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Chat with Kenny

Dated 24 July 2009

Dear friends,

Thanks for your questions posted over the past week. I am happy to answer your questions online. I will repost the questions in blue italics followed by my comments in black.

Kenny the fish

Dear Jayster, you wrote:

Hi Kenny,

Notable set of 2Q09 results. Well done! I would like to ask some questions about your India JV with Messrs Star Agencies. Can you give us some background about your India partners?

How did you get to know them and what value do they bring to the table in the JV?

I personally do not think India is a good market for ornamental fish as most of the country is in poverty. I think they would rather eat fish than rear it. What do you think?

Hi Jayster,

I would like to thank you for the kind words about our result. I sincerely appreciate it!

We have known our Indian partner for about 6 years and he is one of our customers. Messrs Star Agencies is one of the largest aquarium accessories distributor in India and the biggest in Chennai. We started exploring the idea of a joint venture a couple years ago and have been intensive in converging our ideas, values and direction for the past one year.

Qian Hu brings to the table, the global market experience, knowledge about fish breeding and manufacturing of aquarium accessories and our Indian partner possesses the experience and knowhow of the vast India domestic market. It was a Win-Win proposition for both companies.

Many years ago, a salesman went to the countryside of China and discovered no one was wearing any shoes and concluded that there was no market in the country. Another salesman went to the same location and concluded there was a huge market as he can sell many shoes because nobody had shoes. The first salesman is still trying to sell shoes to the Italian and went broke, and the second salesman now owns one of the biggest shoes factories in China. Qian Hu sees India from the second salesman perspective. We believe the India market is viable for the company's long term growth plan.

Kenny the fish

Dear Serene Lim, you wrote:

Dear Kenny,

Glad your company is still making money in this recession.

Your sale for the quarter is almost flat. May I know which segment of your business is suffering the most on consumer spending cut back?

I've noticed your 2Q09 results increased mainly due to the 43.6% reduction in the selling and distribution expenses amounting to $0.3M. May I know which specific areas have cost been cut and whether these cost cuts will affect the morale of the staff or the long term prospect of the company?

Hi Serene,

Qian Hu believes that in times of recession, cash flow and profit margin is more important to ensure the long-term viability of the company. We protected our margins by not cutting our selling price hence our revenue was flat but our profit margin and cash flow was not affected.

Qian Hu believes in prudent management and usage of company resources in good and bad times. Multi-tasking our employees and travelling by budget airlines are just some of the ways Qian Hu maximise resources in the company.

Salaries were not cut for our staff and deserving employees received increments and bonuses according to performance. Qian Hu believes that management and employees should stand together in good and bad times. Employees expressing discontent to the cost cutting measures are not retained and allowed to leave the company. It is in times of adversity that true staff royalty is displayed.

Kenny the fish

Dear Gerald Toh, you wrote:

Congrats on the good set of results.

I've noticed you have built up quite a bit of cash amounting to $9.58M. What do you plan to do with it?

Is Qian Hu present in Indonesia and Vietnam? There is a lot ethnic Chinese living in these 2 counties. I'm asking because people who rear dragon fish are mostly Chinese and they do so for fengshui reasons. These 2 markets are potentially huge markets for the company.

Hi Gerald,

I would like to thank you for the kind words. I appreciate it!

Qian Hu has been focused in watching our cash flow in good and bad times as it plays an important role in the viability of the business. We will use the cash for business expansion, debt retiring and hopefully by year end we can declare higher dividend.

Qian Hu's vision is to set up operation in Indonesia and Vietnam within the next 5 years.

Kenny the fish

Dear Ronald Koh, you wrote:

Do you think the financial crisis is over?

What opportunities do you see going forward in this period of uncertainty for your business given Qian Hu's strong financial position?

Hi Ronald,

I believe the worst is over. This doesn't mean the economy is getting better, but it is not getting any worse. The crisis is over when people reduce their fear and confidence start to pick up. The worst thing about the economic crisis is not the deteriorating situation, but the fear and panic of people. I would presume the crisis is over when confidence returns and panic and fear dissipate.

Those who fare better during the crisis will be able to capture more market shares when the economy recovers because weaker players are weeded out. Qian Hu is well positioned to take advantage of the tax incentive dished out by government globally during the crisis should we wish to invest in these country. We have survived many crises due to our culture of being prudent in cost control and cash flow management. I believe all this attributes will attract more talent to join the Qian Hu family. "Crisis is also opportunity", the saying is so true!

Kenny the fish

Thanks again to all the investors who have posted their questions here. I hope I have answered them to your satisfaction. The next chance for us to correspond again will be the time when we announce our Full Year 2009 results. In the meantime, do feel free to visit our corporate website: http://www.qianhu.com/ and our IR website: http://qianhu.listedcompany.com/ for more information.

Take care and I look forward to our next online Q&A.

Kenny the fish