As filed with the Securities and Exchange Commission on April 13, 2004
--------------------------------------------------------------------------------

                       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, 2003

                         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 Section 12(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, 2003:

            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.....................................4
    3.C.   Reasons for the Offer and Use of Proceeds...........................4
    3.D.   Risk Factors........................................................4
  ITEM 4:    INFORMATION ON THE COMPANY........................................6
    4.A.   History and Development of the Company..............................6
    4.B.   Business Overview...................................................7
    4.C.   Organizational Structure...........................................23
    4.D.   Property, Plants and Equipment.....................................23
  ITEM 5:    OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....................24
    5.A.   Operating Results..................................................24
    5.B.   Liquidity and Capital Resources....................................33
    5.C.   Research and Development, Patents and Licenses.....................35
    5.D.   Trend Information..................................................35
  ITEM 6:    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................36
    6.A.   Directors and Senior Management....................................36
    6.B.   Compensation.......................................................39
    6.C.   Board Practices....................................................40
    6.D.   Employees..........................................................40
    6.E.   Share Ownership....................................................41
  ITEM 7:    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS................42
    7.A.   Major Shareholders.................................................42
    7.B.   Related Party Transactions.........................................42
    7.C.   Interest of Experts and Counsel....................................43
  ITEM 8:    FINANCIAL INFORMATION............................................43
    8.A.   Consolidated Statements and Other Financial Information............43
    8.B.   Significant Changes................................................43
  ITEM 9:    THE OFFER AND LISTING............................................43
    9.A.   Offer and Listing Details..........................................43
    9.B.   Plan of Distribution...............................................44
    9.C.   Markets............................................................44
    9.D.   Selling Shareholders...............................................44
    9.E.   Dilution...........................................................45
    9.F.   Expenses of the Issue..............................................45
  ITEM 10:   ADDITIONAL INFORMATION...........................................45
    10.A.  Share Capital......................................................45
    10.B.  Articles of Association............................................45
    10.C.  Material Contracts.................................................48
    10.D.  Exchange Controls..................................................48
    10.E.  Taxation...........................................................49
    10.F.  Dividends and Paying Agents........................................56
    10.G.  Statement by Experts...............................................56
    10.H.  Documents on Display...............................................56
    10.I.  Subsidiary Information.............................................56
  ITEM 11:   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......56
  ITEM 12:   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...........57
  ITEM 13:   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................58
  ITEM 14:   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
             AND USE OF PROCEEDS..............................................58
  ITEM 15:   CONTROLS AND PROCEDURES..........................................58
  ITEM 16:   [RESERVED].......................................................58
    16.A.  AUDIT COMMITTEE FINANCIAL EXPERT...................................58
    16.B.  CODE OF ETHICS.....................................................58
    16.C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................58
  ITEM 17:   FINANCIAL STATEMENTS.............................................59
  ITEM 18:   FINANCIAL STATEMENTS.............................................59
  ITEM 19:   EXHIBITS.........................................................59
  EXHIBIT INDEX


<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", "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, 1999, 2000, 2001, 2002 and 2003 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, prior years' financial statements
have been restated to present London Films as a discontinued operation.

     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.

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                        1999            2000            2001            2002            2003
                                                      ---------       ---------       ---------       ---------       ---------
                                                                        (in thousands, except per share data)
<S>                                                   <C>             <C>             <C>             <C>             <C>
Statement of Operations Data:
Total revenues........................................$ 388,755       $ 398,639       $ 392,021       $ 387,487       $ 431,208
Cost of sales.........................................  228,453         227,442         233,971         233,402         266,023
                                                      ---------       ---------       ---------       ---------       ---------
Gross profit..........................................  160,302         171,197         158,050         154,085         165,186
Selling and marketing expense.........................   95,906          97,743         102,094         102,619         117,071
General and administrative expense....................   38,601          33,488          33,972          32,081          38,847
Non-cash compensation expense.........................      548           1,378           2,025           1,632             654
Restructuring charge(1)...............................       --              --             838              --           8,368
                                                      ---------       ---------       ---------       ---------       ---------
Operating income......................................   25,246          38,588          19,121          17,753             245
Interest expense(2)...................................  (14,092)        (18,642)        (11,275)        (11,677)        (13,999)
Interest income.......................................      947           1,118             892             940           1,050
Foreign exchange gain (loss)..........................    4,574           7,502           5,828          (7,387)         (1,103)
Other income (expense), net...........................    1,899          (4,181)              7             387            (18)
                                                      ---------       ---------       ---------       ---------       ---------

Income (loss) from continuing operations
        before income tasex and extraordinary items...   18,574          24,386          14,573              15         (13,824)
Income tax benefit (expense)(3).......................   35,887           1,934          (4,032)         (2,630)           (832)
Share of loss from equity investment, net of tax......        -               -          (1,117)              --              --
                                                      ---------       ---------       ---------       ---------       ---------
Income (loss) from continuing operations
        before extraordinary items....................   54,463          26,321           9,424          (2,615)        (14,657)
Loss from discontinued operation......................      (60)           (644)             --              --              --
Extraordinary gain(4).................................        -           2,104              --              --              --
                                                      ---------       ---------       ---------       ---------       ---------
Net income (loss).....................................$  54,403       $  27,781           9,424          (2,615)        (14,657)
                                                      =========       =========       =========       =========       =========

Earnings per share-basic (5)
        Income (loss) from continuing operations
                before extraordinary items............$    2.46       $    0.94       $    0.25       $  (0.07)       $  (0.40)
        Net income (loss).............................$    2.46       $    0.99       $    0.25       $  (0.07)       $  (0.40)
Earnings per share - diluted (5)
        Income (loss) from continuing operations
                before extraordinary items............$    2.23       $    0.86       $    0.24       $  (0.07)       $  (0.40)
        Net income (loss).............................$    2.23       $    0.91       $    0.24       $  (0.07)       $  (0.40)
Weighted average shares outstanding(5)
        basic                                            22,132          28,071          38,083          37,356          36,285
        diluted                                          24,370          30,678          39,816          37,356          36,285

Other Financial Data:
Cash provided by operating activities.................$  28,444       $   6,452       $  35,921       $  23,279       $  17,342
Cash used in investing activities.....................$ (57,517)       $(17,178)      $ (19,913)      $ (18,804)      $ (16,554)
Cash provided by (used in) financing activities.......$  43,066       $  20,073       $     393       $       2       $  (2,007)
</TABLE>


                                       2
<PAGE>


<TABLE>
<CAPTION>
                                                        1999            2000            2001            2002            2003
                                                      ---------       ---------       ---------       ---------       ---------

<S>                                                   <C>             <C>             <C>             <C>             <C>
Balance Sheet Data:
Cash(6)...............................................$  23,624       $  15,848       $  22,128       $  37,598       $  44,154
Total assets..........................................$ 434,660       $ 434,304       $ 416,519       $ 473,853       $ 537,586
Total debt(7).........................................$ 240,108       $ 114,819       $ 122,966       $ 154,893       $ 184,833
Capital Stock(8)......................................$      64       $   7,067       $   7,067       $   7,067       $   7,067
Total shareholders' equity(9).........................$  82,547       $ 229,988       $ 212,539       $ 229,824       $ 241,716
</TABLE>

----------
(1)  Restructuring include 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.
(2)  Interest expense for the years ended December 31, 1999 and 2000 excludes
     capitalized future interest payments as required by SFAS No. 15. See "Item
     5: Operating and Financial Review and Prospects -- Liquidity and Capital
     Resources -- Treatment of Bank Waivers Under SFAS No. 15."
(3)  Includes for the year ended December 31, 1999 a non-cash deferred income
     tax benefit of $38.8 million resulting from the release of a substantial
     portion of a valuation allowance relating to operating loss carry
     forwards.
(4)  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.
(5)  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. Options granted under the 2001
     stock option plan have been excluded from the diluted earnings per share
     calculation for the year ended December 31, 2001 because their effect
     would be anti-dilutive. For the years ended December 31, 2002 and 2003,
     the diluted weighted average shares outstanding exclude the incremental
     effect of 1,789,490 and 1,347,773 stock options, respectively because it
     would have been anti-dilutive for these periods.
(6)  Cash includes cash and cash equivalents and in 1999 and 2003 restricted
     cash of $5.7 million and $2.8 million respectively.
(7)  Total debt excludes capitalized future interest payments as required by
     SFAS No. 15. See "Item 5: Operating and Financial Review and Prospects --
     Liquidity and Capital Resources -- Treatment of Bank Waivers Under SFAS
     No. 15." which amounts to $6.3 million as of December 31, 1999. Due to the
     repayment of the restructured debt in the fourth quarter of 2000, all
     capitalized future interest payments have been released.
(8)  In 2000 due to the conversion to a par value from NLG 0.01 to EUR 0.20,
     $4.4 million was transferred from additional paid-in capital to capital
     stock.
(9)  In 2000 a dividend of (euro)16.1 million (approximately $15.7 million) was
     paid to the Company's then sole shareholder. In 2001 and 2002, the Company
     paid a dividend of (euro)0.28 (approximately $0.25) per share and of
     (euro)0.14 (approximately $0.13) per share, respectively to its
     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, 2003, the rate was (euro) 0.791766 = $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.


                                       3
<PAGE>


     The table below shows information concerning the European Central Bank
rates for euro for the years ended December 31, 1999, 2000, 2001, 2002 and 2003,
expressed in euro per one U.S. dollar.

                                           Year ended December 31,
                                ----------------------------------------------
                                 1999      2000      2001      2002      2003
                                 ----      ----      ----      ----      ----

High......................      0.9985    1.2118    1.1927    1.1658    0.9637
Low.......................      0.8482    0.9626    1.0477    0.9536    0.7918
Average (1)...............      0.9341    1.0834    1.1159    1.0670    0.8897
End of period.............      0.9954    1.0770    1.1347    0.9536    0.7918

(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 months.

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

October 2003....................................    0.8604     0.8636    0.8483
November 2003...................................    0.8338     0.8754    0.8338
December 2003...................................    0.7918     0.8351    0.7918
January 2004....................................    0.8075     0.8082    0.7795
February 2004...................................    0.8053     0.8053    0.7777
March 2004......................................    0.8181     0.8252    0.8010


     The European Central Bank rate on December 31, 2003 was $1.00 = (euro)
0.7918 and the European Central Bank rate on March 31, 2004 was $1.00 = (euro)
0.8181.

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.

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


                                       4
<PAGE>


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 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 40% of our cost of sales in 2003 consists 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 and Italy (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, 2004. Head Sports Holdings N.V., a Netherlands
Antilles corporation, is controlled by Johan Eliasch and his family members. As
of April 13, 2004 Johan Eliasch also owned 45,900 of Head N.V.'s shares
directly. 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 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


                                       5
<PAGE>


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 2003
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.

ITEM 4:   INFORMATION ON THE COMPANY

4.A. History and Development of the Company



                                       6
<PAGE>


     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 32,000 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 2003 was approximately $1.49 billion at the wholesale
level, consisting of $525 million of skis, $195 million of bindings, $360
million of boots and $410 million of snowboard equipment. The ski market is
split predominantly among Europe, the United States and Japan, with Europe in
2003 constituting approximately 60% of the world market, the United States
approximately 17% and Japan approximately 14%. 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 2003. 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 2003, 1.4 million boards were sold.

     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.

     The decline in the market for skis has had a corollary effect on the market
for bindings, ski boots and other accessories. The



                                       7
<PAGE>


bindings market declined from approximately 5.9 million pairs sold per year in
the early 1990's to approximately 4.2 million pairs in 2003. The ski boots
market suffered a significant decline from 3.9 million pairs sold in 2000 to 3.6
million pairs sold in 2003 with lower average prices in constant value. We
believe this decline in price was due to oversupply resulting from late
manufacturers' reaction to a slowing of the replacement cycle for ski boots.

     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 $525 million or 100% of total industry-wide ski
sales at wholesale in 2003, 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.

     In 2003, consolidation continued in the snowboard industry of the winter
sports market. Traditional ski distributors and retailers replaced many of the
snowboard specialists in the marketplace. We expect this trend to continue.

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 2003 was approximately 9.1 million units, with
a value of approximately $347 million at the wholesale level. We believe the
markets contracted by approximately 8% in revenue in 2003. The market is divided
predominantly among the United States, Europe and Japan. The United States and
Europe each represents more than 25% of the 2003 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. In 2003 the tennis market
was also impacted by consumer uncertainty about general economic activities and
the deterioration of the labor market globally.

     We estimate worldwide sales of tennis balls at approximately $220 million
at wholesale in 2003, with approximately 22.8 million dozen tennis balls sold.
Of these sales, the US and Europe accounted for approximately 42% and 28% in
units, respectively, representing the two largest markets for tennis balls. In
2003, the market for tennis balls was generally perceived to have a decline
overall by approximately 2%.

Diving Market

     We define the diving market as the market for diving equipment, wetsuits,
drysuits and diving accessories. In 2003, the overall diving market was
generally perceived to have declined by 3%, with the important US and Japanese
markets showing, according to some estimates, a downturn in demand of up to
respectively 1% and 20%. 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 improvement generally
across the industry in 2002.

     We estimate the market at the end of 2003 to have been approximately $470
million based on new market estimations. 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.

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 2003, 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, and we believe we held the number
        three position globally or 13% of



                                       8
<PAGE>


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 in 2002, in terms of numbers of
        units sold. In the 2003 season, we 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 2003.

     o  Balls. Penn is the world's leading manufacturer of tennis and
        racquetball balls in volume sold. In 2003, we estimate that Penn sold
        over half the tennis balls sold in the United States and held 30% of
        the tennis ball market worldwide in volume. In 2003, we estimate we
        held 75% 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 2003
        Mares and Dacor 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. Hannes Trinkl, the 2001 Downhill World champion, 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 2001/2002
        and 2002/2003 overall world championship title in the Big Air
        discipline.

     o  Racquet Sports. Andre Agassi endorses our Head tennis racquets and used
        our Head Liquidmetal racquet in the 2003 U.S. Open. Gustavo Kuerten and
        Goran Ivanisevic both won 2001 Grand Slam tournaments using a Head
        Intelligence racquet. 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  In 2003 we introduced Head Liquidmetal racquets, which Fortune magazine
        and Business Week recently declared to be one of the 25 best products of
        the year 2003. Three months after their introduction, 3 of our Head
        Liquidmetal lines of racquets were in the top four best-selling racquets
        in the U.S. Pro/Specialty channel of distribution. In addition, our Head
        Liquidmetal "LM Radical" racquet was the best selling racquet of all
        brands in Japan in the September to December 2003 sales period. In 2000,
        we introduced our Head Intelligence and Head Intelligence X racquets,
        which, along with Head Titanium racquets (launched in 1997),
        significantly increased our overall U.S. market share in terms of
        revenues from 9% in 1997 to 24% in 2003.

     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 used at the 2002 Winter Olympics in Salt Lake City, Utah
        and in World Cup ski races 2002/2003. 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.

     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.



                                       9
<PAGE>


     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.

     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 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 skis and snowboards
and Head Liquidmetal tennis racquets. In 2003, 2002 and 2001, we incurred $13.6
million, $11.0 million and $9.5 million, respectively, on engineering, research
and development.

     Reduce Costs. We are implementing 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 a recently purchased plant in Litovel, Czech
        Republic. We expect lower overhead costs for these manufacturing
        operations as they will share administrative



                                       10
<PAGE>


        and management resources with our existing infrastructure in Austria. We
        have already ceased production at our Estonia plant in preparation for
        its closing, currently scheduled for the end of 2004 with its subsequent
        sale.

     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 are in the process of closing our tennis ball production facility in
        Mullingar, Ireland and transferring these operations to our existing,
        under-utilized plant in Phoenix, Arizona.

     o  We are centralizing our European distribution organizations for Winter
        Sports and Racquet Sports products so that Head International GmbH will
        operate 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. From January 1, 2005, we intend for
        Head International to invoice products to our customers in France and
        the UK. 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 only as sales agencies. We already competed the
        consolidation of our U.S. warehouses from three locations to one
        location and streamlining the management of our U.S. diving, winter and
        racquet sports businesses.

     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 43.8% of our total revenues in 2003.

Head Ski

     Our Head ski brand is one of the leading ski brands in the world. We
estimated 13% market share of our skis in 2003. 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 39.4% of our total Winter Sports revenues in
2003.

     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        4      Extreme stability and precision for
                                                             racing and high performance skiing
     Freeride         Advanced to expert skiers       6      Maximum lift in powder snow and
                                                             maneuverability for off piste and extreme
                                                             Skiing
     Allround Carve   Intermediate to advanced        9      Easy-turning and maneuverability for all
                      skiers                                 types of terrain
     New School       Advanced to expert skiers       3      Shock-absorbing reinforced construction
                                                             for mogul, freestyle skiing and jumps
     All-Mountain     Beginner to intermediate        3      Shorter length and easy-turning suitable
     Cruise           skiers                                 for learning and hobby skiers
     Junior           Young skiers                    7      Radical side cuts designed for easy
                                                             handling for younger skiers of all
                                                             Abilities
     Rental           All skiers                      6      Added durability
     Accessories      All skiers                     18      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.



                                       11
<PAGE>


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
2002/2003 and 2003/2004.

     Market Share. We estimate that the global ski market was approximately $525
million at wholesale in 2003. We believe, based on our market knowledge and
experience, that in 2003, 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 13% in 2003, an increase of
approximately 60% from an estimated 8% in 1996.

     We believe that demand for carving skis will continue to increase and that
carving ski sales represented 100% of total industry-wide ski sales in 2003. 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.

     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 2003, based on units sold. Our bindings business represented
30.4% of our total Winter Sports revenues in 2003.

     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                           4      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                       4      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



                                       12
<PAGE>


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 1999, we introduced 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. We believe that the SL 100
became the largest selling binding in the worldwide market and accounted for
over one-third of our binding sales worldwide in units in 2003. The launch of
the SL 100 bindings helped us gain what we believe to be a leading position in
the worldwide bindings market.

     In 2002, Tyrolia introduced Rail Flex, an integrated tool free binding
system.

     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 $195 million at wholesale in 2003. We estimate our market share
worldwide for bindings in units was approximately 32% in 2003 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.

     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.

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 20.9% of our total Winter
Sports revenues in 2003.

     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       11     Project introduced in 2001 with full
                       professional skiers                         bi- injection technology and high
                                                                   performance construction to maximize
                                                                   energy transmission. A totally new
                                                                   buckling system incorporates two
                                                                   innovative patented solution, to
                                                                   improve performance
     All Mountain      Experts to intermediate skiers       10     New range 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
</TABLE>



                                       13
<PAGE>


<TABLE>
<CAPTION>
     <S>               <C>                                  <C>    <C>
     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 $360 million in 2003. We believe, based on our market knowledge
and experience, that the Head ski boots held the number three position worldwide
in 2003 based on units sold. We estimate that our market share (Head and Munari
together) in 2003 was approximately 14%, which was a positive trend in
comparison to the 2002 season.

     We aim to increase unit sales of our boots worldwide by leveraging our
brand names and extending the top end product line described above. Our
expectation for 2004 is a stable global market and a concentration of brands at
dealer level, from which we should benefit.

     Manufacturing. All of our ski boots will be manufactured at our recently
purchased plant in Litovel, Czech Republic, starting with the 2004/2005
collection. Until 2003 ski boots were produced in our factory in Estonia
(approx. 94%) and in Italy (6%). The new factory will allow us to improve our
efficiency and service and reduce fixed costs as well.

Snowboards

     We market our snowboard products under the Head brand. These products
accounted for 9.4% of our total Winter Sports revenues in 2003.

     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



                                       14
<PAGE>


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 snowboard, bindings
and boots was approximately 1.4 million units in 2003 and that our market share
was approximately 5.9% 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 38.6% of our total revenues in 2003.
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 2003 our Head racquets were the number two brand
worldwide, comprising 20% and 24% of the world retail market in units and
revenue respectively. Revenues from racquets and accessories amounted to 61.5%
of our total Racquet Sports revenues in 2003.

     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         Head Liquidmetal Series   Tennis enthusiasts        5      Performance racquets
                                              at all level of                  featuring Head Liquidmetal
                                              Play                             for perfect energy transfer
                    Intelligence Series       All levels of play        9      Racquets featuring
                                                                               Intellifibers
                                                                               (piezoelectric material),
                                                                               Top model with Chip system
                                                                               (chip powered and
                                                                               electronically dampened
                                                                               racquets)
                    Titanium and              Entry level players      16      Lightweight value products
                    Performance                                                for short and medium swings
                    racquets
                    Junior Series             Young players             9      Lightweight racquets for
                                                                               juniors from ages 6 to 14
     Squash                                   All players              20      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 9.1 million units and $347 million at wholesale level in 2003. We
believe, based on our market knowledge and experience, that Head brand tennis
racquets were number one



                                       15
<PAGE>


in Europe and number two on a worldwide level in 2003. We estimate that market
share of overall revenues generated for 2003 was approximately 24% worldwide and
that our European market share was 32%. Due to the first time availability of
substantial third party quantitative market research data for Europe, market and
market share information cannot be reconciled back to 2002 reporting and may
vary substantially.

     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 products increased from 0.8
million in 1993 to 1.8 million in 2003. 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 and
Intelligence 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
2003 ATP Tour Entry-List Rankings, Head racquets were used by more than 30 of
the top-rated 100 professional male players, including career grand slam
champion and 2003 Australian Open winner Andre Agassi, 2001 French Open Champion
Gustavo Kuerten, and 2001 Wimbledon Champion Goran Ivanisevic, making Head the
number one racquet brand used on the ATP Tour. A number of tennis players on the
WTA Tour, such as Anastasia Myskina, Patty Schnyder and Chanda Rubin and ATP
Senior Tour players such as Bjorn Borg and highly reputed coaches including Bob
Brett 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 Intelligence X tennis
racquets have, we believe, significantly increased our overall U.S. market share
(in terms of revenues) from 9.0% in 1997 to 24% in 2003.

     We cross-leveraged these technologies to create line extensions in Head
Squash and Racquetball and the Titanium and Intelligence models which we believe
improved our position in other racquet sports markets as well. In 2003, we
estimate that we finished the year slightly down in the U.S. racquetball market
share. However we estimate that we were the number two brand of the racquetball
racquet market in 2003.

     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 75% 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 37.8% of our total Racquet Sports revenues in 2003.

     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                    5      Models designed for specific courts
                                                                  Surfaces
     Pro Penn USPTA    Teaching professionals              5      Highest quality felt/premium rubber
                                                                  balls made for specific court surfaces
     Tennis Masters    Top professionals and serious       6      Balls for tournament play made of
     Series and ATP    tournament players                         long- wearing felt and rubber-coated
     Tour                                                         for moisture/stain resistance; New
                                                                  balls: Prestige specifically for
                                                                  Germany and Marathon for International
                                                                  Markets
     Stars             Beginners (sold to clubs and        2      Manufactured with less pressure
                       teaching pros)
     Titanium          Premium3                            3      New in 1998; titanium enhanced core
     Court One         Casual/Recreational                 1      Non USTA approved
     Private Label     Casual/Recreational                 1      Special orders
     Racquetball
     Balls
</TABLE>



                                       16
<PAGE>


<TABLE>
<CAPTION>
     <S>               <C>                                 <C>    <C>
     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
$220 million worldwide, with approximately 22.8 million dozen tennis balls sold
in 2003. We believe Penn was the market leader in 2003, with an estimated market
share of 31% worldwide and of over 52% (based on volume) in the United States,
the world's largest market in 2003. Along with the general decline in the market
we estimate that Penn sales have declined during recent years. Due to the first
time availability of substantial third party quantitative market research data
for Europe market and market share information cannot be reconciled back to 2002
reporting and may vary substantially.

     We believe that Penn's strong market position is a result of the superior
quality of our products, economies of scale through the largest tennis plant
globally in Phoenix/Arizona 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 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 75% (based on
volume) in 2003. 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
facilities in Phoenix, Arizona and Mullingar, Ireland. In 2002, a key automation
project was successfully implemented in both Phoenix and Mullingar. This
resulted in some cost savings in 2002. As part of our cost-cutting program we
are in the process of closing our tennis ball production facility in Ireland
effective March 31st, 2004 and will transfer these operations to our existing,
under-utilized plant in Arizona.

     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 2003. 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, with Dacor being particularly strong in
the United States. 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 15.4% of our total revenues in 2003.

     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
</TABLE>



                                       17
<PAGE>


<TABLE>
<CAPTION>
     <S>                                    <C>    <C>
     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 $470 million in 2003 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
2002 at wholesale. Our market share worldwide for the Mares and Dacor brands for
2003 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 12% market share, and
in South Asia, where both brands combined had an estimated 7% market share in
2003. 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. Until recently, we also
manufactured certain diving products in Tallinn, Estonia. We are in the process
of transferring all of our diving production in Tallinn, Estonia to a recently
purchased 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 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 2.2% of our total revenues in
2003.

     From the 1st of January 2002, the Head footwear business which used to be
part of our Racquet Sports division became a licensed business and our UK bags
business which was previously licensed out, has been brought in-house and is
managed by our UK sales and distribution subsidiary.

     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 $9.7 million of revenues in 2003 for the
Head, Mares and Penn brands. Wholesale licensee revenues amounted to
approximately $130 million. We intend to explore other licensing opportunities
for products suitable to the image of our brands. South America is a region
which still offers potential.

     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 approximately 80 countries to over 32,000
accounts. Our worldwide sales force comprised approximately 360 people as of
December 31, 2003. In addition, we utilize sales representatives and independent
distributors to serve specialized markets and related distribution channels.



                                       18
<PAGE>


Europe

     Sales to customers within Europe accounted for 59.1% of our 2003 net sales.
We are centralizing our European distribution organizations for Winter Sports
and Racquet Sports products so that Head International GmbH, will operate 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.
From January 1, 2005, we intend for Head International to invoice products also
to our customers in France and the UK. As a result, all of our invoicing to
customers in these markets, and to third-party distributors worldwide, will
occur from Head International. The related former European distribution
companies thereafter function only as sales agencies.

North America

     Sales to customers in North America accounted for 28.1% of our 2003 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. A new U.S.
distribution center was founded in Curtis Bay, Maryland and commences shipping
all Head, Tyrolia, Penn and Mares/Dacor products in January of 2004. We expect
the consolidation of the different warehouse locations into one to generate
savings beginning in 2004. 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 9.6% of our 2003 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% in
2003. 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 3.1% of our 2003 net
sales. These markets mainly consist of Latin America, Eastern Europe and
Australia. We believe the number of countries in these markets in which sales
were made exceeded 50 in 2003. Sales of our products to these regions are made
by independent importers/distributors. We intend to continue to pursue
strategies to broaden our 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, CD-ROMs 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:



                                       19
<PAGE>


     o  are re-designing our websites to generate more "hits" from search
        engines;

     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.

     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 and Dacor 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.

     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 Hannes Trinkl, the 2001 Downhill World
        Champion, Maria Riesch, Florian Eckert, Franco Cavegn, Marco Buchel,
        Alain Baxter 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 2001/2002 and 2002/2003 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, Rainer Schuettler, Sebastien Grosjean
        and Gustavo Kuerten, WTA players such as Patty Schnyder, Chanda Rubin
        and Anastasia Myskina, as well as players from the ATP Senior Tour
        popular among mature players, including "legends" Thomas Muster, Bjorn
        Borg, Guillermo Vilas 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.



                                       20
<PAGE>


     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 as well.

     o  Most free diving world records, including those set by Francisco "Pipin"
        Ferreras and Gianluca Genoni, have been set using Mares equipment. The
        last record set by Gianluca Genoni in Liguria was of 132 meters,
        variable ballast, with a very large, worldwide recognition. In 2002,
        "Tauchen" magazine awarded Mares the first prize for the best Buoyancy
        Compensator line of the year at the Dusseldorf Boat Show. "Dive-Oz",
        Australia's biggest online scuba resource, awarded Mares the "Golden
        Star Award" for the X-Vision mask. Also, 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.

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.

     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 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.

     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.

     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 53 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. We expect to release it on
the market in 2004.

Customers

     We sell our products to approximately 32,000 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. No single customer accounted for more than 4% of
our 2003 net sales.



                                       21
<PAGE>


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.

    o   The main competitors to our Head ski brand, are Rossignol, which is
        owned by Rossignol S.A.; 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

    We source our raw materials from multiple suppliers under purchase orders,
and where appropriate, we negotiate contracts for up to one year forward at
fixed rates to hedge our production cost. Our primary raw materials are
plastics, rubber, steel and felt. We have not experienced extreme volatility of
raw material prices.

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



                                       22
<PAGE>

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 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 (formerly HTM Deutschland GmbH)...............    Germany                     100%
  Head UK Ltd.....................................................    Great Britain               100%
  Penn Racquet Sports Co..........................................    Ireland                     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 (formerly HTM Sports Corp.)....................    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, 2003 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                13,139
                                   Administration, marketing, research       Leased                 4,186
                                   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                 2,973
Maser, Italy...................    Ski boot manufacturing, research and      Leased                 6,490
                                   development
Tallinn, Estonia...............    Former ski boot and diving products       Owned                 29,574
                                   manufacturing
Litovel, Czech Republic........    Ski boots and diving products             Owned                 11,700

</TABLE>


                                       23
<PAGE>

<TABLE>
<CAPTION>

<S>                                <C>                                       <C>                   <C>
                                   manufacturing
Budejovice, Czech Republic.....    Tennis racquets assembly and ski          Owned                  7,375
                                   manufacturing
Rapallo, Italy.................    Manufacturing                             Owned                  1,200
                                   Warehousing, administration, research     Owned                  4,800
                                   and development
Casarza, Italy.................    Warehousing                               Owned                  7,300
                                   Manufacturing and warehousing             Owned                  7,708
Phoenix, Arizona...............    Tennis and racquetball ball               Owned                 13,009
                                   administration, manufacturing,
                                   research and development
Mullingar, Ireland.............    Tennis ball manufacturing, warehouse      Owned                  3,094
                                   Administration                            Owned                    386
                                   Warehouse                                 Leased                 1,747
</TABLE>

    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.

    After a slow beginning of the 2002/03 season due to a lack of snow in
certain areas of Europe and Eastern North America and the difficult economic
environment in the two important markets of Germany and Japan, the overall
market for skis showed some recovery at the end of the 2002/03 season as well as
during the beginning of the 2003/04 season. The worldwide market in tennis has
shown a decline as a result of various factors, including customer reaction to a
slowing economy and reduced interest in the sport. However, the introduction of
the Head Liquidmetal racquets in August 2003 resulted in some reversal of this
trend starting in the third quarter of 2003, primarily in the United States and
Japan. The market for tennis balls is generally perceived to have declined. The
overall market for diving equipment also generally is perceived to have declined
primarily due to fewer people traveling worldwide to dive centers and resorts
and making corresponding purchases of equipment. Industry observers expect the
diving market to recover when customers feel that the threat of terrorism is
sufficiently contained. We are successfully introducing diving products in new
geographical areas such as Eastern Europe and Southeast Asia and focusing on
reducing the number of offered products in order to have a simpler and more
efficient line that continues to fulfill divers' needs.



                                       24
<PAGE>

    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 28% is generated in
U.S. dollars whereas 59% 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 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 $1.6 million and $0.7
million in the 2002 and 2003 fiscal years, respectively. As of December 31,
2003, deferred non-cash compensation relating to previously granted stock
options amounted to approximately $1.7 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 35% is generated in U.S. dollars whereas 48% 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


                                       25
<PAGE>


       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.

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.
In 2003, we recorded one significant additional provision due to a sudden
decline in the customer's credit worthiness. Recoveries related to changes in
reserves did not occur during 2003.

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.

       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 2003, the Company decided to shutdown its Penn tennis ball plant in
Ireland at the end of March 2004 due to the high cost of production in an euro
country versus a market of falling average prices compared to the Company's
competitors producing in the Far East and transferring these operations to its
existing, under-utilized plant in Phoenix, Arizona. Some plant equipment will be
shipped to Phoenix. Future cash flows for the remaining three months of
production in Ireland, sales proceeds of plant equipment and land and building
less dismantling costs resulted in an amount lower than the book value of the
plant and equipment as of December 31, 2003 and made an impairment of $2.6 to
fair value million necessary. The actual cash flows could differ from the
amounts included in our estimate.

       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


                                       26
<PAGE>


         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 2003.

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, 2003, we had approximately $394.5 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 $371.1 million of net operating loss carryforwards to lower cash
taxes on future taxable income (see Note 18 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 August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" which requires companies to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the carrying amount of the related
long-lived asset. SFAS 143 is effective for financial statements for fiscal
years beginning after June 15, 2002. The adoption of SFAS 143 had no impact on
the Company's financial position and results of consolidated operations.

       In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred. The provisions of SFAS No. 146 are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. This standard has been adopted from January 1, 2003 and
applied for exit and disposal activities entered into in 2003.

       In January 2003, the Emerging Issues Task Force (EITF) issued EITF 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables". EITF 00-21
addresses the issues of (1) how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting; and (2) how
arrangement consideration should be measured and allocated to the separate units
of accounting in the arrangement. EITF 00-21 does not change otherwise
applicable revenue recognition criteria. EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. EITF
00-21 had no impact on our financial position or results of operations.

       In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires a liability to
be recognized at the time a company issues a guarantee for the fair value of the
obligations assumed under certain guarantee agreements, such as certain
indemnity provisions and guarantees of third party debt. The provisions for
initial recognition and measurement of guarantee agreements are effective on a
prospective basis for guarantees that are issued or modified after December 31,
2002. Management has adopted FIN 45 and there was no impact on our financial
position or results of operations.



                                       27
<PAGE>

       In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46)
"Consolidation of Variable Interest Entities, an interpretation of ARB 51". FIN
46 addresses the consolidation of entities for which control is achieved through
means other than through voting rights ("variable interest entities" or "VIE")
by clarifying the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements" to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. FIN 46
provides guidance on how to determine when and which business enterprise (the
"primary beneficiary") should consolidate the VIE. In addition, FIN 46 requires
that both the primary beneficiary and all other enterprises with a significant
variable interest in a VIE make additional disclosures. The disclosure
provisions of FIN 46 are effective in all financial statements initially issued
after January 31, 2003. FIN 46 is required to be immediately applied by all
entities with a variable interest in a VIE created after January 31, 2003. A
public entity with a variable interest in a VIE created before February 1, 2003
is required to apply FIN 46 to that entity no later than the beginning of the
first interim or annual reporting period beginning after June 15, 2003.

       In December 2003, the FASB revised FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46) and codified certain FASB
Staff Positions (FSPs) previously issued for FIN 46 in FASB Interpretation No.
46, Revised (FIN 46R). FIN 46 as originally issued and as revised by FIN46R,
establishes consolidation criteria for entities for which control is not easily
discernable under ARB 51. The adoption of FIN 46 and FIN 46R in 2003 did not
have a material impact on our financial position or result of operations.

       In April 2003, the FASB issued Statement of Financial Accounting
Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities". SFAS 149 amends SFAS No. 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. Management has assessed the impact
of the adoption of SFAS 149 and concluded that there was no material impact on
our results of operations or financial position.

       In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liability and equity. SFAS
No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003, and to all other instruments that exist as of the beginning
of the first interim period beginning after June 15, 2003. Management has
assessed the impact and concluded that there was no impact on the adoption of
SFAS No. 150.

       In December 2003, the FASB issued SFAS No. 132 (revised 2003),
"Employers' Disclosures about Pensions and Other Postretirement Benefits". This
Statement establishes standards on additional disclosures to those in the
original Statement 132 about the assets, obligations, cash flows, and net
periodic costs of defined benefit pension plans and other defined postretirement
plans separately for pension plans and other postretirement benefit plans. SFAS
No. 132 (revised 2003) is effective for financial statements with fiscal years
ending after December 15, 2003. The standard has been adopted.

Results of Operations

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:


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                 For the Years Ended
                                                                     December 31,
                                                              2002                  2003            Change
                                                       ------------------    ------------------    --------
                                                           $         %           $         %           $
                                                       --------  --------    --------  --------    --------
                                                                 (in thousands, except percentages)
<S>                                                    <C>         <C>        <C>        <C>        <C>
Total revenues .....................................    387,487    100.0%     431,208    100.0%      43,722
Cost of sales ......................................    233,402     60.2%     266,023     61.7%      32,621
                                                       --------    -----     --------    -----      -------
  Gross profit .....................................    154,084     39.8%     165,186     38.3%      11,101
                                                       ========    =====     ========    =====      =======
Selling and marketing expense ......................    102,619     26.5%     117,071     27.1%      14,452
      General and administrative expense (excluding
  non-cash compensation expense) ...................     32,081      8.3%      38,847      9.0%       6,767
Non-cash compensation expense ......................      1,632      0.4%         654      0.2%        (978)
Restructuring costs ................................       --        --         8,368      1.9%       8,368
                                                       --------    -----     --------    -----      -------
  Operating income .................................     17,753      4.6%         245      0.1%     (17,508)
                                                       ========    =====     ========    =====      =======
 Interest expense ..................................    (11,677)    (3.0%)    (13,999)    (3.2%)     (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)    (3.2%)    (13,840)
                                                       ========    =====     ========    =====      =======
 Income tax expense ................................     (2,630)    (0.7%)       (832)    (0.2%)      1,798
                                                       --------    -----     --------    -----      -------
  Net Loss .........................................     (2,615)    (0.7%)    (14,657)    (3.4%)    (12,043)
                                                       ========    =====     ========    =====      =======
</TABLE>


     Total Revenues. For the twelve months ended December 31, 2003, total
revenues increased by $43.7 million, or 11.3%, 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:

                                              For the Years Ended December 31,
                                             ---------------------------------
                                               2002          2003     % Change
                                             --------      --------   --------
                                             (in thousands, except percentages)
Product Category
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%
                                            ==========    ==========    ======



     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.


     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.

     Gross Profit. Gross profit increased by $11.1 million to $165.2 million in
2003 from $154.1 million in 2002. Gross margin decreased to 38.3% in 2003 from
39.8% 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-



                                       29
<PAGE>

cost countries. Please see "Item 4.B Business Overview - Our Strategy - Reduce
Costs" for a description of our cost reduction program.

     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
$14.5 million, or 14.1%, 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.

     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. 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.


                                       30
<PAGE>

     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.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2002

     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,
                                                          2001                  2002             Change
                                                    -----------------     -----------------      -------
                                                       $         %           $         %            $
                                                    -------   -------     -------   -------      -------
                                                             (in thousands, except percentages)
<S>                                                 <C>        <C>        <C>        <C>         <C>
Total revenues .................................    392,021    100.0%     387,487    100.0%      (4,534)
Cost of sales ..................................    233,971     60.4%     233,402     60.2%        (569)
                                                    -------    -----      -------    -----       ------
  Gross profit .................................    158,050     40.8%     154,084     39.8%      (3,966)
                                                    =======    =====      =======    =====       ======
Selling and marketing expense ..................    102,094     26.3%     102,619     26.5%         525
General and administrative expense (excluding
  non-cash compensation expense) ...............     33,972      8.8%      32,081      8.3%      (1,891)
Non-cash compensation expense ..................      2,025      0.5%       1,632      0.4%        (393)
Restructuring costs ............................        838       --           --       --           --
                                                    -------    -----      -------    -----       ------
  Earnings per share-diluted ...................     19,959      5.2%      17,753      4.6%      (2,206)
                                                    =======    =====      =======    =====       ======
Interest expense ...............................    (11,275)    (2.9%)    (11,677)    (3.0%)       (402)
Interest income ................................        892      0.2%         940      0.2%          48
Foreign exchange gain (loss) ...................      5,828      1.5%      (7,387)    (1.9%)    (13,215)
Other income (expense), net ....................          7      0.0%         387      0.1%         380
                                                    -------    -----      -------    -----       ------
  Income from operations before income taxes ...     15,411      4.0%          15      0.0%     (15,396)
                                                    =======    =====      =======    =====       ======
Income tax expense .............................     (4,032)    (1.0%)     (2,630)    (0.7%)      1,402
Share of loss from equity investment, net of tax     (1,117)    (0.3%)       --                   1,117
                                                    -------    -----      -------    -----       ------
  Net income (loss) ............................     10,262      2.6%      (2,615)    (0.7%)    (12,877)
                                                    =======    =====      =======    =====       ======
</TABLE>


       Total Revenues. For the twelve months ended December 31, 2002, total
revenues decreased by $4.5 million, or 1.2%. This was caused by significantly
lower sales of racquet sports, due primarily to conversion of our footwear
business into a licensing agreement, and lower sales of diving equipment,
partially offset by the strengthening of the euro against the U.S. dollar.

       The following table sets forth revenues for each of our product
categories for each of the years ended December 31, 2001 and 2002:

                                               For the Years Ended December 31,
                                             -----------------------------------
                                                 2001          2002     % Change
                                              ----------    ----------    ------
                                              (in thousands, except percentages)
Product Category
Winter Sports..............................   $  135,421    $  144,667     6.8%
Racquet Sports.............................      180,108       168,822    (6.3)
Diving.....................................       68,480        65,600    (4.2)
Licensing..................................        8,012         8,398     4.8
                                              ----------    ----------    ------
  Total revenues...........................   $  392,021    $  387,487    (1.2)%
                                              ==========    ==========    ======



       Winter Sports revenues increased by $9.2 million, or 6.8%. The main
reason for the increase in sales was the strengthening of the



                                       31
<PAGE>

euro against the US dollar and increased sales volumes of our snowboard
equipment.

       Racquet Sports revenues decreased by $11.3 million, or 6.3%. This
decrease in revenues was primarily due to conversion of our footwear business
into a licensing agreement from the beginning of 2002, partially offset by the
strengthening of the euro against the U.S. dollar. To a lesser extent, it also
resulted from lower sales volumes and average selling prices, due to a decline
in the number of recreational players, poor weather conditions in certain
regions during the peak selling season and consumer reaction to a slowing
economy, which caused the racquet industry as a whole to suffer a decline in
2001 and 2002.

       Diving product revenues decreased by $2.9 million, or 4.2%. We believe
that the diving market has suffered from U.S. consumer reaction to the event of
September 11, 2001 and the general downturn in the global economy, which has
resulted in fewer people traveling worldwide to dive centers and resorts and
making corresponding purchases of equipment. This decline in sales volumes was
partially offset the strengthening of the euro against the U.S. dollar.

       Licensing revenues increased by $0.4 million, or 4.8%. This increase was
due to additional revenues from the licensing of footwear products, offset in
part by the sales by our UK subsidiary of sports bags, which previously were
licensed. Both of these changes took place at beginning of 2002.

       Gross Profit. Gross profit decreased by $4.0 million to $154.1 million
from $158.0 million in 2001. Gross margin decreased to 39.8% in 2002 from 40.3%
in 2001. The decline in gross profit reflected lower volumes and lower average
prices across our Racquet Sports and Diving products, and by unfavorable
currency impacts on our Winter Sports revenues. The decline in gross margin
reflected higher material and energy costs, lower average prices as well as
unfavorable currency impacts.

       Selling and Marketing Expense. Selling and marketing expense increased by
$0.5 million, or 0.5%. This decrease was due primarily to unexpectedly high
success-based endorsement fees in 2001. This impact was partly offset by planned
increased departmental selling expense in connection with our new distribution
unit in the United Kingdom.

       General and Administrative Expense. General and administrative expense
decreased by $2.7 million, or 7.8%, to $32.1 million in 2001 from $34.8 million
in 2001. In 2001, amortization of goodwill and trademarks of $1.0 million was
recorded. In accordance with SFAS 142, in 2002, goodwill and trademarks were no
longer amortized. The further decrease was due to additional cost cutting
measures, including head count reductions, which was offset by the strength of
the euro against the U.S. dollar as our general and administrative expenses are
mostly in euro.

       Non-Cash Compensation Expense. We also recorded $2.0 million and $1.6
million for the year ended December 31, 2001 and 2002, respectively, as non-cash
compensation expense due to the grant of stock options under our stock option
plans 1998 and 2001 and the resulting amortization expense.

       Restructuring. In 2001, we also recorded a charge of $0.8 million in
connection with an employee termination.

       Operating Income. As a result of the foregoing factors, operating income
decreased by $1.4 million, or 7.2%, to $17.8 million in 2002 from $ 19.1 million
in 2001.

       Interest Expense. Interest expense increased by $0.4 million or 3.6%. The
increase was due to the strength of the euro against the U.S. dollar. Our
interest expenses are mostly in euro.

       Interest Income. Interest income remained broadly unchanged at $0.9
million for each of 2002 and 2001.

       Foreign Exchange Gain (Loss). We recorded a foreign currency exchange
loss of $7.4 million in 2002, compared to a gain of $5.8 million in 2001. The
loss was primarily associated with our U.S. dollar denominated receivables of
our European subsidiaries as the euro strengthened against the U.S. dollar
during the year. We operate in a multi-currency environment and are subject to
the effects of fluctuation in exchange rates.

       Other Income (Expense), net. Other income, net increased by $0.4 million
due to a gain on sales of various small assets.

       Income Tax Benefit (Expense). Income tax expense decreased by $1.4
million. The decrease in tax expense was mainly attributed to lower pretax
income, offset by an increase of current income tax expense primarily in Austria
and Italy.

       Share of loss from equity investment, net of tax. This represented our
share of loss from an equity investment in a distribution company purchased at
the end of 2000. Our share of loss from this equity investment was $1.1 million.
On December 14, 2001, we withdrew our investment and since then we have had no
further involvement.

       Net Income (Loss). As a result of the foregoing factors, we had a net
loss of $2.6 million in 2002 compared to net income of $9.4.


                                       32
<PAGE>

million in 2001

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.

       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 the U.S. loan agreement.

       In 2002, net cash provided by operating activities decreased to $23.3
million from $35.9 million in 2001. This decrease was primarily the result of a
net loss of $2.6 million in 2002 compared to a net income of $9.4 million in
2001 and a lower level of accounts payable, partially offset by a lower level of
receivables. The cash flows from operating activities and proceeds from sale of
property were used to pay a dividend of $5.2 million to our shareholders and to
purchase property, plant and equipment of $20.7 million.

       For the year ended December 31, 2003, net cash used for financing
activities was $2.0 million, resulting from a repayment of long-term debt of
$1.2 million, a repurchase of treasury stock of $1.2 million and an increase in
restricted cash of $2.7 million partially offset by a change in short-term
borrowings, net of $1.4 million and proceeds from long-term debt of $1.6
million.

       Net cash provided by financing activities for the year ended December 31,
2002 of $2,000 resulted from an increase in long-term debt of $16.6 million,
which included proceeds of $11.0 million from a sale leaseback of our property
in Schwechat, Austria and Neusiedl/Zaya, Austria and proceeds of $4.8 million
from a mortgage on our Penn Phoenix property. Cash was used to pay a dividend of
$5.2 million to our shareholders, repay long-term debt of $4.3 million
(including $3.5 million of the existing 10.75% Senior Notes due 2006), to
purchase treasury stock of $3.0 million and repay $2.9 million of short-term
borrowings.

       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, 2003, we had eight forward contracts on Japanese yen
totaling $9.4 million, four Canadian dollar option contracts totaling $2.6
million, and one Japanese yen option contract totaling $1.9 million. We recorded
a foreign exchange gain of $5.8 million in 2001 and foreign exchange losses of
$7.4 and $1.1 million in 2002 and 2003, respectively. 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. We intend
and have the ability to repay approximately $31.8 million of our short-term
loans from the proceeds of our newly issued 8.5% Senior Notes. Therefore, this
amount has been reclassified to long-term debts in the balance sheet as of
December 31, 2003. The following discussion does not give any effect to this
reclassification.

      Total debt as of December 31, 2003, was $184.8 million, consisting of
short-term borrowings of $69.3 million, other long-term debt of $32.6 million
and 10.75% Senior Notes of $82.9 million.

     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.

Treatment of Bank Waivers Under SFAS No. 15

       SFAS No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings, establishes standards for reporting



                                       33
<PAGE>

information about bank waivers received in connection with a debt restructuring.
SFAS No. 15 requires that a debtor account for the effects of a restructuring
prospectively from the time of the restructuring, and not change the carrying
amount of the payable unless the carrying amount exceeds future cash payments
(interest and face amounts) specified by the new terms. If total cash payments
are less than the carrying amount of the payable at the date of the
restructuring, the carrying amount of the payable shall be reduced to an amount
equal to the sum of the future interest and principal cash payments, and a gain
equal to the amount of the reduction shall be recognized. Thereafter, all cash
payments shall be accounted for as a reduction of the carrying amount of the
payable and no interest expense shall be recognized for any period between the
restructuring and maturity of the payable. As a result of the application of
SFAS No. 15, we recognized an extraordinary gain of approximately $58.2 million
(net of debt restructuring expenses of approximately $3.6 million) for the year
ended December 31, 1998 and $3.0 million (net of $1.6 million in taxes) for the
year ended December 31, 2000.

Loan Agreements

     The following discussion does not give any effect to the repayment of our
short-term loans from the proceeds of our 8.5% Senior Notes issued in January
2004.

       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 that we have recorded (euro)10.6 million
of cash and long-term borrowings. As of December 31, 2003, we had outstanding
debt under the sale-leaseback agreement of $13.2 million.

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

       Oesterreichische Kontrollbank Aktiengesellschaft. As of December 31,
2003, we had outstanding borrowings under this line of credit of $18.9 million
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 2.15% at December 31, 2003. 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

       In July 1999, our subsidiary Head Holding issued (euro)100.0 million of
10.75% senior notes due 2006. Proceeds from the offering of these senior notes
were used to repay existing debt and for general corporate purposes. In October
2000, we repurchased (euro)30.9 million (approximately $32.4 million) of these
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
(approximately $3.5 million) of our senior notes. As of December 31, 2003,
(euro)65.7 million ($82.9 million) aggregate principal amount of these senior
notes was outstanding.

       In January 2004, one of our subsidiaries sold (euro)135.0 million
(approximately $167.2 million) of 8.5% senior notes due 2014, guaranteed by Head
N.V. and certain of its subsidiaries. We have applied to list the notes 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 (approximately $86.8 million) million of which (euro)3.5
million represented the redemption premium and (euro)0.9 million interest.

       U.S. Loan Agreement

       In April 2000, our subsidiaries, Head USA, Inc., Mares America
Corporation, Penn Racquet Sports, Inc. and Dacor Corporation, entered into a $20
million, three-year, renewable term Loan and Security Agreement with Fleet
Capital Corporation and other financial institutions providing for a revolving
loan facility and a letter of credit facility. The agreement was secured by
substantially all accounts receivable and inventory of Head USA, Inc., Mares
America Corporation, Penn Racquet Sports, Inc. and Dacor Corporation and the
Penn trademarks and patents (collectively the "collateral"). Subsequently the
loan amount was reduced to $15.0 million. At December 31, 2003, $0.2 million was
restricted under this agreement. No funds were used under this line of credit as
of December 31, 2003.

       Mortgage Agreement

       One of our subsidiaries entered into a mortgage agreement secured by the
Penn property in Phoenix 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, the
amount owed under this agreement was $4.5 million.

       Other Long-Term Debt

       As of December 31, 2003, we had an aggregate amount of approximately $0.4
million long-term debt 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.



                                       34
<PAGE>

2005

       As of December 31, 2003, we had outstanding amounts of other long-term
debt of $14.5 million with several Italian banks and one bank in each of the
Czech Republic and Estonia, of which $7.0 million was secured. The weighted
average interest rate on borrowings outstanding under the loans was 2.8% at
December 31, 2003. These loans terminate between January 2005 and 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.

       Japanese Bank Loans

       As of December 31, 2003, HTM Sports Japan KK, one of our Japanese
subsidiaries, had short-term credit lines with Sumitomo Bank of approximately
$18.5 million 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 3.0% at December 31, 2003.

       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. The
weighted average interest rate on these loans was 3.4% at December 31, 2003.

       Capital Expenditures; Research and Development

       We expect to spend approximately $55 million on investment in property,
plant and equipment and $36 million on research and development in the 2004 to
2006 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 2003, 2002 and 2001, we spent approximately $13.6 million, $11.0
million and $9.5 million, respectively, on engineering, research and development
and $0.7 million, $1.0 million and $0.6 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 2002/2003 had shown a market
decline. The industry trend has been toward consolidation, which has benefited
us because we are a leading company in our core sectors.

       The slowdown in the U.S. economy in 2002 and 2003 has had an effect on
consumer spending worldwide. In light of the current political and economic
situation, we expect sales in 2004 to be in line or slightly below those
achieved in 2003. Having said this, our products are targeted towards sports
enthusiasts who, based on available market data, tend to have comparatively high
disposable income. We believe that the purchase of new sports equipment among
this group tends to be influenced more by product innovation than by economic
conditions.

       Revenues Growth and Currency Fluctuations

       While we report our results in U.S. dollars, close to 59% 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 2004 to be in line or slightly below
those achieved in 2003.

       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 in Europe towards
integrated, better coordinated ski-binding-boot systems, high performance,
higher priced equipment, based on an increase in average selling prices. In
2003, re-orders were comparable to previous years. For 2004, we will be
concentrating on improving product mix, especially on extending our high end
product line, as we expect



                                       35
<PAGE>

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 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 totally integrated tool free systems (Railflex
System), innovative light-weight constructions, 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 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 have experienced a decline in the overall market
which we partially compensated with the launch of the Liquidmetal series. A
deterioration of the product mix in tennis racquets in the overall market as
well as heavy competition for tennis ball sales unfavorably impacted our
revenues in racquets and balls respectively, offset by a favorable currency
impact from the US dollar. In the fourth quarter 2003, we saw some signs of
recovery in the market, particularly, in racquets, and we expect this to
continue in the foreseeable 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.

5.F.   Disclosures of Contractual Obligations

       Obligations to make future payments under contracts for the periods
indicated are as follows as of December 31, 2003 (in thousands).

<TABLE>
<CAPTION>
                                Less than 1
Contractual Obligations             year     1 - 3 years   4 - 5 years   After 5 years     Total
--------------------------------------------------------------------------------------------------
<S>                             <C>           <C>            <C>             <C>         <C>
Sale-Leaseback                  $   138          305           349           12,438      $  13,230
Mortgage                            197          440           506            3,395          4,538
10.75% Senior Notes due 2006         --       82,925            --               --         82,925
Other Long-Term Debt              3,058        5,122         4,571            2,124         14,875
Operating Leases                  4,700        7,360         5,480              596         18,136
</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.

       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.


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.



                                       36
<PAGE>

<TABLE>
<CAPTION>
                  Name              Age                        Title
                  ----              ---                        -----
<S>                                 <C>  <C>
        Johan Eliasch..........     42   Chairman of the Management Board, and Chief Executive
                                         Officer
        Ralf Bernhart..........     52   Member of the Management Board and Chief Financial
                                         Officer
        George F. Nicolai......     51   Member of the Management Board
        Robert van de Voort....     48   Member of the Management Board
        Klaus Hotter...........     48   Executive Vice President, Ski Division (Managing
                                         Director of Head Sport AG)
        Georg Kroll............     55   Executive Vice President, Licensing Division (Managing
                                         Director of Head Sport AG)
        Robert Marte...........     50   Executive Vice President, Racquet Sports
                                         Division (Managing Director of Head Sport AG)
        Stefano di Martino.....     38   Managing Director, Diving Division (Managing Director
                                         of HTM Sport S.p.A.)
        Edgar Pollmann.........     59   Executive Vice President, Operations (Managing
                                         Director of HTM Sport- und Freizeitgerate AG)
        Jacques Altimani.......     57   Vice President, European Distribution (Managing
                                         Director of Head International GmbH)
        David Haggerty.........     46   President, Penn Racquet Sports Inc.
        Kevin Kempin...........     45   Vice President, Sales/Marketing Racquet Sports U.S. and
                                         Penn Worldwide
        Gerald Skrobanek.......     38   Vice President, Operations Division (Managing Director
                                         of Head Sport AG)
        Clare Vincent..........     35   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 and has been, along
with family members, the ultimate beneficial owner of Head N.V.'s controlling
shareholder, Head Sports Holdings N.V. or predecessors, since January 1996. 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 BrazilInvest and the board
of the Special Olympics Committee.

    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 Valentino, 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 and is a member of the supervisory
board of Bank of America.

    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



                                       37
<PAGE>

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.

    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
--------------------              ---                          -----
Karel Vuursteen                   62          Chairman of the Supervisory Board
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

    Mr. Karel Vuursteen was the Chairman of the Executive Board of Heineken N.V.
from 1993 until his resignation in 2002. Mr. Vuursteen joined Heineken N.V. in
1991. Prior to this, he worked for Philips for 23 years, serving in a variety of
executive positions. Mr. Vuursteen is Chairman of the Supervisory Board of Royal
Ahold N.V. and of Randstad N.V. He also serves on the Supervisory Boards of
Gucci N.V., Electrolux AB, Sweden, ING N.V., Akzo Nobel N.V. and Heineken
Holding N.V. He is Chairman of the World Wildlife Fund in the Netherlands and of
the Stichting Het Concertgebouw Fonds, Netherlands.

    Mr. William S. Cohen has been a Member of the Supervisory Board of Head N.V.
since May 2001. He is currently the Chairman and CEO of The Cohen Group, an
international strategic business consulting firm based in Washington, DC. He is
also a co-director at Empower America, a prominent public policy advocacy group
and chairman of the William S. Cohen Center for International Policy



                                       38
<PAGE>

and Commerce at the University of Maine. Secretary Cohen has other directorships
with NASDAQ and IDT and serves on the advisory boards of large multinational
firms including Intel, Barrick Gold International and BrazilInvest. He is a
former U.S. Secretary of Defense and has served in both the U.S. Senate and
House of Representatives.

    Mr. Jurgen Hintz has been a Member of the Supervisory Board of Head N.V.
since May 2003. He is the 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, 2003 (in thousands):

                                                                    Accrued for
                                                       Paid           future
                                                                     payments
                                                   -----------------------------

Directors' Board
   Johan Eliasch .............................        $  644           $ --
   Ralf Bernhart .............................           541               39
   George Nicolai ............................            11             --
   Robert van de Voort .......................            11             --
                                                      ------           ------
                                                      $1,207           $   39
                                                      ======           ======

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


    For the year ended December 31, 2003, the aggregate compensation paid by us
to our executive officers, excluding the members of the Directors' Board, was
$3.8 million. The expense for accrued compensation was $0.3 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. Stock-based compensation
amounted to $0.3 million for the year ended December 31, 2003. 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, 2003, stock-based compensation amounted to $0.2 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:



                                       39
<PAGE>

<TABLE>
<CAPTION>
                                         Number of                                                Number of
                             Exercise  non-exercised                                            non-exercised
                             price at    shares at                    Number of                 shares at the
                                the     beginning of     Number of    exercised                  end of the
                             issuance     the year    written shares    shares   Exercise price      year
                             --------     --------    --------------    ------   --------------  ------------

<S>                             <C>      <C>               <C>            <C>           <C>       <C>
Option Plan 1998
   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 Vursteen .........     4.31        40,002         15,000         --            --           55,002
   Christoph Henkel .......     4.31        40,002         15,000         --            --           55,002
   Viktor Klima ...........     4.31        40,002         15,000         --            --           55,002
   William S. Cohen .......     4.31        40,002         15,000         --            --           55,002
   Rene Jaggi .............     4.31        40,002           --           --            --           40,002
   Jurgen Hintz ...........     4.31          --           25,002         --            --           25,002
</TABLE>


The total amount accrued by the Company and its subsidiaries to provide pension,
retirement or similar benefits was $1.6 million for the year ended December 31,
2003.

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 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 will become
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 shall provide 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 and
have much stronger connections to the US, it seems appropriate to focus on
specifically the NYSE and SEC rules on corporate governance. Therefore, we
believe that it would be appropriate to ask the shareholders at our next annual
general meeting to approve that we will apply the NYSE and SEC rules of
corporate governance and not specifically the rules of the Dutch CGC. We believe
that by complying with the NYSE and SEC rules, and our current internal Code of
Conduct setting out general standards for ethical behaviour, we should also meet
many of the requirements of the Austrian Code of Corporate Governance.


     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, 2001, 2002 and 2003:



                                       40
<PAGE>


                                             For the Years ended December 31,
                                           ------------------------------------
                                            2001           2002           2003
                                           ------         ------         ------

Austria ...........................          919            871            861
Italy .............................          454            444            357
Other (Europe) ....................        1,007            921            681
North America .....................          454            411            357
Other .............................           42             44             45
                                           -----          -----          -----
Total .............................        2,876          2,691          2,301
                                           =====          =====          =====


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, 2004.
Mr. Eliasch also owned 45,900 of Head N.V.'s shares directly as of this date and
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.

     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, 2003, the exercise price was
$0.32. 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 vested under the 1998 Plan were not exercisable prior to the end of the
two year lock-up period following the initial public offering completed on
October 3, 2000. Options have a maximum term of 10 years. The weighted average
remaining contractual life of the outstanding stock option is 5.6 years, and
options representing 664,412 shares have been exercised. As of December 31,
2003, 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 8.8 years, and 1,701,480 options are exercisable
under the 2001 Plan.

As of December 31, 2003, 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 ultimately beneficially owned and 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, 2003, 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, 2003, 664,412 were exercised so that the Stichting held
1,376,888 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



                                       41
<PAGE>

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. However, a lock-up period was in effect for two years following the
initial public offering on October 3, 2000.

     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 including options to purchase 14,544 depositary receipts to members
of our Supervisory Board. 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

     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, 2003, 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 April 13, 2004. Mr. Eliasch also owned 45,900 of
Head N.V.'s shares directly as of this date. Berno, Gambal & Barbee, Inc. held
2,252,800, or 6.0%, of Head N.V.'s issued shares as of April 13, 2004. Neither
Head Sports Holdings N.V. nor Berno, Gambal & Barbee, Inc. have different voting
rights than other shareholders. As of April 13, 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.



                                       42
<PAGE>

     In September 2000, we concluded a management agreement with Mr. Johan
Eliasch, our Chairman and Chief Executive Officer, with respect to the
management activities carried out by Mr. Johan Eliasch for the benefit of our
company. In accordance with this management agreement, Mr. Johan Eliasch will
receive an annual compensation of (euro)545,000 and a reimbursement of all
reasonable business expenses.

     We receive administrative services from a corporation which is ultimately
owned by the majority shareholder of the Company. Administrative expenses paid
to this entity amounted to approximately $1.2 million, $1.2 million and $3.5
million for the years ended December 31, 2001, 2002 and 2003.

     In 2002 and 2003, one of our subsidiaries leased its office building from
its general manager. Rental expenses amounted to approximately $0.1 and $0.04
million for the year ended December 31, 2002 and 2003.

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 Auditors, page F-1.

     8.A.4      Not applicable.

     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 reserves. 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



                                       43
<PAGE>

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, 2000                    8.25000     4.2500        11.2000     5.2000
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

Quarters Ended
December, 2000                     7.8750     4.2500         9.8700     5.2000
March 2001                         5.9900     3.8200         6.4500     4.5100
June 2001                          4.6500     3.7900         5.3200     4.3200
September, 2001                    4.6700     3.3000         5.2000     3.6000
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

Months Ended
October, 2003                      2.8000     2.2500         2.3000     2.0600
November, 2003                     2.7600     2.2500         2.2500     2.0800
December, 2003                     2.6500     2.1100         2.2000     1.8300
January, 2004                      3.5400     2.4500         3.1000     1.8200
February, 2004                     3.3800     2.9700         2.8000     2.5000
March, 2004                        3.3900     3.0200         2.7500     2.5500


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.

     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.



                                       44
<PAGE>

9.E. Dilution

     Not applicable.

9.F. Expenses of the Issue

     Not applicable.

ITEM 10:  ADDITIONAL INFORMATION

10.A. Share Capital

     Not applicable.

10.B. 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 20, 2008, 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.



                                       45
<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 28, 2007, 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),
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.

     The Netherlands Authority for the Financial markets discloses information
to the public by publication in a newspaper



                                       46
<PAGE>

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

     We are required to hold a general shareholders' meeting annually.
Shareholders' meetings will also be called if convened by our



                                       47
<PAGE>

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 2004 Shareholders
meeting will be held on May 26, 2004.

     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 15 days after convening the general meeting,
not counting the day of publication. The acknowledgement of deposit must be
deposited to allow at least five working days between the day of the deposit and
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
2003.

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 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.



                                       49
<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 is subject to a temporary special distribution tax at a rate of
20 per cent to the extent that any "excessive" distributions are made on shares
or on the shares in the period from 1 January 2001 up to and including 31
December 2005. This distribution tax is a corporate income tax, not a
(creditable or refundable) withholding tax. For purposes of this distribution
tax, distributions are considered to be "excessive" when during a particular
calendar year, the total amount of distributions exceeds the highest of the
following three amounts:

          (i) four per cent of the market capitalisation of the Company at the
     beginning of the relevant calendar year;

          (ii) twice the amount of the average annual dividends (exclusive of
     extraordinary dividends) by reference to the three calendar years
     immediately preceding 1 January 2001; or

          (iii) the adjusted statutory result of the Company for the preceding
     book year.



                                       50
<PAGE>

     The temporary special distribution tax is not levied to the extent that the
aggregate amount of dividend distributions made during the period from 1 January
2001 up to and including 31 December 2005, is in excess of the balance of the
fair market value of the net assets at the end of the book year that ended prior
to 1 January 2001 reduced by the paid-in capital recognised for Netherlands tax
purposes.

     The distribution tax due is reduced pro rata to the extent that shares in
the Company or the shares were held, at the time of the dividend distribution,
during an uninterrupted period of three years by individuals or entities (other
than investment institutions as defined in the Corporate Income Tax Act 1969)
holding at least five per cent of the Company's nominal paid-in capital or five
per cent of the issued shares.

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

          (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;



                                       51
<PAGE>

       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 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);

       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 will be a dividend includible in the gross income of the U.S.
shareholder as ordinary income to the extent paid out of our current and
accumulated earnings and profits as determined under U.S. federal income tax
principles. A distribution in excess of our current or accumulated earnings and
profits will be treated first as a tax-free return of basis to the extent of
such U.S. shareholder's adjusted tax basis in its ordinary shares, and then, to
the extent in excess of such adjusted basis, will be taxable as capital gain
from a sale or exchange of ordinary shares. 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 distribution,
regardless of whether the U.S. shareholder or the Bank of New York, on behalf of
such shareholders, converts the payment into U.S. dollars at that time. Gain or
loss, if any, recognized by a U.S. shareholder on the subsequent sale,
conversion or other disposition of euros will be U.S. source ordinary income or
loss. 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.

     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. 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.



                                       52
<PAGE>

     We did not pay dividends in 2003. 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.

Recent U.S. Tax Law Changes Applicable to Individuals


     Under 2003 U.S. tax legislation, 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 after December 31, 2002 and beginning before January
1, 2009. For this purpose, qualified dividend income generally includes
dividends paid by non-U.S. corporations if, amongst other things, certain
minimum holding periods are met and 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 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 will constitute
qualified dividend income for U.S. federal income tax purposes, provided the
individual U.S. shareholders of our ordinary shares meet certain requirements.
Some of the eligibility requirements for non-U.S. corporations are not entirely
certain, however, and further guidance from the Internal Revenue Service is
anticipated. In addition, the Internal Revenue Service is expected to issue
certification procedures in 2004 whereby a non-U.S. corporation will be required
to certify as to the eligibility of its dividends for the reduced U.S. federal
income tax rates.

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. dollar) 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 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 2003 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



                                       53
<PAGE>

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.

Foreign Personal Holding Company Status

     A foreign corporation will be a foreign personal holding company, referred
to as a FPHC, in any taxable year if it meets both an ownership test and an
income test. The ownership test requires that more than 50% of the voting power
of the corporation be owned, directly, indirectly or by attribution pursuant to
constructive ownership rules by five or fewer individuals who are U.S. citizens
or residents. The income test requires that 60% or more (50% or more in years
after the first year of qualification as a FPHC) of the gross income of the
corporation consist of "FPHC income" such as rents, royalties, annuities,
proceeds from the sale of stock or securities, proceeds from the sale of
commodities, income from personal services and dividends and interest other than
various dividends and interest paid by a qualifying related company that is
incorporated in the same country as the recipient corporation. If a foreign
corporation qualifies as a FPHC, each U.S. person that owns shares in the FPHC
must include in taxable income a deemed dividend equal to the owner's share of
the corporation's total "undistributed FPHC income." In general, undistributed
FPHC income in any given year is the corporation's total taxable income for such
year, such as gross income less deductions such as ordinary and necessary
business expenses, with various adjustments, less dividends paid by the
corporation in such year. This type of deemed dividend is required to be
included in taxable income by each U.S. person that is a shareholder in a FPHC
with undistributed FPHC income, regardless of such person's income percentage in
the corporation and regardless of whether the shareholder actually received a
dividend from the corporation.

     We do not believe that we or any of our subsidiaries currently is a FPHC.
However, it is possible that the ownership test could be met in subsequent
periods as a result of the applicable constructive ownership rules in the event
that one or more of some of our indirect shareholders were to become U.S.
citizens or residents. Thus, depending upon the composition of our income during
such period, we may constitute a FPHC. U.S. shareholders therefore should
consult their own tax advisors regarding the possible applicability of the FPHC
rules to our company and our subsidiaries and the consequences to such
shareholder of FPHC status for our company.

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%. 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. holders generally will not be
subject to U.S. information reporting or backup withholding. However, such
holders 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


                                       54
<PAGE>

     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 federal tax authority (Finanzlandesdirektion), 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%
(10% as of January 1, 2004 in case of reciprocity) of the shares of the company
for a period of at least two consecutive years (one consecutive year as of
January 1, 2004) , 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
corporate income tax at a rate of 34%. 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, 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 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. 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 treated as a sale at fair market value in the
case of substantial shareholdings (i.e. if at least 1% of the share capital is
held at any time within five years prior to the sale).

Tax Upon Liquidation

                                       55
<PAGE>


     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 exists for gains derived by an Austrian
corporate shareholder from the liquidation of a non-resident company if its
share exceeds 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 on 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.

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.

Interest Rate Exposures

                                       56
<PAGE>


     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, 2003, 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, 2003.

     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, 2003                                        December 31, 2002
                                ----------------------------------------------------------------------------------------------------
                                  2004      2005      2006      2007       2008   Thereafter    Total  Fair Value  Total  Fair Value
                                  ----      ----      ----      ----       ----   ----------    -----  ----------  -----  ----------
                                                            (in thousands except percentages)

<S>                              <C>       <C>        <C>       <C>       <C>        <C>       <C>       <C>       <C>      <C>
Debt including current
portion
Fixed rate (EUR)..............     138       147     83,083       169       180     12,438     96,155    96,155    79,943   79,943
Weighted avg. Interest rate       6.70%     6.70%     10.74%     6.70%     6.70%      6.70%     10.19%
(fixed).......................

Fixed rate (USD)..............     197       212        228       245       261      3,395      4,538     4,538     4,721    4,721
Weighted avg. Interest rate       7.33%     7.33%      7.33%     7.33%     7.33%      7.33%      7.33%
(fixed).......................

Variable rate (Italy).........   2,395     2,401      1,985     2,028     1,942      1,921     12,672    12,672     9,481    9,481
Weighted avg. Interest rate...    2.62%     2.62%      2.62%     2.62%     2.62%      2.62%      2.62%

Variable rate, mix of
currencies primarily Czech         663       391        345       331       271        203      2,203     2,203     1,976    1,976
crone........................
Weighted avg. Interest rate..     4.18%     3.61%      3.42%     3.36%     3.04%      3.04%      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:

<TABLE>
<CAPTION>
                                    Contract Amount
                                         Sell
                                      U.S. Dollar       Average Option          Fair Value
                                      Equivalent         Strike Price        December 31, 2003
                                         (in thousands, except for the option strike price)
<S>                                   <C>                 <C>                     <C>
Currency Pairs:
Foreign Currency Forward Contracts
Euro
Japanese Yen                          $   9,352           124.9025                $   628
Canadian Dollar                       $   2,645             1.5288                $   183

Foreign Currency Options
Euro
Japanese Yen                          $   1,870              128.8                $    86
</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.



                                       57
<PAGE>


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

     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.

     There were no changes to our internal control over financial reporting that
occurred during the period covered by this Form 20-F that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

ITEM 16:  [RESERVED]

16.A.  AUDIT COMMITTEE FINANCIAL EXPERT

     While the whole Supervisory Board in 2003 in principle served as audit
committee, Head N.V. expects, in line with Section 407 of the Sarbanes-Oxley Act
of 2002, to establish an audit committee in due time. On the Supervisory Board,
we believe at least two members qualify as audit committee financial experts
under the Sarbanes-Oxley Act of 2002. The Supervisory Board has not yet
determined whether or not we have an audit committee financial expert, but it is
in the process of doing so in connection with the formal establishment of an
audit committee.

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. A copy of this code
of ethics has been filed as Exhibit 11.

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, 2003.
The following table presents the aggregate fees for professional audit services
and other services rendered by PricewaterhouseCoopers in 2003 and 2002 (in
thousands):

                         Year ended December 31,
                          2002            2003
-------------------------------------------------
Audit Fees              $    690        $    747
Audit-Related Fees           160             175
Tax Fees                     286             215
All Other Fees               143             174
                        --------        --------
Total                   $  1,279        $  1,311
                        ========        ========

     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.

     Audit-Related Fees mainly represent fees for the review of the Company's
quarterly financial statements, accounting issues research and technical
assistance.

     Tax Fees consist 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.



                                       58
<PAGE>


     All Other Fees represent professional services provided for services not
directly supporting financial statement audits.

     For 2003 the Supervisory Board pre-approved tax services to be rendered by
member firms of PwC up to an aggregate amount of USD 250.000, 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.

ITEM 17:  FINANCIAL STATEMENTS

     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"
11.       Code of Ethics
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 906 of the
          Sarbanes-Oxley Act of 2002.



                                       59
<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 13, 2004

                                    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


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



Report of Independent Auditors...............................................F-1

Consolidated Balance Sheets at December 31, 2002 and 2003....................F-2

Consolidated Statements of Operations for the Years Ended
December 31, 2001, 2002 and 2003.............................................F-3

Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 2001, 2002 and 2003.............................................F-4

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2002 and 2003.............................................F-5

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

Report of PricewaterhouseCoopers AG on Financial Statement Schedule.........F-33

Financial Statement Schedule, Schedule II--Valuation and Qualifying
Accounts....................................................................F-34



<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

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, 2002 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003, 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 generally accepted auditing
standards in the United States of America, which 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.

As discussed in Note 3 to the consolidated financial statements, Head N.V., in
accordance with the requirements of SFAS 142, changed its method of accounting
for goodwill and indefinite life intangible assets in 2002.






PwC Wirtschaftsprufung AG
Vienna, Austria
March 31st, 2004


                                      F-1
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                ---------------------------
                                                                    2002           2003
                                                                ------------   ------------
                                                             (in thousands, except share data)
<S>                                                              <C>            <C>
ASSETS:
Cash and cash equivalents ....................................   $  37,598      $  41,312
Restricted cash ..............................................        --            2,842
Accounts receivable, net of allowance for doubtful accounts of
  $11,834 and $15,822 ........................................     161,109        195,998
Inventories, net .............................................      77,638         81,200
Prepaid expense and other current assets .....................      16,441         17,764
                                                                 ---------      ---------
  Total current assets .......................................     292,786        339,116
Marketable securities ........................................       2,316          2,826
Property, plant and equipment, net ...........................      73,156         76,694
Intangible assets, net .......................................      20,236         20,236
Deferred income taxes ........................................      78,148         92,060
Other non-current assets .....................................       7,212          6,653
                                                                 ---------      ---------
  Total assets ...............................................   $ 473,853      $ 537,586
                                                                 =========      =========
  LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable .............................................   $  33,069      $  39,468
Accrued expenses and other current liabilities ...............      39,388         51,892
Short-term borrowings ........................................      58,773         37,490
Current portion of long-term debt ............................       2,349          3,392
                                                                 ---------      ---------
   Total current liabilities .................................     133,579        132,241
Long-term debt ...............................................      93,771        143,951
Other long-term liabilities ..................................      16,670         19,669
                                                                 ---------      ---------
   Total liabilities .........................................     244,020        295,861
Minority interest ............................................           9              9
Commitments and contingencies (Note 15)

Stockholders' Equity:
Ordinary shares: EUR 0.20 par value; 39,820,677 shares issued        7,067          7,067
Additional paid in capital ...................................     137,237        137,909
Treasury stock at cost: 1,843,460 and 2,421,235 shares .......      (4,334)        (5,485)
Retained earnings ............................................      67,741         53,084
Accumulated other comprehensive income .......................      22,114         49,142
                                                                 ---------      ---------
   Total stockholders' equity ................................     229,824        241,716
                                                                 ---------      ---------
   Total liabilities and stockholders' equity ................   $ 473,853      $ 537,586
                                                                 =========      =========
</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,
                                                             ----------------------------------
                                                               2001         2002         2003
                                                             --------     --------     --------
                                                              (in thousands, except share data)

<S>                                                          <C>          <C>          <C>
REVENUES:
Product revenues .........................................   $ 384,010    $ 379,089    $ 421,507
Licensing revenues .......................................       8,011        8,398        9,701
                                                             ---------    ---------    ---------
Total revenues ...........................................     392,021      387,487      431,208
Cost of sales ............................................     233,971      233,402      266,023
                                                             ---------    ---------    ---------
Gross profit .............................................     158,050      154,084      165,186
Selling and marketing expense ............................     102,094      102,619      117,071
General and administrative expense (excluding non-cash
  compensation expense)...................................      34,810       32,081       38,847
Non-cash compensation expense ............................       2,025        1,632          654
Restructuring costs (Note 28) ............................          --           --        8,368
                                                             ---------    ---------    ---------
Operating income .........................................      19,121       17,753          245
Interest expense .........................................     (11,275)     (11,677)     (13,999)
Interest income ..........................................         892          940        1,050
Foreign exchange gain (loss) .............................       5,828       (7,387)      (1,103)
Other income (expense), net ..............................           7          387          (18)
                                                             ---------    ---------    ---------
Income (loss) from operations before income taxes ........      14,573           15      (13,825)
Income tax benefit (expense):
  Current.................................................      (2,169)      (2,410)      (2,278)
  Deferred ...............................................      (1,863)        (220)       1,446
                                                             ---------    ---------    ---------
  Income tax expense .....................................      (4,032)      (2,630)        (832)
Share of loss from equity investment, net of tax (Note 26)      (1,117)          --           --
                                                             ---------    ---------    ---------
  Net income (loss) ......................................   $   9,424    $  (2,615)   $ (14,657)
                                                             =========    =========    =========

Earnings per share-basic
  Net income (loss).......................................        0.25        (0.07)       (0.40)
Earnings per share-diluted
  Net income (loss).......................................        0.24        (0.07)       (0.40)
Weighted average shares outstanding
  Basic...................................................      38,083       37,356       36,285
  Diluted.................................................      39,816       37,356       36,285
</TABLE>


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



                                      F-3
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                   Ordinary 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, 2000 .................  38,864,377   $ 7,067   $ 143,999   $ (5,211)   $ 75,620   $   8,512    $ 229,988

Dividend paid ................................        --        --          --         --        (9,455)       --         (9,455)
Stock-based compensation .....................        --        --         2,025       --          --          --          2,025
Purchase of treasury stock ...................  (1,085,000)     --          --       (5,378)       --          --         (5,378)
Transfer of treasury stock (Note 17) .........        --        --       (10,589)    10,589        --          --           --
Net income ...................................        --        --          --         --         9,424        --          9,424
  Other comprehensive income:
    Cumulative effect of adoption of SFAS 133         --        --          --         --          --         1,850        1,850
    Unrealized gain on derivatives instruments
    (net of tax of $88) ......................        --        --          --         --          --           950          950
    Reclassification adjustment for derivative
    gains recorded in net income
    (net of tax of $629) .....................        --        --          --         --          --        (1,850)      (1,850)
    Foreign currency translation adjustment ..        --        --          --         --          --       (15,195)     (15,195)
                                                                                                                       ----------
Comprehensive loss ...........................                                                                            (4,821)
                                                ----------   -------   ---------   --------    --------   ---------    ---------
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 (Note 17) .........  (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 17) .....    (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 (unaudited) .....  36,022,554   $ 7,067   $ 137,909   $ (5,485)   $ 53,084   $  49,142    $ 241,716
                                                ==========   =======   =========   ========    ========   =========    =========
</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,
                                                               --------------------------------
                                                                 2001       2002       2003
                                                                ------     ------     ------
<S>                                                               <C>         <C>         <C>
OPERATING ACTIVITIES:                                                  (in thousands)
  Net income (loss) ............................................  $   9,424   $  (2,615)  $ (14,657)
  Adjustments to reconcile net income
    to net cash provided by operating activities:
    Depreciation and amortization ..............................     14,896      15,946      19,239
    Amortization of debt issuance cost .........................      1,039       1,092       1,232
    Impairment (Note 28) .......................................         --          --       2,625
    Share of loss from equity investment, net of tax ...........      1,117          --          --
    Provision (release) for leaving indemnity
    and pension benefits .......................................        823         883        (348)
    Restructuring costs (Note 28) ..............................         --          --       4,800
    (Gain) loss on sale of property, plant and equipment .......       (867)       (774)         85
    Non-cash compensation expense ..............................      2,025       1,632         654
    Deferred tax (benefit) expense .............................      1,863         220      (1,446)
  Changes in operating assets and liabilities:
    Accounts receivable ........................................      2,071       2,657     (12,058)
    Inventories ................................................      9,402       9,101      13,755
    Prepaid expense and other assets ...........................     (2,535)      1,494       3,071
    Accounts payable, accrued expenses and other liabilities ...     (3,338)     (6,356)        390
                                                                  ---------   ---------   ---------
  Net cash provided by operating activities ....................     35,921      23,279      17,342
                                                                  ---------   ---------   ---------
INVESTING ACTIVITIES:
    Purchase of property, plant and equipment ..................    (16,314)    (20,746)    (16,914)
    Proceeds from sale of property, plant and equipment ........      1,080       2,105         258
    Other acquisitions .........................................     (4,130)         --          --
    Equity investment (Note 26) ................................       (684)         --          --
    Maturities (purchases) of marketable securities, net .......        135        (164)        102
                                                                  ---------   ---------   ---------
  Net cash used for investing activities .......................    (19,913)    (18,804)    (16,554)
                                                                  ---------   ---------   ---------
FINANCING ACTIVITIES:
    Change in short-term borrowings, net .......................     15,135      (2,853)      1,419
    Proceeds from long-term debt ...............................        807      16,592       1,656
    Payments on long-term debt .................................       (716)     (4,340)     (1,249)
    Purchase of treasury stock .................................     (5,378)     (3,046)     (1,151)
    Payments to repurchase shares from exercised options .......         --      (1,121)         --
    Proceeds from exercised options ............................         --           3          17
    Dividend paid ..............................................     (9,455)     (5,233)         --
    Change in restricted cash ..................................         --          --      (2,699)
                                                                  ---------   ---------   ---------
  Net cash provided by (used for) financing activities .........        393           2      (2,007)
                                                                  ---------   ---------   ---------
  Effect of exchange rate changes on cash and cash equivalents      (10,122)     10,994       4,932
  Net increase in cash and cash equivalents ....................      6,279      15,470       3,714
  Cash and cash equivalents at beginning of period .............     15,848      22,128      37,598
                                                                  ---------   ---------   ---------
  Cash and cash equivalents at end of period ...................  $  22,128   $  37,598   $  41,312
                                                                  =========   =========   =========
SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid for interest .......................................  $  10,426   $  10,736   $  12,597
  Cash paid for income taxes ...................................  $   2,208   $   1,747   $   1,340
</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 - The Company

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.

On January 1, 1996, Head Holding acquired 100% of the outstanding shares of HTM
Sport- und Freizeitgerate AG ("HTM"). The acquisition has been accounted for as
a purchase and accordingly the operating results of HTM have been included in
the Company's consolidated financial statements since the date of acquisition.

The Company is a global manufacturer and marketer of branded sporting goods
serving the skiing, tennis and diving markets. Head N.V. has created or acquired
a portfolio of brands -- Head (alpine skis, ski boots and snowboard products,
tennis, racquetball and squash racquets), Penn (tennis balls and racquetball
balls), Tyrolia (ski bindings), Mares and Dacor (diving equipment).


Note 2 - Summary of Significant Accounting Policies

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 generally
accepted accounting principles in the United States of America. In addition, the
Company publishes its statutory financial statements in accordance with Dutch
corporate regulations.

Consolidation Policies

The consolidated financial statements of Head include the accounts of all
majority-owned subsidiaries and entities otherwise controlled by the Company.
All intercompany transactions and balances have been eliminated in
consolidation.

Cash and Cash Equivalents

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

Restricted Cash

Restricted cash comprises 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. Cost is determined on a
first-in first-out basis.


                                      F-6
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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
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. Expenditures which
substantially increase the useful lives of the plant and equipment are
capitalized . The cost of maintenance, repair and minor renewals is expensed as
incurred. When plant and equipment is retired or otherwise disposed, the cost
and related accumulated depreciation are eliminated, 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.

Impairment

The Company accounts for impairments subsequent to January 1, 2002, in
accordance with the Statement of Financial Accounting Standards No. 144 ("SFAS
144"), Accounting for the Impairment or Disposal of Long-Lived Assets, and
previously in accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long Lived Assets to Be Disposed Of". Both standards
require that long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the fair value is less than the carrying amount of the asset, a
loss is recognized for the difference. The Company's review involves comparing
current and future operating 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.

Intangible Assets

Identifiable intangible assets comprise trademarks and goodwill. Prior to the
Company's adoption of SFAS 142, Goodwill and Other Intangible Assets ("SFAS
142"), trademarks were amortized using the straight-line method over a period of
20 to 40 years. Goodwill was amortized using the straight-line method over a
period of 15 to 30 years. The Company periodically reviewed the carrying value
of its intangibles based primarily upon an analysis of undiscounted cash flows.
Any impairment would have been recognized when the expected future operating
cash flows derived from such intangible assets was less than their carrying
value. The impairment to be recognized was measured by the amount by which the
carrying amount of the asset exceeded the fair value of the asset.

The Company applied SFAS 142, beginning July 1, 2001, for goodwill and
intangible assets acquired in business combinations initiated after June 30,
2001, and beginning January 1, 2002, for all other goodwill and intangible
assets. The on-going impact is that goodwill and intangible assets with an
indefinite life are no longer amortized, but instead are tested at least
annually, in the fourth quarter, for impairment. The goodwill impairment test
consists of a two-step test. First, each reporting unit's (which generally
represents one level below an operating segment) carrying value is compared to
its fair value. 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.




                                      F-7
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Revenue Recognition

Revenues from product sales are recognized at the time of product shipment,
which represents transfer of title to the customer. Revenues from each licensing
agreement 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.
Costs associated with product shipment and handling are classified in selling
and marketing expense in the consolidated statement of operations.

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 ("SFAS 133"), Accounting for Derivative Instruments and
Hedging Activities, as amended. 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 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.

Advertising Costs

Advertising costs are expensed as incurred.


                                      F-8
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Stock-Based Compensation

The company accounts for its stock option plan using the fair value method in
accordance with Statement of Financial Accounting Standards No. 123 ("SFAS
123"), Accounting for Stock-Based Compensation.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the debt.

Income Taxes

The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences between
such income and that recognized for tax return purposes. 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 Income (Loss) per Share

Net income (loss) per share is computed under Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings per Share. Basic net income per share
is computed by dividing the net income for the period by the weighted average
number of ordinary shares outstanding during the period. Diluted net income per
share is computed by dividing the net income 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
income per share to the extent such shares are dilutive.

The following table sets forth the computation of diluted weighted average
shares outstanding for the periods indicated:

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

                                                               2001       2002       2003
                                                             --------   --------   --------
                                                                     (in thousands)

<S>                                                           <C>        <C>        <C>
Weighted average shares outstanding - basic...............    38,083     37,356     36,285
Dilutive effect of stock options..........................     1,733         --         --
                                                          ---------------------------------

Weighted average shares outstanding - diluted.............    39,816     37,356     36,285
</TABLE>

For the years ended December 31, 2002 and 2003, the diluted weighted average
shares outstanding exclude the incremental effect of 1,789,490 and 1,347,773
stock options, respectively because it would have been anti-dilutive for these
periods.


                                      F-9
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles 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
allowances on deferred tax assets. Actual results could differ from those
estimates.

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" which requires companies to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset.
SFAS 143 is effective for financial statements for fiscal years beginning after
June 15, 2002. The adoption of SFAS 143 had no impact on the Company's financial
position and results of consolidated operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred. The provisions of SFAS No. 146 are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. This standard has been adopted from January 1, 2003 and
applied for exit and disposal activities entered into in 2003.

In January 2003, the Emerging Issues Task Force (EITF) issued EITF 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables". EITF 00-21
addresses the issues of (1) how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting; and (2) how
arrangement consideration should be measured and allocated to the separate units
of accounting in the arrangement. EITF 00-21 does not change otherwise
applicable revenue recognition criteria. EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. EITF
00-21 had no impact on our financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires a liability to
be recognized at the time a company issues a guarantee for the fair value of the
obligations assumed under certain guarantee agreements, such as certain
indemnity provisions and guarantees of third party debt. The provisions for
initial recognition and measurement of guarantee agreements are effective on a
prospective basis for guarantees that are issued or modified after December 31,
2002. Management has adopted FIN 45 and there was no impact on our financial
position or results of operations.

       In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46)
"Consolidation of Variable Interest Entities, an interpretation of ARB 51". FIN
46 addresses the consolidation of entities for which control is achieved through
means other than through voting rights ("variable interest entities" or "VIE")
by clarifying the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements" to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for



                                      F-10
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 provides guidance on how to determine when
and which business enterprise (the "primary beneficiary") should consolidate the
VIE. In addition, FIN 46 requires that both the primary beneficiary and all
other enterprises with a significant variable interest in a VIE make additional
disclosures. The disclosure provisions of FIN 46 are effective in all financial
statements initially issued after January 31, 2003. FIN 46 is required to be
immediately applied by all entities with a variable interest in a VIE created
after January 31, 2003. A public entity with a variable interest in a VIE
created before February 1, 2003 is required to apply FIN 46 to that entity no
later than the beginning of the first interim or annual reporting period
beginning after June 15, 2003.

       In December 2003, the FASB revised FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" (FIN 46) and codified certain FASB
Staff Positions (FSPs) previously issued for FIN 46 in FASB Interpretation No.
46, Revised (FIN 46R). FIN 46 as originally issued and as revised by FIN46R,
establishes consolidation criteria for entities for which control is not easily
discernable under ARB 51. The adoption of FIN 46 and FIN 46R in 2003 did not
have a material impact on our financial position or result of operations.

In April 2003, the FASB issued Statement of Financial Accounting Standards No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. Management has assessed the impact
of the adoption of SFAS 149 and concluded that there was no material impact on
our results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liability and equity. SFAS No. 150 is
effective for all financial instruments entered into or modified after May 31,
2003, and to all other instruments that exist as of the beginning of the first
interim period beginning after June 15, 2003. Management has assessed the impact
and concluded that there was no impact on the adoption of SFAS No. 150.

In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Other Postretirement Benefits". This Statement
establishes standards on additional disclosures to those in the original
Statement 132 about the assets, obligations, cash flows, and net periodic costs
of defined benefit pension plans and other defined postretirement plans
separately for pension plans and other postretirement benefit plans. SFAS No.
132 (revised 2003) is effective for financial statements with fiscal years
ending after December 15, 2003. The standard has been adopted.

Note 3 - Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets, and ceased amortization of purchased goodwill and trademarks,
which were determined to be indefinite-lived.

Intangible assets consist of the following (in thousands):
                                                              December 31,
                                                     ---------------------------
                                                         2002            2003
                                                     -----------     -----------

Trademarks...........................................$    19,066     $    19,066
Goodwill.............................................      3,926           3,926
                                                     -----------     -----------



                                      F-11
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                                          22,992          22,992
Less: Accumulated amortization of trademarks.........     (2,529)        (2,529)
Less: Accumulated amortization of goodwill...........       (227)          (227)
                                                     -----------     -----------
    Total Intangible assets, net.....................$    20,236     $    20,236
                                                     ===========     ===========

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 2002 and 2003, as required by SFAS No. 142. In
doing so, the Company determined that goodwill and trademarks are not impaired;
therefore no impairment charge was recorded.

The effects of adopting the new standards on net income (loss) and basic and
diluted earnings per share for the years ended December 31, 2001, 2002 and 2003,
are as follows (in thousands, except share data):

                                                         Net Income
Year Ended December 31,                         2001         2002         2003
--------------------------------------------------------------------------------
Net Income (Loss)..........................  $  9,424    $ (2,615)    $ (14,657)
Add: Goodwill amortization.................        58          --            --
Trademark amortization.....................       858          --            --
                                             --------    --------     ---------
Adjusted Net Income (Loss).................  $ 10,340    $ (2,615)    $ (14,657)
                                             ========    ========     =========


<TABLE>
<CAPTION>
                                                                        Earnings per Share
                                                            Basic                             Diluted
Year Ended December 31,                         2001        2002        2003        2001        2002       2003
-----------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>         <C>          <C>        <C>         <C>
Net Income (Loss)..........................  $   0.25    $ (0.07)    $  (0.40)    $   0.24   $  (0.07)   $ (0.40)
Add: Goodwill amortization.................      0.00         --           --         0.00         --         --
     Trademark amortization................      0.02         --           --         0.02         --         --
                                             --------    -------     --------     --------   --------    -------
Adjusted Net Income (Loss).................  $   0.27    $ (0.07)    $  (0.40)    $   0.26   $  (0.07)   $ (0.40)
                                             ========    =======     ========     ========   ========    =======
</TABLE>



Note 4 - Accounts Receivable


Accounts receivable consist of the following (in thousands):

                                                             December 31,
                                                    ---------------------------
                                                        2002            2003
                                                    -----------      ----------
Trade debtors.....................................  $   160,835      $  198,110
Other receivables.................................       12,109          13,710
Allowance for doubtful accounts...................      (11,834)        (15,822)
                                                    -----------      ----------
   Accounts receivable, net.......................  $   161,109      $  195,998
                                                    ===========      ==========


                                      F-12
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 5 - Inventories

Inventories consist of the following (in thousands):

                                                               December 31,
                                                       -------------------------
                                                           2002          2003
                                                       -----------    ----------
Raw materials and supplies..........................   $  18,526      $  21,545
Work in process.....................................       6,486          9,388
Finished goods......................................      67,766         66,421
Provisions..........................................     (15,140)       (16,154)
                                                       ---------      ---------
Total inventories, net..............................   $  77,638      $  81,200
                                                       =========      =========


Note 6 - Marketable Securities

Marketable securities consist of the following (in thousands):


                                                             December 31,
                                                    -------------------------
                                                        2002          2003
                                                    -----------    ----------
Available-for-Sale
------------------

Austrian government debt securities.................$       114    $       137
Corporate debt securities...........................        340            410
Other securities....................................      2,264          2,602
                                                    --------------------------
    Total Marketable securities available-for-sale..      2,718          3,149

    Less: Short-term portion........................       (402)          (323)
                                                    -----------    -----------
    Total Long-term marketable securities...........$     2,316    $     2,826
                                                    ===========    ===========


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
individual securities have been in a unrealized loss position, at December 31,
2003.

<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>
Austrian government
debt securities .............      $ --        $ --        $  137      $    0      $  137      $    0
Corporate debt securities ...        --          --           410           0         410           0
                                   ------      ------      ------      ------      ------      ------
  Subtotal, debt securities..        --          --           547           0         547           0
Other securities ............         323           0       2,279         208       2,602         208
                                   ------      ------      ------      ------      ------      ------
  Total temporarily
  impaired securities .......      $  323      $    0      $2,826      $  208      $3,149      $  208
                                   ======      ======      ======      ======      ======      ======
</TABLE>



                                      F-13
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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

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


Mature within 1 year................................................$      --
Mature between one year and five years..............................      547
Mature between five years and ten years.............................       --
Mature after ten years..............................................       --
                                                                    ---------
Total Marketable securities.........................................$     547
                                                                    =========

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

Note 7 - Property, Plant and Equipment

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

                                                            December 31,
                                                  -----------------------------
                                                     2002               2003
                                                  -----------       -----------

Land..............................................$     4,150       $     4,490
Buildings.........................................     26,800            36,214
Machinery and equipment...........................    133,531           164,013
                                                    ---------        ----------
                                                      164,481           204,718
Less: Accumulated depreciation....................    (91,325)         (128,024)

    Total Property, plant and equipment, net......$    73,156       $    76,694
                                                   ==========        ==========


The useful lives used in computing depreciation are as follows:
                                                                        Years
                                                                       -------
Buildings..............................................................10 - 48
Machinery and equipment.................................................2 - 20


Note 8 - Credit Risk Concentrations

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.


                                      F-14
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 9 - Fair Value of Financial Instruments

The carrying value of the Company's financial instruments approximates fair
value at December 31, 2002 and 2003. 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 on quoted market prices at December 31, 2002
and 2003 (see Note 6).

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.

As a result of adopting SFAS 133 and in accordance with the transition
provisions of that standard, the Company recorded a one-time net-of-tax
unrealized gain of $1.9 million to AOCI as of January 1, 2001. The Company
reclassified a gain of $1.9 million from AOCI to earnings during the year ended
December 31, 2001 due to the realization of the underlying transactions.

The Company recorded the change in fair market value of derivatives related to
cash flow hedges to AOCI of $0.6 million and $1.1 million, net of tax, for year
ended December 31, 2002 and 2003, 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, 2002 and 2003, the Company reclassified a gain
from AOCI to earnings of $1.5 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, 2002 and 2003. 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.

                                                    As of December 31, 2002
                                            ------------------------------------
                                             Contract      Carrying      Fair
                                              amount         value       value
                                            -----------   ----------   ---------

Forward foreign exchange contracts..........$ 13,566      $   140      $  140
Foreign exchange option contracts...........$  1,854      $    33      $   33




                                                    As of December 31, 2003
                                            ------------------------------------
                                             Contract      Carrying      Fair
                                              amount         value       value
                                            -----------   ----------   ---------

Forward foreign exchange contracts..........$ 11,997      $   811      $  811
Foreign exchange option contracts...........$  1,870      $    86      $   86

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



                                      F-15
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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 qualifiying
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 10 - Short-Term Borrowings

Short-term borrowings before reclassification of $31.8 million to long-term debt
(see note 29) consist of the following (in thousands):

                                                           December 31,
                                                    --------------------------
                                                       2002           2003
                                                    -----------    -----------
Lines of credit.....................................$    58,773    $    69,265

In the second quarter of 2001, the Company's subsidiaries entered into a new
financing agreement providing multiple revolving credit lines with the
"Raiffeisenzentralbank" ("RZB"), "Erste Bank" and "Osterreichische Kontrollbank"
("OEKB") which were renegotiated in 2003, in the total amount of (euro)25.0
million ($31.6 million) secured by all Austrian trade receivables. In addition,
the Company has lines of credit with several banks in Italy, France, Austria,
Czech Republic, Canada and Japan of $51.3 million. Further, the Company has a
$15.0 million credit line with Fleet Capital Corporation. As of December 31,
2003, $0.2 million was restricted under this agreement. As of December 31, 2003,
$23.5 million was available under these credit lines and $4.9 million have been
pledged for certain agreements. The weighted average interest rate on
outstanding short-term borrowings was 3.7% and 3.2% as of December 31, 2002 and
2003, respectively.

The Company intends and has the ability to repay $31.8 million of its short-term
loans by senior notes, therefore they have been reclassified to long-term debt
as of December 31, 2003 (see note 29).

Note 11 - Accounts Payable

Accounts payable consist of the following (in thousands):



                                      F-16
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                                             December 31,
                                                         2002         2003
                                                      ---------    ---------

Accounts payable - trade............................. $  21,815    $  24,123
Salaries and wages...................................     1,952        2,172
Allowances and Warranty..............................       510          894
Customs duties.......................................        36        1,469
Fiscal authorities...................................     2,377        3,697
Social institutions..................................     1,021        1,626
Other................................................     5,358        5,487
                                                      ---------    ---------
                                                      $  33,069    $  39,468
                                                      =========    =========



Note 12 - Accrued Expenses and Other Current Liabilities

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

                                                             December 31,
                                                      ----------------------
                                                         2002         2003
                                                      ---------    ---------

Employee compensation and benefits................... $   6,643    $  9,568
Accrued warranties and allowances....................     8,055       8,305
Advertising..........................................     1,896       2,718
Legal, auditing and consulting fees..................     1,994       2,423
Fiscal authorities...................................     2,366         328
Commissions..........................................     1,380       4,199
Accrued interest.....................................     3,564       4,442
Restructuring........................................        --       4,800
Other................................................    13,490      15,109
                                                      ---------    --------
                                                      $  39,388    $ 51,892
                                                      =========    ========

The restructuring accruals include those for severance and excess rent. (See
Note 28).



                                      F-17
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Product Warranties

Included in accrued warranties and allowances are product warranties that have a
probable likelihood of loss and are estimated based on weighted prior year
experiences for recognized revenues. As of December 31, 2003, accruals for
warranties consist of the following (in thousands):

                                                December 31,
                                                    2003
-------------------------------------------------------------
Balance at the beginning of the period          $    2,484
Current year provision                               2,859
Settlements made during the period                  (2,707)
Reversal                                               (25)
Translation adjustment                                 492
                                                -----------
Balance at the end of the period                $    3,103
                                                ===========

Note 13 - Long-Term Debt

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

                                                             December 31,
                                                     ---------------------------
                                                         2002           2003
                                                     ---------------------------

Senior notes.......................................    68,852         82,925
Other long-term debt...............................    27,268         32,642
                                                     ----------    -----------
    Total long-term borrowings.....................
                                                       96,120        115,567
    Less current portion...........................    (2,349)        (3,392)
                                                     ----------    -----------
    Long-term portion..............................  $ 93,771    $   112,175
                                                     ==========    ===========


As of December 31, 2003, $31.8 million of its short-term loans have been
reclassified due to the Company's intention and ability to refinance it by
senior notes (see note 29).

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 bear interest of 10.75%
per annum, which is payable semi-annually and mature in total on July 15, 2006.
Among other restrictions, the notes include 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. The remaining balance of (euro)65.7 million ($82.9 million)
at December 31, 2003, has been repaid with the proceeds of the senior notes
offered in 2004 (see note 29).



                                      F-18
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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 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.


The Company's future minimum lease payments as of December 31, 2003, are as
follows:


                                    (in thousands)
------------------------------------------------------
2004                                $       1,014
2005                                        1,014
2006                                        1,014
2007                                        1,014
2008                                        1,014
Thereafter                                 18,929
                                     ------------
Total minimum payments                     24,001
Amount representing interest              (10,772)
                                     ------------
Obligations under financing
activity                                   13,230
Obligations due within one year              (138)
                                     ------------
Long-term obligations under
financing activity                  $      13,092
                                     ============


As of December 31, 2003 the net book value of land and building under the
sale-leaseback arrangement consists of the following (in thousands):


                                         Land        Building
--------------------------------------------------------------
Cost                                $    1,288     $   10,593

Less: Accumulated depreciation                         (8,540)
                                                   ----------
Net book value                      $    1,288     $    2,053
                                    ==========     ==========

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%.



                                      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 Czech
Republic outstanding with several banks. The weighted average interest rate on
outstanding borrowings was 3.9% and 2.7% as of December 31, 2002 and 2003,
respectively. Borrowings mature at various dates through 2009.

Maturities of Long-Term Debt

Aggregate maturities of long-term debt, other than the sale-leaseback
transaction and before reclassification are as follows (in thousands):


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


2004.............................................       $   3,254
2005.............................................           3,003
2006.............................................          85,483
2007.............................................           2,604
2008.............................................           5,869
Thereafter.......................................           2,124
                                                        ---------
                                                        $ 102,337
                                                        =========


Note 14 - 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.



                                      F-20
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


The table below shows the obligations and funded status as of December 31, 2002
and 2003 (in thousands):

<TABLE>
<CAPTION>
                                                       Pension Benefits         Other Benefits
                                                    ---------------------   ---------------------
                                                      2002        2003        2002        2003
                                                    --------    --------    --------    --------
<S>                                                 <C>         <C>         <C>         <C>
Change in benefit obligation
Benefit obligation at beginning of year .........   $  6,850    $  8,301    $ 11,775    $ 14,318
Service cost ....................................        449         541       1,408       1,643
Interest cost ...................................        346         444         351         456
Plan amendments .................................         --         (22)         --          --
Actuarial loss (gain) ...........................        (39)       (268)        260         138
Benefit payments ................................       (251)       (275)     (1,152)     (2,808)
Translation adjustment ..........................        945       1,671       1,676       2,849
                                                    --------    --------    --------    --------
Benefit obligation at end of year ...............      8,301      10,392      14,318      16,595
                                                    --------    --------    --------    --------
Change in plan assets
Fair value of plan assets at beginning of year...      4,108       4,490        --          --
Actual return on plan assets ....................       (380)        201        --          --
Employer contribution ...........................        198         185        --          --
Benefit payments ................................        (69)        (57)       --          --
Plan participants' contributions ................        138         114        --          --
Asset transferred out ...........................         --         (10)       --          --
Translation adjustment ..........................        495         808        --          --
                                                    --------    --------    --------    --------
Fair value of plan assets at end of year ........      4,491       5,730        --          --
                                                    --------    --------    --------    --------
Funded status ...................................      3,810       4,661      14,318      16,595
Unrecognized net actuarial gain .................       (737)       (849)     (1,931)     (2,109)
Unrecognized prior service cost .................        126          96        --          --
Unrecognized net transition obligation ..........         48          56          19
Translation adjustment ..........................        (61)        (81)       (328)       (277)
                                                    --------    --------    --------    --------
Net amount recognized ...........................   $  3,186    $  3,884    $ 12,077    $ 14,210
                                                    ========    ========    ========    ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                       Pension Benefits         Other Benefits
                                                    ---------------------   ---------------------
                                                      2002        2003        2002        2003
                                                    --------    --------    --------    --------
<S>                                                 <C>         <C>         <C>         <C>
Other assets......................................  $   (343)   $   (404)   $     --    $     --
Accrued benefit cost..............................     3,589       4,355      12,077      14,210
Accumulated other comprehensive income............       (60)        (67)         --          --
                                                    --------    --------    --------    --------
Net amount recognized.............................  $  3,186    $  3,884    $ 12,077    $ 14,210
                                                    ========    ========    ========    ========
</TABLE>



                                      F-21
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


As of December 31, 2002 and 2003 pension plans with an accumulated benefit
obligation excess of plan assets consist of the following (in thousands).

                                                             December 31,
                                                      -------------------------
                                                         2002           2003
                                                      ----------     ----------
Projected benefit obligation ...................         $832           $884
Fair Value of plan assets ......................          383            465


The Company's assets consist of equity funds at December 31, 2002 and 2003.

As of December 31, 2002 and 2003, the components of net periodic benefit costs
consist of the following (in thousands):

                                          Pension Benefits      Other Benefits
                                        ----------------------------------------
                                          2002       2003       2002      2003
                                        --------   --------   --------  --------
Service cost .........................  $  449     $  541     $1,408    $1,643
Interest cost ........................     346        444        351       456
Expected return on plan assets .......    (256)      (306)
Amortization of transition asset .....      --         (3)        --        --
Amortization of prior service cost ...      --        (22)        --        --
Recognized actuarial loss ............      16         14         58       264
                                        --------   --------   --------  --------
Net periodic benefit cost ............  $  555     $  668     $1,818    $2,363
                                        ========   ========   ========  ========


As of December 31, 2002 and 2003 the weighted average assumptions used to
determine benefit obligations are as follows:

                                          Pension Benefits      Other Benefits
                                        ----------------------------------------
                                          2002       2003       2002      2003
                                        --------   --------   --------  --------
Discount rate.........................    5.3%       5.0%       5.0%      5.0%
Rate of compensation increase.........    3.2%       3.0%       3.0%      3.0%

As of December 31, 2002 and 2003 the weighted average assumptions used to
determine net periodic benefit cost are as follows:

                                            Pension Benefits    Other Benefits
                                          --------------------------------------
                                            2002      2003      2002      2003
                                          --------  --------  --------  --------
Discount rate.............................  4.8%      4.7%      5.0%      5.0%
Expected long-term return on plan assets..  5.8%      5.3%       --         --
Rate of compensation increase.............  2.9%      2.7%      3.0%      3.0%




                                      F-22
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 15 - 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 2009. Rent expense was approximately $2.3 million, $3.1 million and $3.6
million for the years ended December 31, 2001, 2002 and 2003, 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,
2003 (in thousands):

                                                           December 31,
                                                               2003
                                                           ------------
2004...................................................    $    4,700
2005...................................................         3,997
2006...................................................         3,363
2007...................................................         2,969
2008...................................................         2,511
Thereafter.............................................           596
                                                           ----------
                                                           $   18,136
                                                           ==========


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.

Note 16 - Accumulated Other Comprehensive Income Balance

The following table shows the components of AOCI:

<TABLE>
<CAPTION>
                                                      For the Year Ended December 31, 2003
                                -----------------------------------------------------------------------------
                                 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............   $   22,210      $     102       $   (60)        $    (138)       $   22,114
Current-period
changes......................       26,543            511            --                33            27,087
Translation Adjustments......           --            (20)           (7)              (32)              (59)
                                ----------      ---------       -------         ---------        ----------
Ending balance...............   $   48,753      $     592       $   (67)        $    (137)       $   49,142
                                ==========      =========       =======         =========        ==========
</TABLE>




                                      F-23
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 17 - 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 authorised capital
requirement is(euro)225,000 (approximately $0.24 million) and the minimum paid
in capital requirement for a N.V. is(euro)45,000 (approximately $0.05 million).

At December 31, 2002 and 2003, 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, 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 was granted the authority to repurchase
shares representing up to 10% of the Company's issued share capital 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
Directors 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.

As of December 31, 2002 and 2003, the Company held 1,843,460 and 2,421,235
treasury shares, respectively.

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 27), 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. 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.

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 our stock option plan 1998 were exercised at a
price between $0.29 and $0.31 per share.

As of December 31, 2002 and 2003, the Stichting held 1,433,678 and 1,376,888
treasury shares, respectively.



                                      F-24
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 18 - 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.

                                              For the Years Ended December 31,
                                          --------------------------------------
                                            2001           2002           2003
                                          --------       --------       --------
Dutch statutory tax rate ............       35.0%            34.5%        34.5%
Tax rate differential ...............       (0.4)           159.1         (0.1)
Other ...............................       (2.9)        26,437.7         (6.9)
Foreign rate differentials ..........        0.4         (1,127.7)         0.7
Valuation allowance .................       (4.5)        (7,970.3)       (34.2)
                                          --------       --------       --------
Effective tax rate ..................       27.6%        17,533.3%        (6.0)%
                                          ========       ========       ========

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

Deferred tax assets (liabilities) consist of the following as of December 31,
2002 and 2003 (in thousands):

                                                              December 31,
                                                       -------------------------
                                                         2002            2003
                                                       ---------      ---------
Short-term:

Deferred tax assets:

Tax loss carried forward .........................      $  3,306       $  4,437
Inventory reserve ................................         4,690          5,387
Reserve for doubtful accounts ....................         1,420          2,441
Other ............................................         2,093          3,536
                                                       ---------      ---------
    Total Short-term deferred tax assets .........        11,509         15,800

Deferred tax liabilities:

Deferred expenses ................................      $ (1,473)        (1,291)
Accrued liabilities ..............................          (265)          (240)
Other ............................................          (454)        (3,006)
                                                       ---------      ---------
    Total Short-term deferred tax liability ......        (2,192)        (4,537)

                                                       ---------      ---------
    Total Short-term deferred tax assets, net ....      $  9,317       $ 11,262
                                                       =========      =========


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



                                      F-25
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                                              December 31,
                                                      --------------------------
                                                         2002            2003
                                                      ----------      ---------
Long-term:

Deferred tax assets:

Tax loss carried forward .......................      $ 102,094       $ 130,134
Intangible assets ..............................          1,533             617
Fixed assets ...................................            596             833
Lease obligations ..............................          3,773           4,498
Other ..........................................            730             887
                                                      ---------       ---------
    Total Long-term deferred tax assets ........        108,726         136,969

Deferred tax liabilities:

Investments ....................................      $ (16,291)        (18,820)
Fixed assets ...................................         (1,608)         (1,952)
Other ..........................................         (1,046)           (778)
                                                      ---------       ---------
    Total Long-term deferred tax liability .....        (18,945)        (21,551)

Valuation allowance ............................        (11,633)        (23,358)
                                                      ---------       ---------
    Total Long-term deferred tax assets, net ...      $  78,148       $  92,060
                                                      =========       =========


The Company has net operating loss carryforwards of approximately $307.2 million
and $394.5 million as of December 31, 2002 and 2003, respectively. These net
operating losses are available in the following jurisdictions (in thousands):

                                                             December 31,
                                                      -------------------------
                                                        2002            2003
                                                      ---------       ---------
Austria.........................................      $ 276,233       $ 348,791
Germany.........................................          8,648          19,184
Other Europe....................................            812           4,615
Japan...........................................            318              --
North America...................................         21,204          21,916

                                                      $ 307,215       $ 394,506
                                                      =========       =========

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

                                          For the Years Ended December 31,
                                   --------------------------------------------
                                     2001              2002              2003
                                   --------          --------          --------
Austria ..................         $ 10,505          $  2,420          $  1,497
Germany ..................             (233)              129                 5
Other Europe .............           (3,441)             (289)          (15,123)
Japan ....................            1,134             1,276             1,198
North America ............            6,608            (3,520)           (1,401)
                                   --------          --------          --------
Total ....................         $ 14,573          $     15          $(13,825)
                                   ========          ========          ========



                                      F-26
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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 $65.5 million as of December 31,
2003). These net operating losses and any related deferred tax asset are not
included in the above amounts due to the limitation.

In light of the Company's profitability, the Company released a substantial
portion of the valuation allowance in 2001 relating to net operating loss
carryforwards.

Austria and Germany allow an unlimited carryover of net operating losses,
whereas Japan and the United States allow 5 and 15 year carryovers,
respectively.

Note 19 - Employee Termination and Other Related Costs

The company accrued a one time employee termination benefit and other related
costs of $ 0.8 million in the first quarter of 2001 which is included in general
and administrative expense in the accompanying consolidated financial statements
of operations.

Note 20 - Research and Development Expense

The Company incurred research and development expense in the amount of $9.5
million, $11.0 million and $13.6 million for the years ended December 31, 2001,
2002 and 2003, respectively. Research and development expense is included in
cost of sales in the accompanying statements of operations.

Note 21 - Advertising Expense

The Company incurred advertising costs of $35.7 million, $32.8 million and $36.9
million for the years ended December 31, 2001, 2002 and 2003, respectively.
Advertising expenses are included in selling and marketing expense in the
accompanying consolidated statement of operations.

Note 22 - Segment Information

The Company operates in one industry segment, Sporting Goods. The tables below
show revenues from external customers and long-lived assets by geographic region
based on the location of the Company's subsidiaries (in thousands):



                                      F-27
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                             For the Years Ended December 31,
                                          --------------------------------------
                                            2001           2002           2003
                                          --------        -------       --------

Revenues from External Customers:
Austria ...........................       $ 67,753       $ 61,151       $ 85,511
Italy .............................         63,924         60,554         60,778
Germany ...........................         41,818         41,845         47,946
France ............................         29,077         27,885         33,212
United Kingdom / Ireland ..........          8,345         17,923         20,590
Japan .............................         17,940         20,098         21,697
Other (Europe) ....................         31,254         34,235         40,632
North America .....................        131,911        123,794        120,843
                                          --------        -------       --------
   Total revenues .................       $392,021       $387,487       $431,208
                                          ========        =======       ========


                                                                December 31,
                                                           -------------------
                                                             2002       2003
                                                           --------   --------
Long-lived assets:
Austria..................................................  $ 20,722   $ 24,242
Italy ...................................................    21,553     22,953
Germany .................................................     1,019        841
France ..................................................       199        218
United Kingdom / Ireland ................................     6,102      3,992
Japan ...................................................     1,516      1,625
Other (Europe) ..........................................     9,857     12,360
North America ...........................................    32,426     30,699
                                                           --------   --------
   Total Assets..........................................  $ 93,393   $ 96,930
                                                           ========   ========

Note 23 - 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, $1.2 million and $3.5 million
for the years ended December 31, 2001, 2002 and 2003, respectively. The company
is based in the Netherlands and provides investor relations, corporate finance,
legal and consulting services.

In 2002 and 2003, one of the Company's subsidiaries leased its office building
from its general manager. Rental expenses amounted to approximately $0.1 million
and $0.04 million for the years ended December 31, 2002 and 2003.

Note 24 - 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.




                                      F-28
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 25 - Gain on sale of Property

In 2001 and 2002, the Company sold in parts the building used in its Italian
operations for $1.1 million and $0.6 million, respectively, resulting in a gain
of $0.9 million in 2001 and $0.4 million in 2002.

The Company's total proceeds on the sale of property were $1.1 million, $2.1
million and $0.3 million resulting in gains of $0.9 million, $0.8 million and a
loss $0.1 million for the years ended December 31, 2001, 2002 and 2003,
respectively. These gains (loss) are included in general and administrative
expense in the accompanying consolidated statements of operations.

Note 26 - Equity investment

The Company owned an interest in a distribution company which was accounted for
under the equity method of accounting. During 2001, the Company wrote down its
investment and note receivable balance and recorded an additional liability
associated with the Company's $1.1 million share of the investment's net loss,
due to a $0.7 million guarantee provided to the investment. On December 14,
2001, the Company divested the distribution company with no further obligations.

Note 27 - 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 $2.0 million, $1.6 million and $0.7
million for the years ended December 31, 2001, 2002 and 2003, respectively.

Plan 1998

In November 1998, the Company adopted the Head Tyrolia Mares Group Executive
Stock Option Plan (the "Plan"). A total of 2,424,242 options were reserved to be
granted under the terms of the Plan. The Plan provided for grants of stock
options to officers and key employees of Head N.V. and its subsidiaries. The
exercise price for all stock options granted under the Plan was fixed at
inception of the Plan 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 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, 2003, 145,848 shares were
available for grant under the Plan.

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, 2003, the weighted average remaining contractual life of the
outstanding stock options is 5.6 years, and 770,528 options are vested and
exercisable.



                                      F-29
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                                    Exercise Price Less Than
                                                   Grant Date Stock Fair Value
                                                 -------------------------------
                                                   Number of    Weighted average
                                                   of shares     exercise price
                                                 -------------  ----------------

Balance, December 31, 1998.......................     1,465,686     $   0.32
Granted..........................................       783,620         0.32
                                                 --------------     --------
Balance, December 31, 1999.......................     2,249,306         0.32
Granted..........................................        29,088         0.32
                                                 --------------     --------
Balance, December 31, 2000 and 2001..............     2,278,394         0.32
Exercised (see Note 17)..........................     (607,622)         0.32
                                                 --------------     --------
Balance, December 31, 2002.......................     1,670,772         0.32
Exercised (see Note 17)..........................      (56,790)         0.32
                                                 --------------     --------
Balance, December 31, 2003.......................     1,613,982     $   0.32
                                                 ==============     ========

Plan 2001

In September 2001, the Company adopted the Head N.V. Executive Stock Option Plan
2001 (the "Plan 2001"). The Plan 2001 provides for grants of stock options to
officers and employees of Head N.V. 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 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.


                                                   Exercise Price Greater Than
                                                   Grant Date Stock Fair Value
                                                 -------------------------------
                                                   Number of    Weighted average
                                                   of shares     exercise price
                                                 -------------  ----------------

Balance, December 31, 2000.......................            0    $        --
Granted..........................................    3,982,068           4.31
                                                 -------------    -----------
Balance, December 31, 2001, 2002 and 2003........    3,982,068    $      4.31
                                                 =============    ===========

As of December 31, 2003, the weighted average remaining contractual life of the
outstanding stock options is 7.7 years, and 1,701,480 options are exercisable
under the Plan 2001.



                                      F-30
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 28 - Restructuring Costs

In 2003 the Company announced a number of restructuring initiatives.

US facility consolidation

In order to increase utilization of the Company's warehouse facilities and to
centralize headquarter functions the Company recorded restructuring costs $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 and no additional costs are expected to be incurred.

Additionally, the Company shut down its US warehouse for diving products. Upon
discontinuing use of the facility we expensed $0.4 million for excess rent. This
restructuring process was finalized in January 2004.

Ireland facility closure

Further to improve utilization of the Company's production capabilities, the
Company announced and is in the process of closings its tennis ball production
facility in Mullingar, Ireland and transferring these operations to its
existing, under-utilized plant in Phoenix, Arizona. We recognized costs totaling
$7.0 million relating to this program consisting of an impairment and employee
severance costs. The closing of the plant is scheduled for March 2004. In
connection with these efforts we expect to incur additional costs of $2.1
million.

Estonia closure

The Company has transferred all of its manufacturing operations in Tallinn,
Estonia, which manufacture ski boots and certain diving products, to a recently
purchased plant in Litovel in the Czech Republic and expensed $0.6 million. The
Company has already ceased production at its Estonia plant in preparation for
the closing, currently scheduled for the end of 2004, and the subsequent sale of
the property.


                                      F-31
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Impairment, restructuring charges and other related restructuring program costs
incurred in 2003 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                           Total
                                                                                                        impairment,
                                                                                     Other related     restructuring
                                                                                        related         charges and
                                                          Employee                    restructuring    other related
                                                         termination                     program       restructuring
                                        Impairment        benefits     Excess rent        costs            program
                                        ----------      ----------      --------        ----------        ----------
<S>                                     <C>             <C>             <C>             <C>               <C>
US facility consolidation..........     $       --      $      427      $    380        $       --        $      807
Ireland facility closure..........           2,625           4,362            --                --             6,988
Estonia closure..................               --             386            --               187               573
                                        ----------      ----------      --------        ----------        ----------
                                             2,625           5,175           380               187             8,368
Identified restructuring and
future related program costs......              --              --            --             2,111             2,111
                                        ----------      ----------      --------        ----------        ----------
    Total restructuring costs.....      $    2,625      $    5,175      $    380        $    2,298        $   10,479
                                        ==========      ==========      ========        ==========        ==========

Restructuring costs
accrued............................     $       --      $    4,420      $    380        $       --        $    4,800
paid/incurred......................          2,625             755            --               187             3,567
                                        ----------      ----------      --------        ----------        ----------
    Restructuring costs
    incurred in 2003...............     $    2,625      $    5,175      $    380        $      187        $    8,368
                                        ==========      ==========      ========        ==========        ==========
</TABLE>


Note 29 - Subsequent Events

In January 2004, one of the Company's subsidiaries sold (euro)135.0 million of
8.5% unsecured senior notes due 2014, guaranteed by Head N.V. and certain of its
subsidiaries. An application has been made to list the notes 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 expects to use a portion of the remaining proceeds to
repay (euro)31.5 million of other outstanding debt. As of December 31, 2003,
(euro)25.1 million ($31.8 million) short-term loans have been reclassified to
long-term debt due to the Company's intention to refinance them by senior notes.
The remainder of the proceeds will be used for working capital and general
corporate purposes.



                                 F-32

                    Report of Independent Auditors
                   on Financial Statement Schedule

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

Our audits of the consolidated financial statements referred to in our
report dated March 31, 2004, appearing on page F-2 of this Form 20-F,
also inlcuded an audit of the financial statement schedule listed in
Item 18 of this Form 20-F. In our opinion, the financial statement
schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements.

PwC Wirtschaftsprufung AG


Vienna, Austria

March 31, 2004

                                 F-33


                               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)

<S>                             <C>          <C>          <C>         <C>          <C>
Description:
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

Year ended
December 31, 2001:
Provision for doubtful
receivables                     $ 10.5       $  3.9       $  3.2      $ (0.4)      $ 10.8
Provision for inventories         11.5          6.9          3.9        (0.5)        14.0
Allowances for deferred
taxes                             23.8           --          9.9        (1.1)        13.0
</TABLE>


(1) Represents amounts used for the purposes for which the accounts were created
    and reversal of amounts no longer required


                                 F-34