birth.
The current board of statutory auditors was elected for a three-year term on
September 7, 1998 and re-elected for an additional three-year term on April 26,
2001.

|                       |  |           |  |                |      |      |  |  |      |  |  | 
|---------------------- |  | --------- |  | -------------- | ---- | ---- |  |  | ---- |  |  | 
|Name                   |  | Position  |  | Year Appointed |      | Born
|                       |  |           |  |                |      |     
|Matteo Tamburini       |  | Chairman  |  |                | 1998 |      |  |  | 1958 | 
|Italo Giorgio Minguzzi |  | Member    |  |                | 1998 |      |  |  | 1945 | 
|Francesco Serantoni    |  | Member    |  |                | 1998 |      |  |  | 1941 | 
|Carlo Maria Paolella   |  | Alternate |  |                | 1998 |      |  |  | 1962 | 
|Gianluca Nanni-Costa   |  | Alternate |  |                | 1998 |      |  |  | 1959 | 

During 2002, our statutory auditors received in the aggregate  124
thousand in compensation for their services to DMH and its Italian
subsidiaries.




Compensation of Directors and Senior Management

Starting from the year 2002, each of our directors is entitled to an
annual compensation in return for his services as directors equal to  15,000.
Mr. Minoli waived his rights to this compensation for his current term as
director. Directors are also entitled to reimbursement of expenses incurred in
connection with the performance of their functions.

Mr. Minoli has received cash compensation of  934,000 in 2002 as chairman
and chief executive officer of Ducati North America. The amount includes
bonuses paid to Mr. Minoli under the Retention Plan and the management bonus
plan described below. Further, Mr. Minoli is entitled to receive $400,000 in
annual base compensation for his services for the year 2003 as chief executive
officer and chairman of Ducati North America and a pro-rata portion of his
annual compensation (equal to  250,000) as managing director of DMH. See Note
32 to our audited consolidated financial statements.

Mr. Di Biagio received cash compensation of  1,096,000 in 2002 for his
services as our managing director and manager in charge of investor relations
of DMH. The amount includes bonuses paid to Mr. Di Biagio under the Retention
Plan and the management bonus plan described below. Mr. Di Biagio, who held
several board level positions with certain of our subsidiaries, resigned from
all board positions and as our managing director effective March 5, 2003, and
as manager in charge of investor relations of DMH effective March 31, 2003.
See also Note 32 to our audited consolidated financial

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statements. See also  Employees for further information on Mr. Di
Biagios resignation as manager in charge of investor relations of DMH,
including reference to his severance package.

On February 11, 2002, the compensation committee extended for the years
2002, 2003 and 2004 a retention plan (with certain amendments) already in
effect for the years 1999, 2000 and 2001 (the Retention Plan). The
beneficiaries of the Retention Plan are Messrs. Minoli and up to four
additional senior officers of Ducati designated by the managing director. Mr.
Di Biagio was also a beneficiary of the Retention Plan until his resignation as
managing director of DMH. 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 causaor 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.

Extraordinary bonuses under the Retention Plan for earnings recorded in
2001 were paid in 2003 as follows: $400,000 and  511,000 to Messrs. Minoli and
Di Biagio in their capacities as Chairman and managing director, respectively,
and $200,000 and  115,300 to two other senior officers of Ducati. On the
basis of Ducatis 2002 results, no extraordinary bonuses for the year 2002
under the Retention Plan have vested.

In addition, Mr. Minoli and Mr. Di Biagio were each granted 500,000 stock
option/stock appreciation rights during 2002 in connection with our 1999 Stock
Option Plan. None of our other directors are beneficiaries under our 1999
Stock Option Plan. Pursuant to the termination agreement that we have entered
into with Mr. Di Biagio in connection with his resignation as managing
director, Mr. Di Biagio retains all of the option rights (whether or not yet
vested) attributed to him through March 5, 2003, including those granted to him
in 2002; these option rights will continue to be subject to applicable
provisions of the 1997 Stock Option Plan and the 1999 Stock Option Plan. See
Item 10  Additional Information  Share Option Plans.

Our board of directors has approved an end-of-term payment obligation of
U.S. $1,200,000 for Federico Minoli, which will be payable if he is removed or
is not re-appointed as managing director for reasons other than just cause
before his sixtieth birthday in 2009. Subsequent to Mr. Di Biagios
resignation as managing director, Mr. Di Biagio was not entitled to any special
termination payment.

During the year ended December 31, 2002, the aggregate compensation paid
to the senior officers listed above, exclusive of compensation to Messrs.
Minoli and Di Biagio and our other directors, was approximately  1.4 million.
This aggregate compensation includes payments under our management bonus plan
in respect of 2001 and does not include an additional  43,200 of compensation
in the form of mandatory leaving entitlements which our employees are entitled
under Italian law (under Italian law, an employee is entitled an
end-of-employment payment which is accrued each year based on such employees
annual salary).

Pursuant to our management bonus plan, each of our managers, including the
senior officers listed above, is entitled to an annual bonus if certain
conditions are satisfied relating to our financial performance and such
beneficiarys individual performance. On the basis of Ducatis 2002 results,
our managers are not entitled to any bonuses under the management bonus plan
for that year. However, we have approved discretionary performance-based
bonuses for up to  525,000 to our managers with respect to 2002.

In addition, the senior officers listed above received in the aggregate
715,000 stock option/stock appreciation rights during 2002 under our 1999 Stock
Option Plan. See Item 10  Additional Information  Share Option Plans.

At May 6, 2003, Messrs. Minoli and Seragnoli owned 414,815 and 7,815,692,
of our outstanding shares, respectively. None of our other directors or senior
officers listed above own more than 1% of our

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share capital. See Item 10  Additional Information  Share Option
Plans for a description of our share option plans.

Beneficial ownership of our shares held by TPG Acquisition may be
attributed to David Bonderman, who disclaims beneficial ownership of such
shares. See Item 7  Major Shareholders.




Employees

As of December 31, 2002, we employed 1,212 persons worldwide (of which
1,078 were employed in Italy, 47 in the United States, 18 in the United
Kingdom, 18 in France, 20 Germany, 19 in Japan and 12 in the Netherlands), as
compared to 1,144 at December 31, 2001 and 1,063 at December 31, 2000. In
addition, in 2002 we employed an average of 115 temporary employees. Of our
employees, 980 were employed by DMH. Of the 980 persons employed by DMH, 571
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, 2002 our employees
included 58 managers worldwide, as compared to 49 and 48 at December 31, 2001
and 2000, respectively. We believe that our relations with our employees are
good.

Under Italian law, employees are entitled to amounts based upon salary and
years of service upon leaving their employment. We had a liability for such
termination indemnities of  7.1 million at December 31, 2002. See Note 15 to
the audited consolidated financial statements. Under Italian law, we make
social security and national health contributions in respect of our employees
to the Italian government, which provides pension and health 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
Workers and Installers collective bargaining agreement, which was renewed in
May 2003 and expires in December 2006 (except for its economic aspects, which
expire in December 2004 and need to be re-negotiated thereafter to be
coterminous with the overall agreement).

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
June 1998 and expired in December 2001. The terms of this agreement provide
for, among other things, covered employees to be paid an annual performance
bonus based on collective productivity, profitability and quality targets. We
are currently negotiating the renewal of our company-specific agreement,
including with respect to annual performance bonuses. In the meantime, we
continue to operate as regards our employees in accordance with its terms,
except as regards annual performance bonuses. We expect that this agreement,
once renewed, will contain provisions relating to annual performance bonuses
payable for 2002 consistent with bonuses paid in prior years and will have a
term of four years.

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

To improve our efficiency, at board meetings held on March 5, 2003 and on
April 8, 2003, we approved a reorganization plan that provides, inter alia, for
the termination by mutual agreement of a number of our employees in exchange
for severance payments. These terminations are expected to take place by the
end of September 2003. We expect that severance payments under this
reorganization plan will be equal to approximately  3.5 million (this cost
will be charged to 2003 as an extraordinary item, in accordance with Accounting
Principle 19 issued by the Italian Accounting Profession). Of this amount,
approximately  2.2 million relates to the severance package (including
compensation for consultancy and non-competition agreements) for Mr. Di Biagio
in connection with his resignation as manager in charge of investor relations.
See also Note 32 to our audited consolidated financial statements.

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

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Item 7. Major Shareholders and Related Party Transactions




Major Shareholders

TPG Acquisition owns 33.22% of our outstanding shares and controls our
management and policies, as well as determines (or holds a veto right in
respect of) matters requiring shareholder approval. The following table sets
forth information regarding the beneficial ownership of our shares as of the
shareholders meeting held on May 6, 2003 (unless otherwise indicated) by each
shareholder known by us to be the beneficial owner of more than 2.0% of our
shares. These shareholders do not hold any different voting rights from those
held by other ordinary shareholders.

|                                 |  |                        |            |                         |  |  |       |  
|-------------------------------- |  | ---------------------- | ---------- | ----------------------- |  |  | ----- | -
|Name of Shareholder              |  | Number of Shares Owned |            | Percent of Shares Owned
|                                 |  |                        |            |                        
|TPG Motorcycle Acquisition, L.P. |  |                        | 52,657,750 |                         |  |  | 33.22 | %
|Harris Associates, L.P.          |  |                        | 7,870,835  |                         |  |  | 4.97  | %
|Giorgio Seragnoli                |  |                        | 7,815,692  |                         |  |  | 4.93  | %

Prior to our March 1999 initial public offering, TPG Acquisition and an
affiliate held in the aggregate approximately 72.0% of our share capital.

TPG Acquisition is part of a group of investment funds known as Texas
Pacific Group or TPG. Texas Pacific Group was founded by David Bonderman,
James G. Coulter and William S. Price III to pursue public and private
investment opportunities through a variety of methods, including leveraged
buyouts, recapitalizations, joint ventures, restructurings and strategic public
securities investments. Messrs. Bonderman, Coulter and Price are the
shareholders of the general partner of the TPG funds of TPG. Each of Messrs.
Bonderman, Coulter and Price disclaims beneficial ownership of our shares held
by TPG Acquisition. Mr. Bonderman is a member of our board of directors.

As of May 6, 2003 Harris Associates, L.P. owned 4.97% of our share
capital, a 5.14% decrease as compared with its holdings as of May 7, 2002.

As of May 6, 2003, 158,500,963 shares were outstanding. As of the same
date, there were 167,338 ADS (equivalent to 1,673,380 shares) held by 330
record holders in the United States.

Because brokers or other nominees held 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.




Related Party Transactions

No member of the board of directors or board of statutory auditors and no
senior officer (including close members of any such persons families) nor any
enterprise over which any such person is able to exercise a significant
influence has had any interest in any transactions that are or were unusual in
their nature or conditions or are or were material to us, and that were either
effected since December 31, 2001 or that were effected during an earlier period
and remain outstanding or unperformed in any respect. We have not provided any
loans or guarantees to or for the benefit of any such person since December 31,
2001 and none remain outstanding or unperformed.

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

In 2002, we agreed to pay  232,000 to Dream Engine S.r.l. to organize a
promotional tour (called Motogiro dItalia) of vintage motorbikes that took
place in June 2002. Mr. Minoli, our chairman and

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managing director, is the sole director of Dream Engine. Messrs. Minoli
and Gross together indirectly beneficially own 99.9% of the quotas of Dream
Engine.

We also entered into agreements with Dream Engine to organize the
following events, both of which we will sponsor: the Motogiro dItalia(for
consideration of  207,000), to take place in July 2003,and Centopassi, a
five-day amateur motorcycle competition to be held in August 2003 in northern
Italy (for consideration of  135,000).

In 2003, we paid Mr. Pietrogrande approximately  220,000 in compensation
for consulting services to be rendered in 2003.

DMH has commercial relationships with other companies of the Ducati Group
that handle product sales in specific countries (i.e., the U.S., Germany,
France, Japan, Netherlands and the UK). These relationships include sales by
DMH of motorcycles and related products that it produces 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  101,8 thousand and  18,7 thousand, respectively,
existed as of March 31, 2003 between our subsidiaries and DMH (exclusive of
payables from Ducati North America, Inc. to DMH of $11.5 million (equal to 
13.1 million) in respect of a debt paid in 2002 by DMH on Ducati North America,
Inc.s behalf).

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, also by factoring their trade receivables without
recourse if they need additional financing.

At December 31, 2002, the only significant debt payable that DMH owed to
any of its subsidiaries was to Ducati Corse S.r.l. in the amount of  7,373
thousand for Ducati Corses yet-to-be-paid-in share capital.

Ducati Corse was set up so that all aspects relating to the racing
division and the related 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;                                                                                                                                                                   
|
| |  |  | R&D agreement pursuant to which Ducati Corse agreed to carry
out R&D for DMH for sporting activities related to the Moto GP and
Superbike Championships, management of a number of private teams in
the Superbike Championship and motorcycle production;

In 2002, DMH and its subsidiary Ducati.Com S.r.l. entered into a service
agreement for advertising and commercial and data collection services to be
carried out by Ducati.Com on behalf of DMH on the www.ducati.com website.

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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, which were approximately  306.4 million in 2002,
as compared with  315.4 million in 2001, represented 74.2% of our 2002 net
sales (and 77.4% in 2001).

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 materially 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 BEF 54 million
(including interest) (approximately  1.3 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. 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. On August
4, 2000, the trustee also sought payment for the alleged value (BEF 13.7
million, or approximately  340,000) of spare parts that were part of the
distributors inventory at the time of termination on the assumption that we
had an obligation to buy back these spare parts. We have denied responsibility
for this payment. Our provision for this litigation at December 31, 2002 was 
23,000.

We are also involved in litigation with a former chief executive officer,
Mr. Ernesto Vettore, of the predecessor company of Ducati North America, Inc.
in connection with the termination of his employment. Mr. Vettores claim is
for an amount of approximately  400,000 and remains pending before the Federal
District Court of New Jersey. Until May 21, 2003, a parallel litigation with
Mr. Vettore, based essentially on the same facts as the New Jersey proceedings,
was pending in Italy before the Court of Varese. On that date, the Italian
proceedings were settled among the parties at no charge for us. Our provision
for this litigation at December 31, 2002, was  143,000.

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. We are contesting Mr. Ferraris
claim and have not taken a provision in connection with this litigation.

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On July 23, 2001, DMH received a report following a tax audit by the
Regional Tax Authority of Emilia-Romagna in respect of the period from January
1, 1999 to March 11, 2001 concerning DMH and its former subsidiary, Ducati
Motor S.p.A., which was merged into DMH in 2000.

In the tax audit report, the Tax Authority maintained, among other things,
that the 1996 acquisition of the Ducati business from Ducati Motorcycles S.p.A.
(the Transaction) had not been taxed correctly. We treated the Transaction
as a sale of a business, thus being subject to the payment of a 3.0%
registration tax on the net asset value of the transferred business under
applicable law. The Tax Authority maintained that the Transaction qualifies as
a transfer of individual assets and not as sale of a business, thus being
subject, instead of the registration tax, to a 20% VAT charge applicable to the
overall consideration. As a result, we would have failed to pay VAT due in the
amount of  19.2 million (subject to penalties in accordance with applicable
Italian law).

After evaluating the findings contained in the audit report together with
our tax advisors, we filed with the Tax Authority a defense statement
concluding that the above claim was without foundation and that our treatment
of the Transaction was correct. Based on our conclusions, we did not make a
provision for this matter in our audited financial statements as of December
31, 2002. No assessment claiming the payment of such amount had been issued by
the Tax Authority within that date, from which moment any such assessment
should be regarded as being barred by the relevant statute of limitations.

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 the sale of the MH900e motorcycle. These claims were all settled on
April 2003 for a value equal to approximately
 375,000 in favor of Michael
Hailwoods widow. Such amount was taken from our total provision for that
litigation, which was approximately
 507,000 as of December 31, 2002.




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 par 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. 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
ADR Depositary, in accordance with the deposit agreement relating to the ADRs.




Significant Changes

To improve our efficiency, at board meetings held on March 5, 2003 and
April 8, 2003, we approved a reorganization plan that provides for the
termination by mutual agreement of a number of our employees in exchange for
severance payments. For more information regarding said reorganization plan,
see Item 6  Directors, Senior Management and Employees  Employees.

For information regarding the appointment of three new members of our
board of directors, Messrs. Foti, Lipparini and Thorley, who replaced Messrs.
Ferrari, Di Biagio and Choi, respectively, see Item 6  Directors, Senior
Management and Employees  Directors.

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Item 9.     The Offer and Listing




Trading Markets and Share Prices

The principal trading markets for our shares is Telematico and for our
ADSs (each representing ten shares) is the New York Stock Exchange. 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        |       | New York Stock Exchange
|                            |  | Azionario Price per Share |       | Price per ADS          
|                            |  |                           |       |                        
|                            |  | High                      |       | Low                     |  | High |       | Low
|                            |  |                           |       |                         |  |      |       |    
|                            |  | (in euro)                 |       | (in U.S. dollars)      
|1999 (from March 24, 1999)  |  |                           | 3.098 |                         |  |      | 2.528 |     |  |  | 33.0625 |  |  |  | 25.1875 | 
|2000                        |  |                           | 3.200 |                         |  |      | 1.938 |     |  |  | 30.75   |  |  |  | 17.6875 | 
|                            |  |                           |       |                        
|First Quarter 2001          |  |                           | 2.222 |                         |  |      | 1.661 |     |  |  | 20.50   |  |  |  | 15.80   | 
|Second Quarter 2001         |  |                           | 1.917 |                         |  |      | 1.728 |     |  |  | 16.95   |  |  |  | 14.80   | 
|Third Quarter 2001          |  |                           | 1.775 |                         |  |      | 1.091 |     |  |  | 15.65   |  |  |  | 10.30   | 
|Fourth Quarter 2001         |  |                           | 1.939 |                         |  |      | 1.293 |     |  |  | 17.15   |  |  |  | 11.90   | 
|                            |  |                           |       |                        
|First Quarter 2002          |  |                           | 1.902 |                         |  |      | 1.697 |     |  |  | 16.70   |  |  |  | 14.80   | 
|Second Quarter 2002         |  |                           | 2.031 |                         |  |      | 1.537 |     |  |  | 18.69   |  |  |  | 15.10   | 
|Third Quarter 2002          |  |                           | 1.841 |                         |  |      | 1.498 |     |  |  | 17.65   |  |  |  | 15.00   | 
|Fourth Quarter 2002         |  |                           | 2.004 |                         |  |      | 1.396 |     |  |  | 20.50   |  |  |  | 13.65   | 
|First Quarter 2003          |  |                           | 1.799 |                         |  |      | 1.103 |     |  |  | 18.70   |  |  |  | 12.15   | 
|                            |  |                           |       |                        
|December 2002               |  |                           | 1.889 |                         |  |      | 1.789 |     |  |  | 18.99   |  |  |  | 18.30   | 
|January 2003                |  |                           | 1.799 |                         |  |      | 1.475 |     |  |  | 18.70   |  |  |  | 15.90   | 
|February 2003               |  |                           | 1.478 |                         |  |      | 1.298 |     |  |  | 16.04   |  |  |  | 14.50   | 
|March 2003                  |  |                           | 1.340 |                         |  |      | 1.103 |     |  |  | 14.50   |  |  |  | 12.15   | 
|April 2003                  |  |                           | 1.428 |                         |  |      | 1.112 |     |  |  | 15.60   |  |  |  | 12.20   | 
|May 2003                    |  |                           | 1.496 |                         |  |      | 1.251 |     |  |  | 16.75   |  |  |  | 15.00   | 
|June 2003 (through June 26) |  |                           | 1.362 |                         |  |      | 1.309 |     |  |  | 16.10   |  |  |  | 15.10   | 

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.

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Item 10.     Additional Information




Share Option Plans

In 1997, we established a share option plan for our then managing director
and certain senior officers and independent consultants (the 1997 Stock Option
Plan), pursuant to which options to purchase 8,148,148 shares at an exercise
price of euro 0,723 (Lit. 1,400) per share were granted during the year ended
December 31, 1997. All of these options (except for 109,592 options that were
cancelled as of June 1, 2003) vested as of December 31, 2001 and expire on
August 4, 2007. Generally, vested options are exercisable at the earlier of
the approval of the our financial statements for the year 2003 or the sale by
TPG Acquisition of all or a portion of its original 41% interest in DMH,
provided that if TPG Acquisition sells only a portion of such interest, option
holders may exercise their vested options only in the same proportion as the
sales by TPG Acquisition bear to such original interest. Once vested and
exercisable, options may only be exercised during a 30-day period following the
date of the shareholder approval of our Italian GAAP financial statements.
Options are forfeited if the beneficiary is terminated for cause. As a result
of TPG Acquisitions disposition of a portion of its shares in our March 1999
initial public offering, 20% of vested options (or options to purchase
8,148,148 shares) became exercisable. Of these options, options to purchase
962,963, 309,000, and 229,000 shares were exercised by participants in 1999,
2000 and 2001, respectively. Additional options to purchase 115,778 shares
remained exercisable as of June 30, 2003.

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 that
are designated to participate in the plan by the compensation committee of the
board of directors. Under this plan, the board of directors may grant options
or stock appreciation rights (each such option or right, a Right) in any year
in respect of not more than 2.0% of our outstanding share capital. Beginning
in 2002, Rights may be granted under the plan upon approval by the board of
directors of our Italian GAAP preliminary consolidated income statement and
balance sheet for the prior fiscal year (which approval typically occurs by
February 15 of each year) and expire seven years after the date of grant.
Until 2001, Rights under the plan were granted following approval by the board
of directors of our Italian GAAP consolidated financial statements for the
prior fiscal year (which approval typically occurs in March of each year).
Rights vest in three equal annual installments (or as otherwise determined by
the board of directors) 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
Telematico, in cash (calculated with reference to the market value of the
shares at the time of exercise). To exercise their Rights, the participants
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  2.88 per share,  2.81 per share,  1.99 per share
and  1.80 per share for Rights granted in 1999, 2000, 2001 and 2002,
respectively. Other than in the event of death or disability of a beneficiary,
once vested, rights granted prior to 2002 may only be exercised during a 30-day
period following the approval by the board of directors of our Italian GAAP
consolidated financial statements for the prior fiscal year, and rights granted
beginning in 2002 may only be exercised during a 30-day period following the
approval by the board of directors of our Italian GAAP preliminary consolidated
income statement and balance sheet for the prior fiscal year.

In 1999, we granted 500,000 Rights to Mr. Minoli, 500,000 to Mr. Di Biagio
and an aggregate of 2,159,259 Rights to 51 additional beneficiaries. In March
of 2000, our board of directors approved the grant of 3,159,259 Rights for the
year 2000 (of which 500,000 were granted to Mr. Minoli, 500,000 were granted to
Mr. Di Biagio and 2,159,259 were granted to 70 additional beneficiaries
selected by the compensation committee). In March 2001, the board approved the grant of
3,165,000 Rights under the plan for the year 2001 (of which 500,000 were
granted to Mr. Minoli, 500,000 to Mr. Di Biagio and 2,165,000 to 73 additional
beneficiaries selected by the compensation committee). On February 14, 2002,
the board approved the grant of 3,960,000 Rights for the year 2002 (of which
500,000 were granted to each

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of Messrs. Minoli and Di Biagio and 2,960,000 were
granted to 90 additional beneficiaries selected by the compensation committee).
In granting these Rights in 2002, which together represent approximately 2.5%
of our outstanding share capital, the board decided to waive for 2002 the
above-mentioned 2.0% limit on Rights to be granted in any year under the plan,
due to the prior expiration of 1,190,638 unexercised rights granted under the
plan before 2002.

Rights granted in 1999 through 2002 vest in three annual installments
beginning on December 31 of the year following the year of grant, as follows:
50% in the first year and 25% in each of the two subsequent years. As of June
25, 2003, a total of 1,739,390 Rights granted under the 1999 Stock Option plan
had been cancelled, and a total of 11,704,130 Rights, whether or not vested,
remained exercisable subject to the conditions set forth above.

Our shareholders meeting approved a capital increase of 12 million shares
in connection with the Rights that we have granted from 1999 to 2002 under the
1999 Stock Option Plan.




Buy Back Plan

At a May 7, 2002 meeting, our shareholders approved a plan (the Buy-Back
Plan) pursuant to which, at the direction of our board, we may:



| |  |  | repurchase on the Telematico up to six million of our
shares (representing approximately 3.8% of our then issued and
paid-in share capital);                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | retain such shares as treasury shares;                                                                                                                                              
|
| |  |  | transfer such shares either to beneficiaries of the
Employee Stock Ownership Plan (See  Employee Stock Ownership
Plan) and the 1999 Stock Option Plan as required thereunder; and
|
| |  |  | dispose, subject to applicable law, of such shares on
the Telematico to maintain liquidity of our shares on such stock
exchange.                                                    

Under the Buy-Back Plan, we may repurchase these shares in one or more
transactions over an 18-month period from May 7, 2002 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 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 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 the Company of its Own Shares, as well as certain conditions
relating to the ESOP and the 1999 Stock Option Plan as more fully described in
 Share Option Plans.

As of June 25, 2003, we owned 244,446 of our shares.




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
financials statements.

To satisfy purchases of shares made under the ESOP, we will 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

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for purchase by employees
under the ESOP. On the same day of such purchase, we assign the shares them 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 7, 2002, the shareholders authorized us to
purchase up to six million shares on the Telematico within the subsequent 18
months, including to deliver shares 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 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.

As of the date of this annual report, the ESOP has not been implemented
for 2003. As of June 25, 2003, 1,024 employees would be eligible to
participate in the ESOP had it been implemented as of such date.




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 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 Civil Code, which will come into force on January 1, 2004
(the so-called 2003 corporate law reform). There is some uncertainty as to how
the amendments to the Italian Civil Code should coordinate with the TUF in
areas of conflict or overlap. It is expected that such uncertainties will be
clarified through amendments of the TUF. The following summary includes a
description of certain main provisions introduced by the 2003 corporate law
reform and, where material to us, takes into account those areas of
uncertainty.

General

Our issued share capital consists of 158,500,963 shares, nominal value 
0.52 per share. 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, marketing and sale of motorcycles, engines and other parts and
components, as well as of any other products or accessories that may benefit
the production, marketing and sale of motorcycles, engines and other parts

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and components. DMH is generally authorized to take any actions necessary or
useful to achieve its corporate purpose. On May 7, 2002, our shareholders
amended Article 4 of our by-laws by expressly including motorcycle rentals and
motorcycle riding schools 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 which are reserved for distribution to
beneficiaries of the 1997 Stock Option Plan. As of June 28, 2002, 1,500,963
shares have been issued upon exercise of options by beneficiaries under the
1997 Stock Option Plan. See also  Share Option Plans.

At the meeting held on September 7, 1998, our shareholders also approved
an amendment to the By-laws empowering the board of directors to issue
additional shares to be offered to our shareholders for an aggregate nominal
value of  26,000,000 through one or more issuances to be completed before
August 30, 2003. Our shareholders will be entitled to exercise their
pre-emptive rights with respect to those issuances.

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 stock options in the years 1999 through 2002 to beneficiaries
of the 1999 Stock Option Plan. As of the date hereof, no shares have been
issued for implementation of the 1999 Stock Option Plan. See also  Share
Option Plans.

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 Commissione Nazionale per le Società e la Borsa
(the National Commission for Companies and the Stock Exchange or 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. Upon full implementation, shares of Italian listed companies will
no longer be represented by paper certificates and the transfer and exchange of
shares will take 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;                  

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| |  |  | 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 (a state-owned entity mainly
responsible for extending loans to public administration bodies);                                                               
|
| |  |  | 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 will in turn deposit 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
will simply transfer 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 will instruct the company operating
a centralized clearing system to transfer the shares to the account of the
transferees Intermediary, which will then register 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. 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 (in the case of
rights exercisable at shareholders meetings, the date and nature of the meeting) and the duration in respect of which
the certificates validity is required. Within three 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.

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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
one-fifth of the par 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 reduced by the amount of such losses. 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 will be 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.

Voting Rights

Shareholders are entitled to one vote per share, although a slate voting
system applies in case of appointment of members of the board of statutory
auditors. See Statutory Auditors.

Proxy solicitation is possible. Solicitation can be engaged in 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 own
and have owned at least 1.0% of our shares for more than six months and
who have been registered with us as having been shareholders of at least 1.0%,
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.

Board of Directors

Pursuant to our By-laws, our board of directors must consist of five to
fifteen individuals. The board of directors is elected at a shareholders
meeting for up to three years, as determined by the shareholders from time to
time. The directors, who may but are not required to be our shareholders, may
be re-appointed for successive terms. In accordance with the By-laws, the
board of directors has complete power of ordinary and extraordinary
administration of our business and in particular may perform all acts

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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.

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. However, 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, increases in the amount of our share capital or the
issuance of debentures (if any such power has been delegated to the board of
directors by vote of the extraordinary shareholders meeting) and the reduction
of our shareholders equity to less than two thirds of our paid-in capital as a
result of accumulated losses. 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 board of statutory auditors. 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 a conflicting interest with the
company regarding a proposed resolution must inform the other directors about
the conflict and abstain from voting on the resolution. Resolutions adopted in
breach of this rule may be challenged by dissenting or absent directors or the
statutory auditors if the required majority would not have been attained
without the vote of the director having a conflict of interests, and conflicted
directors may be held liable for damages to us resulting from a resolution
adopted in breach of this rule (see  Minority Shareholders). The By-laws
provide that conflicted directors count for quorum purposes.

Pursuant to the 2003 corporate law reform, effective January 1, 2004,
directors having any interest in a proposed transaction will have to 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 will
not be 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 the
approved transaction is potentially prejudicial to the company or the above
mentioned provisions are not complied with, the resolution may be challenged by
a director or by the board of statutory auditors if the transaction would not
have been approved without the vote of the interested director. A managing
director having any such interest in a proposed transaction within the scope of
his powers will have to solicit prior board approval of such transaction.
Finally, as from January 1, 2004, 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 and to the chairman of the board of statutory
auditors. The board of directors must appoint substitute directors to fill
vacancies arising from removals or resignations, subject to the approval of the
board of statutory auditors, to serve until the next ordinary shareholders
meeting. If at any time a majority of the then current members of the board of
directors 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 (or the board of statutory auditors if all the members of
the board of directors have

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resigned or ceased to be 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,
in each case after consultation with the board of statutory auditors, 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.

Effective January 1, 2004, an Italian stock corporation may adopt one of
two different models of corporate governance structure, as an alternative to
the current model based on a board of directors and a board of statutory
auditors. Stock corporations may opt for (i) a one-tier model with a single
board of directors, including an audit committee composed of independent
non-executive directors, or (ii) a two-tier model, including a management
board, which is entrusted with management responsibilities, and a supervisory
board which is entrusted mainly with control and supervisory responsibilities
and, among other functions, appoints and removes the members of the management
board and approves the companys annual financial statements. The adoption of
one of the new corporate governance models requires an extraordinary
shareholders meeting resolution. For the reasons explained above, however, it
remains unclear whether a public company like us may opt for either of the
new additional alternatives to the current traditional corporate governance
model or how the provisions relating to those alternatives should be adapted to
apply to public companies.

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Statutory Auditors

Under Italian law, in addition to electing the board of directors, our
shareholders elect a board of statutory auditors (Collegio Sindacale). At
ordinary shareholders meetings, the statutory auditors are elected for a term
of three years, may be re-elected for successive terms and may be removed only
for cause and with the approval of a competent court. Each member of the board
of statutory auditors must provide certain evidence that he is in good standing
and meets certain professional standards.

Pursuant to certain provisions of the TUF, the by-laws of listed companies must:



| |  |  | specify the number of statutory auditors (not fewer than three) and alternate members (not fewer than two);                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | regulate the appointment of the chairman of the board of statutory auditors;                                                                     
|
| |  |  | limit the number of mandates that the statutory auditors may have in other companies; and                                                        
|
| |  |  | include clauses ensuring that minority shareholders may elect one statutory auditor (or two if the board is composed of
more than three members).

Our By-laws currently provide that the board of statutory auditors shall
consist of three statutory auditors and two alternate statutory auditors (who
are automatically substituted for a statutory auditor who resigns or is
otherwise unable to serve). The By-laws also provide that the statutory
auditors may not hold the position of statutory auditor in more than three
other listed companies (not counting our subsidiaries). According to our
By-laws, the statutory auditors are elected according to a cumulative voting
system, whereby each shareholder or group of shareholders holding at least 1.0%
of our shares may present a slate listing in progressive order three candidates
to the position of statutory auditor and two candidates to the position of
alternate; each shareholder (or shareholders under common control) may present
and vote for a single slate and each candidate may appear on a single slate.
If more than one slate is presented, two statutory auditors and one alternate
are elected from the slate which obtains the largest number of votes in the
shareholders meeting (the candidate listed first on such slate shall become the
chairman of the board of statutory auditors) and one statutory auditor and one
alternate are elected from the slate that obtains the second largest number of
votes.

The TUF provides further that the board of statutory auditors will be
required to verify that we (i) comply with applicable law and its By-laws, (ii)
respect the principles of correct administration, (iii) maintain adequate
organizational structure, internal controls and administrative and accounting
systems and (iv) adequately instruct our subsidiaries to transmit to us
information relevant to our disclosure obligations.

Our board of statutory auditors is required to meet at least once each
quarter. In addition, our statutory auditors may be present at meetings of our
board of directors and shareholders meetings and at meetings of our executive
committee. The statutory auditors may decide to call a meeting of the
shareholders, the board of directors or the executive committee, ask
information about our management to the directors, carry out inspections and
verifications at our premises and exchange information with our external
auditors. The board of directors must report to the statutory auditors at
least quarterly on its activities and on the main transactions carried out by
us. Any shareholder may submit a complaint to the board of statutory auditors
regarding facts that such shareholder believes should be subject to scrutiny by
the board of statutory auditors, which must take any complaint into account in
its report to the shareholders meeting. If shareholders collectively
representing 2.0% of our share capital submit such a complaint, the board of
statutory auditors must promptly undertake an investigation and present its
findings and any recommendations to a shareholders meeting (which must be
convened immediately if the complaint appears to have a reasonable basis and
there is an urgent need to take action). The board of statutory auditors may
report to the competent court serious breaches of the duties of the directors.
Our board of statutory auditors is also required to notify the CONSOB without
delay of any irregularities found

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during its review activities. CONSOB may report to the competent court
serious breaches of the duties of the statutory auditors of a listed company.

As mentioned in the preceding section, effective January 1, 2004, Italian
stock corporations may depart from the traditional Italian model of corporate
governance structure and opt for two alternative models neither of which will
include a board of statutory auditors. As also mentioned, however, it remains
unclear whether a public company like us may opt for either of the new
additional alternatives to the current traditional corporate governance model
or how the provisions relating to those alternatives should be adapted to apply
to public companies.

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.

The external auditors are appointed by the ordinary shareholders meeting
for a three-year term (which may not be renewed more than twice). Such
appointment must be notified to CONSOB.

On October 8, 1998, KPMG S.p.A., with legal offices at Via Vittor Pisani
25, Milan, Italy, was appointed as our external auditors for a three year
period. Their appointment was extended for an additional three year period on
April 26, 2001.

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 (or the board of
statutory auditors) and must be called if requested by holders of at least 20%
of the issued shares. Shareholders meetings may also be called if requested
by holders of at least 10% of the issued shares. In this latter case, however,
the board of directors may refuse to call the meeting if calling it conflicts
with our interest; any dispute arising from such a refusal must be resolved by
the competent court. Shareholders are informed of all shareholders meetings
to be held by publication of a notice in the Italian Official Gazette (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. The notice is also published in
at least two national daily newspapers, as recommended by CONSOB.

Shareholders meetings must be convened at least once a year. Our annual
unconsolidated financial statements are submitted for approval to the ordinary
shareholders meeting which must be convened within four months or, in the
event of exceptional circumstances, within six months after the end of the
financial year to which such financial statements relate. At ordinary
shareholders meetings, shareholders also appoint the external auditors,
approve the distribution of dividends, appoint the board of directors and
statutory auditors, determine their remuneration and vote on any business
matter submitted by the directors.

Extraordinary shareholders meetings may be called to pass upon proposed
amendments to the By-laws, capital increases and reductions, mergers,
split-ups, dissolutions, issuance of debentures, appointment of receivers and
similar extraordinary actions. The notice of a shareholders meeting may
specify up to two or three meeting dates, respectively, for an ordinary or
extraordinary shareholders meeting; such meeting dates are generally referred
to as calls.

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

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the meeting. The quorum required at an extraordinary shareholders
meeting on first, second and third call is more than 50%, one-third and
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.

To attend any shareholders meeting, our by-laws provide that holders of
shares must, at least five days prior to the date fixed for the meeting,
deposit at our offices or with such agent or bank as may be specified in the
notice of meeting a certified statement of account which evidences their
ownership of the shares in exchange for an admission ticket for the meeting.
Such statements may be obtained by owners of shares through the Intermediary
associated with Monte Titoli (or another centralized clearing institution
authorized pursuant to the TUF). Alternatively, beneficial owners may instruct
the relevant Intermediaries to provide the admission tickets and proxy forms.
Pursuant to the 2003 corporate law reform, beginning September 30, 2004, if we
do not amend our by-laws to require that the above-mentioned certified
statement of account be deposited not earlier than two days before the meeting,
holders of shares would no longer have to deposit a certified statement of
account prior to the shareholders meeting.

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) and may be exercised only by the
person expressly named in the applicable form. The person exercising the proxy
cannot be our subsidiary, a director, statutory auditor, or employee of ours or
of any of our subsidiaries.

Proxies may be solicited by an Intermediary (banks or investment
companies, asset management companies and companies having proxy solicitation
as their sole purpose) on behalf of a qualified soliciting shareholder (a
shareholder who owns and has owned at least 1.0%  or such lesser percentage
determined by CONSOB  of our voting capital for at least six months and who
has been registered with us as holder of such shares for the same period of
time). Proxies may also be collected by a shareholders association from among
its members provided that such association has been formed by notarized private
agreement, does not carry out business activities other than those relevant to
the purpose of the association 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 given by each member who has granted a proxy
to the association. CONSOB has established provisions which govern the
transparency and proper performance of the solicitation and collection of
proxies.

Pre-emptive Rights

Pursuant to Italian law, holders of shares are entitled to subscribe for
new issuances of shares, debentures 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 owners of ADSs will be able to
exercise fully any pre-emptive rights to which the holders of shares are
entitled.

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, all prepared in conformity
with Italian GAAP. 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

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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-visthe 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 present intention of issuing preference shares or savings
shares and none are currently authorized or outstanding. The authorization of
preference shares and of savings shares requires an amendment to the By-laws,
thus being subject to the approval by an extraordinary shareholders meeting.
See  Meetings of Shareholders.

Pursuant to the 2003 corporate law reform, starting in 2004, Italian
companies will be 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.

Segregation of Assets and Proceeds

Pursuant to the 2003 corporate law reform, starting in 2004, the board of
directors of an Italian company may resolve to segregate assets of the company
into one or more separate pools. Such pools of assets may have an aggregate
value not exceeding 10% of the shareholders equity of the company. Each pool
of assets must be used exclusively for the carrying out of a specific business
and may not be attached by the general creditors of the company. Similarly,
creditors with respect to such specific business may only attach those assets
of the company that are included in the corresponding pool. Tort creditors, on
the other hand, may always attach any assets of the company. The board of
directors may issue securities carrying economic and administrative rights
relating to a pool. In addition, financing agreements relating to the funding
of a specific business may provide that the proceeds of such business be used
exclusively to repay the financing. Such proceeds may be attached only by the
financing party and such financing party would have no recourse against other
assets of the company.

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 nominal value of their shares (to the extent available out
of our net assets). Holders of preferred 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 passuamong themselves in liquidation.

Purchase by Us of Our Own Shares

We are permitted to purchase shares, subject to certain 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. Such
purchases must be authorized by

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an ordinary shareholders meeting. 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 attaching 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, attaching to such shares will
accrue to the benefit of other shareholders.

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 take
place by way of a public offer or on the market, in a manner agreed with Borsa
Italiana S.p.A., ensuring 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 May 7, 2002 meeting, our shareholders approved a buy-back plan for
the repurchase of our shares. See  Buy Back Plan.

As of June 25, 2003, we owned 244,446 of our 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.

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
which: (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, should also be taken into
account. 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 the
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

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the threshold, subject to a different agreement between the two companies,
the limitation on voting rights and the obligation to sell the excess shares
will apply 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 only
exceeded by the two companies concerned following an agreement authorized in
advance by an ordinary shareholders meeting of each of the two companies.
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 will, subject to any different agreement between
the two parties, apply to both. 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 bisof the
Italian Civil Code and following the procedures described under  Purchase by
the Company of its Own Shares; however, certain restrictions on the manner of
purchase will 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 will render
the agreements null and void and the shares cannot be voted. These rules apply
to shareholders agreements which:



| | (i)   |  | require 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;
|
| | (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 is required to 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 monetary
thresholds, the anti-trust review of the acquisition falls within the exclusive
jurisdiction of the European Commission.

Minority Shareholders Rights

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Any shareholder may, within three months, challenge any shareholders
resolution (with certain limitations and exceptions) on which he did not vote
or in respect of which he dissented on the basis that it was not adopted in
conformity with applicable law or our By-laws. Directors and statutory
auditors may also challenge shareholders resolutions on this basis. Pursuant
to the 2003 corporate law reform, as from January 1, 2004 resolutions which are
not adopted in conformity with applicable law or our by-laws may be challenged
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, unless otherwise provided by our by-laws.

Pursuant to the TUF, in case of resolutions approving mergers or split-ups
involving the distribution of unlisted shares, dissenting shareholders may
require us to buy back their shares for the average price of the previous six
months. Pursuant to the 2003 corporate law reform, as from January 1, 2004
dissenting or absent shareholders may require us to buy back their shares also
in other circumstances, including, among others, as a result of shareholders
resolutions that approve material modifications of the companys purpose or of
the voting rights relating to the companys shares, in each case as provided
for in our by-laws.

Each shareholder may bring to the attention of the board of statutory
auditors facts or acts which are deemed wrongful. If such shareholders
represent more than 2.0% of our share capital, the board of statutory auditors
must investigate without delay and report its findings and recommendations to
the shareholders meeting. Shareholders representing more than 5.0% of our
share capital have the right to report major irregularities to the relevant
court. In addition, pursuant to the TUF, shareholders representing at least
5.0% of our share capital and who have been registered for at least six months
as shareholders of this amount may commence derivative suits before the
competent court against our directors, statutory auditors and general managers.
We may waive or settle the suit unless shareholders holding at least 5.0% 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.

Minority shareholders may appoint a member of the board of statutory
auditors, pursuant to the slate voting system introduced in the By-laws
according to the TUF. See   Statutory Auditors.

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 ordinary
shares of a listed company on an Italian regulated market. The tender offer
must cover all the ordinary shares of the listed company. Similarly, a tender
offer for the entire ordinary share capital 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 common stock (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 common stock. 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
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

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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 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 share capital 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 60% or more of the ordinary shares of the company. This provision,
however, is available only (i) if the tender offer has been approved by
shareholders of the company holding a majority of the shares (excluding the
offeror and the current majority shareholder), and (ii) if 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. Finally, the
TUF provides that anyone holding 90% or more of the ordinary 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 four
months. 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 2003 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 management and coordination powers are liable to
such companys shareholders and creditors for ensuing damages. Said
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 management and coordination powers. Management and
coordination powers are presumed to exist, among other things, with respect to
consolidated subsidiaries.




Material Contracts

On June 29, 2001, we entered into a sale and leaseback transaction with
Locafit S.p.A. with respect to our Bologna production facility. Our agreements
with regard to this transaction are described in Item 5  Operating and
Financial Review and Prospects  Other Financial Transactions.

On July 31, 2001, we entered into a credit linked transaction in which
we acquired a  15.0 million note issued by a Dutch subsidiary of Banca
Nazionale del Lavoro. You should read Item 5, Operating and Financial Review
and Prospects  Other Financial Transactions for a description of this
transaction.

On December 30, 2002, we entered into an agreement pursuant to which we
assigned  26.7 million (nominal value) of our trade receivables to Ducati
Desmo Finance 1 S.r.l. Our agreements with regard to this transaction are
described 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 of dividends or other distribution with
respect to, or of the proceeds form the sale of, shares of an Italian company.

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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  10,330 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.

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  10,330. 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 of the European Union and other
international organizations and its adherence to various bilateral and
multilateral international agreements.




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 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 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 ADSs. In particular, the summary deals only with
beneficial owners who will hold 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 and does not discuss the treatment of ADSs that are held
in connection with a permanent establishment or fixed base through which a
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 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 ADSs, including, in particular, the
effect of any state, local or national tax laws.

For purposes of the summary, beneficial owners of 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, 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.
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.

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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.

Withholding 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.

However, 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, 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. Internal Revenue
Service (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 the U.S. holder represents to be a U.S.
resident individual or corporation and does not maintain a permanent
establishment or a fixed base in Italy. The time for processing requests for
certification by the Internal Revenue Service normally is six to eight weeks.
Accordingly, holders requiring this certification should submit their requests
to the Internal Revenue Service as soon as possible after receiving
instructions from the Depositary. In the case of ADSs

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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. Distributions
of additional shares issued upon capitalization of reserves to beneficial
owners with respect to their ADSs that are made as part of a pro rata
distribution to all shareholders of DMH generally
will not be subject to Italian tax. However, such additional shares will
reduce the tax basis of each single share for the calculation of the capital
gains tax.

The gross amount of dividends (that is, the amount before reduction for
Italian withholding tax) paid to U.S. holders of 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 positions that are hedged or held for
less than 60 days, an individual U.S. holder generally will be subject to U.S.
taxation at a maximum rate of 15.0% in respect of dividends received after 2002
and before 2009.

Tax on Capital Gains.Italian capital gains tax (CGT) normally is
imposed on gains with respect to the transfer or sale of shares whether held
within or outside Italy. More specifically, a 27.0% CGT will be levied on
gains realized on the disposal of a qualified shareholding. 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.
However, under domestic law, an exemption applies to gains realized on the
disposal of non-qualified shareholdings in an Italian company of shares which
are listed on a regulated market, such as the shares of DMH, even when such
shareholdings are held in Italy. A non-qualified shareholding is constituted
by an interest in DMH which does not reach the thresholds described above.

Furthermore, pursuant to the Treaty, a U.S. holder will not be subject to
Italian CGT unless such U.S. holder has a permanent establishment or fixed base
in Italy to which the ordinary shares or ADSs are effectively connected. To
this end, U.S. holders selling 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 CGT. No
CGT will be imposed on the deposit or withdrawal of shares in return for ADSs.
U.S. holders of 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, 2009 generally is subject to
taxation at a maximum rate of 15.0%. Deposits and withdrawals of shares by a
U.S.

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holder in exchange for ADSs will not result in the realization of gain or
loss for U.S. federal income tax purposes.

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 shares or ADSs involving non-Italian residents
concluded either on a regulated market or with the intervention of 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 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 shares or ADSs for a value exceeding 
180,759.91 (the Threshold) 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  129,11 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
either underage (i.e., younger than 18) or 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 450 Fifth
Street, N.W., Washington D.C. 20549, and at the Commissions regional offices
at 175 West Jackson Boulevard, Suite 500, Chicago, Illinois 60604, and 233
Broadway, New York, New York, 10279. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. The Form
20-F and reports and other 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.

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposures are foreign currency risk and interest
rate risk. Since our debt obligations under the Credit Agreement were
extinguished with the proceeds of the Notes issued on May 31, 2000, our
exposure to market risk for changes in interest rates after that date has been
substantially eliminated. The Notes are subject to a fixed interest rate of
6.50% per annum and mature on May 31, 2005. Following the issuance of the
Notes, we terminated the interest rate swap and cap agreements that we used to
manage interest rate risk under the Credit Agreement. The termination of those
agreements generated a  2.9 million gain in 2000. See Note 10 to our audited
financial statements, Subsequent to the issuance of the Notes, we have
financed and continue to plan to finance any short-term cash requirements
through commercial bank credit facilities available to us on which we expect to
be charged a variable interest rate.

Our sales and operating profits are affected by the impact of fluctuations
in foreign currency exchange rates on product prices and certain operating
expenses. We have sales denominated in various foreign currencies, primarily
the U.S. dollar, Japanese yen and U.K. pound sterling. Fluctuations in the
exchange rates of certain foreign currencies, principally the U.K. pound
sterling, the Japanese yen and the U.S. dollar, relative to the euro may have
an adverse effect on our sales and operating results and the international
competitiveness of our Italian-based manufacturing operations. We were also
exposed to changes in the values of foreign currencies relative to the euro, as
a portion of our long-term debt under the Credit Agreement was denominated in
U.S. dollars and U.K. pounds sterling; this exposure was eliminated on the
repayment of the debt outstanding under the Credit Agreement on May 31, 2000.
We engage in certain foreign exchange transactions to hedge portions of our
transactional exposure to fluctuations in exchange rates between the euro
(previously the Italian lira) and various foreign currencies, including the
U.K. pound sterling and U.S. dollar. Our managements current policy is to
hedge approximately 75.0% of the estimate of annual sales denominated in
foreign currencies made in connection with the preparation of our annual
budget. We are not a party to leveraged derivatives and do not hold or issue
derivative instruments for speculative purposes. At December 31, 2001, forward
exchange contracts outstanding were for a notional amount of  99.3 million,
principally to sell U.S. dollars ( 55.7 million), Japanese yen ( 9.2 million)
and U.K. pounds sterling ( 18.5 million).

Exchange Rate Sensitivity

The table below provides information at December 31, 2002 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 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            |        |  |             |   |       |  |            |  
|                           |                 |      |                                   |        |  |             |   |       |  |            |  
|At December 31, 2002       |                 | 2003 |                                   | 2004   |  | Beyond 2004 |   | Total |  | Fair Value
|                           |                 |      |                                   |        |  |             |   |       |  |           
|                           |                 |      | (euro equivalent in thousands,    |        |  |             |   |       |  |            |  
|                           |                 |      | except exchange rate information) |        |  |             |   |       |  |            |  
|Receivables                |                 |      |                                   |        |  |             |   |       |  |            |   |   |  |  |        |        |  |  |        |    
|U.K. Pound Sterling        |                 |      | 11,499                            |        |  |             |  |       |  |            |  |   |  |  | 11,499 |        |  |  | 11,499 |    
|U.S. Dollar                |                 |      | 46,507                            |        |  |             |  |       |  |            |  |   |  |  | 46,507 |        |  |  | 46,507 |    
|Japanese Yen               |                 |      | 20,565                            |        |  |             |  |       |  |            |  |   |  |  | 20,565 |        |  |  | 20,565 |    
|Australian Dollar          |                 |      | 2,727                             |        |  |             |  |       |  |            |  |   |  |  | 2,727  |        |  |  | 2,727  |    
|CHF (Swiss francs)         |                 |      | 3,230                             |        |  |             |  |       |  |            |  |   |  |  | 3,230  |        |  |  | 3,230  |    
|Forward Exchange Contracts |                 |      |                                   |        |  |             |   |       |  |            |   |   |  |  |        |        |  |  |        |    
|U.K. Pound Sterling        |                 |      |                                   |        |  |             |   |       |  |            |   |   |  |  |        |        |  |  |        |    
|                           | Notional Amount |      |                                   | 15.215 |  |             |   |      |  |            |   |  |  |  |        | 15,215 |  |  |        | 615 | 

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|                     |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |      | 
|-------------------- | ------------------------------ | ---- | --------------------------------- | -------- |  | ----------- | - | ----- |  | ---------- | - | - |  |  | -- | -------- |  |  | -- | ---- | 
|                     |                                |      | Expected Maturity Date            |          |  |             |   |       |  |            |  
|                     |                                |      |                                   |          |  |             |   |       |  |            |  
|At December 31, 2002 |                                | 2003 |                                   | 2004     |  | Beyond 2004 |   | Total |  | Fair Value
|                     |                                |      |                                   |          |  |             |   |       |  |           
|                     |                                |      | (euro equivalent in thousands,    |          |  |             |   |       |  |            |  
|                     |                                |      | except exchange rate information) |          |  |             |   |       |  |            |  
|                     | Average contract exchange rate |      |                                   | 0.6407   |  |             |   |      |  |            |   |  |  |  |    | 0.6407   |  |  |    |     | 
|U.S. Dollar          |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |     
|                     | Notional Amount                |      |                                   | 33,016   |  |             |   |      |  |            |   |  |  |  |    | 33,016   |  |  |    | 2540 | 
|                     | Average contract exchange rate |      |                                   | 0.9597   |  |             |   |      |  |            |   |  |  |  |    | 0.0597   |  |  |    |      | 
|Japanese Yen         |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |     
|                     | Notional Amount                |      |                                   | 13,653   |  |             |   |      |  |            |   |  |  |  |    | 13,653   |  |  |    | 579  | 
|                     | Average contract exchange rate |      |                                   | 117,1909 |  |             |   |      |  |            |   |  |  |  |    | 117,1909 |  |  |    |     | 
|Australian Dollar    |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |     
|                     | Notional Amount                |      |                                   | 8,707    |  |             |   |      |  |            |   |  |  |  |    | 8,707    |  |  |    | 230  | 
|                     | Average contract exchange rate |      |                                   | 1.7917   |  |             |   |      |  |            |   |  |  |  |    | 1.7917   |  |  |    |     | 
|CHF                  |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |     
|                     | Notional Amount                |      |                                   | 4,219    |  |             |   |      |  |            |   |  |  |  |    | 4,219    |  |  |    | 34   | 
|                     | Average contract exchange rate |      |                                   | 1,4222   |  |             |   |      |  |            |   |  |  |  |    | 1,4222   |  |  |    |     | 
|Options              |                                |      |                                   |          |  |             |   |       |  |            |   |   |  |  |    |          |  |  |    |     
|U.S. Dollar          |                                |      | 36                                |          |  |             |  |       |  |            |  |   |  |  | 36 |          |  |  | 36 |     
|Japanese Yen         |                                |      | 8                                 |          |  |             |  |       |  |            |  |   |  |  | 8  |          |  |  | 8  |     

At December 31, 2002, we had forwards exchange contracts denominated in
U.K. pounds sterling with a notional amount of  15.2 million (with an average
contract exchange rate of  0.6407), in U.S. dollars with a notional amount of
 33.0 million (with an average contract exchange rate of  0.9597), in
Australian dollars with a notional amount of  8.7 million (with an average
contract exchange rate of 1.7917) and in Japanese Yen with a national amount of
 13.7 million (with an average contract exchange rate of 117.1909 and in Swiss
franc with a national amount of  4.2 (with an average contract exchange rate
of 1.4222. See Notes 1, 18 and 31 to our audited financial statements.

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Item 12. Description of Securities Other than Equity Securities

Not applicable.




PART II




Item 13. Defaults, Dividends Averages 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

Within the 90 days prior to the date of this report, we carried out an
evaluation under the supervision and with the participation of our management,
including the Managing Director and Manager of Finance, of the effectiveness of
the design and operation of our disclosure controls and procedures. 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 and as of the date of our
evaluation, the Managing Director and Manager of Finance concluded that the
disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed in the reports that we file
and submit under the Exchange Act is recorded, processed, summarized and
reported as and when required.




Item 16. [Reserved]




Item 17. Financial
Statements

Not applicable.

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Item 18. Financial Statements

|                                                                                                                |  |  |      | 
|--------------------------------------------------------------------------------------------------------------- |  |  | ---- | 
|Independent Auditors Report of April 11, 2003                                                                  |  |  | F-1  | 
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                                    |  |  | F-2  | 
|Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002                      |  |  | F-3  | 
|Consolidated Statements of Changes of Shareholders Equity for the years ended December
31, 2000, 2001 and 2002 |  |  | F-4  | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 2001 and 2002                      |  |  | F-5  | 
|Notes to Consolidated Financial Statements                                                                      |  |  | F-6  | 
|Schedules:                                                                                                      |  |  |      | 
|Schedule II  Valuation and Qualifying Accounts For the Years Ended December 31, 2000,
2001 and 2002            |  |  | F-78 | 

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Item 19. Exhibits

|               |  |                                                                                                                                                                                                                                                             
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                             
|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).
|2.2            |  | Fiscal Agency Agreement dated May 31, 2000, relating to
Euro 100,000,000 6.50 percent. Rate Notes due 2005
(incorporated by reference to our Registration Statement on
Form 20-F, dated July 2, 2001, file No. 1-14908).                                    
|8              |  | Subsidiaries as of the end of the year covered by this
annual report: see Item 4. Information on the Company 
Organizational Structure                                                                                                                   
|10             |  | Certification by Federico Minoli, Managing Director, and
Enrico DOnofrio, Manager of Finance, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                   

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Signatures

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

| |  |                                                        
| |  | -------------------------------------------------------
| |  | DUCATI MOTOR HOLDING S.P.A.                            
|
| |  |                                                        
|
| |  | /s/ Federico MinoliFederico Minoli
Managing Director   
|
| |  |                                                        
|
| |  | /s/ Enrico DOnofrioEnrico DOnofrio
Manager of Finance

Date: June 30, 2003

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Principal Executive Officer Certification

I, Federico Minoli, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of Ducati Motor Holding
S.p.A.;                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                     
| |  | ----------------------------------------------------
| |  | /s/ Federico MinoliFederico Minoli
Managing Director

Date: June 30, 2003

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Principal Financial Officer Certification

I, Enrico DOnofrio, certify that:



|1. |  | I have reviewed this annual report on Form 20-F of Ducati Motor Holding
S.p.A.;                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                  



| | (a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls;
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                    



|6. |  | The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                                                        
| |  | -------------------------------------------------------
| |  | /s/ Enrico DOnofrioEnrico DOnofrio
Manager of Finance

Date: June 30, 2003

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##### Table of Contents



Independent Auditors Report

To the Board of Directors and 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 at December 31, 2002 and 2001, and the
related consolidated statements of operations, shareholders equity and cash
flows for each of the years in the three-year period ended December 31, 2002.
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 auditing standards generally
accepted in Italy and in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the 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, 2002 and 2001, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2002 in conformity with accounting
principles generally accepted in Italy. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements as a whole, present fairly, in all material
respects, the information set forth therein.

Established accounting principles generally accepted in Italy vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States of America would have affected the results of
operations for each of the years in the three-year period ended December 31,
2002 and shareholders equity at December 31, 2002 and 2001, to the extent
summarized in notes 29, 30 and 31 to the consolidated financial statements.

/s/ KPMG S.p.A.

Bologna, Italy

April 11, 2003

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##### Table of Contents



Ducati Motor Holding S.p.A. and subsidiaries

Consolidated Balance Sheets
(expressed in  000)

|                                                             |  |              |         |              |  |  |         |  
|------------------------------------------------------------ |  | ------------ | ------- | ------------ |  |  | ------- | -
|                                                             |  | December 31, |         | December 31,
|                                                             |  | 2001         |         | 2002        
|                                                             |  |              |         |             
|ASSETS                                                       |  |              |         |              |  |  |         |  
|Current assets:                                              |  |              |         |              |  |  |         |  
|Cash and cash equivalents (note 2)                           |  |              | 23,705  |              |  |  | 23,960  |  
|Trade receivables, net (note 3)                              |  |              | 98,027  |              |  |  | 82,042  |  
|Inventories (note 4)                                         |  |              | 97,636  |              |  |  | 111,427 |  
|Deferred income tax assets (note 27)                         |  |              | 18,139  |              |  |  | 15,558  |  
|Other current assets (note 5)                                |  |              | 8,038   |              |  |  | 13,707  |  
|                                                             |  |              |         |              |  |  |         |  
|Total current assets                                         |  |              | 245,545 |              |  |  | 246,694 |  
|                                                             |  |              |         |              |  |  |         |  
|Non-current assets:                                          |  |              |         |              |  |  |         |  
|Property, plant and equipment, net                           |  |              | 89,636  |              |  |  | 111,975 |  
|Less accumulated depreciation                                |  |              | (35,060 | )            |  |  | (45,573 | )
|                                                             |  |              |         |              |  |  |         |  
|Property, plant and equipment, net (notes 6)                 |  |              | 54,576  |              |  |  | 66,402  |  
|Intangible assets, net (note 7)                              |  |              | 132,000 |              |  |  | 130,518 |  
|Equity investments (note 8)                                  |  |              | 1       |              |  |  | 12      |  
|Other long-term assets (note 9)                              |  |              | 15,610  |              |  |  | 15,616  |  
|                                                             |  |              |         |              |  |  |         |  
|Total assets                                                 |  |              | 447,732 |              |  |  | 459,242 |  
|                                                             |  |              |         |              |  |  |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                         |  |              |         |              |  |  |         |  
|Current liabilities:                                         |  |              |         |              |  |  |         |  
|Short term bank borrowings (note 10)                         |  |              | 38,870  |              |  |  | 39,293  |  
|Current portion of long-term debt (note 10)                  |  |              | 2,270   |              |  |  | 3,230   |  
|Accounts payable  trade (note 11)                           |  |              | 86,749  |              |  |  | 95,112  |  
|Accrued expenses and other liabilities (note 12)             |  |              | 16,763  |              |  |  | 16,145  |  
|Provisions for risks and charges  current portion (note 13) |  |              | 9,148   |              |  |  | 8,577   |  
|Income and other taxes payable (notes 14 and 27)             |  |              | 3,732   |              |  |  | 5,354   |  
|                                                             |  |              |         |              |  |  |         |  
|Total current liabilities                                    |  |              | 157,532 |              |  |  | 167,711 |  
|                                                             |  |              |         |              |  |  |         |  
|Long-term liabilities:                                       |  |              |         |              |  |  |         |  
|Long-term debt, less current portion (note 10)               |  |              | 91,000  |              |  |  | 91,000  |  
|Employees leaving entitlements (note 15)                    |  |              | 5,719   |              |  |  | 7,126   |  
|Deferred income taxes (note 27)                              |  |              | 16,094  |              |  |  | 11,874  |  
|Other long-term liabilities (note 16)                        |  |              | 19,485  |              |  |  | 17,792  |  
|Provisions for risks and charges-long term portion (note 13) |  |              | 3,305   |              |  |  | 3,998   |  
|                                                             |  |              |         |              |  |  |         |  
|Total long-term liabilities                                  |  |              | 135,603 |              |  |  | 131,790 |  
|                                                             |  |              |         |              |  |  |         |  
|Total liabilities                                            |  |              | 293,135 |              |  |  | 299,501 |  
|                                                             |  |              |         |              |  |  |         |  
|Shareholders equity: (note 17)                              |  |              |         |              |  |  |         |  
|Share capital                                                |  |              | 82,420  |              |  |  | 82,420  |  
|Share premium                                                |  |              | 21,316  |              |  |  | 19,879  |  
|Other reserves                                               |  |              | 27,392  |              |  |  | 27,491  |  
|Retained earnings                                            |  |              | 20,173  |              |  |  | 28,036  |  
|Foreign currency translation adjustment                      |  |              | 3,296   |              |  |  | 1,915   |  
|                                                             |  |              |         |              |  |  |         |  
|Total shareholders equity                                   |  |              | 154,597 |              |  |  | 159,741 |  
|                                                             |  |              |         |              |  |  |         |  
|Commitments and contingent liabilities (notes 10 and 18)     |  |              |        |              |  |  |        |  
|                                                             |  |              |         |              |  |  |         |  
|Total liabilities and shareholders equity                   |  |              | 447,732 |              |  |  | 459,242 |  
|                                                             |  |              |         |              |  |  |         |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



Ducati Motor Holding S.p.A. and subsidiaries

Consolidated Statements of Operations
(expressed in  000, except per share data)

|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |         | 
|------------------------------------------------------------------------------- | ----------------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- |  |  | ----------- | ------- | 
|                                                                                |                                                 |  | Year ended   |         | Year ended   |  | Year ended  
|                                                                                |                                                 |  | December 31, |         | December 31, |  | December 31,
|                                                                                |                                                 |  | 2000         |         | 2001         |  | 2002        
|                                                                                |                                                 |  |              |         |              |  |             
|Net sales (note 19)                                                             |                                                 |  | 379,534      |         |              |  | 407,815      |         |  |  | 412,971     |        
|Cost of goods sold (excluding depreciation) (note 20)                           |                                                 |  | (228,890     | )       |              |  | (241,266     | )       |  |  | (249,264    | )      
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        
|                                                                                | Gross profit (excluding depreciation) (note 19) |  |              | 150,644 |              |  |              | 166,549 |  |  |             | 163,707 | 
|Selling, general and administrative expenses
(excluding depreciation) (note 21) |                                                 |  | (95,604      | )       |              |  | (107,968     | )       |  |  | (122,032    | )      
|Depreciation of property, plant and equipment (note 22)                         |                                                 |  | (7,446       | )       |              |  | (9,998       | )       |  |  | (11,993     | )      
|Amortization of intangible assets (note 23)                                     |                                                 |  | (22,147      | )       |              |  | (24,582      | )       |  |  | (21,991     | )      
|Other operating revenues (note 24)                                              |                                                 |  | 4,952        |         |              |  | 7,547        |         |  |  | 10,795      |        
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        
|                                                                                | Operating income                                |  |              | 30,399  |              |  |              | 31,548  |  |  |             | 18,486  | 
|Interest income (note 25)                                                       |                                                 |  | 3,634        |         |              |  | 1,264        |         |  |  | 1,380       |        
|Interest expense (note 25)                                                      |                                                 |  | (12,448      | )       |              |  | (14,014      | )       |  |  | (12,852     | )      
|Foreign exchange gain/(loss), net                                               |                                                 |  | (10,615      | )       |              |  | 677          |         |  |  | 1,363       |        
|Other non-operating income/(expense), net (note 26)                             |                                                 |  | 6,702        |         |              |  | (28          | )       |  |  | 135         |        
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        
|                                                                                | Profit before income taxes                      |  |              | 17,672  |              |  |              | 19,447  |  |  |             | 8,511   | 
|Income taxes (note 27)                                                          |                                                 |  | (7,189       | )       |              |  | (8,894       | )       |  |  | (1,986      | )      
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        
|                                                                                | Net profit                                      |  |              | 10,483  |              |  |              | 10,553  |  |  |             | 6,525   | 
|Net profit per share                                                            |                                                 |  | 0.07         |         |              |  | 0.07         |         |  |  | 0.04        |        
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        
|Number of shares outstanding (note 17)                                          |                                                 |  | 158,271,963  |         |              |  | 158,500,963  |         |  |  | 158,500,963 |        
|                                                                                |                                                 |  |              |         |              |  |              |         |  |  |             |        

See accompanying notes to consolidated financial statements.

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##### Table of Contents



Ducati Motor Holding S.p.A. and subsidiaries

Consolidated Statements of Shareholders Equity
(expressed in  000, except per share data)

|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|-------------------------------------------------------- |  | ------------- | ----------- | ------ |  | -------- | ------ | --------- |  | ----------- |  | ------------- |  | --------- | ------- | ---------- |  | ------ | ------ | -------- |  | -------- | ------ | ----- |  | ------- | ------ | - |  |  | ------- | -
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  | Foreign |        |   |  | 
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  | Other  |        | Retained |  | currency |        | Total
|                                                         |  | Share capital |             | Share  |  | reserves |        | earnings/ |  | translation |  | Shareholders'
|                                                         |  | Shares        |             | Amount |  |          |        |           |  | premium     |  | (note 17)     |  | (deficit) |         | adjustment |  | equity
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |       
|Balance at December 31, 1999                             |  |               | 157,962,963 |        |  |          | 81,581 |           |  |             |  |               |  |           | 40,394  |            |  |        | 1,236  |          |  |          | 6,666  |       |  |         | 1,199  |   |  |  | 131,076 |  
|Capital increases                                        |  |               | 309,000     |        |  |          | 160    |           |  |             |  |               |  |           | 63      |            |  |        |       |          |  |          |       |       |  |         |       |   |  |  | 223     |  
|Allocation to other
reserves/ reclassification
(note 17) |  |               |            |        |  |          |       |           |  |             |  |               |  |           | (16,891 | )          |  |        | 24,238 |          |  |          | (7,347 | )     |  |         |       |   |  |  |        |  
|Foreign currency translation                             |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         | 1,257  |   |  |  | 1,257   |  
|Net profit of the year                                   |  |               |            |        |  |          |       |           |  |             |  |               |  |           |        |            |  |        |       |          |  |          | 10,483 |       |  |         |       |   |  |  | 10,483  |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|Balance at December 31, 2000                             |  |               | 158,271,963 |        |  |          | 81,741 |           |  |             |  |               |  |           | 23,566  |            |  |        | 25,474 |          |  |          | 9,802  |       |  |         | 2,456  |   |  |  | 143,039 |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|Capital increases                                        |  |               | 229,000     |        |  |          | 119    |           |  |             |  |               |  |           | 46      |            |  |        |       |          |  |          |       |       |  |         |       |   |  |  | 165     |  
|Allocation to other
reserves/ reclassification
(note 17) |  |               |            |        |  |          | 560    |           |  |             |  |               |  |           | (2,296  | )          |  |        | 1,918  |          |  |          | (182   | )     |  |         |        |   |  |  |        |  
|Foreign currency translation                             |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         | 840    |   |  |  | 840     |  
|Net profit of the year                                   |  |               |            |        |  |          |       |           |  |             |  |               |  |           |        |            |  |        |       |          |  |          | 10,553 |       |  |         |       |   |  |  | 10,553  |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|Balance at December 31, 2001                             |  |               | 158,500,963 |        |  |          | 82,420 |           |  |             |  |               |  |           | 21,316  |            |  |        | 27,392 |          |  |          | 20,173 |       |  |         | 3,296  |   |  |  | 154,597 |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|Capital increases                                        |  |               |            |        |  |          |       |           |  |             |  |               |  |           |        |            |  |        |       |          |  |          |       |       |  |         |       |   |  |  |        |  
|Allocation to other
reserves/ reclassification
(note 17) |  |               |            |        |  |          |       |           |  |             |  |               |  |           | (1,437  | )          |  |        | 99     |          |  |          | 1,338  |       |  |         |        |   |  |  |        |  
|Foreign currency translation                             |  |               |            |        |  |          |       |           |  |             |  |               |  |           |        |            |  |        |       |          |  |          |       |       |  |         | (1,381 | ) |  |  | (1,381  | )
|Net profit of the year                                   |  |               |            |        |  |          |       |           |  |             |  |               |  |           |        |            |  |        |       |          |  |          | 6,525  |       |  |         |       |   |  |  | 6,525   |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  
|Balance at December 31, 2002                             |  |               | 158,500,963 |        |  |          | 82,420 |           |  |             |  |               |  |           | 19,879  |            |  |        | 27,491 |          |  |          | 28,036 |       |  |         | 1,915  |   |  |  | 159,741 |  
|                                                         |  |               |             |        |  |          |        |           |  |             |  |               |  |           |         |            |  |        |        |          |  |          |        |       |  |         |        |   |  |  |         |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



Ducati Motor Holding S.p.A. and subsidiaries

Consolidated Statements of Cash Flows
(expressed in  000)

|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  
|------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- | - |  | ------- | ------- | -
|                                                                                |                                                          |  | Year ended   |         | Year ended   |  | Year ended  
|                                                                                |                                                          |  | December 31, |         | December 31, |  | December 31,
|                                                                                |                                                          |  | 2000         |         | 2001         |  | 2002        
|                                                                                |                                                          |  |              |         |              |  |             
|Cash flow from operating activities:                                            |                                                          |  |              |         |              |  |              |         |   |  |         |        
|                                                                                | Net profit                                               |  |              | 10,483  |              |  |              | 10,553  |   |  |         | 6,525   |  
|Adjustment to reconcile net profit to net
cash provided by operating activities |                                                          |  |              |         |              |  |              |         |   |  |         |        
|                                                                                | Foreign exchange translation adjustment                  |  |              | 1,258   |              |  |              | 840     |   |  |         | (1,380  | )
|                                                                                | Minority interest                                        |  |              | (435    | )            |  |              |        |   |  |         |        |  
|                                                                                | Amortization of intangible assets                        |  |              | 22,147  |              |  |              | 24,582  |   |  |         | 21,991  |  
|                                                                                | Depreciation of property, plant and equipment            |  |              | 7,446   |              |  |              | 9,998   |   |  |         | 11,993  |  
|                                                                                | Employees leaving entitlement                           |  |              | 992     |              |  |              | 944     |   |  |         | 1,407   |  
|                                                                                | Deferred taxes                                           |  |              | (1,897  | )            |  |              | 996     |   |  |         | (996    | )
|Changes in operating assets and liabilities                                     |                                                          |  |              |         |              |  |              |         |   |  |         |        
|                                                                                | Trade receivables                                        |  |              | (17,945 | )            |  |              | (17,539 | ) |  |         | 15,985  |  
|                                                                                | Inventories                                              |  |              | (14,970 | )            |  |              | (8,621  | ) |  |         | (13,791 | )
|                                                                                | Other current assets                                     |  |              | (6,956  | )            |  |              | 2,727   |   |  |         | (6,312  | )
|                                                                                | Other long-term assets and liabilities                   |  |              | 1,129   |              |  |              |        |   |  |         |        |  
|                                                                                | Payables, accrued expenses and other current
liabilities |  |              | 40,354  |              |  |              | (10,728 | ) |  |         | 9,489   |  
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  
|Net cash provided by operating activities                                       |                                                          |  | 41,606       |         |              |  | 13,752       |         |   |  | 44,911  |        
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |        
|Cash flow from investing activities                                             |                                                          |  |              |         |              |  |              |         |   |  |         |        
|                                                                                | Net purchase of property, plant and equipment            |  |              | (11,328 | )            |  |              | (13,464 | ) |  |         | (23,819 | )
|                                                                                | Net purchase of intangible assets                        |  |              | (15,591 | )            |  |              | (15,916 | ) |  |         | (20,509 | )
|                                                                                | Sale/(purchase) of equity investments                    |  |              |        |              |  |              | 83      |   |  |         |        |  
|                                                                                | Sale/(purchase) of long-term assets                      |  |              | 42      |              |  |              | (5      | ) |  |         | (17     | )
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  
|Net cash used in investing activities                                           |                                                          |  | (26,877      | )       |              |  | (29,302      | )       |   |  | (44,345 | )      
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |        
|Cash flow from financing activities                                             |                                                          |  |              |         |              |  |              |         |   |  |         |        
|                                                                                | Proceeds from issuance of ordinary shares                |  |              | 222     |              |  |              | 165     |   |  |         |        |  
|                                                                                | Movements in bank borrowings  short term
and long term  |  |              | (12,466 | )            |  |              | 40,326  |   |  |         | (310    | )
|                                                                                | Other long term assets                                   |  |              |        |              |  |              | (15,000 | ) |  |         |        |  
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  
|Net cash provided/(used) by financing activities                                |                                                          |  | (12,244      | )       |              |  | 25,491       |         |   |  | (310    | )      
|Net increase in cash and cash equivalents                                       |                                                          |  | 2,485        |         |              |  | 9,941        |         |   |  | 255     |        
|Cash and cash equivalents at beginning of year                                  |                                                          |  | 11,279       |         |              |  | 13,764       |         |   |  | 23,705  |        
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  
|Cash and cash equivalents at end of year                                        |                                                          |  | 13,764       |         |              |  | 23,705       |         |   |  | 23,960  |        
|                                                                                |                                                          |  |              |         |              |  |              |         |   |  |         |         |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



Ducati Motor Holding S.p.A. and subsidiaries
Notes to consolidated financial statements

1. Corporate events, organization and summary of significant accounting policies

1.a Corporate events in the year ended December 31, 2002

On 14 February 2002, the extraordinary shareholders meeting of Ducati
Motor.Com S.p.A., now Ducati.Com S.r.l., (notarised by Jacopo Bersani by deed
no. 25856/4434) authorised the following changes:



| |  |  | write-off of the companys share capital of  2,600,000, 2.5%
of which is held by Ducati Motor Holding S.p.A., the Parent Company
and 97.5% by Ducati Benelux B.V.;     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | transformation from a joint-stock company into a private
limited company;                                                                                                 
|
| |  |  | reconstitution of the share capital for  10,000 fully
subscribed as follows: Ducati Motor Holding S.p.A., 99%, and Ducati
Corse S.r.l., 1%, and fully paid-in as follows:
|



| |  |  |  9,900 by the shareholder Ducati Motor Holding S.p.A.;
| | - |  | -------------------------------------------------------
|
| |  |  |  100 by the shareholder Ducati Corse S.r.l.           
|



| |  |  | at the same time, its corporate purpose was changed to be the
following:
| | - |  | ------------------------------------------------------------------------
|



| |  |  | the conception, analysis, planning, design
and management of corporate databases and IT systems;                                                                                                                                                                                                                                                                                                                             
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the distribution of content though fixed
and mobile networks (telephone, internet, e-mail);                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | the sale, in any form (wholesale, retail,
door-to-door, by catalogue, games or bets, mail order, via
television, telephone and/or internet), on its behalf or
for third parties (also through intermediation, business
development, agency, commission, representation or
acceptance of mandates) of any type of goods for personal,
household or corporate use and consumption, including
ephemeral and luxury articles; and
|
| |  |  | acceptance of advertising in any form for
products and services.                                                                                                                                                                                                                                                                                                                                                             
|



| |  |  | the company can operate in Italy and abroad.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the corporate purpose also includes the technical and financial
coordination of companies or entities in which it has an interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | secondarily and not primarily, the company will be able to
carry out, occasionally and solely in order to pursue the primary
corporate purpose mentioned above, all movable, immovable, industrial
and commercial transactions that will be considered useful or
necessary to this end, including financing operations, also in the
form of guarantee and surety of the companies or entities in which it
has an interest; it will be able to take on, directly or indirectly,
but not for the purpose of placement, interests and shareholdings in
other companies or businesses with a corporate purpose that is the
same, similar or related to its own.
|
| |  |  | the resignation of the entire Board of Statutory Auditors
following the transformation of the company and given that the
circumstances mentioned in art. 2428 of the Civil Code do not apply;                                                                                                                                                                                                                                                                                                                                                                                                                                                              

No impact was recorded on our audited consolidated financial statements as
of and for the year ended December 31, 2002 as a result of the aforementioned
transaction.

In addition, on 1 March 2002 the subsidiary Ducati Benelux B.V. set up a
permanent establishment for the distribution of the products in Sweden with the
following characteristics:

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| |  |  | Name: Ufficina Svedese, filial till Ducati Benelux B.V.,
Netherlands until 17/06/2002 when this name was changed to: Ducati
Sweden, filial till Ducati Benelux B.V., Netherlands
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | date of formation: 01/03/2002                                                                                                                                                   
|
| |  |  | Head Office: box 152  195 24 Marsta                                                                                                                                            
|
| |  |  | legal representative: E. A. De Vries                                                                                                                                            

On 14 February 2002, the Board authorised an amendment to the regulations
governing the granting of rights of share revaluation and/or subscription
and/or purchase (the Options) which allow the beneficiaries to subscribe or
purchase ordinary shares of the Company, as approved by the shareholders
meeting, or to obtain an equivalent sum of money (the Plan adopted by the
Compensation Committee on 6 September 1999 and the Board on 13 September 1999
and amended by the Board on 3 March 2000) so that from 2002 attribution of the
Options would take place within 60 days of the date of Board approval and
publication of the preliminary figures of the Companys consolidated balance
sheet and statement of operations, and not of the Companys consolidated
financial statements complete with explanatory notes and the directors report
on operations. This option to subscribe to shares or pay sums of money is at
the Companys discretion. For further information about the Plan see below,
Stock Option Plans  Second Plan.

On 7 May 2002, the shareholders of the Parent Company convened an ordinary
and extraordinary meeting which resolved, among other things:



| | 1. |  | to authorise, pursuant to articles 2357 of the Civil Code
and 132 of D. Lgs 58/1998, the purchase of parent company shares
up to a maximum of 6,000,000 (six million) shares of par value 
0.52 each, corresponding to around 3.8% of the share capital
currently subscribed and paid in, to be carried out in one or more
tranches within 18 months of the date of the resolution for a
total amount not exceeding  10.8 million, equal to the amount of
the retained earnings available for distribution as shown in the
financial statements as of 31 December 2001; bearing in mind that
the minimum purchase price of each share must not be more than 10%
(ten percent) lower than the reference price of the shares posted
on the Electronic Equity Market by Borsa Italiana S.p.A. the day
prior to each purchase and not more than 10% (ten percent) higher
than the reference price of the shares posted on the Electronic
Equity Market by Borsa Italiana S.p.A. the day prior to each
purchase;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | to authorise, pursuant to art. 2357-ter of the Civil
Code, the sale of parent company shares, in one or more tranches,
of up to 6,000,000 shares of par value  0.52 each, corresponding
to around 3.8% of the share capital currently subscribed and paid
in, purchased on the basis of the above resolution;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| | 3. |  | to grant a mandate to the Board of Directors and/or to
the Managing Director appointed by the Board, to purchase and sell
parent company shares as authorised above, with the widest
possible powers and rights, but in full compliance with the limit
resolved and with current laws on such matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

The extraordinary shareholders meeting of the Parent Company resolved, in
accordance with the provisions of the second and third paragraphs of article
2445 of the Civil Code, as referred to in article 13 of Law 342/2000, to
transform the revaluation reserve (Law 342/2000) of  24.2 million shown in the
financial statements as of 31 December 2001, as approved by the ordinary
shareholders meeting, into an unrestricted reserve, so as to legitimate a
future resolution by the ordinary shareholders meeting approving the purchase
and sale of additional parent company shares of the Company for the purpose of:
(i) assigning the shares purchased in this way to the beneficiaries of the
existing stock option plans and the purchase of shares by employees, as
approved by the corporate boards; and (ii) sustaining the liquidity of the
Ducati stock on the Italian Stock Exchange in full compliance with the
pertinent regulations.

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The Parent Companys Extraordinary Meeting also decided:



| | 1. |  | to approve the proposed specification of the corporate
purpose in line with a different wording of article 4.3 of the
by-laws, relating to the secondary activities that the Company
can carry on in order to achieve its corporate purpose, stating
specifically that these activities include the hire of
motorcycles and running a motorcycle driving school, consequently
redrafting the whole of article 4.3 of the by-laws as follows:                                                                                                                                                                                                    
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | 4.3: secondarily and not primarily, the company will be able
to carry out, occasionally and solely in order to pursue the
primary corporate purpose mentioned above, all commercial
transactions (including the hire of motorcycles and the running of
a motorcycle driving school), as well as all movable, immovable,
and industrial transactions that will be considered useful or
necessary to this end; it will be able to take on, directly or
indirectly, but not for the purpose of placement, interests and
shareholdings in other companies or businesses with a corporate
purpose that is the same, similar or related to its own.;
|
| | 2. |  | to keep all of the other by-laws the same as before.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

On 7 August 2002, the Parent Companys Board of Directors decided to
approve a plan for the securitisation of part of its trade receivables with the
following characteristics:



| |  |  | net book value of the receivables: 50 million euro;
| | - |  | ---------------------------------------------------
|
| |  |  | maturity: 5 years;                                 
|
| |  |  | derecognition of financial assets; and             
|
| |  |  | assignment of trade receivables without recourse;  

and to grant the Chairman Federico Minoli and the Managing Director Carlo Di
Biagio, severally, all powers needed to carry out this type of operation.

Corporate boards

Following the shareholders meeting held on 7 May 2002 and the Board
meeting held on 9 May 2002, the new Board of Directors was appointed and
positions were approved (confirming the same Board as before), and it was
established that the new Board of Directors will remain in office until
approval of the financial statements as of 31 December 2004 and that the
compensation for each member of the Board of Directors would amount to  15,000
as well as the reimbursement of travelling and any other expenses incurred in
connection with the position of director. The Chairman Federico Minoli and the
Managing Director Carlo Di Biagio accepted the office, at the same time waiving
the compensation. The Board of Directors is made up of:

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|                   |  |                                                                                                      
|------------------ |  | -----------------------------------------------------------------------------------------------------
|Federico Minoli    |  | Chairman and member of the Executive Committee                                                       
|Giorgio Seragnoli  |  | Vice-Chairman and member of the Executive Committee                                                  
|Carlo Di Biagio    |  | Managing Director and member of the Executive Committee                                              
|Mauro Benetton     |  | Director                                                                                             
|David Bonderman    |  | Director and member of the Compensation Committee                                                    
|David Choi         |  | Director                                                                                             
|Piero Ferrari      |  | Director and member of the Internal Control Committee He s
subsequently resigned on 22 November 2002.
|Abel Halpern       |  | Director and member of the Executive Committee and of
the Compensation Committee                     
|Paolo Pietrogrande |  | Director and member of the Compensation Committee and
of the Internal Control Committee              
|Dante Razzano      |  | Director and member of the Executive Committee and of
the Compensation Committee                     
|Ulrich Weiss       |  | Director and member of the Compensation Committee and
of the Internal Control Committee              

Following publication of a self-regulation code of corporate governance
for quoted companies by Borsa Italiana S.p.A. (the Code), the Company has
adjusted its internal structure to the model of corporate organisation proposed
by the Code; the shareholders were given adequate information regarding the new
system of corporate governance at the meeting held on 7 May 2002 by means of a
report prepared specifically for the purpose and on the basis of the guidelines
provided by Borsa Italiana S.p.A.

On 14 November 2002, the Parent Companys Board of Directors decided to
approve the Companys Code of Ethics and related rules of conduct, including
those covering insider dealing, and to grant the Chairman Federico Minoli and
the Managing Director Carlo Di Biagio, severally, all possible powers to make
any amendment to the approved text that may be thought necessary or opportune
to update the rules in line with international best practice or new legal
requirements.

Other corporate events

On 23 July 2001, the Parent Company Ducati Motor Holding S.p.A. received a
report following a tax audit by the Regional Tax Police of Emilia-Romagna that
concluded a general examination of the period from 1 January 1999 to 11 March
2001 for both direct and indirect tax purposes concerning Ducati Motor Holding
S.p.A. and the former subsidiary Ducati Motor S.p.A., which was merged with the
Parent Company in 2000.

This audit also involved 1996, but only with regard to the acquisition of
the Ducati business from Ducati Motorcycles S.p.A. In this report, in
addition to certain minor matters, the Tax Authorities dispute the VAT tax
treatment of the sale of the Ducati business by Ducati Motorcycles S.p.A.,
notarised by Iacopo Bersani by deed no. 13,115 on 26 September 1996. The
directors, with the assistance of the Parent Companys tax consultants confirm
that the Parent Company filed a defence statement, as a result of which the
Revenue Office decided not to proceed; the 1996 tax year can therefore be
considered closed.

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As regards the minor matters in dispute, the Company applied for an agreed
assessment, as a result of which the Revenue Office proposed a settlement that
would have closed the matter at a very low cost to the Parent Company.
Following this assessment, Ducati Motor Holding S.p.A. then took steps to
settle the disputes regarding direct taxes for the tax years 1998 and 1999 as
contained in the tax audit report notified to the Parent Company on 23 July
2001. Formalisation of the Parent Companys agreement for the two tax years
took place on 19 November 2002, closing the matters on 6 December 2002 on
payment of  53,342.

Now that all of the matters contained in the tax audit report have been
settled, the Parent Company is not aware of any other potential liabilities.

1.b Organization

Ducati Motor Holding S.p.A. is a limited liability company registered in
Italy.

Ducati
Motor Holding S.p.A. and subsidiaries (Ducati or the Company
or the Group) are engaged in the design, manufacture and sale of motorcycles
and related products under the Ducati brand name. Ducati Motor Holding
S.p.A. (Holding or DMH or the Parent Company) 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, Holding 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:

|                                                       |  |                           |         |             |  |       |         |   |  |  |         |  
|------------------------------------------------------ |  | ------------------------- | ------- | ----------- |  | ----- | ------- | - |  |  | ------- | -
|                                                       |  | Initial                   |         | Adjustments |  | Total
|                                                       |  |                           |         |             |  |      
|                                                       |  | (
000 Except share data)
|Book value of liabilities in excess of assets
acquired |  |                           | (39,020 | )           |  |       |        |   |  |  | (39,020 | )
|Adjustments:                                           |  |                           |         |             |  |       |         |   |  |  |         |  
|- Property, plant and equipment                        |  |                           | 19,847  |             |  |       |        |   |  |  | 19,847  |  
|- Ducati trademark                                   |  |                           | 99,263  |             |  |       | 12,911  |   |  |  | 112,174 |  
|- Other intangible assets, principally goodwill        |  |                           | 20,475  |             |  |       | (2,034  | ) |  |  | 18,441  |  
|                                                       |  |                           |         |             |  |       |         |   |  |  |         |  
|Total adjustments                                      |  |                           | 139,585 |             |  |       | 10,877  |   |  |  | 150,462 |  
|                                                       |  |                           |         |             |  |       |         |   |  |  |         |  
|Amounts owed to Cagiva Group, settled subsequently     |  |                           | (65,136 | )           |  |       | (10,877 | ) |  |  | (76,013 | )
|                                                       |  |                           |         |             |  |       |         |   |  |  |         |  
|Ordinary shares issued as consideration (thousand)     |  |                           | 68,600  |             |  |       |        |   |  |  | 68,600  |  

The agreements relating to the Acquisition also provided for:



| |  |  | the placement of a portion of the cash consideration paid (
16,527 thousand) in an interest-bearing escrow in order to secure
contractual adjustments to the purchase (held on trust by Servizio
Italia);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a non-compete agreement, which has been valued at  7,747
thousand, for a period of five years after the controlling
shareholder has sold all of its interest;                                              

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| | - |  | a purchase price adjustment, subsequently established as 
2,034 thousand, in favor of the Company;                                                                                                                                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | - |  | a contingent payment based on operating results, as defined,
for 1997. In April 1997, Holding entered into an agreement with
Motori Italia S.p.A. of the Cagiva Group for a payment of  12,911
thousand in satisfaction of the contingent payment under the terms
of the purchase agreement relating to the Acquisition.

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).

On July 24, 1997, the Company, with a joint venture partner, established
Gio.Ca.Moto International S.r.l. (Gio.Ca.Moto), based in Bologna, Italy. In
September 1997, Holding acquired 50% of Gio.Ca.Moto, a business engaged in the
design, distribution and sale of customized accessories. Pursuant to an
agreement between the owners of Gio.Ca.Moto, Holding had, at that time, been
assigned, unconditionally and irrevocably, the voting rights for an additional
1% interest, providing Holding with the majority voting interest in
Gio.Ca.Moto. In addition, Holding controls the board of directors by virtue of
selecting two representatives (of a total of four members) and appointing the
chairman of the board who has an additional vote in case of deadlocks.
Accordingly, the accompanying consolidated financial statements include the
operations of Gio.Ca.Moto on a consolidated basis since the date of
acquisition. Subsequent to December 31, 1999, and further to an agreement made
during 1999, the Company completed the purchase of a further 49.9% of
Gio.Ca.Moto for a total consideration of approximately  904 thousand and
increased its holding in Gio.Ca. Moto International S.r.l. to 99.9%.

In connection with a re-organization of the Ducati distributorships,
subsidiaries were formed (Ducati Motor Deutschland GmbH and Ducati France S.A.
during 1997, Ducati Japan KK during 1998 and Ducati Benelux B.V. 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 except for Ducati
France S.A. which is 99.9% owned by Holding. Another subsidiary, Ducati Corse
S.r.l., 99% owned, was formed in 1998 to manage motor racing activity.

On October 24, 2000 by public deed no. 23,088/3,925 registered by notary
public Iacopo Bersani, deposited on October 25, 2000 in the Bologna Companies
Register, Ducati Motor S.p.A. was merged into its parent company Ducati Motor
Holding S.p.A. The procedures relating to this operation have now been
completed. The whole process, which began on March 3, 2000 with the approval of
the merger plan, ended with the preparation of the merger deed on October 24,
2000. In compliance with the law on such matters, the surviving company took
over, among other things, ownership of the equity investments held at that date
by Ducati Motor S.p.A., namely:



| |  |  | 100% Ducati North America Inc.;               
| | - |  | ----------------------------------------------
|
| |  |  | 99% Ducati Corse S.r.l.; and                  
|
| |  |  | 40% H.P.E. High Performance Engineering S.r.l.

From a statutory point of view, the effects of the merger took effect from
November 1, 2000, being the day after the date on which the last registration
required by art. 2504 sexies of the Civil Code was made, in accordance with
paragraph 2 of art. 2504-bis of the Civil Code.
This merger, which has been carried out in accordance with articles 2501 
2504 sexies of the Civil Code, as modified by Legislative Decree 22 of January
16, 1991, will allow the Company to rationalize and centralize the Groups
finance and treasury functions, as well as to eliminate legal and
administrative structures and related costs, charges and legal obligations. The
merger also aims to transform the listed company into the Groups main
operating company.

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The process began with the merger plan being approved by the Boards of the
two companies (art. 2501-bis C.C.) on March 3, 2000 and with the merger
resolution approved by the shareholders meetings of Ducati Motor Holding
S.p.A. on May 2, 2000 and Ducati Motor S.p.A. on May 5, 2000, as recorded in
the Bologna Companies Register on July 12, 2000.

Transactions carried out by the merged company, Ducati Motor S.p.A., have
been recognized in the financial statements of the surviving company, Ducati
Motor Holding S.p.A., with effect from 00.00 hours on 1 January 2000, in
compliance with article 2404-bis paragraph 3 of the Civil Code. The
aforementioned merger did not result in any accounting impact on the
consolidated financial statements of the group.

Considering the new opportunities offered by the Internet and the success
of the MH900 Evoluzione, on 14 July 2000, the Company established a new Group
company, Ducati.Com S.p.A., now Ducati.Com S.r.l., whose present purpose has
been previously indicated. The sole director is Federico Minoli.

The Group has 100% control over Ducati.Com S.r.l., whose shares are held
99% by Ducati Motor Holding S.p.A. and 1% by Ducati Corse S.r.l.

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1.c Summary of the significant accounting policies

Principles of preparation and consolidation

The audited consolidated financial statements of the Company have been
prepared for distribution to its shareholders in conformity with statutory
reporting requirements and accounting standards issued by the Consiglio
Nazionale dei Dottori Commercialisti e dei Ragionieri (National Board of Public
Accountants in Italy), and where these are not exhaustive, the Company has
adopted standards issued by the International Accounting Standard Board
(I.A.S.B.). Hereafter these have been identified as Italian GAAP. Italian
GAAP differs in certain respects from generally accepted accounting principles
in the United States of America (U.S. GAAP). A description of these
differences and their approximate effects on net profit and shareholders
equity is set forth in notes 29, 30 and 31. The financial statements have been
reformatted from the original Italian statutory financial statement
presentation to conform more closely with international presentation and
include certain additional disclosures required by the U.S. Securities and
Exchange Commission (the SEC).

The consolidated financial statements include the financial statements of:
Ducati Motor Holding S.p.A. and its majority owned subsidiaries, which are
Ducati Corse S.r.l., Ducati North America Inc., Ducati France S.A., Ducati
Motor Deutschland GmbH, Ducati Japan KK, Ducati Benelux B.V., Ducati UK Limited
and Ducati.Com S.r.l. from their respective dates of acquisition. All
significant inter-company balances and transactions have been eliminated on
consolidation.

Cash equivalents

The Company considers all highly liquid debt securities with original
maturity of three months or less to be cash equivalents. Certificates of
deposit are valued at the lower of either cost or market value. Securities
purchased under resale agreements are carried at spot value and include
interest accrued.

Accounts receivable and payable

Receivables are stated at nominal value net of an allowance for doubtful
accounts. When a receivable is factored with recourse, the corresponding amount
is included as a trade receivable until the receivable is settled by the
principal. Advances received from factoring companies are presented as a
liability in the balance sheet. When a receivable is factored without recourse,
the receivable is considered settled and is discharged as such.

In December 2002, the Parent Company Ducati Motor Holding S.p.A. signed a
contract, pursuant to Law 130/99, for the roll-over securitisation of trade
receivables without recourse for a period of around five years.

The information required to be disclosed by CONSOB communiqué no.
DAC/RM/97003369 of 9/4/1997 on accounting for credit assignments is given
below.

The Company completed the first tranche of the securitisation operation on 30
December 2002; being a roll-over type operation, the other tranches will be
completed in 2003 and subsequent years. The receivables were assigned, without
recourse, to Ducati Desmo Finance 1 S.r.l. (DDF1), (a special purpose vehicle
company set up specifically for this purpose in accordance with Law 130/99).
DDF1 is owned by two Dutch foundations, Stichting Syros and Stichting Kea, in
which the Ducati Group does not have any kind of interest, pact or agreement
that might imply its classification as a related party. In this initial phase,
DDF1 financed the purchase of the receivables by means of a bridge loan granted
by IntesaBCI. During the course of 2003, DDF1 will finance itself by issuing
bonds subscribed predominantly by Romulus Funding Inc. (Romulus), a finance
company based in Delaware (U.S.A.). Romulus is wholly owned by Global
Securitization Services LLC. The Ducati Group does not have any kind of
interest in

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Romulus or Global Securitization Services LLC, or pact or agreement that
might imply that these entities are a related party. Romulus will finance the
operation by issuing asset backed commercial paper that will then be placed on
the financial market.

The total nominal value of the assigned receivables, none of which had
fallen due at 31 December 2002, the collected amount immediately and the
deferred amount are the followings:

|                                                                           |  |                 |      | 
|-------------------------------------------------------------------------- |  | --------------- | ---- | 
|                                                                           |  | Million of Euro
|                                                                           |  |                
|Total nominal value
of the assigned receivables                            |  |                 | 26.7 | 
|Amount collected                                                           |  |                 | 20.0 | 
|Amount deferred net of commission and
exchange differences ( 0.2 million) |  |                 | 6.5  | 

The nominal value of the assigned receivables is made up of receivables
originally expressed in Euro (21.9 million), Australian Dollars (5.7 million)
and Swiss Francs (2.3 million).

Given that the securitisation is without recourse, the nominal value of
the receivables assigned has been written off from trade receivables and
accounted as cash and banks as far as the amount collected is concerned, and to
receivables from DDF1 as far as the deferred amount is concerned. The
receivables due from DDF1 at 31 December 2002 have been classified under trade
receivables, both for a clearer comparison with the prior year and because the
receivables assigned were trade-related. The effect of the securitisation
transaction on the net financial position at 31 December 2002 amounts to  20.0
million, equal to the amount collected. The initial costs of this roll-over
securitization transaction, amounting to  115 thousand, have been capitalised
to deferred charges and amortised over 5 years, which is the transactions
expected duration given that the quality of the portfolio transferred is
considered high and therefore the risk that the roll-over securitisation
transaction will be terminated in advance is considered unlikely.

The foreign exchange gains (losses) and the commissions related to the
securitization are accounted in the Statement of Operations.

For Ducati Group, the securitisation transaction involves a risk of not
collecting the deferred portion, which under the agreements between DDF1 and
the bank that granted the bridge loan to DDF1, is deferred to after
reimbursement of the loan and therefore subject to collection of the credits on
the part of the vehicle company. This risk has been taken into account when
calculating the allowance for doubtful accounts.

Payables are recorded at face value, which is considered to represent
their settlement value.

Inventories

Inventories are stated at the lower of cost, using the first-in, first-out
method, and net realizable value. Work-in progress and finished goods are
valued based upon annual average cost of production, which includes an
allocation for general overheads.

Property, plant, and equipment

Property, plant, and equipment are stated at historical cost less
accumulated depreciation. Maintenance and repairs are expensed as incurred;
significant improvements are capitalized and depreciated over the useful lives
of the related assets.

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Depreciation is calculated on the straight-line method over the estimated
useful lives of the assets. The following table summarizes the annual
depreciation rates of the Companys property, plant and equipment:

|                                        |  |             |       |  
|--------------------------------------- |  | ----------- | ----- | -
|                                        |  | Annual rate
|                                        |  |            
|Buildings                               |  |             | 3-10  | %
|Plant and machinery                     |  |             | 10-22 | %
|Industrial and sales tooling /equipment |  |             | 25-30 | %
|Other                                   |  |             | 10-25 | %

Assets acquired during the year are depreciated at half the annual rate.

Assets acquired under capital leases are recorded in accordance with
International Accounting Standards, which requires that where the necessary
conditions are met, such assets are recorded at the present value of minimum
lease payments and the obligation under capital leases is recognized as a
liability. The related assets are then amortized over their useful economic
lives.

Intangible assets

Intangible assets are carried at purchase/acquisition cost and are
amortized on the straight-line method over the estimated useful lives of the
assets. The following table summarizes the estimated useful lives of the
Companys intangible assets:

|                                                                        |  |       |      | 
|----------------------------------------------------------------------- |  | ----- | ---- | 
|                                                                        |  | Years
|                                                                        |  |      
|Incorporation and expansion costs                                       |  |       | 5    | 
|Research and development costs on specific product development projects |  |       | 5    | 
|Concept costs                                                           |  |       | 5-7  | 
|Ducati trademark                                                      |  |       | 20   | 
|Goodwill                                                                |  |       | 5-20 | 
|Non-compete agreement                                                   |  |       | 5-7  | 
|Incidental costs of share offering                                      |  |       | 5    | 
|Software, patents and licenses                                          |  |       | 3-5  | 

The life of the non-compete agreement represents the estimated minimum
non-compete period under the terms of the purchase agreement relating to the
Acquisition.

In addition to the above, intangible assets include leasehold improvements
and debt issuance costs incurred in obtaining long term financing. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
lease term and estimated life of the asset. Debt issuance costs are amortized
under the residual balance method over the term of the related financing.

Management periodically assesses the recoverability of intangible assets
and, in cases where such an asset is deemed to have no remaining useful
economic life, the carrying value of the asset is written off in full.

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Investments

Investments in non-associated companies are carried at cost and are
written down for any permanent impairment in value. Investments in associated
companies are accounted for under the equity method.

Income taxes

Current income taxes payable by each of the individual companies included
in the consolidation are calculated according to the tax regulations in force
in the country where each company is based and are classified under income and
other taxes payable. In addition, a provision is made for deferred tax
liabilities of the individual companies, as well as those arising from
consolidation adjustments, net of deferred tax assets where realization of the
benefit is considered reasonably certain on the basis of the particular
companys trading and forecasted performance.

Deferred taxes are calculated at the relevant local country tax rates in
force at the balance sheet date, bearing in mind the period in which
differences will presumably reverse, are reviewed annually to reflect changes in
the economic circumstances of the companies and in the tax rates. Deferred tax
assets and liabilities are accounted for in accordance with Accounting
Principle No. 25, issued by the Italian Accounting Profession in March 1999.

Revenue and cost recognition

Revenues for motorcycle sales are recognized when title passes to the
customer, usually the date of shipment to Ducatis independent importers or
dealers; in case of shipment to Ducatis subsidiaries, revenues are recognized
when title passes to the final customer. Revenues from services are recognized
when services are rendered to the independent dealer or other third party.
Costs are recognized on the accruals basis, with the costs of racing pilots and
teams being recognized over the terms of their contracts.

Advertising costs

Advertising costs are expensed as incurred.

Research and development

Research and development costs, comprising principally the cost of
personnel, materials and external consultants employed in that activity, are
capitalized as an intangible asset for specific product development projects;
otherwise, such costs are expensed as incurred under cost of goods sold
(excluding depreciation). Capitalized research and development costs for the
years ended December 31, 2000, 2001 and 2002 amounted to  8,626 thousand, 
13,307 thousand and  16,529 thousand respectively; these include projects in
progress not yet amortized at the year end. Expensed research and development
costs for the years ended December 31, 2000, 2001 and 2002 amounted to  4,116
thousand,  3,893 thousand and  4,879 thousand respectively.

Concept costs

Concept
costs incurred in the development of the Ducati image are
capitalized as an intangible asset and amortized on a straight line basis,
depending on the nature of the cost, over estimated useful lives of five to
seven years. Capitalized concept costs for the years ended December 31, 2000,
2001 and 2002 amounted to  34 thousand,  27 thousand and  0 thousand,
respectively.

Employee benefit plans

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. The full
amount of the employees vested benefits is accrued. The

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liability is adjusted on the basis of the official inflation. There is no
funding requirement associated with this liability. Leaving entitlements
charged in the years ended December 31, 2000, 2001 and 2002 amounted to  1,758
thousand,  1,954 thousand and  2,298 thousand, respectively.

Provision for risks and charges

Provision for risks and charges are recorded when it is probable that a
liability has been incurred and the amount of the loss can be reasonably
estimated.

Product warranty

Product warranties are accrued based upon the estimated warranty cost per
unit sold and recognized as part of selling, general and administrative
expenses (excluding depreciation). Product warranty expense for the years
ended December 31, 2000, 2001 and 2002 amounted to  9,664 thousand and 
8,505 thousand and  11,111 thousand, respectively.

Foreign currencies

Transactions

Foreign currency transactions are recorded at the exchange rates
applicable at the transaction dates. Assets and liabilities denominated in
foreign currencies are re-measured at exchange rates applicable at the balance
sheet date unless the transaction has been hedged. The resulting gains and
losses on current assets and liabilities are recorded in the statement of
operations. The resulting net loss on long term assets and liabilities is
recorded in the statement of operations, while a net gain is deferred and
subsequently released as the underlying assets and liabilities become
short-term. At the balance sheet date, assets and liabilities denominated in
foreign currencies and hedged by means of a forward exchange contract are
re-measured at the spot rates applicable at the date of the contract plus an
additional amount for the portion of forward exchange premium recognized in the
accounting period. The resulting foreign exchange gains and losses are recorded
in the statement of operations.

Translation

The
functional currency of the Companys foreign subsidiaries is the
respective local currency of that foreign subsidiary. The financial statements
of the Companys subsidiaries are translated into Euro based on:



| |  |  | the exchange rate at balance sheet date for assets and liabilities;  
| | - |  | ---------------------------------------------------------------------
|
| |  |  | the historical exchange rate for share capital and equity reserves;  
|
| |  |  | the average exchange rate in each period for statement of operations.

The resulting translation difference is recorded as an adjustment to
shareholders equity.

Derivative financial instruments

Interest rate swap agreements

Interest rate swap agreements designated to change the interest
characteristics of long-term debt are accounted for on an accrual basis. The
interest differential between the amounts received and paid is classified as
interest expense.

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Forward exchange contracts

Gains and losses on forward exchange contracts are deferred where the
contract is designated on stipulation to a commitment.

The premium paid to acquire forward exchange contracts is recognized as an
expense over the term of the contract; the amortized portion is recorded within
foreign exchange gain/(loss) in the statement of operations and under accrued
expenses and other liabilities in the balance sheet.

Interest rate cap agreements

An interest rate cap agreement designated as a hedge (i.e. to limit
interest cost) of long-term debt is accounted for on an accrual basis. Amounts
receivable under the agreement are recognized when due. Premium paid on the
interest cap agreement is amortized over its respective term.

Net profit/(loss) per share

While, under Italian GAAP, the presentation of net profit/(loss) per share
is not compulsory, the Company has elected to disclose net profit/(loss) per
share on the face of the consolidated statement of operations.

Net profit/(loss) per share is computed by dividing the net profit/(loss)
by the number of ordinary shares outstanding at the year-end; the year-end
number of shares is applied rather than the weighted-average number of
ordinary shares outstanding during the year since, under Italian law, only
shareholders at year-end are entitled to the dividend distribution for that
year. The number of ordinary shares outstanding gives effect to the share
split described in note 17; however this does not reflect the effect of
incremental shares, if any, that would have been outstanding under the
Companys share option plans.

2. Cash and cash equivalents

At December 31, cash and cash equivalents were comprised of the following
items:

|                                                                         |  |              |        |              |  |  |        | 
|------------------------------------------------------------------------ |  | ------------ | ------ | ------------ |  |  | ------ | 
|                                                                         |  | December 31, |        | December 31,
|                                                                         |  | 2001         |        | 2002        
|                                                                         |  |              |        |             
|                                                                         |  | ( 000)     
|Bank and postal accounts                                                 |  |              | 23,652 |              |  |  | 23,837 | 
|Cash on hand                                                             |  |              | 21     |              |  |  | 95     | 
|Certificates of deposit and securities
purchased under
resale agreements |  |              | 32     |              |  |  | 28     | 
|                                                                         |  |              |        |              |  |  |        | 
|                                                                         |  |              | 23,705 |              |  |  | 23,960 | 

Certificates of deposit and securities purchased under resale agreements
represent cash equivalents derived from ongoing treasury management activities.

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3. Trade receivables, net

At December 31, trade receivables, net, were comprised of the following
items:

|                                |  |              |         |              |  |  |        |  
|------------------------------- |  | ------------ | ------- | ------------ |  |  | ------ | -
|                                |  | December 31, |         | December 31,
|                                |  | 2001         |         | 2002        
|                                |  |              |         |             
|                                |  | ( 000)     
|Trade accounts receivable-gross |  |              | 102,349 |              |  |  | 86,230 |  
|Allowance for doubtful accounts |  |              | (4,322  | )            |  |  | (4,188 | )
|                                |  |              |         |              |  |  |        |  
|                                |  |              | 98,027  |              |  |  | 82,042 |  

The decrease in the allowance for doubtful accounts in 2002 refers to
collection of receivables mainly concerning foreign subsidiaries in particular
due to Ducati North America Inc.

The comparison between the two years of trade receivables is affected by
the securitisation transaction described in the section of the notes on the
accounting policies applied to receivables, to which the reader is referred. At
31 December 2002, the amount of receivables assigned without recourse through
the securitisation transaction totals  26.7 million.

The amount due from DDF1 for  6.5 million represents the deferred revenue
of the securitisation transaction as at 31 December 2002; it is classified
under trade receivables so as to provide a better comparison with the previous
year, as the receivables assigned are trade-related.

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4. Inventories

At December 31, inventories were comprised of the following items:

|                                                   |  |              |        |              |  |  |         |  
|-------------------------------------------------- |  | ------------ | ------ | ------------ |  |  | ------- | -
|                                                   |  | December 31, |        | December 31,
|                                                   |  | 2001         |        | 2002        
|                                                   |  |              |        |             
|                                                   |  | ( 000)     
|Raw materials, ancillary materials and consumables |  |              | 9,627  |              |  |  | 8,341   |  
|Work in progress                                   |  |              | 15,722 |              |  |  | 16,357  |  
|Finished products and goods, and spare parts       |  |              | 76,574 |              |  |  | 92,115  |  
|Allowance for slow-moving and obsolete inventory   |  |              | (4,287 | )            |  |  | (5,386  | )
|                                                   |  |              |        |              |  |  |         |  
|                                                   |  |              | 97,636 |              |  |  | 111,427 |  

The allowance for slow-moving and obsolete inventory primarily relates to
spare parts, supplies of which are in general retained for a period of ten
years subsequent to sale. As a result, the quantity of spare parts in inventory
may be greater than requirements and an allowance has been established to cover
the probable losses on such inventory. Starting from 2002, spare parts are
classified under finished products so as to reflect better their main
utilization, being destined for resale, while until 2001 they were booked under
raw materials. For better comparability, the balances as at December 31, 2001
have been reclassified from raw materials to finished products for  12,168
thousand.

5. Other current assets

At December 31, other current assets were comprised of the following
items:

|                         |  |              |       |              |  |  |        | 
|------------------------ |  | ------------ | ----- | ------------ |  |  | ------ | 
|                         |  | December 31, |       | December 31,
|                         |  | 2001         |       | 2002        
|                         |  |              |       |             
|                         |  | ( 000)     
|VAT receivable           |  |              | 2,763 |              |  |  | 3,768  | 
|Tax authorities          |  |              | 1,196 |              |  |  | 2,038  | 
|Suppliers                |  |              | 1,839 |              |  |  | 2,191  | 
|Other amounts receivable |  |              | 496   |              |  |  | 1,074  | 
|Prepaid expenses         |  |              | 1,744 |              |  |  | 4,636  | 
|                         |  |              |       |              |  |  |        | 
|                         |  |              | 8,038 |              |  |  | 13,707 | 

Receivables from the tax authorities mainly comprise withholding taxes on
interest earned by the Company as well as corporation tax for those companies
which have paid amounts in excess of their tax liability for the year.
Receivables from suppliers comprise primarily advance payments on imports.
Prepaid expenses mainly refer to insurance policies, directors remuneration,
sponsorship contracts and prepaid bank charges and interest. Prepaid expenses
include also a deferred loss of  3,194 thousand relating to forward hedging
contracts.

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6. Property, plant and equipment, net

At December 31, property, plant and equipment, net, were comprised of the
following items:

|                                       |                                       |  |              |         |              |  |        |         |  
|-------------------------------------- | ------------------------------------- |  | ------------ | ------- | ------------ |  | ------ | ------- | -
|                                       |                                       |  | December 31, |         | December 31,
|                                       |                                       |  | 2001         |         | 2002        
|                                       |                                       |  |              |         |             
|                                       |                                       |  | ( 000)     
|Land and buildings                     |                                       |  |              |         |              |  |        |        
|                                       | Cost                                  |  |              | 30,066  |              |  |        | 29,302  |  
|                                       | Accumulated depreciation              |  |              | (4,586  | )            |  |        | (5,298  | )
|                                       |                                       |  |              |         |              |  |        |         |  
|                                       | Net book value                        |  |              | 25,480  |              |  |        | 24,004  |  
|Plant and machinery                    |                                       |  |              |         |              |  |        |        
|                                       | Cost                                  |  |              | 21,770  |              |  |        | 28,288  |  
|                                       | Accumulated depreciation              |  |              | (10,119 | )            |  |        | (12,985 | )
|                                       |                                       |  |              |         |              |  |        |         |  
|                                       | Net book value                        |  |              | 11,651  |              |  |        | 15,303  |  
|Industrial and sales tooling/equipment |                                       |  |              |         |              |  |        |        
|                                       | Cost                                  |  |              | 27,528  |              |  |        | 42,299  |  
|                                       | Accumulated depreciation              |  |              | (16,851 | )            |  |        | (23,056 | )
|                                       |                                       |  |              |         |              |  |        |         |  
|                                       | Net book value                        |  |              | 10,677  |              |  |        | 19,243  |  
|Other                                  |                                       |  |              |         |              |  |        |        
|                                       | Cost                                  |  |              | 7,841   |              |  |        | 9,730   |  
|                                       | Accumulated depreciation              |  |              | (3,506  | )            |  |        | (4,234  | )
|                                       |                                       |  |              |         |              |  |        |         |  
|                                       | Net book value                        |  |              | 4,335   |              |  |        | 5,496   |  
|                                       | Construction in progress and payments |  |              | 2,433   |              |  |        | 2,356   |  
|                                       |                                       |  |              |         |              |  |        |         |  
|                                       |                                       |  | 54,576       |         |              |  | 66,402 |        

Property, plant and equipment include  1,576 thousand for leasehold
improvements. These improvements refer to a building involved in a sale and
lease-back operation, as explained in the note Leasing and are amortized over
their estimated useful life.

Ducati Motor Holding S.p.A. and, starting from year 2002, its subsidiary
Ducati Corse S.r.l. have entered into capital lease agreements for machines and
machining centers and industrial building. The original cost of these assets
amounted to approximately  6,599 thousand at December 31, 2002 for machines
and machining and  23,622 thousand for industrial building.

Leasing

As of 31 December 2002, the Group has entered into lease contracts relating to:



| |  |  | machinery and work stations; and             
| | - |  | ---------------------------------------------
|
| |  |  | an industrial building for  23,622 thousand.

These assets have been recorded in the statutory financial statements of
Ducati Motor Holding S.p.A. and its subsidiary Ducati Corse S.r.l. according to
current Italian legislation, by which lease installments are charged to the
statement of operations as incurred with the commitment for residual
installments appearing in the commitments and contingent liabilities. The
related assets are recorded among property, plant and equipment only when they
are redeemed. This practice is in line with current fiscal legislation.

As of 29 June 2001, the Parent Company completed a sale and lease-back
transaction involving an industrial building. This refers to a part of a
building complex used for production purposes located in Via A. Cavalieri
Ducati 3, Bologna. The transaction involved selling the building at around book
value to Locafit Locazione Macchinari Industriali S.p.A., a leasing company,
for  20,710 thousand, with a sale contract notarised by Iacopo Bersani (notary
public) on 29 June 2001, repertory no. 24473/4192, and signing a lease
contract with the same company. This contract has a duration of 8 years from
the date it was signed.

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By way of consideration for the finance lease on the building, Ducati
Motor Holding S.p.A. will pay Locafit SpA  24,767 thousand plus VAT in 32
quarterly installments, as established in the contract. As indicated in the
accounting policies, up to the audited consolidated financial statements for
the year ended 31 December 2000, minor leases involving machinery and work
stations were accounted for in the same way as in the statutory financial
statements, given that they were in any case immaterial.

As from the audited consolidated financial statements for the period ended
31 December 2001, the Group has chosen to use the recommended financial method
for the consolidated financial statements, considering the importance of the
sale and lease-back transaction. This method involves booking the leased assets
and charging depreciation over their useful life in the same way as property,
plant and equipment, at the same time booking the liability to the leasing
company, and charging the financial expenses in the statement of operations on
an accruals basis. The effect of adoption of this accounting principle has had
an immaterial impact on the consolidated financial statements.

Following the adoption of this method, minor lease contracts have also
been accounted for in the same way.

7. Intangible assets, net

At December 31, intangible assets, net, were comprised of the following
items:

|                                        |  |              |         |              |  |  |         | 
|--------------------------------------- |  | ------------ | ------- | ------------ |  |  | ------- | 
|                                        |  | December 31, |         | December 31,
|                                        |  | 2001         |         | 2002        
|                                        |  |              |         |             
|                                        |  | ( 000)     
|Incorporation and expansion costs       |  |              | 705     |              |  |  | 468     | 
|Research and development costs          |  |              | 19,370  |              |  |  | 21,416  | 
|Concept costs                           |  |              | 185     |              |  |  | 77      | 
|Patents and rights on inventions        |  |              | 3,274   |              |  |  | 4,087   | 
|Licenses, trademarks and similar rights |  |              | 82,402  |              |  |  | 76,825  | 
|Goodwill due to 1996 transaction        |  |              | 15,941  |              |  |  | 14,765  | 
|Non Compete agreement                   |  |              | 2,411   |              |  |  | 1,378   | 
|Goodwill on consolidation               |  |              | 1,100   |              |  |  | 959     | 
|Deferred charges and advances           |  |              | 225     |              |  |  | 6,054   | 
|Incidental costs of share offering      |  |              | 4,195   |              |  |  | 2,311   | 
|Other                                   |  |              | 2,192   |              |  |  | 2,178   | 
|                                        |  |              |         |              |  |  |         | 
|                                        |  |              | 132,000 |              |  |  | 130,518 | 

Incorporation and expansion costsrelate principally to incidental costs
of the incorporation of the parent company and the Acquisition. These are
amortized on a straight-line basis over five years.

Research and development costsrelate to development of new models and
engines and are amortized over five years from when incurred.

Concept costsrelate to costs incurred for the development of the
Ducati image, and are amortized on a straight-line basis over a useful life
of five to seven years.

Patents and rights on inventionsmainly consist of software licenses and
the costs of patent rights maintenance. These are amortized on a straight-line
basis over three or five years.

As at December 31, 2001, this item included a writedown of  1,720
thousand of Ducati.Com S.p.A.s e-commerce software. This software, which was
developed during the start-up phase, reflected an architecture suitable for
on-line sales. This distribution channel was not doing enough business to
support the costs of the site and its organization. For this reason, having

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also performed a critical analysis of the sites utilization and level of
obsolescence, the Group prudently carried out an extraordinary writedown of the
net book value based on a permanent impairment of value, also considering the
change in Ducati.Coms business purpose. This writedown has been recorded in
the consolidated statement of operations under amortization of intangible
assets.

Licenses, trademarks and similar rightsrepresent principally the purchase
of the Ducati trademark in the Acquisition. This item, in previous years,
was reduced by  465 thousand on the sale of the Moto Morini trademark, which
had been purchased at the Acquisition, and sold at a small loss.

During 2000, the Parent Company took advantage of Law no. 342 of November
21, 2000 on the revaluation of assets, in order to restate the value of its
trademark in its statutory accounts. The purpose of this law is to allow
companies to bring the book value of certain assets to fair value, and the
revaluation can be applied to assets of the same category as assets shown in
the financial statements as of December 31, 1999. During 2000, the Parent
Company restated the historical cost of its trademark without adjusting
accumulated amortization, as permitted by the Italian Treasury in its circular
of November 6, 2000.

The amount of the revaluation,  29,924 thousand, was confirmed by an
independent expert opinion. Upon revaluation, the net book value of the
trademark in the statutory financial statements is same as the net book value
of the trademark in the Companys audited consolidated financial statements,
where the trademark has always been amortized over an estimated useful life of
20 years. The higher book value in the statutory financial statements resulting
from the revaluation is recognized for national and regional income tax
purposes (Irpeg and Ilor) in 2000, the year in which the revaluation was made.
The Company has therefore calculated amortization for statutory and fiscal
purposes on the trademarks new restated value. The increase in valuation, net
of the related substitute tax of  5,686 thousand, has been included in a
special reserve.

The resulting impact on the 2000 audited consolidated financial statements
of the revaluation of the trademark was an increase of  5,686 thousand in
current taxes due for the substitute tax to be paid on the revaluation, a
decrease of  12,353 thousand in deferred tax liabilities previously recorded
on the temporary difference between the trademark value on the consolidated
financial statements and the value for fiscal purposes, and an increase of 
6,658 thousand in other non-operating income.

Amortization on trademark has been calculated in the audited consolidated
financial statements over a period of 20 years. The useful life of the Ducati
trademark is difficult to determine with accuracy as it is dependent on the
expected life and development of the business, even though these are forecast
to span over a long period of time. For this reason, amortization has been
calculated over 20 years, which is the maximum period currently allowed under
Italian accounting principles for the amortization of intangible fixed assets
such as trademarks.

Goodwill

Relating to the 1996 transaction: this represents the additional value
attributed at the time of the Acquisition to the Ducati business in excess
of the identifiable assets and liabilities of the Predecessor Business and as
adjusted for certain related costs incurred after the Acquisition. The useful
life of this goodwill is difficult to determine with accuracy as it is
dependent on the expected life and development of the business, even though
these are forecast to span over a long period of time. For this reason,
amortization has been calculated over 20 years.

Goodwill on consolidation:  1,291 thousand was incurred in 1998 when the
distribution networks in France and Germany were acquired; this is being
amortized over a period of 15 years, according to expected useful economic
life. Goodwill of  91 thousand was incurred in the year ended December 31,
1999 when the distribution network in the Benelux countries was acquired; this
is being amortized over a period of 5 years, its expected useful economic life.
The increase of  152 thousand during the year ended December 31, 2000 relates
to the goodwill paid for the

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acquisition of the UK sales network, to be amortized over 3 years. This
item also includes  129 thousand of goodwill of Gio.ca Moto International
S.r.l. (now merged with Ducati Motor Holding S.p.A.) which is being amortised
over 5 years.

Non compete agreement: a non-competition agreement was signed by the
Parent Company and the holding company of the Cagiva Group in connection with
the acquisition of the Ducati business in 1996. This amount is being amortised
on a straight line basis of 7 years and 6 months and amounts to  1,378
thousand at December 31, 2002, net of accumulated amortization.

Deferred charges and advancesat December 31, 2002 relate to research and
development capital work in progress of  5,599 thousand and other advances for
 495 thousand.

Incidental costs of the share offering, comprising underwriters
discounts, commissions, consultant/auditor fees and other offering expenses,
are being amortized for a period of 5 years from the date that the Company
listed for trading on a public stock exchange.

Other intangiblesinclude the costs of obtaining long-term loans from
credit institutions. At December 31, 1999, other intangibles included debt
issuance costs of  3,029 thousand incurred for the Credit Agreement in July
1998 (see note 10), which was being amortized over the period of the Credit
Agreement according to the residual balance method. After extinguishing this
loan on May 31, 2000, the residual amount of  1,894 thousand has been written
down and recorded under Other write downs of fixed assets for the period
ended December 31, 2000.

This item also includes  335 thousand relating to bank commissions
incurred for the notes issued by the Parent Company on May 31, 2000, with
maturity on May 31, 2005. The cost is being amortized on a straight-line basis
over the life of the bond which is scheduled to be repaid in a lump-sum on May
31, 2005.

Other intangible assets are amortized on a straight-line basis over 3, 5 and
7-year periods.

F-24



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##### Table of Contents



8. Equity investments

At December 31, equity investments were comprised of the following items:

|                                                                                                                 |  |              |   |              |  |  |    | 
|---------------------------------------------------------------------------------------------------------------- |  | ------------ | - | ------------ |  |  | -- | 
|                                                                                                                 |  | December 31, |   | December 31,
|                                                                                                                 |  | 2001         |   | 2002        
|                                                                                                                 |  |              |   |             
|                                                                                                                 |  | ( 000)     
|Associated companies:                                                                                            |  |              |   |              |  |  |    | 
|Other Shareholdings:                                                                                             |  |              |   |              |  |  |    | 
|ANCMAAssociazione Nazionale
Costruttori Motocicli e Accessori
(National Association of Motorcycle Constructors) |  |              | 1 |              |  |  | 2  | 
|Consorzio Diamante                                                                                               |  |              |  |              |  |  | 10 | 
|                                                                                                                 |  |              |   |              |  |  |    | 
|                                                                                                                 |  |              | 1 |              |  |  | 12 | 

9. Other long-term assets

At December 31, other long-term assets were comprised of the following
items:

|                                                       |  |              |        |              |  |  |        | 
|------------------------------------------------------ |  | ------------ | ------ | ------------ |  |  | ------ | 
|                                                       |  | December 31, |        | December 31,
|                                                       |  | 2001         |        | 2002        
|                                                       |  |              |        |             
|                                                       |  | ( 000)     
|Credit Link                                            |  |              | 15,000 |              |  |  | 15,000 | 
|Prepaid tax payments on employees leaving
entitlement |  |              | 260    |              |  |  | 198    | 
|Other long-term assets                                 |  |              | 350    |              |  |  | 418    | 
|                                                       |  |              |        |              |  |  |        | 
|                                                       |  |              | 15,610 |              |  |  | 15,616 | 

Credit Link. During 2001, Ducati Motor Holding S.p.A. initiated a
financial operation called Credit Link for  15.0 million which is strictly
connected to the issuance of the Bond Loan and in particular, to the risk of
default on this loan. The risk of default refers to the non- performance by
Ducati Motor Holding S.p.A. of financial obligations related to the loan up to
a maximum of  15.0 million. This transaction, the purpose of which is to
maximize the benefit of liquid funds generated during 2001, was formalized by
acquiring a bond issued by the Dutch subsidiary of Banca Nazionale del Lavoro,
which yields an annual deferred coupon of 5.89%. It was issued on
31 July 2001
with expiry on 31 May 2005. Maturities of the Credit Link and related interest
instalments are tied to those of the Bond Loan.

Prepaid tax payments on employees leaving entitlementsrelate to payroll
taxes prepaid on the entitlements accrued at the balance sheet date, as per Act
28/05/97 no.140 implementing Law-Decree D.L. 28/03/97 n.79.

Other long-term assetsmainly consist of deposits for rented properties
and utilities.

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10. Borrowings

At December 31, short-term bank borrowings were comprised of the following
items:

|                          |  |              |        |              |  |  |        | 
|------------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                          |  | December 31, |        | December 31,
|                          |  | 2001         |        | 2002        
|                          |  |              |        |             
|                          |  | ( 000)     
|Revolving credit facility |  |              | 38,858 |              |  |  | 39,287 | 
|Other                     |  |              | 12     |              |  |  | 6      | 
|                          |  |              |        |              |  |  |        | 
|                          |  |              | 38,870 |              |  |  | 39,293 | 

At December 31, long-term debt was comprised as follows:

|                    |  |              |        |              |  |  |        | 
|------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                    |  | December 31, |        | December 31,
|                    |  | 2001         |        | 2002        
|                    |  |              |        |             
|                    |  | ( 000)     
|Current portion     |  |              | 2,270  |              |  |  | 3,230  | 
|Non-current portion |  |              | 91,000 |              |  |  | 91,000 | 
|                    |  |              |        |              |  |  |        | 
|                    |  |              | 93,270 |              |  |  | 94,230 | 

At December 31, 2002 the amounts due to banks within 12 months was 
39,293 thousand. This relates for  39,287 thousand to the bank borrowings of
Ducati Motor Holding S.p.A., the Parent Company, specifically for a short term
loan from Banca Commerciale Italiana, and for  6 thousand to Ducati U.K. Ltd.

On May 31, 2000, DMH issued notes in the aggregate principal amount of 
100 million. The notes, which mature on May 31, 2005, bear interest at a fixed
rate of 6.50% per annum, with the total principal amount being repayable at
maturity. The net proceeds to DMH from the sale of the notes was  99,186,000
after deduction of the issue price discount and the combined management and
underwriting commission and the selling concession. Proceeds of the notes were
used to prepay in full all amounts owed under the Credit Agreement. As a
result, the Credit Agreement has been terminated. The terms and conditions of
the notes do not include any financial coverage ratios or performance
covenants, but do limit the ability to create liens on assets to secure (i)
indebtedness represented by bonds, notes, debentures or other negotiable
instruments or (ii) any guarantee of such indebtedness. Events of default under
the terms and conditions of the notes, which would entitle the note holders to
declare the notes to be immediately due and payable, include, but are not
limited to, failure to pay interest or principal under the notes when due,
failure to comply with any obligations under or in respect of the notes,
failure to pay other indebtedness when due, acceleration of other indebtedness
and the occurrence of certain bankruptcy or other insolvency events.

The notes are listed on the Luxembourg Stock Exchange and were sold
exclusively to institutional investors in Italy and abroad, excluding the
United States of America.

On May 18, 2001, Ducati Motor Holding S.p.A. repurchased two tranches of
this bearer bond on the market at a nominal value of  4 million and  5
million respectively with payment taking place on May 23, 2001. The first
tranche of  4 million was purchased at  101.23, with a purchase discount of 
49,200; the second tranche of a nominal  5 million was purchased at  101.25,
with a purchase discount of  62,500. The Company has cancelled these
securities, so the bond loan is shown net of this repurchase.

This transaction represents the partial and advance use of the money which
Ducati Motor Holding S.p.A. obtained via the property sale and lease-back
operation completed on June 29, 2001; by means of this operation (see footnote
on Leasing), Ducati Motor Holding S.p.A. liquidated part of its property and
then used the funds to finance its medium-term requirements at an interest rate
which was more favorable than the rate applicable to the bonds.
(See footnote 9 in connection with the Credit Link operation).

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Up to December 31, 1999, costs incurred to obtain the 1998 loan were
included in other intangible fixed assets. Such costs were amortized over the
life of the loan, according to the residual balance method. After extinguishing
this loan on May 31, 2000, the residual part was written down by  1,894
thousand and recorded under Other write downs of fixed assets.

All hedging contracts were unwound upon repayment of the long term
borrowing; as a result,  2,705 thousand was recorded as interest income for
the period ended December 31, 2000, as described in note 25. At December 31,
2001 and 2002, the Company did not have any hedging contracts relating to long
term debt, since the medium/long-term debt position is entirely denominated in
Euro and is not subject to any significant interest rate change risk.

Current portion on long-term debt and other short-term borrowings at
December 31, are detailed below:

|                                                  |  |              |        |              |  |  |        | 
|------------------------------------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                                                  |  | December 31, |        | December 31,
|                                                  |  | 2001         |        | 2002        
|                                                  |  |              |        |             
|                                                  |  | ( 000)     
|Short-term borrowing with Banca Commerciale
(DMH) |  |              | 38,858 |              |  |  | 39,287 | 
|Current portion of the term loan                  |  |              | 2,270  |              |  |  | 3,230  | 
|Other                                             |  |              | 12     |              |  |  | 6      | 
|                                                  |  |              |        |              |  |  |        | 
|                                                  |  |              | 41,140 |              |  |  | 42,523 | 

11. Accounts payabletrade

At December 31, accounts payable to suppliers were comprised of the
following items:

|                                                     |  |              |        |              |  |  |        | 
|---------------------------------------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                                                     |  | December 31, |        | December 31,
|                                                     |  | 2001         |        | 2002        
|                                                     |  |              |        |             
|                                                     |  | ( 000)     
|Accounts payable to Italian suppliers                |  |              | 24,171 |              |  |  | 29,454 | 
|Accounts payable to foreign suppliers                |  |              | 15,482 |              |  |  | 18,118 | 
|Accrued invoices (mostly due from Italian
suppliers) |  |              | 47,096 |              |  |  | 47,540 | 
|                                                     |  |              |        |              |  |  |        | 
|                                                     |  |              | 86,749 |              |  |  | 95,112 | 

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12. Accrued expenses and other liabilities

At December 31, accrued expenses and other current liabilities were
comprised of the following items:

|                        |  |              |        |              |  |  |        | 
|----------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                        |  | December 31, |        | December 31,
|                        |  | 2001         |        | 2002        
|                        |  |              |        |             
|                        |  | ( 000)     
|Advances received       |  |              | 2,957  |              |  |  | 2,806  | 
|Social security payable |  |              | 2,347  |              |  |  | 2,415  | 
|Other liabilities       |  |              | 6,722  |              |  |  | 6,074  | 
|Accrued expenses        |  |              | 4,737  |              |  |  | 4,850  | 
|                        |  |              |        |              |  |  |        | 
|                        |  |              | 16,763 |              |  |  | 16,145 | 

Other liabilities mainly represent amounts due to employees and advances
received from customers for future purchases of the MH900 and 996R motorcycles.
These advance bookings were taken through the Companys website. The
considerable decrease is almost totally due to reimbursement of these advances
on completion of the sales.

Accrued expenses include the extraordinary remuneration authorized by the
Compensation Committee and confirmed by the Board of Directors in favor of
beneficiaries, among whom the Chairman and Managing Director. This remuneration
is to be paid in a lump-sum on February 14, 2003 and accrues from February 14,
2002 to February 14, 2003, with  1,048 thousand being the accrual for the
period.

As of December 31, 2002 interest of  3,450 thousand on the notes issued
on May 31, 2000 has also been accrued, as more fully explained in note 10. The
interest accrual has been calculated in accordance with the terms and
conditions of the note agreement, namely a coupon rate of 6.5% per annum.

This balance also includes deferred income for the grant received by the
former subsidiary Ducati Motor S.p.A., now merged with Ducati Motor Holding
S.p.A., from the Ministry of Industry under Law 140 by way of automatic
incentives for innovation. The full amount of the grant,  421 thousand, has
been booked as other income for 2000, with deferral of the portion relating to
subsequent years.

This item includes also  57 thousand related to contributions recognized
to Ducati Corse S.r.l. by the Ministries of Education, University and Research
and relates to contracts between Ducati Corse S.r.l. and the universities of
Padua, Bologna and Perugia. These contributions represent 60% of costs incurred
and are shown under other income and revenues and deferred for the portion
pertaining to the amortization period.

13. Provisions for risks and charges

Provisions for risks and charges include provisions for the following:

Product warrantyfor  11,925 thousand at December 31, 2002 (2001: 
12,130 thousand) are estimated on the basis of both the cost for material and
labor historically incurred for warranties for each model sold to the end
market over the last 24 months, and the expected cost of recall campaigns.

Legal actionsfor  23 thousand at December 31, 2002 (2001:  142
thousand) mainly relate to damages claimed by the Companys former Belgian
distributor for termination of the distribution agreement. In September 1998,
the Belgian courts passed judgment in favor of the former Belgian distributor
for the payment of damages amounting to  1.3 million. Ducati Motor S.p.A.
appealed against the decision on September 21, 1998. In the meantime, the
distributor

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sequestered motorcycles to the approximate value of  775 thousand, for
which a provision for legal action was made as of December 31, 1998. The
provision was reduced by  428 thousand during the year ended December 31,
1999, following developments in the case. In particular, 106 Ducati motorcycles
that had been confiscated in Belgium were auctioned and their book value of 
419 thousand was discharged from inventories. The proceeds from the auction
were credited to the former Belgian distributor, the opposing party in dispute.
The Belgian courts subsequently reversed this first decision on appeal. The
Company has not recorded the amounts due from the former Belgian distributor as
the probability of recovering the auction proceeds seem remote. During the
course of 2001, the reserve was adjusted by 322 thousand. The provision as of
31 December 2002 is deemed to be adequate.

The Ducati Group is also party to a legal dispute with Virginio Ferrari
Racing, one of the two racing teams sponsored by Ducati in the 1998 Superbike
World Championship. Ducati Motor S.p.A. decided not to sponsor Virginio Ferrari
Racing in the 1999 Superbike World Championship. Virginio Ferrari Racing
served a writ on Ducati Motor S.p.A. for a claim of around  6,714 thousand
(Lire 13 billion) in damages suffered by Virginio Ferrari Racing and by Mr.
Virginio Ferrari following the alleged failure of Ducati Motor S.p.A. to honour
its supposed obligation to sponsor the racing team for three years. The Ducati
Group is of the belief that the claim is unfounded and consequently has not
made any provision in the consolidated financial statements as of 31 December
2002.

The Ducati Group is 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
materially adverse effect on our business, financial condition or results of
operations. In particular:

Legal action by a former manageramounts to  143 thousand at December 31,
2002 (2001:  181 thousand) and relates to a provision by Ducati North America,
Inc. in connection with a legal action initiated by a former manager of the
Cagiva Group seconded to Cagiva North America, Inc. (now Ducati North America,
Inc.). Ducati Motor Holding S.p.A. is also involved in disputes with the same
former manager of the Cagiva Group. However, no significant liabilities are
expected as a result of these disputes based on available information and the
opinion of the Companys legal advisors.

Legal risksprovided by a German subsidiary amounts to  109 thousand at
December 31, 2002 against a dispute with a dealer.

Legal actionby Mike Hailwood amounts to  375 thousand. Ducati Motor
Holding S.p.A. and its subsidiary Ducati North America Inc. have been called
before the New Jersey District Court by the widow of the famous motorcyclist
Mike Hailwood, acting presumably as trustee of his estate. Mrs Hailwood
maintains that as the Company sold a model called the MH900e, using Mike
Hailwoods initials as a tribute to his memory and his career, we violated the
brand licence that protected his name and initials, both of which belong to
Hailwoods estate. Mrs Hailwood has asked for compensation for the damages
resulting from this alleged violation, together with an injunction to prevent
the Company using Mike Hailwoods name and initials any more. At 31 December
2002, a proposal was being formalised between the company and Mrs Hailwood in
order to settle this dispute. This agreement envisages paying the other party
an amount of  375 thousand to settle this dispute, in addition to agreements
concerning future collaboration with her son, D. Hailwood.

Movements in the total of provisions for risks and charges for the periods
presented were as follows:

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|                     |  |                    |        |                   |  |       |        |   |  |  |         |  
|-------------------- |  | ------------------ | ------ | ----------------- |  | ----- | ------ | - |  |  | ------- | -
|                     |  | Short-term portion |        | Long-term portion |  | Total
|                     |  |                    |        |                   |  |      
|                     |  | ( 000)           
|December 31, 2000    |  |                    | 10,078 |                   |  |       | 3,305  |   |  |  | 13,383  |  
|Increases            |  |                    | 8,642  |                   |  |       |       |   |  |  | 8,642   |  
|(Decreases)          |  |                    | (9,556 | )                 |  |       |       |   |  |  | (9,556  | )
|Foreign exchange net |  |                    | (16    | )                 |  |       |       |   |  |  | (16     | )
|                     |  |                    |        |                   |  |       |        |   |  |  |         |  
|December 31, 2001    |  |                    | 9,148  |                   |  |       | 3,305  |   |  |  | 12,453  |  
|Increases            |  |                    | 7,831  |                   |  |       | 3,998  |   |  |  | 11,829  |  
|(Decreases)          |  |                    | (8,128 | )                 |  |       | (3,305 | ) |  |  | (11,433 | )
|Foreign exchange net |  |                    | (274   | )                 |  |       |        |   |  |  | (274    | )
|                     |  |                    |        |                   |  |       |        |   |  |  |         |  
|December 31, 2002    |  |                    | 8,577  |                   |  |       | 3,998  |   |  |  | 12,575  |  

The decrease in 2002 of  11,433 is primarily due to utilization of the
warranty reserve. The long-term portion is composed of  3,998 thousand for the
non-current portion of the provision for product warranties.

14. Income and other taxes payable

Income and other taxes payable mainly include the income, property and
other non-income taxes due by each company in the Ducati group and withholdings
of tax made by the Company yet to be reimbursed at the balance sheet date.

15. Employees leaving entitlements

The movements in this account, which primarily relates to the entitlement
under Italian law as outlined in note 1, were as follows:

|                                     |  |              |        |              |  |  |       |  
|------------------------------------ |  | ------------ | ------ | ------------ |  |  | ----- | -
|                                     |  | December 31, |        | December 31,
|                                     |  | 2001         |        | 2002        
|                                     |  |              |        |             
|                                     |  | ( 000)     
|Balance at the beginning of the year |  |              | 4,775  |              |  |  | 5,719 |  
|Charge for the year                  |  |              | 1,954  |              |  |  | 2,298 |  
|Foreign exchange, net                |  |              | (10    | )            |  |  | (13   | )
|Payments                             |  |              | (1,000 | )            |  |  | (878  | )
|                                     |  |              |        |              |  |  |       |  
|Balance at the end of the year       |  |              | 5,719  |              |  |  | 7,126 |  

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16. Other long-term liabilities

At December 31, other long-term liabilities were comprised of the
following items:

|                          |  |              |        |              |  |  |        | 
|------------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                          |  | December 31, |        | December 31,
|                          |  | 2001         |        | 2002        
|                          |  |              |        |             
|                          |  | ( 000)     
|Other finance obligations |  |              | 19,485 |              |  |  | 17,792 | 

The decrease as of December 31, 2002 is due to the lease installments
repayment falling in the year 2002. This item includes payables maturing beyond
December 31, 2007 of  4,838 thousand.

17. Shareholders equity

Share capital

The share capital of the Parent Company, Ducati Motor Holding S.p.A., as of 31
December 2002 amounts to  82,420,500.76, unchanged versus December 31, 2001.

Share premium reserve

The share premium reserve, detailed below, as of December 31, 2001 amounted to
 21,316 thousand and  19,879 thousand as of December 31, 2002. The gross
value of the share premium reserve has been formed over the years as follows:

|                                               |  |           |        |               |  |       |        |   |  |  |        |  
|---------------------------------------------- |  | --------- | ------ | ------------- |  | ----- | ------ | - |  |  | ------ | -
|                                               |  | Par value |        | Share premium |  | Total
|                                               |  |           |        |               |  |      
|Balance at 31/12/2000                          |  |           | 9,437  |               |  |       | 23,566 |   |  |  | 33,003 |  
|15/03/01                                       |  |           |        |               |  |       |        |   |  |  |        |  
|Allocation to accelerated depreciation reserve |  |           |        |               |  |       | (1,735 | ) |  |  | (1,735 | )
|14/05/01                                       |  |           |        |               |  |       |        |   |  |  |        |  
|Conversion of share capital into euro          |  |           | 561    |               |  |       | (561   | ) |  |  | 0      |  
|Shares for Stock Option plan                   |  |           | 119    |               |  |       | 46     |   |  |  | 165    |  
|                                               |  |           |        |               |  |       |        |   |  |  |        |  
|Balance at 31/12/2001                          |  |           | 10,117 |               |  |       | 21,316 |   |  |  | 31,433 |  
|                                               |  |           |        |               |  |       |        |   |  |  |        |  
|07/03/02                                       |  |           |        |               |  |       |        |   |  |  |        |  
|Allocation to accelerated depreciation reserve |  |           |        |               |  |       | (1,437 | ) |  |  | (1,437 | )
|                                               |  |           |        |               |  |       |        |   |  |  |        |  
|Balance at 31/12/2002                          |  |           | 10,117 |               |  |       | 19,879 |   |  |  | 29,996 |  
|                                               |  |           |        |               |  |       |        |   |  |  |        |  

The decrease compared with the previous year of  1,437 thousand is due to
the booking of accelerated depreciation for 2001 using the so-called
recommended method, relating to the part in excess with respect to the net
profit for the year to be allocated to reserves.

At December 31, 1999, the shareholders have authorized a share capital of
up to 165,148,148 shares, including future split share capital increases
excluding pre-emptive rights, to service 8,148,148 share options granted
under the 1997 Plan described in note 18 (approved on

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the extraordinary shareholders meeting of Ducati Motor Holding S.p.A.
held on September 7, 1998). Subsequently, at a meeting on May 2, 2000, the
shareholders authorized the issuance of up to 12,000,000 shares, excluding
preemptive rights, in connection with the granting of stock options in the
years 1999 through 2002 under the 1999 Plan, as described in note 18.

Furthermore:



| |  |  | the by-laws of the Parent Company provide that the Board of
Directors is authorized to resolve, by majority vote of its members,
a share capital increase of up to  25,822,845 (Lit. 50,000,000,000)
by one or more issues of ordinary or preference shares to be offered
to the Companys shareholders by August 30, 2003, with the power to
establish the issue price on each occasion, including any premium
for the shares and the date from which they carry dividend rights.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the shareholders at the extraordinary meeting of September 7,
1998 voted to grant the Board of Directors the power to issue in one
or more blocks, but in any case by and not beyond August 30, 2003,
bearer or registered bonds (convertible or non-convertible) and/or
warrants, up to a maximum amount equal to the subscribed and paid-in
share capital, shown in the latest financial statements to be
approved at the date of the Board of Directors meeting approving
the bond issue in question. This amount may be increased, pursuant
to the resolution of the Inter-ministerial Committee on Credit and
Savings on March 3, 1994 adopted on the basis of article 11 of
Decree 385/93, if the Companys shares are traded on a regulated
market at this date, by the amount of any equity reserves shown in
the same financial statements, and in the case of an issue of
convertible bonds or with warrants, with the further restriction
resulting from the conditions set out below. The Board of Directors
was granted the widest power to establish the bonds issue price and
all its conditions on each occasion, including the exchange ratio,
the period and the procedures for converting convertible bonds and
all the conditions for exercising the warrants. The Board of
Directors was also granted the power to determine the extent and all
the procedures for the capital increase destined to cover any
conversion of these bonds and the exercise of these warrants, but
with the limitation that such an increase may be approved by the
Board of Directors using the power to increase share capital granted
it exclusively under article 7.2 of the by-laws, and so respecting
the maximum amounts and all the terms indicated therein, such that
the Board of Directors may not authorize any other capital increase,
other than that authorized under article 7.2 of the by-laws.

At December 31, 2002, the following entities held an interest in the Parent
Company in excess of 2% of the issued share capital:

|                                 |  |                 |            |   |  |  |       |  
|-------------------------------- |  | --------------- | ---------- | - |  |  | ----- | -
|                                 |  | Number of share |            | %
|                                 |  |                 |            |  
|TPG Motorcycle Acquisition, L.P. |  |                 | 52,657,750 |   |  |  | 33.22 | %
|Harris Associated L.P.           |  |                 | 11,866,649 |   |  |  | 7.49  | %
|Giorgio Seragnoli                |  |                 | 7,815,692  |   |  |  | 4.93  | %

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Other reserves

The Company has certain other reserves, comprised of:

|                                         |  |              |        |              |  |  |        | 
|---------------------------------------- |  | ------------ | ------ | ------------ |  |  | ------ | 
|                                         |  | December 31, |        | December 31,
|                                         |  | 2001         |        | 2002        
|                                         |  |              |        |             
|                                         |  | ( 000)     
|Legal reserve                            |  |              | 188    |              |  |  | 287    | 
|Statutory reserve                        |  |              | 146    |              |  |  | 146    | 
|Extraordinary reserve                    |  |              | 2,820  |              |  |  | 2,820  | 
|Revaluation reserve Law 342 (see note 7) |  |              | 24,238 |              |  |  | 24,238 | 
|                                         |  |              |        |              |  |  |        | 
|                                         |  |              | 27,392 |              |  |  | 27,491 | 

These reserves have been allocated or reclassified from retained earnings
and share premium to provide a more appropriate presentation of the Companys
shareholders equity.

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##### Table of Contents



Reconciliation of statutory net profit / (loss) and shareholders equity
of Holding to consolidated net profit / (loss) and shareholders equity

The statutory financial statements of the Parent Company, stated in
accordance with Italian civil and tax law, indicate distributable reserves
which differ from retained earnings / (losses) as presented in these
consolidated statements. The principal adjustments made in the consolidation of
Holding and its subsidiaries are shown in the following reconciliation of net
profit/(loss) and shareholders equity as reported in the statutory financial
statements of the Parent Company to those reported in the consolidated
financial statements for the years ended December 31, 2001 and 2002.

|                                                                                                   |  |              |        |                      |  |              |         |                      |  |  |        |   |  |  |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------ | ------ | -------------------- |  | ------------ | ------- | -------------------- |  |  | ------ | - |  |  | ------- | -
|                                                                                                   |  | Net profit   |        |                      |  |              |         | Net profit           |  |  |        |  
|                                                                                                   |  | for the year |        |                      |  |              |         | for the year         |  |  |        |  
|                                                                                                   |  | ended        |        | Shareholders' equity |  | ended        |         | Shareholders' equity
|                                                                                                   |  | December 31, |        | at December 31,      |  | December 31, |         | at December 31,     
|                                                                                                   |  | 2002         |        | 2002                 |  | 2001         |         | 2001                
|                                                                                                   |  |              |        |                      |  |              |         |                     
|                                                                                                   |  | ( 000)     
|Per the statutory financial statements of Holding                                                  |  |              | (2,955 | )                    |  |              | 132,161 |                      |  |  | 1,973  |   |  |  | 135,116 |  
|                                                                                                   |  |              |        |                      |  |              |         |                      |  |  |        |   |  |  |         |  
|Adjustments to conform with Company accounting
principles                                          |  |              | (525   | )                    |  |              | 209     |                      |  |  | 645    |   |  |  | 814     |  
|Elimination of tax-driven items                                                                    |  |              | 2,968  |                      |  |              | 46,215  |                      |  |  | 14,929 |   |  |  | 43,247  |  
|Elimination of unrealized inter-company profits                                                    |  |              | 1,503  |                      |  |              | (9,440  | )                    |  |  | (2,388 | ) |  |  | (10,943 | )
|Higher (lower) value of consolidated investments
with respect to their carrying value              |  |              | 5,535  |                      |  |              | 3,334   |                      |  |  | (772   | ) |  |  | (878    | )
|Other                                                                                              |  |              | 1,679  |                      |  |              | 1,870   |                      |  |  | 2,126  |   |  |  | 169     |  
|Tax effects recorded on the consolidation
adjustments                                              |  |              | (1,680 | )                    |  |              | (14,608 | )                    |  |  | (5,960 | ) |  |  | (12,928 | )
|                                                                                                   |  |              |        |                      |  |              |         |                      |  |  |        |   |  |  |         |  
|Total consolidation adjustments                                                                    |  |              | 9,480  |                      |  |              | 27,580  |                      |  |  | 8,580  |   |  |  | 19,481  |  
|                                                                                                   |  |              |        |                      |  |              |         |                      |  |  |        |   |  |  |         |  
|Shareholders equity and net profit (loss) of
the Company as per consolidated financial
statements |  |              | 6,525  |                      |  |              | 159,741 |                      |  |  | 10,553 |   |  |  | 154,597 |  

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##### Table of Contents



18. Commitments and contingent liabilities

The Company had, at December 31, certain other commitments, comprised of:

|                                    |  |              |         |              |  |  |        | 
|----------------------------------- |  | ------------ | ------- | ------------ |  |  | ------ | 
|                                    |  | December 31, |         | December 31,
|                                    |  | 2001         |         | 2002        
|                                    |  |              |         |             
|                                    |  | ( 000)     
|Guarantees (1)                      |  |              | 224     |              |  |  | 511    | 
|Forward exchange contracts (2), (3) |  |              | 116,536 |              |  |  | 81,574 | 
|Contractual commitments (4)         |  |              |        |              |  |  | 2,146  | 
|                                    |  |              |         |              |  |  |        | 
|Total                               |  |              | 116,760 |              |  |  | 84,231 | 



---

|(1) |  | At December 31, 2002, this
amount included guarantees in favor of SNAM for the supply of natural gas ( 36 thousand), and of
Thermal for leasing agreements ( 188 thousand)                                                                                                                                                                                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Hedges against receivables and sales orders principally in US dollars,
Japanese yen and pounds sterling.                                                                                                                                                                                                                                                                                                                       
|   
|(3) |  | At nominal value (see note 10)                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(4) |  | The caption relating to Contractual commitments refers to a contract
signed by the subsidiary Ducati Corse S.r.l. which provides for
commitments that have been delayed; if they are not met, this would give
rise to liabilities versus the other party to the contract. Based on the
current outlook, the Group is of the opinion that it will definitely be
able to meet these commitments without creating any liability.

On 27 June 2002 Holding reached a settlement with an importer, giving rise
to a liability shown under other payables at 31 December 2002 of  500 thousand
and a commitment on the part of Ducati Motor Holding S.p.A. to buy back by 31
December 2003 the inventory of original Ducati spare parts held by the importer
as of 31 December 2003 at their current market value. The commitment relates
solely to products shown in the official Ducati price list at
31 December 2003. At 31 December, 2002, the Company does
not expect a significant liability to arise related to this
commitment.

During 1999, the Companys Compensation Committee approved an end of
mandate entitlement of US$1,200,000, which would be payable to
Mr. Minoli if not re-appointed as Chairman of DMH or dismissed from office for reasons
other than just cause (giusta causa or giustificato motivo soggettivo)
before the officers 60th birthday.

Subsequent to December 31, 1999, the Compensation Committee of the Company
approved a special termination indemnity equal to
 775 thousand for
Mr. Di Biagio, to be paid by the Company if he is removed as
managing director or is not reappointed for reasons other than just
cause before his sixtieth birthday.
Furthermore, the Board of Directors also approved the Compensation Committees
proposal for an extension to the retention bonus granted to certain senior
officers, for another 3 years as approved by the Committee on February 14,
2002. The amount will be based on the annual percentage increase in
measures of the Company's financial performance for 2002, 2003, and
2004,
and will only be paid if the managers concerned (including the Chairman and the
Managing Director) are still working for the Company 12 months after the
approval of the consolidated financial statements (see note 12 for the related
liability accrued at December 31, 2002). Upon termination by the Company of
their employment for reasons other than just cause, the Company is obligated to
pay such officers three times the amount they are entitled.

First Stock Option Plan

On 7 September 1998, the extraordinary shareholders meeting of Ducati
Motor Holding S.p.A., approved, among other things, a stock option plan (the
1997 Plan) by means of a split capital increase excluding pre-emption rights,
pursuant to article 2441 of the Italian Civil Code, of up to Lire 8,148,148,000
at par, to be issued in one or more separate annual tranches by and not beyond
4 August 2007. The maximum number of new ordinary shares to be issued is
8,148,148 with par value Lire 1,000 each and a share premium of Lire 400 each.
They are to be offered exclusively to DMHs then managing director and certain
senior officers and independent consultants of the Company (the
Beneficiaries) within a stock option plan as described below, The list of
beneficiaries, the exact number of newly-issued ordinary shares attributed, the
relevant dates of maturity and subscription rights, were approved by the Board
of Directors on 4 August

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1998 and included in the Companys official corporate records. Given the
particular circumstances relating to this capital increase, the long period
established for its implementation and the fact that it is nevertheless
divisible, this share capital increase is considered to be completed, for all
legal purposes, year by year for the amount which is effectively subscribed
each year, with a consequent updating of the related article in the articles of
association and acquisition of voting and dividend rights for the new shares
issued.

1997 Plan

|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|------------------------------------------------------------------ |  | ---------------------------- | --------- | -------------- |  | ------------ | ----- | - |  |  | ----- | 
|                                                                   |  | Year ended December 31, 2002
|                                                                   |  |                             
|                                                                   |  | Number of shares             |           | Exercise price |  | Market price
|                                                                   |  |                              |           |                |  |             
|                                                                   |  |                              |           |                |  |             |       | 
|Options outstanding at December 31, 1999                           |  |                              | 7,140,741 |                |  |              | 0.723 |   |  |  | 2,562 | 
|Options granted in period                                          |  |                              |          |                |  |              |      |   |  |  |       | 
|Options exercised in period                                        |  |                              | 309,000   |                |  |              | 0.723 |   |  |  |       | 
|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|Options outstanding at December 31,
2000                           |  |                              | 6,831,741 |                |  |              | 0.723 |   |  |  | 1,965 | 
|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|Options granted in period                                          |  |                              |          |                |  |              |      |   |  |  |       | 
|Options exercised in period                                        |  |                              | 229,000   |                |  |              | 0.723 |   |  |  |       | 
|Options forfeited in period                                        |  |                              | 65,148    |                |  |              |       |   |  |  |       | 
|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|Options outstanding at December 31,
2001                           |  |                              | 6,537,593 |                |  |              | 0.723 |   |  |  | 1,804 | 
|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|Options granted in period                                          |  |                              |          |                |  |              |      |   |  |  |       | 
|Options exercised in period                                        |  |                              |          |                |  |              |      |   |  |  |       | 
|Options forfeited in period                                        |  |                              |          |                |  |              |       |   |  |  |       | 
|Options outstanding at December 31,
2002 (to be exercised by 2007) |  |                              | 6,537,593 |                |  |              | 0.723 |   |  |  | 1,797 | 
|                                                                   |  |                              |           |                |  |              |       |   |  |  |       | 
|Of which exercisable                                               |  |                              | 115,778   |                |  |              | 0.723 |   |  |  | 1,797 | 

In the opinion of the Directors, to the best of their knowledge, the 1997
Plan will not give rise to any liabilities for the Company since the Company
will deliver shares in settlement of share options under an approved share
capital increase. As a result, no provision was made in these financial
statements.

The regulations of the 1997 Plan provide for the following:

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Attribution of rights to subscribe to the Companys ordinary shares.
Subscription rights to the Companys ordinary shares (as assigned above to
the beneficiaries) (the rights) accrue (i.e. the individual beneficiary
accrues the right to exercise the option, in accordance with the conditions set
out in the paragraph below) as of 31 December 2001. The extraordinary
shareholders meeting held on 7 September 1998 also passed resolutions
concerning the rules on cessation and transfer of the rights.

Exercising the Rights. Without prejudice to the expiration of the Rights
provided by the Plan, once accrued, the Rights may be exercised, wholly or
partially (and so, the beneficiary may subscribe and pay up all or part of the
ordinary shares offered for subscription), on the occurrence of one of the
following events: (a) at the time of approving the Companys financial
statements for the 2003 financial year; or (b) when the Company TPG Acquisition
L.P. ceases to possess, directly or indirectly, at least 41% of the Companys
fully subscribed and paid-in share capital (in this case, the rights maturing
by that date may be exercised in proportion to the percentage of subscribed and
paid-in share capital that TPG Acquisition currently holds, directly or
indirectly, in the Company, putting the percentage corresponding to the 41%
above, equal to 100% for the purposes of the related calculation).

After the occurrence of the events indicated in letters (a) or (b) above,
the Beneficiaries may exercise the Rights that they have matured, notifying the
Company during the period between the date the shareholders approve the annual
financial statements and 30 days thereafter, and in any case not beyond 4
August 2007. Following the transfer by TPG Acquisition of its stake when the
Company was listed on March 1999, 20% of the accrued rights become exercisable,
of which 1,500,963 were exercised.

In the event that the shares are not quoted at the time the options are
exercised or the Company simply intends to fulfil its liability by disbursing
cash, the beneficiaries will receive this cash payment for an amount equal to
the difference between the market value per share (calculated on the basis of
the EBITDA shown in the latest approved financial statements prepared
according to the US accounting principles, multiplying by 5.0 less the net debt
and then divided by the number of shares outstanding at the date when the
Options are exercised) and the strike price, multiplied by the number of
options matured and exercised. Should the Company settle in cash, in full or in
part, the liabilities deriving from the exercise of the Options, the Company
will pay any additional amount to guarantee that the value received from the
beneficiary (net of the relevant income taxes) is not lower than the net value
he would have received if the Company had decided to give Shares and (where
possible pursuant to applicable tax laws) if the beneficiary had timely sold
them on the market.

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Second Stock Option Plan

In addition, in order to reward the results achieved and at the same time
to give the Companys management an incentive, the Compensation Committee
passed a resolution on 6 September 1999 (ratified by the Board of Directors at
their next meeting on 13 September) laying down the details of a Stock Option
Plan including stock appreciation rights, with the following main
characteristics:

a) the beneficiaries of the plan are the executive directors and managers
(whether employees or consultants and independent professionals) of the Company
and its subsidiaries as identified by the Compensation Committee, without
prejudice to compliance with the provisions of art. 2389 of the Italian Civil
Code;

b) the beneficiaries under the terms below are offered rights that allow
them to subscribe or acquire ordinary shares in the Company, if it continues to
be listed on the Stock Exchange and upon approval of the Shareholders Meeting
in order to increase the share capital or to purchase parent company shares; or
an equivalent amount cash if there is not such resolution or in case the
Company is not listed; or a combination of these two factors;

c) the number of Options to be attributed every year is fixed by the Board
of Directors. Starting from 2002, the Options can be attributed to the
beneficiaries by the Compensation Committee or by the Board of Directors,
pursuant to article 2389.2 of the Italian Civil Code, with a resolution to be
passed within 60 days from the date of approval of the Companys preliminary
consolidated the income statement and balance sheet for the prior fiscal year
(the Consolidated Financial Statements). The maximum number of Options to be
assigned in a single year cannot exceed 2% of the Companys share capital
represented by outstanding shares (the Shares). In 2002, the Board decided to
grant Options representing approximately 2.5% of DMHs shares capital due to
the prior expiration of 1,190,638 unexcercised Options under the plan before
2002;

d) the Options attributed accrue in three equal instalments, unless
decided otherwise by the Board of Directors or by the Compensation Committee,
with an annual frequency, starting on 31 December of the year immediately
following the year of attribution; these Options can be exercised by the
beneficiaries from year to year, by sending a communication to the Company
within 30 days of the date of approval of the most recent Consolidated
Financial Statements. As concerns the Options relating to 1999, 2000 and 2001,
this communication must be sent within 30 days from the approval by the Board
of Directors of the Companys Consolidated Financial Statements and the Report
on Operations for the prior fiscal year. The options will become null and void
if they are not exercised within 7 years of assignment;

e) At the meeting held on 3 March 2000, the Board of Directors resolved to
make an amendment to the Plan as adopted by the Compensation Committee in
September 1999 in light of the changes that have taken place in the tax
regulations governing income from employment, with specific reference to stock
option plans. It has been laid down that for the purpose of calculating the
Strike Price (as defined in the Plan), the value of the Shares which from now
on is defined as the value of the Companys ordinary shares at the date of the
offer of the related Options calculated on the basis of the tax rules in force
at the date of the offer (but without prejudice to the provision of the Plan
according to which the Strike Price cannot be lower than the consolidated net
equity per share at the date that the beneficiaries exercise their Options). We
would point out that the value of the Shares according to current tax rules is
determined on the basis of a straight average of the prices posted on the Stock
Exchange in the last month prior to the offer (the Finance Minister has
clarified that last month should be understood as the period that goes from
the day of reference (i.e. the day on which the Options are allocated) to the
same day of the previous calendar month), while the previous text of the Plan
made reference to the the average market price of the Shares on the Stock
Exchange during the six months prior to the month of allocation.

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An amendment is therefore needed to avoid the setting of the Strike Price
in a way that does not comply with the tax rules unintentionally generating
taxable income in the hands of those beneficiaries who, being employees, could
otherwise take advantage of the tax exemption foreseen in art. 48.2.g-bis) of
the Income Tax Consolidation Act. That amendment is applicable only to the
Options subsequent to those attributed for year 1999.

f) in the event that the shares are not quoted at the time the options are
exercised, the beneficiaries will receive this cash payment for an amount equal
to the difference between the Market Value per Share (calculated on the basis
of the EBITDA shown in the latest approved financial statements based on, the
Italian accounting principles, multiplied by 10 less the consolidated net debt
and then divided by the number of shares outstanding at the date when the
Options are exercised) and the strike price, multiplied by the number of
options exercised. Should the Company settle in cash, in full or in part, the
liabilities deriving from the exercise of the Options, the Company (or the
subsidiary company for whom the beneficiary works) will pay any additional
amount to guarantee that the value received from the beneficiary (net of the
relevant income taxes) is not lower than the net value he would have received
if the Company had decided to give Shares and (where possible pursuant to
applicable tax laws) if the beneficiary had sold the Shares at Market Value per
Share as defined above.

With the said resolutions of the Compensation Committee and Board of
Directors dated, respectively, 6 and 13 September 1999, the Company has
allocated a total of 1,000,000 Options to two beneficiaries (Federico
Minoli and Carlo Di Biagio) for the year 1999, according to the terms
and methods laid down in the Plan. Subsequently, as foreseen by these
resolutions, the Managing Director allocated, by 31 December 1999, a total of
2,159,259 Options to 51 other beneficiaries, as indicated in the list filed
with the deeds of the Company. The strike price laid down for all the options
allocated for 1999 amounts to
 2.879 per share, representing the average of the mean
monthly official price of the Companys shares quoted on the Italian Stock
Exchange for the months of June, July and August 1999.

At the meeting held on 3 March 2000, the Board of Directors also decided
to allocate Options for the year 2000 as well according to the terms and
methods laid down in the Plan as indicated above subject to the maximum limit
foreseen therein of 3,159,259 Options. The Options were distributed with a
strike price of Euro 2.810 per share as follows: 500,000 options to the Managing
Director, Mr. Minoli, and the remaining 2,659,259 options to be distributed at
the discretion of the Compensation Committee (bearing in mind that no
beneficiary can have more than 500,000 options). The Committee assigned these
options to 71 other beneficiaries. The Options resolved in accordance with this
resolution will fall due in three instalments of 50%, 25% and 25% with an
annual maturity starting on 31 December 2001.

Also as a result of these distributions of Options for the years 1999 and
2000, the shareholders meeting  held on 2 May 2000  approved the increase
in capital needed to service the allocations of Options already carried out for
1999 and 2000, fixing the exercise price for these grants at Euro
2.879 and Euro 2.810, as well as the allocations of Options for the years 2001 and
2002, in compliance with the Plan, with total exclusion of the option right
pursuant to art. 2441.5&8 of the Italian Civil Code, as its purpose is to act
as an incentive for the employees to hold shares in the Company, while being in
the Groups interest as far as the Groups consultants and external
collaborators are concerned. In particular, given that this is a divisible
increase in capital for cash, for a maximum number of 12 million ordinary
shares (and therefore with a nominal increase in the share capital up to a
maximum of Euro 6,197,482) to be issued after the exercise of the Options by
the respective beneficiaries and with interest running from 1 January of each
year in which subscription and issuance of each of the shares in accordance
with the law; this increase can be carried out by the Board of Directors in
various separate tranches at annual intervals, in the terms and conditions laid
down in the Plan. This increase in capital can be carried out by no later than
31 July 2009, so as to permit issuance of Shares also to cover exercise (at
latest 7 years after the offer) of any Options allocated in 2002. No more than
200 beneficiaries per year were offered options between 1999 and 2002.

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##### Table of Contents



On 2 May 2000, the shareholders convened in an ordinary and extraordinary
meeting which resolved, among other things to give a mandate to the Board of
Directors or to the company body specifically delegated by the Board of
Directors or by the articles of association to implement the increase in
capital as described above.

On 15 March 2001, the Board of Directors decided to assign options for the
year 2001, again under the terms and conditions listed above, for a total
number of 3,165,000 options. The options were allocated with a strike price of
 1.9882 in the following manner:



| |  |  | the Chairman of the Board of Directors, Federico Minoli,
and the Managing Director, Carlo Di Biagio, were each assigned
500,000 options,      
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the remaining 2,165,000 options were allocated at the
discretion of the Compensation Committee, which assigned them to
73 other beneficiaries.

These options fall due in three instalments of 50%, 25% and 25% with an
annual maturity starting on 31 December 2002.

On 14 February 2002, the Board of Directors decided to assign options for
the year 2002, under the terms and conditions listed above, for a total number
of 3,960,000 options. The options were allocated with a strike price of 
1.8069 in the following manner:



| |  |  | the Chairman of the Board of Directors, Federico Minoli,
and the Managing Director, Carlo Di Biagio, were each assigned
500,000 options,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the remaining 2,960,000 options
were allocated to 90
other beneficiaries.                                                               

These options will fall due in three instalments of 50%, 25% and 25% with
an annual maturity starting on 31 December 2003. On 13 February 2002, given the
market trend of the Companys shares, the Board of Directors decided to replace
the multiplier 10  used to calculate the value of Ducati shares in case the
Options are settled in cash should the Company not be listed on the Stock
Exchange  with 5. The change will concern the Options attributed starting
from the mentioned resolution.

The Board of Directors did not make any assignment of options for 2003.

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##### Table of Contents



1999 Plan

|                                                |  |                  |            |                |  |                              |        |   |  |  |        | 
|----------------------------------------------- |  | ---------------- | ---------- | -------------- |  | ---------------------------- | ------ | - |  |  | ------ | 
|                                                |  |                  |            |                |  | Year ended December 31, 2002
|                                                |  |                  |            |                |  |                             
|                                                |  | Number of shares |            | Exercise price |  | Market price                
|                                                |  |                  |            |                |  |                             
|                                                |  |                  |            |                |  |                             |        | 
|Options outstanding at December 31, 1999        |  |                  | 3,159,259  |                |  |                              | 2.879  |   |  |  | 2.562  | 
|Options granted in period                       |  |                  | 3,159,259  |                |  |                              | 2.810  |   |  |  |        | 
|Options forfeited in period                     |  |                  | (245,000   | )              |  |                              |        |   |  |  |        | 
|Options exercised in period                     |  |                  |           |                |  |                              |        |   |  |  |        | 
|Options outstanding at December 31, 2000 (**)   |  |                  | 6,073,518  |                |  |                              | 2.846  |   |  |  | 1.965  | 
|Options granted in period                       |  |                  | 3,165,000  |                |  |                              | 1.9882 |   |  |  | n.a.   | 
|Options forfeited in period                     |  |                  | (945,638   | )              |  |                              |       |   |  |  |       | 
|Options exercised in period                     |  |                  |           |                |  |                              |       |   |  |  |       | 
|Options outstanding at December 31, 2001 (***)  |  |                  | 8,292,880  |                |  |                              | 2.5368 |   |  |  | 1.804  | 
|Options granted in period                       |  |                  | 3,960,000  |                |  |                              | 1.8069 |   |  |  |       | 
|Options forfeited in period                     |  |                  | (362,500   | )              |  |                              |       |   |  |  |       | 
|Options exercised in period                     |  |                  |           |                |  |                              |       |   |  |  |       | 
|Options outstanding at December 31, 2002
(****) |  |                  | 11,890,380 |                |  |                              | 2.3066 |   |  |  | 1.7970 | 
|Of which exercisable                            |  |                  | 6,019,130  |                |  |                              | 2.6457 |   |  |  | 1.7970 | 



---

|**   |  | of which 3,044,259 will expire by the end of 2006 and 3,029,259 by the end of 2007.                              
|---- |  | -----------------------------------------------------------------------------------------------------------------
|    
|***  |  | of which 2,717,880 will expire by the end of 2006, 2,590,000 by the end of 2007 and 2,985,000 by the end of 2008.
|    
|**** |  | of which 2,695,380 will expire by 2006, 2,525,000 by
2007, 2,860,000 by 2008 and 3,810,000 by
2009.              

Logically, the development of the plan will depend not only on how the
Options are exercised, but also on the decisions that the Company will make
from year to year regarding whether to offer newly-issued shares for
subscription or to pay out the corresponding amount of money.

At the time of preparation of the financial statements, as of 31 December
2002, no provision was made regarding the stock option plans, as the Company
intends to service the Plans by means of the increases in capital mentioned
above.

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##### Table of Contents



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
financials statements. To satisfy purchases of shares made under the ESOP, we
will 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 them 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 7, 2002, the shareholders authorized DMH to purchase up to six
million shares on the Telematico within the subsequent 18 months, including to
deliver shares to employees under the ESOP. 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 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.

On 7 May, 2002, the shareholders of the Parent Company convened in an
ordinary and extraordinary meeting which resolved, among other things:



| | 1. |  | to authorise, pursuant to articles 2357 of the Civil Code
and 132 of D. Lgs 58/1998, the purchase of parent company shares
up to a maximum of 6,000,000 (six million) shares of par value 
0.52 each, corresponding to around 3.8% of the share capital
currently subscribed and paid in, to be carried out in one or more
tranches within 18 months of the date of the resolution for a
total amount not exceeding  10.8 million, equal to the amount of
the retained earnings available for distribution as shown in the
financial statements as of 31 December 2001; bearing in mind that
the minimum purchase price of each share must not be more than 10%
(ten percent) lower than the reference price of the shares posted
on the Electronic Equity Market by Borsa Italiana S.p.A. the day
prior to each purchase and not more than 10% (ten percent) higher
than the reference price of the shares posted on the Electronic
Equity Market by Borsa Italiana S.p.A. the day prior to each
purchase;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | to authorise, pursuant to art. 2357 of the Civil Code,
the sale of parent company shares, in one or more tranches, of up
to 6,000,000 shares of par value  0.52 each, corresponding to
around 3.8% of the share capital currently subscribed and paid in,
purchased on the basis of the above resolution;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | 3. |  | to grant a mandate to the Board of Directors and/or to
the Managing Director appointed by the Board, to purchase and sell
parent company shares as authorised above, with the widest
possible powers and rights, but in full compliance with the limit
resolved and with current laws on such matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

As of 31 December 2002, this resolution had not been implemented.

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No provision has been made at 31/12/02 in connection with this Share Plan.

The extraordinary shareholders meeting of the Parent Company resolved, in
accordance with the provisions of the second and third paragraphs of article
2445 of the Civil Code, as referred to in article 13 of Law 342/2000, to
transform the revaluation reserve (Law 342/2000) of  24.2 million shown in the
financial statements as of 31 December 2001, as approved by the ordinary
shareholders meeting, into an unrestricted reserve, so as to legitimate a
future resolution by the ordinary shareholders meeting approving the purchase
and sale of additional parent company shares of the Company for the purpose of:
(I) assigning the shares purchased in this way to the beneficiaries of the
existing stock option plans and the purchase of shares by employees, as
approved by the corporate boards; (ii) sustaining the liquidity of the Ducati
stock on the Italian Stock Exchange in full compliance with the pertinent
regulations.

The Parent Companys Extraordinary Meeting also decided:



| | 1. |  | to approve the proposed specification
of the corporate purpose in line with a different wording
of article 4.3 of the by-laws, relating to the secondary
activities that the Company can carry on in order to
achieve its corporate purpose, stating specifically that
these activities include the hire of motorcycles and
running a motorcycle driving school, consequently
redrafting the whole of article 4.3 of the by-laws as
follows:                                                                                                                                                                                                   
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | 4.3 Secondarily and not primarily, the company will be able to
carry out, occasionally and solely in order to pursue the primary
corporate purpose mentioned above, all commercial transactions
(including the hire of motorcycles and the running of a motorcycle
driving school), as well as all movable, immovable, and industrial
transactions that will be considered useful or necessary to this
end; it will be able to take on, directly or indirectly, but not
for the purpose of placement, interests and shareholdings in other
companies or businesses with a corporate purpose that is the same,
similar or related to its own.;
|
| | 2. |  | to keep all of the other by-laws the
same as before.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

On 7 August 2002, the Parent Companys Board of Directors decided to
approve a plan for the securitisation of part of its trade receivables with the
following characteristics:



| |  |  | net book value of the receivables: 50 million euro;
| | - |  | ---------------------------------------------------
|
| |  |  | maturity: 5 years                                  
|
| |  |  | off-balance sheet transaction                      
|
| |  |  | assignment of trade receivables without recourse;  

also granting the Chairman Federico Minoli and the Managing Director Carlo Di
Biagio, severally, all powers needed to carry out this type of transaction.

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19. Net sales

The Company operates predominantly in a single industry segment: the
design, manufacture and sale of motorcycles and related products. The Company
offers a wide product range of items for sale, manufactured in Italy and
marketed by a common sales force.

Net sales by product class can be analyzed as follows:

|                                              |  |              |         |              |  |              |         |  |  |  |         | 
|--------------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- |  |  |  | ------- | 
|                                              |  | Year ended   |         | Year ended   |  | Year ended  
|                                              |  | December 31, |         | December 31, |  | December 31,
|                                              |  | 2000         |         | 2001         |  | 2002        
|                                              |  |              |         |              |  |             
|                                              |  |              |         |              |  | ( 000)      |         |  |  | 
|Motorcycles                                   |  |              | 316,354 |              |  |              | 345,475 |  |  |  | 341,529 | 
|Other including principally parts/
components |  |              | 63,180  |              |  |              | 62,340  |  |  |  | 71,442  | 
|                                              |  |              |         |              |  |              |         |  |  |  |         | 
|                                              |  |              | 379,534 |              |  |              | 407,815 |  |  |  | 412,971 | 

Net sales can be analyzed by geographic area as following:

|                |  |              |         |              |  |              |         |  |  |  |         | 
|--------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- |  |  |  | ------- | 
|                |  | Year ended   |         | Year ended   |  | Year ended  
|                |  | December 31, |         | December 31, |  | December 31,
|                |  | 2000         |         | 2001         |  | 2002        
|                |  |              |         |              |  |             
|                |  |              |         |              |  | ( 000)      |         | 
|Italy           |  |              | 92,629  |              |  |              | 92,448  |  |  |  | 106,595 | 
|United States   |  |              | 97,515  |              |  |              | 93,345  |  |  |  | 70,115  | 
|France          |  |              | 30,294  |              |  |              | 34,133  |  |  |  | 33,650  | 
|United Kingdom  |  |              | 29,119  |              |  |              | 34,614  |  |  |  | 31,716  | 
|Germany         |  |              | 46,257  |              |  |              | 46,453  |  |  |  | 49,773  | 
|Japan           |  |              | 25,633  |              |  |              | 41,074  |  |  |  | 44,843  | 
|Other countries |  |              | 58,087  |              |  |              | 65,748  |  |  |  | 76,279  | 
|                |  |              |         |              |  |              |         |  |  |  |         | 
|                |  |              | 379,534 |              |  |              | 407,815 |  |  |  | 412,971 | 

Gross margin (excluding depreciation) by product class can be analyzed as
follows:

|                                              |  |              |         |              |  |              |         |  |  |  |         | 
|--------------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- |  |  |  | ------- | 
|                                              |  | Year ended   |         | Year ended   |  | Year ended  
|                                              |  | December 31, |         | December 31, |  | December 31,
|                                              |  | 2000         |         | 2001         |  | 2002        
|                                              |  |              |         |              |  |             
|                                              |  |              |         |              |  | ( 000)      |         |  |  | 
|Motorcycles                                   |  |              | 113,816 |              |  |              | 125,858 |  |  |  | 117,335 | 
|Other including principally parts/
components |  |              | 36,828  |              |  |              | 40,691  |  |  |  | 46,372  | 
|                                              |  |              |         |              |  |              |         |  |  |  |         | 
|                                              |  |              | 150,644 |              |  |              | 166,549 |  |  |  | 163,707 | 

20. Cost of goods sold (excluding depreciation)

Cost of goods sold (excluding depreciation) comprises principally costs of
materials, parts and components for production, personnel (both direct and
indirect), other manufacturing costs and variations in inventory (including
work-in-progress and finished goods). This item also includes expensed research
and development costs, which, for the years ended December 31, 2000, 2001 and
2002 amounted to  4,116 thousand,  3,893 thousand and  4,879 thousand
respectively; the amounts for the years ended December 31, 2000, 2001 and 2002
include such costs incurred specifically for the racing program for  1,472
thousand,  1,497 thousand, and

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 1,373 thousand. This item excludes depreciation of the property, plant and
equipment employed in the production cycle.

21. Selling, general and administrative expenses (excluding depreciation)

Selling, general and administrative expenses (excluding depreciation)
comprises principally variable sales costs, related personnel costs,
commercial, advertising and promotion costs, expenses relating to the Companys
racing program, product warranty expense and charges for doubtful accounts.
Advertising and promotion costs of the Ducati brand name for the years ended
December 31, 2000, 2001 and 2002 amounted to  6,885 thousand,  7,804 thousand
and  9,494 thousand, respectively. Expenses incurred on the racing program for
the years ended December 31, 2000, 2001 and 2002 amounted to  5,612 thousand,
 6,115 thousand and  6,540 thousand, respectively. Selling, general and
administrative expenses exclude the depreciation of the property, plant and
equipment employed in the commercial and administrative areas of the Companys
activities.

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22. Depreciation of property, plant and equipment

This item comprises the depreciation of property, plant and equipment
(note 6) as follows:

|                                       |  |              |       |              |  |              |       |  |  |  |        | 
|-------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ------ | 
|                                       |  | Year ended   |       | Year ended   |  | Year ended  
|                                       |  | December 31, |       | December 31, |  | December 31,
|                                       |  | 2000         |       | 2001         |  | 2002        
|                                       |  |              |       |              |  |             
|                                       |  |              |       |              |  | ( 000)      |       |  |  | 
|Land and buildings                     |  |              | 864   |              |  |              | 911   |  |  |  | 1,068  | 
|Plant and machinery                    |  |              | 2,022 |              |  |              | 2,857 |  |  |  | 2,882  | 
|Industrial and sales tooling/equipment |  |              | 3,736 |              |  |              | 5,061 |  |  |  | 6,461  | 
|Other                                  |  |              | 824   |              |  |              | 1,169 |  |  |  | 1,582  | 
|                                       |  |              |       |              |  |              |       |  |  |  |        | 
|                                       |  |              | 7,446 |              |  |              | 9,998 |  |  |  | 11,993 | 

The caption Cost of goods sold is not defined under Italian GAAP and,
therefore, the Companys underlying accounting records do not contain an
allocation of depreciation between cost of goods sold and selling,
general and administrative expenses. As such, the charge for depreciation has
been presented as a separate line item on the face of the consolidated
statement of operations. However, on the basis of its own cost accounting,
management has estimated that depreciation for the periods presented could be
analyzed as follows:

|                                             |  |              |       |              |  |              |       |  |  |  |        | 
|-------------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ------ | 
|                                             |  | Year ended   |       | Year ended   |  | Year ended  
|                                             |  | December 31, |       | December 31, |  | December 31,
|                                             |  | 2000         |       | 2001         |  | 2002        
|                                             |  |              |       |              |  |             
|                                             |  |              |       |              |  | ( 000)      |       |  |  | 
|Cost of goods sold                           |  |              | 6,259 |              |  |              | 6,559 |  |  |  | 9,733  | 
|Selling, general and
administrative expenses |  |              | 1,187 |              |  |              | 3,439 |  |  |  | 2,260  | 
|                                             |  |              |       |              |  |              |       |  |  |  |        | 
|                                             |  |              | 7,446 |              |  |              | 9,998 |  |  |  | 11,993 | 

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23. Amortization of intangible assets

This item comprises the amortization of intangible assets (note 7) as
follows:

|                                        |  |              |        |              |  |              |        |  |  |  |        | 
|--------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ |  |  |  | ------ | 
|                                        |  | Year ended   |        | Year ended   |  | Year ended  
|                                        |  | December 31, |        | December 31, |  | December 31,
|                                        |  | 2000         |        | 2001         |  | 2002        
|                                        |  |              |        |              |  |             
|                                        |  |              |        |              |  | ( 000)      |        |  |  | 
|Incorporation and expansion costs       |  |              | 2,985  |              |  |              | 2,363  |  |  |  | 231    | 
|Research and development costs          |  |              | 4,874  |              |  |              | 7,556  |  |  |  | 8,929  | 
|Concept costs                           |  |              | 113    |              |  |              | 117    |  |  |  | 90     | 
|Patents and rights on inventions        |  |              | 1,387  |              |  |              | 3,572  |  |  |  | 1,710  | 
|Licenses, trademarks and similar
rights |  |              | 5,574  |              |  |              | 5,576  |  |  |  | 5,577  | 
|Goodwill due to the 1996 transaction    |  |              | 1,009  |              |  |              | 1,009  |  |  |  | 1,009  | 
|Goodwill ex Gio.ca Moto Srl             |  |              | 13     |              |  |              | 13     |  |  |  | 13     | 
|Non competition 1996 transaction        |  |              | 1,033  |              |  |              | 1,033  |  |  |  | 1,033  | 
|Goodwill subsidiaries                   |  |              | 159    |              |  |              | 159    |  |  |  | 152    | 
|Goodwill on consolidation               |  |              | 74     |              |  |              | 144    |  |  |  | 144    | 
|Incidental costs of share offering      |  |              | 1,884  |              |  |              | 1,884  |  |  |  | 1,884  | 
|Other                                   |  |              | 3,041  |              |  |              | 1,156  |  |  |  | 1,219  | 
|                                        |  |              |        |              |  |              |        |  |  |  |        | 
|                                        |  |              | 22,146 |              |  |              | 24,582 |  |  |  | 21,991 | 

Patents and rights on inventions comprised, for the year ended December
31, 2001, the writedowns of fixed assets for  1,720 thousand and refer to
software belonging to Ducati.Com S.p.A. (see note 7).

24. Other operating revenues

Other operating revenues mainly relate to rental and sponsorship income,
sales of scrap and sundry materials and licensing revenues. The increase of 
3,248 thousand is primarily due to higher sponsorship revenues and essentially
reflects the signing of new sponsorship contracts for  3.3 million.

25. Interest income and expense

The composition of interest income is as follows:

|                                                                                       |  |              |       |              |  |              |       |  |  |  |       | 
|-------------------------------------------------------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ----- | 
|                                                                                       |  | Year ended   |       | Year ended   |  | Year ended  
|                                                                                       |  | December 31, |       | December 31, |  | December 31,
|                                                                                       |  | 2000         |       | 2001         |  | 2002        
|                                                                                       |  |              |       |              |  |             
|                                                                                       |  |              |       |              |  | ( 000)      |       |  |  | 
|Income from certificates of deposit and
securities repurchased under resale agreements |  |              | 157   |              |  |              | 114   |  |  |  | 212   | 
|Interest earned at banks and on tax refund                                             |  |              | 195   |              |  |              | 669   |  |  |  | 1,102 | 
|Early
cancellation of interest rate swap
contracts                                     |  |              | 2,728 |              |  |              |      |  |  |  |      | 
|Other                                                                                  |  |              | 554   |              |  |              | 481   |  |  |  | 66    | 
|                                                                                       |  |              |       |              |  |              |       |  |  |  |       | 
|                                                                                       |  |              | 3,634 |              |  |              | 1,264 |  |  |  | 1,380 | 

The composition of interest expense is as follows:

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##### Table of Contents



|                                      |  |              |         |              |  |              |         |   |  |  |         |  
|------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------- | - |  |  | ------- | -
|                                      |  | Year ended   |         | Year ended   |  | Year ended  
|                                      |  | December 31, |         | December 31, |  | December 31,
|                                      |  | 2000         |         | 2001         |  | 2002        
|                                      |  |              |         |              |  |             
|                                      |  |              |         |              |  | ( 000)      |         |   |  | 
|Interest on borrowings (see note 10): |  |              |         |              |  |              |         |   |  |  |         |  
| short-term debt                     |  |              | (447    | )            |  |              | (776    | ) |  |  | (594    | )
| long-term debt                      |  |              | (2,569  | )            |  |              |        |   |  |  |        |  
|Other financial charges               |  |              | (5,640  | )            |  |              | (7,092  | ) |  |  | (6,269  | )
|Interest expense on notes             |  |              | (3,792  | )            |  |              | (6,146  | ) |  |  | (5,989  | )
|                                      |  |              |         |              |  |              |         |   |  |  |         |  
|                                      |  |              | (12,448 | )            |  |              | (14,014 | ) |  |  | (12,852 | )

Interest on short and long-term debt relates to loans granted by credit
institutions (see note 10). Other financial charges mainly relate to charges
and fees on current bank accounts, on export and import transactions, charges
on factoring arrangements and cash discounts.

The interest expense on the bond, booked to accrued expenses is shown net
of the interest income linked to the repurchase of two tranches of the bond
loan as explained in the note on Borrowings.

26. Other non-operating income/(expense), net

Other non-operating income/(expense), net, comprise:

|                                      |  |              |       |              |  |              |     |  |  |  |     | 
|------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | --- |  |  |  | --- | 
|                                      |  | Year ended   |       | Year ended   |  | Year ended  
|                                      |  | December 31, |       | December 31, |  | December 31,
|                                      |  | 2000         |       | 2001         |  | 2002        
|                                      |  |              |       |              |  |             
|                                      |  |              |       |              |  | ( 000)      |     |  |  | 
|Income:                               |  |              |       |              |  |              |     |  |  |  |     | 
|Trademark revaluation (see note 7)    |  |              | 6,657 |              |  |              |    |  |  |  |    | 
|Gains on the disposal of fixed assets |  |              |      |              |  |              |    |  |  |  | 262 | 
|Other                                 |  |              | 195   |              |  |              | 151 |  |  |  | 26  | 
|                                      |  |              |       |              |  |              |     |  |  |  |     | 
|                                      |  |              | 6,852 |              |  |              | 151 |  |  |  | 288 | 

This items shows the gain realized on the sale of the building owned by
Ducati North America Inc. Ltd. The building was sold because the Company
transferred its head office from New Jersey to California.

|                                   |  |              |       |              |  |              |      |   |  |  |      |  
|---------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ---- | - |  |  | ---- | -
|                                   |  | Year ended   |       | Year ended   |  | Year ended  
|                                   |  | December 31, |       | December 31, |  | December 31,
|                                   |  | 2000         |       | 2001         |  | 2002        
|                                   |  |              |       |              |  |             
|                                   |  |              |       |              |  | ( 000)      |      |   |  | 
|Expenses:                          |  |              |       |              |  |              |      |   |  |  |      |  
|Losses on disposal of fixed assets |  |              |      |              |  |              | (46  | ) |  |  | (3   | )
|Other                              |  |              | (150  | )            |  |              | (132 | ) |  |  | (150 | )
|                                   |  |              |       |              |  |              |      |   |  |  |      |  
|                                   |  |              | (150  | )            |  |              | (179 | ) |  |  | (153 | )
|                                   |  |              |       |              |  |              |      |   |  |  |      |  
|Net                                |  |              | 6,702 |              |  |              | (28  | ) |  |  | 135  |  

Non-operating
income for the year ended December 31, 2000 includes  6,657
thousand of lower taxes paid related to the amount of deferred tax
liabilities recorded in the previous years Consolidated Financial Statements
as a result of the trademark revaluation in 2000.

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27. Income taxes

Current taxes

The Company and its Italian subsidiaries are subject to two income taxes:
(i) IRPEG (corporate income tax) and (ii) IRAP.

IRPEG was levied at a rate of 37% for 2000. Legislation was enacted in
December 2000 that reduced the rate to 36% for 2001 and 2002 and to 35% for
2003 and later years. Additional legislation was enacted in December 2002 that
reduced the rate to 34% for 2003 and later years. On the other hand, in 2000,
2001 and 2002, the Company and its Italian subsidiaries were eligible for
beneficial regimes entailing the application of a lower rate of IRPEG on a
portion of corporate income determined in accordance with the criteria
described below.

Italian companies listed on an E.U. stock exchange as of January 21, 1998,
such as the Company, may benefit  for the three year period following the
year of the listing  from the application of a reduced IRPEG rate equal to 7%
on a portion of their business income (such regime is commonly referred to as
Super Dit). That portion of the business income is equal to 7% of 120% (140%
as of 2001 and 2002) of the sum of (i) the overall shareholder cash
contribution and (ii) the retained earnings and profits net of any
distribution, as reflected in the Companys balance sheet as of the end of each
accounting period following the one pending on September 30,1996 (the Eligible
Income). Such benefit is conditioned upon the Companys net equity not
exceeding  258 million in the year preceding the one in which the benefit is
claimed. In addition, as a result of the availability of the Super Dit regime,
the average IRPEG rate applicable till December 31, 2000 to the Companys
business income cannot be lower than 20%. Any portion of business income not
benefiting from such regime can be carried forward for five years. The parent
company Ducati Motor Holding S.p.A. has calculated its current tax liability
using carry forward tax losses accumulated up to December 31, 1999.

Italian Companies subject to IRPEG, such as the Companys Italian
subsidiaries, are eligible for a regime similar to the Super Dit described
above (such regime is commonly referred to as Dit or Dual Income Tax) with
the following differences: (i) the reduced IRPEG rate equals 19% and (ii) the
average IRPEG rate applicable to the overall companies business income cannot
be lower than 27%. When calculating the current taxes of the subsidiaries
Gio.ca.Moto and Ducati Corse S.r.l., these companies took advantage of the Dual
Income Tax for the year ended December 31, 2001.

The calculation of income taxes in the consolidated financial statements
for the year ended December 31, 2002 also takes into consideration the tax
effects of tax loss carryforwards for Italian companies, available for income
tax purposes. The Company has applied the provisions of Accounting Principle
No.25 on income taxes, issued by the Italian Accounting Profession in March
1999. On January 1, 1998, pursuant to Decree 466 dated December 15, 1997, the
IRAP tax (regional tax on production activities) was introduced into the
Italian tax system. This replaced a number of other taxes such as local income
taxes (ILOR), the capital tax, etc. The tax is determined on the basis of net
value of production, in accordance with criteria laid down in above mentioned
Decree. The system in force to December 31, 1997 with a compound tax rate of
53.2% deriving from corporate income taxes of 37% plus local income taxes of
16.2%, has been replaced by a corporate income tax of 37% plus IRAP of 4.25%.
For IRAP purposes, certain costs are no longer considered deductible (for
example payroll costs and financial charges) and, accordingly, in order to
quantify deferred taxes, rates of 36% or 40.25% have been used according to
whether certain costs are deductible or not for IRAP purposes.

Important reforms to the Italian tax system were also introduced by the
Governments decree law concerning its initial measures to relaunch the economy
(the so-called First 100 Days Law), as follows:



| |  | Exemption from taxation of part of the profits reinvested in fixed
assets used in the business (Tremonti-bis).This benefit is applicable in
the tax period during which the law came into effect, after June 30,
2001, and in the subsequent period, excluding from taxable income 50% of
the net capital investments made during the said periods that are over
and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|  |  | above the average investments made during the previous five years,
with the chance to exclude from this calculation the highest period of
investment.                                                                                                                                                                                                                                                                                                                                                                                           
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | With reference to the DIT system, the First 100 Days Law introduced
the possibility of choosing between this and the exemption of reinvested
profits, offering the chance for businesses that have already carried out
sizeable increases in capital that are relevant for DIT purposes can
continue to take advantage of this benefit. The D.I.T. would be cancelled
as far as the provision is concerned but would not be completely
cancelled from an operating point of view. In fact, the provision in
question lays down the following:



| |  |  | the capital increases which remain relevant for DIT purposes
are those carried out as of 30 June 2001;
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | the businesses that carried them out will continue to enjoy
the related benefits.                       



| |  | Extension of the category of tax-deductible investments to staff
training and education expenses.The benefit involves 50% of the entire
amount of the expenses incurred without having to make any comparison
with the average amount spent in previous years.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As regards the Tremonti-bis law and their deductibility of investments in
fixed assets, the Company and partially its subsidiary Ducati Corse S.r.l. took
advantage of this benefit during the year ended December 31, 2002. The benefit
is recognized as a reduction of income tax expense in the year in which the
credit is claimed for tax purposes.

Deferred tax liabilities (assets)

The increase in deferred tax assets during the year ended 31 December 2002
is mainly related to adjustments made for tax purposes to the statutory
accounts of individual Group companies which are reversed in the consolidation,
booking the related deferred taxes; the increase is also due to revised tax
planning on the part of the Parent Company.

Ducati Motor Holding S.p.A.s latest tax planning strategy is based on the
consideration that D.L. no. 209 of 24 September 2002 imposed further limits on
the benefit introduced by D. Lgs. no. 466 of 18 December 1997 (the dual income
tax, or DIT), in addition to those already imposed by D.L. no. 383 dated 18
October 2001, with a view to definitively cancelling the benefit as anticipated
in the delegated law for the tax reform.

The directors have in particular reconsidered the decision to charge
accelerated depreciation in 2001, believing it to be more advantageous for the
Company not to take advantage of the chance to deduct accelerated depreciation
from taxable income.

It is worth noting that in the financial statements as of December 31,
2001, the Directors did not charge accelerated depreciation to the statement of
operations, but provided for the deferred taxes on it. The decision not to
charge  3,312 thousand of accelerated depreciation had its effect on the tax
return for 2001, which was filed on a timely basis prior to the October
deadline. This decision makes it possible to release the deferred tax reserve
of  1,300 thousand against a higher charge for current income taxes  due to
the increase in taxable income resulting from the decision not to charge
accelerated depreciation  of only  372 thousand (IRPEG 7% + IRAP 4.25%),
thanks to the possibility of applying a corporate income tax rate of only 7% in
2001 (thanks to the Super-DIT system).

However, it should be said that as the shareholders meeting of Ducati
Motor Holding S.p.A. passed a resolution approving the 2001 financial
statements, allocating the net profit to the reserve for accelerated
depreciation, the directors decision is still subject to ratification by the
shareholders at the time they approve the 2002 financial statements; the
directors will also propose that the meeting should approve a reclassification
of the reserve set up previously, as it is no longer needed.

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In the same way, with
regard to the calculation of deferred and current tax payable by the Parent
Company for 2000 and 2001, it has been decided to use the D.I.T. benefit before
using the carry-forward tax losses. This decision meant recognising in the
consolidated statement of operations for 2002 higher deferred tax assets on
losses carried forward of  2,529 thousand and higher taxation (inclusive of
penalties and interest) after filing a supplementary tax return as well as
other effects for  549 thousand and the reversal of deferred tax assets
recognised in prior years for benefits not used for DIT purposes
worth  2,187
thousand.

The above mentioned new tax planning strategy leads to a net benefit in
terms of the tax charge for 2002 of
 720 thousand, of
which  1,642 thousand
for higher deferred tax assets and  922 thousand as higher taxes (including
penalties and interest) relating to prior periods.

Deferred tax assets and liabilities as of December 31, 2002 were
calculated at current tax rates at the balance sheet date, bearing in mind the
period when they will presumably reverse as allowed by the above mentioned
accounting principle 25.

Note that the Budget Law for 2001 changed the standard corporation tax
rate as follows:



| |  |  | from 37% to 36% for 2001 and 2002;        
| | - |  | ------------------------------------------
|
| |  |  | from 36% to 34% from 2003 and later years.

The difference between the taxes calculated by applying the normal tax
rate to pre-tax profit and the actual net taxes shown in the consolidated
statement of operations is mainly due to different rates applied in the various
countries where the foreign subsidiaries operate, as well as to the application
of IRAP only to the Parent Company and the Italian subsidiaries; IRAP can be
applied at varying rates.

Deferred income taxes have been not been calculated on the undistributed
earnings of foreign subsidiaries, as these earnings have been substantially
reinvested and there are no plans to initiate any action that would precipitate
payment of income taxes thereon.

The overall tax charge amounts to the following:

|                  |  |              |       |              |  |              |       |  |  |  |        |  
|----------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ------ | -
|                  |  | Year ended   |       | Year ended   |  | Year ended  
|                  |  | December 31, |       | December 31, |  | December 31,
|                  |  | 2000         |       | 2001         |  | 2002        
|                  |  |              |       |              |  |             
|                  |  |              |       |              |  | ( 000)      |       |  |  | 
|Current taxation  |  |              | 3,847 |              |  |              | 3,197 |  |  |  | 4,106  |  
|Deferred taxation |  |              | 3,342 |              |  |              | 5,697 |  |  |  | (2,120 | )
|                  |  |              |       |              |  |              |       |  |  |  |        |  
|                  |  |              | 7,189 |              |  |              | 8,894 |  |  |  | 1,986  |  

The expected income tax charge, determined pursuant to the applicable tax
rates to profits, differs from the actual tax item shown in the consolidated
income statement as a result of the following:



| |  |  | the use of carry-forward net operating losses accumulated at
Ducati Motor Holding S.p.A.s level until 1999 which were offset
against the income of Ducati Motor S.p.A. merged into the Company in
2000 and the income of Gio.Ca Moto International S.r.l. merged into
the Company in 2001;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | benefits arising from the tax-driven write-off of investments
in Ducati North America Inc. in Ducati Motor Holding S.p.A.s own
statutory financial statements;                                                                                                                            

In the financial statements for the year ended December 31, 2002, the
Company recognized deferred tax assets relating to the carry-forward net
operating losses of the subsidiary
Ducati U.K. Ltd, Ducati.Com S.r.l. and Ducati Corse S.r.l. given the
reasonable certainty of such companies profitability in future years. The tax
benefit was calculated at the rates applicable at the balance sheet date in the
country concerned.

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Movements in the total of deferred income tax (assets)/liabilities for the
periods presented are as follows:

|                     |  |        |        |             |  |         |        |   |  |  |        |  
|-------------------- |  | ------ | ------ | ----------- |  | ------- | ------ | - |  |  | ------ | -
|                     |  | Assets |        | Liabilities |  | Total  
|                     |  |        |        |             |  |        
|                     |  |        |        |             |  | ( 000) |        |   |  | 
|December 31, 2000    |  |        | (1,326 | )           |  |         | (6,350 | ) |  |  | (7,676 | )
|Increases/decreases  |  |        | (1,682 | )           |  |         | 7,381  |   |  |  | 5,699  |  
|Foreign exchange net |  |        | (68    | )           |  |         |       |   |  |  | (68    | )
|                     |  |        |        |             |  |         |        |   |  |  |        |  
|December 31, 2001    |  |        | (3,076 | )           |  |         | 1,031  |   |  |  | (2,045 | )
|Increases/decreases  |  |        | (1.134 | )           |  |         | (996   | ) |  |  | (2,130 | )
|Foreign exchange net |  |        | 221    |             |  |         |       |   |  |  | 221    |  
|Other movements      |  |        | 270    |             |  |         |       |   |  |  | 270    |  
|                     |  |        |        |             |  |         |        |   |  |  |        |  
|December 31, 2002    |  |        | (3,719 | )           |  |         | 35     |   |  |  | (3,684 | )

Deferred tax assets and liabilities have been accounted for in accordance
with Accounting Principle No. 25, issued by the Italian Accounting Profession
in March 1999.

Fiscal periods since 1997 or since the incorporation date of the companys
Italian subsidiaries if later, for which December 31 of each year represent the
statutory closing date, are still open to assessment for both income tax and
Value Added Tax (VAT) purposes; for the overseas subsidiaries fiscal periods
are open as follows:



| |  |  | Ducati North America, Inc. from 1997;                      
| | - |  | -----------------------------------------------------------
|
| |  |  | Ducati Deutschland G.m.b.H. and Ducati France SA from 1997;
|
| |  |  | Ducati Japan K.K from 1998;                                
|
| |  |  | Ducati Benelux B.V. and Ducati U.K. Limited from 1999.     

At December 31, 2002, there are no significant tax claims with respect to
either the Company or the Companys subsidiaries.

The other tax provision for  35 thousand refers to  9 thousand relating to
Ducati France S.A. and  26 thousand relating to a tax risks pertaining to
Gio.Ca Moto International S.r.l., merged with the Parent Company on December
31, 2001.

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28. Transactions with related parties

During the three year period ended December 31, 2002, transactions with
related parties included only transactions with the members of Board of
Directors, as follows:



| |  | consultancy fees and reimbursement of expenses to a Director, Abel
Halpern, none in 2002,  16 thousand in 2001 and  177 thousand in 2000;                                        
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | emoluments to Federico Minoli as Chairman of the Board of Directiors and
consultancy of the Parent Company for
 0.9 million
2002,  1.6 million
in 2001 and  1.0 million in 2000;
| 
| |  | compensation as Managing Director and Head of Relations with Investors to
Carlo Di Biagio for  1.1 million in 2002,  1.1 million in 2001 and  0.5
million in 2000.              

In addition, a provision of  15,000 has been made for each of the
following Directors: U. Weiss, A. Halpern, D. Choi, D. Bonderman, P.
Pietrogrande, P. Ferrari, G. Seragnoli, M. Benetton and D. Razzano. In 2001 a
provision of  20,000 was made with respect to the emolument to be paid to the
Director J. Craven.

A commercial services agreement worth  232 thousand was signed for 2002
with the company Dream Engine S.r.l., whose Sole Director is Federico Minoli,
for the organisation of an event called the Motogiro dItalia (Motorbike Tour
of Italy) involving owners of vintage motorbikes (Ducati or otherwise), which
took place in June 2002. Dream Engine S.r.l. is also held 50% by Federico
Minoli.

The following agreements have also been signed with the same company: (i)
A sponsorship agreement worth  207 thousand for the organisation of the
Motogiro dItalia involving owners of vintage motorbikes (Ducati or
otherwise), which will take place in July 2003; (ii) a sponsorship agreement
worth  135 thousand for Ducati Motor Holding S.p.A. to sponsor an event called
Centopassi (One Hundred Steps) which Dream Engine S.r.l. is to organise
during the month of August or September 2003 involving owners of Ducati and
other makes of motorcycles.

These transactions were carried out at market conditions. For more
information, please review the section entitled Commitments not disclosed in
the balance sheet and in this report under Stock Option Plans.

At December 31, 2002, members of the Board of Directors held shares in
Ducati Motor Holding S.p.A. as follows:

|                  |  |              |           | 
|----------------- |  | ------------ | --------- | 
|                  |  | Year ended  
|                  |  | December 31,
|                  |  | 2002        
|                  |  |             
|                  |  | ( 000)     
|Giorgio Seragnoli |  |              | 7,815,692 | 
|Federico Minoli   |  |              | 414,815   | 
|Carlo di Biagio   |  |              | 895,450   | 

See notes 17 and 18 in relation to share option plans and other
entitlements involving the Directors.

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29. Application of generally accepted accounting principles in the United States of America

The consolidated financial statements of the Company as presented have
been prepared in conformity with Italian GAAP. Those standards differ in
certain significant respects from U.S. GAAP. Following is a description of the
principal valuation and measurement differences between Italian GAAP and U.S.
GAAP.

(a)  Business combination

The Acquisition has been accounted for under Italian GAAP 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 agreement not to compete) with the
remainder to goodwill. Acquisition costs are separately capitalized as an
intangible asset and amortized over a period of five years. 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  |            |  |         |       |  |  |  | 35,429  | 
|Cash paid                                    |  |         | 72,253  |            |  |         |       |  |  |  | 72,253  | 
|                                             |  |         |         |            |  |         |        |  |  |  |         | 
|                                             |  |         | 107,682 |            |  |         |       |  |  |  | 107,682 | 
|Subsequent purchase price adjustments        |  |         | (2,034  | )          |  |         | 12,911 |  |  |  | 10,877  | 
|                                             |  |         |         |            |  |         |        |  |  |  |         | 
|Purchase consideration                       |  |         | 105,648 |            |  |         | 12,911 |  |  |  | 118,559 | 
|Incidental costs of the Acquisition          |  |         | 14,048  |            |  |         |       |  |  |  | 14,048  | 
|                                             |  |         |         |            |  |         |        |  |  |  |         | 
|Total purchase consideration under U.S. GAAP |  |         | 119,696 |            |  |         | 12,911 |  |  |  | 132,607 | 

Under the provisions of EITF Issue No. 88-16, the accounting basis of the
assets and liabilities of the Ducati motorcycle business have 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
establish related deferred taxes. For U.S. GAAP purposes, the allocation of
Holding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:

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|                                                                                    |  |         |         |            |  |         |        |  |  |  |         |  
|----------------------------------------------------------------------------------- |  | ------- | ------- | ---------- |  | ------- | ------ |  |  |  | ------- | -
|                                                                                    |  | Initial |         | Adjustment |  | Total  
|                                                                                    |  |         |         |            |  |        
|                                                                                    |  |         |         |            |  | ( 000) |        |  |  | 
|Book valueliabilities in excess of assets at
September 25, 1996 under Italian GAAP |  |         | (39,020 | )          |  |         |       |  |  |  | (39,020 | )
|U.S. GAAP adjustments                                                               |  |         | (2,086  | )          |  |         |       |  |  |  | (2,086  | )
|                                                                                    |  |         |         |            |  |         |        |  |  |  |         |  
|Book value of liabilities in excess of assets
Acquired                              |  |         | (41,106 | )          |  |         |       |  |  |  | (41,106 | )
|Adjustments:                                                                        |  |         |         |            |  |         |        |  |  |  |         |  
|oProperty,
plant and equipment                                                      |  |         | 10,122  |            |  |         |       |  |  |  | 10,122  |  
|oNon-compete
agreement                                                              |  |         | 7,746   |            |  |         |       |  |  |  | 7,746   |  
|oDeferred
taxes                                                                     |  |         | 3,899   |            |  |         |       |  |  |  | 3,899   |  
|oBrand name                                                                      |  |         | 67,793  |            |  |         | 6,585  |  |  |  | 74,378  |  
|oPredecessor basis adjustment                                                       |  |         | 71,242  |            |  |         | 6,326  |  |  |  | 77,568  |  
|                                                                                    |  |         |         |            |  |         |        |  |  |  |         |  
|                                                                                    |  |         | 119,696 |            |  |         | 12,911 |  |  |  | 132,607 |  

This accounting under U.S. GAAP has resulted in a book value of 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.

Furthermore, this accounting has resulted in the recognition of an
additional gain on disposal (classified as other non-operating income) on the
sale of fixed asset, gross value of  628 thousand, in 1999, which was acquired
at the time of Acquisition.

(b)  Deferred costs

Under Italian GAAP certain costs, principally research and development
expenditures on specific product development projects, are deferred and
amortized over the estimated useful lives of the respective assets. Under U.S.
GAAP, such costs are expensed as incurred. In addition, research and
development costs are recognized as part of cost of goods sold.

(c)  Debt issuance costs

Under Italian GAAP, the entire unamortized debt issuance costs associated
with the long term debt that was repaid with the proceeds of the Credit
Agreement were charged to the statement of operations when such loan was
extinguished during July 1998. Debt issuance costs incurred under the Credit
Agreement were capitalized and were amortized over the term of the debt under
the Credit Agreement. Under U.S. GAAP, the loan relating to the Prior Financing
has been considered partially extinguished given the continuity of certain
credit institutions. As such, the unamortized debt issuance costs related to
the portion not extinguished continued as an asset, being amortized over the
term of the new debt. Certain debt issuance costs incurred under the Credit
Agreement were expensed in conformity with EITF Issue No. 96-19, while the
balance of such costs were capitalized and amortized over the term of the debt.
Upon the extinguishment of the loan arrangements under the Credit Agreement,
the capitalized debt issuance costs as at that date were written-off and the
resulting charge has been recorded under U.S. GAAP 2000.

Under U.S. GAAP, as a result of the partial extinguishment of the Prior
Financing, the interest rate swap designated to change the interest
characteristics of such debt has been marked-to-market and a loss on the
redesignation of the swap for the percentage of debt considered extinguished
has been recognized, with an offsetting premium on the new long-term debt. This
premium is being accreted to interest expense over the remaining term of the
swap. For Italian GAAP purposes, a loss was recognized on the redesignation of
the swap. As a result of the extinguishment of the loan arrangements under the
Credit Agreement during the year ended

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December 31, 2000, unaccreted portion of the premium was recognized in the
statement of operations under U.S. GAAP.

(d)  Costs associated with initial public offering

Under Italian GAAP, costs associated with the Companys initial public
offering, including underwriting discounts, commissions, offering expenses and
registration taxes are capitalized as an intangible asset and are being
amortized over a period of five years from the date of the offering. Under U.S.
GAAP, these costs are considered to be directly associated with the capital
increase from such an offering and consequently have been reduced from the
share premium account within shareholders equity, net of the expected income
tax benefit from the deductibility of these costs over its amortization period
for fiscal purposes.

(e)  Foreign currency translation

Under Italian GAAP, long-term debt denominated in foreign currencies is
re-measured at the exchange rates in effect at the reporting date; foreign
exchange losses on such long-term debt are recognized in the statement of
operations immediately while foreign exchange gains are deferred and included
within provisions for risks and chargeslong-term portion. Under U.S. GAAP,
foreign exchange gains are recognized in the statement of operations
immediately, as are foreign exchange losses.

(f)  Derivative financial instruments

Under Italian GAAP, the Company utilizes forward exchange contracts to
hedge foreign currency risks on export sales. Under Italian GAAP, gains and
losses on forward exchange contracts are deferred where the contract is
designated to a future commitment. Under U.S. GAAP, this treatment is
applicable only if there is a firm commitment to a third party; where this
commitment does not exist, the forward exchange contract is
marked  to 
market; gains and losses therefrom are recognized in the statement of
operations immediately.

Under
U.S. GAAP, the Company has adopted the SFAS No. 133,
Accounting for Derivative Financial Instruments
(SFAS 133) as of January 1,
2001, as required. The cumulative effect of the adoption of SFAS 133 resulted
in a gain of approximately  1,906 thousand, net of income taxes  1,283
thousand. The Company has elected not to adopt hedge accounting provisions in
accordance with SFAS 133 for its hedging derivatives, therefore all derivatives
are recorded at fair value, with adjustments to fair value at each reporting
date recorded in the consolidated statement of operations.

(g)  Leasing

Until December 31, 2000, under Italian GAAP, all leases were accounted for
as operating leases, i.e. machinery and equipment acquired under capital leases
are not recognized as equipment with the obligation under capital lease.
Effective January 1, 2001, lease agreements are accounted for in accordance
with International Accounting Standard 17 (IAS 17), which requires that where
the necessary conditions are met, such machinery and equipment are recorded at
the present value of minimum lease payments and the obligation under capital
leases is recognized as a liability. The related assets are then amortized over
their useful economic lives. Under U.S. GAAP, these lease agreements are
accounted for in a substantially similar manner as IAS 17. However, certain
differences exist including lease transactions involving real estate, such as
the sale and lease back agreement. Under U.S. GAAP, sale and lease back
accounting is not applicable if the seller/lessee maintains continuous
involvement in the asset that was sold and leased back; in such case, the
Financing method or the Deposit method of accounting must be adopted. Based
on the economics of the transaction entered into by Ducati, accounting under
IAS and U.S. GAAP does not produce any material difference in the accounting or
presentation of the financial statements.

(h)  Dealer incentivesoperating costs and financial expenses

Under Italian GAAP, the Companys financing of dealers flooring as an
incentive and cash discounts granted to customers are treated as a financial
expense as interest matures. Under

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U.S. GAAP, these incentives are accrued at the time of grant and are
classified as a reduction of revenue, in accordance with EITF 00-14, and the
amount of such reduction in 2000, 2001 and 2002 was  2,373 thousand,  4,291
thousand and  2,095 thousand, respectively.

(j)  Software capitalization

Under Italian GAAP, costs relating to the preliminary project and post
implementation phases of software projects may be capitalized and amortized
over their useful economic life. Under U.S. GAAP, more specifically the
provisions of SOP 98-1 Accounting for Costs of Computer Software Developed or
Obtained for Internal Use, such costs should be expensed as incurred.

(k)  Deferred taxes

Under Italian GAAP, deferred taxes are recognized on the entire difference
between the reported amount of a brand name (see note (a)) and its tax basis.

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 Italian GAAP, a deferred tax liability is not recognized for a
taxable temporary difference that is essentially permanent in duration. Under
Italian GAAP, the net tax effect of  6,657 thousand resulting from the
trademark revaluation recognized in 2000, was credited to the statement of
operations as non-operating income.

Under U.S. GAAP a deferred tax liability of  5,087 thousand was recorded
for the amount of taxes to be paid in case of distribution or liquidation of
the revaluation reserve, created as a result of the trademark revaluation, in
accordance with EITF 93-16. Thus due to revaluation of trademark in 2000, the
Company recorded a net regional tax benefit of  1,570 thousand in the U.S.
GAAP financial statements. This benefit has been classified as part of income
tax expense, in accordance with EITF 98-11.

(l)  Stock Based Compensation

Under Italian GAAP, compensation expense related to stock based
compensation plans is only recorded in the Companys statement of operations
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 U.S. GAAP, the provisions of Statement of Financial Accounting
Standards No. 123(SFAS No. 123), Accounting for Stock-Based Compensation,
allow entities to continue to apply the provisions of APB Opinion No. 25
Accounting for Stock Issued to Employees for the accounting of compensation
expense for its stock based compensation plans, and requires certain pro-forma
disclosures for employee share options granted as if the fair-value-based
methods defined in SFAS No. 123 had been applied. 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 for its share option plans. For a fixed plan, compensation expense is
recorded in the financial statements on the grant (and a measurement) date only
if the market value of the underlying shares exceeds the exercise price. SFAS
No. 148

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amended SFAS No. 123, as described in note 29 (n), and the disclosure
provisions of SFAS No. 148 are applicable for fiscal periods beginning after
December 15, 2002.

Under the terms of 1997 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 is being amortized over the vesting period. Consequently, 
14,543 thousand was recognized in the Companys U.S. GAAP statement of
operations for year ended December 31, 1999,  2,838 thousand for the year
ended December 31, 2000 and  118 thousand for the year ended December 31,
2001. At the respective balance sheet dates, the remaining non-cash
compensation expense originating at the date of the initial public offering has
been deferred. Assuming the 1997 Plan otherwise remains fixed, no further
compensation expense shall be recorded in future periods.

Under the terms of the 1999 Plan, 3,159,259 options were granted during
1999 with an exercise price of  2.879 per share, 3,159,259 options were
granted during 2000 with an exercise price of  2.810, and a further 3,165,000
options were granted during 2001 with an exercise price of
 1.9882 and a
further 3,960,000 option were granted in 2002 with an exercise price of 
1.807. As a result of the cash-out provisions of the plan, the Company has
accounted for the share option plan under U.S. GAAP as stock appreciation
rights until the Companys shareholders have approved both the share capital
increase to satisfy these options and elected not to apply the cash-out
provision. As the exercise price of the options exceeded the market value of
the underlying shares as of December 31, 1999, no compensation expense was
recorded in the financial statements as of December 31, 1999. During 2000, the
Companys shareholders approval of the share capital increase to satisfy these
options and fixing the exercise price for these grants at Euro 2.879 and Euro
2.810, as applicable, resulted in a measurement date for options granted, as of
the date of approval and a non-cash compensation of  438 thousand, which is
being amortized over the respective vesting periods. Consequently,  159
thousand and  86 thousand and  101 thousand were recognized in the Companys
U.S. GAAP statement of operations for the year ended December 31, 2000,
December 31, 2001 and December 31, 2002, respectively; the remaining non-cash
compensation expense has been deferred. Assuming that the Company continues to
not apply cash-out provisions, which subsequent to the share capital increase
are applicable only at the discretion of the Company, 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 continuosly evaluate the probability
during the contingency period. The exercise price of options granted in 2001
and 2002 is considered variable as it cannot be lower than the consolidated net
worth per share at the time of exercise; hence the company accounted for these
new 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 was recorded for grants during 2001 and
2002 as the exercise price is higher than the market value of the underlying
shares as of December 31, 2001 and December 31, 2002.

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.

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Under U.S. GAAP, the total amount of compensation expense recognized is
credited directly to additional paid in capital to shareholders equity since
no cash-out payment will occur; the portion of this expense deferred to future
years has been shown separately within shareholders equity.

(m)  Earnings per share

Under Italian GAAP, there is no requirement to present earnings per share
nor any accounting standards that regulate its calculation.

Under U.S. GAAP, earnings per share are calculated and presented in
accordance with the provisions of Statement of Financial Accounting Standards
No. 128, Earnings per Share, which requires the presentation of both basic
and diluted earnings per share information for all periods presented; in case
of change in accounting principles or extraordinary items, basic and diluted
earnings per share must be presented before and after the cumulative effect of
change in accounting principles or extraordinary item, on a pro forma basis.
Basic net profit per share is computed by dividing net profit, as calculated in
accordance with U.S. GAAP, by the weighted average number of shares outstanding
in the period; diluted net profit per share includes the effect of incremental
shares, if any, that would have been outstanding under the share option plans
or other obligations to issue such shares.

(n)  Business combinations, goodwill and intangible assets

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, 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 will instead test 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 the
Italian GAAP financial statements relating to the 1996 transaction (see note
29(a) and 1(a)) is not considered as goodwill under U.S. GAAP but is reflected
as part of Brand name, and therefore continues to be amortized.

(o)  Securitization

In December 2002, the Company entered into a securitization transaction
with DDF 1 (see note 1.c), which is accounted as a sale under Italian GAAP.
However, under US GAAP the transaction does not constitute a sale under the
provisions of SFAS 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities. Therefore, the transaction is
accounted as a secured borrowing under U.S. GAAP. The amount of secured
borrowing would be reflected as current liability.

(p)  Implementation of New Accounting Pronouncements

In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Statement

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No. 143 requires an enterprise to record the fair value of an asset
retirement obligation as a liability in the period in which it incurs a legal
obligation associated with the retirement of tangible long-lived assets.
Enterprises are required to adopt Statement No. 143 for fiscal years beginning
after June 15, 2002. Early adoption is encouraged. The Company will adopt
this standard as of January 1, 2003.

In April 2002, the FASB issued Statement No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections.Statement No. 145 provides for the rescission of several
previously issued accounting standards, new accounting guidance for the
accounting for certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. Statement No.
145 will be adopted beginning January 1, 2003, except for the provisions
relating to the amendment of Statement No. 13, which will be adopted for
transactions occurring subsequent to May 15, 2002. Adoption of Statement No.
145 will not have a material impact on the consolidated financial statements.

In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities". Statement No. 146 addresses
financial accounting and reposting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3. The Statement is based on the
general principle that a liability for a cost associated with an exit or
disposal activity should be recorded when it is incurred, that is when it meets
the definition of a liability in FASB Concepts Statement No. 6, and initially
measured at fair value consistent with FASB Concepts Statement No. 7. The
Statement is effective for exit or disposal activities that are initiated after
December 31, 2002. Earlier application is encouraged.

In October 2002, the FASB issued Statement No. 147, Acquisition of
Certain Financial InstitutionsStatement No. 147 addresses the application of
the purchase method of accounting for acquisitions of certain financial
institutions. The provisions related to the application of the purchase method
of accounting are effective for acquisitions on or after October 1, 2002. The
provisions related to accounting for the impairment or disposal of certain
long-term customer relationship intangible assets are effective on October 1,
2002.

In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others", which addresses the disclosure to be
made by a guarantor in its interim and annual financial statements about its
obligations under guarantees. This Interpretation also requires the recognition
of a liability by a guarantor at the inception of certain guarantees. The
Interpretation requires the guarantor to recognize a liability for the
non-contingent component of the guarantees, this is the obligation to stand
ready to perform in the event that specified triggering events or conditions
occur. The initial measurement of this liability is the fair value of the
guarantee at inception. The disclosure requirements are effective for interim
and annual financial statements ending after December 15, 2002. The initial
recognition and measurement provisions are effective for all guarantees within
the scope of Interpretation 45 issued or modified after December 31, 2002.

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123.
SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure provisions of
SFAS No. 148 are applicable for fiscal periods beginning after December 15,
2002. The Company continues to use the intrinsic value based method of APB
Opinion No. 25 to account for its employee stock based compensation plans. The
disclosure provisions of SFAS No. 148 will be adopted by the Company for the
year ending December 31, 2003.

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In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities". The Interpretation addresses consolidation by
business enterprises of variable interest entities, which have one or both of
the following characteristics: the equity investment at risk is not sufficient
to permit the entity to finance its activities without additional financial
support from other parties or the equity investors lack one of three
characteristics of a controlling financial interest. The consolidation
requirements apply to all variable interest entities created after January 31,
2003. Public companies are required to apply the consolidation requirements
that existed prior to February 1, 2003 and remain in existence as of the
beginning of annual or interim periods beginning after June 15, 2003.

In March
2003, the FASB issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity. The
Statement requires issuers to classify as liabilities (or assets in some case)
three classes of freestanding financial instruments that embody obligations for
the issuer. Generally the Statement is effective for financial instruments
entered into or modified after May 31, 2003 and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company will adopt the provisions of the Statement on July 1, 2003.

30.     Reconciliation of net profit and shareholders equity determined under
Italian GAAP with those under U.S. GAAP

The calculation of net profit and shareholders equityin conformity with U.S.
GAAP is as follows

Reconciliation of net profit:

|                                                                                      |  |                                |        |              |  |              |        |   |  |  |        |  
|------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ------------ |  | ------------ | ------ | - |  |  | ------ | -
|                                                                                      |  | Year ended                     |        | Year ended   |  | Year ended  
|                                                                                      |  | December 31,                   |        | December 31, |  | December 31,
|                                                                                      |  | 2000                           |        | 2001         |  | 2002        
|                                                                                      |  |                                |        |              |  |             
|                                                                                      |  | ( 000), except per share data
|Net profit under Italian GAAP                                                         |  |                                | 10,483 |              |  |              | 10,553 |   |  |  | 6,525  |  
|Adjustments increasing (decreasing) reported
net profit:                              |  |                                |        |              |  |              |        |   |  |  |        |  
|oRevenues (see note 29h)                                                              |  |                                | (2,373 | )            |  |              | (4,291 | ) |  |  | (2,095 | )
|oDepreciation of property, plant and
equipment (i)                                    |  |                                | (141   | )            |  |              | 322    |   |  |  | 320    |  
|oAmortization of intangible assets (ii)                                               |  |                                | 4,464  |              |  |              | 5,191  |   |  |  | (193   | )
|oSelling, general and administrative expenses (excluding
depreciation) (iii)          |  |                                | 235    |              |  |              | (288   | ) |  |  |       |  
|oNon-cash expense for stock-based compensation (see note
29(l))                       |  |                                | (2,997 | )            |  |              | (204   | ) |  |  | (101   | )
|oInterest (iv)                                                                        |  |                                | 3,333  |              |  |              | 3,313  |   |  |  | 2,890  |  
|oForeign exchange (see note 29(e))                                                    |  |                                | 1,096  |              |  |              | (3,172 | ) |  |  | 642    |  
|oOther                                                                                |  |                                |       |              |  |              | (10    | ) |  |  |       |  
|oIncome taxes (v)                                                                     |  |                                | (7,006 | )            |  |              | 858    |   |  |  | (1,022 | )
|oCumulative effect of a change in accounting principle,
net of taxes (see note 29(f)) |  |                                |       |              |  |              | 1,906  |   |  |  |       |  
|                                                                                      |  |                                |        |              |  |              |        |   |  |  |        |  
|Approximate net profit in conformity
with U.S. GAAP                                   |  |                                | 7,094  |              |  |              | 14,178 |   |  |  | 6,966  |  
|Other comprehensive income:                                                           |  |                                |        |              |  |              |        |   |  |  |        |  
|oForeign currency translation adjustment                                              |  |                                | 1,345  |              |  |              | 824    |   |  |  | (1,223 | )
|                                                                                      |  |                                |        |              |  |              |        |   |  |  |        |  

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|                                                                          |  |                                |             |              |  |              |             |  |  |  |             | 
|------------------------------------------------------------------------- |  | ------------------------------ | ----------- | ------------ |  | ------------ | ----------- |  |  |  | ----------- | 
|                                                                          |  | Year ended                     |             | Year ended   |  | Year ended  
|                                                                          |  | December 31,                   |             | December 31, |  | December 31,
|                                                                          |  | 2000                           |             | 2001         |  | 2002        
|                                                                          |  |                                |             |              |  |             
|                                                                          |  | ( 000), except per share data
|Comprehensive income                                                      |  |                                | 8,439       |              |  |              | 15,002      |  |  |  | 5,743       | 
|Net profit/(loss) per share in conformity with U.S. GAAP
(see note 29(m)) |  |                                |             |              |  |              |             |  |  |  |             | 
|Weighted average number of shares (basic) (see note 29 (m))               |  |                                | 158,156,829 |              |  |              | 158,417,632 |  |  |  | 158,500,963 | 
|                                                                          |  |                                | 0.045       |              |  |              | 0.077       |  |  |  | 0.044       | 
|Net profit before cumulative effects of a change in
accounting principles |  |                                |             |              |  |              |             |  |  |  |             | 
|Cumulative effects of a change in accounting principle                    |  |                                |            |              |  |              | 0.012       |  |  |  |            | 
|Net profit                                                                |  |                                | 0.045       |              |  |              | 0.089       |  |  |  | 0.044       | 
|Weighted average number of shares (diluted) (see note
29(m))              |  |                                | 163,267,828 |              |  |              | 162,355,535 |  |  |  | 162,359,032 | 
|Net profit before cumulative effects of a change in
accounting principle  |  |                                | 0.043       |              |  |              | 0.076       |  |  |  | 0.043       | 
|Cumulative effects of a change in accounting principle                    |  |                                |            |              |  |              | 0.012       |  |  |  |            | 
|Net profit                                                                |  |                                | 0.043       |              |  |              | 0.088       |  |  |  | 0.043       | 

The difference between basic and diluted shares outstanding is due to the
dilutive effect of employee stock options issued under the 1997 Plan.



|(i) |  | The breakdown of the adjustments to depreciation of property, plant and
equipment is summarized below:
|--- |  | ------------------------------------------------------------------------------------------------------

|                                                     |  |              |      |              |  |              |     |  |  |  |     | 
|---------------------------------------------------- |  | ------------ | ---- | ------------ |  | ------------ | --- |  |  |  | --- | 
|                                                     |  | Year ended   |      | Year ended   |  | Year ended  
|                                                     |  | December 31, |      | December 31, |  | December 31,
|                                                     |  | 2000         |      | 2001         |  | 2002        
|                                                     |  |              |      |              |  |             
|                                                     |  |              |      |              |  | ( 000)      |     |  |  | 
|Revaluation on business combination (see
note 29(a)) |  |              | 260  |              |  |              | 260 |  |  |  | 258 | 
|Assets under capital leases (see note 29(g))         |  |              | (463 | )            |  |              |    |  |  |  |    | 
|Software capitalization (see note 29(j))             |  |              | 62   |              |  |              | 62  |  |  |  | 62  | 
|                                                     |  |              |      |              |  |              |     |  |  |  |     | 
|                                                     |  |              | (141 | )            |  |              | 322 |  |  |  | 320 | 



|(ii) |  | The breakdown of the adjustments to amortization of intangible assets is
summarized below:
|---- |  | ------------------------------------------------------------------------------------------

|                                                              |  |              |        |              |  |              |        |   |  |  |        |  
|------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  |  | ------ | -
|                                                              |  | Year ended   |        | Year ended   |  | Year ended  
|                                                              |  | December 31, |        | December 31, |  | December 31,
|                                                              |  | 2000         |        | 2001         |  | 2002        
|                                                              |  |              |        |              |  |             
|                                                              |  |              |        |              |  | ( 000)      |        |   |  | 
|Brand name on business combination (see note
29(a))           |  |              | 7,439  |              |  |              | 7,236  |   |  |  | 5,469  |  
|Deferred costs (see note 29(b))                               |  |              | (4,332 | )            |  |              | (3,973 | ) |  |  | (7,888 | )
|Debt issuance costs (see note 29(c))                          |  |              | (570   | )            |  |              |       |   |  |  |       |  
|Cost associated with initial public offering
(see note 29(d)) |  |              | 1,927  |              |  |              | 1,928  |   |  |  | 1,928  |  
|Reversal goodwill amortization (see note 28 (n))              |  |              |        |              |  |              |        |   |  |  | 154    |  
|Other                                                         |  |              |        |              |  |              |        |   |  |  | 34     |  
|Advertising costs                                             |  |              |        |              |  |              |        |   |  |  | 110    |  
|                                                              |  |              |        |              |  |              |        |   |  |  |        |  
|                                                              |  |              | 4,464  |              |  |              | 5,191  |   |  |  | (193   | )

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|(iii) |  | The breakdown of the adjustments to selling, general and administrative
expenses (excluding depreciation) is summarized below:
|----- |  | ------------------------------------------------------------------------------------------------------------------------------

|                                    |  |              |     |              |  |              |      |   |  |  |   | 
|----------------------------------- |  | ------------ | --- | ------------ |  | ------------ | ---- | - |  |  | - | 
|                                    |  | Year ended   |     | Year ended   |  | Year ended  
|                                    |  | December 31, |     | December 31, |  | December 31,
|                                    |  | 2000         |     | 2001         |  | 2002        
|                                    |  |              |     |              |  |             
|                                    |  |              |     |              |  | ( 000)      |      |   |  | 
|Lease installments (see note 29(g)) |  |              | 235 |              |  |              | (81  | ) |  |  |  | 
|Other                               |  |              |     |              |  |              | (207 | ) |  |  |  | 
|                                    |  |              |     |              |  |              |      |   |  |  |   | 
|                                    |  |              | 235 |              |  |              | (288 | ) |  |  |   | 
|                                    |  |              |     |              |  |              |      |   |  |  |   | 

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|(iv) |  | The breakdown of the adjustments to interest expense is summarized below:
|---- |  | -------------------------------------------------------------------------

|                                                        |  |              |       |              |  |              |       |  |  |  |       | 
|------------------------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ----- | 
|                                                        |  | Year ended   |       | Year ended   |  | Year ended  
|                                                        |  | December 31, |       | December 31, |  | December 31,
|                                                        |  | 2000         |       | 2001         |  | 2002        
|                                                        |  |              |       |              |  |             
|                                                        |  |              |       |              |  | ( 000)      |       |  |  | 
|Accretion of premium on long-term debt (see
note 29(f)) |  |              | 466   |              |  |              |      |  |  |  |      | 
|Cash discounts (see note 29 (h))                        |  |              | 1,661 |              |  |              | 1,494 |  |  |  | 728   | 
|Imputed leasing interest (see note 29(g))               |  |              | (26   | )            |  |              |      |  |  |  |      | 
|Interest on dealer incentives (see note 29(h))          |  |              | 1,232 |              |  |              | 1,819 |  |  |  | 2,162 | 
|                                                        |  |              |       |              |  |              |       |  |  |  |       | 
|                                                        |  |              | 3,333 |              |  |              | 3,313 |  |  |  | 2,890 | 



|(v) |  | The breakdown of the adjustments to income taxes is summarized below:
|--- |  | ---------------------------------------------------------------------

|                                                               |  |              |        |              |  |              |     |  |  |  |        |  
|-------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | --- |  |  |  | ------ | -
|                                                               |  | Year ended   |        | Year ended   |  | Year ended  
|                                                               |  | December 31, |        | December 31, |  | December 31,
|                                                               |  | 2000         |        | 2001         |  | 2002        
|                                                               |  |              |        |              |  |             
|                                                               |  |              |        |              |  | ( 000)      |     |  |  | 
|Deferred taxes related to revaluation
surplus (see note 29(k)) |  |              | (5,087 | )            |  |              |    |  |  |  |       |  
|Income tax effect of US GAAP adjustments                       |  |              | (1,919 | )            |  |              | 858 |  |  |  | (1,022 | )
|                                                               |  |              |        |              |  |              |     |  |  |  |        |  
|                                                               |  |              | (7,006 | )            |  |              | 858 |  |  |  | (1,022 | )

Reconciliation of shareholders equity:

|                                                                                                   |  |                    |         |                    |  |  |          |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | ------------------ |  |  | -------- | -
|                                                                                                   |  | As of December 31, |         | As of December 31,
|                                                                                                   |  | 2001               |         | 2002              
|                                                                                                   |  |                    |         |                   
|                                                                                                   |  | ( 000)           
|Shareholders equity under Italian GAAP                                                            |  |                    | 154,597 |                    |  |  | 159,741  |  
|Adjustments increasing (decreasing) to
reported shareholders equity:                              |  |                    |         |                    |  |  |          |  
|oProperty, plant and equipment (vi)                                                                |  |                    | (7,528  | )                  |  |  | (7,208   | )
|oIntangible assets (vii)                                                                           |  |                    | (96,976 | )                  |  |  | (102,670 | )
|oAccrued expenses and other current
liabilities, including derivatives (see
note 29(f) and (viii)) |  |                    | (1,958  | )                  |  |  | 251      |  
|oDeferred taxes (see note 29(k) and
(ix))                                                          |  |                    | 28,908  |                    |  |  | 33,332   |  
|oOther                                                                                             |  |                    | 674     |                    |  |  | 37       |  
|                                                                                                   |  |                    |         |                    |  |  |          |  
|Approximate shareholders equity
in conformity with U.S. GAAP                                      |  |                    | 77,717  |                    |  |  | 83,483   |  

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|(vi) |  | The breakdown of the adjustments to property, plant and equipment is
summarized below:
|---- |  | --------------------------------------------------------------------------------------

|                                                     |  |                    |        |                    |  |  |        |  
|---------------------------------------------------- |  | ------------------ | ------ | ------------------ |  |  | ------ | -
|                                                     |  | As of December 31, |        | As of December 31,
|                                                     |  | 2001               |        | 2002              
|                                                     |  |                    |        |                   
|                                                     |  | ( 000)           
|Revaluation on business combination (see note 29(a)) |  |                    |        |                    |  |  |        |  
|- cost                                               |  |                    | (9,157 | )                  |  |  | (9,157 | )
|- accumulated depreciation                           |  |                    | 1,753  |                    |  |  | 2,010  |  
|Software capitalization (see note 29(j))             |  |                    | (124   | )                  |  |  | (61    | )
|                                                     |  |                    |        |                    |  |  |        |  
|                                                     |  |                    | (7,528 | )                  |  |  | (7,208 | )



|(vii) |  | The breakdown of the adjustments to intangible assets is summarized below:
|----- |  | --------------------------------------------------------------------------

|                                                               |  |                    |         |                    |  |  |          |  
|-------------------------------------------------------------- |  | ------------------ | ------- | ------------------ |  |  | -------- | -
|                                                               |  | As of December 31, |         | As of December 31,
|                                                               |  | 2001               |         | 2002              
|                                                               |  |                    |         |                   
|                                                               |  | ( 000)           
|Brand name on business combination (see note 29(a))            |  |                    |         |                    |  |  |          |  
|- cost                                                         |  |                    | (72,968 | )                  |  |  | (72,968  | )
|- tax benefit on brand name (see note 29(k))                   |  |                    | (36,050 | )                  |  |  | (41,541  | )
|- accumulated amortization                                     |  |                    | 35,591  |                    |  |  | 41,059   |  
|Advertising costs                                              |  |                    | (147    | )                  |  |  | (37      | )
|Deferred costs (see note 29(b))                                |  |                    | (19,127 | )                  |  |  | (27,014  | )
|Costs associated with initial public offering (see
note 29(d)) |  |                    |         |                    |  |  |          |  
|- cost                                                         |  |                    | (9,640  | )                  |  |  | (9,640   | )
|- accumulated amortization                                     |  |                    | 5,354   |                    |  |  | 7,283    |  
|Goodwill                                                       |  |                    |         |                    |  |  | 154      |  
|Other                                                          |  |                    | 11      |                    |  |  | 34       |  
|                                                               |  |                    |         |                    |  |  |          |  
|                                                               |  |                    | (96,976 | )                  |  |  | (102,670 | )



|(viii) |  | The breakdown of the adjustments to accrued expenses and other current
liabilities is summarized below:
|------ |  | -------------------------------------------------------------------------------------------------------

|                                     |  |                    |        |                    |  |  |      |  
|------------------------------------ |  | ------------------ | ------ | ------------------ |  |  | ---- | -
|                                     |  | As of December 31, |        | As of December 31,
|                                     |  | 2001               |        | 2002              
|                                     |  |                    |        |                   
|                                     |  | ( 000)           
|- Foreign exchange (see note 29(f))  |  |                    | (48    | )                  |  |  | 567  |  
|- Dealer incentives (see note 29(h)) |  |                    | (1,211 | )                  |  |  | (316 | )
|- Other                              |  |                    | (699   | )                  |  |  |     |  
|                                     |  |                    |        |                    |  |  |      |  
|                                     |  |                    | (1,958 | )                  |  |  | 251  |  



|(ix) |  | The breakdown of the adjustments to income taxes is summarized below:
|---- |  | ---------------------------------------------------------------------

|                                                |  |                    |        |                    |  |  |        |  
|----------------------------------------------- |  | ------------------ | ------ | ------------------ |  |  | ------ | -
|                                                |  | As of December 31, |        | As of December 31,
|                                                |  | 2001               |        | 2002              
|                                                |  |                    |        |                   
|                                                |  | ( 000)           
|- Deferred taxes for tax basis in brand name    |  |                    | (8,116 | )                  |  |  | (6,009 | )
|- Deferred Taxes related to revaluation surplus |  |                    | (5,087 | )                  |  |  | (5,087 | )
|- Income tax effects of US GAAP adjustments     |  |                    | 42,711 |                    |  |  | 44,428 |  
|                                                |  |                    |        |                    |  |  |        |  
|                                                |  |                    | 28,908 |                    |  |  | 33,332 |  

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Consolidated balance sheetU.S. GAAP

With regard to the consolidated balance sheet, the significant balance
sheet captions as determined under U.S. GAAP would have been as follows:

|                                                                            |  |              |         |              |  |  |         |  
|--------------------------------------------------------------------------- |  | ------------ | ------- | ------------ |  |  | ------- | -
|                                                                            |  | December 31, |         | December 31,
|                                                                            |  | 2001         |         | 2002        
|                                                                            |  |              |         |             
|                                                                            |  | ( 000)     
|Assets                                                                      |  |              |         |              |  |  |         |  
|Current assets                                                              |  |              | 259,737 |              |  |  | 289,217 |  
|Property, plant and equipment, net                                          |  |              | 50,289  |              |  |  | 63,210  |  
|Intangible assets, net                                                      |  |              | 29,845  |              |  |  | 23,383  |  
|Deferred tax assets, net of valuation allowance
(excluding current portion) |  |              | 15,413  |              |  |  | 21,608  |  
|Other long-term assets                                                      |  |              | 2,540   |              |  |  | 622     |  
|                                                                            |  |              |         |              |  |  |         |  
|Total Assets                                                                |  |              | 357,824 |              |  |  | 398,495 |  
|Liabilities and Shareholders Equity                                        |  |              |         |              |  |  |         |  
|Current liabilities                                                         |  |              | 158,766 |              |  |  | 188,252 |  
|Long term debt, less current                                                |  |              | 91,000  |              |  |  | 91,000  |  
|Obligations under capital leases, excluding current
Installments            |  |              | 19,485  |              |  |  | 17,792  |  
|Other long-term liabilities                                                 |  |              | 10,856  |              |  |  | 17,968  |  
|                                                                            |  |              |         |              |  |  |         |  
|Total liabilities                                                           |  |              | 280,107 |              |  |  | 315,012 |  
|Shareholders equity                                                        |  |              |         |              |  |  |         |  
|Share capital                                                               |  |              | 82,420  |              |  |  | 82,420  |  
|Share premium                                                               |  |              | 34,171  |              |  |  | 32,524  |  
|Deferred non-cash stock-based compensation                                  |  |              | (390    | )            |  |  | (79     | )
|Predecessor basis adjustment                                                |  |              | (77,568 | )            |  |  | (77,568 | )
|Retained earnings                                                           |  |              | 35,712  |              |  |  | 44,114  |  
|Foreign currency translation adjustment                                     |  |              | 3,372   |              |  |  | 2,072   |  
|                                                                            |  |              |         |              |  |  |         |  
|Total shareholders equity                                                  |  |              | 77,717  |              |  |  | 83,483  |  
|Total liabilities and shareholders equity                                  |  |              | 357,824 |              |  |  | 398,495 |  

The share premium account includes additional paid-in capital for  18,135
thousand for the total non-cash expense for stock based compensation.

The principal differences arise from:



| |  |  | the U.S. GAAP adjustments to shareholders equity outlined above;                                                                                                                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the differing reclassification of certain assets and
liabilities; for example, the line item ''intangible assets under
U.S. GAAP excludes both capitalized debt issuance costs (classified
as ''other assets) and software (classified as ''property, plant
and equipment).

The statutory financial statements of the Parent Company, stated in
accordance with Italian civil and tax law, indicate distributable reserves
which differ from retained earnings/(deficit) as presented in the U.S. GAAP
consolidated statements.

The current assets and the current liabilities includes  20.2 million
respectively arising from the securitization transaction as better explained in
the note 1.b Summary of the significant accounting policies under Italian
GAAP.

Consolidated statement of operationsU.S. GAAP

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With regard to the consolidated statements of operations, the Companys
operating income, profit/(loss) before income tax, minority interest and
extraordinary item, income taxes, extraordinary item and net profit/(loss) as
determined under U.S. GAAP would have been as follows:

|                                                                        |  |              |        |              |  |              |        |   |  |  |        |  
|----------------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  |  | ------ | -
|                                                                        |  | Year ended   |        | Year ended   |  | Year ended  
|                                                                        |  | December 31, |        | December 31, |  | December 31,
|                                                                        |  | 2000         |        | 2001         |  | 2002        
|                                                                        |  |              |        |              |  |             
|                                                                        |  |              |        |              |  | ( 000)      |        |   |  | 
|Operating income                                                        |  |              | 33,560 |              |  |              | 33,691 |   |  |  | 16,148 |  
|Profit/(loss) before income taxes                                       |  |              | 14,631 |              |  |              | 20,308 |   |  |  | 9,973  |  
|Income taxes                                                            |  |              | (7,537 | )            |  |              | (8,036 | ) |  |  | (3,007 | )
|Cumulative effect of adoption of
new accounting principle, net of
taxes |  |              |       |              |  |              | 1,906  |   |  |  |       |  
|Net profit/(loss)                                                       |  |              | 7,094  |              |  |              | 14,178 |   |  |  | 6,966  |  

Operating income, profit/(loss) before income taxes and net profit/(loss)
for the years ended December 31, 2000, 2001 and 2002 are stated after deducting
a non-cash expense for stock based compensation for  2,997 thousand,  204
thousand and  101 thousand, respectively (see note 29(m)). In addition to
the above, the principal differences in operating income arise from:



| |  |  | adjustments from the accounting for the business combination
resulting from the Acquisition, deferred costs, capital leases and
dealer incentives (see note 29);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the reclassification of the factoring charges from the sale
of receivables from interest expense above the operating income
line;                               
|
| |  |  | the classification of certain income and expenses as
''non-operating which would be otherwise classified as operating
under U.S. GAAP.                        

The principal differences in profit/(loss) before income taxes arise from
the aforementioned U.S. GAAP differences plus the different treatment of
foreign currency translation and derivative financial instruments (interest
rate swaps) (outlined in note 29 (e) and 29 (f)) as well as the classification
of the amortization of debt issuance costs as ''interest expense under U.S.
GAAP (not ''amortization charge), and the net effect of  6,658 thousand
resulting from the trademark revaluation (described in note 29(k)).

The principal differences in income taxes arises from deferred tax and tax
benefit on brand name and the aforementioned tax effect of the trademark
revaluation in the year ended 31 December 2000 (see note 29 (k)).

Furthermore, it should be noted that the presentation of the consolidated
statements of operations under U.S. GAAP would classify the charge for
depreciation of property, plant and equipment and amortization of certain
intangible assets within the appropriate line item ''costs of goods sold or
''selling, general and administrative expenses depending on the use of the
related asset.

Under U.S. GAAP, the additional disclosures of earnings per share data may
be presented as follows:

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##### Table of Contents



|                               |  |              |       |              |  |              |       |  |  |  |       | 
|------------------------------ |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ----- | 
|                               |  | Year ended   |       | Year ended   |  | Year ended  
|                               |  | December 31, |       | December 31, |  | December 31,
|                               |  | 2000         |       | 2001         |  | 2002        
|                               |  |              |       |              |  |             
|Net profit per share  basic   |  |              | 0.045 |              |  |              | 0.089 |  |  |  | 0.044 | 
|Net profit per share  diluted |  |              | 0.043 |              |  |              | 0.088 |  |  |  | 0.043 | 

In computing diluted profit per share at December 31, 2000, 2001 and 2002,
the dilutive effect of share equivalents under the 1997 share option plan has
been included, resulting in an increase of the weighted number of shares of
5,110,999, 3,937,903, and 3,858,069 respectively.

Consolidated statement of cash flowsU.S. GAAP

With regard to the consolidated statements of cash flows, differences in
classifications with that presented under Italian GAAP arise from not only the
aforementioned differences in presentation and principle in the consolidated
balance sheet but also from the fact that:



| |  |  | underlying cash flows of overseas subsidiaries would be
translated at the average exchange rate rather than that applied
within the statement of operations. Furthermore, under U.S. GAAP,
the effect of exchange rate changes on cash are included as a
separate line item of the consolidated statements of cash flows
rather than within operating activities;                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | under Italian GAAP, within cash flows from financing
activities, movements in bank borrowingsshort-term and long-term
comprises proceeds and repayments of bank borrowings, movements in
accrued interest payable and the foreign exchange movement on
amounts outstanding. Under U.S. GAAP, of these, only proceeds and
payments from bank borrowings would be so classified;                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | reclassification of certain activities between operating,
financing and investing; for example, under U.S. GAAP capitalized
debt issuance costs and costs associated with initial public
offering have been treated as a reduction of the cash flows from
financing activities while, under Italian GAAP, these have been
classified within ''investing activities. Furthermore, under U.S.
GAAP, the payment of the put warrant has been included within the
consolidated statements of cash flows as a financing activity rather
than within cash flows from operating activities. In addition, under
Italian GAAP R&D expenditure is capitalized and is reflected as a
part of investing activities and under U.S. GAAP it is expensed and
reflected as a part of operating activities.

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Had statements been prepared under U.S. GAAP, the key captions in the
consolidated statement of cash flows would have been as follows:

|                                                    |  |              |         |              |  |              |        |   |  |  |         |  
|--------------------------------------------------- |  | ------------ | ------- | ------------ |  | ------------ | ------ | - |  |  | ------- | -
|                                                    |  | Year ended   |         | Year ended   |  | Year ended  
|                                                    |  | December 31, |         | December 31, |  | December 31,
|                                                    |  | 2000         |         | 2001         |  | 2002        
|                                                    |  |              |         |              |  |             
|                                                    |  |              |         |              |  | ( 000)      |        |   |  | 
|Net cash provided by/(used in)
operating activities |  |              | 27,364  |              |  |              | (3,444 | ) |  |  | 24,879  |  
|Net cash used in investing activities               |  |              | (13,819 | )            |  |              | (9,759 | ) |  |  | (23,889 | )
|Net cash provided by/(used in) financing
activities |  |              | (11,505 | )            |  |              | 23,093 |   |  |  | (310    | )
|Effect of exchange rate changes on cash             |  |              | 445     |              |  |              | 51     |   |  |  | (425    | )
|                                                    |  |              |         |              |  |              |        |   |  |  |         |  
|Net increase in cash and cash
equivalents           |  |              | 2,485   |              |  |              | 9,941  |   |  |  | 255     |  

Furthermore, the supplemental disclosure for the consolidated statement of
cash flows required by U.S. GAAP is as follows:

|                               |  |              |       |              |  |              |       |  |  |  |       | 
|------------------------------ |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  |  | ----- | 
|                               |  | Year ended   |       | Year ended   |  | Year ended  
|                               |  | December 31, |       | December 31, |  | December 31,
|                               |  | 2000         |       | 2001         |  | 2002        
|                               |  |              |       |              |  |             
|                               |  |              |       |              |  | ( 000)      |       |  |  | 
|Cash paid during the year for: |  |              |       |              |  |              |       |  |  |  |       | 
|Interest                       |  |              | 6,086 |              |  |              | 5,472 |  |  |  | 9,187 | 
|Income taxes                   |  |              | 3,304 |              |  |              | 4,938 |  |  |  | 4,336 | 

Impairment of long-lived assets and long-lived assets to be disposed of

In August 2001, the FASB issued Statement No. 144, Accounting For The
Impairment Or Disposal Of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets
amends existing guidance on asset impairment and provides a single accounting
model for long-lived assets to be disposed of. SFAS No. 144 also changes the
criteria for classifying an asset as held-for-sale; and broadens the scope of
businesses to be disposed of that qualify for reporting as discontinued
operations and changes the timing of recognizing losses on such operations.
The Company adopted Statement No. 144 on January 1, 2002. The adoption of
Statement No. 144 did not affect the Companys financial statements.

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31. Additional Financial Statements Disclosures required by U.S. GAAP

The following information is presented on a U.S. GAAP basis.

Income taxes

Profit before income taxes consists of:

|         |  |              |        |              |  |              |         |   |  |  |        |  
|-------- |  | ------------ | ------ | ------------ |  | ------------ | ------- | - |  |  | ------ | -
|         |  | Year ended   |        | Year ended   |  | Year ended  
|         |  | December 31, |        | December 31, |  | December 31,
|         |  | 2000         |        | 2001         |  | 2002        
|         |  |              |        |              |  |             
|         |  |              |        |              |  | ( 000)      |         |   |  | 
|Domestic |  |              | 19,853 |              |  |              | 35,255  |   |  |  | 15,575 |  
|Foreign  |  |              | (5,222 | )            |  |              | (14,947 | ) |  |  | (5,602 | )
|         |  |              |        |              |  |              |         |   |  |  |        |  
|         |  |              | 14,631 |              |  |              | 20,308  |   |  |  | 9,973  |  

Income tax (expense)/benefit consists of:

|                              |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|----------------------------- |  | ------- | ------ | -------- |  | ---------- | ------ | ----- |  | ------------------- | ------ | - |  |  | ------ | -
|                              |  |         |        |          |  |            |        |       |  | Current tax benefit |        |   |  | 
|                              |  |         |        |          |  |            |        |       |  | applied to reduce   |        |   |  | 
|                              |  | Current |        | Deferred |  | brand name |        | Total
|                              |  |         |        |          |  |            |        |      
|                              |  |         |        |          |  | ( 000)    |        |       |  |                    
|Year ended December 31, 2000: |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|Domestic                      |  |         | (3,808 | )        |  |            | 2,320  |       |  |                     | (5,491 | ) |  |  | (6,979 | )
|Foreign                       |  |         | (39    | )        |  |            | (519   | )     |  |                     |       |   |  |  | (558   | )
|                              |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|                              |  |         | (3,847 | )        |  |            | 1,801  |       |  |                     | (5,491 | ) |  |  | (7,537 | )
|Year ended December 31, 2001: |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|Domestic                      |  |         | (3,074 | )        |  |            | (1,363 | )     |  |                     | (5,342 | ) |  |  | (9,779 | )
|Foreign                       |  |         | (123   | )        |  |            | 1,866  |       |  |                     |        |   |  |  | 1,743  |  
|                              |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|                              |  |         | (3,197 | )        |  |            | 503    |       |  |                     | (5,342 | ) |  |  | (8,036 | )
|Year ended December 31, 2002: |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|Domestic                      |  |         | (3,363 | )        |  |            | 8,702  |       |  |                     | (5,491 | ) |  |  | (422   | )
|Foreign                       |  |         | (473   | )        |  |            | (2,112 | )     |  |                     |       |   |  |  | (2,585 | )
|                              |  |         |        |          |  |            |        |       |  |                     |        |   |  |  |        |  
|                              |  |         | (4,106 | )        |  |            | 6,590  |       |  |                     | (5,491 | ) |  |  | (3,007 | )

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The significant components of deferred income tax (expense)/benefit
consist of:

|                                                                                             |  |              |       |              |  |              |        |   |  |  |       |  
|-------------------------------------------------------------------------------------------- |  | ------------ | ----- | ------------ |  | ------------ | ------ | - |  |  | ----- | -
|                                                                                             |  | Year ended   |       | Year ended   |  | Year ended  
|                                                                                             |  | December 31, |       | December 31, |  | December 31,
|                                                                                             |  | 2000         |       | 2001         |  | 2002        
|                                                                                             |  |              |       |              |  |             
|                                                                                             |  |              |       |              |  | ( 000)      |        |   |  | 
|Deferred tax (expense)/benefit (exclusive of the
effects of other components below)          |  |              | 1,271 |              |  |              | (1,630 | ) |  |  | 6,784 |  
|Benefits of operating loss carry forwards                                                    |  |              | 1,264 |              |  |              | 2,133  |   |  |  |      |  
|Tax expense attributable to allocation of tax
benefits directly to share premium             |  |              | (529  | )            |  |              |       |   |  |  |      |  
|Adjustments to deferred tax liabilities and
assets for enacted changes in tax laws and rates |  |              | (205  | )            |  |              |        |   |  |  | (194  | )
|                                                                                             |  |              |       |              |  |              |        |   |  |  |       |  
|                                                                                             |  |              | 1,801 |              |  |              | 503    |   |  |  | 6,590 |  

The reported amount of income taxes differs from the amount that would
result from applying the statutory IRPEG tax rate of 36% (37% in 2000) to
profit before income taxes as a result of the following:

|                                                                 |  |              |        |              |  |              |        |   |  |  |        |  
|---------------------------------------------------------------- |  | ------------ | ------ | ------------ |  | ------------ | ------ | - |  |  | ------ | -
|                                                                 |  | Year ended   |        | Year ended   |  | Year ended  
|                                                                 |  | December 31, |        | December 31, |  | December 31,
|                                                                 |  | 2000         |        | 2001         |  | 2002        
|                                                                 |  |              |        |              |  |             
|                                                                 |  |              |        |              |  | ( 000)      |        |   |  | 
|Computed expected tax expense                                  |  |              | (5,414 | )            |  |              | (7,310 | ) |  |  | (3,590 | )
|Non deductible expenses                                          |  |              | (1,485 | )            |  |              | (1,447 | ) |  |  | (828   | )
|Tax rate differential for foreign subsidiaries                   |  |              | 141    |              |  |              | 1,068  |   |  |  | 207    |  
|Tax-driven write-off of investment in subsidiaries
(see note 27) |  |              |       |              |  |              | 6,120  |   |  |  | 3,685  |  
|Regional corporate income tax (IRAP)
(see note 27)               |  |              | (1,016 | )            |  |              | (3,508 | ) |  |  | (3,184 | )
|Change in valuation allowance                                    |  |              | (440   | )            |  |              | (3,235 | ) |  |  | (3,217 | )
|Tremonti law investment incentive                                |  |              |       |              |  |              |       |   |  |  | 2,622  |  
|Change in tax laws and rates                                     |  |              | (205   | )            |  |              |       |   |  |  | (194   | )
|Other minor adjustments                                          |  |              | 882    |              |  |              | 276    |   |  |  | 1,492  |  
|                                                                 |  |              |        |              |  |              |        |   |  |  |        |  
|Actual income taxes                                              |  |              | (7,537 | )            |  |              | (8,036 | ) |  |  | (3,007 | )

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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, |        | December 31,
|                                               |                                                    |  | 2001         |        | 2002        
|                                               |                                                    |  |              |        |             
|                                               |                                                    |  | Total        |        | Total       
|                                               |                                                    |  |              |        |             
|                                               |                                                    |  | ( 000)     
|Deferred tax assets:                           |                                                    |  |              |        |              |  |        |       
|                                               | - Inventories                                      |  |              | 4,572  |              |  |        | 4,746  |  
|                                               | - Brand name                                       |  |              | 4,600  |              |  |        | 8,976  |  
|                                               | - Accrued liabilities                              |  |              | 6,696  |              |  |        | 9,039  |  
|                                               | - Net operating loss and tax credit carry
forwards |  |              | 15,491 |              |  |        | 16,792 |  
|                                               | - Deferred Research and Development expenses       |  |              | 7,791  |              |  |        | 10,421 |  
|                                               | - Other                                            |  |              | 2,725  |              |  |        | 1,249  |  
|                                               |                                                    |  |              |        |              |  |        |        |  
|Deferred tax assets before valuation allowance |                                                    |  | 41,875       |        |              |  | 51,223 |       
|Valuation allowance                            |                                                    |  | (5,800       | )      |              |  | (9,017 | )     
|                                               |                                                    |  |              |        |              |  |        |        |  
|Total deferred tax assets                      |                                                    |  | 36,075       |        |              |  | 42,206 |       
|Deferred tax liabilities:                      |                                                    |  |              |        |              |  |        |       
|                                               | - Revaluation reserve                              |  |              | (5,087 | )            |  |        | (5,087 | )
|                                               |                                                    |  |              |        |              |  |        |        |  
|Deferred tax liabilities                       |                                                    |  | (5,087       | )      |              |  | (5,087 | )     
|                                               |                                                    |  |              |        |              |  |        |        |  
|Net deferred tax assets                        |                                                    |  | 30,988       |        |              |  | 37,119 |       
|                                               |                                                    |  |              |        |              |  |        |        |  

The valuation allowance for deferred tax assets as of January 1, 2001 and
2002 was  2,565 thousand and  5,800 thousand, respectively. The net change in
the total valuation allowance for the years ended December 31, 2001 and 2002
was in increase of  3,235 thousand and  3,217 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. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies. At December 31, 2002, total amount
of future taxable income necessary to realize the asset is approximately  93
million. Based upon the level of historical taxable income and projections for
future taxable income over the periods, which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance at December 31, 2002.

As explained in note 27, deferred taxes have not been provided on the
excess in the amount of  3,286 thousand for financial reporting over the tax
basis of investments in foreign subsidiaries. The amount becomes taxable upon
repatriation of earnings or a sale or liquidation of the subsidiary. It is not
practicable to estimate the amount of the related unrecognized deferred tax
liability.

At December 31, 2002, the Company had net operating loss and tax credit
carry forwards for Italian, Japanese, U.S., Dutch and U.K. income taxes of
approximately  52 million, which are available to offset future taxable
income. Of this amount,  7.8 million have no expiry while the remainder
expires as follows:

|             |  |                |  | 
|------------ |  | -------------- |  | 
|2004         |  | 15.1 million 
|2005         |  |   1.9 million
|2006         |  |   2.2 million
|2007         |  |   1.4 million
|2020 to 2022 |  | 23.6 million 

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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.

Use of estimates

Management has made a number of assumptions relating to the reporting of
assets and liabilities and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.

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, |        | December 31,
|              |  | 2001         |        | 2002        
|              |  |              |        |             
|              |  | ( 000)     
|Italy         |  |              | 46,481 |              |  |  | 61,847 | 
|United States |  |              | 3,459  |              |  |  | 587    | 
|France        |  |              | 36     |              |  |  | 40     | 
|Germany       |  |              | 21     |              |  |  | 34     | 
|Holland       |  |              | 101    |              |  |  | 156    | 
|Japan         |  |              | 52     |              |  |  | 48     | 
|UK            |  |              | 139    |              |  |  | 498    | 
|              |  |              |        |              |  |  |        | 
|              |  |              | 50,289 |              |  |  | 63,210 | 

Similar information is presented under note 19 for net sales which have
been attributed to countries based on the location of the customer.

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Leasing

The Company is obliged under capital leases for buildings, machinery and
equipment that expire at various dates through 2009. At December 31, 2001 and
2002, the gross amount and related accumulated amortization of such leases
amounted to 
28.0 million and
 27.4 million,
and  5.9 million and  4.4
million, respectively.
 23.0 million has been included in property, plant and
equipment, net, as of December 31, 2002 (2001:
 22.1 million) in the Italian
GAAP consolidated balance sheet, together with the related obligations of 
21.0 million (2001:
 21.6 million). Future minimum capital lease payments as
of December 31 are:

|                                                    |  |  |              |   |              |  |        |   | 
|--------------------------------------------------- |  |  | ------------ | - | ------------ |  | ------ | - | 
|                                                    |  |  | December 31, |   | December 31,
|                                                    |  |  | 2001         |   | 2002        
|                                                    |  |  |              |   |             
|                                                    |  |  | ( 000)     
|- 2002                                              |  |  | 2,563        |   |              |  |        |  
|- 2003                                              |  |  | 2,618        |   |              |  | 2,908  |  
|- 2004                                              |  |  | 2,659        |   |              |  | 3,085  |  
|- 2005                                              |  |  | 2,787        |   |              |  | 2,929  |  
|- 2006                                              |  |  | 18,361       |   |              |  | 2,879  |  
|- 2007 and subsequent years                         |  |  |             |   |              |  | 8,398  |  
|                                                    |  |  |              |   |              |  |        |   | 
|Total minimum lease payments                        |  |  | 28,988       |   |              |  | 20,199 |  
|Less amount representating interest                 |  |  | (4,963       | ) |              |  | (3,649 | )
|Present value of the minimum capital lease payments |  |  | 24,025       |   |              |  | 16,550 |  
|Current installments                                |  |  | 2,270        |   |              |  | 3,230  |  
|Long-term portion                                   |  |  | 21,755       |   |              |  | 13,320 |  
|                                                    |  |  |              |   |              |  |        |   | 
|                                                    |  |  | 24,025       |   |              |  | 16,550 |  

Commitments and Contingencies

The Company is subject to several collective labor bargaining agreements
coverings substantially all of its employees. These agreements principally
expired in 2001. Management believes that these agreements will be renewed
without any significant effect to the operations of the Company.

The Company is 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. It is
reasonably possible that the final resolution of some of these matters may
require the Company to make expenditures, in excess of established reserves,
over an extended period of time and in a range of amounts that cannot be
reasonably estimated. Although the final resolution of any such matters could
have a material effect on the Companys consolidated operating
results or cash flows for a
particular reporting period in which an adjustment of the estimated reserve is
recorded, management believes that any resulting adjustment should not
materially affect its consolidated financial position.

Derivative financial instruments and fair value of financial instruments

The Company is a limited user of derivative financial instruments. It
primarily utilizes interest rate swap and cap agreements and forward exchange
contracts to manage exposures to interest rate and foreign currency
fluctuations. The Company is not party to leveraged derivatives and does not
hold or issue derivative instruments for speculative purposes.

The notional/contract amount of derivatives do not represent the amount
exchanged by the parties and thus are not a measure of the exposure of the
Company through its use of derivatives. The amounts exchanged during the term
of the derivatives are calculated on the basis of the notional/contract amounts
and the other contractual conditions of the derivatives.

Management actively evaluates the credit worthiness of the financial
institutions which are counter parties to derivative instruments, and it does
not expect any counter parties to fail to

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meet their obligations. The credit exposure of derivative instruments is
represented by the unrealized gain in the underlying instrument.

The estimated fair value of on-balance sheet financial instruments (cash,
receivables, payables, accrued expenses, other liabilities and long-term debt)
are considered to approximate their carrying value because such instruments,
except for long-term debt, have short maturity. In the case of long-term debt,
interest may be revised periodically to current market rates. At December 31,
the estimated fair value of derivative financial instruments, which have been
accounted for pursuant to SFAS 133, is as follows:

|                           |  |              |    |              |  |  |       | 
|-------------------------- |  | ------------ | -- | ------------ |  |  | ----- | 
|                           |  | December 31, |    | December 31,
|                           |  |              |    |             
|                           |  | 2001         |    | 2002        
|                           |  |              |    |             
|                           |  | ( 000)      |    |              |  | 
|Forward exchange contracts |  |              | 96 |              |  |  | 2,521 | 

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; and 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 7%, 7,5% and 5.3% of 2000, 2001 and 2002 net sales,
respectively. However, management believes that overall credit risk related to
the Company is limited due to its broad customer base in differing 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 29(l), 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 4.6 years as at
December 31, 2002.

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  0.53 per share as of December
31, 2002. The outstanding share options have a weighted average remaining
contractual life of approximately 4.9 years as of December 31, 2002.

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

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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.

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, the Companys pro forma net profit/(loss) for the years ended
December 31, 2000, 2001 and 2002 would have been  9,447 thousand,  13,299
thousand and 
5,430 thousand, respectively. The pro forma basic and diluted
profit per share at December 31, 2000 would have been  0.060 and  0.058,
respectively, while at December 31, 2001 they would have been  0.084 and 
0.082, respectively and while at December 31, 2002 they would
have been  0.034
and  0.033, respectively.

32. Subsequent events

In order to improve the Companys efficiency, at the board meetings held
on 5 March 2003 (for the first part) and on 8 April 2003 (for the second part),
the Board of Directors approved a reorganisation plan that provides for the
termination by mutual agreement by a number of employees in exchange for
severance incentives that are expected to take place before the end of
September 2003. Said reorganization plan includes (i) the resignation
as of March 5, 2003 of Mr. Di Biagio from his position as a member
of the Board of Directors and Managing Director of the Company and as a board
member of the various subsidiaries, and (ii) the termination by
mutual agreement of Mr. Di Biagios employment relationships
with the Company as from March 31, 2003. Under the agreements that have been
signed by the parties, Mr. Di Biagio retains all of the option rights (whether vested or not yet vested) attributed
to him up to 5 March 2003, which will continue to be regulated by the
applicable provisions of the two current stock option plans, excluding the
possibility of attributing any further options. Also under the said agreements,
he is not due  as the conditions do not exist  the extraordinary indemnity
proposed on 6 September 2000 by the Compensation Committee, subsequently
approved by the Board of Directors at the meeting on 14 September 2000 and
explained in the notes in the section entitled Commitments not recorded in the
balance sheet.

The total cost of the severance incentives under this plan has been
estimated at around
 3.5 million,
including the costs for
 2.2 million
relating to the termination by mutual agreement of Mr. Di
Biagios employment relationships with the Company. This cost will all be charged to 2003 as an
extraordinary item, in accordance with Accounting Principle 19 issued by the
Italian Accounting Profession. Paragraph C.V.h. of this principle lays down
that the costs of severance incentives incurred under reorganisation plans have
to be charged to the year in which the company formally decides to implement
such plans, with the provision being booked to the statement of operations as
an extraordinary (or non-operating) expense. In this case, the reorganisation
plan was formally approved by the Board of Directors on 5 March
(part 1) and 8 April 2003 (part 2).

At the
meeting on 5 March 2003, the Board of Directors also coopted as a
member of the board, pursuant to art. 2386.1 of the Civil Code, Alessandro
Marco Marcello Foti to replace Piero Ferrari, who had resigned. He was also
appointed a member of the Internal Control Committee. At this same meeting, the
Board of Directors confirmed Federico Minoli as Chairman of the Board of
Directors and appointed him Managing Director, granting him all of the powers
of ordinary and extraordinary administration that were held by the previous
Managing Director under the board resolution of 9 May 2002 (without prejudice
to the concurrent powers of the Board and of the Executive Committee),
excluding only those that by law and the by-laws cannot be delegated. Given
that he is also Managing Director, in accordance with art. 16.3 of the by-laws,
Federico Minoli continues to be an ex ufficio member of the Executive
Committee, which now consists of four members. On the other hand, there is no
change in the powers delegated to the Executive
Committee, which remain those laid down in the board resolution on 9 May
2002. The Board also

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decided to adjust the remuneration and extraordinary end-of-term indemnity
of Federico Minoli (both as Chairman and as Managing Director), as follows: (i)
confirmation of the right to receive extraordinary bonuses (known as retention
bonuses) previously attributed to him by the Board in his role as Chairman, as
explained in the notes; (ii) confirmation of attribution of the end-of-term
indemnity of 1.2 million US dollars as explained in the notes, making it
subject in future only to him no longer being the Companys Managing Director;
(iii) recognition of compensation of  250,000 for acting as the Companys
Managing Director; (iv) confirmation of his compensation as Chairman and CEO of
the subsidiary Ducati North America of 400,000 US dollars (plus base bonus and
benefits).

During the Board of Directors meeting held on 8 April 2003, Andrea
Lipparini was coopted as a director, pursuant to art. 2386.1 of the Civil Code,
to replace Carlo Di Biagio who had resigned. At the May 2, 2003
meeting, the Board coopted as a member of
the Board Mr. Giles Thorley to replace Mr. David Choi who had resigned.

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Schedule II

Ducati Motor Holding S.p.A.
Valuation and Qualifying Accounts
For the Years Ended December 31, 1999, 2000 and 2001

|                                              |  |                  |       |            |  |                    |       |            |  |            |      |            |  |  |        |   |  |  |       | 
|--------------------------------------------- |  | ---------------- | ----- | ---------- |  | ------------------ | ----- | ---------- |  | ---------- | ---- | ---------- |  |  | ------ | - |  |  | ----- | 
|                                              |  |                  |       |            |  | Additions          |       |            |  |            |      |            |  | 
|                                              |  |                  |       |            |  |                    |       |            |  |            |      |            |  | 
|                                              |  | Balance at       |       | Charged to |  | Charged to         |       |            |  |            |      | Balance at
|                                              |  | the beginning of |       | cost and   |  | other accounts     |       |            |  |            |      | the end of
|Description                                   |  | the period       |       | expenses   |  | (foreign exchange) |       | Deductions |  | the period
|                                              |  |                  |       |            |  |                    |       |            |  |           
|                                              |  |                  |       |            |  |                    |       |            |  | ( 000)    |      |            |  |  |        |   |  | 
|Allowance for doubtful accounts:              |  |                  |       |            |  |                    |       |            |  |            |      |            |  |  |        |   |  |  |       | 
|Year ended December 31, 2000                  |  |                  | 3,343 |            |  |                    | 240   |            |  |            | (2   | )          |  |  | (377   | ) |  |  | 3,204 | 
|Year ended December 31, 2001                  |  |                  | 3,204 |            |  |                    | 1,037 |            |  |            | 135  |            |  |  | (54    | ) |  |  | 4,322 | 
|Year ended December 31, 2002                  |  |                  | 4,322 |            |  |                    | 1,333 |            |  |            | (214 | )          |  |  | (1,253 | ) |  |  | 4,188 | 
|Allowance for obsolete/slow moving inventory: |  |                  |       |            |  |                    |       |            |  |            |      |            |  |  |        |   |  |  |       | 
|Year ended December 31, 2000                  |  |                  | 3,105 |            |  |                    | 599   |            |  |            | 76   |            |  |  | (625   | ) |  |  | 3,155 | 
|Year ended December 31, 2001                  |  |                  | 3,155 |            |  |                    | 1,670 |            |  |            | 33   |            |  |  | (571   | ) |  |  | 4,287 | 
|Year ended December 31, 2002                  |  |                  | 4,287 |            |  |                    | 1,959 |            |  |            | (119 | )          |  |  | (741   | ) |  |  | 5,386 | 

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