THE WORLD THROUGH THE EYES OF A FISH

Transcription

1 THE WORLD THROUGH THE EYES OF A FISH

2 CONTENTS 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 The world is not merely an oyster, but a huge aquarium with shoals of opportunities. Kenny The Fish

3 THE QIAN HU STORY All that wriggles may not be a juicy worm, but a fish hook disguised. In life, there are no shortcuts...we must always embrace the virtues of hard work, creativity and excellence. Kenny The Fish Life, whether in the aquarium, the vast expanse of the ocean, or the air-breathing world, sometimes offers shortcuts to success and happiness. The truth of the matter is, even for a fish, there are no shortcuts to achieving 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, taking shortcuts in trying to outdo one another often comes with heavy, sometimes fatal, opportunity costs. With regard to Qian Hu, our story is one of persistence, determination to succeed, and sticking to the path of time before we finally arrived at the centre of opportunity. We are always trying to find new ways to do the same things. Our history can be traced back to the early days of my late father Yap Tik Huay and my uncle, Yap Hey Cha, who were pig farmers. In 1985, their pig farm was eradicated due to the Government s move to stem pollution and to free up more land for residential purposes. At that point in time, my three elder brothers, Yap Peng Heng, Yap Hock Huat and Yap Kim Choon joined the family business. They converted the old pig pens into concrete ponds and started breeding guppies for the local tropical fish exporters. However, in 1989, during a heavy thunderstorm, our entire stock of guppies were washed away. We had to start all over again. With a new name Qian Hu, which means a thousand lakes in Chinese, my cousins Alvin, Andy and I joined Qian Hu and together hoped for brighter days to come. Little did we realise that we were in for another setback. After our failure in rearing guppies, we thought that we would farm high-fin loaches instead although we knew very little about this particular variety of fish. In a single swoop, our entire stock of 4,000 loaches died and we lost almost everything, except our mettle and our drive to succeed. We realised our mistake of not spreading our risks, and not 2 THE QIAN HU STORY

4 knowing anything about our products. Since then, however, we learnt our lesson well. In fact, this lesson was so valuable to us that we kept the high-fin loach as our mascot, a daily reminder of where we were, and where we never want to be. In 1990, we expanded into the local wholesale distribution business, and increased our range of ornamental fish to include Discus, Chichlid, Gourami and began diversifying into the aquarium accessories business. Two years later, in 1992, we started exporting to the rest of the world, a journey which helped position Singapore as a major player in the export of ornamental fish. In 1993, we entered in a joint venture with The China Aquaculture Society and incorporated Beijing Qianyang Aquarium Co. Ltd, based in Beijing, to supply coldwater ornamental fish and aquarium accessories to Northern China. We acquired full ownership of the joint 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 certifications for conditioning and packing of ornamental fish for export (1996); the trading, quarantine and breeding of Dragon Fish (1997), and the retail and wholesale of aquarium accessories and pet products (2000). We also designed the landscape of our farm in such a way that runoffs from heavy rainfall would not affect our fish stock and breeding ponds. Our unique system of recycling water had won us the ISO certification for our environmental management system involving the import, export, conditioning, distributing and farming of tropical fish in was also an exciting year for Qian Hu. We developed our own auto-packing machines for the packing of ornamental fish, a project encouraged by the Agri-food and Veterinary Authority of Singapore (AVA), and partially funded by the EDB Innovative Development Scheme. During the same year, Qian Hu The Yap Family was also admitted to the Productivity and Standards Board s Promising Small and Medium Enterprises Programme which helped us to formulate and realise our strategic business plan for the Group. Two years later, we began distributing aquarium and pet accessories to Malaysia, and subsequently to China and Thailand. We see much growth in this segment of our business as we believe that for every dollar spent on ornamental fish, five more dollars will be spent on accessories. As such, in 2001, we established a joint venture company, Wan Jiang Technology Co Ltd, in Guangzhou together with a Taiwanese partner. Wan Jiang will produce our own house brands of aquarium and pet accessories, as well as other third party brands. Initially, Wan Jiang s products will be distributed through our regional subsidiaries. However, our plans are to distribute them to Japan, Germany, United Kingdom and the rest of the world. THE QIAN HU STORY 3

5 Opportunities abound when we see the world through the eyes of a fish...we will continue to build our brand and grow the Company in Singapore and beyond. Kenny The Fish 4 CHAIRMAN S MESSAGE

6 CHAIRMAN S MESSAGE Dear Shareholders On behalf of the Board of Directors, I am pleased to present the first annual statement and audited accounts of Qian Hu Corporation Limited as a listed entity. With your strong support, the Company successfully completed its listing on 8 November 2000, and in the process, accorded Qian Hu the distinction of being the first company of its kind to list on the Singapore Exchange. Funds raised from the initial public offer (IPO) are being channeled into various projects which we hope will sustain the growth of the Company in the years ahead. These include the expansion of our distribution network in Malaysia, Thailand and China and the development of e-commerce capabilities within the Group. Some money were also earmarked for loan repayment while the balance was set aside for additional working capital. Joining the fraternity of listed companies in Singapore has meant an immense sense of pride and achievement for me as well as for all the people who were involved in the success of the Group. To them, my thanks and appreciation. To our new shareholders, I bid you a warm welcome to the Qian Hu family. We look forward to your continued support as we build the brand and grow the Company in Singapore and beyond. Financial Review Qian Hu has done better than expected in the year under review, 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 net profit of $3.2 million which comfortably exceeded the forecast net profit of $3 million which we promised during the launch of our IPO in November. Group turnover rose 34.8% to $33.9 million, of which 49% came from the sale and export of ornamental fish, 35% from manufacturing and distribution of aquarium and pet accessories, and 16% from the manufacture of plastic bags. During the year in review, 61% of the Group s turnover came from our operations in Singapore, whilst 39% were derived from overseas. We have been busy developing new markets as well as expanding our existing channels of distribution. Globally, we currently export more than 500 species and varieties of ornamental fish to more than 50 countries, helping to place Singapore on the world map for exporting more than 30% of the world s output from a single country. We also distribute more than 5,000 types of aquarium accessories to hobbyists in Singapore, Southeast Asia and China. At home base, we have increased the number of retail outlets, authorised by the Agri-food and Veterinary Authority of Singapore to sell the highly-prized Dragon Fish (Arowana) by 10, making it a total of 40 retail outlets. CHAIRMAN S MESSAGE 5

7 We have put in place strategic plans to move the company forward. In the current financial year, we expect to see the Group s overseas subsidiaries expanding at a faster rate. Our joint venture in Guangzhou, Wan Jiang Technology Co Ltd, which we tied-up with a Taiwanese partner, has commenced production of our proprietary brands of aquarium and pet accessories under the Ocean Free brand name as well as a host of third-party brands. We expect Wan Jiang, which initially will distribute its products to our regional subsidiaries, to widen its distribution network to include Japan, Germany, United Kingdom, and the rest of the world. At our home base in Singapore, we will continue to build on the goodwill that we have garnered from our export and retail partners in the various distribution channels. Even our plastic manufacturing subsidiary, Tat Leng, which was initially set out to support our main export business, has made inroads in supplying highgrade plastic bags to the electronics, IT and food industries as well. Tat Leng is expected to increase its production capacity by 50% when its new Woodlands facility, which commences operations by March 2001, is fully-phased in by Despite our humble beginnings, having emerged from the backwaters of Singapore s agrarian industries, we have become sterling case studies for Productivity Standards Board s SME 21 blueprint, and National University of Singapore s best practices among local enterprises. Qian Hu was among four companies in Singapore who received the inaugural International Management Action Award (IMAA) by the Institute of Management and Productivity & Standards Board on 8 November 2000, in recognition of our ability to innovate, create and produce sustainable and tangible results. We were also among the three most transparent companies, out of a total of 268 listed companies in Singapore whose financial year ended in December, as shown in The Business Times Corporate Transparency Index The CTI is a tool to measure how transparent a company is when it announces its With the expected positive contributions from the Group s overall manufacturing and distribution operations, we are confident of achieving sustainable growth in FY2001. Achievements and Acknowledgements We are proud of the achievements we have made over the years. These are due in no small measure to the support we get, and continue to get, from some of Singapore s leading institutions. 6 CHAIRMAN S MESSAGE

8 financial results by assessing the quality of information disclosed, and effectiveness of the company s communication to investors. We would not have been where we are today without the support of our management and staff, our customers, our suppliers, business associates and fellow directors. I am particularly gratified that in a recent employee survey, some 83% of our staff said that they were very happy with the Company. The importance of our staff to the success of the Group cannot be over-emphasised. I would like to take this opportunity to thank all of them for their support in the past as well as in the years ahead. Kenny Yap Executive Chairman & Group Managing Director a.k.a Kenny The Fish CHAIRMAN S MESSAGE 7

9 BOARD OF DIRECTORS Kenny Yap Kim Lee Executive Chairman and Managing Director Center Alvin Yap Ah Seng Deputy Managing Director Far Left Andy Yap Ah Siong Deputy Managing Director Left Robson Lee Teck Leng Independent Director Right Chang Weng Leong Independent Director Far Right In Qian Hu, whether you are a YAP or not doesn t matter at all...what matters is that we are all part of the Qian Hu family, working together and respecting one another. We may have begun as a family business, but we have evolved into a professionally-managed, knowledge-based company that is committed to developing our people assets. Kenny The Fish 8 BOARD OF DIRECTORS

10 THE QIAN HU FAMILY As a knowledge-based business, the role that our staff play in Qian Hu s performance in the global ornamental fish industry can never be over-emphasised. We have therefore placed special emphasis on developing and motivating our people assets, providing them with the professional tools they need to succeed. Through a structured planning process, the training needs of each staff is identified with the direct involvement of the respective departmental manager or supervisor. However, this process is not driven from the top, but through regular reviews and staff feedback, each programme is assessed for its relevance and effectiveness by each staff. This encourages our staff to be closely involved in his or her own development, ensuring the programme s effectiveness and success. Another way we encourage communication is the annual performance appraisal when staff are given feedback on their strengths and areas for improvement. This is also a time when staff are encouraged to speak out and contribute work improvement ideas as we truly believe that creativity is a very important ingredient to our business success. To motivate our staff further, we have in place a variety of schemes to reward and recognise our staff. Since 1999, we introduced an annual survey to allow our staff to assess the Company as well. In the Year 2000 survey, some 83% of the respondents expressed that they were very happy with the Company. This is yet another testimony that we are definitely on the right track! Indeed, the spirit of open communication and teamwork is a corporate culture that is uniquely Qian Hu s. It is a culture that encourages creativity, team work and a happy environment to work in. THE QIAN HU FAMILY 9

11 FINANCIAL HIGHLIGHTS Turnover ($ 000) Profit before taxation ($ 000) 4,129 33,903 25,151 1, Turnover - Business Activities Fish 46% Accessories 37% Others 17 º% Fish 49% Accessories 35% Others 16% Turnover - Geographical Singapore 64% Asia 27% Europe 8% Others 1% Singapore 61% Asia 24% Europe 13% Others 2% FINANCIAL HIGHLIGHTS

12 VALUE ADDED STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2000 (S$ 000) 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 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, To providers of capital: Interest paid on borrowings from bank (net) Dividends to shareholders Retained for re-investment and future growth Depreciation and amortisation Accumulated profits 2,847 1,314 Minority interest (18) 0 Non-production cost and income: Bad debts and provision for doubtful debts (net) Total distribution 9,810 5,737 Production data Number of employee Value added per employee ($ 000) Value added per $ of employment cost Value added per $ sales Value added per $ of investment in fixed assets VALUE πadded STATEMENT 11

13 YEAR IN REVIEW At Qian Hu, we have always been unwavering in our business focus. We recognise that doing too many things keeps one from doing our best. That is why we have chosen to stay focused on our core expertise of distributing and exporting ornamental fish, and its related activities, to the world s aquariums - whether it be the farming of ornamental fish, manufacturing and distributing aquarium and pet accessories, breeding highly-prized Dragon fish, or producing plastic bags for the packing of fish for export. Focus is the secret of strength. Kenny The Fish Listing on Singapore Exchange For the past one year, we too have been very focused on preparing for our initial public offer in October We are glad that our hard work has finally paid off. The eighth day of November the day Qian Hu Corporation Limited got listed on the Singapore Exchange - has been entered in the annals of Qian Hu as a sort of coming-of-age, and transformation of an agrarian, family-run business into a professionallymanaged, export-driven agro-technology company. We were also doubly blessed to receive the International Management Action Award (IMAA) from the Institute of Management and the Productivity & Standards Board that same day. Aquarium and Pet Accessories While we are focused on developing new markets and expanding our existing distribution channels, we have made progress in expanding our manufacturing capabilities for aquarium and pet accessories. In 2001, we established a joint venture company, Wan Jiang Technology Co Ltd, in Guangzhou with a Taiwanese partner. Wan Jiang will produce our own house brands of aquarium and pet accessories as well as other third party brands. Initially, Wan Jiang will supply accessories to our regional subsidiaries. Its distribution network will be widened to include countries such as Japan, Germany, the United Kingdom and the rest of the world. 12 YEAR IN REVIEW

14 In the year under review, we expanded our distribution network for aquarium and pet accessories in Thailand through our 66%-owned subsidiary Qian Hu Marketing. Qian Hu Marketing is in the process of restructuring before a licence can be approved by the local authorities. Breeding of Dragon Fish In the second half of FY2000, we received the licence from the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) to sell Dragon Fish bred by our farm. Under CITES, we are only allowed to sell the second generation of Dragon Fish which takes about 4 years before it can reproduce. Commercial breeding of the endangered and highly-prized Dragon Fish requires specialised knowledge and techniques that we have acquired over the last five years. We are believed to be one of the first few farms in Singapore to have achieved this. Ornamental Fish By the close of fiscal year 2000, Qian Hu has added another 10 retail outlets to our chain of 30 retail outlets authorised by the Agri-food and Veterinary Authority of Singapore (AVA) to sell Dragon Fish. Expanding Production Capacity of Plastic Bags Our plastic manufacturing subsidiary, Tat Leng, is in the midst of finalising its plans for the move to a new facility in Woodlands. Tat Leng was initially incorporated to support the demand for plastic bags from our core export business. However, its high-grade plastic bags have made inroads into the electronics, IT and food industries as well. When fully operational in 2002, Tat Leng will have increased its production capacity by 50%. Aquarium and Pet Accessories Plastic Bags YEAR IN REVIEW 13

15 CORPORATE INFORMATION BOARD OF DIRECTORS Kenny Yap Kim Lee (Executive Chairman and Managing Director) Alvin Yap Ah Seng Andy Yap Ah Siong Robson Lee Teck Leng Chang Weng Leong COMPANY SECRETARY Chia Yong Yong AUDIT COMMITEE Robson Lee Teck Leng (Chairman) Chang Weng Leong Kenny Yap Kim Lee REGISTERED OFFICE 133 New Bridge Road #11-09 Chinatown Point Singapore AUDITORS Arthur Andersen 10 Hoe Chiang Road #18-00 Keppel Towers Singapore Partner-in-charge: Steven Phan Swee Kim PRINCIPAL BANKERS The Development Bank of Singapore Ltd 6 Shenton Way DBS Building Tower One Singapore Overseas-Chinese Banking Corporation Limited 65 Chulia Street #29-02/04 OCBC Centre Singapore SHARE REGISTRAR M & C Service Private Limited 138 Robinson Road #17-00 Hong Leong Centre Singapore CORPORATE INFORMATION

16 GROUP STRUCTURE QIAN HU CORPORATION LIMITED QIAN HU FISH FARM TRADING YI HU FISH FARM TRADING WAN HU FISH FARM TRADING DAUDO AQUARIUM 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%

17 CORPORATE GOVERNANCE The directors and management are committed to high standards of corporate governance and embrace the best practices contained in the Best Practice Guide issued by the Singapore Exchange Securities Trading Limited. The Board of Directors The Board currently has 5 members consisting of 3 executive directors and 2 non-executive directors who are independent directors. The Board meets regularly throughout the year and amongst other matters, reviewed the financial management and performance of the Group including matters relating to corporate governance. The other responsibilities of the Board include the deliberation of the Group s overall business strategy, approval of major investments, review of the Group s financial policies and annual budget. To discharge its responsibilities effectively and efficiently, the Board has set up a number of committees to oversee specific task areas. These committees includes:- The Executive Committee The Executive Committee meets once a month to review the performance of the Company and its subsidiaries, to deliberate on corporate strategies, the Group s businesses and principal risks and to address important issues. It comprises 3 executive directors and is chaired by Kenny Yap Kim Lee. The Audit Committee The Audit Committee, comprises 2 independent directors and 1 executive director, is chaired by Robson Lee Teck Leng. The principal responsibility of the Audit Committee is to assist the Board of Directors in the identification and monitoring of areas of significant financial and business risks. It reviews the compliance with the Listing Manual and the Best Practice Guide of the Singapore Exchange Securities Trading Limited and evaluates the adequacy and effectiveness of internal accounting controls and financial reporting controls. The Committee also reviews interested party transactions as well as the Company s procedures set up to monitor and report on all interested party transactions. Specific function of the Committee includes reviewing the scope of work of the external auditors and receiving and considering the external auditors reports. The Group s annual consolidated financial statements and announcement were reviewed by the Committee before they are submitted to the Board of Directors for approval. The Committee met 2 times after the Company was listed on 8 November The Employees Share Option Scheme Committee The Employees Share Option Scheme Committee comprises 1 executive and 2 non-executive directors and is chaired by Chang Weng Leong. The Committee administers the Employees Share Option Scheme of the Company and deliberates on matters of eligibility as well as the number of options to be granted to each participant, in accordance with the terms and conditions of the Scheme. Dealing in Securities The Group has procedures in place on dealing in securities, whereby there should be no dealings in the Company s shares by its officers during the period commencing one month prior to the announcement 16 CORPORATE GOVERNANCE

18 of the Company s half-year and full year results. Directors and executives are also expected to observe insider trading laws at all times even when dealing in securities within permitted trading period. Compliance with existing Best Practices Guide of the Singapore Exchange The Board of Directors confirms that during the year ended 31 December 2000, the Company has compiled with the corporate governance policies set out in the Best Practices Guide issued by the Singapore Exchange Securities Trading Limited. Corporate Governance for FY2001 In respect of the present financial year ending 31 December 2001, the Audit Committee is in the process of reviewing the consultation papers published by the various public and private-sectorled committees initiated by the Government, with the object of institutionalizing a culture of good corporate governance and best practices for the group during the present financial year. An institutionalized system and culture of good corporate governance is of paramount importance to attract both local and international institutional investors to invest in the Company s shares. Institutional and sophisticated investors place great importance on corporate governance when making investment decisions. The importance of good corporate governance and best practices to the Qian Hu group cannot be over-emphasised. In particular, the Audit Committee will review and carefully study (i) the recommendations of the Final Report and Code of Corporate Governance, published on 4 April 2001, (ii) the Consultation Paper on the Proposed Securities and Futures Act published on 21 March 2001 and (iii) the Consultation Paper on Disclosure and Accounting Standards published on 6 December The guidelines and recommendations set out in these consultation papers will fundamentally form the benchmark standards and instructive principles for the Audit Committee to instill high standards of corporate governance, international transparency practices and timely disclosures in the following four broad 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 s overall third position this year in the Corporate Transparency Index Rankings initiated and published by the Business Times in respect of the financial results disclosures of all public listed companies in Singapore. The Audit Committee has every intention, wherever possible, to comply with the spirit and the letter of the abovementioned consultation papers in its task to institutionalize and maintain the international discipline and standards of good corporate governance and best practices for the Qian Hu group. CORPORATE GOVERNANCE 17

19 OUR PUBLIC RESPONSIBILITIES We are indebted to the environment without which we would not be able to draw valuable resource to conduct our business. The setbacks that we had experienced way back in our history has taught us the importance of protecting our environment. Since then, our operations and processes in our farm have been modified, minimising the environmental impact on our natural surroundings. Since 1997, Qian Hu embarked on a programme to preserve our natural resources and minimise wastes by participating in the ISO Environmental Management System which is an international standard for managing the environment. A year later, we obtained another ISO certification, underscoring once again our commitment towards preserving the environment. Through these two programmes, we have an integrated system in place to manage our operations sensitively, and minimising the possible stress that our business can impose on the environment. Besides our commitment to preserving our natural surroundings, we have been careful not to neglect our social responsibility as well. Our community forms an integral part of the environment that we operate in, and we encourage our staff to be good corporate citizens by actively participating in a number of fund raising activities such as: Annual fund raising projects for various societies, clubs, community centres Direct contributions to organisations such as Society for the Visually Handicapped, homes for the aged, and schools The SHARE programme 18 OUR PUBLIC RESPONSIBLITIES

20 QIAN HU CORPORATION LIMITED 71 Jalan Lekar, Singapore Tel: (65) Fax: (65)

21 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

22 DIRECTORS REPORT 31 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 the Company and the consolidated financial statements of the Company and its subsidiaries ( the Group ) for the financial year ended 31 December Directors The directors of the Company in office at the date of this report are as follows: Kenny Yap Kim Lee Alvin Yap Ah Seng Andy Yap Ah Siong Robson Lee Teck Leng (appointed on 18 October 2000) Chang Weng Leong (appointed on 18 October 2000) Principal Activities The Company was incorporated in Singapore on 12 December 1998 as a private limited company under the name of Qian Hu Fish Farm Pte Ltd. On 13 October 2000, the Company was converted to a public limited company and changed its name to Qian Hu Corporation Limited. The Company was admitted to the Official List of the Singapore Exchange Securities Trading Limited Dealing and Automated Quotation System (SGX-SESDAQ) on 8 November The principal activities of the Company are those of import, export, farming, breeding and distribution of ornamental fishes and aquarium and pet accessories. The principal activities of the subsidiaries are as set out in Note 6 to the accompanying financial statements. There have been no significant changes in the nature of these activities during the financial year. Employees The total number of employees in the Company and the Group at the end of the financial year was 79 and 166 (1999: 60 and 135) respectively. Results For The Financial Year Group Company $ $ Profit after taxation 3,141,797 2,407,728 Minority interest 18,053 - Profit attributable to Members of the Company 3,159,850 2,407,728 Proposed dividends (312,381) (312,381) Retained profit for the year 2,847,469 2,095,347 Transfers To or From Reserves or Provisions Except as shown in the financial statements, there were no material transfers to or from reserves or provisions during the financial year. Acquisition and Disposal of Subsidiaries The following subsidiary was incorporated during the financial year: Country of Company s Issued and Name of subsidiary Principal activities incorporation equity interest paid-up capital Qian Hu Marketing Co Ltd Import, export and Thailand 66% Baht 6,000,000 distribution of aquarium and pet accessories 20 DIRECTORS REPORT

23 Acquisition and Disposal of Subsidiaries (continued) During the financial year, pursuant to a Group restructuring exercise, the Company assumed the assets, undertakings and business of the various partnerships/sole proprietorships from the respective partners/sole proprietors. The purchase consideration was as follows: Name of partnerships/sole proprietorships Wan Hu Fish Farm Trading Bite Lips Gifts & Toys Purchase consideration 1,509,263 ordinary shares of $1 each at $1.20 per share $385,861 in cash The above purchase consideration was based on the net assets of the various partnerships/sole proprietorships at the date of acquisition. Except as disclosed above, there were no other acquisition or disposal of subsidiaries during the financial year. Issue of Shares or Debentures The Company During the financial year, the Company: (a) (b) (c) (d) (e) (f) 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; Issued 1,509,263 ordinary shares of $1 each at $1.20 per share as consideration for assuming the assets, undertakings and business of Wan Hu Fish Farm Trading pursuant to a Group restructuring exercise; Issued 1,000,000 ordinary shares of $1 each via the capitalisation of $500,000 each from amount due to related parties and amount due to directors respectively; Capitalised $840,714 from revenue reserve, by way of bonus issue of 840,714 ordinary shares of $1 each credited as fully paid; Sub-divided each of the existing ordinary shares of $1 each in the authorised and issued and paid-up share capital of the Company into 10 ordinary shares of $0.10 each; and Issued 12,750,000 new ordinary shares of $0.10 each at $0.30 per share for cash pursuant to the initial public offering 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 subsidiaries During the financial year, a subsidiary issued the following shares: Name of subsidiary Shares issued and consideration Purposes Qian Hu Marketing Co Ltd (i) Incorporated with an authorised and paid-up For incorporation and share capital of Baht 2,000,000 initial working capital comprising of 20,000 ordinary shares of Baht 100 each (ii) Issued 40,000 ordinary shares of Baht 100 each via capitalisation of amounts due to holding company and for cash For additional working capital During the financial year, the Company contributed $1,304,010 to the registered capital of a subsidiary, Fujian Anxi Qianlong Plastic Private Co., Ltd. to provide working capital. As at 31 December 2000, the Company had contributed in full to the registered capital of the subsidiary of Rmb8,500,000 (approximately $1,750,444), comprising $1,434,529 in cash and $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

24 Arrangements to Enable Directors to Acquire Shares or Debentures Except 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 Farm Trading 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 $500,000 from 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 object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate. Directors Interest in Shares or Debentures The interests of the directors who held office at the end of the financial year in the share capital of the Company and related corporations were as follows: Other shareholdings in which the director is Held by director deemed to have an interest 1 January January 2000 or date of or date of appointment, 31 December 21 January appointment, 31 December 21 January if later if later The Company (a) (b) (b) (a) (b) (b) Kenny Yap Kim Lee 282,068 4,270,550 4,270, Alvin Yap Ah Seng 318,566 4,719,600 4,719,600-30,000 30,000 Andy Yap Ah Siong 318,566 4,719,600 4,719,600-35,000 35,000 Robson Lee Teck Leng - 30,000 30, Chang Weng Leong - 30,000 30, (a) Ordinary shares of $1 each fully paid. (b) Ordinary shares of $0.10 each fully paid. Directors Contractual Benefits Since the end of the previous financial period, no director has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from a related corporation) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except for the significant related party transactions as disclosed in Note 29 to the financial statements. Dividends Dividends 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 respect of the financial year ended 31 December 2000 proposed by the directors and 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 Debts Before the financial statements of the Company were prepared, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and providing for doubtful debts of the Company and satisfied themselves that all known bad debts of the Company had been written off as bad and that adequate provision had 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 debts written off or the amount of provision for doubtful debts in the group of companies inadequate to any substantial extent. 22 DIRECTORS REPORT

25 Current Assets Before the financial statements of the Company were prepared, the directors took reasonable steps to ascertain that any current assets of the Company which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values or that adequate provision had been made for the diminution in the value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to current assets in the consolidated financial statements misleading. Charges on Assets and Contingent Liabilities At the date of this report, no charge on the assets of the Company or any corporation in the Group which secures the liabilities of any other person has arisen since the end of the financial year and no contingent liability of the Company or any other corporation in the Group has arisen since the end of the financial year. Ability to Meet Obligations No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Company and of the Group to meet their obligations as and when they fall due. Other Circumstances Affecting the Financial Statements At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the consolidated financial statements which would render any amount stated in the financial statements of the Company and the consolidated financial statements misleading. Unusual Items In the opinion of the directors, the results of the operations of the Company and of the Group for the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature. Unusual Items After the Financial Year In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which would affect substantially the results of the operations 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-IPO Scheme to grant options to confirmed full time employees of the Group, other than the directors and controlling shareholders of 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 for ordinary 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 the Company. Exercise price No. of shares Option category No. of holders Exercise period (per share) under option Grade C (Entry and mid-level) 41 8/11/ /10/ cents 506,000 Grade B (Manager) 34 8/11/ /10/ cents 1,482,000 Grade A (Senior Manager) 18 8/11/ /10/ cents 1,344, ,332,000 The Pre-IPO Scheme is administered by the Pre-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 During the financial year, no shares were issued pursuant to the exercise of the Pre-IPO options. Subsequent to the year end, options to subscribe for 12,000 ordinary shares of $0.10 each of the Company were exercised at the exercise price of $0.24 per ordinary share for cash. DIRECTORS REPORT 23

26 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 of the Company. All confirmed full-time employees of the Group other than the directors and controlling shareholders of the Company, 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 nonexecutive directors of the Company as follows: (i) Kenny Yap Kim Lee (ii) Chang Weng Leong (iii) Robson Lee Teck Leng Size of Plan The 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 Option Options may be granted from time to time during the period when the Post-IPO Scheme is in force, except that option shall only be granted on or after third market day on which an announcement on any matter involving unpublishing price sensitive information is released. Acceptance of Option The grant of an option shall be accepted within 30 days from the Offer Date and accompanied by payment to the Company of a nominal consideration of $1. Subscription Price The subscription price for each share in respect of which an option is exercisable shall be the prevailing market price of the Company s shares based on the average of the last dealt price per share as indicated in the daily official list or any other publication published by the Singapore Exchange Securities Trading Limited ( SGX-ST ) for the five consecutive trading days immediately preceding the Offer Date. Exercise Period The exercise period of the Post-IPO options commences on the first anniversary of the Offer Date of the options and expires 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 no shares were issued by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. No other options to take up unissued shares in the Company or its subsidiaries were outstanding as at the end of the financial year. Audit Committee The Audit Committee was formed by the Board of Directors during the year and it comprises one executive director and two 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 Leong Kenny Yap Kim Lee The financial statements, accounting policies and system of internal accounting controls are the responsibility of the Board of Directors acting through the Audit Committee. The Audit Committee has reviewed the scope of work of the statutory auditors and the results arising therefrom including their evaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company s officers to the auditors. The consolidated financial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to the submission 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 interested person transactions, and with the assistance of the management, reviewed interested person transactions. The Audit Committee is of the opinion that the internal procedures have been complied with. 24 DIRECTORS REPORT

27 Audit Committee (continued) The Audit Committee had met two times after the Company was admitted to SGX-SESDAQ on 8 November The Committee has recommended to the Board of Directors that the auditors, Arthur Andersen, be nominated for reappointment as auditors at the forthcoming Annual General Meeting of the Company. Other Information Required by the Singapore Exchange Securities Trading Limited No material contracts to which the Company or any subsidiary, is a party and which involve directors interests subsisted at the end of the financial year or have been entered into since the end of the financial year. Auditors Arthur 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 Director ALVIN YAP AH SENG Director Singapore 18 April 2001 DIRECTORS REPORT 25

28 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 fair view of the state of affairs of the Company and of the Group as at 31 December 2000 and of the results and changes in equity of the Company and of the Group and cash flows of the Group for the year then ended, and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the Board of Directors KENNY YAP KIM LEE Director ALVIN YAP AH SENG Director Singapore 18 April STATEMENT BY DIRECTORS

29 AUDITORS REPORT TO THE MEMBERS OF QIAN HU CORPORATION LIMITED (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 of Qian Hu Corporation Limited and its subsidiaries as at 31 December 2000 and for the year then ended set out on pages 28 to 53. These financial statements are the responsibility of the Company s directors. Our responsibility is to express an opinion 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 and perform 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 as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 and fair 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 in equity 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 consolidated financial statements; (b) the accounting and other records and the registers required by the Act to be kept by the Company and by a subsidiary 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 as auditors, being financial statements included in the consolidated financial statements. The names of these subsidiaries are 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 statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial 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 of a subsidiary incorporated in Singapore, did not include any comment made under Section 207(3) of the Act. Arthur Andersen Certified Public Accountants Singapore 18 April 2001 AUDITORS REPORT 27

30 BALANCE SHEETS AS AT 31 DECEMBER 2000 (Amounts in Singapore dollars) Note Group Company $ $ $ $ Share capital and reserves Share capital 3 8,275,000 3,650,023 8,275,000 3,650,023 Reserves 4 5,290,090 1,159,360 4,313, ,575 13,565,090 4,809,383 12,588,095 4,626,598 Minority interest 63, ,628,954 4,809,383 12,588,095 4,626,598 Fixed assets 5 6,808,914 5,056,055 5,226,598 3,742,605 Subsidiaries ,297, ,767 Associate 7 118, , , ,771 Trademarks/customer acquisition cost, product listing fees 8 251, , , ,667 Pre-operating expenses 9 133,878 78, Land use rights , , Advance for investment ,160 50, ,160 50,000 Loan to a subsidiary (non-trade) ,000 Current assets Stocks 12 4,801,257 2,194,499 2,719,719 1,267,554 Trade debtors 13 6,211,661 4,473,055 4,611,192 3,207,852 Other debtors, deposits and prepayments , , , ,300 Due from - subsidiaries (trade) - - 2,317,007 1,296,485 - subsidiaries (non-trade) ,088 57,396 - shareholders (non-trade) - 109, ,369 - holding company (non-trade) - 1,300-1,300 Fixed deposits ,956 38, ,099 8,081 Cash and bank balances 2,753, ,788 1,680, ,245 15,127,096 8,085,505 12,669,707 6,659,582 Current liabilities Trade creditors 3,304,106 2,255,432 2,422,354 1,747,295 Bills payable to bank, secured , , , ,675 Other creditors and accruals 18 1,933,112 1,737,300 1,361, ,731 Due to - subsidiaries (trade) - - 1,051, ,458 - subsidiaries (non-trade) , ,167 - related parties (non-trade) - 584, ,921 - directors (non-trade) ,594 1,239, ,446 Hire purchase creditors, current portion , ,892 77,599 95,535 Term loan, current portion , , , ,000 Provision for taxation 1,032, , , ,000 Bank overdrafts, secured 17-1,001,834-1,001,834 Proposed dividends (net) 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, ,520 Non-current liabilities Hire 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