Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

KAI YUAN HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 1215) PROFIT WARNING

This announcement is made by Kai Yuan Holdings Limited (the "Company") and together with its subsidiaries, (the "Group") pursuant to Rule 13.09(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong).
The board of directors (the "Board") of the Company wishes to inform the shareholders of the Company (the "Shareholders") and potential investors that the Group is expected to record a considerable loss for the year ended 31 December 2012 (the "Year"). The expected loss was principally attributable to (i) share of operating loss from the Group's associates (the "Associates") engaging in steel manufacturing and trading in China, which mainly resulted from the continuing squeezed gross profit margin of steel products; (ii) a potentially substantial impairment on the Group's investments in the Associates in view of the persisting downturn of the steel industry in China; (iii) operating loss of the Group's heat energy supply segment as a result of increase in production as well as operating costs, and heat energy supply facilities had yet to be utilized at economy of scale; and (iv) a potential impairment on the Group's interests in the jointly-controlled entity (the "JCE") engaging in underground shopping plaza in Shanghai. The above information is based on the preliminary assessment by the Group's management after reviewing and considering the unaudited management accounts of the Group.
The Group has the intention to dispose of its entire interests in the JCE (the "Possible Disposal") and is under negotiation and discussion with interested buyers as at the date of this announcement. It is expected that the Possible Disposal would constitute a notifiable transaction for the Company should it materialize. The Company will make necessary disclosures as and when appropriate in accordance with the Listing Rules.
- 1 -
The Group's consolidated results for the Year have not been finalized and are subject to audit and review by the Company's auditors and the Board. Accordingly, the Board is not in a position to quantify the exact financial effects at this stage. The full final results of the Group for the Year will be disclosed in detail in the 2012 Annual Report of the Company. The Shareholders and potential investors are advised to read the final results announcement of the Company when it is published.

The Shareholders and potential investors should exercise due care in their dealing in the shares of the Company.

By order of the Board

Kai Yuan Holdings Limited Law Wing Chi, Stephen

Executive Director

Hong Kong, 25 January 2013

As at the date of this announcement, the Board comprises Mr. Xue Jian and Mr. Law Wing Chi, Stephen (both being executive directors), Mr. Hu Yishi (being non-executive director) and Mr. Tam Sun Wing, Mr. Ng Ge Bun and Mr. He Yi (all being independent non-executive directors).

- 2 -

distributed by