Investcorp announces 22 percent increase in profits to $110.3 Million

Income before operating expenses, at $324.7 million, was a record achievement for the Firm. Net income before provisions was $171.6 million, one of Investcorp's strongest ever performances. The Firm allocated $61.3 million in provisions, further adding to the strength of its balance sheet reserves.

Investcorp's Board of Directors has recommended a dividend payment of $40 million on ordinary shares, maintaining the level paid for the past 2 years. Additionally, a dividend at the prescribed rate of ten percent per annum will be paid on Investcorp's preference shares. Total assets at June 30, 2005 were $4.8 billion, and total shareholders' funds were $1.2 billion.

Nemir A. Kirdar, Investcorp's President and Chief Executive Officer, said: "Investcorp had an outstanding year in Fiscal 2005. It has been a year of many achievements that have once again reconfirmed the value of Investcorp's franchise in the Gulf region. Each of Investcorp's four lines of business started the year in a position of strength, and all went on to generate excellent results, with many record-breaking accomplishments.

"Investcorp scored a record performance in its placement activities. The Firm's Gulf marketing team placed $1.5 billion of Investcorp products with clients this year, reflecting a 50 percent increase over historical annual placement levels. At the same time, clients received distributions of almost $1 billion from various investment realizations. Investcorp now manages total investments in alternative assets of around $9.5 billion."

Highlights of the year were:

• Corporate Investment, Investcorp's private equity business, made five new acquisitions, Polyconcept in Europe, and American Tire, Associated Materials, GPG and Source Media in the United States. It completed three realizations, ECI, Gerresheimer and MW Manufacturers, and several partial realizations, including Hilding Anders and Stahl. The focus on protecting and increasing the value of the investment portfolio during the challenging global market conditions of the past several years had measurable results. The performance of our portfolio companies improved steadily this year, positioning the Firm well for future realizations.

• Investcorp's Real Estate line of business had a record year. It sold 28 properties, realizing $419 million for our clients. At the same time, it acquired 22 new properties, deploying a record $241 million in equity. These investments included several in a sector new to the Firm, 'opportunistic' real estate, following client demand for investment that offered a different risk/return profile. Four new portfolios were placed with clients, whose demand for Investcorp's real estate product remains very high.

• Investcorp Asset Management, the fund of hedge funds business, did well in the face of a widely recognized muted market for hedge funds globally. Clients subscribed to an additional $375 million in the program, taking the total client assets under management to more than $2 billion for the first time. The program generated steady results for investors, preserving capital and delivering, in the face of some specific market challenges, a reasonable spread over cash returns.

• Technology Investment, Investcorp's venture capital business, completed four very profitable realizations for Technology Fund I and made three new investments. The strong exits included a highly successful IPO of PortalPlayer. The top-quartile performance of Fund I, versus industry peers, supported successful fund raising for Technology Fund II, which is expected to close at approximately $300 million.

• Investcorp itself continued to be financially robust with a fortress balance sheet, supported by high liquidity, strong capital, and diversified funding with long maturities and conservative leverage. It was a milestone year for balance sheet funding with over $1 billion in financing and re-financing activity, which included

• both the Firm's largest ever single facility and its first Asian focus facility. Investcorp's ordinary shares ended the year at a price of $2,000 per share.

• The 2005 fiscal year also saw a diversification of Investcorp's product placement activities through a specific initiative targeting US institutions for the asset management line of business and a limited measure of US and European institutional investor participation in private equity deals and Technology Fund II.