Steinways Financial Analysis Accounts receivable: We establish reserves for accounts receivable and notes receivable.

We review overall collectibility trends and customer characteristics such as debt leverage, solvency, and outstanding balances in order to develop our reserve estimates. Historically, a large portion of our sales at both our piano and band divisions has been generated by our top fifteen customers. As a result, we experience some inherent concentration of credit risk in our accounts receivable due to its composition and the relative proportion of large customer receivables to the total. This is especially true at our band division, which characteristically has a majority of our consolidated accounts receivable balance. We consider the credit health and solvency of our customers when developing our receivable reserve estimates. Inventory: We establish inventory reserves for items such as lower-of-cost-or-market and obsolescence. We review inventory levels on a detailed basis, concentrating on the age and amounts of raw materials, work-in-process, and finished goods, as well as recent usage and sales dates and quantities to help develop our estimates. Ongoing changes in our business strategy, coupled with increased offshore sourcing, could affect our ability to realize the current cost of our inventory, and are considered by management when developing our estimates. We also establish reserves for anticipated book-to-physical adjustments based upon our historical level of adjustments from our annual physical inventories. We account for our inventory using standard costs. Accordingly, variances between actual and standard costs that are not abnormal in nature are capitalized into inventory and released based on calculated inventory turns. Abnormal costs are expensed in the period in which they occur.

Overview Piano division revenues and gross profits improved significantly as a result of increased shipments of Steinway grand units. Band division revenues were stable despite lost sales due to the strike at our Eastlake, Ohio brass instrument manufacturing facility. Band division gross margins deteriorated due to higher material and overhead costs and inefficiencies associated with the strike at our Eastlake plant. Our fall budgeting and planning process provides multi-year cash flow projections which we use to conduct our annual impairment testing of intangible assets. Recent decreases in order volume and declining market trends in the compact disc industry, coupled with other factors, caused us to lower sales expectations for our online music business. As a result, our future anticipated cash flows for this business were reduced and our goodwill and trademarks were determined to be impaired. Accordingly, we recorded a $2.7 million impairment charge to goodwill and $0.3 million impairment charge to trademarks associated with our online music business during the period. Similarly, the multi-year cash flow projections for our band division, which were adversely impacted by increased costs, particularly at our woodwind manufacturing facility, indicated an impairment of that divisions assets. As a result, we recorded impairment charges of $2.2 million related to band division intangible assets and property, plant and equipment.

Net Sales Domestic piano division revenues improved $3.8 million as a result of a 6% increase in Steinway grand unit shipments and a 16% increase in Boston and Essex piano unit shipments. Overseas piano division revenues were $2.3 million higher due to better wholesale demand in Europe as well as $1.8 million attributable to foreign currency exchange rates. Overseas Steinway grand unit shipments increased 5% and Boston and Essex piano line shipments were on par with the year-ago period. Despite a strike at our Eastlake, Ohio brass instrument manufacturing facility, band division revenues were up $0.4 million. We implemented planned price increases on July 1, which more than offset the estimated $2.3 million in lost revenue attributable to the strike. However, overall unit shipments were down 4% compared to the year-ago period. Gross Profit Gross profit was $2.8 million higher due to better sales and margins at our piano divisions. Domestic piano division gross margins increased from 29.9% to 30.3% as production increases and the resultant factory efficiencies more than offset the $0.4 million increased costs on our Boston and Essex piano lines. Overseas piano division margins went from 33.1% to 40.7% due to factory efficiencies and lower overhead spending. Negative production variances of $0.8 million caused by the strike at our Eastlake, Ohio brass instrument manufacturing facility, as well as higher material and overhead costs, caused the band division margin to drop from 23.5% to 20.3% during the period. Operating Expenses Operating expenses increased $2.3 million during the period. Sales and marketing costs increased $1.1 million largely due to advertising and promotional expenses, as well as commissions and bonuses incurred by the piano division. General and administrative costs increased $1.5 million primarily due to the $1.1 million of severance costs associated with the departure of our former Chairman in July 2011. Impairment Charges In the current period, we incurred impairment charges related to our band division and online music division goodwill and trademark intangible assets of $4.0 million. We also incurred impairment charges associated with the long-lived assets at our woodwind instrument manufacturing facility. These charges totaled $1.1 million. We did not incur any impairment charges in the year-ago period. Non-operating Expenses Non-operating expenses were $0.3 million higher than the year-ago period. In May we extinguished $85.0 million of our 7.00% Senior Notes, which enabled us to lower our net interest expense by $1.5 million during the period. However, this savings was offset by unrealized foreign exchange losses of $0.5 million versus unrealized gains of $0.4 million in the year-ago period. Also, the deterioration in Supplemental Executive Retirement Plan assets of $0.4 million adversely impacted non-operating expenses. Lastly, increased expenses associated with our West 57th Street building, which were $0.4 million higher than the year-ago period were also a factor. We expect to continue to incur temporary losses in the near term on this facility due to low occupancy rates. Income Taxes We recorded an income tax benefit of $0.7 million, reflecting our anticipated annual effective income tax rate of 38.9% associated with current year income, as well as uncertain tax positions and discrete items. The combination of these items resulted in an effective tax rate of 39.9% for the period. The rate of 51.4% in the year-ago period reflected an anticipated annual effective income tax rate of 43.7% as well as uncertain tax positions and discrete items.

Cash flows from operating activities decreased $10.3 million from the year-ago period. Cash generated by inventory was $2.8 million lower in the current period as a result of higher production levels at many plants. We used $6.4 million more for prepaids and other assets due to prepaid income taxes, real estate taxes, and expenses associated with our West 57th Street building. We used $6.3 million more for accounts payable, pension, accrued expenses, primarily due to shifts in spending patterns, which have returned to normal levels. Cash flows from investing activities resulted in the use of an additional $5.3 million primarily due to the payment of $2.7 million in additional consideration associated with the acquisition of our online music business, as well as $0.6 million paid to acquire assets of a piano retail store in Chicago, Illinois. Higher capital expenditures of $2.3 million were also a factor as capital expenditures were abnormally low in 2010. In 2011, we expect capital expenditures for the full year to be in the range of $5.0 to $6.0 million. Cash flows from financing activities decreased by $96.3 million compared to the year-ago period. We spent an incremental $80.9 million to extinguish a significant portion of our 7.00% Senior Notes. This was partially offset by incremental cash provided by borrowings of $7.6 million. Also, in the prior period, we generated $28.2 million through stock sales, compared to $4.5 million in the current period. Borrowing Activities and Availability We have a domestic credit facility with a syndicate of lenders (the Credit Facility) with a potential borrowing capacity of $100.0 million in revolving credit loans, which expires on October 5, 2015. It provides for periodic borrowings at either London Interbank Offering Rate (LIBOR) plus a range from 1.75% to 2.25%, or as-needed borrowings at an alternate base rate, plus a range from 0.75% to 1.25%; both ranges depend upon borrowing availability at the time of borrowing. The Credit Facility is collateralized by our domestic accounts receivable, inventory, and certain property, plant and equipment. As of September 30, 2011 we had $10.0 million outstanding on this Credit Facility and $80.9 million of availability, net of borrowing restrictions. We also have certain non-domestic credit facilities originating from two German banks that provide for borrowings by foreign subsidiaries of up to 16.4 million ($22.0 million at the September 30, 2011 exchange rate), net of borrowing restrictions of 1.6 million ($2.1 million at the September 30, 2011 exchange rate) which are payable either December 31, 2011 or in April 2012. These borrowings are collateralized by most of the assets of the borrowing subsidiaries. A portion of the loans can be converted into a maximum of 0.9 million ($1.4 million at the September 30, 2011 exchange rate) for use by our U.K. branch and 300 million ($3.9 million at the September 30, 2011 exchange rate) for use by our Japanese subsidiary. Our Chinese subsidiary also has the ability to convert the equivalent of up to 2.5 million into U.S. dollars or Chinese yuan ($3.3 million at the September 30, 2011 exchange rate). Euro loans bear interest at rates of Euro Interbank Offered Rate (EURIBOR) plus a margin determined at the time of borrowing. Margins fluctuate based on the loan amount and the borrowers bank rating. The remaining

demand borrowings bear interest rates of LIBOR plus 0.8% for British pound loans, LIBOR plus 1.0% for U.S. dollar loans of our Chinese subsidiary, and Tokyo Interbank Offered Rate (TIBOR) plus 1.6% for Japanese yen loans. We had nothing outstanding as of September 30, 2011 on these credit facilities. Our Japanese subsidiary also maintains a separate revolving loan agreement that provides additional borrowing capacity of up to 300 million ($3.9 million at the September 30, 2011 exchange rate). The revolving loan agreement bears interest at an average 30-day TIBOR rate plus 0.9% (outstanding borrowings at 1.1% at September 30, 2011) and expires on June 30, 2012. As of September 30, 2011, we had $0.6 million outstanding on this revolving loan agreement. At September 30, 2011, our total outstanding indebtedness amounted to $78.2 million, consisting of $67.5 million of our 7.00% Senior Notes due March 1, 2014, $10.0 million outstanding on our Credit Facility, and $0.6 million of notes payable to foreign banks. All of our debt agreements contain covenants that place certain restrictions on us, including our ability to incur additional indebtedness, to repurchase 7.00% Senior Notes, to make investments in other entities, and limitations on cash dividend payments. We were in compliance with all such covenants as of September 30, 2011 and do not anticipate any compliance issues in the future. Our bond indenture contains limitations, based on net income (among other things), on the amount of discretionary repurchases we may make of our Ordinary common stock. Our intent and ability to repurchase additional Ordinary common stock either directly from shareholders or on the open market is directly affected by this limitation. In May 2008 we announced a share repurchase program, which permits us to make discretionary purchases of up to $25.0 million of our Ordinary common stock. To date, we have repurchased 102,127 shares and approximately $22.5 million remains authorized for repurchases under this program. We did not make any repurchases during the three and nine months ended September 30, 2011. We repurchased 21,827 shares for $0.3 million during the three months ended September 30, 2010. We experience long production and inventory turnover cycles, which we constantly monitor since fluctuations in demand can have a significant impact on these cycles. In normal economic conditions, we are able to effectively utilize cash flow from operations to fund our debt and capital requirements and pay off borrowings on our domestic line of credit. We intend to manage accounts receivable and credit risk, and control inventory levels by monitoring purchases and production schedules. Our intention is to manage cash outflow and maintain sufficient operating cash on hand to meet short-term requirements. We indefinitely reinvest earnings of our foreign operations. This indefinite reinvestment does not have a material impact on our liquidity. Other than those described above, we do not have any current plans or intentions that will have a material impact on our liquidity in 2011, although we may consider acquisitions that may require funding from operations or from our credit facilities. Other than those described, we are not aware of any trends, demands, commitments, or costs of resources that are expected to materially impact our liquidity or capital resources. Accordingly, we believe that cash on hand, together with cash flows anticipated from operations and available borrowings under the Credit Facility, will be adequate to meet our debt service requirements, fund regular capital requirements and satisfy our working capital and general corporate needs for the next twelve months.

Notes to Contractual Obligations:

(1) Long-term debt represents long-term debt obligations, the fixed interest on our Notes, and the variable interest on our other loans. We estimated the future variable interest obligation using the applicable September 30, 2011 rates. The nature of our long-term debt obligations, including changes to our long-term debt structure, is described more fully in the Borrowing Availability and Activities section of Liquidity and Capital Resources. (2) Approximately $241.3 million of our operating lease obligations are attributable to the land lease associated with the purchase of Steinway Hall, which has eighty-six years remaining. The rest is attributable to the leasing of other facilities and equipment. (3) Purchase obligations consist of firm purchase commitments for raw materials, finished goods, and service agreements. (4) Our other long-term liabilities consist primarily of the long-term portion of our pension obligations, which are described in Note 14 in the Notes to Condensed Consolidated Financial Statements included within this filing and obligations under employee and consultant agreements. We have not included $0.3 million of liabilities relating to uncertain tax positions within this schedule due to the uncertainty of the payment date, if any. Recent Accounting Pronouncements Certain amendments to Accounting Standards Codification (ASC) 820, Fair Value Measurements, become effective for us for fiscal years beginning after December 15, 2011. These amendments include a consistent definition of fair value, enhanced disclosure requirements for Level 3 fair value adjustments and other changes to required disclosures. In June 2011, ASC 220, Comprehensive Income, was amended and will become effective for us for fiscal years beginning after December 15, 2011. These amendments require us to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. As a result of the amendment, the option to present the components of other comprehensive income as part of the statement of changes in stockholders equity is eliminated. In September 2011, ASC 350, Intangibles-Goodwill and Others, was amended to simplify the assessment of goodwill impairment and will become effective for us for fiscal years beginning after December 15, 2011. The amended guidance allows us to do an initial qualitative assessment of relative events and circumstances to determine if fair value of a reporting unit is more likely than not less than its carrying value, prior to performing the two-step quantitative goodwill impairment test. We will comply with the requirements of these amendments when the amendments are effective. None of these amendments are expected to have a material impact on our financial statements.