Final Results

Matrix Income & Growth VCT plc Preliminary results for the year ended 31 December 2007 29 February 2008 Investment Objective Matrix Income & Growth VCT plc is a Venture Capital Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio, which invests primarily in established and profitable unquoted companies, is managed by Matrix Private Equity Partners LLP ("MPEP"). The Company's objective is to provide investors with a regular income stream, by way of tax free dividends, and to generate capital growth which, following portfolio realisations, can be distributed by way of additional tax free dividends. Financial Highlights Ordinary Shares (listed on 8 October 2004) Initial net asset value per share 94.5 pence Initial net assets Â£20,933,124 31 December 2007 31 December 2006 Net assets Â£25,727,915 Â£22,244,902 Net asset value per share 116.9 p 100.6 p Net cumulative dividends paid 4.2 p 1.8 p Total return per share to Shareholders 121.1 p 102.4 p since launch* Share price (mid-market price) 100.5 p 88.5 p Total expense ratio 3.4% 3.7% * Net asset value per share plus cumulative dividends paid per share. This compares with an original investment cost of 60 pence per share after allowing for income tax relief of 40 pence per share. A final income dividend of 1.4 pence per share together with a final capital dividend of 6.4 pence per share, making a total final dividend of 7.8 pence per share, will be recommended to Shareholders at the AGM on 16 May 2008 to be paid on 21 May 2008, thereby increasing net cumulative dividends paid since launch to 12.0 pence per share. Chairman's Statement I am pleased to present the annual results of Matrix Income & Growth VCT plc for the year to 31 December 2007 and to report on a year of good progress and strong performance. Investment portfolio Over the year the Company invested Â£6.3 million into seven companies across a range of industrial and commercial sectors, bringing total investment to Â£14.1 million at cost. The portfolio is predominantly invested in management buy outs ("MBOs"), reflecting the Investment Manager's focus on this type of investment. Your VCT also made its first disposal of a qualifying investment, Ministry of Cake Holdings, realising net proceeds of Â£2.4 million, a gain of Â£1.4 million. Shortly after the year-end, in January 2008, the disposal of the investment in BBI Holdings realised proceeds of Â£842,847, an overall gain of Â£460,734 on cost and equivalent to 2.2 pence per share. We have now reached the end of the third year and the qualifying investment portfolio is currently valued at 27.8% above cost, resulting in a net asset value ("NAV") per share at 31 December 2007 of 116.9 pence (2006: 100.6 pence), and a total return per share, including dividends paid but before payment of the proposed final dividend of 7.8 pence per share, of 121.1 pence (2006: 102.4 pence), compared with the initial NAV per share, net of initial costs, of 94.5 pence. This represents a total return per share since inception of 28.1% (2006: 8.4%). Income from the Company's loan stock investments was running at an aggregate annualised rate of 8.0% at 31 December 2007. The annual running yield on the qualifying investment portfolio as a whole was 4.0%, while the yield on all assets was 4.6%. Now that the majority of the assets are invested in qualifying holdings the overall level of investment income is expected to remain relatively stable, subject to the general level of interest rates. Dividends The revenue account generated an increased net revenue return (after tax) for the year of Â£567,323 (2006: Â£468,957) and your Directors will be recommending a final income dividend of 1.4 pence per share, making a total of 2.4 pence for the year compared with the total income dividend of 2.2 pence per share paid last year. In addition, the Board will be recommending the payment of a capital dividend of 6.4 pence per share. This will be the first capital dividend paid by your Company and is a result of the highly profitable exit from the investment in Ministry of Cake. These dividends will be recommended to Shareholders at the AGM on 16 May 2008 to be paid on 21 May 2008 to Shareholders on the Register on 25 April 2008. Revocation of Investment Company Status In order to enable realised capital profits to be distributed to Shareholders the Board resolved that the Company should revoke its investment company status with effect from 19 December 2007. Investment in qualifying holdings The Company has met the target set by HM Revenue & Customs of investing 70% of total funds raised in qualifying unquoted and AIM quoted companies ("the 70% test") by 31 December 2007. At 31 December 2007, the VCT was 75% invested in qualifying companies (based upon the tax values, which differ from the Investment Portfolio Summary below). Communication with shareholders We aim to communicate regularly with our Shareholders. The May 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. Electronic Versions of the Annual Report At the Extraordinary General Meeting held on 30 October 2007, Shareholders authorised the Company to send communications electronically to Shareholders, and to make documents and information available to Shareholders on a website. You have had the opportunity to decide whether to receive electronic versions of the full version of the Annual Report, or to continue to receive a printed version. The Board has decided not to produce the Summary Annual Report which some of you may have received last year, on the grounds that electronic reporting, and producing only one version of the Annual Report, should save costs. Share buy-backs 94,069 Ordinary Shares came onto the market during the year under review and the Company bought these shares back at a price of 100.6 pence per share, which represented a 10% discount to the then published NAV. These shares, representing 0.43% of the issued share capital at the beginning of the year, were subsequently cancelled by the Company. The Board regularly reviews its share buy back policy. Conflicts of Interest As from 1 October 2008 corporate governance laws will impose a new statutory obligation on your Directors relating to conflicts and potential conflicts of interest with the interests of the Company. As a result, the Board will be seeking Shareholders' approval to amend the Articles of the Company in order to give your Directors new powers to manage such conflicts in the way which is most likely to promote the interests of the Company. Outlook I write at a time of extreme volatility in global markets with significant concerns for slower economic growth. We cannot assume that your Company's fortunes will be unaffected by this wider context, but we consider the investment portfolio to be in good health and well-placed. The portfolio has been constructed at realistic valuations, in companies with resilience and the potential for significant capital appreciation. The Investment Manager's Report highlights the companies in the current portfolio that are performing strongly and we believe this represents a solid platform on which to generate future income and capital dividends. Looking forward, we will continue to pursue a highly selective investment programme even though this may mean relatively few new investments completed in the near term. As 2008 progresses, however, the Investment Manager expects that transactions involving privately owned companies will generally be at lower valuations and that this should present the Company with more attractive buying opportunities. An increasing proportion of the Investment Manager's time is now being spent on preparing investee companies for potentially attractive exits. The Board remains confident that the Company can continue to provide Shareholders with an attractive long term combination of capital growth and income. 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 VCT has continued to pursue its strategy of investing 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 VCT focuses principally on investments in MBOs . This year there has been further progress in building the qualifying investment portfolio, with seven further investments having been made totalling Â£6.3 million. In early July the VCT invested Â£1.0 million to support the MBO of DiGiCo Europe, a global market leading manufacturer of digital sound mixing consoles for the live performance, theatre, post-production and broadcast markets. This was followed in September by an additional investment of Â£1.0 million in Blaze Signs Holdings, the manufacturer of signage for major multiple retailers. This followed the VCT's original investment of Â£574,000 in April 2006 and enabled Blaze to complete the acquisition of Active Sign Maintenance, a complementary maintenance business located nearby. This has broadened Blaze's capabilities and will offer considerable cross-selling opportunities and operating synergies. In October the VCT invested Â£657,000 to support the MBO of Focus Pharmaceuticals, which is based in Burton-upon-Trent and specialises in the licensing and distribution of generic pharmaceuticals. In early December we completed the MBO of Monsal, a Mansfield-headquartered company which is engaged in aerobic and anaerobic technology and consultancy in water treatment and waste disposal industries and in which the MIG VCT invested Â£616,000. As part of an initiative to target further high quality opportunities in the MBO market MIG VCT has formally invested in new companies alongside a small number of investing Chairmen well known to Matrix Private Equity Partners. They are working closely with Matrix to identify MBO transactions using their specialist industry knowledge and experience. Three companies have been established and funded and are actively working with the corporate finance advisory community, seeking to acquire businesses in the construction and support services, healthcare and wellbeing, and food manufacturing and distribution sectors. The investments made during the year are performing generally in line with expectations. It is particularly encouraging that the portfolio has seen its first two successful realisations. In early December, Ministry of Cake was sold to Greencore Group. The VCT's Â£1.0 million investment, made in September 2005, was realised in cash for a total net capital proceeds of Â£2.4 million, representing a Â£983,000 uplift from the valuation prevailing at 30 September 2007. Shortly after the year end a second investment was sold at a significant profit. BBI Holdings, the AIM-listed manufacturer and distributor of point-of-care medical diagnostic products, became the subject of a recommended offer by Inverness Medical Innovations Inc., a US company quoted on the American Stock Exchange ("AMEX"). Favourable exchange rate movements and the strengthening share price of Inverness, which offered a share alternative to the cash offer of 185p per BBI share, enabled the VCT to sell its shares in the market in early January at just over 205p per share. The proceeds of Â£842,000 compared to the Company's investment cost of Â£382,000 and represented a Â£87,000 increase over the valuation as at 31 December 2007. Following the two realisations, the portfolio now comprises seventeen investments at a total cost of Â£13.7 million and a valuation of Â£17.2 million, 125.5% of cost. The performance of the investments is generally pleasing, with a number continuing to exhibit strong trading despite growing evidence of a generally weakening UK economic background. Foremost amongst these are VSI, Youngman, Vectair and PastaKing, which have all enjoyed strong trading. Youngman and PastaKing reported record profits during the year and Vectair more than doubled in profit over the comparable figures in 2006. PXP and British International have both delivered solid performances. Whilst SectorGuard has made acquisitions, its commercial progress has not yet been reflected in its share price. More disappointingly, the performance of both Campden Media and Racoon International has been less positive. Whilst both are profitable, they are trading at levels of profitability much lower than anticipated at the time of investment and their valuations reflect this. It would be surprising if the value of the VCT's unquoted investments were immune from the concerns surrounding the wider economic environment. However, we are confident that we have generally invested in well-established, profitable businesses alongside management teams who are highly motivated to deliver performance for shareholders over the coming years, and that the portfolio's strong early performance reflects this. Investment Portfolio Summary as at 31 December 2007 Date of initial Total Valuation % % of investment book value equity cost of net held by assets funds managed by MPEP Â£'000 Â£'000 Qualifying investments AIM quoted investments BBI Holdings plc May-06 382 756 2.9% 3.11% Developer and manufacturer of rapid test diagnostic products SectorGuard plc Aug-05 150 97 0.4% 5.43% Provider of manned guarding, mobile patrolling, and alarm response services ----- ----- ----- 532 853 3.3% Unquoted investments Youngman Group Limited Oct-05 1,000 3,101 12.1% 29.70% Manufacturer of ladders and access towers Blaze Signs Holdings Limited Apr-06 1,574 2,156 8.4% 53.60% Manufacturer and installer of signs PastaKing Holdings Limited Jun-06 464 1,346 5.2% 27.50% Supplier to the educational and food service market VSI Limited Apr-06 618 1,257 4.9% 47.40% Developer and marketer of 3D software Aust Construction Investors Oct-07 1,000 1,000 3.9% 49.00% Limited Company seeking to acquire businesses in the construction sector Barnfield Management Investments Oct-07 1,000 1,000 3.9% 49.00% Limited Company seeking to acquire businesses in food sector Calisamo Management Limited Dec-07 1,000 1,000 3.9% 49.00% Company seeking to acquire businesses in healthcare sector DiGiCo Europe Limited Jul-07 1,000 1,000 3.9% 30.00% Designer and manufacturer of audio mixing desks PXP Holdings Limited (Pinewood Dec-06 1,000 985 3.8% 37.33% Structures) Designer, manufacturer, supplier and installer of timber-frames for buildings British International Holdings May-06 1,000 951 3.7% 34.93% Limited Supplier of helicopter services Vectair Holdings Limited Jan-06 560 820 3.2% 24.00% Designer and distributor of washroom products Campden Media Limited Jan-06 975 819 3.2% 28.44% Magazine publisher and conference organiser Focus Pharma Holdings Limited Oct-07 657 657 2.6% 13.00% Licensor and distributer of generic pharmaceuticals Monsal Holdings Limited Dec-07 616 616 2.4% 46.51% Supplier of engineering services to water and waste sectors Racoon International Holdings Dec-06 874 437 1.7% 49.00% Limited Supplier of hair extensions, hair care products and training FH Ingredients Limited Feb-05 213 - 0.0% 35.00% Processor and distributor of frozen herbs to the food processing industry ----- ----- ----- 13,551 17,145 66.8% ----- ----- ----- Total qualifying investments 14,083 17,998 70.1% ----- ----- ----- Non-qualifying investments Global Treasury Funds plc (Royal Bank of Scotland)** 2,168 2,168 8.4% Fidelity Institutional Cash Fund 1,178 1,178 4.6% plc** Insight Liquidity Funds plc 1,166 1,166 4.5% (HBOS)** GS Funds plc (Goldman Sachs)** 1,062 1,062 4.1% SWIP Global Liquidity Fund plc 1,016 1,016 3.9% (Scottish Widows)** Barclays Global Investors Cash 612 612 2.4% Selection Funds plc** Institutional Cash Series plc 546 546 2.1% (BlackRock)** ----- ----- ----- Total non-qualifying investments 7,748 7,748 30.0% ----- ----- ----- Total investments 21,831 25,746 100.1% Other assets 199 199 0.7% Current liabilities (217) (217) (0.8)% ===== ===== ===== Net assets 21,813 25,728 100.0% ===== ===== ===== **Disclosed as Investments at fair value within Current assets in the Balance Sheet. Profit and Loss Account for the year ended 31 December 2007 Year ended 31 December 2007 Year ended 31 December 2006 Revenue Capital Total Revenue Capital Total Â£ Â£ Â£ Â£ Â£ Â£ Realised gains/ - 1,433,612 1,433,612 - (212,975) (212,975) (losses) on investments Unrealised gains on - 2,386,239 2,386,239 - 1,731,906 1,731,906 investments Income 1,231,117 - 1,231,117 1,071,415 - 1,071,415 Investment manager's (137,119) (411,357) (548,476) (123,960) (371,881) (495,841) fees Other expenses (337,887) - (337,887) (317,372) - (317,372) ----- ----- ----- ----- ----- ----- Profit on ordinary 756,111 3,408,494 4,164,605 630,083 1,147,050 1,777,133 activities before taxation Tax on ordinary (188,788) 132,958 (55,830) (161,126) 113,421 (47,705) activities ----- ----- ----- ----- ----- ----- Profit attributable to 567,323 3,541,452 4,108,775 468,957 1,260,471 1,729,428 equity shareholders ----- ----- ----- ----- ----- ----- Basic and diluted 2.58p 16.07p 18.65p 2.12p 5.69p 7.81p earnings per ordinary share Note of Historical Cost Profits and Losses for the year ended 31 December 2007 31 December 31 December 2007 2006 Â£ Â£ Profits on ordinary activities before taxation 4,164,605 1,777,133 Less unrealised gains on investments (2,386,239) (1,731,906) Less: realisation of revaluation (loss) of (9,385) - previous years ----- ----- Historical cost profit on ordinary activities 1,768,981 45,227 before taxation ----- ----- ===== ===== Historical cost profit/(loss) for the year after 1,182,664 (334,632) taxation and dividends ===== ===== Balance Sheet as at 31 December 2007 as at 31 December as at 31 December 2007 2006 Â£ Â£ Investments at fair value 17,998,075 10,329,528 Current assets Debtors and prepayments 147,575 142,515 Current investments 7,747,608 11,906,321 Cash at bank 51,562 58,250 ----- ----- 7,946,745 12,107,086 Creditors: amounts falling due within (216,905) (191,712) one year ----- ----- Net current assets 7,729,840 11,915,374 ----- ----- Net assets 25,727,915 22,244,902 ----- ----- Capital and reserves Called up share capital 220,097 221,038 Capital redemption reserve 1,341 400 Revaluation reserve 4,127,530 1,731,906 Special distributable reserve 19,561,655 20,676,105 Profit and loss account 1,817,292 (384,547) ----- ----- Equity shareholders' funds 25,727,915 22,244,902 ----- ----- Net asset value per OrdinaryShare 116.9p 100.6p Reconciliation of Movements in Shareholders' Funds for the year ended 31 December 2007 Year ended Year ended 31 December 2007 31 December 2006 Â£ Â£ At 31 December 2006 22,244,902 20,728,204 - 155,005 ----- ----- As at 1 January 2007 22,244,902 20,883,209 Purchase of own shares (95,275) (35,581) Return for the year 4,108,775 1,729,428 Dividends paid in year (530,487) (332,154) ----- ----- Closing Shareholders' funds 25,727,915 22,244,902 ----- ----- Cash Flow Statement for the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 Â£ Â£ Â£ Â£ Operating activities Investment income received 1,227,519 1,023,128 Investment management fees paid (548,476) (619,414) Other cash payments (399,250) (312,203) ----- ----- Net cash inflow from operating 279,793 91,511 activities Investing activities Acquisitions of investments (6,272,923) (6,447,622) Disposals of investments 2,499,491 - ----- ----- Net cash outflow from investing (3,773,432) (6,447,622) activities Taxation Taxation paid (46,000) - ----- ----- Net cash outflow from taxation (46,000) - Equity dividends Payment of dividends (530,487) (332,154) ----- ----- Cash outflow before financing (4,070,126) (6,688,265) and liquid resource management Management of liquid resources Decrease in current investments 4,158,713 6,763,006 Financing Purchase of own shares (95,275) (35,581) ----- ----- (95,275) (35,581) ===== ===== (Decrease)/increase in cash for (6,688) 39,160 the year ===== ===== Reconciliation of profit before taxation to net cash inflow from operating activities Year ended Year ended 31 December 2007 31 December2006 Â£ Â£ Profit on ordinary activities 4,164,605 1,777,133 before taxation Net (gains)/losses on (1,508,876) 212,893 realisations of investments Net unrealised gains on (2,386,239) (1,731,906) investments Increase in debtors (5,060) (44,958) Increase/(decrease) in 15,363 (121,651) creditors and accruals Net cash inflow from operating 279,793 91,511 activities Analysis of changes in net funds Cash Liquid Resources Total Â£ Â£ Â£ At 1 January 2007 58,250 11,906,321 11,964,571 Cash flows (6,688) (4,158,713) (4,165,401) At 31 December 2007 51,562 7,747,608 7,799,170 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 22,009,752 (2006: 22,103,821) 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 Â£567,323 (2006: Â£468,597) and on 22,031,665 (2006: 22,138,232) 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 Â£ 3,541,452 (2006: Â£1,260,471) which includes the net of tax portion of the Investment Manager's fees charged to the capital reserve of Â£278,399 (2006: Â£ 258,460) and 22,031,665 (2006: 22,138,232) 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 2007 but is derived from those accounts. Statutory accounts for the year ended 31 December 2007 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. The accounting policies set out in the most recently published set of accounts have been followed. 5. Annual Report An Annual Report will shortly be made available on our website: www.migvct.co.uk and will be circulated by post to those Shareholders who have requested to receive copies of the Report. Copies will be available thereafter to members of the public from the Company's registered office. 6. Annual General Meeting The Annual General Meeting will be held at 11.30 am on Friday, 16 May 2008 at the offices of Matrix Group Limited, One Jermyn Street, London SW1Y 4UH. Contact details for further enquiries: Robert Brittain 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 END

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