IMMSI Group

Share capital 194,827,431.24= Euro fully paid up Registered office: viale R. Piaggio, 25 Pontedera (PI) Pisa Register of Companies and Tax Code 04773200011 Pisa Economic and Administrative Repertory 134077

Quarterly Report
First Quarter 2006

COMPANY BOARDS
Board of Directors Chairman Deputy Chairman Chief Executive Officer Directors Roberto Colaninno Matteo Colaninno Rocco Sabelli Graham Clempson Daniele Discepolo Luciano La Noce Giorgio Magnoni Gaetano Miccich Carlo Pirzio Biroli Secretary to the Board of Directors Board of Statutory Auditors Chairman Standing auditors Alternate auditors Giovanni Barbara Attilio Francesco Arietti Alessandro Lai Mauro Girelli Maurizio Maffeis Supervisory Body as per Legislative Decree 231/2001 Enrico Ingrill Giovanni Barbara Gianclaudio Neri Alberto Casacchia

Incentive Plan Committee

Roberto Colaninno Graham Clempson Gaetano Miccich

General Manager Independent Auditors

Gianclaudio Neri Deloitte & Touche S.p.A.

PIAGGIO GROUP FINANCIAL HIGHLIGHTS

Income Statement (reclassified) (1)
(in ML )

March 31, 2006 374.2 112.9 -89.9 23.0 15.2 10.2 0.0 10.2 % % % 30.2 6.1 2.7 43.0 % 11.5 2005 312.3 91.9 -90.8 1.1 -5.9 -10.9 0.0 -10.9 29.4 0.4 -3.5 24.5 7.8

December 31, 2005

Net Sales Gross Industrial Margin Operating Costs Operating Profit Income Before Tax Net income .Minority Interest .Group Gross Margin on Net Sales Operating Earnings on Net Sales Net income on Net Sales EBITDA (operating) EBITDA on Net Sales

1,451.8 438.2 -343.9 94.3 64.0 38.1 0.2 37.9 30.2 6.5 2.6 184.8 12.7

Balance Sheet Net Working Capital Net Tangible Assets Net Intangible Assets Investments Provisions Net Capital Employed Net Financial Position Shareholders Equity Sources of Funds Minority Equity Interest Change in Net Financial Position Opening Net Financial Position Operating Cash Flow (Earnings + Amortisation & Depreciation) (Increase)/Decrease in Working Capital (Increase)/Decrease in Investments Net Change Severance Indemnities provision and other provisions Change in Shareholders Equity Total Change Closing Net Financial Position -411.4 -521.5 30.2 -3,2 -13.3 -0.6 0.6 13.7 12.5 -48.4 -15.9 -13.5 0.5 -64.8 -521.5 128.6 70.2 -136.9 -10.9 59.2 110.1 -411.4 47.2 253.6 624.7 7.2 162.5 253.1 576.4 8.8 44.0 260.1 624.7 7.4 -176.3 759.9 411.4 348.5 759.9 0.3

-175.7 -173.7 757.0 397.7 359.3 757.0 0.3 827.2 586.3 240.8 827.2 0.4

-397.7 -586.3

(1) All the above information is presented in accordance with IFRS

GROUP HIGHLIGHTS FOR THE FIRST QUARTER 2006 Consolidated net sales grew to 374.2 ML (+19.8% compared to the first quarter of 2005), 97.0 ML of which from the Aprilia and Guzzi brands and 275.5 ML relating to the Piaggio, Gilera and Vespa brands, as well as Light Transportation Vehicles (LTV). Piaggio sales increased from 223.4 ML in the first quarter of 2005 to 275.5 ML (+23.3%) in the first quarter of 2006, including 34.6 ML relating to a contract with Poste Italiane (the Italian Post Office), while sales relating to Aprilia and Guzzi increased from 82.8 ML in the first quarter of 2005 to 97.0 ML in the first quarter of 2006 (+17.1%). Consolidated EBITDA increased 75%: 43.0 ML for 11.5% of Sales compared to 24.5 ML in the first quarter of 2005, equal to 7.8% of Sales. The operating profit was 23.0 ML, compared to 1.1 ML in the first quarter of 2005. The Piaggio Groups profit for the first quarter of 2006 was 10.2ML compared to 38.1 ML for the year 2005 and compared to a 10.9 ML loss in the first quarter of 2005. The consolidated Net Financial Position improved from 411.4 ML at December 31, 2005 to 397.7 ML at March 31, 2006, a net improvement of 13.7 ML , compared to a 64.8 ML absorption of financial resources in the first quarter of 2005.

EVENTS AFTER MARCH 31, 2006 No relevant events occurred between the date of this quarterly report and the date of its approval which may have substantially changed the content thereof. FULL-YEAR BUSINESS OUTLOOK In March, the company applied for a listing on the Borsa Italiana (Italian Stock Exchange). At the date of approval of this quarterly report, Consob and the Borsa Italiana were still reviewing the application and a decision is expected in May this year. If the application is approved, the listing could be finalised by this June. In 2006, the Piaggio Group intends to maintain its leadership in scooters and to further regain market share in the motorcycle segment, by continuing the recovery of the Aprilia and Guzzi brands. Particular attention will be paid to launches of new products with innovative technological characteristics, to better cater to domestic and international motorcycle and scooter customers. In the Light Transportation Vehicles segment, the priorities will focus on supporting the expanding Indian market, together with maintaining the sales volumes achieved on the Italian and European markets, which are both highly mature.

PIAGGIO GROUP BUSINESS AND FINANCIAL REVIEW Piaggio Group ended the first quarter of 2006 with a net profit of 10.2ML, compared to a 10.9 ML loss in the same period the year before. The following chart compares the key business results at March 31, 2006 with the Groups figures for the year earlier period.

400 350 300 250 200 ML 150 100 50 0

-10.9 24.5 43.0 1.1 23.0 10.2 31/03/2005 31/03/2006 374.2 312.3

-50 Net Sales EBITDA Operating profit Net Profit

First quarter 2006 Piaggio Group financial highlights Net Sales

(in ML) 1st quarter 2006 1st quarter 2005 Change

Two-wheelers Light Transportation Vehicles Other TOTAL SALES

284.4 88.1 1.7 374.2

236.2 70.0 6.1 312.3

48.2 18.1 -4.4 61.9

First quarter 2006 consolidated Group net sales were 374.2 ML, up 19.8% on the yearearlier result. The increase is attributable to improvements in the Two-wheeler and Light Transportation Vehicle businesses. More specifically, the growth is due to a 10.8 ML increase in turnover for Gilera and Vespa, 14.2 ML for Aprilia and Moto Guzzi and 18.1 ML for Light Transportation Vehicles, all compared to the same period in 2005. Twowheeler sales also include 34.6 ML of turnover with Poste Italiane S.p.A. in the first

quarter of 2006, relating to a supply contract the parent company Piaggio & C. signed at the end of last year. The 112.9 ML gross industrial margin, a 22.8% increase on the first quarter of 2005, was 30.2% of turnover (29.4% in the first quarter of 2005). Consolidated EBITDA was 43.0 ML, up 75.3% compared to 24.5 ML for the same period last year. First quarter 2006 EBITDA was 11.5% of turnover, an improvement of some 3.6% compared to the same period in 2005. The first quarter 2006 operating profit was 23.0 ML, a 21.9 ML improvement on 1.1 ML for the same period in 2005. First quarter profitability (measured as operating profit on net sales) also improved to 6.1%, against 0.4% for the same period in 2005. Compared to 7.0 ML in the first quarter of 2005, net financial costs were 7.8 ML, 3.9 ML of which relate to the bond issued by the parent company last year. After deducting 5 ML for taxation, the first quarter of 2006 ends with a net profit of 10.2 ML, against a 10.9 ML net loss recorded in the same period a year earlier. HIGHLIGHTS BY LINE OF BUSINESS FIRST QUARTER 2006
(in ML) Piaggio Gilera Vespa DERBI Aprilia M. Guzzi

Two-wheelers

LTV

OTHER

TOTAL

Sales volumes

86.7

9.3

26.7

2.3

36.6

161.6

Turnover

170.4

17.0

79.9

17.1

88.1

1.7

374.2

Personnel

3,583

366

1,162

238

1,739

7,088

Investments - Fixed Assets - R&D (spending)

8.9 2.0 6.9

1.5 0.4 1.1

7.9 1.7 6.2

1.2 0.3 0.9

1.7 0.6 1.1

0.2 0.2 0.0

21.4 5.2 16.2

HIGHLIGHTS BY GEOGRAPHICAL AREA FIRST QUARTER 2006

(in ML)

GEOGRAPHICAL AREA

ITALY

EUROPE

NORTH AMERICA

INDIA

OTHER

TOTAL

Sales volumes

62.3

58.8

4.4

31.3

4.9

161.6

Turnover

157.8

140.2

14.5

49.8

11.9

374.2

Personnel

4,929

661

42

1,417

39

7,088

Investments - Fixed Assets - R&D (spending)

18.8 3.7 15.1

1.6 0.5 1.1

0.5 0.5

0.5 0.5

21.4 5.2 16.2

TWO-WHEELER BUSINESS
1st QUARTER 2006 Volumes Sell in (000 units) Piaggio Gilera Vespa Parts/Accessories Derbi (1) Aprilia M. Guzzi TOTAL 9.3 26.7 2.3 125.0 61.0 7.2 18.5 Turnover (ML) 1st QUARTER 2005 Volumes Sell in (000 units) 40.6 6.5 15.4 Turnover (ML) % change Volumes Turnover

101.4 12.1 38.4 18.5 17.0 79.9 17.1 284.4

72.6 11.1 28.6 18.3

50.2 10.8 20.1 0.0 -19.8 -4.0 109.1 21.4

39.7 9.0 34.3 1.1 -25.4 6.5 119.2 20.4

11.6 27.8 1.1 103.0

22.8 75.0 7.8 236.2

(1) Includes parts and accessories

In the first quarter of 2006, the European two-wheeler market was up 11% compared to the same period in 2005 with overall sales of approximately 422 thousand units. Both divisions, scooters and motorcycles, showed improvements, +19% with volumes around 230 thousand units and +4% with volumes around 192 thousand units, respectively; of particular note are the increases in scooters over 50cc (+40%) and in 125cc motorcycles (+19%) and 126cc-750cc (+10%), while decreases were recorded in 50cc scooters (2%) and 50cc motorcycles (-18%). In the first three months of 2006, Piaggio Group sold 125 thousand units, about 22.0% up on the first quarter of 2005, in part following the supply contract with Poste Italiane; this major contract also led to an approximately 4% increase in market share. As regards the scooter segment, the Group increased its market share in Europe from 33.9% in the first quarter of 2005 to 36.4% in 2006. The Piaggio brand, up from 18.4% to 22.4% in terms of market share, attributable mostly to the sales relating to the Poste Italiane contract, and Vespa, whose sales to end-users in Europe grew by more than 50% with a market share of 5.2% (against 4.0% in the first quarter of 2005), performed particularly well.

Aprilia ends the first quarter of 2006 down (with a 5.8% market share compared to 7.8% in 2005), mainly due to a slowdown in the Italian market, awaiting the launch of the range of new Euro 3 vehicles amongst which the Scarabeo 500 i.e presented in April and the Sport city 250 i.e, expected in May. In the first quarter of 2006, Piaggio Groups market share in the European motorcycle segment was 5%, slightly down compared to 2005 (-0.5%); Moto Guzzi improved (a market share of 0.7% for the first quarter of 2006 compared to 0.5% for the same period in 2005), with sales to end-users in Europe more than 43% up compared to 2005. In the 750cc segment, the market share was 1.4%, about 1% up and sales to end-users more than doubled compared to 2005. Aprilia recorded a slight overall downturn (1.8% market share in the first quarter of 2006 compared to 2.0% in the first quarter of 2005), but grew in the 126-750cc segment (0.8% market share in 2006 against 0.2% in 2005) and in the over 750cc segment (2.2% market share against 1.8% in 2005), a 33% overall improvement in the over 50cc motorcycle segment in terms of sales to endusers. The Derbi brand was slightly down (2.3% market share in the first quarter of 2006 compared to 2.8% in the first quarter of 2005). The next few months will see the launch of new Derbi models which will update and complete the range of products available. LTV BUSINESS
1st QUARTER 2006 Volumes Sell in (000 units) Ape of which India Minivan Quargo Microcars Parts/Accessories (1) TOTAL (1) Includes Indian parts 36.6 33.9 31.3 1.6 1.0 0.1 Turnover (ML) 1st QUARTER 2005 Volumes Sell in (000 units) 25.0 23.1 1.5 1.2 0.3 Turnover (ML) % change Volumes Turnover

56.1 46.7 14.1 7.2 0.9 9.9 88.1

39.2 32.7 12.2 8.4 2.4 7.8

35.4 35.5 8.5 -11.1 -70.9 0.0 30.7

43.1 42.8 15.6 -14.6 -62.5 26.5 25.9

28.0

70.0

In the first months of 2006, the European market for Light Transportation Vehicles (vehicles with a Gross Vehicle Weight 3.5 tonnes) increased by 5.5% compared to 2005 (source: ACEA January-February 2006). Italy also improved (+3.4% - Source: ANFIA, January-March 2006), with 55,415 units sold against 53,588 units in 2005. The Indian market, in which Piaggio Vehicle Private Limited (PVPL) successfully operates, continues to expand, growing 24% compared to the first quarter of 2005. In the segments in which PVPL is present, sales to end-users were of 106,117 units against some 85,685 units recorded for the first quarter 2005. More specifically, there was strong growth in the Passenger vehicle segment (+40.6%), while the Cargo segment increased less (+5.6%) compared to 2005. At the end of the first quarter of 2006, PVPL had an overall Indian market share of 29% (36% in the Cargo segment and 25% in the Passenger segment).

The Light Transportation Vehicle (LTV) division ended the first quarter of 2006 with 36,641 units sold, +30.7% compared to the first quarter of 2005 (28,023 units) and an overall turnover of 88.1 ML, up 25.9% compared to the first quarter of 2005 (70.0 ML). This increase is mainly due to the success of the Indian subsidiary PVPL (Piaggio Vehicles Private Ltd), which went from 23,058 units sold in the first quarter of 2005 to 31,270 units sold for the same period in 2006 (+35.6%) with a turnover of 49.9 ML. As regards the European market, the first quarter of 2006 confirmed the positive trend that began in 2005: sales improved from 4,965 units in the first quarter of 2005 to 5,371 units for the same period in 2006 (+8.2%) and first quarter 2006 turnover was 38.3 ML.

CONSOLIDATED CASH FLOW STATEMENT The consolidated cash flow statement drafted in accordance with the IFRS is in the Consolidated financial statements and notes to the financial statements at March 31, 2006; the following comments refer to the summary provided in the Highlights on page 2. 13.7 ML of cash flow was generated in the period. Operating cash flow (net profit plus amortisation and depreciation) was 30.2 ML. The positive effect of this cash flow generated in the period was partially offset by the increase in working capital, which, also as a result of the seasonal nature of the Twowheeler business which concentrates the greatest financial needs in this period of the year, absorbed 3.2 ML of liquidity, compared to 48.4 ML for the same period a year earlier. This positive performance was also achieved as a consequence of the progress in the implementation of non-recourse factoring arrangements on the Italian market, which started in December 2005. Investment activities absorbed 13.3ML of liquidity. Investments in tangible and intangible assets amounted to 14.1 ML, comprising:
ML March 31, 2006 March 31, 2005

Intangible assets Of which Piaggio Of which Aprilia Of which Guzzi Of which Nacional Motor Of which Piaggio Vehicles pvt ltd Tangible assets Of which Piaggio Of which Aprilia 2.0 1.2 5.7 1.5 4.3 4.3 0.8 0.2 0 0.5 6.5 3.0

10

Of which Guzzi Of which Nacional Motor Of which Piaggio Vehicles pvt ltd

0.3 0.4 0.5

14.9 1.6 0.7

Investments in intangible assets refer to investments in research and development projects and other intangible investments, while those in tangible assets refer to industrial and commercial equipment relating to new vehicles and new engines. PIAGGIO GROUP BALANCE SHEET AT MARCH 31, 2006 Working capital was 47.2 ML, slightly up compared to December 31, 2005 (a 3.2 ML net increase, mainly due to the seasonal nature of the Two-wheeler business), but sharply down compared to the same period a year earlier (-115,4 ML), due to management efforts to contain inventories and credit management programmes implemented over the last 12 months, as well as the abovementioned non-recourse factoring arrangements implemented in the Italian market. The -397.7 ML net financial position at March 31, 2006 compares to 411.4 ML at December 31, 2005 and 586.3 ML for the same period in 2005. The 13.7 ML reduction compared to December 31, 2005 is principally due to the positive trend of the operating cash flow, only partially offset by the absorption of resources associated with the seasonal nature of the Two-wheeler business. The composition of the net financial position is summarised in the table below:
ML March 31, 2006 December 31, 2005

Medium/Long-term borrowings Bonds Short-term borrowings (Financial assets) (Cash) Total

226.4 144.0 84.5 (9.9) (47.3) 397.7

231.5 144.0 88.5 (9.8) (42.8) 411.4

Shareholders equity at March 31, 2006 was 359.3 ML, against 348.5ML at December 31, 2005. EMPLOYEES There were 7,088 Group employees at March 31, 2006, compared to 6,353 at December 31, 2005. Personnel numbers were in line with the cyclical nature of the production process, when people are hired on term contracts.

Average number Category 1st quarter 2006 1st quarter 2005 31-Mar-06

As at 31-Dec-05

Managers

115

113

116

115

11

Middle management and clerical staff Manual labour

2,116 4,580

2,106 4,483

2,119 4,853

2,111 4,127

Total

6,811

6,702

7,088

6,353

12

PIAGGIO GROUP

Consolidated Financial Statements and Explanatory Notes at March 31, 2006

13

INCOME STATEMENT /000 Notes 1st quarter 2006 1st quarter 2005

Net Sales

374,189

312,335

Raw materials and supplies Services, leases, rentals and use of third party assets Personnel costs Depreciation of tangible assets Amortisation of intangible assets Other operating income Other operating expense Operating profit (loss)

2 3 4 5 5 6 7

217,010 72,679 59,795 9,738 10,219 26,691 8,444 22,995

176,967 73,537 57,591 11,015 12,409 27,304 7,035 1,085

Gain (loss) on equity investments Financial income Financial charges Earnings before tax 8 8 1,864 (9,662) 15,197

(52) 1,678 (8,688) (5,977)

Income taxes

4,957

4,896

Result from continuing operations

10,240

(10,873)

Result from discontinued operations

Consolidated income

10,240

(10,873)

Attributable to: Group interests Minority interest 10,222 18 (10,905) 32

Earnings per share (in Euro)

0.027

(0.029)

14

BALANCE SHEET
/000

Notes

31/03/2006

31/12/2005

ASSETS Fixed Assets Intangible assets Property, plant and machinery Investment property Equity investments Other financial assets Receivables due from tax authorities (long-term) Deferred tax assets Trade receivables and other receivables Total Fixed Assets 10 11 12 13 13 14 15 16 624,724 253,599 0 604 9,978 7,696 37,604 7,913 942,118 624,746 259,591 506 650 10,354 7,156 35,135 7,140 945,278

Assets held for sale

55

55

Current Assets Trade receivables and other receivables Receivables due from tax authorities (short-term) Inventories Financial assets held for trading Cash and cash equivalents Total Current Assets 18 16 14 17 237,730 10,312 226,469 128 47,291 521,930 176,772 12,440 192,029 137 42,770 424,148

Total Assets Shareholders equity of the Group Minority interest Total shareholders equity 19

1,464,103

1,369,481

359,041 272 359,313

348,213 254 348,467

Non-current liabilities Financial liabilities Trade payables and other payables (long-term) Reserve for employee severance indemnity and staff benefits Other long-term provisions Deferred tax liabilities Total Non-current liabilities 20 21 22 22 23 370,427 16,580 79,234 43,491 33,759 543,491 375,596 13,403 77,068 44,552 35,002 545,621

15

Current liabilities Financial liabilities due within 12 months Trade payables Tax payables Other short-term payables Current portion of other long-term provision Total Current liabilities 20 21 24 21 22 84,478 374,863 25,356 57,397 19,205 561,299 88,488 296,616 14,348 56,237 19,704 475,393

Total shareholders equity and liabilities

1,464,103

1,369,481

16

CASH FLOW STATEMENT (/000) Operating activities Consolidated income Minority interest Taxation for the period Depreciation of property, plant and machinery Amortization of intangible assets Accrual to provisions for risks and reserves for pensions and employee benefits Write downs / (Revaluations) Loss / (gain) on disposal of property, plant and machinery Loss / (gain) on disposal of equity investments Financial income Financial charges Changes in working capital: (Increase)/Decrease in trade receivables (Increase)/Decrease in other receivables (Increase)/Decrease in inventory Increase/(Decrease) in trade payables Increase/(Decrease) in other payables Increase/(Decrease) in current portion of provision for risks Increase/(Decrease) in non-current portion of provision for risks Increase/(Decrease) in reserves for risks, pension reserves and employee benefits Other changes Cash generated from operating activities Interest paid Taxes paid Cash flow from operating activities Investment activities Investment in property, plant and machinery Proceeds from disposal of property, plant and machinery Investments in intangible assets Proceeds from disposal of intangible assets Increase in value of equity investment due to valuation of financial instruments Proceeds from disposal of equity investments Repayment of loans granted Interests received Cash flow from investment activities Financial activities Increase in share capital by Group shareholders Increase in net equity due to valuation of financial instruments Increase in net equity reserves for stock options

1st quarter 2006 10,240 18 4,957 9,738 10,219 7,917 748 (105) (1,864) 9,662 (58,173) (4,306) (34,440) 80,255 2,329 (5,912) (1,061) (338) 4,126 34,010 (5,282) (4,061) 24,667

1st quarter 2005 (10,873) 32 4,896 11,015 12,409 4,779 1,545 (79) (483) (1,678) 8,688 (63,717) 13,227 (48,608) 50,380 6,488 (10,878) 0 (1,595) (2,252) (26,704) (3,774) (4,021) (34,499)

(4,500) 189 (9,555) 181 (862) 46 376 1,764

(24,365) 796 (9,665) 161 0 487 (321) 1,885

(12,361) (31,022)

0 783 324

0 0 241

17

Increase in net equity reserves due to fair value valuation of derivative financial instruments Loans received Payable for financial instruments Cash outflow for repayment of loans Finance through leasing Repayment of financial leases Cash flow from financial activities Increase / (Decrease) in cash Opening balance Exchange difference Closing balance

(32) 36,266 79 (40,764) 0 (224) (3,568) 8,738 30,655 240

0 20,161 0 (20,139) 12,824 0 13,087 (52,434) (63,249) 506

39,633 (115,177)

18

CHANGES IN SHAREHOLDERS EQUITY 1st QUARTER 2006 1st QUARTER 2005

1st QUARTER 2006

Reserve from Reserve Share valuation of Reserve Reserve for Reserve for financial premium Legal from IAS Group for Group Stock Retained reserve reserve instruments transition consolidation conversion Options earnings Profit (loss) for the period Minority Consolidated interest capital TOTAL Group and SHAREHOLDERS Shareholders reserves equity EQUITY

(000 Euro)

Share capital

At January 1st, 2006

194,827

24,500

723

56,898

(4,113)

993

1,532

2,266

32,704

37,883

348,213

254

348,467

Translation of financial statements into currency Change in IAS reserves Allocation of consolidated income Profit (loss) for the period 751

(469) 324 37,883 (37,883) 10,222

(469) 1,075 0 10,222 18

(469) 1,075 0 10,240

At March 31, 2006

194,827

24,500

723

57,649

(4,113)

993

1,063

2,590

70,587

10,222

359,041

272

359,313

19

1st QUARTER 2005

Share Reserve premium Legal from IAS reserve reserve transition Reserve Profit Consolidated Reserve for Reserve for (loss) for Group TOTAL Group for Group Stock Retained the shareholders Minority SHAREHOLDERS consolidation conversion Options earnings period equity interest EQUITY

(000 Euro)

Share capital

At January 1st, 2005

194,827

24,500

671

(4,113)

993

308

966

6,724

26,032

250,908

326

251,234

Translation of financial statements into currency Change in IAS reserves Allocation of consolidated income Profit (loss) for the period

213 241 26,032 (26,032) (10,905)

213 241 0 (10,905)

21

234 241 0

32

(10,873)

At March 31, 2005

194,827

24,500

671

(4,113)

993

521

1,207

32,756 (10,905)

240,457

379

240,836

20

SIGNIFICANT ACCOUNTING POLICIES The quarterly report and the consolidated Financial statements were prepared in accordance with Consob regulation n 11971 dated May 14, 1999, as amended by CONSOB Resolution no 14990 of April 14, 2005 and supplemented by the provisions of International Accounting Standard 34 (IAS 34). COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS The Piaggio Group consolidated quarterly report at March 31, 2006 was prepared in compliance with the IFRS International Financial Reporting Standards, which, since 1995, are mandatory for the preparation of consolidated financial statements of companies listed on regulated European markets. The measurement criteria used for the balance sheet and income statement are in line with those adopted in the financial statements at December 31, 2005. The figures for the first quarter of 2005 have also been restated based on International Financial Reporting Standards (IFRS). The interim financial statements of the subsidiaries used in the consolidation have been suitably adjusted and reclassified, where necessary, in order to comply with international accounting standards and with the classification criteria used throughout the Group. Preparation of the interim financial statements requires management to make estimates and assumptions which affect the values of sales, costs, assets and liabilities in the balance sheet and the information relating to contingent assets and liabilities at the date of the financial statements. If, in the future, such management estimates and assumptions should differ from actual circumstances, then they would be appropriately changed during the year in which those circumstances occur. Furthermore, it is pointed out that some measurement procedures, particularly the more complex ones such as the determination of any impairment in fixed assets, are generally carried out completely only at the time of preparing the annual report, when all necessary information is available, except in the event of indicators that require an immediate measurement of any impairment. The Groups businesses, especially the Two-wheeler sub-sector, are characterized by significant seasonal changes in sales throughout the year. Income tax is recognized on the basis of the best estimate of the average weighted rate expected for the whole year. Consolidation area The changes in the consolidation area in the first quarter of 2006 compared to the consolidated financial statements at December 31, 2005 are due to completion of the liquidation of Aprilia Finance and Aprilia Leasing S.p.A. which commenced in prior years. The changes do not have a significant effect on comparisons between the figures for the two periods. New accounting policies

21

No accounting policies or interpretations that came into effect as at January 1st, 2006 and that have had a significant effect on the Groups financial statements have been reviewed or issued. OTHER INFORMATION Information on significant events occurring after the end of the quarter and on the business outlook for the year is presented in specific paragraphs in this report. SEGMENT INFORMATION Primary sector: light mobility vehicles market The Piaggio Group is a world leader in the sector of light mobility vehicles , a sector the Group helped to define with the introduction of the Vespa and Ape models in the 1940s. This sector relates to Two-, Three- and Four-wheelers for private or business use that allow the user to have greater mobility thanks to their characteristics of safety, maneuverability and reduced emissions. The vehicles produced are marketed internationally under the following brands: Piaggio, Aprilia, Moto Guzzi, Gilera, Derbi, Vespa and Scarabeo. The products, whether Two-, Three- or Four-wheelers, are distributed through dealers. The Piaggio Group operates in the light transport sector following policies common to all companies/products: defining specific business policies so as to reflect the search for a common identity through which global strategies may be channeled. The area of application of these policies regards the different aspects of business management, such as customer discounts and credit management, the provision of production materials, treasury and central corporate functions. Credit management is applied following a centrally-established policy, in order to identify a common language that permits the different companies to operate in line with a standard reference model that aims to measure creditworthiness, dealer reliability, payment terms, and define reporting models for effective and rapid monitoring of the data. Purchases are made internationally by unit. In this respect, the Group is trying to obtain benefits from the synergy deriving mainly from components common to several vehicles and suppliers common to more than one Group company. Treasury is managed centrally by the Parent company in order to concentrate the financial resources necessary to be able to make investments that will generate benefits for all parts of the Group, while monitoring the return on investments. The development of new products is managed globally for the whole Group, taking into account the different requirements of the reference markets. Organizationally, a structure has been created that, by integrating the various brands, enables the implementation of global strategies aiming to find synergy that can increase Group value and highlight its distinctive qualities. Such synergy derives from the concentration of technical, industrial and other central activities that are coordinated by Corporate Functions, thereby ensuring the distribution and integration of specific functional competences. In light of the above, one may consider that the Piaggio Groups activities and related strategies, as well as the underlying Central Control activities, have been defined in one light mobility vehicles sector. As regards the secondary sector (Two-wheeler and LTV businesses) and the third sector (geographical area), please refer to previous paragraphs in this quarterly report. CONTENT AND MAIN CHANGES Income Statement (000 Euro) 22

1. Net sales The distribution of Net sales to third parties (net of intragroup items) by business sub-sector is presented in the table below:

(000 Euro)

1st quarter 2006 Amount % 76.0 23.6 0.4 100.0

1st quarter 2005 Amount 236,179 70,005 6,151 312,335 % 75.6 22.4 2.0 100.0

Two-wheeler LTV Other TOTAL

284,414 88,146 1,629 374,189

while distribution by geographical area is as follows:

(000 Euro) 1st quarter 2006 Amount Italy Europe India North America Other TOTAL 157,753 140,193 49,800 14,519 11,924 374,189 % 42.2% 37.5% 13.3% 3.9% 3.2% 100.0% 1st quarter 2005 Amount 121,232 137,734 34,900 9,129 9,340 312,335 % 38.8% 44.1% 11.2% 2.9% 3.0% 100.0%

As already stated, the Two-wheeler sales include /000 34,600 arising from the contract with Poste Italiane. Sales are stated net of the premiums paid to the customers (dealers). This item does not include transport costs recharged to customers (/000 8,502) and recovery of advertising costs charged in invoices (/000 878), which are stated among other operating income. 2. Raw materials and supplies Total /000 217,010, compared to /000 176,967 at March 31, 2005. Around 58% of net sales in the first quarter, this is an increase of some 1.3% compared to the same period the year before. 3. Services, leases, rentals and use of third party assets Total /000 72,679, compared to /000 73,537 at March 31, 2005, and includes mainly spares and vehicle transport costs (/000 11,524), warranty costs (/000 3,849), advertising and promotional expense for /000 11,450, building rentals for instrumental purposes as well as rentals for cars, computers and photocopiers (/000 2,769). Also included are management services provided by the parent company Immsi SpA, /000 795.

23

4. Personnel costs /000 59,795 overall, compared to /000 57,591 at March 31, 2005 Below is a breakdown of the staff numbers with average and period end figures:
Average number Category 1st quarter 2006 March 31, 2006 As at December 31, 2005 Change

Managers Middle management and clerical staff Manual labour

115 2,116 4,580

116 2,119 4,853

115 2,111 4,127

1 8 726

Total

6,811

7,088

6,353

735

5. Amortization and depreciation Total /000 19,957, compared to /000 23,424 at March 31, 2005, of which /000 9,738 depreciation of tangible assets and /000 10,219 amortization of intangible assets. Below is a summary of amortization and depreciation for first quarter 2006, subdivided by category:
(000 Euro) Intangible Assets Development costs Industrial patents and intellectual property rights Concessions, licences, trademarks and similar rights Other 6,929 1,111 2,147 32 8,606 682 2,631 490 1st quarter 2006 1st quarter 2005

Total amortization of intangible assets

10,219

12,409

(000 Euro) Tangible assets Buildings Plant and machinery Industrial and commercial equipment Other assets

1st quarter 2006

1st quarter 2005

901 3,359 4,812 666

791 2,827 6,160 1,237

Total depreciation of tangible assets

9,738

11,015

6. Other operating income 24

/000 26,691 overall, compared to /000 27,304 in the first quarter of 2005 and mainly include increases in intangible assets for development costs capitalized in the period (/000 6,742), grants related to income, recovery of costs for transport (/000 8,502) and for advertising (/000 878) and other miscellaneous operating income (/000 10,569). The recovery of transport costs item refers to costs recharged to customers, the expense of which being classified under the services item.

7. Other operating costs Other operating costs were /000 8,444, compared to /000 7,035 for the same period in 2005. They include mainly taxes not related to income (/000 1,514), membership costs (/000 252), provisions to bad debt reserves, reserves for risks, etc. (/000 6,213) and other miscellaneous operating costs (/000 461). The taxation not related to income item includes costs sustained by the Italian companies of the Group for the issue of compliance certificates as of 1st January 2005. This cost is re-charged to the Concessionaires and the recovery is posted under other operating income.

8. Net financial income (charges) Net financial charges totaled /000 7,798, compared to /000 7,010 in the first quarter of 2005 and include /000 3,878 for interest payable on a bond issued by Piaggio & C. S.p.A. in April 2005.
(000 Euro) 1st quarter 2006 1st quarter 2005

Financial income: Other income from third-parties: - Interest received from customers - Interest received from banks - Interest received on financial receivables - Other Total other income from third-parties 48 246 61 366 721 30 143 322 145 640

Gains on foreign exchange

1,143

1,038

Total financial income

1,864

1,678

Charges Financial charges paid to parent companies Financial charges paid to others: - Interest paid on bank accounts - Interest paid on bond 388 3,878 1,759 1,875 71 71

25

- Interest paid on borrowings - Interest paid to other lenders - Interest paid on leases - Other Total financial charges to third parties

2,187 748 135 1,170 8,506

3,089 519 144 427 7,813

Losses on foreign exchange

1,085

804

Total financial charges

9,662

8,688

9. Income tax The allocation for taxation in the consolidated income statement at March 31, 2006 is /000 4,957, compared to /000 4,896 in the interim financial statements at March 31, 2005 and comprises the sum of current taxes payable by consolidated companies using the line-by-line method and the deferred taxation pertaining to the period. The tax rate for the first quarter of 2006 is 32.6%. CONSOLIDATED BALANCE SHEET ASSETS 10. Intangible assets

000 Euro Development costs Industrial patent rights and intellectual property rights Concessions, licences, trademarks Goodwill Other intangible assets

Carrying amount Carrying at amount March at 31, December Dispo- Reclassi- Exchange 2006 31, 2005 Increases Amortization sals fications difference 71,732 8,961 (6,929) (19) (66) (24) 73,655

8,579 114,788 429,390 257

535 42 862 17

(1,111) (2,147) 0

(5)

(360) 414

7,638 113,097 430,252 (3)

(32)

(157)

82

Total

624,746

10,417

(10,219)

(181)

(12)

(27) 624,724

Development costs include costs for the development of new products that were capitalized as they were deemed to have a durable use. In the first quarter of 2006, Piaggio Group capitalized /000 8,961 of development costs relating to new products and new engines. Trademarks include the Aprilia and Guzzi brand names, for /000 82,319 and /000 26

29,707, respectively. Measurement of these brands was confirmed by the evaluation of an independent third party in 2005. The above brands are amortized over a maximum of 15 years and amortization for the period was /000 2,043, of which /000 546 relating to Guzzi and /000 1,497 to Aprilia. It is pointed out that, as already exhaustively explained in the explanatory notes to the consolidated financial statements at December 31, 2005, after applying IFRS 3 to the acquisition of the Aprilia Group, a part of the higher value paid, including the tax effect, was attributed to the Aprilia brand, while the higher value deriving from the valuation carried out at the year-end of two of the three financial instruments issued in relation to the acquisition was recorded under goodwill at the present value of /000 62,156. The increase for the period, following measurement of the instruments at fair value, was /000 862. The accounting counter-entry for the adjustment of the acquisition cost, taking into account the peculiarity of the underlying financial instruments, was recorded in the Financial instruments fair value reserve (Euro/000 57,248) and in the non-current financial payables (Euro/000 5,769). The goodwill item includes the accounting effects of the following transactions: - the acquisition by MOD S.p.A. of the Piaggio & C. Group, completed in 1999 and 2000 (net value at January 1st, 2004: /000 330,590); - the acquisition, completed in 2001, by Piaggio & C. S.p.A. of 49% of Piaggio Vehicles Pvt. Ltd from Greaves Ltd (net value at January 1st, 2004: /000 5,192). Added to this is the subsequent acquisition by Simest S.p.A. of an equity investment of 14.66% of the share capital of Piaggio Vehicles Pvt. Ltd., which led to total control of the subsidiary; - the acquisition in October 2003 of 100% of Nacional Motor S.A. by Piaggio & C. S.p.A., at a price of /000 35,040 with goodwill net of amortization of /000 31,237 at January 1st, 2004. /000 Piaggio & C. National Motor Piaggio Vehicles Aprilia Total March 31, 2006 330,590 31,237 5,408 63,017 430,252 December 31, 2005 330,590 31,237 5,408 62,155 429,390

11. Property, plant and machinery

000 Euro Land and buildings Plant and machinery Equipment Other

Carrying amount Carrying at amount March at 31, December Depreci- Disp- Reclassi- Exchange 2006 31, 2005 Increases ation osals fications differences 124,356 72,444 53,761 9,030 217 1,171 2,348 764 (901) (3,359) (4,812) (666) (71) (2) (11) 1,026 (873) (10) (244) (188) (352) (2) (27) 124,510 68,960 51,283 8,846

Total

259,591

4,500

(9,738)

(84)

(101)

(569) 253,599

27

The /000 4,500 increases refer to investments made by the Group in the first quarter of 2006, mainly for equipment relating to new products and the refurbishment of the Scorz factory and the start of the refurbishment of the Mandello del Lario factory. At March 31, 2006, the leased assets are as follows:

Mandello del Lario factory Auto Sap

14,402 23 568

Net value Net value Net value

Guarantees At March 31, 2006, the collateral security provided by the Parent in favour of lenders to secure loans obtained in previous years has been withdrawn following prepayment of such loans.

12. Investment property At March 31, 2006, the amount was reclassified to property, plant and machinery as the premises have been vacated and the asset has been made once more fully available to the Parent. 13. Equity investments and other financial assets
(000 Euro) Equity investments in subsidiaries Equity investments in joint ventures Equity investments in associates March 31, 2006 0 0 604 December 31, 2005 41 0 609 Change (41) 0 (5)

Total

604

650

(46)

The changes for the period are: Disposal of the equity investment in Marker s.r.l., previously recorded under equity investments in associates; Completion of the liquidation of Piaggio Argentina S.A., started in previous years. Also of note is the merger by incorporation of Aprilia World Service USA Inc into Piaggio Usa Inc and the subsequent change in the company name of the latter to Piaggio Group Americas Inc.. The Equity investments in joint ventures item comprises the equity investment in Piaggio Foshan Motorcycles Co. Ltd, relating to the agreement signed on April 15, 2004 between Piaggio & C. S.p.A. and the historical shareholder Foshan Motorcycle Plant on the one side and the Chinese company Zongshen Industrial Group Company Limited. Piaggio & C. S.p.A. has a 45% equity investment in Piaggio Foshan Motorcycles, of which 12.5% is held by the direct subsidiary Piaggio China Company Ltd. No changes are reported for the period. 28

The Parent issued bank guarantees for /000 14,788 against loans granted by banks to the subsidiary Piaggio Foshan Motorcycle Co. Ltd.. The Other financial assets item refers mainly to /000 9,790 of financial receivables of Piaggio & C. S.p.A. due from Scooter Holding 1 S.p.A., previously Piaggio Holding S.p.A., relating to the loan granted to that company as a result of contractual agreements regarding the acquisition of Piaggio & C. Group. This loan, originating with the MV Agusta transaction, has a 5-year term (falling due September 23, 2008) and pays a fixed interest rate of 2.5% compounded annually. Also included are /000 188 of equity investments in other companies.

14. Tax receivables /000 18,008 overall, compared to /000 19,596 at December 31, 2005, of which /000 7,696 included under non-current assets (/000 7,156 at December 31, 2005) and /000 10,312 under current assets (/000 12,440 at December 31, 2005). The tax receivables comprise:
(000 Euro) Receivable for VAT Receivable for income taxation Other receivables from tax authorities March 31, 2006 7,958 9,547 503 December 31, 2005 10,753 8,617 226 Change (2,795) 930 277

Total

18,008

19,596

(1,588)

15. Deferred tax assets 37,604 /000 overall, compared to /000 35,135 at December 31, 2005. The deferred tax assets item includes deferred tax assets referring mainly to the reversal of intra-company gains not realized with third parties, deferred tax assets relating to tax losses of Nacional Motor S.A. (/000 11,331 overall) and deferred tax assets on tax losses of the Parent (/000 17,811).

16. Trade receivables and other receivables Trade receivables and other receivables total /000 245,643, compared to /000 183,912 at December 31, 2005, of which /000 7,913 included under non-current assets (/000 7,140 at December 31, 2005) and /000 237,730 under current assets (/000 176,772 at December 31, 2005). The current portion of trade receivables and other receivables is as follows:
(000 Euro) Trade receivables March 31, 2006 December 31, 2005 208,276 150,851 Change 57,425

29

Amounts due from associates Amounts due from others Other non-financial current assets

938 27,387 1,129

962 23,968 991

(24) 3,419 138

Total

237,730

176,772

60,958

The trade receivables item comprises receivables from normal sales transactions stated net of a provision for doubtful accounts equal to /000 21,639 (including the non-current portion 20,716 being the current portion). The Parent normally sells its receivables with and without recourse. At March 31, 2006, the receivables sold with recourse total /000 41,215, of which /000 18,230 have a counter-entry under current financial liabilities, while the trade receivables sold without recourse in the period January March 2006 total /000 84,535.

17. Inventories

(000 Euro)

March 31, 2006

December 31, 2005

Change

Raw materials, consumables and goods for resale Obsolescence provision

109,399 (11,938) 97,461

82,607 (11,519) 71,088

26,792 (419) 26,373

Work in progress and semi-finished products Obsolescence provision

15,817 (852) 14,965

16,466 (1,048) 15,418

(649) 196 (453)

Finished products and goods Obsolescence provision

128,000 (14,027) 113,973

122,661 (17,170) 105,491

5,339 3,143 8,482

Payments on account

70

32

38

TOTAL

226,469

192,029

34,440

18. Cash and cash equivalents Cash and cash equivalents totaled /000 47,291, compared to /000 42,770 at December 31, 2005, as detailed below:
(000 Euro) Bank and postal accounts Cheques March 31, 2006 47,082 83 December 31, 2005 42,498 212 Change 4,584 (129)

30

Cash and cash equivalents

126

60

66

Total

47,291

42,770

4,521

LIABILITIES

19. Shareholders equity The consolidated shareholders equity at March 31, 2006 increased compared to December 31, 2005 as a result of the profit for the period (/000 10.240), the change in the reserves for stock options (/000 324) and the valuation of the financial instruments (/000 751). Conversion of the financial statements of subsidiaries reporting in currencies other than the Euro had a negative effect amounting to /000 469. At March 31, 2006, the fully paid up share capital comprised 374,668,137 ordinary shares of 0.52 par value each, totaling 194,827,431.

20. Financial liabilities

March 31, 2006 December 31, 2005

(000 Euro) Current portion bank overdrafts current payables amounts due to factors Current portion of non-current borrowings: Leases amounts due to other lenders amounts due to banks Total borrowings falling due within one year Total

Change

7,658 47,339 18,229

12,115 31,532 32,502

(4,457) (15,807) (14,273)

656 6,178 4,419 11,253 84,479

903 5,264 6,172 12,339 88,488

(247) 914 (1,753) (1,086) (4,009)

(000 Euro) Non-current portion Non-current loans Bonds falling due beyond one year Other non-current borrowings Leases amounts due to other lenders amounts due to parents Total borrowings falling due beyond one year Total

31-Mar-06

31-Dec-05

Change

192,109 143,951

187,804 143,951

4,305 0

11,408 22,904 55 34,367 370,427

11,385 32,401 55 43,841 375,596

23 (9,497) 0 (9,474) (5,169)

31

Further information on existing non-current borrowings and on the bond is included in Note 26 of the consolidated financial statements at December 31, 2005. Furthermore, the collateral security issued by the Parent in favour of lenders to secure loans obtained in previous years has been withdrawn following the prepayment of such loans. Financial instruments Interest rate risk At March 31, 2006, the Group has an interest rate swap derivative contract falling due on 29 June 2006 3.5 years Eur quanto basis collar swap new trade for a notional /000 180,760 with the following characteristics:
Payable by the Group Payable by the counterparty

1.7 * 12-month US LIBOR set in arrears < 6-month Euribor with a maximum uplift of with the following characteristics: 0.30% compared to the previous coupon floor: 3% Cap: 5.20% European-style knock-out barrier: 5.50% from 29.12.02 to 28.06.04; 5.75% from 29.06.04 to 28.06.05; 6.10% from 29.06. to 28.06 06 Option: at each maturity, starting on 30.06.04, the bank has the right to transf the floating rate paid by Piaggio to a fixed 4.40% for the residual life of the swap. This hedge refers to non-current financial liabilities of Piaggio & C. S.p.A. and Nacional Motor S.A. Exchange rate risk At March 31, 2006, Piaggio & C. S.p.A. had exchange rate hedges on foreign currency receivables and payables (transaction risk) in place for forward purchases for a value of JPY/000 40,000, corresponding to /000 282 (at the forward rate) and forward sales for a value of USD/000 18,400, CHF/000 1,960, DKK/000 6,250, GBP/000 1,025 e NOK/000 2,350, corresponding overall to /000 19,334 (at the forward rates); regarding the companies of the former Aprilia Group, at March 31, 2006 there were forward sale transactions in place for a value of GBP/000 5,620 and JPY/000 467,000, corresponding overall to /000 11,486. At March 31, 2006, Piaggio & C. S.p.A. had exchange rate hedges on forecast transactions (economic risk) in place for forward purchases for a value of JPY/000 1,500,000, corresponding to /000 10,972 and forward sale transactions for a value of USD/000 9,800, GBP/000 9,750 and CHF/000 7,400, corresponding overall to /000 27,215 (at the forward rates); regarding the companies of the former Aprilia Group, at March 31, 2006 there were forward sale transactions in place for a value of GBP/000 6,750, corresponding to /000 9,831.

21. Trade payables and other payables

Trade payables and other payables total /000 448,840 (/000 366,256 at December 31, 2005), of which /000 16,580 of non-current liabilities (/000 13,403 at December 31, 2005).

32

(000 Euro) Non-current liabilities Amounts due to suppliers Amounts due to tax authorities for indirect and other taxation Amounts due to social security authorities Other payables

March 31, 2006

December 31, 2005

Change

435 2,132 14,013

223 797 1,116 11,267

(223) (362) 1,016 2,746

Total trade payables and other non-current payables

16,580 0

13,403 0

3,177

(000 Euro) Current liabilities Amounts due to suppliers Amounts due to associates (trade) Amounts due to parents (trade) Amounts due to subsidiaries (trade) Total trade payables

March 31, 2006

December 31, 2005

Change

373,065 494 1,242 62 374,863

292,587 2,614 1415

80,478 (2,120) (173) 62

296,616

78,247

Other liabilities Guarantee deposits Amounts due to employees Other Total other current payables OVERALL TOTAL 2,864 32,090 22,443 57,397 448,840 2,028 29,547 24,662 56,237 366,256 836 2,543 (2,219) 1,160 82,584

22. Provision
(000 Euro) March 31, 2006 December 31, 2005 Change

Pension funds Employee severance indemnity Total

475 78,759 79,234

434 76,634 77,068

41 2,125 2,166

(000 Euro)

March 31, 2006

December 31, 2005

Change

Warranty provision Provision for promotional expenses Provision for risks on equity investments Restructuring provision Provision for contractual risks

21,516 2,700 5,842 5,022 13,344

19,893 4,064 5,906 6,172 13,344

1,623 (1,364) (64) (1,150) 0

33

Other provision for risks and charges Total

14,272 62,696

14,877

(605)

64,256 (1,560)

Provision for pensions and employee benefits comprise mainly termination indemnities accrued by the Italian companies of the Group.

employee

Other provision for risks and charges total /000 14,272 (/000 14,877 at December 31, 2005) and are provisions made by the Parent for legal and taxation risks. 23. Deferred tax liabilities Total /000 33,759 (/000 35,002 at December 31, 2005). /000 25,903 of the deferred tax liabilities refer to the tax effect on the recording of the Aprilia brand. The balance refers to timing differences calculated by the other Group companies.

24. Amounts due to tax authorities This item totals /000 25,356, against /000 14,348 for 2005, due mainly to amounts of VAT due to tax authorities in the various countries in which the Group operates.

25. Transactions with related parties The effects on income, the balance sheet and the financial position at March 31, 2006 of the Parent companys transactions with parents, subsidiaries and associated companies are set out in the tables attached hereto, while the effects on income, the balance sheet and the financial position of dealings with other related parties are set out below. All transactions with related parties, including intragroup dealings, are ordinary business transactions and are governed by market conditions or by specific laws; no atypical and/or unusual transactions took place.

/000

Other related parties

Nature of the transaction

Costs for services and the use of assets owned by others

25.0 Purchase of components from associated companies, purchase of vehicles and components from subsidiaries and purchase of services from parents 60.7 Interest receivable on intercompany loans and from Scooter Holding 1 Srl

Positive (negative) miscellaneous income/charges

balance of financial

Current financial receivables

9,789.7 Receivable from Scooter Holding 1 Srl

34

Trade and other payables

25.0 Liabilities arising from the purchase of components and/or vehicles and of the provision of services

As regards dealings with related parties, it is furthermore pointed out that, following the acquisition in October 2003 and subsequent modifications, the banks below are

shareholders of Piaggio & C. S.p.A., either directly or through Piaggio Holding Netherlands BV: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Gruppo Intesa Gruppo Monte dei Paschi di Siena Gruppo Unicredito Gruppo Banca Nazionale del Lavoro Gruppo Banca Popolare di Lodi Interbanca Cassa di Risparmio di Firenze Banca di Roma Centrobanca Banca Commercio e Industria Cassa di Risparmio di Volterra Cassa di Risparmio di San Miniato ICCREA Mediocredito del Trentino Mediocredito del Friuli Banca Popolare delle Marche.

It is pointed out that at March 31, 2006 the Piaggio Group has existing loans and exchange rate hedges in place with the above banks. Moreover, as a consequence of the above, the following directors of Piaggio & C S.p.A. also hold corporate offices in banks with which the Group works: Gaetano Miccich Carlo Pirzio Biroli.

26. Guarantees provided, commitments and other contingent liabilities Guarantees provided At March 31, 2006, no significant changes occurred with respect to that stated in note 34 to the consolidated financial statements at December 31, 2005, to which reference should be made for more detailed information. Commitments regarding the issue of financial instruments (Aprilia Transaction) Piaggio Group has contractual obligations arising from the acquisition of the Aprilia Group, whereby Piaggio & C S.p.A. issued financial instruments in favour of the Aprilia shareholders 2004/2009 that envisage a recovery value that cannot exceed /000 10,000. Disputes and legal action There have been no significant changes to the disputes situation, as outlined in the 2005 Management Report, regarding either legal action or the tax positions existing at the date of drafting this Report.

35

RECEIVABLES

COMPANY PARENT COMPANIES IMMSI SPA PIAGGIO HOLDING NETHERLAND BV TOTAL PARENT COMPANIES

MISCELLAN FINANCIAL EOUS TRADE NON-CURRENT RECEIVABL RECEIVABL RECEIVABLES RECEIVABLES ES ES

ADVANCES ON NON-CURRENT ASSETS AND/OR SUPPLIES

SUBSIDIARIES P & D SPA PIAGGIO ASIA PACIFIC PIAGGIO BENELUX PIAGGIO DEUTSCHLAND PIAGGIO ESPANA PIAGGIO FRANCE PIAGGIO VEHICLES PIAGGIO HELLAS PIAGGIO HRVATSKA PIAGGIO INDOCHINA PIAGGIO LIMITED PIAGGIO PORTUGAL PIAGGIO GROUP AMERICAS NACIONAL MOTOR S.A. DERBI ITALIA SRL PIAGGIO VESPA B.V. PIAGGIO FINANCE S.A. MOTO GUZZI SPA MOTO LAVERDA SRL APRILIA BRASIL APRILIA MOTORRAD GMBH APRILIA HELLAS APRILIA JAPAN CORPORATION APRILIA WORLD SERVICE BV APRILIA LEASING SPA MOTOCROSS COMPANY SRL APRILIA MOTO UK LTD 563,046 414,715 4,850,838 571,493 37,525,301 3,631,862 86,299 20,691,268 1,297,242 384,947 2,755,767 5,825,994 10,235,676 12,793,156 1,228,045 7,611,688 2,047,167 380,467 1,386,885 404,527 16,534,508 3,330,987 167 5,086 164,840 4,426,717 27,877,578 483,358 988,280 1,571,686 342,724 160,000 3,553,118 1,409,878 120,000 65,000 4,800

36

TOTAL SUBSIDIARIES ASSOCIATED COMPANIES FONDAZIONE PIAGGIO PIAGGIO FOSHAN TOTALE ASSOCIATED COMPANIES

112,568,620

27,877,578 21,988,509 13,290,400

24,350 596,267 3,717,779

123,402

494,510 64,000

620,617

3,717,779

123,402

558,510

PAYABLES

COMPANY PARENT COMPANIES IMMSI SPA PIAGGIO HOLDING NETHERLAND BV

TRADE PAYABLES

FINANCIAL PAYABLES

MISCELLANEOUS PAYABLES

1,171,127 54,529

TOTAL PARENT COMPANIES

1,171,127

54,529

SUBSIDIARIES P & D SPA PIAGGIO ASIA PACIFIC PIAGGIO BENELUX PIAGGIO DEUTSCHLAND PIAGGIO ESPANA PIAGGIO FRANCE PIAGGIO VEHICLES PIAGGIO HELLAS PIAGGIO HRVATSKA PIAGGIO INDOCHINA PIAGGIO LIMITED PIAGGIO PORTUGAL PIAGGIO USA GROUP NACIONAL MOTOR S.A. DERBI ITALIA SRL DERBI RACING S.L. PIAGGIO VESPA B.V. MOTO GUZZI SPA PIAGGIO FINANCE S.A. PIAGGIO CHINA APRILIA WORLD SERVICE BV APRILIA MOTO UK LTD APRILIA HELLAS 61,359 4,908,063 6,989 23,459 3,478,850 150,000,000 15,460,000 14,389 102,742 224 234,940 1,633,652 16,405 910,547 465 17,753 254,776 202,578 1,921,876 76,426 2,253,707 5,322,678 566,993 5,735

37

MOTO LAVERDA SRL MOTOCROSS COMPANY SRL APRILIA MOTORRAD GMBH APRILIA JAPAN CORPORATION

787,317 309,498 4,346 42,727

TOTAL SUBSIDIARIES

15,009,378

166,026,993

7,582,120

ASSOCIATED COMPANIES FONDAZIONE PIAGGIO PIAGGIO FOSHAN 280 340,998 152,769

TOTAL ASSOCIATED COMPANIES

341,278

152,769

INCOME/COST ITEMS

COMPANY

SALES

DISPOSA L OF FINANCIAL INCOME FIXED ASSETS

COSTS

FINANCI AL CHARGES

PURCHASES OF FIXED ASSETS

PARENT COMPANIES IMMSI SPA PIAGGIO HOLDING NETHERLAND BV 1,153,187 71,124

TOTAL PARENT COMPANIES

1,153,18 7

71,124

SUBSIDIARIES P & D SPA PIAGGIO ASIA PACIFIC PIAGGIO BENELUX PIAGGIO DEUTSCHLAND PIAGGIO ESPANA PIAGGIO FRANCE PIAGGIO VEHICLES PIAGGIO HELLAS PIAGGIO HRVATSKA PIAGGIO INDOCHINA PIAGGIO LIMITED PIAGGIO PORTUGAL 460,455 3,804,205 10,198,395 15,044,946 19,260,717 1,040,468 5,429,465 1,736,790 1,117,764 3,400,173 488,939 39,871 1,549 17,247 889,013 28,086 26,071 148,864 2,927

38

PIAGGIO GROUP AMERICAS NACIONAL MOTOR S.A. DERBI RACING SL PIAGGIO VESPA B.V. MOTO GUZZI SPA PIAGGIO FINANCE S.A. APRILIA WORLD SERVICE BV APRILIA HELLAS APRILIA JAPAN CORPORATION

11,359,171 3,168,669 378,571 1,612,482 575,000 172,060 444,885 302,883 239,820 4,014,401 24,773,900 997,929 476,535 180 1,003,455 62,891 8,230

TOTALE SUBSIDIARIES

103,203,40 6

698,881

4,508,50 5

4,316,21 5

ASSOCIATED COMPANIES FONDAZIONE PIAGGIO PIAGGIO FOSHAN 408,019 30,072 323,389

TOTAL ASSOCIATED COMPANIES

408,019

353,461

39

PIAGGIO GROUP APPENDIX TO THE QUARTERLY REPORT AT MARCH 31, 2006 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The consolidated quarterly report of the Piaggio Group at March 31, 2006 was prepared in compliance with the provisions of CONSOB Regulation n. 11971/1999, as subsequently modified, and with the international reporting standards applicable to interim financial reporting. After the coming into force of European Regulation n. 1606/2002, Piaggio Group adopted the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, starting from the first half of 2005, with 1st January 2004 being the transition date to IAS-IFRS. The consolidated accounts at March 31, 2006 were drafted using the same disclosure and measurement criteria adopted in the 2005 financial statements. In the consolidated accounts at March 31, 2006, the comparatives for the corresponding period in 2005 have been restated and re-determined in accordance with international accounting standards. This attachment illustrates the effects of adopting IAS-IFRS on the amounts at March 31, 2005 drafted in accordance with Italian accounting standards, while the amounts at December 31, 2005 are covered in the specific Appendix to the half-year report approved by the Piaggio & C. S.p.A. Board of Directors on September 13, 2005. MAIN EFFECTS DERIVING FROM THE APPLICATION OF IAS/IFRS ON THE CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2005.
/000 ITALIAN ACCOUNTI Reclass NG STANDARD ificatio Adjust ns ments S ASSETS NON-CURRENT ASSETS Intangible assets Tangible assets Investment property Equity investments (1) Non-current financial assets Tax receivables (1) Deferred tax assets (1) Trade receivables and other receivables (1) TOTAL NON-CURRENT ASSETS ASSETS INTENDED FOR DISPOSAL CURRENT ASSETS Trade receivables and other receivables (2) Tax receivables (2) Deferred tax assets (2) Inventory (2) Contract work in progress (2) Accrued income and prepaid expenses (2) Own shares (2) Other financial assets (3)

IAS IFRS ASSETS NON-CURRENT ASSETS 576,389Intangible assets 253,097Tangible assets 78Investment property 1,575Equity investments 13,018Other financial assets 848Tax receivables 37,883Deferred tax assets Trade receivables and other 7,992 receivables TOTAL NON-CURRENT 890,880 ASSETS ASSETS INTENDED FOR 0 DISPOSAL CURRENT ASSETS Trade receivables and other 305,261 receivables 17,509Tax receivables 0 261,081Inventory 0Contract work in progress 0 0 0Other financial assets

524,670 236,063

-2,730 -78 78 1,765 -190 0 10,308 848 37,500 180 11,299 -3,307

54,449 17,112

2,710 203

812,145

4,261 74,474

241,677 14,163 17,509 180 -180 261,083 0 12,831 -12,831 0 0 9,766 -9,766

49,421

-2

40

Liquid assets (3) TOTAL CURRENT ASSETS TOTAL ASSETS

24,320 567,366 -8,614 49,419

24,320Liquid assets 608,171TOTAL CURRENT ASSETS

1,379,511 -4,353 123,893 1,499,051TOTAL ASSETS

(1) Previously stated under Other assets" (2) Previously stated under Operating assets" (3) Previously stated under "Cash and cash equivalents" LIABILITIES SHAREHOLDERS EQUITY LIABILITIES SHAREHOLDERS EQUITY Consolidated Group 240,457 shareholders equity 379Minority interest TOTAL SHAREHOLDERS 240,836 EQUITY NON-CURRENT LIABILITIES 274,881Financial liabilities Amounts due to suppliers and 9,985 other payables Provisions for pensions and 78,328 similar obligations 47,391Other non-current reserves 30,871Deferred tax liabilities TOTAL NON-CURRENT 441,456 LIABILITIES LIABILITIES ASSOCIATED WITH ASSETS INTENDED 0 FOR DISPOSAL CURRENT LIABILITIES 348,177Financial liabilities 361,464Amounts due to suppliers 19,216Current taxation 70,750Other payables 0 Current portion of other non17,152 current reserves TOTAL CURRENT 816,759 LIABILITIES

Group shareholders equity Minority interest TOTAL SHAREHOLDERS EQUITY NON-CURRENT LIABILITIES Financial payables Amounts due to suppliers and other payables (4) Provisions for pensions and similar obligations (4) Other non-current reserves (4) Deferred tax liabilities (4) TOTAL NON-CURRENT LIABILITIES

215,173 369 215,542

25,284 10 0 25,294

263,273 9,985

11,608

73,226 5,102 75,263 -21,505 -6,367 2,839 28,032 424,586 21,505 38,375

0 CURRENT LIABILITIES Financial payables Amounts due to suppliers (5) Current taxation (5) Other payables (5) Accrued expenses and deferred income (5) Current portion of non-current reserves TOTAL CURRENT LIABILITIES TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

288,092 361,464 19,216 45,898 24,713 24,713 -24,713 17,152

60,085

139

739,383 17,152 60,224

TOTAL LIABILITIES AND 1,379,511 -4,353 123,893 1,499,051 SHAREHOLDERS EQUITY

(4) Previously stated under "Other non-current liabilities" (5) Previously stated under Operating liabilities" NET FINANCIAL POSITION INCOME STATEMENT Net sales Cost of materials (1) Cost of services and use of assets owned by others Labour Depreciation of tangible assets Amortization of intangible assets (consolidation 312,335 176,575 73,959 56,096 11,073 6,596 -517,225 0 -68,984 -586,209NET FINANCIAL POSITION INCOME STATEMENT 312,335Net sales 176,967Cost of materials Cost of services and use of 73,537 assets owned by others 57,591Personnel costs 11,015Depreciation of tangible assets 0Amortization of goodwill

390

2 -422 241 -58 -6,596

1,254

41

difference) Amortization of intangible assets (other) Grants Adjustments and provisions to reserve for risks and charges Other income (2) Other costs (2) Gains and prior-period income Losses and other charges Operating earnings (EBIT) Net income from equity investments Financial income (3) Financial charges (3) Value adjustments to financial assets Earnings before taxation Taxation Earnings after tax 12,059 84 3,812 26,248 2,362 972 2,113 -5,006 0 1,824 8,444 -52 -11,678 5,083 -16,761 -390 -84 -3,812 1,056 4,671 -972 -2,113 0 740 Amortization of intangible 12,409 assets with a finite life 0 0 27,304Other operating income 7,035Other operating costs 0 0 1,085Operating earnings Profit (loss) from equity -52 investments 1,678Financial income 8,688Financial charges

6,091

-146 244

5,701 -187 5,888

-5,977Earnings before taxation 4,896Taxation Earnings after tax deriving -10,873 from ordinary operations Profit arising from assets 0 intended for disposal Earnings for the period inclusive of minority -10,873 interest 32Minority interest Group earnings for the -10,905 period

Earnings for the period inclusive of minority interest Minority interest Group earnings for the period

-16,761 31 -16,792

5,888 1 5,887

(1) Previously stated under "Materials and services" (2) Previously stated under "Other (costs) income, net" (3) Previously stated under "Financial charges and income, net"

EFFECTS OF THE TRANSITION TO IFRS ON THE BALANCE SHEET AT MARCH 31, 2005 IN DETAIL
Intangible assets Reclassifications ( 000 Euro) to "trade receivables and other receivables" due to change in balance sheet layout March 31, 2005 (2,730) (2,730)

Adjustments (000 Euro) Re-measurement of goodwill Reversal of amortized goodwill Reversal of start-up and expansion costs Recognition of assets held under finance lease Adjustments to leasehold improvements Allocation of goodwill to "intangible assets" Reversal of other multi-year costs for loans Other minor items A A B D B A B H March 31, 2005 (47,497) 30,594 (343) 719 (346) 74,570 (3,256) 8 54,449

42

Tangible assets Reclassifications March 31, 20055 (78) (78)

(000 Euro) to "investment property due to change in balance sheet layout

Adjustments (000 Euro) Reversal of depreciation of land and "scrap value" of buildings Adjustments to leasehold improvements Recognition of assets held under finance lease Other minor items C B D H March 31, 2005 1,064 1,123 14,923 2 17,112

Investment property Reclassifications (000 Euro) from "tangible assets due to change in balance sheet layout March 31, 2005 78 78

Equity investments Reclassifications (000 Euro) to "other financial assets due to change in balance sheet layout March 31, 2005 (190) (190)

Other financial assets Reclassifications (000 Euro) from "equity investments due to change in balance sheet layout from current "other financial assets" due to change in balance sheet layout Other minor items March 31, 2005 190 9,766 352 10,308

Adjustments (000 Euro) March 31, 2005

43

For measurement at fair value of derivative instruments

2,710 2,710

Deferred tax assets Reclassifications (000 Euro) from "deferred tax assets" in the "current assets" due to change in balance sheet layout March 31, 2005

180 180

Adjustments (000 Euro) Accounting for deferred tax assets on IAS/IFRS adjustments G March 31, 2005 203 203

Trade receivables and other receivables Reclassifications (000 Euro) to current trade receivables and other receivables" due to change in balance sheet layout Other minor items March 31, 2005

(2,955) (352) (3,307)

CURRENT ASSETS Trade receivables and other receivables Reclassifications (000 Euro) from "accrued income and prepaid expenses due to change in balance sheet layout from "intangible assets due to change in balance sheet layout from non-current "trade receivables and other receivables" due to change in balance sheet layout March 31, 2005 8,478 2,730 2,955 14,163

Adjustments (000 Euro) For with recourse sale of receivables to factors Recognition of assets held under finance lease Other minor items F D H March 31, 2005 51,860 (2,437) (2) 49,421

Deferred tax assets

44

Reclassifications (000 Euro) to "deferred tax assets" of the "non-current assets due to change in balance sheet layout March 31, 2005

(180) (180)

Inventory Adjustments (000 Euro) Miscellaneous minor items H March 31, 2005 (2) (2)

Accrued income and prepaid expenses Reclassifications (000 Euro) to "trade receivables and other receivables due to change in balance sheet layout March 31, 2005 (12,831) (12,831)

Other financial assets Reclassifications (000 Euro) To non-current "other financial assets" due to change in balance sheet layout March 31, 2005 (9,766) (9,766)

NON-CURRENT LIABILITIES Financial liabilities Adjustments (000 Euro) Reversal of other multi-year charges for loans Recognition of current financial payables on assets held under finance leases For measurement at fair value of derivative instruments B D I March 31, 2005 (2,179) 12,038 1,749 11,608

45

Provisions for pensions and similar obligations Adjustments (000 Euro) Employee benefits E March 31, 2005 5,102 5,102

Other non-current reserves Reclassifications (000 Euro) to "current portion of other non-current reserves" due to change in balance sheet layout From accrued income and prepaid expenses due to change in balance sheet layout March 31, 2005

(17,152) (4,353) (21,505)

Adjustments (000 Euro) For measurement at fair value of derivative instruments I March 31, 2005 (6,367) (6,367)

Deferred tax liabilities Adjustments (000 Euro) Accounting for deferred tax liabilities on Aprilia brand Accounting for deferred tax liabilities on IAS/IFRS adjustments A G March 31, 2005 27,845 187 28,032

CURRENT LIABILITIES Financial liabilities Adjustments (000 Euro) For with recourse sale of receivables to factors For measurement at fair value of derivative instruments Recognition of current financial payables on assets held under finance lease F I D March 31, 2005 51,860 7,328 897 60,085

Other payables Reclassifications

46

(000 Euro) from "accrued expenses and deferred income" due to change in balance sheet layout

March 31, 2005 24,713 24,713

Adjustments (000 Euro) Discounting of " trade receivables and other receivables " Reversal of other multi-year charges for loans Other minor items H B H March 31, 2005 28 87 24 139

Accrued expenses and deferred income Reclassifications (000 Euro) Other minor items March 31, 2005 (24,713) (24,713)

Current portion of other non-current reserves Reclassifications (000 Euro) from "other non-current reserves" due to change in balance sheet layout March 31, 2005 17,152 17,152

INCOME STATEMENT

Cost of materials Reclassifications (000 Euro) from "amortization of intangible assets" on grants to suppliers March 31, 2005 390 390

Adjustments (000 Euro) Miscellaneous minor items H March 31, 2005 2 2

Cost of services and use of assets owned by others Adjustments

47

(000 Euro) For reversal of costs on leased assets D

March 31, 2005 (422) (422)

Personnel costs Reclassifications (000 Euro) from "losses and other charges" due to change to income statement layout March 31, 2005 1,254 1,254

Adjustments (000 Euro) Due to valuation of Stock options E March 31, 2005 241 241

Depreciation of tangible assets Adjustments (000 Euro) Reversal of depreciation of land and "scrap value" of buildings Reversal of depreciation of leasehold improvements Depreciation of leased assets C B D March 31, 2005 (136) (20) 98 (58)

Amortization of goodwill Adjustments (000 Euro) Reversal of amortized goodwill A March 31, 2005 (6,596) (6,596)

Amortization of intangible assets with a finite life Reclassifications (000 Euro) to "cost of materials" March 31, 2005 (390) (390)

Adjustments

48

(000 Euro) Reversal of amortization of start-up and expansion costs Amortization of Aprilia brand Reversal of amortization of costs for leasehold improvements Reversal of amortization for amortized cost For amortization of leased assets B A B B D

March 31, 2005 (37) 896 (22) (135) 38 740

Grants Reclassifications (000 Euro) to "other income" due to change to income statement layout March 31, 2005 (84) (84)

Adjustments and provisions to reserve for risks and charges Reclassifications (000 Euro) to "other operating costs" due to change to income statement layout March 31, 2005 (3,812) (3,812)

Other operating income Reclassifications (000 Euro) from "gains and prior-period income" due to change to income statement layout from "grants due to change to income statement layout March 31, 2005 972 84 1,056

Other operating costs Reclassifications (000 Euro) from losses and other charges" due to change to income statement layout From "adjustments and provisions due to change to income statement layout March 31, 2005 859 3,812 4,671

Adjustments (000 Euro) Other minor items H March 31, 2005 2 2

49

Gains and prior-period income Reclassifications (000 Euro) to "other operating income" due to change to income statement layout March 31, 2005 (972) (972)

Losses and other charges Reclassifications (000 Euro) to "other operating costs" due to change to income statement layout to "labour" due to change to income statement layout March 31, 2005 (859) (1,254) (2,113)

Financial income Adjustments (000 Euro) Interest receivable on discounting receivables Employee benefits on actuarial valuation of employee severance indemnities provision H E March 31, 2005 41 (187) (146)

Financial charges Adjustments (000 Euro) Adjustment for amortized cost on loans Financial charges on leased assets Other minor items B D H March 31, 2005 101 144 (1) 244

Taxation Adjustments (000 Euro) on re-allocation of goodwill to the Aprilia brand Due to change in taxable income A G March 31, 2005 (334) 147 (187)

50

*****

DESCRIPTION OF THE MAIN RECONCILIATION ITEMS BETWEEN ITALIAN ACCOUNTING STANDARDS AND IFRS
The paragraph below describes the main differences between Italian accounting standards and IFRS that have affected Piaggios consolidated accounts. The amounts indicated are stated gross of any related tax effect, which is summarized separately under Accounting for deferred taxation.

A -

Write-off of amortized consolidation difference

The Group has elected to not apply IFRS 3 Business combinations - retrospectively to business combinations prior to the IFRS transition date. Previous accounting standards envisaged amortization of goodwill. According to IAS/IFRS, goodwill is considered to be an intangible asset with an indefinite life and is therefore not amortized, but rather subject to periodical verification for any impairment. In the consolidated accounts at March 31, 2005, the total net value of goodwill was 367 million Euro. In the income statement at March 31, 2005, in accordance with previous accounting standards, 6.6 million Euro of amortization of goodwill was recorded and was reversed in the income statement prepared in accordance with international accounting standards. The total effect on shareholders equity was 29.8 ML. Development costs In accordance with Italian accounting standards, applied research costs and development costs may be either capitalized or charged to profit and loss in the period in which they were incurred. The Piaggio Group has mainly charged research costs at the time in which they were incurred and capitalized those development costs from which future benefits are expected. IAS 38 Intangible assets envisages that research costs be charged to profit and loss, while development costs that meet the requirements of IAS 38 for capitalization must be capitalized and subsequently amortized from the start of production over the economic life of the related products. The approach followed by the Group is therefore in line with the provisions of international accounting standards. As envisaged in IAS 36 Impairment of assets, development costs capitalized among intangible assets must then be tested for impairment and a downward adjustment must be recorded if the recoverable value of the asset is less than its carrying amount, as described below in the paragraph on Impairment of assets.

B -

Write-off of capitalized costs

In accordance with Italian accounting standards, the Group capitalized some costs (mainly plant and expansion costs, leasehold improvements and other costs) which, according to IFRS, must be stated in profit and loss when incurred. In particular, costs of increasing share capital (that are capitalized and amortized under Italian accounting standards) are recorded as a reduction to the increase in share capital and charged to shareholders equity under IFRS. The total effect of these reversals on shareholders equity was 0.7 million Euro at March 31,

51

2005.

C -

Buildings, plant and machinery

The main difference between the old and the new accounting standards regards land and buildings. The Italian standards adopted previously permitted such items to be recorded with the land being depreciated. According to international accounting standards, land must be separate from buildings and therefore not depreciated. There is a 1.1 million Euro increase in the balance sheet, yet no significant effects on the income statement. The useful life of fixed assets calculated as per IAS 16 gave rise to no significant changes due to the fact that the previous accounting standards already envisaged depreciation rates essentially in line with the useful life of the assets. Impairment of assets In accordance with Italian accounting standards, every year the Group measures the recoverable value of intangible assets with an indefinite life (essentially goodwill), comparing the carrying amount of the asset with its recoverable value, i.e. the value in use of that asset (or group of assets). In order to determine the value in use, the Group estimates the future positive and negative cash flows of the asset (or group of assets) which arise from its continued use and, finally, from its sale, and discounts them. If the recoverable value is less than the carrying amount, a downward adjustment equal to the difference should be recorded. As regards tangible assets, the Group records certain downward adjustments if it is expected that the asset will no longer be used. Moreover, if there are signs of impairment, the Group measures the recoverability of groups of similar assets using non-discounted cash flow methods. If the recoverable value is less than the carrying amount, a downward adjustment equal to the difference is recorded. In accordance with IFRS, intangible assets with an indefinite life should be measured every year. Moreover, development costs (capitalized under IFRS and charged under Italian accounting standards) are allocated to the related cash generating units and their recoverability is measured together with the related tangible assets, using discounted cash flow methods.

D -

Finance leases

The Piaggio Group, which already in previous years adopted IAS 17 in respect of finance leases, with the exception of some contracts deemed not substantial, has, upon transition to IAS/IFRS, reviewed and applied this standard to such transactions as well. During 2005, the Group signed a finance lease for the building housing the Guzzi factory in Mandello del Lario. This lease led to a 14.7 million Euro increase in the value of fixed assets.

Employee benefits

The Group grants employees various forms of benefits, which are classified as defined benefit pension plans, as well as other long-term benefits. Upon adopting IFRS, employee termination indemnities are considered as a defined benefit obligation to be recorded in accordance with IAS 19 and must therefore be recalculated using the projected unit credit method. Furthermore, the Group has decided to recognize all accumulated actuarial profits and losses existing at 1st January 2004, recording them directly to an equity reserve. The amount recorded as an adjustment of the previous employee termination indemnities balances was 5.1 million Euro at March 31, 2005.

52

Consequently, the costs relating to pension plans and other benefits to be paid upon termination of employment recorded in the 2004 IFRS income statement include no depreciation of previously unreported actuarial profits and losses.

Disposal of receivables

The Piaggio Group sells a substantial part of its trade receivables to factors. According to Italian accounting standards, all receivables sold with or without recourse have been deleted from the financial statements. According to IFRS, since a with recourse sale is not definitive, the receivables and payables underlying such transactions are restored to the financial statements. As a result thereof, trade receivables and financial payables increase by 51.9 million Euro at March 31, 2005.

G -

Accounting for deferred taxation

This item includes the net effect of deferred taxation calculated on aforementioned IFRS adjustments and on other minor differences between Italian accounting standards and IFRS with regard to recognition of deferred taxation.

H -

Other adjustments

Discounting receivables/payables In accordance with the provisions of international accounting standards, non-current assets and liabilities containing a component of a financial nature associated with deferred payments giving rise to a reduction in the operating income/cost component against the financial interest/charge component have been discounted.

BRIEF RECONCILIATION OF SHAREHOLDERS EQUITY (IFRS1)

March 31, 2005

Notes Shareholders Equity in accordance with Italian accounting standards Write-off of consolidation difference amortization Write-off of capitalized costs Buildings, plant and machinery Finance leases Employee benefits Disposal of receivables Recognition of deferred taxation Other adjustments Shareholders Equity in accordance with international accounting standards Notes a) b) c) d) e) f) g) h)

215,543 29,822 (730) 1,064 270 (5,102) 0 16 (47)

240,836 31-Mar-05

53

Group earnings in accordance with Italian accounting standards Reversal of consolidation difference amortization Reversal of capitalized costs Buildings, plant and machinery Finance leases Employee benefits Sale of receivables Recognition of deferred taxation Other adjustments Group earnings in accordance with international accounting standards a) b) c) d) e) f) g) h)

(16,792) 6,034 113 136 142 (428) (147) 37

(10,905)

54