INVESTMENT PROPERTIES

9 Months Ended

Mar. 31, 2016

Notes to Financial Statements

INVESTMENT PROPERTIES (IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF SHARES)

The following table presents the Company’s investment in properties in China as of March 31, 2016. The exchange rate is based on the exchange rate as of March 31, 2016 published by the Monetary Authority of Singapore.

	Investment	Investment Amount			Investment  Amount
	Date	(RMB)			(U.S. Dollars)
Purchase of Property I   – MaoYe	Jan 04, 2008		5,554			894
Purchase of Property II  – JiangHuai	Jan 06, 2010		3,600			580
Purchase of Property III – FuLi	Apr 08, 2010		4,025			649
Currency translation			-			(86	)
Gross investment in rental properties			13,179			2,037
Accumulated depreciation on rental properties			(4,114	)		(635	)
Net investment in properties – China			9,065			1,402

The following table presents the Company’s investment properties in China as of June 30, 2015. The exchange rate is based on the exchange rate as of June 30, 2015 published by the Monetary Authority of Singapore.

	Investment	Investment Amount			Investment  Amount
	Date	(RMB)			(U.S. Dollars)
Purchase of Property I   – MaoYe	Jan 04, 2008		5,554			894
Purchase of Property II  – JiangHuai	Jan 06, 2010		3,600			580
Purchase of Property III – FuLi	Apr 08, 2010		4,025			648
Currency translation			-			1
Gross investment in rental properties			13,179			2,123
Accumulated depreciation on rental properties			(3,619	)		(583	)
Net investment in properties – China			9,560			1,540

Rental Property I - MaoYe

In fiscal 2008, TTCQ purchased an office in Chongqing, China from MaoYe Property Ltd. (“MaoYe”), for a total cash purchase price of RMB 5,554, or approximately $894 based on the exchange rate as of March 31, 2016 published by the Monetary Authority of Singapore. TTCQ rented this property to a third party on July 13, 2008. The term of the rental agreement was five years. The rental agreement was renewed on July 16, 2014 for a further period of five years. The rental agreement provides for a rent increase of 8% every year after July 15, 2015. The renewed agreement expires on July 15, 2018; however, this rental agreement (1,104 square meters at a monthly rental of RMB 39, or approximately $6) was terminated on July 31, 2015. TTCQ identified a new tenant and signed a new rental agreement (653 square meters at a monthly rental of RMB 39, or approximately $6) on August 1, 2015. This rental agreement provides for a rent increase of 5% every year on January 31, commencing with 2017 until the rental agreement expires on July 31, 2020. TTCQ signed a new rental agreement (451 square meters at a monthly rental of RMB 27, or approximately $4) on January 29, 2016. This rental agreement provides for a rent increase of 5% every year on January 29, commencing with 2017 until the rental agreement expires on January 29, 2019.

Property purchased from MaoYe generated a rental income of $25 and $53 for the three and nine months ended March 31, 2016, respectively, and $29 and $87 for the same periods in the last fiscal year, respectively.

Rental Property II - JiangHuai

In fiscal year 2010, TTCQ purchased eight units of commercial property in Chongqing, China from Chongqing JiangHuai Real Estate Development Co. Ltd. (“JiangHuai”) for a total purchase price of RMB 3,600, or approximately $580 based on the exchange rate as of March 31, 2016 published by the Monetary Authority of Singapore. TTCQ rented all of these commercial units to a third party until the agreement expired in January 2012. TTCQ then rented three of the eight commercial units to another party during the fourth quarter of fiscal year 2013 under a rental agreement that expired on March 31, 2014. Currently all the units are vacant and TTCQ is working with the developer to find a suitable buyer to purchase all the commercial units. TTCQ has yet to receive the title deed for these properties; however TTCQ has the vacancies in possession with the exception of two units, which are in the process of clarification. TTCQ is in the legal process to obtain the title deed, which is dependent on JiangHuai completing the entire project. In September 2014, TTCQ performed a valuation on one of the commercial units and its market value was higher than the carrying amount. As of the date of this report, there was no other valuation performed.

Property purchased from JiangHuai did not generate any rental income during the three and nine months ended March 31, 2016 and 2015.

Rental Properties III – FuLi

In fiscal 2010, TTCQ entered into a Memorandum Agreement with Chongqing FuLi Real Estate Development Co. Ltd. (“FuLi”) to purchase two commercial properties totaling 311.99 square meters (“office space”) located in Jiang Bei District Chongqing. Although TTCQ currently rents its office premises from a third party, it intends to use the office space as its office premises. The total purchase price committed and paid was RMB 4,025, or approximately $649 based on the exchange rate as of March 31, 2016 published by the Monetary Authority of Singapore. The development was completed and the property was handed over during April 2013 and the title deed was received during the third quarter of fiscal 2014.

The two commercial properties were leased to third parties under two separate rental agreements, one of which expired in April 2014 and the other of which expired in August 2014.

For the unit for which the agreement expired in April 2014, a new tenant was identified and a new agreement was executed, which expires on April 30, 2017. The new agreement carried an increase in rent by 20% in the first year. Thereafter the rent increases by approximately 8% for the subsequent years until April 2017.

For the unit for which the agreement expired in August 2014, a new tenant was identified and a rental agreement was executed, which agreement was to expire on August 9, 2016. The agreement carried an increase in rent of approximately 21% in the first year. Thereafter the rent was to increase by approximately 6% for the subsequent year. The tenant of this unit had defaulted on payment of the quarterly rental due in August 2015, however the rental deposit is available to offset the outstanding rent. In early October 2015, TTCQ issued a legal letter to this tenant on the outstanding amounts, to which the tenant has not responded. As of the date of this report, the August 2014 rental agreement (161 square meters at a monthly rental of RMB 16, and approximately $2) was terminated. A new rental agreement with a new tenant (161 square meters at a monthly rental of RMB 14, or approximately $2) was signed on October 21, 2015. This latest rental agreement provides for a rent increase of 6% after the first year, commencing from the year 2016 until the rental agreement expires on October 20, 2017.

Property purchased from FuLi generated a rental income of $8 and $31 for the three and nine months ended March 31, 2016, respectively, while it generated a rental income of $14 and $43, respectively, for the same periods in the last fiscal year.

Penang Property I

During the fourth quarter of 2015, the operations in Malaysia planned to sell its factory building in Penang, Malaysia. In accordance to ASC Topic 360, the property was reclassified from investment property, which had a net book value of RM 371, or approximately $98, to assets held for sale since there was an intention to sell the factory building. In May 2015, TTM was approached by a potential buyer to purchase the factory building. On September 14, 2015, application to sell the property was rejected by PDC. The rejection was based on the business activity of the purchaser not suitable to the industry that is being promoted on the said property. PDC made an offer to purchase the property, which was not at the expected value and  the offer expired on March 28, 2016. However, management is still actively looking for a suitable buyer. As of March 31, 2016 the net book value was RM 369, or approximately $94.

Summary

Total rental income for all investment properties (Property I, II and III) in China was $33 and $83 for the three and nine months ended March 31, 2016, respectively, and was $43 and $130, respectively, for the same periods in the last fiscal year.

Depreciation expenses for all investment properties in China were $25 and $77 for the three and nine months ended March 31, 2016, respectively, and were $27 and $81, respectively, for the same periods in the last fiscal year.