Dali Foods : UPDATE ON USE OF PROCEEDS AND SUPPLEMENTAL ANNOUNCEMENT TO THE ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2019

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Dali Foods Group Company Limited

達 利 食 品 集 團 有 限 公 司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 3799)

UPDATE ON USE OF PROCEEDS

AND

SUPPLEMENTAL ANNOUNCEMENT TO

THE ANNUAL REPORT

FOR THE YEAR ENDED 31 DECEMBER 2019

Reference is made to (i) the prospectus of Dali Foods Group Company Limited 達利食品集 團有限公司 (the ''Company'', together with its subsidiaries, the ''Group'') dated 10 November 2015 (the ''Prospectus''), which disclosed the proposed use of net proceeds (the ''Net Proceeds'') raised from its global offering, and (ii) the annual report of the Company for the year ended 31 December 2019 published on 23 April 2020 (the ''Annual Report'') in respect of the utilisation of the Net Proceeds as at 31 December 2019.

The board (the ''Board'') of directors (the ''Directors'') of the Company would like to provide an update on the use of the Net Proceeds as supplemental information to the Annual Report.

As disclosed in the Annual Report, the shares of the Company were listed on the Main Board of The Stock Exchange of Hong Kong Limited on 20 November 2015 with Net Proceeds from the global offering of approximately HK$8,665 million (after deduction of underwriting fees and commissions and expenses paid in connection with the global offering), and the Company intends to deploy the Net Proceeds for the following purposes:

1. development, introduction and promotion of new products; (ii) expansion and upgrade of production facility and manufacturing network; (iii) enhancing presence in sales channels and promoting brands; (iv) potential acquisitions and business cooperation; and (v) working capital and other general corporate purposes. As at the date of this announcement, there has been no change to the intended use of the Net Proceeds or the allocated amounts as disclosed in the Annual Report.

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In addition to the information above, the Company would like to provide further information to its shareholders and potential investors in relation to the expected timeline on the application of the unutilised Net Proceeds as follows:

						Utilised	Utilised	Unutilised
						Net Proceeds	Net Proceeds	Net Proceeds	Expected timeline
						as at	as at	as at	for the application
		Percentage of	Available	31 December	30 June	30 June	of the unutilised
No.	Intended use	Net Proceeds	Net Proceeds	2019		2020		2020		Net Proceeds(1)
				HK$ million	HK$ million	HK$ million	HK$ million
1	Development, introduction and	20%		1,733		1,195		1,320		413		Expected to be fully
	promotion of new products											utilised on
												or before
												31 December
												2021
2	Expansion and upgrade of	20%		1,733		1,733		1,733		-	N/A
	production facility and
	manufacturing network
3	Enhancing presence in sales	20%		1,733		1,733		1,733		-	N/A
	channels and promoting
	brands
4	Potential acquisitions and	30%		2,600		-	-	2,600		Expected to be fully
	business cooperation											utilised on
												or before
												31 December
												2024(2)
5	Working capital and other	10%		866		866		866		-	N/A
	general corporate purposes
	Total	100%		8,665		5,527		5,652		3,013

1. The expected timeline for the application of the unutilised Net Proceeds is subject to uncertainties brought by the international macro-environment and the unprecedented COVID-19 pandemic on the prevailing and future market conditions and business developments and need. In view of the significant effects to the economy and business environment, we shall update and re-visit our plan continuously.
2. With respect to the pursuit of potential acquisitions and business cooperation, since the Company's listing in November 2015, the Company has been prudently evaluating potential acquisition targets, with a goal of leveraging on our extensive nationwide sales and distribution network and consolidating our position in the food and beverage industry, in accordance with the intended use of Net Proceeds as stated in the Prospectus. The Group will adhere to a prudent financial management policy, maintain sufficient cash flow and maintain a healthy financial position. While strengthening internal growth, the Group will continue to focus on opportunities for mergers and acquisitions and business cooperation, with an aim to crystallise such opportunities and use all of the Net Proceeds allocated for this purpose on or before 31 December 2024. As at the date of this announcement, we had not entered into any legally binding definitive agreement in connection with any such opportunities. Further announcement(s) will be made as and when appropriate in accordance with the Rules Governing the Listing of the Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'').

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As at the date of this announcement, there has not been any material change to the plan as to the use of the Net Proceeds, unless there is material change in market and economic condition. The Group will utilise the balance of the Net Proceeds in a conservative manner. Should the Directors decide to reallocate the intended use of the Net Proceeds to other business plans and/or new projects of the Group to a material extent, the Company will make further announcement(s) as and when appropriate in accordance with the Listing Rules.

Save as disclosed in this announcement, the remaining above information does not affect other information contained in the Annual Report and the remaining contents of the Annual Report remain unchanged.

By Order of the Board

Dali Foods Group Company Limited

達利食品集團有限公司

Xu Shihui

Chairman

Hong Kong, 21 August 2020

As at the date of this announcement, the Board of the Company comprises Mr. XU Shihui, Mr. ZHUANG Weiqiang and Ms. XU Yangyang as executive directors; Ms. XU Biying and Ms. HU Xiaoling as non-executive directors; Mr. CHENG Hanchuan, Mr. LIU Xiaobin and Dr. LIN Zhijun as independent non-executive directors.

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