ETHAN ALLEN INTERIORS Derek Ho December 2, 2004

Background Founded in 1932 and sold products under the Ethan Allen brand name since Incorporated in 1989 through its wholly owned subsidiary, Ethan Allen Inc. It is a leading manufacturer and retailer of quality home furnishings and accessories, offering a full complement of home decorating solutions through the country’s largest network of home furnishing retail stores.

Background Mission: To provide customers with a convenient, full-service, one-stop shopping alternative for their home decorating needs employees (half are represented by unions) 300+ stores located primarily in the U.S. 12 manufacturing facilities

Stock Performance As of 12/01/2004 –Current Price: $39.95/share –EPS: $2.11 –Half of revenues of competitors but higher market capitalization Acquired on 10/22/1999 –Paid $33.00/share –700 shares –Cost basis of $23,100 –Represents approximately 9% of our portfolio –21% unrealized gain

Revenue breakdown Wholesale segment: Comprised of manufacturing sold to dealer-owned stores Retail Segment: Comprised of manufacturing sold to Ethan Allen- owned stores and revenues generated from sale to customer

Ethan Allen’s Business Wholesale manufacturing Distribution to independent retail stores and Ethan Allen stores design consultants Existing products include: case goods (wood furniture such as beds, dressers, and tables), upholstery items (sofas, recliners), and accessories (wall decor, lighting).

Ethan Allen’s Business (Cont.) New Products –Ethan Allen Kids Prevention of furniture tipping –Furnishing Solutions by Ethan Allen Over 40 million copies distributed One of most important marketing tools –Ethan Allen Online Room planner Decorate own room

Macro. Factors (Competitors) Furniture Brands International (FBN)- Broyhill Furniture, Drexel Heritage Furniture, Thomasville Furniture La-Z-Boy Inc. (LZB) Ashley Furniture Industries, Inc. (priv) A highly competitive industry –Growing number of foreign manufacturers –ETH differentiates with solutions-oriented business strategy

Relative Performance ETH v. LZB Differences? ETH- exceptional growth Competition with China ETH v. S&P 500 Differences? Furniture industry very cyclical

Business Strategy Focuses on Differentiation from competitors (over 1000 manufacturers of furniture in U.S. alone) Competitive advantage with complimentary design service and product and styling and quality Trademarks and design patents are valuable assets

Future Growth Uncertain where trends will change product line Goal of adding stores each year Essentially debt free and continues to have the strong cash flow needed to fund future growth and to maintain operating flexibility. According to the National Association of Home Builders, single family home production has increased 6.4% since last October. Quarterly revenue growth of only.07% within the furniture industry (one of last 6 worst)

Valuation See Excel

In the News In April 2004, ETH closed and consolidated 2 plants. As of June 30, 2004 received notices that it may be a potentially responsible party to environmental laws and regulations. In August, ETH expanded with 2 stores in China (for a total of 6 scattered in China). In August, ETH expanded with 2 stores in China (for a total of 6 scattered in China).

Significant Risks Anti-dumping legislation in China Competitors more open to manufacturing overseas (around 25%) Not as large as competitors LZB, FBN

Recommendation Hold Shares In years past, ETH has been able to maintain growth and “change with the times” by offering more product and service solutions. Questions?