THE WORLD THROUGH THE EYES OF A FISHqianhu.listedcompany.com/misc/ar2000.pdf · the local tropical...

THE WORLD THROUGH THE EYES OF A FISH

“The world is not merely anoyster, but a huge aquariumwith shoals of opportunities.”Kenny The Fish

The Qian Hu Story 2

Chairman’s Message 4

Board of Directors 8

The Qian Hu Family 9

Financial Highlights 10

Value Added Statement 11

Year in Review 12

Corporate Information 14

Group Structure 15

Corporate Governance 16

Our Public Responsibilities 18

Contents for Financial Statement 19

Statistics of Shareholders 59

Notice of Annual General Meeting 60

CONTENTS

“All that wriggles may notbe a juicy worm, but a fishhook disguised. In life,there are no shortcuts...wemust always embrace thevirtues of hard work,creativity and excellence.”Kenny The Fish

THE QIAN HU STORY

2 THE QIAN HU STORY

Life, whether in the aquarium, the vast expanse ofthe ocean, or the air-breathing world, sometimes offersshortcuts to success and happiness. The truth of thematter is, even for a fish, there are no shortcuts toachieving one’s goals.

Even if success is meted out to you on a silver platter,in The Fish’s case, tasty morsels on a steel hook, takingshortcuts in trying to outdo one another often comeswith heavy, sometimes fatal, opportunity costs.

With regard to Qian Hu, our story is one of persistence,determination to succeed, and sticking to the path oftime before we finally arrived at the centre ofopportunity. We are always trying to find new ways todo the same things.

Our history can be traced back to the early days of mylate father Yap Tik Huay and my uncle, Yap Hey Cha,who were pig farmers. In 1985, their pig farm waseradicated due to the Government’s move to stempollution and to free up more land for residentialpurposes.

At that point in time, my three elder brothers, YapPeng Heng, Yap Hock Huat and Yap Kim Choon joinedthe family business. They converted the old pig pensinto concrete ponds and started breeding guppies forthe local tropical fish exporters. However, in 1989,during a heavy thunderstorm, our entire stock ofguppies were washed away.

We had to start all over again. With a new name “QianHu”, which means a thousand lakes in Chinese, mycousins Alvin, Andy and I joined Qian Hu and togetherhoped for brighter days to come.

Little did we realise that we were in for anothersetback. After our failure in rearing guppies, wethought that we would farm high-fin loaches insteadalthough we knew very little about this particularvariety of fish. In a single swoop, our entire stock of4,000 loaches died and we lost almost everything,except our mettle and our drive to succeed. We realisedour mistake of not spreading our risks, and not

The Yap Family

THE QIAN HU STORY 3

knowing anything about our products. Since then,however, we learnt our lesson well. In fact, this lessonwas so valuable to us that we kept the high-fin loachas our mascot, a daily reminder of where we were,and where we never want to be.

In 1990, we expanded into the local wholesaledistribution business, and increased our range ofornamental fish to include Discus, Chichlid, Gouramiand began diversifying into the aquarium accessoriesbusiness. Two years later, in 1992, we startedexporting to the rest of the world, a journey whichhelped position Singapore as a major player in theexport of ornamental fish.

In 1993, we entered in a joint venture with The ChinaAquaculture Society and incorporated Beijing QianyangAquarium Co. Ltd, based in Beijing, to supply cold-water ornamental fish and aquarium accessories toNorthern China. We acquired full ownership of thejoint venture company two years later.

In 1995, a year after we moved to our present farm,located within the Sungei Tengah Agrotechnology Park,Qian Hu developed quality systems for our operations.This led to our achieving three ISO 9002 certificationsfor conditioning and packing of ornamental fish forexport (1996); the trading, quarantine and breedingof Dragon Fish (1997), and the retail and wholesale ofaquarium accessories and pet products (2000).

We also designed the landscape of our farm in such away that runoffs from heavy rainfall would not affectour fish stock and breeding ponds. Our unique systemof recycling water had won us the ISO 14001certification for our environmental managementsystem involving the import, export, conditioning,distributing and farming of tropical fish in 1998.

1997 was also an exciting year for Qian Hu. Wedeveloped our own auto-packing machines for thepacking of ornamental fish, a project encouraged bythe Agri-food and Veterinary Authority of Singapore(AVA), and partially funded by the EDB InnovativeDevelopment Scheme. During the same year, Qian Hu

was also admitted to the Productivity and StandardsBoard’s Promising Small and Medium EnterprisesProgramme which helped us to formulate and realiseour strategic business plan for the Group.

Two years later, we began distributing aquarium andpet accessories to Malaysia, and subsequently to Chinaand Thailand. We see much growth in this segment ofour business as we believe that for every dollar spenton ornamental fish, five more dollars will be spent onaccessories. As such, in 2001, we established a jointventure company, Wan Jiang Technology Co Ltd, inGuangzhou together with a Taiwanese partner. WanJiang will produce our own house brands of aquariumand pet accessories, as well as other third party brands.Initially, Wan Jiang’s products will be distributedthrough our regional subsidiaries. However, our plansare to distribute them to Japan, Germany, UnitedKingdom and the rest of the world.

“Opportunities abound whenwe see the world through theeyes of a fish...we willcontinue to build our brandand grow the Company inSingapore and beyond.”Kenny The Fish

4 CHAIRMAN’S MESSAGE

CHAIRMAN’S MESSAGE

CHAIRMAN’S MESSAGE 5

Dear Shareholders

On behalf of the Board of Directors, I am pleased topresent the first annual statement and audited accountsof Qian Hu Corporation Limited as a listed entity.

With your strong support, the Company successfullycompleted its listing on 8 November 2000, and in theprocess, accorded Qian Hu the distinction of being thefirst company of its kind to list on the SingaporeExchange.

Funds raised from the initial public offer (IPO) arebeing channeled into various projects which we hopewill sustain the growth of the Company in the yearsahead.

These include the expansion of our distribution networkin Malaysia, Thailand and China and the developmentof e-commerce capabilities within the Group.Some money were also earmarked for loan repaymentwhile the balance was set aside for additional workingcapital.

Joining the fraternity of listed companies in Singaporehas meant an immense sense of pride and achievementfor me as well as for all the people who were involvedin the success of the Group. To them, my thanks andappreciation.

To our new shareholders, I bid you a warm welcome tothe Qian Hu family. We look forward to your continuedsupport as we build the brand and grow the Companyin Singapore and beyond.

Financial ReviewQian Hu has done better than expected in the year underreview, with export sales growing at a healthy 30%compared with the industry’s average growth rate of 6%.

As a result, the Group was able to post a record netprofit of $3.2 million which comfortably exceeded theforecast net profit of $3 million which we promisedduring the launch of our IPO in November.

Group turnover rose 34.8% to $33.9 million, of which49% came from the sale and export of ornamental fish,35% from manufacturing and distribution of aquariumand pet accessories, and 16% from the manufacture ofplastic bags.

During the year in review, 61% of the Group’s turnovercame from our operations in Singapore, whilst 39% werederived from overseas.

We have been busy developing new markets as well asexpanding our existing channels of distribution.Globally, we currently export more than 500 speciesand varieties of ornamental fish to more than 50countries, helping to place Singapore on the world mapfor exporting more than 30% of the world’s output froma single country. We also distribute more than 5,000types of aquarium accessories to hobbyists inSingapore, Southeast Asia and China.

At home base, we have increased the number of retailoutlets, authorised by the Agri-food and VeterinaryAuthority of Singapore to sell the highly-prized DragonFish (Arowana) by 10, making it a total of 40 retail outlets.

6 CHAIRMAN’S MESSAGE

We have put in place strategic plans to move thecompany forward. In the current financial year, weexpect to see the Group’s overseas subsidiariesexpanding at a faster rate. Our joint venture inGuangzhou, Wan Jiang Technology Co Ltd, which wetied-up with a Taiwanese partner, has commencedproduction of our proprietary brands of aquarium andpet accessories under the “Ocean Free” brand name aswell as a host of third-party brands.

We expect Wan Jiang, which initially will distribute itsproducts to our regional subsidiaries, to widen itsdistribution network to include Japan, Germany, UnitedKingdom, and the rest of the world.

At our home base in Singapore, we will continue tobuild on the goodwill that we have garnered from ourexport and retail partners in the various distributionchannels. Even our plastic manufacturing subsidiary,Tat Leng, which was initially set out to support our mainexport business, has made inroads in supplying high-grade plastic bags to the electronics, IT and foodindustries as well. Tat Leng is expected to increase itsproduction capacity by 50% when its new Woodlandsfacility, which commences operations by March 2001,is fully-phased in by 2002.

With the expected positive contributions from theGroup’s overall manufacturing and distributionoperations, we are confident of achieving sustainablegrowth in FY2001.

Achievements and AcknowledgementsWe are proud of the achievements we have made overthe years. These are due in no small measure to thesupport we get, and continue to get, from some ofSingapore’s leading institutions.

Despite our humble beginnings, having emerged fromthe backwaters of Singapore’s agrarian industries, wehave become sterling case studies for ProductivityStandards Board’s SME 21 blueprint, and NationalUniversity of Singapore’s best practices among localenterprises.

Qian Hu was among four companies in Singapore whoreceived the inaugural International Management ActionAward (IMAA) by the Institute of Management andProductivity & Standards Board on 8 November 2000,in recognition of our ability to innovate, create andproduce sustainable and tangible results.

We were also among the three most transparentcompanies, out of a total of 268 listed companies inSingapore whose financial year ended in December, asshown in The Business Times’ Corporate TransparencyIndex 2001. The CTI is a tool to measure howtransparent a company is when it announces its

CHAIRMAN’S MESSAGE 7

financial results by assessing the quality of informationdisclosed, and effectiveness of the company’scommunication to investors.

We would not have been where we are today withoutthe support of our management and staff, ourcustomers, our suppliers, business associates andfellow directors.

I am particularly gratified that in a recent employeesurvey, some 83% of our staff said that they werevery happy with the Company. The importance ofour staff to the success of the Group cannot beover-emphasised.

I would like to take this opportunity to thank all ofthem for their support in the past as well as in the yearsahead.

Kenny YapExecutive Chairman & Group Managing Directora.k.a Kenny The Fish

“In Qian Hu, whether youare a YAP or not doesn’tmatter at all...whatmatters is that we are allpart of the Qian Hu family,working together andrespecting one another. Wemay have begun as afamily business, but wehave evolved into aprofessionally-managed,knowledge-based companythat is committed todeveloping our peopleassets.”Kenny The Fish

Kenny Yap Kim LeeExecutive Chairman and Managing DirectorCenter

Alvin Yap Ah SengDeputy Managing DirectorFar Left

Andy Yap Ah SiongDeputy Managing DirectorLeft

Robson Lee Teck LengIndependent DirectorRight

Chang Weng LeongIndependent DirectorFar Right

8 BOARD OF DIRECTORS

BOARD OF DIRECTORS

THE QIAN HU FAMILY

THE QIAN HU FAMILY 9

As a knowledge-based business, the role that our staffplay in Qian Hu’s performance in the global ornamentalfish industry can never be over-emphasised.

We have therefore placed special emphasis ondeveloping and motivating our people assets,providing them with the professional tools they needto succeed.

Through a structured planning process, the trainingneeds of each staff is identified with the directinvolvement of the respective departmental manageror supervisor. However, this process is not driven fromthe top, but through regular reviews and stafffeedback, each programme is assessed for its relevanceand effectiveness by each staff. This encourages ourstaff to be closely involved in his or her owndevelopment, ensuring the programme’s effectivenessand success.

Another way we encourage communication is theannual performance appraisal when staff are givenfeedback on their strengths and areas forimprovement. This is also a time when staff areencouraged to speak out and contribute workimprovement ideas as we truly believe that creativityis a very important ingredient to our business success.To motivate our staff further, we have in place a varietyof schemes to reward and recognise our staff.

Since 1999, we introduced an annual survey to allowour staff to assess the Company as well. In the Year2000 survey, some 83% of the respondents expressedthat they were very happy with the Company. This isyet another testimony that we are definitely on theright track! Indeed, the spirit of open communicationand teamwork is a corporate culture that is uniquelyQian Hu’s. It is a culture that encourages creativity,team work and a happy environment to work in.

FINANCIAL HIGHLIGHTS

Turnover - Business Activities

Turnover - Geographical

Turnover ($’000) Profit before taxation ($’000)

10 FINANCIAL HIGHLIGHTS

1,808

4,129

1999 2000

25,151

33,903

1999 2000

Singapore 61%

Asia 24%

Europe 13%

Others 2%

Singapore 64%

Asia 27%

Europe 8%

Others 1%

1999 2000

1999 2000

Fish 46%

Accessories 37%

Others 17 º%

Fish 49%

Accessories 35%

Others 16%

(S$’000) 2000 1999

Revenue earned 33,903 25,151

less: Purchase of goods (24,690) (19,614)

Gross value added from operations 9,213 5,537

Other operating income 495 205

Exchange gain 94 2

Share of profit (loss) of associated company 8 (7)

Total value added 9,810 5,737

Distribution:

To employees in salaries and other related costs 4,422 2,747

To government in corporate and other taxes 1,042 505

To providers of capital:

♦Interest paid on borrowings from bank (net) 158 150

♦Dividends to shareholders 312 0

Retained for re-investment and future growth

♦Depreciation and amortisation 948 827

♦Accumulated profits 2,847 1,314

♦Minority interest (18) 0

Non-production cost and income:

♦Bad debts and provision for doubtful debts (net) 99 194

Total distribution 9,810 5,737

Production data 2000 1999

Number of employee 166 135

Value added per employee ($’000) 59 42

Value added per $ of employment cost 2.22 2.09

Value added per $ sales 0.29 0.22

Value added per $ of investment in fixed assets 1.05 0.82

VALUE ADDED STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000

VALUE πADDED STATEMENT 11

YEAR IN REVIEW

12 YEAR IN REVIEW

At Qian Hu, we have always been unwavering in ourbusiness focus. We recognise that doing too many thingskeeps one from doing our best. That is why we havechosen to stay focused on our core expertise ofdistributing and exporting ornamental fish, and itsrelated activities, to the world’s aquariums - whether itbe the farming of ornamental fish, manufacturing anddistributing aquarium and pet accessories, breedinghighly-prized Dragon fish, or producing plastic bagsfor the packing of fish for export.

Listing on Singapore ExchangeFor the past one year, we too have been very focusedon preparing for our initial public offer in October 2000.We are glad that our hard work has finally paid off. Theeighth day of November 2000 - the day Qian HuCorporation Limited got listed on the SingaporeExchange - has been entered in the annals of Qian Huas a sort of coming-of-age, and transformation of anagrarian, family-run business into a professionally-managed, export-driven agro-technology company. Wewere also doubly blessed to receive the InternationalManagement Action Award (IMAA) from the Institute ofManagement and the Productivity & Standards Boardthat same day.

Aquarium and Pet AccessoriesWhile we are focused on developing new markets andexpanding our existing distribution channels, we havemade progress in expanding our manufacturingcapabilities for aquarium and pet accessories. In 2001,we established a joint venture company, Wan JiangTechnology Co Ltd, in Guangzhou with a Taiwanesepartner. Wan Jiang will produce our own house brandsof aquarium and pet accessories as well as other thirdparty brands. Initially, Wan Jiang will supply accessoriesto our regional subsidiaries. Its distribution networkwill be widened to include countries such as Japan,Germany, the United Kingdom and the rest of theworld.

“Focus is the secretof strength.”Kenny The Fish

YEAR IN REVIEW 13

In the year under review, we expanded our distributionnetwork for aquarium and pet accessories in Thailandthrough our 66%-owned subsidiary Qian HuMarketing. Qian Hu Marketing is in the process ofrestructuring before a licence can be approved bythe local authorities.

Breeding of Dragon FishIn the second half of FY2000, we received the licencefrom the Convention on International Trade inEndangered Species of Wild Fauna and Flora (CITES) tosell Dragon Fish bred by our farm. Under CITES, we areonly allowed to sell the second generation of DragonFish which takes about 4 years before it can reproduce.Commercial breeding of the endangered andhighly-prized Dragon Fish requires specialisedknowledge and techniques that we have acquired overthe last five years. We are believed to be one of the firstfew farms in Singapore to have achieved this.

By the close of fiscal year 2000, Qian Hu has addedanother 10 retail outlets to our chain of 30 retail outletsauthorised by the Agri-food and Veterinary Authorityof Singapore (AVA) to sell Dragon Fish.

Expanding Production Capacity of Plastic BagsOur plastic manufacturing subsidiary, Tat Leng, is inthe midst of finalising its plans for the move to a newfacility in Woodlands. Tat Leng was initially incorporatedto support the demand for plastic bags from ourcore export business. However, its high-grade plasticbags have made inroads into the electronics, IT andfood industries as well. When fully operational in 2002,Tat Leng will have increased its production capacityby 50%.

Plastic Bags

Aquarium and Pet Accessories

Ornamental Fish

BOARD OF DIRECTORSKenny Yap Kim Lee(Executive Chairman and Managing Director)Alvin Yap Ah SengAndy Yap Ah SiongRobson Lee Teck LengChang Weng Leong

COMPANY SECRETARYChia Yong Yong

AUDIT COMMITEERobson Lee Teck Leng (Chairman)Chang Weng LeongKenny Yap Kim Lee

REGISTERED OFFICE133 New Bridge Road #11-09Chinatown PointSingapore 059413

SHARE REGISTRARM & C Service Private Limited138 Robinson Road#17-00 Hong Leong CentreSingapore 068906

CORPORATE INFORMATION

AUDITORSArthur Andersen10 Hoe Chiang Road#18-00 Keppel TowersSingapore 089315Partner-in-charge: Steven Phan Swee Kim

PRINCIPAL BANKERSThe Development Bank of Singapore Ltd6 Shenton WayDBS Building Tower OneSingapore 068809

Overseas-Chinese Banking Corporation Limited65 Chulia Street #29-02/04OCBC CentreSingapore 049513

14 CORPORATE INFORMATION

GROUP STRUCTURE

SUBSIDIARIES

TAT LENG PLASTIC PTE LTD (SINGAPORE) 100%

GUAN GUAN AQUARIUM SDN BHD (MALAYSIA) 100%

QIAN HU MARKETING CO LTD (THAILAND) 66%

BEIJING QIAN YANG AQUARIUM CO LTD (CHINA) 100%

FUJIAN ANXI QIAN LONG PLASTICS PRIVATE CO LTD (CHINA)100%

ASSOCIATES

FUJIAN ANXI JI YING HANDICRAFT ARTICLE CO LTD (CHINA) 25%

WAN JIANG TECHNOLOGY CO LTD (CHINA) 50%

QIAN HU CORPORATION LIMITEDQIAN HU FISH FARM TRADING

YI HU FISH FARM TRADINGWAN HU FISH FARM TRADING

DAUDO AQUARIUM

CORPORATE GOVERNANCE

The directors and management are committed to highstandards of corporate governance and embrace the bestpractices contained in the Best Practice Guide issued bythe Singapore Exchange Securities Trading Limited.

The Board of DirectorsThe Board currently has 5 members consisting of 3executive directors and 2 non-executive directors whoare independent directors. The Board meets regularlythroughout the year and amongst other matters,reviewed the financial management and performanceof the Group including matters relating to corporategovernance. The other responsibilities of the Boardinclude the deliberation of the Group’s overallbusiness strategy, approval of major investments,review of the Group’s financial policies and annualbudget. To discharge its responsibilities effectivelyand efficiently, the Board has set up a number ofcommittees to oversee specific task areas. Thesecommittees includes:-

The Executive CommitteeThe Executive Committee meets once a month toreview the performance of the Company and itssubsidiaries, to deliberate on corporate strategies,the Group’s businesses and principal risks and toaddress important issues. It comprises 3 executivedirectors and is chaired by Kenny Yap Kim Lee.

The Audit CommitteeThe Audit Committee, comprises 2 independentdirectors and 1 executive director, is chaired byRobson Lee Teck Leng. The principal responsibilityof the Audit Committee is to assist the Board ofDirectors in the identification and monitoring of areas

of significant financial and business risks. It reviewsthe compliance with the Listing Manual and the BestPractice Guide of the Singapore Exchange SecuritiesTrading Limited and evaluates the adequacy andeffectiveness of internal accounting controls andfinancial reporting controls. The Committee alsoreviews interested party transactions as well as theCompany’s procedures set up to monitor and reporton all interested party transactions. Specific functionof the Committee includes reviewing the scope ofwork of the external auditors and receiving andconsidering the external auditors’ reports. The Group’sannual consolidated financial statements andannouncement were reviewed by the Committeebefore they are submitted to the Board of Directorsfor approval.

The Committee met 2 times after the Company waslisted on 8 November 2000.

The Employees’ Share Option Scheme CommitteeThe Employees’ Share Option Scheme Committeecomprises 1 executive and 2 non-executive directorsand is chaired by Chang Weng Leong. The Committeeadministers the Employees’ Share Option Scheme ofthe Company and deliberates on matters of eligibilityas well as the number of options to be granted toeach participant, in accordance with the terms andconditions of the Scheme.

Dealing in SecuritiesThe Group has procedures in place on dealing insecurities, whereby there should be no dealings inthe Company’s shares by its officers during the periodcommencing one month prior to the announcement

16 CORPORATE GOVERNANCE

of the Company’s half-year and full year results.Directors and executives are also expected to observeinsider trading laws at all times even when dealingin securities within permitted trading period.

Compliance with existing Best Practices Guide of theSingapore ExchangeThe Board of Directors confirms that during the yearended 31 December 2000, the Company hascompiled with the corporate governance policies setout in the Best Practices Guide issued by the SingaporeExchange Securities Trading Limited.

Corporate Governance for FY2001In respect of the present financial year ending 31December 2001, the Audit Committee is in theprocess of reviewing the consultation paperspublished by the various public and private-sector-led committees initiated by the Government, with theobject of institutionalizing a culture of good corporategovernance and best practices for the group duringthe present financial year. An institutionalized systemand culture of good corporate governance is ofparamount importance to attract both local andinternational institutional investors to invest in theCompany’s shares. Institutional and sophisticatedinvestors place great importance on corporategovernance when making investment decisions.The importance of good corporate governanceand best practices to the Qian Hu group cannotbe over-emphasised.

In particular, the Audit Committee will review andcarefully study (i) the recommendations of the FinalReport and Code of Corporate Governance, published

on 4 April 2001, (ii) the Consultation Paper on theProposed Securities and Futures Act published on21 March 2001 and (iii) the Consultation Paper onDisclosure and Accounting Standards published on6 December 2000.

The guidelines and recommendations set out in theseconsultation papers will fundamentally form thebenchmark standards and instructive principles forthe Audit Committee to instill high standards ofcorporate governance, international transparencypractices and timely disclosures in the following fourbroad aspects of the group’s corporate management:-

• Appointment of Directors and Board Management• Compensation and Remuneration Policies for

Executive Directors and Senior Management Staff• Accountability and Audit• Communication with the Public and Shareholders

The Audit Committee is heartened by the Company’soverall third position this year in the CorporateTransparency Index Rankings initiated and publishedby the Business Times in respect of the financialresults disclosures of all public listed companies inSingapore. The Audit Committee has every intention,wherever possible, to comply with the spirit and theletter of the abovementioned consultation papers inits task to institutionalize and maintain theinternational discipline and standards of goodcorporate governance and best practices for theQian Hu group.

CORPORATE GOVERNANCE 17

OUR PUBLIC RESPONSIBILITIES

18 OUR PUBLIC RESPONSIBLITIES

We are indebted to the environment without whichwe would not be able to draw valuable resource toconduct our business. The setbacks that we hadexperienced way back in our history has taught usthe importance of protecting our environment. Sincethen, our operations and processes in our farm havebeen modified, minimising the environmental impacton our natural surroundings.

Since 1997, Qian Hu embarked on a programme topreserve our natural resources and minimise wastesby participating in the ISO 14000 EnvironmentalManagement System which is an internationalstandard for managing the environment. A year later,we obtained another ISO 14001 certification,underscoring once again our commitment towardspreserving the environment. Through these twoprogrammes, we have an integrated system in placeto manage our operations sensitively, and minimisingthe possible stress that our business can impose onthe environment.

Besides our commitment to preserving our naturalsurroundings, we have been careful not to neglectour social responsibility as well. Our communityforms an integral part of the environment that weoperate in, and we encourage our staff to be goodcorporate citizens by actively participating in anumber of fund raising activities such as:

• Annual fund raising projects for various societies,clubs, community centres

• Direct contributions to organisations such as Societyfor the Visually Handicapped, homes for the aged,and schools

• The SHARE programme

QIAN HU CORPORATION LIMITED71 Jalan Lekar, Singapore 698950

Tel: (65) 766 7087 Fax: (65) 766 3995www.qianhu.com

FINANCIAL STATEMENTS

Directors’ Report 20

Statement by Directors 26

Auditors’ Report 27

Balance Sheets 28

Statements of Profit and Loss 29

Statements of Changes in Equity 30

Consolidated Statement of Cashflows 31

Notes to the Financial Statements 33

Proforma Statement of Profit and Loss 54

Supplementary Information 58

19

DIRECTORS’ REPORT31 DECEMBER 2000

(Amounts in Singapore dollars unless otherwise stated)

The directors are pleased to present their report to the members together with the audited financial statements of theCompany and the consolidated financial statements of the Company and its subsidiaries (“the Group”) for the financialyear ended 31 December 2000.

DirectorsThe directors of the Company in office at the date of this report are as follows:

Kenny Yap Kim LeeAlvin Yap Ah SengAndy Yap Ah SiongRobson Lee Teck Leng (appointed on 18 October 2000)Chang Weng Leong (appointed on 18 October 2000)

Principal ActivitiesThe Company was incorporated in Singapore on 12 December 1998 as a private limited company under the name ofQian Hu Fish Farm Pte Ltd. On 13 October 2000, the Company was converted to a public limited company and changed itsname to Qian Hu Corporation Limited.

The Company was admitted to the Official List of the Singapore Exchange Securities Trading Limited Dealing and AutomatedQuotation System (SGX-SESDAQ) on 8 November 2000.

The principal activities of the Company are those of import, export, farming, breeding and distribution of ornamentalfishes and aquarium and pet accessories. The principal activities of the subsidiaries are as set out in Note 6 to theaccompanying financial statements.

There have been no significant changes in the nature of these activities during the financial year.

EmployeesThe total number of employees in the Company and the Group at the end of the financial year was 79 and 166 (1999: 60and 135) respectively.

Results For The Financial Year

Group Company$ $

Profit after taxation 3,141,797 2,407,728Minority interest 18,053 -

Profit attributable to Members of the Company 3,159,850 2,407,728Proposed dividends (312,381) (312,381)

Retained profit for the year 2,847,469 2,095,347

Transfers To or From Reserves or ProvisionsExcept as shown in the financial statements, there were no material transfers to or from reserves or provisions during thefinancial year.

Acquisition and Disposal of SubsidiariesThe following subsidiary was incorporated during the financial year:

Country of Company’s Issued andName of subsidiary Principal activities incorporation equity interest paid-up capitalQian Hu Marketing Co Ltd Import, export and Thailand 66% Baht 6,000,000

distribution of aquariumand pet accessories

20 DIRECTORS’ REPORT

Acquisition and Disposal of Subsidiaries (continued)During the financial year, pursuant to a Group restructuring exercise, the Company assumed the assets, undertakings andbusiness of the various partnerships/sole proprietorships from the respective partners/sole proprietors. The purchaseconsideration was as follows:

Name of partnerships/sole proprietorships Purchase considerationWan Hu Fish Farm Trading 1,509,263 ordinary shares of $1 each at $1.20 per shareBite Lips Gifts & Toys $385,861 in cash

The above purchase consideration was based on the net assets of the various partnerships/sole proprietorships at thedate of acquisition.

Except as disclosed above, there were no other acquisition or disposal of subsidiaries during the financial year.

Issue of Shares or DebenturesThe CompanyDuring the financial year, the Company:

(a) Increased its authorised share capital from $4,000,000 comprising 4,000,000 ordinary shares of $1 each to$20,000,000 comprising 20,000,000 ordinary shares of $1 each;

(b) Issued 1,509,263 ordinary shares of $1 each at $1.20 per share as consideration for assuming the assets, undertakingsand business of Wan Hu Fish Farm Trading pursuant to a Group restructuring exercise;

(c) Issued 1,000,000 ordinary shares of $1 each via the capitalisation of $500,000 each from amount due to relatedparties and amount due to directors respectively;

(d) Capitalised $840,714 from revenue reserve, by way of bonus issue of 840,714 ordinary shares of $1 each creditedas fully paid;

(e) Sub-divided each of the existing ordinary shares of $1 each in the authorised and issued and paid-up share capitalof the Company into 10 ordinary shares of $0.10 each; and

(f) Issued 12,750,000 new ordinary shares of $0.10 each at $0.30 per share for cash pursuant to the initial publicoffering of the Company.

All newly issued and paid-up shares rank pari passu in all respects with the existing ordinary shares of the Company.

The subsidiariesDuring the financial year, a subsidiary issued the following shares:

Name of subsidiary Shares issued and consideration PurposesQian Hu Marketing Co Ltd (i) Incorporated with an authorised and paid-up For incorporation and

share capital of Baht 2,000,000 initial working capitalcomprising of 20,000 ordinary sharesof Baht 100 each

(ii) Issued 40,000 ordinary shares of For additional working capitalBaht 100 each via capitalisation ofamounts due to holding companyand for cash

During the financial year, the Company contributed $1,304,010 to the registered capital of a subsidiary, Fujian AnxiQianlong Plastic Private Co., Ltd. to provide working capital. As at 31 December 2000, the Company had contributed in fullto the registered capital of the subsidiary of Rmb8,500,000 (approximately $1,750,444), comprising $1,434,529 in cashand $315,915 in plant and machineries respectively.

Except as disclosed above, no other shares or debentures of the Company or its subsidiaries were issued during the financial year.

DIRECTORS’ REPORT 21

Arrangements to Enable Directors to Acquire Shares or DebenturesExcept for:(a) the issue of 1,509,263 ordinary shares of $1 each at par to certain directors of the Company and affiliated parties/

company as purchase consideration for assuming the assets, undertakings and business of Wan Hu Fish FarmTrading pursuant to a Group restructuring exercise; and

(b) the issue of 500,000 ordinary shares of $1 each to certain directors of the Company via capitalisation of $500,000from amount due to directors,

neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objectwas to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of theCompany or any other body corporate.

Directors’ Interest in Shares or DebenturesThe interests of the directors who held office at the end of the financial year in the share capital of the Company and relatedcorporations were as follows:

Other shareholdingsin which the director is

Held by director deemed to have an interest1 January 2000 1 January 2000

or date of or date ofappointment, 31 December 21 January appointment, 31 December 21 January

if later 2000 2001 if later 2000 2001The Company (a) (b) (b) (a) (b) (b)

Kenny Yap Kim Lee 282,068 4,270,550 4,270,550 - - -Alvin Yap Ah Seng 318,566 4,719,600 4,719,600 - 30,000 30,000Andy Yap Ah Siong 318,566 4,719,600 4,719,600 - 35,000 35,000Robson Lee Teck Leng - 30,000 30,000 - - -Chang Weng Leong - 30,000 30,000 - - -

(a) Ordinary shares of $1 each fully paid.(b) Ordinary shares of $0.10 each fully paid.

Directors’ Contractual BenefitsSince the end of the previous financial period, no director has received or become entitled to receive a benefit (other thana benefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emolumentsshown in the financial statements, or any emoluments received from a related corporation) by reason of a contract made bythe Company or a related corporation with the director or with a firm of which the director is a member, or with a companyin which the director has a substantial financial interest, except for the significant related party transactions as disclosedin Note 29 to the financial statements.

DividendsDividends paid or proposed since the end of the previous financial period were as follows:

$A final dividend of 0.5 cents per share, less tax of 24.5%, in respectof the financial year ended 31 December 2000 proposed by the directorsand subject to approval at the forthcoming Annual General Meeting of the Company 312,381

No other dividends have been paid or proposed since the end of the previous financial period.

Bad and Doubtful DebtsBefore the financial statements of the Company were prepared, the directors took reasonable steps to ascertain thatproper action had been taken in relation to the writing off of bad debts and providing for doubtful debts of the Companyand satisfied themselves that all known bad debts of the Company had been written off as bad and that adequate provisionhad been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances which would render the amount of bad debtswritten off or the amount of provision for doubtful debts in the group of companies inadequate to any substantial extent.


Current AssetsBefore the financial statements of the Company were prepared, the directors took reasonable steps to ascertain that anycurrent assets of the Company which were unlikely to realise their book values in the ordinary course of business had beenwritten down to their estimated realisable values or that adequate provision had been made for the diminution in the valueof such current assets.

At the date of this report, the directors are not aware of any circumstances which would render the values attributed tocurrent assets in the consolidated financial statements misleading.

Charges on Assets and Contingent LiabilitiesAt the date of this report, no charge on the assets of the Company or any corporation in the Group which secures theliabilities of any other person has arisen since the end of the financial year and no contingent liability of the Company orany other corporation in the Group has arisen since the end of the financial year.

Ability to Meet ObligationsNo contingent or other liability has become enforceable or is likely to become enforceable within the period of twelvemonths after the end of the financial year which, in the opinion of the directors, will or may substantially affect the abilityof the Company and of the Group to meet their obligations as and when they fall due.

Other Circumstances Affecting the Financial StatementsAt the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or theconsolidated financial statements which would render any amount stated in the financial statements of the Company andthe consolidated financial statements misleading.

Unusual ItemsIn the opinion of the directors, the results of the operations of the Company and of the Group for the financial year havenot been substantially affected by any item, transaction or event of a material and unusual nature.

Unusual Items After the Financial YearIn the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the intervalbetween the end of the financial year and the date of this report which would affect substantially the results of theoperations of the Company and of the Group for the financial year in which this report is made.

Share Options(a) Qian Hu Pre-IPO Employees’ Share Option Scheme (the “Pre-IPO Scheme”)

At an Extraordinary General Meeting held on 9 October 2000, the shareholders of the Company approved the Pre-IPOScheme to grant options to confirmed full time employees of the Group, other than the directors and controlling shareholdersof the Company, to participate in the equity of the Company.

On 25 October 2000, the following 3,332,000 options were granted to 93 employees of the Group to subscribe forordinary shares of the Company of $0.10 each at an exercise price of $0.24 per share (“Pre-IPO options”). Of this amount,506,000 shares were granted to 10 employees of the Group who are immediate family members of certain directors of theCompany.

Exercise price No. of sharesOption category No. of holders Exercise period (per share) under optionGrade C (Entry and mid-level) 41 8/11/2000 - 24/10/2010 24 cents 506,000Grade B (Manager) 34 8/11/2001 - 24/10/2010 24 cents 1,482,000Grade A (Senior Manager) 18 8/11/2001 - 24/10/2010 24 cents 1,344,000

93 3,332,000

The Pre-IPO Scheme is administered by the Pre-IPO Option Committee, consisting of an executive director and non-executivedirectors of the Company as follows:(i) Kenny Yap Kim Lee(ii) Chang Weng Leong(iii) Robson Lee Teck Leng

During the financial year, no shares were issued pursuant to the exercise of the Pre-IPO options. Subsequent to the yearend, options to subscribe for 12,000 ordinary shares of $0.10 each of the Company were exercised at the exercise priceof $0.24 per ordinary share for cash.


Share Options (continued)(b) Qian Hu Post-IPO Employees’ Share Option Scheme (the “Post-IPO Scheme”)

At an Extraordinary General Meeting held on 9 October 2000, the Post-IPO Scheme was approved by the shareholders ofthe Company. All confirmed full-time employees of the Group other than the directors and controlling shareholders of theCompany, including their associates, are eligible to receive the Post-IPO options granted under the Post-IPO Scheme.

The Post-IPO Scheme is administered by the Post-IPO Option Committee, consisting of an executive director and non-executive directors of the Company as follows:(i) Kenny Yap Kim Lee(ii) Chang Weng Leong(iii) Robson Lee Teck Leng

• Size of PlanThe total number of new shares over which options may be granted pursuant to the Post-IPO Scheme shall not exceed 10%of the issued share capital of the Company on the day immediately preceding the offer date of the options (“Offer Date”).

• Grant of OptionOptions may be granted from time to time during the period when the Post-IPO Scheme is in force, except that option shallonly be granted on or after third market day on which an announcement on any matter involving unpublishing pricesensitive information is released.

• Acceptance of OptionThe grant of an option shall be accepted within 30 days from the Offer Date and accompanied by payment to the Companyof a nominal consideration of $1.

• Subscription PriceThe subscription price for each share in respect of which an option is exercisable shall be the prevailing market price of theCompany’s shares based on the average of the last dealt price per share as indicated in the daily official list or any otherpublication published by the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the five consecutive tradingdays immediately preceding the Offer Date.

• Exercise PeriodThe exercise period of the Post-IPO options commences on the first anniversary of the Offer Date of the options andexpires on (and including) the day immediately preceding the tenth anniversary of the Offer Date.

As at 31 December 2000, no Post-IPO option was granted by the Company to any of its employees.

Except for the above, no other options to take up unissued shares of the Company or its subsidiaries were granted and noshares were issued by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. No otheroptions to take up unissued shares in the Company or its subsidiaries were outstanding as at the end of the financial year.

Audit CommitteeThe Audit Committee was formed by the Board of Directors during the year and it comprises one executive director andtwo independent non-executive directors. The members of the Committee as at the date of this report are as follows:

Robson Lee Teck Leng (Chairman)Chang Weng LeongKenny Yap Kim Lee

The financial statements, accounting policies and system of internal accounting controls are the responsibility of theBoard of Directors acting through the Audit Committee. The Audit Committee has reviewed the scope of work of thestatutory auditors and the results arising therefrom including their evaluation of the system of internal controls. The AuditCommittee also reviewed the assistance given by the Company’s officers to the auditors. The consolidated financialstatements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to thesubmission to the directors of the Company for adoption.

In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions,the internal procedures set up by the Company to identify and report, and where necessary, seek approval for interestedperson transactions, and with the assistance of the management, reviewed interested person transactions. The AuditCommittee is of the opinion that the internal procedures have been complied with.


Audit Committee (continued)The Audit Committee had met two times after the Company was admitted to SGX-SESDAQ on 8 November 2000.

The Committee has recommended to the Board of Directors that the auditors, Arthur Andersen, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

Other Information Required by the Singapore Exchange Securities Trading LimitedNo material contracts to which the Company or any subsidiary, is a party and which involve directors’ interests subsistedat the end of the financial year or have been entered into since the end of the financial year.

AuditorsArthur Andersen have expressed their willingness to accept re-appointment as auditors of the Company.

On behalf of the Board of Directors

KENNY YAP KIM LEE ALVIN YAP AH SENGDirector Director

Singapore18 April 2001


STATEMENT BY DIRECTORS

In the opinion of the directors, the financial statements set out on pages 28 to 53 are drawn up so as to give a true and fairview of the state of affairs of the Company and of the Group as at 31 December 2000 and of the results and changes inequity of the Company and of the Group and cash flows of the Group for the year then ended, and at the date of thisstatement there are reasonable grounds to believe that the Company will be able to pay its debts as andwhen they fall due.

On behalf of the Board of Directors

KENNY YAP KIM LEE ALVIN YAP AH SENGDirector Director


26 STATEMENT BY DIRECTORS

(Formerly known as Qian Hu Fish Farm Pte Ltd)

We have audited the financial statements of Qian Hu Corporation Limited and the consolidated financial statements ofQian Hu Corporation Limited and its subsidiaries as at 31 December 2000 and for the year then ended set out on pages 28to 53. These financial statements are the responsibility of the Company’s directors. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion:(a) the financial statements and consolidated financial statements are properly drawn up in accordance with the provisions

of the Companies Act (the “Act”) and Statements of Accounting Standard in Singapore and so as to give a true andfair view of:

(i) the state of affairs of the Company and of the Group as at 31 December 2000 and of the results and changes inequity of the Company and of the Group and cash flows of the Group for the year then ended; and

(ii) the other matters required by Section 201 of the Act to be dealt with in the financial statements and consolidatedfinancial statements;

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by asubsidiary incorporated in Singapore have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and the auditors’ reports of all subsidiaries of which we have not acted asauditors, being financial statements included in the consolidated financial statements. The names of these subsidiariesare shown in Note 6 to the financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statementsof the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidatedfinancial statements and we have received satisfactory information and explanations as required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and in respect ofa subsidiary incorporated in Singapore, did not include any comment made under Section 207(3) of the Act.

Arthur AndersenCertified Public Accountants


AUDITORS’ REPORT TO THE MEMBERS OFQIAN HU CORPORATION LIMITED

AUDITORS’ REPORT 27

BALANCE SHEETSAS AT 31 DECEMBER 2000

(Amounts in Singapore dollars)

Note Group Company2000 1999 2000 1999

$ $ $ $Share capital and reservesShare capital 3 8,275,000 3,650,023 8,275,000 3,650,023Reserves 4 5,290,090 1,159,360 4,313,095 976,575

13,565,090 4,809,383 12,588,095 4,626,598Minority interest 63,864 - - -

13,628,954 4,809,383 12,588,095 4,626,598

Fixed assets 5 6,808,914 5,056,055 5,226,598 3,742,605Subsidiaries 6 - - 2,297,752 825,767Associate 7 118,178 115,056 121,771 121,771Trademarks/customer acquisition cost, product listing fees 8 251,916 236,667 251,916 236,667Pre-operating expenses 9 133,878 78,153 - -Land use rights 10 268,757 264,114 - -Advance for investment 11 206,160 50,000 206,160 50,000Loan to a subsidiary (non-trade) - - - 170,000

Current assetsStocks 12 4,801,257 2,194,499 2,719,719 1,267,554Trade debtors 13 6,211,661 4,473,055 4,611,192 3,207,852Other debtors, deposits and prepayments 14 883,206 521,688 518,750 297,300Due from- subsidiaries (trade) - - 2,317,007 1,296,485- subsidiaries (non-trade) 15 - - 450,088 57,396- shareholders (non-trade) - 109,369 - 109,369- holding company (non-trade) - 1,300 - 1,300Fixed deposits 16 477,956 38,806 372,099 8,081Cash and bank balances 2,753,016 746,788 1,680,852 414,245

15,127,096 8,085,505 12,669,707 6,659,582

Current liabilitiesTrade creditors 3,304,106 2,255,432 2,422,354 1,747,295Bills payable to bank, secured 17 903,687 317,675 903,687 317,675Other creditors and accruals 18 1,933,112 1,737,300 1,361,735 802,731Due to- subsidiaries (trade) - - 1,051,569 597,458- subsidiaries (non-trade) 15 - - 114,567 102,167- related parties (non-trade) - 584,921 - 584,921- directors (non-trade) 15 492,594 1,239,422 - 398,446Hire purchase creditors, current portion 19 191,525 263,892 77,599 95,535Term loan, current portion 20 200,000 200,000 200,000 200,000Provision for taxation 1,032,575 491,910 888,000 438,000Bank overdrafts, secured 17 - 1,001,834 - 1,001,834Proposed dividends (net) 312,381 - 312,381 -

8,369,980 8,092,386 7,331,892 6,286,062

Net current assets (liabilities) 6,757,116 (6,881) 5,337,815 373,520

Non-current liabilitiesHire purchase creditors, non-current portion 19 (239,796) (208,019) (186,900) (117,970)Term loan, non-current portion 20 (595,017) (775,762) (595,017) (775,762)Deferred taxation (81,152) - (72,000) -

13,628,954 4,809,383 12,588,095 4,626,598

The accompanying notes are an integral part of the financial statements.

28 BALANCE SHEETS

STATEMENTS OF PROFIT AND LOSSFOR THE YEAR ENDED 31 DECEMBER 2000


Note Group Company1 January 12 December 1 January 12 December2000 to 1998 to 2000 to 1998 to

31 December 31 December 31 December 31 December2000 1999 2000 1999

$ $ $ $

Turnover 21 33,902,592 25,151,286 27,434,538 18,818,934Cost of sales (21,305,615) (16,393,264) (17,805,631) (12,791,839)

Gross profit 12,596,977 8,758,022 9,628,907 6,027,095

Selling and distribution expenses (984,996) (834,074) (739,035) (571,627)General and administrative expenses (7,820,008) (6,170,199) (5,773,179) (3,746,640)Other operating income (expenses) 495,230 204,739 266,824 (150,548)

Profit from operations 22 4,287,203 1,958,488 3,383,517 1,558,280Financial expenses - net 24 (158,364) (150,250) (141,789) (143,705)

Profit before taxation 4,128,839 1,808,238 3,241,728 1,414,575Share of profit (loss) of associated company 8,230 (6,715) - -

Profit before taxation 4,137,069 1,801,523 3,241,728 1,414,575Taxation 26 (995,272) (488,000) (834,000) (438,000)

3,141,797 1,313,523 2,407,728 976,575Minority interest 18,053 - - -

Profit attributable to Members of the Company 3,159,850 1,313,523 2,407,728 976,575Proposed dividends 27 (312,381) - (312,381) -

Retained profit for the year 2,847,469 1,313,523 2,095,347 976,575

Earnings per share (cents) 28 Basic 5.04 3.70 Diluted 5.03 3.70


STATEMENTS OF PROFIT AND LOSS 29

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2000


Share Share Revenue TranslationGroup capital premium reserve reserve Total

$ $ $ $ $

Balance at 12 December 1998Currency translation differences - - - (16,542) (16,542)Net profit for the period - - 1,313,523 - 1,313,523Issue of new shares 3,650,023 - - - 3,650,023Goodwill on consolidation taken directly to revenue reserves - - (137,621) - (137,621)

Balance at 31 December 1999 3,650,023 - 1,175,902 (16,542) 4,809,383

Balance at 1 January 2000 3,650,023 - 1,175,902 (16,542) 4,809,383Currency translation differences - - - 42,088 42,088Net profit for the year - - 3,159,850 - 3,159,850Proposed dividends (Note 27) - - (312,381) - (312,381)Issue of new shares 3,784,263 2,851,852 - - 6,636,115Share issue expenses - (769,965) - - (769,965)Capitalisation of accumulated profits for bonus issue 840,714 - (840,714) - -

Balance at 31 December 2000 8,275,000 2,081,887 3,182,657 25,546 13,565,090

Company

Balance at 12 December 1998Net profit for the period - - 976,575 - 976,575Issue of new shares 3,650,023 - - - 3,650,023

Balance at 31 December 1999 3,650,023 - 976,575 - 4,626,598

Balance at 1 January 2000 3,650,023 - 976,575 - 4,626,598Net profit for the year - - 2,407,728 - 2,407,728Proposed dividends (Note 27) - - (312,381) - (312,381)Issue of new shares 3,784,263 2,851,852 - - 6,636,115Share issue expenses - (769,965) - - (769,965)Capitalisation of accumulated profits for bonus issue 840,714 - (840,714) - -

Balance at 31 December 2000 8,275,000 2,081,887 2,231,208 - 12,588,095


30 STATEMENTS OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2000


1 January 12 December2000 to 1998 to

31 December 31 December2000 1999

$ $

Cash flows from operating activitiesProfit before taxation and minority interest 4,137,069 1,801,523Adjustments for:

Bad trade debts written off - 16,954Depreciation of fixed assets 791,279 707,993Gain on disposal of fixed assets (5,748) (54,505)Fixed assets written off - 24,671Amortisation of land use rights 4,555 -Amortisation of pre-operating expenses 9,236 964Amortisation of trademarks/customer acquisition cost, product listing fees 143,041 118,333Provision for doubtful debts- trade 99,241 192,561- non-trade - 16,954Provision for stock obsolescence - 10,000Write back of provision for stock obsolescence (415,000) (441,000)Share of (profit) loss of associated company (8,230) 6,715Interest expense 167,473 151,351Interest income (9,109) (1,101)Net effect of exchange differences (2,470) 89,781

Operating profit before working capital changes 4,911,337 2,641,194(Increase) decrease in:

Stocks (1,367,286) (1,763,499)Trade debtors (1,789,045) (4,683,859)Other debtors, deposits and prepayments (311,518) (521,688)Due from- holding company (non-trade) 1,300 (1,300)- shareholders (non-trade) 109,369 (109,369)Loan to a subsidiary - (50,000)

Increase (decrease) in:Trade creditors 661,593 2,255,432Bills payable to bank, secured 586,012 317,675Other creditors and accruals 232,159 1,738,589Due to- related parties (non-trade) (84,921) 584,921- directors (non-trade) (381,655) 1,239,422

Cash generated from operations 2,567,345 1,647,518Income tax paid (368,347) (3,910)Interest paid (167,473) (151,351)

Net cash generated from operating activities 2,031,525 1,492,257

Cash flows from investing activitiesPurchase of fixed assets (Note 5) (1,053,358) (1,137,408)Proceeds from disposal of fixed assets 173,289 177,356Advance for investment (206,160) (50,000)Payment for land use rights - (264,114)Payment for trademarks/customer acquisition cost, product listing fees (158,290) (355,000)Payment of pre-operating costs (64,961) (78,153)Investment in associated company - (121,771)

Net cash used in investing activities (1,309,480) (1,829,090)

CONSOLIDATED STATEMENT OF CASHFLOWS 31

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

1 January 12 December2000 to 1998 to

31 December 31 December2000 1999

$ $

Cash flows from financing activitiesProceeds from issue of shares to minority shareholders of a subsidiary 86,550 -Proceeds arising from hire purchase - 675,953Repayment of hire purchase creditors (261,687) (204,042)Proceeds from term loan - 1,000,000Repayment of term loan (180,745) (24,238)Repayment of loan from directors - (1,328,181)Proceeds from issue of new shares (net) 3,055,034 -Net cash inflow from acquisition of partnerships/sole proprietorships (Note B) 16,906 -Interest received 9,109 1,101

Net cash generated from financing activities 2,725,167 120,593

Net increase (decrease) in cash and cash equivalents 3,447,212 (216,240)Cash and cash equivalents at beginning of year/period (Note A) (216,240) -

Cash and cash equivalents at end of year/period (Note A) 3,230,972 (216,240)

Note A: Cash and cash equivalents

Cash and cash equivalents included in the consolidated statement of cash flows comprise the following balance sheetamounts:

2000 1999$ $

Cash and bank balances 2,753,016 746,788Fixed deposits 477,956 38,806Bank overdrafts, secured - (1,001,834)

Cash and cash equivalents 3,230,972 (216,240)

Note B: Analysis of acquisition of partnerships/sole proprietorships

The attributable net assets of partnerships/sole proprietorships acquired during the financial year are as follows:

$

Fixed assets 1,459,500Stocks 824,472Trade debtors 48,802Trade creditors (387,081)Other creditors and accruals (16,657)Due to directors (134,827)

Total purchase price 1,794,209Total purchase price via issue of 1,509,263 ordinary shares of $1.20 each 1,811,115

Net cash proceeds from issue of shares 16,906


32 CONSOLIDATED STATEMENT OF CASHFLOWS

NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2000

(Amounts in Singapore dollars unless otherwise stated)

These notes are an integral part of and should be read in conjunction with the accompanying financial statements.

1. THE COMPANY, ITS SUBSIDIARIES AND THEIR PRINCIPAL ACTIVITIES

The Company was domiciled and incorporated in Singapore on 12 December 1998 as a private limited company under thename of Qian Hu Fish Farm Pte Ltd. On 13 October 2000, the Company was converted to a public limited company andchanged its name to Qian Hu Corporation Limited. The address of its principal place of business is No. 71 Jalan Lekar,Singapore 698950.

The Company was admitted to the official list of the Singapore Exchange Securities Trading Limited Dealing and AutomatedQuotation System (SGX-SESDAQ) on 8 November 2000.

The principal activities of the Company are those of import, export, farming, breeding and distribution of ornamentalfishes and aquarium and pet accessories. The principal activities of the subsidiaries are as set out in Note 6 to the financialstatements.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparationThe financial statements, which are expressed in Singapore dollars, are prepared in accordance with Statements of AccountingStandard in Singapore and under the historical cost convention.

Revenue recognitionSales are recognised net of goods and services tax and discounts when goods have been delivered and accepted by thecustomer.

Interest income is recognised on an accrual basis.

Basis of consolidationThe consolidated financial statements include the financial statements of the Company and its subsidiary companies. Theresults of subsidiaries acquired or disposed of during the year are included in or excluded from the consolidated financialstatements with effect from the respective date of acquisition or disposal. All intercompany balances and any unrealisedprofit or loss on intercompany transactions are eliminated on consolidation.

When subsidiaries are acquired, any excess or deficiency of the purchase consideration over the fair values, assigned bythe directors, of the underlying net assets of subsidiaries at the date of acquisition represents goodwill or capital reserveon consolidation respectively and is taken directly to revenue reserves in the year of acquisition.

Investment in associated company is accounted for in the consolidated financial statements using the equity method. TheGroup’s share of the post-acquisition results of associated company is included in the consolidated profit and loss account.The Group’s share of the post-acquisition accumulated profits and reserves of associated company is included in thecarrying value of the investment in the consolidated balance sheet.

In the preparation of the consolidated financial statements, the financial statements of foreign subsidiaries and associatedcompany are translated at the rates of exchange ruling at the balance sheet date except for share capital and reserveswhich are translated at historical rates of exchange and profit and loss items are translated at the average exchange ratesfor the year. Foreign currency translation differences are taken directly to translation reserve.

Subsidiaries and associated company(i) Subsidiaries

A subsidiary is a company in which the Group, directly or indirectly, holds more than half of the issued share capital, orcontrols more than half of the voting power, or controls the composition of the board of directors.

Investments in subsidiaries are stated in the Company’s balance sheet at cost. Provision for diminution in value is madewhen, in the opinion of the directors, there has been a decline, other than temporary, in the value of the investment.

NOTES TO THE FINANCIAL STATEMENTS 33

Subsidiaries and associated company (continued)(ii) Associated company

An associated company is a company, not being a subsidiary, in which the Group or the Company has a long-term interestof between 20% and 50% of the equity and in whose financial and operating decisions the Group or the Company exercisessignificant influence.

Investment in associated company is stated in the Company’s balance sheet at cost. Provision for diminution in value ismade when, in the opinion of the directors, there has been a decline, other than temporary, in the value of the investment.

Fixed assetsFixed assets are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis so as towrite-off the cost of the fixed assets over their estimated useful lives as follows:

YearsLeasehold buildings over the remaining lease periodMotor vehicles 5 - 10Computers 3Furniture, fittings and office equipment 5 - 10Equipment and tools 8Forklift 5Machinery 5 - 8Air conditioner 5Ponds and concrete tanks 3 - 10Electrical and installation 10Brooder stocks 50

Construction-in-progress represents plant and machinery under construction and is stated at cost. This includes cost ofconstruction and other direct costs including interest. Construction-in-progress is not depreciated until such time as therelevant assets are completed and put into operational use.

Fully depreciated assets are retained in the financial statements until they are no longer in use and no further charge indepreciation is made in respect of these assets.

Hire purchaseWhere assets are financed by hire purchase agreements that give rights approximating to ownership, the assets arecapitalised as if they had been purchased outright at the values equivalent to the present value of the total rental payableduring the periods of the hire purchase and the corresponding hire purchase commitments are included under liabilities.The excess of the hire purchase payments over the recorded hire purchase obligations is treated as finance charges, whichare allocated over each hire purchase term to give a constant rate of interest on the outstanding balance at the end of eachperiod.

StocksStocks are stated at the lower of cost (determined on a weighted average basis) and net realisable value. Provision is madefor deteriorated, damaged, obsolete and slow-moving stocks.

TaxationIncome tax expense is determined on the basis of tax effect accounting, using the liability method, and is applied to allsignificant timing differences. Deferred tax benefits are not recognised unless there is reasonable expectation of theirrealisation.

Forward foreign exchange contractsGains and losses on all forward foreign exchange contracts, except for hedges against firm future commitments, arerecognised currently in the profit and loss account. Gains and losses on forward foreign exchange contracts that arehedges against firm commitments are deferred in the balance sheet and included in measuring the committed transaction.The discount or premium on a hedged forward foreign exchange contract arising from the difference between the contractedforward exchange rate and the spot exchange rate at inception date of the contract is recognised over the life of thecontract.

34 NOTES TO THE FINANCIAL STATEMENTS

Foreign currencies translationThe accounting records of the companies in the Group are maintained in their respective functional currencies.

Transactions in foreign currencies are recorded in the respective companies’ functional currencies using exchange ratesapproximating those ruling at the transaction dates. Foreign currency monetary assets and liabilities at the balance sheetdate are translated into the respective functional currencies at exchange rates approximating those ruling at that date.All resulting exchange differences are dealt with through the profit and loss account.

Trademarks/customer acquisition cost, product listing feesTrademarks/customer acquisition cost and product listing fees are stated at cost less amounts amortised. These costsare amortised on a straight-line basis through the profit and loss account over 3 years.

Pre-operating expensesPre-operating expenses are stated at cost less accumulated amortisation. The expenses are amortised on a straight-linebasis through the profit and loss account over 5 years upon commencement of operations.

Land use rightsThis refers to the rights to use the acquired land and are stated at cost less accumulated amortisation. Land use rights areamortised over the period in which the right to use the land is granted.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand, bank deposits and highly liquid investments which are readily convertibleto cash and which are subject to insignificant risk of changes in value, net of bank overdrafts which are repayable ondemand and which form an integral part of the Group’s cash management.

Segment reportingA segment is a distinguishable component of the Group that is engaged either in providing products or services (businesssegment), or in providing products or services within a particular economic environment (geographical segment), whichis subject to risks and rewards that are different from those of other segments.

Segment information is presented in respect of the Group’s business and geographical segments. The primary format,business segments, is based on the Group’s management and internal reporting structure.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Unallocated items mainly comprise income earning assets and revenue, interest-bearingloans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to beused for more than one year.

Accounting standards not effective until after the financial yearSAS 10 (Revised), Events after the Balance Sheet Date, which is effective for financial years beginning on or after 1 October2000, prohibits the recognition of dividends proposed or declared after the balance sheet date as accrued liabilities. Hadthe revised standard been applied in the current financial year, the current liabilities of the Company and the Group wouldhave been lower by $312,381 and, correspondingly, the net assets and reserves would have been higher by the sameamount.

SAS 34, Intangible Assets, which is also effective for financial years beginning on or after 1 October 2000, prohibits thedeferral and amortisation of pre-operating expenses. The Group’s accounting policy relating to such expenses, as describedabove, will be changed in the next financial year. Had the new standard been applied to the current financial year, theGroup’s net assets and revenue reserve as at 31 December 2000 would have been lower by $133,878, respectively.


3. SHARE CAPITAL

Company2000 1999 2000 1999

No. of shares No. of shares $ $AuthorisedBalance at 1 January Ordinary shares of $1 each 4,000,000 100,000 4,000,000 100,000Creation of additional shares of $1 each [Note (a)] 16,000,000 3,900,000 16,000,000 3,900,000

20,000,000 4,000,000 20,000,000 4,000,000

Sub-division of ordinary shares of $1 each into 10 ordinary shares of $0.10 each [Note (e)] 200,000,000 - - -

Balance at 31 December Ordinary shares of $0.10 each 200,000,000 4,000,000 20,000,000 4,000,000

Issued and fully paidBalance at 1 January Ordinary shares of $1 each 3,650,023 3 3,650,023 3Issue of 3,650,020 ordinary shares of $1 each - 3,650,020 - 3,650,020Issue of 2,509,263 ordinary shares of $1 each [Notes (b) and (c)] 2,509,263 - 2,509,263 -Bonus issue of 840,714 ordinary shares of $1 each [Note (d)] 840,714 - 840,714 -

7,000,000 3,650,023 7,000,000 3,650,023

Sub-division of ordinary shares of $1 each into 10 ordinary shares of $0.10 each [Note (e)] 70,000,000 - - -Public issue of ordinary shares of $0.10 each [Note (f)] 12,750,000 - 1,275,000 -Balance at 31 December Ordinary shares of $0.10 each 82,750,000 3,650,023 8,275,000 3,650,023

During the financial year, the Company:(a) Increased its authorised share capital of the Company from $4,000,000 comprising 4,000,000 ordinary shares of $1

each to $20,000,000 comprising 20,000,000 ordinary shares of $1 each;

(b) Issued 1,509,263 ordinary shares of $1 each at $1.20 per share as consideration for assuming the assets, undertakingsand business of Wan Hu Fish Farm Trading pursuant to a Group restructuring exercise;

(c) Issued 1,000,000 ordinary shares of $1 each via the capitalisation of $500,000 each from amount due to relatedparties and amount due to directors respectively;

(d) Capitalised $840,714 from revenue reserve, by way of bonus issue of 840,714 ordinary shares of $1 each credited asfully paid;

(e) Sub-divided each of the existing ordinary shares of $1 each in the authorised and issued and paid-up share capital ofthe Company into 10 ordinary shares of $0.10 each; and

(f) Issued 12,750,000 new ordinary shares of $0.10 each at $0.30 per share for cash pursuant to the initial publicoffering of the Company.

All newly issued and paid-up shares rank pari passu in all respects with the existing ordinary shares of the Company.


4. RESERVES

Group Company2000 1999 2000 1999

$ $ $ $

Share premium

Arising from the issue of 1,509,263 sharesof $1 each at $1.20 per share, as considerationfor the acquisition of Wan Hu Fish Farm Tradingpursuant to a Group restructuring exercise 301,852 - 301,852 -

Arising from the issue of 12,750,000ordinary shares of $0.10 each at $0.30 per share,in connection with the initial public offering ofthe Company 2,550,000 - 2,550,000 -

Share issue expenses in relation to theinitial public offering (769,965) - (769,965) -

At end of year/period 2,081,887 - 2,081,887 -

Note (a)Included in the share issue expenses is an amount of $170,000 paid to the auditors of the Company for their servicesrendered in conjunction with the initial public offering of the Company.

Group Company2000 1999 2000 1999

$ $ $ $

Accumulated profits

At beginning of year/period 1,175,902 - 976,575 -Net profit for the year/period 3,159,850 1,313,523 2,407,728 976,575Proposed dividends (312,381) - (312,381) -Goodwill on consolidation taken

directly to revenue reserves - (137,621) - -Capitalisation of accumulated profits for bonus issue (840,714) - (840,714) -

At end of year/period 3,182,657 1,175,902 2,231,208 976,575

Retained by:

Company 2,231,208 976,575Subsidiaries 1,092,663 343,663Associated company (3,593) (6,715)Goodwill on consolidation taken directly to revenue reserves (137,621) (137,621)

3,182,657 1,175,902

Translation reserve

At beginning of year/period (16,542) - - -Net movement during the year/period 42,088 (16,542) - -At end of year/period

25,546 (16,542) - -

Total 5,290,090 1,159,360 4,313,095 976,575


5. FIXED ASSETS

Furniture,fittings Equipment

Leasehold Motor and office andbuildings vehicles Computers equipment tools

(a) Group $ $ $ $ $

CostAs at 1.1.2000 3,344,211 1,004,444 159,209 217,844 80,283Additions 243,006 401,946 119,892 81,794 29,788Disposals - (88,223) (2,210) (18,494) (53,385)Translation differences 10,409 7,638 879 2,826 450

As at 31.12.2000 3,597,626 1,325,805 277,770 283,970 57,136

Accumulated depreciationAs at 1.1.2000 198,725 407,546 48,159 48,329 40,426Charge for the year 221,983 212,597 69,709 40,869 3,349Disposals - (24,245) (2,210) (10,287) (24,764)Translation differences - 1,369 159 689 192

As at 31.12.2000 420,708 597,267 115,817 79,600 19,203

Charge for 1999 198,837 195,286 42,752 29,778 22,647

Net book valueAs at 31.12.2000 3,176,918 728,538 161,953 204,370 37,933

As at 31.12.1999 3,145,486 596,898 111,050 169,515 39,857

(b) Company

CostAs at 1.1.2000 3,045,326 509,767 122,589 120,362 -Additions 134,726 226,992 113,361 42,417 -Disposals - - - (7,830) -

As at 31.12.2000 3,180,052 736,759 235,950 154,949 -

Accumulated depreciationAs at 1.1.2000 198,727 149,422 35,073 18,253 -Charge for the year 211,421 167,917 61,059 24,057 -Disposals - - - (5,628) -

As at 31.12.2000 410,148 317,339 96,132 36,682 -

Charge for 1999 198,727 149,422 35,073 18,253 -

Net book valueAs at 31.12.2000 2,769,904 419,420 139,818 118,267 -

As at 31.12.1999 2,846,599 360,345 87,516 102,109 -

As at 31 December 2000, the Group and the Company had fixed assets acquired under hire purchase with net book valueas follows:

Group Company2000 1999 2000 1999$’000 $’000 $’000 $’000

Net book valueMotor vehicles 502 549 353 369Machinery 136 128 - -

638 677 353 369

During the financial year, the Group acquired fixed assets with an aggregate cost of $2,680,954 (1999 : $5,481,797) ofwhich $1,459,500 (1999 : $3,668,436) was acquired from partnerships/sole proprietorships and $168,096 (1999 : $675,953)was acquired by means of hire purchase agreements. Cash payments of $1,053,358 (1999 : $1,137,408) were made topurchase fixed assets.


Air Ponds and Electrical and Brooder Construction-Forklift Machinery conditioner concrete tanks installation stocks in-progress Total

$ $ $ $ $ $ $ $

32,500 1,683,190 30,724 213,167 163,203 - 64,869 6,993,644- 256,822 10,290 - 29,190 1,459,500 48,726 2,680,954- (209,876) - (36,650) - - - (408,838)- 4,985 - 6,147 - - 2,259 35,593

32,500 1,735,121 41,014 182,664 192,393 1,459,500 115,854 9,301,353

32,500 1,034,248 15,881 77,937 33,838 - - 1,937,589- 132,308 5,620 36,533 39,121 29,190 - 791,279- (172,461) - (7,330) - - - (241,297)- - - 2,459 - - - 4,868

32,500 994,095 21,501 109,599 72,959 29,190 - 2,492,439

- 126,622 15,881 43,252 32,938 - - 707,993

- 741,026 19,513 73,065 119,434 1,430,310 115,854 6,808,914

- 648,942 14,843 135,230 129,365 - 64,869 5,056,055

- 244,529 30,724 - 161,703 - - 4,235,000- 61,412 10,290 - 27,179 1,459,500 - 2,075,877- (13,800) - - - - - (21,630)

- 292,141 41,014 - 188,882 1,459,500 - 6,289,247

- 42,251 15,881 - 32,788 - - 492,395- 45,192 5,620 - 37,176 29,190 - 581,632- (5,750) - - - - - (11,378)

- 81,693 21,501 - 69,964 29,190 - 1,062,649

- 42,251 15,881 - 32,788 - - 492,395

- 210,448 19,513 - 118,918 1,430,310 - 5,226,598

- 202,278 14,843 - 128,915 - - 3,742,605


6. SUBSIDIARIES

(a) These comprise:

Company2000 1999

$ $

Unquoted equity investments:Cost at beginning of year/period 825,767 -Additional investments during the year/period 1,471,985 825,767

Cost at end of year/period 2,297,752 825,767

(b) Details of the subsidiaries as at 31 December 2000 are as follows:

Country ofincorporation Percentage of Cost of

Principal and place equity held by investment byName activities of business the Company the Company

2000 1999 2000 1999% % $ $

SubsidiariesWan Hu Fisheries Import, export, Singapore 100 100 8 8Pte Ltd (in members’ wholesale andvoluntary liquidation) distribution of

seafood

Tat Leng Plastics Manufacture of Singapore 100 100 57,050 57,050Pte Ltd plastic bags and

plastic toys

Guan Guan Aquarium Import and export Malaysia 100 100 150,451 150,451Sdn Bhd # of aquarium

accessories

Fujian Anxi Qianlong Manufacture of People’s 100 100 1,750,444 446,434Plastics Private Co., plastic bags, RepublicLtd # plastic containers of China

and gift items

Beijing Qianyang Import and export People’s 100 100 171,824 171,824Aquarium Co., Ltd # of cold-water Republic

ornamental fish of Chinaand aquariumaccessories

Qian Hu Marketing Import, export and Thailand 66 - 167,975 -Co Ltd * distribution of

aquarium andpet accessories

2,297,752 825,767

# Audited by other auditors* Audited by an associated firm of Arthur Andersen, Singapore


7. ASSOCIATE

(a) This comprises:

Group Company2000 1999 2000 1999

$ $ $ $

Unquoted equity investment, at cost 121,771 121,771 121,771 121,771Share of post-acquisition loss (3,593) (6,715) - -

118,178 115,056 121,771 121,771

(b) Details of the associated company as at 31 December 2000 are as follows:

Country of Percentage ofincorporation and equity held by

Name Principal activities place of business the Company2000 1999

% %

Fujian Anxi Production and People’s Republic of China 25 25Jiying Handicraft trading ofArticle Co., Ltd handicraft items

8. TRADEMARKS/CUSTOMER ACQUISITION COST, PRODUCT LISTING FEES

Group and Company2000 1999

$ $

At cost- trademarks/customer acquisition cost 490,000 355,000- product listing fees 23,290 -

513,290 355,000Less accumulated amortisation (261,374) (118,333)

251,916 236,667

Movement in accumulated amortisation during the year/period is as follows:

At beginning of year/period 118,333 -Amortisation for the year/period 143,041 118,333

At end of year/period 261,374 118,333

Trademarks/customer acquisition cost relate to cost paid to third parties in relation to the acquisition of trademarks rightsand existing customer base of two brands of pet food, namely “ARISTO-CATS YI HU” and “Nature’s Gift”.

Product listing fees relate to cost paid to third parties in relation to the entitlements to list and sell the Company’sproducts in certain supermarkets.


9. PRE-OPERATING EXPENSES

Group2000 1999

$ $

At cost 146,004 81,043Less accumulated amortisation (12,126) (2,890)

133,878 78,153


At beginning of year/period, attributable to subsidiaries acquired during the year/period 2,890 1,926Amortisation for the year/period 9,236 964

At end of year/period 12,126 2,890

10. LAND USE RIGHTS

This relates to land use rights acquired by one of the subsidiaries, Fujian Anxi Qianlong Plastics Private Co., Ltd, in thePeople’s Republic of China.

Group2000 1999

$ $

At cost 273,312 264,114Less accumulated amortisation (4,555) -

268,757 264,114


At beginning of year/period - -Amortisation for the year/period 4,555 -

At end of year/period 4,555 -

11. ADVANCE FOR INVESTMENT

This relates to an advance for investment in a Company, Wan Jiang Technology Co., Ltd, which is in the process of being set up.

Prior year amount relates to an advance for investment in a subsidiary, Qian Hu Marketing Co Ltd, which was incorporatedin the current year.


12. STOCKS

Group Company2000 1999 2000 1999

$ $ $ $

Fish 653,477 277,869 619,701 193,617Accessories and gift items 4,758,460 3,211,807 2,920,361 2,402,937Finished goods - plastic products 161,127 76,869 - -Raw materials - plastic products 142,326 50,744 - -

5,715,390 3,617,289 3,540,062 2,596,554Less provision for stock obsolescence (914,133) (1,422,790) (820,343) (1,329,000)

4,801,257 2,194,499 2,719,719 1,267,554

Movements in provision for stock obsolescence during the year/period are as follows:

Group Company2000 1999 2000 1999

$ $ $ $

At beginning of year/period, transferredfrom partnership accounts 1,422,790 1,853,790 1,329,000 1,760,000Provision for the year/period - 10,000 - 10,000Write back of provision (415,000) (441,000) (415,000) (441,000)Write off against provision (93,657) - (93,657) -

At end of year/period 914,133 1,422,790 820,343 1,329,000

13. TRADE DEBTORS

Group Company2000 1999 2000 1999

$ $ $ $

Trade debtors 7,057,717 5,239,994 5,365,551 3,883,094Less provision for doubtful trade debts (846,056) (766,939) (754,359) (675,242)

6,211,661 4,473,055 4,611,192 3,207,852

Movements in provision for doubtful trade debts during the year/period are as follows:

At beginning of year/period 766,939 574,378 675,242 574,378Transferred from partnership accounts 17,697 - 17,697 -Provision for the year/period 99,241 192,561 99,241 100,864Write off against provision (37,821) - (37,821) -

At end of year/period 846,056 766,939 754,359 675,242


14. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS

Group Company2000 1999 2000 1999

$ $ $ $

Deposits 98,559 34,323 8,040 23,704Prepayments 37,237 67,508 23,446 -Advance to employees 31,849 22,164 - -

167,645 123,995 31,486 23,704

Other debtors 732,515 414,647 504,218 290,550Less provision for doubtful debts (16,954) (16,954) (16,954) (16,954)

715,561 397,693 487,264 273,596

Total 883,206 521,688 518,750 297,300

Movement in provision for doubtful debts during the year/period is as follows:

At beginning of year/period 16,954 - 16,954 -Provision for the year/period - 16,954 - 16,954

At end of year/period 16,954 16,954 16,954 16,954

15. DUE FROM/(TO) SUBSIDIARIES/DIRECTORS (NON-TRADE)

These balances are unsecured, interest-free and repayable on demand.

16. FIXED DEPOSITS

A subsidiary’s fixed deposits amounting to approximately $106,000 (1999: $31,000) have been pledged with a bank tosecure a performance guarantee granted by the bank.

17. BILLS PAYABLE TO BANK/BANK OVERDRAFTS, SECURED

The bills payable and bank overdrafts of the Group and the Company are secured by:

(i) a second legal mortgage over certain properties held by certain shareholders of the Company; and

(ii) a joint and several personal guarantee from certain substantial shareholders of the Company (discharged subsequent tothe year end).

18. OTHER CREDITORS AND ACCRUALS

Group Company2000 1999 2000 1999

$ $ $ $

Accrued operating expenses 983,368 308,797 843,994 109,626Other creditors 949,744 1,428,503 517,741 693,105

1,933,112 1,737,300 1,361,735 802,731


19. HIRE PURCHASE CREDITORS

GroupPayments Interest Principal

$ $ $

20001 year to 5 years 264,333 54,455 209,878Later than 5 years 37,695 7,777 29,918

302,028 62,232 239,796Not later than 1 year 218,207 26,682 191,525

520,235 88,914 431,321



556,252 84,341 471,911

CompanyPayments Interest Principal

$ $ $



320,676 56,177 264,499



241,436 27,931 213,505

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.


20. TERM LOAN


$ $Loan repayable:Due within 1 year 200,000 200,000Due after 1 year 595,017 775,762

Total term loan 795,017 975,762

This loan is repayable in equal instalments commencing 1 November 1999 over 5 years, at an interest rate of 5.75% (1999: 5.5%) per annum and is secured by the following:

(i) a second legal mortgage on certain properties held by certain shareholders of the Company; and

(ii) a joint and several personal guarantee from certain substantial shareholders of the Company (discharged subsequent tothe year end).

21. TURNOVER

Group Company1 January 12 December 1 January 12 December2000 to 1998 to 2000 to 1998 to


$ $ $ $Sales of goods- Fish 16,467,532 11,606,655 15,513,431 9,778,215- Accessories 11,987,639 9,252,479 11,921,107 9,040,719- Others 5,447,421 4,292,152 - -

33,902,592 25,151,286 27,434,538 18,818,934

22. PROFIT FROM OPERATIONS

This is determined after charging (crediting) the following:



$ $ $ $Auditors’ remuneration- auditors of the Company 53,000 66,000 43,000 44,000- other auditors 19,656 3,118 - -Non-audit fees- auditors of the Company 19,400 21,300 15,000 16,900- other auditors 12,600 8,400 - -Directors’ fees- directors of the company 4,000 - 4,000 -Directors’ remuneration- directors of the company 529,219 456,000 529,219 456,000- director of subsidiaries 436,273 712,005 - -Amortisation of land use rights 4,555 - - -Amortisation of pre-operating expenses 9,236 964 - -Amortisation of trademarks/ customer acquisition cost, product listing fees 143,041 118,333 143,041 118,333


22. PROFIT FROM OPERATIONS (continued)



$ $ $ $

Bad trade debts recovered - (31,846) - (31,846)Bad trade debts written off - 16,954 - 16,594Depreciation of fixed assets 791,279 707,993 581,632 492,395Fixed assets written off - 24,671 - -(Gain) loss on disposal of fixed assets (5,748) (54,505) 5,752 (12,985)Provision for doubtful debts- trade 99,241 192,561 99,241 100,864- non-trade - 16,954 - 16,954Provision for stock obsolescence - 10,000 - 10,000Write back of provision for stock obsolescence (415,000) (441,000) (415,000) (441,000)Operating lease expenses 268,865 270,621 125,835 90,902Personnel expenses 4,421,754 2,747,129 3,533,330 1,786,755Exchange gain, net (94,278) (1,905) (75,918) (5,968)

23. DIRECTORS’ REMUNERATION

2000 1999Number of directors of the Company in remuneration bands is as follows:

$500,000 and above - -$250,000 to $499,999 - -Below $250,000 5 3

5 3

24. FINANCIAL EXPENSES - NET



$ $ $ $

Interest expense- term loan 48,824 18,123 48,824 18,123- hire purchase 34,953 17,970 16,037 10,324- bank overdrafts 82,999 111,101 82,999 111,101- others 697 4,157 697 4,157Interest income- fixed deposits (732) (393) - -- others (8,377) (708) (6,768) -

158,364 150,250 141,789 143,705


25. PERSONNEL EXPENSES



$ $ $ $

Salaries and wages 4,018,844 2,488,533 3,225,521 1,627,391Central Provident Fund contribution 345,789 206,827 257,143 137,559Staff welfare benefits 57,121 51,769 50,666 21,805

4,421,754 2,747,129 3,533,330 1,786,755

Number of persons employed at the end of the financial year/period 166 135 79 60

26. TAXATION



$ $ $ $

Current tax- current year/period 916,764 488,000 762,000 438,000Deferred tax- current year/period 73,400 - 72,000 -Share of tax of associated company 5,108 - - -

995,272 488,000 834,000 438,000

The Company

The Company’s current year tax charge is higher than the amount obtained by applying the statutory income tax rate onprofit before taxation mainly due to certain non-deductible expenses added back for tax purposes.

The Group

The Group’s current year tax charge is lower than the amount obtained by applying the statutory income tax rate on profitbefore taxation mainly due to:

(i) the reversal of deferred tax asset not recorded in the previous year by a subsidiary; and

(ii) a subsidiary in the People’s Republic of China is not subject to the Enterprise Income Tax for the current financial year.

In accordance with the “Income Tax Law of the People’s Republic of China (“PRC”) for Enterprises with Foreign Investmentand Foreign Enterprises”, the subsidiaries in PRC are entitled to full exemption from Enterprise Income Tax (“EIT”) for thefirst two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year afteroffsetting all tax losses carried forward from the previous five years.

27. PROPOSED DIVIDENDS

A final dividends of 0.5 cents (1999: Nil) per share, less tax at 24.5% amounting to $312,381 (1999: $Nil) is proposed.


28. EARNINGS PER SHARE

Basic earnings per share

The calculation for basic earnings per share is based on:


$ $

Consolidated profit after taxation and minority interest 3,159,850 1,313,523

Number of sharesThe weighted average number of ordinary shares is arrived at as follows:

Weighted average number of shares31 December 2000 31 December 1999

Original Adjusted * Original Adjusted *

Issued ordinary shares at beginning of year/period 3,650,023 36,500,230 3 30

Weighted average number of ordinary shares issued during the year/period 2,437,185 24,371,850 3,552,087 35,520,870

Public issue of ordinary shares of $0.10 each - 1,851,370 - -

Weighted average number of issued ordinary shares at end of year/period 6,087,208 62,723,450 3,552,090 35,520,900

* Adjusted for the effect of 1:10 share split during the financial year.

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of alldilutive potential ordinary shares. The number of unissued shares under option granted under the Qian Hu Pre-IPOEmployees’ Share Option Scheme and their exercise prices are set out in the Directors’ Report. The average fair value ofone ordinary shares during financial year 2000 was $0.32 per share. The weighted average number of ordinary sharesadjusted for the unissued shares under option is as follows:

Group2000 1999

$ $Number of sharesWeighted average number of ordinary shares (used in the calculation of basic earnings per share) 62,723,450 35,520,900

Weighted average number of ordinary shares under option 611,627 -

Number of shares that would have been issued at fair value (458,721) -

Weighted average number of ordinary shares (diluted) 62,876,356 35,520,900


29. RELATED PARTY INFORMATION

In addition to the related party information disclosed elsewhere in the financial statements, the Group and the Companyhad significant transactions with related parties, on terms agreed between the parties, as follows:



$ $ $ $

(a) IncomeSales to subsidiaries - - 2,850,112 1,623,447

(b) ExpensesPurchases from subsidiaries - - 380,387 324,559

Interest expense paid to a related party - 4,157 - 4,157

Fees paid to a firm of which a director is a member 70,000 - 70,000 -

Consultation fee paid to a company which a director has substantial interest 25,000 25,000 25,000 25,000

(c) OthersPurchase consideration paid to certain directors of the Company and affiliated parties/company for assuming the assets, undertakings and business of the various partnerships/sole proprietorships 2,196,977 3,184,054 2,196,977 3,184,054

Purchase consideration paid to certain directors of the Company, affiliated parties and other parties for acquisition of subsidiaries - 732,434 - 732,434

(d) Share optionsPursuant to Qian Hu Pre-IPO Employees Share Option Scheme (the “Pre-IPO Scheme”), Pre-IPO Options in respect of a totalnumber of 506,000 shares were granted to 10 employees of the Group who are affiliated parties or immediate familymembers of certain directors of the Company.

30. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Non-cancellable operating lease commitments

As at 31 December 2000, the Group and the Company had lease commitments in respect of land and office premises withterms of more than one year as follows:

Group Company2000 1999 2000 1999

$ $ $ $Future minimum lease payments- not later than 1 year 262,000 148,000 116,000 51,000- 1 year to 5 years 547,000 293,000 358,000 205,000- later than 5 years 782,000 453,000 668,000 453,000

1,591,000 894,000 1,142,000 709,000

Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.

(b) Forward foreign exchange contracts

As at 31 December 2000, the Group and the Company has outstanding forward foreign exchange contracts amounting toapproximately $130,000 (1999: $Nil) for hedging against future purchase commitments denominated in Deutschemark.


31. SEGMENT INFORMATION

(a) Analysis by Business Segments

The Group is organised on a worldwide basis into two main operating segments, namely:(a) Fish(b) Accessories

Other operations include plastics and other support services.

Inter-segment pricing is on an arm’s length basis.

2000 Fish Accessories Others Eliminations Group$’000 $’000 $’000 $’000 $’000

TurnoverExternal sales 16,468 11,988 5,447 - 33,903Inter-segment sales 559 3,141 138 (3,838) -

Total sales 17,027 15,129 5,585 (3,838) 33,903

Segment results 2,092 2,056 441 71 4,660Unallocated expenses (373)

4,287Financial expenses - net (158)Share of profit of associated company 8Taxation (995)Minority interests 18

Net profit for the year 3,160

Assets 9,892 6,649 4,396 20,937Investment in associated company 118Unallocated assets 1,860

Total assets 22,915

Liabilities 3,134 2,132 1,698 6,964Unallocated liabilities 2,322

Total liabilities 9,286

Capital expenditure 1,839 343 499 2,681Depreciation and amortisation 460 344 144 948Other non-cash expenses (income) 99 (421) - (322)


31. SEGMENT INFORMATION (continued)



Total sales 11,758 11,100 4,297 (2,004) 25,151

Segment results 561 1,226 292 (23) 2,056Unallocated expenses (97)

1,959Financial expenses - net (150)Share of loss of associated company (7)Taxation (488)

Net profit for the period 1,314

Assets 7,068 4,332 2,285 - 13,685Investment in associated company 115Unallocated assets 86

Total assets 13,886

Liabilities 2,106 1,787 1,208 - 5,101Unallocated liabilities 3,975


Capital expenditure 3,895 729 858 - 5,482Depreciation and amortisation 369 355 103 - 827Other non-cash expenses (income) 123 (412) 55 - (234)

(b) Analysis by Geographical Segments

Turnover is based on the location of customers regardless of where the goods are produced. Assets and additions toproperty, plant and equipment are based on the location of those assets.

Turnover Assets Capital expenditure2000 1999 2000 1999 2000 1999$’000 $’000 $’000 $’000 $’000 $’000

Singapore 20,781 16,057 19,468 11,511 2,173 4,763Asia 8,262 6,733 3,447 2,375 508 719Europe 4,382 2,016 - - - -Others 478 345 - - - -

Total 33,903 25,151 22,915 13,886 2,681 5,482


32. SUBSEQUENT EVENT

Qian Hu Marketing Co Ltd (“QHMC”), a subsidiary, has not been able to obtain a Foreign Business Licence to undertake thebusiness of distributing pet food and accessories in Thailand (the “Thailand Distribution Business”). Under the Foreign BusinessAct B.E. 2542 of Thailand (“FBA”), foreign businesses undertaking the distribution of pet food and accessories are required to belicensed by the Director-General of the Commercial Registration Department, the Ministry of Commerce, Thailand (“MOC”) withthe approval of the Foreign Business Board. This requirement came into effect on 3 March 2000. QHMC which commencedbusiness in March 2000 without the required license, has in August 2000 applied to the MOC for the licence.

The Company has instructed an international law firm practising in Thailand to advise the Company on the restructuring ofQHMC. The Company’s lawyers in Thailand have advised the Company to hold shares directly in QHMC and via a newThailand holding company to be set up. Under the new structure, QHMC will be 51% owned by a Thailand holding company,whose issued share capital will be held in the ratio of 49% by the Company and the balance 51% by a Thailand party. Theremaining 49% of QHMC’s issued share capital will be held directly by the Company. As at the date of this report, Thailandlawyers are in the process of undertaking the restructuring. QHMC will only undertake the Thailand Distribution Businessafter it is legally permitted to undertake such businesses in accordance with Thailand laws and regulations.

33. COMPARATIVES

Prior period comparatives related to the period from the date of incorporation, 12 December 1998 to 31 December 1999.

Where necessary, the prior year financial statements have been restated to conform with the current year’s presentation inaccordance with the new presentation requirements of Statement of Accounting Standard No. 1 (Revised 1999), Presentationof Financial Statements, Statement of Accounting Standard No. 15 (Revised 1999), Leases, and Statement of AccountingStandard No. 23 (Revised 1999), Segment Reporting.


THE FOLLOWING PROFORMA STATEMENT OF PROFIT AND LOSSDOES NOT FORM PART OF THE AUDITED FINANCIAL STATEMENTS

PROFORMA STATEMENT OF PROFIT AND LOSSFOR THE YEAR ENDED 31 DECEMBER 2000


Note Proforma Group2000 1999$’000 $’000

Turnover 33,903 26,445

Cost of sales (21,306) (17,856)

Gross profit 12,597 8,589

Selling and distribution expenses (985) (810)General and administrative expenses (7,820) (6,006)Other operating income 495 173

Profit from operations 4,287 1,946Financial expenses - net (158) (142)

Profit before taxation 4,129 1,804Share of profit (loss) of associated company 8 (7)

4,137 1,797Taxation (995) (488)

Profit after taxation 3,142 1,309Minority interest 18 -

Profit attributable to Members of the Company 3,160 1,309Proposed dividends (312) -

Retained profit for the year 2,848 1,309

Earnings per share (cents) Basic C 4.40 1.87 Diluted C 4.39 1.87

A. BASIS OF PRESENTATION OF PROFORMA GROUP STATEMENT OF PROFIT AND LOSS

The financial information set out in the proforma statement of profit and loss is based on the audited financial statementsof the Company and its subsidiaries for the year ended 31 December 2000. It has been prepared in accordance with theaccounting principles of the Group set out in the notes to the financial statements and on the basis that the ProformaGroup has been in place throughout the period from 1 January 1995 or the respective dates of incorporation, whichever islater, to 31 December 2000.

In arriving at the Proforma Group financial information, adjustments have been made as considered necessary in order toreflect the financial statements on a consistent and comparable basis, including notional adjustments to reflect theinvestments and share capital of the Company as if the Proforma Group has existed from 1 January 1995.

54 PROFORMA STATEMENT OF PROFIT AND LOSS

B. RECONCILIATION OF PROFORMA GROUP’S RESULTS TO STATUTORY ACCOUNTS

(a) Turnover

2000 1999$’000 $’000

As reflected in the Proforma Statement of Profit and Loss 33,903 26,445

Less: Turnover of subsidiaries acquired for year ended 31 December 1999 - (1,294)

As reflected in the statutory accounts 33,903 25,151

(b) Profit before taxation

2000 1999$’000 $’000

As reflected in the Proforma Statement of Profit and Loss 4,129 1,804

Less: Pre-acquisition profits of subsidiaries acquired relating to year ended 31 December 1999 - 4

As reflected in the statutory accounts 4,129 1,808

C. EARNINGS PER SHARE

Basic earnings per shareBasic earnings per share is computed based on the weighted average number of post-Placement ordinary shares in issueduring the year of 71,851,370 (1999: 70,000,000, the pre-Placement ordinary shares after adjusting for the sub-divisionof shares).

Diluted earnings per shareWhen calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of alldilutive potential ordinary shares. The number of unissued shares under option granted under the Qian Hu Pre-IPOEmployees’ Share Option Scheme and their exercise prices are set out in the Directors’ Report. The average fair value ofone ordinary shares during financial year 2000 was $0.32 per share. The weighted average number of ordinary sharesadjusted for the unissued shares under option is as follows:

Group2000 1999

$ $Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 71,851,370 70,000,000

Weighted average number of ordinary shares under option 611,627 -

Number of shares that would have been issued at fair value (458,721) -

Weighted average number of ordinary shares (diluted) 72,004,276 70,000,000

PROFORMA STATEMENT OF PROFIT AND LOSS 55

D. PROFORMA GROUP SEGMENTAL INFORMATION

(a) Business segments



Total sales 17,027 15,129 5,585 (3,838) 33,903

Segment results 2,092 2,056 441 71 4,660Unallocated expenses (373)

4,287Financial expenses - net (158)Share of profit of associated company 8Taxation (995)Minority interests 18

Net profit for the year 3,160

Assets 9,892 6,649 4,396 20,937Investment in associated company 118Unallocated assets 1,860

Total assets 22,915

Liabilities 3,134 2,132 1,698 6,964Unallocated liabilities 2,322


Capital expenditure 1,839 343 499 2,681Depreciation and amortisation 460 344 144 948Other non-cash expenses (income) 99 (421) - (322)

56 PROFORMA STATEMENT OF PROFIT AND LOSS

1999 Fish Accessories Other Eliminations Group$’000 $’000 $’000 $’000 $’000


Total sales 12,672 11,482 4,297 (2,006) 26,445

Segment result 677 1,228 310 (23) 2,192Unallocated expenses (236)

1,956Financial expenses - net (152)Share of loss of associated company (7)Taxation (488)Net profit for the year

1,309

Assets 9,372 4,315 2,824 - 16,511Investment in associated company 115Unallocated assets 85

Total assets 16,711

Liabilities 2,509 1,790 1,285 - 5,584Unallocated liabilities 4,484


Capital expenditure 480 475 858 1,813Depreciation and amortisation 369 368 104 841Other non-cash expenses (income) 284 (412) 27 (101)

(b) Geographical segmentsTurnover is based on the location of customers regardless of where the goods are produced. Assets and additions toproperty, plant and equipment are based on the location of those assets.

Turnover Assets Capital expenditure2000 1999 2000 1999 2000 1999$’000 $’000 $’000 $’000 $’000 $’000

Singapore 20,781 16,931 19,468 14,261 713 1,094Asia 8,262 7,153 3,447 2,450 508 719Europe 4,382 2,016 - - - -Others 478 345 - - - -

Total 33,903 26,445 22,915 16,711 1,221 1,813

PROFORMA STATEMENT OF PROFIT AND LOSS 57

1. DIRECTORS’ REMUNERATION

The following information relates to remuneration of directors of Qian Hu Corporation Limited:

Name of Directors in Remuneration Bands 2000 1999

Remuneration Bands

$500,000 and above - -

$250,000 to $499,999 - -

Below $250,000 5 3

Total 5 3

SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED 31 DECEMBER 2000

Name of Director Salary* Bonus* Directors’ Fees Total$ $ $ $

Kenny Yap Kim Lee 158,640 40,000 - 198,640Alvin Yap Ah Seng 124,375 40,000 - 164,375Andy Yap Ah Siong 126,204 40,000 - 166,204Robson Lee Teck Leng# - - 2,000 2,000Chang Weng Leong# - - 2,000 2,000

Total 409,219 120,000 4,000 533,219

* The salary and bonus amount shown is inclusive of allowances and CPF.# Appointed on 18 October 2000

2. MAJOR PROPERTIES

Details of leasehold properties held by the Group as at 31 December 2000 are as follows:

Tenure/ Land Net Book ValueDescription Unexpired Area 2000 1999

Location and existing use term (sqm) $ $

Owned by the Company- Leasehold land and building69 & 71 Jalan Lakar, Singapore Fish farming 20 years from 41,776 2,769,904 2,846,599

purposes 11 November 1993

Owned by Subsidiary Company- Leasehold land and factory buildingMeifa Industrial Zone, Industrial use 20 years from 25,430 675,771 563,001Anxi County, 18 August 1996Fujian Province, PRC

3,445,675 3,409,600

SUPPLEMENTARY INFORMATIONFOR THE YEAR ENDED 31 DECEMBER 2000

(SGX listing manual requirements)

58 SUPPLEMENTARY INFORMATION

ANALYSIS OF SHAREHOLDERS

No. of No. ofRange of Shareholdings Shareholders % Shares %

1 - 1,000 20 5.13 20,000 0.021,001 - 10,000 181 46.41 1,366,000 1.65

10,001 - 1,000,000 177 45.38 13,614,370 16.451,000,001 and above 12 3.08 67,761,630 81.88

Total 390 100.00 82,762,000 100.00

Authorised Share Capital : S$20,000,000Issued and fully Paid-up Capital : S$8,276,200Class of Shares : Ordinary share of S$0.10 eachNumber of shares : 82,762,000

TOP TWENTY SHAREHOLDERS

Name of Shareholders No. Of Shares Held %

1. Qian Hu Holdings Pte Ltd 27,515,790 33.252. Alvin Yap Ah Seng 4,719,600 5.703. Andy Yap Ah Siong 4,719,600 5.704. Yap Hock Huat 4,719,600 5.705. Yap Kim Choon 4,719,600 5.706. Yap Kim Chuan 4,719,600 5.707. Yap Ping Heng 4,719,600 5.708. Kenny Yap Kim Lee 4,270,550 5.169. Yap Hey Cha 2,510,000 3.0310. Ang Kim Sua 2,500,000 3.0211. Hong Leong Finance Nominees Pte Ltd 1,445,690 1.7512. OCBC Securities Pte Ltd 1,202,000 1.4513. Lim Peng Yian 632,670 0.7714. Yap Ai Choo 624,710 0.7615. Phillip Securities Pte Ltd 608,000 0.7416. Lee Kim Hwat 604,710 0.7317. Tan Ait Soon 604,710 0.7318. Seah Chong Huat 574,720 0.7019. Ng Wah Hong 548,850 0.6620. Tan Kim Lang 475,000 0.57

Total 72,435,000 87.52

STATISTICS OF SHAREHOLDERS AS AT 19 APRIL 2001

STATISTICS OF SHAREHOLDERS 59

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Second Annual General Meeting of the Company will be held at 71 Jalan Lekar Singapore698950 on 16 May 2001 at 11:00 am to transact the following business: -

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 31 December 2000 andthe Auditors’ Report thereon. (Resolution 1)

2. To re-elect to the office of Director, Mr. Robson Lee Teck Leng, who pursuant to Article 88 of the Company’s Articlesof Association will hold office as director only until the forthcoming Annual General Meeting and who, being eligible,offers himself for re-election. (Resolution 2)

3. To re-elect to the office of Director, Mr. Chang Weng Leong, who pursuant to Article 88 of the Company’s Articles ofAssociation will hold office as director only until the forthcoming Annual General Meeting and who, being eligible,offers himself for re-election . (Resolution 3)

4. To re-elect to the office of Director, Mr Yap Ah Siong, Andy, retiring by rotation pursuant to Article 89 of the Company’sArticles of Association and who, being eligible, offers himself for re-election. (Resolution 4)

5. To approve Directors’ Fees of $4,000 for the year ended 31 December 2000. (Resolution 5)

6. To declare a first and final Dividend of 5 % per ordinary share less income tax for the year ended 31 December 2000.(Resolution 6)

7. To re-appoint Messrs Arthur Andersen as Auditors of the Company and to authorise the Directors to fix their remuneration.(Resolution 7)

SPECIAL BUSINESS

Ordinary Resolutions

To consider and, if thought fit, to pass with or without modifications, the following resolutions as Ordinary Resolutions: -

8. General authority to issue Shares

That pursuant to Section 161 of the Companies Act and the listing rules of the Singapore Exchange Securities TradingLimited, the Directors be and are hereby authorised to issue ordinary shares of the Company (whether by way ofrights, bonus or otherwise) at any time and upon such terms and conditions and for such purposes as the Directorsmay in their absolute discretion deem fit, provided that the aggregate number of such shares to be issued shall notexceed 50 per cent of the issued share capital of the Company immediately prior to the proposed issue and providedthat the aggregate number of such shares to be issued other than on a pro-rata basis to the then existing shareholdersshall not exceed 20 per cent of the issued share capital of the Company immediately prior to the proposed issue, and,unless revoked or varied by the shareholders in general meeting, such authority shall continue in force until theconclusion of the next Annual General Meeting or the date by which the next Annual General Meeting is required bylaw or by the Articles of Association of the Company to be held, whichever is the earlier. (Resolution 8)

9. Authority to issue Shares pursuant to the exercise of Options previously granted under the Qian Hu Pre-IPO Employees’Share Option Scheme approved at the Company’s Extraordinary General Meeting on 9 October 2000 (“the Pre-IPOScheme”). That authority be and is hereby given to the Directors of the Company to allot and issue from time to timesuch number of ordinary shares credited as fully paid upon the exercise of options granted under the provisions of thePre-IPO Scheme and to do all acts and things which they may consider necessary or expedient to carry the sameinto effect. (Resolution 9)

60 NOTICE OF ANNUAL GENERAL MEETING

10. Authority to offer and grant Options and issue Shares under the Qian Hu Post-IPO Employees’ Share Option Schemeapproved at the Company’s Extraordinary General Meeting on 9 October 2000 (“the Post-IPO Scheme”)

That authority be and is hereby given to the Directors of the Company:

(a) to implement and administer the Post-IPO Scheme;

(b) to modify and/or amend the Post-IPO Scheme from time to time provided that such modifications and amendmentsare effected in accordance with the provisions of the Post-IPO Scheme and to do all such acts and to enter into allsuch transactions, arrangements and agreements as may be necessary or expedient in order to give full effect tothe Post-IPO Scheme; and

(c) to offer and grant options in accordance with the provisions of the Post-IPO Scheme and to allot and issue fromtime to time such number of ordinary shares credited as fully paid upon the exercise of such options providedalways that the aggregate number of ordinary shares, over which options under the Post-IPO Scheme may begranted on any date, when added to the number of shares issued and issuable in respect of all options grantedunder the Post-IPO Scheme, shall not exceed 10% of the issued capital of the Company on the day immediatelypreceding the date of the grant of that option

(d) to do all acts and things which they may consider necessary or expedient to carry the Post-IPO Schemeinto effect. (Resolution 10)

11. To transact any other business.

CLOSURE OF BOOKS

NOTICE IS HEREBY GIVEN that upon the approval of the first and final dividend at the Second Annual General Meeting, theRegister of Transfer and the Register of Members of the Company will be closed from 28 May 2001 to 29 May 2001, bothdates inclusive, for the preparation of dividend warrants. The dividends will be paid on 8 June 2001 to members on theRegister as at 5 pm on 25 May 2001.

Registrable transfers received by the Company’s Registrar, M&C Services Private Limited at 138 Robinson Road #17-00Hong Leong Centre, Singapore 068906, up to 5 pm on 25 May 2001 will be registered before entitlements to the proposeddividends are determined.

By order of the Board

Chia Yong YongCompany Secretary30 April 2001Singapore

Explanatory notes on Special Business to be transacted

i. Ordinary Resolution No. 8 is to authorise the Directors to issue shares up to 50 per cent of the Company’s issued sharecapital, with an aggregate sub-limit of 20 per cent of the Company’s share capital for any issue of shares not made ona pro rata basis to shareholders.

ii. Ordinary Resolution No. 9 is to authorise the Directors to allot and issue shares upon the exercise of Options previouslygranted under the Qian Hu Pre-IPO Employees’ Share Option Scheme approved at the Company’s Extra-ordinary GeneralMeeting on 9 October 2000.

iii. Ordinary Resolution No. 10 is to authorise the Directors to offer and grant options in accordance with the Qian Hu Post-IPO Employees’ Share Option Scheme approved at the Company’s Extra-ordinary General Meeting on 9 October 2000,and to allot and issue shares under the said Scheme provided that the aggregate number of ordinary shares , overwhich options under the Post-IPO Scheme may be granted on any date, when added to the number of shares issued andissuable in respect of all options granted under the Post-IPO Scheme shall not exceed 10% of the issued capital of theCompany on the day immediately preceding the date of the grant of that option

NOTICE OF ANNUAL GENERAL MEETING 61

Statement Pursuant to Clause 902(4)(a) of the Listing Manual of the Singapore Exchange Securities Trading Limited

Mr Robson Lee Teck Leng is the Chairman of the Company’s Audit Committee and upon his re-election as a Director of theCompany will continue as Chairman of the Company’s Audit Committee. Mr Lee is considered by the Board of Directorsto be an independent Director.

Mr Chang Weng Leong is a member of the Company’s Audit Committee and upon his re-election as a Director of theCompany, will continue as a member of the Audit Committee. Mr Chang is considered by the Board of Directors to be anindependent Director.

Notes

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his

stead. A proxy need not be a member of the Company. Where a member appoints two proxies, he shall specify the proportion of his shareholding

to be represented by each proxy. A member who is bankrupt shall not, while his bankruptcy continues, be entitled to exercise his rights as a

member, or attend, vote or act at any meeting of the Company.

2. The instrument appointing a proxy must be deposited with the Company Secretary at the Company’s registered office at 133 New Bridge Road

#11-09 Chinatown Point Singapore 059413 not less than 48 hours before the time appointed for the Annual General Meeting or any

adjournment thereof.

3. If the member is a corporation, the instrument appointing the proxy shall be either given under its common seal or signed on its behalf by an

attorney duly authorised in writing or a duly authorised officer of the corporation.

62 NOTICE OF ANNUAL GENERAL MEETING

QIAN HU CORPORATION LIMITED(INCORPORATED IN THE REPUBLIC OF SINGAPORE)

PROXY FORM

ANNUAL GENERAL MEETING

* Please indicate your vote “For” or “Against” with a “ X ” within the box provided.** If you wish to exercise all your votes “For” or “Against”, please indicate with a “ X ” within the box provided.

Alternatively, please indicate the number of votes as appropriate.

Dated this day of 2001 Total Number of Shares Held

Signature(s) of Member(s)/ Common Seal of Corporate Member

Important:1. For investors who have used their CPF monies to buy Qian Hu Corporation Limited’s shares, this Annual Report is forwarded to them at the request of

their CPF Approved Nominees solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

I/We

of being a member/members of the

abovenamed Company, hereby appoint:

NAME

ADDRESS

NRIC/PASSPORT NUMBER PROPORTION OF SHAREHOLDINGS(%)

and/or (delete as appropriate)

NAME

ADDRESS

NRIC/PASSPORT NUMBER PROPORTION OF SHAREHOLDINGS(%)

as my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual General Meeting of the Company, to be held at71 Jalan Lekar Singapore 698950 on 16 May 2001at 11:00 a.m, and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the Meeting as indicated hereunder. If no specific directionas to voting is given, the proxy/proxies will vote or abstain from voting at his/their discretion, as he/they will on any othermatter arising at the Meeting.

To be used on a To be used in theshow of hands event of Poll

No. Resolutions Relating To: *For *Against **For **AgainstAS ORDINARY BUSINESS

1. Adoption of Reports and Audited Accounts

2. Re-election of Mr. Robson Lee Teck Leng as director.

3. Re-election of Mr. Chang Weng Leong as director.

4. Re-election of Mr. Yap Ah Siong, Andy as director.

5. Approval of Directors’ Fees.

6. Declaration of first and final Dividend

7. Re-appointment of Auditors.

AS SPECIAL BUSINESS

8. General authority for Directors to issue Shares

9. Authority for Directors to issue Shares pursuant to the exerciseof Options previously granted under the Qian Hu Pre-IPOEmployees’ Share Option Scheme (“the Pre-IPO Scheme”)

10. Authority for Directors to offer and grant Options and issueShares under the Qian Hu Post-IPO Employees’ Share OptionScheme (“the Post-IPO Scheme”)

IMPORTANT: PLEASE READ NOTES BELOW

NOTES

1. A member of the Company shall not be entitled to appoint more than two proxies to attend and vote at this Meeting. A proxy need not be amember of the Company.

2. Where a member appoints two proxies, he shall specify the proportion of his shareholding to be represented by each proxy. If no such proportionor number is specified the nomination shall be deemed to be alternative.

3. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section130A of the Companies Act, Cap. 50), you should insert that number. If you have shares registered in your name in the Register of Members of theCompany, you should insert that number. If you have shares entered against your name in the Depository Register and shares registered in yourname in the Register of Members, you should insert the aggregate number. If no number is inserted, this proxy will be deemed to relate to all theshares held by you.

4. This proxy must be signed by the member or his duly attorney authorised in writing. Where an instrument appointing a proxy is signed on behalfof the appointor by an attorney, the power of attorney (or other authority) or a duly certified copy thereof must (failing previous registration withthe Company) be lodged with the instrument of proxy.

5. If the member is a corporation, the instrument appointing the proxy shall be either given under its common seal or signed on its behalf by anattorney duly authorised in writing or a duly authorised officer of the corporation. A corporation which is a member may authorise by resolutionof its directors or other governing body such person as it thinks fit to act as its representative at the meeting, in accordance with its Articles ofAssociation and Section 179 of the Companies Act, Chapter 50.

6. This proxy, duly completed (together with the power of attorney, if any, under which it is signed or a certified copy thereof) must be deposited atthe Registered Office of the Company at 133 New Bridge Road #11-09 Chinatown Point Singapore 059413, not less than 48 hours before the timeappointed for the holding of the Meeting or adjourned Meeting, failing which this proxy may be treated as invalid.

7. The Company may reject this proxy if it is incomplete, improperly completed or illegible. In addition, in the case of shares entered in theDepository Register, the Company may reject the proxy if such member is not shown in the records of the Central Depository (Pte) Ltd (“CDP”) ascertified by CDP to the Company, to have the Company’s shares entered against his/her name in the Depository Register as at 48 hours before thetime appointed for the Meeting or adjourned Meeting.

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