Dr. Jianfeng He - Chairman Baiqing Shao - Chief Executive Officer Herriet Qu - Chief Financial Officer Jennifer Zhang - IR Director of Hollysys

Baiding Rong - Credit Suisse Frank Xu - Goldman Sachs Lingxin Kong - CICC Alex Chang - Citi

Ladies and gentlemen, thank you for standing by and welcome to the Hollysys Automation Technologies, fiscal year 2014 fourth quarter and fiscal year 2014 ended on June 30, 2014 earnings conference call. At this time all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) Please be advised, this conference is being recorded today, August 13, 2014. I would now like to hand the conference over to Ms. Jennifer Zhang, the Investor Relations Director of Hollysys Automation Technologies. Thank you. Please go ahead, Ms. Zhang.

Hello everyone and thank you for joining us. Today our speakers will be Dr. Jianfeng He, Chairman of Hollysys Automation Technologies; Mr. Baiqing Shao, CEO; and Ms. Herriet Qu, CFO; and myself, the IR Director of Hollysys. On today’s call Mr. Shao will provide a general overview of our business, including some highlights for the quarter, and Ms. Qu will discuss our performance from a financial perspective and financial outlook for fiscal year 2015 and the whole senior management will answer questions afterwards. Before we get started, I would like to remind everyone that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts, including statements relating to the expected growth of Hollysys’ future product introductions, the mix of products in future periods and future operating results. Such forward-looking statements based upon the current beliefs and expectations of Hollysys’ management, are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors among others, could cause actual results to differ from those set forth in the statements, business conditions in China and in Southeast Asia; continued compliance with government regulations, legislation or regulatory environments, requirements or changes adversely affecting the businesses in which Hollysys is engaged; cessation or changes in government incentive programs; potential trade barriers affecting the international expansion; fluctuations in customer demand; management of rapid growth and transition to new markets; intensity of competition from or introduction of new and superior products by other providers of automation and control system technology; timing, approval and market acceptance of new product introductions; general economic conditions; geopolitical events and regulatory changes; as well as other relevant risks detailed in Hollysys’ filings with the Securities and Exchange Commission. The information set forth herein should be read in light of such risks. Hollysys does not assume any obligation to update the information discussed in this conference call or its filings. Please note that all amounts noted in this conference call will be in U.S. dollars unless otherwise noted. I would now like to turn the call over to Mr. Baiqing Shao. Please go ahead, Mr. Shao.

Thank you Jennifer and Greetings everyone. In fiscal year 2014 we made solid achievements and delivered robust growth in several areas in terms of financial performance and business operation, and outperformed the challenging earnings guidance we announced previously. When we enjoy the exciting moment, we also calmly evaluate the future opportunities and challenges and carefully plan for the future growth. Here we would like to discuss the achievements in the past fiscal year and strategies in the future in the respective segments. The industrial automation delivered solid growth during fiscal year 2014. The actual growth rate was not as fast as we previously expected, mainly because of the influence by the general economic environment. During the past fiscal year China began to adjust its industry structure and reducing the capacity in some industries such as metallurgy, building material, paper mill and coal fire and power, but we gained more market share from rising industries to make up for the loss from decreasing industries. We were doing well in chemical, which took up the largest portion of our revenue in industrial automation, and we were doing better in food & beverage industry and the medical industry. In order to better cope with such situations, firstly we have been continuously improving our industry solution capability and our competition capability to strengthen industry marketing and influence on the base of the regional network construction a few years ago, and to focus more on larger projects with a more total solution supply. Secondly, we increased the higher gross margin products provided including Distributed Control System DCS, Safety Instrumentation System SIS and advanced control software, and reduced the lower gross margin instrumentation business, to improve the operation quality and the profitability. Thirdly, we continue to provide quality service and maintenance to our customers, to set up long term working relationship with our older customers and provide more value adding technologies to improve their operation. Fourthly, capture the new growth opportunities of energy conservation and emission reduction, and pursue the new business opportunities driven by intelligent and automated product and working. The factory automation which is categorized in the industrial automation is relatively a new business, but with a strong potential. In this area we provide proprietary Programming Logic Controller PLC and developed our proprietary solution and equipment, to the industries such as the coal mining, wastewater treatment, and the Traditional Chinese Medicine TCM. We have built up the advanced technology platform, mature products and successful application track record in the above areas, and we’d like to seek more opportunities to replace labor and improve the production efficiency for our customers. Besides, we are expecting another strong growth driver of industry automation from overseas markets. We have established subsidiary companies and offices in India, Malaysia and Singapore to provide our industrial automation products. We are currently enhancing the localization such as recruiting local talents and establishing local partnership. We believe that we will have the same strong advantages as in China, like the quality products, better service, better value for money, which will enable us to win more customers and enlarge overseas business scale. Nuclear power business was gradually recovering since the second half of the calendar year 2013, and we successful provided and installed our proprietary HOLLiAS-N Distributed Control System HOLLiAS-N DCS in Unit 1 and Unit 2 of Hongyanhe Nuclear Power Plant, Unit 1 and Unit 2 of Ningde Nuclear Power Plant, and Unit 1 of Yangjiang Nuclear Power Plant and assist these units, the successful commercial operation and delivered outstanding performance. In high-speed rail sectors, we made remarkable achievements in fiscal year 2014. The revenue in rail transportation sector in fiscal year 2014 was doubled compared with fiscal year 2013, mainly because of the strong rail industry recovery since the second half of last year after China Railway Corporation, CRC was established. In the fiscal year 2014, we signed several sizable ground-based high-speed rail signaling system contracts to provide the Train Control Centers, TCC, and other related products consecutively, including the Lanzhou-Xinjiang high-speed rail line Xinjiang section, Mudanjiang-Suifenhe high-speed rail line, Qingdao-Rongcheng high-speed rail lines, Jilin-huichun high-speed rail line, Guiyang-Guangzhou high-speed rail line Guizhou section, and Shenyang-Dandong high-speed rail line; and several batches of significant Automatic Train Protection ATP equipment providing contracts. The strong backlog and the booming order pipeline make us certain for another strong year ahead. We believe with our key position in China’s high-speed rail signaling system providing superior products performance and a well-reputed track record, we are prepared to take more market share in the high-speed rail signaling in the near future. In subway sector, we signed the contract with Land Transport Authority LTA to provide Supervisory Control and Data Acquisition System, SCADA, for the Thomson Lines and Eastern Region Lines in Singapore in June this year, which was a major breakthrough for us to provide our proprietary SCADA system to the international market. In the future, we will closely work with international local rail authorities to explore the SCADA and subway signaling business opportunity. Overseas, we were excited of Bond Group’s solid financial and operational performance and strong order backlog, and we were pleased to see that Concord Group worked together with our domestic team to provide Integrated Supervisory Control System for Thomson and Eastern Region Lines in Singapore. In the next phrase, we will accelerate the overseas business expansion, ensure the healthy development of Bond and Concord’s original business, and increase our proprietary products and systems, providing leverage, leveraging their marketing resources and improve our overseas business gross margin. In addition, analysts and investors are invited to attend our Annual Investor Day around mid-October in our Beijing premises, which will be filled with showcasing our core executive team; insightful presentations from various corporate executives and facility tour, to further enhance our transparency, corporate investor relations and communication. Our shareholders who would like to participate in this annual event, shall contact their brokerage firms or contact us directly to arrange the reservation. We are looking forward to meeting with you in October at our premises. With that, I would like to turn the call over to Jennifer Zhang, who will read the financial results analysis on behalf of our CFO, Mr. Herriet Qu. Jennifer.

Thank you Mr. Shao. I’ll now share Hollysys financial and operational results for fiscal year and 2014 ended June 30 2014, the company reported solid financial results. For fiscal year 2014, total revenues increased by 49.4% to $521.3 million, from $349.1 million of the prior year. Of the total revenues, revenue from integrated contracts increased by 45.6% to $478.3 million, as compared to $328.6 million of the prior year. Revenue from product sales increased by 55.7% to $31.9 million, as compared to $20.5 million for the prior year; and the revenue from services was $11.1 million for the current year. The company’s total revenue by segment was as follows: Industrial Automation, $224.4 million, Rail Transportation, $178.1 million; Mechanical and Electrical Solution $108.8 million, miscellaneous $10 million. As a percentage of total revenues, overall gross margin excluding non-cash amortization of acquired intangibles was 34.7% for fiscal year 2014, as compared to 36.2% for the prior year. The non-GAAP gross margin for integrated contracts, product sales and service, excluding non-cash amortization of acquired intangibles was 32.1%, 63.7% and 63.3% for fiscal year 2014, as compared to 34.3%, 66.8%, and nil for the prior year respectively. The gross margin fluctuation was mainly due to the different revenue mix with different margin. Including non-cash amortization of acquired intangibles, recorded on a GAAP basis, overall gross margin was 33.7% for the fiscal year 2014, as compared to 35.4% for the prior year. The gross margin for integrated contracts, product sales and services, including non-cash amortization of acquired intangibles was 31%, 63.7%, and 63.3% for the year ended June 30, 2014, as compared to 33.5%, 66.8%, and nil for the prior year respectively. For fiscal year 2014, selling expenses were $28.3 million, representing a slight increase of $1.5 million or 5.5%, as compared to $26.8 million year-over-year. As a percentage of total revenues, selling expenses were 5.4% and 7.7% for fiscal year 2014 and 2013 respectively. General and administrative expenses, excluding non-cash share-based compensation expenses were $36.7 million for the fiscal year 2014, representing an increase of $8.7 million or 31.0%, as compared to $28.0 million year-over-year. The increase was mainly due to an increase of $3.7 million incurred by the newly acquired company bonds, as well as an increase of $4.2 million in bad debt allowance. As a percentage of total revenues, G&A expenses were 7% and 8% for fiscal year 2014 and 2013, respectively. Including the non-cash share-based compensation expenses recorded on a GAAP basis, G&A expenses were $39.7 million and $29.6 million for the fiscal year 2014 and 2013, respectively. Research and development expenses were $36.5 million for the fiscal year 2014 as compared to $32.5 million of the prior year, representing an increase of $4 million or 12.2%. As a percentage of total revenues, R&D expenses were 7% and 9.3% for the year ended June 30, 2014 and 2013 respectively. The VAT refunds and government subsidies amounted to $25.9 million for the year ended June 30, 2014 as compared to $23 million for the prior year, representing an increase of $2.9 million or 12.9%. The increase was consisted of an increase of $4 million in VAT refunds, which was partially offset by a decrease of $1.1 million in government subsidies. The income tax expenses and the effective tax rate were $19.9 million and 21.7% for the fiscal year 2014, as compared to $8.1 million and 13.4% for the prior year. Of the $19.9 million expenses for the current year, $1.4 million was accrued and withheld for the potential profits distribution from PRC to overseas. Excluding the withholding tax impact, the effective tax rate for the current year is 20.2%. Beijing Hollysys & HangZhou Hollysys are now in the process of renewing their High-tech certification, which would grant the company a preferential tax rate of 15% for calendar year 2014 to 2016, and expected to get the renewed certificate in late 2014. For the January to June 2014, the company used the statutory tax rate of 25% to calculate the current and the deferred tax from a conservative stand point. For the fiscal year 2014, the non-GAAP net income attributable to Hollysys excluding non-cash share-based compensation expenses, amortization of acquired intangibles and acquisition related consideration fair value adjustments was $87.2 million or $1.49 per diluted share base on 58.4 million shares outstanding. This represents an increase of $29.6 million or 51.3% over the $57.6 million or $1.02 per diluted share based on 56.4 million shares outstanding reported in the prior year period. On a GAAP basis, net income attributable to Hollysys was $69.9 million or $1.20 per diluted share, representing an increase of $17.9 million or 34.3% over the $52 million or $0.92 per diluted share reported in the prior year period. Hollysys backlog as of June 30, 2014 was $556 million, representing a decrease of 7.8% compared to $602.9 million as of March 31, 2014, and an increase of 13.8% compared to $488.7 million as of June 30, 2013.The detailed breakdown of backlog by segment was as followings. Industrial Automation $178.7 million, Rail Transportation $262.1 million, Mechanical and Electrical Solution $115.2 million. For the fiscal year ended June 30, 2014 the net cash provided by operating activities was $84.8 million. Including investing and financing activities, the total net cash inflow for this year was $49.9 million. During this year the net cash used in investing activities was $25.2 million, majorly consisted of $18.9 million placed with banks as time deposits, $8.4 million used in purchase of property, plant and equipment, $5.5 million paid for the second batch of share consideration for bond acquisition, and partially offset by $11.6 million proceeds from maturity of time deposits. The net cash used in financing activities was $8.3 million, majorly consisted of $13.8 million used in repayment of short-term bank loans, $9.2 million used in repayment of long-term bank loans, and partially offset by $14.6 million proceeds from short-term bank loans. The total amount of cash and cash equivalents and time deposits with original maturities over three months were $190.5 million, $150.5 million and $133.1 million as of June 30, March 31, 2014, and June 30, 2013 respectively. Of the total $190.5 million as of June 30, 2014, cash and cash equivalents were $162.2 million and time deposits with original maturities over three months were $28.3 million. For the fiscal year 2014, DSO is 150 days as compared to 180 days for the prior year and the inventory turnover is 36 days as compared to 32 days for the prior year. Given our strong backlog currently on-hand and sales pipeline envisioned so far, we set our guidance for fiscal year 2015 with revenue in the range of $565 million to $600 million and non-GAAP net income in the range of $94 million to $98 million. At this time we like to open up for the Q&A session. Please note that for Chinese speaking participants we can also do the Q&A in Mandarin and we will provide translation. (Foreign Language) Operator, please.

(Operator Instructions) Your first question comes from the line of Baiding Rong of Credit Suisse. Your line is open. Please go ahead. Baiding Rong - Credit Suisse (Interpreted): (Foreign Language) Okay, thank you Baiding. Mr. Baiding Rong has four questions. The first question regarding the guidance, he asked the management to give a breakdown of the guidance in terms of revenue and net income by different segments? And second question is regarding to ATP, and he wants to know how many sets of ATP is due upon delivery? And thirdly, he asked about the gross margins and the breakdown in different segments like IA, Rail and M&E? And the fourth question is regarding the IA growth into 2015 and he wants to know the growth rate of the factory automations growth of the IA in 2015? Thanks. Herriet Qu (Interpreted): (Foreign Language) So for the first question, I mean we have three major businesses, Industrial Automation, Rail and M&E. For the Industrial Automation we expect to have 8% to 15% growth rate going into the next fiscal year and with a high expectation to achieve 10% to 15%. For the Rail, because this year we achieved very high growth because of the backlog execution and the new orders pipeline. So this gives us a very high pressure going into next fiscal year. So we expect the next fiscal year to maintain a stable performance as compared to this fiscal year. For the M&E we expect to have around 15% growth rate. (Foreign Language) So for the ATPs it’s not appropriate to disclose the exact numbers of the set of the ATP upon delivery, but according to the contract we are ordered to deliver all the ATPs by July 30. But we still have some sets of ATPs due upon delivery. So by the end of the September quarter we will finish the whole contract. (Foreign Language) We still maintain a stable growth margin performance for the Industrial Automation that is 30% to 35%, Rail is 40% and the Mechanical and Electrical Solutions 15%. Baiqing Shao (Interpreted): (Foreign Language) Okay, I’ll translate for Mr. Shao, our CEO, for the growth of the process automation factory, automation going into the next fiscal year. Firstly, for the process automation, this business is where we originate from. Even though because of the current economic situation that caused the metallurgy and building materials industries has kind of slowed down, but we have stable growth from the food and beverage industry, thermal power and the medical industries. So in 2015 we feel confident to achieve about 10% to 15% growth in this segment. For the factory automation, this area we emphasized very much and invested a lot of resources. We have the mature products like the PLC and the motion control products, and especially for the Traditional Chinese Medicine we have the packaging machines and dispensing equipment and have done a lot of research and have established successful track record. So in the future we will continue with the research and development in terms of the entire automated production line development in this area. So overall, speaking for the factory automation, because these are low based, we expect this area to grow faster compared with process automation. (Foreign Language) Okay, for the specific measures, we have successfully released our DCS K-series products and have successfully applied the K-series DCS in the large projects, like the very large, super critical, super power plant. Also, we have strengthened our industry solution improvement and established or strengthened our relationship with large customers and enhanced our after sales and maintenance work. So in the future we seek to improve the quality and the win-rate field and improve the overall revenue performance of this area. (Foreign Language) For the factory automation, we constitute some kind of the technology corporation, to introduce more advanced technology or products to improve our solution. So we will have for the improvement and we will announce when we get more progress in this area. (Foreign Language) The factory automation currently in China is in the process of fast growth. All this is because of very deep knowledge and the solid accumulation of technology, such that we will also invest more in this area. Baiding Rong - Credit Suisse (Interpreted): (Foreign Language) Okay, Baiding has two more questions. First he wants to know the order pipeline for the Rail and M&E for the future. And second, he wants to know the gross margin performance of the different segments. So which of that there is not too much difference of the gross margin of the individual segment. Baiqing Shao (Interpreted): (Foreign Language) Okay, for the orders of the rail. Firstly in the CTCS-3 segment, our ATPs can be applied in the four types of the high speed trains of A, B, C, D and for the CTCS-2 for the ground TCC supplying, we have won quite a lot of order as you have seen and because of the strong performance of our rail in the last fiscal year. So in the next fiscal year we expect to have the similar or the stable performance in this sector. Besides we are also spending and doing more research in the related areas, such as we are doing more maintenance, and also we have developed our ATP products equipment in the track trains. Besides we also have designed and developed our track circuit product and have passed the related tax or examination by the local authorities. (Foreign Language) Okay. Also for the CTCS-1, we are developing the related technology and a solid foundation for the future reconstruction market opportunities and also we are spending our market share in our EU and TCC market and we have got our track circuit and interlocking system for the preparation to be certified by the local authorities to expand our product lines in this area. And lastly, for the intra-city high-speed trains, we have formed a dual technology solution. One is C2 and the second one is C2 plus ATO. So we are well prepared in both technology paths into the future and enhance the entrance barrier and enhance now our competitive strengths. (Foreign Language) In terms of the overall investment scale in China, and China is going to invest more than RMB800 billion in the rail construction in 2014 and now less than RMB600 billion or RMB700 billion in the next year, 2015. So we are confidence the favorable environment will present us some more opportunities for the continuous development. (Foreign Language) Besides, we have successfully signed our SCADA contract with LTA for the Thompson line in Singapore. So that truly, greatly helps our brand name recognition in the international make. So we continue to work closely with such large end customers in the international market and to improve our international presence. Thank you. (Foreign Language)

Okay. Next question.

Your next question comes from the line of Frank Xu of Goldman Sachs. Please go ahead. Frank Xu - Goldman Sachs: Hi. Can you hear me?

Hello. Frank Xu - Goldman Sachs: Hi, this is Frank Xu from Goldman Sachs. So I have some very quick questions. First of all, can you talk about the new motion control products outlook? How much factory automation revenue is there going to be in this sector in financial year 2014 and what about the forecast of this sector in financial year 2015 and 2016? And also, I see there’s a new revenue line item called Service Rendered for this year’s financial reports. So I was just wondering if you can give some color on what exactly is this item? Thank you very much.

Thank you, Frank. Baiqing Shao (Interpreted): (Foreign Language) For the motion control, we have developed our products and successfully applied in the customers one and we don’t want to disclose too much details about this product. But this will, just like the PLC work as a core product we will provide into this market in the future. (Foreign Language) For the factory automation percentage revenue, sorry we don’t disclosure details separate of the factory automation versus product automation and sequences of skill in a relatively small scale. So in the future, because of the labor cost increase in this area of growth, we think it will gradually take you out a percentage and in the future we may consider to disclose the detailed breakdown of our IA and give you the detailed revenue performance of this area in the factory automation. (Foreign Language) Frank Xu - Goldman Sachs: Got it. Thank you very much.

Hello. Because of the increase in the service performance, after we discuss with our auditor we accepted this service in our revenue to better illustrate our nature in terms of the product providing and service providing in the whole segment. Frank Xu - Goldman Sachs: Thank you. Mr. Shao, Ms. Qu and Ms. Jennifer for translation. Thank you very much.

Thank you, Frank. Next question please.

Your next question comes from the line of Lingxin Kong of CICC. Please go ahead. Lingxin Kong – CICC (Interpreted): (Foreign Language) : Second question, he has noticed these orders decrease in the M&E segment in the last quarter the asset the management explained. And third question is about the revenue and net income guidance in 2015. He want to know how much ATP and TCC contracts have been included in our guidance and if there’s any opportunity that we can outperform the guidance we announced. Thank you.

(Foreign Language) Okay, for the CBTC and other related products, are categorized in the signaling field and also can be named as the safety system. So we are very cautious and careful in the product development and also we currently do a lot of testing of our products. In future we will increase our investment and development into these two areas and explore more opportunities in the market. So we cannot give you guidance of how much revenue we can earn from this segment in the next two years. (Foreign Language) So for the second question about the order decrease in the M&E, because of its kind of seasonality in this quarter and our strong delivery of the orders. So in the future, into the M&E segment, it will strengthen our investment and investment in the marketing. Also we have established a lot of strategic operation relations in Singapore and Malaysia and work closely with the customers in the local area. And also, we have a lot of EPC customers. So we’ll also elaborate their customer resources in the local area to strengthen our IA marketing and sales. And certainly we will build ourselves in terms to do more in total solutions, products and more turnkey solution providing. Herriet Qu (Interpreted): (Foreign Language) So for the guidance of 2015, we made the guidance based on our current backlog and our new order pipeline envisioned. But maybe there is some uncertainty in terms of that new ordered signing and there is possibility to outperform our guidance in the Rail. It’s really hard to say. Just like in this fiscal year, it’s really very much beyond our expectations originally. So in this area currently we give such guidance, but that really depends on the market. (Foreign Language)

Next question. Hello operator, next question please.

Your last question comes from the line of Alex Chang of Citi. Please go ahead. Alex Chang – Citi (Interpreted): (Foreign Language) Thank you, Alex. I’ll translate all the three questions. Firstly, for the VAT and government subsidy in this fiscal year, he would like to know the split of the two segments and the future trend of the VAT and government subsidy. And second question is regarding one sentence written in our earnings report; that is $1.4 million was accrued and withheld for potential profits distribution from PRC to overseas. He wants the management to explain. And similarly, he wanted to know the market share change in the CTCS-3 and CTCS-2 in our Rail and he said that we have a very high market share in the CTCS-2, but our market share in the CTCS-3 is relatively low around 30%. Is there any potential to increase our market share in this area and what is the reason for the low market share in this area? Thank you. Herriet Qu (Interpreted): (Foreign Language) Okay, I’ll translate first. For the first question, we have $22 million for the VAT refund and $3 million for the government subsidy. In the future there will be no policy change in these two areas. For the VAT refund we need to first pay the tax to the government first and then to claim back the related tax from the government. But I want to tell you that there’s no linear relationship between the VAT and the revenue, so it’s laterally related with your proprietary software portion in our products providing. And for your information, for both IA and Rail, we can claim the VAT refund. For the M&E there’s no VAT refund. And secondly, for your question about the sentence, because we have been considering to pay the dividend, if we want to pay, we need to accrue and withhold the potential tax first according to the accounting firm. But whether we will pay the dividend, it will largely depend on the management decision and the consideration of our operation, and definitely we need to seek the Board’s approval for this proposal. And thirdly, we definitely want to unite our market shares in the C3 segment, but firstly we need to do and perform well in the current C2 and C3 projects and try to enlarge our market share in the C3 in the future, maybe potentially.

Thank you, Alex. Okay, thank you everyone for joining us on the call today. If you haven't got a chance to raise your question, we'll be pleased to answer them through follow up contacts. We look forward to speaking with you again in the near future. Thank you. Take care.

That does conclude today’s conference. Thank you all for participating. You may all disconnect.