LOM (Holdings) Limited 2003 Full Year Report

"Major world equity markets experienced a sustained rebound after a volatile start to the year. This recovery was accompanied by strongly rising commodity prices as world economic expansion and the rapid acceleration of demand by China for raw materials has created a demand imbalance in both the energy and metals areas. A further very important event has been the decline in the US dollar, with a "wink and nod" by the administration, as the US seeks to escape its debt and trade imbalances through devaluation. We believe that these trends will continue through the rest of the year and expect that though volatile, economic output, stock markets and commodity prices will continue to rise and the US dollar will fall.

LOM group net revenues rose 45% over 2003 with all of our divisions reporting healthy increases. Broking revenues were up 44%, asset management revenues rose 23%, investment services revenues rose 30% and net interest earnings rose 23%. Of note is the growth in our leasing business where revenues rose 115% over the year. Given the success of the leasing business we plan to expand our leasing activities into Grand Cayman.

LOM's work during the past three years in reducing overheads while continuing to invest in "straight through processing" technology in order to enhance productivity has paid returns. As business activity rose we were able to hold costs relatively stable and allow a significant proportion of those increased revenues to drop through to the bottom line. Although our costs during 2003 rose 21%, this is a result of larger commission costs, which are directly related to our broking activities, and the write off of our investment in the BSX. Ex these costs group expense rose only 6%, largely due to a significant increase in professional fees.

The decision to write off our investment in the Bermuda Stock Exchange was made not because we have lost faith in the long-term ability of the Exchange to grow to profitability but because we feel that the success of the exchange is dependant on it achieving DIE (Designated Investment Exchange) status. This in turn is dependant upon the British Government. After many years of this approval being promised as imminent and then having the exchange's goal posts moved, we feel that the timing of approval is so uncertain that it would be prudent to make this financial write off at this time.

Going forward we expect to be faced with some cost increases related to business expansion in our main revenue areas. However it is anticipated that our growth in marginal revenue will be significantly higher than any increases in marginal costs.

Overall 2003 group net profits rose to $3,043,300 or $0.48 per share, a 13.7% return on capital. As our shareholders are aware we paid a special dividend of $0.25 per share in November of 2003. We are pleased that the group was able to demonstrate a more acceptable return on capital during 2003. At the end of 2003 book value per share was $3.77, and we held $13 million in cash on our balance sheet, representing 54% of total capital. The group has no debt.

Conditions in the offshore environment remain a difficult place in which to operate, and carry challenges and costs not faced by our onshore competitors. Though the attacks by the OECD upon the offshore world have waned, mainly due to a firm stance taken by Switzerland in terms of what would and would not be acceptable in terms of a global "level playing field", it seems that the regulatory bodies in Bermuda and the Channel Islands are "falling over themselves" to prove to the world's onshore regulatory bodies how co-operative they can be. Their priorities to a global "bureaucratic brotherhood" are placed above the jurisdiction's duties and obligations to its clients.

We view the Bahamas as emerging into a serious competitive alternative to traditional offshore centres like Bermuda due to the demonstrated commitment by both the government and opposition to work with the investment and trust industry in order to grow and enhance international financial business. It is a truth that as both companies and countries grow in size and success, with the passing of time and generations, the "management", whether corporate or national, become comprised of individuals who have never built a business or industry, and though they pay lip service to what is required for continuing success, their actions, being based upon their limited experience, often result in decisions that cause the enterprise's competitive demise. We fear this is happening in Bermuda and point to the continuing decline in the rate of incorporation of international companies.

Furthermore the enormous success Bermuda has had over the past several years in attracting re-insurance companies to the island should not obscure the reality that we are suffering relative declines in many of our other international business areas. As a result Bermuda is in danger of becoming a "one company town" with all the risks that that situation entails.

We would like to thank our customers for their support and loyalty through the bear market. Our customers are not only our main asset but also the main contributors to the growth in the group as most of our new business comes from referrals. We would also like to thank our dedicated and hard working staff that we believe are the best in the business."