Fu Shou Yuan International : 2021 Interim Report

CONTENTS

Corporate Information	2
Chairman's Statement	3
Management Discussion and Analysis	6
Other Information	24
Report on Review of Condensed Consolidated
Financial Statements	29
Condensed Consolidated Statement of Profit or
Loss and Other Comprehensive Income	30
Condensed Consolidated Statement of
Financial Position	31
Condensed Consolidated Statement of
Changes in Equity	33
Condensed Consolidated Statement of
Cash Flows	34
Notes to the Condensed Consolidated
Financial Statements	36
Definitions and Glossary	59

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Bai Xiaojiang (Chairman)

Mr. Tan Leon Li-an(Vice-Chairman)

Mr. Wang Jisheng (Chief Executive)

Non-executive Directors

Mr. Lu Hesheng

Mr. Huang James Chih-cheng

Mr. Ma Xiang (resigned with effect from March 24, 2021)

Ms. Zhou Lijie (appointed with effect from March 24, 2021)

Independent Non-executive Directors

Mr. Chen Qunlin

Mr. Luo Zhuping Mr. Ho Man Ms. Liang Yanjun

Mr. Chen Xin (appointed with effect from January 21, 2021)

AUDIT COMMITTEE

Mr. Ho Man (Chairman)

Mr. Huang James Chih-cheng Mr. Luo Zhuping

Mr. Chen Xin (appointed with effect from January 21, 2021)

NOMINATION COMMITTEE

Mr. Bai Xiaojiang (Chairman)

Mr. Wang Jisheng

Mr. Chen Qunlin

Mr. Luo Zhuping

Mr. Ho Man

REMUNERATION COMMITTEE

Mr. Luo Zhuping (Chairman)

Mr. Tan Leon Li-an

Mr. Chen Qunlin

COMPLIANCE COMMITTEE

Ms. Liang Yanjun (Chairman)

Mr. Luo Zhuping

Mr. Ho Man

Mr. Chen Qunlin

COMPANY SECRETARY

Ms. Hu Yi

AUTHORIZED REPRESENTATIVES

Mr. Bai Xiaojiang

Ms. Hu Yi

REGISTERED OFFICE

Ocorian Trust (Cayman) Limited

Windward 3, Regatta Office Park

P.O. Box 1350

Grand Cayman KY1-1108

Cayman Islands

HEADQUARTERS

Room 1306

No. 88 Cao Xi Road North

Shanghai

China 200030

PRINCIPAL PLACE OF BUSINESS IN HONG KONG

UNIT 709, 7/F

K. Wah Centre

191 Java Road

North Point

Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Ocorian Trust (Cayman) Limited

Windward 3, Regatta Office Park

P.O. Box 1350

Grand Cayman KY1-1108

Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited

Shops 1712-1716, 17th Floor

Hopewell Centre

183 Queen's Road East

Wanchai

Hong Kong

PRINCIPAL BANKERS

Shanghai Pudong Development Bank

Construction Bank of China

Shanghai Rural Commercial Bank

Bank of Communications

Bank of Shanghai

Citibank, N.A.

AUDITOR

Deloitte Touche Tohmatsu

Registered Public Interest Entity Auditors

35/F, One Pacific Place

88 Queensway Hong Kong

STOCK CODE

1448

WEBSITE

www.fsygroup.com

2	Fu Shou Yuan International Group Limited Interim Report 2021

CHAIRMAN'S STATEMENT

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors of Fu Shou Yuan International Group Limited, I hereby report the results of the Group for the six months ended June 30, 2021.

In the first half of 2021, the COVID-19 pandemic continued. With vaccination programs rolled out in many parts of the world and the continuous implementation of quantitative easing policies in many countries and the in-depth regional economic and trade cooperation, the global market showed signs of stabilization and the economy gradually restarted. China generally remained stable with favorable momentum thanks to its outstanding performance in COVID-19 pandemic control and prevention and economic recovery driven by policies such as tax reduction and financial support and the effective implementation of in-depth reform.

Despite all the challenges, the Group maintained stable growth in the first half of 2021 and recorded total revenue of RMB1,141.6 million. Net profit amounted to RMB455.6 million, of which profit and total comprehensive income attributable to owners was RMB367.4 million. The Board declared an interim dividend of HK5.64 cents per Share for 2021 to the Shareholders in appreciation of their support.

With a traditional culture of filial piety, Chinese people always carefully attend to the funeral rites of parents and treasure their own historical legacy. As such, the culture of filial piety and respect for the elderly has become an important foundation for promoting the development of the death care service industry. With the increase in aging population and rising living standards and consumer spending in China, per capita spending in death care services continues to increase with expanding market size, implying vast opportunities for China to comfortably grow into a globally leading death care service market where the Group was well established.

Since its establishment, Fu Shou Yuan has always adhered to its original intention of "running a good enterprise and changing the entire industry". By upholding the corporate spirit of "innovation, truth-seeking, peace of mind, and sincerity" and with a "three-step" strategic development goal, Fu Shou Yuan requires its staff to adopt "idea oriented", "standards oriented" and "management oriented" approaches, improves the operation structure and financial structure, strengthens system and structural construction and team building, actively expands its service scope, continuous improves service quality and facilitates market development with effective resource allocation, thereby promoting changes in the death care service industry with new culture. At present, the Group has established its presence across burial services, funeral services, equipment and supplies, pre-need services, landscape design, "Death Care + Internet" and life education. The Group's business has been expanded to more than 40 cities in 18 provinces, autonomous regions and municipalities in China, including Shanghai, Henan, Chongqing, Anhui, Shandong, Liaoning, Jilin, Fujian, Zhejiang, Jiangxi, Jiangsu, Guangxi, Beijing, Guizhou, Inner Mongolia, Hubei, Gansu and Heilongjiang.

During the Period, Fu Shou Yuan continued to contribute to the COVID-19 pandemic control and prevention by offering online death care services. To address the problems of inability to attend funerals on site and the cumbersome process of arranging funerals, the Group launched the "Fu Shou Cloud" online service platform last year. To further the effort, funeral service institutions within the Group in 23 cities launched the free "Online Obituary" and "Online Wake" services. By contacting the local funeral service institutions by phone, people may attend a wake or a memorial ceremony online to meet their needs of funeral services and express their longing to their deceased loved ones anytime and anywhere, which makes the industry more efficient and heartwarming. In addition, the Group continues to strengthen its efforts in "Internet +" by actively developing new memorial channels through Internet technology to optimize, upgrade and transform the traditional funeral industry, and integrate people-oriented ideas into the digital technology of "Internet +" to enable "continuation of spiritual life". The Group has launched an online "Online Memorial" platform that integrates functions of tribute to martyrs,

Fu Shou Yuan International Group Limited Interim Report 2021

3

CHAIRMAN'S STATEMENT

remembrance of ancestors, commemoration of loved ones and patriotic education by offering "Online Tomb- sweeping", "Online Blessing" and "Online Photo Album" products and services and adding new features such as online family memorial hall, hall of fame and loyalty point system, thereby realizing spiritual inheritance through digital life services and embedding new values in funeral services, so that love and companionship can continue forever with online services.

Fu Shou Yuan always pays attention to the elderly service. As the aging population in China continues to grow, the Group introduced the "pre-need contracts" to China as early as 2015, which has become an important strategic pivot of the Group, satisfying the pre-need of customers to make their own funeral arrangement and bringing about a stable source of customers for the Group. "Pre-need contract" is an inclusive funeral service product with the characteristics of price transparency, guaranteed services and full expression of personal desire which have helped tens of thousands of elderly solve their palliative care problems by establishing standardized pre-planned process. Pre-need services are being recognized, supported and increasingly sought after by governments of various levels and elderly service centres, and also draw the attention from the academic community. At the beginning of 2021, Fu Shou Yuan was invited to participate in the "Research on Incentives and Satisfaction of Pre- need Contract Customers" conducted by the "Pre-need contract" project team of the School of Labor and Human Resources of Renmin University of China.

The Group is committed to serving the community, preserving the local cultural heritage and promoting ecological development across China. In March 2021, the Group entered into an agreement, pursuant to which the Group would acquire 90% equity interest in Heze Fuluyuan Cemetery Management Co., Ltd.* (菏澤福祿源公墓管理有限公 司). The Group further established presence in Jinan, Tai'an, Zaozhuang, Dezhou, Binzhou and Heze in Shandong Province, promoting reformation in local funeral industry and improving the funeral facilities and overall quality of funeral services in Heze. In May 2021, the Group entered into an agreement, pursuant to which the Group would acquire 100% equity interest in Anhui Longmen Cultural Cemetery Co., Ltd.* (安徽龍門文化陵園有限公司) with a view to create synergy and facilitate the Group's development in northern Anhui, thereby providing opportunities for the Group's strategic development and enhancing the core competitiveness of our brand across the country.

Fu Shou Yuan actively explores cooperation opportunities in new sectors to continuously improve management, service quality and customer satisfaction and promote industry growth. In May 2021, the Group entered into a strategic partnership with Zhejiang Haifeng Flower Co., Ltd.* (浙 江 海 豐 花 卉 有 限 公 司) on the supply of fresh flowers and floral training. Under the partnership, both parties will fully utilize their respective advantages, improve the information and resource sharing platform, strengthen mutual communication and maintain a high level of trust between the strategic partners, thereby creating greater advantages.

The Group adheres to the sustainable development strategies of environment protection, technology-driven development, charity and public welfare, traditional culture inheritance and life education, and strives to assume corporate, social, industry, historical and public responsibilities to build a caring and heart-warming life service system. We integrate the concept of green operation into all aspects of the industry chain and consider innovation as the source of corporate development. In April 2021, Shanghai Fu Shou Yuan launched the "life spars" project. The spars are environmentally friendly, land-saving and portable, with which the commemoration of the deceased is no longer restricted by time and space, breaking the traditional impression of land-saving burial. We adopted modern technology in the park design by installing interactive electronic screens that record images of life, thereby forming a landscape space and memorial site shared by the living and the deceased, making it possible to reduce burial space and diversify interment. In June 2021, the Group was awarded the "2021 (Industry) Excellent Quality Award" at the second International Quality Festival for its commitment to high quality life services and new culture innovation in the death care service industry.

4	Fu Shou Yuan International Group Limited Interim Report 2021