QUARTERLY REPORT April -June 2006

WEAK SALES, ADDITIONAL ONE-OFF ITEMS AND REFINANCING

-Rationalization measures progress according to plan but profits are weighed by weaker sales -Continued restructuring in line with the new strategy to generate growth in future -BRIO’s Board proposes capital injection of SEK 224 million to assure a satisfactory equity/assets ratio and sufficient financing to carry out the new strategy (see separate press release) -BRIO’s Boards adjusts forecast REPORTING PERIOD APRIL-JUNE 2006 -Net sales were SEK 264.2 million (294.0 m) -Operating loss was SEK 71.8 million (-25.9 m) -Operating loss adjusted for one-off items was SEK 35.4 million -Loss after tax was SEK 80.3 million (-36.1 m) -EPS was SEK -14.34 (-6.45) ERIOD JANUARY-JUNE 2006 -Net sales reached SEK 497.0 million (531.9 m) -Operating loss was SEK 112.2 million (-61.8 m) -Operating loss adjusted for one-off items was SEK -75.8 million -Loss after tax was SEK 127.3 million (-76.8 m) -EPS was SEK -22.73 (-13.73) OTHER EVENTS DURING THE PERIOD -The cost-saving scheme and capital rationalization scheme launched in October 2005 under the name BRIO 2008 are progressing according to plan. Due however to a weaker than expected sales trend, earnings have not improved at the rate previously predicted. -The second quarter is burdened with one-off items totaling SEK 23 million in obsolescence write-downs after further adjustments to our product range. Additionally, there are one-off items totaling SEK 13 million, of which most stems from the liquidation of business activities in the USA. -The Board announces an extraordinary general meeting for August 16, 2006 and proposes that the company carries out refinancing measures to assure that BRIO has a satisfactory equity/assets ratio and sufficiently sound financial platform to complete the changes warranted by the new strategy. The Board’s proposal means an injection of SEK 224 million before issue costs and amortization of the SEK 44 million acquisition financing arranged in 2005 in connection with the acquisition of the remaining 50 percent of European Nursery Group (ENG). Refinancing entails a new share issue and the issue of a debenture loan. An long-term financing agreement has also been made with BRIO’s creditors. -Cost-saving measures and the ongoing capital rationalization plan within the framework of the BRIO 2008 action plan are proceeding according to plan. However, due to a weaker than expected sales trend, BRIO retracts its previous forecast that “substantially lower costs are expected to generate better earnings throughout 2006”. Measures included in the BRIO 2008 action plan are expected to generate savings of about SEK 80 million per year reaching full effect as of 2007, and a SEK 100 million reduction in tied-up capital tied up to 2007 compared with 2004’s level and adjusted for present- day Group structure. As a consequence of the scheme’s various measures, BRIO is expected to show a positive cash flow from currrent business activities in 2007. CEO’S STATEMENT BRIO is currently undergoing a demanding conversion process, which has become more intense the past year. Our evolution from a production and trade driven company to a more innovative and consumeroriented company takes time and patience along with a long-term perspective. The strategic adjustments underway are based on extensive analysis of both internal and external factors, and include both structural and organizational changes as well as more aggressive focus on product development. The market is somewhat sluggish pending the release of our new BRIO products in the stores this autumn. Sales have dropped within both BRIO’s classic range and the wholesale segment Scanditoy during the first six months. The contribution margin ratio has also been weak for both units. One reason for this includes the changes and 30% cutback in BRIO’s range that entailed selling out discontinued articles. The purpose is to make room for the new products while simultaneously lowering the capital tied up, resulting in obsolescence write-downs of SEK 23 million. Scanditoy’s results have been negatively affected during the period by an unfortunate product mix. An action plan is underway to reinforce Scanditoy's product range and improve efficiency. Our BRIO 2008 action plan was launched in October 2005. The plan includes a cost-saving scheme and a capital rationalization scheme. Both are progressing according to plan, but since sales have been weaker than expected, we are not seeing improvements at the rate earlier predicted. To cultivate growth and profitability, BRIO’s product range is being broadened and renewed with products adapted to the target group of parents to children up to the age of five. Intense product development activities are in motion for both new toys, prams, children’s car seats and furniture. The first products based on this strategy are scheduled for launch this autumn, which will be followed-up with more product launches throughout 2007 and 2008. This will mark the large-scale new product launches on the market. The time span of taking a product from the drawing table to the store shelf is seldom shorter than 18 months. Consequently, it will take more time before our intensified product development activities have full impact on our earnings and can produce visible, positive financial effects. The Board announces an extraordinary general meeting and proposes that BRIO carry out a refinancing to secure an injection of SEK 224 million, excluding financing costs. Our ambition is to assure that BRIO has a satisfactory equity/assets ratio and sufficiently sound financial base to complete the changes of the new strategy. Additionally, BRIO needs to continue to strengthen and intensify its product development activities and secure the financial space to exploit the business opportunities on the market in order to become a profitable, more successful company in the long term. Although we still have a way to go before our conversion is complete and BRIO has achieved a satisfactory profitability, we have a solid foundation on which to build. BRIO is already one of the most popular brands in Sweden and abroad, which in itself creates great potential. The ultimate challenge lies in creating new, attractive products that can live up to the high demands that the market has on us. Despite the short-term difficulties we face, our shareholders can rest assured that I, alongside every BRIO employee will do everything possible to make this conversion process a success. Thomas Bräutigam CEO of BRIO For further information, please contact Thomas Bräutigam, President and CEO, thomas.brautigam@brio.net Phone +46 479 190 00