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Shao Baiqing and Ace Lead Profits Limited Won Preliminary Victory Against Hollysys Automation Technologies in the BVI

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On March 8, 2021, Justice Gerhard Wallbank of the Commercial Division of the Eastern Caribbean Supreme Court, Territory of the British Virgin Islands (the "Court") approved an order (the "Order") recording a preliminary victory by Shao Baiqing ("Mr. Shao") and Ace Lead Profits Limited ("Ace Lead", together with Mr. Shao, the "Claimants") in their lawsuit against Hollysys Automation Technologies Ltd. (NASDAQ:HOLI) (the "Company"), filed on February 1, 2021. In the lawsuit, the Claimants challenge the legality of recent wide-ranging amendments to the Company's memorandum and articles, which were made without the knowledge or consent of the shareholders. The Claimants seek a final order prohibiting the Company from relying on those amendments to restrict in any way the rights or powers of the shareholders to amend the memorandum and/or articles. Faced with the lawsuit, and the Claimants' application for an urgent interim injunction restraining the Company from relying on the unlawful amendments until trial, the Company was forced to concede that it should be restrained, and that the trial of the lawsuit should take place on an expedited basis in July 2021.

As the Order records, the Company has undertaken, among other things, that until final disposition of the lawsuit, it will not take or fail to take any action pursuant to any of the amendments to the Company's memorandum and articles challenged by the Claimants. As a result, the Company is prohibited for the time being from relying on the unlawful amendments to its articles of association for the improper purpose of disenfranchising shareholders, entrenching the board of directors of the Company (the "Board"), and preventing the shareholders from considering the recent acquisition proposal by the buyer consortium consisting of Mr. Shao, Ace Lead, and CPE Funds Management Limited (the "Consortium"). The Order represents a major step towards final vindication for the Claimants and all other shareholders of the Company.

These highly objectionable amendments to the articles of association of the Company were adopted within one month following the submission of a proposal by the Consortium to acquire all of the outstanding shares of the Company at a price of $15.47 per share in cash, which was subsequently increased to $17.1 per share in cash on January 29, 2021. Despite the compelling premium of the Consortium's proposal, the Board has continued to claim that there is no need for the shareholders to "take any action at this time" and prescribed no timetable regarding their review of the Consortium's revised proposal of $17.1 per share.

Since the sudden change to the Company's board and management compositions last July, the Company has suffered deteriorating financial performance for two consecutive reporting quarters. On March 5, 2021, the Company announced that for the first half of fiscal year 2021 ended December 31, 2020, its non-GAAP net income attributable to the Company decreased by 17.1% and non-GAAP diluted earnings per share decreased by 17.9% as compared to the comparable prior year period. As a result, the Company's stock price dropped nearly 6% on March 5, 2021 while the NASDAQ Composite rose about 1.6% that day. The closing price as of March 12, 2021 was $14.21, significantly lower than the revised offer price of $17.1.

Statement of the Consortium

Shareholders cannot afford to remain inactive: positive action is required! It is clear that existing management and the Board do not know how to run the business successfully and they are not interested in fulfilling their fiduciary duties to the shareholders. It is time for the Board to hear a loud and clear message from the shareholders that the shareholders wish to consider the Consortium's acquisition proposal on its merits and demand immediate liquidity with the highly compelling premium that the Consortium is offering.

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