The board of directors of Kai Yuan Holdings Limited announced that the group is expected to record a considerable loss for the year ended 31 December 2012. The expected loss was principally attributable to share of operating loss from the group's associates engaging in steel manufacturing and trading in China, which mainly resulted from the continuing squeezed gross profit margin of steel products; a potentially substantial impairment on the group's investments in the associates in view of the persisting downturn of the steel industry in China; 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 a potential impairment on the group's interests in the jointly-controlled entity (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.