Final Results

Matrix Income & Growth VCT plc Preliminary results for the year ended 31 December 2006 14 March 2007 Investment Objective Matrix Income & Growth VCT plc is a Venture Capital Trust (VCT) managed by Matrix Private Equity Partners LLP ("MPEP") investing primarily in established profitable unquoted companies. The Company's objective is to provide investors with a regular and growing income stream, by way of tax free dividends, and to generate capital growth through portfolio realisations, which can be distributed by way of additional tax free dividends. Financial Highlights Ordinary Shares (listed on 8 October 2004) Initial net asset value per 94.5 pence share £20,933,124 Initial net assets 31 December 31 December 2006 2005 (restated) Net assets £22,244,902 £20,883,209 Net asset value per share 100.6 p 94.3 p Net cumulative dividends paid 1.8 p 0.3 p Total return per share to Shareholders 102.4 p 94.6 p since launch Share price (mid-market price) 88.5 p 99.0 p A final dividend of 1.4 pence per share will be recommended to Shareholders at the AGM on 26 April 2007 to be paid on 18 May 2007, thereby increasing net cumulative dividends paid since launch to 3.2 pence per share. Chairman's Statement Overview I am pleased to present to Shareholders the preliminary results of Matrix Income & Growth VCT plc for the year to 31 December 2006 and to report continuing progress. Further headway has been made in constructing a broadly based portfolio, predominantly of management buy out ("MBO") investments, with the aim of combining a regular and growing income with the potential for future capital gain. This approach has helped to generate sufficient income to enable the Board to recommend a final dividend of 1.4 pence per share, making a total of 2.2pence for the year. Despite the relatively early stage in the Company's life, the investment portfolio is currently valued above cost, resulting in a net asset value ("NAV") per Ordinary Share at 31 December 2006 of 100.6 pence per share (2005: 94.3 pence per share (restated)), and a total return of 102.4 pence per share (2005: 94.6 pence per share (restated)), compared with the initial NAV of 94.5 pence per share. This represents an increase over the initial NAV of 8.4% (2005: 0.1%). Investment portfolio Over the year the Company invested £6.45 million into nine companies across a range of industrial and commercial sectors, bringing total investment to £8.81 million at cost; eight of these investments are MBOs, reflecting the Investment Manager's focus on this type of investment. The level of income from the portfolio is growing as qualifying investments are made. Income from the Company's loan stock investments was running at an annualised rate of 8.9% at 31 December 2006. The annualised running yield on the qualifying investment portfolio as a whole was 5.4%, while upon all investments it was 5.2%. Results and dividend The revenue account generated a net revenue return (after tax) for the year of £468,957 (2005 (15 months): £288,940) and your Directors will be recommending a final dividend of 1.4 pence per share to Shareholders at the Annual General Meeting to be held on 26 April 2007. The dividend will be paid on 18 May 2007 to Shareholders on the Register on 20 April 2007 making a total of 2.2 pence per share for the year ended 31 December 2006. Investment in qualifying holdings The Investment Manager remains confident of meeting the target set by HM Revenue & Customs of investing 70% of the funds raised in qualifying unquoted and AIM quoted companies ("the 70% test") by 31 December 2007. At 31 December 2006, the Company was 43.4% (based upon the tax values, which differ from accounting values) invested in qualifying companies. In respect of the shares allotted between 5 October and 31 December 2004 the Company was required to comply with the qualifying tests by 31 December 2006. This target was achieved with 76% being invested in qualifying holdings by 31 December 2006. Communication with shareholders The Company intends to communicate regularly with Shareholders. The April AGM will provide a useful platform for the Board to meet Shareholders and exchange views. Your Board welcomes your attendance at General Meetings to give you the opportunity to meet your Directors and representatives of the Investment Manager. The fourth and latest newsletter providing further information on the progress of the Company was sent out in January 2007. Summary Annual Report You will have received an earlier letter from me proposing to distribute a Summary of the Annual Report to Shareholders rather than the full version (unless you opted to receive the latter). Companies' Annual Report and Accounts have become longer and more complex, principally due to the requirements of new statutory, corporate governance and other reporting regulations. As a result, we have decided to follow the example of a number of other companies and produce a Summary Annual Report for the year to 31 December 2006. Changes to UK accounting rules Shareholders may be aware that there have been some recent changes to UK accounting standards, which have affected the reporting of this year's results. Principally, quoted investments are now valued on a bid price basis (last year, a mid market basis was used), while dividends to shareholders are no longer recognised in the financial statements until they are paid (last year, a proposed dividend was recognised in the financial statements). Last year's figures have been restated to reflect these changes. Share buy-backs 40,000 Ordinary Shares came onto the market during the year under review and the Company bought these back at a price of 88.5 pence per share, which represented a 10% discount to the then published NAV. These shares, representing 0.18% of the issued share capital of the Company at the beginning of the year, were subsequently cancelled by the Company. Outlook The Board's short-term aim is to continue to build a broadly based investment portfolio. Because of the weight of funds raised there is increased competition for deals and, therefore, the danger that purchase prices will be inflated. However the Investment Manager believes that this is less of a problem for the size of deals it is addressing, and remains confident that it will be able to identify good quality investment opportunities which can be completed at attractive valuations. Based on this the Board believes the Company should achieve the 70% test by 31 December 2007 and at least maintain this level of investment in qualifying companies going forward. As more investments are completed, an increasing proportion of the Investment Manager's time will be spent on preparing investee companies for attractive exits. Finally, I would like to express my thanks to all Shareholders for their continuing support of the Company. Keith Niven Chairman Investment Manager's Review The Company's strategy is to invest primarily in established profitable unquoted companies. Typically these investee companies are cash-generative and therefore capable of producing dividend income as soon as the investment is made, as well as capital returns to Shareholders on their ultimate sale or flotation. The Company focuses principally on investments in MBOs. The two most recent investments were completed in December. The first was the MBO of PXP Holdings (Pinewood Structures), a leading supplier of timber frame sections to the UK building sector, in which the Company invested £1,000,000. This was followed by an investment of £874,199 into the MBO of Castlegate 435 (Racoon International), the UK's largest supplier of hair extensions and related products. The investment portfolio now totals thirteen companies and overall progress is encouraging. Several investments are already showing strong potential to generate future capital gains from trade sales of the underlying companies. Youngman Group has enjoyed an outstanding year, achieving profitability well in excess of that anticipated at investment. Blaze Signs Holdings has also exceeded expectations, benefiting from strong demand from a number of retail clients. BBI Holdings plc has made a number of acquisitions during the year and its share price growth has been strong. SectorGuard plc also made a significant acquisition, an intruder alarm systems maintenance business, and was admitted to its industry regulatory body's Approved Contractor Scheme on the first possible date for accreditation. The portfolio contains two investments involved in the food industry. Ministry of Cake (Holdings) has continued to grow sales and stands to benefit from the recent receivership of a competitor. PastaKing Holdings has performed particularly well since investment; sales and profitability are running at levels well above plan with good cash generation. British International Holdings has made a solid start since its MBO, and is trading in line with plan. Passenger numbers on the Penzance to Scilly Isles route were down on prior year, but other contracts compensated for the revenue shortfall. Campden Media had a successful year with a number of new publication launches and there are plans to expand its US wealth management conferencing business during 2007. VSI also performed well despite the effect of the weak US$ on its software revenues, and a number of growth initiatives are under consideration for the current year. Vectair Holdings has reinforced its strong UK market position and results for the year to date are materially ahead of last year's performance; export markets, both in Europe and the US, offer real growth prospects over the next few years. Only one relatively small investment, FH Ingredients, has proved very disappointing. Poor implementation of a major capital expenditure programme soon after the investment led to cash pressures and efforts to re-finance the company proved unsuccessful; the company entered into administration on 26 January 2007. Notwithstanding this, the overall portfolio is already showing a valuation uplift of 17.2% over cost at the year-end. When combined with its annualised running yield of 5.4%, this is pleasing performance at this stage of its construction. We continue to attract a good flow of attractive new investment opportunities, but we remain wary of some extremely high valuations being placed on businesses in the current market. We are confident that the Company will meet the relevant VCT regulations by its deadline of 31 December 2007. Investment portfolio summary as at 31 December 2006 Date of Total Valuation % value of % of initial book investment equity investment portfolio held by cost funds managed by MPEP* £'000 £'000 Qualifying investments AIM quoted investments BBI Holdings plc May 06 382 608 2.73% 11.20% Developer and manufacturer of rapid test diagnostic products SectorGuard plc Aug 06 150 171 0.77% 10.77% Provider of manned guarding, mobile patrolling and alarm response services ------ ------ ------ 532 779 3.50% Unquoted investments Youngman Group Limited Oct 05 1,000 2,493 11.21% 30.00% Manufacturer of ladders and access towers British International Jun 06 1,000 1,000 4.50% 34.93% Holdings Limited Supplier of helicopter services PXP Holdings Limited Dec 06 1,000 1,000 4.50% 37.33% (Pinewood Structures) Designer, manufacturer, supplier and installer of timber-frames for buildings Ministry of Cake Holdings Sep 05 1,000 991 4.46% 35.00% Limited Manufacturer of frozen cakes and desserts for the foodservice industry Campden Media Limited Jan 06 975 975 4.38% 27.59% Magazine publisher and conference organiser Castlegate 435 Limited Dec 06 874 874 3.93% 49.00% (Racoon International) Supplier of hair extensions, hair care products and training VSI Limited Apr 06 618 618 2.78% 48.91% Developer and marketer of 3D software Blaze Signs Holdings Apr 06 574 574 2.58% 45.00% Limited Signwriter Vectair Holdings Limited Jan 06 560 560 2.52% 24.00% Designer and distributor of washroom products PastaKing Holdings Limited Jun 06 464 464 2.09% 27.50% Supplier to the educational and food service market FH Ingredients Limited Feb 05 213 - 0.00% 35.00% Processor and distributor of frozen herbs to the foodservice industry ------ ------ ------ 8,278 9,549 42.95% ------ ------ ------ Total qualifying 8,810 10,328 46.45% investments ==== ==== ==== Non-qualifying investments Barclays Global Investors 2,026 2,026 9.11% Cash Selection Funds plc** GS Funds plc (Goldman 1,998 1,998 8.99% Sachs)** Global Treasury Funds plc 1,992 1,992 8.96% (Royal Bank of Scotland)** Fidelity Institutional 1,986 1,986 8.93% Cash Fund plc** SWIP Global Liquidity 1,884 1,884 8.47% Funds plc (Scottish Widows)** Insight Liquidity Funds 1,101 1,101 4.95% plc (HBOS)** Institutional Cash Series 919 919 4.14% plc (BlackRock)** Unquoted investments - 1 0.00% ------ ------ ------- Total non-qualifying 11,906 11,907 53.55% investments ------ ------ ------ Total investments 20,716 22,235 100.00% ==== ==== ==== *The other funds managed by MPEP include Matrix Income & Growth 2 VCT plc (MIG2), Matrix Income & Growth 3 VCT plc (MIG3), Matrix Income & Growth 4 VCT plc (MIG4) and TriVest VCT plc (TriVest). All of these funds have co-invested in the quoted and unquoted investments alongside the Company with the exception that MIG2 and MIG3 did not invest in Ministry of Cake (Holdings) Limited and FH Ingredients Limited, and MIG3 did not invest in Youngman Group Limited. **Disclosed as current investments in the Balance Sheet. Income Statement for the year ended 31 December 2006 Year ended 31 December 2006 Fifteen months ended 31 December 2005 (restated) Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Realised losses - (212,975) (212,975) - - - on investments Unrealised gains - 1,731,906 1,731,906 - - - on investments Income 1,071,415 - 1,071,415 842,724 - 842,724 Investment (123,960) (371,881) (495,841) (110,779) (332,337) (443,116) Manager's fees Other expenses (317,372) - (317,372) (375,313) - (375,313) ------ ------ ------ ------ ------ ------ Return on 630,083 1,147,050 1,777,133 356,632 (332,337) 24,295 ordinary activities before taxation Tax on ordinary (161,126) 113,421 (47,705) (67,692) 63,144 (4,548) activities ------ ------ ------ ------ ------ ------ Return 468,957 1,260,471 1,729,428 288,940 (269,193) 19,747 attributable to equity shareholders ------ ------ ------ ------ ------ ------ Return per O 2.12p 5.69p 7.81p 1.86p (1.73)p 0.13p rdinary Share The total column is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. There were no other recognised gains or losses in the year. Balance Sheet As at 31 December 2006 As at 31 December As at 31 December 2006 2005 (restated) £ £ Non-current assets Investments at fair value 10,329,528 2,362,893 Current assets Debtors and prepayments 142,515 1,657,859 Current investments 11,906,321 17,109,025 Cash at bank 58,250 19,090 ------ ------ 12,107,086 18,785,974 Creditors: amounts falling due within (191,712) (265,658) one year ------ ------ Net current assets 11,915,374 18,520,316 ------------- ------------- Net assets 22,244,902 20,883,209 ======== ======== Capital and reserves Called up share capital 221,038 221,438 Capital redemption reserve 400 - Share premium account - 20,711,686 Capital reserve - unrealised 1,731,906 - Capital reserve - realised (740,628) (269,193) Special distributable reserve 20,676,105 - Revenue reserve 356,081 219,278 ------------- ------------- Equity shareholders' funds 22,244,902 20,883,209 ======== ======== Net asset value per Ordinary Share 100.64p 94.31p Reconciliation of Movements in Shareholders' Funds For the year ended 31 December 2006 Year ended Fifteen months ended 31 December 2006 31 December 2005 £ £ At 31 December 2005 (as originally 20,728,204 46,771 restated) Prior year adjustment arising from the 155,005 - introduction of FRS 21 ------ ------ As at 1 January 2006 (restated) 20,883,209 46,771 Issues of Ordinary Shares - 22,093,621 Expenses of issues - (1,210,499) Purchase of own shares (35,581) - Return for the year 1,729,428 19,747 Dividends paid in year (332,154) (221,436) ------ ------ Closing Shareholders' funds 22,244,902 20,728,204 Cash Flow Statement For the year ended 31 December 2006 Year ended Fifteen months ended 31 December 2006 31 December 2005 £ £ Operating activities Investment income received 1,023,128 758,659 Investment management fees paid (619,414) (319,543) Other cash payments (312,203) (254,499) ------ ------ Net cash flow from operating activities 91,511 184,617 Investing activities Acquisitions of investments (6,447,622) (2,362,893) ------ ------ Net cash outflow from investing (6,447,622) (2,362,893) activities Equity dividends Payment of dividends (332,154) (66,431) ------ ------ Cash outflow before financing and (6,688,265) (2,224,707) liquid resource management Management of liquid resources Decrease/(increase) in current 6,763,006 (18,669,327) investments Financing Share capital raised - 22,131,121 Issue costs of Ordinary Shares - (1,210,497) Purchase of own Ordinary Shares (35,581) - ------ ------ (35,581) 20,920,624 ------ ------ Increase in cash for the year 39,160 6,590 ==== ==== Notes 1. Net asset value per Ordinary Share Net asset value per Ordinary Share is based on net assets at the end of the year, and on 22,103,821 (2005: 22,143,821) Ordinary Shares, being the number of Ordinary Shares in issue on that date. 2. Return per Ordinary Share The revenue return per Ordinary Share is based on the net revenue profit from ordinary activities after taxation of £468,597 (2005: £288,940 (restated)) and on 22,138,232 (2005: 15,498,387) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. The capital return per Ordinary Share is based on a capital return of £ 1,260,471 (2005: loss £269,193 (restated)) which includes the net of tax portion of the Investment Manager's fees charged to the capital reserve of £ 258,460 (2005: £269,193 and 22,138,232 (2005: 15,498,387) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year. 3. Investment Manager's Fees In accordance with the policy statement published under "Management, Expenses and Administration" in the Company's Prospectus dated 9 July 2004, the Directors have charged 75% of the investment management expenses to the realised capital reserve. 4. Financial Information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 December 2006 but is derived from those accounts. Statutory accounts for the year ended 31 December 2006 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 5. Annual Report A Summary Annual Report will be circulated by post to all Shareholders shortly and copies will be available thereafter to members of the public from the Company's registered office. Shareholders who wish to receive a copy of the full Annual Report may request a copy by writing to the Company Secretary, Matrix-Securities Limited, One Jermyn Street, London SW1Y 4UH. Alternatively copies may be downloaded via the Company Secretary's web site at www.matrixgroup.co.uk. 6. Annual General Meeting The Annual General Meeting will be held at 2.00 pm on Thursday 26 April 2007 at the offices of Matrix Group Limited, One Jermyn Street, London SW1Y 4UH. Contact details for further enquiries: Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925 3300 or by e-mail on mig@matrixgroup.co.uk Mark Wignall or Mike Walker at Matrix Private Equity Partners LLP (the Investment Manager), on 020 7925 3300 or by e-mail on info@matrixpep.co.uk

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