ATLAS PEARLS LTD — Interim / Quarterly Report 2008

Aug 28, 2008

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ABN 32 009 220 053

29[th] August 2008

The Manager Australian Stock Exchange Exchange Plaza 2 The Esplanade PERTH WA 6000

Dear Sir,

RE: APPENDIX 4D - HALF YEAR REPORT

The Company lodges its financial report for the six month period to 30[th] June 2008. The Directors are pleased to announce an after tax profit of $4,275,928. Total revenue for the 6 months to 30[th] June 2008 was $11,199,156 of which $3,362,147 related to the gain recognised on the revaluation of the company’s pearls and oysters under AASB141.

The company has sufficient pearl stocks to achieve its full year revenue forecast for pearl sales of $15.8 million. Unless there are changes to current market conditions, it is expected that these sales will be achieved. Jewellery retail and other by-product sales are forecast to deliver an additional $1 million to revenue. Expenditure has been affected by a 50% increase in fuel prices in Indonesia in 2008. The first six months of 2008 have seen the AUD strong against the Japanese Yen which has had a negative impact on revenue but recent appreciation of the Japanese Yen against the Australian Dollar will have a positive effect on the earning capacity of the company if this trend continues.

The company paid an interim fully franked dividend of two (2) cents per share in July this year. Cash flow is expected to remain strong but future income receipts may slow due to global economic conditions.

A large harvest (nearly 80,000 pearls valued at $5 million) was delivered to Pearlautore International in July. There has been a pleasing improvement in pearl size and the overall quality of the pearls remains good. The final harvest for 2008 will be delivered in September.

The company will finalise the termination of its US listing and reporting obligations in September. This deregistration process has been expensive for the company (approx $250,000) but will result in significant savings to the company which would have been required to comply with significant compliance regulations (Sarbanes Oxley Act) in future years.

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43 York Street, Subiaco, WA 6008 Australia � PO Box 8015, Subiaco East, WA 6008, Australia TELEPHONE (61) (8) 9380 9444 � FACSIMILE (61) (8) 9380 9970 � WEBSITE http://www.atlassouthseapearl.com.au � EMAIL atlas@atlassouthseapearl.com.au

The implementation of research outcomes from the genetics program that is being undertaken in conjunction with James Cook University will commence this year when the hatchery breeding season commences. Analysis of the genetic affects on pearl growth will also start when the first research pearls are harvested in September. This is expected to yield significant results for the company over the next five years.

Progress on the company’s Malaysian expansion for the business has been constrained due to the local land use approval process. The oysters that were expected to be farmed at the new Malaysian sites are being managed in Indonesia. This delay is not expected to impact adversely on long term growth projections and efforts are still being made to secure a new site for development in Malaysia.

Yours faithfully,

/s/ George Snow GEORGE SNOW Chairman

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ATLAS SOUTH SEA PEARL LIMITED

(A.B.N. 32 009 220 053)

AND ITS CONTROLLED ENTITIES

INTERIM FINANCIAL REPORT 30[TH] JUNE 2008

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INDEX

1.	Directors’ Report	1
	1.1. Director’s Report	1
	1.2. Significant Changes	4
	1.3. Dividends	4
	1.4. Directors’ Meetings	4
	1.5. Directors’ Benefits	4
	1.6. Directors’ Shareholdings	5
2.	Auditor’s Independence Declaration	6
3.	Consolidated Income Statement	7
4.	Consolidated Balance Sheet	8
5.	Consolidated Statement of Changes in Equity	9
6.	Consolidated Cash Flow Statement	10
7.	Notes to the Consolidated Financial Statements	11
8.	Directors’ Declaration	23
9.	Independent Auditor’s Review Report to the Members	24
10.	Appendix 4D information	26

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS REPORT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

The Directors present the financial report of Atlas South Sea Pearl Limited ("the Company") and the consolidated accounts of the economic entity, being the Company and its controlled entities for the half year ended 30th June 2008 and the auditors report thereon.

DIRECTORS’ REPORT

The Directors of the Company during or since the end of the half year are:

Name	Period of Directorship
George Robert Warwick Snow, B.Ec. Chairman	Director since 28 October 1997 Chairman since 28 July 2004
Stephen John Arrow Non-Executive Director	Director since 29 June 1999 Retired 28 May 2008
Ian Mackenzie Murchison B.Comm, FCA, Dip. Naut. Sc. Non-Executive Director	Director since 28 July 2004
Stephen Paul Birkbeck Non-Executive Director	Director since 15 April 2005
Joseph James Uel Taylor, B.Sc. (Biology), Ph.D. Managing Director	Director since 13 September 2000

ACTIVITIES AND REVIEW OF OPERATIONS

The activity of the economic entity is the management of a pearl farming business located in Indonesia. There has been no significant change in the pearl farming activities of the economic entity since the last year end report. There has been some diversification of the economic entity’s activities into jewellery manufacturing and retail of pearl products but this represents less than 5% of the total turnover and profit of the business at present.

A summary of consolidated revenues and results for the half-year by significant geographical segments is set out below:

Indonesia Australia Intersegment eliminations Total continuing operations Other unallocated revenue Unallocated revenue less unallocated expenses Profit before income tax Income tax expense Profit for the period	Segment revenues 2008 2007 $ $ 3,607,049 4,250,674 7,132,245 8,352,412 (3,277,401) (3,860,409)	Segment results 2008 2007 $ $ 3,186,082 6,059,830 3,234,310 6,244,131 18,461 (50,432)
	7,461,893 8,742,677 3,737,263 7,627,483	6,438,853 12,253,529 (374,613) (999,530)
	11,199,156 16,370,160
		6,064,240 11,253,999 (1,788,312) (3,198,050)
		4,275,928 8,055,949

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS REPORT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

1. Pearling Operations

a. Juvenile Oyster Production Results

Despite the La Nina conditions that were experienced during last year, both our hatcheries maintained very satisfactory output of spat (1mm infant pearl oysters). Grow-out, which had been experiencing problems in late 2007, has shown significant improvement and juvenile oyster numbers from the 2007/08 hatchery season are on target. The climate experts forecast that 2008 will be a more normal year.

Large numbers of young oysters have been shipped from Bali and Lombok to our main farming sites in Alyui Bay, Papua with great success.

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----- Start of picture text -----

Tianyar
Penyabangan Barat
Gerokgak Karang Malaka
Asem
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b. Pearl Production Results

From January to June of 2008 over 200,000 oysters have been seeded. We are now transporting some of the Bali seeded oysters to the fast growing waters of Papua to improve pearl growth and reduce production costs at the remote Alyui Bay site.

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Alyui Bay, Waigeo
Island , Papua
Malaka , Lombok
Bali –
Penyabangan & Gerokgak &
Tianyar Barat - N. Bali
Karang Asem - E. Bali
----- End of picture text -----

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS REPORT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

A new grow-out site in East Bali, Tianyar Barat has been surveyed. Development of the site has been approved by the regional government and we expect to begin pilot scale farming there within the next few months.

Commercial scale harvesting of second operation pearls commenced this year after two year’s of working to improve quality. The results have been better than anticipated and we will be continuing efforts in this area.

The harvests completed up to June 30, 2008 have been very successful and we remain pleased with overall quality of the pearls. Additional harvests are planned for September 2008.

c. By-product Results The sale of mother of pearl continues and we expect this to remain a significant part of the by-product revenue. Work continues in seeking markets for pearl oyster as sea food.

d. Retail Operations

Significant progress has been made in our jewellery manufacturing division. An expanded marketing team has seen growth in retail sales. A range of new and exciting jewellery collections has been introduced with specific price points to entice a wider market base. Retail sales of pearls and pearl jewellery continues to grow. Additional retail outlets in the tourist precincts of Seminyak and Ubud in Bali have been opened this year.

e. Wholesale pearl sales

The Company continues to be represented by Pearl Autore International (PAI) as the sole agent for the international trading of our pearls. PAI’s representation remains strong in United States, Europe and Asia and despite the slower international economy, pearl sales to date have been on target. The strong, strategic alliance with the Autore group gives Atlas a significant advantage in the global pearl market.

f. New Pearling Ventures

The establishment of a Malaysian based pearl farm is advancing slower than hoped due to the detailed requirements at a local level to secure lease arrangements. Approval of the pearling venture at a state and national level has been received. The Managing Director of Atlas South Sea Pearl has received a number of invitations to examine pearling opportunities in the south east Asian and Pacific regions.

In Indonesia, the company has recently secured an additional grow-out lease on the island of Bali. This pearl farm at this site will be commissioned by the end of 2008.

2. Operating Environments

a. Socio-Political and Security situation

The Company continues to carefully monitor the security situation in Indonesia.

The Company’s active involvement in both social and environmental initiatives remains a key component of our philosophy. Our scholarship programme and support for the most underprivileged in the communities continues.

Atlas South Sea Pearl is committed to operating its pearling ventures in a socially, environmentally and ethically responsible manner.

b. Personnel

Employee numbers have increased compared to last year. As at 30[th] June 2008, Atlas South Sea Pearl and the Indonesian subsidiary PT Cendana Indopearls employed 568 people in Indonesia (June 2007: 436) and 4 people in Australia (June 2007: 4). There was an increase of 100 staff employed in growout in North Bali.

3. Profit Result

The Company announces an after tax profit of $4,275,928 (2007 – $8,055,949) for the six months to 30[th] June which was achieved on sales of $7,456,587 (2007 - $8,797,327). The profit for 2007 was affected by a net increase in the fair market value of Agriculture assets of $5,561,754 (2008 - $2,633,228). The driver that caused a greatest change in the increase in fair market value of Agriculture assets in 2007 was the improvement in the average size of the pearls in stock when comparing December 2006 with June 2007.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS REPORT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

There has been a decrease in sales revenue of $1,340,740 (15%) during the first six months of 2008 when compared to the corresponding period in 2007. A smaller proportion of premium quality product sold has resulted in the lower sales income for the first six months of 2008. The average sales price is expected to improve in the second half of the year when there will be a larger quantity of product available for sale.

SIGNIFICANT CHANGES

There have been no significant changes in the state of affairs of the economic entity during the period.

DIVIDENDS

A dividend of 2 cents per share was paid on 14[th] July 2008. The total amount paid in this dividend was $1,800,918.

DIRECTORS MEETINGS

The attendance at meetings of the Company’s Directors including meetings of the Audit Committee is shown below:

Director	Period	Number of Directors Meetings	Number of Directors Meetings	Audit Committee Meetings	Audit Committee Meetings
		Held	Attended	Held	Attended
G.R.W. Snow	01/01/08 - 30/06/08	4	4	1	1
S.J. Arrow	01/01/08 - 28/05/08	3	2	1	-
I.M. Murchison	01/01/08 - 30/06/08	4	3	1	-
S.P. Birkbeck	01/01/08- 30/06/08	4	3	1	1
J.J.U. Taylor	01/01/08 - 30/06/08	4	4	1	1

As at the date of this report the economic entity has an audit committee which is made up of the non-executive members of the Board. The Directors have the right, in connection with their duty and responsibilities as directors, to seek independent professional advice at the Company’s expense.

DIRECTORS’ BENEFITS

Pursuant to an agreement with Arrow Pearling Company Pty Ltd, fees of $47,000 were charged to the Company during the half year which represents a royalty for training pearl technicians (six months to 30 June 2007 - $46,762). This agreement was entered into in March 1999 prior to Mr. Arrow becoming a board member and it was entered into on commercial terms. This agreement ceases in March 2009.

Apart from the foregoing, since the previous financial year end, no Director of the Company has received or has become entitled to receive a benefit (other than the emoluments disclosed in the annual financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related company with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS REPORT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

DIRECTORS SHAREHOLDINGS

The relevant interest of each Director in the share capital of the Company, as notified by the Directors to the Australian Stock Exchange in accordance Corporations Act 2001, at the date of this report is as follows:

Current Holdings

	Ordinary Shares	Ordinary Shares
	Direct	Indirect
G.R.W. Snow	-	13,899,373
I.M. Murchison	-	700,000
S.P. Birkbeck	-	400,000
J.J.U. Taylor	20,000	1,200,000

AUDITOR’S INDEPENDENCE DECLARATION

The auditors Independence declaration as required by section 307C of the Corporations Act 2001, on page 6 forms part of the directors report for the half year ended 30[th] June 2008.

ON BEHALF OF THE BOARD

G.R.W. SNOW Chairman 29[th] August 2008

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BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 aa.perth@bdo.com.au www.bdo.com.au

ABN 79 112 284 787

29 August 2008

The Directors Atlas South Sea Pearl Limited 43 York Street SUBIACO WA 6008

Dear Sirs

DECLARATION OF INDEPENDENCE BY GLYN O’BRIEN TO THE DIRECTORS OF ATLAS SOUTH SEA PEARL LIMITED

As lead auditor of the group for the half-year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• any applicable code of professional conduct in relation to the review.

This declaration is in respect of Atlas South Sea Pearl Limited and the entities it controlled during the period.

Glyn O’Brien Director

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BDO Kendalls Audit & Assurance (WA) Pty Ltd

Perth, Western Australia.

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BDO Kendalls is a national association of separate partnerships and entities

ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

CONSOLIDATED INCOME STATEMENT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

Note Revenue from continuing operations 2 Other income 2 Operating costs Marketing expenses Administration expenses Finance costs Research & development Other expenses Total expenses Profit before income tax expense Income tax expense Profit after income tax attributable to members of the parent entity Overall Operations: Earnings per share for profit/(loss) attributable to ordinary equity holders of the Company: Basic earnings per share (cents) 3 Diluted earnings per share (cents) 3	Half Year 2008 2007 $ $ 7,456,587 8,797,327 3,742,569 7,572,833 (1,245,553) (2,091,932) (1,196,196) (961,215) (2,197,322) (1,395,214) (57,968) - (74,500) (25,000) (363,377) (642,800)
	(5,134,916) (5,116,161)
	6,064,240 11,253,999 (1,788,312) (3,198,050)
	4,275,928 8,055,949
	4.75 8.99 4.75 8.99

The Income Statement is to be read in conjunction with the notes to and forming part of the half year financial report.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

CONSOLIDATED BALANCE SHEET AS AT 30[TH] JUNE 2008

Note CURRENT ASSETS Cash and cash equivalents Trade and other receivables Financial instruments 4 Inventories Biological assets 5 Total Current Assets NON-CURRENT ASSETS Trade and other receivables Inventories Biological assets 5 Property, plant and equipment Deferred tax assets Total Non-Current Assets Total Assets CURRENT LIABILITIES Trade and other payables Borrowings Financial instruments 4 Current tax liabilities Total Current Liabilities NON-CURRENT LIABILITIES Deferred tax liabilities Long-term provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital 9 Reserves Retained profits Total Equity	30/06/08 31/12/07 30/06/07 $ $ $ 147,049 1,032,797 556,021 4,306,753 2,580,632 6,513,497 164,377 116,581 112,248 6,517,913 3,228,207 4,947,913 5,065,634 8,569,494 3,587,845
	16,201,726 15,527,711 15,717,524
	110,432 577,995 - 86,689 77,671 79,314 14,345,011 9,323,674 13,396,651 2,123,915 2,290,465 2,566,752 378,697 172,152 274,063
	17,044,744 12,441,957 16,316,780
	33,246,470 27,969,668 32,034,304
	2,974,555 928,854 1,124,589 589,615 279,438 276,296 - 152,601 152,031 448,353 349,912 1,218,072
	4,012,523 1,710,805 2,770,988
	3,880,491 2,815,254 3,229,044 92,611 67,879 73,357
	3,973,102 2,883,133 3,302,401
	7,985,625 4,593,938 6,073,389
	25,260,845 23,375,730 25,960,915
	19,544,815 19,544,815 19,544,815 (6,814,003) (6,224,108) (5,452,824) 12,530,033 10,055,023 11,868,924
	25,260,845 23,375,730 25,960,915

The Balance Sheet is to be read in conjunction with the notes to and forming part of the half year financial report.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

Note Total equity at the beginning of the half-year Adjustment on change in accounting policy for AASB 141 to retained profits net of tax Restated total equity at the beginning of the financial year Exchange differences on translation of foreign operations Net investment in foreign operation Net income recognised directly in equity Profit for the half year Total recognised income and expense for the year Shares issued during the year Shares forfeited/ cancelled during the year Share based payments Dividend payment Total movement in equity Total equity at the end of the half-year	Half Year 2008 2007 $ $ 23,375,730 18,198,998
	- 2,193,466
	23,375,730 20,392,464
	176,015 81,148 (779,830) (1,056,402)
	(603,815) (975,254) 4,275,928 8,055,949
	3,672,113 7,080,695
	- 440,000 - (155,946) 13,920 10,571 (1,800,918) (1,806,869)
	(1,786,998) (1,512,244)
	25,260,845 25,960,915

The statement of changes in equity is to be read in conjunction with the notes to and forming part of the half year financial report.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

CONSOLIDATED CASH FLOW STATEMENT FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

Note Cash flows from operating activities Proceeds from pearl jewellery and oyster sales Proceeds from other operating activities Interest paid Interest received Payments to suppliers and employees Income taxes paid Net cash provided by/ (used in) operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds on disposal of fixed assets Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Proceeds from issue of shares Loan to employees to purchase shares Repayment of loan to employees Payments for purchase of company shares Dividend payment Net cash used in financing activities Net increase/(decrease) in cash held Cash and cash equivalents at the beginning of the half-year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the half-year	Half Year 2008 2007 $ $ 5,450,173 5,093,518 139,869 (61,391) (19,640) (649) 24,340 22,825 (5,836,907) (4,451,999) (713,780) (632,958)
	(955,945) (30,654)
	(198,620) (482,214) - 15,573
	(198,620) (466,641)
	1,520,390 290,873 (1,204,652) - - 440,000 - (440,000) - 65,000 - (155,946) - (1,806,869)
	315,738 (1,606,942)
	(838,827) (2,104,237) 1,032,797 2,631,979 (46,911) 28,279
	147,059 556,021

The cashflow statement is to be read in conjunction with the notes to and forming part of the half year financial report.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30TH JUNE 2008

1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This general purpose financial report for the interim half-year reporting period ended 30[th] June 2008 has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standard AASB 134 Interim Financial Reporting .

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the annual report for the year ended 31[st] December 2007 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period unless otherwise stated.

1.1 Compliance with IFRS

Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures the financial report of Atlas South Sea Pearl Limited complies with International Financial Reporting Standards (IFRS).

1.2 Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities at fair value.

1.3

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

1.4 Principles of consolidation

The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Atlas South Sea Pearl Limited (“Company” or “parent entity”) as at 30 June 2008 and the results of its subsidiaries for the year then ended. Atlas South Sea Pearl Ltd and its subsidiaries together are referred to in this financial report as the consolidated entity.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies , generally accompanying a shareholding of more than one half of the voting rights.

Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control existed.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of identifiable net assets of the subsidiary.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

1.5 Income tax

The charge for current income tax expense is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using the tax rates that have been enacted at the balance date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefit brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

1.6 Inventories

(a) Pearls - The cost of pearls grown by the Group is the fair value less estimated point of sale costs at the time the pearls are harvested.

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

(c) Oysters – refer note 1.7 (Biological assets)

1.7 Biological assets

Oysters are measured at their fair value less estimated point of sale costs. The fair value of oysters is determined by using the present value of expected net cash flows from the oysters, discounted using a pretax market determined rate.

Changes in fair value less estimated point of sale costs of oysters are recognised in the income statement in the year they arise.

Pearls are initially measured at their fair value less estimated point of sale costs at the time of harvest. The fair value of pearls is determined by reference to market prices for pearls at the time of harvest.

The gain on initial recognition of pearls is recognised in the income statement in the year of harvest. At the time of harvest, pearls are recorded as inventory.

Change in accounting policy

In the year ended 31 December 2007 the Group changed its accounting policy for Biological Assets. The group has applied AASB 141 Agriculture . The standard requires that all inventories, which meet the definition of a biological asset – a living animal or plant, shall be measured on initial recognition and at each reporting date at its fair value less estimated point of sale costs, except where the fair value cannot be reliably measured.

In previous reporting periods the directors believed that the most appropriate market valuation for their oysters was their cost of production due to there being no market for oysters for which a reliable valuation comparison can be made. Since this date the directors believe that the company’s accumulated knowledge and experience has enabled them to provide a reliable estimate and provide reasonable assumptions upon which to calculate the fair value. The effect of this change is noted below.

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

The change in policy was necessary for the financial report to provide more relevant information about the Groups financial position, financial performance and cashflows. The new policy has been applied prospectively from the start of 2007. Accordingly, the adoption of the new policy has no effect on prior years.

It was not practicable to adjust amounts relating to periods prior to those presented below, including the adjustment required on the opening balance sheet for the year ended 31 December 2006 and therefore the impact for the 2006 income statement. The change in accounting policy has been applied from 31 December 2006, prior to this date the Directors believe that they were unable to distinguish the information that would have been available when the initial financial report for that prior period was authorised for issue.

As a result opening retained earnings for the year ended 31 December 2007 was increased by $2,193,466 for the Group, reflecting the initial recognition of oysters and of harvested pearls, the tax effects of the recognition and the effects of moving from a cost to fair value basis on consolidation. The comparatives for the period 30 June 2007 have consequently been restated to reflect this change in accounting policy.

The details of the Biological assets that are held by the economic entity as at 30 June 2008 are provided at Note 5.

1.8 Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Property

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arms length transaction), based on periodic valuations by external independent valuers, less subsequent depreciation for buildings.

Leasehold property is shown at cost and amortised over the shorter of the term of the unexpired lease on the property or the estimated useful life of the improvements on the property.

Plant and Equipment

Plant and equipment are measured on the cost basis less depreciation and impairment losses.

The carrying value of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount of these assets which is assessed on the basis of the expected net cash flows that will be received from the assets employed and subsequent disposal.

The cost of fixed assets constructed within the economic entity includes the cost of materials and direct labour. Repairs and maintenance carried out on the assets are expensed unless there is a future economic benefit that will flow to the group which can be reliably measured, in which case the value of the asset is increased.Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

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 commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are:

Class of fixed asset	Depreciation rate
	2008	2007
Leasehold land & buildings & improvements	5-10%	5-10%
Vessels	10%	10%
Plant & equipment	20-50%	20-50%

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NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

1.9 Leases

Lease payments for operating leases, where substantially all the risk and benefits remain with the lessor, are charged as expenses to the income statement in the period in which they are incurred.

1.10 Investments and other financial assets

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

a) Financial assets at fair value through profit or loss A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management within the requirements of AASB 139 Recognition and Measurement of Financial Instruments. The policy of management is to designate a financial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value.

Derivatives are also categorised as financial assets at fair value through profit or loss unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

b) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as noncurrent assets. Loans and receivables are included in receivables in the balance sheet.

c) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

d) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are nonderivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

e) Recognition and derecognition

Purchases and sales of investments are recognised on trade-date, the date on which the Economic Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Economic Entity has transferred substantially all the risks and rewards of ownership.

f) Subsequent measurement Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest rate method.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the financial

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assets at fair value through profit or loss category are presented in the income statement within other income or other expenses in the period in which they arise.

g) Derivative instruments

Derivative instruments are initially measured at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. Gains and losses arising from changes in fair value are taken to the income statement unless they are designated as hedges.

Atlas South Sea Pearl Limited and its subsidiaries designate derivatives as either;

• (i) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or

• (ii) Hedges of highly probable forecast transactions (cash flow hedges).

At the inception of the transaction the relationship between the hedging instruments and the hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions is documented. Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be effective in offsetting changes in fair values or cash flows of hedged items, are also documented.

Fair value hedge – Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedge asset or liability that are attributable to the hedged risk.

Cash flow hedge – The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred to a hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in the hedge reserve in equity are transferred to the income statement in the periods when the hedged item will affect profit and loss.

1.11 Impairment of assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the assets carrying value. Any excess of the assets carrying value over its recoverable amount is expensed to the income statement as an impairment loss.

1.12 Foreign currency translations

a) Functional and presentation currency

Items included in the financial statements of each of the subsidiaries within the economic entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Australian dollars, which is Atlas South Sea Pearl Ltd’s functional and presentation currency.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of transaction. Foreign currency monetary items are translated at the year end exchange rate, Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of transaction. Non-monetary items measured at fair value are reported at the exchange

rate at the date when fair values were determined. Exchange differences arising on the translation of non-monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of nonmonetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

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• c) Group Companies

The results and financial position of all group entities (none of which has the currency of a hyperinflation economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

• Income and expenses for each income statement are translated at average exchange rates; and

• All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings repaid, a proportional share of such exchange differences are recognised in the income statement as part of the gain or loss on sale.

1.13 Employee benefits

Wages and salaries, annual leave, sick leave and long service leave

Provision is made for the Group’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. Liabilities due to be paid within 12 months of the reporting date are recognised in other payables. The liability for long service leave is recognised in the provision for employee benefits .

Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred.

Share-based payments

Share-based compensation benefits are provided to employees via the Atlas South Sea Pearl Limited Employee Share Plan. The fair value of shares granted under the Employee Share Plan is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employee becomes unconditionally entitled to the shares. The fair value at grant date is considered to be the current share price on the date of granting.

1.14 Provisions

Provisions for legal claims , service warranties and make good obligations are recognised when the Group has a present legal or constructive obligation as a result of a past event; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

1.15 Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, high liquid investments with original maturity or three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

1.16 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

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Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(a)Sales Revenue comprises of revenue earned from the sale of products or services to entities outside the economic entity. Sales revenue is recognised when the goods are provided or when the fee in respect of services provided is receivable.

(b)Interest Income is recognised as it accrues.

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

1.17 Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within four months from our wholesale customer Pearlautore, with agreed upon contractual monthly payments. All other trade receivables are generally due for settlement within 30 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account – provision for impairment of trade receivables, is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.

Significant financial difficulties of the debtor, financial reorganisation, and default and delinquency in payments, more than 30 days overdue, are considered indicators that the trade receivable is impaired. The Group also considers the long term history of the debtor. The amount of the impairment allowance is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in the income statement within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the income statement.

1.18 Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition .

1.19 Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest rate method. Fees paid on the establishment of loan facilities , which are not an incremental cost relating to the actual draw down of the facility, are recognised in the income statement. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date .

1.20 Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the year but not distributed at balance date.

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1.21 Earnings Per Share

(a) 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.

(b) 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.

1.22 Segment Reporting

A business segment is identified for a group of assets and operations engaged in providing services that are subject to risks and returns that are different to those of other business segments.A geographical segment is identified when services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

1.23 Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

1.24 Critical accounting estimates and judgements

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Key estimates – Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

Critical judgements in applying the entity’s accounting policies

– Doubtful debts provision

No provision has been recognised in respect of receivables owed to the Group

– Determination of net market value of inventories and biological assets

Agricultural assets include pearl oysters, both seeded and unseeded and pearls that have been harvested from the oysters which remain unsold. Seeded oysters are measured at their fair value using the net present value of expected future net cash flows attributed to this inventory less the estimated point of sale costs. The fair value of unseeded oysters is determined by reference to market prices for this type of asset in Indonesia. Pearls are measured at their fair value less estimated point of sale costs by reference to market prices for pearls as determined by the Company’s marketing agent, Pearlautore International.

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NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

Key assumptions that have been used to determine the fair market value of the oysters in 2008 are as follows:

Average selling priceforpearls*	¥12,512per momme
¥exchangerate	¥95:AUD1.00
Average pearlsize	0.54 momme
Proportionof market grade pearls	75%
Discountrate applied to cash flow	30%
Mortality &rejection rates	Historicalcomparison
Average unseeded oystervalue	$2.14

• Average pearl prices are based on historical averages discounted for potential market volatility

For the purpose of preparing the half year financial report, the half year has been treated as a discrete reporting period.

A reference to Dollars or $ means Australian Dollars.

2 Revenue Sales revenue Sale of goods Other revenue Interest income Other revenues Revenue Change in net market value of biological assets Change in fair value less point of sale costs of oysters Gain arising on initial recognition of harvested pearls Other income Foreign exchange gains Gain on financial instruments Gain on sale of non-current assets Other income 3 EARNINGS PER SHARE Basic earnings/(loss) per share Diluted earnings per share Weighted average number of ordinary share outstanding during the year used for calculation of basic earnings per share Weighted average number of potential ordinary shares outstanding during the year used for calculation of diluted earnings per share	Half Year 2008 2007 $ $ 7,341,335 8,742,677 22,184 44,080 93,068 10,570
	7,456,587 8,797,327
	1,538,825 1,734,394 1,823,322 5,636,899
	3,362,147 7,371,293 115,470 201,540 259,790 - 5,162 -
	3,742,569 7,572,833
	2008 2007 cents cents 4.75 8.99
	4.75 8.99
	No. No. 90,045,890 89,533,597
	90,045,890 89,533,597

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ATLAS SOUTH SEA PEARL LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

4 FINANCIAL INSTRUMENTS

Derivative financial instruments represent foreign currency hedging that is in place to manage risk relating to the Company’s exposure to foreign currencies. Under AASB 139, derivative financial instruments are measured at fair value at the reporting date. Gains and losses resulting from changes to fair value are taken to the income statement unless they are designated as effective hedges, in which case the difference is taken directly to equity. The economic entity held a number of forward exchange contracts and options at 30 June 2008. None of the contracts held by the economic entity are classified as effective hedges under the standard.

5 BIOLOGICAL ASSETS

Current - Oysters Non-Current - Oysters Total Biological Assets The details of the Biological Assets that are held by the economic entity as at year end are as follows: Nature of Biological Assets:-Oysters (Pinctada Maxima) Held within the economic entities operations: Juvenile oysters which are not nucleated Nucleated oysters 6 DIVIDENDS Distributions paid – Ordinary Shares Fully franked ordinary dividend declared on 7thMay of 2.0 cents (2007 – 2.0cents) per share franked at a tax rate of 30%	Half Year 2008 2007 $ $ 5,065,634 3,587,845 14,345,011 13,396,651
	19,410,645 16,984,496
	No. No. 589,159 1,008,310 724,255 654,381
	1,313,414 1,662,691
	$ $ 1,800,918 1,806,869

7 SEGMENT REPORTING

(a) Business

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.

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NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

(b) Geographical

30/06/2008 Revenue External segment revenue Inter-segment revenue Total segment revenue Other unallocated revenue Total Revenue Result Segment Results Unallocated corporate revenue/(expenses) Profit from ordinary activities before income tax Income tax expense Net Profit 30/06/2007 Revenue External segment revenue Inter-segment revenue Total segment revenue Other unallocated revenue Total Revenue Result Segment Results Unallocated corporate expenses Profit from ordinary activities before income tax Income tax refund/(expense) Net Profit	Indonesia Australia Eliminations	Total
	$ $ $ 329,648 7,132,245 - 3,277,401 - (3,277,401)	$ 7,461,893 -
	3,607,049 7,132,245 (3,277,401) 3,146,505 590,758 3,186,082 3,234,310 18,461 Indonesia Australia Eliminations $ $ $ 390,265 8,352,412 - 3,860,409 - (3,860,409)	7,461,893 3,737,263
		11,199,156
		6,438,853 (374,613)
		6,064,240 (1,788,312)
		4,275,928
		Total $ 8,742,677 -
	4,250,674 8,352,412 (3,860,409) 5,636,899 1,857,501 133,083 6,059,830 6,244,131 (50,432)	8,742,677 7,627,483
		16,370,160
		12,253,529 (999,530)
		11,253,999 (3,198,050)
		8,055,949

8 CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

9 ISSUED CAPITAL

90,045,890 (2007 – 90,045,890) fully paid ordinary shares Number of shares on issue at the beginning of the reporting period Shares issued under Employee Share Plan Shares bought back and cancelled Number of share on issue at the end of the reporting period	Half Year 2008 2007 $ $ 19,544,815 19,544,815 2008 2007 No. $ No. $ 90,045,890 19,544,815 89,313,280 19,260,762 - - 1,100,000 440,000 - - (367,390) (155,947)
	90,045,890 19,544,815 90,045,890 19,544,815

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NOTES TO AND FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

10 EVENTS OCCURING AFTER THE BALANCE SHEET DATE

The results of significant operation activities are made available to shareholders and other interested parties through announcements to the Australian Stock Exchange. There have been no significant post balance date events to disclose.

11 SUBSIDIARIES

There have been no changes to subsidiaries during the reporting period.

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DIRECTORS DECLARATION

The Directors declare that the financial statements and notes set out on pages 7 to 22:

• (a) comply with Accounting Standards AASB134 "Interim Financial Reporting" and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (b) give a true and fair view of the consolidated entity’s financial position as at 30[th] June 2008 and of its performance, as represented by the results of its operations and its cash flows, for the half-year ended on that date;

In the Directors opinion there are reasonable grounds to believe that Atlas South Sea Pearl Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

G.R.W. SNOW Chairman

Perth, Western Australia 29[th] August 2008

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BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay Street SUBIACO WA 6008 PO Box 700 WEST PERTH WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 aa.perth@bdo.com.au www.bdo.com.au

==> picture [152 x 32] intentionally omitted <==

ABN 79 112 284 787

INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF ATLAS SOUTH SEA PEARL LIMITED

We have reviewed the accompanying half-year financial report of Atlas South Sea Pearl Limited, which comprises the condensed balance sheet as at 30 June 2008, and the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the half-year ended on that date, a statement or description accounting policies, other selected explanatory notes and the directors’ declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the halfyear end or from time to time during the half-year in order for the disclosing entity to lodge the half-year financial report with the Australian Securities and Investments Commission.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the disclosing entity are responsible for the preparation and fair presentation of the half-year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the disclosing entity’s financial position as at 30 June 2008 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Atlas South Sea Pearl Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

BDO Kendalls is a national association of separate partnerships and entities

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==> picture [121 x 24] intentionally omitted <==

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Atlas South Sea Pearl Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2008 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.

BDO Kendalls Audit & Assurance (WA) Pty Ltd

==> picture [135 x 39] intentionally omitted <==

Glyn O'Brien Director

Perth, Western Australia Signed on this 29[th] day of August 2008

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ATLAS SOUTH SEA PEARL AND ITS CONTROLLED ENTITES

RESULTS FOR ANOUNCEMENT TO THE MARKET AS PER APPENDIX 4D

AUSTRALIAN STOCK EXCHANGE LISTING RULES

FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

1 The reporting period and the previous corresponding period as detailed in this financial statement are 30[th] June 2008 and 30[th] June 2007 respectively

			2008	2007	% Change	Up/Dow
						n
2	Key	Financial Data
	2.1	Revenue(a)	7,456,587	8,797,327	15.2%	Down
	2.2	Profit/(loss)from ordinary activities	4,275,928	8,055,949	46.9%	Down
		after tax attributable to members(b)
	2.3	Net profit/(loss) attributable to	4,275,928	8,055,949	46.9%	Down
		members(b)
	2.4	Dividends(c)
			2008	2007
		Interim dividend
		Amount per share	2.0 cents	2.0 cents
		Franking percentage	100%	100%
		Date paid	14/7/08	25/05/07
		Final Dividend
		Amount per share	-	2.0 cents
		Franking percentage	-	100%
		Date paid	-	26/10/2007
		Record Date	-	2/10/2007

Explanation of 2.1 to 2.4

• a) Revenue from the sale of pearls has decreased as a result of less pearls (by weight) being sold in the first six months of 2008 (53,677 momme) compared to the same period in 2007 (57,264 momme).

• b) Net profit has decreased due to a lower pearl sales revenue ($1,340,740 or 15%) and due to a lower net fair value adjustment of biological assets recognised in the income statement in the first six months of 2008 of $2,633,228, compared to the same period in 2007 ($5,561,754). This has been marginally offset by an improved gross profit margin in the period due to a lower unit cost per pearl.

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FOR THE HALF YEAR ENDED 30[TH] JUNE 2008

• c) An interim dividend was declared in May 2008 and paid on 14[th] July 2008. A final dividend has not yet been declared. The Company’s dividend reinvestment plan was not available for these dividend payments.

• 3 Net Tangible Assets

et Tangible Assets
	Consolidated
	2008	2007
Net tangible assets	25,260,845	25,960,915
Ordinary Shares	90,045,890	90,045,890
Net tangible assets per ordinary share	0.28 cents	0.29 cents

• 4 Change in control of entities

There have been no changes to subsidiaries during the reporting period.

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