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SECURITIES AND EXCHANGE COMMISSION

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the fiscal year ended October 31, 2003

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

For the transition period from              to             

Commission file number: 0-18553

Ashworth, Inc.

2765 LOKER AVENUE WEST, CARLSBAD, CA 92008
(Address of Principal Executive Office, including Zip Code)
(760) 438-6610
(Registrant’s Telephone Number, including Area Code)

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

Securities registered pursuant to section 12(g) of the Act: common stock, $.001 par value

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

     The aggregate market value of the Registrant’s common stock held by nonaffiliates based upon the last reported sales price of its common stock on April 30, 2003 as reported on the NASDAQ National Market was $73,318,000.

     There were 13,310,069 shares of common stock, $.001 par value, outstanding at the close of business on December 31, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

     PART III incorporates certain information by reference from the Registrant’s definitive Proxy Statement for its 2004 Annual Meeting of Stockholders to be filed with the Commission within 120 days of October 31, 2003 pursuant to Regulation 14A, which information is incorporated herein by reference.

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CAUTIONARY STATEMENTS AND RISK FACTORS

This report contains certain forward-looking statements, including without limitation those regarding the Company’s plans and expectations for revenue growth, product lines, strategic alliances, domestic and foreign distribution centers, designs and seasonal collections, capital spending, marketing programs, foreign sourcing, cost controls, inventory levels and availability of working capital. These forward-looking statements may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result” or other similar words and phrases. Readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein. Forward-looking statements and the Company’s plans and expectations are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, and the Company’s business in general is subject to certain risks that could affect the value of the Company’s common stock. These risks include, but are not limited to, the following:

ú		Demand for the Company’s products may decrease significantly if the economy weakens, if the popularity of golf decreases or if unusual weather conditions cause a reduction in rounds played.
ú		Like other apparel manufacturers, the Company must correctly anticipate and help direct fashion trends within its industry. The Company’s results of operations would suffer if the Company fails to develop fashions or styles that are well received in any season.
ú		The Company is party to a multi-year licensing agreement to design, source and sell Callaway Golf apparel primarily in the United States, Europe, Canada and Australia. The Company must correctly anticipate the fashion trends and demand for these product lines. The Company’s results of operations would suffer if it fails to develop fashions or styles for the Callaway Golf apparel product line that are well received in any season.
ú		The market for golf apparel and sportswear is extremely competitive. The Company has several strong competitors that are better capitalized. Outside the green grass market, the Company’s market share is not as significant. Price competition or industry consolidation could weaken the Company’s competitive position.
ú		The outbreak of Severe Acute Respiratory Syndrome affected travel to countries where the Company’s products are manufactured. Visiting manufacturers in the affected countries is an important part of the product development process for the Company. If travel to these countries is again restricted by a similar outbreak, the Company’s product development process and reputation as a designer and manufacturer of innovative products may be adversely affected, our international production and shipments may be limited, and the Company could lose sales.
ú		The Company relies on domestic and foreign contractors to manufacture various products. If these contractors deliver goods late or fail to meet the Company’s quality standards, the Company could lose sales and its reputation could suffer.
ú		The Company’s domestic and foreign suppliers rely on readily available supplies of raw materials at reasonable prices. If these raw materials are in short supply or are only available at inflated prices, the contractors may be unable to deliver the Company’s products in sufficient quantities or at expected prices and the Company could lose sales and have lower gross profit margins.
ú		An increase in terrorist activities, as well as the continued conflicts around the world, would likely

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		adversely affect the level of demand for the Company’s products as customers’ and consumers’ attention and interest are diverted from golf and fashion and become focused on these events and the economic, political, and public safety issues and concerns associated with them. Also, such events could adversely affect the Company’s ability to manage its supply and delivery of product from domestic and foreign contractors. If such events caused a significant disruption in domestic or international shipments, the Company’s ability to fulfill customer orders also would be materially adversely affected.
ú		The Company has entered into agreements to purchase land and a building in Oceanside, California and to lease new office and distribution facilities in Basildon, England to replace and expand existing owned and leased office and distribution facilities. The Company’s results of operations would be adversely affected if the Oceanside distribution center is not operational as anticipated or functionality problems are encountered. Any such delay or operation problems may cause the Company to incur additional expense, experience delays in customer shipments, require the Company to lease additional distribution space or extend the term of existing leases. In addition, whether or not the facilities are operational at the time anticipated, the Company’s results of operations could be negatively impacted if future sales volume growth does not reach expected levels and the facility’s additional distribution capacity is not fully utilized, or if the Company does not achieve projected cost savings from the new distribution facilities as soon as, or in the amounts, anticipated.
ú		If economic conditions deteriorate, the ability of the Company’s customers to pay current obligations may be adversely impacted and the Company may experience an increase in delinquent and uncollectable accounts.
ú		Fluctuations in foreign currency exchange rates could affect the Company’s ability to sell its products in foreign markets and the value in U.S. dollars of revenues received in foreign currencies. The Company’s revenues from its international segment may also be adversely affected by taxation and laws or policies of the foreign countries in which the Company has operations, as well as laws and policies of the United States affecting foreign trade, investment and taxation.
ú		The Company maintains high levels of inventory to support its Authentics™ program as well as the Callaway Golf apparel brand. Additional products, greater sales volume, and customer trends toward increased “at-once” ordering may require increased inventory. Disposal of excess prior season inventory is an ongoing part of the Company’s business, and write-downs of inventories may materially impair the Company’s financial performance in any period. Particular inventories may be subject to multiple write-downs if the Company’s initial reserve estimates for inventory obsolescence or lack of throughput prove to be too low. These risks increase as inventory increases.

2004 ANNUAL MEETING OF STOCKHOLDERS

     The Company’s annual meeting of stockholders will be held at 8:00 a.m. on Wednesday, March 24, 2004 at the Company’s corporate headquarters at 2765 Loker Avenue West, Carlsbad, California.

PART I

Item 1. BUSINESS.

GENERAL DESCRIPTION OF THE COMPANY

     Ashworth, Inc., based in Carlsbad, California, was incorporated in Delaware on March 19, 1987. As used in this report, the terms “we,” “us,” “our,” “Ashworth” and the “Company” refer to Ashworth, Inc., its predecessors, subsidiaries and affiliates, unless the context indicates otherwise. The Company designs,

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markets and distributes quality sports apparel, headwear and accessories under the Ashworth® label. In 2001, the Company entered into a multi-year licensing agreement to design, source, market and sell Callaway Golf apparel primarily in the United States, Europe, Canada and Australia.

     The Company has wholly-owned subsidiaries that currently own and operate seven Company outlet stores. A wholly-owned United Kingdom subsidiary distributes our products in Europe. In fiscal 2003, the Company completed the dissolution of its wholly-owned subsidiary in the Virgin Islands due to federal income tax code changes relating to foreign sales corporations. The Company established one division in 1998 to distribute its Ashworth products in Canada and a second division in 2002 to distribute its Callaway Golf apparel in Canada.

     Ashworth designs and markets men’s and women’s sportswear with an authentic style and function for golf and casual lifestyle environments. The Company distributes its products under the Ashworth and Callaway Golf apparel brands to golf pro shops, resorts, specialty golf retailers, and men’s and women’s specialty and department stores. The Company has focused on developing new looks and fabrications that represent innovation, style and function in the golf market.

Available Information

     Our website address is www.ashworthinc.com. You may obtain free electronic copies of our reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports on the “Investor Info” portion of our website, under the heading “SEC Filings.” These reports are available on our website as soon as reasonably practicable after we electronically file them with the Securities and Exchange Commission.

ASHWORTH PRODUCTS

     The Ashworth Men’s Division designs Authentics™, fashion, Ashworth 7™ and Weather Systems^® collections. Each fashion collection typically consists of knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and accessories. Product design focuses on classic, timeless designs with emphasis on quality and innovation.

     The Ashworth Women’s Division designs Authentics™, Weather Systems^® and fashion collections. The collections focus on timeless, elegant designs that are functional and sophisticated for the woman with a fashion sense and an active lifestyle.

     In May 2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf Company to create lines of men’s and women’s Callaway Golf apparel. The first product offering was designed for Fall 2002 and included three separate collections.

     The Callaway Golf apparel men’s Collection range includes classic and fashion lines featuring knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and accessories. The designs focus on sophisticated styling using luxury fabrics.

     The Callaway Golf apparel men’s Sport range includes classic and fashion lines featuring knit shirts, pullovers, vests, jackets, sweaters, pants, shorts, headwear and accessories. The designs aim to appeal to the active consumer.

     For the first few seasons, the focus of the Callaway Golf apparel women’s line will be on the classic collection. The designs are intended to be functional and timeless.

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     Callaway Golf is a trademark of Callaway Golf Company. Ashworth, Inc. is an Official Apparel Licensee of Callaway Golf Company. The multi-year agreement has various annual requirements for marketing expenditures and royalty payments based on the level of net revenues.

DISTRIBUTION CHANNELS

     Approximately 88% of our products are currently warehoused in and shipped from Ashworth’s distribution facilities in Carlsbad, California and approximately 12% are drop-shipped from off-shore factories directly to our international distributors, Ashworth, U.K. Ltd., Ashworth Canada and Ashworth Golf Apparel Canada. The Company has entered into an agreement to purchase land and a new 203,000 square foot distribution center to be built to the Company’s specifications on a 15.5 acre site in Oceanside, California, to replace the Company’s existing Carlsbad distribution facilities. The new distribution center is expected to be operational in late fiscal 2004.

     The Company currently distributes and sells its products primarily through the following distribution channels:

U.S. Golf Pro Shops, Resorts and Off-Course Golf Specialty Shops

     The Company’s core customers are golf pro shops located at golf courses and resorts as well as off-course golf-theme specialty retailers. The Company refers to this channel as the green grass distribution channel. According to the 2003 Darrell Survey, a leading golf industry consumer usage survey, Ashworth was the leading golf apparel company in the United States with a 12.6% share in shirt usage among golfers. The Company currently distributes its products in nearly all of the 50 states.

U.S. Department Stores and Specialty Stores

     The Company currently sells its products to selected upscale department and specialty stores, including Parisian, Belk, Bloomingdale’s, Marshall Fields, Lord & Taylor and Nordstrom.

U.S. Corporate Market

     The Company markets to top specialty-advertising firms that re-sell the Company’s products to Fortune 500 companies and other major corporations for use in their company stores, sales meetings, catalogs and corporate events.

International Market

     The Company has a wholly-owned subsidiary in Essex, England that distributes Ashworth products and Callaway Golf apparel to customers, either directly or through independent sales representatives, in the United Kingdom and other European countries such as Germany, France, Spain, Sweden, Ireland and Portugal. In 1998, the Company opened one division, operated by Almec Leisure Group pursuant to a management agreement, to sell and distribute its Ashworth products in Canada. In 2002, the Company opened a second division in Canada, operated by S&P Apparel, Inc. pursuant to a management agreement, to distribute its Callaway Golf apparel in Canada.

     The Company has entered into licensing and distribution agreements with various partners in countries such as Japan, Hong Kong, Singapore, Taiwan, South Africa and South Korea. Under these agreements, the licensees will import certain product lines from Ashworth and manufacture other approved licensed products

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designed specifically for their market.

     The Company also uses distributors to sell Ashworth products in other countries such as United Arab Emirates and Mexico.

Ashworth Retail Stores

     The Company operates, through wholly-owned subsidiaries, seven retail stores in California, Texas, Colorado, Arizona, Utah and Nevada. The main purpose of these stores is to help control and manage inventory by selling prior season and irregular merchandise. The Company also sells its excess and irregular inventory from time to time through better clearance retailers.

Ashworth Concept Store

     The Company opened an Ashworth Concept Store in Costa Mesa, California in October 1997 to sell lifestyle products. The Company closed the store in Costa Mesa on October 1, 2003 and is in the process of dissolving the subsidiary.

SALES AND MARKETING

     The Company’s products are sold in the United States, Europe and Canada largely by independent sales representatives who are not employees of the Company or its subsidiaries. The Company currently has approximately 170 independent sales representatives worldwide. The Company also uses several different distributors and licensees in various international locations.

     In an effort to add exposure and consumer credibility to its Ashworth brand, the Company has golf celebrities who wear and endorse the Company’s products. At October 31, 2003 they were: (1) Fred Couples, (2) Stuart Appleby, (3) Rich Beem, (4) Chris DiMarco, (5) Scott Verplank, (6) Rocco Mediate, (7) Johnny Miller, (8) Pat Bates, (9) Allen Doyle, (10) Bruce Leitzke, (11) Bruce Summerhayes, (12) Kelly Robbins and (13) Jim Nantz, a popular CBS sports announcer. The Company uses these players and celebrities in advertisements, in-store displays, and for trade shows, store and other special appearances.

     The Ashworth marketing platform is designed to heighten brand awareness, brand strength and brand growth globally through print, moving media, communications and promotional initiatives.

     Ashworth continued its in-store shop program in 2003 and now has a distinct in-store presence in many locations throughout the United States, Europe and Canada. This modular fixture program is designed to help create an in-store shop for Ashworth products coupled with pictures and displays of our spokespersons and golf professionals.

     In an effort to introduce new young customers to the Ashworth brand, the Company supports high school and collegiate golf by providing team uniforms to selected high school, college and university golf teams. The Company has a sponsorship agreement with the American Junior Golf Association whereby the Company makes an annual cash contribution and provides shirts for the participants in four specific events.

     The domestic market for Ashworth apparel has been seasonal, with the highest revenues traditionally in the period from February through August and the lowest revenues in the period from September through January. The Company expects that the addition of the department and specialty retail store markets, the corporate market, and additional product categories for fall and winter in the European market will help to reduce the seasonality of the Company’s business.

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     Net revenues in fiscal 2003 were $149,438,000, an increase of 15.6% from net revenues of $129,286,000 in fiscal 2002. During the last three fiscal years, the Company had the following domestic and international revenues:

     See “Note 1 of Notes to Consolidated Financial Statements, The Company and Summary of Significant Accounting Policies, Business,” for revenues, operating income and identifiable assets of Ashworth U.K., Ltd., and “Note 11, Segment Information” for market segment information.

     The Company’s revenues from its international segment may be adversely affected by currency fluctuations, taxation and laws or policies of the foreign countries in which the Company has operations, as well as laws and policies of the United States affecting foreign trade, investment and taxation.

     For more information regarding the risks of currency fluctuations that could affect the Company’s ability to sell its products in foreign markets, the value in U.S. dollars of revenues received in foreign currencies, the impact of such fluctuations on the Company’s international segment and strategies the Company may use to manage the risks presented by currency exchange rate fluctuations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity And Capital Resources – Currency Fluctuations,” “Item 7A, Quantitative and Qualitative Disclosures about Market Risk,” and “Note 1 of Notes to Consolidated Financial Statements, Foreign Currency.”

     At December 31, 2003, we had a sales order backlog of approximately $56,050,000 from independent third parties, which is approximately $8,963,000 higher than the comparable backlog last year. Backlog reflects sales orders that are placed with the Company prior to the quarter in which the goods are to be shipped, as opposed to “at-once” sales orders that are received in the quarter in which the goods are expected to be shipped. The current backlog covers orders for goods expected to be shipped through approximately June 2004. The amount of the sales order backlog at a particular time is affected by a number of factors, including the timely flow of product from suppliers which can impact the Company’s ability to ship on time, and the timing of customers’ orders. Accordingly, a comparison of sales order backlog from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments in any period. In addition, sales orders may be changed or canceled prior to shipment, preventing the Company from converting backlog into revenue.

INVENTORY

     The Company maintains high levels of inventory to support its Authentics program, increased sales volume, and to meet increased customer demand for “at-once” ordering. Disposal of excess prior season inventory is an ongoing part of the Company’s business, and inventory writedowns may impair the Company’s

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financial performance in any period. Particular inventory may be subject to multiple writedowns if the Company’s initial reserve estimates for inventory obsolescence or lack of throughput prove to be too low. These risks increase as inventory grows. The Company’s goals are to increase the inventory turns and lower the overall inventory levels relative to revenues.

COMPETITION

     According to the 2003 Darrell Survey, the Ashworth brand was the leader in the Company’s core green grass market in 2003, with a 12.6% share in shirt usage among golfers. The Company’s share of other markets, including upscale department stores and the corporate market, is less significant. The golf apparel market is not dominated by any single company, and is highly competitive both in the United States and abroad. The Company competes not only with golf apparel manufacturers, but also with other branded sports and sportswear apparel manufacturers that have entered the golf apparel market in recent years. Many of the Company’s competitors have greater financial resources. Ashworth competes with other golf apparel manufacturers on design, product quality, customer servicing and brand image.

PRODUCT SOURCING

     Ashworth sources its products in the following ways:

     Contract Manufacturing: At the beginning of fiscal 2000, starting with the Spring 2000 line, Ashworth ceased most contract manufacturing and stopped purchasing its own raw materials.

     Ready-Made Finished Goods: During fiscal 2003, nearly all of the Company’s production was through “full package” purchases of ready-made goods, manufactured to the Company’s quality and styling specifications domestically and by sources outside of the United States. In fiscal 2003, approximately 80% of the Company’s finished goods were made in Asian countries while approximately 20% were made in the Caribbean Basin, Central and South America, Europe and the United States. Asian countries where our goods were manufactured included China, Hong Kong, Indonesia, Korea, Macau, Malaysia, the Philippines, Sri Lanka, Taiwan, Thailand, India, Brunei and Bahrain.

     In-House Embroidery: Ashworth embroiders custom golf course, tournament and corporate logos in-house using approximately 65 multi-head, computer-controlled embroidery machines with a total of approximately 570 sewing heads. The embroidery design library contains over 48,000 Ashworth and customer designs. Embroidery is applied to both garments and finished headwear. On average, the Company embroiders 90,000 logos per week on approximately 70,000 garments.

TRADEMARKS AND LICENSE

     The Company owns and utilizes several trademarks, principal among which are the Ashworth typed and design marks, the Golfman design mark, and the Weather Systems stylized mark. The Ashworth typed and design marks, the Golfman design marks and the Weather Systems stylized mark have been registered for apparel, shoes, leather goods and/or golf bags on the Principal Register of the United States Patent and Trademark Office. Additionally, the Company has several other pending trademark applications in the United States.

     The Company has registered the Ashworth typed and design marks, the Golfman design marks and/or the Weather Systems stylized marks as well as has pending applications for apparel, shoes, leather goods and/or golf bags internationally. The application process varies from country to country and can take approximately one to three years to complete.

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     The Company has three EZ-TECH applications pending in the United States, Canada and the European Union. The Company also has ASHWORTH 7 as a registered mark in the United States and Japan and several pending applications in other countries.

     Ashworth regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the marketing of its products. Although Ashworth believes that it has the exclusive right to use the trademarks and intends to vigorously protect its trademarks against infringement, there can be no assurance that Ashworth can successfully protect the trademarks from conflicting uses or claims of ownership in cases where the trademarks were used and/or registered previous to Ashworth’s lawful registrations.

     Callaway Golf is a trademark of Callaway Golf Company. The Company is an Official Apparel Licensee of Callaway Golf Company. The Company has licensed the use of the Callaway Golf trademark pursuant to a multi-year licensing agreement to design, source and sell Callaway Golf brand apparel primarily in the United States, Europe, Canada and Australia. The agreement is effective until December 31, 2010 and, at Ashworth’s sole discretion, may be extended for one five-year term provided that Ashworth meets or exceeds certain minimum requirements for calendar years 2008 and 2009, that Ashworth gives notice of its intention to renew by January 1, 2010 and that Ashworth is not in material breach of the agreement.

EMPLOYEES

     At December 31, 2003, Ashworth had approximately 400 regular employees and 135 seasonal temporary employees. Ashworth considers its labor relations to be generally good.

Item 2. PROPERTIES.

     The Company owns two buildings located on Loker Avenue West in Carlsbad, California that were purchased on December 9, 1993 for $3,500,000. The buildings include a total of approximately 78,000 square feet, consisting of space for embroidery, warehousing and distribution functions. The mortgage on these two buildings was refinanced on December 1, 2000 for $3,000,000 amortized over 25 years but is due and payable in five years on December 1, 2005. The Company has entered into an agreement to sell the two buildings for approximately $5,747,000 and is currently in escrow. The Company has negotiated a form of lease and on close of escrow the Company intends to enter into a lease agreement to lease the facility from the new owner. The term of the lease is anticipated to commence on the close of escrow and terminate on December 31, 2004, with an option to renew the term of the lease for a period of 60 days with written notice of intent to exercise the option due at least 90 days prior to the expiration of the initial term of the lease. Under the terms of the form of lease, the Company would pay monthly rent of approximately $47,000 plus taxes, insurance and utilities.

     The Company has entered into an agreement to purchase land and a new 203,000 square foot distribution center to be built to the Company’s specifications on a 15.5 acre site in Oceanside, California. The proposed building will replace the Company’s existing distribution facilities currently operating out of five separate owned or leased buildings in Carlsbad, California. The new distribution center is expected to be operational in late fiscal 2004.

     The Company and its subsidiaries currently have the following leases for administrative and distribution facilities, as well as store leases for retail space:

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     The Company also pays percentage rent based on revenues that exceed certain breakpoints for all of the retail store leases. All of the leases require the Company to pay its pro rata share of taxes, insurance and maintenance expenses. The Company guarantees at least some portion of several leases held by Ashworth subsidiaries.

Item 3. LEGAL PROCEEDINGS.

     On January 22, 1999, Milberg Weiss Bershad Hynes & Lerach LLP filed a class action in the United States District Court for the Southern District of California (“U.S. District Court”) on behalf of purchasers of the Company’s common stock during the period between September 4, 1997 and July 15, 1998. The action was subsequently consolidated with two similar suits and plaintiffs filed their Amended and Consolidated Complaint on December 17, 1999. Upon the Company’s motion, the U.S. District Court dismissed the Complaint with leave to amend on July 18, 2000. On September 18, 2000, plaintiffs served their Second Consolidated Amended Complaint (“Second Amended Complaint”). On November 6, 2000, the Company filed its motion to dismiss the Second Amended Complaint, which the U.S. District Court granted, in part, and denied, in part. The remaining portions of the Second Amended Complaint allege that, among other things, during the class period and in violation of the Securities Exchange Act of 1934, the Company’s financial statements, as reported, did not conform to generally accepted accounting principles with respect to revenues and inventory levels. It further alleges that certain Company executives made false or misleading statements or omissions concerning product demand and that two former executives engaged in insider trading. The plaintiffs seek unspecified damages. The parties are currently in the discovery process. Based on the current status of the litigation the Company has not booked any provision for settlement charges.

     The Company is party to other claims and litigation proceedings arising in the normal course of business. Although the legal responsibility and financial impact with respect to such other claims and litigation cannot currently be ascertained, the Company does not believe that these other matters will result in payment by the Company of monetary damages, net of any applicable insurance proceeds, that, in the aggregate, would be material in relation to the consolidated financial position or results of operations of the Company.

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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matter was submitted to a vote of the Company’s security holders during the fourth quarter of the fiscal year covered by this report, either by proxy solicitation or otherwise.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

     The Company’s common stock is traded on the Nasdaq National Market under the symbol “ASHW.” The following table sets forth the high and low sale prices on the Nasdaq National Market for the quarters indicated.

Holders

     The Company has only one class of common stock. As of December 31, 2003, there were 491 stockholders of record and approximately 4,200 beneficial owners of the Company’s common stock.

Dividends

     No dividends have ever been declared with respect to the Company’s common stock. In the past, the Board of Directors has chosen to reinvest profits in the Company rather than declare a dividend. The Company does not currently intend to pay cash dividends for the foreseeable future.

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.

     The following selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and the Notes thereto which are included elsewhere in this report. The statement of income data set forth below with respect to the fiscal years ended October 31, 2003, 2002 and 2001 and the balance sheet data as of October 31, 2003 and 2002 are derived from, and should be read in conjunction with, the audited Consolidated Financial Statements and the Notes thereto included elsewhere in this report. The statement of income data set forth below with respect to the fiscal years ended October 31, 2000 and 1999 and

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the balance sheet data as of October 31, 2001, 2000 and 1999 are derived from audited financial statements not included in this report. No dividends have been paid for any of the periods presented.

RESULTS OF OPERATIONS

General

     The Company operates in an industry that is highly competitive and must accurately anticipate fashion trends and consumer demand for its products. There are many factors that could cause actual results to differ materially from the projected results contained in certain forward-looking statements in this report. For additional information, see “Cautionary Statements and Risk Factors,” above.

Critical Accounting Policies

     In response to the SEC’s Release Numbers 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” and 33-8056, “Commission Statement About Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company has identified the following critical accounting policies that affect its significant judgments and estimates used in the preparation of its consolidated financial statements.

     Revenue Recognition. Based on its terms of F.O.B. shipping point, where risk of loss and title transfer

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to the buyer at the time of shipment, the Company recognizes revenue at the time products are shipped or, for Company stores, at the point of sale. The Company records sales in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. Under these guidelines, revenue is recognized when all of the following exist: persuasive evidence of a sale arrangement exists, delivery of the product has occurred, the price is fixed or determinable and payment is reasonably assured. Provisions are made currently for estimated product returns and sales allowances.

     Sales Returns and Other Allowances. Management must make estimates of potential future product returns related to current period product revenues. Management analyzes historical returns, current economic trends, changes in customer demand, and sell-through of our products when evaluating the adequacy of the sales returns and other allowances. Significant management judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period. Material differences may result in the amount and timing of our revenues for any period if management makes different judgments or utilizes different estimates. The reserves for sales returns and other allowances amounted to $728,000 at October 31, 2003 compared to $535,000 at October 31, 2002.

     Allowance for Doubtful Accounts. Management must also make estimates of the uncollectability of accounts receivable. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by analyzing current economic conditions, historical bad debts and continually evaluating individual customer receivables considering the customer’s financial condition. During the second quarter of fiscal 2003, the Company wrote off the $2.5 million unpaid principal balance of an unsecured promissory note and approximately $2.0 million of receivables due from a national retail customer which had filed for protection under U.S. bankruptcy laws, against the $4.5 million reserved in fiscal 2002 by the Company for these specific receivables. If the financial condition of other significant customers of ours were to deteriorate, resulting in the impairment of their ability to make payments, material additional allowances for doubtful accounts may be required. In October 2002, the Company acquired credit insurance to cover many of its major accounts. Our trade accounts receivable balance was $31.0 million, net of allowances for doubtful accounts of $1.3 million, at October 31, 2003 as compared to the balance of $33.6 million, net of allowances for doubtful accounts of $3.2 million, at October 31, 2002 which includes a reserve of approximately $2.0 million for the receivables due from a national retail customer discussed above.

     Inventory. The Company writes down its inventory by amounts equal to the difference between the cost of inventory and the estimated net realizable value based on assumptions about the age of the inventory, future demand and market conditions. This process provides for a new basis for the inventory until it is sold. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Our inventory balance was $44.5 million, net of inventory write-downs of $1.0 million, at October 31, 2003, as compared to an inventory balance of $41.2 million, net of inventory write-downs of $1.0 million, at October 31, 2002. The inventory balance increased as compared to the prior fiscal year-end due to the addition of the Callaway Golf apparel product line. The Ashworth brand inventory declined approximately 5% as compared to the prior fiscal year.

     Asset Purchase Credits. In November 2000, the Company entered into an agreement with a third party whereby inventory was exchanged for future asset purchase credits (“APCs”), which may be utilized by the Company to purchase future goods and services over a four-year period. The original value of the inventory exchanged (at cost) was $1.4 million resulting in $1.4 million in future APCs. The Company has entered into contracts with several third party suppliers who have agreed to accept these APCs, in part, as payment for goods and services. From time to time the Company may enter into additional contracts with such third party suppliers to use the APCs. At October 31, 2003 the Company had $472,000 of the APCs remaining and management expects to fully utilize them over their remaining life.

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Off-Balance Sheet Arrangements

     At October 31, 2003 and 2002, the Company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, the Company does not engage in trading activities involving non-exchange traded contracts which rely on estimation techniques to calculate fair value. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if the Company had engaged in such relationships.

Overview

     The Company earns revenues and income and generates cash through the design, marketing and distribution of quality men’s and women’s sports apparel under the Ashworth and Callaway Golf apparel brands. The Company’s products are sold in the United States, Europe, Canada and various other international markets to selected golf pro shops, resorts, off-course specialty shops, upscale department stores and to top specialty-advertising firms for the corporate market. Nearly all of the Company’s production in fiscal 2003 was through “full package” purchases of ready-made goods with approximately 80% of it manufactured in Asian countries. The Company embroiders a majority of these garments with custom golf course, tournament and corporate logos for its customers.

     Fiscal 2003 was another challenging but successful year for the Company. The Company was tested by one of the toughest global economies in decades, continuing global terrorism and SARS, all of which impacted travel, resort business and general corporate spending. The Company believes that the new Ashworth multi-channel, multi-brand business strategy produced above average results in the industry despite these challenging external conditions. The Company achieved record sales and earnings in 2003.

     In fiscal 2003 Ashworth continued implementing its new business model as well as building the Ashworth brand while successfully completing the first full year of operation with the new Callaway Golf apparel line. The prestigious Darrell Survey®, a leading golf industry consumer survey, once again named the Ashworth brand the leading brand in shirt usage in America. The Ashworth brand has now been ranked as the #1 brand for eight years in a row. The Ashworth brand was also named “the best men’s fashion brand” in Europe by Today’s Golfer® magazine. The new brand at Ashworth, Inc., Callaway Golf apparel, was successfully launched in the middle of fiscal 2002. Fiscal 2003 sales for the first full year of operation equaled approximately $30 million.

     Innovation. The Company continues to emphasize innovation and new products. Staying ahead of the curve and giving its customers new and better products enables the Company to remain strong in very competitive industry conditions and during tough economic times. Launched in 2002, the EZ-TECH™ product, which is 100% cotton, resists fading, pilling and wicks moisture, has continued to sell well. This fabrication was purchased by over two-thirds of the Company’s global account base in fiscal 2003.

     Global Distribution. The Ashworth brand truly has global distribution. Within the last few years the Company’s subsidiaries, distributors and licensees are now selling Ashworth product in China, Russia, Poland, Slovakia, Mexico, South Korea and will soon be restarting its business in Japan with a new licensee. The Company’s Callaway Golf apparel license is primarily focused in the United States, Europe and Canada.

     Preparing For Additional Growth. The Company has taken on two significant operational projects in fiscal 2003. The first was moving into a much needed and larger European embroidery, distribution and sales

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center. The European team successfully accomplished this in September of 2003. The second and larger project was the design and development of a new embroidery and distribution center in Oceanside, California, near our global headquarters. Our goal is to move into this facility late in fiscal 2004.

     Results of Operations. The Company’s performance, as discussed below, is notable in light of a continuing weak golf and retail industry and challenging economic environment during the fiscal year. The Company believes these favorable results are due to its successful multi-brand, multi-channel global business strategy, which was fully implemented in fiscal 2003. Overall, performance from the Company’s multiple distribution channels was encouraging.

     The growth in the Company’s domestic retail channel was fueled by an increase in the number of department stores and an increase in the average sales per door resulting from having two strong brands with innovative designs. The Company believes that department store merchants are supporting this growth because of its performance in-store and its ability to generate good gross margins for them in difficult times. More lifestyle and non-golf product also helped fuel this growth. The growth in the domestic green grass channel was driven by substantial growth from the Callaway Golf apparel line as well as an increase in the number of accounts for the Ashworth brand. The average sale per account was slightly down for the Ashworth brand due to conservative buying trends in the golf industry and slightly up for Callaway Golf apparel. While historically the corporate channel has grown quite steadily, the Company believes that the slower growth in this channel was primarily due to external factors such as the economy and corporate belt tightening.

     The net revenues in the Company’s European distribution channel again showed strong growth this fiscal year. The growth was driven by a larger base of accounts as well as higher average sales per door. Both Ashworth and Callaway Golf apparel brands grew. The growth in the Company’s Canadian distribution channel was fueled by increased average sales in the Ashworth brand as well as growth from Callaway Golf apparel.

Fiscal 2003 Compared To Fiscal 2002

     Consolidated net revenues were $149,438,000 for fiscal 2003, an increase of 15.6% from net revenues of $129,286,000 in fiscal 2002. The increase resulted primarily from the addition of the Callaway Golf apparel product line, which had its first full year of operation in fiscal 2003, as well as an increase in the retail distribution channel due to an increase in number of doors. During the fourth quarter of fiscal 2003, net revenues increased $2,954,000 as compared to the same period of the prior year due to increased sales of Ashworth and Callaway Golf apparel branded products in various channels of distribution. Domestic net revenues for fiscal 2003 increased 13.1% to $126,380,000 from $111,706,000 in fiscal 2002 primarily due to increased net revenues in green grass and off-course specialty stores, which increased by $6,914,000 or 8.9%, in retail channels, including the Company owned stores, which increased by $6,029,000 or 42.9%, and corporate, which increased by $1,731,000 or 8.6% as compared to fiscal 2002. International net revenues increased by $5,478,000 or 31.2% to $23,058,000 in fiscal 2003 from $17,580,000 in fiscal 2002. The increase was primarily due to higher revenues in the Company’s U.K. subsidiary and Canadian divisions, of which $1,635,000 was due to the weakening of the U.S. dollar against the British pound and Canadian dollar during fiscal 2003. Net revenues from the Company’s U.K. subsidiary in fiscal 2003 increased by $3,194,000 or 28.9% and revenue from the Canadian divisions increased by $1,922,000 or 50.6% as compared to net revenues in fiscal 2002.

     The gross profit margin for fiscal 2003 increased slightly to 40.7% as compared to 40.4% in fiscal 2002 primarily due to improved sourcing and inventory management systems.

     Selling, general and administrative (“SG&A”) expenses increased 1.7% to $48,080,000 in fiscal 2003

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compared to $47,279,000 in fiscal 2002. As a percent of net revenue, SG&A expenses decreased to 32.2% of net revenues in fiscal 2003 as compared to 36.6% in fiscal 2002. Excluding the additional $4.25 million pre-tax bad debt reserve taken in the third quarter of fiscal 2002, the SG&A expenses in fiscal 2003 would have increased 11.7% in total expenditures as compared to the same period in fiscal 2002 but would still have decreased as a percent of net revenues from 33.3% in fiscal 2002. The Company believes that excluding the effect of the increase in reserve for bad debts booked in the third quarter of fiscal 2002 for the single customer filing for protection under the U.S. bankruptcy laws provides additional information to investors to better understand the impact the transaction had on the Company’s performance for fiscal 2003 as compared to fiscal 2002 and, therefore, the adjusted SG&A measure is useful to investors. Total SG&A expenditures increased primarily due to the increase in sales related variable expenses related to commissions and royalties. The decrease in SG&A as a percent of net revenues resulted from the fixed expenses being spread over higher net revenues.

     Net other expenses were $517,000 for fiscal 2003 compared to $728,000 in fiscal 2002 primarily due to increased foreign exchange gains in fiscal 2003. Foreign exchange gains increased to $343,000 in fiscal 2003 from $74,000 in fiscal 2002 primarily due to the strengthening British pound and the Canadian dollar. Interest expense increased slightly to $876,000 in fiscal 2003 from $842,000 in fiscal 2002 due primarily to costs associated with the new line of credit facility negotiated with the Company’s bank.

     The effective income tax rate applicable to the Company for fiscal 2003 remained at 40.0%.

     During fiscal 2003, the Company earned net income of $7,328,000 as compared to net income of $2,509,000 in the prior year. The increase in net income for fiscal 2003 was primarily attributable to the higher net revenues and lower SG&A expenses as outlined above.

Fiscal 2002 Compared To Fiscal 2001

     Consolidated net revenues were $129,286,000 for fiscal 2002, an increase of 2.2% from net revenues of $126,560,000 in fiscal 2001. During the fourth quarter of fiscal 2002, net revenues increased $8,693,000 as compared to the same period of the prior year due to the addition of the Callaway Golf apparel line and increased sales of Ashworth branded product in various channels of distribution. Domestic net revenues for fiscal 2002 increased 2.0% to $111,706,000 from $109,517,000 in fiscal 2001 primarily due to increased net revenues in green grass and off-course specialty stores, which increased by $5,369,000 or 7.4%, and corporate, which increased by $3,205,000 or 18.9%. The increase was partially offset by lower net revenues in retail channels, including the Company owned stores, which decreased by $6,384,000 or 31.3% as compared to fiscal 2001, due primarily to lower consumer traffic and spending resulting in continued cautious purchasing by department store buyers. International net revenues increased by 3.2% to $17,580,000 in fiscal 2002 from $17,043,000 in fiscal 2001. Net revenues from the Company’s U.K. subsidiary in fiscal 2002 increased by $1,918,000 or 21.0% as compared to net revenues in fiscal 2001 primarily due to the addition of the Callaway golf apparel line. Decreased net revenues from the Pacific Rim, Australia and other countries were partially offset by increased net revenues from Mexico and Canada.

     The gross profit margin for fiscal 2002 increased to 40.4% as compared to 39.6% in fiscal 2001. The increase was primarily due to improved sourcing and inventory management systems.

     SG&A expenses increased 7.6% to $47,279,000 in fiscal 2002 compared to $43,951,000 in fiscal 2001. As a percent of net revenue, SG&A expenses increased to 36.6% of net revenues in fiscal 2002 as compared to 34.7% in fiscal 2001. Excluding the additional $4.25 million pre-tax bad debt reserve taken in the third quarter of fiscal 2002, the SG&A expenses would have decreased in both total expenditures and as a percent of net revenues despite additional investment in infrastructure to support the launch of the Callaway

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Golf apparel product line.

     Net other expenses were $728,000 for fiscal 2002 compared to $1,448,000 in fiscal 2001 primarily due to reduced interest expense in fiscal 2002. Interest expense decreased to $842,000 in fiscal 2002 from $1,352,000 in fiscal 2001 due primarily to lower interest rates on slightly lower annual average borrowing on the Company’s line of credit with its bank. In fiscal 2002 the Company had foreign exchange gains of $74,000 as compared to foreign exchange losses of $90,000 in fiscal 2001 primarily due to the consolidation of various European currencies to the Euro as well as a more stable British pound.

     The effective income tax rate applicable to the Company for fiscal 2002 remained at 40.0%.

     During fiscal 2002, the Company earned net income of $2,509,000 as compared to net income of $2,828,000 in the prior year. The decrease in net income for fiscal 2002 was primarily attributable to higher SG&A expenses as outlined above.

LIQUIDITY AND CAPITAL RESOURCES

     The Company’s primary sources of liquidity are expected to be cash flows from operations, a working capital line of credit with its bank, and other financial alternatives such as leasing. The Company requires cash for capital expenditures and other requirements associated with the expansion of its domestic and international production, distribution and sales, as well as for general working capital purposes. Ashworth’s need for working capital is seasonal with the greatest requirements from approximately December through the end of July each year. The inventory build-up during this period is to provide product for shipment for the spring/summer selling season.

     Operations in fiscal 2003 produced a positive cash flow of $10,829,000, compared to a negative cash flow of $476,000 in fiscal 2002. The primary reasons for the positive cash flow from operations were an increase in net income and a decrease in accounts receivable offset by an increase in inventories and a decrease in accounts payable. Net income increased 192.0% to $7,328,000 for fiscal 2003 as compared to $2,509,000 for fiscal 2002. Accounts receivable decreased by 7.7% to $30,993,000 at October 31, 2003 compared to $33,572,000 at October 31, 2002 as a result of increased collection efforts and tightened credit granting policies. The accounts receivable decreased despite a 10.1% increase in net revenues in the fourth quarter of fiscal 2003 compared to the same quarter in fiscal 2002. Inventory increased by 8.0% to $44,476,000 as compared to $41,188,000. The inventory increase was smaller in fiscal 2003 than in fiscal 2002 primarily due to better inventory management controls. The inventory increased to support expected future growth in net revenues. Accounts payable decreased by 9.6% to $5,731,000 from $6,338,000 primarily due to timing differences in purchases.

     On April 24, 2003, the Company entered into a new business loan agreement with Bank of America, N.A., as the administrative agent, and two other lenders. The new credit facility expires on April 30, 2005 and is collateralized by substantially all of the assets of the Company. The loan agreement provides a revolving line of credit of $45,000,000 with a seasonal increase in the line of credit to $55,000,000 for each period commencing December 1 through June 15 during the term of the agreement.

     Interest under this loan agreement is currently charged at the bank’s reference (prime) rate. At October 31, 2003, the prime rate was 4.00%. The loan agreement also provides for optional interest rates based on London interbank offered rates (“LIBOR”) for periods of at least 30 days in increments of $500,000. The loan agreement contains various restrictive covenants requiring, among other matters, the maintenance of certain financial ratios. Management believes the Company was in compliance with all such covenants as of October 31, 2003. The line of credit may also be used to finance commercial letters of credit and standby

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letters of credit. Commercial letters of credit outstanding under this loan agreement totaled $5,524,000 at October 31, 2003 as compared to $11,227,000 at October 31, 2002 under the prior loan agreement. The Company had $3,400,000 outstanding against the line of credit at October 31, 2003, compared to $11,125,000 outstanding at October 31, 2002 under the prior loan agreement. The decrease in outstanding letters of credit and borrowings is primarily due to converting several vendors from letters of credit to open credit terms as well as better working capital management. At October 31, 2003, $36,076,000 was available for borrowings under this loan agreement.

     During fiscal 2003, the Company invested $3,631,000 in property and equipment, primarily for upgrades of computer systems and equipment, warehouse automation, and sales fixtures. For fiscal 2004, Ashworth management anticipates spending approximately $19,700,000 primarily for the purchase of the new distribution center in Oceanside, California and on sales fixtures, embroidery equipment, outlet stores openings and renovations and upgrades of computer systems and equipment. Except for purchase of the real property, for which the Company plans to obtain mortgage financing, and the equipment lease related to the equipment required for the operation of the Company’s new distribution center, as discussed hereafter, management currently intends to finance the purchase of the Company’s capital equipment from its own cash resources, but may use other leases or equipment financing agreements if deemed appropriate.

     Ashworth’s long-term debt on October 31, 2003, including the current portion, is comprised of a mortgage on the two buildings it owns at 2791 and 2793 Loker Avenue West, Carlsbad, California, which had a balance outstanding of $2,650,000 and capitalized leases with principal sum liabilities of $270,000. The mortgage was refinanced on December 1, 2000 for $3,000,000 amortized over 25 years, but is due and payable on December 1, 2005.

     The Company is party to an exclusive licensing agreement with Callaway Golf Company with royalty payments being calculated as a percent of sales with certain minimum guarantees. These royalty payments began in January 2003. The revenues from the Callaway Golf apparel product line have been, and the Company believes will continue to be, sufficient to cover such minimum guarantees.

     During fiscal 2003, common stock and capital in excess of par value increased by $2,045,000 due to the issuance of 318,000 shares of common stock on the exercise of options.

     On October 25, 2002, the Company entered into an agreement to purchase land and a building, to be built to the Company’s specifications, in the Ocean Ranch Corporate Center in Oceanside, California. The building, to be constructed with approximately 203,000 square feet of useable space, will be used by the Company to warehouse, embroider, finish, package and distribute clothing products and related accessories. Subject to timely completion of construction, the purchase agreement obligates the Company to purchase the land and building in the first half of fiscal 2004 for approximately $15,000,000. The Company has also entered into a contingent lease agreement that obligates the Company to pay a monthly base rent plus standard common area maintenance (“CAM”) charges for a term of 10 years. The lease would take effect only if the land and building purchase is not completed due to certain defaults by the Company, as specified in the purchase agreement. The base rent and CAM payments under the conditional lease would start on the date 30 days after substantial completion of the improvements. The base rent would be calculated according to a specified formula based on the purchase price under the purchase agreement, expected interest rates and other criteria. If the Company were to default on the purchase agreement, monthly rental under the lease agreement is currently estimated to commence at approximately $132,000 and the monthly CAM charges are currently estimated to commence at approximately $27,000. The Company is not obligated to make any deposits or progress payments under the purchase agreement unless the Company makes change requests which require a deposit that exceeds a certain dollar limit. The Company plans to, and management believes it will be able to, obtain a long-term loan separate from the line of credit agreement to finance the purchase of the land and the

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building.

     The Company has entered into agreements with equipment manufacturers to purchase the equipment required for the operation of the Company’s new distribution center in Oceanside, California. On June 23, 2003, the Company entered into a Master Equipment Lease Agreement with a financial institution which has accepted an assignment of these purchase agreements and assumed all rights and payment obligations under these agreements. From time to time, commencing approximately June 26, 2003, the financial institution will make progress payments to the equipment manufacturers during the period while the equipment is being purchased, assembled, installed and/or tested as required by the purchase agreements. The total cost of the equipment is expected to be approximately $12,000,000. The Company is obligated to pay the financial institution for interest costs related to the progress payments calculated using the prime rate plus one half of one percentage point per annum based on a 360 day year. As of October 31, 2003, the financial institution has made progress payments of $2,304,000 leaving an available balance of $9,696,000 and the Company has paid $33,000 in interest charges. If the Company fails to deliver a certificate of acceptance and execute an equipment schedule by the outside closing date of February 28, 2004, the Company is obligated to purchase the equipment from the financial institution at a price equal to the aggregate amount of all costs, disbursements and expenses incurred or committed to be incurred by the financial institution. The Company expects to enter into an agreement with the financial institution to extend the outside closing date to the fourth quarter of fiscal 2004.

     Based on current levels of operations, the Company expects that sufficient cash flow will be generated from operations so that, combined with other financing alternatives available, including cash on hand, borrowings under its bank credit facility and leasing alternatives, the Company will be able to meet all of its debt service, capital expenditure and working capital requirements for at least the next 12 months.

Currency Fluctuations

     Ashworth U.K., Ltd., a wholly-owned subsidiary of the Company operating in England, maintains its books of account in British pounds, and Ashworth Canada, a division of the Company operating in Montreal, Canada, as well as Ashworth Golf Apparel Canada, a division of the Company operating in Granby, Canada, maintain their books of account in Canadian dollars. For consolidation purposes, the assets and liabilities of Ashworth U.K., Ltd., Ashworth Canada and Ashworth Golf Apparel Canada are converted to U.S. dollars at the month-end exchange rate and results of operations are converted using an average rate during the month. A translation difference arises for share capital and retained earnings, which are converted at rates other than the month-end rate, and these amounts are reported in the stockholders’ equity section of the balance sheets.

     Ashworth U.K., Ltd. sells the Company’s products to other countries in the European Union, largely with revenues denominated in the local currency. Fluctuations in the currency rates between the United Kingdom and those other countries give rise to a loss or gain that is reported in earnings. (See “Note 1 to Consolidated Financial Statements, Foreign Currency”).

     Ashworth Canada and Ashworth Golf Apparel Canada sell the Company’s products within Canada with the revenues denominated in Canadian dollars and ordinarily there is no transaction adjustment for currency exchange rates for the Company.

     All export revenues by Ashworth, Inc. are U.S. dollar denominated and ordinarily there is no transaction adjustment for currency exchange rates for the Company. However, with respect to export revenues to Ashworth U.K., Ltd., Ashworth Canada and Ashworth Golf Apparel Canada, the foreign entities are at risk on their indebtedness to Ashworth, Inc. The foreign entities maintain their accounts with Ashworth, Inc. in British pounds or Canadian dollars, but owe Ashworth, Inc. in U.S. dollars. At the end of every

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accounting period, the debt is adjusted to British pounds or Canadian dollars by multiplying the indebtedness by the closing British pound/U.S. dollar or U.S. dollar/Canadian dollar exchange rate to ensure that the account has sufficient British pounds or Canadian dollars to meet its U.S. dollar obligation. This remeasurement is either income or expense in each entity’s financial statements. When the financial statements of Ashworth U.K., Ltd., Ashworth Canada and Ashworth Golf Apparel Canada are consolidated with the financial statements of the parent company, the gain or loss on transactions, relating to any long-term portion of the intercompany indebtedness, is eliminated from the income statement and appears in the stockholders’ equity section of the consolidated balance sheet under “Accumulated other comprehensive income (loss).”

     The Company purchases most of its products from offshore manufacturers. All of these purchases were denominated either in U.S. dollars, or in British pounds for the Ashworth subsidiary in England, and consequently there was no foreign currency exchange risk.

Inflation

     Management believes that inflation has not had a material effect on our results of operations during the three most recent fiscal years. There can be no assurance that a high rate of inflation in the future would not have an adverse effect on the Company’s results of operations.

New Accounting Standards

     In June 2001, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. The Company adopted the provisions of SFAS No. 143 for the quarter ending January 31, 2003. The adoption of SFAS No. 143 has not had a material impact on the Company’s financial position and results of operations.

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 retains the fundamental provisions in SFAS No. 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS No. 121. The Company adopted the provisions of SFAS No. 144 for the quarter ending January 31, 2003. The adoption of SFAS No. 144 has not had a material impact on the Company’s financial position and results of operations.

     In April 2002, the FASB issued SFAS No. 145, Rescission of FASB SFASs No. 4, 44, and 64, Amendment of FASB SFAS No. 13, and Technical Corrections. SFAS No. 145 updates, clarifies and simplifies existing accounting pronouncements including: rescinding SFAS No. 4, which required all gains and losses from extinguishments of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect and amending SFAS No. 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. Upon adoption of SFAS No. 145, companies will be required to apply the criteria in APB Opinion No. 30, reclassifying prior period items that do not meet the extraordinary item classification criteria

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in such Opinion. The Company adopted the provisions of SFAS No. 145 for the quarter ending January 31, 2003. The adoption of SFAS No. 145 has not had a material impact on the Company’s financial position and results of operations.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The principal difference between SFAS No. 146 and EITF Issue No. 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework. In contrast, under EITF Issue No. 94-3, a company recognized a liability for an exit cost when it committed to an exit plan. SFAS No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company adopted the provisions of SFAS No. 146 for the quarter ending January 31, 2003. The adoption of SFAS No. 146 has not had a material impact on the Company’s financial position and results of operations.

     In November 2002, the FASB published Interpretation (“FIN”) No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. FIN No. 45 also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor’s fiscal year-end. The disclosure requirements in FIN No. 45 are effective for financial statements with respect to interim or annual periods ending after December 15, 2002. The Company adopted the provisions of FIN No. 45 for the quarter ended January 31, 2003. The adoption of FIN No. 45 has not had a material impact on the Company’s financial position and results of operations.

     In November 2002, the EITF issued Issue 02-16, Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor. Issue 02-16 provides guidance on how a customer should account for cash consideration received from a vendor. The requirements of this Issue for volume-based rebates apply to new arrangements, including modifications of existing arrangements, entered into after November 21, 2002. The adoption of the new accounting for other supplier payments is effective for arrangements entered into or modified after December 31, 2002. Management has reviewed this issue and has determined that as the Company does not receive cash consideration from its vendors, EITF Issue 02-16 does not have a material impact on the Company’s financial position and results of operations. To date, the Company has not received cash consideration from its vendors and has not entered into any arrangements for which the Company would be required to apply the accounting provisions of EITF Issue No.02-16.

     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure provisions of SFAS No. 123 to require disclosure in the summary of significant accounting policies of the effects of an entity’s accounting policy with respect to stock-based employee compensation on the reported net income and earnings per share in annual and interim financial statements. SFAS No. 148 is effective for fiscal year beginning after December 31, 2002. The Company adopted the disclosure provisions of SFAS No. 148 for the quarter ending

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April 30, 2003. The adoption of SFAS No. 148 has not had a material impact on the Company’s financial position and results of operations.

     On January 17, 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN No. 46”). FIN No. 46 addresses consolidation of entities that are not controllable through voting interests or in which the equity investors do not bear the residual economic risks and rewards. These entities have been commonly referred to as special purpose entities. FIN No. 46 provides guidance related to identifying variable interest entities and determining whether such entities should be consolidated. It also provides guidance related to the initial and subsequent measurement of assets, liabilities and non-controlling interests in newly consolidated variable interest entities and requires disclosures for both the primary beneficiary of a variable interest entity and other beneficiaries of the entity. For variable interests entities created, or interests in variable interest entities obtained, subsequent to January 31, 2003, the Company is required to apply the consolidation provisions of FIN No. 46 immediately. For variable interest entities created, or interests in variable interest entities obtained, on or before January 31, 2003, the consolidation provisions of FIN No. 46 were first required to be applied in the Company’s financial statements as of December 31, 2003. To date, the Company has not created any variable interest entities nor obtained an interest in any variable interest entities for which the Company would be required to apply the consolidation provisions of FIN No. 46.

     In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 is generally effective for derivative instruments, including derivative instruments embedded in certain contracts, entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 has not had a material impact on the Company’s financial position and results of operations.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how to classify and measure certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 has not had a material impact on the Company’s financial position and results of operations.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

     The Company’s long-term debt currently consists of notes payable with a total balance of $2,920,000 at October 31, 2003. See “Note 4 of Notes to Consolidated Financial Statements.” The debt bears interest at variable and fixed rates ranging from 5.88% to 8.26%, which approximates fair value based on current rates offered for debt with similar risks and maturities on October 31, 2003. The Company also had $3,400,000 outstanding on its revolving line of credit with interest charged at the bank’s reference (prime) rate. The loan agreement also provides for optional interest rates based on IBOR for periods of at least 30 days in increments of $500,000. A hypothetical 10% increase in interest rates during the year ended October 31, 2003 would have resulted in a $29,000 decrease in net income.

Foreign Currency Exchange Rate Risk

     The Company’s ability to sell its products in foreign markets and the U.S. dollar value of the sales

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made in foreign currencies can be significantly influenced by foreign currency fluctuations. A decrease in the value of foreign currencies relative to the U.S. dollar could result in downward price pressure for the Company’s products or losses from currency exchange rates. From time to time the Company and its U.K. subsidiary enter into short-term foreign exchange contracts with its bank to hedge against the impact of currency fluctuations between the U.S. dollar and the British pound. The contracts provide that, on specified dates, the Company would sell the bank a specified number of British pounds in exchange for a specified number of U.S. dollars. Additionally, the Company’s subsidiary in England from time to time enters into similar contracts with its bank to hedge against currency fluctuations between the British pound and other European currencies. Realized gains and losses on these contracts are recognized in the same period as the hedged transaction. These contracts have maturity dates that do not normally exceed 12 months. The Company will continue to assess the benefits and risks of strategies to manage the risks presented by currency exchange rate fluctuations. There is no assurance that any strategy will be successful in avoiding losses due to exchange rate fluctuations, or that the failure to manage currency risks effectively would not have a material adverse effect on the Company’s results of operations. On July 15, 2003, the Company’s U.K. subsidiary entered into four forward exchange contracts to sell British pounds and buy U. S. dollars, as well as five forward exchange contracts to sell Euros and buy British pounds. At October 31, 2003, the notional amount of the remaining foreign exchange contracts designated as cash flow hedges was $4,302,000 with an unrealized after tax loss of $108,000. See “Note 1 of Notes to Consolidated Financial Statements, The Company and Summary of Significant Accounting Policies, Foreign Currency,” for a discussion on the Company’s hedging activities.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The following financial statements with respect to the Company are submitted herewith:

	1.		Independent Auditors’ Report, page F-1.
	2.		Consolidated Balance Sheets — October 31, 2003 and 2002, pages F-2 and F-3.
	3.		Consolidated Statements of Income for the years ended October 31, 2003, 2002 and 2001, page F-4.
	4.		Consolidated Statements of Stockholders’ Equity for the years ended October 31, 2003, 2002 and 2001, page F-5.
	5.		Consolidated Statements of Cash Flows for the years ended October 31, 2003, 2002 and 2001, page F-6.
	6.		Notes to Consolidated Financial Statements, pages F-7 through F-23.
	7.		Independent Auditors’ Report on Supplementary Schedule, page F-24.
	8.		Supplementary Schedule, page F-25.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

     None

Item 9A. CONTROLS AND PROCEDURES.

     As of October 31, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and provide reasonable assurance that information required to be disclosed by the Company in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within required time periods.

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     There were no significant changes in the Company’s internal controls over financial reporting that occurred during the Company’s fourth quarter of fiscal 2003 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required by this Item 10 will be included in the Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders under the caption “Directors and Executive Officers” which will be filed with the Securities and Exchange Commission no later than March 1, 2004 and is incorporated into this Item 10 by reference.

     The Company has adopted a Code of Business Conduct and Ethics that applies to all directors and employees, including the Company’s principal executive, financial and accounting officers. The Code of Business Conduct and Ethics is posted on the Company website at www.ashworthinc.com and is filed as an exhibit to this Annual Report on Form 10-K. The Company intends to satisfy the requirements under Item 10 of Form 8-K regarding disclosure of amendments to, or waivers from, provisions of our Code of Business Conduct and Ethics that apply, by posting such information on the Company’s website. Copies of the Code of Business Conduct and Ethics will be provided, free of charge, upon written request directed to Investor Relations, Ashworth, Inc., 2765 Loker Avenue West, Carlsbad, California 92008.

Item 11. EXECUTIVE COMPENSATION.

     The information required by this Item 11 will be included in the Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders under the caption “Executive Compensation” which will be filed with the Securities and Exchange Commission no later than March 1, 2004 and is incorporated into this Item 11 by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by this Item 12 with respect to security ownership of certain beneficial owners and management will be included in the Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners and Management” which will be filed with the Securities and Exchange Commission no later than March 1, 2004 and is incorporated into this Item 12 by reference.

EQUITY COMPENSATION PLAN INFORMATION

Securities Available for Issuance Under the Company’s Equity Compensation Plans

     The following table provides information with respect to the Company’s equity compensation plans as of October 31, 2003, which plans were as follows: the Company’s 2000 Equity Incentive Plan (the “2000 Plan”), the Incentive Stock Option Plan (the “ISO Plan”), and the Nonqualified Stock Option Plan (the “NQO Plan”). The ISO Plan and the NQO Plan were each terminated at the time of adoption of the 2000 Plan in December 1999, and no additional awards may be granted under such terminated plans.

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(1)

Includes 736,000 shares of common stock that may be issued upon exercise of outstanding options under the 2000 Plan and 1,466,000 shares that may be issued upon exercise of outstanding options under the terminated ISO Plan and NQO Plan.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item 13 will be included in the Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders under the caption “Certain Relationships and Related Transactions” which will be filed with the Securities and Exchange Commission no later than March 1, 2004 and is incorporated into this Item 13 by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

     The information required by this Item 14 will be included in the Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders under the caption “Independent Auditor Fees and Services” which will be filed with the Securities and Exchange Commission no later than March 1, 2004 and is incorporated into this Item 14 by reference.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  The following documents are filed as part of this report:

	1.		Financial Statements
			Independent Auditors’ Report
			Consolidated Balance Sheets — October 31, 2003 and 2002
			Consolidated Statements of Income for the years ended October 31, 2003, 2002 and 2001
			Consolidated Statements of Stockholders’ Equity for the years ended October 31, 2003, 2002 and 2001

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			Consolidated Statements of Cash Flows for the years ended October 31, 2003, 2002 and 2001
			Notes to Consolidated Financial Statements — October 31, 2003, 2002 and 2001
	2.		Financial Statement Schedule
			Independent Auditors’ Report on Supplementary Schedule
			Schedule II — Valuation and Qualifying Accounts
	3.		Exhibits.
			See Item (c) below.

(b)  Reports on Form 8-K

     On August 28, 2003, the Company filed a report on Form 8-K dated August 28, 2003 furnishing the press release reporting the results of operations for the third quarter fiscal 2003 and first nine months ended July 31, 2003.

(c) Exhibits

3(a)		Certificate of Incorporation as filed March 19, 1987 with the Secretary of State of Delaware, Amendment to Certificate of Incorporation as filed August 3, 1987 and Amendment to Certificate of Incorporation as filed April 26, 1991 (filed as Exhibit 3(a) to the Company’s Registration Statement dated February 21, 1992 (File No. 33-45078) and incorporated herein by reference) and Amendment to Certificate of Incorporation as filed April 6, 1995 (filed as Exhibit 3(a) to the Company’s Form 10-K for the fiscal year ended October 31, 1994 (File No. 0-18553) and incorporated herein by reference).
3(b)		Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on February 23, 2000 (File No. 0-18553) and incorporated herein by reference).
4(a)		Specimen certificate for Common Stock, par value $.001 per share, of the Company (filed as Exhibit 4(a) to the Company’s Registration Statement dated November 4, 1987 (File No. 33-16714-D) and incorporated herein by reference).
4(b)(1)		Specimen certificate for Options granted under the Amended and Restated Nonqualified Stock Option Plan dated March 12, 1992 (filed as Exhibit 4(b) to the Company’s Form 10-K for the fiscal year ended October 31, 1993 (File No. 0-18553) and incorporated herein by reference).
4(b)(2)		Specimen certificate for Options granted under the Founders Stock Option Plan dated November 6, 1992 (filed as Exhibit 4(b)(2) to the Company’s Form 10-K for the fiscal year ended October 31, 1993 (File No. 0-18553) and incorporated herein by reference).
4(c)		Specimen certificate for Options granted under the Incentive Stock Option Plan dated June 15, 1993 (filed as Exhibit 4(c) to the Company’s Form 10-K for the fiscal year ended October 31, 1993 (File No. 0-18553) and incorporated herein by reference).
4(d)		Rights Agreement dated as of October 6, 1998 and amended on February 22, 2000 by and between Ashworth, Inc. and American Securities Transfer & Trust, Inc. (filed as Exhibit 4.1 to the

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		Company’s Form 8-K filed on March 14, 2000 (File No. 0-18553) and incorporated herein by reference).
10(a)*		Personal Services Agreement and Acknowledgement of Termination of Executive Employment effective December 31, 1998 by and between Ashworth, Inc. and Gerald W. Montiel (filed as Exhibit 10(b) to the Company’s Form 10-K for the fiscal year ended October 31, 1998 (File No. 0-18553) and incorporated herein by reference).
10(b)*		Amendment to Personal Services Agreement effective January 1, 1999 by and between Ashworth, Inc. and Gerald W. Montiel (filed as Exhibit 10(c) to the Company’s Form 10-K for the fiscal year ended October 31, 1998 (File No. 0-18553) and incorporated herein by reference).
10(c)*		First Amended and Restated Executive Employment Agreement effective February 22, 1999 by and between Ashworth, Inc. and Randall L. Herrel, Sr. (filed as Exhibit 10(a) to the Company’s Form 10-Q for the quarter ended April 30, 1999 (File No. 0-18553) and incorporated herein by reference).
10(d)*		Employment Agreement effective December 15, 2000 by and between Ashworth, Inc. and Terence W. Tsang (filed as Exhibit 10(f) to the Company’s Form 10-Q for the quarter ended January 31, 2001 (File No. 0-18553) and incorporated herein by reference).
10(e)*		Founders Stock Option Plan dated November 6, 1992 (filed as Exhibit 10(g) to the Company’s Form 10-K for the fiscal year ended October 31, 1993 (File No. 0-18553) and incorporated herein by reference).
10(f)*		Amended and Restated Nonqualified Stock Option Plan dated November 1, 1996 (filed as Exhibit 10(i) to the Company’s Form 10-K for the fiscal year ended October 31, 2000 (File No. 0-18553) and incorporated herein by reference).
10(g)*		Amended and Restated Incentive Stock Option Plan dated November 1, 1996 (filed as Exhibit 10(j) to the Company’s Form 10-K for the fiscal year ended October 31, 2000 (File No. 0-18553) and incorporated herein by reference).
10(h)*		Amended and Restated 2000 Equity Incentive Plan dated December 14, 1999 adopted by the stockholders on March 24, 2000 (filed as Exhibit 4.1 to the Company’s Form S-8 filed on December 12, 2000 (File No. 333-51730) and incorporated herein by reference).
10(i)(1)		Credit Agreement dated April 24, 2003, between Ashworth, Inc. as Borrower, Bank of America, N.A., as Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as Lenders, expiring April 30, 2005 (filed as Exhibit 10(i)(1) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(i)(2)		Guaranty Agreement dated April 24, 2003 between Ashworth Store I, Inc., Ashworth Store II, Inc. and Ashworth Store III, Inc. as Guarantors and Bank of America, N.A., as Administrative Agent on behalf of Ashworth, Inc. as the Borrower (filed as Exhibit 10(i)(2) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(i)(3)		Security Agreement effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000, between Ashworth, Inc. as Pledgor, Bank of America, N.A., as Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as Lenders, expiring April 30, 2005 (filed as Exhibit 10(i)(3) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-

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		18553) and incorporated herein by reference).
10(i)(4)		Security Agreement effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000, between Ashworth Store I, Inc., Ashworth Store II, Inc. and Ashworth Store III, Inc. as Pledgor, Bank of America, N.A., as Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as Lenders, expiring April 30, 2005 (filed as Exhibit 10(i)(4) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(i)(5)		Deed of Hypothec of Universality of Moveable Property effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000, between Ashworth, Inc. as Grantor, Bank of America, N.A., as Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as Lenders, expiring April 30, 2005 (filed as Exhibit 10(i)(5) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(i)(6)		Equitable Mortgage Over Securities effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000, between Ashworth, Inc. as Mortgagor, Bank of America, N.A., as Security Trustee and Beneficiary, Union Bank of California, N.A. and Bank of the West as Beneficiaries, expiring April 30, 2005 (filed as Exhibit 10(i)(6) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(j)*		Change in Control Agreement dated November 1, 2000 by and between Ashworth, Inc. and Randall L. Herrel, Sr. (filed as Exhibit 10(m) to the Company’s Form 10-K for the fiscal year ended October 31, 2000 (File No. 0-18553) and incorporated herein by reference).
10(k)*		Change in Control Agreement dated November 1, 2000 by and between Ashworth, Inc. and Terence W. Tsang (filed as Exhibit 10(n) to the Company’s Form 10-K for the fiscal year ended October 31, 2000 (File No. 0-18553) and incorporated herein by reference).
10(l)		Promotion Agreement effective November 1, 1999 by and between Ashworth, Inc. and Fred Couples (filed as Exhibit 10(o) to the Company’s Form 10-K for the fiscal year ended October 31, 2000 (File No. 0-18553) and incorporated herein by reference).
10(m)*		Offer and Acceptance of Executive Employment effective May 29, 2001 by and between Ashworth, Inc. and Eddie Fadel (filed as Exhibit 10(o) to the Company’s Form 10-K for the fiscal year ended October 31, 2002 (File No. 0-18553) and incorporated herein by reference).
10(n)*		Contract Termination Agreement effective October 31, 2002 by and among Ashworth, Inc., James Nantz, III and Nantz Communications, Inc. (filed as Exhibit 10(p) to the Company’s Form 10-K for the fiscal year ended October 31, 2002 (File No. 0-18553) and incorporated herein by reference).
10(o)		Real Estate Purchase and Sale Agreement and Joint Escrow Instructions effective October 25, 2002 by and between Innovative Development Enterprises, Inc. and Ashworth, Inc. (filed as Exhibit 10(q) to the Company’s Form 10-K for the fiscal year ended October 31, 2002 (File No. 0-18553) and incorporated herein by reference).
10(p)*		Promotion Agreement effective October 31, 2002 by and among Ashworth, Inc., James W. Nantz, III and Nantz Enterprises, Ltd. (filed as Exhibit 10(q) to the Company’s Form 10-Q for the quarter ended January 31, 2003 (File No. 0-18553) and incorporated herein by reference).

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10(q)		Purchase and Installation Agreement dated April 10, 2003 between Ashworth, Inc. and Gartner Storage & Sorter Systems of Pennsylvania (filed as Exhibit 10® to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(r)		Agreement for Lease dated May 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and Juniper Developments Limited (filed as Exhibit 10(s) to the Company’s Form 10-Q for the quarter ended April 30, 2003 (File No. 0-18553) and incorporated herein by reference).
10(s)		Lease dated September 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and Juniper Developments Limited (filed as Exhibit 10(t) to the Company’s Form 10-Q for the quarter ended July 31, 2003 (File No. 0-18553) and incorporated herein by reference).
10(t)		Master Equipment Lease Agreement dated as of June 23, 2003 by and between Key Equipment Finance and Ashworth, Inc. including Amendment 01, the Assignment of Purchase Agreement and the Certificate of Authority (filed as Exhibit 10(u) to the Company’s Form 10-Q for the quarter ended July 31, 2003 (File No. 0-18553) and incorporated herein by reference).
10(u)*		Offer and Acceptance of Executive Employment effective August 30, 2001 by and between Ashworth, Inc. and Gary I. Schneiderman.
10(v)†		License Agreement, effective May 14, 2001, by and between Ashworth, Inc. and Callaway Golf Company.
10(w)†		Amendment to License Agreement, effective December 16, 2003, by and between Ashworth, Inc. and Callaway Golf Company.
14		Ashworth, Inc. Code of Business Conduct and Ethics adopted October 17, 2003.
21		Subsidiaries of the Registrant.
23		Consent of KPMG LLP.
31.1		Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Randall L. Herrel, Sr.
31.2		Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by Terence W. Tsang.
32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Randall L. Herrel, Sr.
32.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Terence W. Tsang.

*     Management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 15(c) of Form 10-K and applicable rules of the Securities and Exchange Commission.

†     Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders
Ashworth, Inc.:

We have audited the accompanying consolidated balance sheets of Ashworth, Inc. (a Delaware corporation) and subsidiaries as of October 31, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ashworth, Inc. and subsidiaries as of October 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended October 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

       KPMG LLP

San Diego, California
January 9, 2004

F-1

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ASHWORTH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

October 31, 2003 and 2002

(Continued)

F-2

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ASHWORTH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets, Continued

October 31, 2003 and 2002

See accompanying notes to consolidated financial statements.

F-3

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ASHWORTH, INC. AND SUBSIDIARIES

Consolidated Statements of Income

For the years ended October 31, 2003, 2002 and 2001

See accompanying notes to consolidated financial statements.

F-4

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ASHWORTH, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

For the years ended October 31, 2003, 2002 and 2001