Company: AOSL
Filing Date: 2025-08-28
Form Type: 10-K
Source: 0001628280-25-041297
Chunk: 145

Company: ALPHA & OMEGA SEMICONDUCTOR Ltd
Filing Date: 2025-08-28
Form: 10-K
Item: Item 7
Chunk 145
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 Company is accounting for this transaction as a secured borrowing under the Transfers and Servicing of Financial Assets guidance.  In addition, any cash held in the restricted bank account controlled by HSBC has a legal right of offset against the borrowing.  This agreement, with certain financial covenants required, has no expiration date.  On August 11, 2021, the Borrower signed an agreement with HSBC to decrease the borrowing maximum amount to $8.0 million with certain financial covenants required.  Other terms remain the same.  As of June 30, 2025, there was no outstanding balance for this loan.

The Chinese government imposes certain currency exchange controls on cash transfers out of China.  Regulations in China permit foreign owned entities to freely convert the RMB into foreign currency for transactions that fall under the “current account,” which includes trade related receipts and payments, interests, and dividend payments.  Accordingly, subject to the review and verification of the underlying transaction documents and supporting documents by the account banks in China, our Chinese subsidiaries may use RMB to purchase foreign exchange currency for settlement of such “current account” transactions without the pre-approval from SAFE or its provincial branch.  Pursuant to applicable regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.  A Chinese company must pay 10% of its annual after-tax profits to fund its statutory reserve fund unless it has reached 50% of the registered capital of the company. Where the accumulative amount of the company’s statutory reserve is not enough to make up for the losses of the previous year, the current year’s profits must first be used to make up for the losses before the statutory reserve is accrued.  While SAFE approval is not statutorily required for eligible dividend payments to the foreign parent, in practice, before making the dividend payment, the account bank may seek SAFE’s opinion with respect to a dividend payment if the payment involves a relatively large amount, which may delay the dividend payment depending on the then overall status of cross-border payments and receipts of China.

Transactions that involve conversion of RMB into foreign currency in relation to foreign direct investments and provision of debt financings in China are classified as “capital account” transactions.  Examples of “capital account” transactions include repatriations of investments by foreign owners and repayments of loan principal to foreign lenders.  "Capital account" 

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transactions require prior approval from SAFE or