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Dated 25 July 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 Jayster, you wrote:

The rising cost of labour in developing countries like China and India and inflationary pressure on rare materials and transportation is squeezing the profit margins of products and services worldwide.

Has Qian Hu increased the price of its products in the last 6 months?

Is it easy to pass on the cost increase to end consumers in the industry you are in?

Does price increase affect the demand for the products you are selling?

Hi Jayster,

Welcome back.

Since 2010, the cost of manufacturing in China has been rising. China is no longer a cheap place to manufacture low-end products.

Qian Hu is in the final stage of reviewing selling prices to Original Equipment Manufacturer (OEM) customers and allocating more resources in producing a series of in-house developed aquarium accessories.

Qian Hu will continue to innovate by producing more in-house products in addition to the existing OEM business for distribution. We believe our Research & Development (R&D) efforts over the years have resulted in Qian Hu producing innovative products that commands a price premium over OEM products. We will continue in our R&D efforts to strengthen profit margin for in-house products and as a hedge against the possibility of reduction in demand for OEM products after the price increase.

Kenny the fish

Dear Jeremy Scott, you wrote:

You mentioned during your result briefing that Qian Hu is expected to have a new CEO by 2020.

Can you briefly elaborate on your succession plans leading to 2020 and why 2020?

Hi Jeremy,

When I reached the age of 40 years old in 2005, we started Qian Hu's succession planning process by recruiting management trainees, aged 25 to 35 years old. We planned to train and develop them for the next 15 years hence the 2020 timeline for a revitalised management team for Qian Hu. In 2020, I would be 55 years old and a new CEO from the succession team should take over in his or her mid-forties. I intend to stay on as Executive or Non-Executive Chairman for another 5 years. By the age of 60, I will exit the management team of Qian Hu but will be offering myself as an FOC (free-of-charge) advisor to the company whenever they need me.

I plan to exit the company at a relatively "young" age of 60 by corporate standards. I could stay on longer but I feel I should give the next generation of management complete freedom and authority to bring Qian Hu to greater heights. I should only be there to provide guidance and advice when needed without interfering with the way they run the business.

Kenny the Fish

Dear Lim Tong Chua, you wrote:

Your business seems to be perpetually affected by acts of god because of difficulties getting your products to its destination when volcanoes erupts.

Any plans to locate distribution centres in Europe so there is a buffer when there are disruptions?

Hi Tong Chua,

Up to 60-70% of the world's ornamental fish supply comes from Southeast Asia (SEA). This is why it is strategically critical we have export bases in SEA. With our Joint Venture in Indonesia this year, we have somewhat completed the supply bases for the group.

The fact that our supply bases are in SEA and vocanic eruptions or some other natural disasters are infrequent event and beyond anyone's control, it does not make commercial sense for us to set up holding areas in Europe.

Kenny the fish

Dear Yvonne Ho, you wrote:

I would like an update on your India and Indonesian partners. Are they currently profitable?

Hi Yvonne,

The India Joint Venture (JV) will be profitable this year.

We have signed the Memorandum of Understanding (MoU) of the JV in Indonesia this year and the forming of the company is almost completed. We will make a separate announcement soon about the completion of the JV. It usually takes about two to three years for this type of JV to be profitable.

Kenny the fish

Dear Anthony Goh, you wrote:

Any year-end dividend this year given the uncertain economic environment?

Hi Anthony,

Although Qian Hu has no formal dividend policy, we have declared dividends consistently over the years during bad and good times.

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 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