The private equity group 3i yesterday raised the amount it will return to shareholders by £200m to £700m after record earnings from sales of its investments last year.
The windfall will be paid to shareholders in July in the form of an issue of "B shares", which can then be cashed in.
With the private equity industry raising ever-larger funds, pressure has mounted to do deals. That, and the increased competition among private equity groups it brings, has seen prices soar for a declining number of assets.
Last year 3i chose to sell £2.2bn of investments, against £1.3bn the previous year, including stakes in the foreign exchange company Travelex and the German pharmaceuticals group Betapharm. At £576m, profits from sales were more than double those in 2004.
Meanwhile, Europe's biggest listed private equity company invested £1.1bn across 58 deals - a more modest increase of £345,000 on the previous 12 months.
Almost half of those new investments were made in continental Europe, 36 per cent in the UK, 6 per cent in the US and the remainder in Asia.
Philip Yea, 3i's chief executive, said: "We have been very active sellers and cautious buyers. We work the angles and try to avoid the mainstream auctions, to fish where others are not fishing."
But the City should not expect the same "exceptional levels" of asset sales over the coming year, he warned. 3i now has investments in about 1,000 companies - less than a third of the number it was involved in three years ago.
Mr Yea expected 3i to invest more heavily this year than last, but said he would continue to pursue a strategy of making fewer, larger deals with China and India presenting increasingly attractive opportunities.
The company he runs, formerly known as Investors In Industry, was founded after the Second World War to help to finance small- and medium-sized companies. Before flotation in 1994, 3i's owners were the Bank of England and the country's big banks.
Now it comprises three main businesses: buyouts, where it takes majority stakes in "mid-market" companies for investments of up to about €1bn (£687m); growth capital, where it takes smaller minority stakes; and venture capital for start-ups.
Buoyant European stock markets and increased competition among buyout groups spurred the value of 3i's investment portfolio 22.5 per cent over the year to the end of March.
Total annual return, or net profits, were £330m higher at £831m allowing 250-odd 3i deal-makers to carve up about £250m in bonuses. The company proposes to pay a total dividend of 15.2p per share, 4.1 per cent better than in the previous year.
Analysts applauded the results, with Merrill Lynch again telling clients to buy 3i shares. They have risen by about 40 per cent over the past year, but eased 14p to 919p yesterday on profit-taking.