I have long waited to write a letter to reach each and every one of you, to express my appreciation for your support and trust all these years.

Well, when more appropriate timing than now? A "thank you" letter as our Board delivers this Annual Report 2006 to you, the 10th report since our modest listing on 25 August 1997.

Although we are still young at age 10 for a listed company, this is a good point in time to recount our milestones together.

Milestones

+ The Nurturing Years

Many of you first knew us as "G&W" and some still fondly call us by this old name. "G&W" in short means "green and white", the 2 colors symbolic of our many batching plants and mixer trucks which feed the essential ready-mix concrete to many past and present important construction projects around us.

Born and bred as a building materials specialist, we took cautious little steps to expand, diversify and regionalize along our growth path. One early step was our setting up of building materials business in the PRC, firstly in Beijing and then in Shenyang. The early Shenyang experience was important in helping us establish friendship with the local business community and authorities and gain invaluable knowledge.

+ Building Our Track Record in PRC Real Estate

About 10 years ago, we took a bold step and invested in a new 12-storey office building in Shenyang. This project was very well received in Shenyang and to-date is still being hailed as a success case of early Singaporean investment in Shenyang. Through this highly successful project, we stamped the "Brothers" branding on the Shenyang business community.

In 2000, we ventured into a residential redevelopment project of 956 units. To identify our Singaporean roots, we proudly named this maiden residential project as "Sentosa Gardens". The project was also highly successful and we have substantially completed the construction and sales in 2005.

Our success in the Shenyang real estate market boosted our confidence that we have created for ourselves a niche in this north-eastern corner of the booming PRC economy.

+ Building Our Assets Through the Years

At the same time, we have consistently looking out for attractive-yielding investments to maximize our shareholders' value. In 2002, we acquired 57.73% of Oakwell Engineering Limited, strategically sold down to 27.83% in 2005. The acquisition and partial sale of Oakwell boosted the Group's consolidated net asset base by a significant S$16 million.

+ Making Strategic Alliances

We recognize that strategic alliances can bring about even more growth opportunities. In 2005 we formed a 46.58%-owned joint venture, Construction Consortium Pte. Ltd., with Koh Brothers Group Limited holding the other 53.42%. Construction Consortium combines the construction arm from Koh Brothers and the building materials arm from Brothers and is well poised to optimise business synergies from both groups.

2006

+ Impetus for Future Growth

FY2006 has been an eventful year for the Group. The year was packed with activities as we focused on the PRC real estate market as our key growth driver.

In June, the Group adopted its new name of Brothers (Holdings) Limited to align with our emphasis on building a people-oriented organisation.

The highlight of 2006 was the approval by the PRC government of our plans to develop a new township, known as Singapore City@Shenyang on 5 million sq. ft. of land in Heping District, Shenyang. This project is expected to take approximately 8 years to complete and will be developed over 6 phases. We anticipate the construction of Phase 1 to commence in second quarter of 2007.

The Group also announced a placement of 24,840,000 new ordinary shares at S$0.29142 per share to new strategic investors on 12 December. The net proceeds of approximately S$7.2 million will be primarily utilised for the Group’s investment in Singapore City@Shenyang, with the balance to be used for the working capital towards the Group’s future expansion plans.

More good news as the Group received a major boost of confidence from Azette Holdings Ltd, the investment vehicle of one of Singapore most sucessful businessmen, Mr Tan Boy Tee, Chairman of Labroy Marine Ltd, to co-invest in the Singapore City@Shenyang project for a total investment of RMB400 million. This further strengthens our position.

+ Financial Highlights

The Group reported turnover of S$3.2 million and gross profit of S$1.8 million in FY2006, mainly contributed by rental of its Shenyang office building and remaining sales of Sentosa Gardens.

The Shenyang office building continued to generate a stable income stream, with rental occupancies remaining consistently good at above 90% for the tenth year in succession.

As for Sentosa Gardens, which was substantially completed and sold by end 2005, its contribution to Group results was reduced in FY2006.

As a result of the new investment in Singapore City@ Shenyang, higher finance charges and start-up expenses were incurred in FY2006.

The Group’s share of results from associated companies decreased by 63% to S$1.1 million in FY2006. The decrease arose from the Construction and Building Materials Segment due to an overall lower level of construction work done in FY2006.

The Group continues to maintain a strong financial balance sheet with more than S$35.7 million in cash and cash equivalents as at 31 December 2006. This is expected to increase with the completion of the fund raising activities in January 2007. Current ratio stands at 1.61x while the gearing ratio is negligible.

Prospects

+ Our Strategy for Growth

Our strategy will mainly focus on:

1. Leveraging on our track record and network in Shenyang to ride on the PRC real estate boom;

2. Continuously seeking strategic investments with attractive yields or synergiese to be reaped; and

3. Establishing strategic alliances to improve our competitiveness and generate potential business opportunities

+ New Developments in 2007

I am happy to update you that as I write, the Group has just announced another new residential project to be named “Sentosa View?in Shenyang, PRC. Comprising modern terrace houses, Sentosa View will be undertaken via a joint project development agreement entered between CEH Shenyang Shoe Industrial Inc (“CSSIP? and our whollyowned subsidiary, Brothers Realty (Shenyang) Co., Ltd. CSSIP is a subsidiary of Singapore’s Chee Eng Hang Pte Ltd (“CEH Group?. We are very pleased to partner CEH Group in this new project. The CEH Group, through CSSIP, has established a sound business track record in Shenyang, PRC, since the 1990’s and is a well-reputed business partner.

In the early part of January 2007, the Group announced the pre-launch of its “CEONet? a networking platform for businessmen to explore business opportunities in Northeastern PRC. CEONet is intended to be hosted at our Singapore City@Shenyang. At the same time, the Group has also appointed celebrity actor, Mr Li Nanxing as the spokeperson for its Singapore City@Shenyang project. The event was graced by the Vice-Mayor of Shenyang City, Mr Wang Xiang Kun as well as many successful businessmen and business associates.

We believe that our expansion into the Shenyang property market should contribute positively to the Group’s top and bottom line in the coming years.

+ Brothers?10th Listing Anniversary

2007 marks the 10th anniversary of our listing on 25th August 1997.

For this special edition of Annual Report, we have selected a “First Day Cover?design. We have picked Singapore City@Shenyang for the images on the stamps as this project marks a very important milestone on our growth path. For the postmark, we have used our Brothers name ?this is also the first Annual Report bearing this branding.

Our dedication in the past has achieved a vast 208% growth in our net assets, from S$20.5 million at time of IPO listing to S$63.3 million at year-end 2006. Symbolically, just as a rare First Day Cover appreciates over time, we believe that our “Singapore City@Shenyang?First Day Cover will appreciate many times in value over the next 10 years. We are committed to growing our value for you in the future.

+ Appreciation

The success of Brothers over the years would not have been possible without the contribution and support from various parties. Therefore I would like to take this opportunity to express my sincere appreciation to our shareholders, customers, financial advisors, professionals and bankers for their unwavering support through the years.

I would like to thank the management team and staff for their hard work and the Board of Directors for their wise counsel and guidance provided to the Group. My special thanks goes to our MD, Mr Koh Tiak Chye ?his efforts in establishing our presence in Shenyang and strategic business development of the Group have brought much fruit to the Group. I would also like to thank the three Directors, Mr Low Beng Tin, Mr Tan Soon Pow and Mdm Koh Siew Kiang, who have resigned from Brothers?Board to focus on the Oil & Gas and Construction & Building Materials businesses.

On that note, I like to welcome our new Executive Director and Chief Executive Officer, Ms Ethel Low into Brothers (Holdings) Limited. She brings with her, a wealth of financial knowledge and experience in the property and construction market. I believe, with her contribution, Brothers would continue to scale greater heights ahead.

Koh Teak Huat