**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        20-F**
  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
                  1934For
                  the fiscal year ended December 31,
                  2004
 
 OR
  o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 For
        the
        transition period from _____ to_____
  **COMMISSION
        FILE NUMBER** **0-28186**
  **ATLAS
        PACIFIC LIMITED**
 (Exact
        Name of Registrant as Specified in its Charter)
 
 
 **WESTERN
        AUSTRALIA, AUSTRALIA**
 (Jurisdiction
        of incorporation or organization)
 **43
        YORK STREET, SUBIACO WESTERN AUSTRALIA 6008**
 (Address
        of principal executive offices)
 
 Securities
        registered or to be registered pursuant to Section 12(b) of the
        Act:
  Title
                  of each class
              Name
                  of each exchange on which registeredNone
              None
 
 Securities
        registered or to be registered pursuant to Section 12(g) of the
        Act:
 Ordinary
        Shares of Common Stock, as evidenced by American Depositary Shares* as evidenced
        by American Depositary Receipts (Title of Class)
  Securities
        for which there is a reporting obligation pursuant to Section 15(d) of the
        Act:
 None
  The
        Company had 87,810,254 Ordinary Shares of Common Stock outstanding as of
        December 31, 2004.
 *
        Each
        American Depositary Share represents 20 Ordinary Shares of Common Stock.
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
  Yes
              x
              No
              o
 
 Indicate
        by check mark which financial statement item the registrant has elected to
        follow.
  Item
                  17
              x
              Item
                  18
              o
  
 **TABLE
        OF CONTENTS**
  **Page**Introduction
              1**PART
                  I**
              **ITEM
                  1**
              Not
                  Required
              3**ITEM
                  2**
              Not
                  Required
              3**ITEM
                  3**
              Key
                  Information
              3**ITEM
                  4**
              Information
                  on the Company
              8**ITEM
                  5**
              Operating
                  and Financial Review and Prospects
              25**ITEM
                  6**
              Directors,
                  Senior Management and Employees
              34**ITEM
                  7**
              Major
                  Shareholders and Related Party Transactions
              39**ITEM
                  8**
              Financial
                  Information
              40**ITEM
                  9**
              The
                  Offer and Listing
              42**ITEM
                  10**
              Additional
                  Information
              43**ITEM
                  11**
              Quantitative
                  and Qualitative Disclosures about Market Risk
              51**ITEM
                  12**
              Not
                  Required
              53**PART
                  II**
              **ITEM
                  13**
              Defaults,
                  Dividend Arrearages and Delinquencies
              54**ITEM
                  14**
              Material
                  Modifications to the Rights of Security Holders and Use of
                  Proceeds
              54**ITEM
                  15**
              Controls
                  and Procedures
              54**ITEM
                  16A**
              Audit
                  Committee Financial Expert
              54**ITEM
                  16B**
              Code
                  of Ethics
              55**ITEM
                  16C**
              Principal
                  Accountant Fees and Services
              55**ITEM
                  16D**
              Exemptions
                  from Listing Standards for Audit Committees
              55**ITEM
                  16E**
              Purchases
                  of Equity Securities by the Issuer and Affiliated
                  Purchasers
              55**PART
                  III**
              **ITEM
                  17**
              Financial
                  Statements
              56**ITEM
                  18**
              Not
                  Required
              56**ITEM
                  19**
              Exhibits
              56
 
 i
  **INTRODUCTION**
  ***Currency
        of Presentation and Definitions***
 
 As
        used
        herein, except as the context otherwise requires, the term “Company” refers to
        Atlas Pacific Limited, an Australian corporation and its subsidiaries. The
        term
“ADRs” refers to the American Depositary Receipts of the Company, which evidence
        ownership of American Depositary Shares (“ADSs”) of the Company. Each ADR
        evidences ownership of a specified number of ADSs and each ADS evidences
        ownership of 20 ordinary shares of the Company’s common stock (the “Shares”).
  The
        Company’s fiscal year ends on December 31 of each year. References in this
        document to a particular year are to the fiscal year unless otherwise
        indicated.
  The
        Company furnishes the Bank of New York, as depositary for its ADSs (the
“Depositary”), with annual reports containing audited consolidated financial
        statements and an opinion thereon by the Company’s independent registered public
        accounting firm. Such financial statements have been audited in accordance
        with
        Australian auditing standards. The Depositary makes such reports available
        for
        inspection by the record holders of ADRs. The Company also furnishes the
        Depositary with financial statements prepared in accordance with Australian
        Accounting Standards (“AAS”), which are required to be furnished to shareholders
        under Australian law. AAS differs from U.S. Generally Accepted Accounting
        Principles (“US GAAP”) in certain material respects. Accordingly, the Company’s
        audited consolidated financial statements include a reconciliation of certain
        line items to US GAAP - See Note 31 of “Item 17. Financial
        Statements.”
  The
        Company publishes its consolidated financial statements expressed in Australian
        Dollars. In this document, references to “US Dollars” or “US$” are to the
        currency of the United States of America and references to “Australian Dollars”
        or “A$” are to the currency of Australia. Solely for convenience, this annual
        report on Form 20-F contains translations of certain Australian Dollar amounts
        into US Dollars at specified rates. These translations should not be construed
        as representations that the Australian Dollar amounts actually represent
        such US
        Dollar amounts or could have been or could be converted into US Dollars at
        the
        rates indicated or any other rates. Unless otherwise indicated, the translation
        of Australian Dollars into US Dollars has been made at the rate of A$1.00
        =
        US$0.7805, which was the Noon Buying Rate in New York City for cable transfers
        in Australian Dollars as certified for customs purposes by the Federal Reserve
        Bank of New York (the “Noon Buying Rate”) on December 31, 2004. For information
        regarding rates of exchange between Australian Dollars and US Dollars for
        2000
        to the present, see “Item 3. A. Selected Financial Consolidated Data - Exchange
        Rates.”
  1
  ***Forward-Looking
        Statements***
 
 This
        Annual Report contains “forward-looking statements” as that term is used in the
        Private Securities Litigation Reform Act of 1995. Forward-looking statements
        are
        based on current expectations rather than historical facts and they are
        indicated by words or phrases such as
“anticipate,”“estimate,”“expect,”“project,”“believe,”“intend,”“envision,” and
        similar words or phrases. These forward-looking statements involve known
        and
        unknown risks, uncertainties and other factors that may cause actual results,
        performance or achievements to be materially different from any future results,
        performance or achievements expressed or implied by such forward-looking
        statements. Some of the factors that would affect our financial performance,
        cause actual results to differ from our estimates, or underlie such
        forward-looking statements, are set forth in various places in this report,
        including but not limited to “Item 3. D Risk Factors.”
  These
        risks include, but are not limited to, the following:
  ·
              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 a healthy and adequate supply of quality
                  pearls.
  2
  **PART
        I**
  **ITEM
        1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**
  Not
        required.
  **ITEM
        2. OFFER STATISTICS AND EXPECTED TIMETABLE**
  Not
        required.
  **ITEM
        3. KEY INFORMATION**
  **A.** **Selected
        Consolidated Financial Data**
  The
        selected consolidated financial information set forth below has been derived
        from the Company’s audited financial statements and the notes thereto contained
        elsewhere herein. Such financial statements have been prepared in accordance
        with AAS, should be read in conjunction with, and are qualified in their
        entirety by reference to, the Company’s audited consolidated financial
        statements and notes thereto. The financial results should not be construed
        as
        indicative of financial results for subsequent periods. See “Item 4. Information
        on the Company” and “Item 5. Operating and Financial Review and
        Prospects.”
  3
  **Income
                    Statement Data**
                
                **Years
                    Ended December 31,****2004****(1)**
                  **(US$)**
                
                **2004****(A$)**
                
                **2003****(6)**
                  **(A$)**
                
                **2002****(6)**
                  **(A$)**
                
                **2001**
                  **(A$)**
                
                **2000****(A$)**Australian
                    Accounting Principles:Revenue
                
                $
                5,336,687
                
                $
                6,837,523
                
                $
                9,637,393
                
                $
                11,341,448
                
                $
                11,335,984
                
                $
                7,250,178Net
                    income (loss) from operations
                
                
                (1,147,301
                )
                
                (1,469,956
                )
                
                1,244,733
                
                
                3,499,017
                
                
                4,150,770
                
                
                2,472,159Net
                    income (loss) from continuing operations
                
                
                (1,147,301
                )
                
                (1,469,956
                )
                
                1,244,733
                
                
                3,499,017
                
                
                4,150,770
                
                
                2,472,159Net
                    income (loss)
                
                
                (1,147,301
                )
                
                (1,469,956
                )
                
                1,244,733
                
                
                3,499,017
                
                
                4,150,770
                
                
                2,472,159Net
                    income (loss) per share-basic
                
                
                (0.0130
                )
                
                (0.0167
                )
                
                0.0142
                
                
                0.0423
                
                
                0.0680
                
                
                0.0452Net
                    income (loss) per share-diluted
                
                
                (0.0130
                )
                
                (0.0167
                )
                
                0.0142
                
                
                0.0403
                
                
                0.0510
                
                
                0.0327Weighted
                    average number ofbasic
                    ordinary shares outstanding
                
                
                87,810,254
                
                
                87,810,254
                
                
                87,810,254
                
                
                82,724,884
                
                
                61,013,243
                
                
                54,751,017Weighted
                    average number ofdiluted
                    ordinary shares outstanding
                
                
                87,810,254
                
                
                87,810,254
                
                
                87,810,254
                
                
                87,910,235
                
                
                88,026,526
                
                
                88,264,874U.S.
                    Generally Accepted Accounting Principles:Revenue
                
                $
                5,336,687
                
                $
                6,837,523
                
                $
                9,637,393
                
                $
                11,341,448
                
                $
                11,335,984
                
                $
                7,250,178Amortization
                    of goodwill(2)
                
                
                --
                
                
                --
                
                
                247,777
                
                
                251,941
                
                
                --
                
                
                --Gain/(loss)
                    on foreign exchange derivatives(3)
                
                
                (539,879
                )
                
                (691,709
                )
                
                782,327
                
                
                (6,318
                )
                
                205,610
                
                
                --Stock
                    options issued to employees
                
                
                --
                
                
                --
                
                
                --
                
                
                (36,400
                )
                
                (47,250
                )
                
                --Capitalization
                    of administrationcosts(4)
                
                
                131,520
                
                
                168,508
                
                
                426,448
                
                
                487,022
                
                
                (170,962
                )
                
                (494,250
                )Foreign
                    Currency Balances(5)
                
                
                (1,111,567
                )
                
                (1,424,174
                )
                
                (1,116,101
                )
                
                320,234
                
                
                --
                
                
                --Net
                    income (loss) from operations
                
                
                (2,667,226
                )
                
                (3,417,330
                )
                
                1,585,184
                
                
                4,515,498
                
                
                4,138,168
                
                
                1,977,909Net
                    income (loss) from continuing operations
                
                
                (2,667,226
                )
                
                (3,417,330
                )
                
                1,585,184
                
                
                4,515,498
                
                
                4,138,168
                
                
                1,977,909Net
                    income (loss)
                
                
                (2,667,226
                )
                
                (3,417,330
                )
                
                1,585,184
                
                
                4,515,498
                
                
                4,138,168
                
                
                1,977,909Net
                    income (loss) per share - basic (before cumulative effect of
                    change in
                    accounting policy)
                
                
                (0.0303
                )
                
                (0.0389
                )
                
                0.0181
                
                
                0.0546
                
                
                0.0666
                
                
                0.0361Net
                    income loss) per share - basic (after cumulative effect of change
                    in
                    accounting policy)
                
                
                (0.0303
                )
                
                (0.0389
                )
                
                0.0181
                
                
                0.0546
                
                
                0.0678
                
                
                N/ANet
                    income (loss) per share - diluted (before cumulative effect of
                    change in
                    accounting policy)
                
                
                (0.0303
                )
                
                (0.0389
                )
                
                0.0181
                
                
                0.0506
                
                
                0.0542
                
                
                0.0287Net
                    income (loss) per share - diluted (after cumulative effect of
                    change in
                    accounting policy)
                
                
                (0.0303
                )
                
                (0.0389
                )
                
                0.0181
                
                
                0.0506
                
                
                0.0551
                
                
                N/AWeighted
                    average number ofbasic
                    ordinary shares outstanding
                
                
                87,810,254
                
                
                87,810,254
                
                
                87,810,254
                
                
                82,724,884
                
                
                61,013,243
                
                
                54,751,017Weighted
                    average number ofdiluted
                    ordinary shares outstanding
                
                
                87,810,254
                
                
                87,810,254
                
                
                87,810,254
                
                
                89,284,659
                
                
                79,439,026
                
                
                79,439,026
 
 4
  **Balance
                    Sheet Data**
                
                **Years
                    Ended December 31,****2004****(1)**
                  **(US$)**
                
                **2004**
                  **(A$)**
                
                **2003****(6)**
                    **(A$)**
                
                **2002****(6)**
                  **(A$)**
                
                **2001**
                  **(A$)**
                
                **2000**
                  **(A$)**Australian
                    Accounting Principles:Cash
                    and cash equivalents
                
                $
                2,504,621
                
                $
                3,208,996
                
                $
                4,301,918
                
                $
                6,119,808
                
                $
                5,585,608
                
                $
                4,455,056Total
                    assets
                
                
                16,536,468
                
                
                21,187,019
                
                
                22,192,134
                
                
                23,715,481
                
                
                21,164,130
                
                
                17,144,601Total
                    current liabilities
                
                
                1,057,625
                
                
                1,355,061
                
                
                889,926
                
                
                2,780,309
                
                
                2,985,647
                
                
                1,416,206Long-term
                    debt and capital leaseobligations
                
                
                87
                
                
                112
                
                
                406
                
                
                --
                
                
                1,877
                
                
                3,703,201Shareholders’
                    equity (excluding minority interests) (AAS)
                
                
                15,478,756
                
                
                19,831,846
                
                
                21,301,802
                
                
                20,935,172
                
                
                18,176,606
                
                
                12,025,194U.S.
                    Generally Accepted Accounting Principles:Goodwill(2)
                
                $
                390,030
                
                $
                499,718
                
                $
                499,718
                
                $
                251,941
                
                
                -
                
                
                -Financial
                    instruments(3)
                
                
                226,275
                
                
                289,911
                
                
                981,620
                
                
                199,292
                
                
                205,610
                
                
                -Inventory(4)
                
                
                --
                
                
                --
                
                
                (168,508
                )
                
                (594,956
                )
                
                (1,081,978
                )
                
                (911,016
                )Cash
                    and cash equivalents
                
                
                4,200,676
                
                
                5,382,032
                
                
                5,614,748
                
                
                5,976,085
                
                
                4,709,240
                
                
                3,544,040Total
                    assets
                
                
                14,200,818
                
                
                18,194,514
                
                
                20,703,635
                
                
                22,397,898
                
                
                20,287,762
                
                
                16,233,585Total
                    current liabilities
                
                
                1,057,713
                
                
                1,355,174
                
                
                889,463
                
                
                2,793,441
                
                
                2,985,647
                
                
                1,416,206Long-term
                    debt and capital lease obligations
                
                
                87
                
                
                112
                
                
                406
                
                
                --
                
                
                1,877
                
                
                3,703,201Foreign
                    Currency Translation(5)
                
                
                (1,219,216
                )
                
                (1,562,096
                )
                
                (2,004,591
                )
                
                (1,507,226
                )Shareholders’
                    equity (excluding minority interests) (US GAAP)
                
                
                13,143,104
                
                
                16,839,339
                
                
                19,734,174
                
                
                19,604,454
                
                
                17,300,238
                
                
                11,114,178Dividends
                    paid per share
                
                
                -
                
                
                -
                
                $
                0.0100
                
                $
                0.0400
                
                $
                0.0200
                
                
                --
 
 (1)
                US
                    Dollar amounts have been translated at the Noon Buying Rate on
                    December
                    31, 2004 of A$1.00 = US$0.7805. Such translations are provided
                    for
                    information purposes only.(2)
                Under
                    AAS, goodwill relating to the acquisition of a business is written
                    off on
                    a straight line basis over the period during which the benefits
                    of the
                    goodwill are expected to arise which cannot be greater than 20
                    years.
                    Effective January 1, 2002, goodwill may not be amortized under
                    US GAAP but
                    instead is tested for impairment each year. Consequently, the
                    amount of
                    goodwill on the balance sheet is greater under US GAAP than under
                    AAS and
                    there is an adjustment required to net income on the income statement
                    under US GAAP. See Note 31.2 of “Item 17. Financial
                    Statements.”(3)
                US
                    GAAP requires that the loss or gain on forward exchange contracts
                    noted in
                    Note 31 of “Item 17. Financial Statements” be recognized in the income
                    statement and reflected on the balance sheet of the Company.
                    This loss or
                    gain is not reflected on the income statement or the balance
                    sheet under
                    AAS. See Note 31.5 of “Item 17. Financial Statements.”(4)
                Under
                    AAS, the Company capitalized expenditures into inventory which
                    were of an
                    administrative nature for the years 2000 and 2001. Under US GAAP,
                    expenditures which are of an administrative nature may not be
                    capitalized
                    into inventory and must be expensed in the period in which incurred.
                    Adjustments to net income and total assets were required under
                    US GAAP in
                    2001, 2002, 2003 and 2004. See Note 31.8 of “Item 17. Financial
                    Statements.”(5)
                The
                    Company does not consider its Indonesian subsidiary, Cendana,
                    to be a self
                    sustaining entity. Under Australian GAAP, only monetary items
                    that are
                    stated in a currency other than Australian Dollars are converted
                    to the
                    reporting currency at the exchange rate at the balance date.
                    All other
                    foreign currency balances are translated to Australian Dollars
                    at their
                    historical rate. This is referred to as the temporal method of
                    accounting.
                    Under US GAAP, all balance sheet items that are recorded in a
                    currency
                    other than the reporting currency are translated at the spot
                    rate at the
                    balance date. This is referred to as the current rate accounting
                    method.
                    The foreign currency movements are recorded in a foreign currency
                    revaluation reserve on the balance
                    sheet.
  5
  Note
                    - The comparatives for this US GAAP reconciliation have only
                    been shown
                    for the last three years (2002, 2003, 2004) as it is impractical
                    to
                    undertake this for earlier years. The US GAAP information for
                    the years
                    ended December 31, 2002 and 2003 has been restated to correct
                    an error in
                    the accounting for the translation of the Indonesian subsidiary
                    balances.(6)
                US
                    GAAP restated in accordance with the adjustment stated in (5)
                    above. The
                    adjustments for foreign currency translation have not been made
                    in
                    previous years and so the accounts for 2002 and 2003 are restated
                    in this
                    report for the first time.
 
 The
        Company’s financial statements have been prepared in accordance with AAS.
        Certain line items have been reconciled to US GAAP to assist U.S. persons
        in
        evaluating such data. The complete reconciliation of such line items is set
        forth in “Item 17. Financial Statements - Note 31 to Financial
        Statements.”
 
 ***Exchange
        Rates***
  Solely
        for informational purposes, this annual report contains translations of certain
        Australian Dollar amounts into or from US Dollars at a specified rate. See
        “Introduction.” These translations should not be construed as representations
        that the Australian Dollar amounts represent the US Dollar amounts indicated,
        or
        could be converted into or from US Dollars at the rate indicated. The exchange
        rate on June 30, 2005 was A$1.00 = US$0.7620.
  The
        following table sets forth, for the months indicated, certain information
        concerning the Noon Buying Rate for Australian Dollars expressed in US Dollars
        per A$1.00:
  **Month
                    Ending**
                **High**
                **Low**December
                    31, 2004
                $
                    0.7805
                $
                    0.7495January
                    31, 2005
                0.7790
                0.7578February
                    28, 2005
                0.7940
                0.7669March
                    31, 2005
                0.7974
                0.7685April
                    30, 2005
                0.7834
                0.7658May
                    31, 2005
                0.7811
                0.7550June
                    30, 2005
                0.7810
                0.7485
 
 The
        following table sets forth, for the years indicated, certain information
        concerning the Noon Buying Rate for Australian Dollars expressed in US Dollars
        per A$1.00:
  **Year
                  Ended December 31,**
              **Average****(1)**2000
              $
                  0.57572001
              0.51172002
              0.54482003
              0.65892004
              0.7384
  (1)
              Represents
                  the average of the Noon Buying Rates on the last day of each month
                  during
                  the relevant period.
 
 6
 **B.**  **Capitalization
        and Indebtedness**
  Not
        required.
  **C.**  **Reasons
        for the Offer and Use of Proceeds**
  Not
        required.
  **D.**  **Risk
        Factors**
  *The
        Company’s business, financial condition and operating results could be adversely
        affected by any of the following factors. The risks and uncertainties described
        below are not the only ones that the Company faces. Additional risks and
        uncertainties not currently known to the Company’s management, or that the
        Company’s management currently thinks are immaterial, may also impair the
        Company’s business operations.*
  **The
        Company’s operations are based in Indonesia, which has been subject to recent
        economic and socio-political unrest.** Some
        parts of Indonesia have experienced social, ethnic and economic disruption.
        In
        November 1999, the Company abandoned its cultivation site in Kupang, W. Timor
        in
        part due to increasing unrest in the area. The province of West Papua, where
        some of the Company’s water leases are located, is agitating for independence.
        The Company monitors the socio-political situation closely. In the event
        of
        civil unrest, there is an evacuation plan in place to protect the Company’s
        employees. Security personnel are employed to provide protection to employees
        and the Company’s assets to the best of their ability. It is difficult to
        predict what will occur. If the employees are forced to leave the project
        as a
        result of an emergency, the Company does not expect it will be able to salvage
        any of the oysters or pearls and this will have a material adverse effect
        on the
        Company’s business, operations and financial condition.
  **The
        cultivation process for South Sea pearls requires certain environmental
        conditions and**  **any
        change in weather or water conditions could have a material adverse effect
        on
        the Company’s pearl production** .
        The
        cultivation process depends on certain environmental factors, including
        consistently warm sea water temperature, fully saline water conditions, adequate
        tidal flow to distribute the food supply and availability of phytoplankton
        food.
        There are only a few areas in the world that meet such requirements. The
        water
        areas encompassed by the Company’s water leases present ideal conditions for
        pearl cultivation. The conditions in these areas, however, are subject to
        change
        based on normal weather patterns. The Company has no control over these weather
        patterns. In 2002, weather patterns caused by *El
        Niño* adversely
        affected the Company’s ability to raise juvenile oysters. Although the Company
        established joint operations in Northern Bali and Northern Maluku (Bacan)
        primarily for the production of juvenile oysters to respond to this problem,
        the
        Company anticipates that its rearing of oysters will continue to be affected
        by
        natural weather patterns. There can be no assurances that if these weather
        patterns continue the Company will have access to sources of oysters for
        the
        pearl cultivation process or if available, will be available on favorable
        terms.
        The failure to maintain an adequate supply of juvenile oysters for nucleation
        could have a material adverse effect on the Company’s pearl cultivation process.
  7
 **The
        Company’s oysters are sensitive to disease.** The
        Company’s oysters are placed in panels in the sea. Although, the Company’s
        employees continuously clean the oysters, certain foreign organisms can enter
        the oyster and eat the oyster or cause diseases. The cultivation process
        for
        pearls takes approximately two years from the time the oyster is seeded;
        therefore, the loss of oysters due to disease could have a material adverse
        effect on the Company’s production process and generation of
        revenue.
  **The
        sale of pearls is dependent upon a strong economy** .
        The
        sale of pearls is sensitive to fluctuations in the global economic cycle.
        Pearls
        are categorized as a luxury item and their consumption is dependent upon
        the
        availability of disposable income and is strongly influenced by fashion trends.
        The Company’s pearls compete with several other types of jewelry such as
        precious metals and precious gem stones for consumer disposable income.
        Unfavorable general economic conditions have an adverse effect on consumer
        spending for such items, and therefore on the Company’s sales.
  **The
        price for pearls is subject to fluctuation based on supply and quality.** The
        price
        that the Company can obtain for its pearls is significantly dependent on
        the
        overall supply of available pearls and the quality of the Company’s pearls. There
        has
        been an increase in the supply of pearls globally over the last five years.
        Most
        of the increase in South Sea pearl production has come from Indonesia and
        the
        Philippines, and there is evidence of increased production from
        Australia .
        This
        increase in supply has had an adverse effect on pearl prices, but the potential
        adverse impact of continued increases in supply cannot be determined with
        any
        certainty. There has also been an increase in supply of fresh water pearls
        from
        China and black pearls from Tahiti.  In
        addition, although the Company closely monitors its pearl cultivation process,
        it is difficult to predict the quality of pearls the Company will harvest
        in any
        given year. Significant increases in the supply of pearls or decreases in
        the
        quality of the Company’s pearls could have a material adverse effect on the
        Company’s revenues.
  **The
        Company is dependent on a small number of key expatriate
        managers.** The
        Company’s cultivation process is very technical. The Company depends on a small
        number of key expatriate managers who supervise the cultivation process.
        Due in
        part to the remote location of the Company’s pearl farms, the Company has
        limited access to a skilled work force, and the replacement of these managers
        could be difficult. The loss of the services of any of these individuals
        could
        materially and adversely affect the Company’s pearl production, business and
        financial condition.
  **The
        Company is exposed**  **to
        fluctuations in exchange rates.** The
        majority of the revenues the Company derives from the sale of its pearls
        occurs
        in Japanese Yen. The Company’s revenues are reported, however, in Australian
        Dollars. Fluctuation in the exchange rate of Japanese Yen to the Australian
        Dollar could have a material adverse effect on the Company’s revenues. The
        Company’s operating expenditures are predominantly denominated in Indonesian
        Rupiah (“IDR”). Fluctuations in the exchange rate between the IDR and the
        Australian Dollar will have an effect on the operating results of the
        Company.
  **The
        Company is exposed**  **to
        the volatile inflation rate in Indonesia.** Inflation in Indonesia has varied up to 15.13% per annum for the period from
        2000 to 2004. The official inflation rate as of April 2005 was 8.12% per
        annum.
        In general, inflation increases all of the Company’s operating costs in
        Indonesia, but specifically impacts wages, food and fuel (diesel and benzene).
        As the Company’s revenues are derived mostly from sources outside of Indonesia,
        the Indonesian inflation rate does not cause a corresponding increase in
        the
        Company’s revenues. As a result, Indonesia’s inflation could have a material
        adverse effect on the Company’s expense structure.
  8
 **ITEM
        4. INFORMATION ON THE COMPANY**
  **A.** **History
        and Development of the Company**
  The
        Company is incorporated as a public company in Australia and operates under
        the
        Corporations Act 2001. The Company operates under an Australian Company Number
        ("ACN”) 009 220 053 and an Australian Business Number ("ABN") 32 009 220 053.
        The Company is listed on the Australian Stock Exchange (“ASX”), which is
        governed by the ASX Listing Rules. The Company’s domicile is Australia and its
        registered office and principal place of business is 43 York Street, Subiaco
        Western Australia 6008 (telephone: +61 8 9380-9444, facsimile: +61 8 9380-9970).
  The
        Company was incorporated on February 28, 1987 as Atlas Pacific Gold N.L.
        for the
        purpose of acquiring all of the capital stock in Sharcon, a company that
        owned
        options to acquire mineral and precious metal mining tenements. In June 1987,
        the Company raised A$5 million through an initial public offering in Australia
        and, shortly thereafter, listed its shares on the ASX. The Company used the
        proceeds from this offering to acquire the stock of Sharcon and to explore
        the
        existence of gold and other precious and semiprecious metals in mining tenements
        in Western Australia and New Zealand.
  From
        1987
        through 1988, the Company explored various mining tenements and sought proposals
        to mine those locations that the Company believed to contain ore deposits.
        The
        Company never commenced mining due to the closure of a nearby ore treatment
        facility, which the Company planned to use to process the ore. Between 1988
        and
        1993, the Company sold most of its mining interests and investigated other
        potential business opportunities. The Company did not generate revenue from
        its
        mining operations and has now disposed of all its mining interests. It no
        longer
        pursues mineral exploration activities.
  In
        1993,
        the Company invested in the Indonesian pearling project (the “Pearling Project”)
        through its subsidiary Tansim Pty Ltd, with a number of other joint venturers.
        The Pearling Project operates an oyster hatchery and farm for the purpose
        of
        cultivating South Sea pearls. (See “Business Overview - Pearling).” On January
        20, 1994, the Company changed its status from a No Liability (N.L.) company
        to a
        company limited by shares and changed its name to Atlas Pacific
        Limited.
  PT
        Cendana Indopearls (“Cendana”), an Indonesian-approved foreign investment
        company, owns and operates the Pearling Project. The Company acquired a 75%
        interest in the Pearling Project by purchasing all of the capital stock of
        Tansim Pty Ltd, ("Tansim"), an Australian corporation, in June 1993. Tansim
        purchased the remaining 25% interest in Cendana from the other shareholders
        in
        exchange for 5,375,000 Shares and options to purchase an aggregate of 8,062,500
        Shares of the Company, in October 1999. Following Indonesian government approval
        of the transaction, the shares and options were issued on October 14, 1999.
        During 2002, 7,996,215 of these options were exercised at a price of A$0.30
        each, and on October 14, 2002, the remaining 66,285 options were cancelled.
  9
 The
        Company’s principal focus remains on pearl production in Indonesia. As of
        December 31, 2004, 75% (A$15.9 million) of the Company’s total assets were
        employed in Indonesia, principally in oyster stocks, plant and equipment.
        The
        remaining 25% of the Company’s assets are made up of pearls, cash and
        receivables, predominantly in Australia.
  During
        the last and current fiscal years, the Company did not receive an indication
        of
        any public takeover offers by third parties in respect of the Company’s Shares
        or by the Company in respect of other companies’ shares.
  **B.** **Business
        Overview - Pearling**
  ***Introduction***
 
 A
        pearl
        is a lustrous concretion produced by certain bivalve mollusks including mussels
        and oysters. Natural pearls consist almost entirely of nacre, which is the
        substance forming the inner layers of the mollusk shells. Nacre, also referred
        to as mother-of-pearl, is composed primarily of aragonite crystals. The pearl
        is
        an abnormal growth resulting from the invasion of the body of the mollusk
        by
        foreign matter, or “nucleus”. The foreign body acts as an irritant in the
        mollusk and becomes coated with layer upon layer of nacreous material.
        Approximately 30% of cultivated mollusks reject the nucleus and do not produce
        pearls. Both marine and freshwater mollusks produce pearls, and the most
        commonly used mollusk for the production of pearls is the oyster.
  There
        are
        several types of pearls cultivated around the world. The four major categories
        of cultured pearls are (1) Akoya pearls produced in the seas around China
        and
        Japan, (2) freshwater pearls produced mainly in China, (3) South Sea pearls
        produced primarily in Australia, Indonesia, Philippines, and Myanmar, and
        (4)
        black pearls produced in Tahiti and several other Pacific Islands.
  Prices
        of
        pearls vary enormously. There are several factors which determine the value
        of a
        pearl. These factors include size, shape, color, skin quality and luster.
        As the
        size of a pearl increases, its value increases exponentially. With respect
        to
        shape, the most valuable pearls are spherical. Drop and button shapes are
        less
        valuable than spherical pearls, but are still considered to be quality pearls.
        Circles and irregular shaped pearls, or baroques, are the least valuable
        shapes
        of pearls.
  Pearl
        coloration varies widely, with the most valuable shade being gold. South
        Sea
        pearls may be silver, cream, yellow or gold. The *Pinctada
        maxima* oyster,
        which the Company uses, produces pearls colored from silver through to gold.
        There are two varieties of this oyster. The silver lip variety produces the
        valuable silver-white pearl and the gold lip variety produces cream, yellow
        and
        highly sought after gold colored pearls. Another species of oyster, *Pinctada
        margerifera* ,
        produces pearls which are referred to as black pearls, ranging in color from
        purple through green and black/gray. The Company does not use the *Pinctada
        margerifera* variety
        of oyster for pearl production.
  10
 The
        final
        significant determinant of pearl value is skin quality and luster. The less
        blemishes and “pit” marks the greater the value of the pearl. Luster refers to
        the appearance of a pearl’s surface judged by its brilliance and ability to
        reflect light. The greater the luster, the more valuable the pearl.
  ***Pearl
        Cultivation***
  Pearls
        have been cultured successfully since 1920 using a process developed in Japan
        in
        which the oysters are “nucleated” or “seeded.” In this process, a nucleus is
        introduced into the oyster and the oyster then deposits layers of nacre around
        the bead. This process takes approximately two years for South Sea pearls.
        Today, cultured South Sea pearls are not easily distinguished from naturally
        occurring pearls, which are extremely rare.
  Pearl
        cultivation traditionally relied on the availability of wild oysters, or
        shell,
        which were nucleated to form pearls. However, hatchery-reared oysters have
        become an increasingly popular means of cultivating pearls. By using
        hatchery-reared oysters, pearl farmers are able to control oyster breeding
        to
        improve the quality of the oysters that will be nucleated. This, in turn,
        produces higher quality pearls.
  Pearls
        have been successfully cultivated in Japan, China, Tahiti, the Cook Islands,
        Myanmar, Australia, the Philippines and Indonesia. Ideal conditions for the *Pinctada
        maxima* oyster,
        which produces the South Sea pearl, exist in certain select regions of the
        world’s equatorial and tropical waters located 20 degrees north and south of the
        equator between Myanmar in the west and Northern Australia and the Indonesian
        province of West Papua (formerly Irian Jaya) in the east. Indonesia lies
        in the
        middle of this region. These regions provide the following natural environmental
        factors necessary to cultivate pearls: the availability of phytoplankton
        food
        upon which the filter feeding oysters rely; adequate tidal flow to distribute
        the supply of food; warmer sea water temperatures without abrupt fluctuations
        of
        more than a few degrees and fully saline, as opposed to brackish, water
        conditions.
  ***The
        South Sea Pearl Industry***
  Australia
        is the largest and most experienced producer of South Sea pearls. The bulk
        of
        Australian pearls are produced in Western Australia. Western Australia manages
        the industry on a quota system with a total permitted annual catch of 572,000
        wild shell shared among sixteen pearl oyster licenses. In addition to this,
        beginning in 1992, Western Australian license holders became entitled to
        seed an
        additional 350,000 hatchery produced oysters. The quota is not divided equally,
        and the two largest pearling operators control over 50% of the quota. Family
        groups or small partnerships tightly control the licenses. In 1998, the
        authorities in the Northern Territory also issued six pearling licenses for
        a
        total permitted annual seeding limit of 420,000 seedings for wild and hatchery
        produced oysters.
  Although
        the technology is available to introduce hatchery programs in Western Australia,
        high production costs, particularly labor costs, have limited the development
        of
        such programs. In addition, Western Australia recently extended its quota
        system
        to embrace hatchery-reared oysters in addition to wild shell. Because of
        the
        fixed quota system and restrictive hatchery policy, expansion opportunities
        for
        Australian pearl producers are limited. The only ways to increase profitability
        are through improvement in pearl quality or reduction in costs of production.
        Thus, the Australian pearling industry is virtually closed to new participants
        unless they are prepared to acquire an existing operation.
  11
 By
        comparison, the pearling industry in Indonesia is relatively unregulated.
        The
        Indonesian government has issued South Sea pearling licenses to approximately
        97
        companies. Through natural attrition of businesses the number of functioning
        pearl businesses in Indonesia has dropped to around 48, most of which are
        small
        concerns. Due to a lesser abundance of wild shell and lower labor costs,
        there
        is much heavier emphasis on hatchery breeding programs in Indonesia than
        in
        Australia.
  Despite
        temporary setbacks, production in Indonesia has grown substantially in the
        last
        11 years. Indonesia now produces approximately the same volume of pearls
        as
        Australia. The value of such production, however, is less than that of Australia
        due to the lower quality and size of the pearls. The Indonesian pearling
        industry is significantly less regulated than in Australia and technological
        improvements in the Indonesian cultivation process are taking
        place.
  The
        Company also believes that the pearling conditions in Indonesia offer some
        advantages to those in Australia. The waters are warmer for a longer period
        of
        time, which facilitates a longer growing season for the pearls. The faster
        growing conditions, however, result in a less consistent result for pearls
        produced from an oyster that is re-seeded after the first pearl is harvested.
        This results in less high quality large pearls being produced by the Company.
        There is also less variation in water temperature throughout the year, which
        means that seeding of oysters can take place over a longer period of time
        each
        year.
  The
        Indonesian government continues to encourage foreign investment. Foreign
        investment entities are required to use an investment structure known as
        a “PMA”
        company, which offers investors, among other things, tax concessions and
        remissions on duty of essential imports. Likewise, Indonesia does not levy
        sales
        tax on exported products, which includes the Company’s pearls. In general there
        has been an improvement in the Indonesian security situation. In particular
        during Bali’s recovery from the tragic events of October 2002 there has been a
        sense of goodwill towards foreign companies that have continued to maintain
        a
        presence in the province.
  There
        can
        be no assurances, however, that the economic or political environment for
        pearl
        production in Indonesia will remain stable or that the Indonesian government
        will maintain favorable investment vehicles for foreign investments.
  The
        Company still believes that the overall advantages of housing its operations
        in
        Indonesia as compared to Australia, outweigh the disadvantages of operating
        in
        Indonesia.
  12
 ***The
        Pearling Project***
  General
 
 In
        1990,
        a group of joint venture parties, of which Tansim was a party, commissioned
        an
        extensive marine review and survey to locate the best possible pearl farm
        site
        within a narrow belt of equatorial waters centered on the Indonesian Islands
        and
        Northern Australia. Based on the results of such study, they chose a location
        for the pearl farm at Lelindo Point near the town of Kupang in West Timor,
        Indonesia in 1991 and commenced construction in 1992. On October 16, 1992,
        Ardindo Nusa, on behalf of the Joint Venture, entered into a lease for five
        hectares (12.3 acres) of land at Lelindo Point. The Joint Venture constructed
        a
        hatchery, laboratory, administrative offices, workshop, store room and
        accommodations for expatriate managers on such land. The Venturers began
        commercial production of oysters at the hatchery in 1993.
  On
        September 4, 1994, the Joint Venture entered into an additional lease for
        0.3
        hectares (0.74 acres) of land located on Kambing Island overlooking the nursery,
        (collectively, with the Lelindo Point land lease, “Kupang”). In addition, on
        September 8, 1995, Cendana received Presidential approval for its water leases.
        These waters were used as a nursery for young oysters. See “Item 4.D Information
        on the Company - Property, Plant and Equipment.”
  During
        1998, the Kupang area became a less desirable location for the Company’s
        operations due to an increase in local industry which caused some pollution
        and
        because of increased security threats. The Company began to develop facilities
        at Waigeo Island, in the province of West Papua. By the end of January 1999,
        the
        Company had reduced its operations at the Kupang facility to hatchery and
        grow-out facilities only. The majority of the nucleated oysters were
        successfully transported to the Company’s new pearl farm at Waigeo Island during
        1999. During November 1999, the Company decided to close down the Kupang
        facility and concentrate its resources on its pearl farming activities at
        the
        Company’s newer facility in West Papua. Land-based industrial development near
        the Kupang facility, an increased number of ships traveling past the farm
        leases
        and pearl farm security issues all contributed to reducing the attractiveness
        of
        the Kupang site in West Timor. In addition, the influx of militia from East
        Timor following the deployment of UN Interfet forces in September seriously
        compromised the safety of the Kupang-based personnel. In December 1999, the
        Company withdrew all of its personnel and pearling assets from Kupang, including
        the remaining oysters, which were all relocated to West Papua. By December
        2000,
        the Company finalized negotiations with an Indonesian company for the sub-lease
        of the land, buildings and water leases comprising the Kupang facility for
        a
        period of five years.
  During
        1997, Cendana entered into water leases for approximately 2,500 hectares
        at
        Alyui Bay, Waigeo Island, West Papua (formerly known as Irian Jaya) in northern
        Indonesia. Cendana also entered into a land lease for five hectares near
        these
        water leases. The leases are for 25 years and expire in September 30, 2022.
        The
        Company developed the site as a pearl farm and hatchery and began relocating
        nucleated oysters to this site in 1997. See “Item 4.D Information on the Company
        - Property, Plant and Equipment.”
  Alyui
        Bay
        proved to be a successful pearl farming site. The Company commenced commercial
        pearl harvests at this site in 1999, with an excellent quality of pearls
        being
        produced. Significant infrastructure was developed at Alyui Bay including
        three
        accommodation camps, a modern hatchery, engineering workshop, fuel storage,
        operating shed and boat building facilities. The farm accesses some of its
        labor
        force from a nearby village while in excess of 150 staff are accommodated
        at the
        farm camps in fully equipped facilities.
  13
 During
        2002, the adverse impact of the *El
        Nino* climatic
        phenomenon on the production of juvenile oysters at Alyui Bay required the
        Company to explore opportunities to source oysters elsewhere. In July 2002,
        the
        Company entered into an arrangement with an Indonesian company called PT
        Horiko
        Abadi (“Abadi”), which allowed it to have access to a hatchery and associated
        sea leases at a location called Banyupoh on the Indonesian island of Bali.
        The
        Company paid A$90,000 to Abadi for access to this facility for a period of
        three
        (3) years. This Agreement will expire in August 2005 and the Company has
        elected
        not to exercise its option to extend this joint production arrangement. Under
        this contract, Abadi remains the owner of the land and water leases, but
        the
        Company has a right to operate from this site and share the outputs (juvenile
        oysters) from this operation in the ratio of 30% to Abadi and 70% for the
        Company’s Indonesian subsidiary. The Company is required to contribute 70% of
        the ongoing operating costs of this facility, which are approximately A$7,000
        per month.. Equipment from the original Kupang hatchery was re-commissioned
        for
        use at this facility at minimal cost. It is expected that the ongoing operation
        costs incurred at the Banyupoh site will reduce significantly in 2005 as
        no
        additional spawning activities are planned for 2005.
  In
        addition to the joint operation at Banyupoh, the Company leased an independent
        juvenile production and grow-out site in Northern Bali near the village of
        Penyabangan in December 2003. The Company entered into a 30-year lease in
        relation to 0.2 hectares of land and one hundred hectares of ocean with the
        local authorities with payments of approximately A$15,000 paid up front and
        A$200 payable per month for the term of the lease. The Company has the right
        to
        construct buildings on the land and use the ocean for the production and
        rearing
        of pearl oysters. A hatchery center and related support infrastructure for
        the
        Company’s boat maintenance/building, seeding technician training, longline
        production and support activities was completed during 2004. As a result
        of the
        completion of the hatchery facility, the Company plans to transition its
        activities at the Banyupoh facility to this hatchery upon expiration of the
        joint production agreement. The ocean space at Penyabangan has been developed
        and now accommodates approximately 420,000 juvenile oysters.
  Successful
        spawnings using specially selected brood stock have resulted in commercial
        batches of juvenile oysters being produced at the Penyabangan site in 2004
        and
        2005. Apart from the obvious benefit of providing a viable alternative source
        of
        pearl oysters to the main pearling center of Alyui Bay, this new venture,
        with
        its close proximity to Denpasar, its ready and available workforce, and its
        cheaper infrastructure costs, has great potential to reduce the Company’s cost
        of juvenile oyster production.
  During
        2003, the Company entered into a second joint production arrangement for
        juvenile oysters with an Indonesian company called Cahaya Cemerlang
        (“Cemerlang”). Cemerlang granted the Company shared access to leases and
        facilities which consist of over 100 hectares of ocean leases and two camps
        covering a combined area of four hectares which are located around Bacan
        Island
        in the North Maluku province of Indonesia. In return for access to these
        facilities, the Company must provide Cemerlang with a share of juvenile
        production from that site. This share is calculated on the basis of a 50:50
        split if the juveniles that are produced are taken by Cemerlang from this
        facility before the oysters reach 12 months of age or a split of 30% to
        Cemerlang and 70% to the Company if the oysters are taken from this site
        after
        they turn 12 months of age. During 2003, over 400,000 juvenile oysters were
        successfully reared. The Company’s share of this production was over 200,000
        juvenile oysters. Due to a high level of juvenile oyster mortality, only
        110,000
        juvenile oysters were successfully reared from this facility during 2004.
        The
        joint arrangement is for five years, and the Company has an option to extend
        the
        term thereafter for five (5) years on similar terms. Because this site continues
        to experience high levels of mortalities, the use of the site as a source
        of
        juvenile oysters has become severely restricted. As a result, the Company
        reached agreement with Cemerlang to cease the joint operations by the end
        of
        November 2005. Any juvenile oysters from the 2004/05 hatchery breeding season
        will be split in accordance with the contract. All joint assets will also
        be
        divided between the Company and Cemerlang. The Company’s share of oysters and
        assets will be transferred to another site at either Bali or Alyui
        Bay.
  14
 Because
        the Company is now able to produce its juvenile oysters from alternative
        sites,
        the Company has transformed the Alyui Bay project from a fully integrated
        operation covering all the pearl production stages from hatchery to harvest
        to a
        dedicated pearling center concentrating on seeding and husbandry of high
        quality
        mature pearl oysters. Specialization at this unique location is already
        delivering an improved result in terms of productivity (seeding rates are
        higher
        than any prior year) and post-seeding results with a higher retention rate
        of
        nuclei being experienced than in prior periods. Many of the non-essential
        support tasks such as boat building and long-line manufacture have been
        transferred to the lower cost center of Bali.
  The
        Company monitors the socio-political situation in Indonesia closely. Unrest
        in
        Kupang was one of the reasons for the closure of the Kupang facility and
        the
        Company’s decision to transfer all resources to the Waigeo Island site.
        Indonesia continues to experience social, ethnic and economic instability.
        The
        province of West Papua where the Company’s pearling leases are located is
        agitating for independence. It is difficult to predict how these forces will
        influence the Pearling Project.
  The
        Company attempts to manage this issue by maintaining good relations with
        employees, nearby village communities, regional and provincial authorities
        and
        the community at large. In general, security in Indonesia continued to improve
        during 2004. Bali in particular is slowly recovering from the traumatic events
        of October 2002 and there is a palpable sense of goodwill towards foreign
        companies that have continued to maintain a presence in the province. Elsewhere
        in Indonesia the situation is largely unchanged. The Company continues to
        work
        hard in the critical areas of government liaison, community relations and
        security. The Company is proud of the success it has had in improving the
        access
        of local communities to facilities such as medical care, education,
        transportation and better general living standards.
  In
        the
        event civil unrest threatens the Company’s farms at Waigeo Island or North Bali,
        there is an evacuation plan in place to protect the expatriate and Indonesian
        national employees. If the expatriates are forced to leave, the Company does
        not
        expect that any of the Pearling Project could be salvaged.
  Oyster
        Growth and Pearl Cultivation
 
 In
        Australia, pearl cultivation has relied primarily upon the availability of
        wild
        shell. The Pearling Project, however, breeds oysters at its various hatchery
        facilities, in which oysters are grown to cultivate pearls. By using
        hatchery-reared oysters instead of wild shell, the project scientists are
        able
        to control breeding to improve the overall health and quality of the oysters.
        Only the best oysters are selected for cultivation, which in turn produces
        higher quality pearls.
  15
 The
        cultivation of pearls is a long and labor intensive process which starts
        with
        the spawning of adult oysters during the months of August to March.
        Approximately two dozen adult oysters are placed in tanks in the hatchery
        where
        they spawn to produce oyster larvae. The larvae remain in the hatchery tanks
        where they swim and feed on algae. After approximately three weeks, the larvae
        stop swimming and settle on netting material located in the tank. The larvae
        attach themselves to the nets and continue to grow and feed on increasing
        amounts of algae. After about one month, the netting on which they have been
        growing is placed in a protective mesh and moved to the nursery in the open
        waters. The waters are rich in nutrients so that the juvenile oysters, or
        “spat,” are able to grow quickly. The netting is suspended from “long lines”
        strung between floats in the water. The spat are left in these net structures
        for approximately three to four months. As the spat continue to grow on the
        netting, the nursery workers start to thin out the spat and transfer them
        from
        the netting when they are large enough to be placed in “28 pocket panels.” These
        panels consist of a metal frame covered in netting that has been divided
        into 28
        separate pockets. These panels are moved out of the nursery area to various
        locations of the open-water pearl farms where the spat continue to grow.
        By
        placing the spat in different locations, the Company is able to reduce the
        risk
        of losing an entire crop due to the presence of adverse conditions in any
        one
        area.
  After
        approximately a year to fifteen months, the spat, now shell, are too large
        for
        the 28 pocket panels and are placed into larger “eight pocket panels.” The shell
        remain in the eight pocket panels until they are ready to be nucleated at
        21-24
        months of age.
  When
        the
        shell are ready to be nucleated, they are brought to an operations room.
        Technicians then perform the exacting surgical procedure of placing a nucleus
        in
        the oyster. The first step involves opening the oyster so that a nucleus
        can be
        implanted. This is accomplished by a procedure referred to as “pegging the
        shell.” Workers place wedge shaped pegs in the shells as they open and close
        during their normal feeding process. By opening the oysters in this manner
        instead of forcing them open, the strong muscle which holds the shell together
        is not torn, which is fatal to an oyster. After the oyster has been opened
        to a
        certain width, the oyster is ready for surgery.
  The
        oyster is placed on an operating table where technicians carefully insert
        a
        nucleus composed of a bead, made from the shell of a freshwater mussel, into
        the
        oyster. In addition, they insert a small piece of nacreous tissue, known
        as
        saibo tissue, from a “donor oyster.” Nacreous producing tissue is naturally
        found only on the outer lip of the oyster. Therefore, this tissue must also
        be
        inserted at the same location as the nucleus in order to produce a pearl.
        Approximately one out of every 20 oysters is used as a donor from which the
        nacreous producing tissue is taken.
  After
        the
        oysters have been nucleated, they are placed in an eight pocket panel and
        returned to the ocean where they are hung from the long lines. From the time
        of
        nucleation, it takes approximately two years to develop a pearl of 10 to
        12
        millimeters in diameter. Throughout the entire process, workers continuously
        clean the shell, the panels and the long lines because naturally occurring
        marine growth will compete with the oysters for food. In addition, foreign
        organisms can enter the oysters and either eat the oysters or cause disease.
        Finally, under normal conditions, approximately 30% of the oysters will reject
        the nucleus and an additional 10% to 20% die. The oysters are x-rayed
        approximately eight months after being nucleated to determine which animals
        have
        rejected the nucleus. Any shell which reject the nucleus can be re-nucleated.
        Sometimes the oyster will reject the nucleus but the saibo tissue is retained
        and a pearl forms around this. A pearl formed in this manner is called a
        keshi
        pearl. This is a “seedless” pearl and it will usually have a slightly irregular
        shape.
  16
 As
        indicated above, the environment has enormous influence over the success
        of
        pearling. Successful pearling requires careful consideration of environmental
        issues and the Company strives to ensure that its activities have a minimal
        impact on the environment. The Company has procedures in place to mitigate
        any
        damage to the environment in the event of an accidental fuel spillage and
        it
        treats all waste in an environmentally friendly manner. It adheres strictly
        to
        the guidelines established in the environmental report it submitted to the
        Indonesian Authorities in 2000 as part of its application to obtain a permanent
        operating license.
  Towards
        the end of 2001 and throughout 2002, the Alyui Bay site came under the influence
        of *El
        Niño,* which
        had a dramatic influence on the agricultural sector in Australia and parts
        of
        South East Asia. The production of juvenile oysters at Alyui Bay, the then
        lifeblood of the Company’s pearling operation, was severely curtailed by this
        event. The Company took immediate action and was able to source commercial
        quantities of juvenile pearl oysters through an arrangement with a third
        party
        hatchery.
  By
        mid-2002, the *El
        Niño* effect
        was being felt by a number of pearl producers throughout Indonesia and, as
        2002
        progressed, it became clear that the unfavorable environmental conditions
        were
        not going to be short-lived. Very few juvenile oysters that were the progeny
        of
        the Alyui hatchery were successfully reared to maturity during 2002. The
        Company
        secured oysters for the 2003 operating season through a third-party hatchery
        arrangement, the purchase of mature oysters from other Indonesian pearl farms
        and the development of share-farming arrangements. The hatchery arrangement
        was
        with Cemerlang pursuant to which the Company sent one of its expatriate
        technical officers to the Cemerlang hatchery facility at Togian, N Sulawesi
        in
        return for 50% of the progeny from this hatchery. The share farming arrangements
        were entered into with an Indonesian pearl farmer called Mr. Analau. Under
        this
        arrangement, Mr. Analau provided 100,000 mature oysters that were seeded
        by the
        Company and farmed through to harvest, and the proceeds from the sale of
        the
        resulting pearls are to be divided between the Company and the oyster supplier
        in equal portions. Although *El
        Niño* conditions diminished as 2003 progressed, the Company continues to take steps
        to
        reduce the risks to future production as a result of insufficient juvenile
        oysters being available.
  ***Pearl
        Sales and Revenue***
  The
        Company completed its first pearl harvest in 1995. Harvests of commercial
        size
        commenced in 1997. The majority of the Company’s pearls are sold by Pearlautore
        International Pty Ltd, the Companys’ marketing partner, in Sydney, Australia.
        Pearlautore International receives a commission of between 7.5% and 25% for
        cleaning, grading, valuing and selling the Company’s product. The Company has
        appointed Pearlautore International as the exclusive valuer and distributor
        of
        its South Sea pearls until December 31, 2005. The Company is currently
        negotiating with Pearlautore International in relation to the extension of
        this
        contract. Pearls have traditionally been sold at auction but are increasingly
        also offered to buyers and sold under privately negotiated arrangements.
        During
        2004, all of the Companys’ pearls were sold under privately negotiated
        arrangements, reflecting a change in the focus of Pearlautore International’s
        marketing away from the auction method used in previous years. Pearls are
        harvested at various times during the year depending on the seeding date
        of the
        oyster. Pearls that are harvested between October and December are generally
        offered for sale in the following fiscal year.
  17
 The
        Company distributes all of its pearls through Pearlautore International;
        however, there are a variety of wholesale customers from many geographical
        locations who purchase the Company’s pearls from Pearlautore International.
        Therefore, the Company does not rely on a single customer to purchase all
        of its
        pearls.
  Pearls
        are classified into two categories. “Sellable” goods are made up of higher
        quality pearls in sizes of 9 mm in diameter or greater and are represented
        in
        quality by grades A, B and C1. “Commercial” goods, although still of value, are
        made up of lower quality pearls and are a combination of grade C2 and below
        and
        all pearls under 9 mm in diameter. The majority (86% by value and 54% by
        weight
        in 2004 and 95% by value and 74% by weight in 2003) of pearls sold by the
        Company are “sellable” goods.
  During
        2000, the Company commenced sales of oyster meat and mother of pearl oyster
        shell. In the early stages the Company experienced difficulty establishing
        strong markets for these products. Logistical issues have limited the processing
        of pearl oyster meat but the demand for mother of pearl (“MOP”) increased in
        2003 and 2004 **.** In
        2004,
        the Company established Southseas Creations within the Indonesian subsidiary
        to
        further develop markets for oyster meat, MOP and jewelry. In 2004, revenue
        from
        these bi-products amounted to A$508,209, a significant increase from A$54,521
        in
        2003. The Company will continue to develop these markets during
        2005.
  ***Competition
        and Markets***
  Competition
        in the South Sea pearling industry has become more intense. The Company competes
        with other South Sea pearl farmers in Australia, Indonesia, the Philippines
        and
        other Southeastern Asian regions. Many of these pearlers have significantly
        greater financial resources and experience, and are better known than the
        Company. To a limited degree, the Company also competes with producers of
        less
        expensive types of pearls such as the Akoya, freshwater and black pearls
        produced in Japan, China and the South Pacific, respectively. The Company
        also
        competes for consumer disposable jewelry dollars with producers of other
        types
        of gems such as diamonds, other precious stones and precious metals such
        as
        gold. Public demand for fine jewelry, including South Sea pearls, is also
        influenced by general economic conditions.
  During
        the last two years, an increase in supply of pearls globally has had an adverse
        effect on the market price of South Sea pearls. The increase in supply has
        also
        lead to a change in distribution methods within the pearl industry. Although
        the
        auction system has been relied upon for the sale of pearls in the past, this
        system has now been complemented with a “value adding” process where smaller
        quantities of more discrete pearl types and grades are sold through
        private negotiation. “Value added” means selecting and placing pearls in a
        strand or a set of jewelry. The sales that
        result from this type of marketing can take longer to close, but this is
        offset
        by higher margins. Only 5% of the Company’s pearls were sold as value added
        product in 2003. During 2004, the Company’s pearls sold as value added product
        increased to 27%. The Company expects this type of marketing to continue
        at a
        similar level in 2005. The
        changes that are being experienced in the pearling industry are not dissimilar
        to those experienced in other-commodity based industries. The Company cannot
        predict future demand nor how great an effect increases in the supply of
        South
        Sea pearls will have on the market price for such pearls. The pearling industry
        and the marketing and distribution arrangements for this product are currently
        undergoing significant change, which is likely to result in a rationalization
        and restructuring of producers. We believe that the Company, with its focus
        being in Indonesia, is well positioned to benefit from any change because
        of the
        relatively low operating costs compared to Australian producers and our
        relatively high quality of production compared to most Indonesian pearl
        farmers.
  18
 Up
        until
        the last decade, approximately 90% of Australia’s South Sea pearl production was
        sold in Japan. This amount has been reduced as the demand for such pearls
        has
        increased in the emerging markets of Hong Kong, South Korea, Singapore, Taiwan,
        Europe and North America. Sales of South Sea pearls are primarily made to
        the
        gem jewelry trade.
  The
        Company offers its pearls in all the major world markets without placing
        too
        much reliance on any one geographic market. The Company’s principal markets are
        Japan, Hong Kong, Europe and North America.
  ***Foreign
        Investment Regulations in Indonesia***
  In
        Indonesia, all proposed foreign investment and expansion projects require
        the
        prior approval of the BKPM, Indonesia’s equivalent of a foreign investment
        review board. A company may seek such approval by filing an investment plan
        with
        the BKPM, which contains information regarding the Company’s share capital, loan
        capital, technical assistance agreements, and proposed joint venture agreements.
        Under previous laws and regulations, the BKPM could require a foreign promoter
        of such a project to include a local joint-venture partner.
  In
        July
        1993, the Company sought approval from the BKPM for participation by foreign
        investors in the Pearling Project. A Joint Venture Agreement and an application
        to form Cendana as an approved foreign investment company, or PMA company,
        was
        lodged with the BKPM. These agreements were filed in December 1993. Following
        their approval in 1994, Cendana filed its Articles of Association with the
        Indonesian Ministry of Justice, which were approved in December
        1994.
  The
        laws
        and regulations applicable to PMA companies have, at frequent intervals since
        1986, progressively relaxed the restrictions that were imposed by the Indonesian
        Law on Foreign Capital Investment of 1967. **** These
        reform packages were intended to encourage foreign investment in Indonesia
        and
        to boost exports. In 1999, the BKPM granted permission for the Indonesian
        company, Cendana, to become a fully foreign-owned company. At that time,
        the
        Company acquired 100% of its Indonesian subsidiary.
  19
 ***Foreign
        Trade Regulations in Indonesia***
  In
        general, Indonesian government policy protects local interests. In 1990,
        however, the government implemented certain reforms aimed at facilitating
        the
        flow of imports and exports into and out of Indonesia. With respect to imports,
        the deregulation plan included the replacement of non-tariff barriers into
        Indonesia with tariffs.
  There
        are
        no restrictions on the export of pearls from Indonesia and no export tax
        is
        payable. Indonesia, however, does impose a provincial “retribution tax,” which
        is applicable to the export of pearls. These payments amount to approximately
        1.5% of the export value of pearls.
  Indonesia
        has no exchange controls; therefore, foreigners are able to move funds freely
        in
        and out of the country through accounts denominated in local or foreign
        currency.
  ***Government
        Regulation***
  Australia
 
 The
        activities of the Company are subject to numerous laws and regulations,
        including those described herein.
  The
        Australian Corporations and Securities Legislation (“ACSL”) is the main body of
        law governing companies incorporated in Australia, such as the Company. The
        Australian Securities and Investments Commission is an Australian government
        instrumentality that administratively enforces the ACSL. The ACSL covers
        matters
        such as directors’ duties and responsibilities, preparation of accounts, auditor
        control, issue and transfer of shares, control of shareholders’ meetings, rights
        of minority interests, amendments to capital structure, preparation and filing
        of public documents such as annual reports, changes in directors and changes
        to
        capital.
  The
        Australian Stock Exchange imposes listing rules on all listed companies,
        such as
        the Company. The rules cover such issues as immediate notification to the
        market
        of relevant information, periodic financial reporting and the prior approval
        of
        shareholder reports by the Australian Stock Exchange.
  The
        Company believes that it is in material compliance with the foregoing Australian
        laws and regulations and with the rules of the Australian Stock Exchange.
  Indonesia
  Indonesian
        laws require Cendana to obtain certain tax identification numbers and
        miscellaneous occupational licenses. Cendana has obtained all licenses from
        the
        BKPM, including its permanent operating license for the now-dormant Kupang
        site
        and a permanent operating license for the Waigeo and Bali sites, which were
        granted during 2000 and 2003 respectively. The Bacan facility is currently
        operated under the license of Cemerlang by Indonesian managers employed by
        Cendana. **** The
        BKPM
        also requires Cendana to have its accounts audited annually by an Indonesian
        public accountant. Cendana complies with this requirement. Indonesia maintains
        other laws relating to corporate governance that are similar to laws of other
        jurisdictions. The Company believes that Cendana is in material compliance
        with
        these laws and with other applicable Indonesian laws and regulations.
        Environmental approvals are issued with the operating permits for each site.
        These require regular reporting to authorities in relation to fuel usage
        for
        energy generation, compliance with waste emissions and any incidents that
        may
        have caused harm to the local environment. The Company is in full compliance
        with its environmental reporting obligations.
  20
 United
        States of America
 
 Because
        the Company has registered its Shares with the U.S. Securities and Exchange
        Commission (“SEC”) and listed the ADRs on the Nasdaq Stock Market (“Nasdaq”),
        the Company must comply with U.S. laws and SEC regulations applicable to
        foreign
        companies that trade their securities in the U.S., including the Sarbanes-Oxley
        Act of 2002 and the listing requirements of Nasdaq. These laws, regulations
        and
        requirements cover matters such as independence of directors, audit committee
        compensation and duties, codes of ethics, independence of auditors, and
        disclosure of fees and services provided by auditors. The Company believes
        that
        it is in material compliance with these laws, regulations and listing
        requirements.
  On
        December 1, 2004, the Company announced its intention to voluntarily delist
        its
        ADRs from the Nasdaq Small Cap Market. The Company has not yet finalized
        all of
        the requirements to complete this process. When the process is completed
        the
        ADRs are expected to be traded on the OTC Bulletin Board. The delisting of
        the
        ADRs is intended to reduce the Company’s listing costs and allow it to more
        easily comply with U.S. listing regulations.
  21
  **C.**  **Organization
        Structure**
  Atlas
        Pacific Limited owns all of the capital stock of Tansim Pty Ltd, an Australian
        company, which in turn owns all of the capital stock of the Indonesian company,
        PT Cendana Indopearls. The functional relationship of the group’s structure is
        described in the table below.
  ATLAS
          PACIFIC LTD - Australian Company
  **Functions**
                **Assets**
                **Risks**1.
                Marketing
                    of pearls - cleaning, sorting and grading.
                1.
                Marketing
                    agreements and established marketing network.
                1.
                Fluctuations
                    in pearl market prices, fluctuations in exchange rates Yen/A$
                    and
                    marketing requirements.2.
                General
                    business administration
                2.
                Professional
                    management and technical support with access to industry and
                    business best
                    practice.
                2.
                Investment
                    in S.E. Asia and aquaculture industry; market maker and investor/banker
                    reaction/perception of the business.3.
                Financial
                    reporting and public relations
                3.
                Listed
                    on Australian and International stock exchanges, relationships
                    with
                    investment brokers and banks.
 
  TANSIM
          PTY LTD (100% owned by Atlas Pacific Limited) - Australian Company
  **Functions**
                **Assets**
                **Risks**1.
                Holds
                    investment in PT Cendana Indopearls
                1.
                Investment
                    in PT Cendana Indopearls
                1.
                Unable
                    to recover value of investment2.
                Provided
                    original project finance.
 
  PT
          CENDANA INDOPEARLS (100% owned by Tansim Pty Ltd ) - Indonesian
          Company
  **Functions**
                **Assets**
                **Risks**1.
                Breeding/hatchery
                1.
                Operational
                    personnel
                1.
                Environmental
                    and climatic variations - spat and oyster losses.2.
                Oyster
                    farming
                2.
                Fixed
                    assets
                2.
                Remote
                    location - limits access to skilled workforce and emergency services,
                    makes logistics more difficult.3.
                Seeding
                    / nucleation
                
                ·Boats·Farm
                  equipment
                3.
                Security
                    and socio-political issues.4.
                Pearl
                      harvesting
                
                ·Hatchery
                    buildings
                    & equipment·Nucleation
                    equipment
                4.
                Limited
                    access to capital.5.
                Administration
                    of operations, security, logistics, community relations.
                
                ·Accommodation/support
                    infrastructure
  22
 **D.** **Property,
        Plants and Equipment**
  ***Subiaco,
        W. Australia***
 
 The
        Company rents office space, consisting of approximately 275 square meters,
        in
        the suburb of Subiaco, Western Australia, from Mr. David Morrison. The lease commenced
        on July 1, 2004 and has a term of three (3) years with an option to renew
        the
        lease under the same terms for three (3) additional years. The lease provides
        for an aggregate rental payment of A$18,000 annually, which rent is paid
        in
        equal monthly installments. The rental payment is subject to annual increases
        based upon fair market value.
  ***Kupang,
        W. Timor***
 
 On
        October 6, 1992, the Joint Venture (which later became PT Cendana Indopearls)
        entered into a 20-year lease for five hectares (12.3 acres) of land at Lelindo
        Point and constructed a hatchery, laboratory, administrative offices, workshop,
        store room and accommodations for expatriate managers. On September 4, 1994,
        it
        entered into a 10-year lease for 0.3 hectares (0.74 acres) of land located
        on
        Kambing Island overlooking the nursery. Ardindo Nusa entered into these land
        leases on behalf of the Joint Venture. Pursuant to the Sale Agreement, the
        Joint
        Venture agreed to transfer all assets, including the land leases, to Cendana.
        Accordingly, Ardindo Nusa assigned all beneficial interest in the leases
        and any
        extensions thereof to the Company.
  On
        March
        10, 1993, Cendana entered into water leases, which leases were later amended.
        On
        September 4, 1995, Cendana received Presidential approval for its water leases.
        The various water leases are located within a four mile radius of the Kupang
        hatchery and total 725 hectares (2.8 square miles). The leases are for a
        term of
        30 years. Cendana used these waters as a nursery for young oysters and as
        a
        pearl farm for the nucleated oysters prior to the closure of the Kupang
        facilities in December 1999.
  During
        November 1999, the Company decided to close the facility at Kupang. See “Item 4.
        Information on the Company - The Pearling Project.” In December 2000, the
        Company finalized negotiations with an Indonesian company for the sub-lease
        of
        the land, buildings and water leases comprising the Kupang facility for a
        period
        of five years. The sub-lease commenced on February 2001. Cendana receives
        A$55,192 (US$34,800) per annum under the sub-lease. Pursuant to the terms
        of the
        sub-lease, Cendana will transfer all of its beneficial interest in the land
        and
        water leases, and the building relating to the Kupang facility, to the
        sub-lessee upon the payment of all of the sub-lease payments due for the
        five
        year sub-lease period.
  The
        Indonesian government owns all of the land and water upon which the Kupang
        pearl
        farm was located and leases the property to Cendana for a fee of A$8,400
        per
        annum. All of the government leases are conditioned upon Cendana meeting
        certain
        requirements, including the development and use of the leased property for
        pearling operations. The sub-lease arrangement fulfills the Indonesian
        government’s conditions. The Company remains primarily liable for the annual
        lease payments to be made to the government.
  23
 
 ***Waigeo
        Island, W. Papua***
  Cendana
        also has water leases that commenced on September 30, 1997 encompassing
        approximately 2,500 hectares (6,200 acres) on Waigeo Island, in the W. Papua
        (formerly Irian Jaya) province of Indonesia. The leases are for a term of
        25
        years and expire on September 30, 2022. This site is approximately 130
        kilometers west of Sorong in a remote area with excellent waters for pearl
        farming. It was a condition to the Indonesia government’s agreement to enter
        into the leases that the Company construct and operate a hatchery at the
        site.
        The Company completed construction of its hatchery during 1998. The hatchery
        had
        its initial production run in December 1998. The new facility has the capacity
        to hold up to one million mature adult oysters. The Company moved its operations
        and all of its equipment to this site in November 1999 when it closed its
        facility in Kupang.
  In
        addition to the hatchery, the Company has constructed an office, workshop,
        accommodation buildings and a fuel storage facility at the Waigeo site. The
        Company also has a fleet of approximately 25 work vessels of various sizes
        and
        two medium size wooden hull transportation ships. One of the Company’s two
        transport vessels, D'Entrecasteau was replaced in August 2003 following its
        loss
        at sea. The replacement vessel, Sahabat, has significantly more capacity
        for
        transportation of oysters than the D'Entrecasteau had. A significant part
        of the
        farm infrastructure is made up of longlines, floats and panels, which
        accommodate the oysters while they are being farmed. The Company has expended
        approximately A$6.8 million since 1997 to construct and purchase the capital
        improvements described above at the Alyui Bay farm. These expenditures were
        funded from the Company’s own cash reserves. Although the facilities continue to
        be developed, the main infrastructure at the Waigeo site is now
        complete.
  In
        1998,
        the Company leased approximately five hectares (12.3 acres) of land and 2,000
        hectares (4,920 acres) of water at the Alyui Bay site. The Company pays
        3,000,000 Indonesian Rupiah per annum (A$600) to the Kawe Tribe at Selpele
        village for the 25-year water and land lease, which both expire on July 1,
        2023.
        The Company believes that it is in compliance with all of the terms of the
        lease.
  In
        2002,
        the Company began transitioning the focus of the Alyui Bay site to concentrate
        on seeding the best quality oysters. This transition is now complete. This
        unique location is delivering an improved result in terms of quality of productivity
        through the seeding of more oysters than before  and
        better post-seeding results with
        higher retention of nuclei as a result of more focused attention on mature
        oysters .
        Many of
        the non-essential support tasks have been transferred to the lower cost center
        at N. Bali. The Company’s new boat, which it acquired in August 2003, has proved
        to be a very satisfactory vessel for transporting the juvenile oysters from
        N.
        Bali and Bacan to Alyui Bay.
  ***N.
        Bali***
 
 In
        July
        2002, the Company entered into a joint operating arrangement with Abadi whereby
        the Company secured an interest in the right to access a small hatchery and
        associated sea leases in Northern Bali at Banyupoh (the “Bali Hatchery Joint
        Venture”). The infrastructure at Banyupoh occupies approximately two hectares
        (4.9 acres), and is relatively simple but has been sufficient for successful
        oyster spawnings. In addition to the hatchery, there is a simple grading
        shed,
        accommodations for four employees and an office. Abadi owns all of the land
        and
        buildings located at Banyupoh. In addition, Abadi owns the majority of the
        equipment on the farm. The Company transferred its equipment from the original
        Kupang hatchery, which was re-commissioned for use at this facility at minimal
        cost, to the farm and pays A$30,000 annually (for three years) for the use
        of
        the land, buildings and water leases. Abadi also has a sea lease for
        approximately 38 hectares (93 acres) adjacent to the land area on which the
        hatchery and other infrastructure is built. Abadi pays A$12,500 for the water
        lease in Banyupoh, and the leases expire in 2026. The Bali Hatchery Joint
        Venture uses the water leases to hold longline systems to accommodate the
        juvenile oysters once they leave the land-based hatchery. The agreement for
        this
        joint arrangement runs until August 2005.
  24
 In
        addition to the joint operation at Banyupoh, the Company has also **** leased
        0.2 hectares of land and 100 hectares of ocean that are being developed
        into **** an
        independent juvenile production and grow-out facility in North Bali near
        the
        village of Penyabangan, which is approximately 15km east of Banyupoh. The
        Company paid an upfront lease payment of A$15,000 for both of the leases
        and has
        an obligation to pay approximately A$200 per month for the 30-year term of
        the
        leases. By December 31, 2003 there were a significant number of juvenile
        oysters
        from the 2003/04 spawning season growing at this new location and the first
        on-shore facilities, albeit somewhat rudimentary, were in place. The Company
        completed the development of the Penyabangan facility during 2004 with the
        construction of a low-cost hatchery center, which supports the Company’s
        research and development program. The site also supports the Company’s boat
        building and other manufacturing/support activities at more remote locations
        elsewhere in Indonesia. By developing an independent hatchery facility, Cendana
        will no longer be reliant upon its joint venture partner, Abadi, for juvenile
        oysters. It is anticipated that this facility will realize 200,000 to 300,000
        juveniles each year.
  During
        2003, the Company moved its Indonesian headquarters from Sorong to Denpasar,
        Bali. The Company’s office is well located with excellent access to
        communication and transport infrastructure. The Company recruited six highly
        competent local Indonesian staff and the Company’s Managing Director is now
        based in Bali. The Company spent around A$20,000 for office equipment and
        communications equipment. **** Cendana
        has entered into a three (3) year lease of its office facility and pays rent
        of
        approximately A$1,500 per annum.
  ***Bacan,
        N. Maluku***
 
 During
        2004, the Company entered into a second joint production arrangement with
        Cemerlang. This joint arrangement is for a period of five years, and the
        Company
        has an option to extend the arrangement thereafter for five years on the
        same
        terms. The Company has been granted shared **** use
        of
        the leases and facilities of this operation. The Company is responsible for
        the
        funding of this operation and for the supply of expatriate and Indonesian
        managers for this operation. Cemerlang receives a proportion of the juvenile
        oysters that are produced from this facility depending upon the age that
        the
        juveniles are taken. The split is 50:50 if the juvenile oysters are taken
        from
        the Bacan facility before they are 12 months of age. After this, the oysters
        are
        split 70% to Cendana and 30% to Cemerlang. The joint venture partner will
        continue to retain ownership of the water and land leases and any assets
        which
        were in existence at the commencement of the arrangement. Any removable
        infrastructure that is paid for by Cendana during the term of the agreement
        will
        be split equally. Fixed
        assets that have been paid for by Cendana that cannot be removed from the
        site
        at the end of the agreement will be paid for by Cemerlang based on their
        depreciated cost value. Although t he
        Bacan
        operations had been expected to produce approximately 300,000 juvenile oysters
        each year for each of the Company and the joint venture partner, high levels
        of
        mortalies among juvenile oysters at the site during 2004 forced the Company
        to
        evaluate its continued use of this sites on going use. A total of 229,000
        juvelile oysters have been delivered to Alyui Bay from the site over the
        course
        of operations during 2003 and 2004. In June, 2005, Cemerlang and the Company
        agreed to wind up the joint arrangement by the end of 2005.
  25
 **ITEM
        5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**
  The
        Company’s consolidated financial statements are prepared in accordance with AAS.
        Certain line items of such financial statements have been reconciled to US
        GAAP
        to assist U.S. persons in evaluating such data. See “Item 17. Financial
        Statements - Note 31 to Financial Statements.” The following discussion
        references only the amounts computed in accordance with AAS.
  ***Overview***
  The
        following is an analysis of the Company’s results of operations, liquidity and
        capital resources. To the extent that such analysis contains statements that
        are
        not of a historical nature, such statements are forward-looking statements,
        which involve risks and uncertainties. See “Introduction - Forward Looking
        Statements.”
  In
        order
        to produce pearls the Company must maintain an ongoing supply of oysters.
        The
        natural cycle of the oyster dictates that it is approximately four years
        from
        the spawning of the oyster until the production of a pearl. See “Item 4.B.
        Business Overview.” The Company capitalizes the costs associated with the
        rearing, husbandry and nucleating of an oyster over the pearl production
        cycle.
        These capitalized costs are disclosed in the financial statements as “Self
        Generating and Regenerating Assets.” Upon the harvesting of the oyster and the
        production of the pearl, an appropriate portion of this cost is transferred
        to
        the pearl inventory and ultimately to the cost of sales when the pearls are
        sold.
  Total
        revenue derived by the Company from different sources during its most recent
        three fiscal years is set forth in the following table:
  **2004**
              
              **2003**
              
              **2002****A$**
              
              **A$**
              
              **A$**Interest
                  received
              
              $
              156,262
              
              $
              194,150
              
              $
              364,886Sales
                  of oysters
              
              
              98,620
              
              
              0
              
              
              0Sales
                  of pearls
              
              
              5,212,130
              
              
              8,803,892
              
              
              10,581,317Sales
                  of MOP, meat and jewelry
              
              
              508,209
              
              
              54,521
              
              
              17,495Revenue
                  from joint operations
              
              
              4,024
              
              
              0
              
              
              85,922Foreign
                  exchange gain
              
              
              790,084
              
              
              525,344
              
              
              182,039Miscellaneous
              
              
              68,195
              
              
              59,486
              
              
              109,789$
              6,837,523
              
              $
              9,637,393
              
              $
              11,341,448
  26
  In
        addition, the following table summarizes the results of the Company’s pearl,
        oyster, oyster meat and MOP sales for its last three fiscal years:
 
 **2004**
                
                **2003**
                
                **2002****Revenue
                    from sale of pearls (wholesale)****Sellable
                    Grade Pearls:**Value
                    (A$)
                
                $
                4,288,583
                
                $
                7,913,204
                
                $
                9,851,511Quantity
                    (No.)
                
                
                57,374
                
                
                52,933
                
                
                47,508Weight
                    (Momme)
                
                
                27,939
                
                
                31,325
                
                
                29,324Average
                    price per momme (A$)
                
                $
                153
                
                $
                253
                
                $
                336Average
                    weight per pearl (momme)
                
                
                0.487
                
                
                0.592
                
                
                0.617**Commercial
                    Grade Pearls:**Value
                    (A$)
                
                $
                690,879
                
                $
                400,523
                
                $
                583,727Quantity
                    (No)
                
                
                59,170
                
                
                21,734
                
                
                22,630Weight
                    (Momme)
                
                
                23,601
                
                
                10,774
                
                
                12,791**Keshi
                    (seedless) pearls:**Value
                    (A$)
                
                $
                232,668
                
                $
                490,165
                
                $
                146,079Weight
                    (Momme)
                
                
                2,250
                
                
                3,640
                
                
                1,232**Revenue
                    from sale of MOP, meat & jewelry(A$)**
                
                $
                508,209
                
                $
                54,521
                
                $
                17,495
  **A.** **Operating
          Results**
 ***2004
        Compared to 2003***
 
 Total
        revenue from the sale of goods decreased by $3,035,431, or 34%, in 2004 to
        $5,822,982. The Company’s revenue from the sale of pearls for 2004 was
        A$5,212,130, which represented a decrease of A$3,591,762, or 41%, when compared
        to 2003. The major factors that contributed to the fall in the Company’s sales
        revenue for 2004 include:
  o
              The
                  pearls that were harvested were smaller on average in 2004 (sellable
                  grade
                  - 0.487 momme per pearl compared to 0.592 momme per pearl in 2003).
                  This
                  was due to the size of the oysters that were used to produce these
                  pearls,
                  which were smaller than normal when they were
                  seeded.
 
 o
              The
                  smaller sized pearls yielded a lower price than the larger pearls
                  sold in
                  previous years.
 
 o
              In
                  addition to the impact of the smaller sizes of the pearls on the
                  price
                  achieved per pearl, the pearls sold in 2004 were of a lesser quality
                  when
                  compared to previous years. The average price per momme in 2004
                  was A$153
                  for sellable grade pearls compared with A$253 per momme achieved
                  in
                  2003.
  27
  o
              The
                  strengthening of the Australian Dollar against the Japanese Yen
                  (which is
                  the trading currency for pearls) resulted in a lower revenue base
                  in the
                  reporting currency (A$).
  In
        Japanese Yen per momme, the average price of sellable grade pearls dropped
        by
        33% in 2004 compared to 2003. The Australian Dollar appreciated by approximately
        6% on average from 2003 to 2004. The adverse effect of the currency movement
        on
        sales was offset by exchange rate gains from hedging that was in place and
        this
        resulted in income from foreign exchange gains during 2004 of A$790,084 (versus
        - A$702,735 in 2003).
  As
        in
        2003, the lower quality of the Company’s pearls in 2004 was due to the lower
        quality of oysters available for seeding in 2001 and 2002 coupled with the
        effect of the *El
        Nino* climatic
        conditions on these oysters in 2002. The oysters that were seeded in 2002
        were
        smaller than in previous years due to stock availability pressures and because
        the oysters from which the Company extracted Saibo tissue in 2001 and 2002
        caused a partial deterioration in the quality and color of the pearls that
        were
        harvested in 2003 and 2004. Poor quality pearls continued to be harvested
        from
        second operation oysters in 2004. These are pearls that are produced from
        oysters, which have already produced one pearl and which are then re-seeded
        with
        a second nucleus. This practice has proven to be unsuccessful in terms of
        producing a consistently high quality pearl and the Company discontinued
        this
        practice in 2003. The average weight of the sellable grade pearls that were
        harvested in 2004 also decreased. In prior years, pearls were left unharvested
        for a longer period of time so they were larger. The Company harvested pearls
        earlier in 2004 because it was anticipating that there was the potential
        for its
        selling agent, Pearlautore International, to hold an auction in Kobe, Japan
        in
        the early part of the year. This did not occur but these pearls were sold
        later
        in 2004. Cumulatively, these factors had an adverse effect on revenue during
        2004.
  By
        December 31, 2003, the Company had transferred over 120,000 oysters close
        to
        seeding age to its Alyui Bay pearling center from its Bali and Bacan operations.
        It also moved an additional 200,000 oysters to Alyui Bay in the first few
        months
        of 2004. A significant number of these oysters comprised the selectively
        bred
“silver lip” strain. This improved supply of juvenile virgin oysters in 2003 and
        2004 has resulted in the Company being able to return to a more selective
        seeding program where only the healthiest and best quality oysters are seeded.
        This is expected to have a direct effect on pearl quality in 2007 and 2008.
        The
        quantity of oysters seeded was also increased in 2003 and 2004 from
        approximately 23,000 and 203,000 in 2001-and 2002 respectively.
  During
        2003, the Company seeded 206,000 virgin, or first-time seeded, pearl oysters.
        A
        further 78,000 oysters were seeded under a share farming arrangement in 2003.
        During 2004, the number of virgin oysters that were seeded increased to 342,000.
        This shows a significant growth and compares well with the 284,000 oysters
        that
        were seeded in 2003. The oysters that were seeded in 2004 will be harvested
        in
        2005 and 2006 with most of the sales from these oysters expected in 2006.
        The
        growing conditions in 2004 were favorable for both juvenile and mature pearl
        oysters at Alyui Bay and North Bali, which has lead to high survival, excellent
        health and improved growth results when compared with 2003. It is anticipated
        that these improved seeding and oyster growing conditions will improve some
        of
        the adverse results that were experienced in sales revenue decline during
        2003
        and 2004. The average pearl size and the pearl quality is expected to improve
        as
        a result of seeding better quality oysters.
  28
 The
        Company remains committed to the production of high quality pearls. To this
        end,
        the Company is focusing primarily on the production of pearls in white and
        silver color from first time operated pearl oysters. The Company believes
        that
        these pearls generate the best yield for the cost and that these products
        remain
        in strong demand. To support this endeavor, the Company will maintain the
        diversified growing centers developed in previous years and continue to
        investigate new opportunities as they emerge.
  Revenue
        from the sale of MOP, oyster meat and jewelry increased in 2004 by $453,688,
        or
        832%, from A$54,521 in 2003, to A$508,209 in 2004. This is partly as a result
        of
        an improved market for raw MOP, which saw prices more than double in 2004.
        The
        Company had accumulated a stockpile of this product at the end of 2003 and
        the
        increased demand has allowed these reserves to be sold at profitable prices.
        Additional resources have also been delegated to the manufacture and sale
        of MOP
        jewelry and the processing and sale of meat from the oysters that are harvested.
        There was also A$98,600 of revenue from the sale of surplus juvenile oysters
        in
        2004.
  Interest
        income decreased by A$37,888, or 40%, from A$94,150 in 2003 to A$156,262
        in
        2004, as cash reserves were used to fund operations. A significant portion
        of
        the net foreign exchange gains of A$525,344 recorded during 2004 was the
        result
        of sales being recorded at the Japanese Yen spot rate with the sales proceeds
        being delivered into a series of existing forward exchange rate hedge contracts
        and derivative products at a more favorable exchange rate. These hedging
        products are employed by the Company to hedge the foreign exchange risk of
        movements in the Australian Dollar/Japanese Yen exchange rate. The Company
        did
        not earn any revenue from oyster share farming joint ventures in 2003; the
        revenue from previous years was from former share farming arrangements which
        have now completed their production cycle.
  The
        cost
        of goods sold increased marginally from A$5,049,131 in 2003 to A$5,089,271
        in
        2004. This was as a result of the higher number of pearls being produced
        in 2004
        than in 2003. There has been an overall reduction in unit cost of production
        in
        the business as a result of economies of scale from higher oyster quantities.
        This will flow through to lower production costs of pearls in the future.
        Inflation in Indonesia, which was between 6% and 7% in 2004, continues to
        press
        production costs upward. The Company cannot estimate the impact of inflation
        on
        its cost of goods sold in 2005 and beyond.
  Marketing
        costs declined by A$54,068, or 28%, from 618,811 in 2003 to A$564,743 in
        2004
        due to the decline in revenue from pearl sales and **** commissions
        and marketing levies applied to pearl sales. However, the average commission
        rate for the sale of pearls increased to 8.76% in 2004 from 6.24% in 2003
        as a
        result of more pearls undergoing additional value adding processes before
        sale.
        This enhances the price of the pearls, but the additional work results in
        a
        higher commission rate.
  Administration
        expenses declined by 6.2% from A$1,741,238 in 2003, to A$1,632,692 in 2004.
        The
        cost of administration increased slightly in Indonesia, mainly due to the
        increase in accounting, logistics and administration staff to cope with higher
        levels of activity.
  29
 Other
        expenses increased by 99% from A$464,171 in 2003 to A$923,798 in 2004. The
        major
        factors contributing to this increase was a write-down in oyster inventory
        of
        A$541,032 in 2004. This included a write-down of A$224,000 of oyster inventory
        to its expected net realizable value and a A$317,000 adjustment related to
        the
        reconciliation of the accounting treatment for the capitalization of inventory
        under Indonesian and Australian Accounting Principals.
  The
        Company recorded a pre-tax operating loss of A$1,373,010 in 2004 compared
        to a
        pre-tax operating profit of A$1,941,309 in 2003. This decrease of A$3,314,319,
        is primarily due to the decline in revenue from pearl sales (A$3,035,431)
        and
        the increase in costs due to the adjustment in the valuation of the oyster
        inventory (A$541,032 - See Note 3 of “Item 17. Financial
        Statements”).
  Despite
        the Company’s pre-tax loss, the Company incurred an income tax expense arising
        from recently completed tax audits of its Indonesian subsidiary, which resulted
        in an increase of A$408,000 in tax provisions for prior years.
  The
        Company produced a net loss after tax of A$1,469,956 for 2004 compared to
        a net
        profit after tax of A$1,244,733 in 2003, due to the reasons described
        above.
  ***2003
        Compared to 2002***
 
 Total
        Company revenue for 2003 was A$9,637,393, which represented a decrease of
        A$1,704,055, or 15%, when compared to 2002 revenue. Sales revenue from pearls
        in
        2003 was A$8,858,413 compared to A$10,598,812 in 2002. The major factors
        that
        contributed to the Company’s revenue falling by 15% in 2003
        include:
  o
              A
                  fall in the market price for pearls, due to a greater supply of
                  pearls and
                  weaker demand precipitated by the state of the economy in Japan
                  and
                  America.
 
 o
              A
                  strengthening exchange rate between the Australian Dollar exchange
                  rate,
                  and the Japanese Yen, which is the currency for pearl
                  sales.
 
 o
              A
                  decline in the quality and size of pearls produced due to less
                  favorable
                  climatic conditions existing during the development of the
                  pearls.
  In
        Japanese Yen per momme terms, the average price of sellable pearls dropped
        by
        19% in 2003 compared to 2002. The Australian Dollar appreciated by approximately
        11% on average from 2002 to 2003. The adverse effect of the currency movement
        on
        sales was offset by exchange rate hedging that was in place and this resulted
        in
        a significant increase in the income from foreign exchange gain during
        2003.
  The
        lower
        quality of the Company’s pearls in 2003 is a reflection of the lower quality of
        the oysters that were available for seeding in 2001 and the effect of the
        El
        Nino climatic conditions on these oysters in 2002. More specifically, the
        older
        age of the oysters from which the Company extracted Saibo tissue in 2001
        appears
        to have caused a partial deterioration in the color of the pearls that were
        harvested in 2003. The quality was also adversely affected by the poor quality
        of the pearls achieved from second operation oysters. These are pearls that
        are
        produced from oysters, which have already produced one pearl and which are
        then
        re-seeded with a second nucleus. This practice has proven to be unsuccessful
        in
        terms of producing a high quality pearl and the Company has discontinued
        this
        practice. The average weight of the sellable grade pearls that were harvested
        in
        2003 also decreased. This was intentional, however, as the Company encountered
        higher demand for pearls in the 9-11 mm diameter range in 2003. In prior
        years,
        pearls were left unharvested for a longer period of time so that they were
        larger. Cumulatively, these factors had an adverse affect on revenue during
        2003.
  30
 The
        adverse impact of the climatic conditions on the quantity of the Company’s
        juvenile oysters seeded in recent years and on the quality of the developing
        pearls will continue to negatively impact the Company’s pearl sales revenue in
        2004. However, the Company has changed its seeding practices by eliminating
        second operations and has improved its Saibo tissue quality. These changes
        are
        expected to yield improved quality pearls for the future.
  By
        December 31, 2003, the Company had transferred over 120,000 oysters near
        to
        seeding age to its Alyui Bay pearling center from its Bali and Bacan operations.
        It also moved an additional 200,000 oysters to Alyui Bay in the first few
        months
        of 2004. A significant number of these oysters comprised the selectively
        bred
“silver lip” strain. During 2003 the Company seeded 206,000 virgin or first-time
        seeded pearl oysters. A further 78,000 oysters were operated upon under a
        share
        farming arrangement in 2003. These activities demonstrate the strong capacity
        that the Company is achieving at its Alyui Bay center. The Company is continuing
        to increase its nucleations at the Alyui Bay center and should be able to
        achieve its target of 300,000 nucleations for 2004. This compares well with
        the
        200,000 oysters that were seeded in 2002. The oysters that were nucleated
        in
        2003 will be harvested in 2004 and 2005. In 2003 growing conditions for both
        juvenile and mature pearl oysters were conducive to high survival, excellent
        health and improved seeding results when compared with 2002.
  Interest
        income decreased by A$170,736 to A$194,150 in 2003 as cash reserves were
        used to
        fund operations. A significant portion of the net foreign exchange gains
        of
        $525,344 recorded during 2003 was the result of the strong rise in the
        Australian Dollar against existing forward exchange rate hedge contracts
        and
        derivative products. These products are employed by the Company to hedge
        the
        foreign exchange risk of a fall in the Australian Dollar exchange rate. The
        Company did not earn any revenue form oyster share farming joint ventures
        in
        2003, the revenue from previous years was from former share farming arrangements
        which have now completed their production cycle.
  The
        cost
        of goods sold increased in 2003 from A$2,493,667 in 2002 to A$5,049,131 as
        a
        result of the higher number but lower quality of sellable grade pearl product
        that was produced and sold at market in 2003. This increase also occurred
        because there were substantially more oysters to maintain in this harvest
        batch.
        This higher number of oysters did not, however, produce significantly more
        pearls as would be expected, which was mainly due to the poor environmental
        conditions that existed at that time. This resulted in a corresponding higher
        cost per unit than achieved in previous years. This increase was partially
        offset by the reduction during 2003 in the unit cost of production for juvenile
        oysters up to 12 months of age. These cost savings should flow into 2004
        and
        lead to an overall reduction in the unit cost of production. This result
        has
        been achieved as a direct consequence of the relocation of juvenile production
        from Alyui Bay to N. Bali and Bacan that commenced in late 2002. Inflation
        in
        Indonesia, which presently hovers around 5%, continues to press production
        costs
        upward. The Company cannot estimate the impact of inflation on its cost of
        good
        sold in 2004.
  31
 Marketing
        costs declined by A$240,373, or 28%, to A$618,811 in 2003 due to the decline
        in
        revenue from pearl sales and **** commissions
        and marketing levies applied to pearl sales.
  Administration
        expenses for 2003 declined by A$384,496 to A$1,629,004. This reduction is
        part
        of the Company’s cost reduction strategy whereby it relocated its Indonesian
        logistics and support center from the more isolated point of Sorong to Bali,
        which offers excellent access to communication and transport infrastructure,
        which reduced the Company’s cost to access this center. The strategy of
        continuing to source and train Indonesian Nationals and reduce the number
        of
        expatriate employees has also continued to reduce the Company’s costs of
        operations.
  The
        Company achieved a pre-tax operating profit of A$1,941,309 in 2003 compared
        to a
        pre-tax operating profit of A$5,617,033 in 2002. This decrease of A$3,675,724,
        or 65%, is primarily due to the decline in revenue from pearl sales and the
        increase in cost of goods sold that occurred in 2003.
  The
        Company’s income tax expense decreased significantly, from A$2,617,033 in 2002
        to A$1,941,309 in 2003. This decrease was due to the decline in the pre-tax
        operating profit from 2002 to 2003. As a percentage of pre-tax operating
        profit,
        income taxes declined to 36% in 2003 from 38% in 2002.
  The
        Company produced a net income of A$1,244,733 for 2003 compared to a net income
        of A$3,499,017 in 2002, due to the decline in revenue from pearl sales, and
        the
        increase in cost of goods sold, as described above.
  ***Future
        Business Potential and Constraints***
 
 The
        Company remains focused on growing its business within the pearling industry.
        The Company has identified key factors that have lead to a decrease in its
        profitability over the last two years and has implemented steps to address
        these
        problems. Significant effort has been made to ensure that there is a continuous
        supply of oysters for its Alyui Bay facility where the production of the
        pearls
        takes place. The Company views the maintenance of a supply of juvenile oysters
        as a key to the success of the business growth in the future.
  The
        development of the Company’s own hatchery and oyster grow-out farm at
        Penyabangan in North Bali has been a key development for the business. This
        facility has resulted in a low cost hatchery, which has been able to
        successfully produce significant numbers of juvenile oysters. Logistics
        functions such as boat building and longline manufacture have been moved
        to
        Penyabangan where labor and materials can be sourced at a much cheaper rate.
        A
        second joint production arrangement on the island of Bacan has proven to
        be less
        successful in terms of its production results, but it has been very cost
        effective. The Company will now focus its attention on seeking additional
        farm
        sites to meet its expansion needs. It will have the opportunity to structure
        production at these new sites to better suit the differing environmental
        and
        habitat conditions.
  32
 The
        Company believes that it has made significant improvements in hatchery
        production techniques that will make juvenile oyster production more efficient.
        These improvements have been the result of research work carried out in North
        Bali. This research, combined with continual improvements in pearl oyster
        husbandry and production techniques, should assist the Company in bringing
        high
        quality product to the market in the future.
  The
        increase in seedings from 284,000 in 2003 to 342,000 in 2004 should continue
        to
        improve the economies of scale at the Company’s Alyui Bay site. The Company had
        1.3 million oysters in various stages of development and pearl production
        at the
        end of 2004 (compared to 1.1 million in 2003). The absence of production
        quotas
        in Indonesia ensures that the quantity of oysters that the Company can nucleate
        is limited mainly by the Company’s ability to produce juvenile oysters and the
        biomass limitations of the various pearl production sites, rather than
        government regulation. This provides the Company with a competitive advantage
        not available to its Australian competitors. The quantity and quality of
        the
        Company’s pearl production is also determined by the techniques it employs in
        the nucleation and husbandry of its oysters. Climatic and environmental
        conditions will affect its future results; these factors can only be managed
        but
        not controlled by the Company.
  The
        Company continues to monitor the movement of foreign exchange rates against
        the
        Australian Dollar, especially that of the Japanese Yen, which is the currency
        in
        which most of the Company’s revenue is denominated. The Company uses forward
        foreign exchange contracts and some derivative products, with terms of not
        more
        than two years, to hedge these risks. Derivative financial instruments are
        not
        held for speculative purposes. Although the Company makes efforts to limit
        its
        exposure to adverse movements in the Japanese Yen against the Australian
        Dollar,
        these exchange rates are subject to market influences over which the Company
        has
        no influence.
  Many
        Asia
        Pacific countries, including Indonesia, have experienced economic difficulties
        including liquidity problems, volatility in prices and significant slowdowns
        in
        business activity over the last five years. Operating costs, including wages,
        employee amenities and fuel, have been subject to inflation, with increases
        in
        Indonesia of around 6.6% on average per annum over the past 2 years. The
        Company’s operations will continue to be affected, into the foreseeable future,
        by Indonesia’s economic condition. The ability of the Company to sell its assets
        in Indonesia depends to a large extent on events beyond the Company’s control.
        If the Company was forced to abandon its pearl farms due to political unrest,
        the Company would likely not recover any of its investment in its Indonesian
        assets.
  Resolution
        of the adverse economic conditions that exist in Indonesia depend to a large
        degree on fiscal and monetary measures that may be taken by the Indonesian
        government. National elections held throughout Indonesia have done little
        to
        clarify this position. Such actions are beyond the Company’s control, and the
        Company cannot predict whether the government will be successful in initiating
        and achieving economic recovery. The Company also cannot determine the future
        effects that the ongoing adverse economic conditions may have on the Company’s
        liquidity and earnings, as well as on its Indonesian customers (for oyster
        meat
        and MOP) and suppliers.
  33
 **B.** **Liquidity
        and Capital Resources**
  Net
        cash
        flow provided from operating activities declined from A$246,835 in 2003 to
        A$95,791 in 2004. The decrease was primarily due to a reduction in the proceeds
        from the sale of pearls by A$4,117,893. This was partially offset by an increase
        of A$710,364 in proceeds from other operating activities to A$769,835. Payments
        to suppliers declined by A$692,782 to A$6,279,530 and income taxes paid declined
        by A$2,555,861 to A$410,894 in 2004 due to a strengthening Australian Dollar,
        which meant that the Company had better buying power and lower profits, which
        meant that taxes were less.
  The
        Company used cash from investment activities in 2004 primarily to purchase
        new
        property, plant and equipment in the amount of A$778,641. This compares to
        A$1,119,718 expended on property, plant and equipment in 2003. A significant
        part of this investment related to the development of the new Penyabangan
        site
        for the production of juvenile oysters. The Company paid for these new assets
        in
        part from cash from operations, with the balance coming from cash
        reserves.
  The
        Company has developed the land that it obtained pursuant to a 30 year lease
        at
        Penyabangan in N. Bali by building a hatchery, storage facilities, residential
        accommodations and an administration office and showroom. Approximately
        A$220,000 was spent on capital improvements at this location in relation
        to the
        hatchery and ancillary buildings, power generation equipment and hatchery
        equipment, such as water tanks, autoclave, pumping systems and scientific
        equipment in 2004. **** The
        Company spent an additional A$185,000 **** at
        Penyabangan on longlines, panels and cleaning equipment for the housing and
        husbandry of oysters at the site and boats to service the farm during 2004.
        The
        Company expects to spend an additional A$130,000 at Penyabangan in 2005 to
        finalize the site development in relation to buildings, equipment and sea-based
        infrastructure.
  The
        Company spent approximately A$36,000 for land-based capital equipment at
        Bacan,
        plus an additional A$91,000 for longlines and work boats during 2004. Given
        the
        uncertainty of the future success of this site for the production of juvenile
        oysters, no further capital expenditure has been committed to the facilities
        at
        Bacan and negotiations have commenced with the owners of this facility for
        the
        joint farming arrangements to be wound down.
  All
        future investments are currently expected to be funded through operational
        cash
        flows and cash reserves. The Company believes it has sufficient working capital
        for its present requirements.
  Cash
        on
        hand at the end of 2004 was $A3,208,996, down from A$4,301,918 at the end
        of
        2003 due to the Company using its cash reserves to purchase assets and fund
        its
        ongoing operations.
  The
        Company did not pay a dividend in 2004. This contrasted to dividend payments
        of
        $A878,103 in 2003 and $A3,402,484 in 2002. The Company has not decided whether
        it will pay any dividends in 2005. This will depend on the availability of
        surplus cash and the outlook for future profits and will be considered at
        a
        future date by the Board of Directors.
  34
 The
        Company had no borrowings or long-term debt as of the end of 2004. The Company
        funds its pearling operations from operational cash flow and cash reserves
        and
        plans to continue to do so in 2005. As of December 31, 2004, the Company
        had in
        place a letter of credit facility with the Australia and New Zealand (ANZ)
        Bank
        with a limit of A$2,000,000 (this does not include an additional limit of
        A$1,500,000 for foreign currency trading). To date this facility has not
        been
        utilized. The facility is secured by a lien over the assets of the
        Company.
  The
        Company did not raise any funds from capital raising activities during 2004
        or
        2003. This was in contrast to 2002 where the Company raised A$2,556,365 from
        the
        exercise of options to purchase its Shares. There are no options or other
        rights
        to purchase Shares outstanding.
  **C.** **Research
        and Development**
  In
        June
        2004, the Company entered into an agreement with James Cook University to
        obtain
        information regarding the genetics of silver/gold lipped pearl oyster
        ( *Pinctada
        maxima* )
        populations in Indonesia. This research is to be undertaken over a period
        of
        four years. The aim and scope of this research is to develop molecular tools
        and
        acquire statistical information to allow a well designed selective breeding
        program to be commenced. There are a series of components to this research
        to
        wit:
  o
              Identification
                  of the founder genetic base;
 o
              Identification
                  of the influence that the environment has on family
                  ranking;
 o
              Estimation
                  of the heritability and genetic
                  correlations;
 o
              Genetic
                  diversity analysis;
 o
              Development
                  of a DNA parentage determination marker
                  suite.
  The
        research project commenced in August 2004 with the breeding of oysters from
        various parent groups at the Company’s Penyabanagan hatchery facility in North
        Bali. Specific results from this research will not be realized for some years,
        but practical techniques for the improvement of breeding have already been
        learned from the work done to date.
  The
        Company has committed to an amount of A$200,000 in cash, A$50,000 per year
        over
        four years, plus the resources of its staff and facilities in Bali, estimated
        at
        A$63,000 per annum, as a co-contribution to this research over the four years
        of
        the project. Additional funds are being provided by the Australian government
        and James Cook University is providing the research expertise and personnel
        for
        this project.
  As
        part
        of its ordinary operations, the Company continues to test and monitor shell
        growth rates, pearl growth rates, pearl quality, hatchery cleanliness and
        the
        suitability of the surrounding waters as to temperature, pollution and water
        currents. The Company’s in-house marine scientists also continually study and
        test innovative ways to improve shell husbandry, and consequently, the
        production of quality pearls.
  35
 The
        Company provides research opportunities for promising Indonesian and Australian
        students in conjunction with universities and fisheries
        departments.
  Expenditures
        incurred on research and development in the Company’s last three fiscal years
        have been treated as ordinary operating expenses, and are expensed when
        incurred. Expenses that are identified as pearl production costs are
        capitalized. See “Overview” and “Item 17. Financial Statements.”
  **D.** **Trend
        Information**
 
 The
        Company’s pearl farm and operations are now well established. In 2002, the
        Company experienced the negative impact of climatic and environmental factors,
        such as *El
        Nino* ,
        that
        reduced the size and quality of the pearls the Company produced in its 2003
        and
        2004 harvests. In addition, these factors adversely affected the Company’s
        production of juvenile oysters required for future pearl
        production.
  The
        Company has implemented a number of initiatives to ensure that it has an
        adequate supply of oysters for future pearl production by diversifying the
        areas
        from which it can source juvenile oysters. The Company has also focused its
        pearl production facility at Alyui Bay to maximize the number of specially
        selected oysters that can be seeded and to maintain practices that will maximize
        the health of these oysters during the growth and development of the pearls.
        The
        increased number of oysters that the Company has seeded in the last two years
        combined with improved pearl retention rates and better quality oysters should
        increase the Company’s production of pearls in the longer term. The Company
        believes that the Alyui Bay site has reached its potential in terms of the
        number of oysters that it can effectively manage in a sustainable way. Future
        growth will come from pearl quality improvement and expansion into new pearl
        production farm sites in Indonesia that are currently being
        identified.
  The
        Company believes that the decline in price for South Sea pearls over the
        last
        four years may have stabilized due to a small improvement in demand and a
        static
        level of supply. The pearl market continues to be highly competitive. South
        Sea
        pearls compete directly with other types of pearls including freshwater pearls
        from China, Akoya pearls from Japan and black pearls from Tahiti and other
        South
        Pacific nations. Pearls also compete directly with other gem stones that
        are
        used in the jewelry trade. There has been a significant shift in the
        distribution networks for pearls with significant levels of traders being
        eliminated as the industry matures and becomes more competitive. The Company
        continues to target the production of pearls it believes will be most sought
        after by the market and the least subject to these price pressures. However,
        the
        lead time for the production of a pearl is at least two years, and, as such,
        it
        is difficult to react quickly to changes in market trends if they
        occur.
  The
        Company continues to enhance its marketing skills. It is investigating more
        opportunities to add value to its products by becoming more directly involved
        in
        the distribution process for some part of its pearl production. The Company
        sees
        many advantages over other pearl sellers, such as its location, which it
        intends
        to exploit in the future.
  36
 The
        Company includes all of the revenue, expenses, assets and liabilities of
        its
        joint ventures in its consolidated financial statements. As a result, the
        Company does not have any off-balance sheet arrangements required to be
        disclosed pursuant to Commission rules.
  **E.** **Tabular
        disclosure of contractual obligations**
 
 Payments
                  due by periodContractual
                  obligations
              
              Total
              
              less
                than
                  1
                year
              
              1-3
                years
              
              3-5
                years
              
              more
                than
                  5
                yearsLong
                  term debt obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Capital
                  (finance) lease obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  lease obligations
              
              
              46,636
              
              
              18,270
              
              
              28,366
              
              
              -
              
              
              -Purchase
                  obligations(1)
              
              
              A$150,000
              
              
              A$150,000
              
              
              -
              
              
              -
              
              
              -Total
              
              
              A$196,636
              
              
              A$168,270
              
              
              A$28,366
              
              
              -
              
              
              -
 
 (1)
              The
                  Company has contractual obligations to fund a portion of the operating
                  costs with respect to facilities at Banyupoh and Bacan that it
                  operates
                  jointly with others. See “Item 4.B Business Overview - Pearling.” and
                  “Item 4.D Information on the Company - Property, Plant and Equipment.”
                  These obligations reflect the total estimated amount the Company
                  will
                  spend with respect to these joint arrangements during the terms
                  of these
                  agreements.
 
 **ITEM
        6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**
  **A.** **Directors
        and Senior Management**
  The
        following sets forth the names of the members of the Company’s Board of
        Directors and its senior management. Generally, each member of the Board
        of
        Directors serves for a three-year term. Such term may be shortened, in certain
        instances, in accordance with the Company’s Constitution and the ACSL. The term
        of office of a certain number of Directors expires each year; consequently,
        the
        number of Directors who stand for re-election each year may vary. The Company’s
        executive officers are appointed by, and serve at the pleasure of, the
        Board.
  **GEORGE
        ROBERT WARWICK SNOW, Bachelor in Economics, Fellow of the Australian Institute
        of Company Directors (59 years old)** .
        Mr.
        Snow has served as a director since October 28, 1997 and was appointed Chairman
        of the Board of Directors on July 28, 2004. Mr. Snow is a graduate in Economics
        from the Australian National University and has had 29 years experience in
        finance, property development, real estate management and equity finance.
        Mr.
        Snow is the managing director of the Sydney-based Dampier Investment Group
        Pty
        Limited, an equity financier involved in strategic company management.
  **STEPHEN
        JOHN ARROW (44 years old).** Mr.
        Arrow
        has served as a director since June 29, 1999. Mr. Arrow has 24 years experience
        in the pearling industry in Western Australia and the Northern Territory
        and is
        managing director and owner of Arrow Pearl Co Pty Ltd, Western Pearlers Pty
        Ltd,
        and a Director and co-owner of Deep Sea Pearls Pty Ltd.
  37
 **IAN
        McKENZIE MURCHISON Bachelor in Commerce, Fellow of Chartered Accountants,
        Diploma of Nautical Science (54 years old).** Mr.
        Murchison was appointed a director on July 28, 2004. Mr. Murchison has had
        over
        25 years experience in finance and investment, and has been a director of
        both
        listed and unlisted companies in Australia and overseas. He is an investment
        director and founding partner of the Western Australia based private equity
        investment fund, Foundation Capital, and was founding partner of the national
        chartered accounting firm of Southertons.
  **STEPHEN
        BIRKBECK (45 years old).** Mr.
        Birkbeck was appointed a director on April 15, 2005. Mr Birkbeck is the founder
        and CEO of Mt Romance Australia Pty Ltd, an Australian company, which is
        one of
        the world’s largest producers of sandalwood oil. Mr Birkbeck has experience in
        marketing luxury goods in overseas markets, especially Europe.
  **JOSEPH
        JAMES UEL TAYLOR, B.Sc. (Biology), Ph.D. (38 years old)** .
        Dr.
        Taylor has served as a director since September 13, 2000. He was appointed
        to
        the role of managing director effective September 1, 2001. Dr. Taylor is
        a
        marine biologist and aquaculturist whose Ph.D. research specialized in the
        husbandry of *Pinctada-maxima* pearl
        oysters. Since 1989, Dr. Taylor has been involved in the management of
        aquaculture operations, mainly associated with South Sea pearl farming. He
        has
        acquired extensive knowledge about the biology of pearl oysters and has
        presented many research papers on this subject. Dr. Taylor commenced employment
        with the Company in 1996 and has overseen the development of the project
        to its
        current level of production. From
        1996
        to 2000, Dr. Taylor held the position of project manager with the
        Company.  Prior
        to
        this, he spent three years working for PT Mutiara Cemerlang, which is an
        Indonesian pearl business. The constitution of the Company does not require
        the
        Managing Director to retire by rotation.
 
 **SIMON
        CHARLES BUNBURY ADAMS, B.Bus, M.Acc, ACIS (39 years old).** Mr.
        Adams was appointed as the Chief Financial Officer and Company’s Secretary on
        February 1, 2001. He has more than ten years experience in corporate management
        in the industries of pearling, mining and engineering. He has been employed
        with
        the Company for over four years **.** Prior
        to
        joining the Company, Mr. Adams worked for two and a half years as the chief
        accountant of Advanced Energy Systems, Ltd, an engineering firm, which
        specialised in renewable energy systems, and for five years before that Mr.
        Adams worked for Transcontinental Resources Group, an organization that had
        several real estate and mining interests.
 There
        are
        no arrangements or understandings with major shareholders, customers, suppliers
        or others by which any director or member of senior management was appointed
        to
        his position. There are no family relationships between any directors or
        executive officers and any other directors or executive officers.
  38
  **B.** **Compensation**
  The
        total
        remuneration paid to each of the Company’s directors and senior managers for
        services in all capacities during 2004 is set forth below:
  **Responsibilities**
              
              **Directors
                  Fees**
                **A$**
              
              **Other**
                **A$**
              
              **Super-annuation**
                **A$**
              
              **Total**
                **A$**G.R.W.
                  Snow
              
              
              Chairman
              
              
              44,687
              
              
              -
              
              
              4,022
              
              
              48,709S.J.
                  Arrow
              
              
              Non-Executive
                  Director
              
              
              30,000
              
              
              -
              
              
              2,700
              
              
              32,700I.M.
                  Murchison(1)
              
              
              Non-Executive
                  Director
              
              
              14,063
              
              
              
              
              
              1,265
              
              
              15,328J.J.U.
                  Taylor
              
              
              Managing
                  Director
              
              
              -
              
              
              279,253
              
              
              21,687
              
              
              300,940S.C.B.
                  Adams
              
              
              Chief
                  Financial Officer
              
              
              -
              
              
              105,000
              
              
              9,450
              
              
              114,450
 
 (1)
              Appointed
                  a director of the Company on July 28,
                  2004.
 
 There
        are
        no agreements between the Company and any director or senior manager which
        provide for benefits upon termination or retirement.
  The
        Company makes compulsory superannuation contributions (retirement benefit
        contributions) based on a percentage of salary for its Australian employees
        and
        executive officers. These plans are Australian-mandated retirement plans.
  39
  **C.** **Board
        Practices**
  **Name**
              **Position
                  with the Company**
              **Term**
                **Expires**George
                  Robert Warwick Snow
              Chairman
                  of the Board since July 28, 2004, Director since October 28,
                  1997.
              2006Stephen
                  John Arrow
              Director
                  since June 29, 1999.
              2008Ian
                  McKenzie Murchison
              Director
                  since July 28, 2004.
              2008Stephen
                  Birkbeck
              Director
                  since April 15, 2005
              2006Joseph
                  James Taylor
              Managing
                  Director since September 1, 2001 and a Director since September
                  13,
                  2000.
              (1)Simon
                  Charles Bunbury Adams
              Chief
                  Financial Officer since January 2, 2000 and Secretary since February
                  1,
                  2001.
              (2)Jan
                  Seir Jorgensen
              Project
                  Manager since November 5, 2002.
              (2)
 
 (1)
              The
                  Constitution of the Company stipulates that the Managing Director
                  does not
                  have to retire and be re-appointed. Mr. Taylor’s employment contract has a
                  term of three years and expires on December 31, 2007, unless extended
                  by
                  the mutual agreement of the
                  parties.
 (2)
              These
                  are executive positions within the Company or Cendana which have
                  no fixed
                  term of employment.
 
 There
        are
        no agreements between the Company and any director which provide for benefits
        upon termination or retirement.
  The
        audit
        committee is made up of the four (4) non-executive Directors, and the chair
        of
        the audit committee is Mr. Murchison, our financial expert. The role of the
        committee is to advise on the establishment and maintenance of a framework
        of
        internal control in relation to the financial reporting of the Company’s
        business activities. The activities of the committee ensure that the financial
        information prepared for use by the Board in determining policies or for
        inclusion in the Company’s financial reports is of the highest quality and is as
        reliable as possible. The committee, from time to time, requests the external
        auditor, the Company’s financial controller and the Company’s Chief Financial
        Officer to provide information at its meetings.
  The
        Company does not have a compensation committee. Remuneration of executives
        is
        set by the Board and when the issue of compensation for the Managing Director
        is
        discussed, this director abstains from the meeting and is not present during
        such discussions. Compensation for the Directors is set in line with current
        industry standards.
  40
 **D.** **Employees**
  The
        table
        below sets forth the number of employees of the Company at the end of the
        indicated year **** by
        general category of job position.
 
 **Number
                    of Employees**
                **2004**
                **2003**
                **2002****Australia
                    -**management, administration and support
                4
                5
                5**Indonesia
                    -**Expatriates
                    - management and technical support
                7
                7
                8Indonesian
                    locals
                432
                339
                245*Administration*
                *14*
                *11*
                *10**Hatchery*
                *5*
                *4*
                *5**Farm
                    and Growout*
                *250*
                *206*
                *116**Operations
                    and Harvests*
                *14*
                *10*
                *N/A**Logistics*
                *59*
                *42*
                *44**Electrical
                    and Building*
                *23*
                *18*
                *25**Mechanical
                    and engineering*
                *20*
                *16*
                *10**Security
                    and Community Relations*
                *47*
                *32*
                *35*
  N/A -
                  Not
                  Allocated
  The
        Company continued to promote Indonesian staff into senior positions during
        2004.
        With the development of additional operations
        in Bacan and Bali ,
        several
        key national staff and experienced expatriate managers have been relocated
        to these
        new
        projects, which relocations have created opportunities for the more experienced
        Indonesian staff to take on senior positions at Alyui.
  The
        number of employees has increased as a result of the Company’s additional
        operations in Bali and Bacan.
 
 The
        employees are not represented by unions and union membership is not compulsory
        in Indonesia.
 
 **E.** **Share
        Ownership**
  The
        following table sets forth the number of ordinary shares of common stock
        and the
        percentage of total ordinary shares outstanding beneficially owned by each
        of
        the Company’s directors and senior management as of June 30, 2005.
  **Name**
              **No.
                  of Shares**
                **Beneficially
                  Owned**
              **Percentage
                  of SharesOutstanding**George
                  Robert Warwick Snow
              14,025,744
              15.97%Stephen
                  John Arrow
              1,952,934
              2.22%Ian
                  McKenzie Murchison
              650,000
              0.74%Joseph
                  James Uel Taylor
              65,000
              0.07%Simon
                  Charles Bunbury Adams
              -
              -
  There
        are
        currently no outstanding options to purchase Shares of the Company. In addition,
        there are currently no arrangements involving the issuance of Shares or options
        to purchase Shares of the Company issued to employees.
  41
 **ITEM
        7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**
  **A.** **Major
        Shareholders**
  The
        following table sets out certain information with respect to each person
        or
        group of affiliated persons who is currently known to the Company to be the
        beneficial owner of 5% or more of the Shares of the Company.
  **Title
                  of Class**
              **Identity
                  of Person**
                **or
                  Group**
              **Amount
                  Owned**
              **Percentageof
                  Class****(1)**Ordinary
                  Shares
              Dampier
                  Investment Group.****(2)
              14,025,744
              15.97%
  (1)
              Based
                  on 87,810,254 Shares outstanding as of June 30, 2005.(2)
              Includes
                  Dampier Investments Pty Ltd and Tempest Pty Ltd Mr. George Snow
                  is the
                  beneficial owner of the shares held by the Dampier Investment
                  Group.
 
 All
        Shares owned by Dampier Investment Group have the same voting rights as the
        Company’s other Shares.
  To
        the
        best of the Company’s knowledge, it is not owned or controlled, directly or
        indirectly, by another corporation or by any foreign government.
  To
        the
        best of the Company’s knowledge, there are no agreements in place which could
        result in a change of control of the Company.
  As
        of May
        31 2005, 2,515,750 Shares, or 2.86%, were held on record by 214 persons with
        U.S. addresses. In addition, 22 persons with U.S. addresses were record holders
        of 211,039 ADSs as of May 31, 2004. Accordingly, the Company has a minimum
        of
        236 U.S. record holders, who own at least 6,736,530 or 7.67%, of the Company’s
        Ordinary Shares.
  **B.** **Related
        Party Transactions**
  Admiral
        Poernomo, who retired as a Director of the Company in May 2003, received
        the
        equivalent of A$57,188, A$47,255 and A$37,095 in each of 2004, 2003 and 2002
        respectively, for providing office facilities and administration services
        for
        the Company’s Indonesian subsidiary in Jakarta, Indonesia.
  In
        March
        1999, the Company entered into a consulting agreement with Arrow Pearl Co
        Pty
        Ltd (“Arrow”), a company owned by Mr. Arrow and for which he serves as managing
        director. Mr. Arrow is a director of the Company. Pursuant to this agreement,
        staff of the Company are trained as pearl operation technicians at the
        Indonesian pearl farm. The Company paid Arrow A$189,030, A$177,566 and A$232,061
        during the years 2004, 2003, and 2002 respectively, under the terms of the
        agreement. We believe the terms of the consulting agreement are at or below
        market rate. The Agreement expires in 2009.
  42
 The
        Company rented office space in North Fremantle, Western Australia, from Arrow
        in
        2002 and 2003, which lease expired in June 2004. The Company paid rent of
        A$18,072, A$36,430 and A$35,000 to Arrow in 2004, 2003 and 2002 respectively.
  During
        2004, the Company entered into an employment contract with Claire Taylor,
        the
        wife of the managing Director, Joseph Taylor, on what the Company believes
        to be
        commercial terms. Under this contract, Mrs. Taylor received remuneration
        of
        $48,556 for her services in establishing additional markets for the Company’s
        by-product material.
  During
        the year, sales of individual pearls of small quantities were made to some
        staff
        and Directors on normal commercial terms
  During
        2004, sales of individual pearls of small quantities were made to some staff
        and
        directors on normal commercial terms.
  **C.** **Interest
        of Experts and Counsel**
  Not
        required.
 
 **ITEM
        8. FINANCIAL INFORMATION**
  **A.** **Consolidated
        Statements and Other Financial Information**
  Please
        see Item 17. for a list of the financial statements filed as part of this
        Annual
        Report.
  ***Legal
        Proceedings***
 
 The
        Company is not a party to any material legal proceedings, and was not a party
        to
        any material legal proceedings during 2004.
  ***Dividend
        Policy***
 
 The
        Company did not pay any dividends in 2004 and has not stated whether it plans
        to
        pay any dividends in 2005. The Company paid one dividend in April 2003 amounting
        to A$878,103 and two dividends during 2002 that totaled A$3,402,484. In deciding
        whether to declare a dividend, the Company compares the amount of its profits
        to
        its anticipated cash needs for ongoing working capital, taxes and anticipated
        capital expenditures, and evaluates these factors in view of global
        environmental, political and market uncertainties.
  **B.** **Significant
        Changes**
  There
        have been no significant subsequent events following the close of 2004 up
        to the
        date of this Annual Report that are known to us and which require disclosure
        in
        this Annual Report.
  43
  **ITEM
        9. THE OFFER AND LISTING**
  ***Trading
        Market for American Depositary Receipts (ADRs)***
  The
        Shares trade in the United States in the form of ADRs issued by the Bank
        of New
        York. Each ADR represents a specified number of ADSs, which each evidence
        ownership of 20 Shares of the Company. On May 31, 1995, the Company’s ADRs began
        trading on the over-the-counter bulletin board service of the National
        Association of Securities Dealers under the symbol APCFY. On September 12,
        1996,
        the Company’s ADRs were listed and began trading on the SmallCap Market of the
        National Association of Securities Dealers, Inc. under the symbol APCFY.
        On
        December 1, 2004, the Company announced its intention to voluntarily delist
        its
        ADRs from the Nasdaq Small Cap Market. The Company has not yet finalized
        all of
        the requirements to complete this process. When the process is completed
        the
        ADRs are expected to be traded on the OTC Bulletin Board. The delisting of
        the
        ADRs is intended to reduce the Company’s listing costs and allow it to more
        easily comply with U.S. listing regulations.
  The
        quotations set forth below represent the high and low closing bid prices
        of the
        Company’s ADRs for the periods specified and, are inter-dealer quotations,
        without retail mark-ups, mark-downs or commissions, do not necessarily represent
        actual transactions, and may reflect only fluctuations in exchange rates
        between
        the US Dollar and Australian Dollar:
  **For
                  the Year Ended:**
              **High
                  Closing Bid Price**
                **(US$)**
              **Low
                  Closing Bid Price**
                **(US$)**2000
              $4.38
              $1.882001
              4.09
              2.002002
              5.55
              3.602003
              4.91
              2.652004
              4.25
              2.06
 
 **For
                  the Quarter Ended:**
              **High
                  Closing Bid Price**
                **(US$)**
              **Low
                  Closing Bid Price**
                **(US$)**2003March
                  31
              $4.91
              $3.50June
                  30
              4.30
              3.25September
                  30
              4.05
              3.10December
                  31
              3.35
              2.652004March
                  31
              $4.25
              $2.83June
                  30
              3.35
              2.18September
                  30
              2.97
              2.06December
                  31
              2.79
              2.31
 
 44
  
 **For
                  the**
                **Month
                  Ended:**
              **High
                  Closing Bid Price**
                **(US$)**
              **Low
                  Closing Bid Price**
                **(US$)**December
                  31, 2004
              $2.74
              $2.38January
                  31, 2005
              2.73
              2.25February
                  28, 2005
              3.80
              2.40March
                  31, 2005
              3.64
              3.01April
                  30, 2005
              3.35
              3.00May
                  31, 2005
              3.10
              2.70
 
 ***Trading
        Market for the Shares***
  The
        principal non-United States trading market for the Shares is the Australian
        Stock Exchange. The Company cannot practicably determine what percentage
        of its
        Shares traded on the Australian Stock Exchange are held by U.S. persons.
        The
        quotations set forth below represent the high and low closing sales prices
        of
        the Company’s Shares during the periods indicated:
  **For
                  the Year Ended:**
              **High
                  Closing Sale Price**
                **(A$)**
              **Low
                  Closing Sale Price**
                **(A$)**2000
              $0.36
              $0.182001
              0.42
              0.182002
              0.52
              0.352003
              0.40
              0.202004
              0.26
              0.15
 
 **For
                  the Quarter Ended:**
              **High
                  Closing Sale Price**
                **(A$)**
              **Low
                  Closing Sale Price**
                **(A$)**2003March
                  31
              $0.40
              $0.28June
                  30
              0.32
              0.27September
                  30
              0.30
              0.20December
                  31
              0.24
              0.202004March
                  31
              $0.26
              $0.20June
                  30
              0.22
              0.15September
                  30
              0.18
              0.16December
                  31
              0.18
              0.16
 
 **For
                  the Months Ended:**
              **High
                  Closing Sale Price**
                **(A$)**
              **Low
                  Closing Sale Price**
                **(A$)**December
                  31, 2004
              $0.17
              $0.16January
                  31, 2005
              0.17
              0.16February
                  28, 2005
              0.22
              0.16March
                  31, 2005
              0.23
              0.19April
                  30, 2005
              0.23
              0.22May
                  31, 2005
              0.22
              0.20
 
 45
  **ITEM
        10. ADDITIONAL INFORMATION**
  **A.** **Share
        Capital**
  Not
        required.
  **B.** **Memorandum
        and Articles of Association**
  A
        description of the Company’s Constitution is contained in Item 10B of its Annual
        Report on Form 20-F for the fiscal year ended December 31, 2001 (Registration
        No. 000-28186), which was filed with the Commission on July 18, 2002. Item
        10B
        of the Company’s 2001 Annual Report is incorporated by reference
        herein.
  **C.** **Material**  **Contracts**
  ***Office
        Rental Agreement Denpasar Bali***
 
 In
        June
        2003, Cendana entered into a rental agreement with Nyoman Ardana for the
        use of
        an office building of approximately 225 square meters located at Jalan Sekar
        Jepun V Nomor 21 Gatot Subroto Timur - Denpasar 80237 Bali Indonesia. This
        rental agreement is for a term of three years and four months. The annual
        rental
        is equivalent to A$1,500 per annum and is paid in advance for the full term
        of
        the lease.
  ***Production
        and Grow-out site, Penyabangan, North Bali***
 
 In
        December 2003, the Company obtained approval from the Indonesian authorities
        and
        the local village for the establishment of a water lease near the coastal
        village of Penyabangan in Northern Bali. The Company secured this lease to
        ensure its access to juvenile oyster production facilities in the area when
        the
        arrangement at Banyupoh ceases in 2005. In
        March
        2004, another lease was granted by the local village for the exclusive use
        of a
        parcel of land adjacent to the ocean lease that was secured in December 2003. Development
        of this facility included a low cost hatchery center, which was completed
        in
        2004. The Company intends to develop the site to support its future boat
        building and other manufacturing/support activities for the more remote
        locations elsewhere in Indonesia. The agreements are for a term of 30-years
        in
        relation to 0.2 hectares of land and one hectare of ocean, with payments
        of
        approximately A$15,000 paid up front and A$200 payable per month for the
        term of
        the lease.
  ***The
        Bacan Joint Production Agreement***
 
 In
        March
        2004, the Company entered into a joint production agreement with Cahaya
        Cemerlang to access the leases and facilities located around Bacan Island
        in the
        province of North Maluku, Indonesia. In return for the use of the facilities
        and
        leases the Company funds and provides the technical input for the production
        of
        juvenile oysters. Oysters that are produced at this site are to be divided
        equally after the age of 6 months. Any oysters that are not removed from
        the
        site before 12 months are divided in the ratio of 70% to Cendana and 30%
        to
        Cahaya Cemerlang. The arrangement has a 5 year term and an option to extend
        if
        both parties agree at the end of the arrangement.
 
 46
 ***The
        Banyupoh Bali Hatchery Joint Venture***
 
 In
        July
        2002, the Company entered into an agreement with Abadi for a 70% interest
        in a
        pearl oyster hatchery and associated sea leases in Northern Bali, Indonesia.
        The
        Company re-commissioned equipment from its original Kupang hatchery at minimal
        costs to use at this facility. The Company contributes 70% of all costs
        associated with the funding for the operation and receives 70% of the production
        of juvenile pearl oysters from the operation. The agreement is for an initial
        term of three years until August 2005 with an option to extend the arrangement
        for an additional year if mutually agreed. Because this site continues to
        experience high levels of mortalities, the use of the site as a source of
        juvenile oysters has become severely restricted. As a result, the Company
        reached agreement with Cemerlang to cease the joint operations by the end
        of
        November 2005. At the end of the agreement term, the Company will take 70%
        of
        any shared assets or be compensated for those that are immovable. Most of
        the
        fixed assets that have been purchased are in the form of longlines, floats
        and
        nets that are used to accommodate the oysters, which are easily split. The
        portion of these that have been used by the Company will be dismantled and
        taken
        to the Company’s nearby facility at Penyabangan. Staff employed by the joint
        entity perform the day-to-day functions of the facility, but are supervised
        by
        the Company. The staff persons hired to run this facility do not have separate
        tasks delegated to them. They work for both entities and the cost of their
        wages
        is paid from the joint funds contributed by the parties. See “Item 4.B. Business
        Overview - The Pearling Project” and Item 4.D. Information on the Company -
        Property, Plant and Equipment.”
 
 ***Lease
        agreement between the Company and Arrow Pearl Co Pty Ltd***
 
 On
        July
        30, 2001, the Company entered into a lease agreement with Arrow Pearl Co
        Pty Ltd
        for office space at 6 Rous Head Road, North Fremantle, Western Australia.
        The
        lease arrangement commenced on September 1, 2001 and was for a period of
        two (2)
        years. Mr. Stephen Arrow is a director of both the Company and Arrow Pearl
        Co
        Pty Ltd Pursuant to the terms of the lease, the rent was subject to increase
        based on annual changes in the Consumer Price Index. The Company paid the
        equivalent of A$36,144 annually in monthly installments until June 30, 2004,
        when the Company relocated to new office space. See “Item 4.D. Information on
        the Company-Property, Plant and Equipment” and “Item 7. Major Shareholders and
        Related Party Transactions.”
  ***Pearl
        distribution agreement between the Company and Pearlautore International
        Pty
        Ltd***
 
 The
        Company appointed Pearlautore International Pty Ltd as its exclusive valuer
        and
        distributor of South Sea pearls on January 1, 2000. This agreement was scheduled
        to expire on December 31, 2003. The agreement automatically renewed in January
        2004 on substantially the same terms for a period of two years, as neither
        party
        exercised its option to terminate the agreement. Pearlautore International
        Pty
        Ltd receives a commission of between 7.5% and 25% for cleaning, grading,
        valuing
        and selling the Company’s pearls.
  47
 ***Employment
        agreement between the Company and Dr. Joseph James Uel
        Taylor***
 
 The
        Company and Dr. Taylor entered into an employment agreement effective September
        1, 2001 and renewed it effective on January 1, 2004, pursuant to which Dr.
        Taylor serves as the Company’s Managing Director. The Agreement provides for the
        payment of approximately A$250,000 in salary per year. The agreement may
        be
        terminated by either party upon four months’ notice. Dr. Taylor now resides in
        Indonesia and as such, part of his salary is paid by Cendana, and the balance
        is
        paid by Atlas Pacific Limited. The contract is bifurcated to reflect the
        payments from the different entities within the group.
  ***Director’s
        Access, Insurance and Indemnity Deed between the Company and each Director***
  On
        May
        29, 2003, the Company entered into a contract with each of its directors
        whereby
        the Company indemnifies each director against all liabilities to another
        person
        (other than the Company or a related body corporate) that may arise from
        his
        position as a director, except where the liability arises out of conduct
        which
        involves negligence, default, breach of duty or a lack of good faith. The
        agreement states that the Company will pay the full amount of any such
        liabilities, including advancing amounts the director to pay for the costs
        and
        expenses of defending any such action.
  ***Lease
        agreement between the Company and Mr. David Morrison***
  In
        June
        2004, the Company entered into a lease agreement with Mr. David Morrison
        for
        office space at 43 York Street, Subiaco, Western Australia. The lease
        arrangement commenced on July 1, 2004 and is for a period of three (3) years.
        The Company will pay an amount of A$18,000 per annum in equally monthly
        installments for the term of the lease. The lease has an option which allows
        the
        arrangement to be extended for an additional three (3) years under similar
        terms. The office space is approximately 275 square meters in area.
  ***Collaborative
        Research Agreement between the Company and James Cook University***
  In
        June
        2004, the Company entered into a Collaborative Research Agreement with the
        James
        Cook University of Townsville, Queensland Australia. The agreement has been
        undertaken to investigate options for the genetic improvement of the silver/gold
        lip oyster and to provide the Company with information on the genetics of
        its
        oyster population. The Company has agreed to fund the research project. The
        total amount of research funds for the research project under this agreement
        is
        A$50,000 per annum for 4 years.
  ***Stand-by
        Finance and Foreign Currency Dealing Agreement between the Company and
        Australian and New Zealand Banking Group Ltd***
  In
        October 2004, the Company entered into a Stand-by Finance and Foreign Currency
        Dealing Agreement with Australian and New Zealand Banking Group Limited (the
        “ANZ Facility”). The purpose of the ANZ Facility is to finance certain of the
        Company’s exports. This facility has a limit of A$1,700,000.  In addition,
        A$300,000 has been negotiated to assist with working capital requirements. 
        The total of these two financing facilities is A$2,000,000 - See Note
        20.3
        of “Item 17. Financial Statements.” An additional credit facility with a limit
        of A$1,500,000 is in place for the purpose of Foreign Currency Dealing which
        enables the Company to enter into foreign currency contracts to hedge its
        foreign exchange exposure.  The total value of these facilities amounts
        to
        A$3,500,000.
  48
 **D.** **Exchange
        Controls and Other Limitations Affecting Security Holders**
  Australia
        has largely abolished exchange controls on investment transactions. The
        Australian Dollar is freely convertible into US Dollars. In addition, there
        are
        currently no specific rules or limitations regarding the export from Australia
        of profits, dividends, capital, or similar funds belonging to foreign investors,
        except that certain payments to non-residents must be reported to the Australian
        Cash Transaction Reports Agency, which monitors such transactions.
  The
        Australian Foreign Acquisitions Act (the “Act”) sets forth limitations on the
        rights of non-Australian residents to own or vote the ordinary shares of
        an
        Australian company. The Act permits the Commonwealth Treasurer to examine
        acquisitions and arrangements that could result in foreign persons controlling
        an Australian business. The Commonwealth Treasurer may prohibit a proposed
        takeover if it would lead to a change of control of a business where the
        resultant control would be against the national interest. The Act contains
        divestiture provisions to ensure it can be enforced, as well as stringent
        monetary-penalty provisions for breaches and the making of false or misleading
        statements.
  The
        Act
        requires the prior approval of the Commonwealth Treasurer for certain classes
        of
        persons to enter into an agreement to acquire shares of an Australian company,
        if, after the acquisition, such person or corporation would hold a substantial
        interest in such corporation, as explained herein. The foregoing approval
        requirement applies to the following classes of persons: (i) any natural
        person
        not ordinarily resident in Australia, (ii) any corporation in which either
        a
        natural person not ordinarily resident in Australia or a foreign corporation
        (as
        defined in the Act) holds a substantial interest, and (iii) two or more such
        persons or corporations which hold an aggregate substantial
        interest.
  A
        person
        holds a “substantial interest” in a corporation if the holder alone or together
        with any associates (as defined in the Act) controls 15% or more of the voting
        power in the corporation or holds 15% or more of the issued shares in that
        corporation. Two or more persons hold an aggregate substantial interest in
        a
        corporation if they, together with any associates (as so defined), control
        40%
        or more of the voting power, or own 40% or more of the issued shares, in
        such
        corporation.
  The
        Act
        requires foreign persons or foreign-controlled entities to give 40 days’ notice
        to the Commonwealth Treasurer of a proposal to acquire or increase (or offer
        to
        acquire or increase) a single interest of 15% or more of the ownership or
        voting
        power of an Australian company. If two or more foreign persons or
        foreign-controlled entities are acting together, the threshold is 40% in
        the
        aggregate.
  49
 The
        Constitution of the Company does not contain any additional limitations on
        a
        nonresident’s right to hold or vote the Company’s securities.
  **E.** **Taxation**
  The
        following discussion summarizes certain U.S. federal and Australian tax
        consequences of the ownership of Shares (or ADRs representing them) by a
        person
        (“U.S. Portfolio Stockholder”) that: (i) is a citizen or resident of the U.S., a
        U.S. corporation or that otherwise will be subject to U.S. federal income
        tax on
        a net income basis in respect of the Shares or ADRs; (ii) is not a resident
        of
        Australia for Australian tax purposes; (iii) has not, within the preceding
        5
        years, beneficially owned 10% of the issued capital or voting stock in the
        Company; and (iv) has not used the Shares or ADRs in carrying on a trade
        or
        business, wholly or partly through a permanent establishment in
        Australia.
  The
        statements regarding U.S. and Australian tax laws set forth herein are based
        on
        those laws as in force on the date of this document and are subject to changes
        to those laws subsequent to the date of this document that may affect the
        tax
        consequences described herein (some of which may have retroactive effect).
        This
        summary is not exhaustive of all possible tax considerations and investors
        are
        advised to satisfy themselves as to the overall tax consequences, including
        specifically the consequences under U.S., state, local and other laws, of
        the
        acquisition, ownership and disposition of Shares or ADRs by consulting their
        own
        tax advisors.
  ***Taxation
        of Gains on Sale***
  A
        U.S.
        Portfolio Stockholder is not subject to Australian income tax on the sale
        of its
        Shares or ADRs in the Company.
  ***Passive
        Foreign Investment Company Status***
  The
        following discussion of “passive foreign investment companies” (“PFICs”) is of
        particular interest for U.S. Portfolio Stockholders in 2005 whose holding
        period
        in their Shares or ADRs extends back to 1996.
  A
        foreign
        corporation is classified as a passive foreign investment company (a “PFIC”) in
        any year in which at least 75 percent of its gross income is passive income,
        or
        in which a at least 50 percent of its assets produce passive income. Passive
        income includes interest income from cash holdings and profits from the sale
        of
        marketable securities, even if derived from an active business. During 1995
        and
        1996, substantially all of the Company’s gross income was passive income derived
        from the sale of its investment securities and from interest income. Therefore,
        the Company has determined that it was a PFIC during 1995 and 1996. However,
        the
        Company has not been a PFIC since 1996. While no absolute assurance can be
        given, the Company believes that it most likely will have a sufficiently
        high
        percentage of non-passive gross income (sales minus cost of sales) derived
        from
        the sale of pearls, and sufficiently high percentage of assets producing
        non-passive income, for 2005 and for the foreseeable period thereafter, to
        avoid
        PFIC status in 2005 and for the foreseeable period thereafter.
  50
 However,
        under a special “once a PFIC - always a PFIC” rule contained in the Internal
        Revenue Code, if a foreign corporation is a PFIC during any year in which
        a U.S.
        shareholder owned shares or ADRs in that foreign corporation, that U.S.
        shareholder forever continues to be subject to the special adverse PFIC tax
        regime with respect to those ADRs or Shares, even if the foreign corporation
        is
        no longer a PFIC, unless a special “purging election” has been made. Thus, a
        U.S. Portfolio Stockholder who owned Shares or ADRs in 1996 will be subject
        to
        the special PFIC rules on gain from the sale of those Shares or ADRs, even
        if
        they are sold in 2005 or thereafter, and even if the Company is not a PFIC
        during 2005 and thereafter, unless that U.S. Portfolio Stockholder has made
        the
        special “purging” election. By contrast, a U.S. Portfolio Stockholder whose
        holding period in its Shares or ADRs began after 1996 will not be subject
        to the
        PFIC rules, if, as anticipated by the Company, the Company is no longer a
        PFIC
        during 2005 and thereafter.
  Under
        the
        PFIC rules applicable in 2005 and thereafter to a U.S. Portfolio Stockholder
        who
        owned Shares or ADRs in 1996 but does not make a “purging election,” that U.S.
        Portfolio Stockholder who sells the Shares or ADRs at a gain, whether in
        2005 or
        thereafter, will be subject to a special additional tax. To compute this
        additional tax, (i) the gain is allocated ratably over the U.S. Portfolio
        Stockholder’s holding period for the ADRs or Shares, (ii) the amount allocated
        to the current taxable year is taxed as ordinary income, and (iii) the amount
        allocated to other taxable years is taxed at the highest applicable marginal
        rate in effect for each year and an interest charge is imposed to recover
        the
        deemed benefit from the deferred payment of the tax attributable to each
        year.
        Such a U.S. Portfolio Stockholder will also be subject to a special additional
        tax on certain excess distributions from the Company, will be denied a step-up
        in tax basis on Shares and ADRs on the death of a U.S. individual shareholder,
        and will be required to comply with burdensome annual reporting
        requirements.
  A
        U.S.
        Portfolio Stockholder in 2005 who owned Shares or ADRs in 1996 could have
        avoided the “once a PFIC - always a PFIC” rule, and thus avoided the PFIC rules
        for post-1996 years, by making a “purging election.” Additional information
        concerning the “purging election” is found in Treasury Regulation 1.1297-3T.
  Another
        election that in some cases can reduce the adverse impact of the PFIC rules
        is
        the “qualified electing fund election.” The qualified electing fund election
        would require the U.S. Portfolio Stockholder to provide an analysis of the
        Company’s earnings on a U.S. tax basis, and the Company will not provide this
        analysis. Therefore, the Company expects that the “qualified electing fund”
        election will not be available to its U.S. Portfolio Stockholders.
  Another
        election that in some cases is available to a U.S. shareholder of a PFIC
        is the
“mark-to-market” election. Under this election, the excess of the fair market
        value of the PFIC stock at the end of the tax year over its adjusted basis
        (as
        increased to reflect net previous inclusions of “mark-to-market” gains over
        previous “mark-to-market” losses) is included as ordinary income in the current
        year. Additional information concerning the “mark-to-market” election is
        contained in Treasury Regulations 1.1296-1 and 1.1296-2. There are some
        technical uncertainties as to the application of the “mark-to-market” rules for
        Atlas shares in 2005, due to the fact that Treasury Regulation 1.1296-1 applies
        to taxable years beginning on or after May 3, 2005, and due to some uncertainty
        as to the circumstances in which NASDAQ-traded ADR’s of Australian Stock
        Exchange - traded companies qualify under Treasury Regulation 1.1296-2 to
        be
        subjects of the “mark-to-market” election.
  51
 The
        foregoing is a general summary of the implications of the PFIC rules. Special
        rules may apply to specific types of investors, such as dealers in securities.
        The PFIC rules have been amended frequently, and future amendments are quite
        possible. U.S. Portfolio Stockholders in 2005 whose holding period in its
        Shares
        or ADRs extends back to 1996 should consult their own tax advisers as to
        the
        potential application of the PFIC rules as well as the impact of any proposed
        legislation that could affect them.
  ***Taxation
        of Dividends***
  In
        IRS
        Notices 2004-70, 2003-69, 2003-71, and 2003-79, the Internal Revenue Service
        set
        forth the criteria it would apply to determine if dividends paid by an
        Australian or other foreign corporation, such as the Company, can qualify
        for
        the reduced 2003-2008 individual U.S. tax rates (generally 15%) applicable
        to
        qualifying dividends. Under Notices 2003-69, 2003-71 and 2003-79, an Australian
        corporation is a “qualified foreign corporation” whose dividends can qualify for
        the reduced tax rate if the Australian corporation qualifies as a resident
        of
        Australia, and qualifies under the limitations of benefits clause, for the
        benefits of the Australian - U.S. income tax treaty. An Australian corporation
        can also qualify if the ADR on which the dividend is paid is readily tradable
        on
        NASDAQ or other established securities market in the U.S. Further, to pay
        qualifying dividends, the Australian corporation must not be, for the taxable
        year of the Australian corporation in which the dividend was paid, or the
        preceding taxable year, a foreign personal holding company, a foreign investment
        company, or a PFIC. Certain holding period requirements must also be met.
        With
        respect to individuals whose holding period in the Company stock began after
        the
        Company’s 1996 PFIC year, the Company believes that its dividends can qualify
        for the reduced post-2002 individual tax rates applicable to qualifying
        dividends.
  The
        Company’s dividends to its U.S. Portfolio Stockholders would be exempt from
        Australian dividend withholding tax to the extent such dividends are considered
        to be “franked” for Australian tax purposes. A dividend is considered to be
“franked” to the extent that such dividend is paid out of the Company’s income
        on which Australian corporate tax has been levied. Even if not “franked,” a
        dividend will be exempt from Australian dividend withholding tax if it is
        paid
        out of the Company’s non-Australian-source dividend income and the Company
        specifies a “foreign dividend account declaration percentage” for such purpose.
        The Company anticipates that when it pays dividends, such dividends would
        likely
        be either “franked,” or paid from the Company’s non-Australian source dividend
        income as specified in the foreign dividend account declaration percentage,
        and
        therefore would be exempt from Australian dividend withholding tax.
  If,
        however, dividends are paid by the Company that are not “franked,” nor paid from
        the Company’s non-Australian source dividend income as specified in the foreign
        dividend account declaration percentage, such dividend would then be subject
        to
        Australian dividend withholding tax. However, in accordance with the provisions
        of the Australia/United States Income Tax Treaty, Australian withholding
        tax on
        dividend income derived by a U.S. shareholder would be limited to 15% of
        the
        gross amount of the dividend. Subject to certain limitations, any Australian
        dividend withholding tax may be claimed as a credit against the federal income
        tax liability of the U.S. shareholder. The overall limitation on non-U.S.
        taxes
        eligible for U.S. credit is calculated separately with respect to specific
        classes, or “baskets” of income. For this purpose, dividends distributed by the
        Company will generally constitute “passive income” or, in the case of certain
        U.S. Portfolio Stockholders, “financial services income.” The U.S. tax credits
        allowable with respect to each income basket cannot exceed the U.S. federal
        income tax payable with respect to such income. The consequences of the separate
        limitation calculation will depend on the nature and sources of each U.S.
        Portfolio Stockholder’s income and the deductions allocable
        thereto.
  52
 Distributions
        on the Shares or ADRs will constitute dividends for U.S. federal income tax
        purposes to the extent paid out of current or accumulated earnings and profits
        of the Company, as determined for U.S. federal income tax purposes. If the
        Company pays a dividend, such dividend would likely be paid in Australian
        dollars. The amount of dividend income for a U.S. Portfolio Stockholder will
        be
        the US Dollar value of the dividend payment on the date of receipt, even
        if the
        dividend is not converted into US Dollars. Gain or loss, if any, realized
        on a
        sale or other disposition of Australian Dollars will be ordinary income or
        loss
        to the U.S. Portfolio Stockholder. Dividends paid by the Company will not
        be
        eligible for the “inter-corporate dividends received” deduction allowed to U.S.
        corporations.
  As
        mentioned above in connection with the PFIC discussion, an excess distribution
        by the Company on a Share or ADR that was owned by the U.S. Portfolio
        Stockholder recipient during 1996 or any subsequent year in which the Company
        is
        a PFIC may be subject to additional U.S. taxes. An excess distribution generally
        includes any annual distribution in excess of 125 percent of the average
        distributions received by the U.S. Portfolio Stockholder from the PFIC stock
        during the three preceding taxable years.
  ***Estate
        and Gift Tax***
  Australia
        does not impose any estate, inheritance or gift taxes. Therefore, no Australian
        estate tax, inheritance tax or gift tax will be imposed on the death of,
        or upon
        a lifetime gift by, a U.S. Portfolio Stockholder.
  **F.** **Dividends
        and Paying Agents**
  Not
        required.
  **G.** **Statement
        by Experts**
  Not
        required.
  **H.** **Documents
        on Display**
  The
        Company files annual and semi-annual reports and other information with the
        SEC.
        You may read and copy any report or document the Company files, including
        the
        exhibits, at the SEC’s public reference room located at 450 Fifth Street, N.W.,
        Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
        information on the public reference rooms. Such materials can also be obtained
        on the SEC’s site on the internet at http://www.sec.gov .
  53
 The
        Company will also provide without charge to each person, including any
        beneficial owner, upon written or oral request of that person, a copy of
        any and
        all of the information that has been incorporated by reference in this Annual
        Report. Please direct such requests to the Managing Director, Atlas Pacific
        Limited, 43 York Street, Subiaco Western Australia 6008, telephone number
        (61)
        (8) 9380-9444 or facsimile number (61) (8) 9380-9970.
  **I.** **Subsidiary
        Information**
  Not
        required.
 
 **ITEM
        11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
  ***Interest
        Rate Risk***
  The
        following table sets forth the types of instruments held by the Company that
        are
        subject to fluctuation in interest rates as of December 31, 2004 and the
        terms
        of such instruments:
  **Fair
                  Value at**
                **Dec.
                  31, 2004**
              
              **Fair
                  Value at**
                **Dec.
                  31, 2003**
              
              **Terms****A$**
              
              **A$**Cash
                  in hand and at bank
              
              $
              1,886,833
              
              $
              1,533,897
              
              
              Current
                  account with interest receivable at 3.66% (2003 - 3.83%) and cash
                  on
                  handFixed
                  Term Deposit
              
              
              1,300,000
              
              
              2,768,021
              
              
              Interest
                  receivable at 5.23% (2003 - 5.01%) maturing within one
                  month$
              3,186,833
              
              $
              4,301,918
 
 The
        carrying amount of trade accounts payable and trade accounts receivable
        approximate their fair values. See “Item 17. Financial Statements - Note 30 -
        Additional Financial Instruments Disclosure.”
  The
        Australian Dollar equivalents of unhedged amounts payable or receivable in
        foreign currencies, calculated at year end exchange rates, are as
        follows:
  **2004**
                
                **2003****A$**
                
                **A$****Amounts
                    receivable:**Indonesia
                    Rupiah
                
                $
                75,543
                
                $
                298,712Japanese
                    Yen
                
                
                537,846
                
                
                537,594US
                    Dollars
                
                
                6,696
                
                
                -$
                620,085
                
                $
                836,306**Amounts
                    Payable:**Indonesian
                    Rupiah
                
                $
                945,232
                
                $
                1,106,923
 
 54
  ***Commodity
        Price Risk***
  The
        Company is subject to the risk of price changes in the pearl market. The
        market
        price of South Sea pearls is similarly determined at auctions held throughout
        the year, although some pearls are now being sold at private events in
        negotiated transactions. The prevailing market price is largely determined
        by
        the quality and the quantity of pearls available. This commodity price risk
        is
        not actively managed by the Company.
  ***Foreign
        Currency Exchange Rate Risk***
  The
        Company’s functional currency is Australian Dollars although a portion of the
        business is transacted in foreign currencies. The Company is exposed to foreign
        currency fluctuations as a result of operations in Indonesia and receipt
        of
        pearl sales proceeds predominantly in Japanese Yen.
  The
        Company operates pearl farms in Indonesia. As a result a significant proportion
        of the Company’s ongoing operating expenses are incurred in Indonesian Rupiah.
        Accordingly, the Company is exposed to the risk of adverse changes occurring
        in
        the Indonesian Rupiah/Australian Dollar exchange rate. The Company’s investment
        in its Indonesian subsidiary is accounted for by the temporal method of foreign
        exchange conversion and gains and losses are taken in to the Company’s current
        year’s financial statements. The Company does not hedge against this investment.
  Nearly
        all pearl sales are denominated in Japanese Yen. The Company has entered
        into
        foreign exchange contracts to hedge certain anticipated sale commitments
        denominated in foreign currencies, particularly Japanese Yen. The terms of
        these
        commitments are not more than 24 months. See “Item 17. Financial Statements -
        Note 30 to Financial Statements.”
  The
        net
        foreign exchange gain/(loss) incurred, as a result of movements of both the
        Japanese Yen and the Indonesian Rupiah against the Australian Dollar, in
        2002,
        2003 and 2004 was A$187,284, A$525,344 and A$541,363 respectively.
  The
        Company’s policy is to enter into forward foreign exchange contracts to hedge up
        to 70% and 40% of foreign currency sales expected within 12 and between 12
        and
        24 months, respectively. The amount of anticipated future sales is forecast
        in
        light of current conditions in foreign markets and experience in the pearling
        industry.
  The
        following table sets forth the gross value in Australian Dollars to be received
        under foreign currency contracts, the weighted average contracted exchange
        rates
        and the settlement periods of outstanding contracts for the Company (as of
        December 31):
  55
  **Weighted
                    average exchange rate**
                
                **Gross
                    Value**
                  **A$**Sell
                    Japanese Yen - Settlement Period
                
                **2004**
                
                **2003**
                
                **2004**
                
                **2003**Not
                    later than one year
                
                
                JPY73.50
                
                
                JPY70.13
                
                $
                3,384,800
                
                $
                7,310,601One
                    to two years
                
                
                -
                
                
                JPY70.81
                
                
                -
                
                
                500,000
 
 These
        forward exchange contracts are hedging anticipated sales that are due within
        24
        months. Any unrealized gains and losses on the hedging contracts, together
        with
        the costs of the contracts, will be recognized in the financial statements
        at
        the time the underlying transaction occurs. The
        gross
        unrealized gains and losses as
        of
        December 31, 2004 and 2003 on
        hedges
        of foreign
        currency sales anticipated
        to take place in the future are set forth below :
  **Gains**
                  **A$**
                
                **Losses****A$****2004**
                
                **2003**
                
                **2004**
                
                **2003****Expected
                    Sale Year**Not
                    later than one year
                
                $
                289,911
                
                $
                922,729
                
                
                
                
                
                -One
                    to two years
                
                
                -
                
                
                58,891
                
                
                
                
                
                -
 
 The
        future income of the Company may be adversely affected by adverse movements
        in
        the Japanese Yen/Australian Dollar exchange rate.
  **ITEM
        12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**
  Not
        required.
 56
  **PART
        II**
  **ITEM
        13.   DEFAULTS, DIVIDEND ARREARAGES AND
        DELINQUENCIES**
  There
        has
        been no default of any indebtedness nor is there any arrearage in the payment
        of
        dividends.
  **ITEM
        14.   MATERIAL MODIFICATIONS** **TO
        THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**
  There
        have been no changes to the instruments defining the rights of the holders
        of
        any class of registered securities, and the rights of holders of the registered
        securities have not been altered by the issuance or modification of any other
        class of securities. There are no restrictions on working capital and no
        removal
        or substitution of assets securing any class of the Company’s registered
        securities.
  **ITEM
        15. CONTROLS AND PROCEDURES**
  (a)
              Under
                  the supervision and with the participation of our management, including
                  our principal executive officer and principal financial officer,
                  we
                  conducted an evaluation of the effectiveness of the design and
                  operation
                  of the Company’s disclosure controls and procedures, as defined in Rules
                  13a-15(e) and 15d-15(e) promulgated under the Securities Exchange
                  Act of
                  1934, as amended, (the “Exchange Act”) within the 90 day period preceding
                  the filing date of this report. Based on this evaluation, our principal
                  executive officer and principal financial officer concluded that
                  the
                  Company’s disclosure controls and procedures have been designed and are
                  being operated in a manner that provides reasonable assurance that
                  the
                  information required to be disclosed by the Company in reports
                  filed under
                  the Exchange Act is recorded, processed, summarized and reported
                  within
                  the time periods specified in the SEC’s rules and forms.
 
 (b)
              There
                  have been no significant changes (including corrective actions
                  with regard
                  to significant deficiencies or material weakness) in our internal
                  controls
                  or in other factors that could significantly affect these controls
                  subsequent to the date of the evaluation referenced in paragraph
                  (a)
                  above.
 
 **ITEM
        16A. AUDIT COMMITTEE FINANCIAL EXPERT**
  The
        Company’s audit committee is made up of the four non-executive directors. Mr.
        Ian Murchison meets the definition of an audit committee financial expert,
        as
        defined for the purposes of Item 16A. of Form 20-F and serves as the Company’s,
        and meets the definition of a, financial expert. The Company has determined
        that
        the number of directors that make up the audit committee reflects the
        appropriate level of governance for a Company of this type and size. All
        of the
        audit committee members have experience with the financial management of
        a
        company and are familiar with the reports that are provided by management
        for
        the purpose of reporting the financial position of the business.
  57
 **ITEM
        16B. CODE OF ETHICS**
  The
        Company has not yet adopted a Code of Ethics relating to the conduct of the
        principal executive officer, the principal financial officer, the principal
        accounting officer or other officers who perform a similar role. All senior
        executives operate on the basis of trust and there is open discussion between
        the chairman and other directors and the senior management. Although, the
        Company planned to develop such a code of conduct, last year, due to attention
        to other priorities, it has not yet done so. The Company plans to develop
        such a
        plan over the next 12 months. Until now, the resources needed to develop
        such a
        set of procedures has not been available.
  **ITEM
        16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
  The
        aggregate fees billed for the last two fiscal years for professional services
        rendered by the Company’s auditor are as follows:
  **2004**
                **2003**Audit
                    FeesAuditors
                    of the Company
                A$42,594
                A$53,666Tax
                    FeesAuditors
                    of the Company
                A$8,921
                -
 
  Audit
        Fees consist of fees for the audit of our financial statements, and those
        of our
        subsidiaries, and review of documents in connection with filings with the
        SEC
        and other statutory or regulatory filings. Tax Fees consist of fees for services
        rendered for tax compliance, tax advice and tax planning. All Other Fees
        consist
        of financial consulting fees. The Company did not pay any Audit-Related Fees
        to
        its auditors in 2003 or 2004.
 
 Our
        Board
        of Directors pre-approves all audit, audit-related and non-audit services
        not
        prohibited by law to be performed by our independent auditors and associated
        fees prior to the engagement of the independent auditor with respect to such
        services **.**
 
 **ITEM
        16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
        COMMITTEES**
  Not
        applicable.
  **ITEM
        16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
        PURCHASERS**
  Not
        applicable.
  58
  **PART
        III**
  **ITEM
        17. FINANCIAL STATEMENTS**
  The
        following Financial Statements are filed as part of this Annual
        Report.
 
 **PageNumber****Independent
                  Auditor’s Report**
              **F-1****Statements
                  of financial performance (Income Statement)**
              **F-2****Statements
                  of financial position (Balance Sheet)**
              **F-3****Statement
                  of cash flows**
              **F-4****Notes
                  to and forming part of the financial statements**
              **F-5**
 
 **ITEM
        18. FINANCIAL STATEMENTS**
  Not
        required.
  **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)
  59
  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)(2)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 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)
  60
  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)8.1
                    List
                        of Subsidiaries(6)12.1
                    Section
                      302
                      Certification of Chief Executive Officer (9)12.2
                    Section
                        302 Certification of Chief Financial Officer(9)13.1
                    Section
                        906 Certification of Chief Executive Officer(9)13.2
                    Section
                        906 Certification of Chief Financial Officer(9)
   (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.
  (2)
              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, 1996
                  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, 1997
                  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)
              Filed
                  herewith.
  61
  **SIGNATURES**
  The
        Registrant hereby certifies that it meets all of the requirements for filing
        on
        Form 20-F and has duly caused and authorized the undersigned to sign this
        annual
        report on its behalf.
  **ATLAS
                PACIFIC LIMITED**Date: June
                28, 2005
              By:
              /s/ G.R.
                SnowG.R.
                Snow,Chairman
   62
  **ATLAS
        PACIFIC LIMITED AND ITS CONTROLLED ENTITIES**
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 We
        have
        audited the accompanying balance sheets of Atlas Pacific Limited as of December
        31, 2004 and 2003, and the related statements of operations, stockholders'
        equity, and cash flows for each of the three years in the period ended December
        31, 2004. These financial statements are the responsibility of the Company's
        management. Our responsibility is to express an opinion on these financial
        statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States).  Those standards require
        that
        we plan and perform the audit to obtain reasonable assurance about whether
        the
        financial statements are free of material misstatement.  The Company
        is not
        required to have, nor were we engaged to perform, an audit of its internal
        control over financial reporting.  Our audits included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. 
        An
        audit also includes examining, on a test basis, evidence supporting the amounts
        and disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, as well as evaluating
        the
        overall financial statement presentation.  We believe that our audits
        provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of the Company as at December 31,
        2004
        and 2003, and the results of its operations and its cash flows for each of
        the
        three years in the period ended December 31, 2004, in conformity with Australian
        generally accepted accounting principles.
 
 As
        discussed in Note 31, the US GAAP information for the three years ended December
        31, 2002 and 2003 has been restated to correct an error in the accounting
        for
        the translation of the Indonesian subsidiary.
  /s/
        S
        Andrawes
 BDO
        Chartered Accountants
 Perth
 Western
        Australia, Australia
 July
        15,
        2005
  F-1
  **Statements
        of financial performance**
 **Atlas
        Pacific Limited and its Controlled Entities**
 **For
        the years ended 31 December**
 **(Australian
        Dollars)**
  **Note**
                **CONSOLIDATED****2004**
                **2003**
                **2002****$**
                **$**
                **$**Revenue
                    from sale of goods
                2
                5,822,982
                8,858,413
                10,598,812Other
                    revenues from ordinary activities
                2
                1,014,541
                778,980
                742,636**Total
                    revenue**
                2
                **6,837,523**
                **9,637,393**
                **11,341,448**Expenses
                    from ordinary activitiesCost
                    of goods sold
                
                (5,089,271)
                (5,049,131)
                (2,493,667)Marketing
                    expenses
                
                (564,743)
                (618,811)
                (859,184)Administration
                    expenses
                
                (1,632,692)
                (1,629,004)
                (2,013,500)Borrowing
                    costs
                3
                (29)
                (124)
                (3,295)Other
                    expenses from ordinary activities
                
                (923,798)
                (399,014)
                (354,769)**Total
                    expenses**
                
                **(8,210,533)**
                **(7,696,084)**
                **(5,724,415)****Profit
                    from ordinary activities before related income tax
                    expense**
                
                **(1,373,010)**
                **1,941,309**
                **5,617,033**Income
                    tax expense relating to ordinary activities
                4
                (96,946)
                (696,576)
                (2,118,016)**Profit
                    from ordinary activities after related income tax attributable
                    to members
                    of the parent entity**
                15
                **(1,469,956)**
                **1,244,733**
                **3,499,017****Total
                    changes in equity other than those resulting from transactions
                    with owners
                    as owners**
                5
                **(1,469,956)**
                **1,244,733**
                **3,499,017**Basic
                    earnings per share
                5
                (0.0167)
                0.0142
                0.0423Diluted
                    earnings per share
                5
                (0.0167)
                0.0142
                0.0403
 
 The
        accompanying notes form part of these financial statements.
  F-2
 **Statements
          of financial position**
 **Atlas
        Pacific Limited and its Controlled Entities**
 **As
        at 31 December**
 **(Australian
        Dollars)**
 
 **CONSOLIDATED****2004**
              **2003**
              **2002****Note**
              **$**
              **$**
              **$****Current
                  assets**Cash
                  assets
              6
              3,208,996
              4,301,918
              6,119,808Receivables
              7
              1,934,360
              1,253,030
              1,182,741Inventories
              8
              1,201,667
              3,333,948
              2,924,061Self-generating
                  and regenerating assets
              9
              2,583,417
              2,165,998
              2,671,601**Total
                  current assets**
              
              8,928,440
              11,054,894
              12,898,211**Non-current
                  assets**Inventories
              8
              240,248
              121,836
              145,237Self-generating
                  and regenerating assets
              9
              9,090,275
              8,406,627
              8,203,530Property,
                  plant and equipment
              10
              2,688,137
              2,458,214
              2,194,935Intangible
                  assets
              11
              -
              -
              247,776Deferred
                  Tax Asset
              4
              239,919
              150,563
              25,792**Total
                  non-current assets**
              
              12,258,579
              11,137,240
              10,817,270**Total
                  assets**
              
              21,187,019
              22,192,134
              23,715,481**Current
                  liabilities**Payables
              12
              1,020,369
              766,980
              935,500Current
                  tax liabilities
              4
              230,480
              -
              1,720,422Provisions
              13
              104,212
              122,946
              124,387**Total
                  current liabilities**
              
              1,355,061
              889,926
              2,780,309**Non-current
                  liabilities**Deferred
                  tax liabilities
              4
              112
              406
              -**Total
                  non-current liabilities**
              
              112
              406
              -**Total
                  liabilities**
              
              1,355,173
              890,332
              2,780,309**Net
                  assets**
              
              19,831,846
              21,301,802
              20,935,172**Equity**Contributed
                  equity
              14
              18,849,092
              18,849,092
              18,849,092Retained
                  profits
              15
              982,754
              2,452,710
              2,086,080**Total
                  equity**
              
              19,831,846
              21,301,802
              20,935,172
 
 The
        accompanying notes form part of these financial statements.
  F-3
 **Statement
          of cash flows**
 **Atlas
        Pacific Limited and its Controlled Entities**
 **For
        the years ended 31 December**
 **(Australian
        Dollars)**
 
 **CONSOLIDATED****2004**
                  **2003**
                  **2002****$**
                  **$**
                  **$****Cash
                      flows from operating activities**Proceeds
                      from pearl and oyster sales
                  5,839,566
                  9,957,459
                  11,289,725Proceeds
                      from other operating activities
                  769,835
                  59,471
                  30,037Interest
                      paid
                  (29)
                  (124)
                  (7,731)Interest
                      and bill discounts received
                  176,843
                  169,096
                  364,886Payments
                      to suppliers
                  (6,279,530)
                  (6,972,312)
                  (7,734,691)Income
                      tax paid
                  (410,894)
                  (2,966,755)
                  (1,938,119)Net
                      cash provided by/(used in) operating activities (Note
                      20.2)
                  95,791
                  246,835
                  2,004,107**Cash
                      flows from investing activities**Payments
                      for property, plant and equipment
                  (778,641)
                  (1,119,718)
                  (617,118)Proceeds
                      on disposal of fixed assets
                  1,891
                  115,849
                  15,828Payment
                      for Other Financial Instrument
                  (47,450)
                  -
                  -Net
                      cash provided by/(used in) investing activities
                  (824,200)
                  (1,003,869)
                  (601,290)**Cash
                      flows from financing activities**Dividend
                      Payment
                  -
                  (878,103)
                  (3,402,484)Receipts
                      from conversion of options
                  -
                  -
                  2,556,365Repayment
                      of convertible notes
                  -
                  -
                  (22,498)Net
                      cash provided by/(used in) financing activities
                  -
                  (878,103)
                  (868,617)Net
                      increase/(decrease) in cash held
                  (728,409)
                  (1,635,137)
                  534,200Cash
                      at the beginning of the financial year
                  4,301,918
                  6,119,808
                  5,585,608Effects
                      of exchange rate changes on the balances of cash held in foreign
                      currencies
                  (364,513)
                  (182,753)
                  -Cash
                      and term deposits at the end of the financial year (Note
                      20.1)
                  3,208,996
                  4,301,918
                  6,119,808
 
 The
        accompanying notes form part of these financial statements.
  F-4
  **ATLAS
        PACIFIC LIMITED AND ITS CONTROLLED ENTITIES**
 **NOTES
        TO AND FORMING PART OF THE FINANCIAL STATEMENTS**
 **FOR
        THE YEAR ENDED 31 DECEMBER 2003, 2002 AND 2001**
 **(Australian
        Dollars)**
 
 Statement
        of significant accounting policies
 1.1 Basis
        of
        preparation
 
 This
        general purpose financial report has been prepared in accordance with Accounting
        Standards and other mandatory professional reporting requirements and the
        Corporations Act 2001.
 
 The
        financial statements have been prepared under the historical cost convention
        and
        except where stated, they do not take into account changing money values
        or fair
        values of non-current assets. The accounting policies relating to the financial
        statements are consistent with those applied in the previous year unless
        otherwise stated.
 
 1.2 Comparative
        amounts
 
 Where
        necessary, the figures for the previous year have been reclassified to
        facilitate comparison.
 
 1.3 Principles
        of consolidation
 
 The
        financial statements of the economic entity comprise consolidated accounts
        of
        Atlas Pacific Limited and all controlled entities within the meaning of the
        Corporations Act. All intercompany balances and unrealized profits resulting
        from intra-group transactions have been eliminated.
 Where
        a
        controlled entity is acquired during a year, its results are included only
        from
        the date of acquisition. Where there is loss of control of a controlled entity
        during a year, its results are included only for that period of the year
        during
        which the parent entity had control.
 In
        the
        instance of the acquisition of a controlled entity, the cost method of
        accounting is used for all acquisitions of assets regardless of whether shares
        or other assets are acquired. Cost is determined as the fair value
        apportionment, at the date of acquisition, of the purchase consideration
        plus
        costs incidental to the acquisition.
 Atlas
        Pacific Limited is a listed public company incorporated and domiciled in
        Australia.
 
 1.4 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 to Note 1.5.
 
 1.5 Self-generating
        and regenerating assets (SGARAs)
 
 The
        Consolidated Entity has applied AASB1037 Self-Generating and Regenerating
        Assets
        (SGARAs). The standard requires that all inventory which is a non-human living
        asset is to be treated separately from other inventory. SGARAs must be measured
        at net market value and the increment/(decrement) in net market values of
        the
        SGARAs is to be recognized as revenue/(expense) in the statement of financial
        performance.
 
 The
        value
        of the SGARAs is only recognized when it can be measured reliably.
 
 Pearls,
        although not a living organism, are a product of an oyster which is classified
        as a SGARA and as such, they too are classified as a SGARA at the time that
        they
        are harvested. In the opinion of the Directors, the most reliable valuation
        methodology for the pearls that are defined as a product of a SGARA is the
        net
        market value for the pearls based on the price at which they are sold by
        PT
        Cendana Indopearls to Atlas Pacific Ltd Once the pearls are sold by PT Cendana
        Indopearls, they cease to become a SGARA under the definition in the accounting
        standard.
 
 F-5
  Oysters
        are a living organism which meet the definition of a SGARA. There is no market
        for pearl oysters by which a reliable valuation comparison of this category
        of
        the SGARA can be made. Given the uncertainty and risk that exists in the
        process
        of producing a pearl and other risk factors specific to the operations of
        the
        economic entity, the Directors believe that the most appropriate market
        valuation for the oysters is their cost of production to date. Cost is the
        total
        direct hatchery and farm operations and includes the cost of oyster purchases
        and nuclei used in seeding operations.
 
 The
        details of the SGARAs that are held by the economic entity as at 31 December
        are
        provided at Note 9.
 
 1.6 Revenue
        recognition
 
 (a)
              Sales
                  Revenue - comprised of revenue earned from the sale of products
                  or
                  services to entities outside the consolidated entity. Sales revenue
                  is
                  recognized when the goods are provided or when the fee in respect
                  of
                  services provided is receivable.
 (b)
              Interest
                  Income - recognized as it accrues.
 (c)
              Asset
                  Sales Revenue - comprises 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.
 (d)
              Inventory
                  Revaluation - in accordance with accounting standard AASB1037
                  Self-Generating and Regenerating Assets, any increase in the net
                  market
                  value of these assets are recognized as revenue at the time of
                  the
                  revaluation.
 
 1.7 Investments
 
 Long
        term
        investments are stated at cost or valuation, less a provision for diminution
        in
        value, as assessed by the Directors annually to ensure that the carrying
        amount
        is not in excess of recoverable amount. The recoverable amount is assessed
        from
        the shares’ current market value or the underlying net assets in the particular
        entities. The expected net cash flows from investments have not been discounted
        to their present value in determining the recoverable amounts.
 
 1.8 Valuation
        of non-current assets
 
 In
        determining the recoverable amounts of non-current assets, the expected net
        cash
        flows arising from the continued use and subsequent disposal of those assets
        have not been discounted to their present value.
 
 The
        carrying amount of non-current assets are reviewed to determine whether they
        are
        in excess of their recoverable amount at balance date. If the carrying amount
        of
        a non-current asset exceeds the recoverable amount, the asset is written
        down to
        the lower amount and the write-down is included in the statement of financial
        performance.
 
 1.9 Depreciation
 
 Depreciation
        on property, plant and equipment is calculated on a straight line basis so
        as to
        write off the cost or valuation of property, plant and equipment over their
        estimated useful lives.
 
 The
        depreciation rates used for each class of depreciable assets are:
 
 **Class
                  of fixed asset**
              **Depreciation
                  rate****2004**
              **2003**
              **2002**Leasehold
                  land & buildings & improvements
              5-10%
              5-10%
              5-10%Vessels
              10%
              10%
              10%Plant
                  & equipment
              20-50%
              20-50%
              20-50%
 F-6
  1.10 Goodwill
 
 Goodwill
        and goodwill on consolidation are initially recorded at the amount by which
        the
        purchase price for a business or for an ownership interest in a controlled
        entity exceeds the fair value attributed to its net assets at date of
        acquisition. Both purchased goodwill and goodwill on consolidation are amortized
        on a straight line basis over the period of 5 years. The balances are reviewed
        annually and any balance representing future benefits for which the realization
        is considered to be no longer probable are written off.
 
 1.11 Foreign
        currency translations
 
 (a)
              Translations
 The
        Company considers that the operations of the Indonesian subsidiary are
        integrated with those of the parent entity and therefore the temporal method
        of
        accounting for foreign exchange conversion has been adopted,
        whereby,
  (i)
              monetary
                  items are converted at the exchange rate applicable at the year
                  end;
 (ii)
              other
                  pearling project assets and liabilities are converted at the exchange
                  rate
                  applicable at the time of transaction,
                  and
 (iii)
              gains
                  and losses on transactions are taken to the current year’s profit and loss
                  account.
 
 (b)
              Hedges
 Gains
        or
        losses on hedges of specific commitments including those relating to the
        price
        of particular goods or services to be purchased or sold, are to be deferred
        and
        included in the measurement of the purchase or sale transaction.
 
 1.12  Income
        tax
 
 The
        liability method of tax-effect accounting has been adopted,
        whereby:
 (a)
              the
                  income tax (expense)/benefit in the profit and loss account is
                  determined
                  by applying the current tax rate to operating profit/(loss) after
                  allowing
                  for permanent differences,
 (b)
              a
                  provision for deferred income tax is created
                  for
 (i)
              expenses
                  which are currently deductible in determining taxable income but
                  which
                  have not been taken up in arriving at the operating profit,
                  and
 (ii)
              revenue
                  which has been included in operating profit but which is not yet
                  assessable for tax,
 (c)
              a
                  future income tax benefit is brought to account
                  for
 (i)
              expenses
                  which have been taken up in arriving at the operating profit but
                  are not
                  currently deductible for income tax purposes,
                  and
 (ii)
              revenue
                  which is currently assessable for tax but which has not yet been
                  included
                  in operating profit,
 (iii)
              income
                  tax losses carried forward.
 
 Future
        income tax benefits are not brought to account unless realization of the
        benefits is virtually certain.
  Realization
        is contingent upon
 (i)
              deriving
                  future assessable income of a nature and of an amount sufficient
                  to enable
                  the benefit of the deductions for the losses to be
                  realized,
 (ii)
              the
                  company continuing to comply with the conditions for deductibility
                  imposed
                  by the law, and
 (iii)
              no
                  changes in the legislation which would adversely affect realization
                  of the
                  benefit of the losses.
 
 1.13 Bills
        of
        exchange
 
 Bills
        of
        exchange have been purchased in the market at a discount to face value. The
        bills are carried at an amount representing cost and a portion of the discount
        recognized as income on an effective yield basis. The discount brought to
        account each period is accounted for as interest received.
 
 1.14 Trade
        and
        other creditors
 
 These
        amounts represent liabilities for goods and services provided to the economic
        entity prior to the end of the financial year and which are unpaid. The amounts
        are unsecured and are usually paid within 30 days of recognition.
 
 F-7
 1.15 Trade
        and
        other debtors
 
 The
        ability to collect debts is assessed at balance date and specific provision
        is
        made for any doubtful accounts.
 
 1.16 Interests
        in joint operations
 
 The
        economic entity’s share of the assets, liabilities, revenue and expenses of
        joint operations are included in the appropriate items of the consolidated
        balance sheet and profit and loss account.
 
 1.17 Leases
 Lease
        payments for operating leases, where substantially all the risk and benefits
        remain with the lessor, are charged as expenses in the period in which they
        are
        incurred.
 
 1.18  Earnings
        Per Share
 i)
              Basic
                  earnings per share
 Basic
                  earnings per share is determined by dividing net profit after income
                  tax
                  attributable to members of the Company, excluding any costs of
                  service
                  equity other than ordinary shares, by the weighted average number
                  of
                  ordinary shares outstanding during the financial year, adjusted
                  for bonus
                  elements in ordinary shares issued during the
                  year.
 ii)
              Diluted
                  earnings per share
 Diluted
                  earnings per share adjusts the figure used in determination of
                  basic
                  earnings per share to take into account the after income tax effect
                  of
                  interest and other financial costs associated with dilutive potential
                  ordinary shares and the weighted average number of shares assumed
                  to have
                  been issued for no consideration in relation to dilutive potential
                  ordinary shares.
 
 1.19 Segment
        Reporting
 Segment
        revenues and expenses are those directly attributable to the segment and
        include
        any joint revenue and expenses where a reasonable basis of allocation exists.
        Segment assets include all assets used by a segment and consist principally
        of
        cash, receivables, inventories, intangibles and property, plant and equipment,
        net of allowances and accumulated depreciation and amortisation. Whilst most
        such assets can be directly attributed to individual segments, the carrying
        amount of certain assets used jointly by two or more segments is allocated
        to
        the segments on a reasonable basis. Segment liabilities consist principally
        of
        accounts payable, employee entitlements, accrued expenses, provisions and
        borrowings. Segment assets and liabilities do not include deferred income
        tax.
 Inter-segment
        Transfers - Segment revenues, expenses and results include transfers between
        segments. These transfers are eliminated on consolidation.
 
 1.20 Employee
        entitlements
 Provision
        is made for the Company's liability for employee entitlements arising from
        services rendered by employees to balance date. Employee entitlements expected
        to be settled within one year together with entitlements arising from wages
        and
        salaries, annual leave and sick leave which will be settled after one year,
        have
        been measured at their nominal amount. Other employee entitlements payable
        later
        than one year have been measured at the present value of the estimated future
        cash outflows to be made for those entitlements.
 Contributions
        are made by the economic entity to employee superannuation funds and are
        charged
        as expenses when incurred.
 
 1.21 Derivatives
 The
        consolidated entity is exposed to changes in foreign exchange rates from
        its
        activities. The consolidated entity uses forward foreign exchange contracts
        to
        hedge these risks. Derivative financial instruments are not held for speculative
        purposes. Derivative financial instruments designated as hedges are accounted
        for on the same basis as the underlying exposure. The accounting for forward
        foreign exchange contracts is set out in Note 1.11 (b).
 F-8
 
 1.22 Adoption
        of Australian Equivalents to International Financial Reporting
        Standards
  Australia
        is currently preparing for the introduction of International Financial Reporting
        Standards (IFRS) effective for financial years commencing 1 January 2005.
        This
        requires the production of accounting data for future comparative purposes
        at
        the beginning of the next financial year.
  The
        economic entity’s management, along with its auditors, are assessing the
        significance of these changes and preparing for their implementation. We
        will
        seek to keep stakeholders informed as to the impact of these new standards
        as
        they are finalized.
  The
        directors are of the opinion that the key differences in the economic entity’s
        accounting policies which will arise from the adoption of IFRS are:
  §              Taxation
 A
        “balance sheet” approach will be adopted, replacing the “statement of financial
        performance” approach currently used by Australian companies. This method
        recognizes deferred tax balances when there is a difference between the carrying
        value of an asset or liability, and its tax base. It is expected that the
        standard may require the entity/group to carry higher levels of deferred
        tax
        assets and liabilities. This will result in the recognition of new assets
        and
        liabilities and an initial impact on retained earnings at 1 January
        2004.
  §              Revenue
 Currently
        the group includes gross revenue received on disposal of assets as revenue.
        Under Australian equivalents to IFRSs gains and losses on sale of will be
        recognized on a net basis in revenue, resulting in lower revenue being recorded
        by the entity/group.
  §              Translation
        of Foreign Subsidiaries
 Currently
        the group translates the accounts of its foreign subsidiary using the temporal
        method for integrated operations. Australian equivalents to IFRSs do not
        distinguish between integrated and self-sustaining operations and all
        investments in a foreign subsidiary with a functional currency different
        to the
        group’s presentation currency will be translated using the closing rate for
        assets and liabilities; the transaction date rate (or average rate) for income
        and expenses; with differences taken to equity. When the foreign subsidiary
        is
        disposed of, Australian equivalents to IFRSs require any balance in equity
        to be
        transferred to the profit or loss. As a result there will be a higher equity
        balance and less volatility in earnings compared to the current treatment
        of
        integrated operations. There will be an initial impact on retained earnings
        from
        the transfer of translation differences to a foreign currency translation
        reserve which will be restated to zero at 1 January 2004.
  §              Impairment
        of Assets
 The
        group
        currently assesses the amount of impairment of assets by determining the
        recoverable amount of the asset on the basis of undiscounted cash flows.
        Under
        Australian equivalents to IFRSs, the group will be required to determine
        the
        recoverable amount as the higher of fair value less costs to sell and value
        in
        use. It is likely that this change in policy will lead to impairments being
        recognized more often than under the existing policy and increased volatility
        in
        future earnings.
  §              Proposed
        Dividends
 Currently
        the group records a provision for dividends when they are declared determined
        or
        publicly recommended on or before reporting date. Under Australian equivalents
        to IFRSs these dividends will not be recognized if they are still to be approved
        at reporting date and no longer at the discretion of the group, resulting
        in
        lower liabilities and lower expenses.
  §              Financial
        Instruments, Recognition and measurement - Hedging
  All
        derivatives contracts, whether used as hedging instruments or otherwise,
        will be
        carried at fair value on the group’s statement of financial position. Australian
        equivalents to IFRSs recognize fair value hedge accounting, cash flow hedge
        accounting, and hedges of investments in foreign operations. Fair value and
        cash
        flow hedge accounting can only be considered where effectiveness tests are
        met.
  Ineffectiveness
        outside the prescribed range precludes the use of hedge accounting and can
        result in significant volatility in the statements of financial
        performance.
 The
        hedging rules will impact the way the group accounts for hedges of its funding
        and for hedges of its statement of financial position. This will result in
        new
        assets and liabilities being recognized, increased volatility in future earnings
        and will have an initial impact on opening retained earnings at 1 January
        2004.
 F-9
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$****2.
                  Revenue from ordinary activities**Revenue
                  from operating activitiesSales
                  revenue
              5,822,982
              8,858,413
              10,598,812Revenue
                  from joint venture partners
              -
              -
              85,922Interest
                  received - other parties
              156,262
              194,150
              364,886Net
                  Foreign exchange gain
              790,084
              525,344
              -Total
                  other revenues
              19,391
              4,294
              227,9046,788,719
              9,582,201
              11,277,524
 
 Revenue
                  from outside operating activitiesProperty
                  rental
              48,804
              55,192
              63,92448,804
              55,192
              63,924Total
                  revenue
              6,837,523
              9,637,393
              11,341,448
 
 **3.
                  Profit from ordinary activities before income tax
                  expense**The
                  operating result before income tax has been determined after
                  charging/(crediting) the following items:Interest
                  paid - other corporations
              29
              124
              3,295Operating
                  lease rental costs
              46,508
              56,732
              57,137Movements
                  in provisionsDepreciation
                  property, plant and equipment
              28,356
              26,914
              17,566Other
                  expenses from ordinary activitiesMovements
                  in provisionsAmortization
                  of goodwill on acquisition of minority interest
              -
              247,777
              251,941Increase
                  in tax related expenses
              177,442
              -
              -Provision
                  for employee entitlements
              19,727
              4,542
              42,374Foreign
                  currency translation (gain)/loss
              185,617
              177,391
              (187,284)Write-down
                  in oyster inventory value
              541,032
              -
              -Loss/(profit)
                  on disposal of fixed assets
              (20)
              34,461
              (15,828)923,798
              464,171
              91,203
 
 F-10
  **Consolidated****2004**
                **2003**
                **2002****$**
                **$**
                **$****4.
                    Income tax**a)Income
                    Tax
                    ExpensePrima
                    facie tax expense calculated at 30% on the profit from ordinary
                    activities
                (411,903)
                582,393
                1,685,110Tax
                    effect of permanent differences:Non
                    deductible expenses
                963
                16,436
                43,458Other
                    Assessable Income
                778
                -
                -Permanent
                    Differences (Indonesia)
                43,144
                -
                -Non-Deductible
                    Expenses (Indonesian Tax Audit)
                53,233Restatement
                    of closing trading stock
                91,697
                145,014
                -Amortization
                    of goodwill
                -
                74,333
                75,582Foreign
                    currency movements
                (232,963)
                (985,962)
                293,404Inventory
                    valuation adjustment
                68,308
                3,839
                -Current
                    year losses not brought to account
                251,672
                860,433
                -Prior
                    year losses not previously recorded as future tax benefits
                    recouped
                -
                -
                (50,630)(Future
                    income tax benefit)/provision for deferred tax not previously
                    brought to
                    account
                -
                -
                71,092Income
                    tax under provided in prior years
                232,017
                90
                -Income
                    tax attributable to operating result
                96,946
                696,576
                2,118,016
  Income
                      tax expense attributable to profit from ordinary activities
                      is made up of
                      movements in:Current
                      income tax provision
                  230,480
                  817,333
                  2,124,078Deferred
                      income tax provision
                  (2,421)
                  406
                  (1,877)Future
                      income tax benefit
                  (132,650)
                  (121,253)
                  (4,185)Income
                      tax under/(over) provided in prior years
                  1,537
                  90
                  -96,946
                  696,576
                  2,118,016
  b)    Current
                      tax liabilityProvision
                      for current income taxBalance
                      at beginning of year
                  (424,840)
                  1,720,422
                  1,534,461Income
                      tax paid
                  (410,894)
                  (2,983,755)
                  (1,981,713)Current
                      year income tax provision
                  230,480
                  817,333
                  2,167,674Foreign
                      Currency movements
                  -
                  17,553
                  -Under/(over)
                      provision in prior years
                  7,979
                  3,607
                  -Transfer
                      to current tax receivable
                  827,755
                  424,840
                  -230,480
                  -
                  1,720,422c)   
                    Deferred tax liabilityProvision
                      for deferred income tax at the applicable rate of 30%
                  (112)
                  406
                  -
 F-11
  
 **Consolidated****2004**
              **2003**
              **2002****4.Income
                  tax (Cont.)**
              **$**
              **$**
              **$**d)
                  Deferred Tax AssetThe
                  future income tax benefit is made up of the following estimated
                  tax
                  benefits:Tax
                  Losses
              114,555
              -
              -Timing
                  Differences
              125,364
              150,568
              25,792239,919
              150,568
              25,792Future
                  income tax benefits not taken to accountThe
                  potential benefits of which will be realized only if the conditions
                  occur
                  for deductibility (set out in Note 1.12), are as follows:Revenue
                  losses not brought to account
              939,444
              551,856-
                  Capital losses (prior years)
              924,638
              924,638
              304,247
  For
        details of the franking account, refer to Note 16.
 
 **Consolidated****2004**
              **2003**
              **2002****5.    
                  Earnings per share**
              **Cents**
              **Cents**
              **Cents**Basic
                  earnings per share (cents per share)
              (1.67)
              1.42
              4.23Diluted
                  earnings per share (cents per share)
              (1.67)
              1.42
              4.03**2004**
              **2003**
              **2002****Earnings
                  reconciliation**
              **$**
              **$**
              **$**Net
                  profit used for basic earnings
              (1,469,956)
              1,244,733
              3,499,017After
                  tax effect of dilutive securities
              -
              -
              46,902Diluted
                  earnings
              (1,469,956)
              1,244,733
              3,545,919
  **2004**
                **No.**
              **2003**
                **No.**
              **2002**
                **No.**Weighted
                  average number of ordinary shares outstanding during the year used
                  for
                  calculation of basic earnings per share
              87,810,254
              87,810,254
              82,724,884Weighted
                  average number of potential ordinary shares outstanding during
                  the year
                  used for calculation of diluted earnings per share
              87,810,254
              87,810,254
              87,910,235
 
 Diluted
        earnings per share is calculated after taking into consideration all options
        and
        convertible notes on issue that remain unconverted at 31 December as potential
        ordinary shares.
 F-12
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$****6.    
                Cash assets**Cash
                  at bank
              1,908,996
              1,533,897
              2,492,418Deposits
                  at call
              1,300,000
              2,768,021
              -Bills
                  of exchange
              -
              -
              2,600,000Bank
                  bonds
              -
              -
              1,027,3903,208,996
              4,301,918
              6,119,808
 
 **7.    
                  Receivables**CURRENTTrade
                  debtors
              764,916
              639,759
              937,931Income
                  tax receivable
              827,755
              126,845
              -Sundry
                  debtors & prepayments
              341,689
              486,426
              244,8101,934,360
              1,253,030
              1,182,741
  **8.    
                  Inventories**CURRENTPearls
              1,193,728
              3,333,948
              2,924,061Jewelry
              7,939
              -
              -1,201,667
              3,333,948
              2,924,061NON
                  CURRENTNuclei
              151,911
              121,836
              145,237Other
              88,337
              -
              -240,248
              121,836
              145,237Total
                  inventory
              1,441,915
              3,455,784
              3,069,298**9.    
                  Self-generating and regenerating assets (SGARAs)**CURRENTOysters
              2,583,417
              2,165,998
              2,671,601NON
                  CURRENTOysters
              9,090,275
              8,406,627
              8,203,530Total
                  SGARAs
              11,673,692
              10,572,625
              10,875,131
  The
        details of the SGARAs that are held by the economic entity as at year end
        are as
        follows:
 F-13
 
 Nature
        of
        SGARAs:-  Oysters
        ( *Pinctada
        Maxima* )
  **2004**
              **2003**
              **2002**Number
              **No.**
              **No.**
              **No.**Held
                  within the economic entities operations:Juvenile
                  oysters which are not nucleated362,940
              749,889
              697,468
              384,622Nucleated
                  oysters
              385,578
              302,780
              285,853Other
                  oysters used for broodstock, saibo tissue and research
              3,006
              8,348
              3,219Economic
                  entities share held within joint operations:Nucleated
                  oysters
              97,628
              -
              1,7151,236,101
              1,008,596
              675,409Change
                  increment in net market value during the financial year
              $nil
              $nil
              $nil
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$****10.   
                  Property, plant and equipment**(a)GeneralPlant
                  and equipment-
                  at cost
              100,475
              77,393
              74,107-
                  accumulated depreciation
              (69,950)
              (62,721)
              (62,020)30,525
              14,672
              12,087(b)Pearling
                  projectLeasehold
                  land and buildings-
                  at cost
              1,283,492
              1,236,544
              907,266-
                  accumulated depreciation
              (437,975)
              (361,430)
              (282,922)845,517
              875,114
              624,344Plant
                  and equipment, vessels, vehicles-
                  at cost
              6,862,873
              6,097,114
              5,690,261-
                  accumulated depreciation
              (5,050,778)
              (4,528,686)
              (4,131,757)1,812,095
              1,568,428
              1,558,504Total
                  pearling project
              2,657,612
              2,443,542
              2,182,848Total
                  property, plant and equipment
              2,688,137
              2,458,214
              2,194,935
 
 Included
        in Pearling Project leasehold land and buildings is $278,920 (2003 - $414,223,
        2002 - $93,665), being construction in progress at cost.
 F-14
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$**Reconciliations
                  of the carrying amount for each class of property, plant and equipment
                  are
                  set out below:(a)GeneralCarrying
                  amount at beginning of the year
              14,672
              12,087
              7,902Additions
              23,081
              9,763
              8,507Depreciation
              (7,228)
              (7,178)
              (4,322)Carrying
                  amount at end of the year
              30,525
              14,672
              12,087
 
 (b)Pearling
                  projectLeasehold
                  land and buildingsCarrying
                  amount at beginning of the year
              875,114
              624,344
              615,504Additions
              46,948
              329,278
              99,572Depreciation
              (76,545)
              (78,508)
              (90,732)Carrying
                  amount at end of the year
              845,517
              875,114
              624,344Plant
                  and equipment, vessels, vehiclesCarrying
                  amount at beginning of the year
              1,568,428
              1,558,504
              1,679,030Additions
              708,610
              780,677
              516,115Disposals
              (1,870)
              (150,311)
              -Depreciation
              (463,073)
              (620,442)
              (636,641)Carrying
                  amount at end of the year
              1,812,095
              1,568,428
              1,558,504
 
 **11.  
                  Intangible assets**Goodwill
                  associated with acquisition of 25% investment in P.T. Cendana Indopearls
                  -
                  at cost
              1,249,292
              1,249,292
              1,249,292Accumulated
                  amortization
              (1,249,292)
              (1,249,292)
              (1,001,516)-
              -
              247,776
 
 **12.  
                  Payables**CURRENTTrade
                  creditors
              332,361
              129,867
              81,052Other
                  creditors
              688,008
              637,113
              854,4481,020,369
              766,980
              935,500
 F-15
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$****13.  
                  Provisions**CURRENTEmployee
                  entitlements
              104,212
              122,946
              124,387Number
                  of employees
              12
              12
              13
 
 Employee
        entitlements relate to holiday pay accrual for all employees of Atlas Pacific
        Ltd and all expatriate employees of PT Cendana Indopearls. There are no material
        accruals in relation to the 432 (2003 - 339, 2002 - 244) Indonesian employees
        of
        PT Cendana Indopearls.
  **14. 
                  Contributed equity**Issued
                  and paid-up capital 87,810,254 ordinary
              18,849,092
              18,849,092
              18,849,092Reconciliation
                  of Contributed EquityBalance
                  at beginning of year
              18,849,092
              18,849,092
              16,183,065Shares
                  issued2002
                  - 731,080 (2001 - 23,806,942) convertible notes with 15 cent face
                  value
                  converted
              -
              -
              109,6622002
                  - 8,521,215 options exercised at 30 cents each
              -
              -
              2,556,365Balance
                  at end of year
              18,849,092
              18,849,092
              18,849,092
 
 Holders
        of ordinary shares are entitled to receive dividends as declared from time
        to
        time and are entitled to one vote per share at shareholders’ meetings. In the
        event of winding up of the Company, ordinary shareholders rank after all
        other
        shareholders (where applicable) and creditors and are fully entitled to any
        proceeds of liquidation.
 
 **15. 
                  Retained profits**Reconciliation
                  of Retained EarningsBalance
                  at beginning of year
              2,452,710
              2,086,080
              1,993,541Net
                  profit (loss) attributable to members of the parent entity
              (1,469,956)
              1,244,733
              3,499,017Dividends
                  Paid
              -
              (878,103)
              (3,406,478)Balance
                  at end of year
              982,754
              2,452,710
              2,086,080
 
 
 F-16
 
 
 **16. 
                  Dividends****Cents
                  perShare**
              **TotalAmount
                  $**
              **PercentageFranked**Dividends
                  paid and not provided for in previous years by the Company
                  are:**2004**Nil
              -
              -
              -**2003**Paid
                  30 April 2003
              1.0
              878,103
              100%**2002**Paid
                  26 April 2002
              2.0
              1,650,274
              50%Paid
                  25 October 2002
              2.0
              1,756,204
              100%3,406,478
 
 **2004**
              **2003**
              **2002****$**
              **$**
              **$**Dividend
                  Franking AccountFranking
                  credits available to shareholders of the Company for subsequent
                  financial
                  years
              2,572,711
              2,692,687
              2,042,723
 
 **17. 
                  Options****2004**
              **2003**
              **2002****NO.**
              **NO.**
              **NO.**(a)Exercisable
                  between 14 October 1999and
                  14 October 2002 at 30 cents eachOutstanding
                  at beginning of year
              -
              -
              8,062,500Exercised
                  during the year
              -
              -
              (7,996,215)Cancelled/forfeited
                  during the year
              -
              -
              (66,285)Outstanding
                  at year end
              -
              -
              -(b)Exercisable
                  between 1 January 2001and
                  31 December 2002 at 30 cents each.Outstanding
                  at beginning of year
              -
              -
              525,000Exercised
                  during the year
              -
              -
              (525,000)Cancelled/Forfeited
                  during the year
              -
              -
              -Outstanding
                  at year end
              -
              -
              -**Total
                  number of options outstanding at year-end.**
              **-**
              **-**
              **-**
  F-17
 
 **18.
                  Commitments**The
                  Company has commitments in relation to the rental of its current
                  office
                  premises. The commitments for lease payments contracted for but
                  not
                  provided for are as follows:**2004**
              **2003**
              **2002****$**
              **$**
              **$**Not
                  longer than one year
              18,270
              -
              27,108Longer
                  than one year, but less than 5 years
              28,366
              -
              -46,636
              -
              27,108
  **19.**  **Contingent
        liabilities**
 
 There
        are
        no contingent liabilities that the Directors are aware of at the date of
        this
        report.
  **20. 
        Notes to the statement of cash flows**
 
 20.1 Reconciliation
        of cash
 
 For
        the
        purposes of the statement of cash flows, cash includes cash on hand and in
        banks, and investments in money market instruments, net of outstanding bank
        overdrafts. Cash at the end of the financial year as shown in the statement
        of
        cash flows is reconciled to the related items in the balance sheet as
        follows:-
 
 **Consolidated****2004**
              **2003**
              **2002****$**
              **$**
              **$**Cash
                  at bank (Note 6)
              1,908,996
              4,301,918
              2,492,418Deposits
                  at call (Note 6)
              1,300,000
              -
              -Bills
                  of exchange (Note 6)
              -
              -
              2,600,000Bank
                  bonds (Note 6)
              -
              -
              1,027,390Cash
                  and cash equivalents
              3,208,996
              4,301,918
              6,119,808
 
 20.2 Reconciliation
        of net cash from operating activities to Operating profit after income
        tax
 Operating
                  profit after income tax
              (1,469,956)
              1,244,733
              3,499,017Inventories
              1,009,074
              699,007
              (3,054,338)Increase/(decrease)
                  in interest accrual
              17,988
              (25,055)
              (4,436)Non
                  cash changes in debtors, prepayments and creditors
              (398,751)
              (914,350)
              459,732Provision
                  for depreciation
              546,849
              706,129
              724,619Provision
                  for employee entitlements
              (13,458)
              (2,063)
              (36,499)Amortization
                  of goodwill
              -
              247,776
              251,941(Profit)/loss
                  on disposal of fixed assets
              (20)
              34,461
              (15,828)Increase/(decrease)
                  in taxes payable
              218,446
              (1,942,954)
              179,899Foreign
                  exchange differences
              185,619
              199,151
              -Net
                  cash provided by/(used in) operating activities
              95,791
              246,835
              2,004,107
  F-18
 
 20.3
              Credit
                  facilities
 As
        at 31
        December 2004, the Company had in place a trade discounting facility with
        the
        ANZ Bank with a limit of $2,000,000. To date, this facility has not been
        utilized. This facility is secured by a registered first debenture charge
        over
        the assets of the Company.
 **21.  
          Directors’ and executives’ remuneration**
 The
        names
        and positions held of parent entity directors and specified executives in
        office
        at any time during the financial year ended 31 December 2005 are:
  Parent
                Entity Directors:Mr
                  S.J. Arrow
              Director
                  - Non-ExecutiveMr
                  W.F. James
              Chairman
                  - Non-Executive (retired 28 July 2004)Mr
                  I.M. Murchison
              Director
                  - Non-ExecutiveMr
                  G.R.W Snow
              Chairman
                  - Non-ExecutiveMr
                  J.J.U. Taylor.
              Managing
                  Director -Executive.Specified
                  ExecutivesMr
                  R.P. Poernomo
              President
                  Director, PT Cendana IndopearlsMr
                  J.S. Jorgensen
              Director,
                  PT Cendana IndopearlsMr
                  S.C.B. Adams
              Company
                  Secretary and Financial Controller
  **Parent
        Entity Directors’ Remuneration**
  **2004**Primary
                
                
                Postemployment
                
                
                Equity
                
                
                Other
                
                
                TotalSalary
                    & Fees
                
                
                SuperannuationContributionMr
                    S.J. Arrow
                
                
                30,000
                
                
                2,700
                
                
                -
                
                
                -
                
                
                -
                
                
                32,700Mr
                    W.F. James
                
                
                35,000
                
                
                3,150
                
                
                -
                
                
                -
                
                
                -
                
                
                38,150Mr
                    I.M. Murchison
                
                
                14,063
                
                
                1,265
                
                
                -
                
                
                -
                
                
                -
                
                
                15,328Mr
                    G.R.W Snow
                
                
                44,687
                
                
                4,022
                
                
                -
                
                
                -
                
                
                -
                
                
                48,709Mr
                    J.J.U. Taylor
                
                
                214,227
                
                
                21,687
                
                
                
                
                
                
                
                
                65,026
                
                
                300,940337,977
                
                
                32,824
                
                
                -
                
                
                -
                
                
                65,026
                
                
                435,827
 
 **2003**Primary
              
              Postemployment
              
              Equity
              
              Other
              
              TotalSalary
                  & Fees
              
              Superannuation
                  ContributionMr
                  S.J. Arrow
              
              
              30,000
              
              
              2,700
              
              
              -
              
              
              -
              
              
              -
              
              
              32,700Mr
                  W.F. James
              
              
              60,000
              
              
              4,219
              
              
              -
              
              
              -
              
              
              -
              
              
              64,219Mr
                  I.M. Murchison
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Mr
                  G.R.W Snow
              
              
              33,750
              
              
              3,038
              
              
              -
              
              
              -
              
              
              -
              
              
              36,788Mr
                  J.J.U. Taylor
              
              
              241,084
              
              
              21,388
              
              
              
              
              
              
              
              
              -
              
              
              262,472364,834
              
              
              31,345
              
              
              -
              
              
              -
              
              
              -
              
              
              396,179
  F-19
 **21.  
          Directors’ and executives’ remuneration (cont.)**
  **Specified
        Executives’ Remuneration**
  **2004**Primary
              Post
                  employment
              Equity
              Other
              TotalSalary
                  & Fees
              Superannuation
                  ContributionMr
                  S.C.B. Adams
              105,000
              9,450
              -
              -
              -
              114,450Mr
                  J.S. Jorgensen
              160,306
              -
              -
              -
              -
              160,306Mr
                  R.P. Poernomo
              19,961
              -
              -
              -
              -
              19,961285,267
              9,450
              -
              -
              -
              294,717
 
 **2003**Primary
              Post
                  employment
              Equity
              Other
              TotalSalary
                  & Fees
              Superannuation
                  ContributionMr
                  S.C.B. Adams
              105,263
              7,692
              -
              -
              -
              112,955Mr
                  J.S. Jorgensen
              149,286
              -
              -
              -
              -
              149,286Mr
                  R.P. Poernomo
              12,500
              -
              -
              -
              21,463
              33,963267,049
              7,692
              -
              -
              21,463
              296,204
  **Shareholdings**
 Number
        of
        Shares held by Parent Entity Directors and Specified Executives
  Balance
                  1/1/04
              Net
                  Change
              Balance
                  31/12/04*Parent
                  Entity Directors*Mr
                  S.J. Arrow
              1,952,934
              -
              1,952,934Mr
                  W.F. James
              -
              -
              -Mr
                  I.M. Murchison
              650,000
              -
              650,000Mr
                  G.R.W Snow
              14,025,744
              -
              14,025,744Mr
                  J.J.U. Taylor
              65,000
              -
              65,000*Specified
                  Executives*Mr
                  S.C.B. Adams
              -
              -
              -Mr
                  J.S. Jorgensen
              36,034
              -
              36,034Mr
                  R.P. Poernomo
              1,265,000
              -
              1,265,00017,994,712
              -
              17,994,712
  There
        are
        no options held by Directors or Specified Executives of the Company. There
        are
        no Directors or Specified Executives who have received any remuneration in
        the
        form of securities of any sort issued by the Company in the last two financial
        years.
  The
        Company’s policy for determining the nature and amount of emoluments of board
        members and senior executives of the company is as follows:
  The
        remuneration structure for executive officers, including executive directors,
        is
        based on a number of factors, including length of service, particular experience
        of the individual concerned and overall performance of the company. The
        contracts for service between the company and specified directors and
        executives, with the exception of the Managing Director Mr J Taylor whose
        contract expires in December 2007, are on a continuing basis the terms of
        which
        are not expected to change in the immediate future. Upon retirement specified
        directors and executives are paid employee benefit entitlements accrued to
        date
        of retirement.
 
 
 F-20


**21.  
        Directors’ and executives’ remuneration (cont.)**
  Disclosure
        of directors’ and executives’ remuneration changed under Australian law for the
        year ended 31 December 2004. Prior years’ disclosure for 3 years comparative is
        presented below.
  **2004**
                **$**
              **2003**
                **$**
              **2002**
                **$**Amounts
                  received or due and receivable by Directors of the Company
              435,827
              445,470
              454,756Number
                  of Directors of Atlas Pacific Limited whose remuneration
                  was:
              **2004**
                **No.**
              **2003**
                **No.**
              **2002**
                **No.**$10,000
                  to$19,999
              1
              1
              1$30,000
                  to$39,999
              2
              3
              2$40,000
                  to$49,999
              1
              -
              1$50,000
                  to$59,999
              -
              -
              1$60,000
                  to$69,999
              -
              1
              1$180,000
                  to$189,999
              -
              -
              1$260,000
                  to$269,999
              -
              1
              -$300,000
                  to$309,999
              1
              -
              -Income
                  received or due and receivable by Australian based executive officers
                  (including executive directors) of the economic entity, from all
                  entities
                  in the economic entity and any related entities.
              294,717
              262,473
              180,000**No.**
              **No.**
              **No.**The
                  number of executive officers whose income was within the following
                  bands$30,000
                  - $39,999
              1
              -
              -$110,000
                  - $119,999
              1
              -
              -$140,000
                  - $149,999
              1
              -
              -$180,000
                  - $189,999
              -
              -
              1$260,000
                  - $269,999
              -
              1
              -
 
 It
        is the
        opinion of the Board in 2003 and 2002 that none of the company’s existing
        offices other than the Managing Director meet the definition of Executive
        Officer under Section 9 of the Corporations Act 2001.
  22.  
        **Related party transactions**
 
 Details
        of Directors’ remuneration are set out in note 21.
 DIRECTORS
        TRANSACTIONS WITH THE COMPANY OR ITS CONTROLLED ENTITIES
  Mr
        R.P.
        Poernomo, the President Director of the Indonesian subsidiary PT Cendana
        Indopearls, received a fee on normal commercial terms of the equivalent to
        $57,188 (2003 - $47,255 2002 $37,095) for providing office facilities and
        administration services for the Company’s Indonesian subsidiary in Jakarta,
        Indonesia.
  The
        Company had an agreement with Arrow Pearling Co Pty Ltd, a company of which
        Mr
        S.J. Arrow is Managing Director and major shareholder, to sub-lease office
        space
        on commercial terms. Rent of $18,072 (2003 - $36,430 2002 $35,000) was paid
        during the year. The rental arrangements with Arrow Pearling Co Pty Ltd ceased
        on 30 June 2004.
  The
        Company also has a consultancy agreement with Arrow Pearling Co Pty Ltd under
        which staff of the economic entity have been trained as pearl operation
        technicians at the Indonesian pearl farm. During the year, $189,030 (2003
        -
        $177,566 2002 $232,061) was payable to Arrow Pearling Co Pty Ltd as consulting
        fees. This agreement was entered into prior to Mr Arrow becoming a Director
        of
        the Company. It was entered into on commercial terms and expires in March
        2009.
  F-21
  During
        the year, an employment contract was entered into between the Company and
        Claire
        Taylor, the wife of the managing Director, Joseph Taylor, on commercial terms.
        Under this contract, Mrs Taylor received remuneration of $48,556 for her
        services in establishing further markets for the Company’s by-product
        material.
 During
        the year, sales of individual pearls of small quantities were made to some
        staff
        and Directors on normal commercial terms
 TRANSACTIONS
        WITH NON-DIRECTOR RELATED PARTIES
  The
        Company purchases pearls from its wholly owned controlled entity PT Cendana
        Indopearls. These transactions are in the normal course of
        business.
 
 
 **23. 
                  Remuneration of auditors**
              **2004**
              **2003**
              **2002**Amounts
                  received or due and receivable by the auditors for:
              **$**
              **$**
              **$**Auditing
                  or reviewing financial statementsAuditors
                  of the Company
              42,594
              17,513
              24,998Other
                  auditors
              -
              12,776
              62,16242,954
              30,289
              87,160Other
                  ServicesAuditors
                  of the Company
              8,921
              23,377
              -Other
                  auditors
              48,016
              31,732
              70,45956,937
              55,109
              70,459
  
  **24. 
                  Segment reporting**(a)Business
                  Segment (Primary Reporting)The
                  economic entity 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****$**
                **$**
                **$**
                **$****2004****Revenue**External
                    segment revenue
                669,459
                5,218,743
                -
                5,888,202Inter-segment
                    revenue
                3,534,025
                -
                (3,534,025)
                -**Total
                    segment revenue**
                4,023,484
                5,218,743
                (3,534,025)
                5,888,202Other
                    unallocated revenue
                (1,656,595)
                974,518
                1,631,398
                949,321**Total
                    revenue**
                
                
                
                6,837,523**Result**Segment
                    result
                314,931
                (300,917)
                (853,068)
                (839,054)Unallocated
                    corporate expenses
                (1,954,477)
                (2,665,335)
                4,085,856
                (533,956)Profit
                    from ordinary activities before income tax
                
                
                
                (1,373,010)Income
                    tax expense
                
                
                
                (96,946)**Net
                    profit**
                
                
                
                (1,469,956)
   F-22
  Depreciation
                    and amortization
                21,128
                7,228
                -
                28,356Other
                    non-cash expenses
                3,666
                16,061
                -
                19,727**Assets**Segment
                    assets
                15,416,636
                1,898,788
                -
                17,315,424Unallocated
                    corporate assets
                549,848
                3,321,747
                -
                3,871,595**Consolidated
                    total assets**
                15,966,484
                5,220,535
                -
                21,187,019**Liabilities**Segment
                    liabilities
                874,227
                350,953
                -
                1,225,180Unallocated
                    corporate liabilities
                58,233
                71,760
                -
                129,993**Consolidated
                    total liabilities**
                932,460
                422,713
                -
                1,355,173Acquisitions
                    of non-current assets(Property,
                    Plant and Equipment)
                755,558
                
                
                755,558Unallocated
                    acquisitions of non-current assets
                
                23,083
                
                23,083778,641
 
 **Indonesia**
              **Australia**
              **Eliminations**
              **Total****$**
              **$**
              **$**
              **$****2003****Revenue**External
                  segment revenue
              54,521
              8,803,892
              -
              8,858,413Inter-segment
                  revenue
              5,875,549
              -
              (5,875,549)
              -**Total
                  segment revenue**
              5,930,070
              8,803,892
              (5,875,549)
              8,858,413Other
                  unallocated revenue
              
              
              
              778,980**Total
                  revenue**
              
              
              
              9,637,393**Result**Segment
                  result
              233,950
              3,002,940
              (483,381)
              2,753,509Unallocated
                  corporate expenses
              
              
              
              (812,200)Profit
                  from ordinary activities before income tax
              
              
              
              1,941,309Income
                  tax expense
              
              
              
              (696,576)**Net
                  profit**
              
              
              
              1,244,733Depreciation
                  and amortization
              946,726
              7,179
              -
              953,905Other
                  non-cash expenses
              2,842
              1,700
              -
              4,542**Assets**Segment
                  assets
              13,688,492
              3,843,809
              -
              17,532,301Unallocated
                  corporate assets
              248,550
              4,411,283
              -
              4,659,833**Consolidated
                  total assets**
              13,937,042
              8,255,092
              -
              22,192,134
 
 F-23
 
 
 (b)Geographical
                  (cont)**Indonesia**
              **Australia**
              **Eliminations**
              **Total****$**
              **$**
              **$**
              **$****2003****Liabilities**Segment
                  liabilities
              623,083
              181,328
              -
              804,411Unallocated
                  corporate liabilities
              7,171
              78,750
              -
              85,921**Consolidated
                  total liabilities**
              630,254
              260,078
              -
              890,332Acquisitions
                  of non-current assets
              1,109,955
              -
              -
              1,109,955(Property,
                  Plant and Equipment)Unallocated
                  acquisitions of non-current assets
              
              
              
              9,7631,119,718
 
 **Indonesia**
              **Australia**
              **Eliminations**
              **Total****$**
              **$**
              **$**
              **$****2002****Revenue**External
                  segment revenue
              103,417
              10,603,213
              -
              10,706,630Inter-segment
                  revenue
              5,069,768
              -
              (5,069,768)
              -**Total
                  segment revenue**
              5,173,185
              10,603,213
              (5,069,768)
              10,706,630Other
                  unallocated revenue
              
              
              
              634,818**Total
                  revenue**
              
              
              
              11,341,448**Result**Segment
                  result
              349,363
              6,574,753
              (291,034)
              6,633,082Unallocated
                  corporate expenses
              
              
              
              (1,016,049)Profit
                  from ordinary activities before income tax
              
              
              
              5,617,033Income
                  tax expense
              
              
              
              (2,118,016)**Net
                  profit**
              
              
              
              3,499,017Depreciation
                  and amortization
              988,459
              4,516
              
              992,975Other
                  non-cash expenses
              17,488
              24,886
              
              42,374**Assets**Segment
                  assets
              13,537,058
              3,743,913
              247,776
              17,528,747Unallocated
                  corporate assets
              200,426
              5,986,308
              -
              6,186,734**Consolidated
                  total assets**
              13,737,484
              9,730,221
              247,776
              23,715,481
 
 F-24
 
 
 (b)Geographical
                  (continued)**Indonesia**
              **Australia**
              **Eliminations**
              **Total****$**
              **$**
              **$**
              **$****Liabilities**Segment
                  liabilities
              699,147
              291,946
              
              991,093Unallocated
                  corporate liabilities
              407,776
              1,381,440
              
              1,789,216**Consolidated
                  total liabilities**
              1,106,923
              1,673,386
              
              2,780,309**2002**Acquisitions
                  of non-current assets
              615,687
              -
              -
              615,687Unallocated
                  acquisitions of non-current assets
              
              
              
              8,507624,194
 
 
 **25.** **Economic
        dependency**
 
 The
        company’s pearls are sold at auction and by private treaty sales through a
        distribution arrangement with Pearlautore International Pty Ltd in Sydney.
        Pearls at the auctions are sold to a number of wholesale customers with a
        wide
        geographic spread.
  All
        of
        the company’s pearls are purchased from its wholly owned subsidiary PT Cendana
        Indopearls.
  **26. 
        Controlled entities**
  **Percentage
                  owned**
              **Place
                  of incorporation**
              **Book
                  value of Company’s investment****2004**
              **2003**
              **2002**
              
              **2004**
              **2003**
              **2002****$**
              **$**
              **$**Sharcon
                  Pty Ltd
              100%
              100%
              100%
              Australia
              -
              -
              -Tansim
                  Pty Ltd
              100%
              100%
              100%
              Australia
              -
              -
              -P.T.
                  Cendana Indopearls
              100%
              100%
              100%
              Indonesia
              -
              -
              --
              -
              -
 
 The
        ultimate parent entity, Atlas Pacific Limited, is incorporated in
        Australia.
 
 **27.** **Post
        balance date events**
 
 There
        have been no significant post balance date events.
 
 
 F-25
 
 **28.**  **Amounts
        payable/receivable in foreign currencies**
 
 The
        Australian Dollar equivalents of unhedged amounts payable or receivable in
        foreign currencies, calculated at year end exchange rates, are as
        follows:
 **CONSOLIDATED****2004**
              **2003**
              **2002****$**
              **$**
              **$**Amount
                  receivable:Indonesian
                  Rupiah
              75,543
              298,712
              44,834Japanese
                  Yen
              537,846
              537,594
              824,629US
                  Dollars
              6,696
              -
              191,037620,085
              836,306
              1,060,500Amounts
                  payable:Indonesian
                  Rupiah
              (945,232)
              (1,106,923)
              (614,866)US
                  Dollars
              -
              -
              (35,721)(945,232)
              (1,106,923)
              (650,587)
 
 **30.
        Additional financial instruments disclosure**
  (a)
              Net
                  fair value of financial assets and
                  liabilities
 
 The
        net
        fair value of cash, cash equivalents and no-interest bearing monetary financial
        assets and liabilities approximates their carrying value.
 
 (b)
              Interest
                  rate risk
 
 The
        economic entity’s exposure to interest rate risk and the effective weighted
        average interest rate for each class of financial asset and financial liability
        is set out below. Exposures arise predominantly from assets and liabilities
        bearing variable interest rates as the economic entity intends to hold fixed
        rate assets and liabilities to maturity.
 
 F-26
 
  **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
                6
                3.05
                1,886,833
                1,300,000
                22,163
                3,208,996Receivables
                4,7
                0.00
                -
                -
                2,174,279
                2,174,2791,886,833
                1,300,000
                2,196,442
                5,383,275Financial
                    LiabilitiesPayables
                12
                0.00
                -
                -
                (1,250,849)
                (1,250,849)**-**
                **-**
                (1,250,849)
                (1,250,849)Net
                    Financial Asset/(Liabilities)
                
                
                1,886,833
                1,300,000
                945,593
                4,132,426**2003****Financial
                    Assets**Cash
                6
                4.59
                1,515,306
                2,768,021
                18,591
                4,301,918Receivables
                4,7
                0.00
                -
                -
                1,253,030
                1,253,0301,515,306
                2,768,021
                1,271,621
                5,554,948Financial
                    LiabilitiesPayables
                12
                0.00
                -
                -
                (766,980)
                (766,980)**-**
                **-**
                (766,980)
                (766,980)Net
                    Financial Asset/(Liabilities)
                
                
                1,515,306
                2,768,021
                504,641
                4,787,968**2002**Financial
                    AssetsCash
                6
                4.80
                1,273,827
                4,808,889
                37,092
                6,119,808Receivables
                7
                0.00
                -
                -
                1,182,741
                1,182,7411,273,827
                4,808,889
                1,219,833
                7,302,549Financial
                    LiabilitiesPayables
                12
                0.00
                -
                -
                (935,500)
                (935,500)-
                -
                (935,500)
                (935,500)Net
                    Financial Asset/(Liabilities)
                
                
                1,273,827
                4,808,889
                284,333
                6,367,049
  
 
 F-27
 
 
 **CONSOLIDATED****Reconciliation
                  of net financial**
                **assets
                  to net assets**
              
              **2004**
              **2003**
              **2002****Note**
              **$**
              **$**
              **$**Net
                  financial assets/(liabilities) as above
              
              4,132,427
              4,787,968
              6,367,049Non-financial
                  assets & liabilities-
                  Inventories
              8
              1,441,915
              3,455,784
              3,069,298-
                  SGARA’s
              9
              11,673,691
              10,572,625
              10,875,131-
                  Property, plant & equipment
              11
              2,688,137
              2,458,214
              2,194,935-
                  Intangibles
              12
              
              -
              247,776-
                  Tax liability/benefit (net)
              4
              (112)
              150,157
              (1,694,630)-
                  Provisions
              15
              (104,212)
              (122,946)
              (124,387)Net
                  assets per balance sheet
              
              19,831,846
              21,301,802
              20,935,172
 
 (c)
                Foreign
                    Exchange Risk
 The
        consolidated entity has entered into foreign exchange contracts to hedge
        certain
        anticipated sale commitments denominated in foreign currencies, particularly
        Japanese Yen. The terms of these commitments are not more than 6
        months.
  The
        consolidated entity’s policy is to enter into forward foreign exchange contracts
        to hedge a proportion of foreign currency sales expected in the future. The
        amount of anticipated future sales is forecast in light of current conditions
        in
        foreign markets and experience in the pearling industry.
  The
        following table sets out the gross value to be received under foreign currency
        contracts, the weighted average contracted exchange rates and the settlement
        periods of outstanding contracts for the consolidated entity.
 
 **2004**
              **2003**
              **2002**
              **2004**
              **2003**
              **2002****Weighted
                  average rate**
              **AUD**
              **AUD**
              **AUD**Sell
                  Japanese YenNot
                  later than one year
              73.50
              70.13
              66.13
              3,384,800
              7,310,601
              9,939,247One
                  to two years
              -
              70.81
              64.62
              -
              500,000
              1,500,000
 
 
 F-28
 
 These
        forward exchange contracts are hedging anticipated sales that are due within
        6
        months. Any unrealized gains and losses on the hedging contracts, together
        with
        the costs of the contracts, will be recognized in the financial statements
        at
        the time the underlying transaction occurs. The gross unrecognized gains
        and
        losses on hedges of anticipated foreign currency sales for the consolidated
        entity are as follows:
 
 **2004**
              **2003**
              **2002****Gains**
              **Losses**
              **Gains**
              **Losses**
              **Gains**
              **Losses****AUD**
              **AUD**
              **AUD**
              **AUD**
              **AUD**
              **AUD**Not
                  later than one year
              289,911
              
              922,729
              -
              172,174
              (28,570)One
                  to two years
              -
              
              58,891
              -
              55,688
              -
 (d)
                  Credit
                      risk exposure
 The
        credit risk on financial assets of the economic entity which have been
        recognized on the balance sheet, other than investments in shares, is the
        carrying amount, net of any provision for doubtful debts. The consolidated
        entity minimizes concentration of credit risk by undertaking transactions
        with a
        large number of customers and counterparties in various countries. The company
        carries insurance against default of its debtors up to $2 million.
  Credit
        risk on off-balance sheet derivative contracts is minimized as counterparties
        are recognized financial intermediaries with acceptable credit ratings
        determined by a recognized rating agency.
  **31.** **Significant
            differences between Australian GAAP and US
            GAAP**
 
 The
        above
        referred to standards and requirements differ in certain respects from US
        GAAP.
        However, the differences which had a significant effect on the consolidated
        net
        income and shareholders equity of Atlas Pacific Ltd in previous years no
        longer
        exist, due to changes in the accounting conventions used in the Company’s
        Australian accounts. While this is not a comprehensive summary of all
        differences between Australian Accounting Practice (Australian GAAP) and
        US
        GAAP, other differences are not likely to have a significant effect on the
        consolidated net income or shareholders equity of the group.
  The
        effect on the statement of performance and the statement of position from
        the
        adjustments that are required to reflect US GAAP for the above stated accounts
        are as follows:
 
 F-29
  **YEARS
                  ENDED 31 DECEMBER****2004**
              **2003****(1)**
              **2002****(1)****STATEMENT
                  OF PERFORMANCE**Net
                  income/(loss) under Australian GAAP
              (1,469,956)
              1,244,733
              3,499,01731.2Amortization
                  of Goodwill
              -
              247,777
              251,94131.4Stock
                  Option issue to employees
              -
              -
              (36,400)31.5Change
                  in Fair Value of Derivative Instruments
              (691,709)
              782,327
              (6,316)31.8Capitalization
                  of Administration Expenses to Inventory
              168,508
              426,448
              487,02231.9Adjustment
                  to foreigh exchange balances of off-shore subsidary
              (1,424,173)
              (1,116,101)
              320,234Net
                  income before cumulative effect of change in Accounting Principal
                  under US
                  GAAP
              (3,417,330)
              1,585,184
              4,515,498Cumulative
                  effect of change in Accounting Principal
              -
              -
              -Net
                  income under US GAAP
              (3,417,330)
              1,585,184
              4,515,498
 
 **YEARS
                  ENDED 31 DECEMBER****2004**
              **2003****(1)**
              **2002****(1)****STATEMENT
                  OF POSITION**EquityAustralian
                  GAAP
              19,831,846
              21,301,802
              20,935,17231.2Goodwill
              499,718
              499,718
              251,94131.5Financial
                  Instruments
              289,911
              981,620
              199,29231.8Capitalization
                  of Administration Expenses to Inventory
              -
              (168,508)
              (594,956)31.9Adjustment
                  to foreigh exchange balances of off-shore subsidary
              (3,782,136)
              (2,880,458)
              (1,186,993)US
                  GAAP
              16,839,339
              19,734,174
              19,604,456Total
                  AssetsAustralian
                  GAAP
              21,187,019
              22,192,134
              23,715,48131.2Goodwill
              499,718
              499,718
              251,94131.5Financial
                  Instruments
              289,911
              981,620
              199,29231.8Capitalization
                  of Administration Expenses to Inventory
              -
              (168,508)
              (594,956)31.9Adjustment
                  to foreigh exchange balances of off-shore subsidary
              (3,782,136)
              (2,880,458)
              (1,186,993)US
                  GAAP
              18,194,514
              20,703,635
              22,397,898
  (1)
                US
                    GAAP restated in accordance with the adjustment stated in Note
                    31.9. The
                    adjustments for foreign currency translation have not been made
                    in
                    previous years and so the accounts for 2002 and 2003 are restated
                    in this
                    report for the first time.
  **31.1** **DEVELOPMENT
          COST**
 
 Under
        Australian GAAP, development costs such as those relating to the establishment
        of a pearl farm, can be capitalized and amortized when commercial production
        is
        achieved. For US GAAP purposes, such research and development cost is written
        off when incurred. In 1997, the Company wrote off all development costs incurred
        to date as an abnormal item, and therefore the Company’s accounting treatment of
        these costs is now consistent with US GAAP.
 
 **31.2** **GOODWILL**
 
 Under
        Australian GAAP, goodwill relating to the acquisition of a business is written
        off on a straight line basis over the period during which the benefits of
        the
        goodwill are expected to arise which cannot be greater than 20 years. Effective
        from 1 January 2002, goodwill may not be amortized under US GAAP. Consequently,
        there is an adjustment required to the accounts and this is reflected as
        described in note 31 above.
  F-30
 **31.3** **VALUATION
          OF INVENTORY**
 
 For
        US
        GAAP purposes inventory is valued at the lower of cost or fair market value.
        Australian GAAP requires inventory to be valued at the lower of cost and
        net of
        realizable value. For the purpose of preparation of the primary financial
        statements, no difference exists between the different methods of valuing
        inventory.
  Under
        Australian GAAP, special disclosures are required in relation to inventory
        which
        is classified as a Self-Generating or Regenerating Asset (SGARA). This
        disclosure is included in the annual report but has not effect on the accounting
        treatment of the inventory for the Company.
 
 **31.4** **STOCK
          OPTION ISSUES**
 
 During
        2000, the Company repriced its stock options from A$0.40 to A$0.30, the then
        quoted market price. Under US GAAP, these options are accounted for as variable
        options from that time forward and must be marked to market through income
        until
        they are exercised, forfeited, or expire.
  Exercise
        price of options:  A$0.30
 
 As
                  at December 31, 2004
              As
                  at December 31, 2003
              As
                  at December 31, 2002Number
                  of options on issue
              -
              -
              -1Share
                  Price (December 31)
              
              
              A$0.390March
                  28, 2002
              
              
              A$0.460April
                  19, 2002
              
              
              A$0.495September
                  30, 2002
              
              
              A$0.425Change
                  in value attributed to options
              N/A
              N/A
              A$36,400
  (1)
                525,000
                    options exercised during 2002-
                  175,000
                    - March 28, 2002
                  170,000
                    - April 19, 2002
                  180,000
                    - September 30, 2002(2)
                275,000
                    options forfeited during
                    2001.
 
 **31.5** **GAINS
          AND LOSSES ON FOREIGN EXCHANGE CONTRACTS**
 
 In
        accordance with FAS 133 US GAAP requires that the loss or gain on Forward
        Exchange Contracts (FEC’s) noted in Note 31 above must be recognized in the
        statement of performance of the Company. The adjustment to the statement
        of
        performance and statement of position has been recognized from January 1,
        2001
        and this difference is as follows:
 
 2004
              2003
              2002$
              $
              $Fair
                  Value of Forward Exchange Contracts
              289,911
              981,620
              199,292Gain/(Loss)
                  from Forward Exchange Contracts
              (691,709)
              782,327
              (6,318)
 
 FAS
        133
        was required to be adopted from January 1, 2001 and therefore a cumulative
        effect of change in accounting principal was booked upon adoption.
  F-31
 **31.6** **EARNINGS
          PER SHARE**
 
 The
        calculation of diluted earnings per share under US GAAP differs from that
        under
        Australian GAAP. Under US GAAP common stock equivalents are not included
        in
        diluted earnings per shares unless they are considered dilutive. Also, under
        US
        GAAP the treasury stock method is used to calculate the dilutive effect of
        stock
        options.
  YEARS
                    ENDED 31 DECEMBER2004
                2003(1)
                2002(1)(cents)
                (cents)
                (cents)Basic
                    Earnings per share underAust
                    GAAP
                (1.67)
                1.42
                4.23US
                    GAAP (before cumulative effect of change in Accounting
                    Principal)
                (3.89)
                1.81
                5.46US
                    GAAP (after effect of change in Accounting Principal)
                (3.89)
                1.81
                5.46Earnings
                    per ADR under US GAAP
                  -
                    20 shares equivalent to 1 ADR
                  before
                    change in Acc. Princ.
                (77.80)
                36.20
                109.17after
                    change in Acc. Princ.
                (77.80)
                36.20
                109.17Diluted
                    Earnings per share underAust
                    GAAP
                (1.67)
                1.42
                4.03US
                    GAAP (before cumulative effect of change in Accounting
                    Principal)
                (3.89)
                1.81
                5.06US
                    GAAP (after effect of change in Accounting Principal)
                (3.89)
                1.81
                5.06Earnings
                    per ADR under US GAAP
                  -
                    20 shares equivalent to 1 ADR
                  before
                    change in Acc. Princ.
                (77.80)
                36.20
                101.92after
                    change in Acc. Princ.
                (77.80)
                36.20
                101.92Reconciliation
                    of Diluted Earnings2004
                  (A$)
                2003(1)
                  (A$)
                2002(1)
                  (A$)Before
                    cumulative effect of change in Accounting PrincipalNet
                    Profit - Basic EPS (USGAAP)
                (3,417,330)
                1,585,184
                4,515,498Add
                    Back Interest on Convertible Notes
                -
                -
                2,276Net
                    Profit - Diluted EPS (US GAAP)
                (3,417,330)
                1,585,184
                4,515,498Outstanding
                    Shares - Basic EPS
                87,810,254
                87,810,254
                82,724,884Add
                    dilutive options (US GAAP)
                -
                -
                6,535,281Add
                    dilutive convertible notes (US GAAP)
                -
                -
                24,494Outstanding
                    Shares - Diluted EPS (US GAAP)
                87,810,254
                87,810,254
                89,284,659
 
 (1)
                  US
                      GAAP restated in accordance with the adjustment stated in Note
                      31.9. The
                      adjustments for foreign currency translation have not been
                      made in
                      previous years and so the accounts for 2002 and 2003 are restated
                      in this
                      report for the first time.
 
 F-32
 
 
 YEARS
                  ENDED 31 DECEMBER2004
              2003(1)
              2002(1)(cents)
              (cents)
              (cents)After
                  cumulative effect of change in Accounting PrincipalNet
                  Profit - Basic EPS (US GAAP)
              (3,417.330)
              1,585,184
              4,515,498Add
                  Back Interest on Convertible Notes
              -
              -
              2,276Net
                  Profit - Diluted EPS (US GAAP)
              (3,417.330)
              1,585,184
              4,515,498Outstanding
                  Shares - Basic EPS
              87,810,254
              87,810,254
              82,724,884Add
                  dilutive options (US GAAP)
              -
              -
              6,535,281Add
                  dilutive convertible notes (US GAAP)
              -
              -
              24,494Outstanding
                  Shares - Diluted EPS (US GAAP)
              87,810,254
              87,810,254
              89,284,659
  (1)
                  US
                      GAAP restated in accordance with the adjustment stated in Note
                      31.9. The
                      adjustments for foreign currency translation have not been
                      made in
                      previous years and so the accounts for 2002 and 2003 are restated
                      in this
                      report for the first
                      time.
 
 **31.7** **SHARE
          OPTION PLANS**
 
 The
        Company has no formal process for the inclusion of share options in the
        remuneration of its employees or executives. Options have in the past been
        issued as part of the remuneration of employees and executives. At 31 December
        2004 there are no outstanding share options issued by the Company and no
        options
        were issued to employees and executives in the year ended 31 December
        2004.
 
 F-33
 
 
 2004
              2003
              2002Issued
                  and subscribed ordinary shares
              Number
                  of Shares
              A$
              Number
                  of Shares
              A$
              Number
                  of Shares
              A$Balance,
                  beginning of year
              87,810,254
              18,849,092
              87,810,254
              18,849,092
              78,557,959
              16,183,065Issue
                  of ordinary shares pursuant to options exercised at 30 cents each
              --
              --
              --
              --
              8,521,215
              2,556,365Issue
                  of ordinary shares through conversion of Secured Convertible Notes
                  (debt)
                  to equity.
              --
              --
              --
              --
              731,080
              109,662Balance
                  at end of year
              87,810,254
              18,849,092
              87,810,254
              18,849,092
              87,810,254
              18,849,092
 
 **31.8** **Capitalization
          of Administration Expenses**
 
 The
        Company has capitalized expenditure into inventory which is of an administrative
        nature for the years 2000 and 2001. These costs were capitalized because
        they
        form part of the cost of running the Indonesian company which is dedicated
        to
        the production of pearls. Under ARB 43, expenditure which is of an
        administrative nature may not be capitalized to inventory and must be expensed
        in the period that it is incurred. The adjustment required to reflect this
        change is as follows:
 
 YEARS
                  ENDED 31 DECEMBER2004
              2003
              2002Administration
                  costs capitalized
              -
              -
              -Cumulative
                  effect on Total Assets
              -
              (168,508)
              ($594,956)Cumulative
                  effect on Equity
              -
              (168,508)
              ($594,956)Effect
                  on Net Income
              168,508
              426,448
              $487,022
  **31.9** **Adjustment
            for foreigh exchange balance of off-shore subsidary**
  The
            Company does not consider the Indonesian subsidiary, Cendana, to be a
            self
            sustaining entity. Under Australian GAAP, only monetary items that are
            stated in
            a currency other than Australian Dollars are converted to the reporting
            currency
            at the exchange rate at the balance date. All other foreign currency
            balances
            are translated to Australian Dollars at their historical rate. This is
            referred
            to as the temporal method of accounting. Under US GAAP, all balance sheet
            items
            that are recorded in a currency other than the reporting currency are
            translated
            at the spot rate at the balance date. This is referred to as the current
            method.
            The foreign currency movements are recorded in a foreign currency revaluation
            reserve on the balance sheet. The adjustment required to reflect this
            change is
            as follows:
 YEARS
                        ENDED 31 DECEMBER2004
                    
                    2003
                    
                    
                    2002Cumulative
                        effect on Total Assets
                    
                    
                    (3,782,134
                    )
                    
                    
                    (2,801,329
                    )
                    
                    
                    (1,713,860
                    )Cumulative
                        effect on Total Liabilities
                    
                    
                    -
                    
                    
                    
                    871
                    
                    
                    
                    (13,131
                    )Cumulative
                        effect on Equity
                    
                    
                    (3,782,136
                    )
                    
                    
                    (2,880,458
                    )
                    
                    
                    (1,186,993
                    )Cumulative
                        effect on Translation Reserve
                    
                    
                    1,562,096
                    
                    
                    
                    2,004,591
                    
                    
                    
                    1,507,226Effect
                        on Net Income
                    
                    
                    1,424,173
                    
                    
                    
                    (1,116,101
                    )
                    
                    
                    320,234
 F-34