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:

          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.

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

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Exchange Rates

          Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of euro prices of 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.

          The effective Noon Buying Rate for euro on June 28, 2004 was US$ 1.2145 per 1 euro.

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Risk Factors

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

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 than us. Certain of our competitors may also have shorter product development cycles and may be able to bring new products to market more quickly than we can. Like other competitors in the motorcycle industry, our competitiveness is also influenced by our performance on international professional racing circuits. We cannot assure you that the racing success of Ducati motorcycles in the World Superbike Championship will continue or will be replicated in the Moto GP Championships, which we re-entered in 2003. 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, in the future, we will be able to maintain our present competitive position. See “Item 4. Information on the Company—Products and Distribution—Market Share and Competition”.

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. We have experienced periods (notably –5.0% in 2002) of material decreases 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”)), which has had a material effect on our results of operations for such periods. The factors underlying such changes in demand are beyond our control, and demand for our products may again decline in the future, which could have a further negative impact on our business, prospects, results of operations or financial condition.

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

          Like other competitors in the motorcycle industry, our operations are characterized by seasonal fluctuations in demand and a stable production level (although we shut down production each year during the month of August and the last two weeks of December). Annual retail demand for motorcycles is highest during April, May and June, resulting in peak factory sales during March, April and May and a build-up of inventory from September to February. As a result, we must plan overall annual production levels based on predicted levels of demand for our products, which we derive in part from our own market assessments and long-term, non-binding purchase commitments from our distributors. We must also provide current models to the market during the critical annual spring season as demand typically shifts in the second half of the year to models introduced for the ensuing year. Mismanagement of our production levels or delayed delivery of current models can result in excess inventories and resulting

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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 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—Production—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. In the first four months of 2004, the price of steel increased from 20% to 40% (depending on the type of steel), resulting in an average increased per-motorcycle production cost of approximately two percent. We believe that it is likely that there will be further increases in steel prices. Any increase in the prices of motorcycle components may have a material adverse effect on our business, prospects, results of operations or financial condition.

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

          In 2002 and 2003, our capital expenditures in property, plant and equipment were approximately € 23.8 million and € 15.7 million. Such expenditures in 2002 principally related to our research and development initiatives ( i.e. , the launch of the Multistrada and the 999 ). 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). We had fewer expenditures in 2003 owing to the reduced capital requirements relating to the development of our new Sportclassic motorcycle model line. 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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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 December 2003 and expires in December 2007.

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

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.

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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. In 2003 and 2004, many such personnel did not receive performance bonuses as part of their compensation owing to our failure to meet certain financial targets in 2002 and 2003, respectively. As a result, we may have increased difficulty in retaining such personnel, especially if the labor market in general improves. See “Item 6. Directors, Senior Management and Employees.” Competition in general for qualified personnel in the motorcycle industry is intense and we could be materially adversely affected by the loss of key employees. We cannot assure you that we will be able to attract, recruit and retain sufficient qualified personnel to remain competitive.

The international nature of our operations exposes us to risks

          Like our competitors, we distribute motorcycles and other products in many countries and face risks related to our international operations, including:

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 2003, we had net sales denominated in U.S. dollars, Japanese yen and U.K. pounds sterling that together exceeded 32.3% of our total net sales for the year (with sales in U.S. dollars accounting for approximately 14.4% 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 2003, the euro’s appreciation over other currencies (including the U.S. dollar, where the appreciation was approximately 19.4% on average, and 20.4% at year end), contributed to the decline in our sales and operating results. We engage in foreign exchange transactions to hedge portions of our transactional exposure to fluctuations in exchange rates between the euro and various foreign currencies, including the U.S. dollar, the U.K. pound sterling and the Japanese yen. Our hedging policy until the end of 2003 consisted in covering, during the last quarter of each year, the sales of the coming year. Beginning in January 2004, we have shifted to an 18-month rolling coverage. We cannot assure you that

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the foregoing will adequately protect us from the effects of future exchange rate fluctuations. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

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. Since their issuance, to reduce interest costs, we have repurchased an aggregate principal amount of approximately € 39.3 million of the Notes — € 9.0 million in 2001 (funded through advances proceeds from the sale and lease-back transaction related to our Bologna facility), none in 2002, € 15.3 million during 2003 and € 15.0 million during the first six months of 2004 (in each case, funded from proceeds of corresponding committed bank loans). 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.

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Control by certain shareholders

          As of June 28, 2004, TPG Motorcycle Acquisition L.P. (“TPG Acquisition”), a limited partnership which is part of a group of investment funds known as Texas Pacific Group (“TPG”), owned 33.15% of our outstanding shares and controls us. In addition, as of May 6, 2004, Harris Associates, L.P. and Giorgio Seragnoli owned 7.57% and 4.93%, respectively, of our outstanding shares. The remainder of our shares are widely held. As a result, TPG has the power to determine (or holds a veto right in respect of) matters requiring shareholder approval, including the appointment of our board of directors. 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:

          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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