As filed with the Securities and Exchange Commission on April 14, 2005
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549
                                 ---------------
                                    FORM 20-F
                                 ---------------

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2004

                         Commission file number 1-15134

                                    HEAD N.V.
             (Exact Name of Registrant as Specified in its Charter)

                                 The Netherlands
                 (Jurisdiction of Incorporation or Organization)
                                    Rotterdam
                                 The Netherlands

                    (Address of Principal Executive Offices)
                                    Rokin 55
                                1012 KK Amsterdam
                                 The Netherlands
                                 +31-20-625-1291
                                 ---------------

 Securities registered or to be registered pursuant to Section12(b) of the Act:

   Title of Each Class                 Name of Each Exchange on Which Registered
Ordinary Shares of (euro)0.20 each             New York Stock Exchange
                                                Vienna Stock Exchange
                                 ---------------

       Securities registered or to be registered pursuant to Section 12(g)
                                of the Act: None

                                 ---------------

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                of the Act: None

                                 ---------------

The number of outstanding shares of each of the issuer's classes of capital or
common stock as of December 31, 2004:

            37,399,442 Ordinary Shares Nominal Value (euro)0.20 each

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                Yes  X  No
                                   ----   ----
            Indicate by check mark which financial statement item the
                       registrant has elected to follow.

                            Item 17   Item 18 X
                                   ---     -----
--------------------------------------------------------------------------------
<PAGE>

                                TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................1
   ITEM 1:     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS...........2
   ITEM 2:     OFFER STATISTICS AND EXPECTED TIMETABLE.........................2
   ITEM 3:     KEY INFORMATION.................................................2
     3.A.     Selected Financial Data..........................................2
     3.B.     Capitalization and Indebtedness..................................5
     3.C.     Reasons for the Offer and Use of Proceeds........................5
     3.D.     Risk Factors.....................................................5
   ITEM 4:     INFORMATION ON THE COMPANY......................................8
     4.A.     History and Development of the Company...........................8
     4.B.     Business Overview................................................8
     4.C.     Organizational Structure........................................25
     4.D.     Property, Plant and Equipment...................................25
   ITEM 5:     OPERATING AND FINANCIAL REVIEW AND PROSPECTS...................26
     5.A.     Operating Results...............................................26
     5.B.     Liquidity and Capital Resources.................................35
     5.C.     Research and Development, Patents and Licenses..................37
     5.D.     Trend Information...............................................37
     5.E.     Off-Balance Sheet Arrangements..................................38
     5.F.     Disclosures of Contractual Obligations..........................39
   ITEM 6:     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................39
     6.A.     Directors and Senior Management.................................39
     6.B.     Compensation....................................................41
     6.C.     Board Practices.................................................42
     6.D.     Employees.......................................................43
     6.E.     Share Ownership.................................................43
   ITEM 7:     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............45
     7.A.     Major Shareholders..............................................45
     7.B.     Related Party Transactions......................................45
     7.C.     Interest of Experts and Counsel.................................45
   ITEM 8:     FINANCIAL INFORMATION..........................................45
     8.A.     Consolidated Statements and Other Financial Information.........45
     8.B.     Significant Changes.............................................46
   ITEM 9:     THE OFFER AND LISTING..........................................46
     9.A.     Offer and Listing Details.......................................46
     9.B.     Plan of Distribution............................................47
     9.C.     Markets.........................................................47
     9.D.     Selling Shareholders............................................47
     9.E.     Dilution........................................................47
     9.F.     Expenses of the Issue...........................................47
   ITEM 10:       ADDITIONAL INFORMATION......................................48
     10.A.    Share Capital...................................................48
     10.B.    Memorandum and Articles of Association..........................48
     10.C.    Material Contracts..............................................51
     10.D.    Exchange Controls...............................................51
     10.E.    Taxation........................................................52
     10.F.    Dividends and Paying Agents.....................................58
     10.G.    Statement by Experts............................................58
     10.H.    Documents on Display............................................59
     10.I.    Subsidiary Information..........................................59
   ITEM 11:       QUANTITATIVE AND QUALITATIVE DISCLOSURES
                     ABOUT MARKET RISK........................................59
   ITEM 12:       DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES......60
   ITEM 13:       DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.............60
   ITEM 14:       MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
                     HOLDERS AND USE OF  PROCEEDS.............................60
   ITEM 15:       CONTROLS AND PROCEDURES.....................................60
   ITEM 16:       [RESERVED]..................................................60
     16.A.    AUDIT COMMITTEE FINANCIAL EXPERT................................60
     16.B.    CODE OF ETHICS..................................................61
     16.C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................61

<PAGE>

     16.D.    Exemption from the Listing Standards for Audit Committee........61
     16.E.    Purchase of Equity Securities by the Issuer
                     and Affiliated Purchasers................................61
   ITEM 17:       FINANCIAL STATEMENTS........................................61
   ITEM 18:       FINANCIAL STATEMENTS........................................62
   ITEM 19:       EXHIBITS....................................................62
   EXHIBIT INDEX

                                       3

<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements that are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our management. The words "anticipates", "believes",
"estimates", "expects", "plans", "intends" and similar expressions are intended
to identify these forward-looking statements, but are not the exclusive means of
identifying them. These forward-looking statements reflect the current views of
our management and are subject to various risks, uncertainties and contingencies
which could cause our actual results, performance or achievements to differ
materially from those expressed in, or implied by, these statements. These
risks, uncertainties and contingencies include, but are not limited to, the
following:

         o   our ability to implement our business strategy;

         o   our liquidity and capital expenditures;

         o   our ability to obtain financing;

         o   our ability to realize the cost savings we expect to achieve from
             our cost reduction program;

         o   competitive pressures and trends in the sporting goods industry;

         o   our ability to compete, including internationally;

         o   our ability to introduce new and innovative products;

         o   cyclicality and economic condition of and anticipated trends in the
             industries we currently serve;

         o   legal proceedings and regulatory matters;

         o   our ability to fund our future capital needs; and

         o   general economic conditions.

     Actual results and events could differ materially from those contemplated
by these forward-looking statements as a result of factors ("cautionary
statements") such as those described above and in "Risk Factors." In light of
these risks and uncertainties, there can be no assurance that the results and
events contemplated by the forward-looking statements contained in this report
will in fact occur. You are cautioned not to place undue reliance on these
forward-looking statements. We do not undertake any obligation to update or
revise any forward-looking statements. All subsequent written or oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements.


                        X X X X X X X X X X X X X X X X X



     In this annual report, references to "the Company", "we", "us" or "our" are
to Head N.V. and its subsidiaries, references to "Head Holding" are to our
intermediate holding company subsidiary, Head Holding Unternehmensbeteiligung
GmbH and its predecessor company, and references to "HTM" are to our primary
operating subsidiary HTM Sport-und Freizeitgerate AG.

     "Head," "Head Titanium Tennis", "Head Intelligence", "Head Intellifiber",
"Head Chipsystem", "Flexpoint","Tyrolia", "Free Flex", "Rail Flex",
"Powerframe", "Penn", "Mares", "Dacor", "San Marco", "Cyber", "Munari", "Contour
Tech" and "Sporasub" are our trademarks. All other trademarks, service marks or
brand names appearing in this annual report are the property of their respective
holders.



                                       1
<PAGE>

ITEM 1:  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.

ITEM 2:  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3:  KEY INFORMATION

3.A. Selected Financial Data

     The following table provides our selected consolidated financial data for
the periods indicated. The historical financial data for the years ended
December 31, 2000, 2001, 2002, 2003 and 2004 have been derived from our
consolidated financial statements which have been prepared in accordance with
accounting principles generally accepted in the United States, or U.S. GAAP, and
have been audited by PricewaterhouseCoopers, our independent auditors.
Historical results are not necessarily indicative of the results that may be
expected for any future period.

     In October 2000, London Films was distributed to Head Sports Holdings N.V.,
our controlling shareholder, an entity that is ultimately controlled by Johan
Eliasch and his family members. As a result, London Films has been presented as
a discontinued operation in the financial statements for the year 2000.

     The selected financial data should be read in conjunction with our
historical consolidated financial statements, the notes thereto and "Item 5--
Operating and Financial Review and Prospects" included elsewhere in this annual
report.


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                          2000         2001        2002          2003         2004
                                                          ----         ----        ----          ----         ----
                                                                 (in thousands, except per share data)
Statement of Operations Data:
<S>                                                    <C>          <C>          <C>          <C>          <C>
Product revenues....................................   $ 390,784    $ 384,010    $ 379,089    $ 421,507    $ 466,701
Licensing revenues..................................       7,855        8,011        8,398        9,701       11,059
                                                        --------     --------     --------     --------     --------
Total revenues......................................     398,639      392,021      387,487      431,209      477,759
Other revenues (1)..................................         836        1,088        1,246        1,394        1,326
Sales deductions (2)................................      (8,775)      (8,318)      (8,783)     (10,272      (12,071)
                                                        --------     --------     --------     --------     --------
Total net revenues..................................     390,700      384,791      379,950      422,330      467,014
Cost of sales.......................................     227,442      233,971      233,402      266,023      294,360
                                                        --------     --------     --------     --------     --------
Gross profit........................................     163,259      150,820      146,548      156,307      172,654
Selling and marketing expense.......................      89,804       94,864       95,082      108,193      118,511
General and administrative expense..................      34,720       34,843       32,524       38,847       41,883
Non-cash compensation expense.......................       1,378        2,025        1,632          654          555
Gain on sale of property (3)........................      (1,232)        (871)        (443)         --        (5,650)
Restructuring charge (4)............................        --            838         --          8,368        2,347
                                                        --------     --------     --------     --------     --------
Operating income....................................      38,588       19,121       17,753          245       15,008
Interest expense (5)................................     (18,642)     (11,275)     (11,677)     (13,999)     (25,699)
Interest income.....................................       1,118          892          940        1,050        2,121
Foreign exchange gain (loss)........................       7,502        5,828       (7,387)      (1,103)        (606)
Other income (expense), net.........................      (4,181)           7          387          (18)         (97)
                                                        --------     --------     --------     --------     --------
Income (loss) from continuing operations
   before income taxes and extraordinary items......      24,386       14,573           15      (13,825)      (9,274)
Income tax benefit (expense) (6)
   Current..........................................      (3,231)      (2,169)      (2,410)      (2,278)      (2,504)
   Deferred.........................................       5,165       (1,863)        (220)       1,446      (25,156)
                                                        --------     --------     --------     --------     --------
                                                           1,934       (4,032)      (2,630)        (832)     (27,661)
Share of loss from equity investment, net of tax....        --         (1,117)        --           --           --
                                                        --------     --------     --------     --------     --------
Income (loss) from continuing operations
   before extraordinary items.......................      26,321        9,424       (2,615)     (14,657)     (36,935)
Loss from discontinued operation....................        (644)        --           --           --           --
Extraordinary gain (7)..............................       2,104         --           --           --           --
                                                        --------     --------     --------     --------     --------
Net income (loss) ..................................   $  27,781        9,424       (2,615)     (14,657)     (36,935)
                                                        ========     ========     ========     ========     ========

Earnings per share - basic (8)
   Income (loss) from continuing operations
     before extraordinary items.....................   $    0.94    $    0.25    $   (0.07)   $   (0.40)   $   (1.02)
   Net income (loss)................................   $    0.99    $    0.25    $   (0.07)   $   (0.40)   $   (1.02)
Earnings per share - diluted (8)
   Income (loss) from continuing operations
     before extraordinary items.....................   $    0.86    $    0.24    $   (0.07)   $   (0.40)   $   (1.02)
   Net income (loss)................................   $    0.91    $    0.24    $   (0.07)   $   (0.40)   $   (1.02)
Weighted average shares outstanding (8)
   basic............................................      28,071       38,083       37,356       36,285       36,198
   diluted..........................................      30,678       39,816       37,356       36,285       36,198

Other Financial Data:
Cash provided by operating activities...............   $   6,452    $  35,921    $  23,279    $  17,342    $   7,789
Cash used in investing activities...................   $ (17,178)   $ (19,913)   $ (18,804)   $ (16,554)   $ (28,762)
Cash provided by (used in) financing activities.....   $  20,073    $     393    $       2    $  (2,007)   $  36,437


                                                          2000         2001        2002          2003         2004
                                                          ----         ----        ----          ----         ----
Balance Sheet Data:
Cash (9)...........................................    $  15,848    $  22,128    $  37,598    $  44,154    $   66,019
Total assets.......................................    $ 434,304    $ 416,519    $ 473,853    $ 537,586    $  587,520
Total debt.........................................    $ 114,819    $ 122,966    $ 154,893    $ 184,833    $  242,708
Capital Stock......................................    $   7,067    $   7,067    $   7,067    $   7,067    $    7,067
Total shareholders' equity (10)....................    $ 229,988    $ 212,539    $ 229,824    $ 241,716    $  216,942
-----------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)  Other revenues consist of amounts billed to the customer in a sales
     transaction for shipping and handling. Prior to 2004, these amounts were
     reflected as a reduction of selling and marketing expenses. The amounts in
     the prior years have been reclassified to be consistent with the current
     year's presentation.
(2)  Sales deductions consist of sales incentives, which are earned by our
     customers subsequent to delivery of our product, including cash discounts
     for volume rebates and other than cash consideration. Prior to 2004,these
     amounts were reflected as a reduction of selling and marketing expenses.
     The amounts in the prior years have been reclassified to be consistent with
     the current year's presentation.
(3)  In 2000, 2001 and 2002 Gain on sale of property included gains on the sell
     of a building in Italy. In 2004 we recorded a gain from the sale of our
     premises in



                                       3
<PAGE>

    Ireland.

(4)  Restructuring charge includs employee terminations in 2001. In 2003
     restructuring include employee terminations of $5.2 million, impairment of
     fixed assets of $2.6 million, excess rent of $0.4 million and other related
     restructuring program costs of $0.2 million. In 2004 restructuring charge
     includes costs for facility closures in Ireland of $1.6 million and Estonia
     of $0.7 million.
(5)  Interest expense for the year ended 2000 excludes capitalized future
     interest payments as required by SFAS No. 15.
(6)  The increase in income tax expense in 2004 is mainly due to a reduction in
     the Austrian tax rate which led to a decrease in deferred tax assets
     resulting from tax losses carried forward of $24.9 million.
(7)  Includes for the year ended December 31, 2000 a gain of $2.1 million (net
     of income tax expense) as a result of the extinguishments of the
     restructured debt.
(8)  Earnings per share and weighted average shares outstanding represent our
     historical amounts as adjusted to reflect the two for one split of our
     outstanding ordinary shares upon the closing of the public offering in
     September 2000. Earnings per share and weighted average shares outstanding
     on a diluted basis give effect to all outstanding options and warrants
     calculated under the treasury stock method. For the years ended December
     31, 2002, 2003 and 2004, the number of options that were outstanding but
     not included in the computation of diluted net loss per share because their
     effect would have been anti-dilutive was 1,789,490 options, 1,347,773
     options, and 1,278,201 options, respectively.
(9)  Cash includes cash and cash equivalents and in 2003 and 2004 restricted
     cash of $2.8 million and $6.4 million, respectively.
(10) In 2000, a dividend of (euro)16.1 million (approximately $15.7 million) was
     paid to our then sole shareholder. In 2001 and 2002, we paid a dividend of
     (euro)0.28 (approximately $0.25) per share and of (euro)0.14 (approximately
     $0.13) per share, respectively to our shareholders.


Exchange Rates

     In this report, references to "U.S. dollars," "dollars" or "$" are to
United States dollars and "euro" or "(euro)" means the common currency for
twelve member states of the European Monetary Union. We have rounded percentages
and some amounts contained herein for ease of presentation, and sometimes
amounts may not add due to this rounding. We have presented most amounts in U.S.
dollars. In some cases, this report contains translations of euro amounts into
U.S. dollars at specified rates solely for the convenience of the reader. You
should not construe these translations as representations that the euro amounts
actually represent these U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated.

     In January 1999, 11 European Union member states (Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal
and Spain) formed the EMU. The 11 EMU member states also introduced a new common
currency: the euro. The fixed, irrevocable conversion rates between the euro and
national EMU currencies were announced on December 31, 1998. These countries, as
well as Greece, have adopted the euro as their national currency as of January
1, 2002.

     Unless otherwise indicated, U.S. dollar amounts have been translated from
euro amounts to U.S. dollars, based on the European Central Bank rates. On
December 31, 2004, the rate was (euro) 0.734160 = $1. Our inclusion of such
translations is not meant to suggest that the euro amounts actually represent
such U.S. dollar amounts or that such amounts could have been converted into
U.S. dollars at such rate or any other rate. For a discussion of the impact of
the exchange rate fluctuations on our financial condition and results of
operations, see "Risk Factors" and "Operating and Financial Review and
Prospects." We did not use the rates listed above in the preparation of our
financial statements.


                                       4
<PAGE>
     The table below shows information concerning the European Central Bank
rates for euro for the years ended December 31, 2000, 2001, 2002 and 2003, 2004
expressed in euro per one U.S. dollar.

<TABLE>
<CAPTION>

                                                                            Year ended December 31,
                                                         --------------------------------------------------------------
                                                            2000         2001         2002        2003         2004
                                                         ------------  ----------  -----------  -----------------------

<S>                                                      <C>          <C>          <C>         <C>          <C>
High...................................................  1.211827     1.19275      1.16577     0.96367      0.84731
Low....................................................  0.962649     1.04767      0.95356     0.79177      0.73351
Average (1)............................................  1.083363     1.11594      1.06703     0.88973      0.80486
End of period..........................................  1.077006     1.13469      0.95356     0.79177      0.73416
</TABLE>


(1)  The average of the European Central Bank rates for euro on the last
     business day of each month during the applicable period.


    The table below sets forth the period end, high and low exchange rates,
expressed in euro per one U.S. dollar, for six prior month.


                                              ----------------------------------
                                                Period
Months                                            end         High       Low
------                                        ----------   ---------  ----------

August 2004...................................  0.82570     0.83452    0.80913
September 2004................................  0.80587     0.83063    0.80587
October 2004..................................  0.78511      0.8152    0.78174
November 2004.................................  0.75216     0.78709    0.75216
December 2004.................................  0.73416     0.75809    0.73351
January 2005 .................................  0.76717     0.77304    0.74036
February 2005 ................................  0.75432     0.78358    0.75415
March 2005....................................  0.77137     0.77364    0.74538

    The European Central Bank rate on December 31, 2004 was $1.00 =
(euro)0.734160 and the European Central Bank rate on March 31, 2005 was $1.00 =
(euro)0.771367.

3.B. Capitalization and Indebtedness

      Not applicable.

3.C. Reasons for the Offer and Use of Proceeds

      Not applicable.

3.D. Risk Factors

The sporting goods industry is highly competitive and our success depends upon
our ability to respond quickly to changes in consumer preferences

     The sporting goods industry is very competitive and includes many regional,
national and international companies, some of which have achieved substantial
market share. We compete primarily on the basis of product features, brand
recognition, quality and price, and the failure to remain competitive could
adversely affect our results of operations and financial condition. Some of
these competitors offer types of sports products that we do not sell and some of
our competitors are larger and have substantially greater financial and other
resources than us.

     Our success also depends partly on our ability to anticipate and respond
quickly to changing merchandise trends, consumer taste and consumer preferences.
Any failure to so respond could adversely affect consumer acceptance of our
brand names, product lines and business.

Our failure to introduce innovative products to the market could adversely
affect our sales and margins

     Our success is dependent in part on our introduction of innovative products
that represent an improvement over existing products that we or other
manufacturers offer. We believe that our future growth and success will depend
significantly on our continued ability to identify, develop, introduce and
market innovative sports products such as our Head Intelligence skis and
snowboard equipment, our Head Titanium, Head Intelligence and Head Liquidmetal
series of tennis racquets, and our Mares and Dacor lines of diving equipment,
although we cannot assure you of our ability to do so. Our operating results may
fluctuate as a result of the amount, timing and market acceptance of new
products that we or our competitors introduce. In addition, our failure to
introduce new, innovative products will adversely affect our margins because
margins on the sales of sports products tend to decline over time with the entry
of competitive products into existing markets.



                                       5
<PAGE>

Negative factors beyond our control have caused and could continue to cause a
decline in demand for our products

     We and the sporting goods industry in general are dependent on the
economies in which we sell our products and levels of consumer spending.
Economic conditions affect not only the ultimate consumer, but also retailers,
our primary customers. As a result, our results may be adversely affected by
downward trends in the economies in which we sell our products, such as the
recession in Japan during the 1990's and the current general worldwide economic
slowdown. In addition, the occurrence of events that adversely affect economies,
such as the September 11, 2001 attacks on the United States and subsequent acts
of terrorism, continue to adversely affect leisure travel and related
discretionary consumer spending, which can have a particularly negative impact
on our diving business. We cannot assure you that any prolonged economic
downturn would not adversely affect us. In addition, a decline in the size of
the market for sports products from which we derive sales, whether from a
decrease in the popularity of particular products or adverse weather conditions,
such as lack of snowfall, could cause a decline in sales.

We may not successfully realize the savings of our cost reduction program

     The cost savings described under "Item 4.B Business Overview--Our
Strategy--Reduce Costs" represent the savings we anticipate to result from the
full implementation of our cost reduction program described in that section.
These future cost savings are based upon a number of estimates. We may not
realize the cost savings from our cost reduction program if, among other things:

     o  our estimates are proved incorrect;
     o  there are additional unanticipated costs; and/or
     o  the implementation of the program is not completed for any reason in the
        time periods envisaged, including disruptions and delays in transferring
        our operations from one plant to another as described.

     Accordingly, the estimated cost savings are not necessarily indicative of
our future financial results which may be affected by a number of other factors,
including demand and pricing for our products, pricing for raw materials and
other costs associated with our production, distribution and other operations.

Shifts in currency exchange rates may adversely affect our results of operations

     We operate in a multi-currency environment in which a portion of our
revenues and expenses are denominated in currencies other than the euro. We are,
as a result, subject to currency translation risk and, to a lesser extent,
currency transaction risk. Currency translation risk arises because we measure
and record the financial condition and results of operations of each of our
subsidiaries in their functional currency and then translate these amounts into
our reporting currency, the U.S. dollar. We incur transaction risk when one of
our subsidiaries enters into a transaction using a currency other than its
functional currency, although we reduce this risk by seeking to match our
revenues and costs in each currency. Accordingly, shifts in currency exchange
rates, particularly between the euro and the U.S. dollar, may adversely affect
our results of operations.

We are dependent in part on the performance of third-party suppliers, which may
cause delays in filling orders, affect the quality of some products or affect
the image of our trademarks

     Approximately 25% of our cost of sales in 2004 consisted of fees paid to
third-party manufacturers located in Europe, in countries such as the Czech
Republic (some junior skis), Germany (snowboard bindings), Austria (snowboards),
Estonia, Italy and Bulgaria (diving products) and Asia, in countries such as
China (tennis and squash racquets, accessories and snowboard boots) and Thailand
(diving products). Furthermore, a substantial number of our third party
licensees outsource the manufacturing of Head licensed products to third party
manufacturers. As a result of this outsourcing, we, as well as our third party
licensees, are dependent in part on the performance of third-party suppliers in
our ability to deliver quality products in a timely manner. We and our licensees
are also increasingly subject to risks relating to the local economic and
political conditions in the countries to which we outsource our manufacturing
operations. Although these factors have not had an adverse impact on our
operations to date, we cannot assure you that these factors will not affect
quality control, orders and shipments, or the image of our trademark in the case
of licensees. In addition, the ability to fulfill orders and our cost of sales
may be adversely affected in the event we are required to shift the
manufacturing of some of our products from one geographical location to another.

We are indirectly controlled by one shareholder whose interests may conflict
with yours

     Head Sports Holdings N.V., controlled 18,987,344 shares, or 47.7% of our
issued shares as of March 31, 2005. Head Sports Holdings N.V., a Netherlands
Antilles corporation, is controlled by Johan Eliasch and his family members. Our
controlling shareholder, Head Sports Holdings N.V., has the power to approve the
nominations of our executive officers, approve the proposed actions of the
Supervisory and Management Boards, change our core business, cause us to engage
in transactions with affiliated companies, cause or restrict the sale of our
assets, control our dividend policy and make other fundamental corporate
decisions.

     The business of Head N.V. is carried out primarily by a Management Board,
which appoints its executive officers, and is overseen by a Supervisory Board.
Under Head N.V.'s articles of association, a Dutch foundation called the
Stichting Head Option Plan has the power to nominate all members of the
Management Board, appoint one-third of the Supervisory Board and nominate the
remaining members of the Supervisory Board. The Board of the Stichting is Head
Sports Holdings N.V., the entity controlled by Johan Eliasch



                                       6
<PAGE>

and his family members. The special power of the Stichting ceases when Johan
Eliasch or his affiliates or family members cease to control the Stichting or
cease to beneficially hold any of Head N.V.'s shares. In general, a two-thirds
majority of shareholders voting at a general meeting of shareholders may remove
members of the Management and Supervisory Boards, and the articles of
association, including the rights of the Stichting, also may be amended (at the
proposal of the Management Board and with approval of the Supervisory Board) by
a two-thirds majority of shareholders. Therefore, as a result of his control
over the Stichting, Johan Eliasch will retain the power to nominate and
essentially control the election of the Management and Supervisory Board members
and other executive officers so long as he holds any of Head N.V.'s shares until
there is an amendment to the articles of association to remove the rights of the
Stichting.

We are dependent on patents and trademarks and inadequate protection of patents
and trademarks or patent or trademark litigation would adversely affect our
business

     We rely on a combination of patents, trademarks, trade secrets and
confidentiality agreements to protect our proprietary technology, rights and
know-how. We hold several hundred patents and trademarks, several of which are
filed in multiple jurisdictions, including in Europe, the United States and
Japan. Our major trademarks are registered in our key markets and numerous other
countries. We believe our patents and trademarks to be among our most valuable
marketing assets and generally seek protection for them, particularly the names
Head, Tyrolia, Penn and Mares in countries where significant existing or
potential markets for our products exist. We believe we have taken adequate
measures to protect our proprietary information, trade names and trademarks in
all our major markets, although not all our trade names and trademarks are
proprietary to us for all of our products in all our markets. For example, we do
not own the trademark "Liquidmetal" but rather license the name pursuant to an
agreement we have with Liquidmetal Technologies, Inc. This agreement has an
initial term of four years commencing January 1, 2003, and the parties have
agreed to make best efforts to extend the agreement thereafter for a similar
duration under similar terms.

     We cannot assure you that the measures we (or our licensors from whom we
license patents and trademarks) take to protect our intellectual property will
afford us adequate protection against patent and trademark infringements, that
pending patent and trademark applications will eventually be issued or that the
claims allowed for any of our existing or future patents and trademarks will
provide competitive advantages for our products or will not be successfully
challenged or circumvented by competitors. In addition, we cannot assure you
that we will be able to continue to license names for which we do not currently
hold trademarks, such as "Liquidmetal", at all or under the same terms as our
existing license agreements.

     In the United States, patent applications are maintained in secrecy for a
period after filing and the right to a patent is given to the first to invent,
not the first to file, a patent application. We cannot be sure that our products
or technologies do not infringe patents that may be granted in the future under
pending patent applications, or that our products do not infringe any patents or
proprietary rights of third parties. The validity and enforceability of third
party claims could prevent us from selling our products or could require us to
obtain licenses from the owners of these patents or to redesign our products to
avoid infringements. We cannot assure you that we could accomplish any of these
alternatives successfully, and our inability to do so if necessary could
adversely affect our business. In addition, we cannot assure you that our
employees and third parties with whom we have entered into confidentiality
agreements will respect these obligations, or that our competitors will not use
our trade secrets or proprietary information. In addition, the laws of some
countries do not protect our products and intellectual property rights to the
same extent as the laws of the United States or Europe. Litigation may be
necessary to defend against claims of infringement, to enforce our patents or
trademarks, or to protect trade secrets and could result in substantial costs to
us. We cannot assure you that we would prevail in these types of litigation.

Environmental regulations by European Union, national and local regulatory
bodies could adversely affect our business

     Our operations are subject to European Union, national and local laws
governing, among other things, water pollution, air pollution, noise pollution
and hazardous substance discharges. We believe that our business, operations and
facilities have been and are being operated in compliance in all material
respects with applicable environmental and health and safety laws. However, the
operation of manufacturing plants entails risks in these areas. As a result, we
cannot assure you that we will not incur material costs or liabilities. In
addition, we could incur significant costs in order to comply with any future
European Union, national or local environmental and health and safety laws that
may be adopted or to respond to stricter interpretations or stricter enforcement
of existing laws in the future.

     We believe that the overall impact of complying with regulations and
legislation protecting the environment will not have a material adverse effect
on our future financial position or operating results. We cannot assure you,
however, that this will be the case. Capital expenditures and expenses in 2004
attributable to compliance with environmental laws were not material.

We have product liability exposure resulting from the use of our products

     Some of our products are used in relatively high-risk recreational
settings, and from time to time we are named as a defendant in lawsuits
asserting product liability claims relating to our sporting goods products. To
date, none of these lawsuits has had a material adverse effect on us, and we do
not believe that any lawsuit now pending could reasonably be expected to have
such an effect. We maintain product liability and general liability insurance
coverage. No assurances can be given that such insurance will continue to be
available at an acceptable cost or that such coverage will be sufficient to
cover one or more large claims, or that the insurers will not successfully
disclaim coverage as to a pending or future claim.



                                       7
<PAGE>

ITEM 4:  INFORMATION ON THE COMPANY

4.A. History and Development of the Company

     We are a leading global manufacturer and marketer of branded sporting goods
serving the skiing, tennis and diving markets. We have created or acquired a
portfolio of brands -- Head (principally alpine skis, ski boots and snowboard
products and tennis, racquetball and squash racquets), Penn (tennis balls and
racquetball balls), Tyrolia (ski bindings) and Mares and Dacor (diving
equipment). Our key products have attained leading market positions and have
gained visibility through their use by many of today's top athletes.

     With a broad product offering marketed mainly to middle to high price
points, we supply sporting equipment and accessories to all major distribution
channels in the skiing, tennis and diving markets, including pro shops,
specialty sporting goods stores and mass merchants. Our products are sold
through over 31,000 customers in over 80 countries and target sports enthusiasts
of varying levels of ability and interest ranging from the novice to the
professional athlete. Our strongest presence has traditionally been in Europe,
and we have recently been successful in building market share in the United
States, the next largest market for our products after Europe.

     Our Head ski division traces its origins to 1950 when it was founded by
Howard Head, the inventor of the metal ski. In 1970 and 1971, AMF Incorporated
acquired the predecessors of our Head ski, Tyrolia bindings and Mares diving
divisions, which collectively became known as AMF's Sport Product Group. In
1989, HTM Sports Holding B.V., a company formed by Freeman Spogli & Co. and a
group of Japanese investors, acquired the companies that comprised the Sports
Product Group in addition to the predecessor of our ski boot and trekking shoes
division. In 1993, this company was sold to Austria Tabak, the then Austrian
government-owned tobacco monopoly, which held them through what today is known
as HTM Sport-und Freizeitgerate AG, or "HTM". Following its purchase by Austria
Tabak, HTM began experiencing financial difficulties. In January 1996, our
intermediate holding company subsidiary, Head Holding Unternehmensbeteiligung
GmbH, or "Head Holding", acquired HTM from Austria Tabak for ATS 10 million
($0.8 million) pursuant to a Share Purchase Agreement dated September 20, 1995.

     Over the last 54 years, we believe we have earned a reputation as a leading
developer and manufacturer of innovative, high-quality and technologically
advanced sporting equipment. Our focus continues to be on our core products of
skiing, tennis and diving equipment. In order to expand market share and
maximize profitability, we have increased our emphasis on marketing and new
product development, leveraging further our brands, global distribution network
and traditional strength in manufacturing. We have added complementary product
lines and premier brands through acquisitions, including diving products company
Dacor in 1998 for $2.3 million and the tennis ball manufacturer Penn for $40.6
million in 1999. In October 1999, we acquired the Blax and Generics snowboard
business for $0.7 million whose products we now market under the Head brand.

     Head N.V. was incorporated as a holding company under the laws of The
Netherlands on August 24, 1998 as a public company with limited liability
(naamloze vennootschap) or an N.V. Our corporate seat is in Rotterdam, The
Netherlands. We are registered under number 24286737 at the Commercial Register
in Rotterdam, The Netherlands. Our executive offices are located at Rokin 55,
1012 KK Amsterdam, The Netherlands. Our telephone number is +31-20-625-1291. Our
website address is www.head.com. Our agent in the United States is CT
Corporation System, 111 Eighth Avenue, 13th Floor, New York, NY 10011.


4.B. Business Overview

Industry Overview

Winter Sports Market

     We define the winter sports market as the market for alpine skis, ski boots
and bindings, and snowboard equipment. We estimate that there are 50 million
skiers and 8 million snowboarders active worldwide and that the market for
winter sports equipment in 2004 was approximately $1.54 billion at the wholesale
level, consisting of $550 million of skis, $205 million of bindings, $385
million of boots and $400 million of snowboard equipment. The ski market is
split predominantly among Europe, the United States and Japan, with Europe in
2004 constituting approximately 63% of the world market, the United States and
Canada approximately 24% and Japan approximately 11%. The snowboard market is
led by North America, followed by Europe and then Japan.

     Ski sales have traditionally been the primary component of the winter
sports market, with ski sales patterns having a relational effect on the sales
of bindings, ski boots and other ski accessories. The market for skis, however,
has undergone a transformation in the past decade by declining from an estimated
6.5 million pairs sold per year worldwide in the late 1980's to approximately
4.2 million pairs sold per year in 2004. The reduction in ski sales resulted
primarily from a shift in consumer preference from skiing to snowboarding in the
early 1990's, an absence of significant product innovation prior to the
introduction of the carving ski and the severe decline in the Japanese market,
caused by the economic difficulties experienced there in recent years. In the
last ten years, the snowboard market developed into a new form of winter sport,
and the market has increased from 800,000 boards sold in 1995 to a peak of 1.6
million in 2000. In 2004, 1.3 million boards were sold.


                                       8
<PAGE>

     Globally in 2002 the winter sports market experienced a decrease of
approximately 5% caused by late snow in some important markets in Europe and the
west of North America and the recessionary global economy. For 2003 the market
remained stagnant at this level, and in 2004 the market was stable with some
shifts from Japan to other markets.

     The decline in the market for skis has had a corollary effect on the market
for bindings, ski boots and other accessories. The bindings market declined from
approximately 5.9 million pairs sold per year in the early 1990's to
approximately 4.0 million pairs in 2004. The ski boots market showed some
increase from 3.6 million pairs sold in 2003 to 3.75 million pairs in 2004.

     The ski and snowboard industries have faced pricing pressures as a
consequence of the market decline and, to a lesser extent, as a result of
increasing concentration of sales to sporting goods specialty chains, resulting
in a phase of consolidation within the industry as weaker brands are acquired or
go out of business. The ability of a manufacturer to offer packages of skis,
bindings and boots has become more important.

     Carving skis have proved popular with skiers. We estimate sales of carving
skis increased to approximately $550 million or 100% of total industry-wide ski
sales at wholesale in 2004, from an estimated $40 million in 1995. Carving is
designed to capture the feel of snowboarding with greater control and allows for
turns to be executed at high speed making skiing a more effortless and easier
experience for skiers of all abilities. Based on our market knowledge and
experience we expect that these features will make skiing more fashionable for
all groups, that carving will continue to dominate the category at the expense
of traditional skis and that some snowboarders will shift to carving skis.
Industry observers also believe that growth in carving skis has helped to
stabilize the overall ski market, thereby partially offsetting the declining
industry trend. New trends like the park&pipe skis, skiercross skis and fat
offpiste (freeride) skis show the vitality of the sport. Products targeted
specifically at women are becoming a strong factor in sporting goods in general
and in wintersports products in particular.

Racquet Sports Market

     We define the racquet sports market as the market for tennis, squash and
racquetball racquets and tennis balls and racquetball balls. We estimate that
the market for tennis racquets in 2004 was approximately 9.5 million units, with
a value of approximately $ 363 million at the wholesale level. The majority of
the market increase versus last year is attributable to the US $ decline (Euro,
Yen and other currencies translate into more US $ revenue). We believe the
markets increased by only approximately 2% in local currencies in revenue in
2004. The market is divided predominantly among the United States, Europe and
Japan. The United States and Europe each represents more than 25% of the 2004
world market.

     Measured in unit volume, the worldwide tennis racquet market has declined
from its peak in the early 1990's, as a result of various factors, including
reduced interest in the sport, particularly from younger people. The decline in
interest is believed to be due to competing leisure activities, such as
alternative sports, computer games and the Internet.

     We estimate worldwide sales of tennis balls at approximately $232 million
at wholesale in 2004, with approximately 21.0 million dozen tennis balls sold.
Of these sales, the US and Europe accounted for approximately 47% and 26% in
units respectively, representing the two largest markets for tennis balls. In
2004, the global market for tennis balls was generally perceived to have
declined by approximately 1% in units and 4% in revenue measured in constant
currencies. The declining US Dollar has had a similar impact in tennis balls as
in tennis racquets. While the US tennis ball market grew in unit sales, the
market was stable in revenue terms. The European market is estimated to have
been stable in units while declining in local revenues by approximately 4.5%. We
have also received more accurate data from several European and Far East
markets, making the comparisons from 2003 to 2004 difficult.

Diving Market

     We define the diving market as the market for diving equipment, wetsuits,
drysuits and diving accessories. We estimate the market at the end of 2004 to
have been approximately $515 million. We believe that the overall diving market
was generally perceived as flat, with the important Western European and
Japanese markets showing, according to some estimates, a downturn in demand of
up to 2% and 5%, respectively. This overall decline was, we believe, principally
due to the decrease in international travel to diving destinations and, to a
lesser extent, the general worldwide economic slowdown. Only certain markets in
areas such as South East Asia and Eastern Europe showed some general improvement
across the industry in 2004. The growth in 2004 is due to the strengthening of
Euro against the US Dollar. We expect the diving market to recover when
customers feel that the threat of terrorism is sufficiently contained. The
popularity of the sport is becoming significant in many emerging countries like
Russia, Poland, Croatia, Serbia, Ukraine, Thailand and South Africa with
significant increase in sales especially as far as diving centers are concerned.
The market can be divided into a lower segment sold through chain stores with
lower average prices and an upper segment sold through specialty stores. The
lower segment of the market consists primarily of equipment for snorkeling while
the upper segment of the market consists of equipment for scuba diving.

     The diving industry is fragmented with well over 30 brands. While there are
various companies which produce a number of diving products, Mares is the only
company which designs and manufactures a complete line of products under one
trademark.



                                       9
<PAGE>

Our Competitive Advantages

     We have a leading market share in key product areas. We believe we hold
leading market position in skiing, tennis and diving products.

     o  Skis. In 2004, we believe, based on our market knowledge and experience,
        that Head skis were the number two selling skis in Europe, the largest
        market for ski equipment in the world. We believe we held the number
        three position globally with 14% of the market based on units sold.

     o  Bindings. Tyrolia bindings also have long been a market leader, and we
        believe, based on our market knowledge and experience, that Tyrolia was
        the top selling brand of ski bindings worldwide in 2004, in terms of
        numbers of units sold. In the 2004 season, we also believe we were the
        largest manufacturer of ski bindings worldwide in terms of numbers of
        units produced (including ski bindings manufactured for others).

     o  Racquets In tennis, we believe Head maintained the number one market
        position in Europe and the number two position globally in retail sales
        in 2004.

     o  Balls Penn is the world's leading manufacturer of tennis and racquetball
        balls in terms of volume sold. In 2004, we estimate that Penn sold half
        the tennis balls sold in the United States and held 30% of the tennis
        ball market worldwide in volume. In 2004, we estimate we held 60% of the
        racquetball ball market in the United States, which we believe accounted
        for 90% of the worldwide market.

     o  Diving. Mares is one of the largest producers and marketers of diving
        equipment in the world. We also own Dacor Corporation, a U.S.-based
        seller of a selected range of diving equipment. We believe that in 2004
        Mares, Dacor and Sporasub together held 17% of the worldwide market in
        diving equipment.

    We have a strong brand identity. Our principal brands -- Head, Penn, Tyrolia
and Mares -- are among the most widely recognized names in their markets. We
reinforce the strength of our brands through a program of endorsements with high
profile athletes and sponsorship of major tournaments and other events.

     o  Winter Sports. Young racer and rising star on the downhill horizon
        Johann Grugger endorses Head skis as well as the up and coming star
        Maria Riesch, from Germany. In snowboarding, we have received
        endorsements from the German athlete, Jan Michaelis, who won the overall
        2001/2002 world championship title in Halfpipe and his Finnish teammate,
        Jukka Eratuli, who won the 2002, 2003 and 2005 overall world
        championship title in the Big Air discipline.

     o  Racquet Sports. Andre Agassi endorses our Head tennis racquets and has
        used our Head Liquidmetal racquet in all major events since the fall of
        2003. Anastasia Myskina, Svetlana Kuznetsova and Marat Safin won the
        French Open 2004, the US Open 2004 and the Australian Open 2005
        respectively using Liquidmetal racquets. Penn is the official tennis
        ball of many major tennis tournaments worldwide, including ATP Tour and
        WTA Tour events and the Tennis Masters Series and Tennis Masters Cup.

     o  Diving. We believe most free diving world records, including those set
        by Francisco "Pipin" Ferreras at 170 meters and Gianluca Genoni, have
        been set using Mares equipment.

     This strong brand identity allows our products to command higher prices and
fosters brand loyalty. We believe the strong identity and visibility of our
brands have been instrumental in increasing licensing opportunities for apparel
and other products, as well as enabling us to introduce new product lines and
enter new markets more effectively.

     We are at the forefront of product development and innovation. We have been
and continue to be at the forefront of the development of innovative and
technologically advanced sporting equipment.

     o  We will launch a new premium technology called Flexpoint in April and
        May 2005 globally and expect to sell a substantial amount of racquets.
        In 2003 we introduced Head Liquidmetal racquets, which Fortune magazine
        and Business Week declared to be one of the 25 best products of the year
        2003. For the entire year of 2004, five of our Head Liquidmetal lines of
        racquets were in the top ten best-selling racquets in the all-important
        U.S. Pro/Specialty channel of distribution. Since 2000, when we
        introduced our Head Intelligence racquets, which, along with Head
        Titanium racquets (launched in 1997) and Liquidmetal racquets (launched
        in 2003), we significantly increased our overall U.S. market share in
        terms of revenues from 9% in 1997 to 25% in 2004.

     o  In our Head Intelligence skis and snowboards, we have utilized the
        technology originally developed for our Head Intelligence line of tennis
        racquets. Head Intelligence skis and snowboards transfer the energy
        created by contact with surface of the snow through Intellifibers to
        absorb vibration and adjust the stiffness of the skis and snowboards
        based upon speed and snow conditions. Major ski magazines and trade
        journals have rated the skis highly and we gained added visibility when
        the skis were



                                       10
<PAGE>

        used at the 2002 Winter Olympics in Salt Lake City, Utah, at the World
        Championships in St. Moritz 2003 and in World Cup ski races 2004/2005.
        We have also been a leader in the development of carving skis, and we
        introduced the first bindings specifically designed for carving skis,
        which include carving plates and other features designed to improve
        performance. With our recent introduction of Liquidmetal skis we have
        another technological highlight that should help to maintain or increase
        our marketshare in the high end segment of the ski market. Our approach
        in the rental market to develop and market innovative rental systems has
        made us a leading player in this field.

     o  Mares is a leader in technological innovation in the diving market and
        holds several key patents on regulators, diving computers and other
        related products. Both the U.S. Navy and the European Union have
        certified many of these products.

     We employ an integrated marketing program. We consider our marketing
approach to be key to promoting and reinforcing the strength of our brands
worldwide. Each of our products is supported by an integrated marketing program
which is designed to be responsive to the demands of our targeted trade
customers.

    o   Our marketing techniques include the hosting of training programs and
        clinics for in-store personnel, participation in trade fairs,
        preparation of in-store promotional materials and a strong advertising
        program, including print advertising and point-of-sale merchandising
        such as displays and samples. As a result, we believe that we have built
        a strong presence in specialized ski, tennis and diving retail outlets
        in a number of our key geographic markets.

    o   In addition, we operate a strong grassroots program, introducing our
        products to instructors, coaches and other professionals who are in a
        position to generate interest in a product and influence the decision of
        the ultimate consumer.

    o   We believe the breadth of products we offer in our chosen markets makes
        us more attractive to customers because it allows them to reduce their
        number of suppliers, as well as to end users because it simplifies their
        purchase decision.

    We design and develop the manufacturing technology for our high-end products
in-house. In addition to designing our products, we have made a strategic
decision to design and develop the manufacturing technology for our high-end
sports products at our own technologically advanced manufacturing plants. In
this way, we protect the quality, image and workmanship associated with our
products and ensure that we move new products quickly from development to the
marketing and selling stages. By maintaining control throughout every facet of
the development and manufacturing process of our high-end products, we also seek
to protect our proprietary technology and thereby prevent imitations of our
products. We believe that this manufacturing strategy provides us with a
significant competitive advantage. When we do not believe that a product's
quality or proprietary technology will be compromised, we outsource the product
to third-party manufacturers in order to reduce costs and improve unit
profitability.

Our Strategy

     Our business strategy is to capitalize on our competitive strengths in
order to increase revenues while improving cash flow and profitability through
market share expansion, new product introductions and cost reductions.

     Expand Market Share. We intend to expand our market share, particularly in
the United States and Japan, by focusing on innovative products such as our Head
Liquidmetal racquets and Head Intelligence skis and snowboards and
strong-selling products such as Penn tennis balls.

     o  We intend to build market share in most European markets through
        continued product innovation and brand marketing.

     o  We intend to increase our penetration of the U.S. market for tennis
        racquets and other Head products through continued innovations in
        racquets and an exclusive endorsement agreement with the US Professional
        Tennis Association (racquets and balls) and a non-exclusive endorsement
        agreement with the Professional Tennis Registry (racquets only), the two
        largest teaching organizations globally. Our goal is to become the
        leading supplier of tennis products and add significantly to the
        presence of Head racquets in the United States. In skis, we intend to
        increase our marketshare through the endorsement of worldclass
        freeskiers including J. Olsson and J.T. Holmes.

     o  We intend to expand sales of our snowboard equipment by leveraging our
        sales, marketing and distribution networks.

     o  We intend to increase our penetration of the U.S. market for diving
        equipment by introducing new products into the Mares line.

     o  We intend to increase business in emerging markets such as Asia, Latin
        America and Eastern Europe through a combination of higher brand
        awareness, product innovations and increasing sales and marketing
        resources.

     Rapidly Develop and Launch New Products. We intend to continue our
tradition of product innovation and development by identifying new product
opportunities and moving quickly to launch these products successfully. After we
identify a new product



                                       11
<PAGE>

opportunity, we rely on our in-house research and development department and the
manufacturing facilities available to us to produce the desired product concept.
Thereafter, through a combination of our integrated marketing program, high
brand awareness and global distribution organization efficiency we are able to
introduce the new products to the market rapidly. Recent examples of this are
our Head Intelligence and Head Liquidmetal skis and snowboards and Head
Liquidmetal tennis racquets. In 2004, 2003 and 2002, we incurred $15.5 million,
$13.6 million and $11.0 million, respectively, on engineering, research and
development.

     Reduce Costs. We have implemented the following cost reduction program,
which we believe will result in cost savings and increased operating income:

     o  We have transferred all of our manufacturing operations of ski boots and
        fins in Tallinn, Estonia to our plant in Litovel, Czech Republic.

     o  We have transferred some of our ski manufacturing from our plant in
        Kennelbach, Austria to our existing plant in Budejovice, Czech Republic
        where production costs are considerably lower. We also have transferred
        much of our racquet production in Kennelbach to Budejovice.

     o  We have closed our tennis ball production facility in Mullingar, Ireland
        and transfered these operations to our existing, under-utilized plant in
        Phoenix, Arizona.

     o  We have centralized our European distribution organizations for Winter
        Sports and Racquet Sports products so that Head International GmbH
        operates as a single distribution company for key markets. Head
        International invoices and ships products from one European distribution
        center in Klaus, Austria to our customers in Switzerland, Germany, Italy
        and Austria since January 1, 2004. As a result, all of our invoicing to
        the customers in these markets and to third-party distributors worldwide
        will occur from Head International. The former related European
        distribution companies will thereafter function as sales agencies. As a
        result of the faster than expected growth of our ski boot business in
        all European markets, we were unable to integrate France and the UK as
        planned on January 1, 2005 in our European distribution center in Klaus,
        due to capacity reasons. We will evaluate further integration based on
        new service demands from our costumers. Any possible further integration
        is not planned before 2007.

     We are investigating additional cost savings. Where we are confident that
quality and proprietary technology will not be compromised, we intend to look
for and secure further arrangements to manufacture our products in low-cost
regions, including expanding our outsourced manufacturing in China. We aim to
decrease our overhead and production costs over the next five years as we
identify and implement new measures such as additional relocation of production
plants and outsourcing arrangements.

Our Products

     Statements regarding our competitive position consist of estimates based on
industry reports concerning market share, market position and industry data for
our various lines of business compiled by industry analysts for our major
markets, our knowledge of our sales and markets, and claims by other sporting
goods products manufacturers.

Winter Sports

     Winter Sports products accounted for 46.3% of our total net revenues in
2004.

Head Ski

     Our Head ski brand is one of the leading ski brands in the world. We
estimate that we had a 14% market share worldwide in 2004. We sell a broad range
of carving skis designed for all levels of skiers, from the novice to the
professional racer. Our ski products represented 36.7% of our total Winter
Sports revenues in 2004.



                                       12
<PAGE>



    The following table sets forth our principal Head ski models:
<TABLE>
<CAPTION>

                                                        Number of
       Line                   Target Market               Models           Features
   ------------------    ---------------------------   ----------  --------------------------
<S>                      <C>                                 <C>   <C>
   Racing Carver         Expert skiers and racers            3     Extreme stability and precision for
                                                                   racing and high performance skiing
   Freeride              Advanced to expert skiers           8     Maximum lift in powder snow and
                                                                   maneuverability for off piste and extreme
                                                                   Skiing
   Skicross              Advanced to expert skiers           5     Maximum versatility on and offpiste
   Allmountain/          Intermediate to advanced            7     Easy-turning and maneuverability for all
   Allround Carve        skiers                                    types of terrain
   Park & Powder         Advanced to expert skiers           3     Shock-absorbing reinforced construction
                                                                   for mogul, freestyle skiing and jumps
   Junior                Young skiers                        7     Radical side cuts designed for easy
                                                                   handling for younger skiers of all
                                                                   Abilities
   Rental                All skiers                          9     Added durability
   Accessories           All skiers                         22     Includes ski poles, carrying bags and
                                                                   other items
</TABLE>


     Technology. We believe that we are an industry leader in the development of
innovative and technologically advanced carving skis. Our carving skis are not
only different in appearance from conventional skis, but are also differentiated
from various other carving skis by patented technical features and directional
stability. In February 2002, we introduced a patented "ski management" system --
Head Intelligence skis. This product line utilizes the technology we introduced
in 2000 with our Head Intelligence line of tennis racquets and incorporates the
piezoelectric Intellifiber and Head Chipsystem. Head Intelligence skis transfer
the energy created by contact with surface of the snow through the Intellifibers
to absorb vibration and adjust the stiffness of the skis based upon speed and
snow conditions. This gives the skier more control with less effort. Major ski
magazines and trade journals have rated the skis highly and we gained added
visibility through the skis being used at the 2002 Winter Olympics in Salt Lake
City, Utah and in World Cup ski races.

     Market Share. We estimate that the global ski market was approximately $550
million at the wholesale level in 2004. We believe, based on our market
knowledge and experience, that in 2004 Head skis were the number two selling
skis in Europe and that we held the number three position worldwide based on
units sold. We estimate our market share for skis worldwide was 14% in 2004, an
increase of approximately 75% from an estimated 8% in 1996.

     We believe that carving ski sales represented 100% of total industry-wide
ski sales in 2004. We expect to increase our market share through geographic
expansion and focused product offerings. We plan to pursue market share growth
in the United States and expect to have further opportunities in developing ski
markets such as Eastern Europe and to a lesser extent, South America and China.

     Positioning. We were the first ski manufacturer to introduce a fully
integrated line of carving skis, boots and bindings. We believe that this
integrated product offering is key to maintaining preferred relationships with
trade customers and increasing our global market share. In addition, through
this integrated offering, we achieve synergies in distribution and engage in
joint product development among our internal product groups in the development
of new carving products and other products.

     Manufacturing. We manufacture Head skis at our manufacturing plants in
Kennelbach, Austria and Budejovice, Czech Republic, where we use a computerized
manufacturing system. As part of our efforts to reduce costs, we have
transferred some of our ski manufacturing from our plant in Kennelbach, Austria
to our plant in Budejovice, Czech Republic. We outsource the manufacture of some
models of junior skis to a third party. Through factory automation, we have been
able to greatly improve our labor productivity. We use some excess capacity to
manufacture high performance and carving skis for other branded ski companies.

Bindings

     We believe that Tyrolia was the top selling brand in the worldwide ski
bindings market in 2004, based on units sold. Our bindings business represented
32.1% of our total Winter Sports revenues in 2004.



                                       13
<PAGE>

    The following table sets forth the principal Tyrolia binding products:

<TABLE>
<CAPTION>
                                                            Number of
         Line                    Target Market                Models           Features
     -----------------    --------------------------------  ----------   ------------------------
<S>                       <C>                                    <C>     <C>
     Racing               Expert and professional skiers         3       Innovative Free Flex PLUS
                                                                         Technology (patented)
     Rail Flex            Beginners and advanced skiers          3       Integration system with double
                                                                         free-flex, boot center adjustment and
                                                                         tool free mounting
     Light Diagonal       Carving skiers                         3       Different systems featuring Cyber
                                                                         Free Flex Technology (patented) or
                                                                         Carve Flex Technology and different
                                                                         integrated stand heights
     Super Light          All skiers                             3       SL Super light and LD Light diagonal
                                                                         technology with different integrated
                                                                         stand height
     Junior               Young skiers                           4       Provides safety features for juniors
                                                                         and children
     Rental               Rental market                          8       Adjustable toe and heel parts with
                                                                         unique Single Code System. Chip
                                                                         technology for Sym Pro
     Carving Plates       Carving skiers                         3       Two-piece plates, pre-drilled for
                                                                         Tyrolia models, different stand
                                                                         heights and damping systems
</TABLE>

     Technology. We believe that the Tyrolia brand has consistently offered
outstanding performance in safety and reliability while introducing
technological innovations. In 1996, we were the first to introduce a carving
binding line to complement the performance characteristics of the Cyber ski.
Free Flex technology allows the heel of the skier to glide freely as the ski
bends, optimizing edge grip and ski contour, which facilitates a higher degree
of angulations throughout a turn. In 2000, we introduced a new racing
technology, Free Flex PLUS, which provides improved traction performance at high
speed by eliminating the counterflex motion of the ski.

     In 2004, we introduced the second generation of the SL 100, a super
lightweight binding (25% weight reduction compared to equivalent bindings) with
a modern design for the middle and lower price point in different model
variations. The re launched SL-series accounts already for over one fourth of
Tyrolia Binding sales worldwide.

     In 2004, Tyrolia introduced also the second generation of Rail Flex, an
integrated tool free binding system. Integrated binding systems are the fastest
growing market segment worldwide. The new rail flex system accounts already for
more than 20% of worldwide binding sales.

     In our Rental line, we introduced the innovative chip system in 2001,
targeted at the Rental business. It provides simplified and complete data
integration together with special software, and precise and quick adjustment of
the bindings, thus saving time and increasing the safety of our products. These
bindings are now offered together with pre-mounted Head Rental skis and Head
Rental boots, which also include the chip.

     Market Share. We estimate that the market for bindings worldwide was
approximately $205 million at the wholesale level in 2004. We estimate our
market share worldwide in production for bindings in units was approximately 39%
in 2004 and believe that Tyrolia was the top selling brand in 2003, in terms of
numbers of units sold.

     We expect growing demand for integrated bindings systems, specific features
for shaped skis as well as new plate technology. We intend to continue marketing
our carving bindings as part of our unique, integrated Cyber line of carving
skis, boots and bindings, as well as carving plates, to increase their brand
appeal and market share. We also intend to respond to the growing demands for
so-called "systems", by developing complete new and innovative solutions of
integrated binding-ski systems to enhance the coordination of movement and
forces of all products, as well as to offer convenient mounting technology for
our dealers. Therefore we are also going to introduce Rail Flex technology for
the junior market segment in 2005.

     Manufacturing. All of our Tyrolia bindings are manufactured at our
technologically advanced plants in Schwechat (production) and Neusiedl
(assembly), Austria or under our supervision in the Czech Republic. Tyrolia
bindings consist of over 100 separate components, many of which are made
in-house and then assembled automatically with the assistance of robotics.
Assembly not performed by robotics is outsourced to plants in the Czech
Republic. Further we produce bindings for Fischer and Elan.


                                       14
<PAGE>

Ski Boots

     We market our ski boots under the Head and Munari brand names. Our new and
high price point ski boots are marketed under the Head brand name due to Head's
high level of brand awareness. We also supply private label boots marketed to
lower price points. Our ski boot business represented 21.9% of our total Winter
Sports revenues in 2004.

     The following table sets forth our principal categories of ski boots:

<TABLE>
<CAPTION>

                                                             Number of
         Line                      Target Market               Models            Features
    -----------------     --------------------------------  ----------   -------------------------------
<S>                       <C>                                      <C>    <C>
    Head
    Racing/Freeride       Racers, experts and freeriders           7      New Project introduced in 2004 with full
                          professional skiers                             bi- injection technology, Full Custom

                                                                          System and several adjustments that provide
                                                                          maximum precision and performance for high end
                                                                          skiers.

    All Mountain          Experts to intermediate skiers          10      Edge Line introduced in 2002, with a
    Performance                                                           wide range of models targeted to the
                                                                          expert and advanced skier. Intended
                                                                          to provide an outstanding level of
                                                                          performance and comfort
    New Concept           Extra comfort                            4      New range targeted at the skier
                                                                          Looking for maximum comfort and ease
                                                                          of use featuring a completely new
                                                                          technology
    Sport/Comfort         Intermediate and beginners               6      EZ-on shell, Double Power Buckle and
                                                                          Autoski Walk intended to create
                                                                          maximum ease of use and comfort
    Junior                Young skiers (all segments)              5      Junior boots for racers to beginners
    Rental                Rental                                   9      High comfort and reliability for
                                                                          intermediates and beginners
    Munari
    Sport Comfort         Intermediate and beginners               4      Easy walk adjustment, light and user-friendly
                                                                          boots

    Comfort               Beginners                                4      Easy step-in and high comfort boots

    Junior                Young skiers (all segments)              7      Junior boot line for good, intermediate and
                                                                          beginner skiers
</TABLE>

     Technology. In 2003, we introduced a new range, the E-Fit line, which we
believe allowed us to increase the market share in the comfort segment.

     The Edge and EZON boots have become our best-selling ski boots in terms of
number of units sold. The Edge boot allowed us to increase the market share in
the middle and higher price segment and this line was successfully sold at
retail level.

     Market Share. We estimate that the market for boots worldwide was
approximately $385 million in 2004. We believe, based on our market knowledge
and experience, that the Head ski boots held the number three position worldwide
in 2004 based on units sold. We estimate that our volume market share (Head and
Munari together) in 2004 was approximately 16%, an increase of approximately 77%
from an estimated 9% market share in 1998.

     We aim to increase unit sales of our boots worldwide by leveraging our
brand names and consolidating the results of the top end product line as
described above. Our expectation for 2005 is a stable global market and a
concentration of brands at dealer level, from which we should benefit.

     Manufacturing. Until 2003 ski boots were produced in our factory in Estonia
(approximately 94%) and in Italy (6%). In 2004 we transferred the production of
our ski boots from Estonia to our new factory in Litovel, Czech Republic which
will allow us to improve our efficiency and service and reduce fixed costs as
well. In 2005 we plan to produce 91% of our total ski boots in the Czech
Republic and 9% in Italy.

Snowboards



                                       15
<PAGE>

     We market our snowboard products under the Head brand. These products
accounted for 9.3% of our total Winter Sports revenues in 2004.

     The following table sets forth our principal categories of snowboarding
products:
<TABLE>
<CAPTION>

                                             Number of
          Line             Target Market       Models              Features
     ---------------    -------------------  ----------  --------------------------------
<S>                     <C>                       <C>    <C>
     Boards             Freestyle/Freeride        14     Intelligence Chip Technology and Intellifiber
                                                         Technology, Dimensional concept: perfect
                                                         boot-binding-board match
                                                         Free Flex rail system: innovative
                                                         binding fixation
     Softboots          Freestyle/Freeride         8     ThermoFit liners: individually customizable fit
                                                         Double Lasted Sole: integrated EVA midsole
     Softbindings       Freestyle/Freeride         7     Powerframe concept: better board flex -- better
                                                         transmission
                                                         Auto-Open straps: reentry improvement
                                                         Auto-Lock highback: automatic fixation of highback
                                                         to heelcup
     Step in            Freeride/Freestyle         1     Step-X4: 4 point fixation for best power
     bindings &                                          transmission and control
     Boots
     Rental             Freeride/Freestyle               Head "Rent'n Ride in 58 Seconds Program"
                                                         Dimensional concept: perfect boot-binding match
                                                         Chip system: faster registration of rental
                                                         equipment
                                                         Powerbase toolfree: first toolfree stance & angle
                                                         adjustable rental softbinding
                                                         Step-X4 toolfree: first toolfree stance & angle
                                                         adjustable step in rental binding
</TABLE>

     Technology. In 2003, we introduced Head Intelligence with Head Chip System
in our snowboards and took advantage of the momentum already created in skis at
dealers and media. We also introduced complete new lines of snowboard boots and
snowboard bindings featuring the "Dimensional Concept". This concept aims to
perfectly match snowboarding boot size with board, avoiding toe and heeldrag, or
low leverage. We believe no other snowboard company has dealt with this common
problem in the systematic way Head does. In every product category, Head offers
unique features, like Free Flex rails in the board line, Powerframe with
bindings, ThermoFit liners and Double Lasted soles with boots. We believe that
the Head "Rent'n Ride in 58 Seconds Program" is still the fastest and most
versatile rental system offered to the market.

     Market Share. We estimate that the global market of snowboards was
approximately 1.3 million units in 2004 and that our market share was
approximately 5.7% worldwide.

     Manufacturing. We source all of our products except the Step-X4 bindings
that are manufactured by Tyrolia.

Racquet Sports

     Racquet Sports products accounted for 35.2% of our total net revenues in
2004. Under the Head brand name, we design, engineer and manufacture a broad
offering of tennis, squash and racquetball racquets. We also sell tennis
accessories under the Head brand and tennis balls and racquetball balls under
the Penn brand name.

Head Racquets

     We estimate that in 2004 our Head racquets were the number two brand
worldwide, comprising 19% and 25% of the world wholesale market in units and
revenue respectively. Revenues from racquets amounted to 64.6% of our total
Racquet Sports revenues in 2004.



                                       16
<PAGE>




     The following table sets forth the principal Head racquet product lines:
<TABLE>
<CAPTION>

                                                                          Number of
            Category                  Line              Target Market      Models                Features
         --------------    --------------------------------------------- ----------  --------------------
         <S>               <C>                      <C>                       <C>   <C>
         Tennis Racquets   Head Liquidmetal Series  Tennis                    9     Performance racquets
                                                    enthusiasts at                  featuring Head Liquidmetal
                                                    all level of play               for perfect energy transfer
                           Protector Series         All levels of play        2     Tailored racquets designed
                                                                                    to cure acute Tennis elbow
                                                                                    through a proprietary
                                                                                    racquet design featuring a
                                                                                    Chip system with
                                                                                    piezoelectric materials
                           Titanium and             Entry level              13     Lightweight value products
                           Performance racquets     players                         for short and medium swings
                           Junior Series            Young players             7     Lightweight racquets for
                                                                                    juniors from ages 6 to 14
         Squash                                     All players              12     Racquets for all skill
                                                                                    levels and price points
         Racquetball                                All players              11     Racquets for all skill
                                                                                    levels and price points
         Accessories                                All players               *     Tennis bags, racquet
                                                                                    strings and grips
                                                                                    racquetball gloves and
                                                                                    other tennis accessories
</TABLE>

----------

* Not meaningful.

     Technology. We have gained technological leadership in the tennis market
with both the Head Titanium and the Head Intelligence Technology, which were
launched in 1997 and 2000 respectively. In August 2003, we once more introduced
innovative racquet technology with Head Liquidmetal. Leading global tennis
publications such as "U.S. Tennis Magazine" and the German "Tennis Magazin" have
thoroughly playtested our Head Liquidmetal racquets against relevant competitor
products and rated the Head Liquidmetal racquets the highest. The LM 4 and the
LM Instinct were the U.S. Tennis Magazine's "editor's choice" racquets.

     Market Share. We estimate that the market for tennis racquets worldwide was
approximately 9.5 million units and $363 million at wholesale level in 2004. We
believe, based on our market knowledge and experience, that Head branded tennis
racquets were number one in Europe and number two on a worldwide level in 2004.
We estimate that market share of overall revenues generated for 2004 was
approximately 25% worldwide and that our European market share was 31%.

     We believe that since the early 1990s, our worldwide unit market share of
racquet products has grown substantially, despite a significant decline in the
size of the market. Unit sales of Head tennis racquets increased from 0.8
million in 1993 to 1.8 million in 2004. We believe these market share gains
occurred in all major markets around the world and were largely due to the
introduction of proprietary premium technologies such as Titanium, Intelligence
and Liquidmetal and their subsequent and successful use by some of the most
popular athletes in tennis. On a long-term basis, due to our continued
investment in research and development, global sales, marketing and distribution
network and high level of market penetration, we expect to continue to grow our
global market share for our tennis racquet products, with an increased presence
in the U.S. and Japan and opportunities in developing markets such as Asia,
South America and Eastern Europe, where a growing middle class is showing an
increasing interest in tennis.

     We believe that our significant global market share is partly a result of
our strong presence on the professional tennis circuit. Based upon the December
2004 ATP and WTA Tour Entry-List Rankings, Head racquets were used by more than
25 of the top-rated 100 professional male players, including career grand slam
champion and 2003 Australian Open winner Andre Agassi and 2005 Australian Open
Champion Marat Safin, making Head the number one racquet brand used on the ATP
Tour. On the WTA Tour Anastasia Myskina won the 2004 French Open and Svetlana
Kuznetsova the US Open 2004 using Head racquets. A number of ATP Senior Tour
players such as Bjorn Borg and highly reputed coaches including Bob Brett,
Emilio Sanchez and Dennis van der Meer also use Head tennis products. In
addition, we operate a strong grassroots program, introducing our products to
leading instructors, coaches and other professionals who are in a position to
generate interest in a product and influence ultimate customer decisions.

     The Head Titanium, Head Intelligence and Head Liquidmetal tennis racquets
have, we believe, significantly increased our overall U.S. market share (in
terms of revenues) from 9.0% in 1997 to 25% in 2004.



                                       17
<PAGE>

     We cross-leveraged these technologies to create line extensions in Head
Squash and Racquetball and the Titanium, Intelligence and Liquidmetal models
which we believe improved our position in other racquet sports markets as well.
In 2004, we increased our Racquetball racquet marketshare substantially to 31%
in the U.S. racquetball market. We estimate that we were the number two brand of
the racquetball racquet market in 2004.

     Manufacturing. As part of our cost-cutting program, we now only partially
manufacture our high-end racquets in our facility in Kennelbach, Austria,
because we have transferred the labor intensive racquet finishing production
from Kennelbach to our facility in Budejovice, Czech Republic. All other
racquets, accounting for approximately 80% of all racquets sold, are outsourced
to manufacturers in China.

Penn

     We believe that Penn is one of the world's leading manufacturers and
marketers of tennis and racquetball balls. Revenues from our Penn division
amounted to 35.2% of our total Racquet Sports revenues in 2004.

     The following table sets forth the principal Penn product lines:
<TABLE>
<CAPTION>

                                                               Number of
                 Line                    Target Market          Models                      Features
          ------------------   ----------------------------   ----------  ----------------------------------
<S>                            <C>                                <C>    <C>
          Tennis Balls
          Championship         Frequent players                    3      Models designed for specific courts
                                                                          Surfaces
          Pro Penn USPTA       Teaching professionals              2      Highest quality felt/premium rubber
                                                                          balls made for specific court surfaces
          Tennis Masters       Top professionals and               4      Balls for tournament play made of
          Series and Pro       serious tournament players                 long- wearing felt and rubber-coated
          Penn ATP Tour                                                   for moisture/stain resistance;
                                                                          Including: Prestige specifically for
                                                                          Germany and Pro Penn ATP for
                                                                          International Markets
          Stars                Beginners (sold to clubs and        3      Manufactured with less pressure
                               teaching pros)
          Titanium             Premium3                            2      New in 1998; titanium enhanced core
          Court One            Casual/Recreational                 1      ITF approved
          Private Label        Casual/Recreational                 1      Special orders

          Racquetball Balls
          Pro                  Tournament players                  1      Premium price/performance
          Ultra-Blue           All players                         1      Flagship brand
          Titanium             All players                         1      New in 1998; titanium enhanced core

</TABLE>

     Technology. Penn has introduced many innovations, including:

     o  "play related" tennis balls for different court surfaces and high
        altitude play;

     o  optical yellow tennis balls, which have become industry standard;

     o  the pull ring can with plastic lid;

     o  recyclable plastic tennis ball containers; and

     o  Smart Optic felt with 19% more visibility.

     Market Share. We estimate that the market for tennis balls is approximately
$232 million worldwide, with approximately 21.0 million dozen tennis balls sold
in 2004. We believe Penn was the market leader in 2004, with an estimated volume
market share of 30% worldwide and of 50% in the United States, the world's
largest market in 2004.

     We believe that Penn's strong market position is a result of the superior
quality of our products, economies of scale through our plant in
Phoenix/Arizona, which is the largest plant known globally, and close
affiliation with the professional tennis circuit. Penn is the official ball used
in many major tennis tournaments globally, including the Tennis Masters Cup and
Tennis Masters Series events, ATP Tour and the WTA tour events, and some Davis
Cup and Federation Cup ties. We are the exclusive tennis ball sponsor of the
Masters Series tournaments, the highest profile tournaments in tennis outside
the Grand Slam events. This exclusive sponsorship will provide



                                       18
<PAGE>

live broadcast brand exposure globally during the season as well as
merchandising opportunities.

     The market for racquetball balls is concentrated mainly in the United
States, which we estimate accounts for over 90% of the world market. In the
United States, we estimate our market share was approximately 60% in 2004. Since
the early 1990s, annual racquetball balls sales, including Penn racquetball
balls sales, have been declining, and we expect this trend to continue.

     Manufacturing. We currently manufacture our tennis balls and racquetball
balls (with the exception of less than 5% of the low end products) at our
facility in Phoenix, Arizona. We have transferred our European tennis ball
production facility from Mullingar, Ireland to our existing, under-utilized
plant in Phoenix, Arizona, where production costs are lower through economies of
scale. By importing goods from the U.S into Europe we also benefit from the
strength of the euro.

     Several years ago, we entered into an agreement with a South American
company, which manufactures and distributes Penn tennis balls in Argentina
exclusively for the South American markets.

Mares and Dacor Diving

     We believe, based on our market knowledge and experience, that our diving
products had an estimated global market share of approximately 17% in 2004. The
Mares and Dacor products cover the upper and middle market segments and include
several models of air regulators, buoyancy compensator jackets, diving fins,
diving masks, snorkels, exposure suits and diving computers.

     Each of these brands has different product features and is aimed to cover
the various international market needs. In addition, we offer a variety of air
tanks and valves, diving boots and gloves, underwater flashlights, equipment
bags, knives and various other accessories and diving instruments. Our diving
business represented 15.9% of our total net revenues in 2004.

     The following table sets forth the principal Mares and Dacor products:

<TABLE>
<CAPTION>
                                                  Number of
                           Line                    Models                             Features
            ---------------------------------    ----------  ---------------------------------
<S>                                                   <C>    <C>
            Regulators........................        20     Lightweight, durable; high performing
            Air tanks.........................         3     High resistance to impact and aging
            Valve sets........................         2     Designed to guarantee optimal air flows at any
                                                             pressure
            Buoyancy compensator jackets......        19     Devices for airflow control and better buoyancy
            Wetsuits..........................        20     Designed to ensure warmth and comfort
            Wetsuit accessories...............         9     Gloves, boots and socks
            Fins..............................        23     Designed to provide maximum power using minimum
                                                             effort
            Masks and goggles.................        35     Includes single, two and four lens models, with
                                                             maximum visibility
            Snorkels..........................        24     Designed to provide easy and dry breathing
            Computers.........................         9     Designed to provide enhanced performance and
                                                             safety
            Other accessories.................        54     Knives, spearguns, flashlights, bags, etc.

</TABLE>

     Technology. Mares historically has been the industry's technological leader
and has introduced many ground-breaking diving products ahead of the
competition, including plastic fins, underwater guns and high-performance
regulators. A large part of Mares' sales is dependent on patented technology,
including air regulators, diving fins and diving masks and a new generation of
buoyancy control vests (HUB) to provide maximum freedom during diving and, just
recently, a new algorithm for decompression.

     Market Share. We estimate that the market for diving equipment was
approximately $515 million in 2004 based on exchange rates at that time. We
believe, based on our market knowledge and experience, that our Mares brand of
diving equipment had one of the best market positions in Europe and worldwide in
2004 at wholesale. Our market share worldwide for the Mares, Dacor and Sporasub
brands for 2004 is estimated at 17%.

     We are working to expand our presence in key markets such as the United
States, where, we believe, Mares and Dacor combined held a 10% market share, and
in Asia Pacific, where both brands combined had an estimated 8% market share in
2004. We also expect to grow our global market share through new product
introductions and the addition of advanced technological features in our
existing products. Many new patents have been introduced in 2002, thus
strengthening our products offering. In addition, we expect the fragmented
nature of the diving industry to provide increased opportunity for growth.

     Manufacturing. We currently manufacture the majority of our diving
products, including Dacor products, in Italy. We have transfered all of our
diving production in Tallinn, Estonia to our plant in Litovel, Czech Republic.
We are focused on in-house production of our high-technology products, such as
regulators and computers, and outsource the remainder of our products to



                                       19
<PAGE>

manufacturers in countries such as Italy and Thailand. We have made a number of
improvements to our manufacturing processes in the last three years to reduce
cost and improve efficiency. In addition, we outsource the assembly of a number
of products.

Licensing

     In 1996, we formed a licensing division to capitalize on opportunities
resulting from the worldwide brand recognition of the Head name, which has
existed for over 50 years. We believe the Head brand name is associated with
innovative, high quality, well-designed, high performance products. Licensing
enables us to expand the Head name to additional product categories and we
believe that some of our other brands such as Penn and Mares have licensing
potential. Revenues from licensing amounted to 2.4% of our total net revenues in
2004.

     Head apparel contributes approximately two thirds of the total royalty
income and is licensed in all important markets worldwide (e.g. Europe, UK, USA,
Canada, Japan and China). We also grant rights to the Head brand for other
product categories such as footwear, luggage, eyewear, watches, equipment, bikes
and accessories. Licensing generated $11.0 million of revenues in 2004 for the
Head, Mares and Penn brands. Wholesale licensee revenues amounted to
approximately $150 million. We intend to explore other licensing opportunities
for products suitable to the image of our brands. China offers considerable
potential for further increase in licensing revenues.

     We believe that substantial licensing growth opportunity exists by
capitalizing on the success of our strong-selling products as well as through
improved leveraging of our brand portfolio. We also intend to protect and
maintain the premium image of our brands by licensing only high quality goods
within compatible product lines.

Sales and Distribution

     Our products are sold in over 80 countries to approximately 31,000
accounts. Our worldwide sales force comprised approximately 369 people as of
December 31, 2004. In addition, we utilize sales representatives and independent
distributors to serve specialized markets and related distribution channels.

Europe

     Sales to customers within Europe accounted for 61.4% of our 2004 net sales.
We have centralized our European distribution organizations for Winter Sports
and Racquet Sports products so that Head International GmbH operates as a single
distribution company for several key markets. Head International invoices and
ships products from one European distribution center in Klaus, Austria to our
customers in Switzerland, Germany, Italy and Austria since January 1, 2004. As a
result, all of our invoicing to customers in these markets, and to third-party
distributors worldwide, occur from Head International. The related former
European distribution companies function as sales agencies.

North America

     Sales to customers in North America accounted for 26.2% of our 2004 net
sales. We distribute Head, Tyrolia, Penn and Mares/Dacor through the
company-owned Head USA subsidiary. Under Head USA's leadership, Winter Sports,
Racquet Sports and Diving have separate sales/marketing organizations and sales
forces but share all administrative and logistical functions. Our goal is to
improve distribution to increase penetration in North America and reestablish
Head and Tyrolia brand names in the U.S. winter sports market.

     The success of our Head Titanium and Intelligence and Head Liquidmetal
racquets has helped to significantly raise Head's profile as a tennis brand in
North America. We hope to further heighten this profile through the endorsement
by the US Professional Tennis Association, the world's largest association of
tennis-teaching professionals, and other sales and marketing efforts.

Asia

     Sales to customers in Asia accounted for 9.0% of our 2004 net sales. In
Japan, our largest market in Asia, our Winter Sports products are distributed by
our own subsidiary distribution unit, while our Racquet Sports and Diving
products are distributed by third parties. The cooperation with World Commerce
Corporation in Japan for the distribution of our Racquet Sports products as well
as the successful launch of the Head Titanium, Intelligence and Liquidmetal
racquets have increased our tennis market share in Japan from 3.6% to 10,7% in
2004. Our products are sold in the rest of Asia only to independent importers or
distributors on a wholesale basis.

Other Markets

     Sales to customers in other markets accounted for 5.1% of our 2004 net
sales. These markets mainly consist of Latin America, Africa and Australia. We
believe the number of countries in these markets in which sales were made
exceeded 50 in 2004. Sales of our products to these regions are made by
independent importers/distributors. We intend to continue to pursue strategies
to broaden our



                                       20
<PAGE>

presence in these emerging markets.

Marketing

     We consider the marketing function to be key to promoting our brand names
worldwide. Our marketing strategy is centered around the Head, Tyrolia, Penn and
Mares brands. We believe that there are significant opportunities to continue to
build these brands and that increased coordination between our marketing and
product development teams has greatly improved our ability to efficiently
develop products consistent with consumer preferences. As a result, we have been
able to increase the frequency and efficiency of our product innovations as well
as the depth of our product lines in each of our key categories. Consumer
research has become an integral part of product development and advertising
campaigns. Each of our products is fully supported by a consistent, integrated
marketing program, which is designed to be responsive to the demands of our
target customers.

     We attribute our consistently successful product launches to our strong
emphasis on marketing in all of our divisions. We use marketing strategies
directed at retailers, as well as the ultimate consumer, to increase demand. Our
marketing strategy for retailers is aimed at educating them on the technical
features of our products. We hold clinics for retailers and sales people to
inform them about the various product lines. We provide retailers with
videotapes, DVDs and product brochures to further educate and assist the retail
sales team.

     We currently operate several websites including www.head.com,
www.ridehead.com, www.tyrolia.com, www.pennracquet.com, www.mares.com and
www.divedacor.com, which advertise our products and list our distributors. In
recognition of the penetration of the internet and growth in e-commerce, we have
set up a project to expand our usage and reliance on the internet. As part of
this project, we:

     o  have implemented an "Online Management System", allowing retailers to
        place and track orders and review credit status;

     o  are expanding website content to cover sports and related information.
        We expect that this project will improve brand recognition and generate
        incremental sales.

     In addition, to create consumer interest, we use product promotions and
point of sale advertising with sporting goods chains and through our dealers in
each of our product categories. Our website (www.head.com) communication
continues to take a more dominant role in our overall advertising.

     o  We devote significant marketing resources to our ski business, including
        training by an in-house winter sports specialist to educate retail
        salespersons so they can sell Head skis more effectively. We also
        coordinate with retailers to improve display of Head products and place
        in-store promotional materials such as consumer catalog, banners and
        posters. Head participates in a number of trade fairs annually in order
        to launch its new products and advertises its skis in leading specialty
        ski publications.

     o  In order to promote use of the carving ski, we host promotional
        activities such as Cyber promotional days, Cyber "demo" days and Cyber
        test sessions. With respect to the marketing of Tyrolia bindings, we
        utilize international advertising and promotional activities with a
        strong focus on brand awareness, new product presentations, dealer
        promotion tools (catalogs, racing folders, consumer leaflets), point of
        sale materials, product visibility and media advertising.

     o  Our snowboarding products are promoted through our sponsorship of top
        caliber riders, international snowboard camps, special interest media
        events, snowboarding videos and internet sites. We also have promotions
        in ski resorts in Europe in which potential customers can try our
        snowboarding equipment. Sales to end-users are supported by in-store
        training and point of sale materials.

     o  Our Racquet Sports division conducts a variety of marketing programs
        targeted to a broad range of players, including demonstration programs
        for consumers and, in coordination with retailers, in-store promotions
        and dealer incentive programs. We advertise our racquets in specialty
        tennis magazines and participate in advertising programs with specific
        sporting goods chains.

     o  We operate a strong grassroots program, introducing our tennis products
        to instructors, coaches and other opinion leaders who are in a position
        to generate interest and influence the decision of the ultimate
        customer. For example, through Head and Penn, we participate in the US
        "Tennis Welcome Center" program, sponsored by the Tennis Industry
        Association (TIA) and the United States Tennis Association (USTA), which
        is designed to introduce consumers to tennis through free coaching
        sessions, equipment and access to courts.


                                       21
<PAGE>

     o  Our Diving division advertises in a number of specialized publications
        worldwide and conducts promotions and media campaigns in stores, diving
        centers and tourist resorts. Mares, Dacor and Sporasub are getting high
        visibility on all major specialized magazines but also larger mass media
        thanks to focused partnership with diving resorts, aquariums and
        athletes. Special attention is dedicated to Mares website
        (www.mares.com) which is considered one of the best in the industry and
        is hosting over half a million visitors per year. On internet the
        mymares.com web site collect about 22.000 members.

     To complement our marketing strategies, we cultivate the endorsement and
promotion of our products among athletes. These endorsements emphasize technical
performance and increase brand awareness.

     o  In Winter Sports, we maintain a strong program of endorsements by high
        profile athletes, such as Johann Grugger, Maria Riesch, Marco Buchel,
        and former champions such as "legend" Franz Klammer, the 1976 Olympic
        Champion. We also have an endorsement arrangement with the Austrian
        national ski team. In snowboarding, we have received endorsements from
        the German athlete, Jan Michaelis, who won the overall 2002 world
        championship title in Halfpipe and his Finnish teammate, Jukka Eratuli,
        who won the 2002, 2003 and 2005 overall world championship title in the
        Big Air discipline.

     o  Our tennis racquet endorsement program is focused and highly selective.
        It includes current top level ATP players popular among the youth market
        such as Andre Agassi, Marat Safin, Juan Carlos Ferrero and Gustavo
        Kuerten, WTA players such as Patty Schnyder, Svetlana Kuznetsova and
        Anastasia Myskina, as well as players from the ATP Senior Tour popular
        among mature players, including "legends" Thomas Muster, Bjorn Borg,
        Emilio Sanchez and Ilie Nastase. In addition, since January 2003, we are
        the official tennis racquet of the US Professional Tennis Association
        with over 10,000 members. Over 3,000 of these members have already
        signed exclusive contracts with HEAD. For the previous 7 years, Wilson
        was the official racquet of this important organization. We are also the
        key racquet sponsor of the Professional Tennis Registry, the leading
        global teaching organization.

     o  Penn is the official tennis ball for many major tennis tournaments
        worldwide, including ATP tour and WTA Tour events, the Tennis Masters
        Series and Tennis Masters Cup. Penn is the exclusive sponsor/supplier of
        the US Professional Tennis Association and is the official ball of the
        USTA League Tennis Program as well.

     o  Most free diving world records have been set using Mares equipment. The
        last record set by Gianluca Genoni in Liguria, October 2004, was of -133
        meters, variable ballast, which received, worldwide recognition. A new
        athlete joined Mares Free Diving Team: Marina Kazankova is Blue Jump
        world champion, sponsored by Mares. In 2004, Mares was - for the fourth
        time - chosen the best manufacturer of BCs. "Tauchen" magazine awarded
        Mares the first prize for the best Buoyancy Compensator line of the
        year, Australia's biggest online scuba resource, awarded Mares the
        "Golden Star Award" for the X-Vision mask. In 2002 Dacor signed a
        sponsorship agreement with the underwater explorer and shipwreck hunter
        Barry Clifford, to heavily promote Dacor products in his new US
        television series, "Adventure, Inc", which is broadcasted nationwide on
        all major national TVs. We signed a sponsorship agreement in 2002 with
        Paramount to use Mares/Dacor equipment in the movie Tomb Raider II,
        which was released in 2003. Mares is sponsoring the most important
        aquariums in the world: Acquario di Genova, Aquaemundi, Underwater
        World, Two Oceans Aquarium, Coex Aquarium, New England Aquarium, Newport
        Aquarium. Mares sponsored the Scylla project, the ambitious project of
        the National Marine Aquarium of Plymouth (UK). In 2004, for the first
        time in his history, Mares has done a Limited Edition line of scuba
        equipment.

Research and Development

     We believe that we are an industry leader in the development of innovative
and technologically advanced sports equipment. Our research and development
groups identify consumer needs and shifts in consumer preferences in order to
develop new product ideas and concepts to satisfy such needs or preferences. To
ensure quality and precision, the majority of our products are designed on our
own computer-aided design and manufacturing (CAD/CAM) systems.

     We believe that our high level of expertise is evident in all our product
lines. Since Howard Head developed the first metal ski in 1950, we have
consistently introduced new materials and processes into the manufacture of
skis, including fiberglass, graphite, aluminum and titanium and led the industry
with the introduction of a complete line of carving skis. We utilize
sophisticated manufacturing processes to integrate torsion rib systems in all
Head skis in order to produce a torsionally stiff ski without losing softer
flexing properties. We have also developed an exponential dampening system for
skis and traction plates to promote top performance for all types of skiers. In
2002, we successfully adapted the piezoelectric Head Intellifiber and Head Chip
System to skis and launched Head Intelligence skis and Head Intelligence
Snowboards in 2003. In 2003 we introduced the first fully integrated Ski-Binding
system in the lower and mid price volume segment. In 2004 we started the
development of the Liquidmetal ski which we launched in February 2005.

     Head ski boots has well established research and development resources and
is one of the leading innovators, with a long history in ski boot manufacturing.
In 2004 we introduced the full costum system which allows to adapt the width of
the boot with an internal



                                       22
<PAGE>

wedge.

     In the area of bindings, we continually introduce new technical features
for improved performance, safety and comfort such as new Free Flex systems, the
unique safety "ABS" anti-friction toeplates, new and lighter designs of our
unique Diagonal safety feature, new integrative solutions with new mounting
processes (Railflex System), innovative light-weight constructions, as well as
changes in styling and appearance in each two- to three-year product cycle. In
2004 we introduced a new demo version of the integrated Rail Flex System.

     Our expertise in tennis racquet design resulted in the 1997 launching of
the Head Titanium Tennis series and in 2000 the Head Intelligence racquet
technology. Some of these racquets feature a Microchip design, which converts
mechanical energy into electrical energy and the result is the first
chip-powered, electronically dampened tennis racquet. In 2002 we launched Head
Intelligence X, further advancing the performance benefits of the proprietary
Head Intelligence technology. In 2003 we introduced the Head Liquidmetal
technology in our racquets, which "Fortune" magazine and "Business Week"
recently declared to be one of the best 25 products of the year 2003. Tennis
magazines in the United States and Germany also have recognized the
state-of-the-art design of this proprietary technology. In 2004 we brought the
Protector series of racquets to the market. These are specially designed to
address the needs of players with tennis elbow and contain the first-ever
Electronic Dampening System. Our EDS is different from other dampening systems
because it reacts immediately upon ball impact, not after, giving a
revolutionary vibration dampening. Combined with a special cushioned grip and
string the system reduces stress on the arm and can alleviate pain symptoms for
some players with acute tennis elbow.

     Penn has long been a major source of innovation in the tennis ball market,
improving tennis balls through such innovations as the introduction of "play
related" tennis balls for different court surfaces and altitudes; optical yellow
tennis balls, which have become industry standard; and recyclable plastic tennis
ball containers with pull ring and plastic lid.

     Mares has a 54 year history of product innovation and we believe is one of
the most advanced R&D centers in the industry. In 2002, Mares invented the new
airtrim system for BCs which eliminates the old style inflators. By doing so,
Mares has renewed some key elements in the area of diving. A new series of
minimal weight regulators with performance is now under testing by the US Navy
Seals for heavy conditions use. In addition, the new state-of-the-art watch
computer "Nemo" is achieving considerable interest. It was released on the
market in 2004.

Customers

     We sell our products to approximately 31,000 specialty sporting goods
stores, chain stores and department stores in over 80 countries. Our customers
vary depending on where our products are sold. Our largest customers include
Price Costco, The Sports Authority and Wal Mart in the United States; Victoria,
Alpen and Xebio in Japan; Intersport International, a voluntary buying group
which distributes our products predominantly in Europe; and Decathlon in France
and other European countries.

     The payment terms that we offer to customers in our three business areas
(Winter Sports, Racquet Sports and Diving) are consistent with the terms offered
by other participants in the market.

     Winter Sports: This business area is very seasonal. We start our winter
sport sales in July and August but our customers' sales to retail customers
occur primarily in November and December. Payment by our customers is not
contingent upon resale of our product by our customers. However, the standard
practice in this business area is for customers to pay their vendors only after
they begin to sell the vendor's products. Therefore, as a result of this
practice, payment terms for this business area typically exceed 90 days since we
receive cash payments between November and February for sales starting in July.

     Racquet Sports: Generally payment terms are between 60 and 90 days.
However, in limited cases, such as when we deliver products early or in
connection with certain sales campaigns, we may grant terms over 90 days.

     Diving: As a result of competition in this business area, and in line with
the standard practice of our competitors, we grant payment terms of 120 days to
our key customers for shipments to Italy (our major market). In addition, the
diving business in Europe is very seasonal with most sales occurring in the
spring and summer months. Despite this, we produce and deliver diving equipment
and products throughout the entire year so as to improve our production and
logistical capabilities.

Competition

     The sporting goods industry is highly competitive. We compete primarily on
the basis of product features, brand recognition, quality and price. We compete
with numerous international and national companies that manufacture and
distribute sporting goods and related equipment. We are generally in a favorable
position as the sports equipment market consolidates across all of our product
lines.

     We compete in individual market segments against various competitors.



                                       23
<PAGE>

     o  The main competitors to our Head ski brand, are Rossignol, which is
        owned by Rossignol S.A (undergoing takeover of ownership by Quiksilver);
        Salomon, which is owned by Salomon AG; Atomic, which is owned by Amer
        Group Plc; Fischer, which is owned by Fischer GmbH; K2, which is owned
        by K2 Inc., and a number of smaller ski manufacturers. Our Tyrolia
        bindings division competes primarily with Salomon, Marker and Atomic.
        With respect to Head ski boots, our main competitors are Salomon;
        Nordica, Technica and Dolomite, all of which are owned by the
        Technica-Lowa-Dolomite Group; and Lange and Rossignol, part of Rossignol
        S.A.

     o  The principal competitors of the Head tennis racquet division are Wilson
        Sporting Goods Co., which is owned by Amer Group Plc, and Prince Sports
        Group Inc., which is owned by a partnership of the Prince Senior
        Management and the Lincolnshire Equity Fund II, L.P.

     o  The principal competitors of Penn tennis balls are Wilson Sporting Goods
        Co., and Dunlop Slazenger International. In racquetball balls, our
        principal competitor is Ektelon which is owned by Prince Sports Group,
        Inc.

     o  Competitors of the Mares and Dacor diving division include Scubapro,
        Uwatec (computers only), Aqualung Group which includes the U.S. Divers
        and Sea Quest brands, and Cressi.

     Some of our competitors, notably Salomon, which is part of adidas-Salomon
AG, are larger and have greater financial and other resources than we do. For
the most part, we compete on a product-by-product basis, and are retaining
market share as against our larger competitors and acquiring market share from
smaller companies as the sporting goods industry consolidates.

Seasonality

     As many of our goods, especially winter sports goods, are shipped during a
specific part of the year, we experience highly seasonal revenue streams.
Following industry practice, we begin to receive orders from our customers in
the Winter Sports division from March until June, during which time we book
approximately three quarters of our orders for the year. We typically begin
shipment of skis, boots, bindings and snowboard equipment in July and August,
with the peak shipping period occurring in October and November. At this time,
we will begin to receive re-orders from customers, which constitute the
remaining quarter of our yearly orders. Re-orders are typically shipped in
December and January. Racquet Sports and Diving product revenues also experience
seasonality, but to a lesser extent than Winter Sports revenues. During the
first six months of any calendar year, we typically generate more than half of
our Racquet Sports and Diving product revenues, but only about 10% of our Winter
Sports revenues. In preparation for the second-half increase in winter product
revenues, we incur most of our winter product costs in the first half of the
year.

Materials

     As a result of the price increases for oil and steel in the world market,
we faced significant cost increases in plastic components (bindings, boots,
fins), carbon-fibres and metal parts (binding components and ski edges) during
2004. We expect that this trend will continue in 2005 and will have a cost
impact of between $4 to $5 million.

Patents and Trademarks

     Our major trademarks are registered in the United States, throughout the
European Union and in several other countries, and we consider trademark
protection to be very important to our business. Significant trademarks include
Head, Tyrolia, Penn, Mares and Dacor. We believe that these trademarks are
important in identifying our products and the trademarks are often incorporated
prominently in product designs. Other trademarks include Sporasub, Munari, Cyber
and San Marco. We do not own the trademark "Liquidmetal" but rather license the
name pursuant to an agreement we have with Liquidmetal Technologies, Inc. This
agreement has an initial term of four years commencing January 1, 2003, and the
parties have agreed to make best efforts to extend the agreement thereafter for
a similar duration under similar terms.

     We utilize some proprietary or patented technologies in the formulation or
manufacturing of a number of our products, including Free Flex technology in the
manufacture of our precision bindings, Dimple and Shock Stop technology in the
manufacture of our tennis racquets, Autowalk and Double Power buckles in the
manufacture of Head ski boots and various other proprietary technologies used in
the manufacture of our diving products. We also use patents in connection with
our Head Titanium tennis racquets and with Head Intelligence technology,
particularly the Chip System technology. We believe our proprietary information
to be among our most important and valuable assets, and generally seek patent
protection for our products in countries where significant existing or potential
markets for our products exist. We believe we have taken adequate measures to
protect our proprietary information in all of our major markets. We consider our
proprietary technology and patent protection to be important to our business.

     However, we are not dependent on any one patent or set of patents. Some of
our recently introduced products like Titanium, Intelligence and Liquidmetal
tennis racquets, the Mares and Dacor HUB system and Tyrolia "Super Light"
bindings have patents that



                                       24
<PAGE>

have many years to run.

4.C. Organizational Structure

     We were formed as a public company with limited liability in 1998 and hold
100% of the issued and outstanding share capital of Head Holding, our
intermediate holding company. Our primary operating subsidiary is HTM Sport-und
Freizeitgerate AG, which in turn owns all of our worldwide operating and
distribution subsidiaries and is the issuer of our senior notes.


     The following is a list of Head N.V.'s significant (direct and indirect)
subsidiaries and their country of incorporation:

<TABLE>
<CAPTION>

                                                                                            Proportion of
                       Significant Subsidiary                           Domicile          Issued Capital Held
  ----------------------------------------------------------------    -----------------  -------------------
<S>                                                                   <C>                         <C>
  HTM Sport- und Freizeitgerate AG................................    Austria                     100%
  Head Holding Unternehmensbeteiligung GmbH.......................    Austria                     100%
  Head International GmbH.........................................    Austria                     100%
  Head Sport AG...................................................    Austria                     100%
  Head Tyrolia GmbH...............................................    Austria                     100%
  Head Technology GmbH............................................    Austria                     100%
  Tyrolia Technology GmbH.........................................    Austria                     100%
  Head/Tyrolia Sports Canada Inc..................................    Canada                      100%
  Head Sport s.r.o................................................    Czech Republic              100%
  OU HTM Sport Eesti..............................................    Estonia                     100%
  Head Tyrolia Sports S.A.........................................    France                      100%
  Head Germany GmbH...............................................    Germany                     100%
  Head UK Ltd.....................................................    Great Britain               100%
  HTM Sport S.p.A.................................................    Italy                       100%
  HTM Sports Japan KK.............................................    Japan                       99.6%
  HTM Head Tyrolia Mares Iberica S.L..............................    Spain                       100%
  Head Switzerland ...............................................    Switzerland                 100%
  HTM USA Holdings Inc............................................    USA                         100%
  Head USA Inc....................................................    USA                         100%
  Penn Racquet Sports Inc.........................................    USA                         100%
</TABLE>


4.D. Property, Plant and Equipment

     The following table sets forth information as of December 31, 2004 with
respect to the manufacturing, production, warehousing and office facilities used
by us in our business:

<TABLE>
<CAPTION>
                                                                                                 Area (in
            Location                              Description                 Owned/ Leased   square meters)
-------------------------------    ----------------------------------------  -------------------------------
<S>                                <C>                                       <C>                   <C>
Kennelbach, Austria............    Ski and tennis manufacturing              Leased                12,774
                                   Administration, marketing, research       Leased                 4,563
                                   and development
Klaus, Austria.................    Warehousing                               Leased                 8,710
Schwechat, Austria.............    Binding manufacturing                     Leased                12,709
                                   Warehousing                               Leased                 5,510
                                   Administration, marketing, research       Leased                 1,472
                                   and development
Neusiedl, Austria..............    Binding assembly and warehousing          Leased                 2,974
Maser, Italy...................    Ski boot manufacturing, research and      Leased                 6,500
                                   development
Litovel, Czech Republic........    Ski boots and diving products
                                   Manufacturing                             Owned                  8,122
                                   Warehouse                                                        7,182
Budejovice, Czech Republic.....    Tennis racquets assembly and ski          Owned                  8,534
                                   manufacturing
Rapallo, Italy.................    Manufacturing                             Owned                  1,200
                                   Warehousing, administration, research     Owned                  4,800
                                   and development
Casarza, Italy.................    Manufacturing and warehousing             Owned                  7,708
Phoenix, Arizona...............    Tennis and racquetball ball               Owned                 13,009
                                   administration, manufacturing,
                                   research and development
</TABLE>

                                       25
<PAGE>


     In addition, to the facilities described above, we own and lease additional
facilities in various areas throughout the world. Our leased facilities have
remaining terms generally ranging from one to four years.

     Substantially all leases contain renewal options pursuant to which we may
extend the lease terms in increments of one to four years. We do not anticipate
any difficulty in renewing our leases as they expire.

     Management considers our facilities to be well maintained and satisfactory
for our operations, and believes that our facilities provide sufficient capacity
for our current and expected production requirements.

Environmental Matters

     Our operations are subject to European Union, federal, state and local
laws, regulations and ordinances relating to the operation and removal of
underground storage tanks and the storage, handling, generation, treatment,
emission, release, discharge and disposal of various materials, substances and
wastes. The nature of our operations exposes us to the risk of claims with
respect to environmental matters and we cannot assure you that material costs or
liabilities will not be incurred in connection with such claims.

     Based on our experience to date, we believe that future cost of compliance
with environmental laws, regulations and ordinances, or exposure to liability
for environmental claims, will not have a material adverse effect on our
business, operations, financial position or liquidity. However, future events,
such as changes in existing laws and regulations, or unknown contamination of
sites owned or operated by us (including contamination caused by prior owners
and operators of such sites), may give rise to additional compliance costs which
could have an adverse effect on our financial condition.

ITEM 5:  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A. Operating Results

Overview

     We generate revenues in our principal markets by selling goods directly to
retail stores and to a lesser extent, by selling to distributors. We also
receive licensing and royalty income. As many of our goods, especially Winter
Sports goods, are shipped during a specific part of the year, we experience
highly seasonal revenue streams. Following industry practice, we begin to
receive orders from our customers in the Winter Sports division from March until
June, during which time we book approximately three quarters of our orders for
the year. We will typically begin shipment of skis, boots and bindings in July
and August, with the peak shipping period occurring in October and November. At
this time, we will begin to receive re-orders from customers, which constitute
the remaining quarter of our yearly orders. Re-orders are typically shipped in
December and January. Racquet Sports and Diving product revenues also experience
seasonality, but to a lesser extent than Winter Sports revenues.

     Although the 2004/2005 winter sports season experienced a late start in all
geographic markets, good snow conditions helped the sales recover. The Japanese
market continued to decline, suffering from a continued difficult economic
environment, which leads us to expect that sales for 2005 will further decline.
Apart from additional potential sales in Eastern Europe and in China, we expect
the worldwide ski market to be stable. The snowboard market suffered more
strongly from the late start in the winter sports season, and we expect the
market for snowboard products to decline by approximately 10%.

     While the tennis market in the US showed some growth in 2004, due to bad
weather conditions during the summer of 2004 the European tennis market
declined. Retailers in many markets reported higher than average inventories,
reflecting a reduction in purchases for the second half of the year. Tennis
racquet sales volume in Japan remained stable. Growth in the US market for
tennis balls was stable during 2004, while in Europe the market growth for
tennis balls experienced a decline from bad weather conditions.

     Growth in the overall market for diving equipment is expected to be flat in
the US and declining in Europe, due to less travel worldwide to dive centers and
resorts and, corresponding by, fewer purchases of equipment. However, the market
in Southeast Asia experienced fair growth. In the past, we have increasingly
focused on the Japanese and Chinese markets and have established dedicated area
managers and implemented marketing initiatives. Our strategy in the Japanese and
Chinese markets is to improve product availability and customer satisfaction.

     We operate in a multi-currency environment and are subject to currency
translation risk and, to a lesser extent, currency transaction risk, principally
between the euro and U.S. dollar. Currency translation risk arises because we
measure and record the financial condition and results of operations of each of
our subsidiaries in their functional currency and then translate these amounts
into U.S. dollars, our reporting currency. Of our revenues 22% is generated in
U.S. dollars whereas 57% of our consolidated revenues are generated in Euros.
The functional currency of our European operations is the euro. Fluctuations in
the value of the euro with respect to the U.S. dollar have had, and may continue
to have, a significant impact on our financial condition and results of
operations. We are



                                       26
<PAGE>

subject to currency transaction risk whenever one of our subsidiaries enters
into a transaction using a currency other than its functional currency. We
reduce this risk, however, by seeking to match our revenues and costs, as well
as assets and liabilities, in each currency.

Factors Affecting Revenues

     As a manufacturer and distributor of branded sporting goods, our revenues
are affected by the overall economic trends of our principal geographic markets,
mainly Europe, but also the United States and Japan, and related changes in
consumer confidence. Weather can also affect our revenues. For example, a lack
of snow in a particular area in a particular season will result in fewer
purchases of skiing and snow boarding equipment, and poor weather at a diving
location may reduce interest in the sport and related equipment purchases. We
believe our global geographic penetration and diversification of sports products
help to mitigate any localized adverse impacts from weather. Other factors that
can affect our revenues are consumer preferences based on technical innovations,
and general popularity of the sports for which we produce equipment. In
addition, the rate of leisure travel can affect our revenues as purchases of our
equipment are often tied to travel to ski and diving destinations.

     Most of our revenues are denominated in euro. As our historical
consolidated financial statements are reported in U.S. dollars, they are
affected by movements in the exchange rate of the U.S. dollar against the euro.
Our revenues are also affected by fluctuations in the value of the currency in
which the products are sold relative to the value of the currencies of the
countries from which the products were shipped. For example, appreciation of the
euro against the U.S. dollar may adversely affect the revenues or margins from
our products manufactured on an euro-cost basis and sold in the United States as
our products become less price competitive on a U.S. dollar basis or sell for
lower prices on a euro basis, which reduces our margins.

Factors Affecting Expenses

     We separate our principal expenses into:

        o  cost of sales;

        o  selling and marketing expenses;

        o  general and administrative expenses; and

        o  interest expense.

     The major components of cost of sales are raw materials and payroll and
energy expenses related to the manufacturing of our products. Depreciation of
our manufacturing equipment and production sites, as well as research and
development expenses associated with the development of our products, are also
included in this category.

     Selling and marketing expenses are comprised primarily of advertising
expenses (including the sponsorship of professional athletes) and payroll
expenses related to the selling department. Also included in this category are
commission payments to sales teams. General and administration expenses include
warehousing expenses and various administrative costs.

     Approximately 70% of our annual capital expenditures are for maintenance of
our facilities and equipment, including molds and tools. Some product lines
change annually as new products are introduced, while others are in use for
several years.

     In connection with ordinary share options granted to officers we have
incurred a non-cash compensation expense of approximately $0.7 million and $0.6
million in the 2003 and 2004 fiscal years, respectively. As of December 31,
2004, deferred non-cash compensation relating to previously granted stock
options amounted to approximately $1.2 million. This amount will be recognized
as an expense over the remaining vesting terms of the options. Any further stock
option grants will result in additional non-cash compensation expense being
recognized.

     Our expenses, as reported in U.S., dollars are also affected by movements
in the exchange rate of the U.S. dollars against the currencies of the countries
in which we operate and sell our goods. Of our cost of goods sold and other
operating expenses 26% is generated in U.S. dollars whereas 66% is generated in
euros. Because a portion of our U.S. dollar revenues are generated from products
manufactured on an euro-cost basis, the appreciation of the euro against the
U.S. dollar has increased our expenses when translated into U.S. dollar and
adversely affected our margins.


Critical Accounting Policies and Estimates


     The preparation of our consolidated financial statements required us to
make estimates and assumptions that affected reported amounts of assets and
liabilities and the results during the reporting period. On an on-going basis,
we evaluate our estimates and judgements, including those related to product
returns, bad debts, inventories, tangible and intangible long-lived assets,
income taxes and warranty obligations. The estimates and judgements are based on
historical experiences and on various other factors that are believed to be
reasonable under the circumstances.


                                       27
<PAGE>

Pension and Postretirement benefits

     The Company accounts for the costs of pension plans and postretirement
benefits in accordance with SFAS 87, "Employers' Accounting for Pensions" ("SFAS
87") and SFAS 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" ("SFAS 106"), respectively.

     The Company sponsors defined benefit pension and postretirement benefit
plans. The postretirement plans provide leaving indemnities paid to employees at
some Austrian and other European locations. The indemnities are based upon years
of service and compensation levels and are generally payable upon retirement or
dismissal in some circumstances, after predetermined number of years of
services.

     The calculation of the Company's pension expense and pension liability
associated with its defined benefit pension plans requires the use of a number
of assumptions that the Company deems to be "critical accounting estimates."
Changes in these assumptions can result in different pension expense and
liability amounts, and actual experience can differ from the assumptions. The
Company believes that the most critical assumptions are the discount rate and
the expected rate of compensation increase.

     At the end of each year, the Company determines the discount rate to be
used for pension liabilities. In estimating this rate, the Company looks to
rates of return on high quality, long term corporate bonds that receive one of
the two highest ratings given by a recognized ratings agency. The Company
discounted its future pension liabilities using rates of 5.0% and 4.5% at
December 31, 2003 and 2004, respectively. The discount rate used to determine
the value of liabilities has a significant effect on expense.

     The actuarial assumptions on the expected rate of compensation are
determined by management based on the present rate of compensation increase and
upon information available to the Company. The expected rate of compensation
increase in the pension plans is 2.4% and 2.7% at December 31, 2003 and 2004,
respectively.

     The Company expects to make insignificant amounts of employer contributions
during 2005. The estimate of contributions is based on significant assumptions,
such as pension plan benefit levels. Actual contributions could differ.


Allowance For Doubtful Accounts

     We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required. We
specifically analyze accounts receivables and evaluate historical bad debt,
customer concentrations, customer creditworthiness, current economic trends and
changes in our customer payment terms when evaluating the adequacy of the
allowance for doubtful accounts. These estimations are continually reviewed.
Recoveries related to changes in reserves did not occur in 2004.

Impairment Of Long Lived Assets

     Property, plant and equipment are initially stated at cost. Depreciation on
property, plant and equipment is computed using the straight-line method over
their estimated useful lives. We have determined useful lives of property, plant
and equipment after consideration of historical results and anticipated results
based on our current plans. Our estimated useful lives represent the period the
asset remains in service assuming normal routine maintenance. We review the
estimated useful lives assigned to property, plant and equipment when our
business experience suggests that they do not properly reflect the consumption
of the economic benefits embodied in the property, plant or equipment nor result
in the appropriate matching of cost against revenue. Factors that lead to such a
conclusion may include physical observation of asset usage, examination of
realized gains and losses on asset disposals and consideration of market trends
such as technological obsolescence or change in market demand.

     When events or changes in circumstances indicate that the carrying amount
may not be recoverable, property, plant and equipment are reviewed for
impairment. When such assets' carrying value is greater than the undiscounted
cash flows estimated to be generated by those assets, an impairment loss is
recognized equal to the difference between the fair value of the assets and
their carrying value. Factors we consider important, which could trigger an
impairment review, include the following:

o    significant underperformance relative to historical or projected future
     results;
o    significant changes in the manner of our use of the acquired assets or the
     strategy for the related business; and
o    significant negative industry or economic trends.



                                       28
<PAGE>

     The assessment of tangible and intangible long-lived assets for possible
impairment requires certain judgements and estimates to be made by us, primarily
related to our projected cash flows. Our projected cash flows reflect a number
of assumptions including sales volume, prices, and terminal values of tangible
long-lived assets, which are based on the expected life of products and
forecasted life cycle. While we believe that our assumptions are appropriate,
such estimates could differ materially from what will actually occur in the
future.

     In accordance with SFAS 142, we also perform impairment reviews of our
goodwill and trademarks at least annually. We test goodwill for impairment using
the two-step process prescribed in SFAS 142. The first step is a screen for
potential impairment, while the second step measures the amount of impairment,
if any. Our trademark impairment test involves comparing the fair value of the
trademark to its carrying value.

     This review is based upon our projections of anticipated future cash flows.
The most significant variables in determining cash flows are discount rates, as
well as the assumptions and estimates used to determine the cash inflows and
outflows. Management determines discount rates to be used based on the risk
inherent in the related activity's current business model and industry
comparisons. While we believe that our assumptions are appropriate, such amounts
estimated could differ materially from what will actually occur in the future.


Liabilities For Product Warranties


     We provide for the estimated cost of product warranties and product returns
at the time revenue is recognized. Our warranty provision is established based
on our best estimates of the amounts necessary to settle future and existing
claims on products sold as of the balance sheet date. Our product return
provisions are based on our historical experiences. While we believe that our
warranty and product return provisions are adequate and that the judgment
applied is appropriate, such amounts estimated to be due and payable could
differ materially from what will actually transpire in the future. We update
these estimated charges periodically. The actual product performance and/or
field expense profiles may differ, and in those cases we adjust our warranty
reserves accordingly. Future warranty expenses may exceed our estimates, which
could lead to an increase in our cost of sales. Significant differences from our
estimates did not occur in the past.

Inventory Obsolescence

     Our chosen markets are competitive and subject to fluctuations in demand
and technological obsolescence. We periodically review our inventory for
obsolescence and declines in market value below cost. Estimated obsolescence or
unmarketable inventory led to write-downs of our inventory to the estimated
market value based upon assumptions about future demand and market conditions.
If actual future demand or market conditions are less favourable than those
projected by us, additional inventory write-downs may be required. No
significant write downs were recognized in 2004.

Realizability Of Tax Loss Carryforwards

     We record a valuation allowance to reduce our deferred tax assets to the
amount that we believe is more likely than not to be realized. While we have
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event we
were to determine that we would not be able to realize all or part of our net
deferred tax assets in the future, an adjustment to the deferred tax assets
would be charged to income in the period such determination was made. Changes in
local income tax rates may also effect deferred tax assets.

     As of December 31, 2004, we had approximately $437.4 million (net of
restricted portion due to the EC decision) of net operating tax loss carry
forwards, primarily in Austria. Austria allows an unlimited carryover of net
operating losses. Accordingly, we believe it is more likely than not that we
will utilize $418.2 million of net operating loss carryforwards to lower cash
taxes on future taxable income (see Note 20 to the consolidated financial
statements). The realization of operating loss carry forwards is ultimately
dependent upon our ability to generate future earnings in the respective
jurisdictions. There can be no guarantee that we will generate future earnings.

Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standard Board ("FASB") issued a
revised SFAS No. 123(R), "Share-Based Payment - Amendment of FASB Statements No.
123 and 95" ("SFAS 123(R)"). SFAS 123(R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services or incurs liabilities in exchange for goods or services
that are based on the fair value of the entity's equity instruments, focusing
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS 123(R) requires entities to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award (with limited
exceptions) and recognize the cost over the period during which an employee is
required to provide service in exchange for the award. We are required to adopt
SFAS 123(R) effective July 1, 2005 , and we are currently in the process of
evaluating the impact of SFAS 123(R).



                                       29
<PAGE>

     In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non monetary
Assets - An Amendment of APB Opinion No. 29" ("SFAS 153") which eliminates the
exception for non monetary exchanges of similar productive assets and replaces
it with a general exception for exchanges of non monetary assets that do not
have commercial substance. We are required to adopt SFAS 153 for non monetary
asset exchanges occurring in the first quarter of 2006. We are currently in the
process of evaluating the impact of SFAS 153.

     In November 2004, FASB issued SFAS No. 151, "Inventory Costs -- an
amendment of ARB No. 43, Chapter 4" ("SFAS 151"). This Statement amends the
guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). This Statement requires that those items
be recognized as current-period charges regardless of whether they meet the
criterion of abnormal. In addition, this Statement requires that allocation of
fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The provisions of this Statement shall be
effective for inventory costs incurred during fiscal years beginning after June
15, 2005. We are currently in the process of evaluating the impact of SFAS 151.

     In December 2003, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS 132(R)"). The provisions of that Statement do
not change the measurement and recognition provisions of SFAS No. 87,
"Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 132(R) replaces SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," and
requires additional disclosures pertaining to plan assets, benefit obligations,
key assumptions, and the measurement date. This standard is effective for
domestic plans for the reporting period ending after December 15, 2003 (and June
15, 2004 for disclosure of estimated future benefit payments) and for foreign
plans and non-public entities for interim periods ending after December 15, 2003
and for years ending after June 15, 2004. We have adopted this standard and has
provided the required disclosures.

     In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46)
"Consolidation of Variable Interest Entities, an interpretation of ARB 51". In
December 2003, the FASB issued FIN 46R, "Consolidation of Variable Interest
Entities," which amended FIN 46. FIN 46R was effective immediately for
arrangements entered into after January 31, 2003, and became effective January
1, 2004 for all arrangements entered into before February 1, 2003. FIN 46R
requires existing unconsolidated variable interest entities ("VIEs") to be
consolidated by their primary beneficiary. The primary beneficiary of a VIE is a
party that absorbs a majority of the entity's expected losses or receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, which are the ownership interests, contractual interests, or
other pecuniary interests in an entity that changes with changes in the fair
value of the entity's net assets excluding variable interests. Prior to FIN 46R,
we included an entity in its consolidated financial statements only if it
controlled the entity through voting rights. The adoption of FIN 46 and FIN 46R
did not have a material impact on our financial position or result of
operations.

     In November 2002, the Emerging Issues Task Force ("EITF") reached a
consensus on EITF Issue No. 00-21, "Revenue Arrangements with Multiple
Deliverables" ("EITF 00-21"). EITF 00-21 provides guidance on how to account for
arrangements that involve the delivery or performance of multiple products,
services and/or rights to use assets. The provisions of EITF 00-21 apply to
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. The adoption of EITF 00-21 did not have a material impact on our
consolidated financial statements.


Results of Operations


Year Ended December 31, 2003 Compared to Year Ended December 31, 2004

     The following table sets forth each line item of our consolidated statement
of operations as a percentage of total revenues for the periods shown:


                                       30
<PAGE>


<TABLE>
<CAPTION>

                                                                        For the Years Ended
                                                                            December 31,
                                                                    2003                   2004             Change
                                                             ---------------------  -------------------  ------------
                                                                $           %           $           %          $
                                                             --------  -----------  ----------  -------  ------------
                                                                      (in thousands, except percentages)
<S>                                                          <C>         <C>        <C>          <C>         <C>
Total net revenues......................................     422,330     100.0%     467,014      100.0%      44,684
Cost of sales...........................................     266,023      63.0%     294,360       63.0%      28,337
                                                            --------     ------    --------      ------     -------
Gross profit............................................     156,307      37.0%     172,654       37.0%      16,347
                                                            ========     ======    ========      ======     =======
Selling and marketing expense...........................     108,193      25.6%     118,511       25.4%      10,318
General and administrative expense (excluding
non-cash compensation expense)..........................      38,847       9.2%      41,883        9.0%       3,036
Non-cash compensation expense...........................         654       0.2%         555        0.1%         (99)
Gain on sale of property................................          --                 (5,650)      (1.2%)     (5,650)
Restructuring costs.....................................       8,368       2.0%       2,347        0.5%      (6,021)
                                                            --------     ------    --------      ------     -------
Operating Income........................................         245       0.1%      15,008        3.2%      14,763
                                                            ========     ======    ========      ======     =======
Interest expense........................................     (13,999)     (3.3%)    (25,699)      (5.5%)    (11,700)
Interest income.........................................       1,050       0.2%       2,121        0.5%       1,071
Foreign exchange loss...................................      (1,103)     (0.3%)       (606)      (0.1%)        497
Other income (expense), net.............................         (18)     (0.0%)        (97)      (0.0%)        (79)
                                                            --------     ------    --------      ------     -------
Income (loss) from operations before income taxes.......     (13,825)     (3.3%)     (9,274)      (2.0%)      4,551
                                                            ========     ======    ========      ======     =======
Income tax expense......................................        (832)     (0.2%)    (27,661)      (5.9%)     26,829
                                                            --------     ------    --------      ------     -------
Net Loss................................................     (14,657)     (3.5%)    (36,935)      (7.9%)    (22,278)
                                                            --------     ------    --------      ------     -------
</TABLE>


     Total Net Revenues. For the twelve months ended December 31, 2004, total
net revenues increased by $44.7 million, or 10.6%, to $467.0 million from $422.3
million in 2003. This increase was mainly due to the strengthening of the euro
against the U.S. dollar as well as a positive development of the sales in our
winter sports and diving divisions.

     The following table sets forth revenues for each of our product categories
for each of the years ended December 31, 2003 and 2004:




                                             For the Years Ended December 31,
                                             -----------------------------------
                                               2003          2004      % Changes
                                             ---------   -----------   ---------
                                            (in thousands, except percentages)
Product category:
Winter Sports........................... $    188,768  $    223,211       18.2%
Racquet Sports..........................      166,417       168,037        1.0%
Diving..................................       66,322        75,453       13.8%
Licensing...............................        9,701        11,059       14.0%
                                          -----------   -----------   ---------
Total Revenues..........................      431,208       477,759       10.8%
Other Revenues..........................        1,394         1,326       (4.9%)
Sales Deductions........................      (10,272)      (12,071)      17.5%
                                          -----------   -----------   ---------
     Total Net Revenues................. $    422,330  $    467,014       10.6%
                                          -----------   -----------   ---------

     Winter Sports revenues increased by $34.4 million, or 18.2%, to $223.2
million from $188.8 million in 2003. This increase was due to the strengthening
of the euro against the U.S. dollar, higher sales volumes for bindings, skis and
snowboard equipment and higher sales volumes and prices for our ski boots.

     Racquet Sports revenues increased by $1.6 million, or 1.0%. This increase
resulted mainly from the strengthening of the euro against the U.S. dollar.
Although sales volumes and prices for our tennis racquets remained stable we
faced a decrease in sales volumes and prices for our tennis balls.

     Diving product revenues increased by $9.1 million, or 13.8%. This results
mainly from increased sales volumes due to better product availability and the
strengthening of the euro against the U.S. dollar.

     Licensing revenues increased by $1.4 million, or 14.0% mainly due to
increased revenues from existing contracts and from new licensing agreements.




                                       31
<PAGE>

     Other revenues include amounts billed to customers for shipping and
handling.

     Sales deductions consist of sales incentives, which are earned by our
customers subsequent to delivery of our product, including cash discounts for
volume rebates and other than cash consideration. We acknowledge that our policy
was at variance with EITF 01-09. As a result of the adoption of EITF 01-09, in
the financial statements for 2003 we reclassified sales incentives of $10.3
million from selling and marketing to sales deductions. Sales deductions
increased by $1.8 million, or 17.5%, to $12.1 million from $10.3 million in 2003
mainly due to increased revenues and the strengthening of the euro against the
U.S. dollar.

     Cost of Sales. Cost of Sales increased by $28.3 million or 10.7%. Driven by
the oil and steel price development on the world market we were facing
significant cost increases in plastic components (bindings, boots, fins),
carbon-fibres and metal parts (e.g. binding components and ski edges).

     Gross Profit. Gross Profit increased by $16.3 million to $172.7 million
from $156.3 million in 2003 due to increased revenues. Gross margin remained
stable at 37.0% in 2004 compared to the comparable 2003 period.

     Selling and Marketing Expense. Selling and marketing expense increased by
$10.3 million, or 9.5%, to $118.5 million from $108.2 million in 2003. The
increase was due mainly to the strengthening of the euro against the U.S.
dollar, which adversely impacted our predominantly euro denominated costs. In
addition, our variable distribution costs increased due to higher sales.

     General and Administrative Expense. General and administrative expense
increased by $3.0 million, or 7.8%, due mainly to the strengthening of the euro
against the U.S. dollar, which adversely impacted our predominantly euro
denominated costs.

     Non-Cash Compensation Expense. We recorded $0.6 million in 2004 compared to
$0.7 million in 2003 as non-cash compensation expense due to the grant of stock
options under our stock option plans of 1998 and 2001, and the resulting
amortization expense.

     Gain on sale of property. We recorded a gain from the sale of our premises
in Ireland of $5.7 million in 2004.


     Restructuring .The transfer of the skiboot production from Estonia to
Czechia, the transfer of the jacket production from Estonia to Bulgaria, the
transfer of the tennis-ball production from Ireland to Phoenix USA and the
expansion of our ski plant in Budweis have been completed successfully.We
started materializing benefits of these projects in the second half of 2004
partly offset by one-off costs and expect all benefits to be materialized in
2005. We recorded restructuring costs of $2.3 million in 2004 consisting of
dismissal and transfer costs in connection with the closing of our production
facility in Mullingar, Ireland and our plant in Tallinn, Estonia.

     Operating Income. As a result of the foregoing factors, operating income
for the twelve months ended December 31, 2004 increased by $14.8 million to
$15.0 million.

     Interest Expense. 2004 interest expense increased by $11.7 million or 83.6%
to $25.7 million from $14.0 million in 2003. This increase was mainly due to the
following: write-off of the capitalized debt issuance costs of $3.2 million
relating to our former 10.75% senior notes, which were repaid with proceeds from
our new 8.5% senior notes in January 2004; the premium of $4.4 million for the
early redemption of the 10.75% senior notes and the higher interest expenses due
to increased debt of the group. The strength of the euro against the U.S. dollar
further impacted these predominantly euro denominated expenses.

     Interest Income. Interest income increased by $1.1 million, or 102%, due to
higher cash on hand during this period as well as due to the strengthening of
the euro against the U.S. dollar.

     Foreign Exchange Loss. In 2004 we recorded a foreign currency exchange loss
of $0.6 million, compared to a loss of $1.1 million in 2003.

     Other Income (Expense), net. Other expense, net increased by $0.08 million
to a net expense of $0.1 million from $0.02 million in 2003.

     Income Tax Expens. In 2004, income tax expense increased by $26.8 million
to $27.7 million from $0.8 million in 2003. This increase in income tax expense
is mainly due to a reduction in the Austrian tax rate which led to a decrease in
deferred tax assets resulting from tax losses carried forward of $24.9 million.

     Net Income (Loss). As a result of the foregoing factors, we had a net loss
of $36.9 million in 2004, compared to a net loss of $14.7 million in 2003.




                                       32
<PAGE>

Year Ended December 31, 2002 Compared to Year Ended December 31, 2003

     The following table sets forth each line item of our consolidated statement
of operations as a percentage of total revenues for the periods shown:

<TABLE>
<CAPTION>

                                                                    For the Years Ended
                                                                        December 31,
                                                               2002                     2003                Change
                                                       ---------------------   ----------------------     ---------
                                                            $           %            $           %            $
                                                       ----------  ---------   -----------  ---------     ---------
                                                                   (in thousands, except percentages)
<S>                                                      <C>         <C>          <C>         <C>            <C>
Total net revenues...............................        379,950     100.0%       422,330     100.0%         42,380
Cost of sales....................................        233,402      61.4%       266,023      63.0%         32,621
                                                       ---------   ---------   ----------    -------      ---------
  Gross profit...................................        146,548      38.6%       156,307      37.0%          9,759
                                                       =========   =========   ==========    =======      =========
Selling and marketing expense....................         95,082      25.0%       108,193      25.6%         13,111
General and administrative expense (excluding
   non-cash compensation expense)................         32,081       8.4%        38,847       9.2%          6,767
Non-cash compensation expense....................          1,632       0.4%           654       0.2%           (978)
Restructuring costs..............................             --         --         8,368       2.0%          8,368
                                                       ---------   ---------   ----------    -------      ---------
  Operating income...............................         17,753       4.7%           245       0.1%        (17,508)
                                                       =========   =========   ==========    =======      =========
Interest expense.................................        (11,677)     (3.1%)      (13,999)     (3.3%)        (2,322)
Interest income..................................            940       0.2%         1,050       0.2%            110
Foreign exchange loss............................         (7,387)     (1.9%)       (1,103)     (0.3%)         6,284
Other income (expense), net......................            387       0.1%           (18)     (0.0%)          (405)
                                                       ---------   ---------   ----------    -------      ---------
  Income (loss) from operations before income taxes           15       0.0%       (13,825)     (3.3%)       (13,840)
                                                       =========   =========   ==========    =======      =========
Income tax expense...............................         (2,630)     (0.7%)         (832)     (0.2%)         1,798
                                                       ---------   ---------   ----------    -------      ---------
  Net Loss.......................................         (2,615)     (0.7%)      (14,657)     (3.5%)       (12,043)
                                                       ---------   ---------   ----------    -------      ---------
</TABLE>

     Total Net Revenues. For the twelve months ended December 31, 2003, total
net revenues increased by $42.4 million, or 11.2%, due to higher sales volumes
of winter sports products and a positive impact from the strengthening of the
euro against the U.S. dollar, partially offset by lower sales volumes of racquet
sports and diving products.

     The following table sets forth revenues for each of our product categories
for each of the years ended December 31, 2002 and 2003:


<TABLE>
<CAPTION>

                                                      For the Years Ended December 31,
                                               ---------------------------------------------
                                                   2002            2003          % Changes
                                               -------------  --------------  --------------
                                                     (in thousands, except percentages)
Product category:
<S>                                           <C>             <C>                    <C>
Winter Sports.............................    $     144,667   $     188,768          30.5%
Racquet Sports............................          168,822         166,417          (1.4%)
Diving....................................           65,600          66,322           1.1%
Licensing.................................            8,398           9,701          15.5%
                                               ------------    ------------   ------------
Total Revenues............................          387,487         431,208          11.3%
Other Revenues............................            1,246           1,394          11.9%
Sales Deductions..........................           (8,783)        (10,272)         17.0%
                                               ------------    ------------   ------------
     Total Net Revenues...................    $     379,950   $     422,330          11.2%
                                               ------------    ------------   ------------
</TABLE>

     Winter Sports revenues increased by $44.1 million, or 30.5%, due to higher
sales volumes across all product lines and the strengthening of the euro against
the US dollar.

     Racquet Sports revenues decreased by $2.4 million, or 1.4%, mainly because
of lower sales volumes and average selling prices of tennis racquets and balls.
The tennis industry as a whole suffered a decline in 2002 and 2003, due to
consumer reaction to a slowing economy. During the fourth quarter 2003 we saw
some recovery in sales volumes relative to each of the previous three quarters.




                                       33
<PAGE>

     Diving product revenues increased by $0.7 million, or 1.1%, due to the
strengthening of the euro against the U.S. dollar, partially offset by a
decrease in sales volumes. We believe that the diving market is suffering from
both consumer reaction to the perceived threat of terrorism and the general
downturn in the economy, which has resulted in fewer people traveling worldwide
to dive centers and resorts and making corresponding purchases of equipment.

     Licensing revenues increased by $1.3 million, or 15.5%, due to the
strengthening of the euro against the U.S. dollar.

     Other revenues consist of amounts billed to the customer in a sales
transaction for shipping and handling. We acknowledge that our policy was at
variance with EITF 00-10. As a result of the adoption of EITF 00-10, in the
financial statements for 2002 and 2003 we reclassified amounts billed to
customers for shipment and handling of $1.2 million and $1.4 million,
respectively from selling and marketing to other revenues.

     Sales deductions consist of sales incentives, which are earned by our
customers subsequent to delivery of our product, including cash discounts for
volume rebates and other than cash consideration. We acknowledge that our policy
was at variance with EITF 01-09. As a result of the adoption of EITF 01-09, in
the financial statements for 2002 and 2003 we reclassified sales incentives of
$8.8 million and $10.3 million, respectively from selling and marketing to sales
deductions. Sales deductions increased by $1.5 million, or 17.0%, to $10.3
million from $8.8 million in 2002 mainly due to increased revenues and the
strengthening of the euro against the U.S. dollar.

     Gross Profit. Gross profit increased by $9.8 million to $156.3 million in
2003 from $146.5 million in 2002. Gross margin decreased to 37.0% in 2003 from
38.6% in 2002 due to lower average prices, the inclusion of costs associated
with various reorganization programs, and the strengthening of the euro against
the U.S. dollar which adversely affected our euro-denominated cost. To lower our
expenses, we initiated a cost reduction program in 2003 that, in part, involved
migrating certain operations out of higher-cost countries. Please see "Item 4.B
Business Overview - Our Strategy - Reduce Costs" for a description of our cost
reduction program. Gross Profit for 2002 and 2003 has changed due to the
adoption of EITF 01-09 (Sales deductions) and EITF 00-10 (Other revenues).

     In 2003, we have transferred all of our manufacturing operations in
Tallinn, Estonia, which manufacture ski boots and certain diving products, to a
recently purchased plant in Litovel, Czech Republic. We expect lower overhead
costs for these manufacturing operations as they will share administrative and
management resources with our existing infrastructure in Austria. We have also
transferred some of our ski manufacturing from our plant in Kennelbach, Austria
to our existing plant in Budejovice, Czech Republic where production costs are
considerably lower. For these activities we recognized $1.6 million of
additional costs primarily related to inventory disposals and additional
preproduction costs which increased our cost of sales and $0.6 million
restructuring costs (see below).

     Selling and Marketing Expense. Selling and marketing expense increased by
$13.1 million, or 13.8%, due to exchange rate effects on these predominantly
euro-denominated costs and an increase of the allowances for bad debts amounting
to $1.9 million as a result of the illiquidity of an Italian customer. Selling
and Marketing Expense for 2002 and 2003 have changed due to the adoption of EITF
01-09 (Sales deductions) and EITF 00-10 (Other revenues).

     General and Administrative Expense. General and administrative expense
increased by $6.8 million, or 21.1%, mainly due to exchange rate effects on
these predominantly euro-denominated costs, as well as $1.4 million termination
costs and other reorganization costs.

     Non-Cash Compensation Expense. Non-cash compensation expense is due to the
grant of stock options under our stock option plans of 1998 and 2001, and the
resulting amortization expense. We record stock-based compensation expense based
on the grant-date fair values of the stock options, computed using the
Black-Scholes option pricing model. Stock-based compensation expense is
recognized over the vesting term of the options. No new option grants occurred
in 2002 and 2003 due to the declining performance of our stocks and the
Management and Supervisory Boards' focus on improving our cost structure.

     Restructuring. We announced a restructuring program in the United States,
Ireland and Estonia which is expected to resulting $10.5 million, of which $8.4
million was incurred in 2003. Please see "Item 4.B Business Overview - Our
Strategy - Reduce Costs" for a description of our cost reduction program. The
most significant component of this program is aimed at increasing the
utilization of our tennis ball production capabilities in the United Sates.
Accordingly, we are in the process of closing our tennis ball production
facility in Mullingar, Ireland and transferring these operations to the
existing, under-utilized plant in Phoenix, Arizona. We recognized restructuring
costs totaling $7.0 million relating to this program consisting of an impairment
of $2.6 million and employee severance costs of $4.4 million. The continual
decline in the tennis ball market has adversely affected our ability to
efficiently operate two facilities. We expect our decision to consolidate our
facilities to have a favorable impact on the cost to produce tennis balls. The
full benefit of this plan is expected to begin as early as the second half of
2004.

     In order to increase utilization our U.S. warehouse facilities and to
centralize U.S. headquarter functions, we recorded restructuring costs of $0.4
million consisting of termination benefits incurred for the movement of our U.S.
winter sports organization to our U.S.



                                       34
<PAGE>

headquarters, the shutdown of current warehouse facilities, the closing of the
related office, and other costs associated with the restructuring program.
Additionally, we shut down our U.S. warehouse for diving products. Upon
discontinuing use of the facility we expensed $0.4 million for excess rent. In
2003 we have realized $2.1 million as a benefit from this program.

     Our production of ski boots and certain diving products in Estonia has been
transferred to our new Litovel, Czech Republic facility. In 2003, we incurred
$0.6 million related to excess rent and other exit costs.

     Operating Income. As a result of the foregoing factors, including the costs
of the restructuring program as well as the strengthening of the euro against
the U.S. dollar which adversely affected our euro-denominated costs, operating
income for the twelve months ended December 31, 2003 decreased by $17.5 million,
or 98.6%.

     Interest Expense. Interest expense increased by $2.3 million or 19.9% to
$14.0 million in 2003 from $11.7 million in 2002. The increase was due to the
strength of the euro against the U.S. dollar, in particular with respect to
interest on our euro-denominated 10.75% senior notes. In January 2004, one of
our subsidiaries sold (euro)135.0 million of 8.5% unsecured Senior Notes due
2014 and, with the proceeds, redeemed the outstanding 10.75% senior notes as
well as certain short-term loans. As a result of this new Senior Notes issuance
interest costs are expected to increase in 2004. The Company's interest expenses
are mostly in euro.

     Interest Income. Interest income increased by $0.1 million, or 11.7%, due
to higher cash on hand during this period.

     Foreign Exchange Loss. We recorded a foreign currency exchange loss of $1.1
million, compared to a loss of $7.4 million in 2002. This reduction was
primarily due to the reclassification of non-euro denominated intercompany
accounts receivable at one of our euro based subsidiaries to
permanently-invested intercompany receivables. We made this decision in 2003
because of our focus to use cash flows to fund the subsidiary's operations and
future growth.

     Other Income (Expense), net. Other income, net, decreased by $0.4 million
to a net expense of $0.02 million in 2003 from a net income of $0.4 million in
2002.

     Income Tax Expense. In 2003, income tax expense decreased by $1.8 million
to $0.8 million in 2003 from $2.6 million in 2002. The change in tax expense is
mainly attributed to an increase of deferred tax assets, primarily in Germany
and Austria due to current year losses under local tax law.

     Net Income (Loss). As a result of the foregoing factors, we had a net loss
of $14.7 million in 2003, compared to a net loss of $2.6 million in 2002.

5.B. Liquidity and Capital Resources

     Our liquidity needs arise principally from working capital requirements,
capital expenditures and asset acquisitions. Given the nature of winter sports,
and to a lesser extent racquet sports, our operating cash flow and working
capital needs are highly seasonal. See "Factors Affecting Revenues". Our need
for cash is greater in the third and fourth quarters when cash generated from
operating activities, together with draw downs from our bank lines, are invested
in inventories and receivables. Historically, our primary sources of liquidity
have been cash provided from operating activities, proceeds from the issuance of
debt and equity securities and borrowings under various credit facilities.

     In 2004 cash generated from operating activities decreased by $9.6 million,
or 55.1% to $7.8 million from $17.3 million in 2003. This decrease is mainly the
result of the higher net loss in 2004. We increased our cash position with a
portion of the net proceeds from our newly issued 8.5% senior notes due 2014. We
used part of the proceeds from the 8.5% senior notes to redeem at a premium our
outstanding 10.75% senior notes due 2006, certain other long-term debts, and
$29.7 million of originally classified as short-term borrowings and reclassified
as long-term debt, as of December 31, 2003.In addition, we used part of these
proceeds, together with cash from operation and cash from sale of our premises
in Ireland to purchase property, plant and equipment of $23.2 million. Finally,
we used $13.6 million to purchase available for sale marketable securities.

     Total debt as of December 31, 2004, was $242.7 million, consisting of
short-term borrowings of $39.9 million, other long-term debt of $31.0 .million
and 8.5% Senior Notes of $171.8 million.

     As of December 31, 2004, we had $2.5 million in available unused credit
facilities and reported $59.6 million cash on hand. Net cash provided by from
operating activities decreased from $23.3 million in 2002 to $17.3 million in
2003. This decrease is a result of lower net income and a higher level of
accounts receivable partially offset by a greater reduction of inventories. The
cash flows from operating activities were primarily used to purchase property,
plant and equipment of $16.9 million and to repurchase treasury stock of $1.2
million.

     As of December 31, 2003, we had $41.3 million in unrestricted cash and cash
equivalents and aggregate undrawn credit facilities of $8.7 million under
operating credit lines, Austrian bank loans, and other lines of credit. In
addition, $15.0 million was available under



                                       35
<PAGE>

the U.S. loan agreement.

     As described above, we operate in a multi-currency environment and are
subject to currency translation risk and, to a lesser extent, currency
transaction risk. We incur transaction risk whenever one of our subsidiaries
enters into a transaction using a currency other than its functional currency.
In order to reduce this risk, we seek to match our revenues and costs in each
currency. We also hedge part of our firm commitments for sales to Japan,
Switzerland and Canada through forward contracts and options with Austrian
banks. As of December 31, 2004, we had ten forward contracts on Japanese yen
totaling $12.9 million, twelve Canadian dollar forward contracts totaling $9.0
million, five British pounds forward contracts totaling $5.5 million and fours
Swiss franc forward contracts totaling $10.2 million. We recorded foreign
exchange losses of $7.4, $1.1 and $0.6 million in 2002, 2003 and 2004. See
"Quantitative and Qualitative Disclosures About Market Risk".

     We finance our operations through short- and long-term borrowings under
agreements available to us and our subsidiaries as well as other debt.

     Based upon current operations and our historical results, we believe that
our cash flow from operations will be adequate to meet our anticipated
requirements for working capital, capital expenditures and scheduled interest
payments. In January 2004, we sold (euro)135 million of 8.5% senior notes. With
the proceeds of this sale, we redeemed all of our outstanding 10.75% senior
notes, paid back certain other debts and retained the remaining funds for
working capital and general corporate purposes. As a result of the repayment of
certain debt, our available credit facilities will be reduced. Additional
financing may be required to fund unanticipated capital and working capital
expenditures. Although we believe that we will have enough money available to
fund our planned working capital and capital expenditures for the next several
years, we cannot assure you that we will not require additional financing for
our operations.

Loan Agreements


     Sale-Leaseback.We entered into an agreement on June 28, 2002, whereby we
sold land and building to an unrelated bank and leased it back over a 15 year
term. The proceeds of this sale were (euro)10.6 million. We have the obligation
to purchase the property back after 15 years for (euro)8.2 million. We may also
repurchase the property at our option from the first until the tenth year of the
arrangement for the present value of the future lease payments and the remaining
residual value.

     We are also required to pay the bank a monthly deposit of (euro)0.01
million, which will be repaid to us, plus interest of 6.7%, at the time of
repurchase.

     Because of our continuing involvement, this transaction has been accounted
for as a financing such we have recorded (euro)10.6 million of cash and
long-term borrowings at the inception date of this agreement. At December 31,
2003 and 2004, the remaining obligation under the financing agreement is $13.2
and $14.1 million, respectively.

     Operating Credit Lines. As of December 31, 2003 and 2004, we had
outstanding debt of $2.3 million and $0.2 million, respectively with various
Austrian banks. We had an undrawn credit facilities as of December 31, 2003 of
$7.9 million. The weighted average interest rate on outstanding loans was at
December 31, 2003 and 2004 3.6% and 4.5%, respectively.

     Oesterreichische Kontrollbank Aktiengesellschaft. As of December 31, 2003
and 2004, we had outstanding borrowings under this line of credit of $18.9
million and $20.4 million, respectively with Austrian banks in the context of
Austrian export promotion programs administered by Oesterreichische Kontrollbank
Aktiengesellschaft. The weighted average interest rate on this indebtedness was
at December 31, 2003 and 2004 2.15% and 2.65%, respectively. These loans had
been made in form of credits for specific exports. The amounts owed are secured
by bills of exchange and by all Austrian trade receivables. No more credit
facilities are available under these terms of commitment.

     Senior Notes On July 15, 1999, one of our wholly-owned subsidiaries, Head
Holding issued (euro)100.0 million of senior notes. The notes bore interest of
10.75% per annum, which was payable semi-annually and was to mature in total on
July 15, 2006. Among other restrictions, the notes included certain restrictive
terms regarding investments, distributions and incurrence of additional
indebtedness by us. On January 5, 2000, a registration statement for the
exchange of the original 10.75% senior notes for new 10.75% senior notes was
made effective by the U.S. Securities Exchange Commission (SEC). On February 9,
2000, this Exchange Offer was consummated. In October 2000, we repurchased
(euro)30.9 million of its senior notes in a series of transactions using part of
the proceeds of our initial public offering. In July 2002, we repurchased
another (euro)3.6 million of its senior notes. At December 31, 2003, we had
(euro)65.5 million ($82.9 million) of senior notes outstanding. In January 2004,
one of our subsidiaries issued (euro)135.0 million of 8.5% unsecured senior
notes due 2014, guaranteed by Head N.V. and certain of its subsidiaries. The
notes are listed on the Luxembourg Stock Exchange. With the proceeds from the
sale, all of our outstanding 10.75% senior notes due 2006 were redeemed. The
total redemption payment was (euro)70.1 million of which (euro)3.5 million
represents the redemption premium. In addition, we used a portion of the
remaining proceeds to repay (euro)25.8 million of other outstanding debt. In
June 2004, we repurchased the equivalent of (euro)5.5 million of its 8.5% senior
notes for (euro)5.0 million ($5.9 million) and realized a gain of $0.4 million.
As a result of this transaction, we wrote-off $0.07 million of debt issue costs.
At December 31, 2004, we had (euro)126.2 million ($171.8 million) of senior
notes outstanding. As of December 31, 2003, (euro)25.1 million ($31.8 million)
short-term loans were reclassified to long-term debt due to our intention to
refinance them with senior notes.



                                       36
<PAGE>

The remainder of the proceeds will be used for working capital and general
corporate purposes.


     Mortgage Agreement

     In 2002, one of our subsidiaries entered into a mortgage agreement secured
by the Penn Phoenix property with an unrelated financial institution of $4.8
million over a 15 year term at an interest rate of 7.33%. At December 31, 2003
and 2004, the outstanding balance of the mortgage was $4.5 million and $4.3
million, respectively.


     Other Long-Term Debt

     As of December 31, 2003 and 2004, we had an aggregate amount of
approximately $0.4 million and $0.1 million long-term debt respectively owed to
several Austrian government agencies. This debt is denominated in euro and had a
weighted average interest rate on outstanding borrowings of approximately 4.3%
at December 31, 2003. This long-term debt is payable over several years, with
the final payments scheduled in 2005.

     Other long-term debt comprises secured loans in Austria, Italy and the
Czech Republic outstanding with several banks. At December 31, 2003 and 2004,
the remaining outstanding long-term debt is $14.9 million and $12.5 million,
respectively. The weighted average interest rate on outstanding borrowings was
2.7% and 2.6% as of December 31, 2003 and 2004, respectively. Borrowings mature
at various dates through 2009.


     Italian Bank Loans

     As of December 31, 2003, HTM Sport S.p.A., our Italian subsidiary, had
drawn an aggregate amount of approximately $19.2 million with various Italian
banks. The weighted average interest rates on these credit lines was 4.3% at
December 31, 2003. This lines were repaid using the proceeds from our 8.5%
Senior Notes issued in January 2004.



     Japanese Bank Loans

     As of December 31, 2003 and 2004, HTM Sports Japan KK, one of our Japanese
subsidiaries, had short-term credit lines with Sumitomo Bank of approximately
$18.5 million and $17.4 million, respectively that are renewed annually. We
guarantee the payments to Sumitomo Bank in the amount of the outstanding debt.
The weighted average interest rate on these loans was at December 31, 2003 and
2004 3.0%.

     Other Lines of Credit

     As of December 31, 2003 we had outstanding amounts of approximately $10.3
million under other operating lines of credit in France and Canada. In addition,
there was an unused credit facility in Canada of $0.8 million. The weighted
average interest rate on these loans was 3.4% at December 31, 2003. As of
December 31, 2004 we had $1.9 million under other operating lines of credit in
Canada with a weighted average interest rate of 4.75%. The unused credit
facility as of December 31, 2004 amounted to $2.5 million.

     Capital Expenditures; Research and Development

     We expect to spend approximately $55 million on investment in property,
plant and equipment and $45 million on research and development in the 2005 to
2007 period, primarily for the design and manufacturing of products that are
scheduled to be introduced and existing products which we expect to continue
selling during the period.

5.C. Research and Development, Patents and Licenses

     We believe that we are an industry leader in the development of innovative
and technologically advanced sports equipment. Our research and development
groups identify consumer needs and shifts in consumer preferences in order to
develop new product ideas and concepts. In addition, we encourage
cross-fertilization of ideas among divisions, which has led to further product
innovations. In 2004, 2003 and 2002, we spent approximately $15.5 million $13.6
million and $11.0 million, respectively, on engineering, research and
development and $0.7 million, $0.7 million and $1.0 million, respectively, for
patents and licenses. To ensure quality and precision, the majority of our
products are designed on our own computer-aided design and manufacturing
(CAD/CAM) systems.

5.D. Trend Information

     We operate in mature markets that in 2003/2004 experienced flat to slightly
declining conditions on a worldwide basis. The industry trend continues to be
towards a consolidation of players who are able to provide retailers with
offerings across all product segments within the sporting categories. This has
been most pronounced in the Winter Sports market were almost all companies now
offer the full range of products consisting of skis, ski boots, bindings and
snowboards.



                                       37
<PAGE>

     Continuing weakness in the Japanese market has particularly affected the
Winter Sports market and we expect this trend to continue in 2005. We have seen
some recovery in the US market, especially in Racquet Sports although on a
worldwide basis this growth was offset by poor weather conditions suppressing
sales in Europe.

     We expect that future growth in our markets will come from the development
of the markets in Eastern Europe, South East Asia and China.

     Revenues Growth and Currency Fluctuations

     While we report our results in U.S. dollars, approximately 65% of our
revenues are in euros and the majority of our manufacturing is on a euro cost
basis. As a consequence, currency fluctuations have an effect upon our reported
results. Within a given period, the appreciation of the euro against the dollar
will be reflected in higher revenues and costs on a translation basis, and
conversely, when it depreciates, we would expect to show lower revenues and
costs. Given the current order flow, we expect revenue in 2005 to be in line
with 2004.

     Currency fluctuations can also affect gross margins. This is especially
true in Winter Sports, where we incur a majority of our costs in the first six
months and receive a majority of our revenues in the last six months of the
year, and both costs and revenues are primarily euro-based. Accordingly, a
strong euro in the first six months, when we incur costs, or a weak euro in the
last six months, when we receive revenues, will adversely affect our reported
margins on a U.S. dollar basis.

     Product Outlook

     In Winter Sports, we see a significant trend towards integrated, better
coordinated ski-binding-boot systems. We see retailers to become more cautious
in placing pre season orders. In 2004, re-orders were slightly below previous
years caused by the late arrival of snow. For 2005, we will be concentrating on
improving product mix, especially on extending our high end product line, as we
expect the consumer preference for high performance sports products to continue.
We will extend our integrated line of ski products and concentrate on improving
the ski product mix. For those products for which there is high demand, such as
our best-selling SL 100 bindings, we will focus on increased profitability. We
continually introduce new technical features for improved performance, safety
and comfort such as the integrative solutions with new totally integrated tool
free systems (Railflex System), innovative light-weight constructions, the use
of liquid metal on our top range of skis as well as changes in styling and
appearance in each two- to three-year product cycle.

     In snowboards, where we have recently introduced the Intelligence
technology, we are still outsourcing our products and are more and more products
sourcing from China with focus on cost efficiency and high quality in
manufacturing.

     In ski boots, where we have renewed our high end range during 2004, we will
maintain our cost efficiency in means of production and concentrate on improving
our product mix.

     In Racquet Sports, we expect sales in units in the global market to remain
more or less unchanged in both racquets and balls. At the same time, the mix
will continue to deteriorate slightly as overcapacities continue to put pressure
on prices and margins. We will launch a new premium technology called Flexpoint
in April and May globally and expect to sell a substantial amount of racquets.
In balls no major change in products are planned for the near term future.

     In Diving, we are successfully introducing our products in new geographical
areas such as Eastern European countries and Southern Asia. During the last
season attention was given to reducing the number of offered products in order
to have a simpler and more efficient line still able to fulfill all divers'
needs.

5.E. Off-Balance Sheet Arrangements

     We have no off-balance sheet entities or off-balance sheet arrangements
that are reasonably likely to have a material impact on our financial position
and results of consolidated operations.


                                       38
<PAGE>

5.F. Disclosures of Contractual Obligations

     Obligations to make future payments under contracts for the periods
indicated are as follows as of December 31, 2004 (in thousands).


<TABLE>
<CAPTION>

                                         Less than 1                                       After 5
Contractual Obligations                      year        1 - 3 years     3 - 5 years        years           Total
----------------------------------------------------------------------------------------------------------------------
Long-Term Debt Obligations
<S>                                                <C>            <C>             <C>        <C>             <C>
     8.50% Senior Notes due 2014                   --             --              --         171,843         171,843
     Mortgage                                     212            473             547           3,109           4,341
     Other Long-Term Debt                       2,934          4,911           4,243             434          12,522

Capital (Finance) Lease Obligations
     Sale-Leaseback                               159            352             402          13,206          14,119

Operating Lease Obligations
     Operating Leases                           5,015          4,422           3,879           8,723          22,040

</TABLE>


     In connection with our benefit plans we are required to meet certain
funding requirements, which could require us to make certain cash payments in
the future. The Company does not expect to make significant contribution during
2005.

     In January 2004, one of our subsidiaries sold (euro)135.0 million of 8.5%
unsecured senior notes due 2014. With the proceeds from the sale, all of our
outstanding 10.75% senior notes due 2006 were redeemed.

The contractual interest in our mortgage agreement is 7.33%, in our
sales-leaseback agreement 6.70% and in our other long-term debts it varies
between 1.8% and 6.0% (in average 2.6%).


ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. Directors and Senior Management

Management Board and Executive Officers

     Our amended articles of association provide for a Management Board that is
charged with our management under the general supervision of the Supervisory
Board. Our Management Board currently has four members, whose names and
biographies are set forth below along with those of our executive officers. See
"Summary of Material Provisions of our Articles of Association and Other Matters
- Management Board".

     The following table sets forth information with respect to our Management
Board and other key executive officers in and managers to our consolidated
group.

<TABLE>
<CAPTION>

                  Name              Age                               Title
        -----------------------   ------ ------------------------------------------------------
<S>                                 <C>  <C>
        Johan Eliasch..........     43   Chairman of the Management Board, and Chief Executive
                                         Officer
        Ralf Bernhart..........     53   Member of the Management Board and Chief Financial
                                         Officer
        George F. Nicolai......     52   Member of the Management Board
        Robert van de Voort....     49   Member of the Management Board
        Klaus Hotter...........     49   Executive Vice President, Ski Division (Managing
                                         Director of Head Sport AG)
        Georg Kroll............     56   Executive Vice President, Licensing Division (Managing
                                         Director of Head Sport AG)
        Robert Marte...........     51   Executive Vice President, Racquet Sports
                                         Division (Managing Director of Head Sport AG)
        Stefano di Martino.....     39   Managing Director, Diving Division (Managing Director
                                         of HTM Sport S.p.A.)
        Edgar Pollmann.........     60   Executive Vice President, Operations (Managing
                                         Director of HTM Sport- und Freizeitgerate AG)
</TABLE>


                                       39
<PAGE>

<TABLE>
<CAPTION>
<S>                                 <C>  <C>
        Jacques Altimani.......     58   Vice President, European Distribution (Managing
                                         Director of Head International GmbH)
        David Haggerty.........     47   President, Penn Racquet Sports Inc.
        Kevin Kempin...........     46   Vice President, Sales/Marketing Racquet Sports U.S. and
                                         Penn Worldwide
        Gerald Skrobanek.......     39   Vice President, Operations Division (Managing Director
                                         of Head Sport AG)
        Clare Vincent..........     36   Head of Corporate Finance

</TABLE>


     Mr. Johan Eliasch has served as Chairman of the Management Board of Head
N.V. and Group Chief Executive Officer since September 1995. He has been
Managing Director of Head Holding Unternehmensbeteiligung GmbH since September
10, 1998 and a member of the Supervisory Board of HTM since 2000. Since 1991, he
has been Chairman of Equity Partners Limited. Mr. Eliasch also serves as a
Special Advisor to the Shadow Foreign Secretary and is deputy chairman of the
Conservative Foundation. Mr. Eliasch is a member of the advisory board of the
International Peace Foundation, the sports advisory board of the Shimon Peres
Peace Foundation, the advisory board of The Centre for Social Justice.

     Mr. Ralf Bernhart has served as the Chief Financial Officer of the Head
group of companies since March 1996. He was a member of the HTM Supervisory
Board in 1995 prior to becoming a member of the HTM Management Board in 1996. He
has been a Managing Director of Head Holding Unternehmensbeteiligung GmbH since
July 19, 1999 and in October 2000, he became a member of the Management Board of
Head N.V. Prior to joining Head N.V., from 1990 to 1995, Mr. Bernhart was a
member of the Executive Board of Hafslund Nycomed Pharma AG, Austria, a leading
pharmaceutical company.

     Mr. George F. Nicolai, born in 1953, has been a member of the management
team of MeesPierson Trust B.V. from 1989 until 2003, and will continue as a
non-executive director of the latter. After finishing his law degree at the
University of Utrecht, he joined Pierson Heldring & Pierson (now Fortis Bank)
serving in a variety of executive positions, both in the Netherlands and abroad.
He currently also serves as a member of the board of several Dutch subsidiaries
of international companies such as Rothschilds, Volvo, National Grid and Pirelli
and as chairman of several foundations.

     Mr. Robert van de Voort is a lawyer and is the co-founder and managing
director of the TMF Group of companies. This group is active in a wide range of
financial services including corporate and structured finance. Mr. van de Voort
has a number of other board directorships as well as Supervisory Board
memberships.

     Mr. Klaus Hotter has served as Vice President of Head Sport AG since 1986
and managed our Winter Sports Division. In November 2002, he was appointed
Managing Director of Head Sport AG and assumed full responsibility for the
Winter Sports Division. He managed European distribution at Blizzard from 1981
to 1986.

     Mr. Georg Kroll has served as Vice President of Head Sport AG since 1990
and was appointed Managing Director of Head Sport AG in November 2002. In 1996,
he became the Division Manager for Licensing. From 1990 to 1995, he was the
Division Manager for the Footwear Division of HTM. Prior to joining Head in 1981
where he managed distribution for Head in Germany, Austria and International
Trade, he served as General Manager for Kneissl of America.

     Mr. Robert Marte has served as Vice President of Head Sport AG since 1987.
He manages our Racquet Sports Division and was appointed Managing Director of
Head Sport AG in November 2002. He began with HTM in 1980 as a product manager.


     Mr. Stefano di Martino, has served as Managing Director of the Diving
Division of HTM Sport S.p.A since January 2, 2004. After having had a successful
experience as professional runner, Mr. Martino joined Nike Italy in 1989 and
spent his professional experience in Nike in various management positions
including Director of Footwear Sales for Nike Europe. Prior to joining HTM Sport
S.p.A. he was European Footwear Sales Director and Energy/Trend General Manager
for Nike Europe, Middle East, Africa.

     Mr. Edgar Pollmann has served as General Manager of the Tyrolia bindings
division of HTM since 1996. In November 2002, he was appointed Managing Director
of Global Operations. From 1995 to 1996, he was an industrial consultant for HTM
responsible for the restructuring and turn-around program of the Tyrolia binding
division of HTM. Prior to joining HTM, he served as Managing Director of Steyr
Auto GesmbH (the national importer and distributor of Fiat, Lancia and Alfa
Romeo automobiles) from 1981 to 1993 and as industrial consultant for various
companies from 1994 to 1995.

     Mr. Jacques Altimani joined our group in 1975 and was responsible for
building up our French subsidiary, now Head Tyrolia Sports S.A. In addition to
acting as Managing Director of our French subsidiary, he took over the
responsibility for our European Distribution and was appointed Managing Director
of Head International GmbH in 2002. Prior to joining us, Mr. Altimani worked as
area manager for the North American market for Hart skis, Ramy skis, bindings
and ski poles.



                                       40
<PAGE>

     Mr. David Haggerty was named President of Head/Penn Racquet Sports in
January 2001. In November 2002, he was appointed as Chief Executive Officer of
Head N.V.'s business in the USA. From January 1999 until taking this position,
he was chief operating officer of Head USA, and Vice President/ General Manager
of Head USA Racquet Sports from August 1998 until January 1999. Mr. Haggerty was
President of Dunlop Sports from August 1996 to August 1998 and President of
Dunlop Slazenger Racquet Sports from October 1994 to August 1996. From 1980 to
1993, he held various management positions with Prince Sports Products, Inc.

     Mr. Kevin Kempin joined the Head Group in 1993 as Vice President of Key
Accounts in our U.S. Racquet Sport business. Before joining Head, Mr. Kempin was
Director of Tennis at the University of Utah in 1983-84, and thereafter served
for six years as a key sales manager and then vice president at Prince Sports.
Mr. Kempin is currently Vice President of Sales and Marketing for our U.S.
Racquet Sports business and for Penn Worldwide.

     Mr. Gerald Skrobanek joined Head Sport AG in September 2000. After having
managed IT and Global Supply Chain Management for more than two years, Mr.
Skrobanek took over the responsibility for Head Sport AG's global operations.
Prior to joining Head, Mr. Skrobanek served as Chief Information Officer for
Vianova Resins, an international chemical company and Wienerberger, a leading
building material producer.

     Mrs. Clare Vincent joined the Head Group in 1999, became Head of Corporate
Finance in 2002 and has been a member of the Executive Committee since 2003. Her
role includes investor relations and corporate development. Prior to joining us,
Mrs. Vincent was in Corporate Development at Rexam PLC. Clare is a chartered
accountant and trained at PricewaterhouseCoopers.

     In November 2002, an Executive Committee was established. This Committee
includes Johan Eliasch, Ralf Bernhart, Klaus Hotter, Robert Marte, Edgar
Pollmann, Stefano di Martino, Georg Kroll, Gerald Skrobanek and Clare Vincent.
It is the highest consultative body and it was formed to ensure that business
issues and practices are shared across Head N.V. and to define and implement
common policies.

Supervisory Board

     The Supervisory Board is responsible for overseeing Head N.V.'s Management
Board and the general course of affairs of Head N.V.'s business. Head N.V.'s
Supervisory Board currently has four members, whose names and biographies are
set forth below.

     The following table sets forth information with respect to Head N.V.'s
Supervisory Board.

        Name               Age                   Title
--------------------       ---         --------------------------------
William S. Cohen           63          Member of the Supervisory Board
Jurgen Hintz               61          Member of the Supervisory Board
Viktor Klima               56          Member of the Supervisory Board


     Secretary William S. Cohen has been a Member of the Supervisory Board of
Head N.V. since May 2001. Secretary Cohen is a former U.S. Secretary of Defense
(1997-2001) and has served in both the U.S. Senate (1979-1997) and the U.S.
House of Representatives (1973-1979). He is currently the Chairman and CEO of
The Cohen Group, an international strategic business consulting firm based in
Washington, DC. Secretary Cohen also serves as a Director on the Boards of
American International Group, Inc, and Viacom Inc.



     Mr. Jurgen Hintz has been a Member of the Supervisory Board of Head N.V.
since May 2003. He retired in December 2004 as Group Chief Executive Officer of
Novar plc, an international group with core activities in Intelligent Building
Systems, Aluminum Extrusion Solutions, and Security Printing Services with an
annual turnover of (pound)1.5 billion. Prior to this he was President and Chief
Executive of Carnaud/Metalbox until October 1995, Executive Vice-President and
member of the main Board of Procter & Gamble Company and non-Executive Director
of Inchcape plc and Apple Computers Inc.

     Mr. Viktor Klima served as Chancellor of the Republic of Austria from
January 1997 until his resignation February 2000. In this capacity Mr. Klima
held the Presidency of the European Union in the second half of 1998. Prior to
serving as Chancellor, he served as Minister of Finance 1996-97 and Minister of
Economy 1992-96. Prior to his political career, he was a member of the
management board of the OMV oil company, responsible for finance, capital
markets and acquisitions. Prior to this position he held various management
positions within OMV. Mr. Klima took up a senior management position with
Volkswagen in October 2000.

6.B. Compensation

     The table below shows the compensation of the directors for the year ended
December 31, 2004 (in thousands):



                                       41
<PAGE>

                                                                  Accrued for
                                                 Paid               future
                                                                   payments
                                             ---------------   ---------------
Directors' Board
   Johan Eliasch........................    $           738   $            --
   Ralf Bernhart........................                721                23
   George Nicolai.......................                 12                --
   Robert van de Voort..................                 12                --
                                             ---------------   --------------
                                            $         1,483   $            23
                                             ==============    ==============

Supervisory Board
   Karel Vuursteen......................    $            10   $            --
   Viktor Klima.........................                 10                --
   William S. Cohen.....................                 10                --
   Jurgen Hintz.........................                 10                --
                                             --------------    --------------
                                            $            40   $            --
                                             --------------    --------------


     For the year ended December 31, 2004, the aggregate compensation paid by us
to our executive officers, excluding the members of the Directors' Board, was
$2.8 million. The expense for accrued compensation was $0.5 million. Under the
Head Tyrolia Mares Group Executive Stock Option Plan 1998 described below under
"Stock Option Plans," we have issued options to purchase an aggregate of
1,699,392 depositary receipts representing ordinary shares to some of our
executive officers and Supervisory Board members. Options vest over a period of
four years and are subject to the Company meeting specified earnings performance
targets during this period. These options were exercisable beginning on January
1, 2002, but the shares were subject to a lock-up until October 3, 2002. Each
option may be exercised for a nominal price.

     Under the Head N.V. Executive Stock Option Plan 2001 described below under
"Stock Option Plans", we have issued options to purchase an aggregate of
3,275,486 depositary receipts representing ordinary shares to some of our
executive officers and Supervisory Board members. For the year ended December
31, 2004, stock-based compensation amounted to $0.3 million. The exercise price
for all stock options granted under the 2001 Plan was fixed at inception of the
Plan. The vesting period varies from 0 to 6 years.

     The table below shows the details of both Executive Option Plans for
current and former Directors' and Supervisory Board members:

<TABLE>
<CAPTION>

                                            Number of                                                           Number of
                                               non                                                                 non
                                            exercised                                                           exercised
                               Exercise     shares at     Number of    Number of                                shares at
                               price at   beginning of     written     exercised     Number of     Exercise     the end of
                             the issuance   the year       shares        shares       shares         price       the year
                            ------------- ------------  ------------- -----------  -------------  ----------  --------------
Option Plan 1998
<S>                                    <C>    <C>                <C>           <C>          <C>           <C>      <C>
   Ralf Bernhart.........              --     175,714            --            --           --            --       175,714
   Christoph Henkel......              --       3,636            --            --           --            --         3,636
   Rene Jaggi............              --       3,636            --            --           --            --         3,636

Option Plan 2001
   Johan Eliasch.........            4.31   1,426,470            --            --           --            --     1,426,470
   Karel Vuursteen.......            4.31      55,002            --            --           --            --        55,002
   Christoph Henkel......            4.31      55,002            --            --           --            --        55,002
   Viktor Klima..........            4.31      55,002        15,000            --           --            --        70,002
   William S. Cohen......            4.31      55,002        15,000            --           --            --        70,002
   Rene Jaggi............            4.31      40,002            --            --           --            --        40,002
   Jurgen Hintz..........            4.31       25002        15,000            --           --            --        40,002

</TABLE>

     The total amount accrued by the Company and its subsidiaries to provide
pension, retirement or similar benefits was $2.0 million for the year ended
December 31, 2004.

6.C. Board Practices

     Prior to the adoption of the US Sarbanes-Oxley Act of 2002, we maintained
formal and informal procedures that were designed to ensure that we complied
with our various disclosure obligations. In response to the Sarbanes-Oxley Act,
we continued to use such procedures but also evaluated and, where necessary,
formalized them in order to ensure that we are in compliance with the current
and proposed US SEC and NYSE regulations, Dutch Law and the rules set out by the
Vienna Stock Exchange and to facilitate improvement



                                       42
<PAGE>

of the internal control framework. Such procedures were and are intended to
assist the Board of Management by ensuring that the disclosure in all filed
reports is accurate, complete, timely, understandable and that it fairly
presents the condition of the group.


     As a Dutch company listed on both the Vienna Stock exchange and the NYSE,
we must consider different corporate governance systems. On December 9, 2003 a
corporate governance code ("Dutch CGC") was presented which became effective to
Dutch listed companies as per the financial year beginning on or after January
1, 2004. The Dutch CGC specifically states that a company may choose to not
comply with certain of its provisions if the deviation is explained to and
approved by the general meeting of shareholders. In Austria a voluntary
self-regulatory Code of Corporate Governance was drafted in October 2002, which
provides corporations with a framework for the management and control of
enterprises. This Code of Corporate Governance recommends Austrian stock listed
companies to voluntarily adhere to such Code or parts of it. We are listed on
the Vienna Stock Exchange, but as a Dutch company we are not subject to such
Code's recommendations. Since we are not listed in the Netherlands, it seemed
appropriate to focus on specifically the NYSE and SEC rules on corporate
governance. Therefore, at our last annual general meeting in 2004 we asked our
shareholders to approve that we will apply the NYSE and SEC rules of corporate
governance and not specifically the rules of the Dutch CGC. Our shareholders
approved such proposal and we therefore have to comply with the NYSE corporate
governance rules. We believe that by complying with the NYSE and SEC rules, and
our current internal Code of Conduct setting out general standards for ethical
behavior, we should also meet many of the requirements of the Austrian Code of
Corporate Governance. Our Corporate Governance Guidelines are posted on our
website www.head.com, section "Investor Relations".


     In our next Annual General Meeting in May 2005, we will propose our
shareholders will consider a proposal to authorize the Board of Management to
apply for a de-listing from the New York Stock Exchange and terminate the
"Common Share Agreement" between us and The Bank of New York. The present costs
of compliance with the requirements of the Sarbanes-Oxley Act ("SOX") have had,
and will continue to have, an impact on our operating results. This lead the
Board of Management to analyse and discuss the benefits and issues associated
with our current listings, particularly the listing on the NYSE. As a result of
this analysis, the Board of Management has made a proposal to the Supervisory
Board to discuss the de-listing of our ordinary shares from the NYSE and to
terminate the "Common Share Agreement" between us and the Bank of New York as
U.S. transfer agent and registrar. These discussions may possibly lead to a
de-listing of our ordinary shares from the NYSE and termination of the Common
Share Agreement.


     When reviewing any resolution to de-list from the NYSE and terminate the
Common Share Agreement, the Board of Management and the Supervisory Board will
among other things carefully consider the interests of all of our shareholders,
the advantages and disadvantages of the de-listing, the financial savings
achieved by the de-listing, the particular impact of the de-listing on the
holders our ordinary shares listed on the NYSE and any feasible alternatives to
the de-listing.


     If the Annual Meeting accepts the proposal to authorize the Board of
Management to apply for the de-listing and if the Board of Management with the
approval of the Supervisory Board resolves to pursue the de-listing from the
NYSE, we will submit to the NYSE an application to de-list.


     None of our directors have service contracts that provide for benefits upon
termination of employment.

6.D. Employees

     The table below shows the number of employees by geographic location at the
years ended December 31, 2002, 2003 and 2004:


                                        For the Years ended December 31,
                                  ----------------------------------------------
                                     2002           2003              2004
                                  ----------   ---------------  ----------------
Austria...........................       871               861               885
Italy.............................       444               357               331
Other (Europe)....................       921               681               831
North America.....................       411               357               378
Other.............................        44                45                47
                                  ----------   ---------------  ----------------
Total.............................     2,691             2,301             2,472
                                  ----------   ---------------  ----------------

6.E. Share Ownership

     Head Sports Holdings N.V., a Netherlands Antilles corporation, is
controlled by Johan Eliasch and his family members. Head Sports Holdings N.V.
held 18,987,344, or 47.7%, of Head N.V.'s issued shares as of March 31, 2005.
Mr. Eliasch is eligible to receive all options issued under the 1998 Plan that
do not vest to current participants in the 1998 Plan. None of the remaining
officers and directors own or hold options under which the underlying shares
amount to one percent or more of the Company's share capital.



                                       43
<PAGE>

     The exercise price for all stock options granted under the 1998 Plan was
fixed at inception of the Plan and increases at the rate of 10% per annum until
the options are exercised. As of December 31, 2004, the exercise price was
$0.35. Options generally are vested over a period of 4 years and are subject to
the Company meeting certain earnings performance targets during this period.
Options have a maximum term of 10 years. The weighted average remaining
contractual life of the outstanding stock option is 4.6 years, and options
representing 861,760 shares have been exercised. As of December 31, 2004,
options representing 770,528 shares are vested and exercisable.

     The exercise price for all stock options granted under the 2001 Plan was
fixed at inception of the Plan at $4.31. The vesting period varies from 0 to 6
years. Johan Eliasch, our Chairman and Chief Executive Officer, received
1,426,470 options under this grant, which vested immediately. Options have a
maximum term of 10 years. The weighted average remaining contractual life of the
outstanding stock option is 6.7 years, and 1,756,482 options are exercisable
under the 2001 Plan.

As of December 31, 2004, no other shares were available for grant under the 2001
Plan.

Stock Option Plans

The Stichting Head Option Plans

     We have established a Dutch foundation, the Stichting Head Option Plan (the
"Stichting"), the Board of which is controlled by Head Sports Holdings N.V., an
entity that is controlled by Johan Eliasch and his family members, that holds
certain of our ordinary shares and issues depositary receipts to our employees
and other third parties. The Stichting is the shareholder and therefore votes,
collects dividends on behalf of the holders of depositary receipts and may also
buy and sell shares in its own name and for its own account. Holders of the
depositary receipts issued by the Stichting have no voting rights. The
Stichting's sole corporate body is its Board; it does not have any members or
shareholders. The named Administrator, Head Sports Holdings N.V., decides on the
composition of the board and has the sole power to appoint any successor
administrator.

     Options are granted by means of an agreement between the participant, the
Stichting and us. Upon the exercise of an option, the option price is paid to
us, and we issue the shares or transfer to the Stichting listed shares that we
have purchased, which issues the same number of depositary receipts to the
participant. Holders of depositary receipts are entitled to proceeds of the
sales of their shares upon request to the Stichting. However, a lockup on such
shares was in effect for two years following the initial public offering on
October 3, 2000.

     As of December 31, 2004, the Stichting had rights to acquire 4,219,162
ordinary shares at the exercise price, to enable the Stichting to issue
depositary receipts representing ordinary shares upon the exercise of options.
Through December 31, 2003, 2,041,300 shares have been acquired by the Stichting.
As of December 31, 2004, 861,760 were exercised so that the Stichting held
1,179,540 shares.

1998 Stock Option Plan

     In November 1998, our Management Board approved the Head Tyrolia Mares
Group Executive Stock Option Plan. The 1998 Plan calls for the grant of options
to officers and key employees to purchase for a nominal fee depositary receipts
representing ordinary shares of Head N.V. The 1998 Plan provides for the
issuance of a maximum aggregate number of options equal to 10% of the then
outstanding shares of Head N.V., on a fully-diluted basis, subject to
adjustments upon the occurrence of a stock split or dividend or in the event of
a merger, reorganization or other similar event.

     Upon exercise of the options, option holders receive depositary receipts
rather than shares in the Company. Depositary receipts issued under the 1998
Plan will be administered by the Stichting. Holders of depositary receipts may,
upon request, receive from the Stichting the proceeds from the sale of their
shares.

     Options granted under the Plan vest over a four-year period, each year
being a "performance period", and may each be exercised at a nominal price
within a period of 10 years from the date of grant. With respect to each
"performance period", the options vest depending on the participant's
performance, expressed as the "overall performance percentage" (as defined in
the 1998 Plan). For purposes of determining such overall performance percentage,
the administrator of the 1998 Plan has determined, for each participant and for
each performance period, performance targets which comprise a minimum target, a
maximum target and a relative target weight. The exercise period for options
which vest prior to January 1, 2002, began on January 1, 2002. The exercise
period for options which vest after January 1, 2002, began at the date of
vesting.

     Under the 1998 Plan, options to purchase 2,278,394 depositary receipts have
been granted. No further options will be granted by the Company to the
Stichting, under the 1998 Plan.

2000 Stock Option Plan

     In August 2000, our Management Board adopted the Head N.V. Executive Stock
Option Plan 2000, but that plan has not been implemented.

2001 Stock Option Plan



                                       44
<PAGE>

     In September 2001, we adopted the Head N.V. Executive Stock Option Plan
2001 (the "2001 Plan"). The 2001 Plan provides for grants of stock options to
officers and employees of Head N.V. and its subsidiaries to purchase for $4.31
depositary receipts representing ordinary shares of Head N.V. On September 28,
2001, a total of 3,982,068 options were granted under the terms of the 2001
Plan. Upon exercise of the options, option holders receive depositary receipts
rather than our shares. Depositary receipts issued under the 2001 Plan will be
administered by the Stichting. Holders of depositary receipts may, upon request,
receive from the Stichting the proceeds from the sale of their shares.

     The exercise price for all stock options granted under the Plan was fixed
at inception of the 2001 Plan. The vesting period varies from 0 to 6 years. All
options that have been vested shall become immediately exercisable. Johan
Eliasch, our Chairman and Chief Executive Officer, received 1,426,470 options
under this grant, which vested immediately. We assume that all options granted
will become fully vested. Options have a maximum term of 10 years. As of
December 31, 2004, no other shares were available for grant under the 2001 Plan.

ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders

     Head Sports Holdings N.V., a Netherlands Antilles corporation, is
controlled by Johan Eliasch and his family members. Prior to the initial public
offering on October 3, 2000 Head Sports Holdings N.V. held 96.0% of our issued
and outstanding shares. Head Sports Holdings N.V. held 18,987,344, or 47.7%, of
Head N.V.'s issued shares as of December 31, 2004. Donald Smith & Co., Inc. held
3,737,900, or 9.4% and Aegis Financial Corporation held 2,223,700, or 5.6% of
Head N.V.'s issued shares as of December 31, 2004. Neither Head Sports Holdings
N.V. nor , Donald Smith & Co., Inc., Aegis Financial Corporation have different
voting rights than other shareholders. As of December 31, 2004 no other person
is known to us to hold 5% or more of our issued shares.

7.B. Related Party Transactions

     On June 15, 1999, entities controlled by our principal shareholder,
chairman and chief executive officer contributed all of the outstanding share
capital of London Films Ltd., valued at the date of contribution at $20.5
million, to us. The transaction was accounted for on an "as if pooling" basis
and, accordingly, the combined financial statements were presented for all
periods in which common control existed. We issued 4,227,820 shares against this
contribution in kind. London Films Ltd., a company duly established in London,
U.K., owns or has the rights to over 125 feature films and television programs,
which it markets on a world-wide basis.

     In August 2000, we granted an option to receive all outstanding shares of
London Films Ltd. as a shareholder distribution to Head Sports Holdings N.V., an
entity beneficially owned by Johan Eliasch and his family members. On October
31, 2000, London Films Ltd. was distributed in accordance with this option.
London Films had net assets of $0.6 million at the time the shares were
distributed. As a result, London Films is presented as a discontinued operation
in our financial statements for the years ending December 31, 1999 and 2000.



     We received administrative services from corporations which are ultimately
owned by the principal shareholder of the Company. Administrative expenses
amounted to approximately $1.2 million ((euro) 1.2 million), $3.5 million
((euro)3.1 million) and $5.6 million ((euro)4.5 million) for the years ended
December 31, 2002, 2003 and 2004, respectively. The company provides investor
relations, corporate finance, legal and consulting services and since 2004
internal audit and other services in relation to compliance with the rules under
the Sarbanes-Oxley Act of 2002.

     One of our subsidiaries leased its office building from its general
manager. Rental expenses amounted to approximately $0.1 million, $0.04 million
and $0.05 million for the years ended December 31, 2002, 2003 and 2004,
respectively.


7.C. Interest of Experts and Counsel

       Not applicable.

ITEM 8: FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

       8.A.1   See Item 18.

       8.A.2   See Item 18.

       8.A.3   See Report of Independent Registered Public Accounting Firm, page
               F-1.

       8.A.4   Not applicable.



                                       45
<PAGE>

       8.A.5   Not applicable.

       8.A.6   See Note 24 to the Financial Statements.

       8.A.7   Legal or Arbitration Proceedings

     From time to time, we are party to lawsuits and proceedings in the normal
course of our business. We cannot predict the outcome of these lawsuits.
Nevertheless, we do not believe that we are currently party to any lawsuits or
proceedings that will have a material effect on our financial condition or
results of operations.

       8.A.8.  Dividend Policy

     Under Netherlands law, we may only pay dividends on our shares if we
maintain minimum paid-up share capital and the reserves required by Dutch law or
by our amended articles of association. If dividends on our ordinary shares are
paid in cash, we expect to pay these dividends in euros.

     While we currently intend to retain future earnings to finance operations,
we will evaluate our dividend policy annually in light of results. Pursuant to
our articles of association, the Management Board may decide which part of the
free distributable profits shall be reserved. It should be noted that if
preference shares are issued (which is presently not the case) this authority
shall be applicable to the remainder of the profit after the preferred dividend
to the holders of preference shares have been paid. Because of the fact that
pursuant to the articles of association the part of the profit which is not
reserved by the Management Board is distributed to the holders of ordinary
shares, the Management Board effectively decides which part of the profit (after
possible satisfaction of the preferred dividend of holders of preference shares)
shall be distributed to the holders of ordinary shares.

     Cash dividends payable to holders of ordinary shares listed on the New York
Stock Exchange will be paid to The Bank of New York which will convert the
dividends into U.S. dollars at the rate of exchange applicable on the date such
dividends are paid, for disbursement to such holders. Cash dividends payable to
holders of ordinary shares listed on the Vienna Stock Exchange will be paid to
Bank Austria Creditanstalt AG in euros for disbursement to holders. Any dividend
payments would be subject to Netherlands statutory withholding taxes.

8.B. Significant Changes

     No significant change has occurred since the date of the annual financial
statements included in this document.

ITEM 9: THE OFFER AND LISTING

9.A. Offer and Listing Details

     The total nominal value of our issued share capital is (euro)7,964,135.40
and consists of 39,820,677 ordinary shares of (euro)0.20 each.

     Our shares were listed on the New York Stock Exchange and the Vienna Stock
Exchange on September 28, 2000 in connection with our initial public offering.

     The chart below shows the high and low market prices of our ordinary shares
on each exchange for the financial periods indicated:

                              NYSE                        Vienna Stock Exchange
                              ----                        ---------------------
                      (amounts in dollars)                  (amounts in euros)
                     High                Low              High             Low
                     ----                ---              ----             ---
Years Ended
December, 2001      5.9900             3.1100            5.3200           3.1500
December, 2002      3.5400             1.8500            3.8800           1.8000
December, 2003      2.9000             1.4500            2.5200           1.3600
December, 2004      3.9300             2.4000            3.2000           1.8200

Quarters Ended
December, 2001      3.6000             3.1100            4.2000           3.1500
March, 2002         3.5400             3.2000            3.8800           3.5200
June, 2002          3.5000             2.9500            3.6800           3.0500
September, 2002     3.1700             2.0700            3.2900           2.0600
December, 2002      2.3500             1.8500            2.3000           1.8000
March, 2003         2.1700             1.4500            2.0100           1.4000
June, 2003          2.3600             1.5100            1.1900           1.3600
September, 2003     2.9000             2.0000            2.5200           1.7000
December, 2003      2.8000             2.1100            2.3000           1.8300
March, 2004         3.5400             2.4500            3.1000           1.8200
June, 2004          3.3700             2.9000            2.7000           2.1500


                                       46
<PAGE>

September, 2004     3.1500             2.4000            2.5800           2.1500
December, 2004      3.9300             2.8100            3.2000           2.3000
March, 2005         4.4000             3.4000            3.5000           2.6500

Months Ended
October, 2004       3.0300             2.8100            2.4500           2.3000
November, 2004      3.7200             2.9400            2.8500           2.3500
December, 2004      3.9300             3.3200            3.2000           2.5000
January, 2005       3.8000             3.5100            3.1800           2.7300
February, 2005      4.4000             3.6900            3.5000           2.8500
March, 2005         3.8000             3.4000            2.9900           2.6500


9.B. Plan of Distribution

     Not applicable.

9.C. Markets

     The ordinary shares were listed on the New York Stock Exchange on September
29, 2000 and are available in registered form only. Our shareholders register is
maintained in New York, by The Bank of New York, our U.S. transfer agent and
registrar. All of the New York Stock Exchange shares are represented by a single
global share certificate held through the Depository Trust Company and
registered with our transfer agent and registrar in the name of Cede & Co., the
nominee of DTC.


     In our next Annual General Meeting in May 2005, we will propose our
shareholders will consider a proposal to authorize the Board of Management to
apply for a de-listing from the New York Stock Exchange and terminate the
"Common Share Agreement" between us and The Bank of New York. The present costs
of compliance with the requirements of the Sarbanes-Oxley Act ("SOX") has had,
and will continue to have, an impact on our operating results. This lead the
Board of Management to analyse and discuss the benefits and issues associated
with our current listings, particularly the listing on the NYSE. As a result of
this analysis, the Board of Management has made a proposal to the Supervisory
Board to discuss the de-listing of our ordinary shares from the NYSE and to
terminate the "Common Share Agreement" between us and the Bank of New York as
U.S. transfer agent and registrar. These discussions may possibly lead to a
de-listing of our ordinary shares from the NYSE and termination of the Common
Share Agreement.


     When reviewing any resolution to de-list from the NYSE and terminate the
Common Share Agreement, the Board of Management and the Supervisory Board will
among other things carefully consider the interests of all of our shareholders,
the advantages and disadvantages of the de-listing, the financial savings
achieved by the de-listing, the particular impact of the de-listing on the
holders our ordinary shares listed on the NYSE and any feasible alternatives to
the de-listing.


     If the Annual Meeting accepts the proposal to authorize the Board of
Management to apply for the de-listing and if the Board of Management with the
approval of the Supervisory Board resolves to pursue the de-listing from the
NYSE, we will submit to the NYSE an application to de-list.

     Ordinary shares are available on the Vienna Stock Exchange in bearer form
only and represented by a single global share certificate, which we have
deposited with Oesterreichische Kontrollbank Aktiengesellschaft ("OeKB"), as
custodian. The ordinary shares in bearer form can only be transferred in
book-entry form. All ordinary shares are listed on the Vienna Stock Exchange;
however, only the Vienna Stock Exchange shares may be traded on that market.

     The Vienna Stock Exchange is operated by a stock corporation, the Wiener
Borse AG, based on a license issued by the Federal Ministry of Finance. Members
of the Exchange include banks and investment firms. The supervising authorities
are the Federal Securities Authority (Finanzmarktaufsicht) and the Federal
Ministry of Finance. The latter supervises the legality of the Vienna Stock
Exchange's resolutions and of its organization primarily by way of an authorized
exchange commissioner appointed by the Ministry. The Federal Securities
Authority monitors the prevention of insider trading, fairness in trading and
market-related aspects.

9.D. Selling Shareholders

     Not applicable.

9.E. Dilution

     Not applicable.

9.F. Expenses of the Issue

     Not applicable.



                                       47
<PAGE>

ITEM 10: ADDITIONAL INFORMATION

10.A.Share Capital

     On May 26, 2004, the Board of Management was granted the authority to
repurchase shares representing up to 30% of our issued share capital during a
period of 18 months (until November 26, 2005), although we will not hold more
than 10% of our issued shares at any time.

     Pursuant to resolutions which were approved on May 26, 2004 the Board of
Management is authorized to cancel ordinary shares which have been repurchased
by us for a maximum of 30% of our issued share capital as at December 31, 2003,
over a period of 18 months (until November 26, 2005).

10.B. Memorandum and Articles of Association

Corporate Purpose

     Article 3 of our amended articles of association provides that we may
perform all acts and do all things (as long as these are not prohibited by law),
such as operate all kinds of businesses, hold, participate in, manage and
finance other enterprises and companies, borrow money and provide security there
for and provide security for the debts of others and do all that is connected
with the foregoing or may be conducive thereto including owning, leasing or
obtaining licenses for real and intellectual properties, all which is to be
interpreted in the widest sense. The Company's file number is 24286737 in
Rotterdam at Kamer van Koophandel, Rotterdam.

Ordinary Shares

     Form. All our ordinary shares may be either in registered or bearer form.
All our ordinary shares are listed both on the New York Stock Exchange and the
Vienna Stock Exchange. However, ordinary shares are available on the Vienna
Stock Exchange only in bearer form and on the New York Stock Exchange only in
registered form.

     Our ordinary shares in bearer form are represented by a single global
bearer share certificate, which we will deposit with "OeKB" as custodian.
Ordinary shares in bearer form can only be transferred in book entry form. Other
than the single global share certificate, no separate share certificates
representing our ordinary shares in bearer form will be issued. Our ordinary
shares listed on the New York Stock Exchange are held through The Depository
Trust Company ("DTC") and be registered in the name of Cede & Co, the nominee
for DTC.

     Holders of registered ordinary shares are entered in our shareholders
register. At the request of a shareholder a share certificate (consisting of a
"mantel" main part only) may be issued for registered ordinary shares. At such
request, we will, without a fee, issue a non-negotiable extract from the
shareholders' register in the name of the holder unless a certificate has been
issued for such holder's registered ordinary share. A deed of transfer together
with our acknowledgement in writing (or service on us of this deed) is required
to transfer registered ordinary shares.

     Voting Rights. Each ordinary share represents the right to participate and
to cast one vote at a general meeting.

     Dividends. Each ordinary share is entitled to the same amount of dividend
if one is declared.

     Liquidation Rights. Upon liquidation, each holder of ordinary shares shall
be entitled to the balance remaining after satisfaction of all our debts and, to
the extent that preference shares have been issued, after an amount equal to any
previously declared but unpaid dividend and the paid-up amount of such
preference shares has been distributed to the holders of preference shares, in
proportion to the total number of ordinary shares held by each of them. Any
dissolution or liquidation is subject to applicable provisions of Dutch law.

     Preemptive Rights. Unless restricted or limited and except for issues of
ordinary shares in return for non-cash consideration and ordinary shares issued
to our employees or employees of any of our group companies, holders of ordinary
shares generally will have preemptive rights to subscribe for their pro-rata
amount of all new ordinary share issuances. However, pursuant to the amended
articles of association, all authorized but unissued ordinary shares may be
issued by the Management Board and the preemptive rights associated with all
currently authorized capital may be limited or excluded by the Management Board.
This authority has been extended by resolution of the shareholders and will end
on May 26, 2009, unless further extended by an amendment of the articles of
association or by a resolution of the shareholders for a period of not more than
five years in each instance. When extending the authority of our Management
Board to issue shares and to limit or exclude preemptive rights, the general
meeting of shareholders shall determine the number of shares which may be issued
or affected as well as the date when this authorization shall expire.



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<PAGE>

Preference Shares

     Preference shares may be issued as a preventive measure against unfriendly
takeover bids. The minimum amount required to be paid on the preference shares
upon issuance is 25% of the nominal amount issued. In the event of a hostile
takeover bid, preference shares may be issued to a legal entity charged with
caring for our interests and preventing influences that may threaten our
continuity, independence or identity. Holders of preference shares do not share
in our reserves and such shares are not listed. The preference shares will be
registered shares and share certificates will not be issued. Preference shares
can be issued in the same way as ordinary shares, but carry no preemptive
rights. Preference shares and ordinary shares have equal voting rights at a
general meeting of shareholders. Holders of preference shares will be paid a
cumulative annual dividend calculated on the basis of the deposit interest rate
of the European Central Bank to the paid up part of their nominal value. To the
extent there are distributable profits, the preferential dividend shall be paid
first. An allocation of profits to the reserves or the payment of a dividend to
holders of ordinary shares may only be effected from the remaining distributable
profits.

     Authorized but unissued preference shares may be issued by the Management
Board, which is also authorized to grant rights to subscribe for such shares.
Unless extended by the amendment of our articles of association or by resolution
of the shareholders for a period of five years in each instance, these
authorizations will end on May 26, 2009, five years after the date of the last
Annual General Meeting of the Company when the authority of the Management Board
was extended by resolution of the shareholders.

     Voting and other rights. Persons who are not DTC participants may
beneficially own ordinary shares held by DTC only through direct or indirect
participants in DTC. So long as Cede & Co., as the nominee of DTC, is the
registered owner of ordinary shares, DTC for all purposes will be considered the
holder of such shares. Accordingly, any person owning a beneficial interest in
New York Stock Exchange shares held through DTC must rely on the procedures of
DTC and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a shareholder. We understand that, under existing industry practice, in the
event that an owner of a beneficial interest in New York Stock Exchange shares
held through DTC desires to take any action that DTC, as the registered
shareholder, is entitled to take, DTC would authorize the participants to take
such action, and the participants would authorize beneficial owners holding
interests through such participants to take such action or would otherwise act
upon the instructions of beneficial owners holding interests through them.

Acquisition of Our Own Shares

     We may acquire our own shares subject to the provisions of Dutch law.
Provided they are fully paid up, we may acquire our own shares for consideration
if:

     o  our shareholders' equity less the payment required to acquire the shares
        does not fall below the sum of the paid-up and called portion of our
        share capital and any statutory reserves; and

     o  we and our subsidiaries would thereafter not hold, or hold in pledge,
        shares with an aggregate nominal value exceeding 10% of our issued share
        capital.

     Shares held by us in our own capital as treasury stock may not be voted or
counted for quorum purposes at shareholders' meetings.

Obligations to Disclose Holdings

     Pursuant to the Dutch Act on Disclosure of Holdings in Listed Companies
1996 (Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996)
which applies during the period we are listed on the Vienna Stock Exchange, the
members of the management board and supervisory board that hold our ordinary
shares must disclose the number of shares and options and the number of voting
rights to the Netherlands Authority for the Financial markets (Autoriteit
Financiele marken). Furthermore, they are required to immediately report to the
Netherlands Authority for the Financial markets any changes in the number of
shares and options. Also, anyone acquiring or transferring our ordinary shares
after they are admitted to listing on the Vienna Stock Exchange that causes the
holder's percentage of our issued capital or voting control to fall into one of
the following ranges or changes from one range to another must notify us and the
Netherlands Authority for the Financial markets.

The ranges are:

     o  0 to 5%,

     o  5 to 10%,

     o  10 to 25%,

     o  25 to 50%,

     o  50 to 66 2/3%, and

     o  66 2/3% or more.



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<PAGE>

     The Netherlands Authority for the Financial markets discloses information
to the public by publication in a newspaper distributed throughout The
Netherlands. If disclosure is required, failure to disclose one's shareholding
is an offense that may result in civil sanctions, including suspension of voting
rights and criminal and administrative sanctions, including the imposition of
fines.

     The Dutch 1995 Act on the Supervision of the Securities Trade (Wet toezicht
effectenverkeer 1995) provides for an additional notification duty for
shareholders holding a direct or indirect interest in more than 25% of the
capital in a listed company. These shareholders are obliged to notify the
Netherlands Authority for the Financial markets of any and all transactions they
enter into with respect to our securities. If a shareholder with a greater than
a 25% interest is a legal entity and not an individual, the obligation is
extended to the managing directors and supervisory directors of the legal
entity.

The Stichting Head Option Plan

     The Stichting has the power to nominate all members of the Management
Board, appoint one-third of the Supervisory Board and nominate the remaining
members of the Supervisory Board. The existence of the Stichting is perpetual,
and control of the Stichting's Board of Directors may be passed to Mr. Eliasch's
affiliates or family members but may not otherwise be transferred. The
aforementioned rights of the Stichting shall cease and shall revert to the
Supervisory Board in the case of a change of control of the Stichting, which is
defined in our articles of association as an event following which Mr. Eliasch
or his affiliates or family members fail to possess the power to direct
management and policies of the Stichting, whether through the ownership of
voting securities or by contract or otherwise, or in the event Mr. Eliasch or
his affiliates or family members fail to beneficially own any shares in the
company. Upon a change of control of the Stichting and when Mr. Eliasch fails to
beneficially own any shares in the company, all members of the Supervisory Board
are appointed by our shareholders.

Management Board

     As a public company with limited liability organized under the laws of The
Netherlands, our business is carried out primarily by a Management Board and by
executive officers appointed by our Management Board. Members of the Management
Board are appointed by our shareholders at a general shareholders' meeting from
a list of nominees drawn up by the Stichting. Our shareholders may however
decide at a general shareholders' meeting, by a resolution adopted by a
two-thirds majority vote, that a given list of nominees drawn up by the
Stichting will not be binding. In the event the Stichting makes a non-binding
nomination, our shareholders may at a general shareholders' meeting elect
persons to the Management Board not nominated by the Stichting by a resolution
adopted by the affirmative vote of two-thirds of the votes cast. Any member of
the Management Board may be suspended or removed from the Management Board at
any time by a majority vote of our shareholders at a general meeting of
shareholders. However, any suspension or removal not proposed by the Stichting
may only be decided at a general shareholders' meeting by a resolution adopted
by a two-thirds majority vote. The Management Board is authorized to represent
us, as is the Chairman of the Management Board acting alone. Our articles of
association state that our Management Board shall consist of one or more
members. The aforementioned rights of the Stichting shall cease as described
above. Decisions of the Management Board are adopted by a simple majority of
votes caste.

Supervisory Board

     Our Management Board is overseen by a Supervisory Board consisting of at
least three members, which also oversees the more general course of our
business. Up to one-third of the members of the Supervisory Board are appointed
by the Stichting. The other members of the Supervisory Board are appointed by
our shareholders at a general shareholders' meeting from a list of nominees
drawn up by the Stichting. Our shareholders may however decide at a general
shareholders' meeting, by a resolution adopted by a two-thirds majority vote,
that a given list of nominees drawn up by the Stichting will not be binding. In
the event the Stichting makes a non-binding nomination, our shareholders may at
a general shareholders' meeting elect persons to the Supervisory Board not
nominated by the Stichting by a resolution adopted by the affirmative vote of
two-thirds of the votes cast. Any member of the Supervisory Board appointed by
the Stichting may be suspended or removed from the Supervisory Board by the
Stichting at any time. Members of the Supervisory Board appointed by the general
shareholders' meeting may be suspended or removed from the Supervisory Board at
any time by a majority vote of our shareholders at a general meeting of
shareholders. However, any suspension or removal not proposed by the Stichting
may only be decided at a general shareholders' meeting by a resolution adopted
by a two-thirds majority vote. The aforementioned rights of the Stichting shall
cease as described above. Our Supervisory Board may agree, with the approval of
the Management Board, that specific Management Board resolutions be subject to
the Supervisory Board's approval. No resolutions are specified in our articles
of association that require Supervisory Board approval.

Indemnification of Management Board and Supervisory Board Members

     Our articles of association require that we indemnify any person who is or
was a member of our Management Board or Supervisory Board and who was, is or is
threatened to be made a party to, any action, suit or similar proceeding, by
reason of the fact that he or she is or was a Management Board or Supervisory
Board member. This indemnification generally covers all expenses, attorneys
fees, judgements, fines and amounts paid in settlement actually and reasonably
incurred by the indemnified person in connection with the relevant action, suit
or proceeding, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to our best interests. Whether the
indemnified person acted in such a manner may be determined by us.

Shareholders' Meetings



                                       50
<PAGE>

     We are required to hold a general shareholders' meeting annually.
Shareholders' meetings will also be called if convened by our Supervisory Board
or Management Board. Unless otherwise required by law or our amended articles of
association, decisions of our general meeting of shareholders may be adopted by
a majority of the votes cast. However, except that resolutions regarding
extraordinary transactions, including amendment of our articles of association,
legal merger or split-up of our company can only be adopted upon a proposal of
the Management Board, after approval of the Supervisory Board, and requires a
special majority as described herein. A resolution to dissolve our company can
only be adopted upon a proposal of the Management Board, after approval of the
Supervisory Board, and requires an affirmative vote of three quarters of the
votes cast.

     Shareholders meetings will be held in The Hague, Amsterdam, Rotterdam or
Haarlemmermeer (Schiphol Airport) and chaired by the Chairman of our Supervisory
Board. A holder of registered shares or his attorney wishing to attend a general
meeting of shareholders should notify the Management Board in writing of his
intention. Such notice must be received by the Management Board not later than
on the date mentioned in the notice of the meeting. The 2005 Shareholders
meeting will be held on May 25, 2005.

     For holders of bearer shares, attendance and exercise of voting rights are
subject to certain conditions. In particular, only those shareholders who
register in time and deposit their bearer shares until the end of the general
meeting with the depositary bank nominated by us or any other credit institution
specified in the notice of the general meeting are entitled to attend and cast
votes in a general meeting. Bearer shares are equally deemed to have been
properly deposited if with the consent of the depositary bank, they are
deposited in safe custody until the end of the general meeting. Our articles of
association provide that shareholders must be allowed to file such
acknowledgement of deposit at least fifteen days after convening the general
meeting, not counting the day of publication. The acknowledgement of deposit
must be deposited at the earliest five days before the day of the general
meeting.

Adoption of Annual Accounts

     Within five months following the end of each fiscal year, our Management
Board must prepare annual accounts accompanied by an annual report. This period
may be extended by our general meeting of shareholders on account of special
circumstances for up to six months. Within this period, the annual accounts and
annual report must then be submitted to the Supervisory Board, which will
present a report on it to the general meeting of shareholders. Our annual
accounts and the annual report will be available to our shareholders within the
period referred to in this paragraph. Our annual accounts must be adopted by our
general meeting of shareholders.

Dividends

     We may not pay dividends if the dividend payment would reduce our
shareholders' equity below the sum of our paid-up capital and any reserves
required by Dutch law or by our amended articles of association. Pursuant to our
amended articles of association, the preference shares have preferential
dividend rights. Our Management Board shall determine how much of any remaining
profit shall be allocated to our reserves before dividends are paid on the
ordinary shares. Our general meeting of shareholders may resolve, upon a
proposal of our Management Board, that some or all of any dividends declared on
ordinary shares will be paid in ordinary shares in our share capital or
securities in any other entity's share capital rather than in cash. Our
Management Board may, subject to various statutory provisions, distribute one or
more interim dividends. A claim for the payment of a dividend (including an
interim dividend) lapses five years after the first calendar day following the
day on which shareholders were first permitted to make a claim for payment of
the dividend.

Capital Reduction

     Upon the proposal of our Management Board, our general meeting of
shareholders may resolve to reduce our issued share capital by canceling shares
or reducing the nominal value of our shares, subject to statutory provisions and
the provisions of our amended articles of association.

Amendment of the Amended Articles of Association; Dissolution; Legal Merger;
Split-up

     A resolution of our general meeting of shareholders to amend our articles
of association, or enter into a legal merger or split-up of our company can only
be adopted upon a proposal of our Management Board, after approval of the
Supervisory Board, and requires the affirmative vote of two-thirds of the votes
cast, except that a change of the authorized capital requires an absolute
majority. A resolution to dissolve our company can only be adopted upon a
proposal of our Management Board, after approval of the Supervisory Board, and
requires the affirmative vote of three quarters of the votes cast.

10.C. Material Contracts

     We have no material contracts outside the ordinary course of business, with
the exception of the indenture entered into by one of our subsidiaries with
respect to its 8.5% Senior Notes. See "Item 5: Operating and Finance Review and
Prospects--Liquidity and Capital Resources--Loan Agreements."


10.D. Exchange Controls

     Not applicable.


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<PAGE>

10.E. Taxation

     This taxation summary solely addresses the material Netherlands, U.S. and
Austrian tax consequences to shareholders in connection with the ownership and
disposition of the ordinary shares. This summary does not discuss every aspect
of taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under applicable law and is
not intended to be applicable in all respects to all categories of investors.
This summary also assumes that our business will be conducted in the manner
outlined in this annual report. Changes in our organizational structure or the
manner in which we conduct our business may invalidate this summary. The laws
upon which this summary is based are subject to change, perhaps with retroactive
effect. A change to these laws may invalidate the contents of this summary,
which will not be updated to reflect changes in laws. Shareholders should
consult their tax advisors regarding their particular personal tax consequences
of owning and disposing of ordinary shares.

           Netherlands Tax Consequences for Holders of Ordinary Shares

     This summary does not purport to be a comprehensive description of all
Netherlands tax consequences of an investment in our shares. Each investor
should consult a professional tax advisor with respect to the tax consequences
of an investment in our shares. The discussion of certain Netherlands taxes set
forth below is included for general information only and does not address every
potential tax consequence of an investment in our shares under the laws of the
Netherlands. The following summary of Netherlands tax considerations is limited
to the tax implications for an individual or corporate owner of our shares who,
directly or indirectly, owns less than 10% of the voting power of the Company (a
"holder of shares").

     The following summary is based on the tax legislation, published case law,
treaties, rules and other regulations as applicable for the calendar year 2004.

Withholding Tax

     Dividends distributed by the Company are generally subject to a Netherlands
withholding tax imposed at a rate of 25%. The expression "dividends distributed
by the Company" as used herein includes, but is not limited to, distributions in
cash or in kind, deemed and constructive distributions and repayments of paid-in
capital not recognised as capital for Netherlands dividend withholding tax
purposes.

     If a holder of shares is resident in a country other than the Netherlands
and if a double taxation treaty is in effect between the Netherlands and such
country, such holder of shares may, depending on the terms of such double
taxation treaty, be eligible for a full or partial exemption from, or refund of,
Netherlands dividend withholding tax.

     Residents of the United States that qualify for, and comply with the
procedures for claiming, benefits under the income tax treaty between the
Netherlands and the United States (the "U.S.-NL Treaty"), generally are eligible
for a reduction of the Netherlands withholding tax on dividend income to 15%. A
holder of shares will qualify for benefits under the U.S.-NL Treaty (subject to
compliance with the procedures for claiming benefits described below) if the
holder is a resident of the United States and (i) is the beneficial owner of the
dividends paid thereon; (ii) is an individual, an exempt pension trust or exempt
organisation (as defined for purposes of the US-NL Treaty), an estate or trust
whose income is subject to US taxation as the income of a resident, either in
its hands or in the hands of its beneficiaries or a corporation that is entitled
to benefits under the limitation on benefits provision of the U.S.-NL Treaty;
(iii) is not also resident in another jurisdiction; and (iv) does not hold the
shares in connection with the conduct of business through a permanent
establishment or the performance of services from a fixed base, in the
Netherlands. The U.S.-NL Treaty provides for a complete exemption from
withholding tax on dividends paid to exempt pension trusts and exempt
organisations, as defined therein. Except in the case of exempt pension trusts
and exempt organisations, the reduced dividend withholding tax rate can be
applied at source upon payment of the dividends, provided that the proper forms
have been filed in advance of the payment.

     A holder of shares (other than an exempt organisation) generally may claim
the benefits of a reduced withholding tax rate or an exemption from withholding
tax pursuant to the U.S.-NL Treaty by submitting a duly signed Form IB 92 USA,
which form includes a banker's affidavit stating that the shares are in the
bank's custody in the name of the applicant, or that the shares have been
exhibited to the bank as being the property of the applicant. If the Form IB 92
USA is submitted prior to the dividend payment date, the Company can apply the
reduced withholding tax rate to the dividend payment. A holder of shares who is
unable to claim withholding tax relief in this manner can obtain a refund of
excess tax withheld by filing a Form IB 92 USA and describing the circumstances
that prevented claiming withholding tax relief at source.

     Qualifying U.S.-exempt organizations must seek a full refund of the tax
withheld by using the Form IB 95 USA, which form also includes a banker's
affidavit.



                                       52
<PAGE>

Taxes on Income and Capital Gains

     A holder of shares will not be subject to any Netherlands taxes on income
or capital gains in respect of dividends distributed by the Company or in
respect of any gain realised on the disposal of shares (other than the
withholding tax described above), provided that:

               (i) such holder is neither resident nor deemed to be resident of
     the Netherlands for Netherlands tax purposes (nor has opted to be taxed as
     a resident of the Netherlands);

               (ii) such holder does not have an enterprise or an interest in an
     enterprise that is carried on through a permanent establishment or a
     permanent representative in the Netherlands and to which Netherlands
     permanent establishment or permanent representative the shares are
     attributable;

               (iii) such holder does not have a substantial interest or a
     deemed substantial interest in the Company or, in the event that such
     holder does have or is deemed to have such interest, it forms part of the
     assets of a Netherlands enterprise;

               (iv) such holder is not entitled to a share in the profits of an
     enterprise that is effectively managed in the Netherlands other than by way
     of securities or through an employment contract, the shares being
     attributable to such enterprise; and

               (v) such holder does not perform activities in the Netherlands in
     respect of the shares that exceed "regular, active portfolio management".

     Shares will generally not form part of a substantial interest if the holder
of such shares, alone or together with his spouse, certain other relatives
(including foster children) and/or certain persons sharing his or her household,
does not hold, whether directly or indirectly, ownership of, or have certain
rights over: (a) at least five percent of the issued share capital of any class
of shares of the Company; (b) option rights to acquire shares in the Company
representing at least five percent of the issued share capital of any class of
shares of the Company; or (c) profit participating certificates entitling the
holder to at least five percent of the annual profit of the Company, or
entitling the holder to at least five percent of the liquidation proceeds upon
liquidation of the Company. A deemed substantial interest is present if part of
a substantial interest has been disposed of, or is deemed to have been disposed
of, on a non-recognition basis.

Anti-Dividend Stripping Legislation

     In the Netherlands legislation exists that affects the eligibility for an
exemption, reduction, refund or credit of dividend withholding tax. A recipient
of a distribution on the shares will not be entitled to an exemption, reduction,
(partial) refund or credit of Netherlands dividend withholding tax if such
recipient is not considered the beneficial owner of such distribution. This is
the case if:

               (i) the recipient of the distribution, in connection with the
     receipt of the distribution has incurred an obligation, as part of one or
     more related transactions, as a result of which the distribution in whole
     or in part has accrued or will accrue to the benefit of a person that is to
     a lesser extent entitled to an exemption, reduction, (partial) refund or
     credit of Netherlands dividend withholding tax than the recipient of the
     distribution is entitled to; and

               (ii) such person, other than the recipient of the distribution,
     retains or acquires, directly or indirectly, a comparable interest in the
     shares or any other shares in the Company on which the distribution is
     paid, as such person had before the related transaction was or related
     transactions were entered into.

Distribution tax

     The Company was subject to a temporary special distribution tax at a rate
of 20 per cent to the extent that any "excessive" distributions were made in
2004. The temporary special distribution tax was abolished as of 1 January 2005.

Gift, Estate and Inheritance Taxes

     No gift, estate or inheritance taxes will arise in the Netherlands with
respect to an acquisition of shares by way of a gift by, or on the death of, a
holder of shares who is neither resident nor deemed to be resident in the
Netherlands, unless:

               (i) such holder at the time of the gift has or at the time of his
     death had a Netherlands enterprise or an interest in a Netherlands
     enterprise that is or was, in whole or in part, carried on through a
     permanent establishment or a permanent representative in the Netherlands
     and to which Netherlands enterprise the shares are or were attributable; or



                                       53
<PAGE>

               (ii) in the case of a gift of shares by an individual who at the
     time of the gift was neither resident nor deemed to be resident in the
     Netherlands, such individual dies within 180 days after the date of the
     gift, while being resident or deemed to be resident in the Netherlands; or

               (iii) the shares are or were attributable to the assets of an
     enterprise that is effectively managed in the Netherlands and the donor is
     or the deceased was entitled, other than by way of securities or through an
     employment contract, to a share in the profits of that enterprise, at the
     time of the gift or, as applicable, at the time of his or her death.

     For purposes of Netherlands gift, estate and inheritance tax, an individual
who holds the Netherlands nationality is deemed to be resident in the
Netherlands if he or she has been resident in the Netherlands at any time during
the ten years preceding the date of the gift or death.

     For purposes of Netherlands gift tax, an individual not holding the
Netherlands nationality is deemed to be resident in the Netherlands if he or she
has been resident in the Netherlands at any time during the twelve months
preceding the date of the gift. Applicable tax treaties may override this deemed
residence.

Other Taxes and Duties

     No Netherlands VAT, registration tax, transfer tax, stamp duty or any other
similar documentary tax or duty other than court fees will be payable in the
Netherlands in respect of or in connection with the subscription, issue,
placement, allotment or delivery of the shares.

  United States Federal Income Tax Consequences for Holders of Ordinary Shares

     The following is a general summary of the material U.S. federal income tax
consequences of the ownership and disposition of our ordinary shares. This
summary is based on the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), existing temporary and proposed Treasury Regulations, revenue rulings,
administrative pronouncements and judicial decisions, all as currently in effect
and all of which are subject to change or changes in interpretation, possibly
with retroactive effect. This summary deals only with ordinary shares held as
capital assets within the meaning of Section 1221 of the Code. This summary does
not discuss all of the tax consequences that may apply to holders that are
subject to special tax rules, including:

     o  persons subject to the imposition of the U.S. federal alternative
        minimum tax;

     o  persons who hold the ordinary shares through partnerships or other pass
        through entities;

     o  U.S. expatriates;

     o  insurance companies;

     o  tax-exempt entities;

     o  banks; financial institutions; regulated investment companies;
        securities broker-dealers;

     o  persons who hold ordinary shares as part of a hedging, straddle,
        constructive sale or conversion transaction;

     o  traders in securities who elect to apply a mark-to-market method of
        accounting;

     o  persons who acquired the ordinary shares pursuant to the exercise of
        employee stock options or otherwise as compensation;

     o  persons whose functional currency is not the U.S. dollar; and

     o  U.S. persons owning (directly, indirectly or by attribution) 10% or more
        of the voting power or share capital of the Company.

     For purposes of this discussion a "U.S. shareholder" is a beneficial owner
of ordinary shares that is:

     o  an individual who is a citizen or resident of the United States for U.S.
        federal income tax purposes;

     o  a corporation (or other entity taxable as a corporation for U.S. federal
        income tax purposes) created or organized in or under the laws of the
        United States or of any state thereof (including the District of
        Columbia);



                                       54
<PAGE>

     o  an estate the income of which is subject to U.S. federal income taxation
        regardless of source; or

     o  a trust if both a U.S. court is able to exercise primary supervision
        over the administration of the trust, and one or more U.S. persons have
        the authority to control all substantial decisions of the trust.

     If a partnership (including for this purpose any entity treated as a
partnership for U.S. federal income tax purposes) holds ordinary shares, the tax
treatment of a partner generally will depend upon the status of the partner and
the activities of the partnership. If a U.S. shareholder is a partner in a
partnership that holds our ordinary shares the shareholder is urged to consider
its own tax advisor regarding the ownership and disposition of ordinary shares.

Taxes on Distributions

     The gross amount of any distribution, including Netherlands withholding tax
thereon, actually or constructively received by a U.S. shareholder with respect
to ordinary shares generally will be a dividend includible in the gross income
of the U.S. shareholder as ordinary income. Dividends paid on ordinary shares
generally will constitute income from sources outside the United States and will
not be eligible for the dividends received deduction otherwise allowed to
corporate U.S. shareholders in respect of dividends received from U.S.
corporations.

     The amount of any distribution paid in euros based on the spot rate in
effect will be the U.S. dollar value of the euros on the date of actual or
constructive receipt by the U.S. shareholder or the Bank of New York, on behalf
of such shareholders, as the case may be. If euros received in a distribution
are converted into U.S. dollars on the date received by U.S. shareholders or the
Bank of New York on behalf of such U.S. shareholders, as the case may be, U.S.
shareholders generally should not be required to recognize any exchange gain or
loss on such conversion. Gain or loss, if any, recognized by a U.S. shareholder
on the subsequent sale, conversion or other disposition of euros will generally
be U.S. source ordinary income or loss.

     Subject to various conditions and limitations, and subject to the
discussion in the next paragraph, tax withheld in the Netherlands in accordance
with the U.S.-NL Treaty will be treated as a foreign tax that U.S. shareholders
may elect either to deduct in computing their U.S. federal taxable income or
credit against their U.S. federal income tax liability. Dividends on ordinary
shares generally will be treated as "passive income" or, in the case of certain
holders, "financial services income" for purposes of calculating the amount of
the foreign tax credit available to a U.S. shareholder. Under recently enacted
legislation, for taxable years beginning January 1, 2007, dividend income
generally will constitute "passive category income" or, in the case of certain
U.S. Holders, "general category income." Additional withholding tax, if any, in
excess of the rate applicable under the U.S.-NL Treaty generally will not be
eligible for credit against the U.S. shareholder's U.S. federal income tax
liability. However, a U.S. shareholder should be able to obtain a refund of such
excess amount by filing the appropriate forms with the Netherlands Tax
Administration requesting such refund and providing the required information.

     Under various circumstances, we will be allowed to reduce the amount of
dividend withholding tax imposed on U.S. shareholders that is paid over to the
Netherlands Tax Administration by crediting withholding tax imposed on various
dividends paid to us. In such event, the Netherlands withholding tax imposed on
dividends paid to a U.S. shareholder may not be fully creditable against the
U.S. shareholder's U.S. federal income tax liability.

     If a U.S. shareholder is an accrual method taxpayer, for taxable years
beginning before 2005, it must translate the Netherlands withholding tax into
U.S. dollars at a rate equal to the average exchange rate for the taxable year
in which the tax accrue, but must translate taxable dividends into U.S. dollars
at the spot rate on the date received. This difference in exchange rates may
reduce the U.S. dollar value of the credits for the Netherlands withholding tax
relative to its U.S. federal income tax liability attributable to a dividend.
However, for taxable years beginning after 2004, an accrual method U.S.
shareholder may elect to translate the Netherlands withholding tax into U.S.
dollars using the exchange rate in effect at the time the taxes were paid. Any
such election will apply for the taxable year in which it is made and all
subsequent years, unless revoked with the consent of the Internal Revenue
service.

     We did not pay dividends in 2004. If we were to pay dividends in the
future, we will endeavor to provide to U.S. shareholders the information they
will need to calculate their foreign tax credit.

     The rules governing the foreign tax credit are complex. U.S. shareholders
are urged to consult their own tax advisors regarding the availability of the
foreign tax credit in their particular circumstances.

     Certain U.S. shareholders (including individuals) are eligible for reduced
rates of U.S. federal income tax (currently a maximum of 15%) in respect of
"qualified dividend income" received in taxable years beginning before January
1, 2009. For this purpose, qualified dividend income generally includes
dividends paid by a non-U.S. corporation if, among other things, the U.S.
shareholders meet certain minimum holding periods and other requirements and the
non-U.S. corporation satisfies certain criteria, including that either (i) the
ordinary shares with respect to which the dividend has been paid are readily
tradable on an established securities markets in the United



                                       55
<PAGE>

States, or (ii) the non-U.S. corporation is eligible for the benefits of a
comprehensive U.S. income tax treaty (such as the U.S.-NL Treaty) which provides
for the exchange of information. We currently believe that dividends paid with
respect to our ordinary shares should constitute qualified dividend income for
U.S. federal income tax purposes, however, this is a factual matter and
therefore is subject to change. The U.S. Treasury and the Internal Revenue
Service have announced their intention to promulgate rules pursuant to which
holders of ordinary shares, among others, will be permitted to rely on
certifications from issuers to establish that dividends are treated as qualified
dividend income. Each individual U.S. shareholder of our ordinary shares is
urged to consult his own tax advisor regarding the availability to him of the
reduced dividend tax rate in light of his own particular situation and regarding
the computations of his foreign tax credit limitation with respect to any
qualified dividend income paid by the Company to him, as applicable.

Sale or Other Disposition of the Ordinary Shares

     Upon the sale or other disposition of ordinary shares, a U.S. shareholder
generally will recognize capital gain or loss for U.S. federal income tax
purposes in an amount equal to the difference between the U.S. dollar value of
the amount realized from such sale or other disposition and the U.S.
shareholder's tax basis (determined in U.S. dollars) for such ordinary shares.
Such gain or loss will be U.S. source gain or loss and will be treated as
long-term capital gain if the ordinary shares were held for more than one year.
The deductibility of capital losses is subject to limitations. In the case of a
U.S. shareholder who is an individual, long-term capital gain generally will be
subject to preferential rates. If a U.S. shareholder receives euros upon a sale
or other disposition of ordinary shares, gain or loss, if any, recognized on the
subsequent sale, conversion or disposition of the euros generally will be U.S.
source ordinary income or loss. However, if such euros are converted into U.S.
dollars on the date received by the U.S. shareholder, the U.S. shareholder
generally should not be required to recognize any gain or loss on the
conversion.

Passive Foreign Investment Company Status

     If during any taxable year 75% or more of our gross income consists of
various types of "passive income," such as dividends, interest, rents or
royalties (other than rents or royalties derived in the active conduct of a
trade or business and received from a unrelated person), or gains from
disposition of certain minority interests), or if the average value during a
taxable year of "passive assets", is 50% or more of the average value of all of
our assets, we will be treated as a "passive foreign investment company," or
"PFIC" for such year and in succeeding years. Passive assets are, generally,
assets that generate passive income. If we were treated as a PFIC in any taxable
year (which conclusion is a factual determination that must be made as of the
close of the taxable year), upon receipt of a distribution on, or a sale of,
ordinary shares, a U.S. shareholder generally will be required to allocate to
each day in its holding period with respect to the ordinary shares a pro rata
portion of any distributions received on the ordinary shares which are treated
as an "excess distribution." Any amount of an excess distribution, which term
includes gain on the sale of stock, treated as allocable to a prior taxable year
is subject to federal income tax at the highest applicable rate of the year in
question, plus an interest charge on the amount of tax deemed to be deferred.
Furthermore, dividends paid by us would not be "qualified dividend income" and
would be taxed at the higher rates applicable to other items of ordinary income.
We currently believe that we did not qualify as a PFIC for the 2004 taxable
year, and it is our intention to conduct our investment activities in a manner
to avoid PFIC status in the future. However, because PFIC status is a factual
matter that must be determined annually, there are no assurances in this regard.

     In the event that we were a PFIC in a subsequent taxable year, the
foregoing rules with respect to distributions and dispositions may be
ameliorated if a U.S. shareholder were eligible for and timely made either:

        o    a valid "QEF" or Qualified Electing Fund election, in which case
             the U.S. shareholder generally would be required to include in
             income on a current basis its pro rata share of our ordinary income
             and net capital gains; or

        o    a valid "mark-to-market" election, in which case, subject to
             various limitations, the U.S. shareholder would essentially be
             required to take into account the difference, if any, between the
             fair market value and the adjusted tax basis of its ordinary
             shares, at the end of a taxable year, in calculating its income for
             such year.

     A U.S. shareholder who decided not to make any of the above elections at
any time during the period in which the shareholder held our ordinary shares
while we were a PFIC nevertheless may elect to make a "deemed sale election"
pursuant to which the shareholder would be treated as having sold its ordinary
shares on the last day of the last taxable year in which we qualified as a PFIC.

     For U.S. shareholders to qualify for treatment under a QEF election, we
would be required to provide various information to the U.S. shareholders.
Although we have not definitively decided whether we would provide such
information, we currently do not intend to do so. U.S. shareholders are urged to
consult their own tax advisors regarding the application of the PFIC rules to
their ownership of our ordinary shares.

U.S. Information Reporting and Backup Withholding

     Dividend payments with respect to ordinary shares and proceeds from the
sale, exchange or other disposition of ordinary shares may be subject to
information reporting to the Internal Revenue Service and possible U.S. backup
withholding at a current rate of 28%.



                                       56
<PAGE>

Backup withholding will not apply to a shareholder who furnishes a correct
taxpayer identification number or certificate of foreign status and makes any
other required certification or who is otherwise exempt from backup withholding.
U.S. persons who are required to establish their exempt status generally must
provide such certification on a properly completed Internal Revenue Service Form
W-9 (Request for Taxpayer Identification Number and Certification). Non-U.S.
shareholders generally will not be subject to U.S. information reporting or
backup withholding. However, such shareholders may be required to provide
certification of non-U.S. status (generally on Internal Revenue Service Form
W-8BEN) in connection with payments received in the United States or through
certain U.S.-related financial intermediaries.

     Backup withholding is not an additional tax. Amounts withheld as backup
withholding may be credited against a shareholder's U.S. federal income tax
liability, and a shareholder may obtain a refund of any excess amounts withheld
under the backup withholding rules by timely filing the appropriate claim for
refund with the Internal Revenue Service and furnishing any required
information.

     Austrian Tax Consequences for Holders of Ordinary Shares

General

     The following is a summary of the principal Austrian tax consequences of
purchase, possession, ownership and disposal of the ordinary shares. This
summary is based on current law, including but not limited to the double
taxation convention between Austria and the Netherlands and practice as to
matters of Austrian taxation. It does not purport to be a complete analysis of
all potential tax effects relevant to a decision to invest in the ordinary
shares. Prospective investors who are in any doubt as to their tax position
should seek independent advice.

     An Austrian shareholder of ordinary shares is an individual who is resident
in Austria or who ordinarily resides in Austria, or corporations with Austrian
place of management or registered office in Austria.

Dividend withholding tax

     Pursuant to Netherlands income taxation provisions, dividends of
Netherlands corporations are subject to withholding tax amounting to 25%.

     According to the double tax treaty, the right to impose tax in the
Netherlands is limited to 15% of the gross amount of the dividends. In order to
obtain relief from tax obligations exceeding the 15% withholding tax for
dividends in the Netherlands, Austrian shareholders may apply for tax relief. In
order to obtain this reduced rate of withholding tax, a two-stage procedure must
be followed: applications are filed by using the printed form entitled
"Inkomstenbelasting nr. 92 Ost," which can be obtained from the appropriate
Austrian tax authority , which is then to be submitted in duplicate to either
the tax office responsible for individuals (Wohnsitzfinanzamt) or corporations
(Sitzfinanzamt). The respective tax office will then confirm on one copy of the
application form that the shareholder resides in Austria. As soon as the
dividends are distributed, the Austrian shareholder must submit this certified
copy to the bank dealing with the distribution of the dividends; this bank shall
effect the relief at source at 15% of gross dividends.

     In case an Austrian shareholder does not obtain such relief at source, he
may apply to the competent Netherlands tax authorities for reimbursement by the
end of the third calendar year of such wrongful retention.

     Gross dividend distributions to Austrian individual shareholders are
considered income as defined by the Income Tax Act. Such income is generally
subject to a special tax rate of 25 %. According to the double taxation
convention, Austrian individual shareholders may have the 15% withholding tax on
the gross dividends credited against their Austrian income tax. The maximum
amount to be credited may not exceed the tax amount calculated prior to the
credit allotted to income gained in the Netherlands.

     With respect to dividends paid to corporations resident in Austria, relief
concerning the amount exceeding the 15% withholding tax levied in the
Netherlands is possible, as outlined above for Austrian private investors. For
qualifying shareholdings of at least 25% held by Austrian corporations a
reduction to 5% is available. Provided the dividends of the company are paid to
a parent company resident in Austria, pursuant to Article 2 of directive Nr.
90/435 of the European Community (EWG) by the European Council dated July 23,
1990 ("Parent/Subsidiary Directive") and which holds an interest of at least 25%
( will be reduced to 20% with retroactive effect as from 1 January 2005, under
current proposal) of the shares of the company for a period of at least one
consecutive year, no Netherlands tax is levied at source. The gross dividends to
Austrian corporations not qualifying for the benefits under the participation
exemption according to Section 10 Corporate Income Tax Act are subject to
Austrian corporate income tax at a rate of 25%. Corporations may, as Austrian
private investors, claim a credit of the actual paid Dutch withholding tax
against the Austrian corporate income tax.

Capital Gains

     Capital gains from the alienation of ordinary shares shall be taxable in
Austria only if the alienator is resident in Austria. This does not apply if the
alienator within five years before the alienation of the ordinary shares has
been resident in the Netherlands. In such case,



                                       57
<PAGE>

capital gains from the alienation of ordinary shares shall be taxable also in
the Netherlands.

     In Austria, capital gains realised from the sale of ordinary shares by
individuals are subject to tax at marginal tax rates (up to 50%) if the
one-year-holding period is not met. After expiry of the holding period sales of
substantial shares (i.e., if the shareholder has owned a share of at least 1% at
any time within the five years period prior to the sale), and sales of shares
representing part of a domestic business property (Betriebsvermogen) are subject
to income tax only. The capital gain is subject to half the average tax rate if
the substantial share does not represent part of a domestic business property
and the one-year-holding period is met.

     In General, corporations subject to unlimited tax liability in Austria are
subject to corporate income tax on any capital gains realised from any sale of
ordinary shares (with exceptions for certain foreign shareholdings). For
corporations, which have been established after December 31, 2000, no tax is
generally levied on capital gains resulting from the sale of an interest of at
least 10% in a non-resident company provided the one-year holding period is met.
On the other hand, for these corporations capital losses realised from the sale
of such interest are not tax deductible. However, these corporations have the
option to treat both, capital gains and capital losses taxable.

     For Corporations, which have been established before January 1, 2001 the
above rules will become applicable from 2006 (assessment period) onwards.

Departure Tax

     Measures of shareholders which lead to a loss of taxation power of Austria
in relation to other countries are generally treated as a sale at fair market
value (with certain exemptions).

     However, in relation to EU member states (and, in certain cases, member
states of the European Economic Area), taxation may upon application be deferred
until the respective shareholding is actually disposed of.

Tax Upon Liquidation

     In case of liquidation of the company, a shareholder is subject to tax on
the difference between the proceeds from the liquidation and the acquisition
cost of the shares in the case of an individual shareholder or the book value in
the case of a corporate shareholder, irrespective of the extent of the
shareholding. However, an exemption generally exists for gains derived by an
Austrian corporate shareholder from the liquidation of a non-resident company if
its share is at least 10% and the one-year holding period is met.

Share Transfer Tax

     The share transfer tax was abolished with effect as of October 1, 2000.

Inheritance and Gift Tax

     Share transfers due to death or donation by residents of Austria or by
Austrian citizens who have not resided outside of Austria for more than two
years are subject to Austrian Inheritance and Gift Tax (exemptions exist for
transfers of shares of less than 1% due to death). This also applies to
transfers by non-resident shareholders or non-Austrian citizens to beneficiaries
who are Austrian residents or citizens as defined above.

     Shares held by non-resident shareholders are not subject to Austrian
inheritance and gift tax on a transfer to another non-resident of Austria by
reason of death or donation. Non-resident shareholders are Austrian non-citizens
not resident in Austria or Austrian citizens not having been resident in Austria
for more than two years.

     For reasons of double taxation, special reference is made to double
taxation conventions entered into by the Republic of Austria. If no double
taxation convention has been concluded, foreign inheritance and gift taxes can
be allowed as credit against the Austrian inheritance and gift tax by the
Austrian Federal Ministry of Finance in case of reciprocity. Reciprocity is
assumed if the foreign country does not levy inheritance and gift tax on assets
situated in Austria or if the foreign country allows Austrian inheritance and
gift tax as credit against its own inheritance and gift tax. Application for
credit must be filed with the Austrian Federal Ministry of Finance.

10.F. Dividends and Paying Agents

     Not applicable.

10.G. Statement by Experts

     Not applicable.



                                       58
<PAGE>

10.H. Documents on Display

     The documents referred to in this report can be read at the U.S. Securities
and Exchange Commission's public reference facilities at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549.

     The public may obtain information on the operation of the Commission's
public reference facilities by calling the Commission in the United States at
1-800-SEC-0330. Copies of reports, proxy statements and other information
concerning us are also available for inspection at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.

10.I. Subsidiary Information

     Not applicable.

ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures About Market Risk

     In the ordinary course of business, our primary market risk exposures are
changes in interest rates and fluctuations in foreign currency exchange rates.
To meet our objective of minimizing our exposure to fluctuations in foreign
currency exchange rates, we use forward currency contracts. Such instruments are
entered into purely to meet our objective and not for speculative purposes.

     Our foreign currency risks have not changed materially over the last years.
However, with respect to interest rates, we have less exposure to interest rate
changes because we refinanced some of our floating rate debt with the proceeds
from our fixed rate senior notes issued in July 1999 and repaid another portion
of the floating rate debt with the proceeds from our initial public offering in
October 2000 and in 2004 with the proceeds of our newly issued bond due in 2014.

Interest Rate Exposures

     The table below provides information about our financial instruments that
are sensitive to interest rates, primarily our debt obligations. For such
obligations the table presents the repayment schedule of amounts outstanding on
December 31, 2004, based on the contractual maturity dates of our bank and other
debt facilities and the related weighted average interest rates by expected
maturity date. Variable rates are based on rates as of December 31, 2004.

     The carrying value of our senior notes and other long-term debt approximate
fair value based on current rates being offered and quoted market prices of debt
with similar terms.

<TABLE>
<CAPTION>

                                        Interest-Rate Risk Management
                                 Principal (Nominal) Amount by Expected Maturity
                                               Interest Rate

                                                                                                                     Year Ended
                                                           Year Ended December 31, 2004                           December 31, 2003
                                    ------------------------------------------------------------------------------------------------
                                                                                                         Fair                Fair
                                    2005      2006      2007      2008     2009    Thereafter  Total     Value     Total     Value
                                    ----      ----      ----      ----     ----    ----------  -----     -----     -----     -----
                                                                           (in thousands)
Debt, including current portion

<S>                               <C>             <C>       <C>      <C>       <C>   <C>       <C>       <C>        <C>       <C>
Fixed rate (EUR)................  $    159        170       182      194       208   185,049   185,962   185,962    96,155    96,155
Weighted avg. Interest rate
(fixed).........................      6.70%     6.70%     6.70%    6.70%     6.70%     8.37%     8.36%              10.19%

Fixed rate (USD)................  $    212        228       245      263       284     3,109     4,341     4,341     4,538     4,538
Weighted avg. Interest rate
(fixed).........................      7.33%     7.33%     7.33%    7.33%     7.33%     7.33%     7.33%               7.33%

Variable rate (ITL).............  $  2,589      2,141     2,186    2,095     1,637       434    11,082    11,082    12,672    12,672
Weighted avg. Interest rate
(variable)......................      2.53%     2.53%     2.53%    2.53%     2.53%     2.53%     2.53%               2.62%

Other currencies (CSK)..........  $    345        292       292      292       219               1,440     1,440     2,203     2,203
Weighted avg. Interest rate.....      3.34%     3.04%     3.04%    3.04%     3.04%               3.11%               3.59%

</TABLE>

Foreign Currency Exchange Rate Exposures

     The table below provides information about our forward foreign exchange
contracts and foreign exchange options contracts which we use to manage our
fluctuations in foreign currency exchange rates:


                                       59
<PAGE>

<TABLE>
<CAPTION>

                                      Contract
                                     Amount Sell
                                      U.S. Dollar    Average Option    Fair Value
                                      Equivalent      Strike Price  December 31, 2004

                                (in thousands, except for the option strike price)

Currency Pairs:
Foreign Currency Forward Contracts
Euro
<S>                                 <C>                 <C>          <C>
Japanese Yen                        $   12,924          134.7470     $     337
Canadian Dollar                     $    9,028            1.6104     $     221
British Pounds                      $    5,506            0.7113     $      32
Swiss Francs                        $   10,152            1.5149     $     125

</TABLE>

     The fair values of the foreign currency contracts represent the amount the
Company would receive or pay to terminate the contracts, considering first,
quoted market prices of comparable agreements, or in the absence of quoted
market prices, such factors as interest rates, currency exchange rates and
remaining maturity. The foreign currency forward contracts and foreign currency
options have a term of less than one year.

ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS

     Not applicable.

PART III

ITEM 15: CONTROLS AND PROCEDURES

     As a result of our normal internal audit process, we identified certain
weaknesses in our internal controls over financial reporting in our Italian
subsidiary. The weaknesses related principally to controls on bonus payments,
which we believe resulted in overpayments to certain former members of our
management team in Italy. Although we have not been able to quantify the exact
amount of any overpayments the amounts involved are not material to either the
Group as a whole or to our Italian subsidiary on a stand-alone basis.
Immediately upon discovery of the weaknesses in our internal controls our new
management team in Italy commissioned a detailed investigation by the head of
our internal audit team. At the conclusion of this investigation, our internal
audit team prepared a comprehensive report in which they made a number of
recommendations designed to improve our internal controls over financial
reporting. We have implemented or will implement all of these recommendations. A
copy of the internal audit team's report detailing the weaknesses in internal
control and their recommendations for improving our internal audit controls over
financial reporting has been delivered to our Supervisory Board and our external
auditors. We have also instructed our attorneys to commence actions to secure
restitution of any improper payments made to former members of our management
team in Italy.

     Our chief executive officer and chief financial officer, after evaluating
the effectiveness of our disclosure controls and procedures (as defined in
Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form
20-F, have concluded that, as of such date, our disclosure controls and
procedures were effective to ensure that material information relating to our
company was made known to them by others within the company.

ITEM 16: [RESERVED]

16.A. AUDIT COMMITTEE FINANCIAL EXPERT

     The Supervisory Board has determined that there is no "audit committee
financial expert" as defined under Sarbanes-Oxley Act of 2002 serving on the
Supervisory Board. No single member of the Supervisory Board meets all of the
five attributes required to meet the definition of audit committee financial
expert. Nonetheless, the Board considers that the Supervisory Board members as a
group possess adequate skills and expertise to fulfill the tasks entrusted to
the Supervisory Board.


                                       60
<PAGE>

16.B. CODE OF ETHICS

     We adopted a code of ethics that applies to all of our employees, including
our Chief Executive officer and principal financial officer. Our Code of Conduct
is posted on our website at www.head.com , section "Investor Relations".

16.C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     PricewaterhouseCoopers (PwC) has served as our independent public auditors
for each of the years ended in the three-year period ended December 31, 2004.
The following table presents the aggregate fees for professional audit services
and other services rendered by PricewaterhouseCoopers in 2003 and 2004 (in
thousands):


                                       Year ended December 31,
                                        2003            2004
------------------------------------------------------------------
Audit Fees....................     $        747    $        939
Audit-Related Fees............              175             605
Tax Fees......................              215             309
All Other Fees................              174              51
                                    -----------     --------------
Total.........................     $      1,311    $      1,904
                                    -----------     ---------------

     Audit Fees primarily relate to the audit of Head N.V.'s annual financial
statements set forth in our Annual Report on Form 20-F and other services
normally provided in connection with statutory and regulatory filings, which
mainly include the statutory audits of financial statements of our subsidiaries
and the assistance with review of documents filed with the SEC. In addition
audit fees contain also the reviews of Head N.V.'s quarter financial statements.


     Audit-Related Fees mainly represent fees for the services provided in
connection with the implementation of financial statements according to IFRS,
closure of our facility in Mullingar, Ireland, and the comfort letter in
connection with the issuance of our 8,5% senior notes in January 2004.


     Tax Fees were comprised solely of tax services permitted under the
Sarbanes-Oxley Act of 2002. Tax services rendered in connection with the audit
of financial statements have been included in the caption Audit Fees.


     All Other Fees represent professional services provided for services not
directly supporting financial statement audits, such as local law advices.


     For 2004 the Supervisory Board pre-approved tax services to be rendered by
member firms of PwC up to an aggregate amount of EUR 280.000, such services to
be provided to Head NV and any of its subsidiaries or affiliated companies. Tax
services included solely tax services permitted under the Sarbanes-Oxley Act of
2002 and any rules and regulations issued in respect to the Sarbanes-Oxley Act.


Pre-Approval Policies and Procedures


     Our Supervisory Board is responsible for the oversight of our independent
auditor's work. Our Supervisory Board pre-approves all audit and non-audit
services provided by PwC. These services may include audit services,
audit-related services, tax services and other services, as described above.

16.D. Exemption from the Listing Standards for Audit Committee

     Not applicable



16.E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers

     There were no purchases by or on behalf of Head N.V. or any affiliated
purchasers of its equity securities during 2004.

ITEM 17: FINANCIAL STATEMENTS



                                       61
<PAGE>

     Not applicable.

ITEM 18: FINANCIAL STATEMENTS

     The following financial statements are filed as part of this Annual Report
on Form 20-F.

ITEM 19: EXHIBITS

1.1     Memorandum and Articles of Association of the Company (previously filed
        with Form F-1 on September 27, 2000).
2.1     Indenture between HTM Sport- und Freitzeigerate AG, Head N.V., Head
        Holding Unternehmensbeteiligung GmbH, Head Sport AG, Head International
        GmbH, HTM Sport S.p.A., Head USA Inc., Penn Racquet Sports Inc.,
        Head/Tyrolia Sports Canada Inc., The Bank of New York, As Trustee,
        Registrar, Transfer Agent And Principal Paying Agent and The Bank of New
        York (Luxembourg) S.A., As Paying Agent And Transfer Agent dated January
        29, 2004
4.1     Loan Agreement between Head USA, Inc., Mares America Corp., Penn Racquet
        Sport, Inc and Fleet Capital Corporation as Agent dated April 5, 2000
        (previously filed with Form F-1 on September 27, 2000).
6.      A statement explaining in reasonable detail how earnings per share
        information were calculated (included in Note 2 to the Financial
        Statements).
8.      See "Item 4.C Organizational Structure"
12.1    Certification of the CEO pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.
12.2    Certification of the CFO pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.
13      Certification of the CEO and CFO pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.

                                       62
<PAGE>

                                   SIGNATURES


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



Date:     April 14, 2005

                               Head N.V.
                               Registrant


                               By:  /s/Johan Eliasch
                                    ----------------------------------
                                    Name:  Johan Eliasch
                                    Title: Chief Executive Officer,
                                           Chairman of the Management Board



<PAGE>









                           HEAD N.V. AND SUBSIDIARIES
                                  ANNUAL REPORT

                      For the Year Ended December 31, 2004








<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                                  ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 2004



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



Report of Independent Registered Public Accounting Firm......................F-1

Consolidated Balance Sheets at December 31, 2003 and 2004....................F-2

Consolidated Statements of Operations for the Years Ended
   December 31, 2002, 2003 and 2004..........................................F-3

Consolidated Statements of Stockholders' Equity for the Years Ended
   December 31, 2002, 2003 and 2004..........................................F-4

Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2002, 2003 and 2004..........................................F-5

Notes to the Consolidated Financial Statements...............................F-6



<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders
of Head N.V. :

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Head N.V.
and its subsidiaries at December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2004, in conformity with generally accepted accounting principles
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.




PwC Wirtschaftsprufung AG
Vienna, Austria
April 14, 2005


                                      F-1
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                             --------------------------
                                                                                2003            2004
                                                                             ---------        ---------
                                                                         (in thousands, except share data)
ASSETS:
<S>                                                                          <C>              <C>
Cash and cash equivalents .............................................      $  41,312        $  59,600
Restricted cash .......................................................          2,842            6,418
Accounts receivable, net of allowance for doubtful accounts of
   $15,822 and $16,591 ................................................        195,998          211,400
Inventories, net ......................................................         78,644           91,884
Assets held for sale ..................................................          2,556            2,155
Prepaid expense and other current assets ..............................         17,764           24,194
                                                                             ---------        ---------
   Total current assets ...............................................        339,116          395,653
Marketable securities .................................................          2,826            2,950
Property, plant and equipment, net ....................................         76,694           85,064
Intangible assets .....................................................         16,536           16,536
Goodwill ..............................................................          3,700            3,700
Deferred income taxes .................................................         92,060           78,912
Other non-current assets ..............................................          6,653            4,705
                                                                             ---------        ---------
   Total assets .......................................................      $ 537,586        $ 587,520

LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable ......................................................      $  39,468        $  40,660
Accrued expenses and other current liabilities ........................         51,892           59,417
Short-term borrowings .................................................         37,490           39,883
Current portion of long-term debt .....................................          3,392            3,305
                                                                             ---------        ---------
   Total current liabilities ..........................................        132,241          143,264
Long-term debt ........................................................        143,951          199,520
Other long-term liabilities ...........................................         19,669           27,785
                                                                             ---------        ---------
   Total liabilities ..................................................        295,861          370,569
Minority interest .....................................................              9                9
Commitments and contingencies (see Note 17)
   Stockholders' Equity:
Ordinary shares: EUR 0.20 par value; 39,820,677 shares issued .........          7,067            7,067
Additional paid in capital ............................................        137,909          143,807
Treasury stock at cost: 2,421,235 and 3,600,775 shares ................         (5,485)         (10,766)
Retained earnings .....................................................         53,084           16,149
Accumulated other comprehensive income ................................         49,142           60,686
                                                                             ---------        ---------
   Total stockholders' equity .........................................        241,716          216,942
                                                                             ---------        ---------
   Total liabilities and stockholders' equity .........................      $ 537,586        $ 587,520
                                                                             =========        =========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                   statements

                                      F-2

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                For the Years Ended December 31,
                                                                        -----------------------------------------------
                                                                           2002               2003               2004
                                                                        ---------          ---------          ---------
                                                                                (in thousands, except share data)
<S>                                                                     <C>                <C>                <C>
Product revenues ................................................       $ 379,089          $ 421,507          $ 466,701
Licensing revenues ..............................................           8,398              9,701             11,059
                                                                        ---------          ---------          ---------
Total revenues ..................................................         387,487            431,208            477,759
Other revenues (see Note 2) .....................................           1,246              1,394              1,326
Sales deductions (see Note 2) ...................................          (8,783)           (10,272)           (12,071)
                                                                        ---------          ---------          ---------
Total net revenues ..............................................         379,949            422,331            467,014
Cost of sales ...................................................         233,402            266,023            294,360
                                                                        ---------          ---------          ---------
Gross profit ....................................................         146,547            156,308            172,653
Selling and marketing expense ...................................          95,082            108,193            118,511
General and administrative expense (excluding non-cash
   compensation expense) ........................................          32,524             38,847             41,883
Non-cash compensation expense ...................................           1,632                654                555
Gain on sale of property (see Note 25) ..........................            (443)              --               (5,650)
Restructuring costs (see Note 25) ...............................            --                8,368              2,347
                                                                        ---------          ---------          ---------
Operating income ................................................          17,753                245             15,008
Interest expense ................................................         (11,677)           (13,999)           (25,699)
Interest income .................................................             940              1,050              2,121
Foreign exchange loss ...........................................          (7,387)            (1,103)              (606)
Other income (expense), net .....................................             387                (18)               (97)
                                                                        ---------          ---------          ---------
Income (loss) from operations before income taxes ...............              15            (13,825)            (9,274)
Income tax benefit (expense):
   Current ......................................................          (2,410)            (2,278)            (2,504)
   Deferred .....................................................            (220)             1,446            (25,156)
                                                                        ---------          ---------          ---------
   Income tax expense ...........................................          (2,630)              (832)           (27,661)
                                                                        ---------          ---------          ---------
Net loss ........................................................       $  (2,615)         $ (14,657)         $ (36,935)
                                                                        =========          =========          =========
Earnings per share-basic
   Net loss .....................................................           (0.07)             (0.40)             (1.02)
Earnings per share-diluted
   Net loss .....................................................           (0.07)             (0.40)             (1.02)
Weighted average shares outstanding
   Basic ........................................................          37,356             36,285             36,198
   Diluted ......................................................          37,356             36,285             36,198
</TABLE>


    The accompanying notes are an integral partt of the consolidated financial
                                  statements.

                                      F-3
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                                          Accumulated
                                                        Ordunary Shares   Additional                         Other         Total
                                                    --------------------    Paid-in  Treasury  Retained  Comprehensive Stockholders'
                                                      Shares      Amount    Capital   Stock    Earnings      Income       Equity
                                                    ----------   -------  --------   --------  --------    --------     -----------
                                                                            (in thousands, except share data)
<S>                                                 <C>          <C>      <C>         <C>      <C>           <C>         <C>
Balance at December 31, 2001 .....................  37,779,377   $ 7,067  $135,435    $   --    $ 75,590     $(5,732)    $212,359
Dividend paid.....................................          --        --        --        --      (5,233)         --       (5,233)
Stock-based compensation..........................          --        --     1,632        --          --          --        1,632
Purchase of treasury stock (see Note 19)..........  (1,247,050)       --       ---    (3,046)         --          --       (3,046)
Repurchase of shares from exercised options.......          --        --       167    (1,288)         --          --       (1,121)
Proceeds from executed option.....................      11,212        --         3        --          --          --            3
Net loss..........................................          --        --        --        --      (2,615)         --       (2,615)
  Other comprehensive income:
    Unrealized losses on marketable
    securities, (net of tax of $65)...............          --        --        --        --          --        (138)        (138)
    Unrealized gain on derivatives instruments
    (net of tax of $54)...........................          --        --        --        --          --         640          640
    Reclassification adjustment for derivative
    gains recorded in net loss
    (net of tax of $506)...........................         --        --        --        --          --      (1,488)      (1,488)
    Foreign currency translation adjustment.......          --        --        --        --          --      28,832       28,832
                                                                                                                         --------
Comprehensive income..............................          --        --        --        --          --                   25,231
                                                    ----------   -------  --------  --------    --------    --------     --------
Balance at December 31, 2002......................  36,543,539     7,067   137,237    (4,334)     67,741      22,114      229,824
Stock-based compensation..........................          --        --       654        --          --          --          654
Purchase of treasury stock (see Note 19)..........    (577,775)       --        --    (1,151)         --          --       (1,151)
Proceeds from executed option.....................      56,790        --        17        --          --          --           17
Net loss..........................................          --        --        --        --     (14,657)         --      (14,657)
  Other comprehensive income:
    Unrealized losses on marketable
    securities, (net of tax of $16)...............          --        --        --        --          --         (33)         (33)
    Unrealized gain on derivatives instruments
    (net of tax of $558)..........................          --        --        --        --          --       1,083        1,083
    Reclassification adjustment for derivative
    gains recorded in net loss
    (net of tax of $295)..........................          --        --        --        --          --        (572)        (572)
    Foreign currency translation adjustment.......          --        --        --        --          --      26,550       26,550
                                                                                                                         --------
Comprehensive income..............................          --        --        --        --          --          --       12,370
                                                    ----------   -------  --------  --------    --------    --------     --------
Balance at December 31, 2003......................  36,022,554     7,067   137,909    (5,485)     53,084      49,142      241,716

Stock-based compensation..........................          --        --       555        --          --          --          555
Changes of treasury stock as consequence of
consolidation of Stichting Head Option Plan.......          --        --     6,729    (6,729)         --          --            0
Proceeds from executed option (see Note 19).......     197,348        --    (1,385)    1,448          --          --           63
Net loss..........................................          --        --        --        --     (36,935)         --      (36,935)
  Other comprehensive income:
    Unrealized gain on marketable
    securities, (net of tax of $24)...............          --        --        --        --          --          98           98
    Unrealized gain on derivatives instruments
    (net of tax of $120)..........................          --        --        --        --          --         360          360
    Reclassification adjustment for derivative
    gains recorded in net loss
    (net of tax of $195)..........................          --        --        --        --          --        (585)        (585)
   Foreign currency translation adjustment........          --        --        --        --          --      11,671       11,671
                                                                                                                         --------
Comprehensive loss................................          --        --        --        --          --                  (25,390)
                                                    ----------   -------  --------  --------    --------    --------     --------
Balance at December 31, 2004......................  36,219,902   $ 7,067  $143,807  $(10,766)   $ 16,149    $ 60,686     $216,942
                                                    ==========   =======  ========  ========    ========    ========     ========
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-4
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            For the Years Ended December 31,
                                                                                      ---------------------------------------------
                                                                                         2002              2003             2004
                                                                                      ---------         ---------         ---------

                                                                                                     (in thousands)
OPERATING ACTIVITIES:
<S>                                                                                   <C>               <C>               <C>
  Net loss ...................................................................        $  (2,615)        $ (14,657)        $ (36,935)
  Adjustments to reconcile net income
    to net cash provided by operating activities:
    Depreciation and amortization ............................................           15,946            19,239            19,261
    Amortization and write-off of debt issuance cost
    and bond discount ........................................................            1,092             1,232             3,570
    Impairment (see Note 25) .................................................             --               2,625              --
    Provision (release) for leaving indemnity
    and pension benefits .....................................................              883              (348)              444
    Restructuring costs (see Note 25) ........................................             --               4,800            (4,882)
    (Gain) loss on sale of property, plant and equipment .....................             (774)               85            (5,471)
    Non cash compensation expense ............................................            1,632               654               555
    Deferred tax (benefit) expense ...........................................              220            (1,446)           25,156
  Changes in operating assets and liabilities:
    Accounts receivable ......................................................            2,657           (12,058)           (2,437)
    Inventories ..............................................................            9,101            13,755            (5,231)
    Prepaid expense and other assets .........................................            1,494             3,071             1,604
    Accounts payable, accrued expenses and other liabilities .................           (6,356)              390            12,154
                                                                                      ---------         ---------         ---------
  Net cash provided by operating activities ..................................           23,279            17,342             7,789
                                                                                      ---------         ---------         ---------
INVESTING ACTIVITIES:
    Purchase of property, plant and equipment ................................          (20,746)          (16,914)          (23,175)
    Proceeds from sale of property, plant and equipment ......................            2,105               258             7,907
    Purchases of marketable securities .......................................             (164)              (39)          (13,663)
    Maturities of marketable securities ......................................             --                 141               169
                                                                                      ---------         ---------         ---------
  Net cash used for investing activities .....................................          (18,804)          (16,554)          (28,762)
                                                                                      ---------         ---------         ---------
FINANCING ACTIVITIES:
    Change in short-term borrowings, net .....................................           (2,853)            1,419           (31,271)
    Proceeds from long-term debt, net of discount ............................           16,592             1,656           164,005
    Payment of debt issuance cost ............................................             --                --              (1,749)
    Payments on long-term debt ...............................................           (4,340)           (1,249)          (91,629)
    Purchase of treasury stock ...............................................           (3,046)           (1,151)             --
    Payments to repurchase shares from exercised options .....................           (1,121)             --                --
    Proceeds from exercised options ..........................................                3                17                63
    Dividend paid ............................................................           (5,233)             --                --
    Change in restricted cash ................................................             --              (2,699)           (2,982)
                                                                                      ---------         ---------         ---------
  Net cash provided by (used for) financing activities .......................                2            (2,007)           36,437
                                                                                      ---------         ---------         ---------
  Effect of exchange rate changes on cash and cash equivalents ...............           10,994             4,932             2,824
  Net increase in cash and cash equivalents ..................................           15,470             3,714            18,288
  Cash and cash equivalents at beginning of period ...........................           22,128            37,598            41,312
                                                                                      ---------         ---------         ---------
  Cash and cash equivalents at end of period .................................        $  37,598         $  41,312         $  59,600
                                                                                      =========         =========         =========
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest .....................................................        $  10,736         $  12,597         $  16,760
  Cash paid for income taxes .................................................        $   1,747         $   1,340         $   2,802
</TABLE>

    The accompanying notes are an integral part of the consolidated financial
                                   statements.

                                      F-5
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Business

Head N.V. ("Head" or the "Company") was incorporated in Rotterdam, Netherlands,
on August 24, 1998. With effect from this date, Head Holding
Unternehmensbeteiligung GmbH ("Head Holding") merged with a wholly owned
subsidiary of the Company in a transaction treated as a merger of entities under
common control and accounted for on an "as if pooling" basis.

Head conducts business in Europe (primarily in Austria, Italy, Germany, France,
Switzerland, the Netherlands and the United Kingdom), North America, and Asia
(primarily Japan).


Note 2 - Summary of Significant Accounting Policies

A summary of significant accounting policies used in the preparation of the
accompanying consolidated financial statements is as follows:

Basis of Presentation

The Company and its subsidiaries maintain their accounting records in accordance
with their local regulations and have made certain adjustments to these records
to present the accompanying financial statements in conformity with accounting
principles generally accepted in the United States of America. In addition, the
Company publishes its statutory financial statements in accordance with Dutch
corporate regulations.

Principles of Consolidation

The consolidated financial statements of Head include the accounts of all
majority-owned subsidiaries and entities over which the Company has financial
and operating control and variable interest entities in which the Company has
determined it is the primary beneficiary. All intercompany transactions and
balances have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents comprise of cash and short-term, highly liquid
investments with an original maturity of three months or less.

Restricted Cash

Restricted cash comprises of deposits pledged as collateral on outstanding lines
of credit. The amounts are collateralized with one financial institution and
earn interest while in deposit.

Inventories

Inventories are stated at the lower of cost or market with cost being determined
on a first-in first-out basis (FIFO).

Marketable Securities

Debt securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity and reported at amortized cost. Debt
and equity securities held principally for selling in the near term are

                                      F-6
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

classified as trading and reported at fair value, with unrealized gains and
losses included in earnings. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale and are
reported at fair value, with unrealized gains and losses reported in other
comprehensive income.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Additions and improvements
that extend the useful lives of the plant and equipment and replacements, major
renewals, and betterments are capitalized. The cost of maintenance, repair and
minor renewals are expensed as incurred. When plant and equipment is retired or
otherwise disposed, the cost and related accumulated depreciation are removed
from the related accounts, and any gain or loss on disposition is recognized in
earnings. Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. The Company's buildings are depreciated
over a period of 10-48 years and machinery and equipment is depreciated over a
period of 2-20 years.

Impairment

The Company accounts for impairments in accordance with the Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"). The Company reviews for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the long-lived asset may not be recoverable. If the fair
value is less than the carrying amount of the asset, a loss is recognized in the
consolidated statements of operations for the difference. The Company's review
involves comparing current and future cash flows to the carrying value of the
assets. Long-lived assets to be disposed of, if any, are reported at the lower
of their carrying amount or fair value less cost to sell. The Company recorded
an impairment charge of zero, $2.6 million and zero, for the years ended
December 31, 2002, 2003, and 2004, respectively.

Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted SFAS 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 142 requires that goodwill and intangible
assets with an indefinite life are no longer amortized, but instead are tested
for impairment at least annually (fourth quarter), or more frequently if events
and changes in circumstances indicate that the carrying value may not be
recoverable. SFAS 142 prescribes a two-phase process for impairment testing of
goodwill. First, each reporting unit's (which generally represents one level
below an operating segment) carrying value is compared to its fair value to
determine if an impairment exists. Second, where the reporting unit's carrying
value exceeds its fair value, an impairment loss is recognized to the extent
that the goodwill carrying value exceeds the reporting unit's implied goodwill,
which is calculated as the difference between the reporting unit's fair value
and the fair value of the reporting unit's recognized and unrecognized assets
and liabilities. The impairment test for indefinite-lived intangible assets
requires that an impairment loss be recognized equal to the excess of its
carrying value over its fair value. The Company has goodwill and identified
intangible assets comprising of trademarks with an indefinite life. For the
years ended December 31, 2002, 2003 and 2004, no impairment charges were
recognized for goodwill or indefinite lived intangible assets.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of a sale arrangement
exists, delivery has occurred, the sales price is fixed and determinable, and
collectibility is reasonably assured. These criteria are generally met when
finished products are shipped to the customers and both title and the risks and
rewards of ownership are transferred, or services have been rendered and
accepted.

                                      F-7
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Revenues from licensing agreements are recognized over the license term for the
fixed license revenue portion and based on underlying customer sales once
minimum contractual sales volumes are met for the variable license revenue
portion.

Provisions are recorded for estimated product returns at the time revenues are
recognized.

Payment terms differ depending on the customer (large distributors, small
shops), product line (winter sports is a very seasonal business, as are racquet
sports and diving, though to a lesser extent than winter sports), country
(payment terms vary in accordance with local practices throughout the world) and
past experiences with customers. It is our normal procedure to agree terms of
transactions, including payment terms (60 to 180 days), with customers in
advance.

Shipping and handling costs

The Company classifies all amounts billed to customers for shipping and handling
as other revenues and all shipping and handling costs as selling and marketing
expense in the consolidated statement of operations. For the years ended
December 31, 2002, 2003, and 2004, the Company incurred shipping and handling
costs of $9.6 million, $10.5 million, and $12.3 million, respectively.

Sales deductions

The Company accrues for customer discounts based upon an estimated refund
obligations and classifies all sales incentives, which are earned by our
customers subsequent to delivery of our product, including cash discounts for
volume rebates and other than cash consideration, such as credits that our
customer can apply against trade amounts owed to us as sales deductions.

Translation of Foreign Currency

Finished goods sales to customers in Austria, Italy, Germany, Japan, France,
Switzerland, Canada, Spain, Netherlands, United Kingdom and the United States of
America are generally billed in local currency. The local currency is the
functional currency of the subsidiaries in these countries. Foreign currency
(functional currency) assets and liabilities are translated into U.S. dollars
(the reporting currency) at the exchange rate on the balance sheet date, with
resulting translation adjustments recorded in other comprehensive income.
Revenues and expenses are translated at average rates prevailing during the
year. Foreign exchange gains and losses arising from transactions denominated in
a currency other than the functional currency are included in income. The effect
of exchange rate changes on intercompany transactions of a long-term investment
nature are included in other comprehensive income. Head N.V. has a functional
currency of the Euro.

Financial Instruments

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities, as amended" ("SFAS 133"). SFAS 133 requires that the Company record
all derivatives on the balance sheet at fair value. The Company uses derivative
instruments, specifically foreign exchange forwards and option contracts, to
hedge the foreign exchange risk related to its forecasted and firmly committed
foreign currency denominated cash flows. On the date on which a derivative
contract is transacted, the Company designates the derivative as a hedging
instrument as either a fair value hedge or a cash flow hedge. Changes in
derivative fair values that are designated, effective and qualify as fair value
hedges are recognized in earnings as offsets to the related earnings effects of
changes in fair value of related hedged assets, liabilities and firm commitments
attributable to the hedged risk. Changes in derivative fair values that are
designated, effective and qualify as cash flow hedges will be deferred and
recorded as a component of accumulated other comprehensive

                                      F-8
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

income (AOCI) until the hedged transactions affect earnings, at which time the
deferred gains and losses on the derivative designated as cash flow hedges are
recognized in earnings, and classified in accordance with the classification of
the hedged item. The Company excludes the time value component of the
derivatives' change in fair value from the assessment of hedge effectiveness.
The Company enters into hedging relationships to limit the foreign exchange rate
risk for periods generally not to exceed one year. The Company does not utilize
financial instruments for trading or speculative purposes.

Research and Development Costs

Research and development costs are expensed as incurred and are reflected in
costs of sales in the statements of operations. The Company incurred research
and development expense in the amount of $11.0 million, $13.6 million and $15.5
million for the years ended December 31, 2002, 2003 and 2004, respectively.

Advertising Costs

Advertising costs are expensed as incurred and are reflected in selling and
marketing expense in the consolidated statements of operations. The Company
incurred advertising costs of $32.8 million, $36.9 million and $39.4 million for
the years ended December 31, 2002, 2003 and 2004, respectively.

Stock-Based Compensation

The Company accounts for its stock option plan using the fair value method in
accordance with SFAS 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Under the fair value recognition provisions of SFAS 123, stock-based
compensation cost is measured at the grant date based on the fair value of the
award and is recognized as expense over the vesting period. Determining the fair
value of stock-based awards at the grant date requires judgment, including
estimating the expected term of stock options, the expected volatility of our
stock, expected dividends, and risk-free interest rates.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the debt
using the effective interest rate method.

Pension and postretirement benefits

The Company accounts for the costs of pension plans and postretirement benefits
in accordance with SFAS 87, "Employers' Accounting for Pensions" ("SFAS 87") and
SFAS 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" ("SFAS 106"), respectively.

Fair Value Disclosure

The carrying value of the Company's financial instruments approximates fair
value at December 31, 2003 and 2004. The carrying amounts reported in the
consolidated balance sheet for cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses and short-term borrowings approximate fair
value due to the short maturity of these instruments and the floating interest
rates of the short-term borrowings. The carrying amounts of marketable
securities are equal to fair value based on quoted market prices at December 31,
2003 and 2004 (see Note 7).

The carrying value of the Company's senior notes and other long-term debt
approximates fair value based on current rates offered and quoted market price
of debt with similar terms.

Income Taxes

                                      F-9
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



The Company utilizes the liability method of accounting for deferred income
taxes whereby deferred tax assets and liabilities are recognized to reflect the
future tax consequences attributable to temporary differences between the
financial reporting bases of existing assets and liabilities and their
respective tax bases. With the exception of Head Holding Unternehmensbeteiligung
GmbH, all of the Company's Austrian subsidiaries are included in a consolidated
Austrian federal income tax return. Separate provisions for income taxes have
been prepared for the Company's other subsidiaries. Deferred taxes are
calculated by using the prevailing tax rates.

The Company provides a valuation allowance for deferred tax assets for which it
does not consider realization of such assets to be more likely than not.

Computation of Net Loss per Share

Net loss per share is computed under SFAS 128, "Earnings per Share" ("SFAS
128"). Basic net loss per share is computed by dividing the net loss for the
period by the weighted average number of ordinary shares outstanding during the
period. Shares held by The Stichting Head Option Plan ("Stichting") are not
treated as outstanding for purposes of the loss per share calculation until the
related option has been exercised. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of ordinary
shares and potential ordinary shares outstanding during the period. Potential
ordinary shares are composed of incremental shares issuable upon the exercise of
share options, and are included in diluted net loss per share to the extent such
shares are dilutive.

For the years ended December 31, 2002, 2003, and 2004, the weighted average
shares outstanding included in basic net loss per share is 37,356,353 shares,
36,285,142 shares, and 36,197,980 shares, respectively. For the years ended
December 31, 2002, 2003 and 2004, the number of options that were outstanding
but not included in the computation of diluted net loss per share because their
effect would have been anti-dilutive was 1,789,490 options, 1,347,773 options,
and 1,278,201 options, respectively.

Comprehensive income (loss)

Comprehensive income (loss) encompasses net income and changes in the components
of accumulated other comprehensive income not reflected in the Company's
consolidated statements of operations during the periods presented.

Concentration of business risk

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
restricted cash, marketable securities and accounts receivable. The Company
places cash with high quality financial institutions. The Company's customers
are concentrated in the retail industry however, concentrations of credit risk
with respect to trade accounts receivable are limited due to the large number of
customers and their dispersion across many geographic areas. The Company
generally performs credit reviews and sometimes obtains credit insurance before
extending credit.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant of these estimates are
impairments, allowances for doubtful accounts, product warranties and returns,
inventory obsolescence and valuation

                                      F-10
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

allowances on deferred tax assets. On an ongoing basis, management reviews its
estimates based upon currently available information. Actual results could
differ from those estimates.

Reclassifications

Certain amounts in the prior year consolidated financial statements have been
reclassified to be consistent with the current year's presentation.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standard Board ("FASB") issued a
revised SFAS No. 123(R), "Share-Based Payment - an Amendment of FASB Statements
No. 123 and 95" ("SFAS 123(R)"). SFAS 123(R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services or incurs liabilities in exchange for goods or services
that are based on the fair value of the entity's equity instruments, focusing
primarily on accounting for transactions in which an entity obtains employee
services in share-based payment transactions. SFAS 123(R) requires entities to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award (with limited
exceptions) and recognize the cost over the period during which an employee is
required to provide service in exchange for the award. The Company is required
to adopt SFAS 123(R) effective July 1, 2005 and is currently in the process of
evaluating the impact of SFAS 123(R).

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non monetary
Assets - An Amendment of APB Opinion No. 29" ("SFAS 153") which eliminates the
exception for non monetary exchanges of similar productive assets and replaces
it with a general exception for exchanges of non monetary assets that do not
have commercial substance. The Company is required to adopt SFAS 153 for non
monetary asset exchanges occurring in the first quarter of 2006. The Company is
currently in the process of evaluating the impact of SFAS 153.

In November 2004, FASB issued SFAS No. 151, "Inventory Costs -- an amendment of
ARB No. 43, Chapter 4" ("SFAS 151"). This Statement amends the guidance in ARB
No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). This Statement requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of
abnormal. In addition, this Statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity
of the production facilities. The provisions of this Statement shall be
effective for inventory costs incurred during fiscal years beginning after June
15, 2005. The Company is currently in the process of evaluating the impact of
SFAS 151.

In December 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS 132(R)"). The provisions of that Statement do
not change the measurement and recognition provisions of SFAS No. 87,
"Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 132(R) replaces SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits," and
requires additional disclosures pertaining to plan assets, benefit obligations,
key assumptions, and the measurement date. This standard is effective for
domestic plans for the reporting period ending after December 15, 2003 (and June
15, 2004 for disclosure of estimated future benefit payments) and for foreign
plans and non-public entities for interim periods ending after December 15, 2003
and for years ending after June 15, 2004. The Company has adopted this standard
and has provided the required disclosures.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46)
"Consolidation of Variable Interest Entities, an interpretation of ARB 51". In
December 2003, the FASB issued FIN 46R, "Consolidation of Variable Interest

                                      F-11
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Entities," which amended FIN 46. FIN 46R was effective immediately for
arrangements entered into after January 31, 2003, and became effective January
1, 2004 for all arrangements entered into before February 1, 2003. FIN 46R
requires existing unconsolidated variable interest entities ("VIEs") to be
consolidated by their primary beneficiary. The primary beneficiary of a VIE is a
party that absorbs a majority of the entity's expected losses or receives a
majority of its expected residual returns, or both, as a result of holding
variable interests, which are the ownership interests, contractual interests, or
other pecuniary interests in an entity that changes with changes in the fair
value of the entity's net assets excluding variable interests. Prior to FIN 46R,
the Company included an entity in its consolidated financial statements only if
it controlled the entity through voting rights. The adoption of FIN 46 and FIN
46R did not have a material impact on our financial position or result of
operations.

In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or rights
to use assets. The provisions of EITF 00-21 apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The adoption of
EITF 00-21 did not have a material impact on the Company's consolidated
financial statements.

Note 3 - Accounts Receivable

Accounts receivable consist of the following (in thousands):

                                                          December 31,
                                                      2003             2004
                                                  ----------       ----------
Trade debtors.................................    $  198,110       $  215,588
Other receivables.............................        13,710           12,404
Allowance for doubtful accounts...............       (15,822)         (16,591)
                                                  ----------       ----------
   Accounts receivable, net...................    $  195,998       $  211,400
                                                  ==========       ==========

Note 4 - Inventories

Inventories consist of the following (in thousands):
                                                          December 31,
                                                  ---------------------------
                                                      2003             2004
                                                  ----------       ----------
Raw materials and supplies...................     $  21,545        $  25,296
Work in process..............................         9,388           11,187
Finished goods...............................        63,865           73,354
Provisions...................................       (16,154)         (17,953)
                                                  ---------        ---------
Total inventories, net.......................     $  78,644        $  91,884
                                                  =========        =========

Note 5 - Assets Held for Sale


                                      F-12
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



During December of 2003, the Company transferred all of its manufacturing
operations in Tallinn, Estonia, which manufacture ski boots and certain diving
products, to our plant in Litovel in the Czech Republic. As of December 31, 2003
the Company had the intention to sell its property in Estonia therefore the
Company reclassified the $2.6 million facility as held for sale in accordance
with SFAS 144. In October 2004, the Company entered into a lease agreement for
this property therefore reclassified the $2.6 million asset from held for sale
to property, plant and equipment. Additionally, the Company recorded an
additional $0.1 million of depreciation expense on this facility which would
have been recognized had the asset been continuously classified as held for use.

During 2004, the Company made the decision to sell its distribution warehouse in
Italy. In accordance with SFAS 144, this asset, with a net book value of $2.2
million has been reclassified as held for sale and the Company ceased
depreciation on this plant.

Note 6- Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                       2003             2004
                                                                    ----------       ----------

<S>                                                                 <C>               <C>
Marketable Securities, short-term.............................      $      323        $  14,556
Deferred tax assets, current..................................          11,262            4,280
Patents and royalties.........................................           2,804            2,351
Advertising...................................................             899            1,043
Other.........................................................           2,476            1,965
                                                                    ----------        ---------
Total prepaid expenses and other current assets ..............      $   17,764        $  24,194
                                                                    ==========        =========
</TABLE>

Note 7 - Marketable Securities

Marketable securities consist of the following (in thousands):


<TABLE>
<CAPTION>
                                                                            December 31,
                                                                    ---------------------------
                                                                       2003             2004
                                                                    ----------       ----------
Available-for-Sale
------------------
<S>                                                                 <C>              <C>
Austrian government debt securities.............................    $      137       $       --
Corporate debt securities.......................................           410              432
Cash bonds......................................................            --           13,772
Other securities................................................         2,602            3,302
                                                                    ----------       ----------
     Total Marketable securities available-for-sale.............         3,149           17,506

     Less: Short-term portion...................................          (323)         (14,556)
                                                                    ----------       ----------
     Total Long-term marketable securities......................    $    2,826       $    2,950
                                                                    ==========       ==========
</TABLE>

                                      F-13
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table is a summary of the Company's investments' gross unrealized
losses and fair value, aggregated by investment category and length of time that
individually securities have been in a unrealized loss position, at December 31,
2004.

<TABLE>
<CAPTION>
                                          Less than 12 Months              12 Months or More                    Total
                                      ----------------------------    ----------------------------   -----------------------------
                                        Fair          Unrealized        Fair         Unrealized        Fair         Unrealized
                                        Value           Losses          Value          Losses          Value          Losses
                                      ---------     --------------    ---------    ---------------   ---------    ----------------
<S>                                     <C>              <C>           <C>             <C>             <C>             <C>
Other securities ...............         --               --            1,655            (139)          1,655            (139)
  Total temporarily
  impaired securities...........        $--              $--           $1,655          $ (139)         $1,655          $ (139)
</TABLE>

Maturities of debt securities are as follows (in thousands):

                                                                    December 31,
                                                                    ------------
                                                                        2004
                                                                    ------------
Mature within 1 year............................................... $        432
Mature between one year and five years.............................           --
Mature between five years and ten years............................           --
Mature after ten years.............................................           --
                                                                    ------------
    Total Marketable securities.................................... $        432
                                                                    ============

Marketable securities with a maturity of less than one year are included in
prepaid expenses and other current assets in the accompanying consolidated
balance sheets.

Note 8 - Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                            December 31,
                                                                    ---------------------------
                                                                       2003             2004
                                                                    ----------       ----------
<S>                                                                 <C>              <C>
Land..............................................................  $    4,490       $    4,576
Buildings.........................................................      36,214           33,021
Machinery and equipment...........................................     164,013          185,599
                                                                     ---------       ----------
                                                                       204,718          223,195
Less: Accumulated depreciation....................................    (128,024)        (138,130)
                                                                     ---------       ----------
    Total Property, plant and equipment, net......................   $  76,694       $   85,064
                                                                     =========       ==========
</TABLE>

For the year ended December 31, 2002, 2003, and 2004, the Company recorded
depreciation expense of $15.9 million, $19.2 million, and $19.3 million,
respectively.

Our total proceeds on the sale of property and equipment were $2.1 million, $0.3
million and $7.9 million resulting in gains of $0.8 million, a loss of $0.1
million and a gain $5.5 million for the years ended December 31, 2002, 2003 and
2004, respectively. As of December 31, 2002 and 2004, $0.4 million and $5.7
million of these gains pertain to plant sales and are reflected as gain on sale
of property on the consolidated statements of operations as these gains

                                      F-14
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

represent gains on the sale of operating activities. All other gains (losses)
are included in other income (expense), net in the accompanying consolidated
statements of operations.

Note 9 - Goodwill and Intangible Assets

Effective January 1, 2002, the Company adopted SFAS 142. Upon adoption of SFAS
142 the Company ceased amortization of purchased goodwill and trademarks, which
were determined to be indefinite-lived. The Company completed the transitional
impairment tests for goodwill and indefinite-lived intangibles as of January 1,
2002, and the annual impairment test, in the fourth quarter of 2003 and 2004, as
required by SFAS 142. Based upon the assessment, the Company determined that
goodwill and trademarks are not impaired; therefore no impairment charge was
recorded.

At December 31, 2003 and 2004, the Company recorded identified intangible assets
consisting of trademarks with a book value of $16.5 million. Also, the Company
recorded goodwill of $3.7 million at December 31, 2003 and 2004.

Note 10 - Fair Value of Financial Instruments

The Company uses derivative instruments, specifically foreign exchange forwards
and option contracts, to hedge the foreign exchange risk related to its
forecasted and firmly committed foreign currency denominated cash flows.

The Company recorded the change in fair market value of derivatives related to
cash flow hedges to AOCI of $1.1 million and $0.4 million, net of tax, for year
ended December 31, 2003 and 2004, respectively, all of which is expected to be
reclassified to earnings during the next twelve months. The time value component
excluded from effectiveness testing was not material for the periods presented.

For the year ended December 31, 2003 and 2004, the Company reclassified a gain
from AOCI to earnings of $0.6 million and $0.6 million, net of tax,
respectively.

The following table provides information regarding the Company's foreign
exchange forward and option contracts as of December 31, 2003 and 2004. The fair
value of the foreign currency contracts represent the amount the Company would
receive or pay to terminate the contracts, considering first, quoted market
prices of comparable agreements, or in the absence of quoted market prices, such
factors as interest rates, currency exchange rates and remaining maturity.


<TABLE>
<CAPTION>
                                                                    As of December 31, 2003
                                                        -------------------------------------------
                                                          Contract       Carrying           Fair
                                                           amount          value            value
                                                        -----------      ---------        ---------
                                                                         (in thousands)
<S>                                                     <C>              <C>              <C>
Forward foreign exchange contracts......................$    11,997      $     811        $     811
Foreign exchange option contracts.......................$     1,870      $      86        $      86
</TABLE>

                                      F-15
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                    As of December 31, 2004
                                                        -------------------------------------------
                                                          Contract       Carrying           Fair
                                                           amount          value            value
                                                        -----------      ---------        ---------
                                                                         (in thousands)
<S>                                                     <C>              <C>              <C>
Forward foreign exchange contracts......................$   37,610       $     716        $     716
</TABLE>

The Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objectives and strategies for
undertaking various hedge transactions. The Company links all derivatives that
are designated as hedging instruments in foreign currency cash flow hedges to
forecasted transactions or firm commitments. In accordance with the provision of
SFAS 133, the Company assesses, both at the inception of each hedge and on an
on-going basis, whether the derivatives that are designated in hedging
qualifying relationship are highly effective in off-setting changes in fair
values or cash flows of hedged items. When it is determined that a derivative is
no longer highly effective as a hedge, the Company discontinues hedge accounting
prospectively.

The counterparties to the foreign currency contracts are major international
banks. Such contracts are generally for one year or less.

Note 11 - Short-Term Borrowings

Short-term borrowings consist of the following (in thousands):


                                             December 31,
                                       ------------------------
                                         2003            2004
                                       --------        --------
Lines of credit........................$37,490         $39,883


In the second quarter of 2001, the Company's subsidiaries entered into a new
financing agreement providing multiple revolving credit lines with the
"Osterreichische Kontrollbank" ("OEKB") which were renegotiated in 2003, in the
total amount of (euro)15.0 million ($20.4 million) secured by all Austrian trade
receivables. As of December 31, 2004, the fair value of trade receivables that
serve as collateral for our revolving credit lines was $72.3 million. In
addition, the Company used lines of credit with several banks in Austria, Canada
and Japan of $19.5 million and had $2.5 million unused credit lines. The
weighted average interest rate on outstanding short-term borrowings was 3.2% and
2.7% as of December 31, 2003 and 2004, respectively.

                                      F-16
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Accounts Payable

Accounts payable consist of the following (in thousands):

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Accounts payable - trade..........................$  24,123           $  27,042
Salaries and wages................................    2,172               2,153
Customs duties....................................    1,469                 134
Fiscal authorities................................    3,697               3,392
Social institutions...............................    1,626               1,354
Prepayments.......................................      949               1,401
Other.............................................    5,432               5,184
                                                  ---------           ---------
                                                  $  39,468           $  40,660
                                                  =========           =========

Note 13 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in
thousands):

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Employee compensation and benefits................$   9,568           $  10,984
Allowances, credit notes..........................    6,507               8,551
Product warranties................................    3,103               4,627
Advertising.......................................    2,718               2,235
Legal, auditing and consulting fees...............    2,423               3,305
Fiscal authorities................................    2,794               2,633
Commissions.......................................    4,199               4,611
Accrued interest..................................    4,442               6,665
Restructuring.....................................    4,800                  --
Accrued Expenses..................................    4,567               5,523
Freight and duties................................    3,069               1,370
Litigation........................................      137               3,835
Other.............................................    3,565               5,078
                                                  ---------           ---------
                                                  $  51,892           $  59,417
                                                  =========           =========



                                      F-17
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 14 - Long-Term Debt

Long-term debt consists of the following (in thousands):

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Senior notes.....................................    82,925             171,843
Other long-term debt.............................    64,417              30,982
                                                 ----------           ---------
   Total long-term borrowings....................   147,342             202,826
   Less current portion..........................    (3,392)             (3,305)
                                                 ----------           ---------
   Long-term portion.............................$  143,951           $ 199,520
                                                 ==========           =========


Senior Notes

On July 15, 1999, one of the Company's wholly-owned subsidiaries, Head Holding
issued (euro)100.0 million of senior notes. The notes bore interest of 10.75%
per annum, which was payable semi-annually and was to mature in total on July
15, 2006. Among other restrictions, the notes included certain restrictive terms
regarding investments, distributions and incurrence of additional indebtedness
by the Company. On January 5, 2000, a registration statement for the exchange of
the original 10.75% senior notes for new 10.75% senior notes was made effective
by the U.S. Securities Exchange Commission (SEC). On February 9, 2000, this
Exchange Offer was consummated. In October 2000, the Company repurchased
(euro)30.9 million of its senior notes in a series of transactions using part of
the proceeds of the Company's initial public offering. In July 2002, the Company
repurchased another (euro)3.6 million of its senior notes. At December 31, 2003,
the Company had (euro)65.5 million ($82.9 million) of senior notes outstanding.

In January 2004, one of the Company's subsidiaries issued (euro)135.0 million of
8.5% unsecured senior notes due 2014, guaranteed by the Company and certain of
its subsidiaries. The notes are listed on the Luxembourg Stock Exchange. With
the proceeds from the sale, all of the Company's outstanding 10.75% senior notes
due 2006 were redeemed. The total redemption payment was (euro)70.1 million of
which (euro)3.5 million represents the redemption premium. In addition, the
Company used a portion of the remaining proceeds to repay (euro)25.8 million of
other outstanding debt.

In June 2004, the Company repurchased the equivalent of (euro)5.5 million of its
8.5% senior notes for (euro)5.0 million ($5.9 million) and realized a gain of
$0.4 million. As a result of this transaction, the Company wrote-off $0.07
million of debt issue costs. At December 31, 2004, the Company had (euro)126.2
million ($171.8 million) of senior notes outstanding.

As of December 31, 2003, (euro)25.1 million ($31.8 million) short-term loans
were reclassified to long-term debt due to the Company's intention to refinance
them with senior notes. The remainder of the proceeds is used for working
capital and general corporate purposes.

Sale-Leaseback Transaction

The Company entered into an agreement on June 28, 2002, whereby it sold land and
building to an unrelated bank and leased it back over a 15 year term. The
proceeds of this sale were (euro)10.6 million. The Company has the obligation to
purchase the property back after 15 years for (euro)8.2 million. The Company may
also repurchase the

                                      F-18
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

property at its option from the first until the tenth year of the arrangement
for the present value of the future lease payments and the remaining residual
value.

The Company is also required to pay the bank a monthly deposit of (euro)0.01
million, which will be repaid to the Company, plus interest of 6.7%, at the time
of repurchase.

Because of the Company's continuing involvement, this transaction has been
accounted for as a financing such that the Company has recorded (euro)10.6
million of cash and long-term borrowings at the inception date of this
agreement. At December 31, 2003 and 2004, the remaining obligation under the
financing agreement is $13.2 and $14.1 million, respectively.


The Company's future minimum lease payments as of December 31, 2004, are as
follows:


                                     (in thousands)
------------------------------------------------------
2005                                 $      1,094
2006                                        1,094
2007                                        1,094
2008                                        1,094
2009                                        1,094
Thereafter                                 19,320
                                     ------------
Total minimum payments                     24,790
Amount representing interest              (10,672)
                                     ------------
Obligations under financing
activity                                   14,119
Obligations due within one year              (159)
                                     ------------
Long-term obligations under
financing activity                   $     13,960
                                     ============

As of December 31, 2004 the net book value of land and building under the
sale-leaseback arrangement consists of the following (in thousands):

                                          Land           Building
----------------------------------------------------------------------
Cost                                $       1,390     $       11,423

Less: Accumulated depreciation                 --             (9,525)
Net book value                      $       1,390     $        1,898


Mortgage Agreement

In 2002, one of the Company's subsidiaries entered into a mortgage agreement
secured by the Penn Phoenix property with an unrelated financial institution of
$4.8 million over a 15 year term at an interest rate of 7.33%. At December 31,
2003 and 2004, the outstanding balance of the mortgage is $4.5 million and $4.3
million, respectively.

                                      F-19
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other long-term debt

Other long-term debt comprises secured loans in Austria, Italy and the Czech
Republic outstanding with several banks. The weighted average interest rate on
outstanding borrowings was 2.7% and 2.6% as of December 31, 2003 and 2004,
respectively. Borrowings mature at various dates through 2009. At December 31,
2003 and 2004, the remaining outstanding long-term debt is $14.9 million and
$12.5 million, respectively.

Maturities of long-term debt

Aggregate maturities of long-term debt are as follows (in thousands):

                                                 December 31,
                                                    2004
                                                 ------------

2005.............................................$    3,305
2006.............................................     2,831
2007.............................................     2,905
2008.............................................     2,844
2009.............................................     2,348
Thereafter.......................................   188,592
                                                 ----------
                                                 $  202,826
                                                 ==========

Note 15 - Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Accrued benefit cost.............................$   18,565           $  20,403
Deferred income..................................        --               5,351
Other............................................     1,104               2,031
                                                 ----------           ---------
Total other long-term liabilities................$   19,669           $  27,785
                                                 ==========           =========

Note 16 - Pension and Other Postretirement Benefit Plans

The Company funds leaving indemnities and pension liabilities paid to employees
at some Austrian and other European locations. The indemnities are based upon
years of service and compensation levels and are generally payable upon
retirement or dismissal in some circumstances, after a predetermined number of
years of service. The Company maintains sufficient assets to meet the minimum
funding requirements set forth by the regulations in each country.

The table below shows the obligations and funded status as of December 31, 2003
and 2004 (in thousands):



                                      F-20
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                              Pension Benefits                       Other Benefits
                                                        ------------------------------        ---------------------------
                                                          2003                2004              2003               2004
                                                        --------           -----------        --------           --------
<S>                                                     <C>                <C>                <C>                <C>
Change in benefit obligation
Benefit obligation at beginning of year ........        $  8,301           $ 10,392           $ 14,318           $ 16,595
Service cost ...................................             541                395              1,643              2,413
Interest cost ..................................             444                241                456                423
Plan amendments ................................             (22)                --                 --                 --
Actuarial loss (gain) ..........................            (268)               (21)               138                222
Benefit payments ...............................            (275)            (5,108)            (2,808)            (2,636)
Translation adjustment .........................           1,671                326              2,849              1,315
                                                        --------           --------           --------           --------
Benefit obligation at end of year ..............          10,392              6,225             16,595             18,330
                                                        --------           --------           --------           --------
Change in plan assets
Fair value of plan assets at beginning of year..           4,490              5,730                 --                 --
Actual return on plan assets ...................             201                 --                 --                 --
Employer contribution ..........................             185                 63                 --                 --
Benefit payments ...............................             (57)            (5,158)                --                 --
Plan participants' contributions ...............             114                  6
Asset transferred out ..........................             (10)                --                 --                 --
Translation adjustment .........................             808                (96)                --                 --
                                                        --------           --------           --------           --------
Fair value of plan assets at end of year .......           5,730                545                 --                 --
                                                        --------           --------           --------           --------
Funded status ..................................           4,661              5,681             16,595             18,330
Unrecognized net actuarial gain ................            (849)              (750)            (2,109)            (2,659)
Unrecognized prior service cost ................              96                124                 --                 --
Unrecognized net transition obligation .........              56                 (0)                --                  0
Translation adjustment .........................             (81)              (124)              (277)              (268)
                                                        --------           --------           --------           --------
Net amount recognized ..........................        $  3,884           $  4,930           $ 14,210           $ 15,404
                                                        ========           ========           ========           ========
</TABLE>


                                      F-21
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Amounts recognized in the statement of financial positions consist of (in
thousands):

<TABLE>
<CAPTION>
                                                              Pension Benefits                       Other Benefits
                                                        ------------------------------        ---------------------------
                                                          2003                2004              2003               2004
                                                        --------           -----------        --------           --------
<S>                                                     <C>                <C>                <C>                <C>
Other assets....................................        $   (404)          $     --           $     --           $     --
Accrued benefit cost............................           4,355              4,999             14,210             15,404
Accumulated other comprehensive income..........             (67)               (69)                --                 --
                                                        --------           --------           --------           --------
Net amount recognized...........................        $  3,884           $  4,930           $ 14,210           $ 15,404
                                                        ========           ========           ========           ========
</TABLE>

Accrued benefit cost are included in the balance sheet line item "Other
long-term liabilities" on the consolidated balance sheets. The Company expects
to make insignificant amounts of employer contributions during 2005.

The accumulated benefit obligation for all defined pension benefits is $9.3
million and $5.0 million at December 31, 2003 and 2004, respectively. As of
December 31, 2003 and 2004 pension plans with an accumulated benefit obligation
excess of plan assets consist of the following (in thousands).

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Projected benefit obligation....................  $    884            $  1,016
Accumulated benefit obligation..................       699                 832
Fair Value of plan assets.......................       465                 545

The Company's assets consist of equity funds at December 31, 2003 and 2004.

As of December 31, 2003 and 2004, the components of net periodic benefit costs
consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                              Pension Benefits                       Other Benefits
                                                        ------------------------------        ---------------------------
                                                          2003                2004              2003               2004
                                                        --------           -----------        --------           --------
<S>                                                     <C>                <C>                <C>                <C>
Service cost....................................        $    541           $    395           $  1,643           $  2,413
Interest cost...................................             444                241                456                423
Expected return on plan assets..................            (306)                11                 --                 --
Amortization of transition asset................              (3)                --                 --                 --
Amortization of prior service cost..............             (22)                --                 --                 --
Recognized actuarial loss.......................              14                  3                264                100
                                                        --------           --------           --------           --------
Net periodic benefit cost.......................        $    668           $    651           $  2,363           $  2,936
                                                        ========           ========           ========           ========
</TABLE>

As of December 31, 2003 and 2004 the weighted average assumptions used to
determine benefit obligations are as follows:



                                      F-22
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                              Pension Benefits                       Other Benefits
                                                        ------------------------------        ---------------------------
                                                          2003                2004              2003               2004
                                                        --------           -----------        --------           --------
<S>                                                       <C>                  <C>              <C>                 <C>
Discount rate...................................          5.0%                 4.5%             5.0%                5.0%
Rate of compensation increase...................          3.0%                 2.3%             3.0%                3.0%
</TABLE>

As of December 31, 2003 and 2004 the weighted average assumptions used to
determine net periodic benefit cost are as follows:

<TABLE>
<CAPTION>
                                                              Pension Benefits                       Other Benefits
                                                        ------------------------------        ---------------------------
                                                          2003                2004              2003               2004
                                                        --------           -----------        --------           --------
<S>                                                       <C>                  <C>              <C>                 <C>
Discount rate...................................          4.7%                 4.4%             5.0%                5.3%
Expected long-term return on plan assets........          5.3%                 2.1%              --                  --
Rate of compensation increase...................          2.7%                 2.4%             3.0%                3.0%
</TABLE>

The expected rate of return on plan assets is based upon the present rate of
return and is expected to be stable.

Note 17 - Commitments and Contingencies

Operating Leases

The Company leases certain office space, warehouse facilities, transportation
and office equipment under operating leases which expire at various dates
through 2012. Rent expense was approximately $3.1 million, $3.6 million and $4.1
million for the years ended December 31, 2002, 2003 and 2004, respectively.

Future minimum payments under non-cancelable operating leases with initial or
remaining lease terms in excess of one year are as follows as of December 31,
2004 (in thousands):

                                                   December 31,
                                                       2004
                                                  --------------
2005............................................    $  5,015
2006............................................       4,422
2007............................................       3,879
2008............................................       3,090
2009............................................       2,557
Thereafter......................................       3,076
                                                    --------
                                                    $ 22,040
                                                    ========

Litigation

From time to time the Company and its subsidiaries are involved in legal
proceedings, claims and litigation arising in the ordinary course of business.
In the opinion of management it is not possible to reasonably estimate the
outcome of current legal proceedings, claims and litigation. However, management
believes that the resolution of these matters will not materially affect the
Company's financial position.

                                      F-23
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company accrued $3.8 million for suits with several parties including
competitors, customers for past receipts, former employees, suppliers and
licensees.

Product Warranties

The Company sells certain of its products to customers with a product warranty
that provides repairs at no cost to the customer or the issuance of credit to
the customer. The length of the warranty term depends on the product being sold,
but ranges from one year to two years. The Company accrues its estimated
exposure to warranty claims based upon historical warranty claim costs as a
percentage of sales multiplied by prior sales still under warranty at the end of
any period. Management reviews these estimates on a regular basis and takes
actual product performance and field expense profiles into consideration to
adjust the warranty provisions.

Included in accrued expenses and other current liabilities are product
warranties that have a probable likelihood of loss and are estimated based on
weighted prior year experiences for recognized revenues. For the years ended
December 31, 2003 and 2004, accruals for warranties have developed as follows
(in thousands):

                                                     2003                2004
                                                  -----------         ----------

Balance at the beginning of the period..........   $   2,484           $ 3,103
Reclassification................................         --                 65
Current year provision..........................       2,859             4,779
Settlements made during the period..............      (2,707)           (3,717)
Reversal........................................         (25)               --
Translation adjustment..........................         492               397
                                                   ---------           -------
Balance at the end of the period.................  $   3,103           $ 4,627
                                                   =========           =======

Note 18 - Accumulated Other Comprehensive Income Balance

The following table shows the components of AOCI:

<TABLE>
<CAPTION>
                                                            For the Year Ended December 31, 2004
                              ----------------------------------------------------------------------------------------
                                  Foreign        Unrealized                                            Accumulated
                                  Currency        Gains on          Minimum                               Other
                                Translation      Derivative         Pension        Unrealized Loss    Comprehensive
                                 Adjustment      Instruments       Liabilities      on Securities         Income
                              ---------------   -------------     -------------   -----------------  -----------------
                                                                    (in thousands)
<S>                              <C>              <C>               <C>               <C>               <C>
Beginning balance ..........     $48,753          $   592           $   (67)          $  (137)          $49,142
Current period changes......      11,664             (225)               --                98            11,537
Translation Adjustments.....          --               53                (3)              (42)                8
                                 -------          -------           -------           -------           -------
Ending balance .............     $60,417          $   420           $   (69)          $   (81)          $60,686
                                 =======          =======           =======           =======           =======
</TABLE>


                                      F-24
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 19 - Shareholders' Equity

The Company is a Naamloze Vennootschap ("N.V."), a limited liability company
under Dutch law. The registered capital of a N.V. is in the form of shares which
represent negotiable securities. The minimum registered and authorized capital
requirement is (euro)225,000 (approximately $0.3 million) and the minimum paid
in capital requirement for a N.V. is (euro)45,000 (approximately $0.06 million).

At December 31, 2003 and 2004, 39,820,677 shares were issued, respectively.

Dividends

The Company declared and paid a dividend of (euro)0.14 (approximately $0.13) per
share during the year ended December 31, 2002. In 2003 and 2004, due to the
current economic environment the Company did not consider it prudent to pay a
dividend.

Treasury Stock

On May 28, 2002, the Board of Management's authority to repurchase shares
representing up to 10% of the Company's issued share capital, and the authority
was extended until November 28, 2003. Pursuant to this resolution between August
15, 2002 and October 21, 2002 the Company purchased 1,247,050 shares of treasury
stock at the prevailing price in the total amount of $3.0 million.

Pursuant to resolutions which were approved on May 20, 2003 the Board of
Management is authorized to buy back a maximum of 30% of the Company's issued
share capital during a period of 18 months, although the Company will not hold
more than 10% of the Company's issued shares at any time. For the year ended
December 31, 2003, the Company has purchased 577,775 shares of treasury stock at
the prevailing price in the total amount of $1.2 million.

On May 26, 2004, the Board of Management was granted the authority to repurchase
shares representing up to 30% of the Company's issued share capital during a
period of 18 months, although the Company will not hold more than 10% of the
Company's issued shares at any time.

As of December 31, 2003 and 2004, the Company issued 2,421,235 and 3,600,775
shares of treasury stock, respectively, of which 1,179,540 was held by the
Stichting at December 31, 2004.

Stichting

The Stichting Head Option Plan (the "Stichting") is a Dutch foundation, the
Board of which is Head Sports Holdings N.V., an entity that is ultimately
controlled by Johan Eliasch and his family members. The Stichting holds, votes,
and receives dividends on certain of the Company's ordinary shares. In
conjunction with the Company's option plans (see Note 24), the Stichting also
issues depository receipts to option holders, upon exercise of the option.
Holders of depositary receipts are entitled to dividends paid on the Company's
shares and to proceeds on the sales of their shares upon request to the
Stichting. However, such holders have no voting rights.

On May 25, 2001, Head N.V. transferred 2,041,300 shares, with an original cost
of $10.6 million, to the Stichting. The Stichting will use these shares to
fulfill the Company's obligations under the Head Tyrolia Mares Group Executive
Stock Option Plan 1998 ("Plan 1998"). The Stichting intends to remit proceeds
from the exercise of employee stock options to the Company. Such shares have
been recorded as a reduction of the Company's equity.

                                      F-25
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In 2002, option holders exercised 607,622 options under "Plan 1998". The Company
repurchased certain of these shares via the Stichting at a market price of $1.3
million.

In 2003, 56,790 options under Plan 1998 were exercised at a price between $0.29
and $0.31 per share. In 2004, option holders exercised 197,348 options under
"Plan 1998" at a price between $0.32 and $0.35 per share.

As of December 31, 2003 and 2004, the Stichting held 1,376,888 and 1,179,540
treasury shares, respectively. As of January 1, 2004, in accordance with FIN 46R
"Consolidation of Variable Interest Entities" the Company consolidated the
Stichting, as the Company was considered the primary beneficiary of the
Stichting, a variable interest entity. As a result of consolidating the
Stichting shares held by the Stichting at December 31, 2004 are presented as
treasury stock, in the consolidated balance sheets. Prior to the consolidation
of the Stichting, the value of the treasury shares held by the Stichting are
reflected as additional paid in capital on the consolidated balance sheets.

Note 20 - Income Taxes

The following table summarizes the significant differences between the Dutch
federal statutory tax rate and the Company's effective tax rate for financial
statement purposes.

<TABLE>
<CAPTION>
                                                                         For the Years Ended December 31,
                                                              --------------------------------------------------
                                                                2002                 2003                 2004
                                                              --------             --------             --------
<S>                                                               <C>                 <C>                  <C>
Dutch statutory tax rate...................................       34.5%               34.5%                34.5%
Tax rate differential......................................      159.1                (0.1)                12.3
Other......................................................   26,437.7                (6.9)              (103.3)
Foreign rate differentials.................................   (1,127.7)                0.7                 (9.5)
Changes in tax rate in Austria.............................         --                  --               (258.1)
Valuation allowance........................................   (7,970.3)              (34.2)                25.9
                                                              --------                ----               ------
Effective tax rate.........................................   17,533.3%               (6.0)%             (298.3)%
                                                              ========                ====               ======
</TABLE>

In 2004, the Company's effective tax rate differed from the statutory tax rate
in the Netherlands primarily due to a reduction of the Austrian income tax rate
from 34% to 25% as of January 1, 2005, which was resolved in May 2004 and led to
a reduction of long-term deferred tax assets, mainly on tax losses carried
forward of $24.9 million, and increased income tax expense. Other effects that
lead to differences between the Dutch federal statutory rate are caused by
withholding taxes, other local taxes and prior year adjustments mainly in Italy,
Austria and Canada.

In 2002, the statutory tax rate in the Netherlands differed from the effective
tax rate primarily due to significant incremental income tax in Austria and
Italy.

                                      F-26
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets (liabilities) consist of the following as of December 31,
2003 and 2004 (in thousands):

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                      --------------------------------------
                                                                          2003                      2004
                                                                      -------------            -------------
<S>                                                                   <C>                      <C>
Short-term:

Deferred tax asset:

Tax loss carried forward..........................................    $       4,437            $       2,162
Inventory reserve.................................................            5,387                    3,190
Reserve for doubtful accounts.....................................            2,441                      536
Other.............................................................            3,536                    2,627
                                                                      -------------            -------------
    Total Short-term deferred tax assets..........................           15,800                    8,515

Deferred tax liabilities:

Deferred expenses.................................................    $      (1,291)           $        (274)
Accrued liabilities...............................................             (240)                      (9)
Other.............................................................           (3,006)                  (3,952)
                                                                      -------------            -------------
    Total Short-term deferred tax liability.......................           (4,537)                  (4,235)
                                                                      -------------            -------------
    Total Short-term deferred tax asset, net......................    $      11,262            $       4,280
                                                                      =============            =============
</TABLE>


The short-term deferred tax asset, net is classified in prepaid expenses.

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                      --------------------------------------
                                                                          2003                      2004
                                                                      -------------            -------------
<S>                                                                   <C>                      <C>
Long-term:

Deferred tax asset:

Tax loss carried forward..........................................    $     130,134            $     112,605
Intangible assets.................................................              617                        1
Fixed assets......................................................              833                    1,284
Lease obligations.................................................            4,498                    3,529
Other.............................................................              887                      919
                                                                      -------------            -------------
    Total Long-term deferred tax assets...........................          136,969                  118,338

Deferred tax liabilities:

Investments.......................................................    $     (18,820)                 (18,059)
Fixed assets......................................................           (1,952)                  (1,304)
Other.............................................................             (778)                    (870)
                                                                      -------------            -------------
    Total Long-term deferred tax liability                                  (21,551)                 (20,232)

Valuation allowance...............................................          (23,358)                 (19.194)
                                                                      -------------            -------------
    Total Long-term deferred tax asset, net.......................    $      92,060            $      78,912
                                                                      =============            =============
</TABLE>

                                      F-27
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company has net operating loss carryforwards of approximately $394.5 million
and $437.4 million as of December 31, 2003 and 2004, respectively. These net
operating losses were experienced in the following jurisdictions (in thousands):

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                      --------------------------------------
                                                                          2003                      2004
                                                                      -------------            -------------
<S>                                                                   <C>                      <C>
Austria...........................................................    $     348,791            $     384,912
Germany...........................................................           19,184                   20,039
Other Europe......................................................            4,615                    2,469
North America.....................................................           21,916                   29,932
                                                                      -------------            -------------
                                                                      $     394,506            $     437,352
                                                                      =============            =============
</TABLE>

The table below shows income (loss) before income taxes by geographic region (in
thousands):

<TABLE>
<CAPTION>
                                                                         For the Years Ended December 31,
                                                              -------------------------------------------------
                                                                 2002               2003                2004
                                                              -----------       ------------       ------------
<S>                                                           <C>               <C>                <C>
Austria....................................................   $     2,420       $      1,497       $      4,858
Non-Austria................................................        (2,405)           (15,322)           (14,132)
                                                              -----------       ------------       ------------
Total......................................................   $        15       $   (13,825)       $    (9,274)
                                                              ===========       ===========        ===========
</TABLE>

In July 1996, commensurate with the European Commission's (EC) decision allowing
the contribution received by HTM Sport- und Freizeitgerate AG (HTM) from Austria
Tabak (former owner) as restructuring aid, the EC limited the utilization of
certain net operating losses (approximately $70.5 million as of December 31,
2004). These net operating losses and any related deferred tax asset are not
included in the above amounts due to the limitation.

Austria and Germany allow an unlimited carryover of net operating losses,
whereas the United States allow 15 year carryovers. The Company recorded a
valuation allowance to reduce the deferred tax assets to the amount the Company
believes is more likely than not to be realized considering future taxable
income and feasible tax planning strategies.

Note 21 - Segment Information

The Company operates in one reporting segment, Sporting Goods. The tables below
show net revenues from external customers and long-lived assets by geographic
region based on the location of the Company's subsidiaries (in thousands):

                                      F-28
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                          For the Years Ended December 31,
                                                   -----------------------------------------------
                                                      2002               2003              2004
                                                   ----------         ----------        ----------
<S>                                                 <C>               <C>               <C>
Revenues from External Customers:
Austria ..................................          $ 59,373          $ 83,179          $201,309
Italy ....................................            60,015            60,172            49,675
Germany ..................................            39,487            45,228              --
France ...................................            26,961            32,181            33,667
United Kingdom / Ireland .................            17,690            20,202            17,954
Japan ....................................            20,098            21,697            21,670
Other (Europe) ...........................            33,545            39,601            20,515
North America ............................           122,780           120,070           122,225
                                                    --------          --------          --------
       Total Net Revenues ................          $379,949          $422,331          $467,014
                                                    ========          ========          ========
</TABLE>

                                                            December 31,
                                                  -----------------------------
                                                     2003                2004
                                                  -----------         ----------

Long-lived assets:
Austria...................................          $ 23,539          $ 28,455
Italy.....................................            22,953            20,432
Germany...................................               841               691
France....................................               218               156
United Kingdom / Ireland..................             3,992             1,723
Japan.....................................             1,625             1,711
Other (Europe)............................            13,063            21,271
North America.............................            30,699            30,863
                                                    --------          --------
       Total Assets........................         $ 96,930          $105,301
                                                    ========          ========

As of January 2004, we have started to centralize our European distribution
organizations for Winter Sports and Racquet Sports products so that Head
International GmbH, Austria operates as distributor and invoices directly to our
customers in Austria, Germany, Switzerland and Italy.

                                      F-29
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Sales by product category consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                           For the Years Ended December 31,
                                                                   ------------------------------------------------
                                                                     2002                 2003              2004
                                                                   ---------           ---------          ---------
<S>                                                                <C>                 <C>                <C>
Revenues by Product Category:
Winter Sports ...........................................          $ 144,667           $ 188,768          $ 223,211
Racquet Sports ..........................................            168,822             166,417            168,037
Diving ..................................................             65,600              66,322             75,453
Licensing ...............................................              8,399               9,702             11,059
                                                                   ---------           ---------          ---------
Total Revenues ..........................................            387,487             431,209            477,759
Other Revenues ..........................................              1,246               1,394              1,326
Sales Deductions ........................................             (8,783)            (10,272)           (12,071)
                                                                   ---------           ---------          ---------
    Total Net Revenues ..................................          $ 379,949           $ 422,331          $ 467,014
                                                                   =========           =========          =========
</TABLE>

Note 22 - Related Party Transactions

The Company receives administrative services from corporations which are
ultimately owned by the principal shareholder of the Company. Administrative
expenses amounted to approximately $1.2 million ((euro)1.2 million), $3.5
million ((euro)3.1 million) and $5.6 million ((euro)4.5 million) for the years
ended December 31, 2002, 2003 and 2004, respectively. The company provides
investor relations, corporate finance, legal and consulting services and since
2004 internal audit and other services in relation to compliance with the
Sarbanes-Oxley Act of 2002.

One of the Company's subsidiaries leased its office building from its general
manager. Rental expenses amounted to approximately $0.1 million, $0.04 million
and $0.05 million for the years ended December 31, 2002, 2003 and 2004,
respectively.

Note 23 - Invested Intercompany Loans

As of January 2, 2003 one of the Company's euro-based subsidiaries reclassified
non-euro denominated intercompany accounts receivable to permanently invested
intercompany receivables of $36.1 million and recorded foreign exchange losses
of $6.6 million in other comprehensive income. In December 2004, $7.0 million of
these intercompany accounts receivable were paid to the euro-based subsidiary as
a result of the non-euro based subsidiary receiving a windfall of cash as a
result of the selling of one of its facility. The Company continues to believe
that the remaining $29.1 million intercompany accounts receivable will not be
collected; therefore, continues to classify this as a permanent investment.


Note 24 - Stock Option Plans

The Company accounts for its stock options in accordance with SFAS 123.
Accordingly, the Company records stock-based compensation expense based on the
grant-date fair values of the stock options computed using the Black-Scholes
option pricing model. Stock-based compensation expense is recognized over the
vesting term of the options and amounted to $1.6 million, $0.7 million and $0.6
million for the years ended December 31, 2002, 2003 and 2004, respectively.

                                      F-30
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Plan 1998

In November 1998, the Company adopted the Head Tyrolia Mares Group Executive
Stock Option Plan 1998 ("Plan 1998"). A total of 2,424,242 options were reserved
to be granted under the terms of the Plan 1998. The Plan 1998 provided for
grants of stock options to officers and key employees of the Company and its
subsidiaries. The exercise price for all stock options granted under the Plan
1998 was fixed at inception of the Plan 1998 and increases at the rate of 10%
per annum until the options are exercised. Options generally vest over a period
of 4 years and are subject to the Company meeting certain earnings performance
targets during this period. Options vested under the Plan 1998 were not
exercisable prior to the end of the two year lock-up period following the
initial public offering. Options have a maximum term of 10 years. As of December
31, 2004, 145,848 shares were available for grant under the Plan 1998.

The weighted average grant-date fair values using the Black-Scholes option
pricing model was $5.42 and $8.84 per share for options granted in 1999 and
2000, respectively.

The fair values of options granted during 1999 and 2000 were estimated on the
date of grant using the following weighted average assumptions: no dividends;
expected volatility of 0% (all options granted prior to IPO); expected terms of
3.6 and 4.0 years, respectively; and risk free interest rates of 5.76% and
6.63%, respectively. The Company has also assumed that all performance targets
will be achieved and all options granted will become fully vested.

As of December 31, 2004, the weighted average remaining contractual life of the
outstanding stock options is 4.6 years, and 770,528 options are vested and
exercisable.

<TABLE>
<CAPTION>
                                                                         Exercise Price Less Than
                                                                        Grant Date Stock Fair Value
                                                                -------------------------------------------
                                                                    Number of              Weighted average
                                                                    of shares               exercise price
                                                                ----------------          -----------------

<S>                                                                    <C>                <C>
Balance, December 31, 1998.................................            1,465,686          $            0.35
Granted....................................................              783,620                       0.35
                                                                ----------------          -----------------
Balance, December 31, 1999.................................            2,249,306                       0.35
Granted....................................................               29,088                       0.35
                                                                ----------------          -----------------
Balance, December 31, 2000 and 2001........................            2,278,394                       0.35
Exercised (see Note 19)....................................            (607,622)                       0.35
                                                                ----------------          -----------------
Balance, December 31, 2002.................................            1,670,772                       0.35
Exercised (see Note 19)....................................             (56,790)                       0.35
                                                                ----------------          -----------------
Balance, December 31, 2003.................................            1,613,982                       0.35
Exercised (see Note 19)....................................            (197,348)                       0.35
                                                                ----------------          -----------------
Balance, December 31, 2004.................................            1,416,634          $            0.35
                                                                ================          =================
</TABLE>

At December 31, 2004, stock options representing 770,528 shares are exercisable
at price of $0.35 per share and grant dates ranging from November 1998 to
January 2000.

Plan 2001

In September 2001, the Company adopted the Head N.V. Executive Stock Option Plan
2001 ("Plan 2001"). The Plan 2001 provides for grants of stock options to
officers and employees of the Company and its subsidiaries. On September 28,
2001, a total of 3,982,068 options were granted under the terms of the Plan
2001. In accordance with SFAS No. 123, the Company records stock-based
compensation expense on the grant-date fair values of the stock

                                      F-31
<PAGE>


options computed using the Black-Scholes option pricing model. As of December
31, 2001, the weighted-average fair value of the grant was $0.77, which was
estimated using the following assumptions: no dividends, expected volatility of
28%, expected term of 5.6 years, and risk-free interest rate of 3.6%.

The exercise price for all stock options granted under the Plan was fixed at
inception of the Plan 2001. The vesting period varies from 0 to 6 years. The
Chairman and Chief Executive Officer received 1,426,470 options under this
grant, which vested immediately. The Company assumes that all options granted
will become fully vested. Options have a maximum term of 10 years. As of
December 31, 2003 no shares were available for grant under the Plan 2001.


<TABLE>
<CAPTION>
                                                                        Exercise Price Greater Than
                                                                        Grant Date Stock Fair Value
                                                                -------------------------------------------
                                                                    Number of              Weighted average
                                                                    of shares               exercise price
                                                                ----------------          -----------------
<S>                                                                    <C>                <C>
Balance, December 31, 2000.................................                    0          $              --
Granted....................................................            3,982,068                       4.31
                                                                ----------------          -----------------
Balance, December 31, 2001, 2002, 2003 and 2004............            3,982,068          $            4.31
                                                                ================          =================
</TABLE>

As of December 31, 2004, the weighted average remaining contractual life of the
outstanding stock options is 6.7 years, and 1,756,482 options are exercisable
under the Plan 2001. At December 31, 2004, stock options representing 1,756,482
shares are exercisable at price of $4.31 per share and grant date was September
2001.


Note 25 - Business Rationalization

Throughout 2003 and 2004 the Company performed various restructuring
initiatives. These initiatives consisted of the following:

US facility consolidation

In order to increase utilization of the Company's warehouse facilities and to
centralize headquarter functions in 2003, the Company recorded restructuring
costs of $0.4 million consisting of termination benefits incurred for the
movement of our US winter sports organization to our US headquarters, the
shutdown of current warehouse facilities and, the closing of the office, and
other costs associated with the restructuring program. As of December 31, 2003,
these restructuring activities were completed.

Additionally, the Company shut down its US warehouse for diving products. Upon
discontinuing use of the facility the Company expensed $0.4 million for excess
rent as of December 31, 2003. This restructuring process was finalized in
January 2004.


Ireland facility closure

To improve utilization of the Company's production capabilities, in 2003 the
Company announced the closing of its tennis ball production facility in
Mullingar, Ireland and the transfer of these operations to its existing,
under-utilized plant in Phoenix, Arizona. In 2003 the Company recognized costs
totaling $7.0 million relating to this program consisting of an impairment of
$2.6 million and employee severance costs of $4.4 million.

                                      F-32
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In March 2004, the Company closed its tennis ball production facility in
Mullingar, Ireland and recognized $1.6 million relating to this program mainly
consisting of cost for decommissioning and clearance of the plant. In September
2004, the Company sold its property in Mullingar, Ireland for (euro)5.7 million
($6.9 million) with a gain of (euro)4.7 million ($5.7 million).


Estonia facility closure

Starting in 2003, the Company has transferred all of its manufacturing
operations in Tallinn, Estonia, which manufacture ski boots and certain diving
products, to our plant in Litovel, Czech Republic and expensed $0.6 million and
$0.7 million as of December 31, 2003 and 2004, respectively. In October 2004,
the Company entered into a lease agreement with respect to the property in
Tallinn, Estonia.


The Company has largely completed the restructuring program during 2004 and
expect annual cost savings as a result of the program to be realized beginning
in 2005 to 2006.

As of December 31, 2004, restructuring costs and accruals for restructuring
costs consist of the following:

<TABLE>
<CAPTION>
                                                                  Employee         Excess rent       Other related         Total
                                                                termination                          restructuring     restructuring
                                                                  benefits                              program         charges and
                                                                                                         costs         other related
                                                                                                                       restructuring
                                                                                                                          program
                                                                                                                           costs
                                                                -----------        -----------       --------------    -------------
                                                                                            (in thousands)
<S>                                                                <C>                <C>                <C>                <C>
Ireland facility closure ...............................           $  --              $  --              $ 1,640            $ 1,640
Estonia closure ........................................              --                 --                  707                707
                                                                   -------            -------            ---                -------
        Total restructuring costs ......................           $  --              $  --              $ 2,347            $ 2,347
                                                                   =======            =======            ===                =======

Accrual for restructuring costs
-------------------------------
Balance as of January 1st, 2004 ........................           $ 4,420            $   380            $  --              $ 4,800
Incurred ...............................................              --                 --                2,347              2,347
Paid ...................................................            (4,502)              (380)            (2,347)            (7,228)
Translation adjustment .................................                82               --                 --                   82
                                                                   -------            -------            ---                -------
Balance as of December 31th, 2004 ......................           $  --              $  --              $  --                   --
                                                                   =======            =======            ===                =======
</TABLE>


Note 26 - Long-Term Contracts

In July 2004, Head signed a new long-term supplier contract for tennis, squash
and racquetball racquets effective April 1, 2005 to renew business relations
with an existing supplier. The agreement will automatically extend after the
agreed expiration date, December 31, 2009, if neither of the two parties cancel.
This agreement contains a lease that will be accounted for in accordance with
EITF 01-08.

In October 2004, the Company entered into a lease agreement, effective January
1, 2005, with respect to the property in Tallinn, Estonia. The lessee has a
purchase option to be executed within two years with paid usufruct fees to be
credited against the purchase price.

                                      F-33
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In November 2004, Head received a prepayment of $5.7 million pertaining to a
licensing agreement commencing on April 1, 2005 through December 31, 2009. The
Company reflected the short-term portion of this prepayment as accounts payable
and the long-term portion as other long-term liabilities on the consolidated
balance sheets. The balance represents the minimum license fee for 5 years
discounted by an annual interest rate of 1.5%.



                                      F-34
<PAGE>

                                    HEAD N.V:

                 Schedule II - Valuation and Qualifying Accounts


<TABLE>
<CAPTION>

                                    Balance at                                                Balance at
                                    beginning                    Deductions    Translation      end of
                                    of period      Additions        (1)          effects        period
-----------------------------------------------------------------------------------------------------------
                                                                   (in millions)
Description:
Year ended
December 31, 2004:
<S>                                <C>           <C>            <C>             <C>           <C>
Provision for doubtful
receivables                        $       15.8  $        5.1   $        3.3    $    (1.0)   $    16.6

Provision for inventories                  16.2           5.7            6.4          2.5         18.0
Allowances for deferred
taxes                                      23.4           2.2            6.8          0.5         19.2

Year ended
December 31, 2003:
Provision for doubtful
receivables                        $       11.8  $        6.4   $        3.8  $       1.4    $    15.8

Provision for inventories                  15.1           4.5            5.4          2.0         16.2
Allowances for deferred
taxes                                      11.6           9.5            2.2         23.4

Year ended
December 31, 2002:
Provision for doubtful
receivables                        $       10.8  $        3.4   $        3.3  $       0.9    $    11.8

Provision for inventories                  14.0           4.7            5.2          1.6         15.1
Allowances for deferred
taxes                                      13.0           1.1            3.2          0.9         11.6

(1)  Represents amounts used for the purposes for which the accounts were
     created and reversal of amounts no longer required

</TABLE>


                                       2

<PAGE>




                                  EXHIBIT INDEX




Description                                                         Sequentially
                                                                        numbered
                                                                            page

1.1  Memorandum and Articles of Association of the Company
     (previously filed with Form F-1 on September 27, 2000)......

2.1  Indenture between HTM Sport- und Freitzeigerate AG, Head
     N.V., Head Holding Unternehmensbeteiligung GmbH, Head Sport
     AG, Head International GmbH, HTM Sport S.p.A., Head USA
     Inc., Penn Racquet Sports Inc., Head/Tyrolia Sports Canada
     Inc., The Bank of New York, As Trustee, Registrar, Transfer
     Agent And Principal Paying Agent and The Bank of New York
     (Luxembourg) S.A., As Paying Agent And Transfer Agent dated
     January 29, 2004............................................

4.1  Loan Agreement between Head USA, Inc., Mares America
     Corporation, Penn Racquet Sport, Inc. and Fleet Capital
     Corporation as Agent dated April 5, 2000 (previously filed
     with Form F-1 on September 27,2000).........................

6.   A statement explaining in reasonable detail how earnings per
     share information were calculated (included in Note 2 to the
     Financial Statements).......................................

8.   A list of the Company's significant subsidiaries, indicating
     their country of incorporation and the names under which
     they do business............................................

12.1 Certification of the CEO pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002..................................

12.2 Certification of the CFO pursuant to Section 302 of the
     Sarbanes-Oxley Act of 2002..................................

13.  Certification of the CEO and CFO pursuant to Section 302 of
     the Sarbanes-Oxley Act of 2002..............................


                                       3


<PAGE>


                                                                    EXHIBIT 12.1
                                                                    ------------


                                 CERTIFICATIONS



I, Johan Eliasch, certify that:

1.   I have reviewed this annual report on Form 20-F of Head N.V.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a - 15(e) and 15d -15(e)) for the company and have:

     (a)  designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          company, including its consolidated subsidiaries, is made known to us
          by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  evaluated the effectiveness of the company's disclosure controls and
          procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  disclosed in this report any change in the company's internal control
          over financial reporting that occurred during the period covered by
          the report that has materially affected, or is reasonably likely to
          materially affect, the company's internal control over financial
          reporting; and

5.   The company's other certifying officer and I have disclosed, based on our
     most recent evaluation of internal control over financial reporting, to the
     company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a)  all significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the company's ability to record,
          process, summarize and report financial information; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the company's internal
          control over financial reporting.





Date: April 14, 2005

                                      By: /s/ Johan Eliasch
                                          -------------------------------
                                      Johan Eliasch
                                      Chairman of the Management Board and
                                      Chief Executive Officer


                                       4

<PAGE>


                                                                    EXHIBIT 12.2
                                                                    ------------



I, Ralf Bernhart, certify that:

1.   I have reviewed this annual report on Form 20-F of Head N.V.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the company as of, and for, the periods presented in this report;

4.   The company's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) for the company and
     have:

     (a)  designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          company, including its consolidated subsidiaries, is made known to us
          by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  the effectiveness of the company's disclosure controls and procedures
          and presented in this report our conclusions about the effectiveness
          of the disclosure controls and procedures, as of the end of the period
          covered by this report based on such evaluation; and

     (c)  disclosed in this report any change in the company's internal control
          over financial reporting that occurred during the period covered by
          the report that has materially affected, or is reasonably likely to
          materially affect, the company's internal control over financial
          reporting; and

5.   The company's other certifying officer and I have disclosed, based on our
     most recent evaluation of internal control over financial reporting, to the
     company's auditors and the audit committee of the company's board of
     directors (or persons performing the equivalent functions):

     (a)  all significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the company's ability to record,
          process, summarize and report financial information; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the company's internal
          control over financial reporting.







Date: April 14, 2005

                                        By:  /s/ Ralf Bernhart
                                            ------------------------------
                                        Ralf Bernhart
                                        Member of the Management Board and
                                        Chief Financial Officer


                                       5

<PAGE>

                                                                      EXHIBIT 13
                                                                      ----------

                            CERTIFICATION PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
                            (18 U.S.C. SECTION 1350)

       In connection with the Annual Report on Form 20-F of Head N.V. (the
"Company") for the period ended December 31, 2003, as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), the undersigned
certify that to the best of our knowledge:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   the information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.




Date:    April 14, 2005          By: /s/ Johan Eliasch
                                     ---------------------------------
                                          Johan Eliasch
                                          Chief Executive Officer,
                                          Chairman of the Management Board

Date:    April 14, 2005          By:  /s/ Ralf Bernhart
                                     ---------------------------------
                                          Ralf Bernhart
                                          Chief Financial Officer,
                                          Member of the Management Board

                                       6