The profits posted by Bermuda investment management firm LOM (Holdings) Limited declined 34 percent last year to some $2 million.

The fall in earnings was largely blamed on a high-profile regulatory probe targeting Lines Overseas Management and LOM senior officers (see separate story).

In a letter to shareholders released through the Bermuda Stock Exchange (BSX) yesterday, the company said an eight percent return on capital had been achieved.

Revenues for the group were $17.4 million, a 1.7 percent increase over 2003.

Notable items were a 19.4 percent rise in brokerage fees, a 28 percent increase in net interest revenue, a 23 percent decline in foreign exchange revenues and a 70 percent decline in corporate finance income.

LOM said there was also a 67 percent increase in lease interest revenues.

On the expense side, LOM saw its group costs rise $15.3 million, or 9.3 percent.

There was a 15 percent increase in employee compensation and employee benefits of which a large part related to higher staff numbers in our asset management subsidiary and costs due to the hurricanes shutting LOM offices in Grand Cayman and the Bahamas.

In his letter, Mr. Lines said: ?It is expected that our staff compensation costs should decline somewhat in 2005. Professional fees increased 33 percent due to legal fees related to the SEC investigation.

The company said LOM?s broking operations had a strong niche in the commodity sector, but attracting customers was becoming more difficult while the US Securities and Exchange Commission continues to bring negative publicity.

?Given our difficulties in growing revenues we shall be once again reviewing our cost structure,? Mr. Lines said.

He added that LOM?s balance sheet remained strong with $25.5 million in shareholders capital of which 56 percent is in cash.

The group?s assets under administration were effectively unchanged from the prior year at $864 million.

At year end, book value per share was $3.98. And since the end of 2004 LOM has repurchased for cancellation 20,600 shares. The group will pay its half yearly dividend on 1 June of five cents per share to shareholders of record on May 18.