Chairman's Message

My dear bosses

After crossing 10 years as a publicly-listed company, Qian Hu, in our next lap of growth, will focus on expanding the Group's distribution network in China and India, as well as building upon our knowledge capital through our R&D initiatives to improve the know-how of the ornamental fish and accessories business. What we are driving at is in building a more formidable work force that will continue to build an organisation, layer on layer, success upon success, that truly lasts for generations. The next few years will be about the Group's continued focus on investing in its people, in R&D, and in rewarding shareholders.

We have also embarked on a topic which is gaining worldwide acceptance - and that is, the factors that help ensure our sustainability as well as the sustainability of Planet Earth and the societies that we live in and operate through. We have made a baby step towards sustainability reporting and am pleased to present Qian Hu Corporation's first Sustainability Report 2011 - excerpts of which are available in this Annual Report (see pages 52 to 59). Although as a Group, we have been aware about the importance of Corporate Social Responsibility (CSR), we have mainly focused our efforts on managing environmental issues (such as our ISO 14001 certification), our people policies and community outreach, we are now more aware about the issues surrounding a more international audience.

We are thankful to the Singapore Exchange for encouraging more Singapore-listed companies to jump on the CSR bandwagon, and to adopt international frameworks such as the Global Report Initiative (GRI). Qian Hu has always believed in corporate transparency - by making a commitment to report on our sustainability efforts, Qian Hu hopes to continue our tradition of instilling goodwill and confidence in our expanded sphere of stakeholders that have interests beyond corporate profitability.

We aim to align our business interests with that of our stakeholders. More importantly, we aspire to be an organisation with a heart - one that is continually aware of any impact that our business activities or actions may have on the environment, consumers, as well as the needs of the less privileged around us. We continually instill these values in our people, believing that our CSR commitment and involvement will see us through the long haul.

The Macro-Economic Environment & Our Growth Strategy

2011 is again a year of economic uncertainties - exacerbated by the Eurozone debt crisis and fears of the United States running into recession again. Qian Hu's growth in FY 2012 is dependent on our ability to increase ornamental fish exports and sustained improvements in the production and sales of Dragon Fish. We continue to be focused on escalating our export of aquarium and pet accessories to more countries even as we expand our regional domestic distribution network. Sustaining a business is not about delivering shortterm profits. It is about generating healthy cash flow, achieving respectable and growing profit margin, and enhancing productivity and efficiency. Qian Hu has a unique mission - We bring fun to everyone! Supporting this is our continual quest for innovation.

Innovation

Since 2000, Qian Hu has spearheaded leadingedge research into the breeding behavior of the Asian Arowana. We have since entered into our second phase of intensive research with Temasek Life Sciences Laboratory. By understanding the behavior of this endangered, pre-historic fish, Qian Hu is able to improve the quality and quantity of future generations of Dragon Fish.

Our R&D team, headed by Dr Alex Chang, has also developed new aquarium accessories products which are well-received in the market, for example using Light Emitting Diode (LED) technology in aquarium lighting products to enhance the appearance of ornamental fish. There are other new products in the development pipeline which will be launched progressively.

Our Environment

Preserving the environment is necessary for the long-term sustainability of our business. While creating value in our business, we aim to minimise the impact that our activities have on the environment. Qian Hu fully complies with the regulatory requirements of our ISO14001 Environmental Management System where we strive to preserve and recycle our natural resources, such as water, in our daily activities of fish breeding, nurturing, retailing and export. Our operations are also compliant with the standards set out by the United Nations' Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

Our People Policy

As at 31 December 2011, the Group has 550 employees of which 144 are based at our headquarters in Singapore, while 406 are from our local and overseas subsidiaries - in Malaysia, Thailand and China. At Qian Hu, our people are indeed our biggest asset, and pivotal to our continued sustainability as a global leader in ornamental fish breeding and distribution. We believe in engaging and developing our staff to their fullest potential, and nurturing a motivated workforce who will spearhead the Group's growth. Each year, our training budget is pegged at 2% of our total payroll, with each employee undergoing some 50 hours of training hours on average. We place a strong emphasis on safety, and during the year in review, a total of 95 employees were sent for workplace safety training as well as other skills enhancement training.

Conclusion

Looking ahead, we acknowledge that while Qian Hu has made good progress in the area of sustainability and in engaging our stakeholders, we still face many challenges. We have a strong policy framework, but we now need to ensure that it is implemented effectively and consistently. We will continue to improve upon our level of reporting in addressing a wider, more international audience with various priorities. Our challenge would always be to match our business priorities with that of our various stakeholders. With our clear growth strategy, coupled with our track record in achieving corporate transparency and a culture of excellence, our stakeholders can rest assured that what Qian Hu has set out to do, we will do our best to achieve our short to medium goals, as well as our long term vision.

Kenny The Fish
Executive Chairman & Managing Director