A Pearler Of A Result.

Atlas South Sea Pearl as all my regular readers know is in my long term portfolio.
For such a small mid-cap company they pay a whopping 8% fully franked dividend.
They also have a share buy back scheme in place,so therefore as the number of shares available decrease, their value and dividends will increase upwards.
As you read their report you will see that the future looks promising.


Dear Shareholder,

The Calendar year 2006 saw continuing strong returns for the Company and I am pleased to advise that
Atlas South Sea Pearl Limited has reported a profit for the twelve months to December 2006, after tax, of $3,235,566 which represents an increase of 57% from last year.

This figure was achieved on revenue of $13,225,729 which in itself was an increase of 31% on the result achieved for 2005.

The Company’s Balance Sheet and Cash Flow remains strong with no external borrowings in place.

The good results from the Company saw total dividends of three and a half cents (3.5 cents) per share, fully franked, being paid for the full 2006 year (2005 ¬ 1 cent per share) (Current share price is 0.43 cents per share)

Production of pearls increased during 2006, compared to the prior year and pearl sales remain strong with early indications of increases in prices and reduction in the over supply that was evident in earlier years.

The adoption of a number of key strategic initiatives in 2004 and 2005 has placed the Company in a strong position for continuing years.

These measures included:

• the diversification of production over a number of geographic centres;
• the specialisation of key activities at specific sites to reduce unit costs of production;
• the implementation of improved breeding and pearl growing techniques which has produced an
improvement in pearl quality; and
• the development of a marketing team to increase return on investment in pearl production and pearl based by products.

2006 has seen continuing good operational results from both the main pearl farm in Aljui Bay, West Papua and from Bali with a total of 380,000 seeding operations being completed in the year.

For a number of years the Company has been committed to a research project with James Cook
University of Townsville in determining genetic characteristics of our oysters and, although this work has some years to go still, we believe that it will give us substantially higher returns from improvements in pearl quality and more predictability in terms of oyster selection for seeding and harvesting.

The Company continues to be represented by the pearl marketing and trading company Pearlautore International (PAI) and in an increasingly competitive market, the performance of PAI was excellent in achieving good sales results for the whole range of the Company’s pearls and achieving, in some categories, significant price increases.

The development of the Company’s internal marketing continued during 2006 with the establishment of a retail jewellery business in Sanur, Bali in the ground floor of our operational Head Office.

There has been development in the design and production of quality jewellery incorporating the Company’s pearl products and together with the expansion in the sales of mother of pearl and associated pearl products. Recent appointments in this area has strengthened the operational performance.

The continuing good results achieved by the Company are principally due to the leadership of our management staff under managing director, Dr Joseph Taylor and senior managers, Mr Jan Jorgensen and Mr Mark Pieper. Other expatriate and Indonesian Managers have all contributed to the increasing fortunes of the Company as it expands in both the scale and diversification of its operations.

Together with my fellow Directors I would like to thank everyone for their strong support and enthusiasm and I am sure that our efforts will continue to deliver strong results for the benefit of shareholders, employees and all associated with the Company.

The Company’s AGM will be held on Thursday 10th May. The notice of meeting will be
despatched to shareholders within the next two weeks.

The Company currently has in excess of $3 million of pearls awaiting sale with its agent in Sydney. Planning is under way for the mid year harvest.

The company anticipates a strong year in 2007 with further expansion of its operations. New
projects are being considered to further increase production.

George Snow

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