PHU M&L Property

Pactolus Hungarian Property Plc
Final results to 31 December 2014

Pactolus Hungarian Property Plc presents its results for the year ended 31 December 2014.

The original sphere of the Company’s activity was that of acquiring, developing, selling and letting investment properties in Budapest, Hungary.  However, at the Annual General Meeting held on 26 June 2014, this was expanded to include investing directly or indirectly (via equities, debt and derivatives) in a portfolio of assets or asset backed investment vehicles including real estate, infrastructure, closed and open ended funds.

Key Highlights

• The portfolio of properties was valued at €7.3m as at 31 December 2014 (2013:€7.3m);

• Net asset value per share of 38p as at 31 December 2014 (2013: 41p), a decrease of 7 per cent, mainly due to exchange rate movements;

• Annualised rent roll of €400,590 at 31 December 2014 (2013: €393,810) with a current annualised rent roll of €454,180;

• Rental yield on cost as at 31 December 2014 was 7.4 per cent (2013: 7.5 per cent);

• The quality of our leases has deteriorated with 83 per cent now expiring in under a year (2013: 73 per cent); and

• The Group has continued to review costs throughout the year, reducing annual administration costs by 24 per cent to €177,140 for the year ended 31 December 2014 (2013: €232,641).

  Chairman’s Statement

  In what has been a fairly static year for the Group in terms of property sales, the Group’s reported net asset value at the period end was €5.1m, which equates to 38 pence per share (conversion rate of €1.2870 to Sterling).  We continue to operate at a profit before financing activities, generating €80,243 this year compared to €20,862 last year.

  The Group continued reducing its costs and for this year reported €177,140 in administrative expenses, a reduction of 24 per cent compared to the €232,641 incurred last year.

  The bank loan provided by Investec was recalled and replaced by funds made available from M&M Investment Company Plc (the parent company of the Asset Manager and majority shareholder of Pactolus Hungarian Property Plc) on 21 December 2014.  Subsequently the Group now has repaid €869,214 of this new loan from M&M Investment Company Plc.

  The share price has moved up to 26p per share as at 31 December 2014 compared to 24p per share as at 31 December 2013.

  Our strategy for the forthcoming year remains to continue to cut costs and sell properties, using the proceeds to reduce unsecured debt.  Once the debt has been cleared, the Company expects to re-invest the proceeds from the sales of its current property estate primarily into the shares of asset backed companies such as property companies or closed-end investment funds, approval of which was given at last year’s Annual General Meeting.

  This year the Board will present for Shareholders approval, a proposal to change the Company’s name from Pactolus Hungarian Property plc to M&L Property & Assets plc as it is not the long term intention of the Company to continue being so focused on Hungarian property assets.    

  Our Annual General Meeting will be held at 10.00am on Thursday 25 June 2015 at the offices of Equiom (Isle of Man) Limited, Jubilee Buildings, Victoria Street, Douglas, Isle of Man, IM1 2SH.  Shareholders who are unable to attend the Meeting are requested to complete and return the form of proxy which is enclosed with the Annual Report and Financial Statements so as to ensure that their votes are represented.

  B Miller
  Non-Executive Chairman

  28 May 2015

  Notes:
  Forex Rates:            Euro to the Pound Sterling as at 31 December 2014 was €1.2870 (2013: €1.2044); 
                                  Forint to the Euro as at 31 December 2013 was 316.50Ft (2013: 296.6Ft).
                                  (Source:  FactSet Research Inc.)

  Asset Manager’s Report

  The Property Portfolio

  The Group’s portfolio valuation has not significantly changed and remains at €7.3m as at 31 December 2014 (2013: €7.3m).  The only valuation changes this year are with regard to the properties sold post year end and reported as current investment properties in the statement of financial position.  These properties have been sold at an average net proceeds of 1.7 per cent above their 31 December 2013 book value.

  During the year to 31 December 2014, the Group made no further additions to the portfolio and the floor space remained at 4,783 square metres.  As at 31 December 2014, there were no property sales completed. 

  Lettings

  As at 31 December 2014, the Group had 18 out of 27 properties let for an average yield against cost of approximately 7.4 per cent (2013: 7.5 per cent).  As at 28 May 2015, the Group had a fully let rental book of properties.

  Disposals

  The Group did not complete any property sales in 2014 (2013:  One).  However, since the year end the Group has completed the sale of 5 properties.  These properties are being sold at an average price per square metre (after cost) of €1,438. 

  Debt and Share Repurchase Programme

  On 21 December 2014 the Group repaid the entire secured bank debt due to Investec Bank Plc (Irish Branch).  This repayment was funded by an unsecured loan advanced to the Company from M&M Investment Company Plc, the parent company of the Group’s Asset Manager.  As at 31 December 2014, the total amount due to M&M Investment Company Plc was €2.3m.

  Net debt to equity ratio has increased to 46 per cent from 44 per cent reported last year.

  The Company currently has authority to acquire up to 28.6 per cent (2,950,774 shares) of its current issued share capital (10,316,624 shares) and will be seeking shareholders’ approval at the next annual general meeting to renew this authority.

  Dividend

  The Company has continued with its policy of not paying dividends.  No dividend has been paid since 30 October 2009 and there are no plans to pay a dividend.

  Hungarian Economy

  The residential property market in Budapest has stabilised.  The Hungarian economy is not expected to record any material growth in 2015. 

  The Group’s strategy for 2015 remains the same in that we intend to work to retain our tenants, sell units when we can achieve reasonable valuations, minimise costs and reduce debt.

  Midas Investment Management Limited

  2nd Floor, Arthur House, Chorlton Street, Manchester, M1 3FH.

  Consolidated Statement of Comprehensive Income

  For the year ended 31 December

	Notes	2014 €	Restated 2013 €
Continuing operations
Rental income and related fees	4	493,473	564,195
Direct operating expenses		(236,090)	(310,692)
Gross profit		257,383	253,503
Administrative expenses	5	(177,140)	(232,641)
Operating profit	5	80,243	20,862
Finance income	10	412	2,265
Finance costs	11	(115,896)	(111,804)
Profit on disposal of investment properties	17	-	9,978
Profit on sale of listed investments	16	967	-
Net gain on revaluation of investment properties	17	26,458	-
Unrealised loss on listed investments	16	(99)	-
Loss for the year from continuing operations		(7,915)	(78,699)
Exceptional items	6	-	(32,517)
Loss before taxation		(7,915)	(111,216)
Tax expense	12	(802)	(741)
Net loss attributable to equity shareholders		(8,717)	(111,957)
Other comprehensive loss:
Exchange differences on translating foreign operations		(62,316)	(190,044)
Total comprehensive loss for the year		(71,033)	(302,001)
Loss attributable to equity shareholders		(8,717)	(111,957)
Total comprehensive loss attributable to equity shareholders		(71,033)	(302,001)
Loss per Ordinary Share:             Basic	13 13	(0.1) Cent	(1.1) Cents
Diluted		(0.1) Cent	(1.1) Cents

Statements of Financial Position

As at 31 December

		Group 2014	Parent 2014	Group 2013	Parent 2013
	Notes	€	€	€	€
Non-Current Assets
Property, plant & equipment	15	24,360	-	32,480	-
Listed investments	16	904	904	-	-
Investment properties	17	5,355,611	-	6,944,319	-
Property under development	17	317,804	-	317,804	-
Investment in subsidiaries	18	-	81,955	-	81,955
		5,698,679	82,859	7,294,603	81,955
Current Assets
Investment properties	17	1,615,166	-	-	-
Loans to subsidiaries	19	-	14,926,622	-	12,997,751
Trade and other receivables	20	61,775	44,771	98,588	51,963
Cash and cash equivalents		233,906	2,803	175,479	5,626
		1,910,847	14,974,196	274,067	13,055,340
Total Assets		7,609,526	15,057,055	7,568,670	13,137,295
Current Liabilities
Trade and other payables	21	257,187	54,997	835,312	642,378
Secured loan	22	-	-	1,150,000	-
Other loans	23	2,284,901	2,284,901	444,887	444,887
		2,542,088	2,339,898	2,430,199	1,087,265
Net Assets		5,067,438	12,717,157	5,138,471	12,050,030
Equity Attributable to Owners of the Parent
Share capital	24	150,226	150,226	150,226	150,226
Capital redemption reserve		222,715	222,715	222,715	222,715
Share premium		1,046,894	1,046,894	1,046,894	1,046,894
Merger reserve		(109,193)	(3,689,271)	(109,193)	(3,689,271)
Translation reserve		(1,578,518)	-	(1,516,202)	-
Retained earnings		5,335,314	14,986,593	5,344,031	14,319,466
Total Equity		5,067,438	12,717,157	5,138,471	12,050,030

The financial statements were approved and authorised for issue at a meeting of the Board of Directors held on 28 May 2015 and signed on its behalf by:

Stephen Gray                                                                                    Barry Smith
Director                                                                                               Director

Group Statements of Changes in Equity

	Share capital €	Capital redemption reserve €	Share premium €	Merger reserve €	Translation reserve €	Retained earnings €	Total €
Balance as at 1 January 2014	150,226	222,715	1,046,894	(109,193)	(1,516,202)	5,344,031	5,138,471
Changes in equity for 2014
Loss for the year	-	-	-	-	-	(8,717)	(8,717)
Exchange differences on translating foreign operations	-	-	-	-	(62,316)	-	(62,316)
Balance as at 31 December 2014	150,226	222,715	1,046,894	(109,193)	(1,578,518)	5,335,314	5,067,438

   

	Share capital €	Capital redemption reserve €	Share premium €	Merger reserve €	Translation reserve €	Retained earnings €	Total €
Balance as at 1 January 2013	235,133	137,808	1,046,894	(109,195)	(1,326,158)	7,143,758	7,128,240
Changes in equity for 2013
Loss for the year	-	-	-	-	-	(111,957)	(111,957)
Purchase of own share	(84,907)	84,907	-	-	-	(1,687,770)	(1,687,770)
Subsidiary write down	-	-	-	2	-	-	2
Exchange differences on translating foreign operations	-	-	-	-	(190,044)	-	(190,044)
Balance as at 31 December 2013	150,226	222,715	1,046,894	(109,193)	(1,516,202)	5,344,031	5,138,471

Company Statements of Changes in Equity

	Share capital €	Capital redemption reserve €	Share premium €	Merger reserve €	Retained earnings €	Total €
Balance as at 1 January 2014	150,226	222,715	1,046,894	(3,689,271)	14,319,466	12,050,030
Changes in equity for 2014
Profit for the year	-	-	-	-	667,127	667,127
Balance as at 31 December 2014	150,226	222,715	1,046,894	(3,689,271)	14,986,593	12,717,157

   

	Share capital €	Capital redemption reserve €	Share premium €	Merger reserve €	Retained earnings €	Total €
Balance as at 1 January 2013	235,133	137,808	1,046,894	(3,689,271)	15,465,269	13,195,833
Changes in equity for 2013
Profit for the year	-	-	-	-	541,966	541,966
Purchase of own shares	(84,907)	84,907	-	-	(1,687,769)	(1,687,769)
Balance as at 31 December 2013	150,226	222,715	1,046,894	(3,689,271)	14,319,466	12,050,030

Statements of Cash Flows

For the year ended 31 December

		Group 2014	Parent 2014	Group 2013	Parent 2013
	Notes	€	€	€	€
Cash flows from operating activities
Net (loss)/profit		(8,717)	667,127	(111,957)	541,966
Adjusted for:
Profit on sale of investment properties	17	-	-	(9,978)	-
Unrealised gain on investment	17	(26,458)	-	-	-
Profit on sale of listed investment		(868)	(868)	-	-
Depreciation	15	8,120	-	8,120	-
Interest income	10	(412)	(812,991)	(2,265)	(753,680)
Bank loan interest expense	11	56,180	-	74,129	-
Other loans interest expense	11	59,716	59,716	37,675	37,675
Foreign exchange (gains)/losses		(28,825)	(6,005)	(4,345)	1,206
Income tax expense	12	802	-	741	-
Decrease/(increase) in receivables		36,813	7,192	148,873	(48,633)
Increase/(decrease) in payables		58,116	45,750	(130,574)	76,387
Cash generated from/(used in) operation		154,467	(40,079)	10,419	(145,079)
Interest paid		(57,950)	-	(74,282)	(37)
Income taxes paid		(2,142)	-	(352)	-
Net cash generated from/(used in) operating activities		94,375	(40,079)	(64,215)	(145,116)
Cash flows from investing activities
Net receipts from sales of investment properties		-	-	152,509	-
Purchase of listed investments	16	(9,513)	(9,513)	-	-
Proceeds of sale of listed investments	16	9,477	9,477	-	-
Purchases of furniture and fittings	15	-	-	(40,600)	-
Bank interest received	10	412	17	2,265	292
Net cash generated from/(used in)  investing activities		376	(19)	114,174	292
Cash flows from financing activities
Bank loan repayment		(1,150,000)	-	(350,000)	-
Purchase of own shares		-	-	(1,687,769)	(1,687,769)
Net loans to subsidiary undertakings		-	(1,115,897)	-	(115,727)
Other loans received		1,147,167	1,147,167	444,887	444,887
Net cash (used in)/from financing activities		(2,833)	31,270	(1,592,882)	(1,358,609)
Net (decrease)/increase in cash and cash equivalents		91,918	(8,828)	(1,542,923)	(1,503,433)
Exchange movement on foreign subsidiaries		(33,491)	6,005	(185,698)	(1,206)
Cash and cash equivalents as at 1 January		175,479	5,626	1,904,100	1,510,265
Cash and cash equivalents as at 31 December		233,906	2,803	175,479	5,626

Notes to the Financial Statements
For the year ended 31 December 2014

Accounting policies

1. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated and parent company financial statements are set out below.

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the Isle of Man Companies Acts 1931 to 2004.

A separate income statement for the parent company has not been presented as permitted by the Isle of Man Companies Acts 1931 to 2004.  The parent company generated profits of €667,127 (2013: €541,966).

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its Subsidiaries.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

Presentational currency

The Directors have adopted to use the Euro in presenting the financial statements due to the international exposure and stakeholders of the Company.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs to its tax base, except for differences arising on:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

• investment in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

  Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

  The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by end of the reporting period and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).  Deferred tax balances are not discounted.

  Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable group company; or

• different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

  Segmental reporting

  The Directors are of the opinion that the Group is engaged in a single segment of business, being primarily investment in properties and related services. The Group invests in properties situated in Budapest, Hungary.

  Adoption of standards effective in 2014

  (a) New and amended standards adopted by the group.
  
        There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on 1 January
        2014 that would be expected to have a material impact on the group.

  (b) New standards and interpretations not yet adopted.

Standards	Effective Dates: Accounting periods commencing after
IFRS 19 Financial Instruments	1 January 2015
IFRS 15 Revenue from Contract with Customers	1 January 2015

The financial statements are prepared in accordance with International Financial Reporting Standards and Interpretations in force at the reporting date.  The Group has not adopted any standards or interpretations in advance of the required implementation dates.  It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements.

Income

Interest, fees and rental income are included in the financial statements on an accruals basis.  Rental income is recognised on a straight line basis. 

Property sales are included in the financial statements on an unconditional exchange basis.  The profit on disposal of investment properties is the difference between the sales proceeds and the carrying value of the assets at the date of disposal, less selling costs.

Expenses

All expenses are accounted for on an accruals basis.

Issue and redemption costs

All costs incurred in the placing and repurchase of the Company's shares are written off in full against  the profit and loss reserve.

Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period.  All differences are taken to the statement of comprehensive income.

Group entities that have a functional currency different from the presentation currency are translated at the closing rate at the end of the reporting period for assets and liabilities. Income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the closing rate at the end of the reporting period) and all resulting exchange differences are recognised as a separate component of equity.

Investment properties

Investment properties include completed properties which are held for their investment potential.

Investment properties are carried at fair value. Fair value is based on active market prices.  Gains and losses arising from changes in the fair value of investment property are included in the statement of comprehensive income for the period in which they arise.  As permitted by IAS 40, investment properties have been valued by the Directors using judgements based on the current local property market.

Properties under development are classified under non-current assets and are stated at the fair value less any impairment.

Investment properties held for sale are actively marketed for sale and classified under current assets and are stated at the fair value less any impairment and selling costs.

Impairment of assets

At the end of each reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its estimated recoverable amount. Any impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Property, plant and equipment

All furniture and equipment are stated at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation, based on a component approach, is calculated using the straight line method to allocate the cost over the assets estimated useful lives, as follows:

Furniture and equipment –               5 – 10 years

Asset residual values and useful lives are reviewed, and adjusted if appropriate at each financial year-end.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount.  These are included in the Statement of Comprehensive Income.

Investment in subsidiary companies

The investments in subsidiary companies are included in the Statement of Financial Position at cost less any provisions for diminution in value.

Loans to subsidiary companies

The unsecured subordinated loan made to Midasz Property Kft. is repayable on demand and has been accounted for under Current Assets and is measured at cost.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of provisions is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.  The provision is recognised in associated profit or loss.

Trade payables

Trade payables are stated at their original invoice value.

Interest–bearing borrowings

Interest–bearing borrowings are stated at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments throughout the expected life of the financial liability.

Borrowing costs

All borrowing costs are recognised in the profit or loss amortised over the period of the loan. 

Critical judgment in applying the Group's accounting policies

The Group prepares its consolidated financial statements in accordance with IFRS as adopted by the European Union, the application of which often requires judgements to be made by the board when formulating the Group’s financial position and results.  The key sources of estimation uncertainty of the Group are the fair value estimates of investment properties.

Investment properties and properties under development represent a significant proportion of the Group’s assets, being 96% (2013: 96%) of the Group’s total assets. Therefore, the estimates and assumptions made to determine their fair value are critical to the measurement of the Group’s financial position and performance.

In determining the fair value of investment properties, the Group uses historical and current market data, and existing lease agreements to determine the fair value of each property.

Financial instruments

Financial instruments are classified and accounted for according to the substance of the contracted arrangement, as either financial assets, financial liabilities or equity instruments.  An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. 

Prior year restatement

The Group amended its disclosure of certain items of expenses to more accurately record these within their appropriate class.  Agency fees and insurance costs directly relating to property are now classed under direct operating costs.  The net impact of the restatement to the shareholder funds for both Group and Company is €Nil.

2. Material agreements

(i) Midas Investment Management Limited (“MIM”) was appointed the Group's Asset Manager on 17 March 2006.

        On 24 April 2013, the Asset Management Agreement was amended by a side letter to incorporate changes to the management         fees.  From that date MIM will charge:

1. A flat annual fee of €55,000 per annum plus VAT;
2. A quarterly fee on all property rented out of 12 per cent of the net rental income plus VAT; and
3. A commission on sales of up to 4 per cent plus VAT of sales proceeds. For the avoidance of doubt, MIM will only charge a fee on sales if it is involved in procuring the buyer and only if the commission charged by others when aggregated with MIM's commission does not exceed 5 per cent plus VAT.

        The Investment Management Agreement cannot be terminated, other than for cause by the Company on 12 month’s prior notice.

(ii) Equiom (Isle of Man) Limited (previously known as Equiom Trust Company Limited) was appointed as Administrator to the Company, pursuant to the Terms of a Letter of Engagement dated 21 December 2005. As part of its engagement, Equiom (Isle of Man) Limited ("Equiom") agrees, as required, for a number of its senior staff members to accept appointment as director of the Company. Equiom also agrees to arrange for a suitable person to be appointed as Company Secretary.

3. Operating segments

The Group primarily operates in a single reporting segment under the classification of its properties held for investment.  The entire Group’s revenue and property assets are derived from and located in a single geographical location, Budapest, in Hungary.

The loss for the year €8,717 (2013: €111,957) primarily derived from operations of managing the Group’s investment properties.  The Group’s principal activity is to let or sell properties located in Central Budapest.

The Group defines its major customers for disclosure purposes as any one customer that represents five per cent or more of the Group's annualised rent roll.  Throughout the year, the Group invoiced four (2013: four) major customers for rental income totalling €200,700 (2013: €193,890), being 44 per cent (2013: 49 per cent) of the Group's current annualised rent roll.

4. Rental income and related fees

Analysis of the Group’s revenue is as follows:

	2014 €	2013 €
Rental income from investment properties	493,473	564,195
	493,473	564,195

5. Group operating profit is stated after charging/(crediting)

	2014	Restated 2013
Administrative expenses	€	€
Directors' emoluments	14,100	17,025
Asset Manager's fees	66,000	113,717
Legal and professional fees	60,694	31,349
Administrator's costs	16,247	19,608
Auditor's remuneration	20,300	24,682
Administrative costs	13,992	14,481
Currency exchange gains	(28,825)	(4,345)
Bank charges	6,512	8,004
Depreciation	8,120	8,120
	177,140	232,641

The Group amended its disclosure of certain items of expenses to more accurately record these within their appropriate class.  Agency fees and insurance costs directly relating to property are now classed under direct operating costs.  The amounts relating to these expenses for the year amounted to €15,335 (2013:  €16,580).  The net impact of the restatement to the shareholder funds for both Group and Company is €Nil.

The Asset Manager's fees calculated and payable for the year ended 31 December 2014 and the preceding period all relate to Midas Investment Management Limited.  As at 31 December 2014 management fees and related interest due to Midas Investment Management Limited were €Nil (2013: €588,745).

6. Exceptional items

	2014	2013
	€	€
Tender and reorganisation costs	-	32,517

7. Staff numbers and costs

Excluding Directors, the Group employs no staff.

8. Auditor's remuneration

	2014	2013
	€	€
Fees payable to the Group's auditors	11,700	13,760
The audit of the Group's trading subsidiaries	8,600	10,922
Taxation services	500	1,000

9. Directors' emoluments

	2014	2013
	€	€
(i) Directors' fees:
Total fees	2,000	2,400

The Directors' fees for all other directors, for both reporting periods, were paid to Equiom (Isle of Man) Limited in accordance with the Letter of Engagement referred to in Note 2.

(ii) Remuneration of Directors:

	2014	2013
	€	€
Mr. C Bennett	-	2,925
Mr. B Miller	12,100	11,700

10. Finance income     

	2014	2013
	€	€
Bank and cash equivalents interest	412	2,265

11. Finance costs

	2014	2013
	€	€
Interest on bank loan	56,180	74,129
Interest on other borrowings	59,716	36,675
	115,896	111,804

12. Tax expense

	2014	2013
	€	€
Current tax
Income tax on foreign subsidiaries	802	741

The Company is subject to Isle of Man income tax at zero per cent (2013:  zero per cent).

The reasons for the difference between the actual tax charge for the year and the theoretical amount that would arise using the average tax rate applicable to profits of the consolidated group are as follows:

	2014	2013
	€	€
Loss before tax	(7,915)	(111,216)
Foreign subsidiaries expected tax charge based on the applicable rate of 10% (2013:  10%)	(792)	(11,121)
Local business tax in Hungary	802	741
Different tax rates applied on overseas jurisdictions	(16,431)	(54,197)
Expenses that are not deductable for tax	14,587	76,151
Gains/(losses) not relievable	2,636	(10,833)
Current income tax charge for the year	802	741

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12 Income Taxes) during the year are shown below.

Amounts credited to the consolidated income statement are as follows:

	2014	2013
	€	€
Available losses in the UK	27,059	27,059
Deferred tax asset not recognised	(27,059)	(27,059)
	-	-

13. Earnings per share

The calculation of the earnings per share is based on the following:

						As at 31 December 2014
Loss for the year			Ordinary Shares					Per Share
		€			Number			€
Basic and diluted loss per share		(8,717)			10,316,624			(0.001)
Adjusted earnings per share for the year ended 31 December 2014
Loss for the year				Ordinary Shares				Per Share
		€			Number			€
Basic loss per share		(8,717)			10,316,624			(0.001)
Gain on listed investment		(868)			-			(0.000)
Net valuation gain		(26,458)			-			(0.003)
Adjusted loss per share		(36,043)			10,316,624			(0.004)

   

						As at 31 December 2013
Loss for the year			Ordinary Shares					Per Share
		€			Number?			€
Basic and diluted loss per share		(111,957)			11,207,261			(0.010)
Adjusted earnings per share for the year ended 31 December 2013
Loss for the year				Ordinary Shares				Per Share
		€			Number?			€
Basic loss per share		(111,957)			11,207,261			(0.010)
Adjusted loss per share		(111,957)			11,207,261			(0.010)
Earnings per share:  Retrospective adjustment (See note 23)
2012
Loss for the year								Per Share
		€		Ordinary Shares				€
Basic and diluted loss per share		(111,957)			16,147,582			(0.007)
Shares acquired post year end					(5,830,958)
		(111,957)			10,316,624			(0.011)

? Weighted average number of Ordinary Shares in issue during the period.

14. Dividends

		2014		2013
	No. of Shares	€	No. of Shares	€
Dividend of €Nil (2013: €Nil) per share paid	10,316,624	-	10,316,624	-

The Company has not paid a dividend to shareholders since 30 October 2009 and will not be paying any future dividends to shareholders until further reductions have been made to the debt outstanding. 

15. Property, plant and equipment

Furniture and equipment

Group		2014 €	2013 €
Cost
As at 1 January		40,600	545,874
Additions		-	40,600
Impairment write off		-	(545,874)
As at 31 December		40,600	40,600
Accumulated depreciation/impairment
As at 1 January		8,120	545,874
Depreciation		8,120	8,120
Impairment write off		-	(545,874)
As at 31 December		16,240	8,120
Opening net book value as at 1 January		32,480	-
Closing net book value as at 31 December		24,360	32,480

As at 31 December 2013, the Directors recognised an impairment loss in furniture and equipment after their annual review and impairment tests. 

16. Listed investments at fair value through profit and loss

Group and Company		2014 €	2013 €
Purchase at cost		9,513	-
Sales proceeds		(9,477)	-
Realised profit on sale		967	-
Unrealised loss on valuation		(99)
Closing fair value at 31 December		904	-

17. Investment properties

Group

Investment properties at 31 December 2014 were subjected to a management valuation review based on the active market indicative prices. 

Amounts recognised in the income statement:

	2014	2013
	€	€
Rental income	493,473	564,195
Direct operating expenses on properties that generated rental income	236,090	310,692

Reconciliation of carrying amounts:

	2014	2013
	€	€
Carrying value at the beginning of the year	7,262,123	7,404,654
Fair value changes	26,458	-
Disposals	-	(142,531)
Carrying value at the end of the year	7,288,581	7,262,123
Investment properties	5,355,611	6,944,319
Properties under development	317,804	317,804
Properties held for resale	1,615,166	-
	7,288,581	7,262,123

Properties sold during the year                                                   

	2014	2013
	€	€
Gross proceeds from the sale of investment properties	-	168,000
Less: carrying value and related sales costs	-	(158,022)
Realised profit on disposal of property	-	9,978

Of properties held for resale as current assets, 5 have been sold post year end.  The remaining are actively marketed and expected to sell in 2015. 

18. Investments in subsidiary companies

The subsidiaries of the Company are stated below:

Subsidiary	Principal activity	Country of registration	Proportion of voting rights & shares held
Midasz Property Kft.	Property investment	Hungary	100%
Midasz Property Two Kft.	Property investment	Hungary	100%
Pactolus Eastern European Property Limited	Property investment	UK	100%
Pactolus (UK) Limited	Property investment	UK	100%
Pactolus (IOM) Limited	Dormant	IOM	100%

   

	2014	2013
Subsidiaries	€	€
Pactolus Eastern European Property Limited	18,561	18,561
Pactolus (UK) Limited	1	1
Midasz Property Kft.	51,393	51,393
Midasz Property Two Kft.	12,000	12,000
	81,955	81,955

All the above subsidiaries, with the exception of Midasz Property Two Kft., were acquired and accounted for under IFRS 3: Business Combinations.

19. Loans to subsidiaries

	Company	Company
	2014	2013
	€	€
Midasz Property Kft.	14,786,291	12,857,420
Midasz Two Property Kft.	75,760	75,760
Pactolus Eastern European Property Limited	65,270	65,270
Pactolus (UK) Limited	(699)	(699)
	14,926,622	12,997,751

These comprise of unsecured subordinated loans issued in support of property acquisitions. The loans provided by the parent company to Midasz Property Kft. are currently charged at interest of 6.25 per cent (2013: 6.25 per cent), and are repayable on demand, however it is not anticipated that the full balance will be recovered within 12 months of the balance sheet date.

20. Trade and other receivables	Group 2014	Company 2014	Group 2013	Company 2013
	€	€	€	€
Rent and fees receivable	12,594	-	21,548	-
Other receivables	39,969	39,969	65,046	39,969
Prepayments and accrued income	9,212	4,802	11,994	11,994
	61,775	44,771	98,588	51,963

   

21. Trade and other payables	Group 2014	Company 2014	Group 2013	Company 2013
	€	€	€	€
Trade payables and accruals	87,923	31,824	723,738	618,630
Rent received in advance	6,536	-	2,151	-
Deposits held	138,259	-	81,269	-
Taxation	1,296	-	2,636	-
Interest payable and similar charges	23,173	23,173	25,518	23,748
	257,187	54,997	835,312	642,378

   

22. Secured loan	Group 2014	Company 2014	Group 2013	Company 2013
	€	€	€	€
Variable interest rate loan	-	-	1,150,000	-
Loan to value of portfolio	-	-	16%	-

During the current and preceding period, the Group operated a loan facility with Investec Bank Plc (Irish Branch).  During the year this loan was repaid in full and the facility cancelled. 

23. Other loans	Group 2014	Company 2014	Group 2013	Company 2013
	€	€	€	€
Unsecured loans	2,284,901	2,284,901	444,887	444,887
	2,284,901	2,284,901	444,887	444,887

During the year the Company was advanced funds repayable on demand from the parent and associated companies of Asset Manager, Midas Investment Management Limited.  These advances are repayable on demand and attract interest at the rate of 4.8 per cent (2013: 6.25 per cent) above Euribor.

24. Share capital

Authorised share capital

	Number of shares	2014 €	Number of shares	2013 €
Ordinary shares of 1p each	70,000,000	900,900	70,000,000	843,080
Ordinary shares of 1p each issued and fully paid
	Number of shares	2014 €	Number of shares	2013 €
Balance as at 1 January	10,316,624	150,226	16,147,582	235,133
Buy back and cancellation of shares	-	-	(5,830,958)	(84,907)
As at 31 December	10,316,624	150,226	10,316,624	150,226

Each ordinary share carries the right to one vote in any circumstances and the right to dividends paid.

At the last Annual General Meeting on 26 June 2014, shareholders approved the Board's proposal to authorise the Company to acquire up to 28.6 per cent of its issued share capital as at 26 June 2014.  After the resolution was passed, the Company was authorised to acquire up to 2,950,774 of its issued ordinary shares.  The Company did not utilise this facility during 2014.

During the year to 31 December 2013, the Company acquired 5,830,958 of its issued Ordinary shares for a total cost of €1,687,769 as part of the ongoing share repurchase programme.  The average price paid per ordinary share was 24 pence, exclusive of direct acquisition costs.

Ordinary shareholders are entitled to vote at all general meetings.

The currency rate used to convert the authorised share capital is €1.2870 (2013: €1.2044).

25. Net Asset Value per Ordinary Share	2014	2013
Net asset value as at 31 December	€5,067,438	€5,138,471
Number of shares in issue as at 31 December	10,316,624	10,316,624
Net asset value per ordinary share	€0.49	€0.50
Net asset value per share [Euro to Sterling exchange rate at the year-end €1.2870  (2013:  €1.2044)]	£0.38	£0.41

26. Financial risk factors

The Group and Company's activities throughout the current and previous year exposes it to a variety of financial risks: market risk (including currency risk and price risk), credit risk, liquidity risk, cash flow risk and interest rate risk.

Risk management is carried out by the Board of Directors.  The Board identifies and evaluates financial risks in close co–operation with the Group's operating units.  The Board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest–rate risk, credit risk, use of financial instruments and investing excess liquidity.

Fair value of financial instruments:

	2014 Carrying Value	2014 Fair Value	2013 Carrying Value	2013 Fair Value
Group	€	€	€	€
Financial assets
Trade and other receivables	52,563	52,563	86,651	86,651
Cash and cash equivalents	233,906	233,906	175,479	175,479
Financial liabilities
Other payables	257,187	257,187	835,312	835,312
Secured loan	-	-	1,150,000	1,150,000
Other loans	2,284,901	2,284,901	444,887	444,887
Company
Financial assets
Trade and other receivables	39,969	39,969	39,969	39,969
Loans to subsidiaries	14,926,622	14,926,622	12,997,751	12,997,751
Cash and cash equivalents	2,803	2,803	5,626	5,626
Financial liabilities
Other payables	54,997	54,997	618,629	618,629
Other loans	2,284,901	2,284,901	444,887	444,887

It is the Directors' opinion that the Group and Company's carrying and fair value of its financial instruments are the same.

Credit risk

The Group places surplus cash with third parties and is therefore potentially at risk from the failure of any such third party of which it is a creditor.  It is the Group's policy to place excess cash funds on a short–term basis only and spread the risk over a number of different providers.

The Group's principal credit risk is that of cash and short–term deposits.  The Board, in conjunction with the Asset Manager, has credit policies in place and this exposure is monitored on an ongoing basis.

Within the Group's credit risk policies are measures to ensure that rental contracts are made with customers of an appropriate credit history in order to minimise the exposure to any outstanding debts from lessees.

The Group and Company's maximum exposure to credit risk:

	Group 2014	Company 2014	Group 2013	Company 2013
	€	€	€	€
Financial assets
Trade and other receivables	52,563	39,969	86,651	39,969
Cash and cash equivalents	233,906	2,803	175,479	5,626
Loans to subsidiaries	-	14,926,622	-	12,997,751
	286,469	14,969,394	262,130	13,043,346

The Group and Company hold no collateral as security against any of the above assets.

An analysis of rent and fees receivable for the Group:

2014
	Carrying amount	Neither impaired nor past due	61-90 Days	91-120 Days	Past due not impaired over 120 Days
	€	€	€	€	€
Rent and fees receivable	12,594	12,594	-	-	-
2013
	Carrying amount	Neither impaired nor past due	61-90 Days	91-120 Days	Past due not impaired over 120 Days
	€	€	€	€	€
Rent and fees receivable	21,548	21,548	-	-	-

There are no rent receivables in the accounts of the parent company.

The Group allows an average receivables period of 30 days after invoice date.  The receivables age analysis is also evaluated on a regular basis for potential doubtful debts.  It is management's opinion that no provision for doubtful debts is required.

The Company's principal credit risk is that of its loans advanced to subsidiaries. 

As at the year end the amounts due to/(from) the Company were as follows:

	2014	2013
	€	€
Midasz Property Kft.	14,786,291	12,857,420
Midasz Two Property Kft.	75,760	75,760
Pactolus Eastern European Property Limited	65,270	65,270
Pactolus (UK) Limited	(699)	(699)
	14,926,622	12,997,751

These loans do not carry any security on the assets of the related subsidiary and are also evaluated on a regular basis for potential impairments.  It is the Board's opinion that no impairment provision is required for the year ended 31 December 2014 (2013: €Nil).

Market risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the UK Pound, the Hungarian Forint and the Euro. Foreign xchange risk arises from future commercial transactions, recognised monetary assets and              liabilities and net investments in foreign operations.  Interest rate risk arises from the Group's borrowing exposure.

Net interest income from cash and cash equivalents for the year totalled €412 (2013: €2,265).  Net interest  payments on borrowings for the year totalled €115,896 (2013: €111,804).

             The Company’s net interest income from cash and cash equivalents for the year totalled €17 (2013:            €292).  The Company does not have any long-term borrowing.  Interest earned on loans to                subsidiaries for the year was €812,974 (2013: €753,388). 

Based on current volatility for both interest and currency exchange rates, the Board determined that relevant risk factors should be taken into account when assessing the Group's exposure to the market risk.  The sensitivity test below is based on the following:

(a)        Interest rate change of +0.5 per cent from the average rate of 1.2 per cent earned in 2014. The average rate is calculated as         the weighted average effective interest rate.Rate on cash at bank balances represents average rate earned on cash balances;

(b)        Foreign exchange rate change of –7 per cent and +7 per cent from €1.2870 to the Pound Sterling and 316.50 Forint to the         Euro, being the rates as at 31 December 2014.

The Company's loans to subsidiaries are transacted in Euros.  The operating currency of the leading trading subsidiary is Forint and so this exposes the Company to foreign currency exchange risks. The Board is satisfied that no impairment is necessary as the major assets within the relevant           subsidiary are valued in Euros.

The tables below show the effect on profit and equity after tax if changes in interest rates as stated in (a) above with all other variables held constant, are used as a sensitivity test on the Group's market risk exposures.

Group 2014			Financial Assets		Financial Liabilities
Total increase/ (decrease)			Cash & cash equivalents	Rent & fees receivable	Trade payables	Long term loans
	€		€	€	€	€
Carrying amount	-		233,906	12,594	257,187	2,284,901
Interest rate risk
Profit (change of +0.5%)	(11,326)		171	-	-	(11,497)
Foreign exchange rate risk
Equity (change of –7%)		(21,926)	(21,926)	-	-	-
Equity (change of +7%)		12,523	12,523	-	-	-
Company 2014			Financial Assets		Financial Liabilities
Total increase/ (decrease)			Cash & cash equivalents	Loans to subsidiaries	Trade payables	Long term loan
	€		€	€	€	€
Carrying amount	-		2,803	14,926,622	54,997	2,284,901
Interest rate risk
Profit (change of +0.5%)	(11,497)		-	-	-	(11,497)
Foreign exchange rate risk
Equity (change of –7%)		(492)	(492)	-	-	-
Equity (change of +7%)		1,570	1,570	-	-	-

   

Group 2013			Financial Assets		Financial Liabilities
Total increase/ (decrease)			Cash & cash equivalents	Rent & fees receivable	Trade payables	Long term loan
	€		€	€	€	€
Carrying amount	-		175,479	21,548	835,312	1,594,887
Interest rate risk
Profit (change of +0.5%)	(10,148)		944	-	-	(11,092)
Foreign exchange rate risk
Equity (change of –4%)		1,372	508	-	864	-
Equity (change of +4%)		392	405	-	(797)	-
Company 2013			Financial Assets		Financial Liabilities
Total increase/ (decrease)			Cash & cash equivalents	Loans to subsidiaries	Trade payables	Long term loan
	€		€	€	€	€
Carrying amount	-		5,626	12,997,751	642,378	444,887
Interest rate risk
Profit (change of +0.5%)	(3,738)		-	-	-	(3,738)
Foreign exchange rate risk
Equity (change of –4%)		(263)	(263)	-	-	-
Equity (change of +4%)		1,118	1,118	-	-	-

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to finance the Group's operations.  The average creditor payment period for the Group and Company is 60 days (2013: 60 days).

Contractual maturity analysis for financial liabilities:

Group 2014
	Due within 1 month	Due between 1 to 3 months	Due between 3 to 12 months	Due between 1 to 5 years	Total
	€	€	€	€	€
Other payables	167,928	3,500	82,259	3,500	257,187
Other loans	2,284,901	-	-	-	2,284,901
	2,452,829	3,500	82,259	3,500	2,542,088
Company 2014
Other payables	54,997	-	-	-	54,997
Other loans	2,284,901	-	-	-	2,284,901
	2,339,898	-	-	-	2,339,898

   

Group 2013
	Due within 1 month	Due between 1 to 3 Months	Due between 3 to 12 months	Due between 1 to 5 years	Total
	€	€	€	€	€
Other payables	754,043	-	61,319	19,950	835,312
Secured loan	-	-	1,150,000	-	1,150,000
Other loans	444,887	-	-	-	444,887
	1,198,930	-	1,211,319	19,950	2,430,199
Company 2013
Other payables	618,630	-	23,748	-	642,378
Other loans	444,887	-	-	-	444,887
	1,063,517	-	23,748	-	1,087,265

27. Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising Shareholders’ return.  Consistently with others in the industry, the Group monitors capital on the basis of the debt–to–adjusted capital ratio.  This ratio is calculated as net debt divided by adjusted capital.  Net debt is calculated as total debt less cash and short term deposits.  Adjusted capital comprises all components of equity.

This gearing ratio at the year-end is as follows:

	2014		2013
	€		€
Debt	2,542,088		2,430,199
Cash and cash equivalents	(233,906)		(175,479)
Net debt	2,308,182		2,254,720
Equity	5,067,438		5,138,471
Net debt to equity ratio	46%		44%

The Group’s Asset Manager reviews the debt structure on a quarterly basis in conjunction with the Board.  The cost of capital and the associated risks are considered and appropriate measures are taken to manage the Group's exposure.

28. Leasing

Leases with tenants

The Group leases out investment properties for an average lease term of 0.9 years (2013: 1.2 years).  There were no contingent rental incomes recognised in the year (2013: €Nil).  The future aggregate minimum rentals receivable under non–cancellable operating leases are as follows:

	2014	2013
	€	€
Less than one year	230,212	358,076
Between two and five years	82,770	132,678
	312,982	490,754

The company has contracted guarantee rental payments as follows:

	2014	2013
	€	€
Less than one year	45,006	57,302
Between two and five years	-	1,176
	45,006	58,478

29. Commitments

At the year end the Group had no capital commitments (2013: €Nil) in its portfolio of investment properties.  The Company had no other capital commitments as at the year end.

30. Related parties

The Group was charged fees by Equiom (Isle of Man) Limited of €16,247 (2013: €19,608) in accordance with the Letter of Engagement referred to in Note 2 (ii).  The amount outstanding as at 31 December 2014 is €4,880 (2013: €3,278).

All of the Directors, apart from Brett Miller, are current staff of Equiom (Isle of Man) Limited.

Asset and tenant management fees amounting to €66,000 (2013: €113,717), interest charges of €29,217 (2013: €31,829), re-organisational charges of €Nil (2013: £5,000), direct expenses recharges of €Nil (2013:  €49,841) and commission income received on share buy back and listed investment transactions totalling €50 (2013: €3,025) were charged by Midas Investment Management Limited.  Tenant management fees chargeable to the company amounting to €59,217 (2013: €Nil) was waived for the year by the Asset Manager but remains chargeable in respect of future periods.  Midas Investment Management Limited is controlled by Mark Sheppard, who is also a Director of the Pactolus Group's United Kingdom subsidiaries.  As at 31 December 2014 the amount outstanding to Midas Investment Management Limited was €Nil (2013: €588,745).

During the year the Company was advanced unsecured funds repayable on demand from the parent and associated companies of the Asset Manager, Midas Investment Management Limited.  These advances attract interest at the rate of 4.8 per cent above the 3 month Euribor (2013:  6.25 per cent) and are detailed below:

There have been no significant events that require reporting since the reporting period date.

1. M&M Investment Company Plc, balance outstanding as at the reporting period date is €2,284,901 (2013:€257,050), interest charged and included in accruals amounts to €23,173 (2013:€616).
2. Midas Nominees Limited, balance outstanding as at the reporting period date is €Nil (2013:€156,758), interest charged for the period totalled €6,865 (2013:€4,799).
3. Gall & Eke Limited, balance outstanding as at the reporting period date is €Nil (2013:€36,889), interest charged and included in accruals amounts to €461 (2013:€395).

The Company also charges interest on its loan account with its subsidiaries.  Interest charged during the year amounted to €812,974 (2013: €753,388) a rate of 6.25 per cent (2013: 6.25 per cent) per annum.

The amount due from each subsidiary is detailed in note 19 of these financial statements.

31. Events after the reporting period

There have been no significant events that require reporting since the reporting period date.

32. Domiciled

Pactolus Hungarian Property Plc is registered and domiciled in the Isle of Man.

33. Ultimate control

During the current and previous year, ultimate control of the Group does not lie with any identifiable individual.  Copies of the Group Annual Report and Financial Statements are available at the Registered Office, Jubilee Buildings, Victoria Street, Douglas, Isle of Man, IM1 2SH and at the office of the Company’s Asset Manager, Midas Investment Management Limited, 2nd Floor, Arthur House, Chorlton Street, Manchester, M1 3FH.

34. Financial Information

The financial information set out above does not constitute the Group's statutory accounts for the year ended 31 December 2014.

Audited statutory financial statements for 2014 will be delivered to the Isle of Man Companies Registry following the Group's Annual General Meeting.

35. Annual General Meeting

Details of the Annual General Meeting will be issued under a separate notice.

36. Report and Accounts

Pursuant to Rule 20 copies of the Audited Financial Statements for the year ended 31 December 2014 will be sent to shareholders in due course. Further copies will be available from the Company's website at www.pactolus.co.uk, at the Company's registered office at Jubilee Buildings, Victoria Street, Douglas, Isle of Man, IM1 2SH or at the offices of Midas Investment Management Ltd, 2^nd Floor, Arthur House, Chorlton Street, Manchester, M1 3FH.

Contacts & enquiries:

Asset Manager
Midas Investment Management Ltd
Mark Sheppard
Tel: 00 44 (0) 161 242 2895

Nominated Adviser:
Cairn Financial Advisers LLP
Liam Murray
Tel: 00 44 (0) 20 7148 7900