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21 July 2014

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 Eric Liou, you wrote:

Hi Sir,

Another not so impressive quarterly results, increasing debt level and decreasing cash level, is there any plan in the near future if this negative trend persist, the Board of directors should consider replacing the CEO or board revamp for fresh ideas/strategy injection?

There has been almost non-existent open market share purchase by members of the board of directors and substantial holder of the company, is this a show of lack of confidence in the company? There are many listed companies for whom the directors/substantial shareholders have been consistently snapping up shares in the open market to demonstrate confidence in the company.

Last but not least, noticed the loan drawdown this quarter is 500k more than the comparing quarter, is the company expected to continue to borrow more to fund its operations for the remaining of 2014? This is a worrying trending as the company's balance sheet is getting weaker every quarter.

Hi Eric,

Thank you for your questions.

Qian Hu has short-term profit pressure but never had any medium or long term prospect issues. We have a business model which is sustainable for generations. Our transformation is slow but steady powered by technology and innovation. Our recent innovative accessories products are gaining positive international attention. We are still on track to become the Number 1 ornamental fish exporter in the world in the next few years.

I do not agree with the idea professed by some in the investing communities that once profit is under pressure, the CEO has to be changed. It can be a shortsighted decision as long-term development of the company can be affected if the CEO is focused on short-term profit. Investors have the choice to invest in any company which they feel comfortable with. Changing the CEO to attain instant profit can affect continuity in the progress of long-term goals set out by management which requires time and patient to achieve.

The low trading liquidity in Qian Hu's shares could also mean that we have loyal and long-term investors. Some investors like our corporate governance and transparency. Others like the dividend we payout every year. Our free float of shares are not substantial and we have many loyal investors. By buying back shares from the open market, we will make the counter even more illiquid.

Qian Hu's long-term goal is to be a debt free and high dividend payout company. Fluctuation in cash flow on a quarterly basis is part and parcel of any company which is going through transformation.


Kenny the fish

Dear David Tan, you wrote:

Do you think vertical fish farming is feasible for Qian Hu? Then you don't need so much land to breed more dragon fish.

Hi David,

We are rebuilding our farm infrastructure currently so that by the year 2015, our automated systems will keep the fish alive and our workers will be trained to monitor the system. This will increase our productivity tremendously. Our new system will have the vertical fish farming component incorporated.

While the breeding of dragon fish is best done in earthen ponds, our research and development team is working on projects to see whether we can use the vertical fish farming concept to breed dragon fish.


Kenny the fish

Dear Jayster, you wrote:

I think you should sell your plastics business or relocate it to a country with cheaper operating cost as it is always affected by increases in resins prices. You just make plastic bags with your plastic business, why don't you make customised plastic packaging for the FMCG industry to increase margins for this line of business.

Hi Jayster,

Our plastic business not only makes normal plastic bags but also produce customised plastic packaging for various industries such as electronic and food industry.

After our core business transformation is completed, we are open-minded to sell or relocate this business in the future.


Kenny the fish

Dear Ah Huat, you wrote:

Did you increase the selling price in the fish and accessories segment? Do you think the demand for your plastic bags will increase in the next few quarters after your price increase or your customers will switch to your competitors?

Hi Ah Huat,

We did not increase the selling price of our fishes. We are selling more of our innovative accessories products. Because of their differentiation, we can create more values for the company.

Our plastic business should recover in the second half of the year. Our customers will eventually accept the new reality of higher oil price and thus higher plastic price. Our competitors are facing the same high raw material cost and their prices are similar to us.


Kenny the fish

Dear Tony Lim, you wrote:

I think your accessories business need e-commerce to expand its geography reach. Do you have your own e-store to sell your products online?

Hi Tony,

We have been contemplating e-commerce for many years. We are constantly reviewing and debating various e-commerce models. We will eventually have the e-commerce component in our distribution channels. We do not have the exact time frame and detail for now.


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 2014 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