On January 16, 2019, Kangde Xin Composite Material Group Co., Ltd. announced that the Company failed to repay its 2018 first ultra-short-term bonds ("18 KDX SCP001") due on January 15, 2019, which constituted a default (the "Default"). The Company believes that Default principally reflects a difficult macro-financial environment and slow sales repayments, among others, since the fourth quarter of 2018, resulting in temporary difficulties in capital turnover. The Default has triggered a cross default under the Notes to which the Company is a party (the "Cross-default"), which may in turn have an adverse impact on the financial position of the Company. At present, the overall operation of the Company remains normal, and the production, operation and management activities are being performed in an orderly and stable manner. The Company will proactively explore appropriate debt solutions and strive to raise the principal and interest of 18 KDX SCP001 through various ways. At the same time, the Company aims to strengthen its operations, leverage its own operating cash flow, and strive for the timely repayment of subsequent debt financing instruments. The Issuer and the Company are currently assessing the impact of the Cross-default. The Company will fulfill relevant follow-up information disclosure obligations in line with the "Information Disclosure Rules for Non-financial Corporate Debt Financing Instruments in the Inter-bank Bond Market" and the 18 KDX SCP001 offering memorandum. If there is any further information, an announcement will be issued in a timely manner. The Issuer has made interest payments on the Notes in a timely manner since issuance. The Issuer aims to strive for the continued timely performance of its obligations to repay the principal and interest of the Notes.