Hong Yuan Holding Group (HGYN)

[12yearplan]

By increasing the number of authorized but unissued shares of common stock, the
Reverse Stock Split could, under



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certain circumstances, have an anti-takeover effect, although this is not the
intent of the Board of Directors. For example, it may be possible for the Board
of Directors to delay or impede a takeover or transfer of control of the Company
by causing such additional authorized but unissued shares to be issued to
holders who might side with the Board of Directors in opposing a takeover bid
that the Board of Directors determines is not in the best interests of the
Company or its stockholders. The Reverse Stock Split therefore may have the
effect of discouraging unsolicited takeover attempts. By potentially
discouraging initiation of any such unsolicited takeover attempts the reverse
split may limit the opportunity for the Company’s stockholders to dispose of
their shares at the higher price generally available in takeover attempts or
that may be available under a merger proposal. The Reverse Stock Split may have
the effect of permitting the Company’s current management, including the current
Board of Directors, to retain its position, and place it in a better position to
resist changes that stockholders may wish to make if they are dissatisfied with
the conduct of the Company’s business. However, the Board of Directors is not
aware of any attempt to take control of the Company and the Board of Directors
has not approved the Reverse Stock Split with the intent that it be utilized as
a type of anti-takeover device.