As filed with the Securities and Exchange Commission on March 27, 2003
================================================================================

                       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, 2002

                         Commission file number 1-15134

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

                                 The Netherlands
                 (Jurisdiction of Incorporation or Organization)
                                    Blaak 16
                                3011 TA Rotterdam
                                 The Netherlands
                                 +31-10-214-1923

                    (Address of Principal Executive Offices)
                                 ---------------

               Securities registered or to be registered pursuant
                          to Section 12(b) of the Act:

    Title of Each Class                      Name of Each Exchange on
Ordinary Shares of (euro)0.20 each                Which Registered
                                              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, 2002:

            37,977,217 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........................................7
     4.A.    History and Development of the Company............................7
     4.B.    Business Overview.................................................8
     4.C.    Organizational Structure.........................................20
     4.D.    Property, Plants and Equipment...................................21
   ITEM 5:   OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....................22
     5.A.    Operating Results................................................22
     5.B.    Liquidity and Capital Resources..................................28
     5.C.    Research and Development, Patents and Licenses...................31
     5.D.    Trend Information................................................31
   ITEM 6:   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................32
     6.A.    Directors and Senior Management..................................32
     6.B.    Compensation.....................................................34
     6.C.    Board Practices..................................................35
     6.D.    Employees........................................................35
     6.E.    Share Ownership..................................................36
   ITEM 7:   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS................37
     7.A.    Major Shareholders...............................................37
     7.B.    Related Party Transactions.......................................37
     7.C.    Interests of Experts and Counsel.................................37
   ITEM 8:   FINANCIAL INFORMATION............................................38
     8.A.    Consolidated Statements and Other Financial Information..........38
     8.B     Significant Changes..............................................38
   ITEM 9:   THE OFFER AND LISTING............................................38
     9.A.    Offer and Listing Details........................................38
     9.B.    Plan of Distribution.............................................39
     9.C.    Markets..........................................................39
     9.D.    Selling Shareholders.............................................39
     9.E.    Dilution.........................................................39
     9.F.    Expenses of the Issue............................................39
   ITEM 10:  ADDITIONAL INFORMATION...........................................39
     10.A.   Share Capital....................................................39
     10.B.   Articles of Association..........................................39
     10.C.   Material Contracts...............................................43
     10.D.   Exchange Controls................................................43
     10.E.   Taxation.........................................................43
     10.F.   Dividends and Paying Agents......................................50
     10.G.   Statement by Experts.............................................50
     10.H.   Documents on Display.............................................50
     10.I.   Subsidiary Information...........................................50
   ITEM 11:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......50
   ITEM 12:  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...........52
   ITEM 13:  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................52
   ITEM 14:  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
               AND USE OF PROCEEDS............................................52
   ITEM 15:  CONTROLS AND PROCEDURES..........................................52
   ITEM 16:  [RESERVED].......................................................52
   ITEM 17:  FINANCIAL STATEMENTS.............................................52
   ITEM 18:  FINANCIAL STATEMENTS.............................................52
   ITEM 19:  EXHIBITS.........................................................53


<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    competitive pressures and trends in the sporting goods industry;

          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    our ability to acquire and integrate businesses;

          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", "Sporasub",
"Blax" and "Generics" 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, 1998, 1999, 2000, 2001 and 2002 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 accountants.
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 beneficially
owned 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,
                                                                -------------------------------------------------------------------
                                                                     1998          1999         2000           2001         2002
                                                                -----------  ------------  -------------- ----------  -------------
                                                                              (in thousands, except per share data)

<S>                                                             <C>           <C>          <C>            <C>          <C>
Statement of Operations Data:
Total revenues............................................      $ 304,504     $  388,755   $ 398,639      $ 392,021    $ 387,487
Cost of sales.............................................        180,894        228,453     227,442        233,971      233,402
                                                                ----------    -----------  ---------      ---------    ---------
Gross profit..............................................        123,610        160,302     171,197        158,050      154,084
Selling and marketing expense.............................         75,551         95,906      97,743        102,094      102,619
General and administrative expense (excluding non-cash
  compensation)...........................................         29,911         38,601      33,488         34,810       32,081
Non-cash compensation expense.............................             21            548       1,378          2,025        1,632
                                                                ----------    -----------  ----------     ----------   ---------
Operating income..........................................         18,127         25,246      38,588         19,121       17,753
Interest expense(1).......................................        (10,573)       (14,092)    (18,642)       (11,275)     (11,677)
Interest income...........................................          1,349            947       1,118            892          940
Foreign exchange gain (loss)..............................         (2,279)         4,574       7,502          5,828       (7,387)
Other income (expense), net...............................            459          1,899      (4,181)             7          387
Minority interests in earnings of subsidiaries............              2              -           -              -            -
                                                                ----------    -----------  ----------     ----------   ---------
Income from continuing operations before income taxes and
extraordinary items.......................................          7,084         18,574      24,386         14,573            15
Income tax benefit (expense)(2)...........................         (1,812)        35,887       1,934         (4,032)      (2,630)
Share of loss from equity investment......................              -              -           -         (1,117)           -
                                                                ----------    -----------  ----------     ----------   ---------
Income (loss) from continuing operations before extraordinary       5,273         54,463      26,321         9, 424       (2,615)
items.....................................................
Income (loss) from discontinued operations................            243            (60)       (644)             -            -
Extraordinary gain(3).....................................         58,203               -      2,104              -            -
                                                                ----------    -----------  ----------     ----------   ---------
Net income (loss).........................................      $  63,718     $   54,403   $  27,781      $   9,424    $ (2,615)
                                                                ==========    ===========  ==========     ==========   =========
Earnings per share --  basic(4)
  Income (loss) from continuing operations before               $    0.26     $     2.46   $    0.94      $    0.25    $   (0.07)
extraordinary items.......................................
  Net income (loss).......................................      $    3.19     $     2.46   $    0.99      $    0.25    $   (0.07)
Earnings per share--  diluted(4)
  Income (loss) from continuing operations before               $    0.26     $     2.23   $    0.86      $    0.24    $   (0.07)
extraordinary items.......................................
  Net income (loss).......................................      $    3.19     $     2.23   $    0.91      $    0.24    $   (0.07)
Weighted average shares outstanding(4)
  Basic...................................................         20,000         22,132      28,071         38,083       37,356
  Diluted.................................................         20,232         24,370      30,679         39,816       37,356

Other Financial Data:
Cash provided by operating activities.....................      $  13,531     $   28,444   $   6,452      $  35,921    $  23,279
Cash used for investing activities........................      $ (17,824)    $  (57,517)  $ (17,178)     $ (19,913)   $ (18,804)
Cash provided by financing activities.....................      $ (27,432)    $   43,066   $  20,073      $     393    $       2
</TABLE>


                                       2
<PAGE>



<TABLE>
<CAPTION>
                                                                                        As of December 31,
                                                                --------------------------------------------------------------------
                                                                   1998           1999         2000          2001          2002
                                                                ----------    --------     --------      --------      --------
                                                                                          (in thousands)
<S>                                                               <C>           <C>          <C>           <C>           <C>
Balance Sheet Data:
Cash(5)...................................................        $ 12,860      $ 23,624     $ 15,848      $ 22,128      $ 37,598
Working capital(6)........................................        $ 29,351      $ 73,432     $151,241      $137,654      $159,207
Total assets..............................................        $344,618      $434,660     $434,304      $416,519      $473,853
Total debt(7).............................................        $199,335      $240,108     $114,819      $122,966      $154,893
Capital stock(8)..........................................        $     53      $     64     $  7,067      $  7,067      $  7,067
Total shareholders' equity................................        $ 38,816      $ 82,547     $229,988      $212,539      $229,824
</TABLE>
----------
(1)  Interest expense for the years ended December 31, 1998, 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."
(2)  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.
(3)  Includes for the year ended December 31, 1998 a gain of approximately $58.2
     million as a result of the application of SFAS No. 15. See "Item 5:
     Operating and Financial Review and Prospects -- Liquidity and Capital
     Resources -- Treatment of Bank Waivers Under SFAS No. 15."
(4)  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 year ended December 31, 2002, diluted weighted
     average shares outstanding excludes the incremental effect of 1,789,490
     stock options because it is anti-dilutive.
(5)  Cash includes cash and cash equivalents and in 1998 and 1999 restricted
     cash of $4.5 million and $5.7 million, respectively.
(6)  Working capital is computed as current assets, excluding restricted cash,
     less current liabilities.
(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." These amounts are $8.0 million and $6.3 million respectively, as of
     December 31, 1998 and 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.


Dividends

       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; references to "schillings" or "ATS" are to Austrian
schillings 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 and schilling 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 and
schilling amounts actually represent these U.S. dollar amounts or could be
converted into U.S. dollars at the rate indicated.

       On January 1, 1999, 11 of the 15 member countries of the European Union,
including Austria, introduced the euro as their official currency and
established fixed conversion rates between the current currencies of each
participating country and the euro. The Austrian schilling has a fixed value
relative to the euro of ATS 13.7603, but may no longer be used for payments in
Austria.

       Unless otherwise indicated, U.S. dollar amounts have been translated from
schillings, and euro amounts have been converted to U.S. dollars, based on the
noon buying rate in New York City for cable transfers in foreign currencies, as
certified for customs purposes by the Federal Reserve Bank of New York on
December 31, 2002. On December 31, 2002, the noon buying rate was (euro) 0.9537
= $1. This rate may differ from the rates used in the preparation of the
Consolidated Financial Statements. We make no representation that euro or
schilling have been, could have been or could be converted into dollars at the
rates indicated.


                                       3
<PAGE>


       The table below shows information concerning the noon buying rate for
Austrian schillings for the year ended December 31, 1998 expressed in schillings
per dollar, and for euro for the years ended December 31, 1999, 2000, 2001 and
2002, expressed in euro per U.S. dollar. On March 25, 2003, the noon buying rate
for euro was (euro) 0.9369 = $1.

<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                                       -----------------------
                                      1998         1999           2000          2001            2002
                                      ----         ----           ----          ----            ----
                                  (ATS per one                        (euro per one U.S. dollar)
                                   U.S. dollar)

 <S>                                 <C>          <C>            <C>           <C>             <C>
 High                                13.039       0.9984         1.2092        1.1947          1.1636
 Low                                 11.323       0.8466         0.9657        1.0488          0.9537
 Average(1)                          12.368       0.9445         1.0861        1.1135          1.0573
 Rate at end of period               11.720       0.9930         1.0652        1.1235          0.9537
</TABLE>


The table below shows the noon buying rate for euro the six prior months
expressed in euro per U.S. dollar:

                   September  October  November December   January  February
                     2002      2002      2002     2002      2003      2003
                     ----      ----      ----     ----      ----      ----
                                                (euro per one U.S. dollar)

High              1.0325      1.0301    1.0106   1.0074    0.9652    0.9339
Low               1.0041      1.0120    0.9863   0.9537    0.9207    0.9195
----------
(1)  The average of the noon buying rate on the last day of each month during
     the applicable period.

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 involves 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 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 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 Tennis and Head Intelligence Tennis
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 trends in world economies and other events beyond our control could
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, or
the occurrence of events that adversely affect economies, such as the September
11 attacks on the United States, both of which reduce discretionary consumer
spending. 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.

Our strategy to expand our business and increase revenue through acquisitions
could be limited by various internal and external factors

       We intend to supplement growth by selectively acquiring sporting goods
companies. We cannot predict whether we will be successful in pursuing our
acquisition strategy because that strategy is subject to a number of risks,
including:

          o    we may have difficulty identifying suitable acquisition targets
               and integrating the operations, systems and management of any
               acquired companies;

          o    our acquisition strategy may divert management's attention from
               other business concerns;

          o    we may be unable to maintain uniform standards, controls,
               procedures and policies;

          o    we may enter markets where we have little or no prior experience;

          o    we may lose key employees of acquired companies;

          o    we may be required to raise additional financing and our ability
               to do so is limited, including by the terms of our debt
               instruments; and

          o    if we sell additional shares in the future to finance an
               acquisition, the trading price of our ordinary shares may be
               affected.

       We have in the past reviewed, and continue to review, acquisition
opportunities, which, if consummated, may impact our operations and financial
condition and significantly increase the amount of our debt. We are not
currently party to any agreement in this regard and no assurance can be given
that we will succeed in consummating any acquisitions or as to the financial,
operating or other effect on us of any such acquisition.

Our failure to upgrade our resources, systems and controls could adversely
affect our ability to grow in accordance with our business plan

       Our management, operational and financial resources and our systems and
controls will be subject to significant demands as we grow and expand. We hope
to continue to increase sales within existing product categories, enter into new
product categories and further develop licensing opportunities. In order to
manage any growth effectively, we will have to continue to implement and improve
our operational and financial systems and controls and expand, train and manage
our employee base. Expansion will create additional demands on our customer
support, sales and marketing and administrative resources and network
infrastructure. We cannot assure you that our operating and financial control
systems and infrastructure will be adequate to maintain and effectively manage
future growth. Our failure to continue to upgrade the administrative, operating
and financial control systems or the emergence of unexpected expansion
difficulties could adversely affect our business.

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

       Approximately 35% of our cost of sales 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), Thailand and Taiwan
(diving products). As a result of this outsourcing, we are dependent in part on
the performance of third-party suppliers in our ability to deliver quality
products in a timely manner. We 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. 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 controlled by one shareholder whose interests may conflict with yours

       Head Sports Holdings N.V., controlled 19,033,244, or 47.8%, of our issued
shares as of March 26, 2003. Johan Eliasch and his family members are the
ultimate beneficial owners of certain entities that control 95.5% of Head Sports
Holdings N.V. 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

                                       5

<PAGE>

decisions.

       As a Netherlands public company with limited liability, our business is
carried out primarily by a Management Board, which appoints our executive
officers, and is overseen by a Supervisory Board. Under our 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., an entity that is
ultimately beneficially owned and 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 our shares. In general, a two-thirds majority of
shareholders voting at a general meeting of shareholders may remove members of
the Management and Supervisory Boards, and the articles of association,
including the rights of the Stichting, also may be amended (at the proposal of
the Management Board and with approval of the Supervisory Board) by a two-thirds
majority of shareholders. Therefore, as a result of his control over the
Stichting, Johan Eliasch will retain the power to nominate and essentially
control the election of the Supervisory and Management Board members and other
executive officers so long as he holds any of our shares until there is an
amendment to the articles of association to remove the rights of the Stichting.

We have antitakeover provisions that could delay or prevent a change in control,
even if it would benefit shareholders

       Our articles of association provide for the possible issuance of
preference shares. Such shares may be issued pursuant to a resolution of the
Management Board, which is also authorized to grant rights to subscribe for such
shares. This authority has been extended by resolution of the shareholders and
will end on May 28, 2007, 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. Moreover, the special powers of the
Stichting coupled with our controlling shareholder's control of the Stichting
will essentially control the election of Supervisory and Management Board
members and other executive officers. As a result, the issuance of preference
shares and our controlling shareholder's control of the Stichting may deter or
prevent a takeover attempt, including an attempt that might result in a premium
over the market price for our ordinary shares.

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, 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.
Key patents and trademarks have been pledged as collateral for our obligations
under loan agreements. 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, Mares, Dacor and Munari, 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. We cannot assure you that the measures we 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 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.

                                       6
<PAGE>


       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 2002
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.

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. 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 may adversely affect
our results of operations.

ITEM 4: INFORMATION ON THE COMPANY

4.A. History and Development of the Company

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

       With a broad product offering marketed mainly to middle to high price
points, we supply sporting equipment and accessories to all major distribution
channels in the skiing, tennis and diving markets, including pro shops,
specialty sporting goods stores and mass merchants. Our products are sold
through over 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 50 years, we believe we have earned a reputation as a
leading developer and manufacturer of innovative, high-quality and
technologically advanced sporting equipment. Since acquiring HTM in January
1996, we have focused on our core products of skiing, tennis and diving
equipment while reducing fixed costs and streamlining our organizational
structure. 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 Blaak 16,
3011 TA Rotterdam, The Netherlands. Our telephone number is +31-10-214-1923. Our
website address is www.head.com.

                                       7
<PAGE>

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 2002 was approximately $1.28 billion at the
wholesale level, consisting of $450 million of skis, $170 million of bindings,
$310 million of boots and $350 million of snowboard equipment. The ski market is
split predominantly among Europe, the United States and Japan, with Europe in
2002 constituting approximately 59% of the world market, the United States
approximately 17% and Japan approximately 15%. The snowboard market is led by
Japan, followed by the United States and then Europe.

       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 2002. 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 2002, 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 global negative economical situation.

       The decline in the market for skis has had a corollary effect on the
market for bindings, ski boots and other accessories. The bindings market
declined from approximately 5.9 million pairs sold per year in the early 1990's
to approximately 4.0 million pairs in 2002. The ski boots market suffered a
significant decline from 3.9 million pairs sold in 2000 to 3.6 million pairs
sold in 2002 with lower average prices in constant value. We believe this
decline in price is due to a structural oversupply situation and the decline in
volume is due 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 speciality 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 $450 million or 100% of total
industry-wide ski sales at wholesale in 2002, 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.

       At present, consolidation is also taking place in the snowboard industry
of the winter sports market. Traditional ski distributors and retailers are
replacing 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 2002 was approximately 9.3 million units, with
a value of approximately $612 million at the retail level, which we estimate
translates into approximately $320 million at wholesale. Although we believe the
markets contracted by approximately 9% in revenue in 2002, due to the
availability of better quality data in particular from China, the market sizes
noted above reflect a higher retail market than previously indicated in both
units and revenue. The market is divided predominantly among the United States,
Europe and Japan. The United States and Europe each represents more than 27% of
the 2002 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.

       The markets decline has led to brand consolidation, which has benefited
primarily Head and Wilson.

       In 2002, the market for tennis racquets was generally perceived to have
declined overall by approximately 5% in units.

       We estimate worldwide sales of tennis balls at approximately $209 million
at wholesale in 2002, with approximately 21.3


                                       8


<PAGE>

million dozen tennis balls sold. Of these sales, approximately 45% (in units)
were in the U.S. and 30% in Europe, representing the two largest markets for
tennis balls. In 2002, 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
and diving accessories. In 2002, the overall diving market was generally
perceived to have declined by 10%, with the important US and Japanese markets
showing, according to some estimates, a downturn in demand of up to 15%. This
overall decline was, we believe, principally due to the decrease in
international travel to diving destinations as a consequence of the fear of
terror attacks 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 is now approximately $325 million. Industry observers
expect the diving market to have a quick turn around as soon as the uncertainty
of the international situation, related to Iraq and terrorism will be over. The
popularity of the sport is becoming significant in many emerging countries like
Russia, Poland, Croatia, Serbia, Ukraine, Philippines and South Africa with
significant increase in sales especially as far as diving centres 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 speciality stores. The
lower segment of the market consists primarily of equipment for children and
novices while the upper segment of the market consists of equipment for scuba
and other more experienced divers.

       The diving industry is highly fragmented with well over 100 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 the same brand.

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 37.3% of our total revenues in 2002.

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 2002. 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 40.2% of our total Winter Sports revenues in
2002.

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

                                                        Number
      Line                  Target Market              of Models                  Features
      ----                  -------------              ---------                  --------

<S>                 <C>                                    <C>     <C>
Racing Carver       Expert skiers and racers               2       Extreme stability and precision for racing and high performance
                                                                   skiing

Freeride            Advanced to expert skiers              4       Maximum lift in powder snow and manoeuvrability for off piste
                                                                   and extreme skiing

Allround Carve      Intermediate to advanced skiers        9       Easy-turning and manoeuvrability for all types of terrain

New School          Advanced to expert skiers              4       Shock-absorbing reinforced construction for mogul, freestyle
                                                                   skiing and jumps

Easy Carver         Beginner to intermediate skiers        2       Shorter length and easy-turning suitable for learning and hobby
                    skiers

Junior              Young skiers                           5       Radical side cuts designed for easy handling for young skiers of
                                                                   all abilities

Rental              All skiers                             3       Added durability

Accessories         All skiers                            10       Includes ski poles, carrying bags and other items
</TABLE>

                                       9


<PAGE>

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

       Market Share. We estimate that the global ski market was approximately
$450 million at wholesale in 2002. We believe, based on published market data
and our market knowledge and experience that in 2002, 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
2002, an increase of approximately 60% from an estimated 8% in 1996.

       We believe that demand for carving skis to continue to increase and that
carving ski sales represented 100% of total industry-wide ski sales in 2002.
Management believes that Cyber, our brand name in carving skis, has become a
stand-alone brand due to its popularity, and expects to increase its market
share for carving skis as a result. In addition, 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 and are one of the few
worldwide manufacturers offering this type of integrated line. 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. 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 labour productivity. We use some excess capacity to manufacture high
performance and carving skis for other branded ski companies.

Tyrolia Bindings

       We believe that Tyrolia was the top selling brand in the worldwide ski
binding market in 2002, based on units. Our binding business represented 30.5%
of our total Winter Sports revenues in 2002.

       The following table sets forth the principal Tyrolia binding products:

<TABLE>
<CAPTION>
                                                       Number
     Line                       Target Market         of Models                             Features
     ----                       -------------         ---------                             --------

<S>                  <C>                                 <C>      <C>
Racing               Expert and professional skiers      3        Innovative Free Flex PLUS Technology (patented).

Rail Flex            Beginners and advanced skiers       2        Integration system with double free-flex, boot centre adjustment
                                                                  and tool free mounting.

Cyber Carve          Carving skiers                      2        Different systems featuring Cyber Free Flex Technology
                                                                  (patented) or Carve Flex Technology and different integrated
                                                                  stand heights.

Performance          All skiers                          5        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. Our
Power Select technology allows skiers to increase or decrease the ski pretension
and to adjust the

                                       10



<PAGE>

radius for carving with the turn of a dial. By adjusting the dial, the skier can
optimise performance for different terrain and snow conditions. Free Flex
technology allows the heel of the skier to glide freely as the ski bends,
optimising edge grip and ski contour, which facilitates a higher degree of
angulation 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. The SL 100 became
the largest selling binding in the worldwide market and accounts for over
one-third of our binding sales worldwide in units. Due to reduced manufacturing
costs, it is also the most profitable binding in our line. The launch of the SL
100 bindings helped us gain 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.

       We are leading new trends such as the growing demand for lightweight
equipment and increased ease of use by developing new technologies. We believe
that the ownership of patents serves as a barrier to entry and that as a result,
our proprietary technology in bindings gives us a competitive advantage.

       Market Share. We estimate that the market for bindings worldwide was
approximately $170 million at wholesale in 2002. We estimate our market share
worldwide for bindings in units was above 30% in 2002 and believe that we were
the top selling brand in 2002, 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 20.0% of our
total Winter Sports revenues in 2002.

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

<TABLE>
<CAPTION>
                                                               Number
     Line                      Target Market                  of Models                           Features
     ----                      -------------                  ---------                           --------
<S>                 <C>                                        <C>        <C>
Head
Racing/Freeride     Racers, experts and freeriders              10        Project introduced in 2001 with full bi-injection
                    professional skiers                                   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 wide range of models
Performance                                                               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.
</TABLE>

                                       11

<PAGE>
<TABLE>
<CAPTION>

<S>                 <C>                                        <C>        <C>

Rear Entry          Beginners                                    2        Easy step-in and high-comfort boots.

Junior              Young skiers (all segments)                  9        Junior boots for racers to beginners.

Rental              Rental                                       6        High comfort and reliability for intermediates and
                                                                          beginners.

Munari
Carvetech           Experienced and carving skiers               4        Flex adjustment, lateral support to obtain maximum edge
                                                                          control.

Mix                 Intermediate and beginners                   5        Easy walk adjustment, light and user-friendly boots.

Comfort             Beginners                                    4        Easy step-in and high comfort boots.
</TABLE>


       Technology. In 2002, Head introduced two new ranges which we believe
allowed us to increase the market share in the middle and high price segment and
present several innovative technical solutions.

       Market Share. We estimate that the market for boots worldwide was
approximately $310 million in 2002. We believe, based on our market knowledge
and experience, that the Head ski boots held the number three position worldwide
in 2002 based on units sold. We estimate that our market share (Head and Munari
together) in 2002 was approximately 13%, which is a positive trend in comparison
to the 2001 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 2003 is a stable global market and a concentration of brands at
dealer level, from which we should benefit.

       Manufacturing. Our high price point boots are produced in Maser, Italy,
where we use sophisticated technology such as bi-injection machines and
automatic manipulation systems. However, we manufacture 90% of our ski boots in
Estonia, where production costs are lower.

Snowboards

       We market our snowboard products under the Head brand. These products
accounted for 9.3% of our total Winter Sports revenues in 2002.

       The following table sets forth our principal categories of snowboarding
products:

<TABLE>
<CAPTION>
                                               Number
     Line                 Target Market       of Lines                                    Features
     ----                 -------------       --------                                    --------

<S>                  <C>                          <C>           <C>
Boards               Freestlye / Freeride         8             Dimensional concept: perfect boot-binding-board match
                                                                Free Flex rail system: innovative binding fixation

Softboots            Freestyle / Freeride         8             Pad-Tech: power absorption and distribution soles
                                                                Double Lasted Sole: integrated EVA midsole

Softbindings         Freestyle / Freeride         6             Powerframe concept: better boardflex - better transmission
                                                                Auto-Open straps: reentry improvement
                                                                Auto-Lock highback: automatic fixation of highback to heelcup

Step in bindings &   Freeride/ Freestyle          2             Step- X4: 4 point fixation for best power transmission and control
boots

Rental               Freeride/ Freestyle                        Head "Rent'n Ride in 59 Seconds Program"
                                                                Dimensional concept: perfect boot-binding-board 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 2002, we introduced a completely new line of snowboards,
snowboard boots and snowboard bindings featuring the "Dimensional Concept". This
concept aims to perfectly match snowboarding boot size with board, avoiding toe
and heeldrag, or

                                       12



<PAGE>

low leverage. No other snowboard company has dealt with this very 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, Pad
Tech and Double Lasted soles with boots. We believe that the Head "Rent'n
Ride in 59 Seconds Program" is the fastest rental system currently offered to
the market.

       Market Share. We estimate that the global market of snowboard, bindings
and boots was approximately 4.3 million units in 2002 and that our market share
was approximately 9% in Europe and 3% in Japan.

       Manufacturing. In 2002, we outsourced all of our products, except the
Step-X4 bindings that are manufactured by Tyrolia.

Racquet Sports

       Racquet sports products accounted for 43.6% of our total revenues in
2002. 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 2002 our Head racquets were the number two brand
worldwide, comprising 19.1% and 24.2% of the world retail market in units and
revenue, respectively (based on independent research conducted in major tennis
markets). Revenues from racquets and accessories amounted to 59.6% of our total
Racquet Sports revenues in 2002.


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

                                                                        Number
  Category              Line                  Target Market            of Models             Features
-----------      -------------------   -----------------------------   ----------    ------------------------
<S>              <C>                   <C>                                  <C>      <C>
Tennis           Intelligence Series   Tennis enthusiasts at all            11       Intelligent racquets featuring Intellifiber
                                       level of play                                 (piezoelectric material), Top model with
                                                                                     Chipsystem (chip-powered and electronically
                                                                                     dampened racquets)

                 Titanium Series       All levels of players                 8       Lightweight power racquets with Shockstop for
                                                                                     ultimate comfort

                 Performance Series    Entry level player                    5       Value products for short and slow swings

                 Junior                Young players                         9       Lightweight racquets for juniors from ages 6
                                                                                     to 14

Squash                                 All players                          10       Racquets for all skill levels and price points

Racquetball                            All players                          12       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. In late summer 2000, we introduced our new technology, Head
Intelligence. During the early part of 2001, top ranked female and male players
started to endorse this unique and proprietary technology. Gustavo Kuerten and
Goran Ivanesivic both won 2001 Grand Slam tournaments using a Head Intelligence
product. We believe that this has generated exceptional awareness for this
technology amongst the media and consumers around the world, and resulted in
higher penetration of premium markets, thereby increasing sales and product mix.
In 2002, we launched the next stage of this technology with the Intelligence X
range of racquets, further advancing the benefits of our proprietary Head
Intelligence technology.

       Market Share. We estimate that the market for tennis racquets worldwide
was approximately 9.3 million units and $320 million at wholesale level in 2002.
We believe, based on our market knowledge and experience, that Head brand tennis
racquets are number one in Europe and number two on a worldwide level. We
estimate that market share of overall revenues generated for 2002 was
approximately 24% worldwide and that our European market share was 32%.

       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 2002. These market share gains occurred in all major
markets around the world and we believe are largely due to the introduction of
proprietary premium

                                       13



<PAGE>

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
2002 ATP Tour Rankings, Head racquets were used by 27 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 most successful
and number one racquet brand used on the ATP Tour. A number of tennis players on
the WTA Tour, such as Jelena Dokic, Barbara Schett, 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. See "-- Marketing."

       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% in 1997 to 24% in 2002.

       We cross-leveraged these technologies to create line extensions in Head
squash and racquetball and the Titanium and Intelligence models, which we
believe also improved our position in other racquet sports markets as well. In
2002, we finished the year slightly down in the U.S. racquetball market share
with a 1.6% decline in revenue share to o% according to a U.S. Tennis Industry
Association coordinated survey. However we estimate that we are still the leader
of the racquetball racquet market.

       Manufacturing. We manufacture high-end racquets in our facility in
Austria, which accounts for approximately 30% of the total volume sold. All
other racquets, accounting for approximately 70% of all racquets sold, are
outsourced from manufacturers in China. For those tennis racquets made in
Austria, a key part of the labour intensive assembly is conducted in Head's
facilities in the Czech Republic. Our Austrian tennis manufacturing facility
contains an automated assembly line and our machines are computer-controlled to
ensure close tolerances. We continually monitor our outsourced products to
ensure quality.

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 38.7% of our total Racquet Sports revenues in 2002.

       The following table sets forth the principal Penn product lines:

<TABLE>
<CAPTION>
                                                                    Number
     Line                         Target Market                    Of Models                         Features
     ----                         -------------                    ---------                         --------
<S>                  <C>                                              <C>      <C>
Tennis Balls
Championship         Frequent players                                 3        Models designed for specific court surfaces

Pro USTPA            Teaching professionals                           3        Highest quality felt/premium rubber balls made for
                                                                               specific court surfaces

Tennis Masters       Top professionals and serious tournament         2        Balls for tournament play made of long-wearing felt
Series and           players                                                   and rubber-coated for moisture/stain resistance; New
ATP Tour                                                                       balls: Prestige specifically for Germany and
                                                                               Marathon for International Markets

Stars                Beginners (sold to clubs and teaching pros)      1        Manufactured with less pressure

Titanium             Premium                                          1        New in 1998; titanium enhanced core

Court One            Casual/Recreational                              1        Non USTA approved

Private Label        Casual/Recreational                              3        Special orders

Fetchem's            Pet owners                                       1        Sold under Ralston Purina brand; chemical/dye free
                                                                               felt
</TABLE>


Racquetball Balls

                                       14



<PAGE>

Pro           Tournament players   1        Premium price/performance

Ultra-Blue    All players          1        Flagship brand

Titanium      All players          1        New in 1998; titanium enhanced core


       Technology. Penn has introduced many innovations, including:

          o    a more durable felt ball covering made of woven wool and man-made
               fiber;

          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 $209 million worldwide, with approximately 21 million dozen tennis
balls sold in 2002. Penn is the market leader, with a market share of 35.3%
worldwide and of over 53% (based on volume) in the United States, the world's
largest market in 2002. Although sales of tennis balls have declined since 1993,
Penn's annual volume has been steady, averaging approximately 6.5 to 7.5 million
dozen sold per year, including the manufacturing of OEM balls, leading to an
increase in market share from 29% in 1993 to 35% in 2002.

       We believe that Penn's strong market position is a result of the superior
quality of our products and close affiliation with the professional tennis
circuit. Penn is the official ball used in more than eighty major tennis
tournaments annually, including the Tennis Masters Series events, ATP Tour and
the WTA tour events, the Davis Cup and the Federation Cup. 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 to have been approximately 65%
(based on volume) in 2002. Since the early 1990s, annual racquetball balls
sales, including Penn racquetball balls sales, have been constant to slightly
declining, and we expect this trend to continue.

       Manufacturing. We currently manufacture our tennis balls and racquetballs
(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. We expect more significant savings in 2003 and
beyond.

       We have entered a joint venture 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 23% in 2002. The
Mares and Dacor products are both targeted for the upper-income market 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 at
different geographical markets, 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 16.9%
of our total revenues in 2002. During last season, considerable attention was
given reducing the number of offered products so that we have a simpler and more
efficient line but that we believe is still capable of fulfilling most divers'
needs.

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

<TABLE>
<CAPTION>
                                          Number
               Line                      of 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>


                                       15

<PAGE>

<TABLE>
<CAPTION>

<S>                                         <C>      <C>
Buoyancy compensator jackets                21       Devices for airflow control and better buoyancy.

Wetsuits                                    19       Designed to ensure warmth and comfort.

Wetsuit accessories                          6       Gloves, boots and socks.

Fins                                        18       Designed to provide maximum power using minimum effort.

Masks and goggles                           34       Includes single, two and four lens models, with maximum visibility.

Snorkels                                    17       Designed to provide easy and dry breathing.

Computers                                    8       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. Approximately 60% of Mares' sales are 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 $325 million in 2002. 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 2002 is estimated at 23%.

       We are working to expand our presence in key markets such as the United
States, where, we believe, Mares and Dacor combined held a 16% market share, and
in South Asia, where both brands combined had an estimated 17% market share in
2002. We also expect to grow our global market share through new product
introductions and the addition of advanced technological features in our
existing products. Many new patents have been introduced in 2002, thus
strengthening our products offering. In addition, we expect the fragmented
nature of the diving industry to provide increased opportunity for growth.

       Manufacturing. We currently manufacture the majority of our diving
products, including Dacor products, in Italy. We 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 Estonia, 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
2002.

       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 new UK sales and distribution subsidiary.

       We have licensed Head sportswear in almost all countries worldwide (e.g.
Norway, UK, Ireland, USA, Canada, Japan and China). We also grant rights to the
Head brand for other product categories such as watches, personal computers,
stationery, bikes, footwear, eyewear, luggage, golf equipment and accessories.
Licensing generated $8.4 million of revenues in 2002 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 280 people as of
December 31, 2002. In addition, we utilize sales representatives and independent
distributors to serve specialized markets and related distribution channels.


                                       16
<PAGE>

Europe

       Sales to customers within Europe accounted for approximately 53.4% of our
2002 net sales. We sell to both retailers and wholesalers and distribute our
products through our own sales force in major European countries, including
Italy, Germany, France, Spain, Portugal, Great Britain, the Netherlands,
Switzerland and Austria, and through third-party distributors in other markets.
In-house personnel are compensated on the basis of a combination of salary and
commission while independent sales people are compensated generally on the basis
of commissions. In Winter Sports, the Head skis, Head ski boots and Tyrolia
bindings are distributed by one sales force to maximize market penetration and
leverage its distribution base. Our snowboard products are distributed in France
and Spain by our Winter Sports sales force and in Germany, Austria, Switzerland
and Italy by our specialized snowboard sales force. In Europe, we utilize the
same sales force for our winter and racquet sports products.

North America

       Sales to customers in North America accounted for approximately 32.1% of
our 2002 net sales. We distribute Head, Tyrolia, Mares/Dacor and Penn products
in North America through our company-owned distribution units. Winter Sports,
Racquet Sports and Diving each have separate organizations and sales forces. Our
goal is to improve distribution to increase penetration in North America and
reestablish the Head and Tyrolia brand names in the U.S. winter sports market.

       The success of our Head Titanium and Intelligence 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 USPTA, the
world's largest association of tennis-teaching professionals, and other sales
and marketing efforts.

Asia

       Sales to customers in Asia accounted for approximately 11.0% of our 2002
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. 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 3.5% of our 2002 net
sales. These markets mainly consist of Latin America, Eastern Europe and
Australia. The number of countries in these markets in which sales were made
exceeded 50 in 2002. 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,
Mares and Dacor 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:

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

          o    are implementing intelligent website advertising to generate more
               website visits;

          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

                                       17



<PAGE>

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 a "USA Tennis" 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 centres and tourist resorts. Mares
               and Dacor are getting high visibility on all major specialised
               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, Florian Eckert, Franco Cavegn, Marco Buchel and
            former champions such as "legend" Franz Klammer, the 1976 Olympic
            Champion. We also have an endorsement arrangement with the Austrian
            national ski team. In snowboarding, German athlete Jan Michaelis has
            won the overall world championship title in Halfpipe and his
            teammate Jukka Eratuli from Finland the overall world championship
            title in the Big Air discipline.

       o    Tyrolia products also are endorsed by all Head ski racers, as well
            as a number of other successful skiers including Kjetil Andre Aamodt
            and Isolde Kostner.

       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 and Gustavo
            Kuerten, WTA players such as Barbara Schett, Chanda Rubin and Jelena
            Dokic, as well as players from the ATP Senior Tour popular among
            mature players, including "legends" Bjorn Borg, Guillermo Vilas and
            Ilie Nastase. In addition starting in January 2003, we have become
            the official tennis racquet of the USPTA (United States Professional
            Tennis Association) with over 12,500 members. Over 2,500 of these
            members have already signed exclusive contracts with HEAD. For the
            previous 9 years, Wilson was the official racquet of this important
            organization.

       o    Penn is the official tennis ball for over eighty major tennis
            tournaments worldwide, including ATP tour and WTA Tour events, the
            Davis Cup, the Tennis Masters Series and Tennis Masters Cup and the
            Federation Cup. Penn is the exclusive sponsor/supplier of the USPTA
            as well.

       o    Most free diving world records, including those set by Francisco
            "Pipin" Ferraras 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,

                                       18



<PAGE>

            awarded Mares the "Golden Star Award" for the X-Vision mask. Also,
            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 with Paramount to use Mares/Dacor equipment in
            the soon-to-be-released movie Tomb Raider II.

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. In addition, we encourage cross-fertilization of ideas among
divisions, which has led to further new product innovations. In 2002, 2001 and
2000, we spent approximately $11.0 million, $9.5 million and $9.1 million
respectively on engineering, research and development. 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.

       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 launching of the
Head Titanium Tennis series and in 2000 the Intelligence racquet technology.
These are the first "intelligent" racquets, using a piezoelectric material Head
Intellifiber, which uses the energy of ball impact to actively power and dampen
racquets. In 2002 we launched Intelligence X, further advancing the performance
benefits of the proprietary Head Intelligence 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
more durable felt covering woven of wool and man-made fibers; "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 52 year history of product innovation and is one of the most
advanced R&D centers in the industry. Recently, 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.

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 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 2002 net sales.

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 adidas-Salomon
            AG; Atomic, which is owned by Amer Group Plc; Fischer, which is
            owned by Fischer GmbH; K-2, which is owned by K-2 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 Nordica, which is owned by Technica;
            Salomon, Lange/Rossignol group; and Technica and Dolomite, both of
            which are owned by the Technica-Lowa-Dolomite Group.

                                       19



<PAGE>

       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 Benetton Sportsystem
            S.p.A.

       o    The principal competitors of Penn tennis balls are Wilson Sporting
            Goods Co., and Dunlop Maxfli Sport Corporation. In racquetball
            balls, our principal competitor is Ektelon which is owned by
            Benetton Sportsystem S.p.A.

       o    Competitors of the Mares and Dacor diving division include Scubapro,
            Inc., Oceanic, and Aqualung Group, including its subsidiaries, U.S.
            Divers Co. and Sea Quest Corp.

       Some of our competitors, notably Salomon, which is part of
addidas-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 estimate that for 2002 cost increases in
all our raw materials were approximately $3 million. 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, Cyber, Tyrolia, Penn, Munari, 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, Blax, Generics and San Marco.

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

       We believe that our patents are among our most valuable assets. We are
not dependent on any one patent or set of patents. Some of our recently
introduced products like Titanium and Intelligence 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 that is the issuer of our senior notes. Our primary
operating subsidiary is HTM Sport-und Freizeitgerate AG, which in turn owns all
of our worldwide operating and distribution subsidiaries.

       The following is a list of our significant (direct and indirect)
subsidiaries and their country of incorporation:

                                                   Proportion of Issued
Significant Subsidiary                  Domicile       Capital Held
----------------------                  --------       -------------
Head Holding Unternehmensbeteiligung    Austria            100%
HTM Sport-und Freizeitgerate AG         Austria            100%
Head Sport AG                           Austria            100%
Head Tyrolia GmbH                       Austria            100%

                                       20


<PAGE>

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%
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%
HTM Sports Corp.                        Switzerland        100%
HTM USA Holdings Inc.                   USA                100%
Head USA Inc.                           USA                100%
Penn Racquet Sports Inc.                USA                100%

4.D. Property, Plants and Equipment

       The following table sets forth information as of December 31, 2002 with
respect to the manufacturing, production, warehousing and office facilities used
by us in our business:
<TABLE>
<CAPTION>

                                                                                                          Owned /   Area (in square
        Location                                                 Description                              Leased        meters)
-----------------------            -----------------------------------------------------------------     --------       -------
<S>                                <C>                                                                   <C>             <C>
Kennelbach, Austria............    Ski and tennis manufacturing                                          Leased          13,139
                                   Administration, marketing, research and development                   Leased           4,186
Klaus, Austria.................    Warehousing                                                           Leased           8,710
Schwechat, Austria.............    Binding manufacturing                                                 Leased          12,709
                                   Warehousing                                                           Leased           5,510
                                   Administration, marketing, research and development                   Leased           1,472
Neusiedl, Austria..............    Binding assembly and warehousing                                      Leased           2,973
Maser, Italy...................    Ski boot manufacturing, research and development                      Leased           6,490
Tallinn, Estonia...............    Ski boot and diving products manufacturing                            Owned           29,574
Budejovice, Czech Republic.....    Tennis racquets assembly and ski manufacturing                        Owned            7,375
Rapallo, Italy.................    Manufacturing                                                         Owned            1,200
                                   Warehousing, administration, research and development                 Owned            4,800
Casarza, Italy.................    Warehousing                                                           Owned            7,300
                                   Manufacturing and warehousing                                         Owned            7,708
Phoenix, Arizona...............    Tennis and racquetball ball administration, manufacturing, research   Owned           13,009
                                   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

                                       21



<PAGE>

costs which could have an adverse effect on our financial condition.

ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A. Operating Results

Factors Affecting Revenues

       We generate revenues in our principal markets by selling goods directly
to retailers and to a lesser extent by selling to distributors. We also receive
licensing and royalty income. We recognize revenues for product sales at the
time of product shipment. 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.

       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, as well as changes in
consumer preferences. The skiing market declined over the past few years due to
a shift in consumer preference from skiing to snowboarding in the early 1990s,
an absence in 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. After a slight growth of 2.5% in
2000, the worldwide ski market experienced decline of 2% in 2001 and 5% in 2002
as compared to the prior year. We believe we are currently well positioned in
the skiing market as we are at the forefront of the development of carving skis,
sales of which have increased to approximately $450 million at wholesale in 2002
from an estimated $40 million in 1995.

       In 2002, we believe, based on our market knowledge and experience, that
the worldwide market for tennis racquets declined by 5% and for tennis balls by
2%. In addition, the worldwide market share of Head tennis racquets increased
from 14.7% in 1995 to 24.2% in 2002 and the worldwide market share for Penn
balls is 35.3% based on volume. In 2002, we believe, based on our market
knowledge and experience, the worldwide market for diving declined approximately
10%. The overall decline was, we believe, principally due to the decrease in
international travel as a consequence of the fear for terror attacks and to a
lesser extend the general worldwide economic slowdown and a consequent decrease
in the number of the end users of diving.

       Approximately 70% of our annual capital expenditure goes to maintenance
of current facilities including the molds, tools and equipment. Some product
lines change annually as new products are introduced, while others are in use
for several years. We have moved part of our manufacturing to lower labor cost
areas, such as ski boots and certain diving products from Italy to Estonia, and
we have moved our diving manufacturing and warehousing to a more modern facility
located near the prior one. We have financed our capital expenditure from
operating cash flows and the disposal proceeds of other factory assets as they
are replaced.

       We operate in a multi-currency environment and are subject to currency
translation risk and, to a much 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. We incur transaction risk whenever one of our subsidiaries enters into
a transaction using a currency other than its functional currency. However, we
reduce this risk by seeking to match our revenues and costs in each currency. In
addition, as described below, we hedge part of our firm commitments for sales to
Japan, Switzerland and Canada through forward contracts and options with
Austrian banks. See " - Liquidity and Capital Resources" and "Quantitative and
Qualitative Disclosures about Market Risk".

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.

                                       22

<PAGE>

       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.

       The debt restructuring in 1998 has been accounted for in accordance with
SFAS No. 15 and future interest payments associated with restructured debt have
been capitalized on our consolidated balance sheets. All future cash payments on
such debt will be accounted for as a reduction of debt and no interest expense
has been recognized for the period between the restructuring and the repayment
of the debt in the fourth quarter 2000. See "-- Treatment of Bank Waivers Under
SFAS No. 15."

       As of December 31, 2002, we had approximately $307.2 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 $274.3 million of net operating loss carryforwards to lower cash
taxes on future taxable income. See Note 20 to the consolidated financial
statements. The realization of operating loss carry forwards is ultimately
dependent upon our ability to generate future earnings in the respective
jurisdictions. There can be no guarantee that we will generate future earnings.

       In connection with ordinary share options granted to officers we have
incurred a non-cash compensation expense of approximately $2.0 million and $1.6
million in the 2001 and 2002 fiscal years, respectively. As of December 31,
2002, deferred non-cash compensation relating to previously granted stock
options amounted to approximately $2.4 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 manufacture and sell our goods.

       In October 2000, London Films was distributed to Head Sports Holdings
N.V., an entity that is ultimately beneficially owned 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.

Basis of Presentation

       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.

Critical Accounting Policies and Estimates

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

       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.

       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.

                                       23



<PAGE>

       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.

       The assessment of tangible and intangible long-lived assets for possible
impairment requires certain judgments 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.

       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 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.

       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.

Recent Accounting Pronouncements

       On July 20, 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that all business combinations be
accounted for by the purchase method. SFAS No. 142 addresses the accounting for
acquired goodwill and other intangible assets and contains certain transitional
provisions, which may affect classification and balances of 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 (see Note 4).

       In October 2001, the FASB issued SFAS No. 144, Accounting for Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 retains the fundamental
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of, for (1) the recognition and
measurement of the impairment of long-lived assets to be held and used and (2)
the measurement of long-lived assets to be disposed of by sale. SFAS No. 144
also amends APB No. 30, Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of Business, by requiring that operating and
disposal gains/losses be recognized in the period incurred. Additionally, SFAS
No. 144 expands the separate presentation requirement of discontinued operations
to include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
on-going operations of the entity in a disposal transaction. This statement is
effective for fiscal years beginning after December 15, 2001. Adoption of this
statement did not have a material impact on our consolidated financial position
or results of operations.

       On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 will not have a material impact on our consolidated
financial position or results of operations other than requiring us
retroactively to reclassify gains or losses on extinguishment of debt from
extraordinary items beginning upon adoption on January 1, 2003.

       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

                                       24
<PAGE>

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. The effects of this standard, if any, have not yet been
evaluated by us.

       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. We
are in the process of assessing the impact of adopting EITF 00-21. We believe
EITF 00-21 has no impact on the financial position and 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. We do not expect that the adoption of FIN 45 will have a significant
impact on the financial position and 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 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. We are
in the process of assessing the accounting impact of adopting FIN 46 but do not
currently expect that it will have an impact on the financial position and
results of operations.

Results of Operations

       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>
                                                                                                     Year Ended December 31,
                                                                                                  2000          2001        2002
                                                                                              -----------   -----------  -------
<S>                                                                                             <C>           <C>          <C>
Total revenues.............................................................................     100.0%        100.0%       100.0%
Cost of sales.............................................................................       57.1          59.7         60.2
                                                                                                -----          ----         ----
Gross profit..............................................................................       42.9          40.3         39.8
Selling and marketing expense.............................................................       24.5          26.0         26.5
General and administrative expense (excluding non-cash compensation expense)..............        8.4           8.9          8.3
Non-cash compensation expense.............................................................        0.3           0.5          0.4
                                                                                                -----         -----        -----
Operating income..........................................................................        9.7           4.9          4.6
Interest expense..........................................................................       (4.7)         (2.9)        (3.0)
Interest income...........................................................................        0.3           0.2          0.2
Foreign exchange gain (loss) .............................................................        1.9           1.5         (1.9)
Other income (expense), net...............................................................       (1.0)          0.0          0.1
                                                                                                ------        ------       ------
Income from continuing operations before income taxes and extraordinary items.............        6.1           3.7          0.0
Income tax benefit (expense)..............................................................        0.5          (1.0)        (0.7)
Share of loss from equity investment, net of tax..........................................          -          (0.3)           -
                                                                                                --------      ------       -------
Income (loss) from continuing operations before extraordinary items.......................        6.6           2.4         (0.7)
Loss from discontinued operations.........................................................       (0.2)           --           --
Extraordinary gain........................................................................        0.5            --           --
                                                                                                ------         -------     ------
Net income (loss).........................................................................        7.0%          2.4%        (0.7)%
                                                                                                 =====          ====        =====
</TABLE>


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

       Total Revenues. For the twelve months ended December 31, 2002, total
revenues decreased by $4.5 million, or 1.2%, to $387.5 million from $392.0
million in 2001. At comparable exchange rates, total revenues decreased by 4.4%.
This was caused by significantly lower sales of racquet sports, the conversion
of our footwear business into a licensing agreement and lower sales of diving
equipment.

                                       25



<PAGE>

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

                                                        For the Years Ended December 31,
                                                        --------------------------------
                                                    2001              2002           % Change
                                                    ----              ----           --------
                                                       (in thousands, except percentages)
Product Category
<S>                                                <C>               <C>               <C>
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)%
                                                 ==========        ==========         ======
</TABLE>


       Winter Sports revenues for the twelve months ended December 31, 2002
increased by $9.2 million, or 6.8%, to $144.7 million from $135.4 million in
2001. The main reason for the increase in sales was the strengthening of the
euro against the US dollar. Excluding the effect of changes in exchange rates,
revenues in winter sports increased by 1.4%. This increase was mainly due to
increased sales of our snowboard equipment.

       Racquet Sports revenues for the twelve months ended December 31, 2002
decreased by $11.3 million, or 6.3%, to $168.8 million from $180.1 million in
2001. Excluding the effect of changes in exchange rates revenues, in Racquet
Sports decreased by 7.8%. This decrease in revenues is mainly due to having
converted our footwear business into a licensing agreement from the beginning of
2002. To a lesser extent, it is the result of the racquet industry as a whole
suffering a decline in 2001 and 2002, due to a decline in the number of the
recreational players, poor weather conditions in certain regions during the peak
selling season and consumer reaction to a slowing economy.

       Diving product revenues for the twelve months ended December 31, 2002,
decreased by $2.9 million, or 4.2%, to $65.6 million from $68.5 million in 2001.
Excluding the effect of changes in exchange rates, revenues from diving products
decreased by 7.0%. We believe that the diving market is suffering from both US
consumer reaction to the uncertainty regarding the overall political situation
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.

       Licensing revenues for the twelve months ended December 31, 2002
increased by $0.4 million, to $8.4 million from $8.0 million in 2001. The
division has been affected by two changes: sports bags, which were licensed
until the end of 2001, started being sold directly by our UK subsidiary and
footwear products were licensed to a third party. Both of these changes took
place at beginning of 2002.

       Gross Profit. For the twelve months ended December 31, 2002, 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, unfavorable currency impacts and lower average
prices. The decline in gross margin reflects higher material and energy costs,
lower average prices as well as unfavorable currency impacts.

       Selling and Marketing Expenses. For the twelve months ended December 31,
2002, selling and marketing expenses increased by $0.5 million, or 0.5%, to
$102.6 million from $102.1 million in 2001. At comparable exchange rates,
selling and marketing expenses decreased by 2.4%. This decrease was due
primarily to significantly lower advertising spending. This impact was partly
offset by planned increased departmental selling expenses in connection with our
new distribution unit in United Kingdom.

       General and Administrative Expenses. For the twelve months ended December
31, 2002, general and administrative expenses decreased by $2.7 million, or
7.8%, to $32.1 million 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 are no longer amortized. In 2001, we also
recorded $0.8 million in connection with an employee termination. The further
increase was due to the strength of the euro against the dollar as our general
and administrative expenses are mostly in euro.

       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.

       Operating Income. As a result of the foregoing factors, operating income
for the twelve months ended December 31, 2002, decreased by $1.4 million, or
7.2%, to $17.8 million from $19.1 million in 2001.

       Interest Expense. For the twelve months ended December 31, 2002 interest
expense increased by $0.4 million, or 3.6%, to $11.7 million from $11.3 million
in 2001. The increase was due to the strength of the euro against the dollar.
Our interest expenses are mostly

                                       26



<PAGE>

in euro.

       Interest Income. For the twelve months ended December 31, 2002 interest
income remained broadly unchanged.

       Foreign Currency Exchange. For the twelve months ended December 31, 2002,
we recorded a foreign currency exchange loss of $7.4 million, 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 US 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. For the twelve months ended December 31,
2002, other income, net increased by $0.4 million to $0.4 million from $0.0
million in 2001.

       Income Tax Benefit (Expense). For the twelve months ended December 31,
2002, total income tax expense decreased by $1.4 million to $2.6 million from
$4.0 million in 2001. The decrease in tax expense is 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 no
further obligations.

       Net Income. As a result of the foregoing factors, for the twelve months
ended December 31, 2002, the Company had net loss of $2.6 million, compared to
net income of $9.4 million in 2001.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

       Total Revenues. For the year ended December 31, 2001, total revenues
decreased by $6.6 million, or 1.7%, to $392.0 million from $398.6 million in
2000. At comparable exchange rates, total revenues decreased by $1.2 million, or
0.3%. This was mainly caused by lower sales of winter products and diving
equipment.

       The following table sets forth revenues for each of our product
categories for each of the years ended December 31, 2000 and 2001:

<TABLE>
<CAPTION>
                                                              For the Years Ended December 31,
                                                              --------------------------------
                                                              2000              2001     % Change
                                                              ----              ----     --------
                                                              (in thousands, except percentages)
Product Category
<S>                                                         <C>               <C>            <C>
Winter Sports........................................       $144,542          $135,421       (6.3)%
Racquet Sports.......................................        174,010           180,108        3.5
Diving...............................................         72,232            68,480       (5.2)
Licensing............................................          7,855             8,012        2.0
                                                          ----------        ----------       ------
  Total revenues.....................................     $  398,639        $  392,021       (1.7)%
                                                          ==========        ==========       =====
</TABLE>

       Winter Sports revenues for the year ended December 31, 2001 decreased by
$9.1 million, or 6.3%, to $135.4 million from $144.5 million in 2000. Excluding
the effect of changes in exchange rates, revenues in Winter Sports decreased by
$8.5 million, or 5.9%. We believe that these decreased sales were mainly a
result of poor snow conditions in the southern part of Europe, a difficult
economic environment in Germany and the continuing weakness of the Japanese
market.

       Racquet Sport revenues for the year ended December 31, 2001 increased by
$6.1 million, or 3.5%, to $180.1 million from $174.0 million in 2000. Excluding
the effect of changes in exchange rates, revenues in Racquet Sports increased by
$9.0 million, or 5.3%. After experiencing some growth in 1999 and 2000, judging
from third party market surveys conducted in all key markets globally, we
believe the market remained stable in 2001 as poor weather conditions in certain
regions during the peak selling season were offset by market increases in other
parts of the world. In this market environment, Racquet Sports experienced
growth during the period, the key revenue drivers being an increase in tennis
racquet sales, following the launch of Head Intelligence technology in late
2000.

       Diving product revenues for the year ended December 31, 2001 decreased by
$3.8 million, or 5.2%, to $68.5 million from $72.2 million in 2000. Excluding
the effect of changes in exchange rates, revenues from diving products decreased
by $2.0 million, or 2.8%. We believe that the diving market is suffering from
both U.S. consumer reaction to the events of September 11th and the general
downturn in the economy, which had resulted in fewer people traveling to dive
centers and resorts and making corresponding purchases of equipment.

       Licensing revenues for the year ended December 31, 2001 increased by $0.2
million, to $8.0 million from $7.9 million in 2000.

       Gross Profit. For the year ended December 31, 2001, gross profit
decreased by $13.1 million to $158.1 million from $171.2 million in 2000. Gross
margin decreased to 40.3% in 2001 from 42.9% in 2000. The decline in gross
profit reflected both lower sales in

                                       27



<PAGE>

Winter Sports and Diving and the costs associated with the conversion of our
Footwear business into a licensing arrangement with Romika. The decline in gross
margin reflects higher material and energy costs, lower sales quantities as well
as the termination of our Footwear business.

       Selling and Marketing Expenses. For the year ended December 31, 2001,
selling and marketing expenses increased by $4.4 million to $102.1 million from
$97.7 million in 2000. This increase was due primarily to increased advertising
expenses incurred in connection with the introduction of the Head Intelligence
racquets and Head Snowboard lines as well as an increase in premiums and
sponsorship payments reflecting the success of our players.

       General and Administrative Expenses. For the year ended December 31,
2001, general and administrative expenses increased by $1.3 million, or 3.9%, to
$34.8 million from $33.5 million in 2000. Of this increase, $0.4 million was
attributable to a lower gain on the sale of a building used in operations in
Italy than was recorded in 2000. In addition, we recorded in the year ended
December 31, 2001, $0.6 million of termination benefits and other related costs
primarily in respect of employee termination and other related costs associated
which in the racquet sports and $0.2 million of expenses in connection with the
start up of our distribution operation in UK.

       We also recorded $1.4 million and $2.0 million for the year ended
December 31, 2000 and 2001, 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.

       Operating Income. As a result of the foregoing factors, operating income
for the year ended December 31, 2001, decreased by $19.5 million, or 50.4%, to
$19.1 million from $38.6 million in 2000.

       Interest Expense. For the year ended December 31, 2001 interest expense
decreased by $7.4 million or 39.5% to $11.3 million from $18.6 million in 2000.
The decrease was due to the partial repayment of our debts using the proceeds of
the initial public offering which took place in October 2000.

       Interest Income. For the year ended December 31, 2001 interest income
decreased by $0.2 million or 20.2% to $0.9 million from $1.1 million in 2000.
This decrease was due to lower cash on hand during these periods.

       Foreign Currency Exchange. For the year ended December 31, 2001, we
recorded a foreign currency exchange gain of $5.8 million, compared to a gain of
$7.5 million in 2000. The decrease for the year, compared with 2000 is primarily
due to the recognition of foreign exchange gains and losses associated with the
Company's U.S. dollar denominated receivables of the Company's European
subsidiaries in 2001. We operate in a multi-currency environment and are subject
to the effects of fluctuation in exchange rates.

       Other Income. For the year ended December 31, 2001, other income
(expense), net increased by $4.2 million to an income of $0.01 million from an
expense of $4.2 million in 2000. In 2000 this amount included a one time payment
of $3.5 million to the former owner of HTM in June 2000.

       Income Tax Benefit (Expense). For the year ended December 31, 2001,
income tax increased by $6.0 million to an expense of $4.0 million from an
income tax benefit of $1.9 million in 2000. This increase is mainly attributed
to an increase of current income tax expense mainly in Austria and Italy in 2001
and the reversal of a valuation allowance on the deferred tax assets associated
with tax loss carryforwards in 2000.

       Share of loss from equity investment, net of tax. This represents the
Company's share of loss from an equity investment in a distribution company
purchased at the end of 2000. For the year ended December 31, 2001 the Company's
share of losses from this equity investment was $1.1 million. On December 14,
2001 the Company withdrew its investment and has no further obligations.

       Net Income. As a result of the foregoing factors, for the year ended
December 31, 2001, the Company had net income of $9.4 million, compared to net
income of $27.8 million in 2000.

5.B. Liquidity and Capital Resources

       Our liquidity needs arise principally from working capital requirements,
capital expenditures and asset acquisitions. Historically, our primary sources
of liquidity have been cash provided from operating activities and borrowings
under various credit facilities.

       Cash generated from operating activities decreased from $35.9 million in
2001 to $23.3 million in 2002. This decrease is a result of lower net income 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.

       Cash from financing activities was provided by entering into a
sale-leaseback agreement of (euro) 10.6 million (approximately $11.0 million) as
well as by entering into a mortgage agreement of $4.8 million which was used in
part to repurchase (euro)3.6 million ( approximately $3.5 million) of the Senior
Notes, to purchase ordinary shares of $4.1 million and to repay $2.9 million
short-term borrowings.

                                       28




<PAGE>

       As of December 31, 2002, we had $37.6 million in cash and cash
equivalents and $49.2 million in unborrowed availability on its credit
facilities. In addition, we had working capital, net of cash of approximately
$159.2 million, an increase of approximately $21.6 million from December 31,
2001. The primary reason of this increase was the strength of the euro against
the dollar. In local currency, working capital has actually been reduced during
the year.

       Cash generated from operating activities increased from $6.5 million in
2000 to $35.9 million in 2001, mainly due to decreased working capital
requirements. In 2001, proceeds from operations were used to purchase property,
plant and equipment totaling $15.2 million, to acquire a distribution business
for $4.1 million, for an interest in a distribution company of $0.6 million, to
pay a dividend to the Company's shareholders of $9.5 million and to purchase
treasury stock of $5.4 million.

       In September 2000, we generated $134.4 million cash proceeds from its
initial public offering, which was used to repay $63.3 million of our lines of
credit, to repay our $29.9 million outstanding senior loan, and to repurchase
$30.0 million senior notes.

       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.

       As described above, we operate in a multi-currency environment and are
subject to currency translation risk and, to a much 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, 2002, we had five forward contracts on Japanese yen
totaling $7.1 million, four Swiss franc forward contracts totaling $5.0 million,
three Canadian dollar option contracts totaling $1.1 million, two Swiss franc
option contracts totaling $0.9 million and one Japanese yen option contract
totaling $1.3 million. We recorded foreign exchange gains of $7.5 million in
2000, $5.8 million in 2001 and foreign exchange losses of $7.4 million in 2002;
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. Total
debt as of December 31, 2002, was $154.9 million, consisting of short-term
borrowings of $58.8 million, other long-term debt of $27.3 million and senior
notes of $68.9 million.

       As of December 31, 2002, we had aggregate undrawn credit facilities of
$34.4 million under operating credit lines, Austrian bank loans, and other lines
of credit. In addition, $14.8 million was available under the U.S. loan
agreement.

       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. We may seek to obtain additional financing in order to pursue our
acquisition strategy and we anticipate refinancing the senior notes when they
mature in 2006. In the absence of a major economic downturn or a large
acquisition, however, we expect that sufficient cash will be available to repay
our senior notes when they mature as well as other existing indebtedness even if
refinancing is not available. Additional financing may be required to fund
unanticipated capital and working capital expenditures and for working capital
needs. Although we believe that we will have enough money available to fund our
working capital and planned capital expenditures for the next several years, we
cannot assure you that we will not require additional financing to expand 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 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

       Long-Term Debt. As of December 31, 2002, we had an aggregate amount of
approximately $0.5 million long-term debt owed to several Austrian banks. This
debt is denominated in euro and had a weighted average interest rate on
outstanding borrowings of approximately 3.4% at December 31, 2002. This
long-term debt is payable over several years, with the final payments scheduled
in 2005.

       Sale-Leaseback. We 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. We have the obligation
to purchase the property back

                                       29


<PAGE>

after 15 years for (euro)8.2 million. We 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. 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, 2002, we had outstanding debt under the sale-leaseback
agreement of $ 11.1 million.

       Operating Credit Lines. As of December 31, 2002, we had outstanding debt
of $0.1 million with various Austrian banks and undrawn credit facilities of
$26.1 million. The weighted average interest rate on outstanding loans was 4.75%
at December 31, 2001.

       Oesterreichische Kontrollbank Aktiengesellschaft. As of December 31,
2002, we had outstanding borrowings under this line of credit of $15.7 million
with Oesterreichische Kontrollbank Aktiengesellschaft. The weighted average
interest rate on this indebtedness was 3.35% at December 31, 2002. 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.

       10 3/4% Senior Notes

       In July 1999, Head Holding issued (euro)100.0 million of 10 3/4% senior
notes due 2006. Proceeds from the offering of the senior notes were used to
repay existing debt and for general corporate purposes. In October 2000, the
Company repurchased (euro)30.9 million (approximately $32.4 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 (approximately $3.5 million) of its Senior Notes. As of
December 31, 2002, (euro)65.7 million ($68.9 million) aggregate principal amount
of senior notes was outstanding.

       The senior notes are unsecured senior obligations of Head Holding which
rank equally with all of Head Holding's existing and future unsecured debt. Head
Holding may redeem all or part of the senior notes at any time on or after July
15, 2003 at a redemption price equal to 105.375% of their principal amount at
maturity, plus accrued interest, declining to 100% of their principal amount at
maturity, plus accrued interest, on or after July 15, 2005.

       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 is 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"). At December 31,
2002, $5.2 million were restricted under this agreement. No funds were used
under this line of credit as of December 31, 2002.

Mortgage Agreement

       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%.

       Other Long-Term Debt

       As of December 31, 2002, we had outstanding amounts of other long-term
debt of $11.0 million with several Italian banks and one bank in the Czech
Republic. The weighted average interest rate on borrowings outstanding under the
loans was 3.9% at December 31, 2002. These loans terminate until 2009.

       Italian Bank Loans

       As of December 31, 2002, HTM Sport S.p.A., our Italian subsidiary, had
drawn an aggregate amount of approximately $16.3 million with various Italian
banks. The weighted average interest rates on these credit lines was 4.7% at
December 31, 2002. We believe we can redraw amounts under these credit lines
after they have been repaid.

       Japanese Bank Loans

       As of December 31, 2002, 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. HTM guarantees 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, 2002.

       Other Lines of Credit

       As of December 31, 2002, we had outstanding amounts of approximately $8.1
million under other operating lines of credit in France, United States and
Canada. The weighted average interest rate on these loans was 4.1% at December
31, 2002.

                                       30



<PAGE>

Disclosures about Contractual Obligations and Commercial Commitments

       Obligations to make future payments under contracts for the periods
indicated are as follows as of December 31, 2002 (in thousands).

                         Less than
Contractual Obligations    1 year    1-3 years  4-5 years  After 5 years  Total
-------------------------------------------------------------------------------
Sale-Leaseback           $   107        237         271        10,477  $ 11,092
Mortgage                     183        409         473         3,657     4,722
Senior Notes                                     68,852                  68,852
Other Long-Term Debt       2,059      3,961       2,391         3,043    11,454
Operating Leases           3,145      4,191       1,378         1,279     9,993

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 2002, 2001 and 2000, we spent approximately $11.0 million, $9.5
million and $9.1 million, respectively, on engineering, research and development
and $1.0 million, $0.6 million and $0.3 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, after a period of decline, have in the
past several years been stable and in 2002 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 an effect on consumer
spending worldwide. In light of the current political and economic situation, we
expect sales in 2003 to be in line or slightly below those achieved in 2002. 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 50% 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 2003 to be in line or slightly below
those achieved in 2002.

     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
are comparable to previous years. For 2003, we will be concentrating on
improving product mix, especially on extending our high end product line, as we
expect the consumer preference for high performance sports products to continue.
We will extend our integrated line of ski products and concentrate on improving
the ski product mix. For those products for which there is high demand, such as
our best-selling recently introduced 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 Dimensional Concept
technology, we are still outsourcing our products with the exception of Step-X4
bindings that are manufactured by Tyrolia.

                                       31

<PAGE>

     In ski boots, where we have renewed our high end range during 2002, 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 which we partially
compensated with our successful product line extension of our Intelligence X
series. We expect sales to be in line with 2002, as we continue to complement
the existing Intelligence X line with new, exciting products and simultaneously
re-position the Titanium-series for the "value consumer".

     In Diving, we are successfully introducing our products in new geographical
areas such as Eastern European countries and Southern Asia. During the last
season big attention was given to reducing the number of offered products in
order to have a simpler and more efficient line but still able to fulfill all
divers' needs. In 2003, we expect to see the benefit of these programs in
increased profitability.

     Capital Expenditures; Research and Development

     We expect to spend approximately $47 million on investment in property,
plant and equipment and $36 million on research and development in the 2003 to
2005 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.

     Strategies for the Future

     Our business strategy is to capitalize on our competitive strengths: our
world class brand portfolio, our leading market positions, our product
innovation leadership, and our global manufacturing, sourcing, sales, marketing
and distribution network. Our goal is to expand our market share while
increasing cash flow and profitability through new product introductions,
continued cost reductions, further licensing agreements and selective
acquisitions.

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 executive officers.


<TABLE>
<S>                                <C>            <C>
              Name                    Age                                  Title
------------------------------     --------       -------------------------------------------------------------
Johan Eliasch................          41         Chairman of the Management Board, and Chief Executive Officer
Ralf Bernhart................          51         Member of the Management Board and Chief Financial Officer
George F. Nicolai............          50         Member of the Management Board
Robert van de Voort..........          47         Member of the Management Board
Carlo Contini................          64         General Manager, Ski Boots Division
Claudio Ferrantino...........          56         Executive Vice President, Diving Division
David Haggerty...............          45         President, Penn Racquet Sports
Klaus Hotter.................          47         Executive Vice President, Ski Division
Robert Kosian................          53         Head of Investor Relations
Georg Kroll..................          54         Executive Vice President, Licensing Division
Robert Marte.................          49         Executive Vice President, Racquet Sports Division
Edgar Pollmann...............          58         Executive Vice President, Bindings Division
Robert Soden.................          59         President, Head USA
Helmut Umlauft...............          56         Vice President, Operations, Head Division
</TABLE>


     Mr. Johan Eliasch has served as Chairman of the Management Board of HTM and
Group Chief Executive Officer since September 1995 and has been, along with
family members, the ultimate beneficial owner of our 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. Since 1991, he has been Chairman of Equity Partners Limited. Mr.
Eliasch also serves as a Special Advisor to the leader of the UK Conservative
Party and the Shadow Foreign Secretary on European Affairs. Mr. Eliasch is a
member of the advisory board of the International Peace Foundation and of the
sports advisory board of the Shimon Peres Peace Foundation.

     Mr. Ralf Bernhart has served as the Chief Financial Officer of HTM and Head
Sport AG 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 HTM, from 1990 to 1995, Mr. Bernhart was a member of the
Executive Board of

                                       32
<PAGE>

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. since 1989. 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, Telefonica, Spireni plc.,
Rothschilds, Volvo, National Grid and Pirelli. Mr. Nicolai also serves as
chairman of the supervisory board of Optical Technologies The Netherlands B.V.
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
boards of both the NationsBank and the Rheinische Hypothekenbank.

     Mr. Carlo Contini has served as Managing Director of HTM Sport S.p.A. since
1996 and manages the ski boots division of HTM. From 1990 to 1996, he served as
the marketing director for the Mares division of HTM.

     Mr. Claudio Ferrantino has served as President of HTM Sport S.p.A. since
1991 and manages the diving division of HTM. He has served as Chairman of Mares
America Corp. USA since 1995. He has been working at HTM Sport S.p.A since 1973
covering different positions including ski/tennis distribution manager.

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

     Mr. Robert Kosian has served as Head of Investor Relations since 2001 and
Head of Corporate Development of Head N.V. from January 1999. As of December 31,
2002, Mr. Kosian decided to leave the Company. From 1991 until joining Head
Holding, he was employed by Citicorp, Inc. or its affiliates and from 1997 was a
Director in the Corporate Finance Division of Citicorp Securities, Inc.

     Mr. Georg Kroll has served as Vice President of Head Sport AG since 1990.
In 1996, he became the Division Manager for Licensing and International Trade.
From 1990 to 1995, he was the Division Manager for the Footwear Division of HTM.

     Mr. Robert Marte has served as Vice President of Head Sport AG since 1987.
He manages the Racquet Sports Division of HTM. He began with HTM in 1980 as a
product manager.

     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. 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. Robert Soden has served as President of Head USA since January 1999. As
of January 2003, he has left the Company. From 1992 to 1998, he served as
President and Chief Executive Officer of Salomon North America, Inc. Prior to
1992, he served in various senior management positions for consumer leisure
product companies.

     Mr. Helmut Umlauft has served as Vice President of Head Sport AG since
1971. He is the Head of Operations of the Head ski and tennis divisions.

     In November 2002, an Executive Committee was established. This Committee
includes Johan Eliasch, Ralf Bernhart, Klaus Hotter, Robert Marte, Edgar
Pollmann, Georg Kroll and Claudio Ferrantino. It is the highest consultative
body and it was formed to ensure that business issues and practices are shared
across the Company and to define and implement common policies.

Supervisory Board

     The Supervisory Board is responsible for overseeing our Management Board
and the general course of affairs of our business. Our Supervisory Board
currently has four members, whose names and biographies are set forth below. See
"Summary of Material Provisions of our Articles of Association and Other Matters
-- Supervisory Board."

     The following table sets forth information with respect to our Supervisory
Board.

<TABLE>
<S>                                                <C>                   <C>


                  Name                                     Age                       Title
--------------------------------------------       ------------------    --------------------------------
William S. Cohen............................               62            Member of the Supervisory Board

                                       33

<PAGE>

Christoph Henkel............................               45            Member of the Supervisory Board
Viktor Klima................................               55            Member of the Supervisory Board
Karel Vuursteen.............................               61            Member of the Supervisory Board
</TABLE>


     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 and
Commerce at the University of Maine. Secretary Cohen has other directorships
with NASDAQ, IDT and Cendant Corporation Inc 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. Christoph Henkel has been a Member of the Supervisory Board of HTM
since 1996. He also is a member of the Board of Directors of Clorox Corp. and of
Henkel Corp. /USA. Throughout the 1990s, Mr Henkel has held various marketing
positions at Henkel KGaA, one of the world's largest consumer goods companies.
In 1989, he became a member of the Shareholders Committee of Henkel KGaA,
becoming its Vice Chairman in 1994.

     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.

     Mr. Karel Vuursteen is the chairman of the executive board of Heineken N.V.
Prior to joining Heineken, he worked for Philips for 23 years, serving in a
variety of executive positions. Mr. Vuursteen also serves as director of Gucci
Group N.V., Netherlands; Nyenrode University, Netherlands; AB Electrolux,
Sweden; Randstad Holding N.V., Netherlands; and De Nederlandse Staatsloterij,
Netherlands. Mr. Vuursteen is also Chairman Advisory Council ING Group N.V.,
Netherlands; and Chairman Stichting Het Concertgebouw Fonds, Netherlands.

6.B. Compensation

     The table below shows the compensation (where applicable) of the directors
for the year ended December 31, 2002 (in thousands):

                                                           Accrued for
                                       Paid                  future
                                                            payments
                                 -----------------     ---------------------
Management Board
  Johan Eliasch............$                  524    $                   --
  Ralf Bernhart.............                  410                        31
  George Nicolai............                   11                        --
  Robert van de Voort.......                   11                        --
                                 -----------------     --------------------
                           $                  956    $                   31
                                 =================     ====================

Supervisory Board
  Karel Vursteen...........$                   10    $                   --
  Christoph Henkel..........                   10                        --
  Viktor Klima..............                   10                        --
  William S. Cohen..........                   10                        --
                                 -----------------     --------------------
                           $                   40    $                   --
                                 =================     ====================

     For the year ended December 31, 2002, the aggregate compensation paid by us
to our executive officers was $2.7 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 $0.2 million for the year ended December
31, 2002. 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, 2002, 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.

                                       34

<PAGE>


The table below shows the details of both Executive Option Plans:

<TABLE>
<S>                     <C>         <C>             <C>               <C>          <C>          <C>              <C>

                        Exercise    Number of non-                                                               Number of non-
                        price at    exercised                          Number of                                   exercised
                          the       options at      Number of          exercised    Number of                    options at the
                        issuance    beginning of    written option      options      shares     Exercise price   end of the year
                        --------    ------------    --------------     ---------    ---------   --------------   ---------------

Option Plan 1998
  Ralf Bernhart........                  175,740                --            --           --               --           175,740
  Christoph Henkel.....                    3,636                --            --           --               --             3,636
  Rene Jaggi...........                    3,636                --            --           --               --             3,636

Option Plan 2001
  Johan Eliasch........                1,426,470                --            --           --               --         1,426,470
  Karel Vursteen.......                   25,002            15,000            --           --               --            40,002
  Christoph Henkel.....                   25,002            15,000            --           --               --            40,002
  Viktor Klima.........                   25,002            15,000            --           --               --            40,002
  William S. Cohen.....                   25,002            15,000            --           --               --            40,002
  Rene Jaggi...........                   25,002            15,000            --           --               --            40,002
</TABLE>


     The total amount accrued by the Company and its subsidiaries to provide
pension, retirement or similar benefits was $1.2 million for the year ended
December 31, 2002.

6.C. Board Practices

     Prior to the adoption of the US Sarbanes-Oxley Act of 2002, we maintained
a series of 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.


     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. However, 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 meet many of the
requirements of this Code of Corporate Governance.


     We are in the process of reviewing our current internal Code of Conduct
which will govern ethics and conflict of interests. Furthermore, all members of
the Supervisory Board are non-executive and independent and envisage setting up
an audit committee which will consist of current and possibly new members of the
Supervisory Board.

6.D. Employees

     The table below shows the number of employees by geographic location at the
years ended December 31, 2000, 2001 and 2002:

                                     For the years ended December 31,
                              -----------------------------------------------
                                       2000            2001              2002
                              -------------    ------------    --------------

   Location
   Austria....................       1,024             919               871
   Italy......................         427             454               444
   Other (Europe).............       1,068           1,007               921
   North America..............         478             454               411
   Other  ....................          41              42                44
                              -------------    ------------    --------------
   Total                             3,038           2,876             2,691
                              =============    ============    ==============

                                       35
<PAGE>

6.E. Share Ownership

     Johan Eliasch and his family members beneficially own entities that control
95.5% of Head Sports Holdings N.V. Head Sports Holdings N.V. owns 19,033,244
ordinary shares, or 47.8% of our issued shares as of March 26, 2003 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, 2002, the exercise price was
$0.29. 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 4.7 years, and
607,622 options have been exercised, as of December 31, 2002. 794,176 options
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 1,631,480 options are exercisable
under the 2001 Plan.

As of December 31, 2002, no other shares were available for grant under the 2001
Plan.

Head Sports Holding N.V., as described below, also controls, among other things,
the voting of our shares held by the Stichting Head Option 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, 2002, 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, 2002, 2,041,300 shares have been acquired by the Stichting.
As of December 31, 2002, 607,622 were exercised so that the Stichting held
1,433,678 shares, or 3.8% of our issued ordinary shares as of such date.

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 Plan provides for the issuance of
a maximum aggregate number of options equal to 10% of the then outstanding
shares of Head N.V., on a fully-diluted basis, subject to adjustments upon the
occurrence of a stock split or dividend or in the event of a merger,
reorganization or other similar event.

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

                                       36

<PAGE>

     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, the Company 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 shares in the Company. 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. The Company assumes that all options
granted will become fully vested. Options have a maximum term of 10 years. As of
December 31, 2002, 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 certain legal entities of which Johan Eliasch and his family
members are the ultimate beneficial owners. 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 19,033,244, or 47.8%, of our
issued shares as of March 26, 2003. Berno, Gambal & Barbee, Inc./Aegis Value
Fund held 2,089,800, or 5.2%, of our issued shares as of March 26, 2003. Neither
Head Sports Holdings N.V. nor Berno, Gambal & Barbee, Inc./Aegis Value Fund have
different voting rights than other shareholders. As of March 26, 2003 no other
person is known to the Company to hold 5% or more of our issued shares.


7.B. Related Party Transactions

     On June 15, 1999, entities controlled by the Company's 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 the Company. 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. The Company
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, the Company 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, 1998, 1999 and 2000.

     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.

     The Company receives 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 $0.2 million, $1.2
million and $1.2 million for the years ended December 31, 2000, 2001 and 2002.

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

7.C  Interests of Experts and Counsel

                                       37
<PAGE>

       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 Accountants, 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 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. Dividend
distributions are decided by the Management Board.

     Our amended articles of association provide for the issuance of preference
shares, which carry preferential dividend rights. No preference shares have been
issued.

     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 report.

ITEM 9: THE OFFER AND LISTING

9.A. Offer and Listing Details

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

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

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

                                  NYSE                   Vienna Stock Exchange
                                  ----                   ---------------------
                          (amounts in dollars)             (amounts in euros)
Years Ended               High               Low          High             Low
                          ----               ---          ----             ---
December, 2000           8.2500             4.2500      11.2000          5.2000
December, 2001           5.9900             3.1100       6.4500          3.1500
December, 2002           3.5400             1.8500       3.8800          1.8000

                                       38

<PAGE>

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


Months Ended
September, 2002          2.3600             2.0700       2.5000          2.0600
October, 2002            2.2000             1.8500       2.3000          1.8500
November, 2002           2.3500             2.0400       2.2200          1.9700
December, 2002           2.2000             1.9500       2.0800          1.8000
January, 2003            2.1700             1.8500       2.0100          1.8300
February, 2003           1.9300             1.5500       1.8900          1.5000


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.

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,

                                       39

<PAGE>


borrow money and provide security therefor 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 28, 2007, 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.

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

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<PAGE>

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 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

                                       41
<PAGE>

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 cast.

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 is 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 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 2003 Shareholders
meeting will be held on May 20, 2003.

     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

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<PAGE>

     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 for our 10 3/4% senior notes. See
"Item 5: Operating and Finance Review and Prospects--Liquidity and Capital
Resources--Loan Agreements."

10.D. Exchange Controls

     Not applicable.

10.E. Taxation

     This taxation summary solely addresses the material Netherlands, U.S. and
Austrian tax consequences to shareholders in connection with the acquisition,
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 paragraph 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. Prospective
investors should consult their tax advisors regarding their particular personal
tax consequences of acquiring, 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").

                                       43
<PAGE>


     The following summary is based on the tax legislation, published case law,
treaties, rules and other regulations as applicable for the calendar year 2002.

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 U.S.-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.

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".

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<PAGE>

     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.

New Legislation

     Recently, new legislation entered into force that affects the eligibility
for an exemption, reduction, refund or credit of the Netherlands 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.

     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

                                       45

<PAGE>

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

          (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; or

     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 United States federal
income tax consequences of the acquisition, 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,
possibly with retroactive effect. Except as specifically set forth herein, 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 organizations;

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

     o    U.S. persons owning directly, indirectly, or constructively, 10% or
          more of the ordinary shares.

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

     o    an individual citizen or resident of the United States for United
          States federal income tax purposes;

     o    a corporation or certain other entities created or organized 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

                                       46

<PAGE>

     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.

Taxes on Income

     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 or
accumulated earnings and profits as determined under U.S. federal income tax
principles. A distribution in excess of our current and 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 basis, will be treated as 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 United States
corporate shareholders.

     The amount of any distribution paid in euros 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 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 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 income tax convention between the U.S. and the Netherlands 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 will generally be treated as
"passive income" or, in the case of various 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 income tax convention 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.

     We do not currently anticipate paying dividends. 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. Investors are urged
to consult their own tax advisors regarding the availability of the foreign tax
credit in their particular circumstances.

Sale or Other Disposition of the Ordinary Shares

     Upon the sale or exchange 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 exchange and the U.S. shareholder's tax basis 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. If a U.S. shareholder receives euros upon a sale or exchange of
ordinary shares, gain or loss, if any, recognized on the subsequent sale,
conversion, or disposition of such 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 such conversion.

Passive Foreign Investment Company

     If during any taxable year 75% or more of our gross income consists of
various types of "passive income," 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 are treated as a PFIC, upon receipt of a
distribution on, or a sale of, ordinary shares, a U.S. shareholder 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. We do not believe that we are currently a
PFIC, and it is

                                       47

<PAGE>

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.

     The foregoing rules with respect to distributions and dispositions may be
avoided if a U.S. shareholder is eligible for and timely makes 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.

     For U.S. shareholders to qualify for treatment under 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. Prospective purchasers are urged to consult
their own tax advisors regarding the consequences of an investment in a PFIC.

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 and 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. Prospective purchasers of ordinary shares
therefore should consult their tax advisors regarding the possible applicability
of the FPHC rules to our company and our subsidiaries and the consequences to
such purchaser 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 redemption 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 30%. Backup withholding will not apply to a holder 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 duly 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 holder's U.S. federal income tax
liability, and a holder may obtain a refund of any excess amounts withheld under
the backup withholding rules by 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

                                       48

<PAGE>

     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
management or registered office in Austria.

Dividend withholding tax

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

     According to the double tax treaty, the right to impose tax in the
Netherlands is limited to 15% of the gross amount of the dividends. In order to
obtain relief from tax obligations exceeding the 15% withholding tax for
dividends in the Netherlands, Austrian shareholders may apply for tax relief. In
order to obtain this reduced rate of withholding tax, a two-stage procedure must
be followed: applications are filed by using the printed form entitled
"Inkomstenbelasting nr. 92 Ost," which can be obtained from the appropriate
Austrian 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 shareholders, including private
investors, individuals and partnerships holding the ordinary shares as operating
assets, are considered income as defined by the Income Tax Act. Such income is
not subject to final tax (Endbesteuerung). If the Austrian private investor may
not claim a free quota or a tax-free amount as provided for in the Income Tax
Act, the dividends are to be reported on his personal tax return. According to
the double taxation convention, Austrian private investors 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%
of the shares of the company for a period of at least two consecutive years, 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.

     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. No tax is generally levied on capital gains resulting from the sale of
an interest of at least 25% in a non-resident company provided the
two-years-holding period is met.

Departure Tax

                                       49

<PAGE>

     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

     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 25 % and the two-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 nonresident 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

                                       50

<PAGE>

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

     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, 2002, 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, 2002.

     The carrying value of the Company's 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.

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


                                                                                                                     Year Ended
                                                   Year Ended December 31, 2002                                   December 31, 2001
                                      ---------------------------------------------------------------------------------------------
                                         2003     2004     2005    2006    2007  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)...............$          107     115       122   68,983      140  10,476     79,943     79,946    60,942    60,942
Weighted avg. Interest rate (fixed)... 10.19%   10.19%   10.19%   10.19%   10.19%  10.19%     10.19%

Fixed rate (USD)...............$          183     197        212     228      245   3,657      4,721      4,721       -         -
Weighted avg. Interest rate (fixed)...  7.33%   7.33%      7.33%   7.33%    7.33%   7.33%      7.33%

Variable rate (Italy)..........$        1,686   1,611      1,590   1,244      697   2,652      9,481      9,481     7,572     7,572
Weighted avg. Interest rate             3.80%   3.80%      3.80%   3.80%    3.80%   3.80%      3.80%

Variable rate, mix of currencies in
2002 primarily Czech crone.....$
                                          374     495        265     225      225     393      1,976      1,976       579       579
Weighted avg. Interest rate....         4.60%   4.60%      4.60%   4.60%    4.60%   4.60%      4.60%
</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:

                                      Contract      Average
                                     Amount Sell    Option
                                     U.S. Dollar    Strike        Fair Value
                                      Equivalent     Price     December 31, 2002
                              (in thousands, except for the option strike price)
Currency Pairs:
Foreign Currency Forward Contracts
Euro
Japanese Yen                          $   7,082      120.59           $   84
Swiss Frank                           $   4,982        1.44          $ (60)
Canadian Dollar                       $   1,141        1.51          $  115

Foreign Currency Options
Euro
Japanese Yen                          $   1,349       121,50         $   33
Swiss Frank                           $     866        1.47          $    1

     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.

                                       51

<PAGE>

ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

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

     Not applicable.

PART III

ITEM 15: CONTROLS AND PROCEDURES

     Prior to the adoption of the Sarbanes-Oxley Act of 2002, we maintained
formal and informal procedures that were designed to ensure that we comply with
our disclosure obligations and that there is a timely flow of important
information to appropriate collection and disclosure points. After the adoption
of the Sarbanes-Oxley Act, we continued to use such disclosure controls and
procedures. Within 90 days prior to the date of this report, an evaluation of
the effectiveness of the design and operation of our disclosure controls and
procedures was performed, with the participation of Head's key senior
management, our CEO and our CFO. In doing so, we considered the controls and
procedures we had already implemented and evaluated the existence of any
material weakness in internal controls or significant deficiencies, all in the
context of our relatively small size and the hands-on role that is played by our
CEO in our day-to-day operations.

     Based on this evaluation, the CEO and CFO concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information about Head and its consolidated subsidiaries and there were no
significant deficiencies. Furthermore, there have been no significant changes in
our internal controls or, to our knowledge, in other factors that could
significantly affect our internal controls subsequent to their evaluation, nor
were there any significant deficiencies or material weaknesses in Head's
internal controls requiring corrective actions.

ITEM 16: [RESERVED]

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.

                                                                       Page

   Index to Consolidated Financial Statements
   Report of Independent Accountants.................................  F-1
   Consolidated Balance Sheets.......................................  F-2
   Consolidated Statements of Operations.............................  F-3
   Consolidated Statements of Stockholders' Equity...................  F-4
   Consolidated Statements of Cash Flow..............................  F-5
   Notes to the Consolidated Financial Statements....................  F-6

                                       52

<PAGE>

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 Head Holding Unternehmensbeteiligung GmbH and Bank of New
     York dated July 15, 1999 (previously filed with Head Holding
     Unternehmensbeteiligung GmbH Form F-4 on September 10, 1999).
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.   A list of the Company's significant subsidiaries indicating their country
     of incorporation and the names under which they do business.
10.1 Reconciliation between Head N.V. and Head Holding Unternehmensbeteiligung
     GmbH Financial Statements.
10.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002.

                                       53



<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS

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, 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, 2001 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002, 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.





PricewaterhouseCoopers
Vienna, Austria
February 24th, 2003

                                      F-1

<PAGE>

                                     HEAD N.V. AND SUBSIDIARIES

                                     CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                            ----------------------------------
                                                                                2001                   2002
                                                                            -----------            -----------
                                                                               (in thousands, except shares)
<S>                                                                        <C>                    <C>
ASSETS:

Cash and cash equivalents................................................. $     22,128           $     37,598
Accounts receivable, net of allowance for doubtful accounts of
  $10,787 and $11,834.....................................................      150,002                161,109
Inventories, net..........................................................       73,575                 77,638
Prepaid expense and other current assets..................................       15,001                 16,441
                                                                            -----------            -----------
  Total current assets....................................................      260,706                292,786
Marketable securities.....................................................        2,001                  2,316
Property, plant and equipment, net........................................       60,728                 73,156
Intangible assets, net....................................................       20,236                 20,236
Deferred income taxes.....................................................       64,793                 78,148
Other non-current assets..................................................        8,055                  7,212
                                                                            -----------            -----------
  Total assets............................................................ $    416,519           $    473,853
                                                                            ===========            ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable.......................................................... $     29,176                 33,069
Accrued expenses and other current liabilities............................       38,593                 39,388
Short-term borrowings.....................................................       53,872                 58,773
Current portion of long-term debt.........................................        1,412                  2,349
                                                                            -----------            -----------
  Total current liabilities...............................................      123,053                133,579
Long-term debt............................................................       67,682                 93,771
Other long-term liabilities...............................................       13,416                 16,670
                                                                            -----------            -----------
  Total liabilities.......................................................      204,151                244,020
Minority interest.........................................................            9                      9
Commitments and contingencies (Note 17)
Stockholders' Equity:
Ordinary shares: EUR 0.20 par value; 39,820,677 shares issued.............        7,067                  7,067
Additional paid in capital................................................      135,435                137,237
Treasury stock at cost: 1,843,460 shares at December 31, 2002.............           --                 (4,334)
Retained earnings.........................................................       75,590                 67,741
Accumulated other comprehensive income....................................       (5,732)                22,114
                                                                            -----------            -----------
  Total stockholders' equity..............................................      212,359                229,824
                                                                            -----------            -----------
  Total liabilities and stockholders' equity.............................. $    416,519           $    473,853
                                                                            ===========            ===========

                The accompanying notes are an integral part of the consolidated financial statements
</TABLE>


                                      F-2

<PAGE>


                                                HEAD N.V. AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                         For the Years Ended December 31,
                                                                            --------------------------------------------------------
                                                                                2000                   2001                  2002
                                                                            -----------            -----------           -----------
                                                                                        (in thousands, except per share data)
<S>                                                                        <C>                    <C>                   <C>
REVENUES:
Product revenues...........................................................$    390,784           $    384,010          $   379,089
Licencing revenues.........................................................       7,855                  8,011                8,398
                                                                            -----------            -----------           -----------
Total revenues.............................................................     398,639                392,021              387,487
Cost of sales..............................................................     227,442                233,971              233,402
                                                                            -----------            -----------           -----------
Gross profit...............................................................     171,197                158,050              154,084
Selling and marketing expense..............................................      97,743                102,094              102,619
General and administrative expense (excluding non-cash
  compensation expense)....................................................      33,488                 34,810               32,081
Non-cash compensation expense..............................................       1,378                  2,025                1,632
                                                                            -----------            -----------           -----------
Operating income...........................................................      38,588                 19,121               17,753
Interest expense...........................................................     (18,642)               (11,275)             (11,677)
Interest income............................................................       1,118                    892                  940
Foreign exchange gain (loss)...............................................       7,502                  5,828               (7,387)
Other income (expense), net................................................      (4,181)                     7                  387
                                                                            -----------            -----------           -----------
Income from continuing operatings
  before income taxes and extraordinary items..............................      24,386                 14,573                   15
Income tax benefit (expense):
  Current..................................................................      (3,231)                (2,169)              (2,410)
  Deferred.................................................................       5,165                 (1,863)                (220)
                                                                            -----------            -----------           -----------
  Income tax benefit (expense).............................................       1,934                 (4,032)              (2,630)
Share of loss from equity investment, net of tax (Note 27).................          --                 (1,117)                  --
                                                                            -----------            -----------           -----------
Income (loss) from continuing operations
  before extraordinary items...............................................      26,321                  9,424               (2,615)
Loss from discontinued operation (Note 3)..................................        (644)                    --                   --
Extraordinary gain (net of income tax of $1,559 in 2000, Note 15)..........       2,104                     --                   --
                                                                            -----------            -----------           -----------
Net income (loss)..........................................................$     27,781           $      9,424          $    (2,615)
                                                                            ===========            ===========           ==========
Earnings per share-basic
  Income (loss) from continuing operations
    before extraordinary items.............................................$       0.94           $       0.25          $     (0.07)
  Loss from discontinued operation.........................................       (0.02)                    --                   --
  Extraordinary gain.......................................................        0.06                     --                   --
  Net income (loss)........................................................        0.99                   0.25                (0.07)
Earnings per share-diluted
  Income (loss) from continuing operations
    before extraordinary items.............................................$       0.86           $       0.24          $     (0.07)
  Loss from discontinued operation.........................................       (0.02)                    --                   --
  Extraordinary gain.......................................................        0.07                     --                   --
  Net income (loss)........................................................        0.91                   0.24                (0.07)
Weighted average shares outstanding
  Basic                                                                          28,071                 38,083               37,356
  Diluted                                                                        30,679                 39,816               37,356


                  The accompanying notes are an integral part of the consolidated financial statements
</TABLE>

                                       F-3
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                          Accumulated      Total
                                                    Ordinary Shares     Additional                           Other         Stock-
                                                 ---------------------   Paid-in    Treasury   Retained   Comprehensive    holders'
                                                   Shares      Amount    Capital      Stock    Earnings      Income         Equity
                                                 ----------  ---------  ----------  --------   --------   -------------    --------
                                                                           (in thousands, except shares)
<S>                                              <C>         <C>       <C>          <C>           <C>      <C>         <C>
Balance at December 31, 1999                     24,227,820       64       15,221         --      64,834      2,428        82,547

Dividend paid..................................          --       --           --         --     (15,717)        --       (15,717)
Stock-based compensation.......................          --       --        1,378         --          --         --         1,378
Conversion to a par value
  from NLG 0.01 to EUR 0.20....................          --    4,414       (4,414)        --          --         --            --
Exercise of warrants...........................   1,009,524        4           (4)        --          --         --            --
Purchase of treasury stock.....................    (956,300)      --           --     (5,211)         --         --        (5,211)
Issuance of ordinary shares under public
  offering, net of issuance costs..............  14,583,333    2,585      131,817         --          --         --       134,402
Spin-off of London Films.......................          --       --           --         --      (1,277)       632          (645)
Comprehensive income:
Net income ....................................          --       --           --         --      27,781         --        27,781
Foreign currency translation
  adjustments..................................          --       --           --         --          --      5,452         5,452
Comprehensive income...........................                                                                            33,233
                                                 ----------   -------   ----------   --------    --------   --------    ---------
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 19)...........          --       --       (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...............          --       --           --         --          --     (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 19)...........  (1,247,050)      --           --     (3,046)         --         --        (3,046)
Repurchase of shares from exercised options....          --       --          167     (1,288)         --         --        (1,121)
Proceeds from executed option..................      11,212       --            3         --          --         --             3
Net loss.......................................          --       --           --         --      (2,615)        --        (2,615)
  Other comprehensive income:
    Unrealized losses on marketable
      securities, (net of tax of $65)..........          --       --           --         --          --       (138)         (138)
    Unrealized gain on derivatives instruments
      (net of tax of $54)......................          --       --           --         --          --        640           640
    Reclassification adjustment for derivative
      gains recorded in net income.............          --       --           --         --          --     (1,488)       (1,488)
    Foreign currency translation adjustment....          --       --           --         --          --     28,832        28,832
                                                                                                                        ---------
Comprehensive income...........................          --       --           --         --          --                   27,846
                                                 ----------   -------   ----------   --------    --------   --------    ---------
Balance at December 31, 2002...................  36,543,539  $ 7,067   $  137,237   $ (4,334)     67,741   $ 22,114    $  229,824
                                                 ==========   =======   ==========   ========    ========   ========    =========


                         The accompanying notes are an integral part of the consolidated financial statements
</TABLE>



                                       F-4
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                                     For the Years Ended December 31,
                                                                                ---------------------------------------
                                                                                    2000          2001         2002
                                                                                ------------    ---------   -----------
                                                                                             (in thousands)
<S>                                                                             <C>             <C>         <C>
OPERATING ACTIVITIES:
   Net income (loss)............................................................$     27,781    $  9,424    $ (2,615)
   Adjustments to reconcile net income
     to net cash provided by operating activities:
     Depreciation and amortization .............................................      16,110      15,936      17,038
     Share of loss from equity investment, net of tax ..........................        --         1,117        --
     Provision for leaving indemnity and pension benefits ......................         772         823         883
     Gain on sale of property, plant and equipment .............................      (1,160)       (867)       (774)
     Gain on debt restructuring ................................................      (2,104)       --          --
     Non-cash interest expense .................................................      (1,023)       --          --
     Non cash compensation expense .............................................       1,378       2,025       1,632
     Deferred tax ..............................................................      (5,165)      1,863         220
     Other, net ................................................................         (31)       --          --

   Changes in operating assets and liabilities (net of effects
     of acquisitions):
     Accounts receivable .......................................................      (7,457)      2,071       2,657
     Inventories ...............................................................     (13,277)      9,402       9,101
     Prepaid expense and other assets ..........................................         (31)     (2,535)      1,494
     Accounts payable, accrued expenses and other liabilities ..................      (9,341)     (3,338)     (6,356)
                                                                                ------------    ---------   -----------
   Net cash provided by operating activities ...................................       6,452      35,921      23,279
                                                                                ------------    ---------   -----------

INVESTING ACTIVITIES:
     Purchase of property, plant and equipment .................................     (20,571)    (16,314)    (20,746)
     Proceeds from sale of property, plant and equipment .......................       3,303       1,080       2,105
     Other acquisitions ........................................................        --        (4,130)       --
     Equity investment (Note 27) ...............................................        --          (684)       --
     Maturities (purchases) of marketable securities, net ......................          90         135        (164)
                                                                                ------------    ---------   -----------
   Net cash used for investing activities ......................................     (17,178)    (19,913)    (18,804)
                                                                                ------------    ---------   -----------

FINANCING ACTIVITIES:
     Change in short-term borrowings, net ......................................     (38,032)     15,135      (2,853)
     Proceeds from long-term debt ..............................................       1,789         807      16,592
     Payments on long-term debt ................................................     (61,970)       (716)     (4,340)
     Proceeds from initial public offering .....................................     134,402        --          --
     Purchase of treasury stock ................................................      (5,211)     (5,378)     (3,046)
     Payments to repurchase shares from exercised options ......................        --          --        (1,121)
     Proceeds from exercised options ...........................................        --          --             3
     Dividend paid .............................................................     (15,717)     (9,455)     (5,233)
     Change in restricted cash .................................................       4,812        --          --
                                                                                ------------    ---------   -----------
   Net cash provided by financing activities ...................................      20,073         393           2
                                                                                ------------    ---------   -----------
   Effect of exchange rate changes on cash and cash equivalents ................     (11,446)    (10,122)     10,994
   Net increase (decrease) in cash and cash equivalents ........................      (2,099)      6,279      15,470
   Cash and cash equivalents at beginning of period ............................      17,948      15,848      22,128
                                                                                ------------    ---------   -----------
   Cash and cash equivalents at end of period ................................. $     15,848    $ 22,128    $ 37,598
                                                                                ============    =========   ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid for interest ..................................................... $     19,992    $ 10,426    $ 10,736
   Cash paid for income taxes ................................................. $      3,230    $  2,208    $  1,747
   Spin-off of London Films ................................................... $        645    $   --      $   --


                The accompanying notes are an integral part of the consolidated financial statements
</TABLE>

                                       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, athletic and outdoor footwear and
apparel), 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.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on a
first-in first-out basis.

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

                                      F-6
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 is recorded at cost and includes expenditures for
new facilities and expenditures which substantially increase the useful lives of
existing facilities. 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. For an explanation how the Company applies SFAS 142, see "Recent
Accounting Pronouncements" in Note 2.

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, United Kingdom and the United States of America are
generally billed in local currency. The local currency is the functional


                                      F-7
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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. Revenue 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.

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.

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.


                                      F-8

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 warrants, 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,
                                                                          --------------------------------------
                                                                             2000         2001            2002
                                                                          ---------    ----------       --------
                                                                                     (in thousands)
<S>                                                                          <C>           <C>           <C>
Weighted average shares outstanding - basic............................      28,071        38,083        37,356
Dilutive effect of stock options.......................................       1,858         1,733            --
Dilutive effect of warrants............................................         750            --            --
                                                                          ---------    ----------       --------
Weighted average shares outstanding - diluted..........................      30,679        39,816        37,356
</TABLE>

For the year ended December 31, 2002, the diluted weighted average shares
outstanding exclude the incremental effect of 1,789,490 stock options because it
is anti-dilutive.

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.
Actual results could differ from those estimates.

Recent Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires that all business combinations be accounted for by
the purchase method. SFAS No. 142 addresses the accounting for acquired goodwill
and other intangible assets and contains certain transitional provisions, which
may affect classification and balances of intangible assets.

The ongoing 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

                                      F-9
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 (see Note 4).

In October 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 retains the fundamental provisions
of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, for (1) the recognition and measurement of
the impairment of long-lived assets to be held and used and (2) the measurement
of long-lived assets to be disposed of by sale. SFAS No. 144 also amends APB No.
30, Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of Business, by requiring that operating and disposal gains/losses be
recognized in the period incurred. Additionally, SFAS No. 144 expands the
separate presentation requirement of discontinued operations to include all
components of an entity with operations that (1) can be distinguished from the
rest of the entity and (2) will be eliminated from the on-going operations of
the entity in a disposal transaction. This statement is effective for fiscal
years beginning after December 15, 2001. Adoption of this statement did not have
a material impact on the Company's consolidated financial position or results of
operations.

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 will not have a material impact on the Company's
consolidated financial position or results of operations other than requiring
the Company retroactively to reclassify gains or losses on extinguishment of
debt from extraordinary items beginning upon adoption on January 1, 2003.

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. The
effects of this standard, if any, have not yet been evaluated by the Company.

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. The
Company is in the process of assessing the impact of adopting EITF 00-21.
Management believes EITF 00-21 has no impact on the financial position and
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. The Company does not expect that the adoption of FIN 45 will have a
significant impact on the financial position and results of operations.

                                      F-10
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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. The
Company is in the process of assessing the accounting impact of adopting FIN 46
but does not currently expect that it will have an impact on the financial
position and results of operations.

Note 3 - Discontinued Operation

In August 2000, prior to its initial public offering, Head N.V. granted its then
100% shareholder, Head Sports Holdings N.V., the option to receive all
outstanding shares of London Films as a shareholder distribution. Head Sports
Holdings N.V. was then and still is controlled by Johan Eliasch. On October 31,
2000, all of the share capital of London Films, with net assets of $0.6 million,
was distributed in accordance with this option. The results of operations of
London Films have been presented as a discontinued operation in the accompanying
consolidated statements of operations for the year ended December 31, 2000.
Revenues of London Films were $ 0.5 million for the year ended December 31,
2000.

No income tax expense has been recorded on the income from discontinued
operations due to the availability of net operating loss carryforwards.

Note 4 - 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.

                                      F-11
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                   -------------------------------
                                                                         2001             2002
                                                                   ---------------   -------------
<S>                                                                    <C>           <C>

Trademarks........................................................$     19,066       $   19,066
Goodwill..........................................................       3,926            3,926
                                                                   ---------------   -------------
                                                                        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
                                                                   ===============   =============
</TABLE>

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 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, 2000, 2001 and 2002,
are as follows:

                                                            Net Income
Year Ended December 31,                              2000       2001       2002
--------------------------------------------------------------------------------
Income (loss) from continuing operations
before extraordinary items ...................    $26,321    $ 9,424    $(2,615)
Add: Goodwill amortization ...................         96         58       --
     Trademark amortization ..................        858        858       --
                                                  -------    -------    -------
Adjusted Income (loss) from continuing
operations before extraordinary items ........    $27,275    $10,340    $ 2,615)
                                                  =======    =======    =======

Net Income (Loss) ............................     27,781      9,424     (2,615)
Add: Goodwill amortization ...................         96         58       --
     Trademark amortization ..................        858        858       --
                                                  -------    -------    -------
Adjusted Net Income (Loss) ...................    $28,735    $10,340    $(2,615)
                                                  =======    =======    =======


<TABLE>
<CAPTION>
                                                                      Earnings per Share

                                                         Basic                                Diluted
Year Ended December 31,                       2000        2001         2002         2000        2001         2002
------------------------------------------------------------------------------------------------------------------
<S>                                        <C>         <C>         <C>           <C>         <C>         <C>
Income (loss) from continuing operations
before extraordinary items .............   $  0.94     $  0.25     $  (0.07)     $  0.86     $  0.24     $  (0.07)
Add: Goodwill amortization .............      0.00        0.00          --          0.00        0.00          --
     Trademark amortization ............      0.03        0.02          --          0.03        0.02          --
                                           -------     -------     --------      -------     -------     --------
Adjusted Income (loss) from continuing
operations before extraordinary items ..   $  0.97     $  0.27     $  (0.07)     $  0.89     $  0.26     $  (0.07)
                                           =======     =======     ========      =======     =======     ========

Net Income (Loss) ......................      0.99        0.25        (0.07)        0.91        0.24        (0.07)
Add: Goodwill amortization .............      0.00        0.00          --          0.00        0.00          --
     Trademark amortization ............      0.03        0.02          --          0.03        0.02          --
                                           -------     -------     --------      -------     -------     --------
Adjusted Net Income (Loss) .............   $  1.02     $  0.27     $  (0.07)     $  0.94     $  0.26     $  (0.07)
                                           =======     =======     ========      =======     =======     ========
</TABLE>


                                      F-12

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Head UK Acquisition

In August 2001, one of the Company's subsidiaries formed a wholly-owned sales
and marketing company in Great Britain. In December 2001, this company acquired
a distribution business for $4.1 million. The acquisition was accounted for in
accordance with SFAS 141, whereby approximately $2.4 million was allocated to
inventories, $0.6 million was allocated to order backlog shown in prepaid
expenses and $0.3 million to liability assumed. The excess of the purchase price
over the fair value of the net assets acquired resulted in $1.4 million of
goodwill. This goodwill will not be amortized, but will be tested at least
annually for impairment. $0.2 million and $0.3 million order backlog was
expensed in 2001 and 2002, respectively.

Note 6 - Accounts Receivable

Accounts receivable consist of the following (in thousands):

                                                             December 31,
                                                       2001             2002
                                                    ----------       ----------
Trade debtors ................................      $  144,196       $  160,835
Other receivables ............................          16,593           12,109
Allowance for doubtful accounts ..............         (10,787)         (11,834)
                                                    ----------       ----------
Accounts receivable, net .....................      $  150,002       $  161,109
                                                    ==========       ==========


Note 7 - Inventories

Inventories consist of the following (in thousands):


                                                             December 31,
                                                    ---------------------------
                                                       2001             2002
                                                    ----------       ----------
Raw materials and supplies....................      $   17,330       $   18,526
Work in process...............................           6,512            6,486
Finished goods................................          63,708           67,766
Provisions....................................         (13,975)         (15,140)
                                                    ----------       ----------
        Total inventories, net................      $   73,575       $   77,638
                                                    ==========       ==========


                                      F-13

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Marketable Securities

Marketable securities consist of the following (in thousands):

                                                              December 31,
                                                       -------------------------
                                                           2001          2002
                                                       -----------    ----------
Held-to Maturity
----------------

Austrian government debt securities....................$      316
Austrian debt security funds...........................     1,087
Corporate debt securities..............................       286
Other securities.......................................       311
                                                       ----------
    Total Marketable securities held-to-maturity.......$    2,001

Available-for-Sale
------------------

Austrian government debt securities....................               $     114
Corporate debt securities..............................                     340
Debt investment funds..................................                   1,208
Other securities.......................................                   1,056
                                                                      ---------
    Total Marketable securities available-for-sale.....               $   2,718

    Less: Short-term portion...........................        --          (402)

                                                       ----------     ---------
    Total Long-term marketable securities..............$    2,001     $   2,316
                                                       ==========     =========


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

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

Mature within 1 year..........................................$          402
Mature between one year and five years........................           454
Mature between five years and ten years.......................            --
Mature after ten years........................................         1,862
                                                              --------------
    Total Marketable securities...............................$        2,718
                                                              ==============

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

Under Austrian regulations debt securities were restricted as to withdrawal,
requiring that a percentage of leaving indemnity plan assets are maintained in
discounted Austrian government and Austrian corporate debt securities. Due to
changes in the regulations, the restriction has been abolished. Management no
longer intends to hold these marketable securities until maturity. Accordingly,
the Company reclassified $2.0 million of held-to-maturity securities to
available-for-sale and wrote down the assets by $0.2 million to market value.


                                      F-14
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 9 - Property, Plant and Equipment

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


                                                           December 31,
                                                    --------------------------
                                                        2001            2002
                                                    ----------      ----------

Land................................................$    4,435      $    4,150
Buildings...........................................    20,325          26,800
Machinery and equipment.............................   101,769         133,531
                                                     ---------      ----------
                                                       126,529         164,481
Less: Accumulated depreciation......................   (65,801)        (91,325)
                                                     ---------      ----------
    Total Property, plant and equipment, net........$   60,728      $   73,156
                                                     =========      ==========


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

Note 10  - 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.

Note 11 - Fair Value of Financial Instruments

The carrying value of the Company's financial instruments approximates fair
value at December 31, 2001 and 2002. 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 approximates the fair value based on quoted market prices at December
31, 2001 and is equal to fair value at December 31, 2002 (see Note 8).

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.

                                      F-15

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


The Company reclassified a gain from AOCI to earnings of $1.5 million for the
year ended December 31, 2002.

The Company recorded the change in fair market value of derivatives related to
cash flow hedges to AOCI of $1.0 million and $0.6 million, net of tax, for year
ended December 31, 2001 and 2002, 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.

The following table provides information regarding the Company's foreign
exchange forward and option contracts as of December 31, 2001 and 2002. 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, 2001
                                          -------------------------------------
                                            Contract      Carrying      Fair
                                             amount         value       value
                                          -----------   ------------  ---------

Forward foreign exchange contracts........$   9,170     $     631     $     631
Foreign exchange option contracts.........$   8,007     $     313     $     313


                                                  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


The Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objectives and strategies for
undertaking various hedge transactions. The Company links all derivatives that
are designated as hedging instruments in foreign currency cash flow hedges to
forecasted transactions or firm commitments. In accordance with the provision of
SFAS 133, the Company assesses, both at the inception of each hedge and on an
on-going basis, whether the derivatives that are designated in hedging
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.


                                      F-16

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 12 - Short-Term Borrowings

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

                                                           December 31,
                                                  ---------------------------
                                                      2001            2002
                                                  -----------     -----------

Lines of credit ..................................$    52,432     $    58,773
Notes payable ....................................      1,440            --
                                                  -----------     -----------
    Total short-term borrowings ..................$    53,872     $    58,773
                                                  ===========     ===========


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") in the total amount of (euro)46.2 million ($48.5 million) secured by
all Austrian trade receivables. In addition, the Company has lines of credit
with several banks in Italy, France, Germany, Czech Republic, Canada and Japan
of $51.3 million. Further, the Company has a $14.8 million credit line with
Fleet Capital Corporation. As of December 31, 2002, $49.2 million was available
under these credit lines. The weighted average interest rate on outstanding
short-term borrowings was 4.l% and 3.7% as of December 31, 2001 and 2002,
respectively.

The credit lines with "RZB" and "Erste Bank" will expire in March 2003 and May
2003, respectively. Currently the Company is in the process of renegotiating
financial agreements providing revolving credit lines with "RZB" and "Erste
Bank". We expect the renegotiation of these two credit lines will be finalized
at the end of March 2003.

Note 13 - Accounts Payable

Accounts payable consist of the following (in thousands):

                                                           December 31,
                                                  ---------------------------
                                                      2001            2002
                                                  -----------     -----------

Accounts payable - trade .........................$    19,264     $    21,815
Salaries and wages ...............................      2,195           1,952
Insurance ........................................        201             210
Fiscal  authorities ..............................      1,871           2,377
Social institutions ..............................        910           1,021
Other ............................................      4,735           5,694
                                                  -----------     -----------
                                                  $    29,176     $    33,069
                                                  ===========     ===========


                                      F-17

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 14 - Accrued Expenses and Other Current Liabilities

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

                                                           December 31,
                                                  ---------------------------
                                                      2001            2002
                                                  -----------     -----------

Employee compensation and benefits................$     6,761     $     6,643
Accrued warranties and allowances.................      8,365           8,055
Advertising.......................................      2,109           1,896
Legal, auditing and consulting fees...............      2,511           1,994
Fiscal authorities................................      2,009           2,366
Commissions.......................................      1,188           1,380
Accrued interest..................................      3,162           3,564
Other.............................................     12,488          13,490
                                                  -----------     -----------
                                                  $    38,593     $    39,388
                                                  ===========     ===========


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, 2002, accruals for
warranties consist of the following (in thousands):

                                                      2002
-------------------------------------------------------------
Balance at the beginning of the period          $       2,418
Current year provision                                  1,885
Settlements made during the period                     (2,256)
Translation adjustment                                    436
                                                -------------
Balance at the end of the period                $       2,484
                                                =============


                                      F-18
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Long-Term Debt

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

                                                           December 31,
                                                  ---------------------------
                                                      2001            2002
                                                  -----------     -----------

Senior notes......................................     60,942          68,852
Other long-term debt..............................      8,152          27,268
                                                  -----------     -----------
     Total long-term borrowings...................     69,094          96,120
     Less current portion.........................      1,412           2,349
                                                  -----------     -----------
     Long-term portion............................$    67,682     $    93,771
                                                  ===========     ===========


Senior Notes

On July 15, 1999, one of the Company's wholly-owned subsidiaries, Head Holding
issued (euro)100.0 million (approximately $101.7 million as at July 15, 1999) of
Senior Notes. Proceeds of the offering were used to repay existing indebtedness
(including the US loan agreement, bridge notes and lines of credit) and for
general corporate purposes.

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 (approximately $32.4
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 (approximately $3.5 million) of its Senior
Notes.


Loan and Security Agreement

In April 2000, the Company's subsidiaries, Head USA, Inc., Mares America
Corporation, Penn Racquet Sports Inc., and Dacor Corporation, entered into a
$20.0 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 is secured by
substantially all the assets of Head USA, Inc., Mares America Corporation, Penn
Racquet Sports, Inc. and Dacor Corporation, including inventory, accounts
receivable, and the Penn trademarks and patents (collectively the "collateral").
The amount the Company is eligible to borrow is based upon a percentage of
certain eligible collateral but will not exceed $14.8 million. Borrowings bear
interest at either a Base Rate or a LIBOR Rate, each as defined in the
agreement, plus an applicable margin. There are no borrowings under this line as
of December 31, 2002. The extinguishment of the prior credit facility and the
write off of deferred financing fees resulted in a loss of $0.9 million in 2000.
This is presented in the consolidated statement of operations under
extraordinary items.


                                      F-19
<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, 2002, are as
follows:

                                    (in thousands)
------------------------------------------------------
2003                                $       842
2004                                        842
2005                                        842
2006                                        842
2007                                        842
Thereafter                               16,561
                                    -----------
Total minimum payments              $    20,771
Amount representing interest             (9,679)
                                    -----------
Obligations under financing
activity                                 11,092
Obligations due within one year             107
                                    -----------
Long-term obligations under
financing activity                       10,984
                                    ===========

As of December 31, 2002 the net book value of land and building under the
sale-leaseback arrangement consists of the following (in thousands):

                                          Land           Building
----------------------------------------------------------------------
Cost                                $       1,070     $       8,796

Less: Accumulated depreciation                 --            (6,947)
                                    -------------     -------------
Net book value                      $       1,070     $       1,849
                                    =============     =============


Mortgage Agreement

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-20

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other long-term debt

Other long-term debt comprises loans in Austria, Italy and Czech Republic
outstanding with several banks. The weighted average interest rate on
outstanding borrowings was 3.9% and 3.9% as of December 31, 2001 and 2002,
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 are as follows (in thousands):


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

2003................................................... $   2,242
2004...................................................     2,302
2005...................................................     2,068
2006...................................................    70,549
2007...................................................     1,167
Thereafter.............................................     6,700
                                                        ---------
                                                        $  85,028
                                                        =========


Debt restructuring

In the fourth quarter of 2000, the Company repaid $29.9 million of debt using
part of the proceeds of the Company's initial public offering. The gain on the
extinguishment of debt of $3.0 million, net of income tax expense of $1.6
million was recorded as an extraordinary item.

Note 16 - Other Long-Term Liabilities

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. Total leaving
indemnity expense was $0.8 million, $2.1 million and $2.1 million for the years
ended December 31, 2000, 2001 and 2002, respectively.

Indemnity and pension liabilities total approximately $12.5 million and $15.7
million at December 31, 2001 and 2002, respectively. The Company assumes a
weighted average annual rate of increase in salaries of 3.0% per annum. The
leaving indemnity liability was determined using a weighted average discount
rate of 6.0% in 2001 and 2002.

                                      F-21

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 17 - Commitments and Contingencies

Operating Leases

The Company leases certain office space, warehouse facilities, transportation
and office equipment under operating leases which expire at various dates
through 2005. Rent expense was approximately $2.3 million, $2.3 million and $3.1
million for the years ended December 31, 2000, 2001 and 2002, 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,
2002 (in thousands):

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

2003....................................................$   3,145
2004....................................................    2,341
2005....................................................    1,850
2006....................................................    1,378
Thereafter..............................................    1,279
                                                        ---------
                                                        $   9,993
                                                        =========


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.

In March 1998, a competitor filed suit against the Company's US subsidiary
alleging patent infringement in connection with the Head Titanium Tennis racket.
The case was settled in April 2000 and the accrual for the estimated settlement
cost was released.

                                      F-22
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 18 - Accumulated Other Comprehensive Income Balance

The following table shows the components of AOCI:

<TABLE>
<CAPTION>

                                                For the Year Ended December 32, 2002
                                                ------------------------------------
                                 Foreign      Unrealized                                   Accumulated
                                 Currency      Gains on      Minimum      Unrealized          Other
                                Translation   Derivative     Pension          Loss        Comprehensive
                                Adjustment    Instruments   Liabilities   on Securities       Income
                                ----------    -----------   -----------   -------------   -------------
                                                                  (in thousands)

<S>                             <C>               <C>           <C>                           <C>
Beginning balance...............$  (6,622)        950           (60)            --            (5,732)
Current-period
changes.........................   28,832        (848)           --           (138)           27,846
                                ---------     -------       -------        -------          --------
Ending balance..................$  22,210         102           (60)          (138)           22,114
                                =========     =======       =======        =======          ========
</TABLE>


Note 19 - Shareholders' Equity

The Company is a Naamloze Vennootschap ("N.V."), a limited liability company
under Dutch law. The registered capital of a N.V. is in the form of shares which
represent negotiable securities. The minimum registered and 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, 2001 and 2002, 39,820,677 shares were authorized and issued,
respectively.

Dividends

The Company declared and paid a dividend of (euro)0.28 (approximately $0.25) per
share and (euro)0.14 (approximately $0.13) per share during the year ended
December 31, 2001 and 2002, respectively.

Treasury Stock

Pursuant to existing resolutions which were approved in August 2000, the Board
of Directors was authorized to buy back 10% of the Company's outstanding share
capital over the next fifteen months to support its share price. Between
November 12, 2000 and May 21, 2001 the Company purchased 2,041,300 shares in the
open market at the prevailing price in the total amount of $10.6 million.

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.

Stichting

                                      F-23

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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
beneficially owned and 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 28),
the Stichting also issues depository receipts to optionholders, 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 October 2002, optionholders exercised 596,410 options under "Plan 1998." The
Company repurchased these shares via the Stichting at market price of $1.3
million.

In December 2002, an additional 11,212 options under "Plan 1998" were exercised.

Note 20 - Income Taxes

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

                                              For the Years Ended December 31,
                                           -------------------------------------
                                             2000           2001          2002
                                           ---------     ---------     ---------

Dutch statutory tax rate...................   35.0%          35.0%        35.0%
Tax rate differential......................   (3.3)          (0.4)          N/M
Other......................................    1.4           (2.9)          N/M
Foreign rate differentials.................    0.4            0.4           N/M
Valuation allowance........................  (41.5)          (4.5)          N/M
                                           ---------     ---------     ---------
Effective tax rate.........................   (7.9)%         27.6%          N/M
                                           =========     =========     =========

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


                                      F-24

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets (liabilities) consist of the following as of December 31,
2001 and 2002 (in thousands):

                                                              December 31,
                                                      --------------------------
                                                          2001           2002
                                                      -----------    -----------

Short-term:

Deferred tax asset:

Tax loss carried forward..............................$     6,827    $    3,306
Inventory reserve.....................................      1,390         4,690
Reserve for doubtful accounts.........................      1,751         1,420
Other.................................................      2,200         2,093
                                                      -----------    ----------
    Total Short-term deferred tax assets..............     12,168        11,509

Deferred tax liabilities:

Deferred expenses.....................................$    (1,464)       (1,473)
Accrued liabilities...................................       (152)         (265)
Other.................................................     (1,053)         (454)
                                                      -----------    ----------
    Total Short-term deferred tax liability...........     (2,669)       (2,192)
                                                      -----------    ----------
    Total Short-term deferred tax asset, net..........$     9,498    $    9,317
                                                      ===========    ==========


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

                                                              December 31,
                                                      --------------------------
                                                          2001           2002
                                                      -----------    -----------

Long-term:

Deferred tax asset:

Tax loss carried forward..............................$    88,042    $  102,094
Intangible assets.....................................         12         1,533
Fixed assets..........................................        143           596
Lease obligations.....................................         --         3,773
Other.................................................        499           730
                                                      -----------    ----------
    Total Long-term deferred tax assets...............     88,697       108,726

Deferred tax liabilities:

Investments...........................................$    (9,853)      (16,291)
Fixed assets..........................................       (997)       (1,608)
Other.................................................        (90)       (1,046)
                                                      -----------    ----------
    Total Long-term deferred tax liability                (10,940)      (18,945)

Valuation allowance...................................    (12,994)      (11,633)
                                                      -----------    ----------
    Total Long-term deferred tax asset, net...........$    64,793    $   78,148
                                                      ===========    ==========


                                      F-25

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


The Company has net operating loss carryforwards of approximately $276.8 million
and $307.2 million as of December 31, 2001 and 2002, respectively. These net
operating losses are available in the following jurisdictions (in thousands):


                                                   December 31,
                                         ------------------------------
                                             2001               2002
                                         -------------      -----------
Austria..................................$     246,731      $   276,233
Germany..................................        7,507            8,648
Other Europe.............................          152              812
Japan....................................        4,700              318
North America............................       17,710           21,204
                                         -------------      -----------
                                         $     276,801      $   307,215
                                         =============      ===========


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 $54 million as of December 31,
2002). 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 21 - 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 22 - Research and Development Expense

The Company incurred research and development expense in the amount of $9.1
million, $9.5 million and $11.0 million for the years ended December 31, 2000,
2001 and 2002, respectively. Research and development expense is included in
cost of sales in the accompanying statements of operations.

                                      F-26

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 23 - Advertising Expense

The Company incurred advertising costs of $30.2 million, $35.7 million and $32.8
million for the years ended December 31, 2000, 2001 and 2002, respectively.
Advertising expenses are included in selling and marketing expense in the
accompanying consolidated statement of operations.

Note 24 - Segment Information

The Company operates in one industry segment, Sporting Goods. The activities
related to the operations of London Films Ltd. were reported as "Income (loss)
from discontinued operations" for the year ended December 31, 2000 and the
segment information for 2000 has been adjusted to reflect this.

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):

                                             For the Years Ended December 31,
                                        ---------------------------------------
                                            2000          2001          2002
                                        -----------   -----------   -----------

Revenues from External Customers:
Austria ..............................  $    67,419   $    67,753   $    61,151
Italy ................................       66,866        63,924        60,554
Germany ..............................       42,893        41,818        41,845
France ...............................       30,646        29,077        27,885
United Kingdom / Ireland .............        9,198         8,345        17,923
Japan ................................       20,809        17,940        20,098
Other (Europe) .......................       29,320        31,254        34,235
North America ........................      131,486       131,911       123,794
                                        -----------   -----------   -----------
   Total revenues ....................  $   398,639   $   392,021   $   387,487
                                        ===========   ===========   ===========


                                                             December 31,
                                                      -------------------------
                                                          2001          2002
                                                      -----------   -----------

Property, plant and equipment:
Austria.............................................. $    17,536   $    20,722
Italy................................................      18,830        21,553
Germany..............................................       1,107         1,019
France...............................................         186           184
United Kingdom / Ireland.............................       3,049         4,705
Japan................................................       1,403         1,516
Other (Europe).......................................       6,112         9,857
North America........................................      12,505        13,601
                                                      -----------   -----------
   Total Assets...................................... $    60,728   $    73,156
                                                      ===========   ===========



                                      F-27
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 25 - 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 $0.2 million, $1.2 million and $1.2 million
for the years ended December 31, 2000, 2001 and 2002, respectively. The company
is based in the Netherlands and provides investor relations, corporate finance,
legal and consulting services.

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

Note 26 - Gain on sale of Property

In 2000, 2001 and 2002, the Company sold in parts the building used in its
Italian operations for $1.7 million, $1.4 million and $0.6 million,
respectively, resulting in a gain of $1.2 million in 2000, $0.9 million in 2001
and $0.4 million in 2002.

The Company's total proceeds on the sale of property were $3.3 million, $1.1
million and $2.1 million resulting in gains of $1.2 million, $0.9 million and
$0.8 million for the years ended December 31, 2000, 2001 and 2002, respectively.
These gains are included in general and administrative expense in the
accompanying consolidated statements of operations.

Note 27 - 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 28 - Stock Option Plans

The Company accounts for its stock options in accordance with SFAS 123.
Accordingly, the Company records stock-based compensation expense based on the
grant-date fair values of the stock options computed using the Black-Scholes
option pricing model. Stock-based compensation expense is recognized over the
vesting term of the options and amounted to $1.4 million, $2.0 million and $1.6
million for the years ended December 31, 2000, 2001 and 2002, 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, 2002, 145,848 shares were
available for grant under the Plan.

                                      F-28

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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, 2002, the weighted average remaining contractual life of the
outstanding stock options is 4.7 years, and 794,176 options are vested and
exercisable.


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

Balance, December 31, 1998.................        1,465,686      $       0.29
Granted....................................          783,620              0.29
                                             ---------------      ------------
Balance, December 31, 1999.................        2,249,306              0.29
Granted....................................           29,088              0.29
                                             ---------------      ------------
Balance, December 31, 2000 and 2001........        2,278,394      $       0.29
Exercised (see Note 19)....................        (607,622)              0.29
                                             ---------------      ------------
Balance, December 31, 2002.................        1,670,772              0.29
                                             ===============      ============

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, 2002 no shares were available for grant under the Plan 2001.


                                      F-29

<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


                                                    Exercise Price Less Than
                                                   Grant Date Stock Fair Value
                                                --------------------------------
                                                   Number       Weighted average
                                                 of shares       exercise price
                                                ------------    ----------------
Balance, December 31, 2000....................             0      $       --
Granted.......................................     3,982,068             4.31
                                                ------------      -----------
Balance, December 31, 2001 and 2002...........     3,982,068      $      4.31
                                                ============      ===========

As of December 31, 2002, the weighted average remaining contractual life of the
outstanding stock options is 8.8 years, and 1,631,480 options are exercisable
under the Plan 2001.


                                      F-30
<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:   March 26, 2003

                                    Head N.V.
                                   Registrant


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



<PAGE>


                                 CERTIFICATIONS



I, Johan Eliasch, certify that:

1.   I have reviewed this annual report on Form 20-F of Head N.V.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rule 13a-14) for the registrant and have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.





Date: March 26, 2003

                                   By: /s/  Johan Eliasch
                                       ----------------------------
                                   Johan Eliasch
                                   Chairman of the Management Board and Chief
                                   Executive Officer


<PAGE>


I, Ralf Bernhart, certify that:

1.   I have reviewed this annual report on Form 20-F of Head N.V.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rule 13a-14) for the registrant and have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     (c)  presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officer and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.






Date: March 26, 2003

                                    By: /s/  Ralf Bernhart
                                        -----------------------------
                                    Ralf Bernhart
                                    Member of the Management Board and Chief
                                    Financial Officer




<PAGE>


                                  EXHIBIT INDEX



Description                                                        Sequentially
                                                                       numbered
                                                                           page

1.1  Memorandum and Articles of Association of the Company
     (previously filed with Form F-1 on September 27,
     2000).........................................................

2.1  Indenture between Head Holding Unternehmensbeteiligung GmbH
     and Bank of New York dated July 15, 1999 (previously filed
     with Head Holding Unternehmensbeteiligung GmbH Form F-4 on
     September 10, 1999)...........................................

4.1  Loan Agreement between Head USA, Inc., Mares America
     Corporation, Penn Racquet Sport, Inc. and Fleet Capital
     Corporation as Agent dated April 5, 2000 (previously filed
     with Form F-1 on September 27,2000)...........................

6.   A statement explaining in reasonable detail how earnings per
     share information were calculated (included in Note 2 to the
     Financial Statements).........................................

8.   A list of the Company's significant subsidiaries, indicating
     their country of incorporation and the names under which
     they do business..............................................

10.1 Reconciliation between Head N.V. and Head Holding
     Unternehmensbeteiligung GmbH Financial Statements.............

10.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
     pursuant to Section 906 of the Sarbanes-Oxley Act of
     2002..........................................................