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(1) SMFL China signs a lease contract with a Company in China (Customer). After the signing of the contract, SMFL China purchases equipment from the seller.
(2) After receiving inspection, the Customer will make lease payments to SMFL China over the course of the lease term.

Transaction Type: RMB-based finance lease (purchase option available at the end of lease term at a bargain purchase price)
Target Properties: Newly acquired fixed assets (limited to movable properties/ real estate excluded)
→Properties subject to VAT receipt
Term: 1 - 3 years in principle (requires consultation if more than 3 years).

・Record the finance lease asset on the balance sheet and carry out depreciation (Same depreciation method employed for fixed asset owned by the Customer).
・Lease payment amount outstanding shall be recorded on the balance sheet as long-term account payable.

・Depreciation expense for the current term + lease interest are treated as expense.

(1) Company in China (Customer) sells the newly-acquired equipment or the existing equipment at book value to SMFL China.
(2) SMFL China leases the equipment back to the Customer at an amount denominated in RMB. (The purchase amount will be remitted from SMFL China to the Customer after receiving inspection. Lease payment will be paid during the lease term in installments.)
＊ Any inquiries regarding the treatment of VAT shall be directed to SMFL China.

Transaction Type: RMB-denominated Finance lease-backs (purchase option available at the end of lease term at a bargain purchase price)
Target Properties: Newly acquired or existing fixed assets (real estate excluded)
→Properties subject to VAT receipt (limited to movable properties)
→ Duty-free import equipment of which the customs supervision period (5 years) have not passed is excluded.
→ EL properties (properties authorized for export by the Ministry of Economy, Trade and Industry of Japan) require change of ownership procedure.
Term: 1 - 3 years in principle (requires consultation if more than 3 years).

・Procurement of long term / fixed rate RMB funding.
・Flexibly diversify funding source as an alternative to bank loans.
・Simple transaction procedure
・No need to submit evidence verifying the use of funds obtained from the leaseback.

・Record the finance lease asset on the balance sheet and carry out depreciation. (Same depreciation method employed by the Customer. No changes in the depreciation method necessary for existing fixed asset that was leased back.)
・Lease payment amount outstanding shall be recorded on the balance sheet as long-term account payable.

・Depreciation expense for the current term + lease interest are treated as expense.

(1) Company in China (Customer) signs installment sales contract with SMFL Japan or Hong Kong. After the signing of the contract, SMFL China purchases equipment from the seller.
(2) After receiving inspection, the Customer will make installment payments to SMFL Japan or Hong Kong over the course of the term.
＊Consult with State Administration of Foreign Exchange or the remittance bank for necessary procedures and documents prior to execution of this scheme.

Transaction Type: Transactions denominated in Yen, US dollar or Hong Kong offshore RMB (limited to contracts with Hong Kong)
Target Properties: Newly-acquired fixed assets (limited to movable properties (excluding real estate) and equipment imported from countries outside mainland China).
Period: 1 - 3 years in principle (requires consultation if more than 3 years). Interest rate is fixed throughout the term.

・Record as Customer’s asset on the balance sheet and carry out depreciation.
・Installment payment amount outstanding shall be recorded on the balance sheet as long-term account payable.

・Depreciation expense for the current term + Installment interest are treated as expense.
＊Consult your auditors / tax accountants for details on handling the tax/accounting aspect of the above-mentioned scheme prior to execution.