SEAMARK Asset Management Ltd. 2008 Full Year and Fourth Quarter Financial Results



    HALIFAX, Feb. 18 /CNW/ - SEAMARK Asset Management Ltd. today announced
that, including the impact of an impairment charge, earnings for the full year
were $0.01 per share, of which a loss of ($0.08) per share was attributable to
the fourth quarter.
    The impairment charge arose from the Company's temporary investments, the
market value of which declined significantly in late 2008 as global equity
markets retreated. The impairment charge and a future tax asset valuation
allowance together resulted in a reduction in earnings per share of $0.09 for
both the full year and the fourth quarter.
    Overall liquid assets increased during the fourth quarter, ending the
year at $11.3 million compared to $11.0 million as of September 30, 2008.
Positive net cash flow during the quarter resulted in an increase in cash and
short-term investments from $8.7 million on September 30 to $9.4 million at
year end, more than offsetting market value declines in temporary investments,
which ended the year at $1.9 million.
    "History will remember 2008 as one of the most trying years ever
experienced by investors," said Stuart Raftus, President & CEO. "Through these
difficult markets, our investment team executed on our investment discipline,
and delivered above median results for our clients in each of our major
investment mandates. SEAMARK's balanced, fixed income and Canadian equity
mandates all rank very well in industry surveys over one-, two-, three-, four-
and ten-year periods. This strong relative performance during difficult times
has positioned the company very well for resumed asset growth."
    "Recent market turmoil has highlighted how important it is for companies
in the financial services sector to maintain the confidence of their clients.
In this regard, SEAMARK may rely not only on its strong relative performance,
but also on its enviable financial position. Our cash and short-term
investments continue to build, providing us with significant financial
flexibility. We remain debt free and our financial resources on hand are more
than adequate to allow us to continue to deliver excellence in client service
through these difficult times."

    A summary of SEAMARK's financial results is provided below.

    An analyst call will be held on February 19, 2009 at 9:30 a.m. Atlantic
time (8:30 a.m. Eastern) to discuss these results. The call will be web-cast
live by CNW Group. A link to the call can be found at: www.seamark.ca
    SEAMARK Asset Management Ltd. (TSX:SM) provides investment management
services across Canada to institutional clients, mutual funds, private
clients, and the managed portfolio advisory programs (wrap programs) of many
of Canada's leading investment dealers.

    
    SUMMARY OF FINANCIAL RESULTS

                                      Three months             Full Year
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    for the period
     ended December 31
     ($ in thousands,
     except per share)
    Total revenue               $  2,126    $  3,220   $  10,522   $  14,174
    Earnings before income tax      (697)        892         917       4,601
    Net earnings                    (868)        516          93       2,831

    Basic earnings per share    $  (0.08)   $   0.05   $    0.01   $    0.27
    Diluted earnings per share     (0.08)       0.05        0.01        0.25

    as of December 31
     ($ in thousands)
    Cash and cash equivalents   $  9,350    $  9,189   $   9,350   $   9,189
    Temporary investments          1,916       2,875       1,916       2,875
    Total assets                  15,525      17,315      15,525      17,315
    Total long-term financial
     liabilities                     nil         nil         nil         nil

    Basic weighted average
     common shares outstanding
     (in thousands)               10,436      10,477      10,421      10,465
    Diluted weighted average
     common shares outstanding
     (in thousands)               10,709      11,353      10,694      11,109
    -------------------------------------------------------------------------
    

    Certain information regarding SEAMARK Asset Management Ltd. contained
herein may constitute forward looking statements within the meaning of
applicable securities laws. Forward looking statements include estimates,
plans, expectations, opinions, forecasts, projections, guidance or other
statements that are not statements of fact. These statements reflect
management's current expectations based on the business conditions under which
the company is currently operating, and are believed to be reasonable, but
management can give no assurance that such expectations will prove to have
been correct.
    By their very nature, forward-looking statements involve inherent risks
and uncertainties, as actual results and events will be affected by a number
of factors, many of which are beyond the company's control. Actual results and
events may therefore differ materially from those predicted by the forward
looking statements. Readers are cautioned not to place undue reliance on any
forward looking statement. Forward looking statements are expressly qualified
in their entirety by this cautionary statement.

    FINANCIAL OVERVIEW & OPERATING HIGHLIGHTS

    The year 2008 was marked by significant declines in the market values of
publicly traded equity securities. These market value declines impacted
SEAMARK's financial results in two ways.
    First, SEAMARK's revenues from clients are derived as a percentage of the
client's assets under management ("AUM"). Global stock market declines in 2008
led to declines in the current market value of client portfolios invested in
equities, reducing SEAMARK's AUM and therefore its revenues.
    Second, SEAMARK has invested alongside its clients in launching a number
of new investment products over recent years. The significant market value
declines in 2008 resulted in an other-than-temporary impairment charge with
respect to these investments, which had the effect of increasing expenses by
$0.9 million in 2008.
    Each of these items is discussed in greater detail below.
    Market value declines resulted in a $670 million decline in AUM for 2008,
compared to 2007 when market value change resulted in a $10 million increase
in AUM. Net asset outflows caused an additional $670 million decline in AUM
for 2008, although this represented an improvement compared to the $1,350
million decline in AUM in 2007. Total AUM declines of $1,340 million in 2008
were therefore exactly equal to the $1,340 million declines in 2007. The
following table summarizes changes in AUM during 2008 and 2007:

    
    -------------------------------------------------------------------------
                         Annual Change in AUM Summary
                                (in billions)
    -------------------------------------------------------------------------
                                     2008                  2007

                          AUM     Net  Market    AUM     Net  Market     AUM
                       end of     New   Value end of     New   Value  end of
                         2008  Assets  Change   2007  Assets  Change    2006
    -------------------------------------------------------------------------
    Total Firm          $2.53  ($0.67) ($0.67) $3.87  ($1.35)  $0.01   $5.21
    -------------------------------------------------------------------------
    Institutional
     clients             1.52   (0.32)  (0.34)  2.18   (1.07)   0.06    3.19
    -------------------------------------------------------------------------
    Mutual funds         0.11   (0.03)  (0.03)  0.17   (0.07)  (0.02)   0.26
    -------------------------------------------------------------------------
    Wrap programs        0.79   (0.30)  (0.27)  1.36   (0.19)  (0.04)   1.59
    -------------------------------------------------------------------------
    Private clients      0.11   (0.02)  (0.03)  0.16   (0.02)      -    0.18
    -------------------------------------------------------------------------
    

    Revenues for the full year 2008 were $10.5 million compared to $14.2
million in 2007. The decline in revenues primarily reflects a decline in the
average AUM in 2008 compared to 2007. It also reflects a year-over-year
decline of $0.4 million in investment income during 2008. At the end of 2007,
investment income was $0.8 million compared to $0.4 million during 2008.
    SEAMARK incurred an other-than-temporary impairment charge of $0.9
million for temporary investments, which is recorded as an expense for 2008.
The Company's temporary investments are classified as available for sale and
are recorded at fair market value on the balance sheet with the unrealized
gains (losses) in the fair values being recorded in accumulative other
comprehensive income. When the fair value of an investment is below its cost
it is assessed to determine if the impairment is other-than-temporary. Factors
considered in determining whether a loss is other-than-temporary include: the
length of time and extent to which fair value has been below cost; the
financial condition and near-term prospects of the issuer; and, the ability to
hold the investment for a period of time sufficient to allow for any
anticipated recovery. If the decline in fair value is determined to be
other-than-temporary the cumulative changes previously recognized in
accumulative other comprehensive income are reclassified to net income.
    In light of current market conditions, SEAMARK has been continually
reviewing its operations and instituting cost saving measures where
appropriate. Total expenses in 2008 and in 2007 were $9.6 million. Expenses in
2008 include the impact of the other-than-temporary impairment discussed
above. Excluding this impairment charge, expenses in 2008 were lower than
2007. The 2008 expenses included increased costs associated with the
establishment of increased equity ownership among key employees and new mutual
fund products launched in the third quarter of 2007. These costs were offset
by a reduction of costs in other areas, including non-recurring expense
recoveries of $0.3 million during the third quarter of 2008.
    Earnings before income taxes as a percentage of total revenue were 9% in
2008, as compared to 33% in 2007. Net earnings as a percentage of revenues
were 1% in 2008, compared to 20% in 2007. Declining revenues and the
other-than-temporary impairment charge of $0.9 million negatively impacted
these ratios during 2008 compared to the previous year.
    The effective tax rate for the full year 2008 was 89.9% compared to 38.5%
for 2007. The increase in the effective tax rate is primarily a result of an
increase in non-deductible expenses and in particular the other-than-temporary
impairment charge discussed above; a portion of which is non-deductible for
tax purposes. In addition, the valuation allowance of $226,000 contributed to
the increase in the effective tax rate by decreasing future tax assets and
increasing future income tax expenses. Two separate assessments make up the
valuation allowance. In essence, Management determines the valuation allowance
amount by assessing all available evidence and concluding, based on the
evidence, the likelihood that future income tax assets will be recovered from
future taxable income. Management establishes a valuation allowance for the
amount of the future income tax asset that recovery cannot be considered "more
likely than not". Management determined that the full future tax asset of
$151,000 relating to the potential recovery of the capital loss for the
other-than-temporary impairment of temporary investments would "more likely
than not" not be recovered as Management does not intend, at this time, to
dispose of the temporary investments to realize the capital losses for income
tax purposes. Management also assessed the future tax asset for the deductible
temporary difference with respect to the equity compensation grants and
determined that based on the current market instability and the timing of the
vesting of these grants that it was "more likely than not" that the full value
of the future tax deductions would not be realized and as a result applied a
$75,000 valuation allowance to this asset.

    
    FOURTH QUARTER 2008

    The following table summarizes the asset flows for the fourth quarter of
    2008 and 2007:
    -------------------------------------------------------------------------
                         Quarterly Change AUM Summary
                                (in billions)
    -------------------------------------------------------------------------
                         4th Quarter 2008               4th Quarter 2007

                AUM     Net   Market     AUM      AUM    Net  Market     AUM
             End of     New    Value  End of   End of    New   Value  End of
                4th  Assets   Change     3rd      4th Assets  Change     3rd
            Quarter                  Quarter  Quarter                Quarter
               2008                     2008     2007                   2007
    -----------------------------------------  ------------------------------
    Total
     Firm     $2.53  ($0.16)  ($0.30)  $2.99    $3.87 ($0.24) ($0.10)  $4.21
    -----------------------------------------  ------------------------------
    Insti-
     tutional
     clients   1.52   (0.09)   (0.14)   1.75     2.18  (0.18)  (0.03)   2.39
    -----------------------------------------  ------------------------------
    Mutual
     funds     0.11       -    (0.01)   0.12     0.17  (0.01)  (0.01)   0.19
    -----------------------------------------  ------------------------------
    Wrap
     programs  0.79   (0.06)   (0.13)   0.98     1.36  (0.05)  (0.05)   1.46
    -----------------------------------------  ------------------------------
    Private
     clients   0.11   (0.01)   (0.02)   0.14     0.16      -   (0.01)   0.17
    -----------------------------------------  ------------------------------
    

    Consistent with the experience for the full year, net asset outflows
during the fourth quarter of 2008 were lower than during the same period in
2007, while market value declines were higher.
    Revenues declined during the fourth quarter of 2008 compared to the same
period in 2007 and the third quarter 2008, reflecting primarily a reduced
level of average AUM as well as reduced investment income during the fourth
quarter of 2008 compared to the third quarter of 2008.
    Expenses in the fourth quarter were $2.8 million compared to $2.3 million
in the fourth quarter 2007. Expenses during the fourth quarter of 2008 were
impacted by the other-than-temporary impairment charge of $0.9 million
previously discussed. Excluding this charge, expenses in the fourth quarter
were lower compared to fourth quarter 2007, reflecting increased stock based
compensation costs offset by an overall reduction in other expenses.

    LIQUIDITY AND CAPITAL RE

SOURCES SEAMARK's total available liquid assets, consisting of cash, short-term investments and temporary investments at the end of 2008 were $11.3 million, down from $12.1 million at the end of 2007. The decline in total available liquid assets primarily reflects market value declines in temporary investments during 2008, which declined from a value of $2.9 million at the end of 2007 to $1.9 million at the end of 2008. Cash and short-term investments increased from $9.2 million at the end of 2007 to $9.4 million at the end of 2008. There are no current liquidity concerns with any financial instruments held by SEAMARK. Currently available liquid assets are expected to be adequate to meet SEAMARK's financial needs and to fund current operations for the immediate future; therefore, no additional capital resources have been arranged. There is no current expectation that any such additional capital resources will be required. SEAMARK has no material contractual obligations other than certain operating leases described in Note 15 to the Consolidated Annual Financial Statements. SEAMARK has no off-balance sheet financial arrangements. The payments due under these contractual obligations are summarized below: ------------------------------------------------------------------------- $ in thousands 2009 2010 2011 2012 2013 after 2013 ------------------------------------------------------------------------- Long Term Debt nil nil nil nil nil nil ------------------------------------------------------------------------- Operating Leases 553 267 269 273 275 46 ------------------------------------------------------------------------- Other Long Term Obligations nil nil nil nil nil nil ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total Contractual Obligations 553 267 269 273 275 46 ------------------------------------------------------------------------- OUTLOOK The near-term economic outlook is very poor. The global economy is in a recessionary period, the length and extent of which is still unknown. Equity market valuations reflect this poor economic outlook, although it is expected that equity market valuations will begin to recover prior to the stabilization of the underlying economy. The timing and extent of that recovery, however, also remains unknown. SEAMARK's financial results for 2009 will be impacted by the current reduced market valuations on equities, as this will reduce the Company's revenues for the year unless and until market valuations improve. In addition, the general market and economic conditions are expected to negatively impact net asset flows in the near future. Many investors are unable or unwilling to commit additional funding to their investment accounts under current conditions, while other investors are required or choose to withdraw assets for current income needs or to avoid continued market volatility. Partially offsetting this, many defined benefit pension plans are expected to need to commit additional funding to their investment accounts to overcome current funding shortfalls. On balance, however, general market conditions do not favour new asset growth in early 2009. Despite this, management believes that SEAMARK is well positioned competitively to begin to win new assets when overall market conditions improve. When selecting an investment manager, investors seek a manger with strong relative performance, a manager that is perceived to be operationally stable, with a strong financial position and tenure in its investment team. SEAMARK's investment team has executed effectively on its investment process during these challenging market conditions. SEAMARK's balanced, fixed income, and Canadian equity mandates all rank very well in relative terms compared to its competitors for one-, two-, three-, four-, and ten-year periods. Over each of the past three years and for 19 of the last 24 years SEAMARK's balanced pension composite has generated above median performance according to the RBC Dexia industry survey. This strong relative investment performance is expected to make the Company's services attractive to investors who are looking to invest new long-term funding or who are dissatisfied with their current investment managers. SEAMARK is financially strong, well financed and adequately capitalized. There is no current expectation that any additional capital resources are required or that the Company would be unable to continue to deliver its normal services to clients. Although revenues have been affected as a result of the current economic downturn, SEAMARK's conservative balance sheet has helped it weather the current conditions. SEAMARK is, however, smaller than many of its competitors and, as a public company, its financial condition is subject to greater scrutiny than most of its competitors, few of which are independent public companies. As a result, concerns regarding SEAMARK's perceived financial situation are expected to make it more difficult to win and retain business prior to a sustained improvement in AUM trends. In order to maintain the strongest possible financial condition for the Company, in the third quarter SEAMARK's Board of Directors elected to suspend the Company's dividend. There is no current intent to restore this dividend for 2009; however, SEAMARK's Board of Directors will continue to review its dividend policy quarterly as is company policy. SEAMARK has maintained the core investment team responsible for its strong relative investment performance, while experiencing moderate changes in that team over recent months. During 2008, SEAMARK executed a smooth transition in the Chief Investment Officer role as the previous Chief Investment Officer retired. In addition, early in 2009 a member of the investment team has left to join a competitor. These changes have not impacted the Company's ability to deliver quality investment service and investment performance to its clients. Any change in investment personnel, however, has the potential to make it somewhat more difficult for investment management companies to win and retain business. SEAMARK's revenues are expected to track its AUM in a manner consistent with their historical relationship. AUM will be impacted by changes in the market value of the securities held on behalf of clients, particularly the market value of equity securities as discussed above. AUM will also be impacted by net asset flows, conditions for which are discussed above. Expenses will vary according to the needs of SEAMARK's business over the course of 2009. If recent unprecedented levels of equity market volatility continue, an additional other-than-temporary impairment charge against SEAMARK's $1.9 million of temporary investments could be required in 2009, which would have the impact of increasing expenses for the year. %SEDAR: 00016315E

For further information:

For further information: Jill McKim, Corporate Secretary, SEAMARK Asset
Management Ltd., (902) 423-9367

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SEAMARK ASSET MANAGEMENT LTD.

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