Slumping stock markets and the global economic slowdown resulted in a 90 percent slump in LOM (Holdings) Ltd. profits last year, the company reported yesterday.

Net income for 2001 was a "modest" $206,459 or three cents per share compared to $7.079 million or $1.10 per share in 2000.

The primary cause for the decline in earnings was a 55 percent decline in gross revenue, from $27.06 million in 2000 to $12.247 million in 2001.

Expenses were reduced by $5.1 million or 32 percent to $10.89 million.

"Global equity bear markets, slowing economic activity in the G7 and the tragic events in September conspired to make 2001 a very challenging and difficult year for the LOM Group," LOM (Holdings) Limited managing director Scott Lines said in a letter to shareholders. "Despite these difficulties we managed to achieve a modest profit of $206,459."

But he added: "The group is in a strong position to weather the current downturn in business and continue to expand business operations."

Mr. Lines said the company's main revenue streams are transaction fees earned on the broking of securities, which declined 60 percent in the company's divisions in Bermuda, Grand Cayman and the Bahamas.

"Net interest revenues also declined 47 percent, as interest rates and customer demand for margin funds declined sharply in the year," he said.

Other sectors recording declines included corporate finance (down 58 percent), revenues from foreign exchange spreads (down 28 percent) and security inventory account (down 19 percent).

But he said revenues from bank and subsidiary fees, which rose six percent and "one bright area was the performance of our asset management subsidiary where revenues rose 15 percent, mainly due to rising funds under management".

Mr. Lines also noted that high costs in Bermuda for salaries and compensation made it difficult for the company to reduce its cost base and said these costs were continuing to rise as new exempted companies came to the Island.

"This has raised the premium on automating our processes and procedures as much as possible and has meant that we have had to continue to spend funds on system enhancements during this downturn," he said.

"Additionally the group has continued and will continue to invest in our long term strategic goals.

"Overall we expect that the balance of 2002 will prove a more rewarding year in the markets than has the past year.

"We remain optimistic that LOM's profits will recover this year as the group's broking and corporate finance divisions see transactions rise and consequent revenue gains.

"We expect that our asset management revenues will continue to grow as our assets under discretionary management increase.

"And finally the marginal costs of servicing these increased revenues should decline as we reap benefits from our investments in technology."

LOM floated its shares on the Bermuda Stock Exchange last June at $4 a share. They traded on Tuesday at $3.20.