Hollysys Automation Technologies Ltd. (NASDAQ: HOLI) (the “Company”) issued a press release (the “March 15 Press Release”) announcing the receipt of a notice from Hollysys Committee on Trust Interests (the “Committee”) that the Committee had commenced a legal action in the Hong Kong High Court against Mr. Shao Baiqing (“Mr. Shao”) and Ace Lead Profits Limited (“Ace Lead”, together with Mr. Shao, the “Claimant Shareholders”). On March 16, 2021, the Company issued another press release (the “March 16 Press Release”) alleging that the press release issued by the Claimant Shareholders on March 14, 2021 contained “misleading” statements. The Claimant Shareholders wish to make the following statements in response to the foregoing press releases issued by the Company.

Statement Regarding the March 16 Press Release

In the March 16 Press Release, the Company referred to an order (the “Order”) issued by Justice Gerhard Wallbank of the Commercial Division of the Eastern Caribbean Supreme Court, Territory of the British Virgin Islands (the “Court”) pursuant to which (i) the Company has undertaken, among other things, that until final disposition of the lawsuit filed by the Claimant Shareholders against the Company, it will not take or fail to take any action pursuant to any of the amendments to the Company’s memorandum and articles (the “M&A”) challenged by the Claimant Shareholders, and (ii) the Claimant Shareholders have undertaken, among other things, not to give notice to requisition a meeting of the members of the Company for the purpose of making any amendments to the M&A until final disposition of the lawsuit. The Company argued in the March 16 Press Release that given the Order represents an agreement between the parties pending the Court’s final determination of the matter, it was not a “victory” or “vindication” of the Claimant Shareholders’ position by the Court.

The Company conveniently omitted to mention the fact that it was the Company who approached the Claimant Shareholders on February 28, two days before the March 2 scheduled Court hearing for the preliminary injunction relief sought by the Claimant Shareholders, and voluntarily offered the Company’s undertakings described in the Order. So why did the Company suddenly offer an undertaking that is substantially similar to the interim relief sought by the Claimant Shareholders two days before the scheduled hearing date, instead of arguing for a dismissal of the Claimant Shareholders’ interim relief at the preliminary injunction hearing?

It turns out Walkers, the BVI law firm which drafted the M&A amendments challenged by the Claimant Shareholders and is defending the Company’s conduct in the BVI lawsuit brought by the Claimant Shareholders, also recently defended (unsuccessfully) another BVI company listed in the United States (Nam Tai) in a BVI lawsuit whereby its directors were similarly accused of having acted for the improper purpose of entrenching the board and disenfranchising shareholders. The trial of the Nam Tai lawsuit concluded on February 24, four days before the Company reached out to the Claimant Shareholders to offer a settlement. Perhaps sensing a defeat was on the way in the Nam Tai action which shares many commonalities with ours, the Company offered to give an undertaking to the Court to preserve the status quo in order to avoid the Court imposing an injunction on the Company. On March 3, 2021, one day after the scheduled Court hearing for the preliminary injunction relief sought by the Claimant Shareholders, the Court handed down a decisive victory for the Nam Tai shareholders and the Court in its ruling admonished Walkers, as well as Nam Tai’s US counsel, Latham & Watkins, the same U.S. law firm advising the Company on corporate governance matters, for their conduct in advising Nam Tam’s board of directors. The Nam Tai ruling further strengthens our belief that the Claimant Shareholders will ultimately prevail on the merits and we look forward to our day in court in July.

Statement Regarding the March 15 Press Release

In the March 15 Press Release, the Company cited a notice of legal action against the Claimant Shareholders from the Committee which is controlled by the Company. Notwithstanding that the legal action has been filed, the Hong Kong High Court has not granted permission for the relevant claims and court papers to be served on the Claimant Shareholders outside of Hong Kong, and the plaintiffs bear the burden of satisfying the Hong Kong High Court as to why it should exercise jurisdiction over defendants who have no nexus to Hong Kong.

The Claimant Shareholders consider the legal action to be absolutely unmeritorious, and will take proper steps to address this matter if and when the Hong Kong High Court has granted permission for the claims to be served on them out of jurisdiction. Meanwhile, all of the unfounded allegations against the Claimant Shareholders are expressly denied. In fact, the Claimant Shareholders have responded to various letters with reasons as to why these claims are completely unmeritorious and baseless. Notwithstanding that, and knowing that the claims lack factual or legal basis, the legal action was filed regardless so as to create an excuse for the Company to issue a press release by reason of the so-called “price sensitive information” that serves no purpose other than to create confusion and spread misinformation with respect to the Claimant Shareholders’ ownership in the Company, all part of an attempt to cast a cloud over the proposal (the “Proposal”) by the Claimant Shareholders and CPE Funds Management Limited (the “Consortium”) to acquire all of the outstanding shares of the Company at $17.1 per share in cash, representing a compelling premium over the trading price of the Company’s shares.

Statement of the Consortium

Since our last press release of March 14, 2021, the Company’s stock price has further declined. The closing price of March 19, 2021 dropped to $13.05, more than $4 less than the $17.10 offer price. The board and existing management continue to destroy the value of the Company while misusing the Company’s valuable resources on entrenching themselves and denying the shareholders the opportunity to cash out on the highly compelling premium that the Consortium is offering. The board is obligated to fulfill its fiduciary duties and act in the best interests of the shareholders. To that end, the board should immediately convene a shareholder meeting for the shareholders to consider and vote on the Proposal. The board should also take all necessary corporate action to render the shareholder rights plan inapplicable to the Proposal. As clearly illustrated in the offer letter of December 7, 2020, the Proposal offers all shareholders, other than the Consortium, with a highly attractive control premium in a fair and equal manner and is not the type of takeover that the rights plan intends to prevent. We hope that the Nam Tai ruling will serve as a timely wakeup call for the board to take immediate actions to actively remedy its prior wrongdoings.