MORE money is needed to encourage youngsters to the theatre to preserve the arts for years to come, said the Prince of Wales at the Royal Shakespeare Company's AGM.

Speaking at The Other Place on Monday, Prince Charles told the board of governors and guests his love of the arts was sparked when his grandmother took him to see the Bolshoi Ballet at Covent Garden when he was seven.

The genial prince praised the RSC for The Lion, The Witch and The Wardrobe and The Secret Garden for encouraging a wider and younger audience to go to the Stratford theatres, but said more should be done.

The prince, the president of the company's board of governors, was full of praise after a hugely successful 1999-2000, for the artistic merit of the productions - most of which the prince has seen - but also for the way the company handled its finances.

Retiring chair of governors, Sir Geoffrey Cass, told the governors the company had made an operating surplus for the year, carried forward into 2000-2001, thanks to prudent management and the excellent box office totals.

"The year saw 1,700 performances and 31 productions seen by almost a million people," said Sir Geoffrey.

"We filled 82% of capacity on tour and in Stratford and 79% in London."

Prince Charles said it was encouraging to see a healthy interest in the theatre growing thanks to tours and residencies in the UK and abroad, but to ensure the future of the live arts the "best known theatre company in the world" must do its best to encourage more children through the doors.

He pointed to a recent instance where he went to a school for excluded pupils in Birmingham, where he found a "marvellous teacher teaching Romeo and Juliet".

He said the children were incredibly enthusiastic about the play and after he had left, he had the "brainwave" of arranging for the children to see the RSC's production, which they loved.

"I got such touching letters from the children and the teacher said it was one of the best things that happened to them," he said.

"I believe that it is absolutely vital that future audiences, especially schoolchildren, are enabled to come and see performances not just at this company but at all the great institutions in the country," said the prince.

Earlier, the prince met residents and trustees of the newly refurbished Emily Payne and Elizabeth Saunders Almshouses in Guild Street when he looked round the homes, which have doubled in size and are completely modernised.

Delighted Stratford mayor Juliet Short said the prince had been very impressed by the work of the trustees and was particularly impressed by former mayors continuing their work with the municipal charities after they retired from office.