On 5 July 2019, Kangdexin Composite Material Group (hereinafter "*ST KDX" or the "Company") received a prior notice on administrative punishment from the China Securities Regulatory Commission (the "CSRC"). The Company announced that, according to the facts set out in the prior notice, its net profit was actually negative in four consecutive years from 2015 to 2018, triggering the conditions of mandatory delisting for major violation of law as specified in Paragraph 3 of Article 4 of the Implementation Measures of Shenzhen Stock Exchange on Forced Delisting of Listed Companies for Major Violation of Law (the "Implementation Measures"). Accordingly, the Company's stock was likely to be forced to delist for major violation of law, and its trading would be suspended from 8 July 2019.

Shenzhen Stock Exchange ("SZSE") will continuously keep a close eye on the subsequent development of *ST KDX. If the CSRC makes the afore-said final decision on administrative punishment on *ST KDX, SZSE will initiate the procedure for mandatory delisting for major violation of law against the Company as early as practicable.

Improving the Basic Delisting System and Assuming the Responsibility for Implementing the Delisting

The delisting system for listed companies is an important operation mechanism for the capital market to winnow and optimize resource allocation, and a basic arrangement for defusing market risk and purifying the market environment. In recent years, the delisting system was improved constantly. In October 2014, the CSRC released the Opinions on Reforming, Improving and Strictly Implementing the Delisting System for Listed Companies, as a move to implement the mandatory delisting system for companies that seriously violate laws. In July 2018, the CSRC released the Decision on Amending the Opinions on Reforming, Improving and Strictly Implementing the Delisting System for Listed Companies, to further improve the relevant provisions on the circumstances of mandatory delisting for major violation of law, and reinforce the exchange's entity responsibility for implementation of delisting system.

According to the CSRC's uniform arrangements, in November 2018, SZSE formulated the Implementation Measures, revised the Rules Governing Share Listing on SZSE, the Implementation Measures of Shenzhen Stock Exchange for the Relisting of Delisted Companies and other rules, further clarifying and improving the implementation standards and procedures for mandatory delisting for major violation of law. According to Article 2 of the Implementation Measures, the major circumstances of mandatory delisting for major violation of law include listed companies' fraudulent issuance, major violation of law on information disclosure and material illegalities in five security fields. In January 2019, SZSE made a decision on mandatory delisting of *ST Changsheng Bio-technology which committed major violations during vaccine production, making it the first company against which  the mandatory delisting decision was issued after the promulgation of the Implementation Measures.

Strictly Implementing the Delisting System and Conducting the Delisting Work on a Regular Basis

In recent years, under the guidance of the CSRC, SZSE continuously deepened the reform of delisting system, strictly implemented the delisting system, and resolutely delisted the companies which had triggered delisting conditions. It has formed regular delisting system arrangements and operation practice. Since 2017, SZSE has smoothly completed the delisting of Xin Tai Electric, *ST Ene-Carbon, Zhonghong Holding and other companies, pushed forward the delisting procedures against *ST Huaze, *ST Zhonghe and *ST Changsheng Bio-technology, and effectively mitigated market risk and realized smooth delisting.

In May 2019, CSRC Chairman Yi Huiman pointed out at the annual conference of China Association for Public Companies that enterprises which seriously disturb market discipline and meet delisting standards shall be resolutely and completely delisted. SZSE will firmly implement the CSRC's requirements of "Four Awes" and "One Synergy", focus on improving the quality of listed companies and strictly implement the delisting system. SZSE shall resolutely practice the principle of zero tolerance to any company that triggers the conditions for delisting, strive to purify the market environment, foster the market mechanism of winnowing and sustain the long-term healthy and steady development of the capital market.