LOM (Holdings) Limited Unaudited 2002 Full Year Report

"Bear Markets in the major world's equity exchanges were the major feature of 2002 and continued to place downward pressure on the main revenue lines of LOM's Operations. The US equity markets declined 23% over 2002 as measured by the S&P 500 Index, while the UK, German, French and Japanese markets declined 25%, 45%,34% and 19% respectively. Bear markets of this magnitude resulted in downward pressure on our brokerage fees which fell 7.3% year on year. The decline in our fees was somewhat mitigated by our exposure to the strong showing of the fold and precious metal stocks which rose sharply over 2002. Additional negative pressure was placed upon our net interest spreads on lending as short-term interest rates fell to 40 year lows. Net interest revenues for the group fell 44% year on year.

On the brighter side, our efforts to diversify our revenue streams have contributed some bright spots to our financial picture. Asset management fees rose 9.6% of group revenues, foreign exchange earnings rose 57% to 5.7% of group revenues and corporate finance income tripled in 2002 to reach 3.5% of group revenues.

Other revenues including our leasing business rose 6.9% to reach 7.9% of group revenue.

Despite these ongoing and continuing efforts at diversifying our revenues, broking fees still constitute almost 60% of revenues and as such, weak equity markets will continue to depress these revenues.

The management of LOM has continued throughout 2002 to focus on cost reduction including reduction of headcount. Our efforts to become more efficient have been hampered by continually rising social costs associated with employment. The combination of high wage demands, employment tax, social insurance, work permit fees, pension contributions and medical costs has made the cost of labour in Bermuda effectively uneconomic save for highest productivity employees. Despite these difficulties we have managed to cut our expenses by 7.1% over 2002 excluding a $400,000 bad debt loss experienced due to the bankruptcy of a Toronto-based Canadian brokerage firm.

Overall 2002 group net profits were effectively unchanged at $200,426 versus $206,459 in 2001. This meager result on $23 million of capital employed is a point of frustration for the management and Shareholders of LOM. Though we continue to seek a return to more attractive returns on capital employed we expect business conditions to remain difficult for the foreseeable future.

There has existed a "perfect storm" type of business environment over the past several years. Financial markets have declined significantly and there has been a substantial increase in regulations applied to the offshore world, combined with a stream of adverse media commentary. Most significantly for LOM there has been, in our principal operating jurisdictions of Bermuda and Grand Cayman, a conscious abandonment of the principals of privacy and client privilege. Though undoubtedly this pressure has come from the British Government, it does not change the reality that it has made Bermuda and Grand Cayman a sub-optimal jurisdiction of choice for private clients. Meanwhile the public determination of the Swiss to preserve their 200 year old principle of client confidentiality has resulted in Switzerland consolidating its position as the jurisdiction of choice for wealthy private clients.

LOM's management continues to focus on growing our various revenue streams while improving our efficiency and containing costs. Business conditions remain very difficult. LOM's balance sheet remains very healthy with net equity of $23.5 million. The group carries no debt and holds cash and equivalents of $8.6 million or 37% of total. At the end of 2002 LOM's book value per share $3.55 per share. The strength of our balance sheet stands us in good shape to continue to weather the current adverse business environment.

We would like to thank our customers for their support and our staff for all the hard work they continue to contribute during this difficult time."