HLS Systems International, Ltd.
The Leading Integrated Automation Control
Systems Company in China
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Safe Harbor
This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995, about HLS Systems International, Ltd. (“HLS”), Chardan North China Acquisition Corp. (“Chardan North”), and
the business after completion of the share exchange. Forward looking statements are statements that are not historical
facts. Such forward-looking statements, based upon the current beliefs and expectations of the HLS 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 forward-looking statements:
business conditions in China, changing interpretations of generally accepted accounting principles; outcomes of
government reviews; continued compliance with government regulations; legislation or regulatory environments,
requirements or changes adversely affecting the businesses in which HLS is engaged; fluctuations in customer demand;
management of rapid growth; intensity of competition from other providers of automation control products; timing approval
and market acceptance of new products introduction; general economic conditions; geopolitical events and regulatory
changes, as well as other relevant risks will be detailed in future filings with the Securities and Exchange Commission. The
information set forth herein should be read in light of such risks. Neither HLS nor Chardan North assume any obligation to
update the information contained in this presentation.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has
not yet become effective. These securities may not be sold, nor may offers to buy be accepted, prior to the time the
registration statement becomes effective. This presentation shall not constitute an offer to sell or the solicitation of an offer
to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such state.
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Chardan North China Acquisition Corp. (OTCBB: CNCA,
CNCAW, CNCAU) will acquire a controlling interest in
HollySys
Transaction expected to close later this year
CNCA will change its name to HLS Systems
International, Limited (“HLS”) , at closing
Combined entity expects Nasdaq listing upon closing
Business Combination
* Chardan North is a SPAC formed to acquire an operating business north of the Yangtze River in the
People’s Republic of China (“China”)
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About HLS Systems International, Ltd.
HLS is the leading domestic developer and provider of
automation technology in China
Automation controls are systems that digitize and automate tasks
Used by utilities, oil and gas refineries, chemical factories, food
and pharmaceutical processing plants, etc.
HLS is one of the fastest growing automation system
solution providers in the world
Over 3,000 clients and 5,000 projects since 1996
Contracted for over 1,000 new projects in 2006 (~3 per day)
Technology based
44 patents issued with 16 more in process
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Profitable and cash flow positive
Dynamic organic growth
35.7% compounded revenue growth FY 2003-2006
100.9% compounded earnings growth FY 2003-2006
Anticipate accelerating growth
China’s increasing industrial automation coupled with expanding
nuclear and rail initiatives
New International contracts
Potential acquisition candidates include synergistic competitors and
sensor manufacturers to vertically integrate
Financial Parameters
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HLS Revenue and Income Growth
Revenue
Income
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Years Ended June 30
(USD $ in Millions)
2006 2005 % Change
Total Revenues $89.9 $79.6 +13%
Gross Profit $32.0 $24.9 +29%
Comprehensive Income $19.2 $13.7 +40%
Three Months Ended September 30
(USD $ in Millions)
2006 2005 % Change
Total Revenues $24.4 $20.9 +17%
Gross Profit $ 9.9 $ 6.1 +62%
Comprehensive Income $ 5.8 $ 4.4 +32%
Select Financial Comparables
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New Contracts
$134,152
$136,083
$126,397
$128,286
$147,398
Average price per contract
$36.89
$26.53
$117.17
$90.06
$88.29
Total amount of new contracts (mm)
275
195
927
702
599
Number of new contracts won
2006
2005
2006
2005
2004
For Three months
Ended
September 30
For Fiscal years Ended
June 30
$98 M in Backlog as of September 30, 2006
Up from $86.8 million as of June 30, 2006
Amounts in USD $
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Large multinationals (2005 rank in China)
1.
ABB
2.
HLS (organic growth in China)
3.
Siemens
4.
Emerson
5.
General Electric
Large multinationals are being overtaken by HLS
-Cost structure at HLS about 30%-50% that of competition
-Equal or higher quality platform
BASF qualified HLS as a vendor after extensive due diligence
Use latest chip technology for each generation
No legacy systems
As newcomer, designed platforms to integrate other’s devices
Open architecture permits quick turnaround
Competitive Landscape
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Impressive track record
Success in market and close proximity to customers has created a long-
term, loyal customer base
Experience in industries with safety concerns (rail and nuclear power)
creates increased demand
Integrated, efficient & scalable automation solutions
Only totally integrated producer based in China
Designs with proprietary software, manufactures, installs, services & maintains
Speed to develop/customize/integrate products is over 2x faster
Product is highly scalable
Low cost production
HLS selling price with 35% gross margin is markedly < international price
Cost of R&D is <20% of international competitors’ R&D cost
Competitive Advantages
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Technology based
Has 44 patents and 15 proprietary software licenses
Technology meets or exceeds that of international competition
Expertise and technology is 3-5 years ahead of Chinese domestic
competitors
High barriers to entry
Highly regulated nuclear and rail industries
HLS is one of five approved suppliers to China’s rail automation industry
HLS is the only domestic producer of automation controls that can supply the
nuclear industry
HLS sets the standard
As the early market entrant in China and as the largest local player, HLS
has set de facto automation standards in a variety of industries including
nuclear and rail
All competitors must modify products to HLS standard
Competitive Advantages
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HLS Core Automation Control Products
HLS develops, produces and integrates innovative and cost-
effective proprietary solutions:
Industrial Automation Control Systems
Solutions that automate tasks
heavy manufacturing (i.e., power generation, petrochemical,
chemical, and steel)
light manufacturing (i.e., pharmaceuticals, beverage, food
processing)
Rail Automation Systems
Train, Subway & Light Rail system controls
creates safe, efficient and reliable operation of railway systems
controls speed of trains, track changes, stoppages, and
distances between other trains
Nuclear Power Plant Automation Systems
Information control center of power plant
monitors, controls, protects parts and equipment
ensures safe, steady, economical operation
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Global industrial automation market size
Estimated to grow to USD $70 billion in 2008 from
USD $35 billion in 2001 (ARC Advisory Group)
China’s industrial automation market
Booming economy and infrastructure fueling growth in
Industrial Automation Control Systems
Industrial Automation Control Market Size
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Traditional Power Market
CAGR historically >10% and to accelerate in future
Large power supply issues (>15% disparity between supply and demand)
500,000 MW capacity (2005) to expand to a 680,000 MW (2010)
Sub-industries will emerge
Gas desulphurization devices on power plants required by Kyoto Protocol over
next 10 years will create a multi-billion dollar industry for industrial automation
Petrochemical/Chemical Market
CAGR historically 10% for petrochemical and 20% for chemical
190 new projects in China already funded with industrial automation
portion estimated to be USD $5.7 billion
Substantial modernization to occur
20% of systems in operation need to be upgraded
High Growth Sectors for
Industrial Automation Systems
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China currently has ~6% of the world’s track for
25% of the world’s cargo
Can only currently meet 1/3 of domestic demand for rail freight
Massive influx of new investment to account for disparity
2004 Government policy to expand and upgrade railways
By 2010, China will add 10,000 km of track and upgrade an additional
10,000 km of track (total investment of ~USD $5.3 billion)
From 2011-2015, Government projects an investment of USD $8.6 billion
in signal equipment (including automation controls)
China’s Traditional Rail Market Need
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Significant investments Subway/Light Rail
infrastructure from 2006-2010
Government expects to invest USD $62.1 billion to construct 55 new
subways or city rails
Covering 1,500 km in metropolitan areas such as Beijing, Shanghai,
Guangzhou, Tianjin, etc.
HLS is the leading player in both traditional rail and urban
rail market
Very high barrier to entry
Safety a major concern and industry is regulated by China’s railway ministry
with HLS as lead player
Work is awarded primarily based on track record in China
Growth Potential in Urban Rail Market
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HLS is the only domestic (Chinese) supplier
HLS has participated in the development of nuclear power plants built in China
HLS has Joint Ventures with the main Nuclear Plant
Developers in China
Significant Growth Potential
In China – government expects to construct ~FORTY >1GW nuclear power
plants in next 20 years
From 2008 to 2014, HLS will have substantial revenue from nuclear
Internationally – HLS will leverage its high-tech, low cost proven system in
other countries worldwide
Over 200 existing units under operation that need to upgrade automation systems
HLS Nuclear Market Position
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HLS recently launched its blockbuster LK series PLC
First large Chinese-designed and manufactured PLC product
Utilizes state-of-the-art technologies
World’s best price performance ratio
The LK series merges modern PLC and advanced DCS together
meets the requirements of system integrators for both continuous and discrete
applications
The PLC market in China is > USD $5B, and growing at 15% per year.
The LK product should produce at least USD $50m in revenue with 30%
after tax profit in 5 years
HLS PLC Position
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HLS has historically focused on China
In next 5 years, international expansion will augment China
New products are ready to be introduced
Strategic positioning
HLS to replicate its strategy as the low-cost/high quality producer in China
to win contracts against foreign suppliers worldwide
Western market expansion
Currently have multiple projects in India and Pakistan
Will partner with companies that have existing contracts/relationships in
Western markets
BASF has chosen HLS as a vendor and is currently working together on a
chemical plant project
In discussions with other large US and European-based companies
International Expansion Opportunities
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Dr. Wang Changli – Vice Chairman & CEO
Pioneer in developing automation and control technology in China
Over 17 years of experience in automation and controls industry
Author of multiple publications on automation and control
technologies
Vice chairman of China’s Automation Industry Association
Bilingual in English and Mandarin
Education
Ph.D. in Automation from Lancaster University in the UK (1988)
BSE from Tianjin University in 1984
Seasoned Senior Management
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John Sun- COO
CEO Forxboro (China) from 1997-2006
Expanded the business from USD $21M to USD $130M
Worked for Emerson electric Company form 1993-1997
Graduate of U.S. based university with MSc
Recently joined HollySys as COO
Qiao Li- Chairwoman
Director of Hi-Tech enterprise development department of
Bejing Hi-Tech Park from 1988-1998
Vice President of Beijing Hi-Tech Venture Capital from 1998-
2003
Master’s degree in Business Administration from Capital
University of Economics and Business
Seasoned Senior Management
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Over 1,200 employees
150 R&D engineers
High employee retention
In past 5 years, only less than 10% engineers have left
company
Two major manufacturing and design centers
Beijing
Hangzhou
7 Regional Sales Offices
Engineering know-how at the sales level
Permits knowledge based early input into design process
Personnel
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Owners of Gifted Time Holdings, on an all-or-none-basis each year, will
be issued an aggregate 2.0 million additional shares of common stock if
they achieve after-tax profits in the following amounts for the year ending
December 31 2007, 2008, 2009, and 2010 and 3.0 million additional
shares of common stock if they achieve after-tax profits in the following
amount for the year ending December 31, 2011:
Year Ending 12/31 After-Tax Profit (USD)
2007 $ 23,000,000
2008 $ 32,000,000
2009 $ 43,000,000
2010 $ 61,000,000
2011 $ 71,000,000
Incentive-Based Compensation
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Needed to move HLS to BVI’s
Terms
Loan to be repaid at closing of acquisition by CNCA with trust
money
NO CHANGE in number of shares outstanding in cap
table
Total Number of shares to be paid out at closing remains
23,500,000
$30 Million Bridge Loan in December 2006
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Post Merger Capitalization Table
100.00%
41.1%
13.7%
27.4%
3.1%
52.9%
Ownership
Percentages
1,300,000
Bridge Loan Investors
$62,000,000
42,000,000
Totals
$92,000,000
$34,500,000
$57,500,000
17,250,000
5,750,000
11,500,000
SPAC Investors
SPAC Common Stock
SPAC Warrants
22,200,000
Gifted Time Shareholders
Investment
(USD)
Shares
SPAC Management
1,250,000
3.0%
($30,000,000)
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Largest Automation & Control Company in China
Track Record of Success
Highly Profitable and Cash Flow Positive
New Generations of Products Continuously Under
Development
Experienced & Motivated Management Team
Impressive Projected Growth Rate
China- Strong growth in nuclear, rail and industrial manufacturing
International - myriad of opportunities
Investment Conclusions
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HLS Systems International, Ltd.
The Leading Integrated Automation Control
Systems Company in China
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In connection with the pending transaction, HLS Systems International Ltd. (“HLS Systems”) has filed with the SEC a
Registration Statement on Form S-4 containing a Proxy Statement/Prospectus for the stockholders of Chardan North. The
stockholders of Chardan North are urged to read the Registration Statement and the Proxy Statement/Prospectus, when it
is available, as well as all other relevant documents filed or to be filed with the SEC, because they will contain important
information about HollySys, HLS Systems, Chardan North and the proposed transaction. The final Proxy
Statement/Prospectus will be mailed to stockholders of Chardan North after the Registration Statement is declared
effective by the SEC. Chardan North stockholders will be able to obtain the Registration Statement, the Proxy
Statement/Prospectus and any other relevant filed documents for free at the SEC’s website (www.sec.gov). These
documents can also be obtained for free from Chardan North by directing a request to Lori Johnson c/o Chardan Capital,
625 Broadway, Suite 1111, San Diego, CA 92101.
HLS Systems, Chardan North and their respective directors and officers may be deemed to be participants in the
solicitation of approvals from Chardan North stockholders in respect of the proposed transaction. Information regarding
Chardan North’s participants will be available in the Proxy Statement /Prospectus. Additional information regarding the
interests of such participants will be included in the Registration Statement containing the Proxy Statement / Prospectus.
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