As filed with the Securities and Exchange Commission on May 16, 2002


                       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, 2001

                       Head Holding Unternehmensbeteiligung GmbH
             (Exact Name of Registrant as Specified in its Charter)

                                     Austria
                 (Jurisdiction of Incorporation or Organization)
                                  Tyroliaplatz
                                A-2320 Schwechat
                                    Austria

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

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

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

              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: 10 3/4% Senior Notes due 2006
                                 ---------------

 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

NOTICE OF SUSPENSION OF DUTY TO FILE REPORTS
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...............................................7
     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.................30
     5.D.    Trend Information..............................................30
   ITEM 6:   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.....................31
     6.A.    Directors and Senior Management................................31
     6.B.    Compensation...................................................33
     6.C.    Board Practices................................................33
     6.D.    Employees......................................................33
     6.E.    Share Ownership................................................34
   ITEM 7:   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..............35
   ITEM 8:   FINANCIAL INFORMATION..........................................36
     8.A.    Consolidated Statements and Other Financial Information........36
   ITEM 9:   THE OFFER AND LISTING..........................................36
     9.A.    Offer and Listing Details......................................36
     9.B.    Plan of Distribution...........................................37
     9.C.    Markets........................................................37
     9.D.    Selling Shareholders...........................................37
     9.E.    Dilution.......................................................37
     9.F.    Expenses of the Issue..........................................37
   ITEM 10:  ADDITIONAL INFORMATION.........................................37
     10.A.   Share Capital..................................................37
     10.B.   Memorandum and Articles of Association.........................37
     10.C.   Material Contracts.............................................41
     10.D.   Exchange Controls..............................................41
     10.E.   Taxation.......................................................41
     10.F.   Dividends and Paying Agents....................................47
     10.G.   Statement by Experts...........................................47
     10.H.   Documents on Display...........................................47
     10.I.   Subsidiary Information.........................................47
   ITEM 11:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....48
   ITEM 12:  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.........49
   ITEM 13:  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES................49
   ITEM 14:  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
              AND USE OF PROCEEDS...........................................49
   ITEM 15:  [RESERVED].....................................................49
   ITEM 16:  [RESERVED].....................................................49
   ITEM 17:  FINANCIAL STATEMENTS...........................................49
   ITEM 18:  FINANCIAL STATEMENTS...........................................49
   ITEM 19:  EXHIBITS.......................................................50
   EXHIBIT INDEX
   RECONCILIATION BETWEEN HEAD N.V. AND
           HEAD HOLDING UNTERNEHMENSBETEILIGUNG GMBH

<PAGE>

                  NOTICE OF SUSPENSION OF DUTY TO FILE REPORTS

General

         On January 31, 2002 Head Holding Unternehmensbeteiligung GmbH ("Head
Holding") filed a Certification and Notice of Suspension of Duty to File Reports
under Sections 13 and 15(d) of the U.S. Securities and Exchange Act of 1934 (the
"Exchange Act") with the U.S. Securities and Exchange Commission (the
"Commission"). This notice was filed in order to inform the Commission that Head
Holding's duty under Section 15(d) of the Exchange Act to file reports required
by section 13(a) of the Exchange Act was suspended pursuant to Rule
12h-3(b)(2)(i) of the Exchange Act. Under Rule 12h-3(b)(2)(i), Head Holding was
eligible to suspend its obligations to file the reports described above as its
10 3/4% Senior Notes due 2006 were held by less than 300 persons resident in the
United States on the first day of Head Holding's fiscal year ending December 31,
2002. This suspension will be discontinued if Head Holding's 10 3/4% Senior
Notes due 2006 are held by more than 300 persons resident in the United States
on the first day of any subsequent fiscal year of Head Holding.

Subsequent Information regarding Head Holding to be filed under Head N.V.

         As a result of the suspension of duty to file reports described above,
Head Holding is not required, among other things, to file an annual report on
Form 20-F for its fiscal year ended December 31, 2001. This annual report on
Form 20-F of Head Holding for the fiscal year ended December 31, 2001 is being
filed solely for the purposes of complying with the provisions of the indenture
governing Head Holding's 10 3/4% Senior Notes, and to inform holders of the 10
3/4% Senior Notes that Head Holding will file reports with the Commission along
with and under those for Head N.V. for so long as the suspension described above
is in force in order to comply with the provisions of the indenture governing
the 10 3/4% Senior Notes. Such holders will therefore only be able to
obtain information regarding Head Holding from the Commission during the period
such suspension is in effect by referring to reports filed by Head N.V.

About Head N.V.

           Head N.V. is a reporting company under the Securities and Exchange
Act of 1934 and is the parent holding company owner of all of Head Holding's
common stock. Unless otherwise stated, information in the annual report on Form
20-F is given in respect of Head N.V. and its subsidiaries, as described below.
A reconciliation of certain financial statement items of Head N.V. presented
herein to those of Head Holding is given at this end of this report.


                        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 Head
N.V.'s intermediate holding company, Head Holding Unternehmensbeteiligung GmbH
and its predecessor company and references to "HTM" are to Head N.V.'s primary
operating subsidiary HTM Sport-und Freizeitgerate AG.

     "Head", "Head Titanium Tennis", "Head Intelligence", "Head Intellifiber",
"Tyrolia", "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.

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

                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 transpire. 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


                                       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, 1997, 1998, 1999, 2000 and 2001 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,
                                                                -------------------------------------------------------------------
                                                                     1997          1998         1999           2000         2001
                                                                ----------------------------------------- -------------------------
                                                                              (in thousands, except per share data)

<S>                                                             <C>           <C>          <C>           <C>           <C>
Statement of Operations Data:
Total revenues............................................      $  286,945    $ 304,504    $  388,755     $ 398,639    $ 392,021
Cost of sales.............................................         178,175      180,894       228,453       227,442      233,971
                                                                -----------   ----------   -----------    ---------    ---------
Gross profit..............................................         108,770      123,610       160,302       171,197      158,050
Selling and marketing expense.............................          73,902       75,551        95,906        97,743      102,094
General and administrative expense (excluding non-cash
  compensation expense and restructuring charge)..........          30,074       29,911        36,910        33,488       33,972
Non-cash compensation expense.............................               -           21           548         1,378        2,025
Employee termination and other related costs..............               -            -         1,691             -          838
                                                                -----------   ----------   -----------    ----------   ---------
Operating income..........................................           4,794       18,127        25,246        38,588       19,121
Interest expense(1).......................................         (16,455)     (10,573)      (14,092)      (18,642)     (11,275)
Interest income...........................................           3,138        1,349           947         1,118          892
Foreign exchange gain (loss)..............................             (73)      (2,279)        4,574         7,502        5,828
Other income (expense), net...............................             216          459         1,899        (4,181)           7
Minority interests in earnings of subsidiaries............              38            2             -             -            -
                                                                ----------    ----------   -----------    ----------   ---------
Income (loss) from continuing operations before income taxes
and extraordinary items...................................          (8,342)       7,084        18,574        24,386       14,573
Income tax benefit (expense)(2)...........................            (360)      (1,812)       35,887         1,934       (4,032)
Share of loss from equity investment......................               -            -             -             -       (1,117)
                                                                -----------   ----------   -----------    ----------   ----------
Income (loss) from continuing operations before extraordinary       (8,702)       5,273        54,463        26,321       9, 424
items.....................................................
Income (loss) from discontinued operations................            (298)         243           (60)         (644)           -
Extraordinary gain(3).....................................               -       58,203              -        2,104            -
                                                                -----------   ----------   -----------    ----------   ---------
Net income (loss).........................................      $   (9,000)   $  63,718    $   54,403     $  27,781    $   9,424
                                                                ===========   ==========   ===========    ==========   =========
Earnings per share--  basic(4)
  Income (loss) from continuing operations before               $    (0.44)   $    0.26    $     2.46     $    0.94    $     0.25
extraordinary items.......................................
  Net income (loss).......................................      $    (0.45)   $    3.19    $     2.46     $    0.99    $     0.25
Earnings per share--  diluted(4)
  Income (loss) from continuing operations before                        -         0.26    $     2.23     $    0.86    $     0.24
extraordinary items.......................................
  Net income (loss).......................................               -         3.19    $     2.23     $    0.91    $     0.24
Weighted average shares outstanding(4)
  Basic...................................................          20,000       20,000        22,132        28,071       38,083
  Diluted.................................................               -       20,232        24,370        30,679       39,816

Other Financial Data:
Cash provided by operating activities.....................      $   27,650    $  13,531    $   28,444     $   6,452    $  35,921
Cash used for investing activities........................      $   (9,346)   $ (17,824)   $  (57,517)    $ (17,178)   $ (19,913)
Cash provided by financing activities.....................      $  (11,393)   $ (27,432)   $   43,066     $  20,073    $     393

</TABLE>

                                       2

<PAGE>



<TABLE>
<CAPTION>
                                                                                        As of December 31,
                                                                --------------------------------------------------------------------
                                                                   1997           1998         1999          2000          2001
                                                                ----------    --------     --------      --------      --------
<S>                                                             <C>             <C>          <C>           <C>           <C>
Balance Sheet Data:
Cash(5)...................................................      $  45,288       $ 12,860     $ 23,624      $ 15,848      $ 22,128
Working capital(6)........................................      $ (61,599)      $ 29,351     $ 73,432      $151,241      $137,654
Total assets..............................................      $ 330,099       $344,618     $434,660      $434,304      $416,519
Total debt(7).............................................      $ 268,730       $199,335     $240,108      $114,819      $122,966
Capital stock(8)                                                $   1,010       $     53     $     64      $  7,067      $  7,067
Total stockholders' equity(9).............................      $ (25,888)      $ 38,816     $ 82,547      $229,988      $212,539

</TABLE>

----------
(1)   Interest expense for the years ended December 31, 1998, 1999 and 2000
      exclude  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 and warrants have been
      excluded from the diluted earnings per share calculation for the year
      ended December 31, 1997 and 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.
(5)   Cash includes cash and cash equivalents and in 1997, 1998 and 1999
      restricted cash of $7.9 million, $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 which is
      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 December 31, 1999. Due
      to the repayment of the restructured debt in the fourth quarter of 2000,
      all capitalized future interest payments have been released.
(8)   In 1997, $1.0 million was transferred from capital stock to additional
      paid-in capital. In 1999 due to the conversion to a par value from NLG
      0.01 to (euro)0.20, $4.4 million was transferred from additional paid-in
      capital to capital stock.
(9)   In 2000, a dividend of (euro)16.1 million (approximately $15.7 million)
      was paid to the Company's sole then shareholder. In 2001, the Company paid
      dividend of (euro)0.28 (approximately $0.25) per share to its
      a 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 eleven 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 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 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
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 as of February 28, 2002, 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, 2001. On December 31, 2001, the noon buying rate was (euro) 1.1235
= $1 which translates to ATS 15.4597 = $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, for the periods and dates indicated, information
concerning the noon buying rate for Austrian schillings for the years 1997 to
1998 expressed in schillings per dollar, and as of 1999, euros expressed in euro
per U.S. dollar. On March 30, 2002, the noon buying rate translated to (euro)
1.1472 = $1.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                -----------------------
                                            1997         1998           1999          2000            2001
                                            ----         ----           ----          ----            ----
                                        (ATS per one U.S. dollar)           (euros per one U.S. dollar)
<S>                                        <C>          <C>            <C>           <C>             <C>

 High                                      13.233       13.039         0.9984        1.2092          1.1947
 Low                                       10.840       11.323         0.8466        0.9657          1.0488
 Average(1)                                12.239       12.368         0.9445        1.0861          1.1135
 Rate at end of period                     12.634       11.720         0.9930        1.0652          1.1235

</TABLE>


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

              October   November   December     January    February     March
               2001       2001       2001        2002        2002       2002
               ----       ----       ----        ----        ----       ----
                                 (euros per one U.S. dollar)

High          1.1245     1.1403     1.1399      1.1636      1.1610      1.1558
Low           1.0892     1.1057     1.1057      1.1073      1.1392      1.1317
----------

(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 carving skis and ski 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 the economy 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,
which are our primary customers. As a result, our results may be adversely
affected by downward trends in the economies in which we sell our products, such
as the recession in Japan during the 1990's, or the occurrence of events that
adversely affect economies, such as the September 11th attacks on the United
States, both of which reduce discretionary consumer spending. We cannot assure
you that any prolonged economic downturn

                                       4

<PAGE>

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
continue to increase sales within existing product categories, enter into new
product categories and further develop licensing opportunities. In order to
manage our growth effectively, we must continue to implement and improve our
operational and financial systems and controls and expand, train and manage our
employee base. Our 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 30% of our cost of sales consist of fees paid to third-party
manufacturers located in Europe, including Czech Republic (bindings and some
junior skis), Estonia and Italy (diving products, ski boots and snowboard
bindings) and Asia, including China (tennis and squash racquets and
accessories), and Thailand and Taiwan (diving products). As a result of our
continued use of 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 such countries into 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 fulfil
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 47.8% of our issued and outstanding
shares as of March 1, 2002. Johan Eliasch and his family members are the
ultimate benefical 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 decisions.

     As a Netherlands public company with limited liability, our business is
carried out primarily by a management board, which

                                       5

<PAGE>

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. Johan Eliasch and/or his affiliates or family members control
the Board of the Stichting. 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 significantly
influence 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, 2006, 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
significantly influence 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, which could adversely affect our business. In
addition, we cannot assure you that our employees and third parties with whom we
have entered into confidentiality agreements will respect these obligations, or
that our competitors will not use our trade secrets or proprietary information.
In addition, the laws of some countries do not protect our products and
intellectual property rights to the same extent as the laws of the United States
or Europe. Litigation may be necessary to defend against claims of infringement,
to enforce our patents or trademarks, or to protect trade secrets and could
result in substantial costs to us. We cannot assure you that we would prevail in
these types of litigation.

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

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

     We believe that the overall impact of complying with regulations and
legislation protecting the environment will not have a material adverse effect
on our future financial position or operating results. We cannot assure you,
however, that this will be the case. Capital expenditures and expenses in 2001
attributable to compliance with environmental laws were not material.

                                       6

<PAGE>

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 (skis, ski boots and snowboard equipment, tennis and
squash racquets, athletic and outdoor footwear and apparel), 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 30,000 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 portfolio 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 which 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.

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

                                       7

<PAGE>

that there are 50 million skiers and 8 million snowboarders active worldwide and
that the market for winter sports equipment in 2001 was approximately $1.35
billion at the wholesale level, consisting of $475 million of skis, $175 million
of bindings, $320 million of boots and $375 million of snowboard equipment. The
ski market is split primarily among Europe, the United States and Japan, with
Europe in 2001 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
4.4 million pairs sold per year in 2001. 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 2001, 1.5 million boards were sold.

     Globally in 2001 the winter sports market experienced a decrease of
approximately 5.4% (2% when calculated on basis of local currency) caused by
late or total lack of snow in some important markets in Europe and eastern 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 4.4 million pairs in 2001. The Japanese and U.S. markets which
suffered the largest historical declines, rebounded in 2001. The ski boots
market suffered a decline from 3.9 million pairs sold in 2000 to 3.6 million
pairs sold in 2001 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 $475 million or 100% of total industry-wide ski
sales at wholesale in 2001, 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. We
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. Established ski companies, including ourselves, are
buying snowboard companies. 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 2001 was approximately 8.3 million units, with
a value of approximately $590 million at the retail level, which we estimate
translates into approximately $350 million at wholesale. Although we believe
that the markets' size did not materially change from last year, due to the
availability of better quality data from third parties, the market size noted
above reflect a slightly bigger market than indicated previously. The market is
divided primarily among the United States, Europe and Japan. The United States
and Europe each represent more than 30% of the 2001 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. For the market in general,
other factors include increased durability of products and, until recently, the
lack of charismatic players.

     The market decline has led to brand consolidation, which has benefited
primarily ourselves and the Wilson brand.

     We estimate worldwide sales of tennis balls at approximately $181 million
at wholesale in 2001 versus $184 million in 2000, with approximately 20.5
million dozen tennis balls sold in 2001 versus 20.6 million dozen for 2000. Of
these sales, approximately 47% (in units) were in the U.S. and 29% in Europe,
representing the two largest markets for tennis balls. Tennis balls sales are
affected by the same market factors as described above.

Diving Market

                                       8

<PAGE>

     We define the diving market as the market for diving equipment, wetsuits
and diving accessories. We estimate that the market for diving equipment was
approximately $355 million at the wholesale level in 2001, down approximately
15% from 2000. Most of the decline was attributable to a sharp decline in U.S.
travel after September 11th, which affected sales of diving equipment. Based on
our market knowledge and experience, we expect the diving equipment market to
grow at approximately 2% per annum over the next two years, driven mainly by the
popularity of the sport in new geographical areas such as Asia and eastern
European countries and from niches such as diving centers and high-tech diving.
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 120 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 34.5% of our total revenues in 2001.

Head Winter

     Our Head ski brand is one of the leading ski brands in the world, with an
estimated 12% market share in 2001. 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 2001.

     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         3    Extreme stability and precision for racing and high performance
                                                     skiing

Freeride       Advanced to expert skiers        7    Maximum lift in powder snow and manoeuvrability for off piste
                                                     and extreme skiing

Allround Carve Intermediate to advanced skiers  6    Easy-turning and manoeuvrability for all types of terrain

Extreme Carve  Advanced to expert skiers        2    Shorter length and radical carving side cut for extreme-turn
                                                     carving skiing

Air Carve      Advanced to expert skiers        2    Shock-absorbing reinforced construction for mogul, freestyle
                                                     skiing and jumps

Easy Carver    Beginner to intermediate skiers  3    Shorter length and easy-turning suitable for learning and hobby
                                                     skiers

Junior         Young skiers                     4    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>

     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 Chip System. 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.

                                       9

<PAGE>

     Market Share. We estimate that the global ski market was approximately $475
million at wholesale in 2001. We believe, based on published market data and our
market knowledge and experience that in 2001, 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 12% in
2001, an increase of approximately 50% from 8% in 1996.

     We expect demand for carving skis to continue to increase and we estimate
that carving ski sales represented 100% of total industry-wide ski sales in
2001. Management believes that Cyber, our name brand 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 to introduce a fully integrated line of
carving skis, boots and bindings and are one of only a few manufacturers world
wide to offer 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, 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 plant in
Kennelbach, Austria, where we use a computerized manufacturing system. We
outsource some models of junior skis to a third party. Through factory
automation, we have been able to greatly improve our labor productivity. In
addition, our introduction of a flexible work schedule adapting to peak
production needs for the March to September period enables us to have greater
control over quantities produced. 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 2001, based on units. Our binding business represented 32.1%
of our total Winter Sports revenues in 2001.

     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).

Freeride             All terrain Freeride skiers         2        Innovative Power Select technology (active adjustment of ski
                                                                  camber; patented).

Cyber Carve          Carving skiers                      4        Different systems featuring Cyber Free Flex Technology
                                                                  (patented) or Carve Flex Technology and different integrated
                                                                  stand heights.

Performance          All skiers                          3        Suitable for all types of snow.

Junior               Young skiers                        3        Provides safety features for children.

Rental               Rental market                      10        Adjustable toe and heel parts with unique Single Code System.
                                                                  Modular pricing system.

Carving Plates       Carving skiers                      3        Two-piece plates, pre-drilled for Tyrolia models, different
                                                                  stand heights and damping systems.
</TABLE>

     Technology. We believe that the Tyrolia brand has consistently offered
outstanding performance in safety and reliability while introducing
technological innovations. In 1996, we were the first to introduce a carving
binding line to complement the performance characteristics of the Cyber ski. Our
Power Select technology allows skiers to increase or decrease the ski pretension
and to adjust the radius for carving with the turn of a dial. By adjusting the
dial, the skier can optimize performance for different terrain and snow
conditions. Free Flex technology allows the heel of the skier to glide freely as
the ski bends, optimizing edge grip and ski contour, which facilitates a higher
degree of 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

                                       10
<PAGE>

market.

     In our Rental line, we introduced the innovative Chip System in 2001, which
revolutionizes process and possibilities in the Rental business by providing
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 comfort 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 $175 million at wholesale in 2001. Based on our market knowledge
and experience, we estimate our market share worldwide for bindings in units was
29% in 2001 and believe that we were the top selling brand in 2001, in terms of
number of units sold.

     We expect demand in special carving bindings systems, specific features for
shaped skis as well as new plate technology, to increase with the growing
preference for carving skis. See "-- Industry Overview -- Winter Sports Market."
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 its brand appeal and market share. We also intend to respond
to demands for so-called systems, by developing completely new and innovative
solutions of integrated binding - plate - ski performance 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 a plant 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 19.8% of our total Winter
Sports revenues in 2001.

     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               8        New 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 2 innovative patented solutions, to improve
                                                                          performance.

All Mountain        Experts to intermediate skiers               7        Bi-injection technology and high performance construction
Performance                                                               derived from Racing line. AutoSki Walk is available for
                                                                          intermediate level skiers.

Sport/Comfort       Intermediate and beginners                   8        EZ-on shell, Double Power Buckle and Autoski Walk
                                                                          create maximum ease use and comfort.

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

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

Rental              Rental                                       4        High comfort and reliable for intermediate 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.

Junior              All segments                                 7        Junior boots from racers to beginners.

</TABLE>

                                       11

<PAGE>

     Technology. In 2001, we introduced two new product lines positioned at the
top end level for racers, freeriders and professional expert skiers. The line
features an exclusive buckling system, two new shells and new innerboot
construction. These products have allowed us to increase by more than 80% the
sales in the top end segment and confirm our innovative brand image .

     Market Share. We estimate that the market for boots worldwide was
approximately $320 million in 2001. We believe, based on our market knowledge
and experience, that the Head ski boots held the number three position world
wide in 2001 based on units sold. We estimate that our market share (Head and
Munari together) in 2001 was approximately 12.5%, which is stable in comparison
to the 2000 season.

     We expect unit sales of our boots worldwide to increase by leveraging our
brand names and extending the top end product line described above. Our
expectation for 2002 is a global declining market between 5-7% 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 relatively lower.

Snowboards

     We market our snowboard products under the Head brand. These products
accounted for 7.5% of our total Winter Sports revenues in 2001.

     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        10             Dimensional concept:  perfect boot binding board match
                                                                Free Flex rail system: innovative binding fixation

Softboots            Freestyle / Freeride        12             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: re-entry improvement
                                                                Auto-Lock highback: automatic fixation of highback to heelcup

Hardboots            Alpine                       3             Polyether shell: highly temperature resistant


Hardbindings         Alpine                       3             Hightech Carbon Dyneema: maximum strength, minimum weight material


Step in bindings &   Freeride/ Freestyle                        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. Head snowboards stand for the
"Dimensional Concept". This concept aims at a perfect match of boot size with
board, avoiding toe and heeldrag, or low leverage. No other snowboard company
has dealt with this very common problem in the systematic way Head does. In
every product category, Head is offering unique features, like Freeflex 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 snowboard market was
approximately 1.5 million units in 2001 and that our market share was
approximately 8.6% in Europe and 2.2% in Japan.

     Manufacturing. In 2001, we outsourced all of our products, except the
Step-X4 bindings that are manufactured by Tyrolia.

                                       12

<PAGE>

Racquet Sports

     Racquet sports products accounted for 45.9% of our total revenues in 2001.
Under the Head brand name, we design, engineer and manufacture a broad offering
of tennis, squash and racquetball racquets. We also sell athletic shoes and
tennis accessories under the Head brand and tennis balls and racquetball balls
under the Penn brand name.

Head Racquets

     We estimate that in 2001 our Head racquets were the number two brand world
wide, comprising 22.1% and 25.6% of the world market in units and revenue,
respectively (extrapolated from independent research on retail sell-through
conducted in all key tennis markets). Revenues from racquets and accessories
amounted to 54.8% of our total Racquet Sports revenues in 2001.

     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                   10      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
have started to endorse this unique and proprietary technology. The consecutive
victories in the 2001 French Open and Wimbledon Grand Slam Tournaments by
Gustavo Kuerten and Goran Ivanesivic, using a Head Intelligence product, has
generated an exceptional awareness for this technology amongst the media and
consumers around the world, resulting in higher penetration of premium markets
and thereby increasing sales and product mix substantially.

     Market Share. We estimate that the market for tennis racquets worldwide
was approximately 8.3 million units and $590 million at retail level in 2001. We
believe, based on our market knowledge and experience, Head brand of tennis
racquets is number one in Europe and number two on a worldwide level as
previously explained. See "-- Industry Overview -- Racquet Sports Market." We
estimate that our revenue market share worldwide for 2001 was approximately
25.6% and that our European market share was 32.2%.

     Since the early 1990s, our worldwide unit market share for our Head
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 1.9 million in 2001. These market share gains occurred in all
major markets around the world and are largely due to the introduction of
proprietary premium technologies such as Titanium and Intelligence and their
subsequent and successful use by some of the most popular athletes in Tennis. On
a long-term basis, due to our continued investment in research and development,
global sales, marketing and distribution network and high level of market
penetration, we expect to continue to grow our global market share for our
tennis racquet products, with an increased presence in the U.S. and Japan and
opportunities in developing markets such as Asia, South America and Eastern
Europe, where a growing middle class is showing an increasing interest in
tennis.

     We believe that our significant global market share is partly a result of
our strong presence within the professional tennis circuit. Based upon the
December 2001 ATP Tour Rankings, Head racquets were used by 22 of the top-rated
100 professional male players, including career grand slam champion and 2001
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 and Chanda Rubin, ATP Senior
Tour players such as Bjorn Borg and highly reputed coaches including Bob Brett
and Dennis van der Meer also endorse Head tennis products. In

                                       13
<PAGE>

addition, we operate a strong grassroots program, introducing our products to
leading instructors, coaches and other opinion leaders who are in a position to
generate interest in a product and influence the ultimate customer decision. See
"-- Marketing."

     The Head Titanium and Head Intelligence tennis racquets have significantly
increased our overall U.S. market share (in terms of revenues) from 9.0% in 1997
to 25% in 2001. According to Yano, an independent Japanese research institute,
during the same period we have also been able to grow our share of the Japanese
market from 3% to 13.5% in retail racquet sales.

     With line extensions in Head squash and racquetball Titanium and
Intelligence models, we cross-leveraged these technologies, and thereby improved
our position in other racquet sports markets as well. In 2001, we finished the
year slightly down in U.S. racquetball market share with a 1.6% decline in
revenue share to 31%, according to the 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 25% of the total volume sold. All other
racquets, accounting for approximately 75% of all racquets sold, are outsourced
from manufacturers in China. For those tennis racquets made in Austria, a key
part of the labor 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 36.3% of our total Racquet Sports revenues in 2001.

     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
ATP Tour

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


Racquetball Balls
Pro                  Tournament players                               1        Premium price/performance

Ultra-Blue           All players                                      1        Flagship brand

Titanium             All players                                      1        New in 1998; titanium enhanced core

</TABLE>

       Technology.  Penn has introduced many innovations, including:

       o  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;

                                       14

<PAGE>

       o  the pull ring can with plastic lid;

       o  recyclable plastic tennis ball containers; and

       o  SMART OPTIK felt with 19% more visibility.

     Market Share. We estimate that the market for tennis balls is approximately
$181 million worldwide, with approximately 20 million dozen tennis balls sold
in 2001. Penn is a market leader, with a market share of 34% worldwide and of
over 51% in the United States, the world's largest market in 2001. 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 34% in 2001.

     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 for more than eighty major tennis
tournaments annually, including the Tennis Master's 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 Master Series tournaments, the highest profile
tournaments in tennis outside the Grand Slam events. This exclusive sponsorship
provides live broadcast brand exposure globally during the season as well as
merchandising opportunities. Penn is also the exclusive tennis ball sponsor of
the United States Professional Tennis Association, the largest tennis teaching
organization globally.

     The market for racquetball balls is concentrated mainly in the United
States, which we estimate to account for over 90% of the world market. In the
United States, we estimate our market share to be approximately 65% in 2001.
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 racquetball
balls (with the exception of less than 5% of the low end products) at our
facilities in Phoenix, Arizona and Mullingar, Ireland. In order to increase
efficiency, we are in the fourth year of a project to automate some of our key
manufacturing processes. Cost savings began to accrue in 1999, with full the
effect expected by year end 2002.

     In 2000, we entered into a licensing agreement with a South American
company which manufactures and distributes Penn tennis balls in Argentina
exclusively for the South American markets.

Athletic and Outdoor Shoes

     During the spring of 2001, we decided to license both our Athletic and
Outdoor footwear activities to Romika, a European streetwear shoe maker.
Following this decision, we liquidated footwear inventory during the rest of
2001. The key management of our Head Footwear Division agreed to transfer their
employment to Romika, implementing a very similar footwear business plan,
thereby granting maximum continuity and consistency. The license period began
January 1, 2002. In 2001, footwear accounted for 8.9% of our Racquet Sports
revenues.

     As part of this licensing arrangement, we will continue to distribute Head
footwear products in key European markets such as Italy, France and Spain as a
distributor for Romika.

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 22.2% in 2001.
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 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 17.5% of our total revenues
in 2001.

                                       15

<PAGE>


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

<TABLE>
<CAPTION>

                                          Number
               Line                      of Models                                   Features
-----------------------------------     ----------   ----------------------------------------
<S>                                         <C>      <C>
Regulators                                  24       Lightweight, durable; some models contain titanium.

Air tanks                                    4       High resistance to impact and aging.

Valve sets                                   3       Designed to guarantee optimal air flows at any pressure.

Buoyancy compensator jackets                16       Effectively adjust buoyancy for freedom during diving.

Wetsuits                                    22       Designed to ensure warmth and comfort.

Wetsuit accessories                         18       Gloves, boots and socks.

Fins                                        19       Designed to provide maximum power using minimum effort.

Masks                                       32       Includes single, two and four lens models.

Snorkels                                    17       Designed to provide easy and dry breathing.

Computers                                    6       Designed to provide exceptional performance and safety.

Other accessories                           48       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.

     Market Share. We estimate that the market for diving equipment was
approximately $355 million in 2001. 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 2001 at wholesale. Our market share
worldwide for the Mares and Dacor brands for 2001 is estimated at 22.2%.

     We are working to expand our presence in key markets such as the United
States, where Mares and Dacor combined held a 16% market share, and in South
Asia, where both brands combined for a 17% market share in 2001. 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 2001, 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 40 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, Tyrolia and Mares have
licensing potential. Revenues from licensing amounted to 2.0% of our total
revenues in 2001.

     We have licensed tennis, ski and golf casual and outdoor sportswear in the
United States, Europe, Korea, Japan, Argentina and other countries. We also
grant rights to the Head brand for other product categories such as watches,
footwear, eyewear, luggage, golf equipment and accessories. Licensing generated
$8.0 million of revenues in 2001 for the Head, Tyrolia, Mares and Penn brands.
Wholesale licensee revenues amounted to approximately $130 million. We intend to
explore other licensing opportunities for outdoor, water sports and other sports
apparel and will also seek to introduce and, in some cases, reintroduce the Head
brand name in some geographic areas, notably in South America.

     We believe that substantial licensing growth opportunity exists by
capitalizing on the success of our strong-selling products as

                                       16

<PAGE>

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 30,000
accounts. Our worldwide sales force had approximately 240 people as of December
31, 2001. In addition, we utilize sales representatives and independent
distributors to serve specialized markets and related distribution channels.

Europe

     Sales to customers within Europe accounted for approximately 51.1% of our
2001 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, 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 Racquet Sports, we have
integrated Penn sales and distribution into our European organization. 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 33.9% of
our 2001 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
further to heighten this profile through combined Head and Penn product
offerings, sales and marketing efforts and take advantage of the Penn
distribution network and higher level of market penetration.

Asia

     Sales to customers in Asia accounted for approximately 11.2% of our 2001
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 3.8% of our 2001 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 2001. 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.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;

                                       17

<PAGE>


        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       have developed an extranet ordering system to allow our
                customers in Germany, Austria, Italy and USA to order our
                products online; and

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

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

     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 catalogs, 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. We expect to cross-market and share resources to maximize
              the impact of the Head tennis and Penn brands.

        o     Our Diving division advertises in a number of specialized
              publications worldwide and conducts promotions and media campaigns
              in stores, diving centers and tourist resorts.

     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, Mario Reiter, the 1998 Olympic Combination Ski
              Champion, and former champions such as "legend" Franz Klammer, the
              1976 Olympic Champion. We also have an endorsement arrangement
              with the Austrian national ski team.

        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 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. See "-- Our Products -- Racquet Sports -- Head Tennis."

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

        o     Most free diving world records, including those set by Francisco
              "Pipin" Ferraras and Audrey Mestre, have been set using

                                       18

<PAGE>

              Mares equipment. Mares is now getting strong visibility in the
              just released Imax "Ocean Men" movie, distributed on a worldwide
              basis. For the last four years, Mares has received the "Brand of
              the Year" award from the popular "Diver" magazine and in 2000, our
              Hub system received the "Product of the Year" award at the Antibes
              World Diving Festival. In 2001, the Mares Hub was selected by
              "Popular Science" magazine as one of the year's best new products.
              Also, "Tauchen" magazine awarded Mares the first prize for the
              best BC line of the year at the Dusseldorf Boat Show.

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 2001, 2000 and 1999, we spent
approximately $9.5 million, $9.1 million and $9.2 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 1947, 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 boots
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.

     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.

Customers

     We sell our products to approximately 30,000 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 2001 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 Benetton Sportsystem S.p.A.; Salomon,
              Lange/Rossignol group; and Technica and Dolomite, both of which
              are owned by the Technica-Lowa-Dolomite Group.

        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

                                       19

<PAGE>

              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 adidas-Salomon
AG, and Benetton Sportsystem S.p.A., 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 2001 cost increases in
all our raw materials were approximately $4 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, including 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 SuperLight 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.

                                       20

<PAGE>

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

<TABLE>
<CAPTION>

Significant Subsidiary                                            Domicile               Proportion of Issued  Capital Held
----------------------                                            --------               ----------------------------------
<S>                                                               <C>                                     <C>

Head Holding Unternehmensbeteiligung GmbH                         Austria                                 100%
HTM Sport-und Freizeitgerate AG                                   Austria                                 100%
Head Sport AG                                                     Austria                                 100%
Head Tyrolia 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%
Mares America Corp.                                               USA                                     100%
Dacor Corp.                                                       USA                                     100%
Penn Racquet Sports Inc.                                          USA                                     100%

</TABLE>

4.D. Property, Plants and Equipment

     The following table sets forth information as of December 31, 2001 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            13,071
                                   Administration, marketing, research and development                 Leased             4,209
Schwechat, Austria.............    Binding manufacturing                                               Owned             12,709
                                   Warehousing                                                         Owned              5,510
                                   Administration, marketing, research and development                 Owned              1,472
Neusiedl, Austria..............    Binding assembly and warehousing                                    Owned              2,973
Maser, Italy...................    Ski boot manufacturing, research and development                    Leased             6,490
Tallinn, Estonia...............    Ski boot and diving products manufacturing                          Owned             28,470
Budejovice, Czech Republic.....    Tennis racquets assembly                                            Owned              4,755
Rapallo, Italy.................    Manufacturing                                                       Owned              2,000
                                   Warehousing, administration, research and development               Owned              4,800
Casarza, Italy.................    Warehousing                                                         Owned              7,300
                                   Manufacturing and warehousing                                       Owned              8,000
Phoenix, Arizona...............    Tennis and racquetball ball administration, manufacturing,          Owned             13,009
                                   research
                                   and development
Mullingar, Ireland.............    Tennis ball manufacturing, warehouse                                Owned              3,094
                                   Administration                                                      Owned                386
                                   Warehouse                                                           Leased               929
                                   Warehouse                                                           Leased               409
</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.

                                       21

<PAGE>


     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 expose us to the risk of claims with
respect to environmental matters and we cannot assure you that material costs or
liabilities will not be incurred in connection with such claims.

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

ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS

5.A.    Operating Results

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. 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
$475 million at wholesale in 2001 from an estimated $40 million in 1995.

     In 2001, we believe, based on our market knowledge and experience, that the
worldwide market for tennis racquets remained stable even if some statistics
show an increase. This divergence might result from changes in the quantity of
third party data. In addition, the worldwide market share of Head tennis
racquets increased from 14.7% in 1995 to 25.6% in 2001. In 2001, the worldwide
market for diving declined approximately 15%. Most of the decline was
attributable to a sharp decline in U.S. travel after September 11th which
affected sales of diving equipment.

     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.

Factors Affecting Expenses

     We separate our principal expenses into:

        o       cost of sales;

                                       22

<PAGE>

        o       selling and marketing expenses;

        o       general and administrative expenses; and

        o       interest expense.

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

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

     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, 2001, we had approximately $276.8 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 should be able to utilize these net operating
loss carryforwards to lower cash taxes on future taxable income. See Note 21 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 $1.4 million and $2.0
million in the 2000 and 2001 fiscal years respectively. As of December 31, 2001,
deferred non-cash compensation relating to previously granted stock options
amounted to approximately $4.0 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 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, 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.

     The assessment of long-lived assets for possible impairment requires us to
make certain judgements and estimates, including the long-lived values and the
estimated cash flows. Whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable, long-lived assets are reviewed for
impairment.

     We provide for the estimated cost of product warranties at the time revenue
is recognized. Should real warranty cost differ significantly, revisions to the
estimated warranty liability may be required.

                                       23

<PAGE>

     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 favorable 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, which we were required to implement with effect from July 1,
2001 and January 1, 2002, respectively. 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 will be that goodwill and intangible assets with an
indefinite life will no longer be amortized, but instead will be tested at least
annually for impairment. The goodwill impairment test will consist of a two-step
method. First, each reporting unit's (which generally represents one level below
an operating segment) carrying value will be compared to its fair value. Second,
where the reporting unit's carrying value exceeds its fair value, an impairment
loss will be 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 will require that an impairment loss be
recognized equal to the excess of its carrying value over its fair value.

     We adopted SFAS No. 142 on January 1, 2002. In accordance with the new
standard, we will cease recognition of $0.1 million in annual goodwill
amortization and $1.0 million in annual trademark amortization, as we have
determined that our trademarks represent indefinite-lived intangible assets. We
expect to complete our transitional impairment test for our trademarks prior to
the issuance of our March 31, 2002 quarterly financial statements. We expect to
complete step one of our transitional goodwill impairment test by June 30, 2002,
and step two by December 31, 2002. Any impairment losses resulting from the
transitional impairment tests will be recognized as a change in accounting
principle measured as of January 1, 2002.

     In October 2001, the Financial Accounting Standards Board ("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 will not have a material impact on our consolidated
financial position or results of operations.

                                       24

<PAGE>


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,
                                                                                                    1999          2000        2001
                                                                                                -----------   -----------  -------
<S>                                                                                               <C>           <C>          <C>
Total revenues.............................................................................       100.0%        100.0%       100.0%
Cost of sales.............................................................................         58.8          57.1         59.7
                                                                                                  -----         -----         ----
Gross profit..............................................................................         41.2          42.9         40.3
Selling and marketing expense.............................................................         24.7          24.5         26.0
General and administrative expense (excluding non-cash compensation expense and
  restructuring charge)...................................................................          9.5           8.4          8.7
Non-cash compensation expense.............................................................            0.1         0.3          0.5
Employee termination and other related costs..............................................            0.4          --           --
                                                                                                  -------       --------     -----
Operating income..........................................................................          6.5           9.7          4.9
Interest expense..........................................................................         (3.6)         (4.7)        (2.9)
Interest income...........................................................................          0.2           0.3          0.2
Foreign exchange gain ....................................................................          1.2           1.9          1.5
Other income (expense), net...............................................................          0.5          (1.0)          0.0
                                                                                                  -----         ------       ------
Income from continuing operations before income taxes and extraordinary items.............          4.8           6.1          3.7
Income tax benefit (expense)..............................................................          9.2           0.5         (1.0)
Share of loss from equity investment, net of tax..........................................          -               -         (0.3)
                                                                                                  -----         -----        ------
Income from continuing operations before extraordinary items..............................         14.0           6.6          2.4
Loss from discontinued operations.........................................................          --          (0.2)            --
Extraordinary gain........................................................................          --            0.5            --
                                                                                                  ----          ------         ----
Net income................................................................................         14.0%          7.0%         2,4%
                                                                                                  =====         =====          ===
</TABLE>

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)
<S>                                                                                      <C>              <C>             <C>
Product Category
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 travelling to dive
centers and resorts and making corresponding

                                       25

<PAGE>

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 Winter Sports and Diving and 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 $0.5 million, or 1.4%, to $34.0
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.

     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.

     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.

     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 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.




Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Total Revenues. For the year ended December 31, 2000, total revenues
increased by $9.9 million, or 2.5%, to $398.6 million from $388.8 million in
1999. This increase was primarily due to the consolidation of Penn revenues,
which began following its

                                       26

<PAGE>

acquisition in May 1999. Excluding the effect of the Penn acquisition and the
snowboarding business, total revenues for the year ended December 31, 2000,
decreased by $15.0 million or 3.9%, to $373.7 million from $388.8 million in
1999. This decrease was primarily due to the currency translation adjustments
resulting from the depreciation of the euro against the U.S. dollar. Excluding
the effects of the Penn acquisition, the snowboarding business and changes in
the exchange rates, total revenues increased by 6.5% in 2000.

     The following table sets forth revenues for each of the year ended December
31, 1999 and 2000:

<TABLE>
<CAPTION>
                                                                                   For the years ended December 31,
                                                                      ------------------------------------------------------------
                                                                              1999                    2000             % Change
                                                                              ----                    ----             --------
<S>                                                                         <C>                      <C>                   <C>
                                                                                          (in thousands, except percentages)
Product category:
Winter Sports......................................................         $151,360                 144,542               (4.5)%
Racquet Sports.....................................................          152,825                 174,010               13.9
Diving                                                                        76,691                  72,232               (5.8)
Licensing..........................................................            7,879                   7,855               (0.3)
                                                                      --------------- ----------------------- --------------------
       Total Revenue...............................................         $388,755                $398,639                2.5%
                                                                      =============== ======================= ====================

</TABLE>

     Winter Sports revenues for the year ended December 31, 2000 decreased by
$6.8 million, or 4.5%, to $144.5 million from $151.4 million in 1999. This
decrease was primarily due to currency translation adjustments resulting from
the depreciation of the euro against the U.S. dollar. Excluding the effect of
changes in exchange rates, revenues from Winter Sports increased by
approximately 8% for the year ended December 31, 2000 compared to 1999 due to an
increase in unit sales of 7% in skis, 5% in bindings and 16% in ski boots.

     Racquet Sports revenues for the year ended December 31, 2000 increased by
$21.2 million, or 13.9%, to $174.0 million from $152.8 million in 1999. This
increase was due primarily to the consolidation of Penn revenues, but was offset
by the effect of currency translation adjustments resulting from the
depreciation of the euro against the U.S. dollar. Excluding both the effect of
the Penn acquisition and of changes in exchange rates, Racquet Sports revenues
increased by 7.7% for the year ended December 31, 2000. The increase was due
primarily to a 27.4% increase in the number of units of tennis racquets sold,
but was partially offset by a decline in sales of footwear.

     Diving product revenues for the year ended December 31, 2000 decreased by
$4.5 million, or 5.8%, to $72.2 million from $76.7 in 1999. This decrease was
primarily due to currency translation adjustments resulting from the
depreciation of the euro against the U.S. dollar. Excluding the effect of
exchange rates, revenues from diving increased by 4.3%.

     Licensing revenues for the year ended December 31, 2000 remained stable.

     Gross Profit. For the year ended December 31, 2000, gross profit increased
by $10.9 million, or 6.8%, to $171.2 million from $160.3 million in 1999. Gross
margin increased to 42.9% in 2000 from 41.2% in 1999. The increase in gross
margin was due to better product mix and favorable exchange rate fluctuations,
as a portion of our US dollar revenues are generated from products manufactured
on a euro cost basis.

     Selling and Marketing Expenses. For the year ended December 31, 2000,
selling and marketing expenses increased by $1.8 million, or 1.9%, to $97.7
million from $95.9 million in 1999. This increase was primarily due to increased
selling and marketing expenses attributable to the consolidation of Penn.

     General and Administrative Expenses. For the year ended December 31, 2000
general and administrative expenses decreased by $3.4 million, or 9.3%, to $33.5
million from $36.9 million in 1999. Of this decrease, $1.2 million was
attributable to the gain on the sale of a building used in operations in Italy.
The balance was due to the impact of exchange rate fluctuations as the majority
of our general and administrative expenses are paid in euro.

     We also recorded $1.4 million and $0.5 million for the year ended December
31, 2000 and 1999, respectively, of non-cash compensation expense due to the
grant of stock options under our existing stock option plan and the resulting
amortization of compensation expense.

     Operating Income. As a result of the foregoing factors, for the year ended
December 31, 2000, operating income increased by $13.3 million, or 52.8%, to
$38.6 from $25.2 million in 1999.

     Interest Expense. For the year ended December 31, 2000, interest expense
increased by $4.6 million, or 32.3%, to $18.6 million from $14.1 million in
1999. The increase was due to higher levels of debt resulting from the Penn
acquisition in May 1999 and our offering of senior notes in July 1999 as a
portion of the proceeds from this offering was used to refinance debt bearing
lower interest

                                       27

<PAGE>

rates. The increase in interest expense was offset, to a lesser extent, by the
repayment of some of our debts following the initial public offering, which took
place in October 2000.

     Interest Income. For the year ended December 31, 2000, interest income
increased by $0.2 million, or 18.0%, to $1.1 million from $0.9 million in 1999.
This change was primarily due to higher cash balances earnings interest.

     Foreign Currency Exchange. For the year ended December 31, 2000, we had a
foreign currency exchange gain of $7.5 million, compared to $4.6 million in
1999. This change was due primarily to a continued weak value of the euro and
various other currencies against the U.S. dollar. We operate in a multi-currency
environment and are subject to the effect of fluctuation in exchange rates.

     Other Income/(Expense). For the year ended December 31, 2000, we had other
expense of $4.2 million due primarily to the one time payment to Austria Tabak
compared to other income of $1.9 million in 1999 due primarily to a profit
resulting from the disposal of a building in Italy in 1999.

     Income Tax Benefit. For the year ended December 31, 2000 we had an income
tax benefit of $1.9 million compared to an income tax benefit of $35.9 million
in 1999. These tax benefits were due to a reduction in the valuation allowance
against deferred tax assets of $38.8 million in 1999 and $5.2 million in 2000.

     Extraordinary Gain/(Loss). For the year ended December 31, 2000 we reported
an extraordinary gain of $2.1 million. The gain resulted from release of $3.0
million (net of $1.6 million of tax) of accrued interest expense according to
SFAS No.15 following the repayment of our restructured long term loans in
October 2000 partially offset by the write-off of $0.9 million of capitalized
debt issuance cost in connection with the refinancing of our U.S. subsidiaries
in April 2000.

     Net Income. As a result of the foregoing factors, for the year ended
December 30, 2000, we had a net income of $27.8 million, compared to $54.4
million in 1999.

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 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 totalling $15.2 million, to acquire a distribution business
for $4.1 million, to acquire an interest in a distribution company for $0.6
million, to pay a dividend to our shareholders of $9.5 million and to purchase
treasury stock of $5.4 million.

     As of December 31, 2001, we had $22.1 million in cash and cash equivalents
and $64.9 million in unborrowed availability on its credit facilities. In
addition, we had working capital, net of cash of approximately $137.7 million, a
decrease of approximately $13.6 million from December 31, 2000. The primary
fluctuation contributing to this decrease was a net decrease in accounts
receivable and inventories resulting from our asset management program.

     Cash generated from operating activities decreased from $28.4 million in
1999 to $6.5 million in 2000, mainly due to increased working capital
requirements. In 1999, operating cash was primarily used to purchase property,
plant and equipment of $24.1 million, and together with cash on hand, was used
to repay debt of $51.5 million. In 2000, proceeds from operating activities,
cash on hand and net draws of $25.5 million under lines of credit were used to
purchase property, plant and equipment totalling $20.6 million, repay $2.7
million due on a senior loan and to pay a dividend to Head Sports Holdings N.V.,
which was our sole shareholder at the time, of $15.7 million.

     In September 2000, we generated $134.4 million cash proceeds from our
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.

     We 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, 2001, we had 7 forward contracts on Japanese yen totaling $9.2 million, one
Swiss franc forward contract totaling $1.5 million, two Canadian dollar option
contracts totaling $1.4 million, five Japanese yen option contracts totaling
$3.8 million and six Swiss franc option contracts totaling $2.8 million. We
recorded foreign exchange gains of $4.6 million in 1999, $7.5 million in 2000
and $5.8 million in 2001.

                                       28

<PAGE>

     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, 2001, was $123.0 million, consisting of short-term
borrowings of $53.9 million, other long-term debt of $8.2 million and senior
notes of $60.9 million.

     As of December 31, 2001, we had aggregate undrawn credit facilities of
$49.9 million under operating credit lines, Japanese bank loans, and other lines
of credit. In addition, $15 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, 2001, we had an aggregate amount of
approximately $0.6 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 4.3% at December 31, 2001. This other
long-term debt is payable over several years, with the final payments scheduled
in 2005.

     Operating Credit Lines. As of December 31, 2001, we had outstanding debt of
$0.3 million with various Austrian banks. The weighted average interest rate on
outstanding loans was 6.4% at December 31, 2001.

     Oesterreichische Kontrollbank Aktiengesellschaft. As of December 31, 2001,
we had outstanding borrowings under this line of credit of $8.8 million with
Oesterreichische Kontrollbank Aktiengesellschaft. The weighted average interest
rate on this indebtedness was 3.75% at December 31, 2001. These loans had been
made in form of credits for specific exports. The amounts owed are secured by
bills of exchange and by the collateral provided under the renegotiated Austria
Loan Agreement.

     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, Head
Holding repurchased (euro)30.9 million of these senior notes using part of the
proceeds of our initial public offering. As of December 31, 2001, $60.9 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,
2001, $5.0 million were restricted under this agreement. No funds were used
under this line of credit as of December 31, 2001.

     Other Long-Term Debt

                                       29

<PAGE>

     As of December 31, 2001, we had outstanding amounts of other long-term debt
of $6.5 million with several Italian banks. The weighted average interest rate
on borrowings outstanding under the loans was 4.5% at December 31, 2001. These
loans terminate until 2009.

     Italian Bank Loans

     As of December 31, 2001, HTM Sport S.p.A., our Italian subsidiary, had
drawn an aggregate amount of approximately $17.3 million with various Italian
banks. The weighted average interest rates on these credit lines was 5.3% at
December 31, 2001. We believe we can redraw amounts under these credit lines
after they have been repaid.

     Japanese Bank Loans

     As of December 31, 2001, HTM Sports Japan KK, one of our Japanese
subsidiaries, had short-term credit lines with Sumitomo Bank of approximately
$19.0 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, 2001.

     Other Lines of Credit

     As of December 31, 2001, we had outstanding amounts of approximately $8.4
million under other operating lines of credit in France, United States and
Canada. The weighted average interest rate on these loans was 4.0% at December
31, 2001.

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 2001, 2000 and 1999, we spent approximately $9.5 million, $9.1
million and $9.2 million, respectively, on engineering, research and development
and $0.6 million, $0.3 million and $0.4 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 or showing moderate growth in local currency
terms. The industry trend has been toward consolidation, which has benefited us
because we are a leading company in our core sectors.

     While the slowdown in the U.S. economy in 2002 will have an effect on
consumer spending worldwide, we are not expecting a negative impact on sales as
compared to 2001. In Europe, our largest market, the economic outlook is for
moderate growth. In the United States, the Sporting Goods Manufacturers
Association estimates a 2% growth in sales of sports equipment for 2002. In
addition, 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 moderate revenue growth in 2002 in local currency
terms, and if the euro remains stable or appreciates against the dollar, we
expect that growth to be reflected in our reported revenues.

     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 high
performance, higher priced equipment, based on an increase in average selling
prices. In 2002, re-orders are comparable to previous years. For 2002, 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

                                       30

<PAGE>

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 mounting processes (Railflex System), innovative
light-weight constructions, as well as changes in styling and appearance in each
two- to three-year product cycle.

     In 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.

     In ski boots, where we have renewed in 2001 the high end range, we will
maintain our cost efficiency in means of production and concentrate on improving
our product mix. In order to reach this goal we are introducing two entirely new
lines called ECT (Extra Comfort Technology) and Edge in 2003 that are focused in
the middle-high price segment and we can count on the newest (in terms of
average age of the projects) collection in the industry.

     In Racquet Sports, we have experienced excellent growth and successful
product line extension with both our Intelligence and Titanium series. We expect
further growth as we plan to continuously revitalise the top end of the product
ranges in tennis, squash and racquetball racquets, introduce a new tennis ball
with improved performance characteristics and are confident to subsequently
increase distribution breadth (markets with lower Head/Penn penetration) and
depth (markets with high distribution coverage for Head/Penn).

     In Diving, we are successfully introducing our products in new geographical
areas such as Eastern European countries and Southern Asia, and have improved
our manufacturing processes, increased sources of raw materials, and outsourced
some processes. In 2002, we expect to see the benefit of these programs in
increased profitability.

     Capital Expenditures; Research and Development

     We expect to spend approximately $50 million on investment in property,
plant and equipment and $32 million on research and development in the 2002 to
2004 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 three 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>
<CAPTION>

              Name                    Age                                  Title
------------------------------     --------       --------------------------------------------------------------
<S>                                    <C>        <C>
Johan Eliasch................          40         Chairman of the Management Board, and Chief Executive Officer
George F. Nicolai............          49         Member of the Management Board
Ralf Bernhart................          50         Member of the Management Board and Chief Financial Officer
Carlo Contini................          63         General Manager, Ski Boots Division
Claudio Ferrantino...........          55         Executive Vice President, Diving Division
David Haggerty...............          44         President, Penn Racquet Sports
Klaus Hotter.................          46         Executive Vice President, Ski Division
Robert Kosian................          52         Head of Investor Relations
Georg Kroll..................          53         Executive Vice President, Licensing Division
Robert Marte.................          48         Executive Vice President, Racquet Sports Division
Edgar Pollmann...............          57         Executive Vice President, Bindings Division
Robert Soden.................          58         President, Head USA
Helmut Umlauft...............          55         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

                                       31

<PAGE>

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. 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 B.V. and as chairman
of several foundations.

     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 Hafslund Nycomed Pharma AG, Austria, a leading pharmaceutical
company.

     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 worked at HTM Sport S.p.A. since 1973 and served
as President since 1991. Mr. Ferrantino currently manages the diving division of
HTM and previously served as ski/tennis distribution manager. He has served as
Chairman of Mares America Corp. USA since 1995.

     Mr. David Haggerty was named President of Head/Penn Racquet Sports in
January 2001. 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 manages the ski division of HTM. 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. 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
product manager.

     Mr. Edgar Pollmann has served as General Manager of the Tyrolia bindings
division of HTM since 1996. 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.
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.

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 five 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.

     Name                         Age                     Title
----------------------    ------------------    --------------------------------
William S. Cohen...             61             Member of the Supervisory Board

                                       32

<PAGE>

Christoph Henkel...             44             Member of the Supervisory Board
Rene C. Jaggi......             53             Chairman of the Supervisory Board
Viktor Klima.......             54             Member of the Supervisory Board
Karel Vuursteen....             60             Member of the Supervisory Board


     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, Velocity Express, IDT and Cendant Corporation Inc. He is a former
U.S. Defense Secretary 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 and of Cineville Inc., a film production company. 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. Rene C. Jaggi has been Chairman of the Supervisory Board of HTM since
1996. He has owned and operated Jstracon AG since 1992, which has controlling
interests in Romika GmbH, Sport Gerspach AG, John Valentine Fitness Club Basel
AG and Hotel Palace AG. He has also been the Chairman of the Board of Directors
of StairMaster from June 1999 until 2001 and the President of the Football Club
Basel since October 1996. Mr. Jaggi was formerly the Chief Executive Officer of
adidas from 1986 to 1991.

     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

     For the year ended December 31, 2001, the aggregate compensation paid by us
to our executive officers, Management Board members and Supervisory Board
members was $3.9 million. The expense for accrued compensation was $0.2 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 $1.0 million for the year ended December 31, 2001.
Options vest over a period of four years and are subject to the Company meeting
specified earnings performance targets during this period. These options will be
exercisable beginning on January 1, 2002, but the shares are 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, 2001, stock-based compensation amounted to $0.6 million. The exercise price
for all stock options granted under the 2001 Plan was fixed at inception of the
Plan. The vesting period varies from 0 to 6 years.

     The total amount accrued by the Company and its subsidiaries to provide
pension, retirement or similar benefits was $1.1 million for the year ended
December 31, 2001.

6.C. Board Practices

     We do not have an audit or remuneration committee.

6.D. Employees

     The table below shows the number of employees by geographic location at the
years ended December 31, 1999, 2000 and 2001:

                                    For the years ended December 31,
                             -----------------------------------------------
                                   1999            2000              2001
                             -------------    ------------    --------------

Location

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Austria...............                965           1,024               919
Italy.................                439             427               454
Other (Europe)........              1,060           1,068             1,007
North America.........                486             478               454
Other  ...............                 40              41                42
                             -------------    ------------    --------------
       Total                        2,990           3,038             2,876
                             =============    ============    ==============

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 and outstanding shares as of March 1,
2002 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, 2001, the exercise price was
$0.26. 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 will not be exercisable prior to the end of
the two year lock-up period following the initial public offering completed on
October 3, 2000. Options have a maximum term of 10 years. The weighted average
remaining contractual life of the outstanding stock option is 5.7 years, and no
options are exercisable under the 1998 Plan.

     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 9.8 years, and 1,551,480 options are exercisable
under the 2001 Plan.

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

Stock Option Plans

The Stichting Head Option Plans

     We have established a Dutch foundation, the Stichting Head Option Plan (the
"Stichting"), the Board of which is controlled by Mr. Eliasch in his capacity as
sole director, 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, Mr. Eliasch, 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 is in effect for two years following the initial public offering on
October 3, 2000.

     As of December 31, 2001, 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.
As of December 31, 2001, 2,041,300 shares have been acquired by the Stichting.

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 is 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

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<PAGE>

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, will begin on January 1, 2002. The exercise period for options
which vest after January 1, 2002, will begin at the date of vesting.

     Under the 1998 Plan, options to purchase 2,278,394 depositary receipts have
been granted, including options to purchase 14,544 depositary receipts to
members of our Supervisory Board. No further options will be granted by Head
N.V. 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, 2001, 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. controlled 47.8% of our issued and
outstanding shares as of March 1, 2002. Head Sports Holdings N.V. does not have
different voting rights from other shareholders. No other single shareholder
holds 5% or more of our issued and outstanding 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 worldwide 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
owned by the majority shareholder of the Company. Administrative expenses paid
to this entity amounted to approximately $0.6 million, $0.2 million and $1.2
million for the years ended December 31, 1999, 2000 and 2001.

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<PAGE>

     The Company has signed a five year agreement for Romika GmbH to license the
Head Performance Footwear brand covering athletic, outdoor and casual shoes and
boots. The license period begins January 1, 2002. Mr. Rene C. Jaggi, who owns
and leads Romika GmbH, is also the current Chairman of the Head N.V. Supervisory
Board.

7.C. Interests of Experts and Counsel

     Not applicable.

ITEM 8: FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

     8.A.1      See Item 18.

     8.A.2      See Item 18.

     8.A.3      See Report of Independent Accountants, page F-1.

     8.A.4      Not applicable.

     8.A.5      Not applicable.

     8.A.6      See Note 25 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 our shareholders decide
to pay cash dividends on our ordinary shares, 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 at shareholders' meetings based on proposals made by
the Management Board. However, our controlling shareholder will control a
majority of votes and therefore will be able to effectively set dividend policy.

     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 AG in euros for disbursement to holders. Any dividend payments
would be subject to Netherlands statutory withholding taxes.

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
each month on each exchange since listing:

                                       NYSE               Vienna Stock Exchange
                                       ----               ---------------------
                               (amounts in dollars)       (amounts in euros)
                                  High      Low              High    Low
                                  ----      ---              ----    ---
September, 2000 (from 9/28)      8.2500   7.5625           11.2000  8.5000
October, 2000                    7.8750   4.7500            9.7800  6.2000
November, 2000                   6.2500   4.2500            7.4000  5.2000
December, 2000                   6.0800   4.7500            7.1000  5.6800
January, 2000                    5.9900   5.2100            6.2600  5.6500
February, 2001                   5.8500   5.0000            6.4500  5.6000
March, 2001                      5.1300   3.8200            5.9000  4.5100

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<PAGE>

April 2001                       4.3800   3.8900            4.9000  4.5000
May 2001                         4.6500   3.9500            5.3200  4.3200
June, 2001                       4.3000   3.7900            5.2000  4.5000
July, 2001                       4.6700   3.5800            5.2000  4.1500
August, 2001                     4.6000   4.3000            5.1500  4.5000
September, 2001                  4.3500   3.3000            4.8400  3.6000
October, 2001                    3.6000   3.3000            4.2000  3.6100
November, 2001                   3.4000   3.1100            3.7000  3.1500
December, 2001                   3.6000   3.1500            3.7600  3.3600
January, 2002                    3.5400   3.2600            3.8300  3.5200
February, 2002                   3.5000   3.3000            3.8800  3.6100
March, 2002                      3.3900   3.2000            3.7500  3.5200


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 (Bundes-Wertpapieraufsicht) 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. Memorandum and Articles of Association

Corporate Purpose

     Article 3 of our amended articles of association provides that we may
perform all acts and do all things (as long as these are not prohibited by law),
such as operate all kinds of businesses, hold, participate in, manage and
finance other enterprises and companies, borrow money and provide security
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

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<PAGE>

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 (at the moment of the amended articles of
association taking effect) 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, 2006, 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 general meeting of shareholders for a period of five years in each
instance, these authorizations will end in 2006, five years after the date of
the last Annual General Meeting of the Company when the authority of the
Management Board was extended by resolution of the shareholders.

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

Acquisition of Our Own Shares

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

                                       38

<PAGE>

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),
any holder of 5% or more of our issued capital or voting control at the time our
ordinary shares are admitted to listing on the Vienna Stock Exchange must notify
both us and the Securities Board of The Netherlands within four weeks. Moreover,
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 also notify us and the Securities Board
of The Netherlands. 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 Securities Board of The Netherlands 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
Securities Board of The Netherlands of any and all transactions they enter into
with respect to our securities. If a shareholder with a greater than a 25%
interest is a legal entity and not an individual, the obligation is extended to
the managing directors and supervisory directors of the legal entity.

The Stichting Head Option Plan

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

Management Board

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

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<PAGE>

Our articles of association state that our Management Board shall consist of one
or more members. The aforementioned rights of the Stichting shall cease as
described above. Decisions of the Management Board are adopted by a simple
majority of votes caste.

Supervisory Board

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

     Under Dutch law, members of the Supervisory Board may not be re-appointed
after their seventy-second birthday.

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 2002 Shareholders
meeting will be held on May 28, 2002.

     For holders of bearer shares, attendance and exercise of voting rights are
subject to certain conditions. In particular, only those shareholders who
register in time and deposit their bearer shares until the end of the general
meeting with the depositary bank nominated by us or any other credit institution
specified in the notice of the general meeting are entitled to attend and cast
votes in a general meeting. Bearer shares are equally deemed to have been
properly deposited if with the consent of the depositary bank, they are
deposited in safe custody until the end of the general meeting. Our articles of
association provide that shareholders must be allowed to file such
acknowledgement of deposit at least 15 days after convening the general meeting,
not counting the day of publication. The acknowledgement of deposit must be
deposited to allow at least five working days between the day of the deposit and
the day of the general meeting.

Adoption of Annual Accounts

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

Dividends

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     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

     The following is a general summary of the principal Netherlands, U.S. and
Austrian tax consequences of the ownership and disposition of ordinary shares.
The 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, and 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. 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").

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

Withholding Tax

     Dividends distributed by the Company generally are 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,

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<PAGE>

deemed and constructive distributions and repayments of paid-in capital not
recognised as capital for Netherlands dividend withholding tax purposes.

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

     Residents of the United States that qualify for, and comply with the
procedures for claiming, benefits under the income tax treaty between the
Netherlands and the United States (the "U.S.-NL Treaty"), generally are eligible
for a reduction of the Netherlands withholding tax on dividend income to 15%. A
holder of shares will qualify for benefits under the U.S.-NL Treaty (subject to
compliance with the procedures for claiming benefits described below) if the
holder is a resident of the United States and (i) is the beneficial owner of the
dividends paid thereon; (ii) is an individual, an exempt pension trust or exempt
organisation (as defined for purposes of the US-NL Treaty), an estate or trust
whose income is subject to US taxation as the income of a resident, either in
its hands or in the hands of its beneficiaries or a corporation that is not
subject to 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 enterprise 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 an enterprise;

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

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

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

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<PAGE>

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 an enterprise or an interest in an 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
         enterprise the shares are or were attributable; or

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

     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 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 summary of the principal United States federal income
tax treatment of the ownership and disposition of our ordinary shares. This
summary is based on the U.S. Internal Revenue Code of 1986, existing and
proposed Treasury Regulations, revenue rulings, administrative interpretations
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 be relevant to holders in light of their
particular circumstances. For example, various types of investors, such as:

        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
             passthrough entities;

        o    insurance companies;

        o    tax-exempt persons;

        o    financial institutions; regulated investment companies; dealers in
             securities;

        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,  may be subject to
             different tax rules not discussed below.

     Persons considering the purchase of the ordinary shares should consult with
their own tax advisors with regard to the application of the U.S. federal income
tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign jurisdiction.

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

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

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<PAGE>

        o    a corporation  organized  under the laws of the United States or of
             any state of the United States (or the District of Columbia);

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

        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, or

        o    any other entity subject to United States federal income taxation
             on a net income basis in respect of the shares of the company.

Taxes on Income

     The gross amount of any distribution (other than a mere pro rata
distribution of ordinary shares), 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 of our current and accumulated
earnings and profits as determined under U.S. federal income tax principles.
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. A
distribution in excess of our current and cumulated 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 constitute gain. Such gain, if any, will be
capital gain if the ordinary shares are held as capital assets, and will be
long-term capital gain, taxable to individuals at a maximum rate of 20%, if the
ordinary shares were held for more than one year.

     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 generally 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.


Sale or Other Disposition of the Ordinary Shares

     A U.S. shareholder generally will recognize gain or loss for U.S. federal
income tax purposes upon the sale or exchange of ordinary shares 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 a capital gain or loss if the
ordinary shares are held as a capital asset, and will be long-term capital gain,
taxable to individuals at a maximum rate of 20%, if the ordinary shares were
held for more than one year. The deductibility of capital losses is subject to
limitations. Any such gain or loss generally will be treated as U.S. source. 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.

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<PAGE>

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 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.

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 an 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 an 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.

Backup Withholding

     Backup withholding and information reporting requirements may apply to
payments made within the United States of dividends on ordinary shares and to
various payments of proceeds of a sale or redemption of ordinary shares paid to
a shareholder. We, our agent, a broker, or any paying agent, as the case may be,
may be required to withhold tax from any payment that is subject to backup
withholding at a current rate of 30% of such payment if the shareholder fails to
furnish the shareholder's taxpayer identification number, to certify that such
shareholder is not subject to backup withholding, or to otherwise comply with
the applicable requirements of the backup withholding rules. Some shareholders,
including corporations are not subject to the backup withholding and information
reporting requirements. Any amounts withheld under the backup withholding rules
from a payment to a shareholder generally may be

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<PAGE>

claimed as a credit against such shareholder's U.S. federal income tax liability
provided that the required information is furnished to the U.S. Internal Revenue
Service.

            Austrian Tax Consequences for Holders of Ordinary Shares

General

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

     An Austrian shareholder of ordinary shares is an individual who is resident
in Austria or who ordinarily resides in Austria, or corporations with Austrian
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

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<PAGE>

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),
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

     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. of at least 1% of the share capital 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-years-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.

                                       47

<PAGE>

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 year.
However, with respect to interest rates, we have less exposure to interest rate
changes because we refinanced some of our floating rate debt with the proceeds
from our fixed rate senior notes issued in July 1999 and repaid another portion
of the floating rate debt with the proceeds from our initial public offering in
October 2000.

Interest Rate Exposures

     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, 2001, 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, 2001.

     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.

<TABLE>
<CAPTION>

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

                                                                                                                     Year Ended
                                                    Year Ended December 31, 2001                                  December 31, 2000
                                      ------------------------------------------ ----------- -------- ------------------------------
                                         2002     2003     2004    2005    2006  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)...............$            -        -        -       -    60,942             60,942      60,942  64,206     64,206
Weighted avg. Interest rate (fixed)...      -        -        -       -    10.75%

Variable rate (Italy)..........$        1,087    1,179    1,205   1,178     880       2,042    7,572       7,572   7,436      7,436
Weighted avg. Interest rate             4.50%    4.50%    4.50%   4.50%   4.50%       4.50%    4.50%
(variable)

Variable rate (Austria), in 2000, mix     324      125      113      17       -           -      579         579   1,355       1,355
of currencies primarily in
euro.......$
Weighted avg. Interest rate....         4.30%    4.30%    4.30%   4.30%   4.30%       4.30%    4.30%

</TABLE>

                                       48

<PAGE>


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 Amount
                                       Sell
                                  U.S. Dollar  Average Option      Fair Value
                                  Equivalent   Strike Price    December 31, 2001
                              (in thousands, except for the option strike price)
Currency Pairs:
Foreign Currency Forward Contracts
Euro
Japanese Yen                          $   9,170    106.6335     $      644
Swiss Franc                           $   1,486        1.52     $      (7)

Foreign Currency Options
Euro
Swiss Franc                           $   2,809       1.4647     $      47
Canadian Dollar                       $   1,377       1.3796     $      21
Japanese Yen                          $   3,821       108.04     $     245

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

ITEM 12:  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

ITEM 13:  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

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

     Not applicable.

PART III

ITEM 15:  [RESERVED]

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 Statement Changes in of Stockholders Equity..............  F-4
   Consolidated Statements of Cash Flow..................................  F-5
   Notes to the Consolidated Financial Statements........................  F-6

                                       49

<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.

                                       50

<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:  May 16, 2002

                            Head Holding Unternehmensbeiteiligung GmbH
                            Registrant


                            By:     /s/Johan Eliasch
                                    -------------------------------------

                                    Name:  Johan Eliasch
                                    Title: Chief Executive Officer



<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                                  ANNUAL REPORT
                      FOR THE YEAR ENDED DECEMBER 31, 2001



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



Report of Independent Accountants............................................F-1

Consolidated Balance Sheets at December 31, 2000 and 2001....................F-2

Consolidated Statements of Operations for the Years Ended
December 31, 1999, 2000 and 2001.............................................F-3

Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 2000 and 2001.............................................F-4

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 2000 and 2001.............................................F-5

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

Management's Discussion and Analysis of Financial Statements and
Results of Operations..........................................................1



<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, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, 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 18, 2002


                                      F-1
<PAGE>


                                                HEAD N.V. AND SUBSIDIARIES

                                               CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                 -------------------------------------
                                                                                       2000                  2001
                                                                                 ----------------       --------------
                                                                                      (in thousands, except shares)
ASSETS:
<S>                                                                              <C>                    <C>
Cash and cash equivalents....................................................... $      15,848          $       22,128

Accounts receivable, net of allowance for doubtful accounts of
  $10,509 and $10,787...........................................................       158,424                 150,002

Inventories, net................................................................        83,701                  73,575

Prepaid expense and other current assets........................................        12,894                  15,001
                                                                                 -------------          --------------
  Total current assets..........................................................       270,867                 260,706

Marketable securities...........................................................         2,174                   2,001

Property, plant and equipment, net..............................................        60,943                  60,728

Intangible assets, net..........................................................        19,850                  20,236

Deferred income taxes...........................................................        72,168                  66,204

Other non-current assets........................................................         8,301                   6,644
                                                                                 -------------          --------------
  Total assets.................................................................. $     434,304          $      416,519

LIABILITIES AND STOCKHOLDERS' EQUITY:

Accounts payable................................................................ $      34,436          $       29,176

Accrued expenses and other current liabilities..................................        41,837                  38,593

Short-term borrowings...........................................................        41,822                  53,872

Current portion of long-term debt...............................................         1,531                   1,412
                                                                                 -------------          --------------
  Total current liabilities.....................................................       119,626                 123,053

Long-term debt..................................................................        71,466                  67,682

Other long-term liabilities.....................................................        13,215                  13,416
                                                                                 -------------          --------------
  Total liabilities.............................................................       204,307                 204,151

Minority interest...............................................................             9                       9
Commitments and contingencies (Note 18)

Stockholders' Equity:
Ordinary shares: EUR 0.20 par value; 39,820,677 shares issued...................         7,067                   7,067

Additional paid in capital......................................................       143,999                 135,435

Treasury stock at cost:  956,300 shares at December 31, 2000....................        (5,211)                     --

Retained earnings...............................................................        75,620                  75,590

Accumulated other comprehensive income..........................................         8,512                  (5,732)
                                                                                 -------------          --------------
  Total stockholders' equity....................................................       229,988                 212,359
                                                                                 -------------          --------------
  Total liabilities and stockholders' equity.................................... $     434,304          $      416,519
                                                                                 =============          ===============

                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,
                                                                                ---------------------------------------------------
                                                                                   1999               2000                  2001
                                                                                ----------         ----------            ----------
                                                                                        (in thousands, except per share data)
REVENUES:
<S>                                                                             <C>                <C>                   <C>
Product revenues............................................................... $  380,876         $  390,784            $  384,010

Licensing revenues..............................................................     7,879              7,855                 8,011
                                                                                ----------         ----------            -----------
Total revenues..................................................................   388,755            398,639               392,021

Cost of sales (the year ended December 31, 1999 included $2,187
  related to the step-up of inventory from acquisitions - Note 4)...............   228,453            227,442               233,971
                                                                                ----------         ----------            -----------
Gross profit....................................................................   160,302            171,197               158,050

Selling and marketing expense...................................................    95,906             97,743               102,094

General and administrative expense (excluding non-cash
  compensation expense and restructuring charge)................................    36,910             33,488                33,972

Non-cash compensation expense...................................................       548              1,378                 2,025

Employee termination and other related costs....................................     1,691                 --                   838
                                                                                ----------         ----------            -----------
Operating income................................................................    25,246             38,588                19,121

Interest expense................................................................   (14,092)           (18,642)              (11,275)

Interest income.................................................................       947              1,118                   892

Foreign exchange gain...........................................................     4,574              7,502                 5,828

Other income (expense), net.....................................................     1,899             (4,181)                    7
                                                                                ----------         ----------            -----------
Income from continuing operations
  before income taxes and extraordinary items...................................    18,574             24,386                14,573

Income tax benefit (expense):
  Current.......................................................................    (2,929)            (3,231)               (2,169)
  Deferred......................................................................    38,816              5,165                (1,863)
                                                                                ----------         ----------            -----------
  Income tax benefit (expense)..................................................    35,887              1,934                (4,032)

Share of loss from equity investment, net of tax (Note 29)......................        --                 --                (1,117)
                                                                                ----------         ----------            -----------
Income from continuing operations before extraordinary items....................    54,463             26,321                 9,424

Loss from discontinued operation (Note 3).......................................       (60)              (644)                   --

Extraordinary gain (net of income tax of $1,559 in 2000, Note 16)...............        --              2,104                    --
                                                                                ----------         ----------            -----------
Net income......................................................................$   54,403         $   27,781            $    9,424
                                                                                ==========         ===========           ===========
Earnings per share-basic
  Income from continuing operations before extraordinary items..................$     2.46         $     0.94            $     0.25
  Loss from discontinued operation..............................................     (0.00)             (0.02)                   --
  Extraordinary gain............................................................        --               0.07                    --
  Net income....................................................................      2.46               0.99                  0.25

Earnings per share-diluted
  Income from continuing operations before extraordinary items..................$     2.23         $     0.86            $     0.24
  Loss from discontinued operation..............................................     (0.00)             (0.02)                   --
  Extraordinary gain............................................................        --               0.07                    --
  Net income....................................................................      2.23               0.91                  0.24

Weighted average shares outstanding
  Basic.........................................................................    22,132             28,071                38,083
  Diluted.......................................................................    24,370             30,679                39,816

                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
                                                     Ordinary Shares    Additional                         Other          Total
                                                   -------------------   Paid-in    Treasury  Retained  Comprehensive  Stockholders'
                                                    Shares     Amount    Capital     Stock    Earnings     Income         Equity
                                                   --------   --------  ----------  --------  --------  -------------  -------------
                                                                             (in thousands, except shares)

<S>                                                <C>         <C>         <C>        <C>         <C>          <C>         <C>
Balance at December 31, 1998                       20,000,000      53       12,853         --      15,471       10,439       38,816

Issuance of warrants.............................          --      --        1,820         --          --           --        1,820

Stock-based compensation.........................          --      --          548         --          --           --          548

Consideration in excess of historical cost
  of assets acquired from common
  control entity.................................   4,277,820      11           --         --      (5,040)          --       (5,029)

Comprehensive income:

Net income.......................................          --      --           --         --      54,402           --       54,402

Foreign currency translation
  adjustments....................................          --      --           --         --          --       (7,951)      (7,951)

Minimum pension liability........................          --      --           --         --          --          (60)         (60)
                                                                                                                           ---------
Comprehensive income.............................                                                                            46,391
                                                   ----------  ------     --------    --------     ------      --------    ---------
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 NLG0.01 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 20).............          --      --      (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
                                                   ==========  ======     ========    ========     ======      ========    =========

                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 FLOWS

<TABLE>
<CAPTION>
                                                                                           For the Years Ended December 31,
                                                                                ---------------------------------------------------
                                                                                   1999               2000                  2001
                                                                                ----------         ----------            ----------
                                                                                                  (in thousands)
OPERATING ACTIVITIES:
<S>                                                                             <C>                <C>                   <C>
  Net income....................................................................$   54,402         $   27,781            $    9,424

  Adjustments to reconcile net income
    to net cash provided by operating activities:

    Depreciation and amortization..............................................     17,502             16,110                15,936

    Share of loss from equity investment, net of tax...........................         --                 --                 1,117

    Provision for leaving indemnity and pension benefits.......................      1,399                772                   823

    Gain on sale of property, plant and equipment..............................       (438)            (1,160)                 (867)

    Gain on debt restructuring.................................................         --             (2,104)                   --

    Non-cash interest expense (income).........................................      1,820             (1,023)                   --

    Non cash compensation expense..............................................        548              1,378                 2,025

    Deferred tax...............................................................    (38,816)            (5,165)                1,863

    Other, net.................................................................         89                (31)                   --

  Changes in operating assets and liabilities (net of effects
    of acquisitions):

    Accounts receivable........................................................    (18,271)            (7,457)                2,071

    Inventories................................................................       (468)           (13,277)                9,402

    Prepaid expense and other assets...........................................      4,704                (31)               (2,535)

    Accounts payable, accrued expenses and other liabilities...................      5,973             (9,341)               (3,338)
                                                                                ----------         -----------           -----------
  Net cash provided by operating activities                                         28,444              6,452                35,921
                                                                                ----------         -----------           -----------

INVESTING ACTIVITIES:

    Purchase of property, plant and equipment..................................    (24,131)           (20,571)              (16,314)

    Proceeds from sale of property, plant and equipment........................      5,762              3,303                 1,080

    Acquisition of Penn, net of cash acquired..................................    (40,191)                --                    --

    Other acquisitions.........................................................       (753)                --                (4,130)

    Equity investment (Note 29)................................................         --                 --                  (684)

    Maturities (purchases) of marketable securities, net.......................      2,783                 90                   135

    Acquisition of minority interest...........................................       (987)                --                    --
                                                                                ----------         -----------           -----------
  Net cash used for investing activities.......................................    (57,517)           (17,178)              (19,913)
                                                                                ----------         -----------           -----------
FINANCING ACTIVITIES:

    Change in short-term borrowings, net.......................................    (16,384)           (38,032)               15,135

    Proceeds from long-term debt...............................................    132,362              1,789                   807

    Payments on long-term debt.................................................    (71,047)           (61,970)                 (716)

    Proceeds from initial public offering......................................         --            134,402                    --

    Purchase of treasury stock.................................................         --             (5,211)               (5,378)

    Dividend paid..............................................................         --            (15,717)               (9,455)

    Change in restricted cash..................................................     (1,865)             4,812                    --
                                                                                ----------         -----------           -----------
  Net cash provided by financing activities....................................     43,066             20,073                   393
                                                                                ----------         -----------           -----------
  Effect of exchange rate changes on cash and cash equivalents.................     (4,401)           (11,446)              (10,122)

  Net increase (decrease) in cash and cash equivalents......................      9,592             (2,099)                6,279

  Cash and cash equivalents at beginning of period.............................      8,356             17,948                15,848
                                                                                ----------         -----------           -----------
  Cash and cash equivalents at end of period................................... $   17,948         $   15,848            $   22,128
                                                                                ==========         ===========           ===========
SUPPLEMENTAL CASH FLOW INFORMATION:

  Cash paid for interest....................................................... $    8,485         $   19,992            $   10,426

  Cash paid for income taxes................................................... $    1,895         $    3,230            $    2,208

  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).

With a broad product offering marketed mainly to middle to high price points,
the Company supplies 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. Head N.V.'s products
are sold through over 27,000 customers in over 80 countries and target sports
enthusiasts of varying levels of ability and interest ranging from the novice to
the professional athlete. The Company's strongest presence has traditionally
been in Europe, and in recent years the Company has built market share in the
United States, the next largest market for the Company's products after Europe.

Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

The Company maintains its accounting records and publishes its statutory
financial statements in accordance with Dutch corporate regulations and has 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.

Consolidation Policies

The consolidated financial statements of Head include the accounts of all
majority-owned subsidiaries. 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.


                                      F-6
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Marketable Securities

Debt securities are classified as held-to-maturity and are reported at amortized
cost.

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

In accordance with the Statement of Financial Accounting Standards No. 121
("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, 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. Trademarks are
amortized using the straight-line method over a period of 20 to 40 years.
Goodwill is amortized using the straight-line method over a period of 15 to 30
years. The Company periodically reviews the carrying value of its intangibles
based primarily upon an analysis of undiscounted cash flows. Any impairment
would be recognized when the expected future operating cash flows derived from
such intangible assets are less than their carrying value. The impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds the fair value of the asset.

Revenue Recognition

Revenues from product sales are recognized at the time of product shipment,
which represents transfer of title to the customer. Revenues from licensing
agreements are recognized over the license term based on underlying customer
sales for the period. 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 and the United States of America are generally billed
in local currency. The local currency is the functional currency of the
subsidiaries in these countries. Foreign currency (functional currency) assets
and liabilities are translated into U.S. dollars (the reporting currency) at the
exchange rate on the balance sheet date, with resulting translation adjustments
recorded in other comprehensive income. 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.


                                      F-7

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

The Company enters into forward foreign currency contracts to hedge currency
fluctuations in transactions denominated in foreign currencies, primarily the
U.S. dollar and Japanese yen, thereby limiting the Company's risk that would
otherwise result from changes in exchange rates. The Company enters into forward
foreign exchange contracts to hedge firm commitments and it buys foreign
exchange option contracts to hedge anticipated transactions. The Company does
not utilize financial instruments for trading or speculative purposes.

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 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
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. 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 occur and are
recognized in earnings. The ineffective portion of a hedging derivative's change
in fair value will be immediately recognized in earnings. The earnings impact
for all designated hedges are recorded in the Consolidated Statement of
Operations on the same line as the gain or loss on the item being hedged.

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

Share Split

In October 2000, the Company effected a two-for-one stock split of its ordinary
shares. All references in the consolidated financial statements and notes
thereto to numbers of shares and per share amounts have been restated to reflect
the stock split.

Computation of Net Income per Share

Net income 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. Shares held by The
Stichting Head Option Plan ("Stichting") are not treated as outstanding for
purposes of the earnings per share calculation until the related option has been
exercised. 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,
                                                          --------------------------------------
                                                             1999          2000           2001
                                                          ----------    ----------    ----------
                                                                        (in thousands)

<S>                                                       <C>           <C>           <C>
Weighted average shares outstanding - basic...............$   22,132    $   28,071    $  38,083
Dilutive effect of stock options..........................     1,402         1,858        1,733
Dilutive effect of warrants...............................       836           750           --
                                                          ----------    ----------    ---------
Weighted average shares outstanding - diluted.............$   24,370    $   30,679    $  39,816
</TABLE>

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 January 1, 2001, the Company adopted SFAS 133 (see Note 12).

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, which the Company is required to implement with effect from July 1, 2001
and January 1, 2002, respectively. 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.


                                      F-9

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


The on-going impact will be that goodwill and intangible assets with an
indefinite life will no longer be amortized, but instead will be tested at least
annually for impairment. The goodwill impairment test will consist of a two-step
method. First, each reporting unit's (which generally represents one level below
an operating segment) carrying value will be compared to its fair value. Second,
where the reporting unit's carrying value exceeds its fair value, an impairment
loss will be 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 will require that an impairment loss be
recognized equal to the excess of its carrying value over its fair value.

The Company adopted SFAS No. 142 on January 1, 2002. In accordance with the new
standard, the Company will cease recognition of $0.1 million in annual goodwill
amortization and $1.0 million in annual trademark amortization, as the Company
has determined that its trademarks represent indefinite-lived intangible assets.
The Company expects to complete its transitional impairment test for its
trademarks prior to the issuance of its March 31, 2002 quarterly financial
statements. The Company expects to complete step one of its transitional
goodwill impairment test by June 30, 2002, and step two by December 31, 2002.
Any impairment losses resulting from the transitional impairment tests will be
recognized as a change in accounting principle measured as of January 1, 2002.

In October 2001, the Financial Accounting Standards Board ("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 will not have a material impact on the Company's
consolidated financial position or 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 years ended December 31,1999 and
2000. Revenues of London Films were $1.5 million and $ 0.5 million for the years
ended December 31, 1999 and 2000, respectively.

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


                                      F-10
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 4 - Acquisition

Dacor Acquisition

On November 19, 1998, one of the Company's subsidiaries acquired 100% of the
outstanding common stock of Dacor Corporation, a U.S. manufacturer of diving
equipment, for a purchase price of approximately $2.3 million. The allocation of
purchase price included approximately $1.6 million of restructuring and
transaction costs (primarily severance and equipment relocation costs associated
with the shut down of Dacor's facility and professional fees) and inventories
with a fair market value of approximately $5.6 million (approximately $1.0
million greater than cost which has been charged to cost of sales in 1999). The
excess of purchase price over the fair value of net assets acquired of
approximately $1.8 million, was allocated to goodwill and is being amortized
over 30 years.

The acquisition has been accounted for as a purchase and, accordingly, the
operating results of Dacor have been included in the Company's consolidated
financial statements since the date of acquisition. Post acquisition, the
business contributed a loss of approximately $0.2 million to consolidated net
income for the year ended December 31, 1998.

Penn Acquisition

Effective May 1, 1999, one of the Company's subsidiaries acquired the
outstanding common stock of Penn Racquet Sports, Inc. for an aggregated purchase
price of approximately $40.6 million.

Penn manufactures and distributes tennis balls and racquetball balls. The
acquisition has been accounted for as a purchase and, accordingly, the operating
results of Penn have been included in the Company's consolidated financial
statements since the date of acquisition. The acquisition was funded by
borrowings under a $50.0 million revolving loan agreement.

The allocation of purchase price included trademarks of $19.1 million, which are
being amortized over 20 years. The allocation of purchase price also included
$1.3 million of exit costs, employee termination and relocation costs and
professional fees and inventories with a fair market value of approximately $7.9
million (approximately $1.2 million greater than cost which has been charged to
cost of sales in 1999). The excess of the fair value of net assets acquired over
purchase price was proportionately allocated to non-current assets.

The following unaudited pro forma consolidated results of operations have been
prepared as if the acquisition had occurred as of January 1, 1999. The pro forma
data give effect to actual operating results prior to the acquisition and
adjustments to revenue, cost of sales, interest expense and amortization.


                                      F-11
<PAGE>


                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                For the Year Ended
                                                                                   December 31,
                                                                                ------------------
                                                                                       1999
                                                                                ------------------
                                                                                    (in thousand,
                                                                                except per share data)

<S>                                                                             <C>
Revenues........................................................................$   411,185
Operating income................................................................     26,806
Income from continuing operations before income taxes and extraordinary items...     18,477
Income from continuing operations before extraordinary items....................     53,686
Net income......................................................................$    53,686

Earnings per share - basic
   Income from continuing operations before extraordinary items.................$      2.43
   Net income...................................................................$      2.43
Earnings per share - diluted
   Income from continuing operations before extraordinary items.................$      2.20
   Net income...................................................................$      2.20
</TABLE>

To fund the Penn acquisition, one of the Company's subsidiaries entered into a
$50.0 million revolving loan agreement (the "US loan agreement"). Borrowings
under the loan are secured by substantially all of the assets of the Company's
US subsidiaries, and accrue interest at prime plus 1.5% for the first 90 days
and at either prime plus 1.5% or LIBOR plus 2.75% thereafter. In July 1999, the
Company repaid all borrowings under this agreement and reduced the available
amount to $20.0 million. In April 2000, the Company replaced the Agreement with
a $20.0 million, three-year, renewable term Loan and Security Agreement with
Fleet Capital Corporation under similar terms.

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 order backlog was expensed in 2001.


                                      F-12
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 6 - Accounts Receivable

Accounts receivable consist of the following (in thousands):

                                                           December 31,
                                                   ---------------------------
                                                       2000           2001
                                                   ------------   ------------


Trade debtors......................................$   149,202    $   144,196
Other receivables..................................     19,731         16,593
Allowance for doubtful accounts....................    (10,509)       (10,787)
                                                   -----------    -----------
  Total Accounts receivable, net...................$   158,424    $   150,002
                                                   ===========    ===========

Note 7 - Inventories

Inventories consist of the following (in thousands):

                                                           December 31,
                                                   ---------------------------
                                                       2000           2001
                                                   ------------   ------------

Raw materials and supplies.........................$    21,409    $    17,330
Work in process....................................      5,573          6,512
Finished goods.....................................     68,191         63,708
Provisions.........................................    (11,472)       (13,975)
                                                   -----------    -----------
  Total inventories, net...........................$    83,701    $    73,575
                                                   ===========    ===========



Note 8 - Marketable Securities

Marketable securities consist of the following (in thousands):

                                                         December 31,
                                                 ---------------------------
                                                    2000             2001
                                                 ----------       ----------


Austrian government debt securities..............$      709       $      316
Austrian debt security funds.....................     1,206            1,087
Corporate debt securities........................       315              286
Other securities.................................        --              311
                                                 ----------       ----------
  Total Marketable securities....................$    2,230       $    2,001
  Less: Short-term portion.......................       (56)              --
                                                 ----------       ----------
  Total Long-term marketable securities..........$    2,174       $    2,001
                                                 ==========       ==========


                                      F-13
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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

                                                      December 31,
                                              ---------------------------
                                                 2000             2001
                                              ----------       ----------

Mature within 1 year..........................$      56       $        --
Mature between one year and five years........      968                --
Mature between five years and ten years.......    1,206                --
Mature after ten years........................       --             2,001
                                              ---------       -----------
Total Marketable securities...................$   2,230       $     2,001
                                              =========       ===========

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

As of December 31, 2001, debt securities were restricted as to withdrawal by
Austrian regulations requiring that a percentage of leaving indemnity plan
assets are maintained in discounted Austrian government and Austrian corporate
debt securities.

Note 9 - Property, Plant and Equipment

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

                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Land.............................................$     4,608        $     4,435
Buildings........................................     19,780             20,325
Machinery and equipment..........................     90,200            101,769
                                                 -----------        -----------
                                                     114,588            126,529
Less: Accumulated depreciation...................    (53,645)           (65,801)
                                                 -----------        -----------
  Total Property, plant and equipment, net.......$    60,943        $    60,728
                                                 ===========        ===========


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


                                      F-14
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 10 - Intangible Assets

Intangible assets consist of the following (in thousands):

                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Trademarks.......................................$    19,066        $    19,066
Goodwill.........................................      2,528              3,926
                                                 -----------        ------------
                                                      21,594             22,992
Less: Accumulated amortization...................     (1,744)            (2,756)
                                                 -----------        ------------
  Total Intangible assets, net...................$    19,850        $    20,236
                                                 ===========        ============


The increase in goodwill of $1.4 million is due to a newly acquired subsidiary
(see Note 5).

Note 11  - 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.

No customer accounted for greater than 4.0% of total revenues during the years
ended December 31, 1999, 2000 and 2001.

Note 12 - Fair Value of Financial Instruments

The carrying value of the Company's financial instruments approximates fair
value at December 31, 2000 and 2001. The carrying amounts reported in the
consolidated balance sheet for cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and accrued expenses approximate fair
value due to the short maturity of these instruments. The carrying amounts of
marketable securities approximate fair value based on quoted market prices.

The carrying amounts of the Company's short-term borrowings and senior debt
approximate fair value because the interest rates are primarily based upon
floating rates identified by reference to market rates.

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.

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


On December 31, 2001, the Company recorded the change in fair market value of
derivatives related to cash flow hedges to AOCI of $1.0 million, of which all is
expected to be reclassified to earnings during the following twelve months. The
ineffective portion related to cash flow hedges is not material.

The following table provides information regarding the Company's forward foreign
exchange contracts and foreign exchange option contracts as of December 31, 2000
and 2001. 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.

<TABLE>
<CAPTION>
                                                    As of December 31, 2000
                                      ---------------------------------------------------
                                          Contract           Carrying           Fair
                                           amount              value            value
                                      ----------------   ----------------   -------------

<S>                                   <C>                <C>                <C>
Forward foreign exchange contracts....$    15,001        $      (77)        $   1,575
Foreign exchange option contracts.....$     2,618        $       --         $     275

                                                    As of December 31, 2000
                                      ---------------------------------------------------
                                          Contract           Carrying           Fair
                                           amount              value            value
                                      ----------------   ----------------   -------------

Forward foreign exchange contracts....$     9,170        $      631         $     631
Foreign exchange option contracts.....$     8,007        $      313         $     313
</TABLE>


The Company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objectives and strategies for
undertaking various hedge transactions. The Company links all derivatives that
are designated as hedging instruments in foreign currency cash flow hedges to
forecasted transactions or firm commitments. The Company also assesses, both at
the inception of each hedge and on an on-going basis, whether the derivatives
that are used in hedging transactions 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 13 - Short-Term Borrowings

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

                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Lines of credit..................................$    39,567        $    52,432
Notes payable....................................      2,255              1,440
                                                 -----------        ------------
  Total short-term borrowings....................$    41,822        $    53,872
                                                 ===========        ============

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)55.0 million ($48.5 million). In addition,
the Company has lines of credit with several banks in Italy, France, Germany,
Canada and Japan of $58.0 million. In April 2000, one of the Company's
subsidiaries replaced the Agreement to fund the Penn acquisition with a $20.0
million, three-year, renewable term Loan and Security Agreement with Fleet
Capital Corporation under similar terms. As of December 31, 2001, $64.9 million
was available under these credit lines. The weighted average interest rate on
outstanding short-term borrowings was 4.4% and 4.0% as of December 31, 2000 and
2001, respectively.

Note 14 - Accounts Payable

Accounts payable consist of the following (in thousands):

                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Accounts payable - trade.........................$    22,390        $    19,264
Salaries and wages...............................      2,344              2,195
Insurance........................................        263                201
Fiscal authorities...............................      2,344              1,871
Social institutions..............................      1,015                910
Other............................................      6,080              4,735
                                                 -----------        -----------
        Total Accounts Payable...................$    34,436        $    29,176
                                                 ===========        ===========


                                      F-17

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 15 - Accrued Expenses and Other Current Liabilities

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


                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Employee compensation and benefits...............$     7,513        $     6,761
Accrued warranties and allowances................      7,618              8,365
Advertising......................................      3,030              2,109
Legal, auditing and consultant fees..............      1,697              2,511
Fiscal authorities...............................      1,294              2,009
Commissions......................................      3,341              1,188
Accrued interest.................................      3,605              3,162
Other............................................     13,739             12,488
                                                 -----------        -----------
  Total Accrued expenses and other current
    liabilities..................................$    41,837        $    38,593
                                                 ===========        ============


Note 16 - Long-Term Debt

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

                                                           December 31,
                                                 ------------------------------
                                                     2000                2001
                                                 -----------        -----------

Senior notes.....................................$    64,206        $    60,942
Other long-term debt.............................      8,791              8,152
                                                 -----------        -----------
  Total long-term borrowings.....................     72,997             69,094
  Less current portion...........................      1,531              1,412
                                                 -----------        -----------
  Long-term portion..............................$    71,466        $    67,682
                                                  ===========       ============

Senior Notes

On July 15, 1999 one of the Company's subsidiaries, Head Holding, which is now a
100% owned subsidiary of the Company, 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.


                                      F-18
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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, Head Holding Unternehmensbeteiligung GmbH repurchased
(euro)30.9 million of its Senior Notes in a series of transactions using part of
the proceeds of the Company's initial public offering.

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 $20.0 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, 2001. The extinguishment of the prior credit facility (see Note
4) 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.


Other long-term debt

Other long-term debt comprises loans outstanding with several banks. The
weighted average interest rate on outstanding borrowings was 5.61% and 3.89% as
of December 31, 2000 and 2001, respectively. Borrowings mature at various dates
through 2009.

Maturities of long-term debt

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


                                      F-19
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2002........................................... $  1,412

2003...........................................    1,304

2004...........................................    1,318

2005...........................................    1,195

2006...........................................   61,822

Thereafter.....................................    2,042
                                                --------
                                                $ 69,094
                                                ========

Debt restructuring

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

Note 17 - 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 $2.4 million, $0.8 million and $2.1 million for the years
ended December 31, 1999, 2000, and 2001, respectively.

Indemnity and pension liabilities total approximately $12.0 million and $12.5
million at December 31, 2000 and 2001, 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 2000 and 2001.

Note 18 - 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 $2.8 million, $2.3 million and $2.3
million for the years ended December 31, 1999, 2000 and 2001, respectively. The
Company also leases certain manufacturing equipment under capital leases.
Capital lease obligations are not significant as of December 31, 2000 and 2001.

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,
2001 (in thousands):



                                      F-20

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

2002........................................... $  2,336

2003...........................................    2,286

2004...........................................    1,646

2005...........................................      966

2006...........................................      645

Thereafter.....................................      645
                                                --------
                                                $  8,524
                                                ========


                                      F-21
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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.

In July 1996 the European Commission released a decision allowing the
contribution received by HTM Sport- und Freizeitgerate AG (HTM) from Austria
Tabak (former owner) as restructuring aid that was compatible with the European
Union's state aid rules. In that decision, the European Commission imposed
capital contribution requirements on HTM. The Commission's decision was appealed
by two of HTM's competitors. On October 6, 1999, the Court of First Instance of
the European Communities upheld the European Commission's decision. No appeal
was filed to the decision of the Court of First Instance within the statutory
appeal period.

In connection with the Senior Notes offering in July 1999, $18.8 million was
contributed downstream as additional capital to HTM in order to satisfy in full
the remainder of the capital contribution requirement imposed by the European
Commission.

Note 19 - Accumulated Other Comprehensive Income Balance

The following table shows the components of AOCI:


<TABLE>
<CAPTION>
                                      For the Year Ended December 31, 2001
                            --------------------------------------------------------
                              Foreign      Unrealized                    Accumulated
                             Currency       Gains on       Minimum          Other
                            Translation    Derivative      Pension      Comprehensive
                            Adjustment     Instruments   Liabilities       Income
                            -----------    -----------   -----------    -------------
                                                (in thousands)
<S>                         <C>               <C>       <C>           <C>
Beginning balance.......... $   8,573           0           (60)            8,513
Current-period
changes....................   (15,195)        950            --           (14,245)
                            ---------         ---           ---           -------
Ending balance............. $  (6,622)        950           (60)           (5,732)
                            =========         ===           ===           =======
</TABLE>



Note 20 - 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


                                      F-22
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


authorised capital requirement is NLG 500,000 (approximately $0.23 million) and
the minimum paid in capital requirement for a N.V. is NLG 100,000 (approximately
$0.05 million).

In August 1998, 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. The number of shares of the Company as of the date of the merger
have been retroactively reflected in the financial statements for all periods
prior to the merger .

As of February 17, 2000, Head N.V. made a dividend payment in the aggregate
amount of (euro)16.1 million ($15.7 million) to its sole shareholder Head Sports
Holdings N.V.

In August and September 2000, our shareholders resolved to amend our articles of
association at a general meeting of shareholders. Upon this amendment becoming
effective on October 3, our ordinary shares were split on a two for one basis
and converted to a par value of (euro)0.20 each from NLG 0.01. At December 31,
2000, 99,551,692 and 39,820,677 shares were authorized and issued, respectively.

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 25, 2001, Head N.V. transferred all of the 2,041,300 shares held in
Treasury Stock to the Stichting, a trust which holds shares of the Company. The
Stichting will use these shares to fulfill the Company's obligations under the
Head Tyrolia Mares Group Executive Stock Option Plan 1998. The shares held by
the Stichting at December 31, 2001 had an original cost of $10.6 million. The
Stichting intends to remit proceeds from the exercise of employee stock options
to the Company.

On May 28, 2001, the Board of management was granted the authority to repurchase
shares representing up to 10% of the Company's issued share capital over a
period of 18 months (until 28 November 2002). No shares have been repurchased
under this resolution as of December 31, 2001.

On May 11, 2001, the Company declared a year end 2000 dividend of (euro)0.28
(approximately $0.25) per share, which was paid on June 6, 2001.

Note 21 - 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,
                                     -------------------------------------
                                        1999         2000          2001
                                     ----------   ----------    ----------
Dutch statutory tax rate.............   35.0%        35.0%         35.0%
Tax rate differential................   31.5         (3.3)         (0.4)
Permanent differences................    0.1          0.4           0.4
Other................................    1.2          1.4          (2.9)
Valuation allowance.................. (261.1)       (41.5)         (4.5)
                                     ----------   ----------    ----------
Effective tax rate................... (193.1)%       (7.9)%        27.6%
                                     ==========   ==========    ==========


                                      F-23
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




                                      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,
2000 and 2001 (in thousands):

                                                              December 31,
                                                       -------------------------
                                                          2000          2001
                                                       ----------    ----------
Short-term:

Deferred tax asset:

Tax loss carried forward...............................$   8,631     $    6,827
Inventory reserve......................................    1,229          1,390
Other short-term liabilities...........................    1,404          1,648
Reserve for doubtful accounts..........................    2,096          1,751
                                                       ---------     ----------
        Total Short-term deferred tax assets...........   13,360         11,616

Deferred tax liabilities:

Deferred expenses......................................$ (1,638)         (1,066)
Other short term receivables...........................    (757)             --
Foreign currency exchange differences..................    (149)           (900)
Accrued liabilities....................................     (71)           (152)
                                                       ---------     ----------
        Total Short-term deferred tax liability........  (2,615)         (2,118)

Valuation allowance....................................  (2,453)         (1,411)
                                                       ---------     ----------
        Total Short-term net deferred tax asset........$   8,293     $    8,087
                                                       =========     ==========


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

                                                              December 31,
                                                       ------------------------
                                                          2000          2001
                                                       ----------    ----------
Long-term:

Deferred tax asset:

Tax loss carried forward..............................$  107,231     $   88,042
Other.................................................       461            499
                                                      ----------     ----------
        Total Long-term deferred tax assets...........   107,692         88,541

Deferred tax liabilities:

Fixed assets..........................................$ (11,977)       (10,694)
Other long-term receivables...........................   (2,035)            (6)
Foreign currency exchange differences.................     (157)           (84)
                                                      ----------     ----------
        Total Long-term deferred tax liability          (14,169)       (10,784)

Valuation allowance...................................  (21,355)       (11,553)
                                                      ----------     ----------
        Total Long-term net deferred tax asset........$   72,168     $  66,204
                                                      ==========     =========


                                      F-25
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


The Company has net operating loss carryforwards of approximately $329.5 million
and $276.8 million, (both net of restricted portion due to the EC decision) as
of December 31, 2000 and 2001, respectively. These net operating losses are
available in the following jurisdictions (in thousands):


                                         December 31,
                               ----------------------------
                                   2000            2001
                               -----------     ------------
Austria........................$   275,964     $  246,731
Germany........................      7,376          7,507
Other Europe...................      1,538            152
Japan..........................     17,735          4,700
North America..................     26,862         17,710
                               -----------     ----------
                               $   329,476     $  276,801
                               ===========     ==========


In July 1996 the EC limited the utilization of certain net operating losses
(approximately $35.0 million as of December 31, 2001). 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 both 1999 and 2000 relating to operating
losses. In 1999, the tax benefits were first applied to reduce other non-current
intangible assets, resulting from the date of acquisition on January 1, 1996,
from $38.7 million to zero. The additional tax benefits were recognized as
deferred income tax benefit in the amount of $38.8 million and $3.6 million in
the years ended December 31, 1999 and 2000, respectively.

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 22 - Employee termination and other related costs

The company accrued employee termination and other related costs of $ 0.6
million in the first quarter of 2001. This primarily relates to one employee who
held a management position.

Note 23 - Research and Development Expense

The Company incurred research and development expense in the amount of $9.2
million, $9.1 million and $9.5 million for the years ended December 31, 1999,
2000 and 2001, respectively. Research and development expense is included in
cost of sales in the accompanying statements of operations.

Note 24 - Advertising Expense

The Company incurred advertising costs of $29.7 million, $30.2 million and $35.7
million for the years ended December 31, 1999, 2000 and 2001, respectively.
Advertising expenses are included in selling and marketing expense in the
accompanying consolidated statement of operations.


                                      F-26
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Note 25 - 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 years ended December 31, 1999 and 2000 and
the segment information for 1999 and 2000 has been adjusted to reflect this. The
tables below show revenues from external customers and long-lived assets by
geographic region (in thousands):

                                             For the Years Ended December 31,
                                       -----------------------------------------
                                          1999          2000             2001
                                       ----------    ----------       ----------

Revenues from External Customers

Austria............................... $   68,042    $   67,419       $   67,753

Italy.................................     73,126        66,866           63,924

Germany...............................     50,642        42,893           41,818

France................................     33,963        30,646           29,077

Japan.................................     23,449        20,809           17,940

Other (Europe)........................     32,605        38,518           39,598

North America.........................    106,929       131,486          131,912
                                       ----------    ----------       ----------
  Total revenues...................... $  388,755    $  398,639       $  392,021
                                       ==========    ==========       ==========


                                              December 31,
                                       ------------------------
                                          2000          2001
                                       ----------    ----------
Long lived assets:

Austria............................... $   18,645    $   17,536

Italy.................................     19,021        18,830

Germany...............................      1,205         1,107

France................................        273           186

Japan.................................      1,619         1,403

Other (Europe)........................      8,163         9,161

North America.........................     12,018        12,505
                                       ----------    ----------
  Total Assets........................ $   60,943    $   60,728
                                       ==========    ==========


Note 26 - 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 $0.6 million, $0.2 million and $1.2 million
for the years ended December 31, 1999, 2000 and 2001, respectively.


                                      F-27
<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


Mr. Rene C. Jaggi who owns and leads Romika GmbH (see Note 30) is also the
current Chairman of the Head N.V. Supervisory Board.

Note 27 - Restructuring Charge

Following the acquisition of Penn the Company decided to restructure its U.S.
distribution subsidiary and to move the distribution of its US Racquet Sports
division from Columbia, MD to Phoenix, AZ and the distribution of its US Winter
Sports division from Columbia to Boston, MA.

The restructuring charge in 1999 includes costs for the closure of the Columbia
location.

Note 28 - Gain on sale of Property

In 2000 and 2001, one of the Company's subsidiaries sold a part of the building
used in operations for $1.7 million and $1.4 million, respectively, resulting in
a gain of $1.2 million in 2000 and $0.9 million in 2001. This gain is included
in general and administrative expense in the accompanying consolidated
statements of operations.

Note 29 - 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 30 - Footwear License

The Company has signed a five year agreement for Romika GmbH to license the Head
Performance Footwear brand covering athletic, outdoor and casual shoes and
boots. The license period begins January 1, 2002. Most current employees of the
Company's footwear division joined Romika GmbH. Revenues arising under this
licensing agreement will vary depending on Romika's sales. This agreement also
provides for the payment of a minimum license fee to the Company.

Note 31 - 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 $0.5 million, $1.4 million and $2.0
million for the years ended December 31, 1999, 2000 and 2001, respectively.

In November 1998, the Company adopted the Head Tyrolia Mares Group Executive
Stock Option Plan (the "Plan"). A total of 2,278,394 options are reserved to be
granted under the terms of the Plan. The Plan provides 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


                                      F-28

<PAGE>

                           HEAD N.V. AND SUBSIDIARIES

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


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 will not be 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, 2001, 145,848 shares
were available for grant under the Plan.

The weighted average grant-date fair values using the Black-Scholes option
pricing model were $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, 2001, the weighted average remaining contractual life of the
outstanding stock options is 5.7 years, and no options are exercisable.

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


Balance, December 31, 1998...............  1,465,686      $     0.26
Granted..................................    783,620            0.26
                                         -----------      ----------
Balance, December 31, 1999...............  2,249,306            0.26
Granted..................................     29,088            0.26
                                         -----------      ----------
Balance, December 31, 2000 and 2001......  2,278,394      $     0.26
                                         ===========      ==========

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, 2001 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 Greater Than
                                              Grant Date Stock Fair Value
                                       -----------------------------------------
                                         Number of           Weighted average
                                         of shares            exercise price
                                       -------------       ---------------------

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

As of December 31, 2001, the weighted average remaining contractual life of the
outstanding stock options is 9.8 years, and 1,551,480 options are exercisable
under the Plan 2001.


                                      F-30
<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.......................................................



<PAGE>

                                                                     EXHIBIT 8.

<TABLE>
<CAPTION>

Significant Subsidiary                              Country of             Name under which significant subsidiary does
                                                    Incorporation                            business

<S>                                                 <C>                 <C>
Head Holding Unternehmensbeteiligung GmbH           Austria             Head Holding Unternehmensbeteiligung GmbH
HTM Sport-und Freizeitgerate AG                     Austria             HTM, Tyrolia
Head Sport AG                                       Austria             Head Sport AG
Head Tyrolia GmbH                                   Austria             Head Tyrolia GmbH
Head Tyrolia Sports Canada Inc.                     Canada              Head Tyrolia Sports Canada Inc.
Head Sport s.r.o.                                   Czech Republic      Head Sport s.r.o.
OU HTM Sport Eesti Inc.                             Estonia             HTM Sport Estonia Inc.
Head Tyrolia Sports S.A.                            France              Head Tyrolia Sports S.A.
HTM Deutschland GmbH                                Germany             HTM Deutschland GmbH
Head UK Ltd.                                        Great Britain       Head UK
Penn Racquet Sports Co.                             Ireland             Penn Racquet Sports Co.
HTM Sport S.p.A.                                    Italy               Mares, HTM Sport
HTM Sport Japan KK                                  Japan               HTM Sports Japan KK
HTM Head Tyrolia Mares Iberica S.L.                 Spain               HTM Head Tyrolia Mares Iberica S.L.
HTM Sports Corp.                                    Switzerland         HTM Sports Corp.
HTM USA Holdings Inc.                               USA                 HTM USA Holdings Inc.
Head USA Inc.                                       USA                 Head  Penn  Racquet  Sports,  Head  Tyrolia  Winter
                                                                        Sports
Mares America Corp.                                 USA                 Mares America Corp.
Dacor Corp.                                         USA                 Dacor Corp.
Penn Racquet Sports Inc.                            USA                 Penn Racquet Sports Inc.

</TABLE>

<PAGE>
 RECONCILIATION BETWEEN HEAD N.V. AND HEAD HOLDING UNTERNEHMENSBETEILIGUNG GMBH

Financial Statements

Head Holding is the immediate subsidiary of Head N.V. As required under the
terms of the 10 3/4 Senior Notes due 2006, Head Holding must report financial
reports on a quarterly and annual basis. The following tables show the
difference in net income and shareholders' equity between Head N.V. and Head
Holding.

The reconciliation and the effect of the restatement is as follows:

                                             For the Years Ended December 31,
                                       -----------------------------------------
                                          1999          2000             2001
                                       ----------    ----------       ----------
                                                      (in thousands)

Net income

Head Holding.........................  $  54,413    $ 27,506          $  11,439

Reconciliation to Head NV:

  Interest expense on
  shareholders loan..................         --         949                657

  Operating expenses.................        (11)       (680)            (2,907)

  Foreign exchange gain..............         --         (78)               135

  Interest income....................         --          85                100
                                       ---------    ---------        ----------
Head NV..............................  $  54,402    $ 27,782         $    9,424
                                       =========    =========        ==========


                                                          December 31,
                                                          ------------
                                                      2000           2001
                                                      ----           ----
                                                         (in thousands)
Shareholders' Equity

Head Holding...................................... $ 156, 862     $ 213,049

Reconciliation to Head NV:

  Shareholders loan...............................    67,781             --

  Common stock and additional paid in capital,
  net of treasury stock...........................     1,836         (1,458)

  Retained earnings...............................      (375)          (922)

  Dividend paid...................................        --          1,021

  Other...........................................     3,883            669
                                                   ---------      ---------
Head NV........................................... $ 229,987      $ 212,359
                                                   =========      =========


The difference in income of the Head N.V.group compared to the Head Holding
group results from Head N.V.'s administration costs. In addition, Head N.V.
generated interest income from the shareholders' loan granted to the Head
Holding group. Since June 2000, Head N.V. has also managed the distribution of
the group's products in the Netherlands.

In the Shareholders' Equity reconciliation, dividend paid represents the excess
of dividend paid to Head N.V. by Head Holding, offset by Head N.V.'s dividend to
its shareholders.