Harley Davidson

EXECUTIVE SUMMARY

Harley-Davidson

is the largest market share holder of motorcycles over 750cc in the United

States. After the expansion of our production and distribution capacity, we

will be in the position to meet the increasing demand for our motorcycles and

other products.

Growth potential appears very good especially in the overseas

market. Gaining a larger market share in these area may require a further

increase in production and distribution capacities. We must plan for expansion

now and continue to grow as a company.

COMPANY DESCRIPTION

In Milwaukee,

William Harley, 21, and Arthur Davidson, 20, began experiments on taking the

work out of bicycling. They were soon joined by Arthur's brothers, Walter and

William. Many changes were made to the engine design before its builders were

satisfied. After the new looped from was finalized, they were ready to begin

production. In 1903 they produced three motorcycles. Harley-Davidson erected

its first building the current Juneau avenue site in 1906 and incorporated

in 1907. In 1907 Harley-Davidson produced 150 motorcycles.

SITUATION ANALYSIS

The

motorcycle market over 750cc has been increasing over the last five years.

The Harley-Davidson 1996 model year production line, sold though a world wide

network of more than 1,000 dealers, includes 20 cruiser, factory custom and

touring motorcycles, as well as police motorcycles. Harley-Davidson benefits

form having one of the world's most recognized and respected brand names and

our motorcycle model names are among the best known in the industry:

The

Competition and Market share

This chart shows the competition and market

share for 1995 in the United States:

Current Market Situation

Overall

Net

sales for 1995 of $1.4 billion were $191.6 million, or 16.5%, higher than net

sales for 1994. Net income and earnings per

share from continuing operations

were $111.1 million and $1.48, for 1995 as compared with $96.2 million and

$1.26, for 1994. Net income and earnings per share from discontinued operations

were $1.4 million and $.02, for 1995 as compared with $8.0 million and $.11,

for 1994, which included a $4.6 million, or $.06 per-share, one-time tax benefit

related to the legal reorganization of Holiday Rambler. On January 22, 1996,

the Company announced its strategic decision to discontinue the operations

of the Transportation Vehicles segment in order to concentrate its financial

and human resources on its core motorcycle business. The Company does not anticipate

a loss on the discontinuance of the Transportation Vehicles segment. The results

of the Transportation Vehicles segment have been reported separately as

discontinued

operations for each year presented. On November 14, 1995, the Company acquired

substantially all of the common stock and common stock equivalents of Eaglemark

Financial Services, Inc. that it did not already own. The purchase price was

approximately $45 million, which was paid from internally generated funds and

short-term borrowings. The Company has included the results of operations of

the Financial Services segment ($3.6 million) in its statement of operations

for the year ended December 31, 1995 as though it had been acquired at the

beginning of the year and deducted the preacquisition earnings as part of non-operating

expense. The Company increased its quarterly dividend in September from $.04

per share to $.05 per share which resulted in a total year pay out of $.18

per share.

Units Shipped and Net Sales

The Motorcycles and Related Products

(Motorcycles) segment's net sales increased 16.5% over 1994 due primarily to

a 9,293 unit (9.7%) increase in motorcycle shipments, as well as a 14.0% increase

in its Parts and Accessories business. The increase in motorcycle shipments

is the result of ongoing implementation of the Company's manufacturing strategy

and efforts to

satisfy demand. The manufacturing strategy is designed to

increase capacity, adjust to changes in the market place and further improve

product quality while reducing costs.

Sales of Buell motorcycles (which

are distributed through select Harley-Davidson dealers) increased to $14 million

in 1995 as compared to $6 million in 1994.

The

...