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Dated 17 January 2011

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 Ah Huat, you wrote:

As an employer in Singapore, which camp are you in? Workfare or Minimum wage? Or do you have a better suggestion to encourage low-wage employees to attend training so their income level and productivity will increase narrowing the income gap in Singapore. Thanks.

Hi Ah Huat,

Happy New Year!

Wow, what a profound and political question. I am a small fish in the ocean but will offer my humble opinion.

I personally do not believe in minimum wage. It may affect the wage increment of the employees as some companies may simply said, I am paying minimum wage and hence legally it is ok to keep wages at the minimum level. With minimum wage, we have officially segregated a group of people into a group with "lower status or class". Psychologically, it is not fair to the employees. We would lose the flexibility to adjust wages according to the changing economic situation. During adverse economic conditions, the requirement to maintain the minimum wage leaves the employers with no choice but to lay off workers to cut cost. The workfare system works better for Singapore as we are a small country and need all the flexibility to react to the changing economic landscape.

Frankly speaking, I do not have any better suggestions to encourage low-wage employees to attend training. I feel the current government policies are adequate as it frequently comes up with various schemes to train our workers. Companies need to create an environment whereby investing and upgrading the skills of their employees becomes part of the corporate culture. The success of training depends on their eagerness to learn and responsibility for their own progress. You can't force the workers to attend training. You can only provide a conducive environment and build a training system within the company to make it an essential part of the corporate culture. Some workers will progress with those initiatives but there will be some, no matter how, be reluctant to upgrade. This is life!

Kenny the fish

Dear Jayster, you wrote:

Looks like the effects of climate change has affected the normal operations of your business. What measures has the company taken to reduce the impact of climate change on the breeding of Dragon Fish and delays in transportation of fish shipments. I feel that management should do something as the effects of climate change seem to be prolonged and not a once-off problem for agriculture companies like Qian Hu.

Hi Jayster,

Happy New Year!

We can't do much to prevent another volcanic ash incidence or severe snow storm. What we can do is to invest in Research & Development to better prepare for the breeding of Dragon Fish.

I believe Qian Hu's progress in R&D on Dragon Fish breeding methods is ahead of our competitors by a few years. We are working hard, experimenting with a few new strategies and methods to breed dragon fish without being adversely affected by the fluctuation in weather. I agree with you that we must do something to reduce the impact of climate change on our business. This is one of our top priorities within the company. If there is a will, there is a way. Nothing is impossible as far as Qian Hu is concerned. We will overcome this sooner than later.

Kenny the fish

Dear Jeffery Tong, you wrote:

No mention of how operation in India is doing. Is it currently profitable?

Hi Jeffery,

Happy New Year!

Operationally the joint venture in India is profitable. But we have initial set-up cost to digest, thus, we are very close to break even in FY2010. We believe it would be profitable in FY2011.

Kenny the fish

Dear William Wu, you wrote:

Qian Hu makes OEM accessories and it seems to be a declining business. Does Qian Hu make its own accessories with its own branding? Companies like HTC has switched from being OEMs to branding the product it manufactures, resulting in higher margins moving upstream. What's your take?

Hi William,

Happy New Year!

We have stopped accepting new OEM customers in FY2010. Our focus for the factory now is to produce at least 50% of the new products for our group, especially for the China domestic market. With our Hydro-Pure series of products and new tanks for Dragon Fish, we are creating more values in producing our own innovative products under our own brands and distributing them within our own marketing network.

Kenny the fish

Dear Christine Hong, you wrote:

Why invest in Indonesia now? How did you get to know the people at Joe Aquatic Indonesia, PT? Vietnam next, why?

Hi Christine,

Happy New Year!

Singapore, Indonesia, Thailand, and Malaysia supply close to 60% of the world's demand for ornamental fish. Currently, we export out from Singapore, Thailand, and Malaysia. With Indonesia coming in this year, we have completed our supply base for the world's ornamental fish demand. It is a strategic move and unprecedented. No company in Asia has the propensity and capability to create such a complete supply base.

Why now? We have always wanted to invest in Indonesia but two things must be there in order for us to invest in any country. The partner must be right, and we must have the right people from Qian Hu to manage the subsidiary. We have known Joe for quite a number of years, and over the years, we have established trust and converge our values and corporate culture. This year, both parties think the time is right to formally tie the knot. We been through a courting period and it is time we got married.

We have subsidiaries and joint venture companies in China, India, Singapore, Malaysia, Thailand and now Indonesia. If you were to look at the emerging developing countries with good GDP and population growth, Vietnam is the next venture which fit the overall strategy of Qian Hu. The proximity to Singapore is another reason we think we can create another Qian Hu there. Once Vietnam is in the picture, the expansion map of Qian Hu in Asia would be almost completed. Our next generation management team will have lots of potential to grow the company since strategically, we have planted the seeds in all the potential countries in Asia. The whole move is about sustainability rather than expansion per se.

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 Half Year 2011 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