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DUCATI ANNUAL REPORT 2001

CONSOLIDATED FINANCIAL STATEMENTS - DUCATI MOTOR HOLDING GROUP

31/12/01

31/12/00

A) AMOUNTS RECEIVABLE FROM SHAREHOLDERS FOR CALLS IN ARREARS


Called-up capital

Uncalled capital

TOTAL RECEIVABLES FROM SHAREHOLDERS

B) FIXED ASSETS
I - INTANGIBLES
1) Establishment and enlargement costs
2) Research and development, advertising costs

705

2.660

19.555

13.935

3) Patent rights

3.274

4.148

4) Licences, trademarks and similar rights

82.402

87.959

5) Goodwill

18.352

20.564

and rights on inventions

6) Difference from consolidation


7) Current and prepayments
8) Other

1.100

1.242

225

1.540

6.387

8.618

132.000

140.666

1) Land and buildings

24.974

25.707

2) Plant and equipment

11.651

10.039

3) Industrial and sales equipment

10.677

9.307

4) Other property

4.841

3.541

5) Current and prepayments

2.433

2.516

54.576

51.110

TOTAL...........................................................................................................................
II - PLANT AND EQUIPMENT

TOTAL ..........................................................................................................................
III - FIXED FINANCIAL ASSETS
1) Shareholdings in:
a) controlled companies

b) related companies

83

c) parent companies

d) other companies

a) from controlled companies

b) from related companies

c) from parent companies

610

605

15.000

2) Amounts receivable:

d) other
3) other securities
4) company's own shares
TOTAL ..........................................................................................................................
TOTAL FIXED ASSETS

15.611

689

202.187
31/12/01

192.465
31/12/00

C) WORKING CAPITAL
I - STOCK ON HAND
1) raw materials, ancillary materials and consumable commodities

21.621

18.079

2) work in progress and semifinished products

15.377

20.569

3) work in progress - orders


4) finished products and goods

60.638

50.367

5) prepayments

97.636

89.015

98.027

80.488

2) from controlled companies

3) from related companies

4) from parent companies

5) other

a ) affiliated companies

b) other

9.370

2.355

TOTAL ..........................................................................................................................
II - AMOUNTS RECEIVABLE:
1) trade debtors
payable within the next year
receivable later than the next year

- within next year


- over next year

9.964

107.397

92.807

1) shareholdings in controlled companies

2) shareholdings in related companies

3) shareholdings in parent companies

4) other shareholdings

32

29

TOTAL ..........................................................................................................................
III - FINANCIAL ASSETS OTHER THAN FIXED ASSETS :

5) company's own shares


6) other securities
TOTAL ..........................................................................................................................

32

29

23.652

13.691

IV - CASH
1) bank and post deposits
2) cheques
3) till money and cash at hand
TOTAL ..........................................................................................................................
TOTAL WORKING CAPITAL

15

36

23.673

13.735

228.738

195.586

D) ACCRUED INCOME AND DEFERRED ASSETS:


ACCRUED INCOME
DISAGIO ON ISSUES AND LOAN CHARGES
OTHER ACCRUED INCOME
TOTAL ACCRUED INCOME AND DEFERRED ASSETS
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY

410
255

366

1.079

1.156

1.744

1.522

432.669

389.573

31/12/01

31/12/00

A) SHAREHOLDERS' EQUITY:
GROUP:
I - Capital stock

82.420

81.741

II - Accumulated paid-in surplus

21.316

23.566

III - Revaluation reserve

24.238

24.238

188

83

IV - Legal reserve
V - Reserve for group's own shares
VI - Statutory reserve
VI - Other reserves
- Consolidation reserve

146

146

- Foreign exchange reserve

3.296

2.456

- Appropriated surplus

2.820

1.008

- Accumulated profits

- Provision as per Act 675/77

- Provision as per Act 904/77

- Provision as per Act 526/82

- Provision as per Act 130/83

- Provision as per Act 46/82

VIII - Profits (losses) carried forward


IX - Operating profits (losses)

9.620

0
(681)

10.553

10.483

154.597

143.039

X - Capital stock and reserves

XI - Operating profit (losses)

154.597

143.039

TOTAL SHAREHOLDERS' EQUITY FOR THE GROUP


THIRD PARTIES

TOTAL SHAREHOLDERS' EQUITY FOR THIRD PARTIES


TOTAL CONSOLIDATED SHAREHOLDERS' EQUITY
B) PROVISION FOR DOUBTFUL DEBTS AND EXPENSES
1)

retirement provision and similar commitments

2)

for taxes

3)

funding of future doubtful debts and expenses

4)

other

TOTAL PROVISION FOR DOUBTFUL DEBTS AND EXPENSES


C) EMPLOYEE RETIREMENT PROVISION

1.031

35

12.453

13.383

13.484

13.419

5.719

4.775

31/12/01

31/12/00

D) CREDITORS AND BORROWINGS :


1) debentures

91.000

100.000

2) convertible debentures

3) bank loans

38.870

11.129

- payable within the next year


- payable later than the next year
4) other borrowings
- payable within the next year
- payable later than the next year
5) prepayments

2.270

86

19.485

170

2.957

929

86.749

83.704

7) paper titles

8) due to controlled companies

9) due to related companies

10) due to parent companies

11) tax debts

3.732

12.838

12) due to social security institutions

2.347

1.998

6) trade creditors

13) other
- other within next year

6.722

11.508

- other over next year

- af- within next year

254.132

222.363

4.336

1.297

TOTAL CREDITORS AND BORROWINGS


E) ACCRUED EXPENSES
ACCRUED COSTS
ISSUE AGIO ON LOANS
OTHER ACCRUED COSTS
TOTAL ACCRUED EXPENSES
TOTAL LIABILITIES

RISKS FOR GRANTED WARRANTIES

401

4.681

4.737

5.978

432.669

389.573

ENGAGEMENTS IN FAVOUR OF THIRD PARTIES


Am'nt payable for Snam

224

224

Domestic currency swap

116.536

138.233

2.834

Creditors for remaining leasing to be settled

PROFIT AND LOSS ACCOUNT

Consolidato Consolidato
31/12/01

31/12/00

A) VALUE OF PRODUCTION
1)

revenue on sale and services

2)

changes in stock on hand


work in progress, semifinished and finished products

3)

changes in work in progress - orders

4)

increase in fixed assets for in-house processing

5)

other revenues and proceeds


-

sundries

current-year contributions

Total revenue and proceeds (5)........................................................


TOTAL VALUE OF PRODUCTION

407.815

379.534

5.096

13.953

5.439

4.669

14.648

12.814

14.648

12.814

432.998

410.970

B) MANUFACTURING COSTS
6)

raw mat., ancillary mat., cons. comm. and goods

189.913

190.646

7)

services..................................................................................

118.565

102.382

8)

leasing...............................................................

3.354

2.837

9)

personnel:

a) wagesand salaries

35.418

33.584

b) social contributions

9.389

8.721

c) retirement allowances

1.954

1.758

d) superannuation and similar allowances


e) other
Total personnel expenses (9)......................................................

1.353

1.957

48.114

46.020

10) amortization and depreciation


a) depr. of intangibles

22.862

20.254

b) depr. of plant and equipment

9.998

7.446

c) other depr. of fixed assets

1.720

1.894

d) depr. of am'nts receiv. included in the assets


working capital and cash
Total amortization and depreciation (10)..........................

1.077

528

35.657

30.122

11) changes in stock on hand,


ancill. mat., cons. comm. and goods...........................................................
12) provisions for doubtful debts

(1.963)

8.642

9.879

13) other provisions.


14) other operating expenses
TOTAL MANUFACTURING COSTS
VALUE OF PRODUCTION LESS MANUFACTURING COSTS (A-B)

(3.543)
0

748

648

401.450

380.570

31.548
31/12/01

30.400
31/12/00

C) FINANCIAL EARNINGS AND CHARGES


15) earnings on shareholdings

a) am'nts receivables included in fixes assets

b) securites incl. in fixed assets other than shareholdings

16) other financial earnings

c) securities incl. in working cap. other than share.

114

d) other revenues
- interest earned

156

669

195

- other financial earnings

481

3.282

- foreign exchange gains

12.095

5.278

13.359

8.911

Total other financial earnings (16).............................................


17) interest and other financial charges
- interest paid on short-term loans

776

447

- interest paid on long-term loans

6.146

2.569

- other financial charges

7.092

10.416

- foreign exchange losses

11.418

14.908

Total interest and other financial charges (17).............................................


TOTAL FINANCIAL EARNINGS AND CHARGES

25.432

28.340

(12.073)

(19.429)

D) ADJUSTMENT OF FINANCIAL ASSETS


18) appreciation
a) of shareholdings

b) fixed financ. assets other than shareholdings

c) securities incl. in work.cap. other than shareholdings

Total appreciation (18)..........................................................

a) of shareholdings

b) fixed financ. assets other than shareholdings

c) securities incl. in work.cap. other than shareholdings

Total depreciation (19)..........................................................

19) depreciation

TOTAL ADJUSTMENTS
E) ABNORMAL REVENUE AND EXPENSES
20) revenue
- surplus from assignments other than no. 5

151

6.851

151

6.851

- depreciation for assignments other than no.14

46

- taxes for previous years

26

106

150

178

150

- non-operating profits
Total revenues (20)....................................................................
21) expenses

- non-operating loss
Total expenses (21)....................................................................

31/12/01
TOTAL ABNORMAL ITEMS
RESULT BEFORE TAXES (A-B+-C+-D+-E)

31/12/00

(27)

6.701

19.448

17.672

3.197

3.847

22) current year income tax

OPERATING RESULT INCL. THIRD PARTIES' ENTITLEMENTS


OPERATING (PROFIT) / LOSS FOR THIRD PARTIES
OPERATING PROFIT / (LOSS) FOR THE GROUP

For the Board of Directors

( Dott. Carlo Di Biagio )

5.698

3.341

10.553

10.484

10.553

10.484

DUCATI GROUP

EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL


STATEMENTS AS AT 31 DECEMBER 2001
The consolidated financial statements of Ducati Motor Holding S.p.A. and its subsidiaries
(the Ducati Group) for the year ended 31 December 2001, expressed in thousands of Euro,
have been prepared and approved by the Board of Directors in accordance with the
principles required by current statutory regulations for consolidated financial statements, as
interpreted and supplemented by the accounting principles issued by the Italian Accounting
Profession, and in the absence thereof, by the International Accounting Standards
Committee (IASC). The consolidated financial statements consist of the balance sheet, the
statement of operations and these explanatory notes. They are accompanied by the report
on operations. Lastly, for the sake of greater clarity, a statement of cash flows, highlighting
changes in liquidity over the period, is attached to the report on operations.
As required by current regulations, the Ducati Groups consolidated financial statements
for the year ended 31 December 2000 have been presented for comparative purposes.
These financial statements were originally expressed in millions of Italian Lire and have
been converted into thousands of Euro using the fixed parity of 1 Euro = Lire 1,936.27.
The consolidated financial statements as of 31 December 2001 have been audited by
KPMG S.p.A.
Unless otherwise indicated, all amounts shown in these notes are stated in thousands of
Euro.
The report on operations deals with the Group's performance, the nature of its activities,
relations with the parent company and direct and indirect subsidiaries and related parties,
as well as events subsequent to the date of the consolidated financial statements.
Furthermore, as explained in the Report on Operations, the merger of the subsidiary
Gio.ca Moto International S.r.l. into Ducati Motor Holding S.p.A. was completed on 31
December 2001.
As a result of this merger, which took effect for statutory and fiscal purposes from 1
January 2001, Ducati Motor Holding S.p.A. took over all rights, obligations and
relationships that were previously in the name of Gio.ca Moto International S.r.l., a
wholly-owned subsidiary..

DUCATI GROUP

ACCOUNTING POLICIES AND PRINCIPLES APPLIED FOR THE


PREPARATION
OF
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
Area of consolidation
The area of consolidation as of 31 December 2001 includes the Parent Company Ducati
Motor Holding S.p.A. and the following subsidiary companies:
3 1 d ic e m b r e
2001

3 1 d ic e m b r e
2000

3 0 .0 6 6
(4 .5 8 6 )

2 9 .2 7 7
(3 .5 7 0 )

2 5 .4 8 0

2 5 .7 0 7

2 1 .7 7 0
(1 0 .1 1 9 )

1 5 .6 7 1
(5 .6 3 2 )

1 1 .6 5 1

1 0 .0 3 9

2 7 .5 2 8
(1 6 .8 5 1 )

2 1 .1 3 5
(1 1 .8 2 8 )

1 0 .6 7 7

9 .3 0 7

7 .8 4 1
(3 .5 0 6 )

5 .7 8 2
(2 .2 4 1 )

4 .3 3 5

3 .5 4 1

T e r r e n i e fa b b r ic a ti
C o sto
F o n d o a m m o rta m e n to
V a lo r e n e tto
Im p ia n ti e m a c c h in a r i
C o sto
A m m o rta m e n to
V a lo r e n e tto
A ttr e z z a tu re in d u stria li e c o m m e r c ia li
C o sto
F o n d o a m m o rta m e n to
V a lo r e n e tto
A ltr i b e n i
C o sto
F o n d o a m m o rta m e n to
V a lo r e n e tto
Im m o b iliz z a z io n i in c o r so e a c c o n ti
T o ta le im m o b iliz z a z io n i m a te r ia li n e tte

2 .4 3 3

2 .5 1 6

5 4 .5 7 6

5 1 .1 1 0

The share capital of the foreign subsidiaries Ducati Japan K.K., Ducati North America Inc.
and Ducati UK Limited is converted into Euro using period-end exchange rates.
As of 31 December 2001 the area of consolidation shows the following changes versus 31
December 2000:
-

Gio.Ca Moto International S.r.l. has merged with Ducati Motor Holding S.p.A. on
31/12/01 with legal effect as of 01/01/2001;

The shareholding in H.P.E. S.r.l was sold at book value.

Consolidation principles
The consolidation principles used in preparing the consolidated financial statements as of
31 December 2001, are consistent with those used for the financial statements as of 31
December 2000, as follows:
x The carrying value of consolidated companies held as equity investments by the Parent
Company and by companies included within the area of consolidation, is eliminated
against the related shareholders' equity, by consolidating the assets and liabilities of
these companies using the line-by-line method of consolidation Any difference
between the carrying value and share of shareholders' equity, as calculated with
reference to the situation at the date of acquisition, is treated as follows:
-

if positive, it is allocated to the individual asset and liability captions to which the
difference refers. Any remaining amount, provided it is considered to benefit future
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DUCATI GROUP

periods, is booked to the caption Difference arising on consolidation (being


essentially goodwill) and amortised on a straight-line basis over the period it is
expected to benefit. If it has no future use, any residual amount is deducted from the
consolidation reserve;
-

if negative, it is credited to the "Consolidation reserve".

x Significant operations between consolidated companies, comprising receivables,


payables, costs and revenues, are eliminated. Any unrealised profits arising on
intercompany transactions are also eliminated.
x The financial statements of the foreign subsidiaries, Ducati North America Inc., Ducati
Japan K.K. and Ducati U.K. Limited, are expressed in dollars, yen and pound sterling
respectively. These have been translated using current exchange rates for assets and
liabilities and average exchange rates for the period for the statement of operations.
Exchange differences arising from this conversion are booked to the translation
reserve under consolidated shareholders' equity.
x The financial statements of the foreign subsidiaries Ducati France S.A., Ducati
Deutschland G.m.b.H. and Ducati Benelux B.V. are expressed in French francs,
German marks and Dutch florins respectively. Since these are all euro-zone currencies,
their financial statements have been translated using the fixed conversion rate for the
respective euro-participating currency for asset, liability and statement-of-operations
balances.
The exchange rates applied are as follows:
Valute

Dollaro U.S.A.
Yen giapponese
Sterlina inglese

31/12/2001
fine periodo
medio
0,8813
115,33
0,6085

31/12/2000
fine periodo medio

0,8909
108,74
0,6192

0,9305
106,92
0,6241

0,9174
99,27
0,6075

x The consolidated financial statements as of 31 December 2001 have been prepared


using the statutory financial statements prepared by the individual companies and
approved by the respective boards of directors. They have been adjusted for the
purposes of the consolidation to reflect the accounting policies of the Parent Company
and to eliminate any tax-related items booked by Group companies solely for the
purpose of obtaining the related tax benefits.
x Shareholders' equity and results for the period pertaining to minority interests in the
consolidated subsidiaries are shown separately on the face of the financial statements.

DUCATI GROUP

A reconciliation of the shareholders' equity and results for the period of the Parent
Company and the corresponding amounts reported in the consolidated financial statements
is set out below (in thousands of Euro):

Net profit
(loss) for the
year ended
31 december
2001
Ducati
Motor Holding S.p.A.

Shareholders'
equity as of
31 december
2001

Net profit
(loss) for the
year ended
31 december
2000

Shareholders'
equity as of
31 december
2000

1.973

135.116

2.111

131.656

645

814

(343)

154

Elimination of
tax-driven items

14.929

43.247

14.716

28.318

Elimination of
unrealised intercompany
profits

(2.388)

(10.943)

(2.561)

(8.564)

Lower value of
consolidated investments
with respect to their
carrying value

(772)

(878)

(3.852)

399

Other

2.126

169

(2.349)

(1.956)

(5.960)

(12.928)

2.761

(6.968)

8.580

19.481

8.372

11.383

10.553

154.597

10.483

143.039

Adjustments to conform
with Group accounting
principles

Tax effects recorded


on the consolidation
adjustments
Total consolidation
adjustments
Shareholder's equity
and net profit (loss)
of the Group as per
consolidated financial s

The other changes mainly refer to the treatment foreign currency intercompany items in the
consolidated financial statements.
The increase in deferred taxes is due 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.
4

DUCATI GROUP

ACCOUNTING POLICIES
The consolidated financial statements of Ducati Motor Holding S.p.A. and its subsidiaries
(the Ducati Group) for the period ended 31 December 2001, expressed in thousands of
Euros, have been prepared in accordance with the principles required by current statutory
regulations on annual consolidated financial statements, as interpreted and supplemented
by the accounting principles issued by the Italian Accounting Profession and, in the
absence thereof, by the International Accounting Standards Committee (I.A.S.C.).
The more significant accounting policies used in preparing the consolidated financial
statements are set out below. They are consistent with those used for the consolidated
financial statements as of 31 December 2000, which are also provided for comparison
purposes, except for the method of accounting for leases which will be explained below.
In the interest of greater comparability, certain prior year items of the balance sheet and
statement of operations have been reclassified to bring them into line with the way they
were shown as of 31 December 2001.
Intangible fixed assets
Intangible fixed assets are booked at purchase or conferral cost; those deriving from Italian
Group companies are also revalued, where applicable, on the basis of specific revaluation
laws. Intangible fixed assets are directly amortised on a straight-line basis over their
estimated economic useful life. Costs incurred in obtaining long-term finance ("debt
capacity") are amortised 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 capitalised 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. The costs
capitalised comprise the utilisation of internal resources, as well as accessory charges.
The amortisation rates used are set out below in the notes on intangible fixed assets.
Property, plant and equipment
Property, plant and equipment are booked at purchase or conferral cost, including any
directly related charges. Ordinary maintenance and repair expenditure that does not
increase the value of the assets concerned is expensed as incurred. Extraordinary
maintenance and repair expenses that increase the useful life of property, plant and
equipment are capitalised and depreciated over the residual life of the assets concerned.
Property, plant and equipment are systematically depreciated on a straight-line basis, using
the ordinary rates indicated by current tax legislation, which are considered to reflect the
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, starting from this year, fixed assets
acquired under finance leasing contracts, if significant, are booked according to the finance
lease accounting method. This requires capitalisation of the original value of the asset and
the booking of the outstanding principal amount due, while depreciation based on the
5

DUCATI GROUP

estimated useful life of the asset is charged to the statement of operations. Lease
instalments for the year, which include repayments of both principal and interest, are
charged to the statement of operations. Given that lease contracts were of little importance
in the past, up until 31 December 2000 they were accounted for by debiting the statement
of operations with the lease instalments on an accruals basis and disclosing the
commitment for future instalments in the memorandum accounts; mention was also made
of the effect that there would have been if the current method of accounting for leases had
been adopted. The comment on this item includes an explanation of the effect of this
change in accounting principle on the consolidated financial statements .

Financial fixed assets


Receivables booked under financial fixed assets are recorded at face value, representing
their estimated realisable value. They also include interest accrued at the balance sheet
date.
Equity investments in subsidiaries are stated at cost, which is roughly equal to their value
calculated under the equity method.
Equity investments in other companies are recorded at purchase or formation cost and
written down to reflect any permanent losses in value.
Other securities booked under financial fixed assets are shown at a value that reflects their
estimated realisable value and interest on them is accrued to the balance sheet date.
Inventories
Inventories are stated at the lower of purchase or production cost and the corresponding
realisable value, based on market conditions, taking account of related selling expenses.
Purchase costs include the amounts 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 at F.I.F.O. Inventories are stated net of an allowance that
reflects losses on obsolete and slow-moving items.
Receivables and payables
Receivables are recorded at face value, after providing for an allowance for doubtful
accounts to reflect their estimated realisable value.
In the case of receivables factored with risk of recourse, the corresponding amount is not
released as a receivable among assets until they are collected from the principal debtor.
Advances received from factoring companies are offset by the entry, among liabilities in
the balance sheet, of an amount payable due to factoring companies.
In the case of receivables factored without risk of recourse, the amount due from the
principal debtor is released and the amount due from the factoring company is recorded.
Payables are recorded at face value, which is considered to represent their settlement value.

DUCATI GROUP

Foreign currency transactions


Transactions in foreign currency are translated into Euro using the exchange rate on the
transaction date.
The difference arising on translating current receivables and payables (not hedged by
forward contracts) at year-end rates is directly booked to the related receivable and payable
balances, with a corresponding gain or loss to the statement of operations among financial
income and charges.
Non-current receivables and payables in foreign currency (excluding any current portions),
deriving from both financially- and trade-related operations are translated using the yearend exchange rate. If the resulting difference represents an exchange loss, this is fully
expensed to income. If the resulting difference represents a gain, it is deferred by booking
it to the exchange fluctuation reserve under liabilities; it is then charged to income when
realised.
Revenues from sales covered by forward currency contracts against future commitments
are booked using the exchange rate of the related currency operation. If the sale takes place
during the year, revenues are adjusted for the difference between the exchange rate at the
date of stipulating the forward contract and the exchange rate at the date of the operation,
together with the related financial charges. The financial elements intrinsic to forward
contracts are also booked.
The nominal forward value of such hedging transactions is recorded among the
commitments and contingent liabilities.

Current financial assets


Securities are valued at the lower of purchase cost or their corresponding market value.
Receivables resulting from so-called "securities purchased under resale agreements" are
recorded at their spot rate, as adjusted for accrued interest.
Accruals and deferrals
These are calculated in accordance with the accruals method, so to match costs and
revenues.
Taxation
Current income taxes for the companies included within the area of consolidation are
calculated on the basis of current tax legislation in the country where the company is based
and recorded under the caption payables due to tax authorities. Deferred tax assets and
liabilities have also been provided as a result of eliminating tax-driven items from the
individual financial statements and making other consolidation adjustments (principally
unrealised intercompany profits), which represent timing differences between the
individual statutory and consolidated financial statements. The statutory financial
statements of Group companies also recognise deferred tax assets and liabilities arising on
7

DUCATI GROUP

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 companys current and expected results.
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.
These taxes are reviewed every year to reflect changes in tax rates and in the financial and
economic situation of the companies concerned.
Other provisions for risks and charges
This item includes provisions against reasonably foreseeable charges and losses, which are
not connected to specific asset items.
Employees leaving entitlements
This is provided at the accounting date, in accordance with current legislation and labour
contracts.
Bonds
Payables arising from financing operations are booked at nominal value which reflects the
estimated repayment value.
As for the Bond Loan, this has been booked for the amount actually subscribed. The related
issue discount is given by the difference between the par value and the purchase cost and is
booked to the statement of operations on an accruals basis, as are the financial elements.
Costs and revenues
These are recorded in the financial statements according to the accounting principles of
prudence and matching, with appropriate accruals and deferrals being made. Revenues and
other income, costs and charges are booked net of returns, discounts, rebates and bonuses.
Revenues are recognised at the date of shipment, which normally coincides with when
ownership of the goods passes. Costs for services are recognised as and when the service is
received. Costs relating to remuneration for drivers and the racing teams are recognised
according to the length of their respective contracts.

DUCATI GROUP

COMMENTARY ON THE CONSOLIDATED BALANCE SHEET AND


STATEMENT OF OPERATIONS CAPTIONS
BALANCE SHEET
ASSETS
Intangible fixed assets
Intangible fixed assets, amounting to 132,000 thousand, are stated net of amortisation.
Changes in intangible fixed assets during the year ended 31 December 2001 are indicated
in a statement attached to these notes (attachment 1).
Start-up and expansion costs mainly relate to the capitalised formation costs of the Parent
Company, together with expansion costs connected with the acquisition in 1996 of the
motorcycle business from Ducati Motorcycles S.p.A.
Movements in start-up and expansion costs between the years are as follows:
31/12/01
2,660
415

Opening net book value


Increases
Decreases
Amortisation
Reclassifications
Closing net book value

(2,363)
(7)
705

31/12/00
5,528
124
(2,984)
(8)
2,660

The reclassifications refer to the difference arising on the retranslation of opening balances
of historic cost and related accumulated amortisation at the exchange rate ruling at 31
December 2001. This specifically relates to the balances expressed in foreign currency
held by the following subsidiaries. These costs are amortised on a straight-line basis over
five years from when incurred.
Research, development and advertising costs, for the most part capitalised by the Parent
Company, Ducati Motor Holding S.p.A., mainly relate to studies and research into the
development of new models or improvements for existing ones. They are amortised on a
straight-line basis over five years from when incurred.
Movements in such costs during the years are as follows:

Opening net book value


Increases
Decreases
Amortisation
Reclassifications
Closing net book value
9

31/12/01

31/12/00

13,935
13,307
(7,673)
(14)
19,555

10,270
8,626
(4,987)
26
13,935

DUCATI GROUP

This item also includes costs incurred for the development of the Ducati image which as of
31 December 2001 have a net book value of 185 thousand Since these costs will benefit
future years, they are being amortised over periods of 5-7 years.
Capitalised R&D costs essentially relate to projects concerning the development of engines
and new models of motorcycle. The research project aims to seek solutions for:
1. reducing motorcycle weight by using innovative materials, while at the same time
increasing safety standards, allowing the reduction of fuel consumption and therefore
lower polluting emissions;
2. improving motorcycle aerodynamics, in order to reduce fuel consumption and hence
lower polluting emissions, and in keeping with the Ducati brands distinctive style;
3. optimising engine performance, while reducing the noise of the intake and exhaust
systems, partly through the use of advanced simulation software.
Reclassifications derive from the adjustment to year-end exchange rates of opening
balances of historic cost and accumulated amortisation expressed in foreign currency.
Industrial patents and intellectual property rights amounting to 3,274 thousand essentially
comprise:
x Software purchased by Ducati North America Inc. and Ducati Motor Holding S.p.A.
x Capitalised costs for maintaining industrial patents.
These costs are amortised on a straight-line basis over three or five years, from when
incurred.
As at 31 December 2001, this item includes 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 organisation. For this
reason, having also performed a critical analysis of the site's utilisation 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 booked to line B 10) c) of the
consolidated statement of operations under other write-offs of fixed assets.
Concessions, licences, trademarks and similar rights almost exclusively consist of costs
incurred for the Ducati trademark, purchased on the basis established at the time the
business division was acquired by Ducati Motorcycles S.p.A.
Movements in this position during the years are as follows:

Opening net book value


Increases
Disposals during the year (net)
Amortisation
Reclassifications
Closing net book value
10

31/12/01

31/12/00

87,959
19
(5,576)
82,402

93,533
(5,574)
87,959

DUCATI GROUP

During 2000, the Parent Company Ducati Motor Holding S.p.A. took advantage of Law
no. 342 of 21.11.2000 on the revaluation of assets. This voluntary revaluation has been
adopted in the statutory financial statements and only applied to the historical cost of the
trademark, as permitted by the Treasury in its circular of 6 November 2000, which allows
companies to revalue only the historical cost without any adjustment to accumulated
amortisation.
The balance of the revaluation, net of the related substitute tax, has been booked to a
special reserve that refers to the law in question, excluding any alternative use.
The amount of the revaluation, 29,924 thousand, is confirmed by the expert opinion
issued by Mr. Paolo Penzo (accountant) on 13 February 2001. This amount has been
applied in the statutory financial statements of Ducati Motor Holding SpA. Amortisation
has been calculated in the consolidated financial statements over a period of 20 years. This
is the maximum period currently allowed under Italian accounting principles for the
amortisation of intangible fixed assets such as trademarks, as it is difficult to estimate
exactly what a trademark's useful life will be, though being linked to the expected duration
and development of the business, it can presumably last for a very long time.
Goodwill mainly reflects that arising from the acquisition in 1996 of the business from
Motori Italia S.p.A., taking account of market trends and forecasts of life and development
of the business at that time. Given that goodwill is expected to benefit over a protracted
period which is difficult to determine since it depends on the forecast life and development
of the business, even though these are expected to span over a long period of time,
amortisation in the consolidated financial statements is charged over 20 years. This period
represents the maximum currently consented under the accounting principles established
by the Italian Accounting Profession and those issued by the International Accounting
Standards Committee (IASC). The purchased goodwill relating to the reorganisation of the
French and German distribution networks acquired in 1998 for a total cost of 1,291
thousand is being amortised over a period of fifteen years, determined on the basis of its
estimated economic useful life. The increase of 152 thousand during the year ended
31 December 2000 relates to the goodwill paid for the reorganisation of the UK sales
network, to be amortised over 3 years .
Movements in this position during the years are as follows:

Opening net book value


Increases
Amortisation
Reclassifications
Closing net book value

31/12/01

31/12/00

20,564
(2,214)
2
18,352

18,236
152
(2,215)
4,391
20,564

As of 31 December 2001, therefore, the consideration of 2,411 thousand paid in


relation to a no-competition agreement 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;
This item also includes 129 million 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.
11

DUCATI GROUP

The 1,100 thousand booked to difference arising on consolidation in the consolidated


financial statements derives from the difference between the carrying value of investments
in subsidiaries and the related share of their shareholders' equity at the time of acquisition.
This difference, which is essentially goodwill, is amortised on a straight-line basis over
20 years for the reasons set out previously.
Assets in process of formation and advances ( 225 thousand) relate to new designs to
be used from the start of the industrialisation process for the new models concerned.
Other intangible fixed assets ( 6,387 thousand) include :
1. 4,195 thousand reflecting the costs for legal and tax consultants, external audit
services and bank commission incurred for the initial public offering. The estimated
useful life of these costs is 5 years commencing from 24 March 1999, the date of
listing on the Milan Stock Exchange.
2. 405 thousand in relation to a no-competition agreement signed by the Parent
Company and the former importer, following the creation of Ducati U.K., which
directly manages the market for Ducati products in Great Britain. The useful life of
this agreement has been established contractually as three years;
3. 403 thousand relating to bank commissions incurred for the bond issue subscribed
by Ducati Motor Holding S.p.A. on May 31 2000, with maturity 31 May 2005. The
cost is being amortised on a straight-line basis over the duration of the loan, as it
will be repaid in a lump-sum 31 May 2005;
4. 1,384 thousand of other intangible fixed assets are amortised over 5 years.

Property, plant and equipment


Property, plant and equipment as of 31 December 2001, 54,576 thousand, is stated net of
accumulated depreciation at that date amounting to 35,060 thousand, of which 9,998
thousand belong to the period ended 31 December 2001.
Property, plant and equipment includes 506 thousand for leasehold improvements.
These improvements refer to a building involved in a sale and lease-back operation, as
explained in the note on "Leasing", and are amortised over their estimated useful life.
Movements in property, plant and equipment categories during the year ended 31
December 2001 are indicated below and in attachment 2 to these notes.

12

DUCATI GROUP

31 dicembre
2001

31 dicembre
2000

Terreni e fabbricati
Costo
Fondo ammortamento

30.066
(4.586)

29.277
(3.570)

Valore netto

25.480

25.707

21.770
(10.119)

15.671
(5.632)

11.651

10.039

27.528
(16.851)

21.135
(11.828)

Valore netto

10.677

9.307

Altri beni
Costo
Fondo ammortamento

7.841
(3.506)

5.782
(2.241)

Valore netto

4.335

3.541

Immobilizzazioni in corso e acconti

2.433

2.516

54.576

51.110

Impianti e macchinari
Costo
Ammortamento
Valore netto
Attrezzature industriali e commerciali
Costo
Fondo ammortamento

Totale immobilizzazioni materiali nette

The depreciation rates applied are set out in the relevant section of the notes on the
consolidated statement of operations.
Leasing
As of 31 December 2001, the Group has entered into lease contracts relating to.
- machinery and work stations;
- an industrial building for 23,622 thousand.
These assets have been recorded in the statutory financial statements of the Parent
Company, Ducati Motor Holding S.p.A. according to current Italian legislation, by which
lease instalments are charged to the statement of operations as incurred with the
commitment for residual instalments 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 Ducati Motor Holding S.p.A. completed a "sale
and lease-back" operation 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.
13

DUCATI GROUP

The operation 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.
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 instalments, as
established in the contract.
As indicated in the accounting policies, up to the 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 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 operation.
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.
Following the adoption of this method, minor lease contracts have also been accounted for
in the same way.
Had the same method also been used in the prior period financial statements shown here
for comparative purposes, the effect on the balance sheet and statement of operations
would have been the following:
Shareholders'
equity
31/12/00

Statement of
operations
31/12/00

x Increase in gross value of


property, plant and equipment
4,405
x Increase in accumulated
depreciation
x Increase in financial payables
x Increase in financial charges
x Decrease in charges for thirdparty assets
x Prepaid expenses
Gross effect on shareholders equity
Related tax effect
Net effect

(1,952)
(2,309)

(463)
(26)
235

(2)
142
(61)
81

14

(254)
102
(152)

DUCATI GROUP

Financial fixed assets


Equity investments
This item, 1 thousand, comprises:
31/12/01

31/12/00

Associated companies :
High Performance
Engineering S.r.l.

83

Other equity investments:


Ancma-Associazione
Nazionale Costruttori
Motocicli e Accessori
Total

1
1

1
84

The equity investment in the associated company, High Performance Engineering S.r.L,
40% owned, was sold at book value on 20 December 2001 as notarised by Cesare Ferrari
Amoretti with deed no. 90649/14239.
Other amounts - receivables

Prepaid taxes on employees' leaving


entitlements
Guarantee deposits
Total

31/12/01

31/12/00

260

328

350
610

277
605

Prepaid taxes on employees' leaving entitlements refers to the amount accrued as at


31/12/96 pursuant to Law 140 of 28/5/97 as converted from D.L. 79 of 28/3/97.
Guarantee deposits refers to amounts provided for various purposes by Group companies
Other securities

Credit Link

31/12/01

31/12/00

15,000

During 2001, the Parent Company Ducati Motor Holding S.p.A. initiated a financial
operation called Credit Link for 15.0 million which is strictly connected to the issue 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.
15

DUCATI GROUP

This operation, the purpose of which is to maximise the benefit of liquid funds generated
during the year, was formalised 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.

Current assets
Inventories
Closing inventories, shown net of the allowance for obsolete and slow-moving inventory,
total 97,636 thousand and comprise:

31/12/2001

31/12/2000

Materie prime, sussidiarie e di consumo


F.do svalutazione

23.789
(2.168)
21.621

19.638
(1.559)
18.079

Prodotti in corso di lavorazione e semilavorati


F.do svalutazione

15.722
(345)
15.377

20.859
(290)
20.569

Prodotti finiti
F.do svalutazione

62.412
(1.774)
60.638

51.673
(1.306)
50.367

Totale

97.636

89.015

The allowance mostly relates to spare parts, because the Group is obliged to maintain
sufficient spare parts to service bikes sold in previous years for at least ten years. This
means that in many cases the quantity of spare parts held in inventory is greater than the
Group's actual requirements and, therefore, not readily recoverable.
Movements in the allowance between periods are as follows:
31/12/01

31/12/00

Opening balance
Increases
Utilisations
Exchange differences emerging from the
translation of foreign subsidiary balances

3,155
1,670
(571)

3,105
599
(625)

33

76

Closing balance

4,287

3,155

16

DUCATI GROUP

Receivables
Trade receivables
Domestic customers
Notes portfolio
Factoring companies
Foreign customers
Gross total
Allowance for doubtful accounts
Net total

31/12/01

31/12/00

21,586
81
1,330
79,352
102,349
(4,322)
98,027

2,107
4,821
11,828
64,936
83,692
(3,204)
80,488

Amounts due from factoring companies reflect the total of receivables transferred without
recourse to factoring companies as of 31 December 2001, not yet collected. Even though
these receivables were transferred without recourse, the corresponding receivables due
from the factoring company have been classified under trade receivables, both for a clearer
comparison with the prior year and because the receivables transferred were trade-related.
The significant decrease with respect to the previous year is due to the termination of the
contract with Ifitalia S.p.A. to which Ducati Motor Holding S.p.A. transferred its Italian
trade receivables until 31/07/01.
Movements in the allowance for doubtful accounts during the periods under review are as
follows:
31/12/01

31/12/00

Opening balance

3,204

3,343

Charges for the period


Exchange differences emerging from
the translation of foreign subsidiary
balances
Utilisations
Closing balance

1,037

240

135
(54)
4,322

(2)
(377)
3,204

Additions to the allowance were provided in accordance with the prudence principle to
cover positions of doubtful collectibility that arose during the respective periods.
The increase in 2001 refers to receivables of doubtful collectibility mainly concerning
foreign subsidiaries.
Utilisations during the year booked to the consolidated statement of operations under
Other operating revenues are mainly due to the writedown of a receivable from an Italian
customer. The corresponding writedown amounts to 40 thousand and has been booked
under Writedowns of doubtful amounts included among current assets in the
consolidated statement of operations.
Utilisations also include a 14 thousand writedown of a receivable due to the German
subsidiary Ducati G.m.b.H.

17

DUCATI GROUP

Other receivables
These amount to 9,370 thousand and are detailed below:
31/12/01
VAT recoverable from the
provincial VAT office
Scrapping subsidy
Due from employees
Tax authorities withholdings on
interest receivable
Deferred tax assets - Italian
companies
Deferred tax assets - foreign
companies
Other tax credits
Tax authorities corporate/local
income tax
Due from social security
institutions
Due from suppliers
Due from insurance companies
Miscellaneous receivables
Total

31/12/00

2,763

3,441

16
88

415
53

82
-

44
6,383

3,076

1,327

169
929

160
19

67

31

1,839
76
265
9,370

257
130
59
12,319

The decrease in the VAT credit with respect to the previous year is mainly due to the
receivable accrued as at 31/12/2000 by Gio.Ca Moto International S.r.l. (merged with
Ducati Motor Holding S.p.A. on 31/12/2001) which was used during 2001 to offset other
tax liabilities.
The scrapping subsidy refers to the receivable accrued as of 31 December 2001 based on
Law 140 of 11 May 1999 allowing motorcycle manufacturers a fixed tax credit of 258.23
for each motorcycle sold at a discount to encourage the scrapping of older vehicles.
Other tax credits refer to amounts due to our subsidiaries, Ducati Japan K.K., Ducati
GmbH and Ducati Benelux B.V. from the tax authorities of the respective countries.
The deferred tax assets relating to foreign companies refer to the subsidiaries, Ducati Japan
K.K., Ducati UK Ltd, Ducati France S.A . and Ducati North America Inc. Ltd.
For further details relating to changes in deferred tax assets, refer to the comment on
taxation provisions.
An analysis of deferred tax assets and liabilities is also given in Attachment 6.
Amounts due from tax authorities for corporate income tax relate to excess payments on
account during the period and refer for 910 thousand to Gio.Ca Moto International S.r.l.,
which merged with Ducati Motor Holding S.p.A. on 31 December 2001. This sum is
expected to be recovered during the current year.
18

DUCATI GROUP

Amounts due from suppliers mostly derive from advance payments for supplies abroad.
The increase is linked to a rise in supplies abroad for suppliers who are paid in advance.
The receivables discussed above are all due within five years.
Current financial assets
The balance recorded in the consolidated financial statements comprises:
31/12/01
Securities
Total

31/12/00
32
32

29
29

As at 31 December 2001, this item consists of securities purchased as a temporary


investment of surplus cash for 32 thousand.
Cash and cash equivalents
These total 23,673 thousand and comprise:
Cash on hand

15 thousand

Cheques

6 thousand

Bank current accounts

23,652 thousand

Accrued income and prepaid expenses


Accrued income and prepaid expenses comprise the following:
Prepaid issue discount.
31/12/01

31/12/00
255

366

This prepayment reflects the discount on the bond loan issued, as explained in the
appropriate item.

19

DUCATI GROUP

Other accrued income and prepaid expenses


31/12/01

31/12/00

Prepaid insurance premiums and guaranty


policies

170

319

Prepaid amounts for technical assistance,


maintenance and sponsorship contracts
Credit Link contract
Other
Total

424

113

410
484
1,488

724
1,156

Prepayments on contracts show a considerable increase mainly because of the stipulation


of new sponsorship agreements by the subsidiary Ducati Corse S.r.l.
The item "prepaid insurance premiums" includes the cost of policies on VAT credits
deferred to future accounting periods, in keeping with the guarantee given and the accruals
principle.
The accrual on the Credit Link contract refers to interest income accrued as at 31
December 2001, which will be paid during 2002.
The item "other" mainly includes prepayments relating to exhibitions and fairs,
emoluments to directors, sponsorship and rent contracts. It also includes 78 thousand
related to forward hedging contracts on dollars, pounds sterling and yen.

20

DUCATI GROUP

LIABILITIES AND SHAREHOLDERS' EQUITY


Shareholders equity
Attachment 4 shows the movements that have taken place in shareholders' equity.
Share capital
The share capital of the Parent Company, Ducati Motor Holding S.p.A., as of 31 December
2001 amounts to 82,420,500.76 against 81,740,647.2238 as of 31 December 2000.
The increase with respect to 31 December 2000 is determined by a combination of the
share capitals conversion into euros and a new share issue.
On 15 March 2001, the Board of Directors of the Parent Company, Ducati Motor
Holding S.p.A., converted the share capital according to current regulations, adopting the
simplified procedure by converting the nominal value of the shares, rounding up the
amount and then carrying out an increase in share capital for the difference.
In particular, the Board unanimously resolved to :
x

convert the par value of each share previously equal to Lire 1,000 into euros, applying
the official conversion rate of 1 to Lire 1,936.27;

x

round up the amount obtained, namely 0.5164569, to 0.52 per share, thus
increasing the par value of each share;

x

multiply the new nominal value of each share ( 0.52 each) by the number of shares
(158,271,963) to reach a total of 82,301,420.76;

x

convert and increase the share capital from 81,740,647.2238 (Lire 158,271,963,000)
to the new value of 82,301,420.76, with an increase in share capital of
560,773.5362, to be carried out free of charge by transferring this amount from the
share premium reserve, reducing the value of the reserve;

On 14 May 2001, a further capital increase took place by issuing 229,000 new shares at a
par value of 0.52, each with a share premium of 0.203, as partial subscription and
payment of the capital increase resolved by the extraordinary meeting of 7 September 1998
for the stock option reserved for the Company's directors, employees and consultants.
This increase brought the Company a total of 165,567 of which 119,080 as share
capital and 46,487 as the share premium reserve.
After the above operations, the Company's new share capital as of 30 December 2001
amounts to 82,420,500.76, represented by 158,500,963 ordinary shares of par value
0.52 each, with normal dividend rights from 1 January 2001.
The increases in share capital carried out during 2001 can be analysed as follows:

21

DUCATI GROUP

UNIT
VALUE

No. of shares

Shares for Stock


Option plan

Par value

229,000

Share premium Total per share


Euro
Euro

0.52

0.203

0.723

PROCEEDS FOR THE COMPANY


Par value

Shares for Stock


Option plan

Share premium

119,080.000

46,487.000

Total in Euro

165,567.000

Share premium reserve


The share premium reserve, detailed below, as of 31 December 2000 amounted to
23,566,068.30 and 21,315,899.70 as of 30 December 2001.
The gross value of the share premium reserve has been formed over the years as follows:
The net decrease compared with the previous year of 2,250 thousand is due to:
Par value
31/03/99
Shares at full price
Shares discounted by 15%
11/05/99
Shares for Stock Option plan

Share premium

8,393
386

38,737
1,457

47,130
1,843

498
9,277

199
40,393

697
49,670

(16,891)

(16,891)

64
23,566

224
33,003

(1,735)

(1,735)

02/05/00
Absorption of losses
accumulated as at 31.12.99
16/05/00
Shares for Stock Option plan

Total

160
9,437

24/04/01
Allocation to accelerated
depreciation reserve
14/05/01
Conversion of share capital
into euro

561

(561)

Shares for Stock Option plan

119

46

165

21,316

31,433

Total

10,117
22

DUCATI GROUP

x

increase of 46 thousand for a share capital increase on 14 May 2001;

x decrease of 561 thousand due to rounding up after the conversion of the share capital
from Lire into euro;
x decrease of 1,735 thousand for the booking of accelerated depreciation for 2000
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.

The last two operations were carried out on 24 April 2001 as a result of the shareholders'
resolution that approved the financial statements as of 31 December 2000.

Revaluation reserve Law 342 of 21 November 2000 for 24,238 thousand


This is the amount of the trademark revaluation, net of the related substitute tax, as
explained in the note in intangible fixed assets.
Even though this reserve has already had substitute tax deducted from it, it should be
understood as being in suspense for tax purposes. This is because if it is distributed to the
shareholders by reducing the reserve or the share capital to which it relates, the amounts
distributed to the shareholders, grossed up by the substitute tax, would be subject to
taxation, forming part of the taxable income of the company and of the shareholders,
though they would still have the benefit of a tax credit.
Other reserves
Are composed by the foreign currency translation account for 3,296 thousands and
extraordinary reserve for 2,820 thousands.
Provisions for risks and charges
These provisions, estimated to cover known or likely losses, the timing and extent of which
cannot be determined, are discussed below.
Taxation provision
As of 31 December 2001 this item amounts to 1,031 thousand. It represents:
- 9 thousand provision relating to Ducati France S.A. ;
- 26 thousand relating to the Parent Company Ducati Motor Holding S.p.A. for a
provision booked in the financial statements as at 31/12/00 for tax risks pertaining to
Gio.ca Moto International S.r.l., merged with the Parent Company on 31/12/01;
- the net exposure of the reserve for deferred tax assets and liabilities refers to the
Italian Group companies and totals 996 thousand.

23

DUCATI GROUP

Deferred
income taxes
Italian
companies

Deferred tax
assets - Italian
companies

Total

Balance as of 31/12/00

(12,728)

19,111

6,383

Allowance (utilisation)

(7,364)

(15)

(7,379)

Balance as of 31/12/01

(20,092)

19,096

(996)

This item refers to net deferred tax liabilities, mainly calculated on the consolidation
adjustments and on the timing differences between the results reported in the financial
statements and the corresponding amounts recognised for fiscal purposes; In particular, it
relates to the elimination on consolidation of items recorded solely for fiscal purposes in
Group company financial statements in order to obtain tax benefits not otherwise available
(primarily relating to the amortisation of intangible fixed assets), to other consolidation
adjustments, to costs deductible in future accounting periods and the effect on corporate
income taxes of losses carried forward.
The offsetting of deferred tax assets and liabilities took place with reference to the timing
differences relating to Ducati Motor Holding S.p.A. and the other Italian subsidiaries,
because the Directors consider it reasonably certain that they will be realised on the basis
of current forecasts.
The net increase in the reserve for deferred taxes for 2000 is principally due the absorption
of tax losses carried forward for tax purposes by certain Group companies up to
31 December 2000.
The tax years still open for direct and indirect taxation purposes are the following:
from 1996 for Ducati Motor Holding S.p.A. (including Ducati Motor S.p.A., now merged
with it) and Ducati North America Inc.; from 1997 for Ducati G.m.b.H., Gio.ca Moto
International S.r.l. and Ducati France S.A.; from 1998 for Ducati Japan Ltd. and Ducati
Corse S.r.l.; from 1999 for Ducati Benelux B.V.; from 2000 for Ducati.Com S.p.A. and
Ducati UK Ltd.
As of 31 December 2001, the Group has no disputes outstanding with the tax authorities,
except as mentioned under Significant Events in the report on operations.
Other provisions for risks and charges
These provisions, estimated to cover known or likely losses, the timing and extent of which
cannot be determined, total 12,453 thousand as of 31 December 2001, of which 3,305
thousand long-term. Movements in the reserves during the period are detailed in
Attachment 3.

24

DUCATI GROUP

Product warranty for 12,130 thousand as of 31 December 2001, of which 3,305


thousand long-term, is estimated on the basis of both the costs for material and labour
historically incurred for warranties for each model on the road and the expected cost of
recall campaigns that might be required in future.
Outstanding legal disputes, totalling 142 thousand as of 31 December 2001, is made up
of:
1. 24 thousand for legal charges that might emerge from a dispute with an importer. The
amount is deemed adequate to cover the expected outcome of the dispute. Note that the
106 Ducati motorcycles confiscated in Belgium have been auctioned off. Their book
value of Euro 419 thousand has therefore been discharged from inventories. The
proceeds from the auction were credited to Performance, the opposing party in the
dispute.
Even though this first grade sentence has since been amended by the Belgian courts,
we have not recorded the amounts due from the counterparty as the chances of
recovering the auction proceeds seem fairly remote.
During the course of 2001, the reserve was adjusted by using 322 thousand. The
provision as of 31 December 2001 is deemed to be adequate.
2. 118 thousand for legal risks provided by a German subsidiary against a dispute with
a dealer.
Legal proceedings with ex-Cagiva Group employees: this amount, 181 thousand as of 31
December 2001, was established by the subsidiary company, Ducati North America Inc, to
cover legal action taken by a former Cagiva group employee seconded to Cagiva North
America, Inc. (now Ducati North America Inc.). In addition, the subsidiary company,
Ducati Motor S.p.A., is also involved in an outstanding dispute with the same Cagiva
group employee. On the basis of information currently available and supported by the
opinion of the Company's legal advisors, the outcome of this matter is not expected to give
rise to any significant liabilities.
Legal proceedings and arbitration
As indicated above, the Ducati Group is party to certain legal proceedings resulting from
the ordinary conduct of business.
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 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 2001.
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
25

DUCATI GROUP

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.
The Company believes Mrs Hailwood's claims to be without foundation and intends to
oppose them.

Employees leaving entitlements


Movements in employees leaving entitlement during the periods under review are as
follows:
31/12/01
Opening balance
Charges for the period
Effect of foreign exchange
translation
Utilisations
Closing balance

31/12/00

4,775
1,954
(10)

3,783
1,758
4

(1,000)
5,719

(770)
4,775

The 10 thousand effect of foreign exchange translations is related to the translation of the
financial statements of foreign subsidiaries.
Payables
Bonds
On 31 May 2000 Ducati Motor Holding S.p.A. issued bearer bonds for Euro 100 million
(Lire 193,627,000,000). The bonds, which mature on 31 May 2005, accrue interest at a
fixed rate of 6.5% per annum, payable at the end of each 12 month period from the date of
issue, with the principle redeemable on maturity.
The net proceeds received by Ducati Motor Holding S.p.A. from the placement of these
bonds amounted to Euro 99,186,000 (Lire 192,050,876,220), net of the discount on the
issue price of 414,000 and bank commissions of 400,000. This liquidity has been used
to repay in advance the rest of the medium/long-term loan taken out in 1998 by Ducati
Motor S.p.A. for an original amount of Lire 325 billion (of which Lire 60 billion in the
form of a revolving multicurrency line of credit).
The terms and conditions of the bond loan do not provide for any financial coverage index
or performance parameter, but they do lay does a limit on the issuer's capacity to grant real
guarantees as security for any further debt represented by bonds of other financial
instruments.
If the terms and conditions of the bond loan are not respected, this automatically gives the
bond-holders a right to immediate redemption. This might include, by way of example,
failure to pay interest or principle when due, a lack of compliance with the obligations
related to issuance of the bonds, failure to pay other liabilities when due, early repayment
26

DUCATI GROUP

of other payables, a declaration of bankruptcy or any other types of insolvency taking


place.
The bonds making up the loan are quoted on the Luxembourg Stock Exchange and the
placement occurred exclusively through institutional investors in Italy and abroad,
excluding the United States of America.
On 18 May 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 23 May 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 intends to cancel 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
29 June 2001; by means of this operation (see comment on "Leasing" for details), 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 favourable than the rate
applicable to the bonds.
See the preceding item "other securities" in connection with the Credit Link operation.
Due to banks
At 31 December 2001 the amounts due to banks within 12 months came to 38,870
thousand. They relate for 38,857 thousand to the bank borrowings of Ducati Motor
Holding S.p.A., the Parent Company, and for 12 thousand to Ducati U.K. Ltd. The
considerable increase compared with 2000 is related to the rise in working capital at
Ducati Motor Holding S.p.A.

Due to other providers of finance


The amounts shown relate to payables for the purchase of fixed assets.
31/12/01
Amounts due within 12 months
Amounts due beyond 12 months

2,270
19,485

31/12/00
86
170

The significant increase as of 31 December 2001 is due to the lease of the industrial
building, booked for the first time, together with existing minor leases, using the finance
lease method (as recommended).
This item includes payables maturing beyond 31/12/2006 of 7,120 thousand.
Advances from customers
This payable reflects advances from foreign customers from whom payment is required in
advance.
27

DUCATI GROUP

31/12/01

31/12/00

2,957

929

The increase is due to the rise in advances from customers of the Parent Company, Ducati
Motor Holding S.p.A. and the foreign subsidiary, Ducati Japan S.A.
Trade accounts payable
These are detailed as follows:
31/12/01
Domestic suppliers
Foreign suppliers
Invoices to be received
Total

24,171
15,482
47,096
86,749

31/12/00
43,178
10,799
29,727
83,704

Trade accounts payable entirely represent payables to suppliers of goods and consultancy
services. The increase in this balance is primarily due to the expansion of activities.
Due to tax authorities
These amounts are detailed below:
31/12/01
VAT payable
Registration and other local taxes
Taxes withheld - employees
Taxes withheld free-lance
personnel
IRPEG-IRAP payable
Taxes payable by foreign companies
19% substitute tax for the trademark
revaluation
Total

31/12/00

2,137

3,872

904
79

88
1,264
101

417
195
-

1,365
462
5,686

3,732

12,838

Amounts due to the tax authorities mainly comprise direct and indirect taxes payable by
individual Group companies, net of taxes paid in advance, as well as taxes withheld at
source by Group companies on remuneration due to employees and free-lance personnel,
and the substitute tax. Taxes payable are determined on the basis of the best interpretation
of current tax law, as analysed in the commentary to the caption Income taxes in the
statement of operations.
Amounts payable to the VAT office show a decrease principally due to the utilisation of
the VAT credit accumulated as at 31/12/2000 by Gio.ca Moto International S.r.l. (now
merged with Ducati Motor Holding S.p.A.) to offset other tax liabilities.
IRPEG / IRAP payable (Corporate income tax and regional tax on business activities) have
decreased sharply compared with the same period last year, mainly as regards IRPEG.
This is due to a reduction in tax rates and taxable income.
28

DUCATI GROUP

Taxes payable by foreign companies relate to the subsidiaries Ducati Motor


Deutschland G.m.b.H., Ducati Benelux B.V., Ducati France S.A. and Ducati Japan S.A,
calculated on the basis of current tax legislation in the respective countries.
As of 31 December 2000, the item "Due to tax authorities" also includes 5,686 of the
substitute tax for the trademark revaluation carried out in accordance with Law 342 of
21 November 2000, as explained in the note on "Intangible fixed assets" and regularly paid
by 31 December 2001.
Due to social security institutions
These amounts are detailed below:
31/12/01
INAIL and INPS
INPDAI (managers' welfare
institution)
Previndai (managers pension fund)
Contributions payable on deferred
remuneration
Due for foreign subsidiaries
Other
Total

31/12/00

1,514
147

1,280
131

33
423

4
420

211
19
2,347

159
4
1998

This item mainly consists of routine payables to social security institutions for
contributions on current and deferred remuneration
Other payables
These amounts are detailed below:
31/12/01
Amounts payable to employees
Payables for MH and 996R
Miscellaneous payables
Total

5,871
468
383
6,722

31/12/00
7,432
3,053
1,023
11,508

Other payables consist of payroll items due to employees at the balance sheet date, but not
yet paid (wages and salaries, bonuses, holidays still to be taken).
The payables for MH and 996R relate to the advances paid by way of an option on future
purchases of the MH 900 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. Miscellaneous payables are
mainly due to insurance brokers, 334 thousand.
The decrease with respect to the previous year is due to premiums paid in advance in 2001.
Accrued expenses and deferred income
These amount to 4,737 thousand and mainly include accrued interest expense on the
bond loan.
29

DUCATI GROUP

As of 31 December 2001, accrued expenses also include net interest of 3,451 thousand (
3,791 thousand al 31/12/2000) on the bearer bonds issued on 31 May 2000, as explained
more fully in the note on bonds.
The interest accrual has been calculated in accordance with the loan's terms and conditions,
namely a coupon rate of 6.5% per annum accounted for on a time-related basis for the
period 31 May 2001 - 31 December 2001.
Accrued expenses also take account of extraordinary remuneration authorised by the
Compensation Committee and confirmed by the Board of Directors in favour of the
Chairman and the Managing Director of the Company. This remuneration is to be paid in a
lump-sum on 15 March 2002, It therefore accrues from 15 March 2001 to 15 March 2002,
with 886 thousand being the accrual for the period.
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 comprises 57 thousand related to contributions recognised 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 amortisation period.

Commitments and contingent liabilities


Commitments comprise the following:
31/12/01
Performance bonds Snam Lease
contract
Domestic currency Swap-Forward
Creditors for residual leasing
instalments
IRS contracts
Cap contracts
Total

31/12/00

224

224

116,536

138,233
2,834

116,760

141,291

Domestic currency Swap-Forward


The balance of 116,536 thousand refers to exchange rate hedges.
These transactions, which refer principally to the sale of US dollars, Japanese Yen and
pounds sterling, are valued at the forward exchange rate stipulated in the contract.
The item connected to residual leasing instalments payable came to zero after adopting the
"finance lease method" for booking leasing contracts from 2001.
30

DUCATI GROUP

Commitments not recorded in the balance sheet


As regards commitments not recorded in the balance sheet and in addition to the
information disclosed in the Group report on operations, during 1999 the Compensation
Committee approved an end of mandate entitlement of USD 1,200,000. This would be
payable to the Chairman of the Board of Directors Mr. Minoli if not reappointed or
dismissed from office for reasons other than just cause before the officers 60th birthday.
The Compensation Committee also approved an extraordinary end-of-mandate entitlement
of 774,685 (Lire 1,500,000,000) for the Managing Director Mr. Di Biagio in the event
that his mandate is terminated without just cause prior to his 60th birthday.
On 14 February 2002, the Board of Directors also approved the Compensation
Committee's proposal (as per article 2389 of the Italian Civil Code) for an extension to the
retention bonus for another 3 years as approved by the Committee on 11 February 2002.
The amount will be based on the consolidated EBITDA for 2002, 2003 and 2004 and will
only be paid if the managers concerned (including the Chairman and Managing Director)
are still working for the Company 12 months after approval of the consolidated financial
statements. It should also be mentioned that if they are terminated by the Company without
just cause, they will have to be paid triple the amount of the emolument attributed to them
Art. 7.2 of the by-laws of the Parent Company, Ducati Motor Holding S.p.A., provides that
the Board of Directors is authorised to resolve, by majority vote of its members, a share
capital increase of up to Lire 50 billion by one or more issues of ordinary or preference
shares to be offered to the Companys shareholders by 30 August 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 extraordinary shareholders meeting of Ducati Motor Holding S.p.A. held on 7
September 1998, approved, amongst other matters, a Stock Option Plan. This involved a
split capital increase excluding pre-emption rights in accordance with art. 2441 of the
Italian Civil Code, as better described in the related comment in the Report on Operations.
In addition, on 2 May 2000 the shareholders approved, among other things, a further
increase in capital to service the so-called "Second Stock Option Plan.
On 14 May 2001, further execution was given to the resolution by the above extraordinary
meeting for a capital increase in service of the first stock option plan.
For information on the stock option plans and the right to issue convertible bonds and/or
warrants, please refer to the appropriate sections.

31

DUCATI GROUP

STATEMENT OF OPERATIONS
Value of production
Net sales
Total net sales amount to:
31/12/01
Net sales

407,815

31/12/00
379,534

A breakdown of net sales by business line and principal geographical area is presented in a
statement attached to these notes (attachment 5). .
Change in work in progress, semi-finished and finished products
The total increase in this item amounts to 5,096 thousand.
Changes in inventories reflect movements in the respective asset categories.
More specifically, with the respect to movements in the respective assets categories, these
changes do not include the effects of conversion between the exchange rate used for
translating the balance sheet and that used for translating the statement of operations.
Capitalisation of internal costs
These amount to 5,439 thousand and mainly derive from the employment of internal
resources and materials for the research and development of programmed new models and
improvements to the current model range.
Other operating revenues
Amount as of
31/12/01
Cost recoveries on invoices
Miscellaneous revenues
Total

3,833
10,815
14,648

Amount as of
31/12/00
2,148
10,666
12,814

These items essentially comprise:


-

Recovery of costs incurred to modify purchased semi-finished products.


Costs recharged to customers for packaging and transport.
Other revenues generated by supplies, such as the sale of scrap, etc.
Advertising and promotion costs recharged to customers.
Costs recharged for race participation.

The increase shown above derives from the general rise in all of these items making up the
balance, in particular costs recharged to customers and sponsorships as a result of new
contracts signed by Ducati Corse S.r.l.

32

DUCATI GROUP

Manufacturing costs
Purchase of raw materials

31/12/01

Purchased materials costs


Packaging
Transport charges on purchases
and other expenses
Total

31/12/00

184,658
600
4,655

187,188
520
2,938

189,913

190,646

The increase in transport charges on purchases is mainly due to the growth in shipments of
materials to subcontractors, as well as to higher volumes.
Services
The cost of services is detailed below :
31/12/01
Power, natural gas, water
Other industrial services
Subcontracted work
Temping agencies
Commission and related charges
Transport on sales
Customer incentives
Advertising and public relations
Promotion expenses, hospitality and
sundry other costs of sales
Other commercial costs
Racing programme
Technical, legal and administrative
advice
Insurance premiums
Other administrative costs
Total

31/12/00

1,169
15,033
31,655
1,386
569
4,720
16,436
4,364

1,073
12,662
25,261
2,418
120
4,264
15,940
4,725

6,549
9,903
5,625
7,352

6,287
4,738
5,296

2,781
11,023
118,565

5,406
2,115
12,077
102,382

Other industrial services and subcontracted work increased dramatically with respect to
2000 following a higher recourse to outsourcing of the production of pieces which are part
of the core business and of other services also related to the industrial sector.
The cost of temping agencies decreased with respect to 2000 after a change in the
Company's policy related to personnel. During 2001 in fact, thanks to the stabilisation of
volumes and higher recourse to outsourcing, above all the Parent Company Ducati Motor
Holding S.p.A., which represents the manufacturing company of the Ducati Group,
decreased its recourse to temping agencies. The use of this form of recruitment has been
almost entirely eliminated in the last quarter of 2001.

33

DUCATI GROUP

The increase in customer incentives, which involve granting bonuses to dealers when they
achieve certain sales targets, and related costs is mainly the result of the increase in
volumes.
Promotion expenses, hospitality and sundry other costs of sales, substantially in line with
the previous year, also refer to costs incurred for presents to non-employees, 479
thousand.
Other commercial costs, which show a remarkable increase with respect to 2000 and
concern advertising and promotions in connection with trade fairs, exhibitions, price lists
and catalogues. The change mainly concerns the subsidiaries Ducati Japan K.K. , Ducati
France S.A. and Ducati North America Inc. Ltd. for initiatives carried out in 2001 such as:
- The D.R.A. (world motorcyclists' rally) organised in the United States;
- le Monde 2 Route: an important fair of motorcycles in which Ducati France S.A. took
part.
Other marketing costs concern advertising and promotions in connection with trade fairs,
exhibitions, price lists and catalogues.
Costs incurred for the racing programme relate to racing drivers, the cost of specific
materials, as well as travel expenses involved in testing and taking part in competitions.
Technical, legal and administrative advice mainly concern 538 thousand for technical
advice, 132 thousand of costs incurred in relation to the Board of Statutory Auditors,
1,810 thousand for administrative, legal and notarial fees, 514 thousand for auditing
costs.
The increase in insurance costs is mainly due to a policy covering additional after sales
services, which is linked to the number of motorcycles registered; the fees for this policy
suffered a hike in the European market, where it was applied from 2000, while in 2001 it
was introduced into the American market. The increase is also related to the new policy on
the credit issuance in force in the last quarter of 2001 and to the adjustment of volumes for
the third-party liability policy for Products and Transport.
Use of thirdparty assets
This amount comprises:

31/12/01

Leasing of machinery and plant


Rented software
Miscellaneous rentals and vehicle
hiring
Total

31/12/00

165
1,244
1,945

456
711
1,670

3,354

2,837

The decrease in leasing of machinery and plant is due to the different accounting method
for leasing contracts, as explained in the specific note.
The increase in software rent is mainly due to the higher recourse to this type of rent by the
Parent Company Ducati Motor Holding S.p.A.

34

DUCATI GROUP

Payroll and related costs


Labour costs are detailed in the table below:

Year ended
31/12/01

Wages and salaries


Social security contributions
Employees' leaving entitlements
Other
Staff canteen
Welfare and health association
Personnel recruitment
Miscellaneous expenses
Other provisions
Total

Year ended
31/12/00

35.418
9.389
1.954

33.584
8.721
1.758

783
59
168
343

600
43
144
312
858
46.020

48.114

The increase in labour costs is linked to company development involving the research for
new activities as well as the strengthening of existing structures. The item "Other
provisions" as at 31 December 2000 included an estimate of the cost for the incentive to
leave stipulated with a manager of the Company.
Changes in the Ducati Group workforce during the periods were as follows:
31/12/01
1
Managers
Office staff
Foremen
Workmen
Total

31/12/00
1

47
488
21
586

48
463
21
591

50
424
18
577

50
411
19
578

1,142

1,123

1,069

1,058

(1) as of the date indicated


(2) average for the period
Depreciation, amortisation and writedowns
This item relates to:
x Property, plant and equipment: this balance amounts to 9,964 thousand as indicated
in the note on the relevant balance sheet item and in Attachment 2. Depreciation is
calculated using half the annual rates indicated below for assets entering service during
the year, since they are generally included in the production cycle for half the period
only.
35

DUCATI GROUP

Property, plant and equipment

Annual rate

Industrial buildings
Temporary constructions
Improvements on third parties
property
Non-automated general plant
Automated operating plant and
machinery
Furnaces
Robotised work stations
Equipment
Testing instruments
Ordinary office furniture and
machines
Electromechanical and electronic
office machines
Cars and motorised equipment
Transport vehicles
Total

Amount
for 2001

3%
10%
3%

871
6
504

10%

829

17.5%
15%
22%
25%
30%

1,973
19
36
4,371
690

12%

391

20%
25%
20%

428
194
156
9,998

x Intangible fixed assets: this balance amounts to 22,896 thousand as indicated in the
note on the relevant balance sheet item and in Attachment 1. Amortisation on
intangible fixed assets depends on the reasons for their acquisition, as discussed in the
note on the relevant balance sheet item.
x Other writedowns of fixed assets total 1,720 thousand and refer to software belonging
to Ducati.Com S.p.A.. The reason for this writedown for permanent impairment of
value is given in the commentary on the balance sheet item concerned.

Writedowns of doubtful amounts included among current assets


This item comprises the following :
31/12/01
Provision to untaxed reserve for
doubtful accounts
Provision to taxed reserve for doubtful
accounts
Total

31/12/00

1,024

240

53

288

1,077

528

The increase in the reserve as at 31 December 2001 is due to charges for the period allocated
by foreign subsidiaries.
Changes in raw, ancillary and consumable materials and goods for resale
As of 31 December 2001 there has been a decrease of 3,543 thousand.
36

DUCATI GROUP

Provisions for risks and charges


These are detailed in the table below:
31/12/01

31/12/00

Product warranty
Legal disputes

8,504
138

9,664
189

French taxation
Total

8,642

26
9,879

31/12/01

31/12/00

182
564
2
748

79
564
5
648

Other operating expenses


These comprise the following:

Local property tax (ICI)


Other taxes and duties
Miscellaneous expenses
Total
Financial income and expense
Financial income
In detail:

From securities included among current


assets
Bank interest income
Foreign exchange differences
Interest income on investments
Other financial income
Total

31/12/01

31/12/00

114

156

669
12,095
8
473
13,359

195
5,278
3,282
8,911

The exchange gains are principally due to income booked during the period in connection
with exchange risk hedging transactions, in expectation of the euro strengthening against
the Yen. The remainder relates to the year-end adjustment of trade receivable and payable
balances expressed in foreign currency.

37

DUCATI GROUP

Financial charges
In detail:
31/12/01
Interest expense on short-term
borrowings
Interest expense and charges on longterm borrowings
Interest expense on use of revolving
credit facility
Other financial charges
Foreign exchange differences
Interest expense on bond loan

31/12/00
776

Total

2,569
447

7,092
11,418

6,625
14,908

6,146
25,432

3,792
28,340

Interest expense on short-term financing and long-term loans reflects amounts accrued in
relation to the loan agreement with a pool of banks, as discussed previously in the note on
"Due to banks", completely repaid as of 31 December 2000. Interest expense on short-term
borrowings represents the financial cost of using short-term loans.
Other financial charges mainly reflect charges and commission on ordinary current
accounts, export/import-related charges and commission, and discounts for immediate
payment as well as the cost of discounts on the bond.
Exchange losses essentially reflect the losses registered during the period linked to
exchange hedging contracts entered into during the latter months of 2000 and in 2001, in
line with the Group's policy of hedging exchange risks at the time the budget is prepared.
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 "Bonds payable".
Non-operating income and expense
This item is detailed below:
Non-operating income
Out-of-period income
Total

31/12/01

31/12/00

151
151

6,851
6,851

The figure for the year ended 31 December 2000, on the other hand, included 6,657 of
lower taxes paid compared with the provision made in the consolidated financial
statements as of 31 December 1999, as a result of revaluing the trademark in 2000.

38

DUCATI GROUP

Non-operating expense
31/12/01

31/12/00

26
106
46
178

150
150

Taxes for prior periods


Other out-of-period expenses
Losses on disposals
Total

The amounts of out-of-period income and expense derive from over- or under-provisions
for foreign tax at the time the previous year's financial statements were prepared, as well as
from fines.
Income taxes for the year
Current and deferred income taxes are detailed below:

Corporate (IRPEG) and other income


taxes
Regional tax on business activities
(IRAP)
Current taxes - foreign companies
Total current taxes
Deferred tax liabilities (assets) - Italy
Deferred tax liabilities (assets) - abroad
Deferred tax liabilities (assets)
Total

31/12/01

31/12/00

578

1,220

2,496

2,587

123
3,197
7,379
(1,681)
5,698
8,895

40
3,847
4,037
(696)
3,341
7,188

Current taxes
When calculating the current taxes of the subsidiary Ducati Corse S.r.l., these companies
took advantage of the Dual Income Tax (D.I.T.) mechanism, which was introduced into the
Italian tax system by Decree Law no. 466 of 18 December 1997 to help boost companies'
capitalisation. The benefit of D.I.T. lies in the possibility of applying a reduced rate of
corporation tax (IRPEG at 19% instead of the standard rate which for 2001 was reduced
from 37% to 36%) to earnings corresponding to the ordinary return on any increase in
capital invested in the business compared with the capital existing at the end of the year in
progress at 30 September 1996. In any case, up to the year ended 31.12.2000, application
of the D.I.T. mechanism could not entail taxation at an average rate of less than 27%.
From 2001 (article 6 of the Budget Law 2000), the part of the ordinary return on capital
subject to tax at 19% (7% for newly-quoted companies) that exceeds the total net profit
declared is to be added to the earnings subject to tax at the reduced rate in subsequent tax
years, though not beyond the fifth. This effectively gets rid of the previous restriction
whereby the application of DIT could not lead to an average tax rate of less than 27%
(DIT) or 19% (SuperDIT). It will therefore no longer be necessary to carry forward
portions of earnings taxable at the lower rate due to the fact that the average rate of 27%
has been exceeded. On the other hand, carry-forward remains in the case where total
taxable income is insufficient compared with that taxable at the lower rate
39

DUCATI GROUP

The most recent ordinary rate of return determined by the Treasury and the Ministry of
Finance for 2001 is 7%. With the coming into effect of art. 6.14 of Law 488 of 23/12/99
(Budget Law 2001), the legislator intended to reinforce the DIT mechanism by means of a
multiplier of 1.20 to be applied to the 7%, increasing the effective amount of the income
subject to the lower rate. The rate of return to be applied in 2000 is therefore 8.4%. This
20% increase in the amount of year 2000 earnings taxed at special low rates will be raised
to 40% in subsequent years.
This multiplier is also applicable to the SuperDIT mechanism which is explained below.
It is worth mentioning that for the companies listed on Italian regulated markets from 21
January 1998, as in the case of Ducati Motor Holding S.p.A., a special income tax rate of
7% (the so-called "SuperDIT") is to be applied to that part of income equal to the ordinary
remuneration of the increase in capital employed compared with the end of the period in
progress at 30 September 1996. This rate is applicable in the year after the listing and the
two subsequent years.
As mentioned previously, the Parent Company Ducati Motor Holding S.p.A. has calculated
its current tax liability using the carry-forward tax losses accumulated up to
31 December 1999; as a result it did not take any benefit from the DIT system as it did not
have enough taxable income. On the other hand, up to 31 December 2000, it accounted for
the DIT and SuperDIT benefit as a deferred tax asset as the Company is reasonably sure of
being able to use it in future years.
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:
x 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 30 June, and in the subsequent period, excluding from taxable
income 50% of the net capital investments made during the said periods that are over and
above the average investments made during the previous five years, with the chance to
exclude from this calculation the highest period of investment.
x 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:
x the capital increases which remain relevant for DIT purposes are those "carried out" as
of 30 June 2001;
x the businesses that carried them out will continue to enjoy the related benefits.
x 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 there deductibility of investments in fixed assets, no
Italian Group company took advantage of this benefit during the year ended 31 December
2001. As already mentioned in the note on "Current taxes", the subsidiary Ducati Corse
S.r.l. took advantage of the DIT system, while the Parent Company Ducati Motor Holding
S.p.A. has provided for this benefit in its deferred tax assets.
40

DUCATI GROUP

Deferred tax assets (liabilities)


The increase in deferred tax liabilities during the year ended 31 December 2001, as
analysed in attachment no. 6, is mainly related to:an increase due 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.
Account has been taken in the statutory financial statements for the year ended 31
December 2001 of the individual Italian companies of the tax effects of losses available at
that date to be carried forward for corporation tax purposes as well as those generated by
the timing differences between the companies' statutory results and their taxable income.
The Parent Company has therefore applied the provisions of Accounting Principle no. 25
on income taxes, issued by the Italian Accounting Profession in March 1999.
Deferred tax assets and liabilities as of 31.12.01 were calculated at current tax rates at the
balance sheet date, bearing in mind the period when they will presumably reverse.
Note that the Budget Law for 2001 changed the standard corporation tax rate as follows:
from 37% to 36% from the year in progress at 1 January 2001;
from 36% to 35% from 2003.
In the financial statements for the year ended 31 December 2001, part of the deferred tax
assets relating to the losses incurred by Ducati North America Inc. were booked, given the
reasonable certainty that the company would generate sufficient profits in the future to
reabsorb them. The tax benefit was calculated at the rates in effect at the balance sheet
date.
The difference between the taxes calculated by applying the normal tax rate to profit before
taxes and the actual net taxes shown in the consolidated statement of operations is mainly
due to the following factors.
The difference between the taxes calculated by applying the normal tax rate to profit before
taxes and the actual net taxes shown in the consolidated statement of operations is detailed
in Attachment 7.
Net profit for the year
As a result of the various entries explained above, the Groups share of consolidated net
profit for the year ended 31 December 2001 amounts to 10,553 thousand.
for The Board of Directors
Managing Director

(Carlo di Biagio)

41

DUCATI GROUP
Consolidated Financial Statements as of December 31, 2001 - Attachment 1 - first part
Movements in intangible fixed assets are detailed in the table below
( Euro/1000)
Historical
ReclassificaAsset category/financial statement
Cost
tions
Increases
caption
31/12/2000
*

Decreases/
writedowns

Historical
Net book Net book
cost
value
value
31/12/2001 31/12/2000 31/12/2001

Start-up and expansion costs

14.917

(48)

415

15.284

2.660

705

Start-up and expansion costs

14.917

(48)

415

15.284

2.660

705

Research and development costs


Advertising cossts
Research and development costs

23.791
562
24.353

1.754
27
1.781

11.528

(7)

11.528

(7)

37.066
589
37.655

13.644
290
13.935

19.370
185
19.555

Patents and trademarks


Software

437
7.046

0
133

42
2.611

0
(1.733)

479
8.057

41
4.107

32
3.242

Patent and similar rights

7.483

133

2.653

(1.733)

8.536

4.148

3.274

Trademark

141.436

19

141.455

87.959

82.402

Trademark

141.436

19

141.455

87.959

82.402

Goodwill

29.668

92

29.760

20.564

18.352

Goodwill

29.668

92

29.760

20.564

18.352

Difference arising on consolidation

1.481

1.481

1.242

1.100

Difference arising on consolidation

1.481

1.481

1.242

1.100

Advances to suppliers
Advances to suppliers - R.&D.
Advances to suppliers third parties property

70
1.470
0

(70)
(1.753)
0

115
283
110

0
0
0

115
0
110

70
1.470
0

115
0
110

Assets in process of formation and advances

1.540

(1.823)

508

225

1.540

225

2.507
395
9.419
3.029
0
1.214
3.404
84
20.052

73
0
0
0
0
0
0
0
73

752
0
0
0
0
0
0
0
752

(17)
0
0
0
0
0
0
0
(17)

3.315
395
9.419
3.029
0
1.214
3.404
84
20.860

1.175
0
6.080
0
0
809
523
31
8.618

1.372
0
4.195
0
0
405
403
12
6.387

240.930

208

15.875

(1.757)

255.256

140.665

132.000

Joint ventures
Marketing expenses
IPO costs
Banking expense
Bond expenses
Non competition agreement
Original debt capacity
Reproduction plant
Other
TOTAL

The reclassifications comprise :


208 thousands for translation differences arising on the application of exchange rate as of 31/12/00 and exchange rate as of 31/12/01
to opening and closing balances respectively.

For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Consolidated Financial Statements as of December 31, 2001 - Attachment 1 - second part
( Euro/1000)
Asset category/financial statement
caption

Accumulated
amortisation
31/12/2000

Reclassifications
*

Increases

Exchange
adjustment

Decreases/
writedowns

Accumulated
amortisation
31/12/2001

Start-up and expansion costs

12.257

(41)

2.363

14.579

Start-up and expansion costs

12.257

(41)

2.363

14.579

Research and development costs


Advertising cossts
Research and development costs

10.147
272
10.419

0
12
12

7.556
117
7.673

0
3
3

(7)
0
(7)

17.696
404
18.100

Patents and trademarks


Software

396
2.939

0
70

51
1.801

0
5

0
0

447
4.815

Patent and similar rights

3.335

70

1.852

5.262

Trademark

53.477

5.576

59.053

Trademark

53.477

5.576

59.053

Goodwill

9.104

88

2.214

Goodwill

9.104

88

2.214

11.408
0
11.408

Difference arising on consolidation

239

144

(2)

381

Difference arising on consolidation

239

144

(2)

381

1.332
395
3.339
3.028
0
404
2.882
53
11.433

5
0
1
1
0
0
0
1
8

614
0
1.884
0
0
405
119
18
3.040

(2)
0
0
0
0
0
0
0
(2)

(6)
0
0
0
0
0
0
0
(6)

1.943
395
5.224
3.029
0
809
3.001
72
14.473

100.264

137

22.862

(15)

123.256

Joint ventures
Marketing expenses
IPO costs
Banking expense
Bond expenses
Non competition agreement
Original debt capacity
Reproduction plant
Other
TOTAL

The riclassifications comprise:


137 thousand for translation differences arising on the application of exchange rate as of 31/12/00 and exchange rate as of 31/12/01

For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Consolidated financial statements as of December 31, 2001 - Attachment 2 - first part
Movements in property, plant and equipment are detailed in the table below
(Euro/1000)

Asset category/ financial statement


caption

Historical
cost
31/12/2000

Reclassifications
Increases Decreases

Historical
cost
31/12/2001

Net book
value
31/12/2000

Net book
value
31/12/2001

Buildings
Temporary constructions

29.130
147

281
2

458
48

160
(160)

30.029
37

25.588
119

25.453
27

Land and buildings

29.277

283

506

30.066

25.707

25.480

5.615
9.724
130
202

2.320
2.614
253

722
320
46
75

(53)
(199)
0
0

8.604
12.459
176
530

4.379
5.517
68
75

6.442
5.000
95
115

Plant and machinery

15.671

5.187

1.163

(252)

21.769

10.039

11.651

Miscellaneous equipment
Testing instruments

18.734
2.400

396
14

5.669
383

(65)
(3)

24.734
2.794

7.737
1.570

9.405
1.272

Industrial and commercial equipment

21.134

410

6.052

(68)

27.528

9.307

10.677

Office furniture and machines


Electronic office machines
Machines awaiting registration
Transport vehicles
National Display

1.968
1.681
1.010
231
891

56
469
4
0
18

325
506
210
976
607

(40)
(333)
(648)
(26)
(64)

2.309
2.323
576
1.181
1.452

1.184
821
748
98
690

1.271
843
168
898
1.155

Other assets

5.781

547

2.624

(1.111)

7.841

3.541

4.335

Construction in progress
Advances to suppliers of fixed assets

1.212
1.304

(1.129)
(701)

945
802

0
0

1.028
1.405

1.212
1.304

1.028
1.405

Construction in progress and advances

2.516

(1.830)

1.747

2.433

2.516

2.433

74.379

4.597

12.092

(1.431)

89.637

51.110

54.576

General plant
Specifi plant
Furnaces
Robotised work stations

TOTAL

The reclassifications comprise :


4.405 thousands for leasing accounted under financial method
192 thousands for translation differenes arising on the application of exchange rate as of 31/12/00 and exchange rate as of 31/12/01 to opening
and closing balance respectively
For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Consolidated financial statements as of December 31, 2001 - Attachment 2- second part

(Euro/1000)

Asset category/ financial statement


caption

Accumulated
amortisation
31/12/2000

Reclassifica-

Buildings
Temporary constructions

3.542
28

Land and buildings

3.570

General plant
Specifi plant
Furnaces
Robotised work stations

1.236
4.207
62
127

Plant and machinery

Increases

Decreases

Accumulated
amortisation
31/12/2001

tions

97
6

905
7

1
0

31
(31)

4.576
10

103

912

4.586

111
1.433
0
253

829
1.973
19
35

0
0
0
0

(14)
(154)
0
0

2.162
7.459
81
415

5.632

1.797

2.856

(168)

10.117

Miscellaneous equipment
Testing instruments

10.997
830

22
3

4.371
689

0
0

(61)
0

15.329
1.522

Industrial and commercial equipment

11.827

25

5.060

(61)

16.851

784
860
262
133
201

20
192
75
0
11

251
428
194
157
140

0
0
0
0
2

(17)
0
(123)
(7)
(57)

1.038
1.480
408
283
297

2.240

298

1.170

(204)

3.506

0
0
0
0

0
0

23.269

2.223

9.998

(433)

35.060

Office furniture and machines


Electronic office machines
Machines awaiting registration
Transport vehicles
National Display

Other assets
Construction in progress
Advances to suppliers of fixed assets

Construction in progress and advances


TOTAL

0
0

The reclassifications comprise :


1.952 thousands for leasing accounted under financial method
271 thousands for translation differenes arising on the application of exchange rate as of 31/12/00 and exchange rate as of 30/06/01 to opening and
closing balance respectively
For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Consolidated Financial statements as of December 31, 2001 - Attachment 3
( Euro/1000)
OTHER PROVISIONS FOR RISKS AND CHARGES
Balance as of
01/01/2001

Product warranty provision- current portion


Product warranty provision- non current portion

9.437

Increases

Exchange
adjustments

8.505

Uses

(29)

8.825
3.305

469

27

Provision for disputes with US


employees

172

110

13

13.383

8.642

Total other provisions for risks


and charges

(9.088)

3.305

Provision for aoutstanding legal disputes

Ohter provisions

Balance as of
31/12/2001

(354)

142

(114)

181

(16)

For the Board of Directors

(Dott. Carlo di Biagio)

(9.556)

12.453

DUCATI GROUP
Consolidated financial statements as of December 31, 2001 - Attachment 4
( Euro/1000 )
Summary of movements in group share of consolidated shareholders' equity

Balance as of
31/12/1999

Share capital

81.741

Share premium reserve

23.566

Revaluation reserve

24.238

Legal reserve
Statutory reserve

82

Allocation of
prior period
profit (loss)

Reclassifications

(1.736)

Profit
for
period

Balance as
of
30/06/00

119

82.420

(560)

46

21.316
24.238

106

188

146

146

2.456

Extraordinary reserve

1.008

1.812

Profit (loss) carried forward

(681)

10.301

10.483

(10.483)

143.039

Total shareholders' equity

Capital
increases

560

Foreign currency
translation account

Net Profit for the year

Movements in
the translation
reserve

840

3.296
0

2.820
9.620

840

10.553

10.553

165

10.553

154.597

For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Consolidated Financial Statements as of December 31, 2001 - Attachment 5
(Euro/1000)

Analysis of motorcycles sold in the principal geographic areas, by value and quantity
31/12/2001
%
Valori

31/12/2000
%
Quantit

Valori

Quantit

Italy

22,7%

29,1%

23,4%

31,0%

Germany

11,7%

11,2%

12,6%

12,4%

United Kingdom

8,1%

7,0%

6,0%

5,2%

France

8,2%

9,5%

7,8%

9,0%

Rest of Europe

11,2%

12,7%

11,4%

12,1%

USA

23,3%

17,0%

26,9%

19,6%

Japan

10,3%

8,3%

6,8%

4,9%

Australia

2,5%

2,8%

3,0%

3,3%

Rest of the world

2,1%

2,3%

2,1%

2,5%

100,0%

100,0%

100,0%

100,0%

Total

For the Board of Directors

(Dott. Carlo di Biagio)

DUCATI GROUP
Euro/1000
CONSOLIDATED FINANCIAL STATEMENTS AS OF December 31, 20001 - Attachment 6
(Euro/1000)
Movements relating to the deferred tax provision and tax credits for deferred tax assets of Italian and foreign companies

Deferred tas assets/liabilities


Italian companies

Opening balanceIncrementi
Other
Deferred tax Decrementi
C/E
Deferred tax
C/E
movements provision
provision
Increases
on
France
Decreases
01/01/2001
shareholder'equity

Tax rate
adjustment

Closing balance Expected


Tax credits for
Reversal
deferred tax assets
Time
31/12/2001

C/E

Deferred taxes
Accelerated amortisation
intangible fixed assets
Total deferred taxes

(12.728)
(12.728)

(7.364)
(7.364)

(20.092) L/T
(20.092)

Deferred tax assets


Elimination of unrealised
intercompany profit

3.626

Losses carried forward of Ducati


Motor Holding S.p.A.

7.395

Statutory provisions reversed


for fiscal purposes
Ducati Motor Holding S.p.A.

5.648

1.220

For preference income


unused for DIT and Superdit purposes

1.239

948

Other minor items

1.203

Total deferred tax assets

19.111

946

(2.133)

141

(141)
3.114

4.572

S/T

5.262

S/T

7.009

S-M/T

2.187

L/T

(996)

66

(3.129)

19.096
-

Total deferred tax assets/liabilities

Deferred tas assets/liabilities


foreign companies

6.383

(4.250)

(3.129)

Opening balanceIncrementi
Other
Deferred tax Decrementi
C/E
Deferred tax
C/E
movements provision
provision
Increases
on
France
Decreases
1.01.01
shareholder'equity

Stautory provisions
reversed for DNA purposes

1.011

1.380

Tax rate
adjustment

Closing balance
Tax credits for
deferred tax assets
30.06.01

C/E

71

2.462

Losses carried forward Ducati France S.A.

270

Adjustments for uniformity purposes


of DNA principles

(79)

(8)

(333)

Losses carried forward Ducati Japan

126

(27)

Losses carried forward Ducati UK

(996)

(20)

250
(420) S-M/T

102

S/T

682

S/T

681

Total tax credit for deferred tax assets


(Net) foreign companies

1.328

2.061

67

(380)

3.076

Total deferred tax assets/liabilities

7.711

(2.189)

67

(3.509)

2.080

For the Board of Directors

(Dott. Carlo Di Biagio)

S/T

DUCATI GROUP
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 - Attchment 7
Reconciliation between tax charge deriving from the financial statements and theorical tax charge
(Euro/1000)
IRPEG

Result before taxes


Theorical tax charge

36%

Total

7.001
(15.764)
3.684

Timing differences deductible in future years

13.315

Total

16.999

Reversal of timing differences from prior years

(9.988)

Differences that will not reverse in future years

1.374

Total

8.385

2001 losses of Group companies recorded in 2001

1.718

Taxable income before carry-forward tax losses

10.103

Utilisation of carry-forward tax losses

(5.970)

Taxable income
Theorical current taxes

4.133
(1.488)

DIT Benefit

(965)

Effect of the rate difference between theorical italian rate


and rates ruling in the subsidiaries'
countries

(178)

Deferred taxes
Deferred tax assets

Total actual tax burden

Total
tax

19.448

Timing differences taxable in future years

Current income taxes for the year

IRAP

701

2.496

3.197

15.466

922

16.388

(10.349)

(341)

(10.690)

5.818

3.077

8.895

For the Board of Directors

( Dott. Carlo Di Biagio )