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16 January 2012

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 Chow Sien Tai, you wrote:

Since Qian Hu is specialised in the fish business, why you think rearing fish for food business is not feasible? Qian Hu cannot be in the ornamental fish business forever. For example Qian Hu can be in business like Long John Silver fast food restaurant. I hope to see a chain of restaurant called Kenny Fish restaurant, Thousand Lakes fish supermart or Qian Hu Sushi.

Hi Sien Tai,

Happy New Year!

The Edible fish and ornamental fish business has only one thing in common, they all engage in the trading of fish. The supply chain and customer base are totally different.

Qian Hu is in the niche business of breeding and selling ornamental fish. We believe the growth potential of this industry is great. Rising income in emerging markets like China and India will raise disposable income. I might not be able to see the full potential reached within my lifetime. Qian Hu will continue to focus on the ornamental fish and pet business to ride this growth in the emerging markets.

Kenny the fish

Dear Jayster, you wrote:

I see the challenges ahead for SME in Singapore in rising operating cost in terms of labour and rental cost and a sharp decline in demand for goods and services in the Western economies in Europe and US. In what way would you like the government to help SME like yourself for the upcoming Budget 2012?

Hi Jayster,

Happy New Year!

We prefer to face the upcoming challenges internally within the management of the company rather than depending on the government for help. However, if our government can be more flexible in the foreign workers quota and reduce their levy, that will instantly ease the cost of doing business in Singapore. Most companies would want to raise their productivity, however, that will takes time. Our government can also allocate more COE for commercial vehicles so that business cost can be further reduced. Having said that, SMEs need to find ways to raise productivity in order to improve profitability in the long run.

Our experience with hiring foreign workers is that they are more willing to work longer hours and less likely to call-in sick often compared to local staff. This is especially so with younger employees. Our government has to be pragmatic and allow foreign workers to help our economy grow.

Kenny the Fish

Dear Lee Sing Heng, you wrote:

Why did you sell your business in Guangzhou, China? Are you exiting the business of manufacturing of aquarium and pet accessories? If not, what's your strategy going forward for this line of business?

Hi Sing Heng,

Happy New Year!

On the contrary, the aquarium and pet accessories business has become more important to our company. However, we need to focus on creating more values out of this business. We want to focus our resources on penetrating new markets and creating creative products thru innovation. Therefore, selling the factory which manufactures aquarium accessories will free our resources to do those things. As we continue to come up with new products, we will have more flexibility in asking other factories to do the OEM business. That fits into our long-term strategy.

Going forward, we will concentrate on exporting products to more countries and investing aggressively in developing our own innovative aquarium accessories without producing them ourselves.

Our fish food business is growing healthily, we might have to set up a fish food producing facility instead.

Kenny the fish

Dear David Tan, you wrote:

I notice your company don't have stock options which encourage staff to achieve long-term goals. How do you keep your staff motivated and attract new talents without the promise of capital gains in owning equity of the company they serve?

Hi David,

Happy New Year!

People stay in a company for reasons other than competitive remuneration. For example, it might be because they like the corporate culture of the company. A company without office politics, management treating employees like family members, transparent and fair treatment of staff might be more important than stock options.

Stock options are expenses to the company and dilutes existing shareholders' shareholdings. When Qian Hu was listed, we used to have stock options. But now we no longer have them. I think some companies' stock options are self-serving and not fair to shareholders.

Kenny the fish

Dear Ah Huat, you wrote:

Ah huat find it strange that your Dragon fish inventory has increased by 28.5% to S$7.5 million when you expect business to slow down in the future. How long does Dragon fish live? Does the value of the Dragon fish increase when it becomes older?

Hi Ah Huat,

Happy New Year!

This year the Chinese New Year is in January, one month earlier than usual, and is the Year of the Dragon. We have to stock up more Dragon fish in anticipation of higher sales volume during the Chinese New Year period. The Chinese New Year and especially the Year of the Dragon will have a positive impact to our sales of Dragon fish. We should see our inventory level come down to normal level after the festive season.

Dragon fish can live up to 100 years. Yes, the bigger the fish, the higher the value.

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 2012 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