**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM        20-F/A**

**Amendment        No. 1**

**(Mark      One)**

| o | **REGISTRATION                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES****EXCHANGE                ACT OF 1934** |
|---|-------------------------------------------------------------------------------------------------------------------------------------|

**OR**

| x | **ANNUAL                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|---------------------------------------------------------------------------------------------------------------------------------------|

**For      the fiscal year ended December 31, 2005**

**OR**

| o | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES** **EXCHANGE                ACT OF 1934** |
|---|-------------------------------------------------------------------------------------------------------------------------------------|

**OR**

| o | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES** **EXCHANGE                ACT OF 1934**Date of event requiring this                shell company                report...................................... For the transition period from                _____________________ to                ____________________ |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**COMMISSION      FILE NUMBER **
**0-28186**

**ATLAS      SOUTH SEA PEARL LIMITED**

**WESTERN      AUSTRALIA, AUSTRALIA**

**43      YORK STREET, SUBIACO WESTERN AUSTRALIA 6008**

| Title                of each class |   | Name                of each exchange on which registered |
|------------------------------------|--------|----------------------------------------------------------|
| None                               |   | None                                                     |

----

| Yes | o | No | x |
|-----|---|----|---|

| Yes | o | No | x |
|-----|---|----|---|

| Yes | x | No | o |
|-----|---|----|---|

| Large                accelerated                filer | o | Accelerated                  filer | o | Non-accelerated filer | x |
|-------------------------------------------------------|---|------------------------------------|---|-----------------------|---|

| Item                17 | x | Item                18 | o |
|------------------------|---|------------------------|---|

| Yes | o | No | x |
|-----|---|----|---|

| Yes | o | No | o |
|-----|---|----|---|

----

**Explanatory          Note**

**TABLE      OF CONTENTS**

|                          |   |                          |   |                                                                                                           |   | **Page** |
|-------------------------------|--------|-------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|----------|
|                          |   |                          |   | Introduction                                                                                                   |   | 1        |
| **PART                  I**   |   | **ITEM                  1**   |   | Not                  Required                                                                                  |   | **       |
|                          |   | **ITEM                  2**   |   | Not                  Required                                                                                  |   | **       |
|                          |   | **ITEM                  3**   |   | Key                  Information                                                                               |   | **       |
|                          |   | **ITEM                  4**   |   | Information                  on the Company                                                                    |   | **       |
|                          |   | **ITEM                  5**   |   | Operating                  and Financial Review and Prospects                                                  |   | **       |
|                          |   | **ITEM                  6**   |   | Directors,                  Senior Management and Employees                                                    |   | **       |
|                          |   | **ITEM                  7**   |   | Major                  Shareholders and Related Party Transactions                                             |   | **       |
|                          |   | **ITEM                  8**   |   | Financial                  Information                                                                         |   | **       |
|                          |   | **ITEM                  9**   |   | The                  Offer and Listing                                                                         |   | **       |
|                          |   | **ITEM                  10**  |   | Additional                  Information                                                                        |   | **       |
|                          |   | **ITEM                  11**  |   | Quantitative                  and Qualitative Disclosures about Market Risk                                    |   | **       |
|                          |   | **ITEM                  12**  |   | Not                  Required                                                                                  |   | **       |
| **PART                  II**  |   | **ITEM                  13**  |   | Defaults,                  Dividend Arrearages and Delinquencies                                               |   | **       |
|                          |   | **ITEM                  14**  |   | Material                  Modifications to the Rights of Security Holders and Use of                  Proceeds |   | **       |
|                          |   | **ITEM                  15**  |   | Controls                  and Procedures                                                                       |   | **       |
|                          |   | **ITEM                  16A** |   | Audit                  Committee Financial Expert                                                              |   | **       |
|                          |   | **ITEM                  16B** |   | Code                  of Ethics                                                                                |   | **       |
|                          |   | **ITEM                  16C** |   | Principal                  Accountant Fees and Services                                                        |   | **       |
|                          |   | **ITEM                  16D** |   | Exemptions                  from Listing Standards for Audit Committees                                        |   | **       |
|                          |   | **ITEM                  16E** |   | Purchases                  of Equity Securities by the Issuer and Affiliated                  Purchasers       |   | **       |
| **PART                  III** |   | **ITEM                  17**  |   | Financial                  Statements                                                                          |   | 3        |
|                          |   | **ITEM                  18**  |   | Not                  Required                                                                                  |   | **       |
|                          |   | **ITEM                  19**  |   | Exhibits                                                                                                       |   | 3        |

| ** | Not                    included in this Amendment No. 1 on Form 20-F/A. Information                    responsive to                    this item is contained in the original Form                    20-F. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**INTRODUCTION**

***Currency      of Presentation and Definitions***

----

***Forward-Looking      Statements***

|   | · | the                economic and socio-political climate in the areas in which the Company                operates; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | storms,                weather patterns, water pollution or other events which increase                the                projected mortality rate or decrease the projected quality of the                Company’s oysters and pearls; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | changes                in the worldwide supply and demand for South Sea                pearls; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | increases                in labor costs in Indonesia and general economic factors in markets                where                the Company plans to sell its pearls; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                exchange rate of Japanese Yen, which is the predominant currency                for                dealing in pearls, against the Australian Dollar and other currencies;                and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the                availability of an adequate supply of quality                pearls. |
|--------|--------|-----------------------------------------------------------------------------------------|

----

**PART      III**

**ITEM      17. FINANCIAL STATEMENTS**

|                                                                     |   | **Page****Number** |    |
|--------------------------------------------------------------------------|--------|--------------------|---------|
| **Independent                Auditor’s Report**                    |   |               | **F-1** |   |
| **Income                Statement**                                      |   |               | **F-2** |   |
| **Balance                Sheet**                                         |   |               | **F-3** |   |
| **Statement                of Changes in Equity**                        |   |               | **F-4** |   |
| **Cash              Flow Statement**                                     |   |               | **F-5** |   |
| **Notes                to and Forming Part of the Financial Statements** |   |               | **F-6** |   |

**ITEM      19. EXHIBITS**

| 1.1    |   | Constitution(6)                                                                                                                                                                                                                                                                                              |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                         |
| 2.1    |   | Form                  of American Depositary Receipt (2(i))                  (1)                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 2.2    |   | Form                  of Stock Certificate (2(ii))                  (1)                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 2.3    |   | Deposit                  Agreement between the Company and the Bank of New York (As amended                  and                  filed with Form F-6) (2(iii))                  (1)                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.1    |   | Loan                  Agreement between the Company and Nusantaqua (3(B)(iii))                  (1)                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.2    |   | Joint                  Funding Agreement between Nusantaqua, Tansim and Cendana                  (3(B)(iv))(1)                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.3    |   | Water                  lease dated March 11, 1993 between PT Perintis Ardindo Nusa and                  the                  Government of Nusa Tenggara Timur Province Fisheries Services,                  with                  English translation (3(B)(vi))                  (1)                       |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.4    |   | Expansion                  to Water Lease dated March 10, 1995 between PT Perintis Ardindo                  Nusa and                  the Investment Coordination Board of the Badan Koordinasi Penanaman                  Modal,                  with English translation (3(B)(vii))                  (1) |
|   |   |                                                                                                                                                                                                                                                                                                         |
| 4.5    |   | Lease                  of 5 hectares of land dated October 6, 1992 between PT Perintis                  Ardindo                  Nusa and the Badan Pertanahan Nasional Sertipikat, with English                  translation (3(B)(viii))                  (1)                                              |
|   |   |                                                                                                                                                                                                                                                                                                         |

----

| 4.6    |   | Lease                  of 3 hectares of land dated September 4, 1994 between Dr. T.P.G.                  Purchase                  and Mr. Paulus Bissilisin, with English translation (3(B)(ix))                  (1)                                                                                                                                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.7    |   | Water                  leases dated January 9, 1998 between PT Cendana Indopearls and                  the                  Investment Coordination Board of the Badan Koordinasi Penanaman                  Modal,                  with English translation (2xx)                  (3)                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.8    |   | Land                  and water lease dated September 30, 1997 between the Company and                  the Kawe                  tribe at Selpele village with English translation (2xxiv)                  (3)                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.9    |   | Consultancy                  Agreement between the Company and Arrow Pearl Co Pty Ltd for training                  and                  technical expertise, dated March 3, 1999 (2xxiv)                  (4)                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.10   |   | Land                  lease dated July 1, 1999 between the Company and Korinus Ayelouw                  with                  English translation (2xxv)                  (4)                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.11   |   | Form                  of Director’s Access, Insurance and Indemnity Deed between the Company and                  each director (2xxix)                  (4)                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.12   |   | Letter                  of Appointment of Pearlautore International Pty Ltd as exclusive                  valuer                  and distributor of Atlas Pacific Limited’s South Sea Pearls (2xxiii)                  (5)                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.13   |   | Memorandum                  of Understanding dated January 9, 2001 for the lease of the Kupang                  facilities between the Company and PT Timor Otsuki Mutiara (2xxiv)                  (5)                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.14   |   | Letter                  of Extension dated May 3, 2001 for Distribution Agreement with                  Pearlautore                  International Pty Ltd (4xxvi) (6)                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.15   |   | Joint                  Production Agreement dated July 2002 between the Company and PT                  Horiko                  Abadi for the joint operation of an oyster hatchery and associated                  sea                  leases in Banyupoh, Northern Bali, with English translation (4xix)                  (7)                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.16   |   | Employment                  Agreement dated November 18, 2002 between the Company and Mr. Jan                  Jorgensen (4xx) (7)                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.17   |   | Joint                  Production Agreement dated March 21, 2004 between PT Cendana Indopearls                  and PT Cahaya Cemerlang for the joint operation of an oyster hatchery                  and                  associated sea leases in Bacan Island in the North Maluku province                  of                  Indonesia (English translation) (8) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.18   |   | Office                  lease dated May 20, 2003 between PT Cendana Indopearls and Nyoman                  Ardana                  and Wayan Kariami (English translation) (8)                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.19   |   | Water                  lease dated December 15, 2003 between PT Cendana Indopearls and                  the                  villagers of Pekraman Penyabengan, Sub-district of Gerokgak, Buleleng                  District, Bali (English translation) (8)                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                    |

----

| 4.20   |   | Land                    lease dated March 1, 2004 between PT Cendana Indopearls and the                    villagers                    of Pekraman Penyabengan, Sub-district of Gerokgak, Buleleng District,                    Bali                    (English translation)                    (8)                           |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.21   |   | Employment                    Agreement dated December 30, 2003 between the Company and Dr.                    Joseph                    Taylor (8)                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.22   |   | Employment                    Agreement dated December 30, 2003 between PT Cendana Indopearls                    and Dr.                    Joseph Taylor (8)                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.23   |   | Office                    lease dated June 8, 2004 between the Company and Mr. David Morrison                    (8)                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.24   |   | Stand-by                    Finance and Foreign Currency Dealing agreement between the Company                    and                    Australian and New Zealand Banking Group Ltd (9)                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.25   |   | Collaborative                    Research Agreement between the Company and James Cook University                    (9)                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.26   |   | Memorandum                    of Understanding dated March 24, 2006 between PT Cendana Indopearls                    and PT                    Bali Cruises Nusantara for the lease grounds on the Bali Hai                    Beach Club to                    develop a pearling based tourism and retail operation(10)       |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.27   |   | Letter                    of Reappointment dated October 11, 2005 for Pearl Distribution                    Agreement                    with Pearlautore                    International Pty Ltd(10)                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.28   |   | Memorandum                    of Understanding between PT Cendana Indopearls and PT Autore                    Cultured                    Pearls for the joint production for breeding and rearing pearl                    oyster at                    facilities in West Lombok, Nusa Tenggara, Barat(10)                    |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.29   |   | Water                    lease dated September 16, 2005 between PT Cendana Indopearls,                    Lembongan                    Village and Pakraman Lembongan Custom Village, Nusa Penida Subdistrict,                    Kelungkung Regency, Bali (English                    translation)                    (10)     |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.30   |   | Water                    and land lease dated May 23, 2005 between PT Cendana Indopearls                    and Bugbug                    Custom Village Bugbug Village Karangasem Subdistrict, Karangasem                    Regency,                    Bali (English                    translation)                    (10) |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 4.31   |   | Form                    of Executive Share Plan Rules and Loan Scheme(10)                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 8.1    |   | List                    of Subsidiaries (6)                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 12.1   |   | Section                  302                  Certification of Chief Executive Officer (11)                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 12.2   |   | Section                    302 Certification of Chief Financial Officer (11)                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                            |
| 13.1   |   | Section                    906 Certification of Chief Executive Officer (11)                                                                                                                                                                                                                                                    |

----

|   |   |                                                                         |
|--------|--------|------------------------------------------------------------------------------|
| 13.2   |   | Section                    906 Certification of Chief Financial Officer (11) |

----

| (1) | Previously                filed as an Exhibit of the number shown in parenthesis on the Registrant’s                Registration Statement on  Form                20-F (File No. 0-28186) and incorporated herein by                reference. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Previously                filed as an Exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on  Form                20-F for the year ended December 31, 1998 and incorporated herein                by                reference. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Previously                filed as an Exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on  Form                20-F for the year ended December 31, 1999 and incorporated herein                by                reference. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Previously                filed as an exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on Form  20-F                for the year ended December 31, 2000 and incorporated herein by                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Previously                filed as an exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on Form  20-F                for the year ended December 31, 2001 and incorporated herein by                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Previously                filed as an exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on Form  20-F                for the year ended December 31, 2002 and incorporated herein by                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Previously                filed as an exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on Form  20-F                for the year ended December 31, 2003 and incorporated herein by                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Previously                filed as an exhibit of the number shown in parenthesis to the Registrant’s                Annual Report on Form  20-F                for the year ended December 31, 2004 and incorporated herein by                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Previously                    filed. |
|------|--------------------------------------|

| (11) | Filed                  herewith. |
|------|----------------------------------|

----

**SIGNATURES**

|         |                                             |                              |
|--------------|--------------------------------------------------|-----------------------------------|
|         | **ATLAS                SOUTH SEA PEARL LIMITED** |
|    |                                        |                         |
|         |                                        | /s/ G.R.                Snow |
|         | G.R.                  Snow,Chairman              |
|         |                                             |
|         | Dated: February 6, 2007                          |
|         |                                             |

----

**ATLAS      SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES**

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM **

|                                                                                                    |                                     |                               |
|---------------------------------------------------------------------------------------------------------|------------------------------------------|------------------------------------|
|                                                                                               |                                |                          |
|                                                                                                    |                                | /s/ S                Andrawes |
|                                                                                                    | BDO                Chartered Accountants |
|                                                                                                    |                                     |
| Perth                  Western                  Australia, AustraliaFebruary                    6, 2007 |                                     |

----

**ATLAS      SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES**

**INCOME      STATEMENT**

**FOR      THE YEAR ENDED 31 DECEMBER 2005**

|                                                                                                              |       | **Note**   |       | **CONSOLIDATED** | ** ** | ATLAS                    SOUTH SEA                    PEARL LIMITED | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                                                                        | ** ** | ** ** | ** ** | **2005**         | ** ** | **2004**                                                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                                                                                                        | ** ** |       | ** ** | **$**            | ** ** | **$**                                                               | ** ** | ** $** | ** ** | **$** |   |
| Revenue                                                                                                           |       |       | 3          |             |       | 9,648,366                                                           |       |   | 5,822,982 |   |   | 9,057,254 |   |   | 5,218,743 |   |
| Other                  income                                                                                     |       |       | 3          |             |       | 199,493                                                             |       |   | 1,014,541 |   |   | 196,598 |   |   | 974,518 |   |
| **Total                  revenue**                                                                                |       |       |       |             |       | **9,847,859**                                                       |       |   | **6,837,523** |   |   | **9,253,852** |   |   | **6,193,261** |   |
|                                                                                                              |       |       |       |             |       |                                                                |       |   |   |   |   |   |   |   |   |   |
| Cost                  of goods sold                                                                               |       |       |       |             |       | (4,275,378                                                          | )          |   | (4,414,357 | ) |   | (4,844,054 | ) |   | (4,954,917 | ) |
| Marketing                  expenses                                                                               |       |       |       |             |       | (870,543                                                            | )          |   | (564,743 | ) |   | (870,543 | ) |   | (564,743 | ) |
| Administration                  expenses                                                                          |       |       |       |             |       | (1,730,268                                                          | )          |   | (1,632,767 | ) |   | (1,147,620 | ) |   | (1,047,055 | ) |
| Other                  expenses                                                                                   |       |       | 4          |             |       | (615,544                                                            | )          |   | (722,984 | ) |   | (420,608 | ) |   | (2,592,386 | ) |
| **Total                  expenses**                                                                               |       |       |       |             |       | **(7,491,733**                                                      | **)**      |   | **(7,334,851** | **)** |   | **(7,282,825** | **)** |   | **(9,159,101** | **)** |
| **Profit/(Loss)                  before related income tax expense**                                              |       |       |       |             |       | **2,356,126**                                                       |       |   | **(497,328** | **)** |   | **1,971,027** |   |   | **(2,965,840** | **)** |
| Income                  tax (expense)/benefit                                                                     |       |       | 5          |             |       | (295,539                                                            | )          |   | (96,946 | ) |   | (604,807 | ) |   | 117,203 |   |
| **Profit/(Loss)                  after income tax attributable to members of the parent                  entity** |       |       |            |             |       | **2,060,587**                                                       |       |   | **(594,274** | **)** |   | **1,366,220** |   |   | **(2,848,637** | **)** |
|                                                                                                              |       |       |       |             |       |                                                                |       |   |   |   |   |   |   |   |   |   |
| Overall                  operations                                                                               |       |       |       |             |       |                                                                |       |   |   |   |   |   |   |   |   |   |
| Basic                  earnings per share                                                                         |       |       | 6          |             |       | $0.02                                                               |       |   | ($0.01 | ) |   |   |   |   |   |   |
| Diluted                  earnings per share                                                                       |       |       | 6          |             |       | $0.02                                                               |       |   | ($0.01 | ) |   |   |   |   |   |   |
|                                                                                                              |       |       |       |             |       |                                                                |       |   |   |   |   |   |   |   |   |   |

----

**ATLAS      SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES**

**BALANCE      SHEET**

**AS      AT 31 DECEMBER 2005**

|                                               |   |   |           | **CONSOLIDATED** | ** ** | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** | ** ** |
|----------------------------------------------------|--------|--------|----------------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                               |   |   | **Note**  |             |       | **2005****$**                                                                 |       |   | **2004****$** |   |   | **2005****$** |   |   | **2004****$** |   |
| **Current                  assets**                |   |   |           |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Cash                  and cash equivalents         |   |   | 7              |             |       | 1,475,480                                                                     |       |   | 3,208,996 |   |   | 1,280,339 |   |   | 2,659,148 |   |
| Trade                  and other receivables       |   |   | 8              |             |       | 4,301,651                                                                     |       |   | 1,934,360 |   |   | 4,154,175 |   |   | 1,186,113 |   |
| Financial                  assets                  |   |   | 9              |             |       | 5,631,149                                                                     |       |   | — |   |   | 4,066,985 |   |   | — |   |
| Inventories                                        |   |   | 10             |             |       | 1,262,890                                                                     |       |   | 1,034,682 |   |   | 899,792 |   |   | 1,248,009 |   |
| Biological                  assets                 |   |   | 11             |             |       | 4,176,109                                                                     |       |   | 2,259,547 |   |   | — |   |   | — |   |
| **Total                  current assets**          |   |   |           |             |       | 16,847,279                                                                    |       |   | 8,437,585 |   |   | 10,401,291 |   |   | 5,093,270 |   |
| **Non-current                  assets**            |   |   |           |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Receivables                                        |   |   | 8              |             |       | —                                                                       |       |   | — |   |   | 14,649,066 |   |   | 14,979,745 |   |
| Inventories                                        |   |   | 10             |             |       | 114,630                                                                       |       |   | 193,521 |   |   | — |   |   | — |   |
| Biological                  assets                 |   |   | 11             |             |       | 5,175,725                                                                     |       |   | 6,688,662 |   |   | — |   |   | — |   |
| Property,                  plant and equipment     |   |   | 13             |             |       | 2,123,684                                                                     |       |   | 1,825,434 |   |   | 24,438 |   |   | 30,525 |   |
| Deferred                  Tax Assets               |   |   | 16             |             |       | 249,050                                                                       |       |   | 239,919 |   |   | 223,525 |   |   | 151,021 |   |
| **Total                  non-current assets**      |   |   |           |             |       | 7,663,089                                                                     |       |   | 8,947,536 |   |   | 14,897,029 |   |   | 15,161,291 |   |
| **Total                  assets**                  |   |   |           |             |       | 24,510,368                                                                    |       |   | 17,385,121 |   |   | 25,298,320 |   |   | 20,254,561 |   |
| **Current                  liabilities**           |   |   |           |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Trade                  and other payables          |   |   | 14             |             |       | 682,975                                                                       |       |   | 1,020,369 |   |   | 294,477 |   |   | 350,953 |   |
| Borrowings                                         |   |   | 15             |             |       | 79,428                                                                        |       |   | — |   |   | 79,428 |   |   | — |   |
| Financial                  instruments             |   |   | 9              |             |       | 5,675,533                                                                     |       |   | — |   |   | 4,075,533 |   |   | — |   |
| Current                  tax liabilities           |   |   | 16             |             |       | 203,120                                                                       |       |   | 230,480 |   |   | 203,120 |   |   | — |   |
| Short                  term provisions             |   |   | 17             |             |       | 66,611                                                                        |       |   | 104,212 |   |   | 24,369 |   |   | 71,648 |   |
| **Total                  current liabilities**     |   |   |           |             |       | 6,707,667                                                                     |       |   | 1,355,061 |   |   | 4,676,927 |   |   | 422,601 |   |
| **Non-current                  liabilities**       |   |   |           |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Deferred                  tax liabilities          |   |   | 16             |             |       | 4,132                                                                         |       |   | 112 |   |   | 4,132 |   |   | 112 |   |
| Long                  term provisions              |   |   | 17             |             |       | 164,928                                                                       |       |   | — |   |   | 7,385 |   |   | — |   |
| **Total                  non-current liabilities** |   |   |           |             |       | 169,060                                                                       |       |   | 112 |   |   | 11,517 |   |   | 112 |   |
| **Total                  liabilities**             |   |   |           |             |       | 6,876,727                                                                     |       |   | 1,355,173 |   |   | 4,688,444 |   |   | 422,713 |   |
| **Net                  assets**                    |   |   |           |             |       | 17,633,641                                                                    |       |   | 16,029,948 |   |   | 20,609,876 |   |   | 19,831,848 |   |
| **Equity**                                         |   |   |           |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Issued                  capital                    |   |   | 18             |             |       | 18,849,092                                                                    |       |   | 18,849,092 |   |   | 18,849,092 |   |   | 18,849,092 |   |
| Reserves                                           |   |   | 19             |             |       | (4,559,049                                                                    | )          |   | (4,677,577 | ) |   | — |   |   | — |   |
| Retained                  profits                  |   |   |           |             |       | 3,343,598                                                                     |       |   | 1,858,433 |   |   | 1,760,784 |   |   | 982,756 |   |
| **Total                  equity**                  |   |   |           |             |       | 17,633,641                                                                    |       |   | 16,029,948 |   |   | 20,609,876 |   |   | 19,831,848 |   |

----

**ATLAS      SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES**

**STATEMENT      OF CHANGES IN EQUITY**

**FOR      THE YEAR ENDED 31 DECEMBER 2005**

|                                                                          |   |           |   | **CONSOLIDATED** | ** ** | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** | ** ** |
|-------------------------------------------------------------------------------|--------|----------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                          |   |  **Note** |   | **2005****$**    |       | **2005****$**                                                                 |       | **2005****$** |   | **2005****$** |   |
|                                                                          |   |           |   |             |       |                                                                          |       |   |   |   |   |
| **Total                  equity at the beginning of the year**                |   |           |   |             |       | 16,029,948                                                                    |       |   | 18,276,755 |   |   | 19,831,848 |   |   | 22,680,485 |   |
|                                                                          |   |           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Adjustment                  on Adoption of AASB 132 and AASB 139, net of tax: |   |           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Retained                  Profits                                             |   |           | 34     |             |       | 289,911                                                                       |       |   | — |   |   | 289,911 |   |   | — |   |
| Reserves                                                                      |   |           |   |             |       | —                                                                       |       |   | — |   |   | — |   |   | — |   |
| Exchange                  differences on translation of foreign operations    |   |           | 19     |             |       | 118,528                                                                       |       |   | (1,652,533 | ) |   | — |   |   | — |   |
| **Net                  income recognised directly in equity**                 |   |           |   |             |       | 408,439                                                                       |       |   | (1,652,533 | ) |   | 289,911 |   |   | — |   |
|                                                                          |   |           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Prior                  year expenses brought to account in current period     |   |           |   |             |       | 12,770                                                                        |       |   | — |   |   | — |   |   | — |   |
| Profit/(Loss)                  for the year                                   |   |           | 20     |             |       | 2,060,587                                                                     |       |   | (594,274 | ) |   | 1,366,220 |   |   | (2,848,637 | ) |
|                                                                          |   |           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| Dividend                  Payment                                             |   |           | 21     |             |       | (878,103                                                                      | )          |   | — |   |   | (878,103 | ) |   | — |   |
|                                                                          |   |           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |   |
| **Total                  equity at the end of the year**                      |   |           |   |             |       | 17,633,641                                                                    |       |   | 16,029,948 |   |   | 20,609,876 |   |   | 19,831,848 |   |

----

**ATLAS      SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES**

**STATEMENT      OF CASH FLOWS**

**FOR      THE YEAR ENDED 31 DECEMBER 2005**

|                                                                                                                  |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|-----------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                                                                  |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                                                                                  |   | **$**            |       | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
| **Cash                  flows from operating activities**                                                             |   |             |       |                                                                          |       |   |   |   |   |
| Proceeds                  from pearl and oyster sales                                                                 |   |             | 7,206,358  |                                                                          |       | 5,839,566 |   |   | 6,528,608 |   |   | 5,209,858 |   |
| Proceeds                  from other operating activities                                                             |   |             | 78,799     |                                                                          |       | 769,835 |   |   | 72,237 |   |   | 701,640 |   |
| Interest                  paid                                                                                        |   |             | (4,032     | )                                                                             |       | (29 | ) |   | (4,032 | ) |   | (29 | ) |
| Interest                  and bill discounts received                                                                 |   |             | 88,731     |                                                                          |       | 176,843 |   |   | 79,232 |   |   | 163,139 |   |
| Payments                  to suppliers                                                                                |   |             | (7,191,567 | )                                                                             |       | (6,279,530 | ) |   | (2,341,950 | ) |   | (1,678,098 | ) |
| Income                  tax paid/(received)                                                                           |   |             | (368,980   | )                                                                             |       | (410,894 | ) |   | (119,350 | ) |   | (230,847 | ) |
| Net                  cash provided by/(used in) operating activities (Note                  25.2)                     |   |             | (190,691   | )                                                                             |       | 95,791 |   |   | 4,214,745 |   |   | 4,165,663 |   |
| **Cash                  flows from investing activities**                                                             |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Advances                  to controlled entities                                                                      |   |             | —    |                                                                          |       | — |   |   | (4,790,585 | ) |   | (5,605,806 | ) |
| Payments                  for property, plant and equipment                                                           |   |             | (832,582   | )                                                                             |       | (778,641 | ) |   | (4,294 | ) |   | (23,083 | ) |
| Proceeds                  on disposal of fixed assets                                                                 |   |             | 78,994     |                                                                          |       | 1,891 |   |   | — |   |   | — |   |
| Payment                  for Other Financial Instrument                                                               |   |             | —    |                                                                          |       | (47,450 | ) |   | — |   |   | (47,450 | ) |
| Net                  cash provided by/(used in) investing activities                                                  |   |             | (753,588   | )                                                                             |       | (824,200 | ) |   | (4,794,879 | ) |   | (5,676,339 | ) |
| **Cash                  flows from financing activities**                                                             |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Proceeds                  from Borrowings                                                                             |   |             | 99,285     |                                                                          |       | — |   |   | 99,285 |   |   | — |   |
| Repayment                  of Borrowings                                                                              |   |             | (19,857    | )                                                                             |       | — |   |   | (19,857 | ) |   | — |   |
| Dividend                  Payment                                                                                     |   |             | (878,103   | )                                                                             |       | — |   |   | (878,103 | ) |   | — |   |
| Net                  cash provided by/(used in) financing activities                                                  |   |             | (798,675   | )                                                                             |       | — |   |   | (798,675 | ) |   | — |   |
|                                                                                                                  |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Net                  increase/(decrease) in cash held                                                                 |   |             | (1,742,954 | )                                                                             |       | (728,409 | ) |   | (1,378,809 | ) |   | (1,510,676 | ) |
| Cash                  at the beginning of the financial year                                                          |   |             | 3,208,996  |                                                                          |       | 4,301,918 |   |   | 2,659,148 |   |   | 4,169,824 |   |
| Effects                  of exchange rate changes on the balances of cash held in foreign                  currencies |   |             | 9,438      |                                                                          |       | (364,513 | ) |   | — |   |   | — |   |
| Cash                  and term deposits at the end of the financial year (Note                  25.1)                 |   |             | 1,475,480  |                                                                          |       | 3,208,996 |   |   | 1,280,339 |   |   | 2,659,148 |   |

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **1.  ** | **STATEMENT                OF SIGNIFICANT ACCOUNTING                POLICIES** |
|--------------------|--------------------------------------------------------------------------------|

| **1.1  ** | **Basis                of preparation** |
|---------------------|-----------------------------------------|

| **1.2  ** | ***First-time                adoption of Australian Equivalent to International Financial Reporting                Standards (AIFRS)*** |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

*First-time        adoption of Australian Equivalent to International Financial Reporting        Standards*

*Financial      Instruments: Disclosure and Presentation*
*Financial      Instruments: Recognition and Measurement*

| **1.3  ** | **Principles                of consolidation** |
|---------------------|------------------------------------------------|

* *

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **1.4  ** | **Income                tax** |
|---------------------|-------------------------------|

| **1.5  ** | **Inventories** |
|---------------------|-----------------|

| (a)   | Pearls                - quantity of pearls as harvested and processed are valued at the                lower of                cost or net market value. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Nuclei                - quantities on hand at the year end are valued at                cost. |
|-----------------|-----------------------------------------------------------------------------------------------|

| (c)   | Oysters                - refer note 1.6 |
|-----------------|-----------------------------------------|

| **1.6  ** | **Biological                Assets** |
|---------------------|--------------------------------------|

*Agriculture*

| **1.7  ** | **Property,                Plant & Equipment** |
|---------------------|----------------------------------------------------|

**Property**

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

**Plant      and Equipment**

**Depreciation**

| **Class                of fixed asset**                          |   | **DEPRECIATION                RATE** |   |
|------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                             |   | **2005**                             |   | **2004** |   |
| Leasehold                land & buildings & improvements |   |                                 | 5-10   | % |   | 5-10 | % |
| Vessels                                                          |   |                                 | 10     | % |   | 10 | % |
| Plant                & equipment                             |   |                                 | 20-50  | % |   | 20-50 | % |

| **1.8  ** | **Financial                Instruments** |
|---------------------|------------------------------------------|

**From      1 January 2005**

| *(a)  * | *Financial                assets at fair value through profit or                loss* |
|-------------------|---------------------------------------------------------------------------------------|

*Recognition      and Measurement of Financial Instruments*

| *(b)  * | *Loans                and receivables* |
|-------------------|----------------------------------------|

| *(c)  * | *Held-to-maturity                investments* |
|-------------------|-----------------------------------------------|

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| *(d)  * | *Available-for-sale                financial assets* |
|-------------------|------------------------------------------------------|

| *(e)  * | *Recognition* |
|-------------------|---------------|

| *(f)  * | *Financial                liabilities* |
|-------------------|----------------------------------------|

| *(g)  * | *Derivative                instruments* |
|-------------------|-----------------------------------------|

| *(h)  * | *Impairment* |
|-------------------|--------------|

| *(i)  * | *Fair                value* |
|-------------------|-----------------------------|

*Valuation      techniques are applied to determine the fair value of all unlisted securities,      including arms length transactions, reference to similar instruments and option      pricing models.*

| *(j)  * | *Investment                in subsidiaries* |
|-------------------|---------------------------------------------|

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **1.9*  *** | **Derivatives** |
|-----------------------|-----------------|

**From      1 January 2004 to 31 December 2004**

**Adjustments      on transition date: 1 January 2005**

**From      1 January 2005**

| **1.10  ** | **Foreign                Currency Transactions and                Balances** |
|----------------------|------------------------------------------------------------------------------|

**Functional      and presentation currency**

**Transactions      and balances**

**Group      Companies**

| ·   | Assets                and liabilities for each balance sheet presented are translated at                the                closing rate at the date of that balance                sheet; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Income                and expenses for each income statement are translated at average                exchange                rates; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | and                all resulting exchange differences are recognised as a separate component                of equity. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **1.11  ** | **Employee                Benefits** |
|----------------------|--------------------------------------|

| **1.12  ** | **Provisions** |
|----------------------|----------------|

| **1.13  ** | **Cash                and Cash Equivalents** |
|----------------------|----------------------------------------------|

| **1.14  ** | **Revenue                recognition** |
|----------------------|----------------------------------------|

| (a)   | Sales                  Revenue comprises of revenue earned from the sale of products or                  services                  to entities outside the consolidated entity. Sales revenue is recognised                  when the goods are provided or when the fee in respect of services                  provided is receivable. Sales                  revenue is recorded on a gross basis. The commission and marketing                  costs                  associated with the sale of pearls are recorded as expenses separately                  to                  the revenue. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Interest                Income is recognised as it accrues. |
|-----------------|-------------------------------------------------------------|

| (c)   | Asset                Sales Revenue comprises of the gross proceeds of the assets. The                profit                and loss on disposal of assets is brought to account at the date                on which                an unconditional contract is                signed. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**1.15          Marketing**

| **1.16  ** | **Leases** |
|----------------------|------------|

| **1.17  ** | **Earnings                  Per Share** |
|----------------------|-----------------------------------------|

| (1)   | Basic                  earnings per share |
|-----------------|-------------------------------------------|

| (2)   | Diluted                  earnings per share |
|-----------------|---------------------------------------------|

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **1.18  ** | **Segment                  Reporting** |
|----------------------|----------------------------------------|

| **1.19  ** | **Comparative                  Figures** |
|----------------------|------------------------------------------|

| **1.20  ** | **Critical                  Accounting Estimates and                  Judgements** |
|----------------------|------------------------------------------------------------------------------------|

*Key      estimates - Impairment*

----

**NOTES        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **2.  ** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REEPORTING STANDARDS                (AIFRS)** |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Atlas                South Sea Pearl Limited and its controlled entities                -** |
|--------|-----------------------------------------------------------------------------------------------|

|   | Reconciliation                of equity reported under Australian Generally Accepted Accounting                Principles (AGAAP) to equity under Australian equivalents to IFRSs                (AIFRS) |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|
|   | **At                date of transition to AIFRS: 1 January                2004** |
|--------|----------------------------------------------------------------------------------|

|                                                |   |   |   |   **Previous****AGAAP** |       | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |           |
|-----------------------------------------------------|--------|--------|--------|-----------------------------------|------------|---------------------------------------------------------------------------------------|------------|-----------------------------|----------------|
|                                                |   |   |   | **$**                             | ** ** | **$**                                                                                 | ** ** | **$**                       |           |
| **Current                Assets**                   |   |   |   |                              |       |                                                                                  |       |                        |           |
| Cash                and cash equivalents            |   |   |   |                              |       | 4,301,918                                                                             |       |                        | —        |   |   | 4,301,918 |   |
| Trade                and other receivables          |   |   |   |                              |       | 1,253,030                                                                             |       |                        | —        |   |   | 1,253,030 |   |
| Inventories                                         |   |   | (2a)   |                              |       | 3,333,948                                                                             |       |                        | (383,445       | ) |   | 2,950,503 |   |
| Biological                assets                    |   |   | (2a)   |                              |       | 2,165,998                                                                             |       |                        | (457,410       | ) |   | 1,708,588 |   |
| **Total                Current Assets**             |   |   |   |                              |       | **11,054,894**                                                                        |       |                        | **(840,855**   | **)** |   | **10,214,039** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Non-current                assets**               |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Inventories                                         |   |   | (2a)   |                              |       | 121,836                                                                               |       |                        | (18,830        | ) |   | 103,006 |   |
| Biological                assets                    |   |   | (2a)   |                              |       | 8,406,627                                                                             |       |                        | (1,568,575     | ) |   | 6,838,052 |   |
| Property,                plant and equipment        |   |   | (2a)   |                              |       | 2,458,214                                                                             |       |                        | (597,654       | ) |   | 1,860,560 |   |
| Deferred                tax asset                   |   |   |   |                              |       | 150,563                                                                               |       |                        | —        |   |   | 150,563 |   |
| **Total                non-current assets**         |   |   |   |                              |       | **11,137,240**                                                                        |       |                        | **(2,185,059** | **)** |   | **8,952,181** |   |
| **Total                Assets**                     |   |   |   |                              |       | **22,192,134**                                                                        |       |                        | **(3,025,914** | **)** |   | **19,166,220** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Current                liabilities**              |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Trade                and other payables             |   |   |   |                              |       | 766,980                                                                               |       |                        | (867           | ) |   | 766,113 |   |
| Current                tax liabilities              |   |   |   |                              |       | —                                                                               |       |                        | —        |   |   | — |   |
| Short                term provisions                |   |   |   |                              |       | 122,946                                                                               |       |                        | —        |   |   | 122,946 |   |
| **Total                current liabilities**        |   |   |   |                              |       | **889,926**                                                                           |       |                        | **—**    |   |   | **889,059** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Non-current                liabilities**          |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Deferred                tax liabilities             |   |   |   |                              |       | 406                                                                                   |       |                        | —        |   |   | 406 |   |
| **Total                non-current liabilities**    |   |   |   |                              |       | **406**                                                                               |       |                        | **—**    |   |   | **406** |   |
| **Total                liabilities**                |   |   |   |                              |       | **890,332**                                                                           |       |                        | **—**    |   |   | **889,465** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Net                Assets**                       |   |   |   |                              |       | **21,301,802**                                                                        |       |                        | **(3,025,914** | **)** |   | **18,276,755** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Equity**                                          |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Issued                capital                       |   |   |   |                              |       | 18,849,092                                                                            |       |                        | —        |   |   | 18,849,092 |   |
| Foreign                currency translation reserve |   |   | (2b)   |                              |       | —                                                                               |       |                        | (3,025,914     | ) |   | (3,025,047 | ) |
| Retained                profits                     |   |   |   |                              |       | 2,452,710                                                                             |       |                        | —        |   |   | 2,452,710 |   |
| **Total                equity**                     |   |   |   |                              |       | **21,301,802**                                                                        |       |                        | **(3,025,914** | **)** |   | **18,276,755** |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **2.** | **FIRST                    TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                    REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Atlas          South Sea Pearl Limited and its controlled entities          -**

**At      the end of last reporting period under previous AGAAP: 31 December      2004**

|                                                |   |   |   |   **Previous****AGAAP** |       | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |           |
|-----------------------------------------------------|--------|--------|--------|-----------------------------------|------------|---------------------------------------------------------------------------------------|------------|-----------------------------|----------------|
|                                                |   |   |   | **$**                             | ** ** | **$**                                                                                 | ** ** | **$**                       |           |
| *Current                Assets*                     |   |   |   |                              |       |                                                                                  |       |                        |           |
| Cash                and cash equivalents            |   |   |   |                              |       | 3,208,996                                                                             |       |                        | —        |   |   | 3,208,996 |   |
| Trade                and other receivables          |   |   |   |                              |       | 1,934,360                                                                             |       |                        | —        |   |   | 1,934,360 |   |
| Inventories                                         |   |   | (2a)   |                              |       | 1,201,667                                                                             |       |                        | (166,985       | ) |   | 1,034,682 |   |
| Biological                assets                    |   |   | (2a)   |                              |       | 2,583,417                                                                             |       |                        | (323,870       | ) |   | 2,259,547 |   |
| **Total                Current Assets**             |   |   |   |                              |       | **8,928,440**                                                                         |       |                        | **(490,855**   | **)** |   | **8,437,585** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Non-current                assets**               |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Inventories                                         |   |   | (2a)   |                              |       | 240,248                                                                               |       |                        | (46,727        | ) |   | 193,521 |   |
| Biological                assets                    |   |   | (2a)   |                              |       | 9,090,274                                                                             |       |                        | (2,401,612     | ) |   | 6,688,662 |   |
| Property,                plant and equipment        |   |   | (2a)   |                              |       | 2,688,138                                                                             |       |                        | (862,704       | ) |   | 1,825,434 |   |
| Deferred                tax assets                  |   |   |   |                              |       | 239,919                                                                               |       |                        | —        |   |   | 239,919 |   |
| **Total                non-current assets**         |   |   |   |                              |       | **12,258,579**                                                                        |       |                        | **(3,311,043** | **)** |   | **8,947,536** |   |
| **Total                Assets**                     |   |   |   |                              |       | **21,187,019**                                                                        |       |                        | **(3,801,898** | **)** |   | **17,385,121** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Current                liabilities**              |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Trade                and other payables             |   |   |   |                              |       | 1,020,369                                                                             |       |                        | —        |   |   | 1,020,369 |   |
| Current                tax liabilities              |   |   |   |                              |       | 230,480                                                                               |       |                        | —        |   |   | 230,480 |   |
| Short                term provisions                |   |   |   |                              |       | 104,212                                                                               |       |                        | —        |   |   | 104,212 |   |
| **Total                current liabilities**        |   |   |   |                              |       | **1,355,061**                                                                         |       |                        | **—**    |   |   | **1,355,061** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Non-current                liabilities**          |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Deferred                tax liabilities             |   |   |   |                              |       | 112                                                                                   |       |                        | —        |   |   | 112 |   |
| **Total                non-current liabilities**    |   |   |   |                              |       | **112**                                                                               |       |                        | **—**    |   |   | **112** |   |
| **Total                liabilities**                |   |   |   |                              |       | **1,355,173**                                                                         |       |                        | **—**    |   |   | **1,355,173** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Net                Assets**                       |   |   |   |                              |       | **19,831,846**                                                                        |       |                        | **(3,801,898** | **)** |   | **16,029,948** |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
|                                                |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| **Equity**                                          |   |   |   |                              |       |                                                                                  |       |                        |           |   |   |   |   |
| Issued                capital                       |   |   |   |                              |       | 18,849,092                                                                            |       |                        | —        |   |   | 18,849,092 |   |
| Foreign                currency translation reserve |   |   | (2b)   |                              |       | —                                                                               |       |                        | (4,677,577     | ) |   | (4,677,577 | ) |
| Retained                profits                     |   |   | (2c)   |                              |       | 982,754                                                                               |       |                        | 875,679        |   |   | 1,858,433 |   |
| **Total                equity**                     |   |   |   |                              |       | **19,831,846**                                                                        |       |                        | **(3,801,898** | **)** |   | **16,029,948** |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

| **2.** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Atlas                    South Sea Pearl Limited and its controlled entities                    -** |
|--------|-------------------------------------------------------------------------------------------------------|

|   | Reconciliation                of profit/(loss) under previous AGAAP to profit/(loss) under Australian                equivalents to IFRS (AIFRS) |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

**Reconciliation      for the profit/(loss) for the year ended 31 December 2004**

|                                                                                                          |   |   |     |   **Previous****AGAAP** |       | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |         |
|---------------------------------------------------------------------------------------------------------------|--------|--------|----------|-----------------------------------|------------|---------------------------------------------------------------------------------------|------------|-----------------------------|--------------|
|                                                                                                          |   |   |     | **$**                             | ** ** | **$**                                                                                 | ** ** | **$**                       |         |
| Revenue                                                                                                       |   |   |     |                              |       | 5,822,982                                                                             |       |                        | —      |   |   | 5,822,982 |   |
| Other                income                                                                                   |   |   |     |                              |       | 1,014,541                                                                             |       |                        | —      |   |   | 1,014,541 |   |
| **Total                revenue**                                                                              |   |   |     |                              |       | **6,837,523**                                                                         |       |                        | **—**  |   |   | **6,837,523** |   |
|                                                                                                          |   |   |     |                              |       |                                                                                  |       |                        |         |   |   |   |   |
|                                                                                                          |   |   |     |                              |       |                                                                                  |       |                        |         |   |   |   |   |
| Cost                of goods sold                                                                             |   |   | (2d)     |                              |       | 5,089,271                                                                             |       |                        | (674,914     | ) |   | 4,414,357 |   |
| Marketing                expenses                                                                             |   |   |     |                              |       | 564,743                                                                               |       |                        | —      |   |   | 564,743 |   |
| Administration                expenses                                                                        |   |   |     |                              |       | 1,604,336                                                                             |       |                        | —      |   |   | 1,604,336 |   |
| Borrowing                costs                                                                                |   |   |     |                              |       | 29                                                                                    |       |                        | —      |   |   | 29 |   |
| Depreciation                                                                                                  |   |   |     |                              |       | 28,356                                                                                |       |                        | —      |   |   | 28,356 |   |
| Write                down of Oyster Inventory values                                                          |   |   | (2d)     |                              |       | 541,032                                                                               |       |                        | (15,269      | ) |   | 525,763 |   |
| Other                expenses                                                                                 |   |   | (2e)     |                              |       | 382,766                                                                               |       |                        | (185,499     | ) |   | 197,267 |   |
| **Total                expenses**                                                                             |   |   |     |                              |       | **8,210,533**                                                                         |       |                        | **(875,682** | **)** |   | **7,334,851** |   |
|                                                                                                          |   |   |     |                              |       |                                                                                  |       |                        |         |   |   |   |   |
| Profit/(loss)                before income tax expense                                                        |   |   | (2c)     |                              |       | (1,373,010                                                                            | )          |                        | 875,682      |   |   | (497,328 | ) |
|                                                                                                          |   |   |     |                              |       |                                                                                  |       |                        |         |   |   |   |   |
| Income                tax expense                                                                             |   |   |     |                              |       | (96,946                                                                               | )          |                        | —      |   |   | (96,946 | ) |
|                                                                                                          |   |   |     |                              |       |                                                                                  |       |                        |         |   |   |   |   |
| **Profit/(loss)                after income tax attributable to members of the parent                entity** |   |   | **(2c)** |                              |       | **(1,469,956**                                                                        | **)**      |                        | **875,682**  |   |   | **(594,274** | **)** |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **2.** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Atlas                    South Sea Pearl Ltd                    -** |
|--------|-----------------------------------------------------------------------|

|   | Reconciliation                of equity reported under Australian Generally Accepted Accounting                Principles (AGAAP) to equity under Australian equivalents to IFRSs                (AIFRS) |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **At                date of transition to AIFRS: 1 January                2004** |
|--------|----------------------------------------------------------------------------------|

|                                                |   |   **Previous****AGAAP** |           | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |   |
|-----------------------------------------------------|--------|-----------------------------------|----------------|---------------------------------------------------------------------------------------|------------|-----------------------------|--------|
|                                                |   | **$**                             | ** **     | **$**                                                                                 | ** ** | **$**                       |   |
| **Current                Assets**                   |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Cash                and cash equivalents            |   |                              | 4,169,824      |                                                                                  |       | —                     |   |   | 4,169,824 |   |
| Trade                and other receivables          |   |                              | 757,832        |                                                                                  |       | —                     |   |   | 757,832 |   |
| Inventories                                         |   |                              | 3,027,284      |                                                                                  |       | —                     |   |   | 3,027,284 |   |
| **Total                Current Assets**             |   |                              | **7,954,940**  |                                                                                  |       | **—**                 |   |   | **7,954,940** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Non-current                assets**               |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Trade                and other receivables          |   |                              | 14,936,844     |                                                                                  |       | —                     |   |   | 14,936,844 |   |
| Property,                plant and equipment        |   |                              | 14,672         |                                                                                  |       | —                     |   |   | 14,672 |   |
| Deferred                tax assets                  |   |                              | 34,107         |                                                                                  |       | —                     |   |   | 34,107 |   |
| **Total                non-current assets**         |   |                              | **14,985,623** |                                                                                  |       | **—**                 |   |   | **14,985,623** |   |
| **Total                Assets**                     |   |                              | **22,940,563** |                                                                                  |       | **—**                 |   |   | **22,940,563** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Current                liabilities**              |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Trade                and other payables             |   |                              | 181,329        |                                                                                  |       | —                     |   |   | 181,329 |   |
| Current                tax liabilities              |   |                              | —        |                                                                                  |       | —                     |   |   | — |   |
| Short                term provisions                |   |                              | 72,963         |                                                                                  |       | —                     |   |   | 72,963 |   |
| **Total                current liabilities**        |   |                              | **254,292**    |                                                                                  |       | **—**                 |   |   | **254,292** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Non-current                liabilities**          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Deferred                tax liabilities             |   |                              | 5,786          |                                                                                  |       | —                     |   |   | 5,786 |   |
| **Total                non-current liabilities**    |   |                              | **5,786**      |                                                                                  |       | **—**                 |   |   | **5,786** |   |
| **Total                liabilities**                |   |                              | **260,078**    |                                                                                  |       | **—**                 |   |   | **260,078** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Net                Assets**                       |   |                              | **22,680,485** |                                                                                  |       | **—**                 |   |   | **22,680,485** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Equity**                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Issued                capital                       |   |                              | 18,849,092     |                                                                                  |       | —                     |   |   | 18,849,092 |   |
| Foreign                currency translation reserve |   |                              | —        |                                                                                  |       | —                     |   |   | — |   |
| Retained                profits                     |   |                              | 3,831,393      |                                                                                  |       | —                     |   |   | 3,831,393 |   |
| **Total                equity**                     |   |                              | **22,680,485** |                                                                                  |       | **—**                 |   |   | **22,680,485** |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **2.** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Atlas                    South Sea Pearl Ltd                    -** |
|--------|-----------------------------------------------------------------------|

|   | **At                the end of last reporting period under previous AGAAP: 31 December                2004** |
|--------|--------------------------------------------------------------------------------------------------------------|

|                                                |   |   **Previous****AGAAP** |           | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |   |
|-----------------------------------------------------|--------|-----------------------------------|----------------|---------------------------------------------------------------------------------------|------------|-----------------------------|--------|
|                                                |   | **$**                             | ** **     | **$**                                                                                 | ** ** | **$**                       |   |
| *Current                Assets*                     |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Cash                and cash equivalents            |   |                              | 2,659,148      |                                                                                  |       | —                     |   |   | 2,659,148 |   |
| Trade                and other receivables          |   |                              | 1,186,113      |                                                                                  |       | —                     |   |   | 1,186,113 |   |
| Inventories                                         |   |                              | 1,248,009      |                                                                                  |       | —                     |   |   | 1,248,009 |   |
| **Total                Current Assets**             |   |                              | **5,093,270**  |                                                                                  |       | **—**                 |   |   | **5,093,270** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Non-current                assets**               |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Trade                and other receivables          |   |                              | 14,979,745     |                                                                                  |       | —                     |   |   | 14,979,745 |   |
| Property,                plant and equipment        |   |                              | 30,525         |                                                                                  |       | —                     |   |   | 30,525 |   |
| Deferred                tax assets                  |   |                              | 151,021        |                                                                                  |       | —                     |   |   | 151,021 |   |
| **Total                non-current assets**         |   |                              | **15,161,291** |                                                                                  |       | **—**                 |   |   | **15,161,291** |   |
| **Total                Assets**                     |   |                              | **20,254,561** |                                                                                  |       | **—**                 |   |   | **20,254,561** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Current                liabilities**              |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Trade                and other payables             |   |                              | 350,953        |                                                                                  |       | —                     |   |   | 350,953 |   |
| Current                tax liabilities              |   |                              | —        |                                                                                  |       | —                     |   |   | — |   |
| Short                term provisions                |   |                              | 71,648         |                                                                                  |       | —                     |   |   | 71,648 |   |
| **Total                current liabilities**        |   |                              | **422,601**    |                                                                                  |       | **—**                 |   |   | **422,601** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Non-current                liabilities**          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Deferred                tax liabilities             |   |                              | 112            |                                                                                  |       | —                     |   |   | 112 |   |
| **Total                non-current liabilities**    |   |                              | **112**        |                                                                                  |       | **—**                 |   |   | **112** |   |
| **Total                liabilities**                |   |                              | **422,713**    |                                                                                  |       | **—**                 |   |   | **422,713** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Net                Assets**                       |   |                              | **19,831,848** |                                                                                  |       | **—**                 |   |   | **19,831,848** |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
|                                                |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Equity**                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Issued                capital                       |   |                              | 18,849,092     |                                                                                  |       | —                     |   |   | 18,849,092 |   |
| Foreign                currency translation reserve |   |                              | —        |                                                                                  |       | —                     |   |   | — |   |
| Retained                profits                     |   |                              | 982,756        |                                                                                  |       | —                     |   |   | 982,756 |   |
| **Total                equity**                     |   |                              | **19,831,848** |                                                                                  |       | **—**                 |   |   | **19,831,848** |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **2.** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Atlas                    South Sea Pearl Ltd                    -** |
|--------|-----------------------------------------------------------------------|

|   | Reconciliation                of profit/(loss) under previous AGAAP to profit/(loss) under Australian                equivalents to IFRS (AIFRS) |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **Reconciliation                for the profit/(loss) for the year ended 31 December                2004** |
|--------|------------------------------------------------------------------------------------------------------------|

|                                                                                                          |   |   **Previous****AGAAP** |           | **Consolidated****Effect                of****Transition                to****AIFRS** |       |    **AIFRS** |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|----------------|---------------------------------------------------------------------------------------|------------|-----------------------------|--------|
|                                                                                                          |   | **$**                             | ** **     | **$**                                                                                 | ** ** | **$**                       |   |
| Revenue                                                                                                       |   |                              | 5,218,743      |                                                                                  |       | —                     |   |   | 5,218,743 |   |
| Other                income                                                                                   |   |                              | 974,518        |                                                                                  |       | —                     |   |   | 974,518 |   |
| **Total                revenue**                                                                              |   |                              | **6,193,261**  |                                                                                  |       | **—**                 |   |   | **6,193,261** |   |
|                                                                                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
|                                                                                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Cost                of goods sold                                                                             |   |                              | (4,954,917     | )                                                                                     |       | —                     |   |   | (4,954,917 | ) |
| Marketing                expenses                                                                             |   |                              | (564,743       | )                                                                                     |       | —                     |   |   | (564,743 | ) |
| Administration                expenses                                                                        |   |                              | (1,047,055     | )                                                                                     |       | —                     |   |   | (1,047,055 | ) |
| Borrowing                costs                                                                                |   |                              | (29            | )                                                                                     |       | —                     |   |   | (29 | ) |
| Other                expenses                                                                                 |   |                              | (2,592,357     | )                                                                                     |       | —                     |   |   | (2,592,357 | ) |
| **Total                expenses**                                                                             |   |                              | **(9,159,101** | **)**                                                                                 |       | **—**                 |   |   | **(9,159,101** | **)** |
|                                                                                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Profit/(loss)                before income tax expense                                                        |   |                              | (2,965,840     | )                                                                                     |       | —                     |   |   | (2,965,840 | ) |
|                                                                                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| Income                tax expense                                                                             |   |                              | 117,203        |                                                                                  |       | —                     |   |   | 117,203 |   |
|                                                                                                          |   |                              |           |                                                                                  |       |                        |   |   |   |   |
| **Profit/(loss)                after income tax attributable to members of the parent                entity** |   |                              | **(2,848,637** | **)**                                                                                 |       | **—**                 |   |   | **(2,848,637** | **)** |

**Notes      to the reconciliation of equity and profit and loss at 1 January 2004 and 31      December 2004**

| a)   | The                changes in the value of inventory, biological assets and property,                plant                and equipment reflects the change from AGAAP where the carrying values                of                non-monetary items of the Group’s Indonesian subsidiary were based on                historic rates using the “Temporal method” to AFIRS where these items are                translated at the balance sheet rate under the “Current rate method”. The                functional currency of the Indonesian subsidiary, PT Cendana Indopearls,                is Indonesian Rupiah which has devalued against the Australian Dollar                over                time. This has resulted in a decrease in the book value of these                assets                when reported in Australian Dollars using the Current rate method                of                accounting as required under AIFRS. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)   | The                adjustments that are recognised in 2a are recorded in a foreign currency                translation reserve. Translation adjustments for non monetary assets                are                recorded as a movement in the foreign currency translation                reserve. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)   | The                change in the retained earnings reflects the different treatment                of                inventory in the Group’s Indonesian subsidiary under AGAAP and AFIRS which                has an effect on cost of goods sold and write down in inventory (refer                2d). This also reflects the change in the treatment of foreign currency                movements under AIFRS compared to AGAAP (refer                2e). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **2.** | **FIRST                TIME ADOPTION OF AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL                REPORTING STANDARDS (AIFRS)****(Cont.)** |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| d)   | The                change in cost of goods sold and written down value of inventory                when                reported under AIFRS compared to AGAAP arises due to the lower asset                value                on translation of foreign assets, in particular the oyster                inventory. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e)   | The                difference in other expenses under AIFRS reflects the foreign currency                translation that was expensed when treated under the temporal method                of                accounting but which is transferred to the translation reserve under                AIFRS. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                    |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|-------------------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                    |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                                    |   | **$**            | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
| **3.**  **REVENUE                  FROM ORDINARY ACTIVITIES** |   |             |       |                                                                          |       |   |   |   |   |   |
| Revenue                  from operating activities                      |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Sales                  revenue                                          |   |             | 9,648,366  |                                                                          |       | 5,822,982 |   |   | 9,057,254 |   |   | 5,218,743 |   |
| Revenue                  from outside operating activities              |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Interest                  received - other parties                      |   |             | 101,618    |                                                                          |       | 156,262 |   |   | 92,119 |   |   | 142,558 |   |
| Net                  foreign exchange gain from operating activities    |   |             | 6,839      |                                                                          |       | 790,084 |   |   | 32,242 |   |   | 831,960 |   |
| Other                  revenues                                         |   |             | 42,963     |                                                                          |       | 19,391 |   |   | 72,237 |   |   | — |   |
| Property                  rental                                        |   |             | 48,073     |                                                                          |       | 48,804 |   |   | — |   |   | — |   |
| Other                  income                                           |   |             | 199,493    |                                                                          |       | 1,014,541 |   |   | 196,598 |   |   | 974,518 |   |
| Total                  revenue                                          |   |             | 9,847,859  |                                                                          |       | 6,837,523 |   |   | 9,253,852 |   |   | 6,193,261 |   |

**4.**
**PROFIT          FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE**

| **Finance                Costs**                                    |   |   |     |   |   |    |   |   |    |   |   |      |   |
|---------------------------------------------------------------------|--------|--------|----------|--------|--------|---------|--------|--------|---------|--------|--------|-----------|--------|
| Interest                paid - other corporations                   |   |   | 1,399    |   |   | 29      |   |   | 1,399   |   |   | 29        |   |
| **Administration                expenses from ordinary activities** |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Operating                lease rental costs                         |   |   | 39,915   |   |   | 46,508  |   |   | 18,442  |   |   | 27,461    |   |
| Movements                in provisions                              |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Depreciation                property, plant and equipment           |   |   | 35,072   |   |   | 28,356  |   |   | 10,382  |   |   | 7,228     |   |
| **Other                expenses from ordinary activities**          |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Movements                in provisions                              |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Increase                in tax related expenses                     |   |   | —  |   |   | 177,442 |   |   | — |   |   | —   |   |
| Provision                for employee entitlements                  |   |   | 34,214   |   |   | 19,727  |   |   | (23,959 | )      |   | 16,061    |   |
| Write-down                in oyster inventory value                 |   |   | —  |   |   | 541,032 |   |   | — |   |   | —   |   |
| Loss/(profit)                on disposal of fixed assets            |   |   | 6,116    |   |   | (20     | )      |   | — |   |   | —   |   |
| Research                and Development costs                       |   |   | 87,500   |   |   | — |   |   | 87,500  |   |   | —   |   |
|                                                                |   |   | (127,830 | )      |   | 738,181 |   |   | 63,541  |   |   | 16,061    |   |
| **Significant                revenues and expenses**                |   |   |     |   |   |    |   |   |    |   |   |      |   |
| Provision                for impairment in loan to subsidiary       |   |   | —  |   |   | — |   |   | — |   |   | 2,576,296 |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**5.**
**INCOME        TAX**

|                                                                                                                                                                                                          |   | **CONSOLIDATED** |      | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|-----------|-------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                          |   | **2005**         |      | **2004**                                                                      |   | **2005** |   | **2004** |   |
|                                                                                                                                                                                                          |   | $                |      | $                                                                             |   | $ |   | $ |   |
|                                                                                                                                                                                                          |   |             |      |                                                                          |   |   |   |   |   |
| a)                     The                  components of tax expense comprise:                                                                                                                |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| Current                  income tax                                                                                                                                                                           |   |             | 300,217   |                                                                          |   | — |   |   | 673,291 |   |   | — |   |
| Deferred                  Tax - relating to origination and reversal of temporary                  differences                                                                                                |   |             | (4,678    | )                                                                             |   | 96,946 |   |   | (68,484 | ) |   | (117,202 | ) |
|                                                                                                                                                                                                          |   |             | 295,539   |                                                                          |   | 96,946 |   |   | 604,807 |   |   | (117,202 | ) |
|                                                                                                                                                                                                          |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| b)                     The                  prima facie tax on profit from ordinary activities before income                  tax is                  reconciled to the income tax as follows: |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| Accounting                  profit/(loss) before tax                                                                                                                                                          |   |             | 2,356,126 |                                                                          |   | (497,328 | ) |   | 1,971,027 |   |   | (2,965,840 | ) |
|                                                                                                                                                                                                          |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| Prima                  facie tax expense calculated at 30% on the profit from ordinary                  activities                                                                                            |   |             | 706,838   |                                                                          |   | (149,198 | ) |   | 591,308 |   |   | (889,752 | ) |
| Tax                  effect of permanent differences:                                                                                                                                                         |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| Non                  deductible expenses                                                                                                                                                                      |   |             | 496       |                                                                          |   | 963 |   |   | 496 |   |   | 963 |   |
| Tax                  looses not brought to account (Indonesia)                                                                                                                                                |   |             | (220,477  | )                                                                             |   | — |   |   | — |   |   | — |   |
| Over-provision                  of tax in prior period                                                                                                                                                        |   |             | (373,047  | )                                                                             |   | — |   |   | — |   |   | — |   |
| Other                  Assessable Income                                                                                                                                                                      |   |             | —   |                                                                          |   | 778 |   |   | — |   |   | 778 |   |
| Permanent                  Differences (Indonesia)                                                                                                                                                            |   |             | 176,100   |                                                                          |   | 43,144 |   |   | — |   |   | — |   |
| Non-Deductible                  Expenses (Indonesian Tax Audit)                                                                                                                                               |   |             | —   |                                                                          |   | 53,233 |   |   | — |   |   | — |   |
| Restatement                  of closing trading stock                                                                                                                                                         |   |             | —   |                                                                          |   | 91,697 |   |   | — |   |   | — |   |
| Amortisation                  of goodwill                                                                                                                                                                     |   |             |      |                                                                          |   | — |   |   |   |   |   | — |   |
| Provision                  for Investment in Subsidiary                                                                                                                                                       |   |             | —   |                                                                          |   | — |   |   | — |   |   | 772,888 |   |
| Foreign                  currency movements                                                                                                                                                                   |   |             | —   |                                                                          |   | (232,963 | ) |   | — |   |   | — |   |
| Inventory                  valuation adjustment                                                                                                                                                               |   |             | —   |                                                                          |   | 68,308 |   |   | — |   |   | — |   |
| Current                  year losses not brought to account                                                                                                                                                   |   |             | 162       |                                                                          |   | 251,672 |   |   | — |   |   | — |   |
| Income                  tax under/(over) provided in prior years                                                                                                                                              |   |             | 5,467     |                                                                          |   | (30,688 | ) |   | 13,003 |   |   | (2,080 | ) |
| Income                  tax attributable to operating result                                                                                                                                                  |   |             | 295,539   |                                                                          |   | 96,946 |   |   | 604,807 |   |   | (117,203 | ) |
|                                                                                                                                                                                                          |   |             |      |                                                                          |   |   |   |   |   |   |   |   |   |
| Weighted                  average effective tax rates                                                                                                                                                         |   |             | 12.54     | %                                                                             |   | N/A |   |   | 30.68 | % |   | 3.95 | % |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

**5.**
**INCOME      TAX**
**      (Cont.)**

|                                                           |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|----------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                           |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                           |   | **$**            | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
|                                                           |   |             |       |                                                                          |       |   |   |   |   |
| Deferred                  tax liabilities                      |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Accrued                  interest                              |   |             | 3,866      |                                                                          |       | — |   |   | 3,866 |   |   | — |   |
| Prepayments                                                    |   |             | 154        |                                                                          |       | 292 |   |   | 154 |   |   | 292 |   |
|                                                           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Deferred                  tax assets                           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Difference                  in accounting and tax depreciation |   |             | 6,604      |                                                                          |       | 53,306 |   |   | 1,546 |   |   | 791 |   |
| Trade                  debtors                                 |   |             | 2,186      |                                                                          |       | 5,448 |   |   | 2,186 |   |   | 5,448 |   |
| Accruals                                                       |   |             | 1,931      |                                                                          |       | 9,297 |   |   | 1,931 |   |   | 10,038 |   |
| Provisions                                                     |   |             | (38,198    | )                                                                             |       | 5,621 |   |   | 6,640 |   |   | 4,982 |   |
| Unrealised                  foreign exchange losses            |   |             | (89,538    | )                                                                             |       | 2,146 |   |   | (193,124 | ) |   | 2,146 |   |
| Revenue                  losses carried forward                |   |             | 114,555    |                                                                          |       | (114,556 | ) |   | 114,554 |   |   | (114,556 | ) |
| Other                                                          |   |             | (6,238     | )                                                                             |       | 135,392 |   |   | (6,237 | ) |   | (26,343 | ) |
| Deferred                  tax income/(expense)                 |   |             | (4,678     | )                                                                             |       | 96,946 |   |   | (68,484 | ) |   | (117,202 | ) |

**6.**
**EARNINGS      PER SHARE**

|                                                          |   | **CONSOLIDATED** |   |
|---------------------------------------------------------------|--------|------------------|--------|
|                                                          |   | **2005**         |   | **2004** |   |
|                                                          |   | **$**            |   | **$** |   |
| Basic                  earnings per share (cents per share)   |   |             | 0.02   |   |   | (0.01 | ) |
| Diluted                  earnings per share (cents per share) |   |             | 0.02   |   |   | (0.01 | ) |

|                                                                                                                                                                             |   | **CONSOLIDATED** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|
|                                                                                                                                                                             |   | **2005**         |       | **2004** |   |
| **Earnings                reconciliation**                                                                                                                                       |   | **$**            | ** ** | **$** |   |
| Net                profit/(loss) used for basic earnings                                                                                                                         |   |             | 2,060,587  |   |   | (594,274 | ) |
| After                tax effect of dilutive securities                                                                                                                           |   |             | —    |   |   | — |   |
| Diluted                earnings                                                                                                                                                  |   |             | 2,060,587  |   |   | (594,274 | ) |
|                                                                                                                                                                             |   |             |       |   |   |   |   |
| Weighted                average number of ordinary shares outstanding during the year used                for                calculation of basic earnings per share             |   |             | 87,810,254 |   |   | 87,810,254 |   |
|                                                                                                                                                                             |   |             |       |   |   |   |   |
| Weighted                average number of potential ordinary shares outstanding during the                year                used for calculation of diluted earnings per share |   |             | 87,810,254 |   |   | 87,810,254 |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**7.**
**CASH      ASSETS**

|                              |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|-----------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                              |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                              |   | ** $**      | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
|                              |   |             |       |                                                                          |       |   |   |   |   |
| Cash                  at bank     |   |             | 660,373    |                                                                          |       | 1,908,996 |   |   | 465,232 |   |   | 1,359,148 |   |
| Deposits                  at Call |   |             | 815,107    |                                                                          |       | 1,300,000 |   |   | 815,107 |   |   | 1,300,000 |   |
|                              |   |             | 1,475,480  |                                                                          |       | 3,208,996 |   |   | 1,280,339 |   |   | 2,659,148 |   |

**8.**
**RECEIVABLES**

| CURRENT                                                   |   |   |      |   |   |      |   |   |       |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|
| Trade                receivables                          |   |   | 3,717,225 |   |   | 764,916   |   |   | 3,694,183  |   |   | 705,059 |   |
| Income                tax receivable                      |   |   | 53,301    |   |   | 827,755   |   |   | —    |   |   | 350,823 |   |
| Sundry                debtors & prepayments           |   |   | 531,125   |   |   | 341,689   |   |   | 459,992    |   |   | 130,231 |   |
|                                                      |   |   | 4,301,651 |   |   | 1,934,360 |   |   | 4,154,175  |   |   | 1,186,113 |   |
| NON                CURRENT                                |   |   |      |   |   |      |   |   |       |   |   |   |   |
| Amount                receivable from controlled entities |   |   | —   |   |   | —   |   |   | 18,830,209 |   |   | 19,160,886 |   |
| Provision                for impairment of receivables    |   |   | —   |   |   | —   |   |   | (4,181,143 | ) |   | (4,181,141 | ) |
|                                                           |   |   | —   |   |   | —   |   |   | 14,649,066 |   |   | 14,979,745 |   |

**9.**
**FINANCIAL      INSTRUMENTS - CURRENT**

| Derivative                financial assets      |   |   | 5,631,149  |   |   | — |   |   | 4,066,985  |   |   | — |   |
|-------------------------------------------------|--------|--------|------------|--------|--------|---------|--------|--------|------------|--------|--------|---------|--------|
|                                            |   |   |       |   |   |    |   |   |       |   |   |    |   |
| Derivative                financial liabilities |   |   | (5,675,533 | )      |   | — |   |   | (4,075,533 | )      |   | — |   |

**10.**
**INVENTORIES**

| CURRENT                          |   |   |      |   |   |      |   |   |    |
|----------------------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|---------|
| Pearls                           |   |   | 1,156,004 |   |   | 1,027,433 |   |   | 899,792 |   |   | 1,248,009 |   |
| Other                            |   |   | 106,886   |   |   | 7,249     |   |   | — |   |   | — |   |
|                             |   |   | 1,262,890 |   |   | 1,034,682 |   |   | 899,792 |   |   | 1,248,009 |   |
|                             |   |   |      |   |   |      |   |   |    |   |   |   |   |
| NON                  CURRENT     |   |   |      |   |   |      |   |   |    |   |   |   |   |
| Nuclei(1)                        |   |   | 114,630   |   |   | 116,304   |   |   | — |   |   | — |   |
| Other                            |   |   | —   |   |   | 77,217    |   |   | — |   |   | — |   |
|                             |   |   | 114,630   |   |   | 193,521   |   |   | — |   |   | — |   |
| TOTAL                  INVENTORY |   |   | 1,377,520 |   |   | 1,228,203 |   |   | 899,792 |   |   | 1,248,009 |   |

| (1) | The                    nuclei are the beads that are inserted into the oyster and around                    which                    the pearl is formed. It takes between 18-26 months for a pearl                    to be                    formed once the nuclei are inserted into the animals. The nuclei                    become a                    part of the “biological asset” for a period of up to two years and so they                    are considered to be non-current assets. The nucleus is transformed                    into a                    pearl through the deposit of nacre by the                    oyster. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**11**
**.**
**BIOLOGICAL      ASSETS**

|                                     |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                     |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                     |   | **$**            | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
|                                     |   |             |       |                                                                          |       |   |   |   |   |
| CURRENT                                  |   |             |       |                                                                          |       |   |   |   |   |
| Oysters                                  |   |             | 4,176,109  |                                                                          |       | 2,259,547 |   |   | — |   |   | — |   |
|                                     |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| NON                  CURRENT             |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Oysters                                  |   |             | 5,175,725  |                                                                          |       | 6,688,662 |   |   | — |   |   | — |   |
| Total                  Biological Assets |   |             | 9,351,834  |                                                                          |       | 8,948,209 |   |   | — |   |   | — |   |

*Pinctada      Maxima*

|                                                                                          |   | **2005** |      | **2004** |   |
|-----------------------------------------------------------------------------------------------|--------|----------|-----------|----------|--------|
| Number                                                                                        |   | **No.**  |      | **No.**  |   |
| Quantity                  held within the economic entities operations:-                      |   |     |      |     |   |
| Juvenile                  oysters which are not nucleated                                     |   |     | 520,660   |     |   | 749,889 |   |
| Nucleated                  oysters                                                            |   |     | 605,760   |     |   | 385,578 |   |
| Other                  oysters used for broodstock, saibo tissue and research                 |   |     | 2,050     |     |   | 3,006 |   |
|                                                                                          |   |     | 1,128,470 |     |   | 1,138,473 |   |
|                                                                                          |   |     |      |     |   |   |   |
| Quantity                  owned by the Company                  within joint operations: |   |     |      |     |   |   |   |
| Nucleated                  oysters                                                            |   |     | 11,173    |     |   | 97,628 |   |
|                                                                                          |   |     |      |     |   |   |   |
| Change                  increment in net market value during the financial year               |   | $        | —   |     | $      | — |   |

**12.**
**INVESTMENTS**

|                                                                   |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|------------------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                   |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                                   |   | **$ **      | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
|                                                                   |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Controlled                    entities - unlisted shares (see Note 30) |   |             | —    |                                                                          |       | — |   |   | 2,750,004 |   |   | 2,750,004 |   |
| Provision                  for diminution in value                     |   |             | —    |                                                                          |       | — |   |   | (2,750,004 | ) |   | (2,750,004 | ) |
|                                                                        |   |             | —    |                                                                          |       | — |   |   | — |   |   | — |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**13.**
**PROPERTY,      PLANT AND EQUIPMENT**

|                                                    |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|---------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                    |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                    |   | **$**            | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
| (a)                   General                      |   |             |       |                                                                          |       |   |   |   |   |
| Plant                  and equipment                    |   |             |       |                                                                          |       |   |   |   |   |
| -                  at cost                              |   |             | 71,546     |                                                                          |       | 100,475 |   |   | 71,546 |   |   | 100,475 |   |
| -                  accumulated depreciation             |   |             | (47,108    | )                                                                             |       | (69,950 | ) |   | (47,108 | ) |   | (69,950 | ) |
|                                                    |   |             | 24,438     |                                                                          |       | 30,525 |   |   | 24,438 |   |   | 30,525 |   |
| (b)                   Pearling project             |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Leasehold                  land and buildings           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| -                  at cost                              |   |             | 1,200,261  |                                                                          |       | 943,653 |   |   | — |   |   | — |   |
| -                  accumulated depreciation             |   |             | (430,265   | )                                                                             |       | (345,063 | ) |   | — |   |   | — |   |
|                                                    |   |             | 769,996    |                                                                          |       | 598,590 |   |   | — |   |   | — |   |
| Plant                  and equipment, vessels, vehicles |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| -                  at cost                              |   |             | 4,900,172  |                                                                          |       | 4,356,773 |   |   | — |   |   | — |   |
| -                  accumulated depreciation             |   |             | (3,570,922 | )                                                                             |       | (3,160,454 | ) |   | — |   |   | — |   |
|                                                    |   |             | 1,329,250  |                                                                          |       | 1,196,319 |   |   | — |   |   | — |   |
| Total                  pearling project                 |   |             | 2,099,246  |                                                                          |       | 1,794,909 |   |   | — |   |   | — |   |
| Total                  property, plant and equipment    |   |             | 2,123,684  |                                                                          |       | 1,825,434 |   |   | 24,438 |   |   | 30,525 |   |

| (a)                 General                                               |   |   |      |   |   |                    |   |   |    |
|--------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-------------------------|--------|--------|---------|
| Carrying                amount at beginning of the year                        |   |   | 30,525    |   |   | 14,671                  |   |   | 30,525  |   |   | 14,672 |   |
| Additions                                                                      |   |   | 4,294     |   |   | 23,082                  |   |   | 4,294   |   |   | 23,082 |   |
| Disposals                                                                      |   |   | (398      | )      |   | —                 |   |   | (398    | ) |   | — |   |
| Depreciation                                                                   |   |   | (9,983    | )      |   | (7,228                  | )      |   | (9,983  | ) |   | (7,228 | ) |
| Carrying                amount at end of the year                              |   |   | 24,438    |   |   | 30,525                  |   |   | 24,438  |   |   | 30,525 |   |
|                                                                           |   |   |      |   |   |                    |   |   |    |   |   |   |   |
| (b)                 Pearling                project                       |   |   |      |   |   |                    |   |   |    |   |   |   |   |
| Leasehold                land and buildings                                    |   |   |      |   |   |                    |   |   |    |   |   |   |   |
| Carrying                amount at beginning of the year                        |   |   | 598,590   |   |   | 721,180                 |   |   | — |   |   | — |   |
| Additions                                                                      |   |   | 240,013   |   |   | 45,914                  |   |   | — |   |   | — |   |
| Depreciation                                                                   |   |   | (76,104   | )      |   | (12                     | )      |   | — |   |   | — |   |
| Foreign                exchange movement                                       |   |   | 7,497     |   |   | (168,492                | )      |   | — |   |   | — |   |
| Carrying                amount at end of the year                              |   |   | 769,996   |   |   | 598,590                 |   |   | — |   |   | — |   |
|                                                                           |   |   |      |   |   |                    |   |   |    |   |   |   |   |
| (c)                 Plant                and equipment, vessels, vehicles |   |   |      |   |   |                    |   |   |    |   |   |   |   |
| Carrying                amount at beginning of the year                        |   |   | 1,199,143 |   |   | 1,124,556               |   |   | — |   |   | — |   |
| Additions                                                                      |   |   | 616,083   |   |   | 705,                287 |   |   | — |   |   | — |   |
| Disposals                                                                      |   |   | (107,387  | )      |   | —                 |   |   | — |   |   | — |   |
| Depreciation                                                                   |   |   | (388,570  | )      |   | (461,078                | )      |   | — |   |   | — |   |
| Foreign                exchange movement                                       |   |   | 9,981     |   |   | (172,446                | )      |   | — |   |   | — |   |
| Carrying                amount at end of the year                              |   |   | 1,329,250 |   |   | 1,196,319               |   |   | — |   |   | — |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**14.**
**PAYABLES**

|                            |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|---------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                            |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                            |   | **$**            | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** |   |
|                            |   |             |       |                                                                          |       |   |   |   |   |
| CURRENT                         |   |             |       |                                                                          |       |   |   |   |   |
| Trade                  payables |   |             | 68,491     |                                                                          |       | 332,361 |   |   | 48,773 |   |   | 306,517 |   |
| Other                  payables |   |             | 614,484    |                                                                          |       | 688,008 |   |   | 245,704 |   |   | 44,436 |   |
|                            |   |             | 682,975    |                                                                          |       | 1,020,369 |   |   | 294,477 |   |   | 350,953 |   |

**15.**
**BORROWINGS**

| CURRENT                       |   |   |   |   |   |    |   |   |   |
|-------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|
| Unsecured                Loan |   |   | 79,428 |   |   | — |   |   | 79,428 |   |   | — |   |

**16.**
**TAX**

| (a) **Liabilities**                                                                   |   |   |    |   |   |    |   |   |    |
|--------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|
|                                                                                       |   |   |    |   |   |    |   |   |    |
| CURRENT                                                                                    |   |   |    |   |   |    |   |   |    |
| Income                tax payable                                                          |   |   | 203,120 |   |   | 230,480 |   |   | 203,120 |   |   | — |   |
|                                                                                       |   |   |    |   |   |    |   |   |    |   |   |   |   |
| NON-CURRENT                                                                                |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Deferred                  tax liabilities comprise -Accrued                interest income |   |   | 3,978   |   |   | 112     |   |   | 3,866   |   |   | 112 |   |
| Prepayments                denominated in foreign currency                                 |   |   | 154     |   |   | — |   |   | 266     |   |   | — |   |
|                                                                                       |   |   | 4,132   |   |   | 112     |   |   | 4,132   |   |   | 112 |   |
|                                                                                       |   |   |    |   |   |    |   |   |    |   |   |   |   |
| (b) **Assets**                                                                        |   |   |    |   |   |    |   |   |    |   |   |   |   |
|                                                                                       |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Deferred                tax assets comprise -                                              |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Tax                allowances relating to property, plant & equipment                  |   |   | 17,609  |   |   | 24,212  |   |   | 1,583   |   |   | 3,129 |   |
| Trade                debtors denominated in foreign currency                               |   |   | — |   |   | 2,186   |   |   | — |   |   | 2,186 |   |
| Accruals                                                                                   |   |   | 12,398  |   |   | 14,328  |   |   | 12,398  |   |   | 14,328 |   |
| Provisions                                                                                 |   |   | 69,461  |   |   | 31,264  |   |   | 9,527   |   |   | 16,166 |   |
| Unrealised                foreign exchange losses                                          |   |   | 89,538  |   |   | — |   |   | 193,124 |   |   | — |   |
| Revenue                losses carried forward                                              |   |   | — |   |   | 114,556 |   |   | — |   |   | 114,556 |   |
| Other                                                                                      |   |   | 60,044  |   |   | 53,373  |   |   | 6,895   |   |   | 656 |   |
|                                                                                       |   |   | 249,050 |   |   | 239,919 |   |   | 223,525 |   |   | 151,021 |   |
|                                                                                       |   |   |    |   |   |    |   |   |    |   |   |   |   |
| (c) Reconciliations                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |
|                                                                                       |   |   |    |   |   |    |   |   |    |   |   |   |   |
| The                overall movement in deferred tax account is as follows:                 |   |   |    |   |   |    |   |   |    |   |   |   |   |
| Opening                balance                                                             |   |   | 239,807 |   |   | 142,861 |   |   | 150,909 |   |   | 33,707 |   |
| (Charge)/credit                to income statement                                         |   |   | 4,678   |   |   | (96,946 | )      |   | 68,484  |   |   | 117,202 |   |
| Other                movements                                                             |   |   | 433     |   |   | — |   |   | — |   |   | — |   |
| Closing                balance                                                             |   |   | 244,918 |   |   | 239,807 |   |   | 219,393 |   |   | 150,909 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

**17.**
**PROVISIONS**

|                                           |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                           |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                           |   | ** $**      | ** ** | **$**                                                                         | ** ** | ** $** | ** ** | **$** |   |
| CURRENT                                        |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Employee                  entitlements         |   |             | 66,611     |                                                                          |       | 104,212 |   |   | 24,369 |   |   | 71,648 |   |
|                                           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| NON                  CURRENT                   |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Employee                  entitlements         |   |             | 164,928    |                                                                          |       | — |   |   | 7,385 |   |   | — |   |
|                                           |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| TOTAL                                          |   |             | 231,539    |                                                                          |       | 104,212 |   |   | 31,754 |   |   | 71,648 |   |
| Number                  of full time employees |   |             | 470        |                                                                          |       | 438 |   |   | 5 |   |   | 5 |   |

| Reconciliation                of provisions: |   |   |     |   |   |     |   |   |     |   |   |     |   |
|----------------------------------------------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|--------|----------|--------|
| Balance                at beginning of year  |   |   | 104,212  |   |   | 122,946  |   |   | 71,648   |   |   | 72,963   |   |
| Provision                used                |   |   | (421,025 | )      |   | (448,230 | )      |   | (220,292 | )      |   | (255,468 | )      |
| Provisions                added              |   |   | 548,352  |   |   | 429,496  |   |   | 180,398  |   |   | 254,153  |   |
| Closing                balance               |   |   | 231,539  |   |   | 104,212  |   |   | 31,754   |   |   | 71,648   |   |

**18.**
**ISSUED        CAPITAL**

|                                                                                                                                        |   | **CONSOLIDATED**  |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                                                                                        |   | **2005**          |       | **2004**                                                                 |       | **2005**  |   | **2004**  |   |
|                                                                                                                                        |   | **$ **            | ** ** | **$ **                                                                   | ** ** | **$ ** | ** ** | **$ ** |   |
|                                                                                                                                        |   |                   |       |                                                                          |       |   |   |   |   |
| Issued                  and paid-up capital 87,810,254 ordinary shares (2004: 87,810,254                  ordinary                  shares) |   |                   | 18,849,092 |                                                                          |       | 18,849,092 |   |   | 18,849,092 |   |   | 18,849,092 |   |
|                                                                                                                                        |   |                   |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Reconciliation                  of Issued Capital -                                                                                         |   |                   |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Balance                  at beginning of year                                                                                               |   |                   | 18,849,092 |                                                                          |       | 18,849,092 |   |   | 18,849,092 |   |   | 18,849,092 |   |
| Shares                  issued                                                                                                              |   |                   | —    |                                                                          |       | — |   |   | — |   |   | — |   |
| Balance                  at end of year                                                                                                     |   |                   | 18,849,092 |                                                                          |       | 18,849,092 |   |   | 18,849,092 |   |   | 18,849,092 |   |

----

**NOTES TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**19.**
**RESERVES**

|                                                                      |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|---------------------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                                      |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                                      |   | ** $**      | ** ** | **$**                                                                         | ** ** | ** $** | ** ** | **$** |   |
| Foreign                  Currency Translation Reserve                     |   |             | 4,559,049  |                                                                          |       | 4,677,577 |   |   | — |   |   | — |   |
|                                                                      |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Reconciliation                  of Foreign Currency Translation Reserve - |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Balance                  at beginning of year                             |   |             | 4,677,577  |                                                                          |       | 3,025,044 |   |   | — |   |   | — |   |
| Movement                  in translation reserve                          |   |             | (118,528   | )                                                                             |       | 1,652,533 |   |   | — |   |   | — |   |
| Balance                  at end of year                                   |   |             | 4,559,049  |                                                                          |       | 4,677,577 |   |   | — |   |   | — |   |

**20.**
**RETAINED        PROFITS**

|                                                                       |   |   |      |   |   |      |   |   |      |   |   |       |   |
|----------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------|--------|
| Balance                at beginning of year                                |   |   | 1,858,433 |   |   | 2,452,710 |   |   | 982,756   |   |   | 3,831,393  |   |
| Adjustment                on adoption of AASB 132 and AASB 139, net of tax |   |   | 289,911   |   |   | —   |   |   | 289,911   |   |   | —    |   |
| Net                profit attributable to members of the parent entity     |   |   | 2,060,587 |   |   | (594,274  | )      |   | 1,366,220 |   |   | (2,848,637 | )      |
| Prior                year adjustment                                       |   |   | 12,770    |   |   | —   |   |   | —   |   |   | —    |   |
| Dividends                paid                                              |   |   | (878,103  | )      |   | —   |   |   | (878,103  | )      |   | —    |   |
| Balance                at end of year                                      |   |   | 3,343,598 |   |   | 1,858,433 |   |   | 1,760,784 |   |   | 982,756    |   |

**21.**
**DIVIDENDS**

|                            |   | **CENTS****PER****SHARE** |                  | **TOTAL****AMOUNT****$** |   | **%****FRANKED** |   |
|---------------------------------|--------|---------------------------|-----------------------|--------------------------|--------|------------------|--------|
|                            |   |                      |                  |                     |   |             |   |   |   |   |
| **2005**                        |   |                      |                  |                     |   |             |   |   |   |   |
| 29                December 2005 |   |                      | 1                cent |                     |   | 878,103          |   |   | 100 | % |
|                            |   |                      |                  |                     |   |             |   |   |   |   |
| **2004**                        |   |                      |                  |                     |   |             |   |   |   |   |
| Nil                             |   |                      | —               |                     |   | —          |   |   | — |   |

|                                                                                                                                      |   | **CONSOLIDATED** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|
|                                                                                                                                      |   | **2005**         |       | **2004** |   |
|                                                                                                                                      |   | ** $**      | ** ** | **$** |   |
| Dividend                  Franking Account                                                                                                |   |             |       |   |   |   |   |
| Franking                  credits available to shareholders of Atlas                  South Sea Pearl for subsequent financial years |   |             | 2,315,731  |   |   | 2,572,711 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **22.** **OPTIONS**                                                                                                                                                                                                                                                                                                                   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| There                  were no options that were issued or exercised during the financial                  years                  relating to this report. There are no options on issue by Atlas                  South Sea Pearl as at the date of this report or any time during                  the period covered under this report. |   |   |

**23.**
**COMMITMENTS**

|                                                       |   | **CONSOLIDATED** |       |
|------------------------------------------------------------|--------|------------------|------------|
|                                                       |   | **2005**         |       | **2004** |   |
|                                                       |   | ** $**      | ** ** | **$** |   |
|                                                       |   |             |       |   |   |   |   |
|                                                       |   |
| Less                than one year                          |   |             | 18,964     |   |   | 18,270 |   |
| Longer                than one year, but less than 5 years |   |             | 9,911      |   |   | 28,366 |   |
|                                                       |   |             | 28,875     |   |   | 46,636 |   |

**24.**
**CONTINGENT      LIABILITIES**

**25.          **
**NOTES          TO THE STATEMENT OF CASH FLOWS**

|   | **25.1.** | ** RECONCILIATION                OF CASH** |
|--------|-----------|-------------------------------------------------|

|                                       |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|--------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                       |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                       |   | ** $**      | ** ** | **$**                                                                         | ** ** | ** $** | ** ** | **$** |   |
| Cash                  at bank (Note 7)     |   |             | 660,373    |                                                                          |       | 1,908,996 |   |   | 465,232 |   |   | 1,359,148 |   |
| Deposits                  on call (Note 7) |   |             | 815,107    |                                                                          |       | 1,300,000 |   |   | 815,107 |   |   | 1,300,000 |   |
| Cash                  and cash equivalents |   |             | 1,475,480  |                                                                          |       | 3,208,996 |   |   | 1,280,339 |   |   | 2,659,148 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**25**
**NOTES      TO THE STATEMENT OF CASH FLOW (Cont)**

**25.2.**
**Reconciliation      of net cash from operating activities to Operating profit after income      tax**

|                                                                    |   | **CONSOLIDATED**  |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |   |
|-------------------------------------------------------------------------|--------|------------------------|------------|-------------------------------------------------------------------------------|--------|
|                                                                    |   | **2005**          |       | **2004**                                                                 |   | **2005**  |   | **2004**  |   |
|                                                                    |   | **$ **            |       | **$ **                                                                   |   | **$ ** | ** ** | **$ ** |   |
| Operating                  profit/(loss) after income tax               |   |                   | 2,060,587  |                                                                          |   | (594,274 | ) |   | 1,366,220 |   |   | (2,848,637 | ) |
| Inventories                                                             |   |                   | (552,937   | )                                                                             |   | 319,011 |   |   | 363,982 |   |   | 1,779,275 |   |
| Increase/(decrease)                  in interest accrual                |   |                   | (12,887    | )                                                                             |   | 17,988 |   |   | (12,887 | ) |   | 17,988 |   |
| Non                  cash changes in debtors, prepayments and creditors |   |                   | (3,175,623 | )                                                                             |   | (398,751 | ) |   | (3,351,661 | ) |   | (6,326 | ) |
| Purchase                  of unprocessed pearls                         |   |                   | —    |                                                                          |   | — |   |   | 4,714,268 |   |   | 2,986,612 |   |
| Provision                  for depreciation                             |   |                   | 473,584    |                                                                          |   | 546,849 |   |   | 10,381 |   |   | 7,228 |   |
| Provision                  for employee entitlements                    |   |                   | 127,328    |                                                                          |   | (13,458 | ) |   | (39,894 | ) |   | (1,315 | ) |
| Provision                  against Loans                                |   |                   | —    |                                                                          |   | — |   |   | — |   |   | 2,576,295 |   |
| (Profit)/loss                  on disposal of fixed assets              |   |                   | 37,218     |                                                                          |   | (20 | ) |   | — |   |   | — |   |
| Increase/(decrease)                  in value of financial assets       |   |                   | 44,384     |                                                                          |   | — |   |   | 8,548 |   |   | — |   |
| Change                  in retained earnings - AASB139                  |   |                   | 289,910    |                                                                          |   | — |   |   | 289,910 |   |   | — |   |
| Movement                  in foreign exchange                           |   |                   | 87,078     |                                                                          |   | — |   |   | 391,232 |   |   | — |   |
| Increase/(decrease)                  in taxes payable                   |   |                   | 417,904    |                                                                          |   | 218,446 |   |   | 474,646 |   |   | (345,457 | ) |
| Foreign                  Exchange Differences                           |   |                   | 12,763     |                                                                          |   | — |   |   | — |   |   | — |   |
| Net                  cash provided by/(used in) operating activities    |   |                   | (190,691   | )                                                                             |   | 95,791 |   |   | 4,214,745 |   |   | 4,165,663 |   |

**25.3.**
**Credit      facilities**

**26.**
**KEY      MANAGEMENT PERSONNEL DISCLOSURE**

|   | a. | Key                Management Personnel |
|--------|----|-----------------------------------------|

| Parent                Entity Directors:                                       |   |                                                                    |
|-------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|
| Mr              G.R.W              Snow Chairman              - Non-Executive |
| Mr                J.J.U. Taylor. Managing                Director -Executive. |
| Mr                S.J. Arrow                                                  |   | Director                - Non-Executive                                 |
| Mr                S.P. Birkbeck                                               |   | Director                - Non-Executive (Appointed 15 April 2005)       |
| Mr                I.M. Murchison                                              |   | Director                - Non-Executive                                 |
|                                                                          |   |                                                                    |
| Specified                Executives                                           |   |                                                                    |
| Mr                S.C.B. Adams                                                |   | Company                Secretary and Financial Controller               |
| Mr                J.S. Jorgensen                                              |   | Production                Manager & Director, PT Cendana Indopearls |
| Mr                J Knauer                                                    |   | Technical                Manager & Director, PT Cendana Indopearls  |
|                                                                          |   |                                                                    |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**26.**
**KEY      MANAGEMENT PERSONNEL DISCLOSURE (Cont)**

|   | b. | Compensation                - Directors |
|--------|----|-----------------------------------------|

**2005**

|                               |   | Short                term benefits            |    |                                 |   |                                             |   |                                      |   |
|------------------------------------|--------|-----------------------------------------------|---------|--------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------|--------|
|                               |   | Salary,                Fees & Commissions |    | Non-monetary                benefits |   | Post                  employment Super-annuation |   |  Share                based payments |   |                Total |   |
| Mr                S.J. Arrow       |   |                                          | 30,000  |                                 |   | —                                          |   |                                      | 2,700  |   |   | — |   |   | 32,700 |   |
| Mr                S.P. Birkbeck(1) |   |                                          | 21,250  |                                 |   | —                                          |   |                                      | 1,913  |   |   | — |   |   | 23,163 |   |
| Mr                I.M. Murchison   |   |                                          | 36,000  |                                 |   | —                                          |   |                                      | 3,240  |   |   | — |   |   | 39,240 |   |
| Mr                G.R.W Snow       |   |                                          | 60,000  |                                 |   | —                                          |   |                                      | 5,400  |   |   | — |   |   | 65,400 |   |
| Mr                J.J.U. Taylor    |   |                                          | 225,443 |                                 |   | 28,114                                           |   |                                      | 4,075  |   |   | — |   |   | 257,632 |   |
|                               |   |                                          | 372,693 |                                 |   | 28,114                                           |   |                                      | 17,328 |   |   | — |   |   | 418,135 |   |

**2004**

|                                 |   | Short                term benefits            |    |                                 |   |                                             |   |                                      |   |
|--------------------------------------|--------|-----------------------------------------------|---------|--------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------|--------|
|                                 |   | Salary,                Fees & Commissions |    | Non-monetary                benefits |   | Post                  employment Super-annuation |   |  Share                based payments |   |                Total |   |
| Mr                S.J. Arrow         |   |                                          | 30,000  |                                 |   | —                                          |   |                                      | 2,700  |   |   | — |   |   | 32,700 |   |
| Mr                W.F. James(2)      |   |                                          | 35,000  |                                 |   | —                                          |   |                                      | 3,150  |   |   | — |   |   | 38,150 |   |
| Mr                I.M. Murchison (3) |   |                                          | 14,063  |                                 |   | —                                          |   |                                      | 1,265  |   |   | — |   |   | 15,328 |   |
| Mr                G.R.W Snow         |   |                                          | 44,687  |                                 |   | —                                          |   |                                      | 4,022  |   |   | — |   |   | 48,709 |   |
| Mr                J.J.U. Taylor      |   |                                          | 214,227 |                                 |   | 65,026                                           |   |                                      | 21,687 |   |   | — |   |   | 300,940 |   |
|                                 |   |                                          | 337,977 |                                 |   | 65,026                                           |   |                                      | 32,824 |   |   | — |   |   | 435,827 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**26.**
**KEY      MANAGEMENT PERSONNEL DISCLOSURE (Cont)**

|   | c. | Compensation                - executives |
|--------|----|------------------------------------------|

**2005**

|                             |   | Short                term benefits            |    |                                 |   |                                             |   |                                      |    |
|----------------------------------|--------|-----------------------------------------------|---------|--------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------|---------|
|                             |   | Salary,                Fees & Commissions |    | Non-monetary                benefits |   | Post                  employment Super-annuation |   |  Share                based payments |    |                Total |   |
| Mr                S.C.B. Adams   |   |                                          | 110,000 |                                 |   | —                                          |   |                                      | 9,900   |   |   | — |   |   | 119,900 |   |
| Mr                J.S. Jorgensen |   |                                          | 183,775 |                                 |   | —                                          |   |                                      | — |   |   | — |   |   | 183,775 |   |
| Mr                J. Knauer      |   |                                          | 129,837 |                                 |   | —                                          |   |                                      | — |   |   | — |   |   | 129,837 |   |
|                             |   |                                          | 423,612 |                                 |   | —                                          |   |                                      | 9,900   |   |   | — |   |   | 433,512 |   |

**2004**

|                             |   | Short                term benefits            |    |                                 |   |                                             |   |                                      |    |
|----------------------------------|--------|-----------------------------------------------|---------|--------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------|---------|
|                             |   | Salary,                Fees & Commissions |    | Non-monetary                benefits |   | Post                  employment Super-annuation |   |  Share                based payments |    |                Total |   |
| Mr                S.C.B. Adams   |   |                                          | 105,000 |                                 |   | —                                          |   |                                      | 9,450   |   |   | — |   |   | 114,450 |   |
| Mr                J.S. Jorgensen |   |                                          | 160,305 |                                 |   | —                                          |   |                                      | — |   |   | — |   |   | 160,305 |   |
| Mr                J. Knauer      |   |                                          | 106,382 |                                 |   | —                                          |   |                                      | — |   |   | — |   |   | 106,382 |   |
|                             |   |                                          | 371,687 |                                 |   | —                                          |   |                                      | 9,450   |   |   | — |   |   | 381,137 |   |

|   | d. | Options                and rights granted as compensation |
|--------|----|-----------------------------------------------------------|

|   | e. | Equity                instruments issued on exercise of remuneration                options |
|--------|----|---------------------------------------------------------------------------------------------|

|   | f. | Options                and Rights Holdings |
|--------|----|--------------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

**26.**
**KEY      MANAGEMENT PERSONNEL DISCLOSURE (Cont)**

| g.   | Shareholdings |
|----------------|---------------|

|                                         |   | Balance                1/1/05 |       | Granted                as compensation |   | OptionsExercised |   | Other                Changes * |    | Balance                31/12/05 |   |
|----------------------------------------------|--------|-------------------------------|------------|----------------------------------------|--------|------------------|--------|--------------------------------|---------|---------------------------------|--------|
| ***Parent                Entity Directors*** |   |                          |       |                                   |   |             |   |                           |    |                            |   |   |   |   |   |   |
| Mr                S.J. Arrow                 |   |                          | 1,952,934  |                                   |   | —          |   |                           | — |                            |   | — |   |   | 1,952,934 |   |
| Mr                S.P. Birkbeck              |   |                          | —    |                                   |   | —          |   |                           | — |                            |   | 790,000 |   |   | 790,000 |   |
| Mr                I.M. Murchison             |   |                          | 650,000    |                                   |   | —          |   |                           | — |                            |   | 56,667 |   |   | 706,667 |   |
| Mr                G.R.W Snow                 |   |                          | 14,025,744 |                                   |   | —          |   |                           | — |                            |   | 289,395 |   |   | 14,315,139 |   |
| Mr                J.J.U. Taylor              |   |                          | 65,000     |                                   |   | —          |   |                           | — |                            |   | (45,000 | ) |   | 20,000 |   |
|                                         |   |                          |       |                                   |   |             |   |                           |    |                            |   |   |   |   |   |   |
| ***Specified                Executives***    |   |                          |       |                                   |   |             |   |                           |    |                            |   |   |   |   |   |   |
| Mr                S.C.B. Adams               |   |                          | —    |                                   |   | —          |   |                           | — |                            |   | — |   |   | — |   |
| Mr                J.S. Jorgensen             |   |                          | 34,034     |                                   |   | —          |   |                           | — |                            |   | — |   |   | 34,034 |   |
| Mr.                J. Knauer                 |   |                          | —    |                                   |   | —          |   |                           | — |                            |   | — |   |   | — |   |
|                                         |   |                          | 16,727,712 |                                   |   | —          |   |                           | — |                            |   | 1,091,062 |   |   | 17,818,774 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**27. **
**RELATED        PARTY TRANSACTIONS**

**28.**
**REMUNERATION        OF AUDITORS**

|                                                        |   | **CONSOLIDATED** |       | **ATLAS                    SOUTH****SEA                    PEARL****LIMITED** |       |
|-------------------------------------------------------------|--------|------------------|------------|-------------------------------------------------------------------------------|------------|
|                                                        |   | **2005**         |       | **2004**                                                                      |       | **2005** |   | **2004** |   |
|                                                        |   | **$**            | ** ** | **$**                                                                         | ** ** | ** $** | ** ** | **$** |   |
|                                                        |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Auditing                  or reviewing financial statements |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Auditors                  of the Company                    |   |             | 62,042     |                                                                          |       | 42,594 |   |   | 34,342 |   |   | 17,732 |   |
| Other                  Services                             |   |             |       |                                                                          |       |   |   |   |   |   |   |   |   |
| Auditors                  of the Company                    |   |             | 22,849     |                                                                          |       | 8,921 |   |   | 11,973 |   |   | 8,921 |   |

| Services                other than auditing that was carried out by the auditor during the                year                comprised: |   |   |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|

|                                                                                                                                              |   | **2005**    |       | **2004** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|------------|----------|--------|
|                                                                                                                                              |   | ** $** | ** ** | **$**    |   |
| Review                of statutory documentation for lodgement with SEC in relation to                ADR’s                listed on NASDAQ |   |        | 8,085      |     |   | 7,326 |   |
| Assistance                with tax audit in Indonesia                                                                                             |   |        | 10,876     |     |   | 1,595 |   |
| Other                tax advice                                                                                                                   |   |        | 3,888      |     |   | — |   |
|                                                                                                                                              |   |        | 22,849     |     |   | 8,921 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**29.        **
**SEGMENT        REPORTING**

| (a) Business                  Segment (Primary Reporting)                                                                                                                                                                                                                                                      |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                |   |   |   |
| The                  Company                  operates predominantly in the pearling industry in the geographic                  regions of Australia and Indonesia. Unallocated items represent                  amounts                  that do not directly relate to the pearling                  activities. |

| (b) Geographical                Segment (Secondary Reporting)                  |   |          |       |          |       |             |       |
|-------------------------------------------------------------------------------------|--------|---------------|------------|---------------|------------|------------------|------------|
|                                                                                |   | **Indonesia** |       | **Australia** |       | **Eliminations** |       | **Total** |   |
|                                                                                |   | **$ **   | ** ** | **$**         | ** ** | ** $**      | ** ** | **$** |   |
| **2005**                                                                            |   |          |       |          |       |             |       |   |   |   |   |   |   |
| **Revenue**                                                                         |   |          |       |          |       |             |       |   |   |   |   |   |   |
| External                segment revenue                                             |   |          | 600,714    |          |       | 9,129,490        |       |   | — |   |   | 9,730,204 |   |
| Inter-segment                revenue                                                |   |          | 4,715,110  |          |       | —          |       |   | (4,715,110 | ) |   | — |   |
| **Total                segment revenue**                                            |   |          | 5,315,824  |          |       | 9,129,490        |       |   | (4,715,110 | ) |   | 9,730,204 |   |
| Other                unallocated revenue                                            |   |          | 267,600    |          |       | (149,190         | )          |   | (756 | ) |   | 117,655 |   |
| **Total                revenue**                                                    |   |          |       |          |       |             |       |   |   |   |   | 9,847,859 |   |
| **Result**                                                                          |   |          |       |          |       |             |       |   |   |   |   |   |   |
| Segment                result                                                       |   |          | 907,442    |          |       | 3,327,395        |       |   | (364,171 | ) |   | 3,870,666 |   |
| Unallocated                corporate expenses                                       |   |          | (457,742   | )             |       | (1,135,981       | )          |   | — |   |   | (1,593,723 | ) |
| Unallocated                corporate revenue                                        |   |          | 229,129    |          |       | (149,190         | )          |   | (756 | ) |   | 79,184 |   |
| Profit                from ordinary activities before income tax                    |   |          |       |          |       |             |       |   |   |   |   | 2,356,126 |   |
| Income                tax expense                                                   |   |          |       |          |       |             |       |   |   |   |   | (295,539 | ) |
| **Net                profit**                                                       |   |          |       |          |       |             |       |   |   |   |   | 2,060,587 |   |
|                                                                                |   |          |       |          |       |             |       |   |   |   |   |   |   |
| Depreciation                and amortisation                                        |   |          | 24,689     |          |       | 10,382           |       |   | — |   |   | 35,072 |   |
| Other                non-cash expenses                                              |   |          | 58,173     |          |       | (23,959          | )          |   | — |   |   | 34,214 |   |
|                                                                                |   |          |       |          |       |             |       |   |   |   |   |   |   |
| **Assets**                                                                          |   |          |       |          |       |             |       |   |   |   |   |   |   |
| Segment                assets                                                       |   |          | 12,664,025 |          |       | 4,593,975        |       |   | (201,887 | ) |   | 17,056,113 |   |
| Unallocated                corporate assets                                         |   |          | 1,784,829  |          |       | 5,669,422        |       |   | — |   |   | 7,454,251 |   |
| **Consolidated                total assets**                                        |   |          | 14,448,854 |          |       | 10,263,397       |       |   | (201,887 | ) |   | 24,510,364 |   |
|                                                                                |   |          |       |          |       |             |       |   |   |   |   |   |   |
| **Liabilities**                                                                     |   |          |       |          |       |             |       |   |   |   |   |   |   |
| Segment                liabilities                                                  |   |          | 219,504    |          |       | 80,527           |       |   | — |   |   | 300,031 |   |
| Unallocated                corporate liabilities                                    |   |          | 1,968,777  |          |       | 4,607,920        |       |   | — |   |   | 6,576,697 |   |
| **Consolidated                total liabilities**                                   |   |          | 2,188,281  |          |       | 4,688,447        |       |   | — |   |   | 6,876,728 |   |
|                                                                                |   |          |       |          |       |             |       |   |   |   |   |   |   |
| Acquisitions                of non-current assets (Property, Plant & Equipment) |   |          | 856,096    |          |       |             |       |   |   |   |   | 856,096 |   |
| Unallocated                acquisitions of non-current assets                       |   |          |       |          |       | 4,294            |       |   |   |   |   | 4,294 |   |
|                                                                                |   |          |       |          |       |             |       |   |   |   |   | 860,390 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**29.**
**SEGMENT        REPORTING (CONT.)**

| (b) Geographical                (continued)                                    |   |          |       |          |       |             |       |      |       |
|-------------------------------------------------------------------------------------|--------|---------------|------------|---------------|------------|------------------|------------|-----------|------------|
|                                                                                |   |          |       |          |       |             |       |      |       |
|                                                                                |   | **Indonesia** |       | **Australia** |       | **Eliminations** |       | **Total** |       |
|                                                                                |   | ** $**   | ** ** | **$**         | ** ** | **$ **      | ** ** | **$**     |       |
| **2004**                                                                            |   |          |       |          |       |             |       |      |       |   |   |   |   |
| **Revenue**                                                                         |   |          |       |          |       |             |       |      |       |   |   |   |   |
| External                segment revenue                                             |   |          | 669,459    |          |       | 5,218,743        |       |      | —    |   |   | 5,888,202 |   |
| Inter-segment                revenue                                                |   |          | 2,986,614  |          |       | —          |       |      | (2,986,614 | ) |   | — |   |
| **Total                segment revenue**                                            |   |          | 3,656,073  |          |       | 5,218,743        |       |      | (2,986,614 | ) |   | 5,888,202 |   |
| Other                unallocated revenue                                            |   |          | (534,846   | )             |       | 974,518          |       |      | 509,649    |   |   | 949,321 |   |
| **Total                revenue**                                                    |   |          |       |          |       |             |       |      |       |   |   | 6,837,523 |   |
| **Result**                                                                          |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Segment                result                                                       |   |          | 261,775    |          |       | (313,683         | )          |      | (218,917   | ) |   | (270,825 | ) |
| Unallocated                corporate expenses                                       |   |          | (647,114   | )             |       | (2,665,335       | )          |      | 3,085,946  |   |   | (226,503 | ) |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Profit                from ordinary activities before income tax                    |   |          |       |          |       |             |       |      |       |   |   | (497,328 | ) |
| Income                tax expense                                                   |   |          |       |          |       |             |       |      |       |   |   | (96,946 | ) |
| **Net                profit**                                                       |   |          |       |          |       |             |       |      |       |   |   | (594,274 | ) |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Depreciation                and amortisation                                        |   |          | 21,128     |          |       | 7,228            |       |      | —    |   |   | 28,356 |   |
| Other                non-cash expenses                                              |   |          | 3,666      |          |       | 16,061           |       |      | —    |   |   | 19,727 |   |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   |   |   |
| **Assets**                                                                          |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Segment                assets                                                       |   |          | 11,806,782 |          |       | 1,732,492        |       |      | —    |   |   | 13,539,274 |   |
| Unallocated                corporate assets                                         |   |          | 549,848    |          |       | 3,295,999        |       |      | —    |   |   | 3,845,847 |   |
| **Consolidated                total assets**                                        |   |          | 12,356,630 |          |       | 5,028,491        |       |      | —    |   |   | 17,385,121 |   |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   |   |   |
| **Liabilities**                                                                     |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Segment                liabilities                                                  |   |          | 930,153    |          |       | 350,953          |       |      | —    |   |   | 1,281,106 |   |
| Unallocated                corporate liabilities                                    |   |          | 28,054     |          |       | 46,013           |       |      | —    |   |   | 78,067 |   |
| **Consolidated                total liabilities**                                   |   |          | 958,207    |          |       | 396,966          |       |      | —    |   |   | 1,355,173 |   |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   |   |   |
| Acquisitions                of non-current assets (Property, Plant & Equipment) |   |          | 755,558    |          |       |             |       |      |       |   |   | 755,558 |   |
| Unallocated                acquisitions of non-current assets                       |   |          |       |          |       | 23,083           |       |      |       |   |   | 23,083 |   |
|                                                                                |   |          |       |          |       |             |       |      |       |   |   | 778,641 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**30. **
**ECONOMIC        DEPENDENCY**

**31.****CONTROLLED      ENTITIES**

|                                   |   | **Percentage                owned** |   | **Percentage                owned** |   | **Place                of** |   | **Book                value of Company's investment** |      |
|----------------------------------------|--------|-------------------------------------|--------|-------------------------------------|--------|-----------------------------|--------|-------------------------------------------------------|-----------|
|                                   |   | **2005**                            |   | **2004**                            |   | **incorporation**           |   | **2005**                                              |      | **2004** |   |
|                                   |   |                                |   |                                |   |                        |   | $                                                     |      | $ |   |
| Sharcon                Pty Ltd         |   |                                | 100    | %                                   |   | 100                         | %      |                                                  | Australia |   |   | — |   |   | — |   |
| Tansim                Pty Ltd          |   |                                | 100    | %                                   |   | 100                         | %      |                                                  | Australia |   |   | — |   |   | — |   |
| P.T.                Cendana Indopearls |   |                                | 100    | %                                   |   | 100                         | %      |                                                  | Indonesia |   |   | — |   |   | — |   |
|                                   |   |                                |   |                                |   |                        |   |                                                  |      |   |   | — |   |   | — |   |

| **32.  ** | **POST                BALANCE DATE EVENTS** |
|---------------------|---------------------------------------------|

| **33.  ** | **FINANCIAL                INSTRUMENTS** |
|---------------------|------------------------------------------|

| (a)   | Treasury                Risk Management |
|-----------------|-----------------------------------------|

| (b)   | Financial                Risk Management |
|-----------------|------------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

**33**
**FINANCIAL      INSTRUMENTS (Cont)**

| (c)   | Financial                Instruments |
|-----------------|--------------------------------------|

|                                   |   | **2005**                                 |   | **2004** |   | **2005** |   | **2004** |      |
|----------------------------------------|--------|------------------------------------------|--------|----------|--------|----------|--------|----------|-----------|
|                                   |   | **Weighted                average rate** |   | **AUD**  |   | **AUD**  |   |
| Sell                Japanese Yen       |   |                                     |   |     |   |     |   |     |      |   |   |   |   |
| Not                later than one year |   |                                     | 84.60  |     |   | 73.50    |   |     | 3,566,985 |   |   | 3,384,800 |   |
|                                   |   |                                     |   |     |   |     |   |     |      |   |   |   |   |
| Buy                Indonesian Rupiah   |   |                                     |   |     |   |     |   |     |      |   |   |   |   |
| Not                later than one year |   |                                     | 7,623  |     |   | —  |   |     | 1,600,000 |   |   | — |   |

|                                   |   | **2005**                                 |   | **2004** |   | **2005** |   | **2004** |    |
|----------------------------------------|--------|------------------------------------------|--------|----------|--------|----------|--------|----------|---------|
|                                   |   | **Weighted                average rate** |   | **AUD**  |   | **AUD**  |   |
| Sell                Japanese Yen       |   |                                     |   |     |   |     |   |     |    |   |   |   |   |
| Not                later than one year |   |                                     | 84.08  |     |   | —  |   |     | 500,000 |   |   | — |   |

| (d)   | Interest                Rate Risk - |
|-----------------|-------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL STATEMENTS**

**33**
**FINANCIAL      INSTRUMENTS (Cont)**

|                                             |   |                **NOTE** |   | **Weighted                average interest rate** |   | **Floating                interest rate**  |   |  **Fixed                interest rate maturing in****1                year or less** |          |                **Non                interest bearing** |   | **Total** |
|--------------------------------------------------|--------|------------------------------|--------|---------------------------------------------------|--------|-------------------------------------------------|--------|-------------------------------------------------------------------------------------------|---------------|-------------------------------------------------------------|--------|-----------|
|                                             |   |                         |   |                                              |   |                                            |   |                                                                                      |          |                                                        |   |      |
|                                             |   |                              |   | %                                            |   |  $                                         |   | $                                                                                         |          |  $                                                     |   | $         |
| **2005**                                         |   |                         |   |                                              |   |                                            |   |                                                                                      |          |                                                        |   |      |   |   |   |   |   |
| Financial                Assets                  |   |                         |   |                                              |   |                                            |   |                                                                                      |          |                                                        |   |      |   |   |   |   |   |
| Cash                                             |   |                         | 7      |                                              |   | 4.53                                            |   |                                                                                      | 639,787       |                                                        |   | 815,107   |   |   | 20,586 |   | 1,475,480 |
| Receivables                                      |   |                         | 8      |                                              |   | 0.00                                            |   |                                                                                      | —       |                                                        |   | —   |   |   | 4,301,652 |   | 4,301,652 |
|                                             |   |                         |   |                                              |   |                                            |   |                                                                                      | 639,787       |                                                        |   | 815,107   |   |   | 4,322,238 |   | 5,777,132 |
|                                             |   |                         |   |                                              |   |                                            |   |                                                                                      |          |                                                        |   |      |   |   |   |   |   |
| Financial                Liabilities             |   |                         |   |                                              |   |                                            |   |                                                                                      |          |                                                        |   |      |   |   |   |   |   |
| Payables                                         |   |                         | 14     |                                              |   | 0.00                                            |   |                                                                                      | —       |                                                        |   | —   |   |   | (682,975 | ) | (682,975) |
|                                             |   |                         |   |                                              |   |                                            |   |                                                                                      | —  |                                                        |   | —   |   |   | (682,975 | ) | (682,975) |
| Net                Financial Asset/(Liabilities) |   |                         |   |                                              |   |                                            |   |                                                                                      | 639,787       |                                                        |   | 815,107   |   |   | 3,639,263 |   | 5,094,157 |

|                                             |   | **NOTE**  |   |                **Weighted                average interest rate** |   |                **Floating                interest rate** |   |  **Fixed                interest rate maturing                in****1                year or less** |      |                **Non                interest bearing** |   | **Total**  |
|--------------------------------------------------|--------|----------------|--------|-----------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|-----------|-------------------------------------------------------------|--------|-----------------|
|                                             |   |           |   |                                                                  |   |                                                          |   |                                                                                                     |      |                                                        |   |            |
|                                             |   |                |   |  %                                                               |   | $                                                        |   | $                                                                                                        |      |  $                                                     |   | $               |
| **2004**                                         |   |           |   |                                                                  |   |                                                          |   |                                                                                                     |      |                                                        |   |            |
| Financial                Assets                  |   |           |   |                                                                  |   |                                                          |   |                                                                                                     |      |                                                        |   |            |   |   |   |   |   |
| Cash                                             |   |           | 7      |                                                                  |   | 4.29                                                          |   |                                                                                                     | 1,886,833 |                                                        |   | 1,300,000       |   |   | 22,163 |   | 3,208,996 |
| Receivables                                      |   |           | 8      |                                                                  |   | 0.00                                                          |   |                                                                                                     | —   |                                                        |   | —         |   |   | 1,934,360 |   | 1,934,360 |
|                                             |   |           |   |                                                                  |   |                                                          |   |                                                                                                     | 1,886,833 |                                                        |   | 1,300,000       |   |   | 1,956,523 |   | 5,143,356 |
|                                             |   |           |   |                                                                  |   |                                                          |   |                                                                                                     |      |                                                        |   |            |   |   |   |   |   |
| Financial                Liabilities             |   |           |   |                                                                  |   |                                                          |   |                                                                                                     |      |                                                        |   |            |   |   |   |   |   |
| Payables                                         |   |           | 14     |                                                                  |   | 0.00                                                          |   |                                                                                                     | —   |                                                        |   | —         |   |   | (1,250,849 | ) | (1,250,849) |
|                                             |   |           |   |                                                                  |   |                                                          |   |                                                                                                     | —   |                                                        |   | —         |   |   | (1,250,849 | ) | (1,250,849) |
| Net                Financial Asset/(Liabilities) |   |           |   |                                                                  |   |                                                          |   |                                                                                                     | 1,886,833 |                                                        |   | 1,300,000       |   |   | 705,674 |   | 3,892,507 |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| (e)   | Net                fair values - |
|-----------------|----------------------------------|

| -                        | Term                receivables are determined by discounting the cash flows, at market                interest rates of similar securities, to their present                value; |
|-----------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -           | Unlisted                investments where there is no organised financial market, the net                fair                value is based on reasonable estimation of the underlying net assets                or                discounted cash flow of the                investment; |
|---------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -           | Other                loans and amounts due are determined by discounting the cash flows,                at                market interest rates of similar borrowings, to their present                value; |
|---------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -           | Forward                exchange contracts and option contracts are the recognised unrealised                gain                or loss at balance date determined from the current forward exchange                rates                for contracts with similar                maturities. |
|---------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **34.                   ** | **CHANGE                IN ACCOUNTING POLICIES** |
|-----------------------------------------------------|--------------------------------------------------|

*Financial      Instruments: Disclosure and Presentation*

*Financial      Instruments: Recognition and Measurement*

| **35.                   ** | **Significant                differences between Australian IFRS and US                GAAP** |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------|

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

|                                                                                                                             |   | **YEARS                ENDED 31 DECEMBER** |      |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                                                                             |   | **2005**                                   |      | **2004** |   |
| **INCOME                STATEMENT**                                                                                              |   |                                       |      |   |   |
| Net                income/(loss) under AIFRS                                                                                     |   |                                       | 2,060,587 |   |   | (594,274 | ) |
| 35.1 Amortization                of Goodwill                                                                                |   |                                       | —   |   |   | — |   |
| 35.3 Change                in Fair Value of Derivative Instruments                                                          |   |                                       |      |   |   | (691,709 | ) |
| 35.5 Capitalization                of Administration Expenses to Inventory                                                  |   |                                       | —   |   |   | 168,508 |   |
| 35.6                Prior year adjustment                                                                                        |   |                                       | 12,770    |   |   | — |   |
| Net                income before cumulative effect of change in Accounting Principle                under US                GAAP |   |                                       | 2,073,357 |   |   | (1,117,475 | ) |
| Cumulative                effect of change in Accounting Principle                                                               |   |                                       | —   |   |   | — |   |
| Net                income under US GAAP                                                                                          |   |                                       | 2,073,357 |   |   | (1,117,475 | ) |

|                                           |   | **YEARS                ENDED 31 DECEMBER** |       |
|------------------------------------------------|--------|--------------------------------------------|------------|
|                                           |   | **2005**                                   |       | **2004** |   |
| **BALANCE                SHEET**               |   |                                       |       |   |   |
|                                           |   |                                       |       |   |   |
| Equity                under AIFRS              |   |                                       | 17,633,641 |   |   | 16,029,948 |   |
| 35.1 Goodwill                             |   |                                       | 499,718    |   |   | 499,718 |   |
| 35.3 Financial                Instruments |   |                                       | —    |   |   | 289,911 |   |
| US                GAAP                         |   |                                       | 18,133,359 |   |   | 16,819,577 |   |
|                                           |   |                                       |       |   |   |   |   |
| Total                Assets under AIFRS        |   |                                       | 24,510,368 |   |   | 17,385,121 |   |
| 35.1 Goodwill                             |   |                                       | 499,718    |   |   | 499,718 |   |
| 35.3 Financial                Instruments |   |                                       | —    |   |   | 289,911 |   |
| US                GAAP                         |   |                                       | 25,010,086 |   |   | 18,174,750 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **35.1                        ** | **GOODWILL** |
|------------------------------------------------------------------------------------|--------------|

| **35.2                        ** | **VALUATION                OF INVENTORY** |
|------------------------------------------------------------------------------------|-------------------------------------------|

| **35.3                        ** | **GAINS                AND LOSSES ON FOREIGN EXCHANGE                CONTRACTS** |
|------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|

|                                                       |   | **2005** | ** ** | **2004** |   |
|------------------------------------------------------------|--------|----------|------------|----------|--------|
|                                                       |   |  $  |       | $        |   |
| Fair                Value of Forward Exchange Contracts    |   |     | —    |     |   | 289,911 |   |
| Gain/(Loss)                from Forward Exchange Contracts |   |     | —    |     |   | (691,709 | ) |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **35.4                       ** | **EARNINGS                PER SHARE** |
|------------------------------------------------------------------------------|---------------------------------------|

|                                                                                                   |   | YEARS                  ENDED 31 DECEMBER |   |
|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                   |   | 2005                                     |   | 2004 |   |
|                                                                                                   |   | ($)                                      |   | ($) |   |
| Basic                  Earnings per share under                                                        |   |                                     |   |   |   |
| AIFRS                                                                                                  |   |                                     | 0.02   |   |   | (0.01 | ) |
| US                  GAAP (before cumulative effect of change in Accounting                  Principal) |   |                                     | 0.02   |   |   | (0.01 | ) |
| US                  GAAP (after effect of change in Accounting Principal)                              |   |                                     | 0.02   |   |   | (0.01 | ) |
| Earnings                  per ADR under US GAAP                                                        |   |                                     |   |   |   |   |   |
| -                  20 shares equivalent to 1 ADR                                                       |   |                                     |   |   |   |   |   |
| before                  change in Acc. Princ.                                                          |   |                                     | 0.47   |   |   | (0.25 | ) |
| after                  change in Acc. Princ.                                                           |   |                                     | 0.47   |   |   | (0.25 | ) |
|                                                                                                   |   |                                     |        |   |   |  |   |
| Diluted                  Earnings per share under                                                      |   |                                     | 0.02   |   |   | (0.01 | ) |
| AIFRS                                                                                                  |   |                                     |   |   |   |   |   |
| US                  GAAP (before cumulative effect of change in Accounting                  Principal) |   |                                     | 0.02   |   |   | (0.01 | ) |
| US                  GAAP (after effect of change in Accounting Principal)                              |   |                                     | 0.02   |   |   | (0.01 | ) |
| Earnings                  per ADR under US GAAP                                                        |   |                                     |   |   |   |   |   |
| -                  20 shares equivalent to 1 ADR                                                       |   |                                     |   |   |   |   |   |
| before                  change in Acc. Princ.                                                          |   |                                     | 0.47   |   |   | (0.25 | ) |
| after                  change in Acc. Princ.                                                           |   |                                     | 0.47   |   |   | (0.25 | ) |

|                                                                      |   | 2005(A$) |       | 2004(A$) |   |
|---------------------------------------------------------------------------|--------|----------|------------|----------|--------|
| Before                cumulative effect of change in Accounting Principal |   |     |       |     |   |
| Net                Profit - Basic EPS (USGAAP)                            |   |     | 2,073,357  |     |   | (1,117,475 | ) |
| Add                Back Interest on Convertible Notes                     |   |     | —    |     |   | — |   |
| Net                Profit - Diluted EPS (US GAAP)                         |   |     | 2,073,357  |     |   | (1,117,475 | ) |
| Outstanding                Shares - Basic EPS                             |   |     | 87,810,254 |     |   | 87,810,254 |   |
| Add                dilutive options (US GAAP)                             |   |     | —    |     |   | — |   |
| Add                dilutive convertible notes (US GAAP)                   |   |     | —    |     |   | — |   |
| Outstanding                Shares - Diluted EPS (US GAAP)                 |   |     | 87,810,254 |     |   | 87,810,254 |   |
| After                cumulative effect of change in Accounting Principal  |   |     |       |     |   |   |   |
| Net                Profit - Basic EPS (US GAAP)                           |   |     | 2,073,357  |     |   | (1,117,475 | ) |
| Add                Back Interest on Convertible Notes                     |   |     | —    |     |   | — |   |
| Net                Profit - Diluted EPS (US GAAP)                         |   |     | 2,073,357  |     |   | (1,117,475 | ) |
| Outstanding                Shares - Basic EPS                             |   |     | 87,810,254 |     |   | 87,810,254 |   |
| Add                dilutive options (US GAAP)                             |   |     | —    |     |   | — |   |
| Add                dilutive convertible notes (US GAAP)                   |   |     | —    |     |   | — |   |
| Outstanding                Shares - Diluted EPS (US GAAP)                 |   |     | 87,810,254 |     |   | 87,810,254 |   |

----

**NOTES      TO AND FORMING PART OF THE FINANCIAL      STATEMENTS**

| **35.5                        ** | **Capitalization                of Administration Expenses** |
|------------------------------------------------------------------------------------|--------------------------------------------------------------|

|                                             |   | YEARS                ENDED 31 DECEMBER |    |
|--------------------------------------------------|--------|----------------------------------------|---------|
|                                             |   | 2005                                   |    | 2004 |   |
| Administration                costs capitalized  |   |                                   | — |   |   | — |   |
| Cumulative                effect on Total Assets |   |                                   | — |   |   | — |   |
| Cumulative                effect on Equity       |   |                                   | — |   |   | — |   |
| Effect                on Net Income              |   |                                   | — |   |   | 168,508 |   |

| **35.6           ** | **Immaterial                  Prior Year Earnings** |
|----------------------------------------------------------------------------|-----------------------------------------------------|

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