Atlas Pearls Annual Report 2015

FY2015 Annual Report · Atlas Pearls

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A T L A S P E A R L S A N D P E R F U M E S - A N N U A L R E P O R T • 2 0 1 5
A T L A S P E A R L S A N D P E R F U M E S - A N N U A L R E P O R T • 2 0 1 5

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For personal use onlyContents

FOCUS & CONSOLIDATE
page 2

CHAIRMANS REPORT
page 11

REVEAL & DELIVER
page 4

SHARE & SUSTAIN
page 6

FINANCIAL REPORT
page 9

CEO REPORT
page 13

DIRECTORS’ REPORT
page 16

FINANCIAL STATEMENTS
page 34

CORPORATE DIRECTORY
page 10

ADDITIONAL ASX INFORMATION
page 69

ANNUAL REPORT • 2015For personal use onlyFocus & Consolidate

Atlas is a leading producer of white South Sea Pearls, operating across multiple
sites in the pristine waters of the Indonesian archipelago for over 20 years. In
this time, Atlas has developed a particular expertise in seeding superior quality
hatchery-bred Pinctada Maxima mother of pearl oysters and harvests more
than 300, 000 South Sea pearls a year.

A long-term investment in research and development regarding breeding
optimisation and pearl quality gives Atlas a comparative advantage, delivering
harvests that feature the right pearl virtues in a bid to maximise markets of
opportunity.

With a solid team of pearl experts accumulating an exceptional set of
complimentary skills in the areas of genetics, marine biology and aquaculture,
Atlas Pearls has built a major competitive advantage over comparable pearling
operations that translates into delivering exceptional quality and superior
value. This is the focus of the Company.

Atlas involvement in the extraction of bioactive ingredients for the medical
and cosmetic industries is on going under a partnership format as part of the
company commitment to uplift the value of its by-products.

The consolidation of group activities toward the core business of pearling will
see an expansion of farming sites leveraging local knowledge and operational
expertise to maximise performance and output.

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ANNUAL REPORT • 2015For personal use onlyFocus & Consolidate

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ANNUAL REPORT • 2015For personal use onlyReveal & Deliver

Atlas acknowledges the need to deliver superior products, but also the importance to
manage perceived value and therefore is committed to nurture and develop value add
skills in the business with particular focus on pearl grading, matching and jewellery
design, manufacturing and retailing. All of which represent a price premium opportunity
to the business.

Atlas is highly respected in trade and wholesale markets and continues to see strong
results through its private auction system. Further refinement and improvements will be
made to this format to optimise the customer experience and sales outcomes. Alongside
this, a dynamic new wholesale platform is being developed in Perth that will create new
channel opportunities for the company, leveraging Atlas’ unique end-to-end ability.

The retail strategy within the business is undergoing the most significant change. As
traditional retail markets shift, the group is reviewing its retail footprint whilst expanding
its online and industrial/eco-tourism activities. Atlas farms provide a unique platform to
not only sell pearls but impart knowledge as consumer demand evolves and they seek
“authentic” retail experiences that enhance and personalise the purchase process with
the aim to not only achieve, but exceed customers‘ expectations.

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ANNUAL REPORT • 2015For personal use onlyReveal & Deliver

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ANNUAL REPORT • 2015For personal use onlyShare & Sustain

Atlas Pearls has an unwavering commitment to the environment and the communities
in which we operate, all represented under the umbrella program 3000 Hands.

Atlas employs over 900 staff from 10 different nationalities, cultures and religions all
working together towards the same objective of producing the best pearls and aligned
behind the same values. 3000 Hands focuses on enhancing the economic, social
wellbeing and environment of the communities Atlas operates in whilst promoting the
principle of a “blue economy”- respecting nature and doing more with less.

We operate on a fundamental understanding to harmoniously work to enhance
the environment and associated ecosystems we live and work in and understand
this is the key to a sustainable future.

Most pearl farms are situated in remote areas and constitute the main, and sometimes
only, employment opportunity. 80 percent of our pearl farm staff are sourced from
surrounding villages and 100 percent of our pearl farm technicians are women. The
employment opportunities made available to these women has led to a noticeable shift
in the family dynamic, allowing income to go into education and general wellbeing
before anything else.

Multiple initiatives are in place to create and build stable economies in remote areas,
from local employment to scholarships, sponsorships and community development
programs. The transfer and sharing of skills and knowledge is a key component of 3000
Hands and promotes ongoing employment for whole communities with specific focus
on women.

Each Atlas pearl delivered to the world is unique and a living symbol of the set of values
shared throughout the organisation as well as a tangible representation of the quest
towards sustainable profitability embedded at the very core of the company business
model.

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ANNUAL REPORT • 2015For personal use onlyShare & Sustain

PAGE 7

ANNUAL REPORT • 2015For personal use onlyFinancial Report

Photography by “Wahyudi Tan”
IG: @wahyuditan

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ANNUAL REPORT • 2015For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

F I N A N C I A L S 2 0 1 5

For the Financial Year Ended 30 June 2015

Results for announcement to the market

Consolidated Financial Results

Total revenue from ordinary activities

Compared to actual for
previous
12 months ending
30 June 2014

Down 26%

Profit from ordinary activities after tax attributable to the owners of Atlas Pearls and Perfumes Ltd

Down 548%

Net Profit attributable to the owners of Atlas Pearls and Perfumes Ltd

Down 548%

12 months ending
30 June 2015
$

12,118,312

(8,134,049)

Dividends

Amount per security

Franked Amount
per security

Dividend per ordinary share in respect of 30 June 2015 financial period

0.0 cents

Commentary on results for the financial period
Refer to the Annual Report attached.

Consolidated Statement of Profit or Loss and Other Comprehensive Income
Refer to the Annual Report attached.

Consolidated Statement of Financial Position
Refer to the Annual Report attached.

Consolidated Statement of Change in Equity
Refer to the Annual Report attached.

Consolidated Statement of Cash Flow
Refer to the Annual Report attached.

Dividend
It is not proposed to pay dividends

Net tangible assets per security

NTA per ordinary share

Year ended
30 June 2014
$

Year ended
30 June 2015
$

8.7

5.6

Control gained or lost over entities during the financial year:
50% of the equity in subsidiary Essential Oils of Tasmania Pty Ltd was sold during the year ended 30 June 2015 resulting in its deconsolidation from the group.

Other Information
Refer to the Annual Report attached.

Commentary on results for the period
Refer to the Annual Report attached.

Audit
The accounts have been audited and an unqualified opinion has been issued

Attachments
The Annual Report of Atlas Pearls and Perfumes Limited for the year ended 30 June 2015 is attached.

PAGE 9

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

C O R P O R A T E D I R E C T O R Y

DIRECTORS

AUDITORS

Geoff NEWMAN
B.Ec (Hons), M.B.A, F.C.P.A, F.A.I.C.D.

Timothy James MARTIN
B.Arts, M.B.A, G.A.I.C.D.

Stephen John ARROW

COMPANY SECRETARIES

Susan HUNTER
BCom, ACA, F Fin, GAICD, AGIA

Danielle BRANDENBURG
BCom/Arts, ACA, A Fin, AGIA

REGISTERED OFFICE

47-49 Bay View Terrace
Claremont, Perth
Western Australia 6010

P.O. Box 1048, Claremont
Western Australia 6910

Telephone: +61(0)8 9284 4249
Facsimile: +61 (0)8 9284 3031

Website: http://www.atlaspearlsandperfumes.com.au
E-mail: atlas@atlaspearlsandperfumes.com.au
Farm Tours Email: Tours@AtlasPearlsAndPerfumes.com.au

BDO Audit (WA) Pty Ltd
38 Station Street, Subicao
Perth, Western Australia 6008

TAX ADVISERS

RSM Bird Cameron
8 St Georges Terrace
Perth, Western Australia 6000

BANKERS

Commonwealth Bank of Australia
150 St Georges Terrace
Perth, Western Australia 6000

SHARE REGISTRY

Computershare (WA) Pty Ltd
Level 11,
172 St George’s Terrace
Perth, Western Australia 6000

HOME EXCHANGE

Australian Securities Exchange Ltd
Exchange Plaza
2 The Esplanade
Perth, Western Australia 6000

ASX Trading Code: ATP

PAGE 10

For personal use onlyC O R P O R A T E D I R E C T O R Y

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

L E T T E R F R O M T H E C H A I R M A N

Dear Shareholder

I am writing to you for the first time as Non-Executive Chairman of Atlas
Pearls and Perfumes, with a sense of disappointment with the financial
results for the year just-gone, but with a great deal of optimism for the
future of the pearling industry and your company’s position in it.

retail path. Our action in selling half of Essential Oils of Tasmania allows
that business to expand to its full potential as an industrial tourism
venture while providing a tied outlet for our pearl protein and powder
products.

There is no doubt that the 2014/15 company Normalised EBITDA
loss of $1.24m and the resulting net loss after tax of $8.1m was
unacceptable to the board, the management and staff of Atlas Pearls
and Perfume and its shareholders and other stake-holders. The impact
of past decisions to seed a greater number of oysters and the resulting
harvests of smaller pearls which so damaged the year’s performance
has been well documented and was progressively informed to the
market as the position was better understood over the course of the year.

The financial impact was magnified by the capital demands of our
Essential Oils of Tasmania business which coincided with weaker
earnings from the core pearling operations.

Much has been learnt from this year and there are many positives to
take forward into 2015/16 and beyond. In particular:

The goal of reducing the company’s exposure to the cyclical pearl
business by creating new revenue streams from by-products remains
valid and significant progress has been achieved on this front.

There is great potential for improving the returns from the core
pearling business through improved processes for managing “shell
in the water” to lift retention rates and the size of harvested pearls.

By re-focusing the retail effort on the farm-shops and a reduced
number of well-located outlets, these operations can be quickly
returned to profitability.

4. Our key operational people are “world class” in the industry and I

have absolute confidence in the team we now have in place both
in Perth and Bali.

The forecast improvement in pearl sizes was evident in the latter
harvests of 2014/15 and that trend is continuing into 2015/16 and our
reduced retail footprint is already showing marked improvement in
trading performance.

Although we required a capital raising of $3.1m before costs to get
through the year, the underlying performance against a dramatically
reduced revenue base has left us with a sustainably lower cost
structure which will be rigidly maintained to ensure better results as
sales recover.

In conclusion, I want to acknowledge the dedication of our remarkable
team of employees at Atlas Pearls and Perfumes. Difficult times call
for sacrifices, restraint, clear thinking and, often quick, and not always
pleasant decisions. As well as acknowledging specifically the role
of your CEO Pierre Fallourd in piloting the company through this
challenging time, I take the opportunity to thank all of our people for
their contribution over the most challenging of years.

Finally, my fellow directors Steve Arrow and Tim Martin have given
great support to both Pierre and myself as we have made the necessary
changes over the past year, and on behalf of them, I thank all of our
shareholders for your ongoing support and look forward to returning
the company to profitability in 2015/16 and capitalising on the many
growth opportunities ahead of us.

Looking forward, there are many positives which have emerged from
the difficulties of 2014/15. We now know that we can achieve our by-
product value adding objectives without going down the full fragrance

Geoff Newman
Chairman
28 August 2015

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For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

S U M M A R Y O F K E Y F I S C A L I N D I C A T O R S 2 0 1 4 / 1 5

30 June 15
$’000

30 June 14
$’000

12,118

(1,235)

(10.2%)

589

(792)

6,697

(496)

(656)

149

245

(7,215)

(59.5%)

398

521

(8,134)

(2.40)

23,974

30,942

4,085

23,974

17%

425.40

16,283

3,470

21.31%

303

578

(63)

300

(12)

436

1,929

11.8%

471

(355)

1,814

0.61

28,416

40,823

5,155

28,809

18%

326.62

Revenue from continuing operation

Normalised earnings before interest, tax, depreciation and amortisation (Normalised EBITDA)

EBITDA margin

Depreciation & amortisation

Foreign exchange (gains)/losses

Revaluation and write-off of Agriculture Assets (oysters, pearls and crops)

Other non-operating costs/benefits

Inventory write off

Derivative instruments

Impairment of joint venture loans

Fair value (gain)/loss on EOT assets

(Gain)/Loss on sale of investment

Earnings/(loss) before interest and tax (EBIT)

EBIT margin

Finance/interest net costs/(income)

Tax (benefit)/expense

Net Loss after tax (NPAT)

Basic earnings/(loss) per share (cents)

Net Tangible Assets

Assets

Debt (Current & Non-current)

Shareholder funds

Debt/shareholder funds (%)

Number of shares on issue (million)

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S U M M A R Y O F K E Y F I S C A L I N D I C A T O R S 2 0 1 4 / 1 5

C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

Following a challenging 12 months, the coming year will see the Atlas
team’s efforts geared towards further strengthening Atlas core business
by rebuilding its comparative advantage of producing superior quality
South Sea Pearls and bringing them to market at competitive prices.
We will approach this with the core values of Focus & Consolidate,
Reveal & Deliver, and Share & Sustain.

FOCUS & CONSOLIDATE

First and foremost, customers form the epicentre of our business
model. Atlas is positioning itself to continue capturing current strong
demand and price uplift from Asia and the re-emerging North
American market.

Secondly, producing superior quality pearls is the only way to address
either an upswing or downswing in demand. Only the best shells
will be presented within the right seeding windows and given the
appropriate cultivation period. Our strong focus on commercialisation
and value adding will be reinforced.

Managing efficiently a 4 year value chain – from Hatchery to Harvest-
requires skills and patience. A dedicated pearl farmer is both inspired
and technically driven in their quest for the perfect pearl as they need
to understand nature’s cycles when managing human and mother of
pearl interactions.

REVEAL & DELIVER

Marketing is all about revealing needs rather than creating them. Atlas’s
common denominator in its past and future investments and projects
revolves around its customers’ expectations, both at trading and retail
level.

We believe that pearl attractiveness is driven by its perceived value and
its full appreciation is an acquired taste which requires education.

By transforming pearls through matching, jewellery design and
manufacturing and even extracting active ingredients from its
mother of pearl shell, Atlas intends to further enhance pearl value and
transcend its cultural and symbolic significance.

Atlas will pursue its quest towards understanding what makes a perfect
pearl and isolate this one element that triggers the formation of a pearl
and turns out to be compatible and beneficial to the rejuvenation of
human tissues.

The most promising value adding projects in the area of jewellery and
perfume or cosmetics have been identified and will be pursued under
the most suitable management and finance format.

SHARE & SUSTAIN

Each oyster that gives birth to a pearl through a modern hatchery pearl
farming model goes through 3000 hands throughout its productive life.

Maintaining harmony among internal and external stakeholders is both
a necessity and a key success factor for Atlas. The company successfully
managed over 10 different nationalities within its ranks and has been
operating in 5 very diverse cultural and religion environments for the
past 25 years.

Atlas is committed to a transfer of knowledge mandate towards the
communities within which it operates in Indonesia through local
employment and cooperation.

By promoting a hatchery business model and environmental
protection best practices as well as local community support
and education the group ensures that natural resources remain
unadulterated and that the activity is sustainable.

Atlas is first and foremost a team of dedicated and passionate
individuals committed to deliver superior value to its customers
through the best products and most efficient route to market. We look
forward to the years to come.

PEARLING OPERATIONS UPDATE

A new management team was appointed in early 2014 and has been
on site since June 2014. They have implemented a series of production
protocol realignments and controls to ensure that in the current
more favourable market conditions attention is focused on quality
and size so that the investments into new pearling sites, research and
development, as well as human resources, initiated over the past 4
years bear the expected quality pearls and revenue growth.

Pearl farming is a 4 year business cycle, along which each animal is
manipulated over 600 times. Each event occurring throughout the life
of the shell is ultimately recorded in the pearl. Genetically superior host
shells can provide faster growing/ stronger animals, while donor oysters
will determine the colour and nacre deposition growth of the pearl.

It is a subtle combination of the right shell gene pool, amount of
shell care, appropriate seeding skills and patience that will provide
the best yield. All of these have to be adjusted to the local and global
environment as well as local configuration; the former can vary from
year to year, while the later can take years to fully understand.

Modern pearl farming is made up of production sequences that are
intimately connected. It is the agility or the ability to positively react
to a constantly changing environment that determines the success of
sustainable pearl ventures. Beyond harvesting, grading and the ability
to assemble batches of consistent and matching pearls as well as the
ability to go to market at the right time can also significantly add value.

RESEARCH AND DEVELOPMENT

The Group is pleased to be undertaking the next Arc Linkage Project
with James Cook University (JCU); “Advanced animal breeding in
aquaculture: using genome-wide molecular breeding values for rapid
animal improvement in the silver-lipped pearl oyster”. This project will
run for a period of 3 years and commenced in February 2015 and will
further advance the intellectual property that the Group has developed
in relation to its oyster breeding program.

The primary impediment to achieving rapid genetic progress in
aquaculture is an inability to accurately and rapidly identify
high-performance animals for selection as parents in animal breeding
programs. This project aims to develop an innovative genomic selection
breeding system for the silver-lipped pearl oyster to overcome current
limitations associated with traditional animal improvement methods.

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A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T

HATCHERY

PEARL FARMING

Spat (juvenile) production for the 2014/15 season was on target.
Spawning facilities are also being upgraded to improve survival rates.
Progressive R&D output benefits under the partnership with JCU will
further enhance the capacity to select the most suitable parent oysters
for pearling and trigger benefits in cultivation period and pearl quality.

The remaining three farms operate as pearl farms; that is they grow
seeded oysters. The farms that operate as a pearl farm exhibit the
conditions (currents, nutrients in the water etc.) that are required to
grow healthy pearls. These conditions are different to those required to
grow a virgin oyster.

GROW-OUT

HARVESTING

The Group continues to operate five pearl farms: Penyabangan (North
Bali); Lembata (Flores); Alor (East Nusa Tenggara); Alyui (West Papua),
and Punggu (Flores). Of these five farms, two operate as technical hubs
and growout facilities; Penyabangan (North Bali) and Lembata (Flores).

The Atlas R&D team have also been undergoing trials at Lembata (2nd
technical hub) to improve mortality rates by using different growing
techniques. These new techniques minimise the need for intervention
during the stressful stage of spat development and have historically
resulted in major improvement in survival rates.

The Group has recently secured two new water leases in the village of
Nuri (south of Larantuka, East Flores) and Kukusan (Punggu, Flores) the
site offers a diverse environment for spat to pearl cultivation. Test rafts
were deployed in May 2015 at Nuri and are showing pleasing results.

One of the core competences of the Group on risk mitigation is to
efficiently manage the distance between specialised production sites.
Grow-out sites which are labour intensive are linked to pearl farming
remote and nutrient rich sites, by a fleet of specialised vessels that
allow oysters to be moved around in order to maximise the sites shell
management capacity.

In 2015 we welcomed a new, state of the art purpose built ship,
designed for oyster transportation; the KM Poernomo. This new vessel
will reduce the time between seeding and delivery to less than three
months. The vessel was fully operational for the main seeding window.

SEEDING

Following an internal audit of stock systems, technician performance,
and operation rooms, new policies are being implemented to improve
retention rates, pearl size and quality.

Management has also been trialling the use of seeding rafts which
enable seeded oysters to be returned to the ocean faster than had they
been seeded on land. Health check dives on oysters seeded on the
rafts already show signs of faster return to the normal feeding process.
The new ship KM Poernomo has been fitted with a seeding deck to
further increase efficiencies.

Technicians and operation rooms have also undergone a complete
review. Technicians will be provided with additional training by an
independent expert. Operation rooms will be upgraded to further
reduce the threat of bacterial infection.

The agreed upon direction is to harvest all pearls from a particular batch
at the optimal time and proceed with a second operation (second
seeding with same shell) of the oysters that provide the best pearls.

Sample harvests will take place 3 months prior to the intended harvest
date, with the objective of fine tuning harvest timing, providing a better
harvest value indication, and allowing optimum second operation.

Pearling management has identified opportunities for joint ventures
with partners-farmers throughout the value chain under the forms of
subcontracted grow-out and/or pearl farming of respectively juveniles
or seeded shells. This will ensure Atlas’ internal capacity is maximised
while the benefit of extra shell availability is not lost.

TRADING

Atlas has experienced a consistent upward price trend for its South
Sea pearls over the past 18 months in a market with growing demand
for pearls of consistent colour and lustre for which Atlas is known. The
Company held two auctions at the Japan Pearl Centre in Kobe during
the half-year ended 31 December 2014. Prices during this period on
a comparable piece basis have increased by approximately 10% when
compared to the June 2014 auction result.

The recent prices achieved for similar pearls are more than 50% higher
on average than when Atlas held its first auction in May 2012. There
continues to be a high degree of confidence in the market’s ability
to absorb strong prices in the long term. Relative short supply in fine
quality merchandise is also helping to boost prices

Japanese buyers continue to offer the strongest prices for Atlas
production, with China undoubtedly being the largest consumer of
white South Sea pearls. The Company sees increasing opportunities
in the North American markets as their economy continues to rebound.

WHOLESALE

Atlas has continued to develop its distribution within the Australian
market with a network of over one hundred regular wholesale,
manufacturers and retail customers. This has resulted in an increased
focus on strand and matched pair production, where greater margins
may be realised.

Our Wholesale Jewellery Division continues to expand, with Pearl
Distribution Manager Tim Jones relocating to the East Coast to further
bolster sales. These wholesale opportunities add diversity to our
revenue base and further enhance our valued-added growth strategy.

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C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T

C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

The ultimate aim of Atlas and Westwood is to construct and operate
a state of the art industrial tourism facility at the Brookfield, featuring
fragrances and flavour extraction processes from raw crops to finished
products as well as a retail store and entertainment and training area
dedicated to essential oils and perfumes.

In 2015 Essential Oils of Tasmania launched its first retail product range
called Wild Islands. Wild Islands currently comprises of five fragrances
developed by the renowned French perfumer Michel Roudnitska, using
uniquely Tasmanian essential oil extracts. The perfumes have been
produced and bottled by Essential Oils of Tasmania. The soft launch of
the product at various tourism markets in Tasmania has been extremely
successful and several tourist retail outlets around Hobart are now
stocking the range. The Group is exploring avenues by which to further
expand the product’s route to market.

Essential Oils of Tasmania continues to work on new business lines
utilising local by-products and exploring projects with unique value
add propositions including consultancy and R&D projects related to
Sandalwood, Lavender and various types of berries.

A significant part of the investment into new equipment to expand the
range of EOT’s product to bio-active ingredients was made possible
by a $1m Austrade Grant with a matching commitment from the JV
partners. The grant period was recently extended by 6 months in order
to allow EOT to complete the project and successfully relocate to its
new premises as it has outgrown its current location.

Pierre Fallourd
CEO
28 August 2015

RETAIL

The Group’s retail brand and positioning has undergone review
over the past six months to strengthen its retail platform. While the
Group continues to have an interest in Perfumes through its equity
investment in Essential Oils of Tasmania Pty Ltd its core retail strength
has now been identified as Industrial Pearl Tourism.

The decision has been made to consolidate the existing retail offering
and shift towards industrial tourism. As part of this realignment the
Bali urban stores located in Jimbaran Square, the Grand Hyatt Nusa
Dua and Sanur were closed on the 30th of June 2015. To date the
farm stores located in Alyui Bay and North Bali have been identified as
Atlas’s best performing retail outlets. As luxury tourism continues to
grow in these pristine remote sites we see an opportunity to further
build our outlets located in North Bali, Alyui, Punggu and Alor. The
recently refurbished Seminyak store will remain as the Group’s urban
presence in Bali. The Group will also focus on collaborating further with
luxury hotel groups to bring Atlas product in house through capsule
collections and art installations which promote Atlas pearls, jewellery
and Atlas industrial tourism outlets.

As part of this review Atlas has also been taking steps towards
rationalising its finished products inventory by way of selective mark-
down, alternative distribution, jewellery conversion and eventually
deconstructing obsolete designs in order to efficiently reduce aging
and/ or irrelevant inventory to make space for faster moving and
aligned items.

The design and manufacturing approach is now two pronged: produce
and promote limited edition jewellery capsules to give the opportunity
to consumers to select and own unique creations and privilege “made
in Bali” jewellery to further strengthen the skills and expertise set up
in-house.

This exercise in better articulating Atlas’s core and retail business
combined with pearl finished products is not only intended to balance
inventory levels while boosting sales, but also to better convey our
message to end consumers, and open doors for business opportunities
along the luxury value chain.

ESSENTIAL OILS OF TASMANIA

Atlas Pearls and Perfumes Ltd sold 50% of its interest in Essential Oils
of Tasmania Pty Ltd to Westwood Properties Pty Ltd in February 2015.
Atlas views Westwood Properties as a strategic partner who will jointly
own the company and grow the business to the next level.

The transaction recognised the following benefits:
•

It provided the working capital necessary to fund EOT”s crop
growing and processing as well as necessary capital equipment;
It provides a capable and resourced partner with which to
progress the EOT business; and
Atlas retains a material investment in EOT and any future success
that such an investment may bring.

•

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For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

D I R E C T O R S ’ R E P O R T

Your Directors present their report on the consolidated entity (referred
to hereafter as the Company) consisting of Atlas Pearls and Perfumes
Ltd (formerly Atlas South Sea Pearl Limited) and the entities it
controlled at the end of, or during, the period ended 30 June 2015.

1. DIRECTORS

The following persons were directors of Atlas Pearls and Perfumes
Ltd during all or part of the financial period and up to the date of this
report except where stated:

GEOFF NEWMAN
B.Ec (Hons),M.B.A, F.C.P.A ,F.A.I.C.D. (Age – 64)
INDEPENDENT NON EXECUTIVE CHAIRMAN (Chair of Audit and Risk
Committee, Chair of Remuneration and Nomination Committee)

Mr Newman has over 26 years’ experience in finance, marketing and
general management roles in organisations either directly involved in
the resources sector or providing services and products to businesses
in that sector. In 1995, after managing Bunnings Pulpwood operations
for a number of years, he joined Coogee Chemicals Pty Ltd as
Commercial Manager and then was appointed to the Board as Finance
Director in the following year. Until August 2005 he was Finance
Director/CFO and Company Secretary of both Coogee Chemicals and
its oil and gas subsidiary Coogee Resources Ltd before he retired from
the Coogee group of companies at the end of June 2006.

Appointed Chairman 16 February 2015
Director since 15 October 2010
(Last re-elected as a director – 30 May 2013)
Directorships of other listed companies held in the last three years: * Nil

STEPHEN PAUL BIRKBECK
(Age – 55)
EXECUTIVE CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER
(Remuneration Committee)

Mr Birkbeck was the founder and former CEO of Mt Romance, an
Australian company that has become one of the largest producers
of sandalwood oil in the world. Mr Birkbeck has extensive marketing
expertise, especially in the luxury goods markets. He has been
presented with a number of excellence awards in relation to
the success of Mt Romance and brings this extensive business
development skill to the Board.

Resigned as Executive Chairman 16 February 2015.
Resigned as Chief Executive Officer 25 November 2014.
Appointed Chief Executive Officer 16 January 2012
Appointed Director on 15 April 2005
Appointed Chairman of the board on 21 December 2009
(Last re-elected as a director – 31 May 2011)
Directorships of other listed companies held in the last three years: * Nil

NELSON ROCHER
(Age - 30)
ALTERNATE DIRECTOR TO STEPHEN PAUL BIRKBECK

Mr Rocher has worked for the internationally recognised cosmetic and
perfume group Yves Rocher, a market leader in France. He worked in
the Yves Rocher marketing department as a product development
manager with his focus and passion being the products, branding and
marketing areas.

Appointed Alternate Director 18 July 2014.
Resigned as alternate director 16 February 2015.
Directorships of other listed companies held in the last three years: * Nil

TIMOTHY JAMES MARTIN
B.ARTS, M.B.A, G.A.I.C.D. (AGE – 43)
NON EXECUTIVE DIRECTOR (Remuneration and Nomination
Committee)

Tim Martin has been an Executive Manager at Coogee Chemicals Pty
Ltd since 2005, held the position of Managing Director from 2012 –
2015 and was appointed Executive Chairman in July 2015.

Prior to working at Coogee Tim worked in management roles within
the packaged food manufacturing sector - supplying to national
supermarket chains, and has ongoing interests in commercial property
development. He is also a director on the board of the Australian
Plastics and Chemicals Industry Association (PACIA).

Appointed Director on 4 February 2013.
Elected as Director on 30 May 2013.
Directorships of other listed companies held in the last three years: * Nil

STEPHEN JOHN ARROW
(Age - 55)
INDEPENDENT NON EXECUTIVE DIRECTOR (Audit and Risk Committee)

Mr Arrow has been involved in the pearling industry in Western
Australia and the Northern Territory since 1980 and is Managing
Director and owner of Arrow Pearl Co Pty Ltd. Mr Arrow brings to the
Board extensive pearling experience from many regions of the world as
well as contacts within the industry.

Mr Arrow previously served on the board of Atlas Pearls and Perfumes
Ltd from 29 June 1999 until 28 May 2008.
Appointed 2 January 2014
Directorships of other listed companies held in the last three years: * Nil

JOSEPH JAMES UEL TAYLOR
B.Sc. (Biology), Ph.D. (Age – 48)
NON EXECUTIVE DIRECTOR, TECHNICAL DIRECTOR
(Audit and Risk Committee, Remuneration Committee)

Dr Taylor is a marine biologist and aqua culturist whose PhD research
specialised 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

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D I R E C T O R S ’ R E P O R T

and has presented many research papers on this subject. Dr Taylor
commenced employment with the Company in 1996 as the Project
Manager and has overseen the development of the business to its
current level of production.

Resigned as director 16 February 2015.
Appointed Director on 13 September 2000
Managing Director from 31 August 2001 to 1 June 2009
(Last re-elected as a director – 31 May 2010)
Directorships of other listed companies held in the last three years: * Nil

2. COMPANY SECRETARY

The role of Company Secretary at the end of the financial period was
shared by Ms Danielle Brandenburg and Ms Susan Hunter.

STEPHEN GLEESON
B.BUS, CPA

Prior to joining Atlas in 2012, Mr Gleeson held the position of CFO/
Company Secretary of statewide recruitment company Skill Hire from
2008 to 2012. He also has international experience as CFO of Peter
Lik USA and has previously acted as Company Secretary for the ASX
listed company Golden Valley Mines NL. He has 26 years’ experience in
corporate restructuring and business re-engineering, and is a member
of CPA Australia.

Resigned 16 February 2015.
Appointed 24 April 2012.

DANIELLE BRANDENBURG
BCom/Arts, ACA, A Fin, AGIA

Ms Brandenburg joined Atlas in 2012 as Group Financial Controller
and was appointed as Chief Financial Officer on 1 July 2015. Ms
Brandenburg has over 10 years’ experience in accounting and
finance. Prior to her appointment with Atlas, Ms Brandenburg was
Financial Controller for Wyllie Group Ltd and worked with BDO in
their External Audit Division. She holds a Bachelor of Commerce and
Arts, is a Member of the Australian Institute of Chartered Accountants,
an Associate of the Financial Services Institute of Australasia, and a
Member of the Governance Institute of Australia.

Appointed 16 February 2015. Resigning 30 August 2015.

SUSAN HUNTER
BCom, ACA, F Fin, GAICD, AGIA

Ms Hunter has 20 years’ experience in the corporate finance industry.
She is founder and Managing Director of consulting firm Hunter
Corporate which specialises in the provision of corporate governance
and company secretarial advice to ASX listed companies and has held
senior executive roles at Ernst & Young and PricewaterhouseCoopers
in their Corporate Finance divisions and at Bankwest in their Strategy
and Ventures division. She holds a Bachelor of Commerce, is a Member
of the Australian Institute of Chartered Accountants, a Fellow of
the Financial Services Institute of Australasia, a Graduate Member of
the Australian Institute of Company Directors and a Member of the
Governance Institute of Australia.

Appointed 19 December 2012.

3. DIRECTORS’ MEETINGS

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

Director

Period

Directors’ Meetings

Audit and Risk Committee
Meetings

Remuneration Committee
Meetings

Meetings Held
Whilst in Office

Attended

Meetings Held
Whilst
in Office

Attended

Meetings Held
Whilst
in Office

Attended

S.P.

01/07/14 – 30/06/15

G. Newman1,2

01/07/14 – 30/06/15

J.J.U.

01/07/14 – 30/06/15

T. Martin2

01/07/14 – 30/06/15

S.J. Arrow1,3

01/07/14 – 30/06/15

Notes
•

•

•
•

On 29 May 2015, the Company adopted a new Corporate Governance Plan and the Audit Committee was renamed the Audit and Risk Committee. The current members of the
Committee are G. Newman (Chair) and S. Arrow Member of the Audit and Risk Committee.
On 29 May 2015, the Company adopted a new Corporate Governance Plan and formed a Remuneration Committee and a Nomination Committee. Prior to this date, the full Board
acted as the Nomination Committee. The current members of these Committees are G. Newman (Chair) and T. Martin.
Attended Remuneration Committee as a guest.
Resigned as director on 16 February 2015.

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REMUNERATION REPORT (AUDITED)

Chief Operations Officer – R Satchell

The directors are pleased to present your Company’s 2015 remuneration
report which sets out remuneration information for Atlas Pearls and
Perfumes Ltd’s non-executive directors, executive directors and other
key management personnel.

Mr R Satchell was appointed as Chief Operations Officer on 1 January
2015. Mr R Satchell previously held the title of General Manager Strategy.
Mr R Satchell’s contract was renegotiated on the 19 August 2015.

Base salary for the 2015/16 financial year of $160,000, reviewed annually.

Name

Position

Non-executive and executive directors

S. Birkbeck

N. Rocher

J. Taylor

G. Newman

T. Martin

S. Arrow

Chairman (until 16 February 2015) & CEO (until 25
November 2014)

Alternate Director (until 16 February 2015)

Non-Executive Director (until 16 February 2015)

Independent Non-Executive Chairman (Chairman from
16 February 2015, Director prior to 16 February 2015)

Non-Executive Director

Independent Non-Executive Director

Other key management personnel

S Gleeson

Managing Director EOT (until 16 April 2015)

J.S Jorgensen

R.Satchell

Chief Operations Officer PT Cendana Indopearl
(until 23 January 2015)

Chief Operations Officer Pt Cendana Indopearl
(from 23 January 2015).

•

D Brandenburg

Chief Financial Officer (until 30 August 2015)

P Fallourd

Chief Executive Office
(Vice President of Pearling until 25 November 2014).

S Mackay-Coghill

Vice President of Jewellery, Perfumes & Cosmetics
(until 7 November 2014).

Changes since the end of the reporting period

The following changes have been made to the remuneration of the
following key management personnel after 30 June 2015;

Chief Financial Officer and Joint Company Secretary –
D Brandenburg

Ms D Brandenburg announced her resignation as Chief Financial Officer
effective 30 August 2015.

Chief Financial Officer – T Harris

Mr T Harris was announced as her replacement and will be officially
appointed Chief Financial Officer effective 31 August 2015. Mr Harris’s
contract was negotiated on 30 June 2015, he commenced with the
company on the 6th of July 2015 to undertake a handover period.

Base salary for the 2015/16 financial year of $175,000 inclusive of 9.5%
superannuation, reviewed annually.

Bonus of 5% of EBITDA in excess of $1.7m for 2015/16. Bonus capped at
$30,000 inclusive of tax and superannuation.

Chief Executive Officer – P Fallourd

Mr P Fallourd’s contract was renegotiated on the 11 August 2015.

Base salary for the 2015/16 financial year of $220,000 plus 9.5%
superannuation, reviewed annually.

Bonus of 8% of EBITDA in excess of $1.7m for 2015/16. Bonus capped at
$48,000 inclusive of tax and superannuation.

PAGE 18

Housing allowance of USD 12,500 per annum.

Bonus of 5% of EBITDA in excess of $1.7m for 2015/16. Bonus capped at
$30,000 inclusive of tax and superannuation.

4.1

REMUNERATION GOVERNANCE

4.1.1

Role of the remuneration and nomination committee

The remuneration and nomination committee is a committee on the
board. It is primarily responsible for making recommendations to the
board on:
•
•

Non-executive director fees
Remuneration levels of executive directors and other key
management personnel
The over-archiving executive remuneration framework and
operation of the incentive plan, and
Key performance indicators and performance hurdles for the
executive team.

Their objective is to ensure that remuneration policies and structures
are fair and competitive and aligned with the long-term interest of the
company.

4.1.2

Non-Executive Director Remuneration Policy

Fees and payments to non-executive directors reflect the demands
which are made on, and the responsibilities of, the directors. Non-
executive directors’ fees are reviewed annually by the Board.
Consideration is given to the remuneration of comparable companies
when setting fee levels.

The Non Executive Directors’ aggregate annual remuneration may not
exceed $350,000 which is periodically recommended for approval by
shareholders. This limit was approved by shareholders at the Annual
General Meeting on 30th May 2007. In the period ending 30 June
2015, the total non-executive directors’ fees including retirement
benefit contributions were $233,596

The following fees have applied:

•

Base fees for Non-Executive Directors - $50,000 per annum as
of 1 July 2014. Non-Executive Directors took a temporary 30%
reduction in fees from 1 November 2014 for the year ended 30
June 2015. The Non-Executive Directors also agreed to salary
sacrifice fees for shares from 1 November 2014.

Additional fees of $8,000 per annum for the Chairman of the Audit
and Risk Committee up until 16 February 2015. The Chairman of
the Audit and Risk Committee took a temporary 30% reduction in
fees from 1 November 2014 for the year ended 30 June 2015 and
also agreed to salary sacrifice fees for shares from 1 November
2014.

Executive Chairman and CEO’s package was $351,000 per annum
including superannuation up until 16 February 2015.

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REMUNERATION REPORT (AUDITED) CONTINUED...

•

The Independent Non-Executive Chairman’s fee is $78,000 per
annum including superannuation from 17 February 2015.
The Technical Director received an additional $750 per day
for pearl technical and Indonesian entity support up until 26
November 2014 where the fee was temporarily reduced to $500
per day for the year ended 30 June 2015. The Technical Director
resigned on 16 February 2015.

4.1.3

Executive remuneration policy and framework

In determining executive remuneration, the board aims to ensure that
remuneration practices are:
•

Competitive and reasonable, enabling the company to attract and
retain key talent
Aligned to the company’s strategic and business objectives and
the creation of shareholder value
Transparent, and
Acceptable to shareholders

•

•
•

The executive remuneration framework has three components;
•
•
•

Base pay and benefits, including superannuation
Short-term performance incentives, and
Long-term incentives through participation in the Atlas South Sea
Pearl Limited Employee Share Plan.

Employment contracts are in place between the Company (or its
subsidiaries) and all key management personnel. Under these
contracts, key management personnel are paid a base salary (which
may be provided in the form of cash or non-financial benefits) in
accordance with their skills and experience, as well as entitlements
including superannuation and accrued annual leave and long service
leave, in the event of termination.

Executives’ salaries are reviewed annually and are adjusted to take into
consideration the individuals’ responsibilities and skills compared to
others within the Company and the industry. There are no guaranteed
base pay increases in any executives’ contracts.

There were no short or medium term cash incentives provided to any
executives of the company during the last financial period except
where noted in section 4.2 of this report. Short or medium cash
incentives are incorporated into some executives’ salary packages
at the time of this report. The framework provides a mix of fixed and
variable pay with short and medium term incentives. As executives
gain seniority with the group, the balance of this mix shifts to a higher
proportion of ‘at risk’ rewards.

An Employee Share Plan (ESP) provides some senior executives with
incentive over and above their base salary (refer 4.5 below). The
allocation of shares under the Employee Share Plan (ESP) is not
subject to performance conditions of the Company. The reasons for
establishing the ESP were:

•

To align the interests of senior management with shareholders.
The ESP provides employees with incentive to strive for long term
profitability which is in line with shareholder objectives; and

To provide an incentive for employees to extend their
employment terms with the company. Pearl farming is a
long term business and the experience of long serving senior
employees is an important factor in the long term success of the
Company.

Use of remuneration consultants

During the financial year ended 30 June 2015 the Company did not
engage any remuneration consultants.

Voting and comments made that the Company’s 2014 Annual
General Meeting.

Atlas Pearls and Perfumes Ltd received more than 69% of “yes” votes on
its remuneration report for the 2014 financial year. The Company did
not receive any specific feedback at the AGM or throughout the year
on its remuneration.

Relationship between Key Management Personnel Remuneration
and Performance.

Each Key Management Personnel is remunerated on an individual
basis. Some Key Management Personnel are entitled to bonuses based
on a percentage of EBITDA.

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4.2

REMUNERATION REPORT (AUDITED) CONTINUED...

Details of remuneration

The following tables show details of the remuneration received by the directors and the key management personnel of the Group for the current
and previous financial period.

Name

Cash salary
& fees

Short term benefits

Total cash
salary, fees
and short

Post-
employment
benefits

Long term
benefits

Share based
compensation

Total

Salary
Sacrifice for
shares

Short term
incentive
cash bonus

Non-cash
monetary
benefit

Term
benefits

Super-
annuation
benefit

Long
service
leave

Bonus
Shares

Options

19,334

63,800
86,358

71,960

16,667

50,000

16,667

27,500

168,937

225,000

51,971

18,812

359,934

457,072

173,944

206,422

133,269

165,000

120,000

59,849

145,494

141,672

117,263

66,278

31,638

66,222

721,608

705,443

1,081,542

1,162,515

32,233

7,393

23,333

38,095

124,387

9,368

9,795

10,000

4,301

8,547

25,000

14,301

42,915

14,301

42,915

14,247

65,385

89,427

213,814

33,205

16,208

19,940

51,567

63,800

93,751

71,960

40,000

50,000

40,000

27,500

207,032

225,000

51,971

18,812

484,321

457,072

173,944

215,790

133,269

198,205

156,003

79,789

164,042

150,219

182,648

66,278

31,638

91,222

16,208

53,145

16,208

53,145

841,544

801,503

1,325,865

1,258,575

8,906

4,235

17,833

20,625

4,937

31,676

24,860

20,591

21,844

10,423

2,192

15,584

13,542

17,352

3,519

3,010

1,354

69,152

40,259

100,828

65,119

7,500

(628)

628

(12,559)

12,559

(2,974)

2,974

7,500

(16,161)

5,000

7,500

20,000

27,500

16,161

(6,660)

13,160

(1,487)

1,487

9,279

18,559

1,424

17,895

3,686

(1,424)

1,424

36,162

36,464

20,001

37,343

51,567

63,800

102,029

76,823

40,000

50,000

40,000

27,500

212,306

258,184

61,434

21,786

507,336

498,094

187,875

250,794

142,205

199,692

172,474

79,789

205,685

165,185

225,395

73,483

33,224

94,000

966,858

862,943

1,474,194

1,361,037

Directors(Non-Executive)

G. Newman 5,9

J.J.U. Taylor 1, 9,10,15

T. Martin 6,9

S. Arrow11,9

Directors (Executive)

S.P. Birkbeck 1,2,9,15

N. Rocher 14,15,16

Total

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

Other Key Management Personnel

S Gleeson 4,8,10,15

JS Jorgensen 3,9,15

R Satchell 3,7,9,16

C. Triefus 7

D Brandenburg4,8,9,16

P Fallourd12,9,16

S Mackay-Coghill13,8,15

Total

Grand Total 2015

Grand Total 2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

2015

2014

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Notes:

REMUNERATION REPORT (AUDITED) CONTINUED...

4.2.1 Details of remuneration – performance analysis

Dr J Taylor and Mr S Birkbeck are Directors of the Company’s Malaysian subsidiary
Aspirasi Satria Sdn Bhd.

Mr S Birkbeck was a key management personnel of the Group with the title of Chief
Executive Officer. Mr S Birkbeck was appointed Chief Executive Officer as at 16
January 2012. Mr S Birkbeck resigned as Chief Executive Officer on 25 November
2014. Mr S Birkbeck signed as Executive Chairman on 16 February 2015.

Mr J Jorgensen was a key management personnel of the Group and was appointed
to the position of Chief Operating Officer (COO) in September 2010. Mr J Jorgensen
is the Chief Operations Officer of the Company’s Indonesian subsidiary, P.T. Cendana
Indopearls. Mr J Jorgensen’s contract as Chief Operating Officer terminated on 23
January 2015. Mr R Satchell was appointed as Chief Operations Officer on the 23
January 2015.

Mr S Gleeson was appointed Chief Financial Officer on 1 February 2012. Mr S Gleeson
resigned as Chief Financial Officer on 1 July 2014. D Brandenburg was appointed
Chief Financial Officer on 1 July 2014. Mr S Gleeson was appointed as Managing
Director for Essential Oils of Tasmania Pty Ltd on 1 July 2015. Mr S Gleeson’s contract
was terminated on 16 April 2015.

The following table indicates the percentage of remuneration relating
to options and performance:

Name

N Rocher
S Birkbeck
S Gleeson
J Jorgensen
D Brandenburg
P Fallourd
S Mackay-Coghill
J Taylor
R Satchell1

30 June 2015
% Performance

30 June 2014
% Performance

7.37%
0.00%
0.00%
0.00%
14.76%
11.27%
0.00%
0.00%
14.08%

14.1%
4.9%
9.0%
0.7%
6.0%
5.0%
28.1%
0.8%
N/A

R Satchell was appointed COO on 23 January 2015 and not
considered Key Management Personnel during the year
ended 30 June 2014.

Mr G Newman was appointed 15 October 2010 as Non-Executive Director. Mr G
Newman was appointed as Non-Executive Chairman on 16 February 2015.

Mr T Martin was appointed 4 February 2013 as Non-Executive Director.

Mr C Triefus was the Retail Production Manager. The Retail Production Manager
manages the retail stores in Bali and co-ordinates all retail stock for the Group. Mr
Triefus resigned as Retail Production Manager on 31 December 2013.

Bonuses were paid to the KMP Danielle Brandenburg based on the milestones
achieved during the period. In 2014 Bonuses were paid to the KMPs, Mr S Gleeson,
Ms S McKay-Coghill and Ms D Brandenburg Danielle based on the milestones
achieved during 2014.

A number of key management took part in the 2015 and 2014 salary sacrifice
schemes. In 2015, Mr P Fallourd, Ms D Brandenburg, Mr R Satchell all participated in
the salary sacrifice scheme which finishes on 25 December 2015. Salary accrued for
under the plan as at 30 June 2015 for these individuals was; Mr P Fallourd $15,385, Ms
D Brandenburg $14,247, Mr R Satchell $9,795. Mr G Newman, Mr T Martin, Mr S Arrow
and Dr J Taylor salary sacrificed all director fees from the 1st of November until the 30th
of June 2015. Fees accrued under the plan as at 30 June 2015 for the directors were;
G Newman $32,233; Mr T Martin $23,333; Mr S Arrow $23,333 and Dr J Taylor $7,393.
$50,000 of Stephen Birkbeck’s salary was accrued for under the 2014 ESSP scheme
and was transferred to him in shares on 18 May 2015.

10. Non-Monetary benefits of other key management personnel included

accommodation allowances, school fees and medical expenses, as per individual
employment contracts.

11. Mr S Arrow appointed as Non Executive Director on 2 January 2014.

12. Mr P Fallourd appointed as Vice President of Pearling on 1 May 2014. Mr P Fallourd

was appointed as Chief Executive Officer on 26 November 2015.

13. Ms S Mackay-Coghill appointed as Vice President Jewellery, Cosmetics & Perfume

on 1 May 2014. Ms S Mackay-Coghill resigned as Vice President Jewellery, Cosmetics
& Perfume on 7 November 2014. Ms S Mackay-Coghil worked on contract with the
Company until 31 December 2014 but was not considered to be a Key Management
Personnel after 7 November 2014.

14. Mr N Rocher appointed as an alternate director to S Birkbeck on 18 July 2014. Mr N

Rocher resigned as alternate director on 16 February 2015.

15. Option benefit related expenses recognised in june 2014 year end have been
reversed in 2015 for all those employees who have left the employment of the
company during the year and are no longer eligible for to realise these options.

16.

Bonus shares were issued to management during 2015 for achievement of
performance related milestones.

4.2.2 Relationship between remuneration and Atlas performance

The following table shows performance indicators as prescribed by the
Corporations Act 2001 over the past 5 reporting periods:

12
months
2015

12
months
2014

6
months
2013

12
months
2012

12
months
2011

(8,134,049)

1,813,922 (2,194,645)

1,406,150

593,936

(2.4)

(48%)

0.61

53%

(0.81)

0.68

0.43

(25%)

(60%)

(38%)

-0.8%

4.4%

0.0%

2.6%

8.8%

Profit/(loss) for the year/
period

Basic earnings per share

Dividend payments

Increase / (decrease) in
share price

Total KMP incentives
as a percentage profit/
loss %

4.3

SERVICE AGREEMENTS

On appointment to the board, all non-executive directors
enter into a service agreement with the Company.

Remuneration and other terms of employment for the
Chief Executive Office, Chief Financial Officer, Chief Operations
Officer and other key management personnel are also
formalised in service agreements. Details of key management
personnel contracts are set out below:

4.3.1

Mr Stephen Birkbeck (Executive Chairman - resigned 16
February 2015, CEO – resigned 25 November 2014)

• Mr S Birkbeck was appointed as CEO commencing from 16

January 2012 and resigned as CEO on 25 of November 2014 and
as Executive Chairman on 16 of February 2015.

•

Base salary for the 2015 financial period of $351,000 per annum
inclusive of superannuation, reviewed annually for CEO role of Atlas.

Termination conditions - either party may terminate the contract
of employment by giving six months’ notice or a lesser amount as
mutually agreed.

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REMUNERATION REPORT (AUDITED) CONTINUED...

4.3.6 Mrs Sonia Mackay-Coghill

4.3

SERVICE AGREEMENTS CONTINUED...

4.3.2 Mr Pierre Fallourd

(CEO – appointed 26 November 2014)

•

Base salary for the 2015 financial period of $200,000 per annum
inclusive of superannuation, reviewed annually.
Termination conditions - either party may terminate the contract
of employment by giving three months’ notice or a lesser amount
as mutually agreed.

4.3.3 Mr Jan Jorgensen

(Chief Operating Officer – employment terminated 23
January 2015)

4.3.7

•

Base salary for the 2015 and 2014 financial period of $165,000
per annum reviewed annually and also subject to various non-
financial allowances relating to living in Indonesia.
Entitled to commission on Pearl Meat sales of 15% of sales
excluding VAT or GST.
Entitled to commission on Mother of Pearl sales of 5% for annual
sales in excess of $300,000 excluding VAT or GST.
Termination conditions – either party may terminate the contract
of employment by giving two months’ notice or a lesser amount
as mutually agreed.

4.3.4

Mr Richard Satchell
(Chief Operations Officer – appointed 23 January 2015)

• Mr R Satchell was appointed Chief Operations Officer 23 January

•

2015. He was previously appointed General Manager Strategy.
Base salary for the 2015 financial period of $160,000 per annum
reviewed annually and also subject to various non-financial
allowances relating to living in Indonesia.
Short-term incentive plan of 5% of Normalised EBITDA for the
financial year ended 30 June 2015, where Normalised EBITDA
is greater than $1.7m, this is capped at a maximum bonus of
$30,000. The bonus is inclusive of taxes.
Base salary for 2014 financial period of $120,000 per annum
reviewed annually and also subject to various non-financial
allowances relating to living in Indonesia.
2014 commission entitlements included; 15% of Pearl Meat sales
of 15% excluding VAT or GST and 5% of Mother of Pearl sales for
annual sales in excess of $300,000 excluding VAT or GST.
Termination conditions – either party may terminate the contract
of employment by giving two months’ notice or a lesser amount
as mutually agreed.

(Vice President of Jewellery, Perfumes & Cosmetics
resigned 7 November 2014)

•

Base salary for the 2015 financial period of $200,000 per annum
inclusive of superannuation, reviewed annually.
Commission payable on 5% of sales in Australia above last year
(excluding loose pearl sales and Showcase)$25,000 advance on
bonus paid.
Termination conditions- either party may terminate the contract
of employment by giving six months’ notice or a lesser amount as
mutually agreed.

Mr Stephen Gleeson
(Managing Director Essential Oils of Tasmania
(appointed 1 July 2014) & Joint Company Secretary
(appointed 24 April 2012), made redundant 16 April 2015)

•

Base salary for the 2015 financial period of $200,000 per annum
inclusive of superannuation, reviewed annually.
Bonus based on achieving various milestones (STIP) relating to
essential oil sales, commissioning of the new pearl extraction
plant, and various other grants. Bonus of 1% growth of 2014/15
EBITDA paid quarterly.
Termination conditions- either party may terminate the contract
of employment by giving six months’ notice or a lesser amount as
mutually agreed.

4.3.8

Mr Nelson Rocher
(Alternate Director – appointed 18 July 14. Head of
Perfume Development – appointed 1 June 2014,
resigned 16 February 2015)

•

Base salary for the 2015 financial period of $82,125 per annum
inclusive of superannuation, reviewed annually.
Termination conditions- either party may terminate the contract
of employment by giving one months’ notice or a lesser amount
as mutually agreed.

4.3.9
•
•

•

Other non - executives (standard contracts)

Contract terminates on retirement.
The Company may terminate the executive’s employment
agreement by providing 2 months written notice or providing
payment in lieu of the notice period.
Not entitled to any special termination payments under these
contracts.

4.4 ADDITIONAL INFORMATION OF THE REMUNERATION REPORT

4.3.5 Mrs Danielle Brandenburg

4.4.1

Loans to Directors and Executives

(Chief Financial Officer – appointed 1 July 2014 –
resigned 30 August 2015)

•

•
•

Base salary for the 2015 financial period of $175,000 per annum
inclusive of superannuation, reviewed annually.
Bonus on 2% of real EBITDA growth on 13/14 to 14/15.
Termination conditions- either party may terminate the contract
of employment by giving six months’ notice or a lesser amount as
mutually agreed.

Details of loans made to directors of the Company and other key
management personnel of the Group under the Employee Salary
Sacrifice Plan, including their personally related parties, are set out below:

Balance at
the start
of the
period

Loans
provided
during the
period

Interest
paid and
payable
for the
period

Interest
not
charged

Balance at
the end of
the period

No in
Group at
the end of
the period

Group

30 Jun 2015

30 Jun 2014

375,000

10,725

14,100

375,000

PAGE 22

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D I R E C T O R S ’ R E P O R T

REMUNERATION REPORT (AUDITED) CONTINUED...

i. Individuals with loans above $100,000 during the financial year

30 Jun
2015

Balance at
the start of
the period

Loans
provided
during the
period

Interest
paid and
payable for
the period

Interest
not
charged

Balance at
the end of
the period

Highest
indebted-
ness
during the
period

Name

J. Taylor*

S. Adams*

263,000

112,000

375,000

7,522

3,203

10,725

263,000

112,000

375,000

263,000

112,000

375,000

4.4.1

Loans to Directors and Executives

30 Jun
2014

Balance at
the start
of the
year

Loans
provided
during
the year

Interest
paid and
payable
for the
year

Interest
not
charged

Balance at
the end of
the year

Highest
indebted-
ness
during
the year

Name
J. Taylor*

$
263,000

S. Adams*

112,000

375,000

$
-

$
9,889

4,211

$
263,000

112,000

14,100

375,000

All loans to key management persons are under terms and conditions
as set out in note 23 relating to the employee share plan.

The amounts shown for interest not charged in the tables above
represent the difference between the amount paid and payable for the
period and the amount of interest that would have been charged on
an arms’ length basis.

$23,333, Stephen Arrow $23,333, Geoff Newman $32,233. During the
twelve months ended 30 June 2014 none of the directors salary sacrificed
into the Non - Executive Director Fee Salary Sacrifice Share plan.

$46,818 of the ESSP accrual above is for shares salary sacrificed

ii
by the Other Key Management Personnel during the year ended 30
June 2015 under the Atlas South Sea Pearl Employee Share Plan; Pierre
Fallourd $15,385 ($50,000 already issued out of total salary sacrifice of
$65,385); Danielle Brandenburg $14,247; Joseph Taylor $7,392; Richard
Satchell $9,795. 30 June 2014 accrual $11,905 for shares salary sacrificed
by Stephen Birkbeck under the Atlas South Sea Pearl Employee Share Plan.

iii
were made to some staff and Directors on normal commercial terms.

During the period, sales of individual pearls of small quantities

During the 12 months ended 30 June 2015, $Nil (2014:
iv
$30,000) in research and development fees were charged to Atlas
Pearls and Perfumes Ltd by Raintree Pearls and Perfumes Pty Ltd.
Raintree Pearls and Perfumes Pty Ltd is controlled by Stephen Birkbeck.

During the period ended 30 June 2015 Atlas Pearls and

v
Perfumes Ltd did not sell any pearls on behalf of Arrow Pearls Pty Ltd.
During the year ended 30 June 2014 Atlas received on consignment
approximately $1,750,000 of loose South Sea Pearls from Steve Arrow
on the 5th of December 2013. Atlas received a sales commission of
5.0% based on the gross value of the pearls. Commission earned on the
sale of loose pearls on behalf of entities controlled by key management
personnel was $Nil for the year end 30 June 2015 (30 June 2014:
$113,614). During the year ended 30 June 2014 Atlas paid the net
proceeds of pearls sales to Arrow less the commission, in the form
of 50% cash and 50% in shares until 10 million shares were acquired
(capped at $650,000). The shares were priced at $0.065 per share.

*These loans have been provided for in a prior period.

4.5 SHARE BASED PAYMENTS COMPENSATION

There is no allowance for impaired receivables in relation to any
outstanding balances, and no expense has been recognised in respect
of impaired receivables due from key management.

ii.

Other loans to Key Management Personnel

The loan advance of $25,000 to S Mackay-Coghill during year end
30 June 2014 was in advance of anticipated bonuses. Ms S Mackay-
Coghill resigned on 7 November 2014, a consultancy arrangement
was subsequently undertaken between 7 November 2014 and 31
December 2014 to repay the outstanding loan balance. As at 30 June
2015 the loan balance owing from Ms S Mackay-Coghill is nil.

4.4.2

Options

Performance options were issued to directors and key management
personnel during the financial period end 30 June 2015 and 30
June 2014. The options were issued at nil cost to employees and will
respectively expire on 31 December 2018 and 31 December 2016. The
options are exercisable based on the completion of KPI’s specific to
each individual. See table at 4.5.10 for details.

4.4.3

Other Key Management Personnel transactions

$78,900 of the ESSP accrual above is for shares salary

i.
sacrificed by the Directors during the year ended 30 June 2015 under
the Atlas South Sea Pearl Non-Executive Director Share Plan; Tim Martin

In 2006 and 2007 ordinary shares were issued to key management
personnel of Atlas Pearls and Perfumes Ltd under an Employee Share
Plan (ESP) that was approved by shareholders at the company’s annual
general meeting in May 2006. These shares have been issued to
employees under the following terms:

In 2007 shares were issued at a price of 40 cents each,

4.5.1
900,000 were issued on 17th April and 200,000 were issued on 10th
May 2007 when the market price was 41 cents and 48 cents per share
respectively. In 2006, 2,150,000 shares were issued at a price of 29
cents each on 30th May when the market price was 31 cents per share.

Entitlement to 50% of the beneficial interest on the shares

4.5.2
vested to employees after they have completed two (2) years of
employment with the company from the date of issue of the shares,
and entitlement to the remaining 50% of the beneficial interest in the
shares vested to employees after they have completed three (3) years
of employment with the company from the date of issue of the shares;

4.5.3
Shares issued under the ESP have been paid for by
employees who have been provided with an interest free, non-recourse
loan by the Company. This loan is to be repaid from the proceeds of
dividends paid in relation to these shares.

PAGE 23

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REMUNERATION REPORT (AUDITED) CONTINUED...

4.5.4

The details relating to the allocation of shares to directors and key management personnel under the ESP are as follows:

Name

Date of Issue

No. of Shares
Issued (3)

Shares Vested
to end of
2010

Shares
Forfeited in
the year

Financial
Year in which
shares vested

Joseph Taylor
(resigned 16 February 2015)

10/5/07

200,000

100%

30/5/06

1,000,000

100%

2009 – 50%
2010 – 50%

2008 – 50%
2009 – 50%

Nature of
shares

Ordinary
Shares

Minimum
value of grant
yet to be
vested (1)

Maximum
value of grant
yet to be
vested (2)

Notes –
1.
2.
3.

The minimum benefit is based on the fact that the vesting criteria for the shares on issue have not yet been met.
The maximum value is based on the value that is calculated at the time that the shares were issued.
The above named individuals are only entitled to these shares when the recourse loan is repaid. As at 30 June 2015, none of these loans have been repaid. Hence, these shares remain
as treasury shares in the employee share trust.

In 2012 key management personnel were invited to participate in the Atlas South Sea Pearl Limited Non-Executive Director Fee Sacrifice

4.5.5
Share Plan and Employee Salary Sacrifice Share Plan that was approved by shareholders at the Company’s Annual General Meeting on 30 May
2012. These shares have been issued to employees under the terms outlined in note 4.5.6.

The existing Employee Share Loan Plan was replaced by a new Employee Salary Sacrifice Share Plan and Non-Executive Director Plan at the AGM
on the 30 May 2012.

4.5.6

The Atlas Employee Salary Sacrifice Share Plan

Please refer to Note 23 in the financial statements for details.

The details relating to the allocation of shares to directors and key management personnel under the Employee Salary Sacrifice Share Plan are as
follows for year end 30 June 2015 and year ended 30 June 2014:

Name

Date of
Entrance

Entitlement
No. of
Shares

No. of
Shares to
be Issued

Date of
Issue

Shares
Vested to
June 2015

Shares
Forfeited in
the year

Financial
Year in
which
shares
vested

Nature of
shares

Share issue
price

Total Value
Salary
Sacrificed

Pierre Fallourd

17/11/14

555,556

100%

2015 –100%

Pierre Fallourd

17/11/14

625,000

26/9/14

100%

2015 –100%

Danielle
Brandenburg

17/11/14

555,556

Richard Satchell

15/12/14

266,667

100%

2015 –100%

Stephen Birkbeck

07/03/14

586,077

769,231

18/05/15

100%

2015 –100%

Ordinary
Shares

$0.045

15,385

$0.080

50,000

$0.045

14,247

$0.045

9,795

$0.065

38,095

Name

Date of
Entrance

Entitlement
No. of
Shares

No. of
Shares to
be Issued

Date of
Issue

Shares
Vested to
June 2014

Shares
Forfeited in
the year

Financial
Year in
which
shares vest

Nature of
shares

Share issue
price

Total Value
Salary
Sacrificed

Stephen Birkbeck

07/03/14

183,154

100%

2014 –
100%

Ordinary
Shares

$0.065

$11,905

4.5.7

The Atlas Non-Executive Director Fee Sacrifice Share Plan

Please refer to Note 23 in the financial statements for details.

PAGE 24

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REMUNERATION REPORT (AUDITED) CONTINUED...

4.5.8

The details relating to the allocation of shares to directors and key management personnel under the Non-Executive Director Fee Salary
Sacrifice Share Plan are as follows:

Name

Date of
Entrance

Entitlement
No. of Shares

No. of Shares
Issued

Date of
Issue

Shares
Vested to end
of 2015

Shares
Forfeited in
the year

Financial
Year in
which shares
vested

Nature of
shares

Share issue
price

Total Value
Salary
Sacrificed

Joseph Taylor

Geoff Newman

Tim Martin

Stephen Arrow

1/11/14

164,289

718,267

518,512

100%

2016 – 100% Ordinary Shares

$0.045

7,393

32,322

23,333

Notes - These shares were issued under the NED plan described above directly to the NEDs, for past services rendered.

4.5.9

The details relating to the allocation of performance options to directors and key management personnel under the Atlas Pearls and
Perfumes Ltd Employee Option Plan are as follows:

Name

Stephen Birkbeck1

Joseph Taylor1

Stephen Gleeson2

Stephen Gleeson1

Pierre Fallourd2

Pierre Fallourd1

Pierre Fallourd3

Nelson Rocher2

Jan Jorgensen2

Danielle Brandenburg1

Sonia McKay-Coghill1

Richard Satchell1

Richard Satchell3

Date of
Grant

13/05/14

24/02/14

02/06/14

24/02/14

02/06/14

30/6/15

24/02/14

02/06/14

30/6/15

Entitlement
No. of
Options

Vesting
Date

Expiry
Date

Shares
Forfeited
in the
year

Financial
Year in
which
shares vest

Nature of shares

Value Per
Options at 30
June 15

Value Per
Options at 30
June 14

Option
Exercise Price

10,000,000

30/6/16

31/12/16

500,000

30/6/16

31/12/16

2,000,000

30/6/16

31/12/16

1,000,000

30/6/16

31/12/16

1,000,000

30/6/16

31/12/16

1,000,000

30/6/16

31/12/16

2,000,000

30/6/18

31/12/18

1,000,000

30/6/16

31/12/16

500,000

30/6/16

31/12/16

2,000,000

30/6/16

31/12/16

100%

2,000,000

30/6/16

31/12/16

100%

1,000,000

30/6/16

31/12/16

1,000,000

30/6/18

31/12/18

2016

2018

2016

2018

Ordinary Shares

$nil

$8,616

$9,279

$nil

$18,558

$nil

$9,279

$nil

$12,559

$628

$5,948

$712

$2,974

$712

$2,974

$1,487

$1,424

$712

$0.0858

$0.095

$0.0858

$0.095

$0.059

$0.0858

$0.095

$0.059

Notes –
1.
2.
3.

These unlisted options were approved by the shareholders at the EGM held on 13 May 2014
These unlisted options were approved by the Board of Directors on 24 February 2014
These unlisted options were approved by the Board of Directors on 29 May 2015

4.5.10

The details relating to the equity instruments held by key management personnel are as follows:

Equity instrument disclosures relating to key management personnel

Options and rights granted as compensation
There were 3,000,000 options issued to key management personnel as remuneration during the period ended
30 June 2015 (30 June 2014 – 21,000,000).

Option holdings
There were 8,000,000 options on issue to key management personnel during the period ended 30 June 2015
(30 June 2014 - 21,000,000).

Shareholdings
The number of shares in the company held during the financial period by each director of the company and the other key management
personnel of the Group, including their personally related parties, are set out below.

Details of shares that were granted as compensation during the reporting period are provided at note 23 and in the Remuneration
Report contained at section 4 of the Directors’ Report.

PAGE 25

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D I R E C T O R S ’ R E P O R T

The details relating to the equity instruments held by key management personnel are as follows:

Balance 01/07/14

Granted as
Compensation

Options Exercised

Other Changes (1)

Balance 30/06/15

Parent Entity Directors

Mr S.P. Birkbeck(2)

Mr J.J.U. Taylor(2)

Mr G. Newman

Mr T. Martin

Mr S. Arrow

Mr N. Rocher(2)

Other Key Management
Personnel

Mr J. Jorgensen(2)

Mr S. Gleeson(2)

Mr C. Triefus(2)

Mr P. Fallourd

Ms S. Mackay - Coghill(2)

Ms D. Brandenburg

Mr R. Satchell(3)

Notes –

43,127,199

1,400,000

1,539,295

19,156,745

11,508,089

6,612,185

624,400

3,649,072

2,586,206

100,000

90,303,191

100,000

300,000

769,231

307,859

56,028,922

2,301,618

(500,000)

625,000

111,111

59,643,741

43,896,430

1,400,000

1,847,154

75,185,667

13,809,707

6,712,185

124,400

3,649,072

3,311,206

200,000

111,111

150,246,932

1. Other changes refer to shares purchased or sold during the financial period. Removal of balance on resignation of Director/KMP or balance held at appointment of Director/KMP
2. Director/KMP retired or resigned in the financial period
3. Director/KMP appointed in the period

The details relating to the equity instruments held by key management personnel are as follows:

Option holding
The number of options over ordinary shares in the parent entity held during the twelve months ended 30 June 2015 by each director
and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below:

Balance 01/07/14

Granted

Exercised

Expired/ forfeited/other

Balance 30/06/15

Parent Entity Directors

Mr S.P. Birkbeck

Mr J.J.U. Taylor

Mr G. Newman

Mr T. Martin

Mr S. Arrow (1)

Mr N. Rocher

Other Key Management

Mr J. Jorgensen

Mr S. Gleeson

Mr C. Triefus

Mr P. Fallourd

Ms S. Mackay-Coghill

Ms D. Brandenburg

Mr R. Satchell

10,000,000

500,000

1,000,000

500,000

3,000,000

2,000,000

1,000,000

22,000,000

2,000,000

1,000,000

3,000,000

This is the end of the Audited Remuneration Report.

10,000,000

500,000

1,000,000

500,000

3,000,000

2,000,000

17,000,000

4,000,000

2,000,000

8,000,000

PAGE 26

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A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

D I R E C T O R S ’ R E P O R T

5.1

PRINCIPAL ACTIVITIES AND REVIEW OF OPERATIONS

Principal Activities

The Company is a producer of pearls and has an interest in perfumes (and cosmetics) through its investments in Essential Oils of Tasmania and
World Senses. The Company has pearl farms in Indonesia with administrative and retail centres in Bali and Perth.

PAGE 27

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5.2

PRINCIPAL ACTIVITIES AND REVIEW OF OPERATIONS
(CONTINUED...)

REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS

5.2.1

Significant changes in the state of affairs

Significant changes in the state of affairs of the Group during the
financial year were as follows:

On the 16th January 2015, a $300,000 5 year term loan was received by
Essential Oils of Tasmania Pty Ltd. Security is charged over specific plant
and equipment owned by Essential Oils of Tasmania Pty Ltd to the
value of the loan. Interest of 3.6% per annum is payable.

On the 11th February 2015, the number of Directors on the Board
reduced from 5 members to 3. Mr Steven Birkbeck resigned as
Executive Chairman and Dr Joseph Taylor resigned as a Non-Executive
Director. Nelson Rocher, Mr Birkbeck’s Alternate Director, has also
resigned and remained actively involved in Atlas’ daily operations until
April 2015. Current Non-executive Director Mr Geoff Newman assumed
the role of Chairman.

Also on 11th February 2015, Joint Company Secretary, Mr Stephen
Gleeson, resigned from his position as Joint Company Secretary. He
retained his role as Managing Director Essential Oil of Tasmania until 16
April 2015. Chief Financial Officer Ms Danielle Brandenburg has been
appointed Joint Company Secretary.

On the 20th of April 2015, 50% of Essential Oils of Tasmania Pty Ltd
(“EOT”) was sold to Westwood Properties Pty Ltd. Westwood’s investment
was valued at A$1.4m, comprising of $280,000 for the shares purchased
and the A$1.12m in loans provided to EOT by Westwood. $720,000 of
the loan is to be used to repay existing loans previously provided by Atlas
to EOT, $400,000 will remain in EOT for a maximum period of 18 months
as working capital. EOT has now been deconsolidated from the Group
and is accounted for as an equity investment.

On the 24th of April 2015, Atlas Pearls and Perfumes Ltd closed
its 1 for 5 non-renounceable pro rata entitlement offer. The offer
which opened on the 25th of March 2015 was fully underwritten at
an offer price of $0.045 per New Share to raise up to $3.1m (before
costs). 16,074,730 new shares were issued at $0.045 per share raising
$723,362.85, the resultant shortfall being 53,048,882 shares. The offer
was underwritten by entities and persons related to the family of
current director Mr. Timothy Martin.

On the 17th of February 2015 a $500,000 bridging loan was secured
from Jingie Investments Pty Ltd. On the 13th of April 2015 a further
$1,000,000 loan was secured from Jingie Investments Pty Ltd. The loans
were unsecured and attracted an interest rate of 7%. Jingie Investments
is a related party of Atlas Pearls and Perfumes Ltd director Tim Martin.
The loans were repaid with funds raised under the non-renounceable
pro rata entitlement offer.

On the 30th of June 2015 the company issued options under the Atlas
Pearls and Perfumes Ltd Employee Option Plan to the following key
Management Persons; Pierre Fallourd 2,000,000 options and Richard
Satchell 1,000,000 options. The options have an exercise price of 5.9
cents each, an expiry date of 31 December 2018 and vest on 30 June
2018 where the following conditions have been met; achieving a
minimum A$2.75m average normalised EBITDA for the 3 years ending
30 June 2018 and that the individual remains directly engaged as an
employee of Atlas Pearls and Perfumes Ltd until 30 June 2018.

PAGE 28

5.2.2

Shareholder Returns

12 Months
Ending

6 Months
Ending

30 June
2015
$’000

(8,134)

(2.40)

Nil

30 June
2014
$’000

1,814

0.61

Nil

30 June
2013
$’000

(2,195)

(0.81)

Nil

Net profit/(loss) after tax

Basic EPS (cents)

Dividends paid

Dividends (per share) (cents)

The adjustments from NPAT to arrive at reported Normalised EBITDA for
these periods are shown below:

12 Months
Ending

6 Months
Ending

30 June
2015
$’000

(8,134)

521

398

589

(792)

6,697

(497)

(656)

149

245

30 June
2014
$’000

1,814

(355)

471

303

578

(63)

300

(12)

436

30 June
2013
$’000

(2,195)

(1,472)

222

136

(1,091)

2,908

242

Net profit/(loss) after tax

Tax expense/( benefit)

Finance/Interest net costs

Depreciation & amortisation

Foreign Exchange (gain)/loss

Agriculture Standard revaluation
(gain)/loss/ pearl adjustments

Other Non-Operating (income)/
expense

Inventory write off

Derivative Instrument
(gain)/loss

Impairment of JV loan

Fair value (gain)/loss
on EOT assets

(Gain)/Loss on sale of investment

Normalised EBITDA

(1,235)

3,470

(1,250)

5.2.3

Financial Position

30 June
2015
$’000

30 June
2014
$’000

Total Assets

Debt (Current & Non-current)

Other Liabilities

Shareholder funds

Debt / Shareholder funds

Number of shares on issue (million)

Net tangible assets per share (cents)

Share price at reporting date (cents)

30,942

(4,085)

(2,883)

23,974

17%

425.4

5.6

4.4

40,823

(5,155)

(6,859)

28,809

18%

326.62

8.7

8.5

30 June
2013
$’000

35,676

(5,274)

(4,605)

25,797

20%

287.039

9.0

4.1

There has been a decrease in the net assets of the group of $4.8M in the
year ended 30 June 2015 (30 June 2014 - $5.1M increase). Movements in
the net worth of the economic entity are summarised below:

•

Cash reserves increased to $2.6M (30 June 2014 - $1.7M) at 30
June 2015. During the period ended 30 June 2015 core debt was
decreased by $134,909 (30 June 2014 - $119K).

Trade receivables decreased to $0.5M (30 June 2014 - $3M)
principally due to the timing of the June auction, funds from the
auction held on the 11th and 12th of June 2015 were primarily
receipted before 30 June 2015. The 30 June 2014 loose pearl
auction was held on the 29th of June 2014.

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D I R E C T O R S ’ R E P O R T

5.2

•

REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS (CONTINUED...)

The valuation of oyster assets at 30 June 2015 was impacted
by the harvest of smaller than average pearls during the 12
months ended 30 June 2015. Whilst it is anticipated that the
majority of these smaller pearls were harvested by 30 June 2015,
management has elected to be conservative in their approach
and use of assumptions in the fair valuation of oysters which has
resulted in a total asset value of $14.5m at 30 June 2015 compared
to $19.3m at 30 June 2014. At 30 June 2015 the main drivers
behind the decrease in value include a reduction in the average
weight (momme per piece) and the sellable percent. The average
weight decreased from 0.60 at 30 June 2014 to 0.55 at 30 June
2015. The average sellable percent decreased from 62% at 30 June
2015 to 52% at 30 June 2014. The number of oysters decreased 5%
from 2,787,914 oysters at 30 June 2014 to 2,623,870 oysters at 30
June 2015. The number of pearls due to be harvested within six
months of the year end reduced from 247,868 at 30 June 2014 to
132,777 at 30 June 2015. Pearls due for harvest within six months
of the valuation date hold a higher value. The reduction in weight,
sellable percent and quantity on hand was partially offset by an
increase in the average sellable price, or ¥/momme increased on
the back of a strengthening market from ¥11,000 at 30 June 2014
to ¥12,000 at 30 June 2015.

Pearls on hand increased from 52,436 at 30 June 2014 to 94,046
at 30 June 2015; the net realisable value decreased from $1.07M
at 30 June 2014 to $0.9M at 30 June 2015. 50,000 of the pieces on
hand at 30 June 2015 were considered reject grade, these were
sold in July 2015. A write-off of $0.2M was recognised in relation
to adjusting the fair value of loose pearls and jewellery costs
for the period as inventory is required to be valued at either fair
value (for biological harvested assets) or the lower of cost and net
realisable value (30 June 2014 - $1.2M). Pearl inventory on hand
at 30 June 2015 and 30 June 2014 was lower grade after the large
June auctions.

Jewellery inventory was $1.8M as at 30 June 2015, down from
$2.9M as at 30 June 2014. A provision for inventory obsolescence
for $0.8M was booked during the year ended 30 June 2015 to
provide for slower moving inventory lines.

Borrowings were $4M at 30 June 2015, $1M lower than 30 June
2014 ($5.1M) due to the maturity of convertible notes on issue
during the year ended 30 June 2015. As at 30 June 2015 there
were no convertible notes outstanding.

Essential Oils of Tasmania Pty Ltd was deconsolidated from the
Group during the year ended 30 June 2015. As at 30 June 2015
essential oil finished product made up $Nil of the inventory balance
at 30 June 2015 (30 June 2014: $1.35M). During the year ended 30
June 2015 the group recorded write-ups of Lavender and Boronia
crops of $0.16M (year ended 30 June 2014: $0.3M write-up).

5.2.4

Operating Results

Atlas recorded a net loss after tax for the period ended 30 June 2015 of
$8.1M, a decrease of $9.9M (30 June 2014 – net profit after tax $1.8M).

The operating revenue for the year ended 30 June 2015 was $12.1M,
compared to the year ended 30 June 2014 - $16.3M. Pearl sales revenue
was $8.7M (30 June 2014 - $11.9M), with retail and wholesale sales
revenue of $1.4M (30 June 2014 - $1.45M). Essential oil sales recognised
up until the 20 April 2015 (point of deconsolidation) were $1.6M (12
months ended 30 June 2014 - $2.02M). The number of jewellery retail
outlets in Indonesia reduced to four by the 30 June 2015, with the
closure of outlets in Sanur, Jimbaran and Nusa Dua (2014 total number
of stores – seven).

Gross Profit percentage overall reduced to 50% in 2015 from 62% in
2014 due to the lower than average size and quality of loose pearls
available for sale during the year ended 30 June 2015, the liquidation
of slow moving jewellery inventory lines and the recognition of a
provision for jewellery inventory obsolescence.

5.2.5

Review of Operations

5.2.5.1

Pearling

Demand and price for Atlas South Sea Pearls remains strong and Atlas
is still considered the market leader in 9-13mm specialty pearl size of
fine quality white and silver South Sea Pearls. Atlas remains committed
to its current private auction sales strategy which has consistently
resulted in strengthening prices. Atlas continues to sell pearls to 50 of
the world’s largest pearl traders, previously 70-80% of the Atlas harvest
was sold to just four different customers.

Auction results steadily improved throughout the year reflective of an
improvement in average size and quality of Atlas product and solid
market demand. The June 2015 auction finished the year strongly with
a result 10% above internal forecasts.

Management and the Board are committed to investing in the
continued improvement of pearl quality and size and are not prepared
to accept average results. Attention to detail and the careful allocation
of resources amongst the pearling division will deliver these results.

The management team has performed a complete review of the
pearl stock systems as well as shell checks and harvest sampling and
is satisfied that the majority of the concerned shells and pearls were
harvested by 30 June 2015, and that the average size and weight is
expected to return to long-term historical averages during the financial
year ended 30 June 2016. New controls and procedures are being
implemented to improve retention rates and quality which will result in
a greater return on investment over the next 5 year cycle. The Company
continues to pioneer new research and development in collaboration
with James Cook University which will further improve on the quality
of Pinctada maxima mother of pearl shells. The objective being to
produce consistently stronger, faster growing shells, which produce
increasingly higher quality larger, white South Sea Pearls.

5.2.5.2

Pearling Value Added

The Company is committed to maximising the value of its pearl harvest
by identifying product most suitable for each of the following markets;
international wholesale trade; domestic wholesale, international retail,
domestic retail.

PAGE 29

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5.2

REVIEW OF OPERATIONS AND SIGNIFICANT CHANGES
IN THE STATE OF AFFAIRS (CONTINUED...)

Atlas continues to refine its jewellery retail strategy and offering which
has seen several large changes over the past 12 months.

During the year ended 30 June 2015, Atlas’s Indonesian farm retail outlets
continued to outperform its urban stores located in Bali. A subsequent
reallocation of resources has been undertaken which resulted in the
closure of Bali Urban stores located in Sanur, Jimbaran and Nusa Dua.
Atlas’s renovated flagship store located in Seminyak has benefited in the
recent months from this reallocation.

The strategy behind Jewellery production has undergone a dramatic
change over the past 18 months with productions and designs being
restricted to limited release capsule collections designed specifically for
the uniquity of South Sea Pearls.

In an effort to further support this new strategy, old slower moving
inventory lines are being heavily discounted and promoted.

The Company continues to view a strong successful retail platform as
an important tool in sheltering the Company from the impact of any
unforeseen shifts in the international loose pearl market.

5.2.5.3

Pearl By-Product Commercialisation

Atlas maintains an active interest in its investments in Essential Oils of
Tasmania and World Senses as part of the Group’s value-added strategy.
The Company remains committed to the commercialisation of its
Mother of Pearl By-Products through the innovative technology and
processes being delivered by Essential Oils of Tasmania. Through World
Senses Atlas continues to work with its joint venture partner Nomad
Two Worlds to deliver these by-products to the international market
with a particular focus on the North American cosmeceutical market.

Our ability to deliver Mother of Pearl powder and protein in a format
suitable to the cosmetic industry has been significantly aided by
the Commercialisation Australia Grant received by Essential Oils of
Tasmania in 2014. This project and the Grant supporting it was due to
be completed by 31 October 2015. Commercialisation Australia has
approved a six month extension to the project which will provide Atlas
and Essential Oils of Tasmania with more time to successfully execute
the Commercialisation of the MOP powder and protein and the CO2
extraction technology behind these products.

business and provide it with the necessary working capital required to
fund EOT’s crop growing and processing as well as necessary capital
expenditure.

Westwood Properties Pty Ltd is also committed to constructing a
development on land owned by Westwood Properties overlooking
the ocean on the outskirts of Hobart to accommodate all of EOT’s
newly acquired and assembled production lines for bio-actives, CO2
extraction units and perfume extraction/bottling lines. The ultimate
aim of Westwood Properties and Atlas continues to be the construction
and operation of a state of the art Industrial Tourism facility at the
aforementioned development site, featuring fragrances and flavour
extraction processes from raw crops to finished products as well as a
retail store and entertainment and training area dedicated to essential
oils and perfume.

5.2.5.5 Corporate Social Responsibility

We remain committed to being a global force in luxury Corporate
Social Responsibility and intend to pioneer a cradle to cradle approach
to the pearl and perfume supply chains by respecting the regional
communities and environment we work in. Our approach to pearl by-
products is central to this approach and is also opening new revenue
streams and giving Atlas invaluable exposure to large multi-national
purchasers of luxury ingredients. Core to our belief is optimising every
aspect of our production, ensuring there is minimal wastage and that
all the richness of the oyster and the pearl is realised in meaningful
ways.

Atlas farming operations, whether they are land or sea-based, strive to
consistently create and build stable economies in remote areas.

Atlas recognises that education and skill development represent
empowerment and the betterment of the families and communities
that make our business a success.

In particular, Atlas is proud to be a Company that actively facilitates
women’s empowerment in the remote areas of Indonesia. One
hundred percent of Atlas’s pearl technicians are women.

The employment opportunities made available to women has led to
a noticeable shift from the dominant patriarchal family structure that
prevails in many parts of Indonesia, to a family dynamic where income
goes into education and family well-being.

5.2.5.4 Natural Extracts

5.2.5.6 Audit Opinion

Essential Oils of Tasmania continues to develop its core business as an
exporter of food flavours and fragrances. The CO2 critical extraction
plant made possible by the Commercialisation Australia Grant continues
to open new doors for the Company through the ability to develop
new ground breaking products. During the year ended 30 June 2015
the Company secured a 12 months consultancy contract for the
processing of sandalwood for the fragrance industry. The successful
commercialisation of Mother of Pearl powder and protein remains a high
priority for the Company. And the Company successfully commercialised
the Wild Islands range of perfumes, including the essence of the pearl,
created by world-renowned master perfumer Michel Rouditnska.

With the support of our new business partner, 50% owner of Essential
Oils of Tasmania, Westwood Properties Pty Ltd, EOT will have a capable
and resourced Tasmanian based partner with which to progress the

The financial report has been audited independently and received an
unmodified opinion with an emphasis of matter on going concern.
Refer to Note 1.33 in the Notes to the Financial Statements for further
detail on going concern. Refer to page 67 for the Independent Auditors
Report and Opinion.

5.2.5.7

Personnel

Staff numbers at the end of the year were as follows:

Expatriates – Indonesia

Indonesian nationals – permanent

Indonesian nationals – part time

Australia

Total Personnel

2015

2014

2013

430

435

905

536

341

941

613

149

807

PAGE 30

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D I R E C T O R S ’ R E P O R T

DIVIDENDS

No dividends were declared and paid by the Company during period
ended 30 June 2015 (2014 – nil).

EVENTS SINCE THE END OF THE FINANCIAL YEAR

On the 1st of July 2015, Atlas Pearls and Perfumes Ltd announced
the resignation of its Chief Financial Officer, Ms Danielle Brandenburg
effective as of 30 August 2015 and the appointment of Mr Trevor Harris
as Chief Financial Officer effective 31 August 2015.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS
OF OPERATIONS

New leases have been secured to potentially add 500,000 oysters at
Punggu (Labuan Bajo) for a 30 year term. This is significant because of
its geographical convenience and the high quality product emerging
from the area. Additional suitability testing is being conducted at
Punggu for a lease with a capacity of another 300,000 shells. There is a
test running a Nuri in West Flores which looks promising however we
are awaiting final test results for confirmation. Further to this we are in
negotiations to deploy test rafts at Gili Banta (to the west of Komodo
Island). There are several other sites that have been identified and
additional more thorough test will be undertaken in the next 6 months.

At the moment our hatcheries deliver a lower survival rate that what
is traditionally seen in the Australian industry, consequently this will
be a primary area of focus for improvement in the coming 12 months.
Success has been achieved in the optimal utilisation of survivors with
routinely 80%+ seeding results with some basic improvements. We
are several years away from optimal operating conditions (selective
breeding program, saibo selection, on site seeding theatres, effective
first ops cycling through to second and third ops). This is aside from the
basic management improvements that better convey the status of the
operation, creating more dependable forecasts, high quality budgets
and effective deployment of resources to optimise revenue generation
in a cost effective manner.

The KM Poernomo, our second pearl oyster transport vessel has been
commissioned and is helping greatly to move oysters in a timely fashion
optimising growth and nacre production. It is an essential tool for Atlas to
maintain the managerial agility to optimise oyster performance.

The commissioning of the dedicated stud breeding facility will have
an impact on the efficiency of the commercial farming programme
by removing the need to maintain detailed comprehensive records
of every pearl oyster family in the system. With family pedigree family
lines now numbering in the hundreds, isolating the monitoring
and selection programme to a dedicated team and facility frees the
large-scale farms to rationalise stock and improving efficiency on the
commercial scale and reduce husbandry costs. Furthermore, financial
modelling analysis demonstrates that the stud farm is expected to be a
profit centre within three years and is expected to produce the Best of
Breed pearls creating a unique marketing position for a small premium
grade crop. The availability of three hatcheries within the Atlas farm
model is creating major risk mitigation and extending our production
season by exploiting the environmental variation found in our different
regional centres. A major spawning in August 2014 resulted in larvae
being shared by the three hatcheries.

We are working tirelessly to ensure that this latest research and
development project is not only a success from a scientific standpoint
but that it is absolutely measured by its ability to generate commercial
gains. Our research team is working tirelessly to ensure the integrity
of the system and with benefits will collaborate with our improved
operational systems in about 4 years to create additional boost to the
company’s performance moving forward.

DIRECTORS’ INTERESTS

The relevant interest of each current Director in the share capital of the
Company, as notified by the Directors to the Australian Stock Exchange
in accordance with S205G (1) of the Corporations Act 2001, at the date
of this report is as follows:

Ordinary Shares

Unlisted Options

G. Newman

S. Arrow

T. Martin(1)

Direct

4,256,545

Indirect

1,847,154

13,809,707

70,929,122

Direct

Indirect

14,900,200 indirect ordinary shares held by Mr T Martin are held by a private
entity which Mr T Martin is 1 of 4 directors. This entity is classified as a related party.

10.

OPTIONS

The Company had 32,582,005 options granted over unissued shares at
the 30 June 2013. As part of the rights issue on 18 January 2013 a total
of 30,240,735 unlisted options expiring 29 January 2014 exercisable at
$0.05 each were issued pursuant to the Company’s non-renounceable
entitlements Prospectus dated 16 November 2012. An additional
2,452,979 options were issued when the shortfall was taken up in
March and April 2013. These options expired on 29 January 2014.
Options exercised during the twelve months ended 30 June 2014
totalled 29,577,674. No listed options were on issue during the twelve
months ended 30 June 2015.

During the year end 30 June 2015 7,500,000 in unlisted options were
issued to certain employees and consultants of Atlas Pearls and
Perfumes Ltd, pursuant to the Atlas Pearls and Perfumes Ltd Employee
Option Plan. 2,000,000 of the unquoted options are exercisable at
$0.0858 on or before 31 December 2016 subject to vesting conditions
specific to the consultant. 5,500,000 are exercisable at $0.059, on or
before 31 December 2018, subject to the following vesting conditions;
achieving a minimum A$2.75m average normalised EBITDA for 3 years
ended 30 June 2018, and that the employee remains directly engaged
as an employee of Atlas Pearls and Perfumes Ltd until 30 June 2018.

During the year end 30 June 2014 26,500,000 in unlisted options
were issued to certain employees and consultants of Atlas Pearls and
Perfumes Ltd, pursuant to the Atlas Pearls and Perfumes Ltd Employee
Option Plan. The unquoted options are exercisable at $0.0858
(18,000,000) and $0.095 (8,500,000) respectively, on or before 31
December 2016, subject to certain vesting conditions specific to each
employee/consultant.

PAGE 31

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D I R E C T O R S ’ R E P O R T

11.

INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND OFFICERS

11.1

Indemnification

The Company has agreed to indemnify the following current directors
of the Company; Mr S Arrow, Mr G Newman and Mr T Martin and the
following former directors; Mr S Birkbeck, Dr J Taylor, Mr S Adams, Mr
RP Poernomo , Mr G Snow, Mr R Wright and Mr I Murchison, against
all liabilities to another person (other than the Company or a related
body corporate) that may arise from their position as directors of
the Company, except where the liability arises out of conduct which
involves negligence, default, breach of duty or a lack of good faith. The
agreement stipulates that the Company will meet the full amount of
any such liabilities, including costs and expenses.

11.2.

Insurance Premiums

Since the end of the previous financial year the Company has paid
insurance premiums of $16,440 (2014 - $15,670) in respect of directors’
and officers’ liability and legal expenses insurance contracts, for current
and former Directors and Officers.

12.

NON-AUDIT SERVICES

The company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor’s expertise
and experience with the Company and/or the Group are important.

Details of the amounts paid or payable to the auditor (BDO) for audit
and non-audit services provided during the period are set out below.

The Board of Directors, in accordance with advice from the Audit and
Risk Committee, is satisfied that the provision of non-audit services
during the period is compatible with general standards of independence
for auditors imposed by the Corporations Act 2001. The Directors are
satisfied that the services disclosed below did not compromise the
external auditor independence requirements of the Corporations Act
2001. The nature of the service provided do not compromise the general
principles relating to auditor independence because they relate to tax
advice in relation to compliance issues and review of the tax provisions
prepared by the Company. None of the services undermine the general
principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants.

The following fees were paid or payable for services provided by the
auditor of the parent entity, its related practices and non-related audit
firms during the period ended 30 June:

AUDIT SERVICES

BDO Australian Firm:

Audit and review of financial reports

Related practices of BDO Australian Firm

Total remuneration for audit services

TAXATION SERVICES

BDO Australian Firm:

Tax compliance services and advice

Related practices of BDO Australian Firm

Total remuneration for taxation services

Total remuneration for non-audit and
taxation services

30 June
2015

30 June
2014

102,379

111,966

102,379

111,966

37,919

51,962

37,919

51,962

37,919

51,962

13.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied under section 237 of the Corporations Act 2001
for leave of court to bring proceedings on behalf of the Company or
to intervene in any proceedings to which the Company is a party for
the purpose of taking responsibility on behalf of the Company for all or
part of those proceedings. The Company has not been a party to any
proceedings during the period.

14.

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 40.

Signed in accordance with a resolution of the Directors.

Geoffrey Newman
Chairman
28 August 2015

PAGE 32

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D E C L A R A T I O N O F I N D E P E N D A N C E

PAGE 33

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S

AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015

Revenue from continuing operations

Cost of goods sold

Gross profit

Other income

Marketing expenses

Administration expenses

Finance costs

Change in fair value less husbandry costs of oysters

Write-off of pearl and jewellery costs

Other expenses

Loss on sale of investment

Share of equity accounted investment

Profit/(Loss) before income tax

Income tax benefit

Profit/(Loss) after income tax for the period from continuing operations

Other comprehensive (losses)

Items that will be reclassified as profit or loss:

Exchange differences on translation of foreign operations

Other comprehensive (losses) for the period, net of tax

Total comprehensive income/(losses) for the period

Profit/(loss) is attributable to:

Owners of the Company

Total comprehensive income/(losses) is attributable to:
Owners of the Company

Overall operations :

Earnings per share for profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company

Basic earnings/(loss) per share (cents)

Diluted earnings/(loss) per share (cents)

Note

2015

12,118,312

(5,891,435)

6,226,877

3,824,188

(454,199)

2014

16,283,183

(6,230,257)

10,052,926

1,091,279

(360,364)

(7,407,977)

(6,814,921)

(473,131)

(5,489,228)

(1,386,517)

(2,220,528)

(245,234)

12,940

(7,612,809)

(521,240)

(8,134,049)

(513,496)

1,971,116

(2,229,675)

(1,438,252)

(299,971)

1,458,642

355,280

1,813,922

(1,073,521)

(9,207,570)

(792,775)

1,021,147

(8,134,049)

1,813,922

(9,207,570)

1,021,147

(2.40)

0.61

0.57

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

PAGE 34

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C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N

AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015

AS AT 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

Current assets

Cash and cash equivalents

Trade and other receivables

Derivative financial instruments

Inventories

Biological assets

Total current assets

Non-current assets

Intangibles

Loans joint venture entities

Investments accounted for using Equity Method

Inventories

Biological assets

Property, plant and equipment

Deferred tax assets

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Borrowings

Derivative financial instruments

Current tax liabilities

Short-term provisions

Total current liabilities

Non-current liabilities

Borrowings

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Contributed equity

Reserves

(Accumulated losses)/ Retained profits

Total equity

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

2015
$

2014
$

Note

2,632,311

562,021

14,245

3,030,227

3,565,680

9,804,484

276,854

1,597,015

292,940

173,510

1,665,207

3,020,985

6,114,013

8,414,231

19,214,436

392,875

67,896

3,025

132,093

10,988,645

12,011,412

4,473,286

3,335,614

21,137,864

30,942,348

1,685,124

3,954,527

225,528

4,401,274

4,599,784

21,608,359

40,822,795

3,141,549

5,014,791

852,323

(94,060)

57,298

5,865,179

8,971,901

130,208

972,780

1,102,988

6,968,167

140,168

2,901,397

3,041,565

12,013,466

23,974,181

28,809,329

36,465,656

(9,049,958)

(3,441,517)

23,974,181

32,153,001

(8,036,205)

4,692,533

28,809,329

PAGE 35

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C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y

FOR THE YEAR ENDED 30 JUNE 2015

Attributable to owners of Atlas Pearls and Perfumes Ltd

Contributed
equity

Note

Share
based
payment
reserve

Foreign
currency
translation
reserve

Retained
earnings/
(Accumulated
loss)

Total equity

18
17

16
17

18
17

16
17

30,203,033
-
-
-

1,949,968
-

1,949,968

581,029
-
-
-

-
41,545

41,545

(7,866,003)
-
(792,775)
(792,775)

-
-

32,153,001

622,574

(8,658,778)

2,878,610
1,813,922
-
1,813,922

-
-

25,796,669
1,813,922
(792,775)
1,021,147

1,949,968
41,545

-
4,692,532

1,991,513

28,809,329

32,153,001
-
-
-

4,312,655
-
36,465,656

622,574
-
-
-

(8,658,778)
-
(1,073,521)
(1,073,521)

4,692,532
(8,134,049)
-
(8,134,049)

59,767
682,341

-
(9,732,299)

-
(3,441,517)

28,809,329
(8,134,049)
(1,073,521)
(9,207,570)

4,312,655
59,767
23,974,181

Balance at 1 July 2013
(Loss) for the period
Exchange differences on translation of foreign operations
Total comprehensive income / (loss) for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Employee share scheme

Balance at 30 June 2014

Balances at 1 July 2014
Profit for the year
Exchange differences on translation of foreign operations
Total comprehensive income / (loss) for the period
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs
Employee share scheme
Balance at 30 June 2015

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

PAGE 36

For personal use only

C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y

C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S

AS AT 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

Cash flows from operating activities

Proceeds from pearl, jewellery and oyster sales

Proceeds from essential oil sales

Proceeds from other operating activities

Interest paid

Interest received

Payments to suppliers and employees

Income tax (paid)/received

Net cash used in operating activities

Cash flows from investing activities

Cash on sale of EOT investment

Payments for property, plant and equipment

Joint venture partnership contributions (paid)

Net cash used in investing activities

Cash flows from financing activities

Repayment of borrowings

Proceeds from issue of shares

Share transaction costs

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial period

Effects of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at the end of the financial year

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Note

2015

2014

12,916,087

11,858,342

1,544,324

441,896

(406,295)

8,867

1,738,829

443,514

(204,364)

9,329

(13,904,890)

(13,743,885)

(98,545)

(359,059)

24.2

501,444

(257,294)

280,000

(2,081,934)

(537,041)

(1,234,528)

(53,971)

(2,338,975)

(1,288,499)

(75,707)

3,160,563

(263,066)

2,821,790

984,259

1,665,207

(17,155)

2,632,311

(329,224)

1,808,715

(30,321)

1,449,171

(96,623)

1,767,156

(5,326)

1,665,207

PAGE 37

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

1.1

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board and
the Corporations Act 2001. Atlas Pearls and Perfumes Ltd is a for-profit
entity for the purpose of preparing the financial statements.

The financial statements cover the consolidated entity of Atlas Pearls
and Perfumes Ltd and its subsidiaries. Atlas Pearls and Perfumes Ltd is a
listed public company, incorporated and domiciled in Australia.

A description of the nature of the consolidated entity’s operations and its
principal activities is included in the review of operations and activities in
the directors report which is not part of these financial statements.

The financial statements were authorised for issue by the directors on
28 August 2015. The directors have the power to amend and reissue
the financial statements.

The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. The accounting
policies have been consistently applied to all the periods presented,
unless otherwise stated.

1.2

Compliance with IFRS

The consolidated financial statements of the Atlas Pearls and Perfumes
Ltd group also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).

1.3

New and amended standards adopted by the group

None of the new standards and amendments to standards that are
mandatory for the first time for the financial period beginning 1 July
2014 affected any of the amounts recognised in the current period or
any prior period and are not likely to affect future periods.

1.4

Historical Cost Convention

These financial statements have been prepared under the historical
cost basis, as modified by the revaluation of available for sale financial
assets, financial assets and liabilities (including derivative instruments)
at fair value through profit or loss and biological assets at fair value less
cost to sell.

1.5

Critical Accounting Estimates

The preparation of financial statements 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. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant
to the financial statements are disclosed in note 1.32.

1.6

Principles of Consolidation

The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Atlas Pearls and Perfumes Ltd (“Company”
or “parent entity”) as at 30 June 2015 and the results of its subsidiaries
for the period then ended. Atlas Pearls and Perfumes Ltd and its
subsidiaries together are referred to in this financial statement as the
consolidated entity.

Subsidiaries are all entities (including structured entities) over which
the group has control. The group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power
to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the group. They are
deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for the
acquisition of business combinations by the Group. 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.

Non-controlling interests in the results and equity of subsidiaries
are shown separately in the statement of profit or loss and other
comprehensive income, statement of changes in equity and statement
of financial position respectively.

(i)

Employee Share Trust

The Group has formed a trust to administer the Group’s employee share
scheme. The trust is consolidated, as the substance of the relationship
is that the trust is controlled by the Group. Shares held by Atlas South
Sea Pearl Limited Employee Share Trust are disclosed as treasury shares
and deducted from contributed equity.

(ii)

Joint Ventures

Joint venture entities

The interest in a joint venture entity is accounted for using the equity
method after initially being recognised at cost in the consolidated
statement of financial position. Under the equity method of
accounting, the investments are initially recognised at cost and
adjusted thereafter to recognise the group’s share of the post-
acquisition profits or losses of the investee in profit or loss, and the
group’s share of movements in other comprehensive income of the
investee in other comprehensive income. Details relating to the entity
are set out in note 30.

When the group’s share of losses in an equity-accounted investment
equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the group does not recognise further
losses, unless it has incurred obligations or made payments on behalf
of the other entity.

Unrealised gains on transactions between the group and its associates
and joint ventures are eliminated to the extent of the group’s
interest in these entities. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity accounted investees have
been changed where necessary to ensure consistency with the policies
adopted by the group.

The group treats transactions with non-controlling interests that do
not result in a loss of control as transactions with equity owners of
the group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling
interests to reflect their relative interests in the subsidiary. Any
difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognised in a
separate reserve within equity attributable to the owners.

PAGE 38

For personal use onlyN O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

1.7

Income tax

The income tax expense or revenue for the period is the tax payable on
the current period’s taxable income based on the applicable tax rate for
each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in
the countries where the company’s subsidiaries operate and generate
taxable income. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, the deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income
tax is determined using tax rates (and laws) that have been enacted or
substantially enacted by the reporting date and are expected to apply
when the related deferred income tax asset is realised or the deferred
income tax liability is settled.

Deferred tax is credited in the consolidated statement of profit or loss
and other comprehensive income 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 tax assets are recognised for deductible temporary differences
and unused tax losses only to the extent that it is probable that future
taxable amounts will be available to utilise those temporary differences
and losses.

Deferred tax liabilities and assets are offset when there is a legally
enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority.
Current tax assets and liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or
to realise the asset and settle the liability simultaneously.

1.9

Biological Assets

Oysters are measured at their fair value less estimated husbandry costs.
The fair value of these biological assets is determined by using the
present value of expected net cash flows from the oysters, discounted
using a pre-tax market determined rate.

Changes in fair value less estimated husbandry costs of these assets are
recognised in the consolidated statement of profit or loss and other
comprehensive income in the period they arise.

The details of the Biological assets that are held by the economic entity
as at 30 June 2015 are provided at Note 10.

1.10

Property, Plant & Equipment

Each class of property, plant & equipment is stated at historical cost less,
where applicable, any accumulated depreciation and impairment losses.

Property

Freehold land and buildings are shown at their cost, 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 and their useful lives are
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 consolidated
statement of profit or loss and other comprehensive income.

1.8

(a)

(b)

(c)

(d)

(e)

Inventories

Depreciation

Pearls – The cost of pearls grown by the Group is the fair
value less husbandry costs at the time the pearls are
harvested. At each reporting date they are valued at the
lower of cost and net realisable value.

Nuclei - quantities on hand at the period end are valued at
the lower of cost and net realisable value.

Oysters – refer note 1.9.

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

Essential Oils - quantities on hand at the period end are
valued at the lower of cost and net realisable value.

Freehold land

Leasehold land & buildings & improvements

Other inventories – including jewellery, fuel, mechanical
parts and farm spares at the period end are valued at the
lower of cost and net realisable value.

Vessels

Plant & equipment

Net realisable value is the estimated selling price in the ordinary course
of business less the estimated costs necessary to make the sale.

2015

5-10%

10%

2014

5-10%

10%

10-50%

PAGE 39

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

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

1.11

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

Financial assets at fair value through profit or loss are financial assets
held for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term. Derivatives are
classified as held for trading unless they are designated as hedges.
Assets in this category are classified as current assets. Realised and
unrealised gains and losses arising from changes in the fair value of
these assets are included in the consolidated statement of profit or loss
and other comprehensive income 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
are included in current assets, except for those with maturities greater
than 12 months after the reporting date which are classified as non-
current assets. Loans and receivables are included in receivables in the
statement of financial position.

(c)

Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable
equity securities, are non-derivatives 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 reporting date. Unrealised
gains and losses arising from changes in fair value are taken directly
to equity. Investments are designated as available-for-sale if they do
not have fixed maturities and fixed or determinable payments and
management intends to hold them for the medium to long term.

(d)

Recognition and derecognition

Regular purchases and sales of financial assets are recognised on trade-
date, the date on which the Group 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 carried at fair value through profit or loss are
initially recognised at fair value and transaction costs are expensed in
the consolidated statement of profit or loss and other comprehensive
income. 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.

(e)

Measurement

At initial recognition, the group measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in the profit or loss.

PAGE 40

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

(f)

Impairment

The Group assesses at each reporting date whether there is objective
evidence that a financial asset or group of financial assets is impaired. In
the case of equity securities classified as available-for –sale, a significant
or prolonged decline in the fair value of a security below its cost is
considered as an indicator that the securities are impaired. A financial
asset or a group of financial assets is impaired and impairment losses
are incurred only if there is objective evidence of impairment as a result
of one or more events that occurred after the initial recognition of the
asset (a ‘loss’ event) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or group of financial
assets that can be reliably estimated.

If there is evidence of impairment for any of the Group’s financial
assets carried at amortised cost, the loss is measured as the difference
between the asset’s carrying amount and the present value of
estimated future cash flows. The cash flows are discounted at the
financial asset’s original effective interest rate. The loss is recognised in
the consolidated statement of profit or loss and other comprehensive
income. If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the reversal
of the previously recognised impairment loss is recognised in the
consolidated statement of profit or loss and other comprehensive
income.

1.12

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 consolidated statement of profit
or loss and other comprehensive income.

1.13

Impairment of assets

Other assets are tested for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the assets carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. Non financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at
each reporting date.

1.14

Foreign Currency Translation

(a)

Functional and presentation currency

Items included in the financial statements of each of the subsidiaries
within the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the
functional currency”). The consolidated financial statements are 1.15

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

1.14

Foreign Currency Translation (Cont.)

presented in Australian dollars, which is Atlas Pearls and Perfumes 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 date of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at period end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the consolidated statement of profit or loss and other
comprehensive income, except when they are deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges or are
attributable to part of the net investment in a foreign operation.

Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. Translation differences on
non-monetary assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair
value gain or loss. Translation differences on non-monetary assets such
as equities classified as available for sale financial assets are included in
the fair value reserve in equity.

All foreign exchange gains and losses are presented in the Statement of
Profit of Loss and Other Comprehensive Income within other income
or other expenses unless they relate to financial instruments.

(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:

1. Assets and liabilities for each statement of financial position

presented are translated at the closing rate at the date of that
statement of financial position;

Income and expenses for each statement of profit or loss and other
comprehensive income 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 are repaid, a proportional share of such exchange
differences are recognised in the statement of profit or loss and other
comprehensive income as part of the gain or loss on sale.

1.15

Employee Benefits

Short Term Obligation

Liabilities for wages and salaries, including non-monetary benefits and
accumulating sick leave that are expected to be settled wholly within
12 months after the end of the period in which the employees render
the related service are recognised in respect of employees’ services up
to the end of the reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.

The liability for accumulating sick leave is recognised in the provision
for employee benefits. All other short-term employee benefit
obligations are presented as payables.

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

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 Pearls and Perfumes Ltd Employee Share Plan. Information
relating to this scheme is set out in note 23.

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 the date that the employee
enters into the plan and is recognised over the period during which the
employee becomes unconditionally entitled to the shares.

1.16

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.

1.17

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.

1.18

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.

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.

1.19

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.

1.20

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. All trade receivables are generally due for
settlement within 30 days.

PAGE 41

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

Any transaction costs arising on the issue of ordinary shares are recognised
directly in equity as a reduction of the share proceeds received.

1.20

Trade receivables (continued...)

1.25

Dividends

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 statement of
profit or loss and other comprehensive income 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
statement of profit or loss and other comprehensive income.

1.21

Trade and other payables

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

1.22

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 statement of profit or loss and other comprehensive
income 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 statement of profit or loss and other
comprehensive income.

Borrowings are removed from the statement of financial position 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.

1.23

Borrowing costs

Borrowing costs incurred for the construction of any qualifying asset
are capitalised during the period of time that is required to complete
and prepare the asset for its intended use or sale. Other borrowing
costs are expensed.

1.24

Contributed Equity

Ordinary share capital is recognised at the fair value of the
consideration received by the Company and recognised in equity.

PAGE 42

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 period but not distributed at reporting date.

1.26

Goods and Service Tax (GST)

Revenues, expenses and assets are recognised net of the amount of
GST except where the GST incurred on a purchase of goods & services
is not recoverable from the taxation authority, in which case the GST
is recognised as part of the cost of acquisition of the asset or as part of
the expense item as applicable; and where receivables and payables
are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation
authority is included as part of receivables in the statement of financial
position.

Cash flows are included in the statement of cashflows on a gross
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of
GST recoverable from, or payable to, the taxation authority.

1.27

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 servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial
period, adjusted for bonus elements in ordinary shares issued during
the period. The weighted average number of shares used for the basic
earnings per share calculation is 339,521,538.

(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. The weighted average number of shares used
for the basic earnings per share calculation is 339,521,538.

1.28

Segment Reporting

The Group has identified its operating segments based on internal
reports that are reviewed and used by the board of Directors and
management team (the chief operating decision makers) in assessing
performance and in determining the allocation of resources.

The operating segments are identified by management based on
the manner in which the product is sold, whether retail or wholesale.
Management also considers the business from a geographical
perspective and has identified four reportable segments. Discrete
financial information about each of these operating businesses is
reported to the board of Directors and management team on at least a
monthly basis.

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

1.28

Segment Reporting (continued...)

The wholesale business is a producer and supplier of pearls within the
wholesale market. The retail business is the manufacture and sale of
pearl jewellery and related products within the retail market.

The accounting policies used by the Group in reporting segments are
the same as those contained in note 1 to the accounts and in the prior
period except as detailed below:

Inter-entity sales
Inter-entity sales are recognised based on an internally set transfer
price. These transactions are eliminated within the internal reports. The
revenue from external parties reported to the chief operating decision
maker is measured in a manner consistent with that in the statement of
profit or loss and other comprehensive income.

Biological assets and pearl inventories
These are recognised at cost within the internal reports.

It is the Group’s policy that if items of revenue and expense are
not allocated to operating segments then any associated assets
and liabilities are also not allocated to segments. This is to avoid
asymmetrical allocations within segments which management believe
would be inconsistent.

1.29

Comparative Figures

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

1.30

Business combinations

The acquisition method of accounting is used to account for all
business combinations, regardless of whether equity instruments
or other assets are acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the
group. The consideration transferred also includes the fair value of any
asset or liability resulting from a contingent consideration arrangement
and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition related costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair
values at the acquisition date. On an acquisition by acquisition basis,
the group recognises any non – controlling interest in the acquiree
either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets.

The excess of the consideration transferred the amount of any non-
controlling interest in the acquiree and the acquisition date fair value
of any previous equity interest in the acquiree over the fair value of
the group’s share of the net identifiable assets acquired is recorded
as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and the measurements of
all amounts have been reviewed, the difference is recognised directly in
profit and loss as a bargain purchase.

Where settlement of any part of cash contribution is deferred, the
amounts payable in the future are discounted to their present value as
at the date of exchange. The discount rate used is the entity’s

incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable
terms and conditions.

Contingent consideration is classified as equity or a financial liability.
Amounts classified as a financial liability are subsequently remeasured
to fair value with changes in fair value recognised in profit or loss.

1.31

Parent entity financial information

The financial information for the parent entity, Atlas Pearls and
Perfumes Ltd, disclosed in note 32 has been prepared on the same
basis as the consolidated financial statements, except as set out below:

(i)

Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the financial
statements of Atlas Pearls and Perfumes Ltd.

(ii)

Share-based payments

The grant by the company of ordinary shares to the employees of
subsidiary undertakings in the group is treated as a capital contribution
to that subsidiary undertaking. The fair value of employee services
received, measured by reference to the grant date fair value, is
recognised over the vesting period as an increase to investment in
subsidiary undertakings, with a corresponding credit to equity.

1.32

Critical accounting estimates and judgments

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 for the period ended 30 30 June 2015 or 30 June 2014.

– Impairment of jewellery

A provision for jewellery obsolesce of $823,434 has been recognised
in respect of the jewellery inventory holdings held by the group at 30
June 15. Judgement has been made in determining the amount of the
provision based on the sales profile and recoverable value of jewellery.

– Write-off of pearl inventories and jewellery

There was a write-off of $1,386,517 as at 30 June 2015 (30 June 2014 –
$2,229,674).

PAGE 43

For personal use only
A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED...)

1.32

Critical accounting estimates and judgments
(continued...)

– 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 husbandry 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
husbandry costs by reference to anticipated market prices for pearls
upon harvest. Carrying amount of inventories and biological assets are
disclosed in note 10.

Key assumptions that have been used to determine the fair market
value of the oysters at 30 June 2015 are as follows:

30 June 2015

30 June 2014

Average selling price for pearls1

¥12,000 per momme

¥11,000 per momme

¥ exchange rate

Average pearl size

¥93.96:AUD1.00

¥95.52:AUD1.00

0.55 momme

0.60 momme

Proportion of market grade pearls

Discount rate applied to cash flow

52%

20%

62%

20%

Mortality & Rejection rates

Historical comparison

Average unseeded oyster value

$1.47

$1.32

Sellable Actual Results for the year ended 30 June 2015

Total Weight Sold (Momme)

33,704

28,468

01/07/14 –
31/12/14

01/01/15-
30/06/15

Total

62,172

Average ¥/Momme

¥10,229 per
momme

¥12,907 per
momme

¥11,455 per
momme

Total No. of Pearls sold

73,424

50,758

124,182

Average pearl prices are based on management’s best
judgement of the quality of pearls in the water at year end.
Atlas expects the percentage of F-ops harvested to increase
over the next two years, resulting in the harvest of heavier,
rounder pearls. Management takes into consideration
historical averages discounted for potential market volatility
when calculating the average selling prices for pearls.

Biological assets are valued using estimated future yen rates. Biological
assets recognised as current assets on the Statement of Financial Position
represent the estimated value of the pearls to be harvested within the
next 12 months. The yen rate used is based on the estimated yen rates
for the next 18 months from Commonwealth Bank of Australia.

1.33

Going Concern

The financial statements have been prepared on the going concern
basis, which contemplates continuity of normal business activities and
the realisation of assets and the settlement of liabilities in the ordinary
course of the business.

The net loss after tax for the Group for the year ended 30 June 2015
amounted to a loss of $8.1m (year ended 30 June 2014 $1.8m profit).

At 30 June 2015 the Group had a working capital balance of $3.9m
(2014: $10.2m); $3.5m (2014: $8.4m) of this balance comprised of
unharvested oysters due for harvest during the next 12 months.

PAGE 44

As at the 30 June 2015 the Group had a net asset position of $24m
(2014: $29m); $14.6m (2014: $19.3m) of this balance comprised of
unharvested oysters.

Results for the 12 months ended 30 June 2015 were impacted by the
harvest of smaller than average pearls, which has resulted in a total
asset value of $14.6m at 30 June 2015 compared to $19.3m at 30 June
2014. As disclosed in note 10 management do anticipate the average
weight and sellable percent of seeded oysters to return to long term
averages over the next 12 months.

In response to this matter all operations and overheads have been
reviewed to identify cost savings aligned with a refocus on the core
pearling business whilst preserving the most prospective of the value-
adding projects.

In accordance with the covenants of the existing facility agreement,
Atlas was required to achieve an Annual Normalised EBITDA greater
than $1.5m for the year ended 30 June 2015. The Group has not met
this requirement. The Commonwealth Bank of Australia (“CBA”) has
agreed in principle to a waiver of this covenant for the year ended 30
June 2015 and is now in the process of formalising the continuation
of the existing debt facilities up until the 30 June 2016 subject to the
following terms and conditions:

- Atlas will seek to refinance the facility with a new lender on
or before 30 June 2016 and provide CBA with an update on their
refinancing progress on a quarterly basis. The current facility limit is
$5,000,000. As at the reporting date the Company had drawn down
$3,816,805 (2014: $3,951,715) and had undrawn facilities available of
$1,183,195 (2014: $1,048,285). The loans can be drawn at any time.
- Continuation of the existing covenants;

• Annual Normalised EBITDA greater than $1.5m.
• Minimum net worth of AUD $18m
• Ratio of net-worth equal to or greater than 60%

- Quarterly reporting of the Atlas Group to be provided within 35
days from the end of each period, including commentary for
variances to budget +/- 10%.

- Atlas to notify the CBA of the loose pearl auction results

within 7 days including relevant commentary.
Principle repayment plan of $1m during the FY15/16 with the
schedule of repayments as follows:

Date of Repayment

30 September 2015

31 December 2015

31 March 2015

30 June 2015

Total

•

Repayment Amount

$150,000

$100,000

$250,000

$500,000

$1,000,000

A new agreement is expected to formalised and signed off with
CBA in September 2015

However, without:
-

-
-

the renegotiation of existing credit and debt facilities of the Group
by the 30 June 2016;
the international market for wholesale loose white south sea
pearls maintaining existing demand levels and pricing;
the Group meeting its auction forecasts;
the Group generating profitable operations with positive cash
flows; the realisation of assets at amounts greater than their
carrying values, and/or
the raising of debt or equity

-
there is a material uncertainty that may cast significant doubt over the
groups’ ability to continue as a going concern and therefore it may be

For personal use only

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED...)

Going Concern (continued...)

1.33
required to realise its assets and extinguish its liabilities other than in
the ordinary course of business, and at amounts that different from
those in the financial statements.
On this basis and considering the options available to the Group, the
directors declared on page 66 that there are reasonable grounds to
believe that the Group can pay its debts, as and when they fall due.
These financial statements do not include any adjustments relating to
the recovery and classification of recorded asset amounts or the amounts
or classification of liabilities and appropriate disclosure that may be
necessary should the Group be unable to continue as a going concern.

REVENUE FROM CONTINUING OPERATIONS

4. INCOME TAX EXPENSE

(a) The components of tax expense/(benefit) comprise:

Current tax

Deferred tax

Prior period under/(over) provision

1,155,519

(634,279)

(240,946)

(114,334)

521,240

(355,280)

(b) Deferred income tax (revenue) expense included in income tax expense comprises:

Decrease(increase) in deferred tax assets
(excluding tax losses) (note 14)

1,294,338

(1,398,565)

(Decrease)increase in deferred tax liabilities
(note 14)

(1,928,617)

1,284,231

(634,279)

(114,334)

Sales Revenue
Sale of goods

Other Revenue
Interest income
Other revenues
Revenue

Other Income
Foreign exchange (losses)/gains realised
Foreign exchange (losses)/gains unrealised
Foreign exchange gains - financial instrument
Gain on conversion of convertible note
Gain on sale of assets
Grant funds
Insurance refund
Write back of dividend provision
Research and development tax offset
EOT Crop Revaluation
Other Income

Consolidated

2015
$

2014
$

Profit/(loss) before income tax expense

(7,612,809)

1,458,642

Tax at the Australian tax rate of 30%

(2,283,843)

437,593

11,774,319

15,933,177

Tax effect of amounts which are not
deductible in calculating taxable income:

9,411
334,582
12,118,312

13,333
336,673
16,283,183

591,556
1,119,368
14,245
656,440
1,663
521,768
-
-
752,044
167,104
3,824,188

405,990
-
-
-
-
336,600
16,922
9,768
-
321,999
1,091,279

Loss of tax benefits on deconsolidation of
subsidiary

202,036

Non-deductible expenses

Tax losses not brought to account

Sundry items

Permanent Differences (Indonesia)

374,174

(352,908)
(528)

Foreign timing difference no longe recognised

2,038,871

Difference in overseas tax rates

Research and development tax offset

Income tax expense/(benefit)

17,007

526,431

521,240

26,224

(8,923)

(667,992)

(142,182)

(355,280)

Weighted average effective tax rates

(7%)

(24%)

(d) Deferred income tax at 30 June relates to the following:

Deferred tax liabilities

Other

(2,147)

PROFIT/(LOSS) BEFORE INCOME TAX INCLUDES THE
FOLLOWING SPECIFIC ITEMS

Fair value adjustment on biological assets and
agricultural produce

(1,880,258)

1,312,530

Administration expenses from ordinary activities
Salaries and wages
Depreciation property, plant and equipment
Operating lease rental costs
Compliance and finance
Other

Other expenses
Loss on foreign exchange realised
Loss on foreign exchange unrealised
Loss on financial instruments unrealised
Loss on derivative financial instruments
Provision for employee entitlements
Write-off of crops
Write off of property, plan and equipment
Write-down on investments
Impairment of Joint venture loan
Share option expense
Other

Finance costs

Interest and finance charges payable

4,442,619
588,557
673,159
821,506
882,136
7,407,977

363,456
569,438
-
-
203,241
-
259,537
245,234
364,067
59,768
155,787
2,220,528

4,226,756
302,686
707,575
571,833
1,006,071
6,814,921

-
971,954
11,964
435,732
(6,290)
(11,982)
-
-
-
-
36,874
1,438,252

473,131
473,131

513,496
513,496

Net loss/(profit) on foreign currency derivatives not
qualifying as hedges

(14,245)

11,964

Prepayments

Convertible notes

Investment in subsidiary

(696)

128,382

87,999

665

Unrealised foreign exchange gain

(261,898)

43,634

Deferred tax assets

Difference in accounting and tax depreciation

33,805

Stock

Accruals

Provisions

Unrealised foreign exchange losses

Unrealised foreign exchange gains

Other

Tax losses

Investment

Intangible Asset

(1,809,069)

(1,116,863)

21,983

363,499

(117,059)

(111,490)

(105,977)

(180,228)

4,503

30,169

(264,590)

289,172

34,821

Deferred tax (income)

(3,192,787)

(306,326)

For details of the franking account, refer to Note 19.

PAGE 45

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

5. EARNINGS /(LOSS) PER SHARE

Basic earnings/(loss) per share (cents per share)

Diluted earnings per share (cents per share)

2015
$

2014
$

(2.40)

0.61

0.57

Earnings reconciliation

Net profit/(loss) used for basic earnings

(8,134,049)

1,813,922

Up to one month

2-3 months

3 months and above

2015
$

2014
$

164,917

163,797

11,205

35,464

43,466

82,062

211,586

289,325

After tax effect of dilutive securities

Diluted earnings/(loss)

(8,134,049)

1,813,922

The other classes within trade and other receivables do not contain
impaired assets other than those disclosed and are not past due.

Weighted average number of ordinary shares outstanding
during the period used for calculation of basic earnings per
share

339,521,538 297,634,113

Adjustments for calculation of diluted earnings per share:
convertible notes

- 22,000,000

These amounts generally arise from transactions outside the normal
operating activities of the Group. Collateral is not normally obtained.

(d) Foreign exchange and interest rate risk

Weighted average number of potential ordinary shares
outstanding during the period used for calculation of diluted
earnings per share

339,521,538 319,634,113

The Group’s exposure to interest rate risk and foreign exchange risk in
relation to trade and other receivables is disclosed in note 32.

Diluted earnings per share is calculated after taking into consideration all
options and any other securities that were on issue that remain unconverted at
30 June 2015 as potential ordinary shares which may have a dilutive effect on
the profit of the Consolidated Group.

Ordinary shares issued to employees under the Employee Share Plan are
considered to be potential ordinary shares and have been included in the
determination of diluted earnings per share to the extent that they are dilutive.

CASH AND CASH EQUIVALENTS

(e) Fair value and credit risk

Due to the short term nature of these receivables, their carrying
amount is assumed to approximate their fair value.

The maximum exposure to credit risk at the reporting date is the
carrying amount of each class of receivables mentioned above. Refer
to note 32 for more information on the risk management policy of the
Group and the credit quality of the entity’s trade receivables.

Cash at bank

Interest rate risk exposure

2015
$

2014
$

2,632,311

1,665,207

2,632,311

1,665,207

DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial assets

Forward foreign exchange contracts

14,245

2015
$

2014
$

The Group’s exposure to interest rate risk is disclosed in note 32. The
maximum exposure to credit risk at the reporting date is the carrying
amount of each class of cash and cash equivalents mentioned above.

Derivative financial liabilities

Forward foreign exchange contracts

Convertible notes

Cash not available for use

(a) Instruments used by the Group

26,443

825,880

852,323

The Group has cash held as a guarantee as part of their obligations
under their lease agreement totalling $100,000 (2014: $112,153).

TRADE & OTHER RECEIVABLES

The Group is party to derivative financial instruments in the normal
course of business in order to hedge a proportion of the exposure to
fluctuations in foreign exchange rates in accordance with the Groups
financial risk policies (refer note 32).

CURRENT

Trade receivables

Sundry debtors & prepayments

(a) Impaired trade receivables

2015

2014

236,146

2,339,893

325,875

681,092

562,021

3,020,985

Derivative financial assets and liabilities comprise forward exchange
contracts and an embedded derivative in the convertible note
agreements (refer to note 16 for convertible note terms). Gains and losses
arising from changes in fair value of foreign exchange hedging contracts
and convertible notes are recognised in the statement of profit or loss
and other comprehensive income in the period in which they arise.

There were no impaired trade receivables for the group during the
period ended 30 June 2015 or 30 June 2014.

(b) Past due but not impaired

As at 30 June 2015, trade receivables of $211,586 (2014: $289,325) were
past due but not impaired in the Group. Within the Group these relate
to a small number of independent customers for whom there is no
recent history of default. Given the past history with this customer no
impairment has been recognised in the financial period. The ageing
analysis of these trade receivables is as follows:

PAGE 46

The Groups operating expenses mainly consist of materials and services
purchased in Indonesian Rupiah. During the period ended 30 June
2015 the Group did not enter into any forward exchange contracts
to purchase Indonesian Rupiah. The sale of pearls is denominated in
Japanese Yen and so the Group has entered into forward exchange
contracts and options to sell Japanese Yen and receive Australian Dollars.

See note 1.12 for details of accounting policy in relation to derivatives.

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED...)

(b) Risk exposures

During the period ended 30 June 2015, the Group harvested 296,040
(2014: 272,479) pearls. A reconciliation of the movement in the fair
market value of the oysters during the period is reflected as follows:

Information about the Group’s exposure to credit risk, foreign exchange
risk and interest rate risk is provided in note 32.

Oysters

Carrying amount at beginning of the period

2015
$
19,344,256

2014
$

17,022,380

INVENTORIES

CURRENT

Pearls – at fair value

2015
$

2014
$

904,501

1,067,815

Value of new juvenile oysters recognised into stock

853,897

3,198,017

Increase in value of stock from change in pearl oyster
development

10,066,990

13,808,040

Decrease in value through mortality

(5,005,697)

(5,182,524)

Decrease in value of Agriculture asset from harvest of pearls

(7,274,985)

(8,329,108)

Essential oil finished products – at cost

1,350,428

Gain/(Loss) from changes to fair value less estimated
husbandry costs

2,616,673

2,935,950

Exchange adjustment

Carrying amount at end of the period

(5,489,228)

1,971,114

2,059,092

(3,143,663)

14,554,325

19,344,256

Other – at cost

Jewellery

Jewellery Obsolescence provision

Pearl Meat

Mother of Pearl

Farm Consumables & Fuel

Cosmetics

NON CURRENT

Nuclei – at cost

TOTAL INVENTORY

(823,434)

3,172

30,302

255,652

43,361

15,658

332,693

263,560

147,910

2,125,726

3,695,770

3,030,227

6,114,013

173,510

132,093

3,203,737

6,246,106

Inventories write-off expense of $1,386,517 (2014: $2,229,675) is included
on the face of the statement of profit or loss and other comprehensive
income. Write-off of pearls occurred when reviewing net realisable value
versus cost.

10.

BIOLOGICAL ASSETS

CURRENT

Oysters – at fair value

Crops – at fair value

NON CURRENT

Oysters – at fair value

Crops – at fair value

2015
$

2014
$

3,565,680

8,414,231

3,565,680

8,414,231

10,988,645

10,930,028

1,081,385

10,988,645

12,011,412

Total Biological Assets

14,554,325

20,425,643

During the period ended 30 June 2015 no significant events occurred
which impacted on oyster mortalities.

The details of the Biological Assets that are held by the Group as at
period end are as follows:

Sensitivity analysis - Oysters

The mark to market estimation of the value of the biological assets
(Oysters) is determined using the net present value of expected
future net cash flows attributed to this inventory less the estimated
husbandry costs. The primary assumptions used for this estimate are
shown in Note 1.32. The following table summarises the potential
impact of changes in the key non-production related variables:

Selling Price (¥/momme)

-10%

No Change

+10%

¥10,909
(Sellable Grade)
¥1,273
(Commercial Grade)

¥12,000
(Sellable Grade)
¥1,400
(Commercial Grade)

¥13,200
(Sellable Grade)
¥1,540
(Commercial Grade)

Discount rate

Profit $

22%

20%

18.18%

($1,934,416)

($1,774,589)

($1,624,443)

($188,921)

$177,526

$1,716,910

$1,937,596

$2,145,016

Selling Price (¥/momme)

-10%

No Change

+10%

¥10,909
(Sellable Grade)
¥1,273
(Commercial Grade)

¥12,000
(Sellable Grade)
¥1,400
(Commercial Grade)

¥13,200
(Sellable Grade)
¥1,540
(Commercial Grade)

FX rate

¥103.36

¥93.96

¥85.42

Profit $

($3,335,195)

($1,761,270)

($37,338)

($1,731,299)

$1,896,306

$33,167

$1,937,596

$4,023,532

Marketable Grade

-10%

No Change

+10%

48%
(Sellable Grade)
52%
(Commercial Grade)

52%
(Sellable Grade)
48%
(Commercial Grade)

58%
(Sellable Grade)
42%
(Commercial Grade)

Nature: Oysters (Pinctada maxima)

2015

No.

2014

No.

Av. Weight

Profit $

0.60

0.55

0.50

$416,512

($1,376,036)

($3,005,625)

$1,937,596

($1,761,451)

$3,610,789

$1,513,640

($392,859)

Quantity held within the Group operations:-

Juvenile and mature oysters which are not seeded

1,872,916

2,060,121

Nucleated oysters

750,954

727,793

2,623,870

2,787,914

The Group is exposed to financial risk in respect of its involvement
in primary production which consists of the breeding and rearing of
oysters for the purpose of producing pearls. The primary financial risk
associated with this activity occurs due to the length of time between
the expenditure of cash in relation to the operation of the farm and the

PAGE 47

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

10.

BIOLOGICAL ASSETS (CONTINUED...)

harvesting of the pearls and realisation of cash receipts from the sales
to third parties. The Group ensures that it maintains sufficient working
capital to ensure that it can sustain its operation through any delays in
cash flow that may be reasonably foreseen.

Included in Pearling project land (leasehold and freehold) and
buildings is $317,680 (2014 - $311,560) which represents construction
of buildings in progress at cost.

Reconciliations of the carrying amount for each class of property, plant
and equipment are set out below:

Level 3 analysis:

The finance and operations departments undertake the valuation of the
oysters. The calculations are considered to be level 3 fair values. The data
is taken from internal management reporting and work completed by
the executive within the respective field teams to determine the material
inputs to the model. The inputs below are confirmed with the relevant
executives and agreed with the Board of Directors every six months.

The main level 3 inputs used by the group for oysters are derived and
evaluated as follows:

Input

2015

2014

Commentary

Average selling price

¥12,000 per
momme

¥11,000 per
momme

Yen Exchange rate

¥93.96: AUD 1

¥95.52: AUD 1

Obtain by analysing sales
prices achieved and the trend
analysis of the past 12 months
of average sales prices.

Based on forward Yen price per
a financial institution.

Average Pearl size

0.55 per
momme

0.60 per
momme

Based on technical assessment
of expected harvest output.

Marketable grade

52%

62%

Discount rate

20%

Mortality

Historical

Costs to complete

$0.80

$0.63

Based on historical data for
pearl size over the last 12
months

Based on analysis of
comparable primary producers.

Based on historical harvest
mortality rates

Based on historical averages
of costs to complete and sell
pearls per momme.

11.

PROPERTY, PLANT AND EQUIPMENT

2015
$

2014
$

2,740,519
(1,404,238)
(752,005)
584,276

2,262,932
(1,142,376)
-
1,120,555

1,314,614
(660,424)
(41,905)
612,285
1,196,561

1,037,198
(301,141)
-
736,057
1,856,613

1,394,817
(287,195)
1,107,622

1,135,047
(198,265)
936,782

5,630,093
(3,460,990)
2,169,103
3,276,725
4,473,286

4,261,299
(2,653,420)
1,607,879
2,544,662
4,401,274

(a) Non-Pearling Assets
Plant and equipment
- at cost
- accumulated depreciation
- EOT asset delist upon deconsolidation

Leasehold improvements
- at cost
- accumulated depreciation
- EOT asset delist upon deconsolidation

Total non-pearling assets

(b) Pearling project
Land (leasehold and freehold) and buildings
- at cost
- accumulated depreciation

Plant and equipment, vessels, vehicles
- at cost
- accumulated depreciation

Total pearling project
Total property, plant and equipment

PAGE 48

(a) Non-Pearling Assets

Plant and equipment

Carrying amount at beginning of the year

Additions

Reclassifications /Disposals

Foreign exchange movement

Depreciation

Carrying amount at end of the year

Leasehold Improvements

Carrying amount at beginning of the year

Additions

Foreign exchange movement

Reclassifications/Disposals

Depreciation

Carrying amount at end of the year

(b) Pearling project

Leasehold land and buildings

Carrying amount at beginning of the year

Additions

Acquisition of pearling operation

Disposals/reclassifications

Depreciation

Foreign exchange movement

Carrying amount at end of the year

Plant and equipment, vessels, vehicles

Carrying amount at beginning of the year

Additions

Acquisition of pearling operation

Disposals / reclassifications

Depreciation

Foreign exchange movement

Carrying amount at end of the year

Total Carrying amount

2015
$

2014
$

1,120,555

557,871

(771,007)

919,611

482,805

(9,478)

27,814

(313,665)

(309,676)

584,276

1,120,555

736,058

331,293

(157,298)

(204,066)

692,240

128,111

25,457

(93,699)

(109,750)

612,288

736,058

2015
$

2014
$

936,782

412,238

925,544

236,292

(341,113)

(39,282)

99,715

(185,771)

1,107,622

936,782

1,607,879

1,976,059

915,911

387,319

(525,128)

(391,558)

170,438

(363,942)

2,169,100

1,607,879

4,473,286

4,401,275

Reconciliation of depreciation to the Statement of Profit of Loss and
Other Comprehensive Income:

Depreciation charge (Note 11)

Capitalised depreciation charge

Depreciation charge (Note 3)

Balance

2015
$

2014
$

(1,273,605)

(850,266)

685,048

547,580

(588,557)

(302,686)

(588,557)

(302,686)

Refer note 32 for information on non-current assets pledged as security
by the Group.

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

12.

TRADE AND OTHER PAYABLES

14.

TAX

FOR THE YEAR ENDED 30 JUNE 2015

CURRENT

Trade payables

ESSP accrual

Other payables and accrued expenses

2015
$

2014
$

(a) Liabilities

304,744

1,652,259

264,300

17,135

1,116,080

1,472,154

CURRENT

Income tax payable

1,685,124

3,141,549

NON-CURRENT

2015

2014

225,528

94,060

(a) Amounts not expected to be settled within the next 12 months

Other payables include accruals for annual leave of $1,024,240 and
$827,853 in the consolidated entity for 30 June 2015 and 30 June 2014
respectively. The entire obligation is presented as current, since the
Group does not have an unconditional right to defer settlement. All
amounts are expected to be settled wholly within the next 12 months.

(b) Risk Exposure

Deferred tax liabilities comprises temporary differences attributable to -

Agricultural and biological assets at fair value

756,345

2,636,603

Prepayments

Investment in subsidiary

Convertible notes

Other

Unrealised foreign exchange gains

Total deferred tax liabilities

(b) Assets

87,999

128,382

749

2,147

261,898

972,780

2,901,397

Information about the Groups exposure to foreign exchange risk is
provided in note 32.

Deferred tax assets comprises temporary differences attributable to -

Tax allowances relating to property, plant & equipment

34,864

1,059

13.

BORROWINGS

CURRENT

Secured

Bank loan

Other bank loan

Lease liabilities

Total secured current borrowings

Unsecured

Other

Convertible notes

Total current borrowings

NON CURRENT

Secured

Other bank loan

Lease liabilities

Total secured non current borrowings

Unsecured

Convertible notes

Total non current borrowings

Agricultural and biological assets at fair value

2015
$

2014
$

Accruals

Provisions

Intangible asset

Investment

3,816,805

3,951,715

Other

Unrealised foreign exchange losses

122,204

15,518

2,800

61,651

3,954,527

4,016,165

4,108

994,518

3,954,527

5,014,791

Tax losses recognised

Total deferred tax assets

The Company believes that the deferred tax asset relating to tax
losses recognised is available to be carried forward based upon the
Company’s projections of future taxable amounts.

125,036

5,172

89,665

50,503

130,208

140,168

The overall movement in deferred tax account is as follows:

Opening balance

(Charge)/credit to statement of profit or
loss and other comprehensive income

Other movements

130,208

140,168

Closing balance

496,135

2,305,204

21,983

572,948

209,449

34,821

289,172

145,758

93,287

262,817

204,777

1,688,968

2,983,306

1,646,647

1,616,478

3,335,615

4,599,784

1,698,387

(1,392,059)

3,192,787

306,326

(2,528,790)

2,784,120

2,362,384

1,698,387

2015

2014

905

57,298

941

15.

PROVISIONS

CURRENT

Employee benefits

Total current provisions

Number of employees

Employee benefits provisions have been recognised in relation
to long service leave for Australian and expatriate employees. The
current provision for long service leave includes all unconditional
entitlements where employees have completed the required period
of service and also those where employees are entitled to pro-rata
payments in certain circumstances. The amount presented as non-
current represents amounts where an agreement is in place to pay the
entitlements over a period of time longer than the next 12 months.

PAGE 49

(a) Security and fair value disclosure

Information about the security relating to secured liabilities and the fair
value is provided in note 32.

(b) Risk Exposure

Information about the Group’s exposure to risks arising from
borrowings is provided in note 32.

During the year all convertible notes were redeemed for ordinary
shares. The shares were issued at the lower of 5 cents or 90% of
the 10 day volume weighted average in line with the convertible
note agreement. A derivative liability of $825,880 (Note 8) had been
recognised on 30 June 2014. On redemption of the convertible notes
for ordinary shares during the year, the derivative liability was fair
valued. A gain of $656,440 has been recognised at 30 June 2015 on the
unwinding of derivative liability post valuation of the convertible note
at time of issue. Refer to Note 16.

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

15.

PROVISIONS (CONTINUED...)

Reconciliation of provisions:

Balance at beginning of period

2015
$

2014
$

57,298

92,037

Provisions released due to de-consolidation of subsidiary entity

(57,298)

Provisions released

Closing balance

(34,739)

57,298

16.

CONTRIBUTED EQUITY

2015
No. of
Shares

2014
No. of
Shares

2015

2014

Issued and fully paid-up capital

414,327,191 319,485,425 36,465,656

32,315,473

Ordinary Shares

Balance at beginning of period

319,485,425 281,737,162 32,153,001

30,203,033

Shares issued (1)(2)(3)(4)(5)(6)(7)

94,841,766

37,748,263

4,704,603

2,080,093

Share transaction costs

(391,948)

(130,125)

Balance at end of period

414,327,191 319,485,425 36,465,656

32,153,001

Treasury Shares

Balance at beginning of period

7,131,027

5,301,616

Acquisition of shares by Trust
under Plan

Shares released

7,000,000

6,291,051

(3,059,618)

(4,461,640)

Balance at end of period

11,071,409

7,131,027

Treasury shares are shares in Atlas Pearls and Perfumes Ltd that are held
by the Atlas Pearls and Perfumes Ltd Executive Share Plan Trust for the
purpose of issuing shares under the Atlas South Sea Pearl Employee
share plan.

(1)
On 10 September 2014, 2,000,000 shares were issued at an
issue price of $0.05 to a convertible note noteholder, who elected to
exercise its conversion right and redeem all of its convertible notes to
ordinary shares. The shares were issued at the lower of 5 cents or 90%
of the 10 day volume weighted average in line with the convertible
note agreement.

On 2 March 2015, 7,000,000 shares were issued at an issue

(2)
price of $0.05 to a convertible note noteholder, who elected to exercise
its conversion right and redeem all of its convertible notes to ordinary
shares. The shares were issued at the lower of 5 cents or 90% of the
10 day volume weighted average in line with the convertible note
agreement.

(3)
On 10 March 2015, 10,000,000 shares were issued at an issue
price of $0.05 to a convertible note noteholder, who elected to exercise
its conversion right and redeem all of its convertible notes to ordinary
shares. The shares were issued at the lower of 5 cents or 90% of the
10 day volume weighted average in line with the convertible note
agreement.

On 1 May 2015, 69,123,612 shares were issued at an issue

(4)
price of $0.045. 16,074,730 shares were issued to multiple shareholders
under the fully underwritten 1 for 5 non-renounceable pro rata
entitlement offer of fully paid ordinary shares. A further 53,048,882 were
issued to the underwriter of the entitlement offer.

(5)
On 26 May 2015, 7,000,000 shares were issued at an issue
price of $0.045 into the Atlas South Sea Pearl Employee share plan.
3,059,618 treasury shares were issued during the year. Only when
shares are issued are they recognised in the ordinary shares balance.

On 30 June 2015, 3,658,536 shares were issued at an issue

(6)
price of $0.041 to a convertible note noteholder, who elected to
exercise its conversion right and redeem all of its convertible notes to
ordinary shares. The shares were issued at the lower of 5 cents or 90%
of the 10 day volume weighted average in line with the convertible
note agreement.

Total shares issued during the year ended June 2015 is

(7)
94,841,766 (2,000,000 in September 15, 17,000,000 in March 15,
69,123,612 in May 15, 3,658,536 in June 15, with 3,059,618 Treasury
shares issued over the course of the year).

(i) Rights

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 in proportion to the number of shares held.

Treasury shares are shares in Atlas Pearls and Perfumes Ltd that are held
by the Atlas South Sea Pearl Limited Executive Share Plan Trust for the
purpose of issuing shares under the Atlas South Sea Pearl Employee
Share Plan.

(ii) Options

Information relating to the Atlas South Sea Pearl Limited Employee
Option Plan, including details of options issued, exercised and lapsed
during the financial year and the options outstanding at the end of the
reporting period, is set out in note 23. See summary detail below:

1. On 27 February 2014, 7,500,000 unlisted options were issued to
certain employees and consultants of Atlas Pearls and Perfumes Ltd,
pursuant to the Atlas Pearls and Perfumes Ltd Employee Option Plan, as
approved by the Board on 24 February 2014. The unquoted options are
exercisable at $0.0858 each on or before 31 December 2016, subject to
certain vesting conditions specific to each employee/consultant.

2. On 4 June 2014, 8,500,000 unlisted options were issued to certain
employees and consultants of Atlas Pearls and Perfumes Ltd, pursuant to
the Atlas Pearls and Perfumes Ltd Employee Option Plan, as approved by
shareholders on 13 May 2014. The unquoted options are exercisable at
$0.095 each on or before 31 December 2016, subject to certain vesting
conditions specific to each employee/consultant.

3. On 4 June 2014, 10,000,000 unlisted options were issued to former
Director Stephen Birkbeck and 500,000 unlisted options to former Director
Joseph Taylor, pursuant to the Atlas Pearls and Perfumes Ltd Employee
Option Plan, as approved by shareholders on 13 May 2014. The unquoted
options are exercisable at $0.0858 each on or before 31 December 2016,
subject to certain vesting conditions specific to each director.

4. On 15 August 2014, 2,000,000 unlisted options were issued to certain
consultants of Atlas Pearls and Perfumes Ltd, pursuant to the Atlas Pearls
and Perfumes Ltd Employee Option Plan, as approved by shareholders
on 13 May 2014. The unquoted options are exercisable at $0.0858 each
on or before 31 December 2016, subject to certain vesting conditions
specific to each employee/consultant.

PAGE 50

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

16.

CONTRIBUTED EQUITY (CONTINUED...)

5. On 30 June 2015, 5,500,000 unlisted options were issued to certain
employees of Atlas Pearls and Perfumes Ltd, pursuant to the Atlas Pearls
and Perfumes Ltd Employee Option Plan, as approved by shareholders
on 13 May 2014. The unquoted options are exercisable at $0.059 each
on or before 31 December 2018, subject to certain vesting conditions
specific to each employee/consultant.

(iii) Capital Risk Management

The Group’s objectives when managing capital are to safeguard their
ability to continue as a going concern, so that they can continue to
provide returns to shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.

The Group has no external requirements imposed upon it in relation to
capital structure except those noted in note 32 as part of the covenants
relating to the financing arrangements with Commonwealth Bank.

The above amounts represent the balance of the franking account as at
the end of the financial period adjusted for:

(i) Franking credits that will arise from the payment of the amount of

the provision for income tax;

(ii) Franking debits that will arise from the payment of dividends

recognised as a liability at the reporting date; and

(iii) Franking credits that will arise from the receipt of dividends

recognised as receivables at the reporting date.

20.

OPTIONS

The Company had 34,000,000 options granted over unissued shares at
the 30 June 2015 (30 June 2014 – 26,500,000). The 34,000,000 options
granted over unissued shares at 30 June 2015 were issued under the
Atlas Pearls and Perfumes Ltd Employee Option Plan. Information
pertaining to the plan including details of options issued, exercised and
lapsed during the financial year and options outstanding at the end of
the reporting period, is set out in note 23.

21.

COMMITMENTS

17.

RESERVES

2015
$

2014
$

Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:

Foreign Currency Translation Reserve

(9,732,299)

(8,658,779)

Within one year

Employee Share Reserve

Total Reserves

682,341

622,574

Later than one year, but not later than five years

(9,049,958)

(8,036,205)

Later than five years

Movements : Foreign Currency Translation Reserve -

2015
$

2014
$

432,468

419,247

1,900,161

1,881,569

362,367

2,332,629

2,663,183

Balance at beginning of year

(8,658,778)

(7,866,003)

Currency translation differences arising during the Year

(1,073,521)

(792,775)

Balance at end of year

(9,732,299)

(8,658,778)

Non - cancellable operating leases
The Group leases premises under non-cancellable operating leases
expiring in 6 years. On renewal the terms of the leases are renegotiated.

The foreign currency translation reserve records exchange differences arising on translation
of foreign controlled subsidiaries to the reporting currency.

Employee Share Reserve -

Balance at beginning of period

Movement in Employee Share Reserve

Balance at end of year

622,574

59,767

682,341

581,029

41,545

622,574

The employee share reserve records the value of equity portion of remuneration paid to
employees in the form of shares or other equity instruments.

18. (ACCUMULATED LOSSES)/ RETAINED PROFITS

Reconciliation of retained earnings/(Accumulated losses):

Balance at beginning of year

Net profit/(loss) for the year

Movement in equity distribution account

Dividends paid

Balance at end of year

19.

DIVIDENDS

2015
$

2014
$

4,692,532

2,878,610

(8,134,049)

1,813,922

(3,441,517)

4,692,532

No dividends have been paid or declared in respect of the 2015
financial year or the period ended 30 June 2014.

Dividend Franking Account

Franking credits available to shareholders of the Company for
subsequent financial years based on a tax rate of 30%.

1,278,704

2015
$

2014
$

There are no capital commitments in place in relation to the acquisition
of property, plant and equipment. Fixed assets are replaced in the
normal course of business operations and the company does not
anticipate any material capital outlay for such replacement costs in the
coming year.

22. CONTINGENCIES

The 2008 tax audit for PT Cendana Indopearls was completed during
the prior year reporting period and a liability in the order of IDR
3,504,206,185 or AUD $350,000 has been assessed by the Indonesian
Tax Office. PT Cendana Indopearls are in agreement with an amount
in the order of AUD $50,000 and have appealed the balance of AUD
$300,000 via the appeal process. A number of attendances at the Tax
Trial Court Surabaya, Indonesia, have taken place. The final judgement
from the tax court is now expected, and is due to be received before
December 2015.

In relation to the 2007 tax case, an outstanding receivable of IDR
1,722,574,935 or AUD $170,000 was refunded to PT. Cendana Indopearls
in May 2015. This was related to interest deductions made from the 2007
Income Tax Refund which PT. Cendana Indopearls disputed.

The 2012 tax audit of PT Cendana Indopearls is being carried out. The
review process is still under way with no findings having as yet been
provided by the tax auditors.

Atlas Pearls and Perfumes Ltd has a bank guarantee with the
Commonwealth Bank of Australia for AUD$100,000 at 30 June 2015 (30
June 2014: $112,153). This guarantee has been taken out to secure the
rental of the Atlas Pearls and Perfumes corporate offices in Claremont,
Western Australia.

PAGE 51

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

23. SHARE BASED PAYMENTS

The Atlas Employee Salary Sacrifice Share Plan

In May 2006, an employee share plan was established which entitles
the Board of Directors to offer shares to key management personnel
within the Group. A total of 1,100,000 shares were issued during 2007
to six (6) employees including the managing director at a price of 40
cents per share which was a one (1) cent and eight (8) cent discount to
the market at the dates of issue being 17th April 2007 and 10th May 2007
respectively. An interest free, non-recourse loan was provided to the key
management staff to pay for these shares. This loan will be repaid by the
employees from the proceeds of dividends that they are entitled to from
the ownership of the shares. 50% of the shares vested to the employees
after two (2) years employment from the time of issuing the shares and
the remaining 50% vested to the employees after they have completed
three (3) years of employment from the time of issuing the shares.
Employees are only entitled to the shares if the loan is repaid in full.

1,900,000 shares remain on issue as at 30 June 2015 with debt of
$375,000 outstanding by employees from the initial loan of $1,063,500
that was made when the shares were allocated to employees. Refer
Remuneration Report (page 22) for details of equity held and loans
outstanding to Key Management Personnel.

Shares issued to the employees are acquired and held in trust for the
employees. Shares held by the trust and not yet issued to employees
at the end of the reporting period are shown as treasury shares in the
financial statements.

The fair value of shares issued under the scheme is independently
determined using a Black-Scholes pricing model that takes into
account the exercise price, the term of the share, the impact of dilution,
the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest
rate for the term of the share.

The shares rank equally with other fully paid ordinary shares.

Where shares are issued to employees of subsidiaries of the Group, the
transactions are treated in accordance with the accounting policy at
note 1.16.

At the company’s annual general meeting in May 2007, shareholders
approved the allocation of a maximum of 4,000,000 shares to senior
executives under the employee share plan within three years of the
approval of the plan. No shares were issued in the current year under
this allocation.

There were no shares issued under the plan in 2011. In 2012 the plan
was replaced with a new Employee Salary Sacrifice Share Plan and Non-
Executive Director Fee Salary Sacrifice Share Plan. At the AGM on the
30 May 2012 it was resolved to cease issuing Shares under this existing
Employee Share Loan Plan that was approved by Shareholders at the
Company’s annual general meeting in May 2006.

This existing Employee Share Loan Plan was replaced by a new
Employee Salary Sacrifice Share Plan and Non-Executive Director Plan
at the AGM on the 30 May 2012.

On 30 May 2012, the Atlas Employee Salary Sacrifice Share Plan was
established. On the 29th of June 2012 506,000 shares were issued into the
Atlas South Sea Pearl Limited Employee Share Trust at $0.055 per share.
Also, on the 4th of September 2012 5,814,000 shares were issued into the
Atlas South Sea Pearl Limited Employee Share Trust at $0.05 per share.

On 15 March 2013 a further 2,931,616 shares were issued into the
Atlas South Sea Pearl Limited Employee Share Trust at $0.05 per
share. During the period ended 30 June 2013, 5,594,000 shares were
issued out of the Atlas South Sea Pearl Limited Employee Share Trust
to employees. Of the 5,594,000 shares issued out of the trust during
the six months ended 30 June 2013, 300,000 shares were issued to
employees who did not salary sacrifice shares but were instead issued
shares out of the trust in lieu of cash bonuses. The total value of the
bonuses issued was $15,000.

During the period ended 30 June 2014 an additional 6,291,051 shares
were acquired on market and issued into the Atlas Pearls and Perfumes
Limited Employee Share Trust and issued out 4,461,640 shares to
employees and contractors. Of the 4,461,640 shares issued out of
the trust during the period ended 30 June 2014, 361,298 shares were
issued to employees who did not salary sacrifice shares but were
instead issued shares out of the trust in lieu of cash bonuses. The total
value of the bonuses issued was $23,484.37. A further 1,798,077 were
issued to contractors who were issued shares in lieu of cash payment.
The total value settled totalled $98,950.

During the period ended 30 June 2015 an additional 7,000,000 shares
were issued into the Atlas Pearls and Perfumes Limited Employee
Share Trust, whilst 3,059,618 shares were issued out to employees and
contractors. Of the 3,059,618 shares issued out of the trust during the
period ended 30 June 2015, 461,111 shares were issued to employees
who did not salary sacrifice shares but were instead issued shares out
of the trust in lieu of cash bonuses. The total value of the bonuses
issued was $32,500. A further 1,171,968 were issued to contractors
who were issued shares in lieu of cash payment. The total value settled
totalled $76,746.

To participate in the Salary Sacrifice Plan, Eligible Employees are
required to salary sacrifice a minimum of 10% of their annual base
salary into Shares. There is no maximum percentage or value cap to the
amount that each Eligible Employee can sacrifice.

The issue price for Shares under the Salary Sacrifice Plan will be
determined from time to time by the Board of Directors (in their
discretion). For the participants who entered into conditional salary
sacrifice arrangements before the AGM on the 30 of May 2012, the
issue price per Share is 5 cents.

The Employee Share Plan is open to Eligible Participants being any
Eligible Employee; or conditional upon the company obtaining any
necessary ASIC relief to extend the operation of ASIC Class Order
03/184 (or similar class order) to them:

i.
ii.

any Eligible Contractor; or
Eligible Casual Employee,

Who is declared by the Board to be an Eligible Participant for the
purposes of the Plan.

PAGE 52

For personal use only

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

23. SHARE BASED PAYMENTS (CONTINUED...)

An Eligible Employee means: a full time or part time employee
(including an executive director) of a Group Company.

An Eligible Contractor means:

(a) An individual that has:

ii.

Performed work for a Group Company, for more than 12
months; and
Received 80% of more of their income in the preceding year
from a Group Company; or

(b) A company where each of the following are satisfied in relation to

the company:
i.

Throughout the previous 12 months the company has had a
contract in place with a Group Company, for the provision
of the services of an individual (contracting individual) to a
Group Company;
The contracting individual has performed work for a Group
Company, for more than 12 months;
The contracting individual has been the only member for the
company for more than 12 months; and;

ii.

iii.

iv. More than 80% of the aggregate income of the company
and the contracting individual from all sources (other than
from each other) in the preceding 12 months was received
form a Group Company.

The Board may determine the terms and conditions of the Salary
Sacrifice arrangement for which Shares are offered in lieu of that
Remuneration.

The number of Shares to be issues, transferred or allocated to the
Trustee to be held on behalf of a Participant will be the dollar amount
of the Salary Sacrifice divided by the issue price per Share outlined in
the Invitation. In the case of fractional entitlements, the number of
Shares to be issue, transferred or allocated to the Trustee to be held on
behalf of a Participant will be rounded up to the nearest whole Share,
unless otherwise determined by the Board from time to time.

Shares to be acquired by Eligible Participants under the Salary Sacrifice
plan are held in the trust until such time that the Shares are fully paid
for. Shares held by the trust and not yet issued to employees at the end
of the reporting period are shown as treasury shares in the financial
statements. As at 30 June 2015 3,059,618 of the shares issued to the
Atlas South Sea Pearl Limited Employee Share Trust had been issued to
Eligible Participants (30 June 2014: 4,461,640 shares).

The shares rank equally with other fully paid ordinary shares.

Where shares are issued to employees of subsidiaries of the Group, the
transactions are treated in accordance with the accounting policy at
note 1.16.

The Atlas Non-Executive Director Fee Sacrifice Share Plan

On the 26 June 2012 828,000 shares were issued into the Atlas South
Sea Pearl Limited Non-Executive Director Trust at $0.05 per share. A
further 250,000 shares were issued on the 4 September 2012 into the
Atlas South Sea Pearl Limited Non-Executive Director Trust at $0.05 per
share. All shares have been issued to recipients from the Atlas South
Sea Pearl Limited Non-Executive Director Trust.

The Non-Executive Director Salary Sacrifice Share Plan is open to
Eligible Participants, being any Non-Executive Director who is declared
by the Board to be an Eligible Participant for the purpose of the Plan.

The Company’s Non-Executive Directors will receive a portion of their
Director’s fee in the form of Shares.

The Company agrees to issue or procure the transfer of Shares to
eligible Non-Executive Directors, in lieu of the amount of Directors’ fees
that each eligible Non-Executive Director has agreed to sacrifice from
their monthly Directors’ fees each financial year.

Refer to Note 16 for movement in share plan, under treasury shares

Atlas Pearls and Perfumes Ltd Employee Option Plan

At the EGM on 13 May 2014 it was resolved to approve the Atlas Pearls
and Perfumes Ltd Employee Option Plan. On 24 February 2014, the
Board adopted the Atlas pearls and Perfumes Ltd Employee Option
Plan (Plan) under which eligible participants may be granted Options
to acquire Shares in the Company.

The intention of the Plan is to reward and to provide ongoing
incentives to Directors, executives, employees, consultants and
contractors of the Company.

The Directors, executives, employees and contractors of the Company
have been, and will continue to be, instrumental in the growth of
the Company. The Directors consider that the plan is an appropriate
method to:
(a) Reward Directors, executives, employees, consultants and

contractors for their past performance;

(b) Provide long term incentives for participation in the Company’s

future growth;

contractors and general loyalty; and

(d) Assist to retain the services of valuation Directors, executives,

employees, consultants and contractors.

The Plan will be used as part of the remuneration planning for
Directors, executives, employees and contractors. Under the plan,
participants are granted options which only vest if certain performance
standards are met. Participation in the plan is at the board’s discretion
and no individual has a contractual right to participate in the plan or to
receive any guaranteed benefits.

The Corporate Governance Council Guidelines recommend that
remuneration packages involve a balance between fixed and incentive
pay reflecting short and long-term performance objectives appropriate
to the Company’s circumstances and goals. The Board considers that
the Plan will assist the Company in structuring the remuneration
packages of its executives in accordance with the Guidelines.

The amount of options that will vest depends on the individual’s Key
Performance Indicators. An option which has vested but has not been
exercised will immediately lapse upon the first to occur of:
(i) Close of business on the Expiry Date;
(ii) The transfer or supported transfer of the Option in breach of Clause

7(a) of the plan;

PAGE 53

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A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

23. SHARE BASED PAYMENTS (CONTINUED...)

(iii) Termination of the Participant’s employment or engagement with
the Company or an Associate Body Corporate on the basis that the
Participant acted fraudulently, dishonestly, in breach of the
Participant’s obligations or otherwise for cause; and

(iv) The day which is six months after an event which gives rise to a

vesting under clauses 4(a) to 4(d) of the plan.

Options are granted under the plan for no consideration. Options
granted under the plan carry no dividend or voting rights. When
exercisable, each option is convertible into one ordinary. The options
expire on the 31 December 2016 and 31 December 2018.

The exercise price of options is based on 143% (June 2014: 143%) of
the volume weighted average share price at which the company’s
shares are traded on the Australian Stock Exchange (ASX) during the
week up to and including the date of the grant.

2015
Average
exercise
price per
share
option

Number
of options

2014
Average
exercise
price per
share
option

Number
of options

As at 1 July 2014

0.089

26,500,000

Granted during the year

0.066

7,500,000

Exercised during the year*

Forfeited during the year

As at 30 June

0.066

7,500,000

0.089

26,500,000

Vested and exercisable at 30
June 2015

•

The weighted average exercise price per share option during the
year ended 30 June 2015 was $0.066 (2014: $0.089).

Expiry Date

Exercise
Price

24 February 2014

31 December 2016

13 May 2014

2 June 2014

31 December 2016

15 August 2014

31 December 2016

30 June 2015

31 December 2018

Total

0.0858

0.0950

0.0858

0.0590

Share
Options
30 June
2015

7,500,000

Share
Options
30 June
2014
7,500,000

10,500,000

8,500,000

2,000,000

5,500,000

34,000,000

26,500,000

Weighted average remaining contractual life of options
outstanding at end of period

1.83 years

2.51 years

Fair value of options granted

The assessed fair value at grant date of options granted during the
year ended 30 June 2015 was $0.16 (5,500,000 options) and $0.51
(2,000,000) (2014: $0.20). The fair value at grant date is independently
determined using a Black-Scholes option pricing model that takes
into account the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free
interest rate for the term of the option.

The model inputs for options granted during the year ended 30 June
2015 and 30 June 2014 are detailed below.

On the 24th of February 2014 7,500,000 options exercisable at $0.0858
each on or before 31 December 2016 were issued to employees and
contractors of the Company on the terms and conditions set out in
the Explanatory Memorandum ratified at the Extraordinary General
Meeting held on the 13th of May 2014. The options issued on the 24th of

PAGE 54

February have a fair value of $0.020. This valuation imputes a total value
of approximately $151,720 for the proposed Options. The value may go
up or down as it will depend in part on the future price of a Share.

The Black & Scholes methodology has been used, together with the
following assumptions:
(i) Options are granted for no consideration and vest based on the
individual’s Key Performance Indicators. Vested options are
exercisable for a period of six months after vesting or the earlier of
31 December 2016.
(ii) Exercise price - $0.086;
(iii) Grant date - 24 February 2014;
(iv) Share price at grant date: $0.063
(v) Expected price volatility of the company’s shares: 60%;
(vi) Expected dividend yield: 0%;
(vii) Risk-free interest rate: 3.06%

On the 13th of May 2014 10,000,000 options exercisable at $0.0858 each
on or before 31 December 2016 were issued to Stephen Birkbeck on the
terms and conditions set out in the Explanatory Memorandum ratified at
the Extraordinary General Meeting held on the 13th of May 2014.

On the 13th of May 2014 500,000 options exercisable at $0.0858 each on
or before 31 December 2016 were issued to Joseph Taylor on the terms
and conditions set out in the Explanatory Memorandum ratified at the
Extraordinary General Meeting held on the 13th of May 2014.

The options issued on the 13th of May 2014 have a fair value of $0.020.
This valuation imputes a total value of approximately $214,020
(respectively $203,829 for Mr Birkbeck and $10,191 for Dr Taylor) for the
proposed Options. The value may go up or down as it will depend in
part on the future price of a Share.

The Black & Scholes methodology has been used, together with the
following assumptions:
(i) Options are granted for no consideration and vest based on the
individual’s Key Performance Indicators. Vested options are
exercisable for a period of six months after vesting or the earlier of
31 December 2016.
(ii) Exercise price - $0.086;
(iii) Grant date – 13 May 2014;
(iv) Share price at grant date: $0.065
(v) Expected price volatility of the company’s shares: 60%;
(vi) Expected dividend yield: 0%;
(vii) Risk-free interest rate: 3.06%

On the 2nd of June 2014 8,500,000 options exercisable at $0.095 each on
or before 31 December 2016 were issued to employees and contractors
of the Company on the terms and conditions set out in the Explanatory
Memorandum ratified at the Extraordinary General Meeting held on the
13th of May 2014. The options issued on the 2nd of June 2014 have a fair
value of $0.019. This valuation imputes a total value of approximately
$164,017 for the proposed Options. The value may go up or down as it
will depend in part on the future price of a Share.

The Black & Scholes methodology has been used, together with the
following assumptions:

For personal use only

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

23. SHARE BASED PAYMENTS (CONTINUED...)

Other Share Based Payments

(ii) Exercise price - $0.095;
(iii) Grant date – 2 June 2014;
(iv) Share price at grant date: $0.067
(v) Expected price volatility of the company’s shares: 60%;
(vi) Expected dividend yield: 0%;
(vii) Risk-free interest rate: 3.06%

On the 15th of August 2014 2,000,000 options exercisable at $0.0858
each on or before 31 December 2016 were issued to a contractor of
the Company on the terms and conditions set out in the Explanatory
Memorandum ratified at the Extraordinary General Meeting held on
the 13th of May 2014. The options issued on the 15th August 2014 have a
fair value of $0.51. This valuation imputes a total value of approximately
$101,609 for the proposed Options. The value may go up or down as it
will depend in part on the future price of a Share.

The Black & Scholes methodology has been used, together with the
following assumptions:
(i) Options are granted for no consideration and vest based on the
individual’s Key Performance Indicators. Vested options are
exercisable for a period of six months after vesting or the earlier of
31 December 2016.
(ii) Exercise price - $0.0858;
(iii) Grant date – 15 August 2014;
(iv) Share price at grant date: $0.11
(v) Expected price volatility of the company’s shares: 60%;
(vi) Expected dividend yield: 0%;
(vii) Risk-free interest rate: 3.06%

On the 30th of June 2015 5,500,000 options exercisable at $0.059
each on or before 31 December 2018 were issued to employees of
the Company on the terms and conditions set out in the Explanatory
Memorandum ratified at the Extraordinary General Meeting held
on the 13th of May 2014. The options issued on the 30th June 2015
have a fair value of $0.016. This valuation imputes a total value of
approximately $90,215 for the proposed Options. The value may go up
or down as it will depend in part on the future price of a Share.

The Black & Scholes methodology has been used, together with the
following assumptions:

(i) Options are granted for no consideration and vest based on the
individual’s Key Performance Indicators. Vested options are
exercisable for a period of six months after vesting or the earlier
of 31 December 2018.
(ii) Exercise price - $0.0590;
(iii) Grant date – 30 June 2015;
(iv) Share price at grant date: $0.044
(v) Expected price volatility of the company’s shares: 60%;
(vi) Expected dividend yield: 0%;
(vii) Risk-free interest rate: 3.06%

The expected price volatility is based on the historic volatility (based on
the remaining life of the options), adjusted for any expected changes to
future volatility due to publicly available information.

Where options are issued to employees of subsidiaries within the
group, the subsidiaries compensate Atlas Pearls and Perfumes Ltd for
the amount recognised as expense in relation to these options.

On the 17 December 2013, 5,251,969 shares were issued at an issue
price of $0.065 each to Arrow Pearl Co Pty Ltd. Arrow Pearl Co Pty Ltd
is an entity controlled by Stephen Arrow. The purpose of the issue was
the reimbursement for the sale of Arrow Pearl Co Pty Ltd pearls at the
December 2013 auction in accordance with an arrangement to remit
the proceeds in Atlas Shares at $0.065 each.

At the Extraordinary General Meeting held on 13 May 2014, the issue
of 4,748,031 shares to Arrow Pearl Co Pty Ltd was ratified. The purpose
of the issue was the reimbursement for the sale of Arrow Pearl Co
Pty Ltd pearls at the February 2014 auction in accordance with an
arrangement to remit the proceeds in Atlas Shares at $0.065 each.

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions and
option related valuation expenses recognised during the period as part
of employee benefit expense were as follows:

Shares issued under the employee share plan

Option expense

2015
$

27,500

59,768

87,268

2014
$

25,016

41,545

66,561

The share based payment expenses arising from the salary sacrifice
share plan is nil as the plan does not give additional benefit to the
employees as shares are issued in lieu of cash salary and cash bonus.
The value of the shares originally issued to the trust is at the value
sacrificed by the employee under the plan.

24.

NOTES TO THE CASH FLOW STATEMENT

24.1

Reconciliation of cash

For the purposes of the statement of cashflows, 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 period
as shown in the statement of cashflows is reconciled to the related
items in the Statement of Financial Performance as follows:

Cash at bank (Note 6)
Balances per statement of cashflows

2015
$

2014
$

2,632,311
2,632,311

1,665,207
1,665,207

24.2

Reconciliation of profit/(loss) after income tax to net
cash inflow from operating activities

Profit/(loss) after income tax
Depreciation and amortisation
(Gains)/Losses on Equity Investments
Share based payments
Foreign exchange (losses) unrealised
Inventory revaluations (losses)
Impairment of JV loan
Derivative instrument gains/(losses) unrealised
Agricultural asset fair value (losses) and inventory write-offs
Decrease/(increase) in trade and other debtors
Decrease/(increase) in inventories
(Decrease)/Increase in trade and other creditors
Increase/(Decrease) in Provision
Increase in taxes

2015
$
(8,134,049)
588,557
202,036
59,767
547,021
-
149,091
(656,440)
6,697,385
2,373,152
454,190
(1,595,637)
139,091
(322,720)

2014
$

1,813,922
302,686
299,971
66,561
971,954
(11,982)
-
435,732
(63,439)
(1,861,060)
(2,275,043)
918,473
(140,834)
(714,236)

Net cash obtained/(used in) operating activities

501,444

(257,294)

PAGE 55

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N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

24.

24.2

NOTES TO THE CASH FLOW STATEMENT (CONTINUED...)

Reconciliation of profit/(loss) after income tax to net
cash inflow from operating activities (Continued...)

As at the date of this report the Company has not entered into any
non-cash financing or investing activities except as follows:

During the period ended 30 June 2014 Atlas Pearls and Perfumes
Ltd sold pearls on behalf of Arrow Pearls Pty Ltd. Atlas received on
consignment approximately $1,750,000 of loose South Sea Pearls
from Steve Arrow on the 5th of December 2013. Atlas received a sales
commission of 5.0% based on the gross value of the pearls. Atlas paid
the net proceeds of pearls sales to Arrow less the commission, in the
form of 50% cash and 50% in shares until 10 million shares were acquired
(capped at $650,000). The shares were priced at $0.065 per share.

Also, during the period ended 30 June 2015, 3,059,618 shares were
issued out of the Atlas South Sea Pearl Limited Employee Share Trust to
employees and contractors (30 June 2014: 4,461,640). Of the 3,059,618
shares issued out of the trust, 461,111 (2014: 361,298) shares were
issued to employees who did not salary sacrifice shares, but were
instead issued shares out of the trust in lieu of cash bonuses. The total
value of the bonuses issued was $32,500 (2014: $23,484). A further
1,171,968 (2014:1,798,077) were issued to contractors who were issued
shares in lieu of cash payment. The total value settled totalled $76,746
(2014:$98,950).

During the year ended 30 June 2014, the Company entered into
a finance agreement with Microsoft to finance a new accounting
software package for the group Microsoft Navision. At 30 June 2015
the balance of the loan was $247,240 (30 June 2014: $92,465). There
were no other new loans to acquire property, plant and equipment
entered into during the year ended 30 June 2015. During the year
ended 30 June 2015, the Company did not issue any ordinary shares to
acquire any new investments.

Also, during the year ended 30 June 2015, all convertible notes were
redeemed for ordinary shares. The shares were issued at the lower of 5
cents or 90% of the 10 day volume weighted average in line with the
convertible note agreement. The convertible notes were fair valued on
maturity and a derivative instrument fair value gain of $656,440 realised
(30 June 2014: loss of $435,732).

24.3

Credit facilities

As at 30 June 2015, the Company had in place a loan facility with
the Commonwealth Bank with a limit of $5,000,000 (30 June 2014
- $5,000,000). This facility has been partially utilised, see note 33 for
further disclosure. Information about the security relating to secured
liabilities and the fair value is provided in note 32.

25.

RELATED PARTY TRANSACTIONS

a.
Interests in subsidiaries are set out in note 28.

Subsidiaries

Joint venture

World Senses Pty Ltd was formed on the 29th November 2012 as a joint
venture between Nomad Two Worlds Global Trading Pte Ltd and Atlas
Pearls and Perfumes Ltd.

At 30 June 2015, there is loan balance of $456,015 owing from World
Senses to Atlas (30 June 2014 - $140,857). This balance consists of salary
and administration recharges and accounting charges, offset by pearl
cosmetic products and pearl protein extraction assets transferred to
Atlas. At 30 June 2015, there is loan balance of $72,961 (30 June 2014:
$72,961) owing to World Senses from Perl’Eco. This balance consists
of pearl jewellery sold to Perl’ Eco by World Senses. An impairment
of $383,054 has been booked against the loan due to the net liability
position on the World Senses Pty Ltd accounts.

Essential Oils of Tasmania Pty Ltd acquired in January 2013 as a 100%
subsidiary. On 20th April 2015 50% of the investment in the entity
was sold to Westwood Properties Pty Ltd. Post this sale Essential Oils
of Tasmania has been deemed a joint venture and has been equity
accounted for.

As at 30 June 2015, there is a loan balance of $1,596,815 owing from
Essential Oils of Tasmania Pty Ltd to Atlas. This balance consists of
admin and expense recharges, and funding advances.

The parent entity has a 50% interest in Brookfield Tasmania Pty Ltd.
At 30 June 2015, there is loan balance of $200 (30 June 2014: $nil)
owing from Brookfield Tasmania Pty Ltd. This balance relates to money
advanced to Brookfield Tasmania Pty Ltd to cover bank fees.

Due from World Senses

Due to World Senses

Impairment of World Senses

Due from Essential Oils of Tasmania

Due from Brookfield Tasmania Pty Ltd

2015
$

456,015

(72,961)

(383,054)

1,596,815

200

2014
$

140,857

(72,961)

1,597,015

67,896

Key management personnel compensation -

Short-term employment benefits

Post-employment benefits

Long Term benefits

Share based compensation

2015
$

2014
$

1,325,865

1,258,575

100,828

20,001

27,500

65,119

37,343

1,474,194

1,361,037

Detailed remuneration disclosures are provided in section 4.2 of the
remuneration report.

Transactions with other related parties

The following balances are outstanding at the end of the reporting period in transactions
with related parties:

Current payables (reimbursement of travel)

Director fees payable

Current receivables (wholesale purchase of jewellery)

Loans to/from related parties

Loans to key management personnel
Beginning of the year

Loans advanced

Loans repaid

End of year

2015
$

2014
$

78,900

35,000

31,058

9,000

113,900

40,058

2015
$

2014
$

400,000

(25,000)

375,000

25,000

400,000

PAGE 56

For personal use only

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

26.

REMUNERATION OF AUDITORS

During the period, the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:

a. BDO Australia

Audit and other assurance services

Audit and review of financial reports

Total remuneration for audit and other assurance services

Taxation Services

Tax compliance services and advise

Total remuneration for taxation services

2015
$

2014
$

102,379

111,966

37,919

51,962

Total remuneration of BDO Australia

140,298

163,928

b. Related practices of BDO Australia

Audit and other assurance services

Audit and review of financial reports

Total remuneration for audit and other assurance services

Taxation Services

Tax compliance services and advise

Total remuneration for taxation services

Total remuneration of related practices of BDO Australia

Total remuneration of BDO Australia and related practices

140,298

163,928

27.

SEGMENT REPORTING

Segment information provided to the Board of Directors and management team

(i) The segment information provided to the Board of Directors and management team for the reportable segments for the period ended 30 June 2015 is as follows:

30 June 2015

Wholesale Loose Pearl

Jewellery

Essential Oils

All other
segments

Total

Australia

Indonesia

Australia

Indonesia

Australia

Total segment revenue

Inter-segment revenue

Revenue from external customers

Normalised EBITDA

Adjusted net operating profit/(loss) before
income tax

Depreciation and amortisation

Revaluation of Biological Assets

Totals segment assets

Total assets includes:

Additions to non – current assets (other than
financial assets or deferred tax)

8,697,181

8,738,163

(1,715,598)

(2,675,153)

267,311

9,132,094

(8,875,225)

298,484

770,330

805,565

177,137

6,864,489

555,144

(290,162)

46,289

4,672,176

18,945,577

1,541,652

592,988

1,589,540

592,988

(197,745)

41,807

850,314

1,589,540

198,507

135,881

56,013

(167,104)

(340,106)

(446,009)

232,354

2,075,193

4,379

338,289

314,142

Total segment liabilities

(685,300)

(968,320)

(23,147)

(8,357)

20,566,947

(8,875,225)

11,774,319

(1,234,668)

(2,519,822)

588,557

6,697,385

26,009,719

2,964,357

(1,685,124)

Included within the net operating profit for wholesale loose pearls in Indonesia is an impairment charge of $nil in relation to the impairment of
oysters.

PAGE 57

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

27.

SEGMENT REPORTING (CONTINUED...)

(ii) The segment information provided to the Board of Directors and management team for the reportable segments for the year ended 30 June 2014 is as follows:

30 June 2014

Wholesale Loose Pearl

Jewellery

Essential Oils

All other
segments

Total

Australia

Indonesia

Australia

Indonesia

Australia

Total segment revenue

Inter-segment revenue

Revenue from external customers

Normalised EBITDA

Adjusted net operating profit/(loss) before income tax

Depreciation and amortisation

Revaluation of Biological Assets

Totals segment assets

Total assets includes:

Additions to non – current assets
(other than financial assets or deferred tax)

12,040,978

7,944,875

555,755

896,076

2,023,581

(17,541)

(7,510,548)

12,023,437

185,168

(374,017)

109,293

434,327

3,074,888

2,892,311

43,167

1,971,114

555,755

(185,226)

(235,238)

43,123

896,076

(27,060)

(93,835)

51,967

2,023,581

422,542

368,088

55,136

321,999

13,181,788

17,966,654

1,192,564

956,946

4,084,381

128,458

563,131

40,034

105,070

397,835

Total segment liabilities

(2,030,664)

(784,221)

(23,001)

(181,392)

(1,027,094)

23,461,265

(7,528,089)

15,933,176

3,470,312

2,557,308

302,686

2,293,113

37,382,333

1,234,528

(4,046,371)

Included within the net operating profit for wholesale loose pearls in Indonesia is an impairment charge of $11,982 in relation to the impairment of oysters.

Other segment information

(i) Segment revenue - Segment revenue reconciles to total revenue from continuing
operations in the statement of profit or loss and other comprehensive income as follows:

Total segment revenue

Intersegment eliminations

Interest income

Other revenues

2015
$

2014
$

20,649,544

23,461,265

(8,875,225)

(7,528,089)

9,411

334,582

13,333

336,674

Total revenue from continuing operations (note 2)

12,118,312

16,283,183

Major customers

A Japanese wholesaler accounted for 12% of external revenue in
the period ended 30 June 2015 (2014 - 11%). These revenues are
attributable to the Australian wholesale loose pearl segment.

The entity is domiciled in Australia. The result of its revenue from third
party customers in Australia is $627,605 (2014: $907,756) in relation
to wholesale loose pearl sales. Revenue for wholesale loose pearls
from third party customers based in other countries during the period
ended 30 June 2015 was $8,034,402 (2014: $10,981,121). 83% of the
total loose pearl sales revenue during the period ended 30 June 2015
(2014: 84%) was to Japanese based customers.

In relation to retail jewellery sales the above segment reporting is
based on the location of the sale, whether in Australia or Indonesia as
the nature of the retail business relies on one off sales transactions with
customers from a variety of locations.

(ii) Adjusted net operating profit

Segment net operating profit/(loss) before income tax reconciliation to
the statement of profit or loss and other comprehensive income.

The Board of Directors and the management team review on a monthly
basis the performance of each segment by analysing the segment’s
net operating profit before tax. A segment’s net operating profit before
tax excludes non-operating income and expense such as interest paid
and received, foreign exchange gains and losses whether realised or
unrealised, fair value gains and losses and impairment charges.

A reconciliation of adjusted net operating profit/(loss) before income
tax is provided as follows:

PAGE 7

Net operating profit /(loss) before tax

(2,519,822)

2,557,308

2015
$

2014
$

Intersegment eliminations

Changes in fair value of biological and agricultural assets

(6,697,385)

63,439

11,982

(149,091)

1,325,765

216,375

(533,490)

(794,303)

961,214

(596,160)

Impairment expense

Foreign exchange gains

Foreign exchange losses

Other

Profit/(loss) before income tax from continuing operations

(7,612,809)

1,458,641

(iii)

Segment assets

Assets are allocated based on the operations of the segment and the
physical location of the asset.

Reportable segments’ assets are reconciled to total assets as follows:

Segment assets

Intersegment eliminations

Unallocated:

Other

Investments

Joint Venture Loans

Deferred tax assets

2015
$

2014
$

26,009,719

37,382,333

1,597,015

533,159

534

3,025

67,896

3,335,614

4,599,784

Fair value adjustments on biological and agricultural assets

(1,763,936)

Total assets as per the statement of financial position

30,942,348

40,822,795

For personal use onlyN O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

27.

SEGMENT REPORTING (CONTINUED...)

The total of non-current assets other than financial instruments and
deferred tax assets located in Australia is $1,253,739 (2014: $2,674,188).
The total located in Indonesia is $14,658,559 (2014: $14,134,400).

(iv)

Segment liabilities

Liabilities are allocated based on the operations of the segment and
the physical location of the asset.

Reportable segments’ liabilities are reconciled to total liabilities as follows:

Segment liabilities

Intersegment eliminations

Unallocated:

Other

Current tax liabilities

Borrowings

Deferred tax liabilities

Derivative financial instruments

2015
$

2014
$

1,685,124

4,046,371

4,800

225,529

(94,060)

4,084,734

5,154,959

972,780

2,901,397

Total liabilities as per the statement of financial position

6,968,167

12,013,467

(v)

Normalised EBITDA reconciliation

Net profit/(loss) before tax

Finance/Interest (rec)/paid

Depreciation/Amortisation

FX (gain)/loss

Agriculture standard revaluation

Inventory write-off

Other non-operating (income)/expense

Gain on derivative instruments

Normalised EBITDA

28. SUBSIDIARIES

2015
$

2014
$

(7,612,809)

1,458,642

397,426

588,557

(792,275)

6,697,385

149,091

(5,603)

(656,440)

470,755

302,686

577,928

(63,439)

(11,982)

299,971

435,732

(1,234,668)

3,470,313

The consolidated financial statements incorporate the assets, liabilities
and results of the following subsidiaries in accordance with the
accounting policy described in note 1.6.

Name of entity

Class of
shares

Percentage
owned

30 June
2015

30 June
2014

Place of
incorporation

Perl’Eco Pty Ltd(1)

Tansim Pty Ltd

P.T. Cendana Indopearls

Aspirasi Satria Sdn Bhd

Essential Oils of Tasmania (2)

Ord

100%

Australia

Indonesia

Malaysia

Australia

(1)

Previously named Sharcon Pty Ltd

Essential Oils of Tasmania Pty Ltd was acquired on 15 January 2013.
On 20 April 2015 50% of Essential Oils of Tasmania Ltd was sold to
Westwood Properties Ltd. Hence, it is no longer consolidation due to to
the relinquishment of control of the entity. The investment in Essential
Oils of Tasmania Pty Ltd is now equity accounted for as a joint venture.

The ultimate parent entity, Atlas Pearls and Perfumes Ltd, is
incorporated in Australia.

29.

NON-CURRENT ASSETS – INVESTMENTS ACCOUNTED
FOR USING THE EQUITY METHOD

Share in World Senses joint venture partnership (note 30)

Share in Brookfield Tasmania joint venture partnership

Share in Essential Oils of Tasmania joint venture partnership

2015
$

2014
$

292,940

3,025

30.

INTERESTS IN JOINT VENTURES

Joint venture

(a)
The parent entity has a 50% interest in World Senses Pty Ltd, which
is a resident in Australia and the principal activity of which is the
commercialisation of Atlas and Essential Oils of Tasmania’s R&D,
products and export markets.

The parent entity has a 50% interest in Brookfield Tasmania Pty Ltd,
which is a resident in Australia and the principal activity of which is to
develop a manufacturing and tourism facility.

The parent entity has a 50% interest in Essential Oils of Tasmania Pty Ltd,
which is a resident in Australia and the principal activity of which is to
grow and produce essential oils.

The interest in World Senses Pty Ltd and Essential Oils of Tasmania
Pty Ltd is accounted for in the financial statements using the equity
method of accounting (refer to note 29). The joint venture is unlisted
hence no quoted fair value is disclosed. Information regarding to the
joint venture is set out below.

World Senses

Joint Ventures’ assets and liabilities
Current assets
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities

Net assets

Joint Venture’s revenues, expenses and results
Revenues
Expenses
Loss before income tax

Reconciliation to carrying value
Opening net asset 1 July
Profit/(loss) for the period
Closing net assets

Group’s share in %
Group share in $
Carrying value

2015
$

2014
$

294,262
441,333
735,595

40,490
1,145,134
1,185,624

294,366
257,118
551,484

41,754
529,808
571,562

(450,029)

(20,078)

-
(613,999)
(613,999)

113,098
(970,158)
(857,060)

(20,078)
(429,951)
(450,029)

50%
(214,975)
-

580,183
(600,261)
(20,078)

50%
(300,131)
-

PAGE 59

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

30.

INTERESTS IN JOINT VENTURES (CONTINUED...)

(b) Contingent liabilities

2015
$

2014
$

The parent entity did not have any contingent liabilities as at 30 June
2015 or 30 June 2014.

Essential Oils of Tasmania

Joint Ventures’ assets and liabilities
Current assets
Non-current assets
Total assets

Current liabilities
Non-current liabilities
Total liabilities

Net assets

Joint Venture’s revenues, expenses and results
Revenues
Expenses
Profit before income tax

Reconciliation to carrying value
Opening net asset 1 July
Profit/(loss) for the period
Closing net assets

Group’s share in %
Group share in $
Carrying value

Share of equity accounted investment
Profit before income tax
Income tax
Profit after tax

Profit for the period to 20 April 2015
Profit post sale of interest

2,903,227
1,843,737
4,746,964

1,106,322
3,054,762
4,161,084

585,880

2,142,671
(1,789,035)
353,636

-
585,878
585,878

50%
292,940
292,940

353,636
32,380
386,016

360,137
25,879

12,940

Group share of Profit
(b)

Contingent liabilities relating to joint ventures

Each of the partners in World Senses Pty Ltd are jointly and severally
liable for the debts of the joint venture. The assets of the joint venture
do not exceed its’ debts.

Each of the partners in Essential Oils of Tasmania Pty Ltd are jointly and
severally liable for the debts of the joint venture. The assets of the joint
venture do not exceed its’ debts.

There have been no legal claims lodged against the joint ventures. The
joint ventures do not have any contingent liabilities in respect of a legal
claim lodged against the joint venture.

31.

PARENT ENTITY FINANCIAL INFORMATION

(a) Summary financial information

The individual financial statements for the parent entity show the
following aggregate amounts:

Statement of financial position
Current assets
Total assets
Current liabilities
Total liabilities

Shareholders equity
Issued capital
Reserves
Share-based payment reserve
(Accumulated losses)

2015
$

2014
$

3,484,479
27,541,788
7,482,837
5,367,163

36,465,658
-
682,341
(12,158,169)
24,989,830

4,419,122
24,800,754
7,159,650
5,044,219

32,153,002
-
622,574
(9,714,552)
23,061,024

(Loss ) for the period

(2,815,205)

(3,304,489)

Total comprehensive (loss)

(2,815,205)

(3,304,489)

PAGE 60

The parent entity did not provide financial guarantees during the
period (2014: Nil).

32.

FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market
risk (including currency risk, interest rate risk and price risk), credit
risk and liquidity risk. The Group’s overall risk management program
focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the
Group. The Group uses derivative financial instruments such as foreign
exchange contracts and options to hedge certain risk exposures.
Derivatives are exclusively used for hedging purposes, ie not as trading
or speculative instruments. The Group uses different methods to
measure different types of risk to which it is exposed. The Group uses
sensitivity analysis in the case of interest rate and foreign exchange risks
and aging analysis for credit risk.

Risk management is carried out by the Board of Directors.

The Group holds the following financial instruments:

-
-
-

N/A
-
-

Financial Assets

Cash and cash equivalents

Trade and other receivables

Derivative financial instruments

Financial Liabilities

Trade and other payables

Borrowings

Derivative financial instruments

Market Risk

(i)

Foreign exchange risk

2015
$

2014
$

2,632,311

1,665,207

354,845

2,773,752

14,245

3,001,401

4,438,959

759,971

2,313,695

4,084,734

5,154,959

852,323

4,844,705

8,320,977

The Group operates internationally and are exposed to foreign
exchange risk arising from various currency exposures, primarily with
respect to the Japanese Yen, Indonesian Rupiah, US Dollar and Euro.

Foreign exchange risk arises from future commercial transactions
and recognised assets and liabilities denominated in a currency that
is not the entity’s functional currency and net investments in foreign
operations. The risk is measured using sensitivity analysis and cash flow
forecasting.

Management manages their foreign exchange risk against their
functional currency. Group companies are required to hedge a
proportion of their foreign exchange risk exposure arising from future
commercial transactions and recognised assets and liabilities using
forward exchange contracts and options under the guidance of the
Board of Directors.

The majority of the Group’s cash reserves are held in Australian banks
with AAA ratings.

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

32.

FINANCIAL RISK MANAGEMENT (CONTINUED...)

The Groups exposure to foreign currency risk at the reporting date expressed in Australian dollars, was as follows:

30 June 2015

30 June 2014

JPY
$

USD
$

EUR
$

JPY
$

1,210,196

71,281

651

639,550

71,546

(3,261)

(709,238)

14,245

(4,058)

1,782,738

565,957

2,706,030

(26,443)

USD
$

163,445

256,058

119,872

EUR
$

21,561

1,483

Cash and cash equivalents

Trade and other receivables

Trade and other payables

Borrowings

Forward exchange contracts – buy foreign currency

Forward exchange contracts – sell foreign currency

Group Sensitivity Analysis

Sensitivity analysis is based on exchange rates in US Dollars, Japanese Yen and Euro increasing or decreasing by 10% and the affect on profit and equity.

Foreign Exchange Risk

30 June 2015

30 June 2014

-10%

10%

-10%

10%

Profit

Equity

Profit

Equity

Profit

Equity

Profit

Equity

Statement of Financial
Position Amount
AUD

2015

2014

Financial Assets

Cash

2,632,311

1,665,207

142,459

Trade and other receivables

354,845

2,773,752

7,950

Derivatives

14,245

1,583

Financial Liabilities

Trade and other payables

759,971

2,313,695

(813)

Borrowings

Derivatives

4,084,734

5,154,959

(78,804)

852,323

Total Increase/(Decrease)

72,373

(116,557)

(6,504)

(1,295)

665

64,476

59,215

91,617

226,533

(76,368)

(300,670)

(2,938)

(61,826)

(74,960)

(185,345)

62,483

246,003

2,404

50,585

Majority of the exposure above relates to the borrowings held in Yen.

Not shown in the table above, is the exposure to exchange movements on the intercompany loan denominated in Australian dollars made to the
Indonesian subsidiaries. At the period end this loan stood at AUD$6,291,336. The intercompany loans are eliminated on consolidation.

Cash flow and fair value interest rate risk

(ii)
The Group’s main interest rate risk arises from its borrowings. Given that borrowings are all due within 12 months and are at fixed interest rates the
Group considers that any fair value interest rate risk or cash flow risk will be immaterial.

Price risk

(iii)
The Group is exposed to fluctuations in pearl prices. This product is not traded as a commodity on an open market and as such the price risk
cannot be hedged.

Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments, as well as credit
exposures to wholesale and retail customers, including outstanding receivables. The Group considers the credit quality of the customer, taking into
account its financial position, past experience and other factors. Sales to retail customers are required to be settled in cash or using major credit
cards, thus mitigating credit risk.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised on page 59. For retail
customers without credit rating the Group generally retains title over the goods sold until payment is received in full.

PAGE 61

For personal use only

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

32.

FINANCIAL RISK MANAGEMENT (CONTINUED...)

All cash balances held at banks are held at internationally recognised
institutions. The Australian Government has guaranteed all deposits
held with Australian banks, cash held in Indonesia is not covered by
this guarantee. The majority of other receivables held are with related
parties and within the Group. Given this the credit quality of financial
assets that are neither past due or impaired can be assessed by
reference to historical information about default rates.

The credit quality of trade receivables that are neither past due nor
impaired can be assessed by reference to historical information about
counterparty default rates.

Trade receivables

Retail customers – no credit history

Wholesale customers –
existing customers with no defaults in the past

Total trade receivables

Derivative financial assets

Liquidity risk

2015
$

2014
$

202,050

1,928,369

202,050

1,928,369

Prudent liquidity risk management implies maintaining sufficient cash,
the availability of funding through an adequate amount of committed
credit facilities and the ability to close out market positions. The Group
manages liquidity risk by continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets
and liabilities. Group management aims at maintaining flexibility in
funding by keeping committed credit lines available. Surplus funds are
generally only invested in instruments such as term deposits that are
highly liquid.

Management monitors rolling forecasts of the Group’s liquidity reserve
(comprising the undrawn borrowing facilities below) and cash and
cash equivalents (note 6) on the basis of expected cash flows. This is
generally carried out by the Board of Directors on a Group basis. In
addition, the Group’s liquidity management policy involves projecting
cash flows in major currencies and considering the level of liquid assets
necessary to meet these and monitoring debt financing plans.

Financing arrangements

The Group had access to the following borrowing facilities at the
reporting date.

Fixed rate

2015
$

2014
$

Expiring within one year – Foreign currency loan trade

5,000,000

The bank loan with the Commonwealth Bank of Australia (“CBA”) has
been renegotiated in principle and the facility is due to be extended
until the 30 June 2016. The new facility agreement is currently being
finalised with sign off by all parties expected in September 2015.

The current bank loan is secured by a registered company charge by
CBA over the whole of the assets and undertaking including uncalled
capital of Atlas Pearls and Perfumes Ltd and its related entities except
for the shares and assets of Essential Oils of Tasmania Pty Ltd and World
Senses Pty Ltd.

The bank loan provided under a Japanese Yen Domestic Foreign
Currency Advance facility has a facility limit equivalent to
AUD$1,875,000. As at 30 June 2015 the Company had drawn down
$698,532. This facility is subject to a fixed interest rate plus the Japanese
BBSY. As at 30 June 2015 this fixed interest rate was 3.55%. Under
the new facility agreement the fixed interest rate is 6.08%. This facility
expires on 30 June 2016.

PAGE 62

The bank loan provided under an Australian Dollar Bills Discount facility
has a facility limit of AUD $3,125,000. As at 30 June 2015 the company
had drawn down $3,120,000. This facility is subject to a fixed interest
rate plus LIBOR. As at 30 June 2014 this fixed interest rate was 5.3%.
Under the new facility agreement the fixed interest rate is 6.08%.

The facility is also subject to a monthly line fee of 0.05% calculated on
the facility limit, A$5,000,000. The new facility will also attract a once of
establishment fee of $23,104 and an ongoing monthly management
fee of A$4,825.

As at the reporting date the Company had drawn down $3,816,805
(2014: $3,951,715) and had undrawn facilities available of $1,183,195
(2014: $1,048,285). The loans can be drawn at any time.

The Company has agreed to the following principal repayments of its
debt facility with CBA:

Date of Repayment

30 September 2015

31 December 2015

31 March 2015

30 June 2015

Total

Repayment Amount

$150,000

$100,000

$250,000

$500,000

$1,000,000

The Company will be required to meet three financial undertakings to
comply with the lending conditions imposed by the bank as follows:
Earnings before interest, tax, depreciation, amortisation and
•
exceptional items (Normalised EBITDA) will be greater than and at
least equal to;
$1,500,000 for the 12 months 1 July 2015 to 30 June 2016
•
• Minimum net worth of the borrower (Atlas) will at all times be

•

greater than $18,000,000; and
The ratio of net worth of the borrower to total tangible assets of
the borrower will at all times be equal to or greater than 60%.

For the year ended 30 June 2015 the Company has agreed in principal
with CBA for a waiver for a breach of its 30 June 2015 Normalised
EBITDA covenant. Normalised EBITDA for the 12 months ended 30
June 2015 was a loss of $1.2m, the covenant for this period was a profit
of $1.5m.

A new other bank loan (unsecured) provided by Microsoft Finance
was provided during the year ended 30 June 2014 to acquire the
accounting software Microsoft Navision. Further loans have been
drawn down during the year ended 30 June 2015 in relation to
Microsoft Navision expenditure. The liability at 30 June 2015 was
$247,240 (2014: $92,465).

Lease liabilities provided by St George Bank were effectively secured by
the rights to the leased assets, recognised in the financial statements,
which revert to the lessor in the event of default. The value of the loans
relating to Lease liabilities as at the reporting date was $20,689 (30 June
2014: $112,064).

During the year ended 30 June 2015 all convertible notes issued during
the six month period ended 30 June 2013 matured. During the period
ended 30 June 2013 Atlas issued Convertible Notes for a total value of
$1,100,000. The Convertible Notes had a maturity date of 2 years after
issue, attracted an interest rate of 6% payable six monthly in arrears and
were redeemable for ordinary shares in Atlas at any time during the
10 Business Days prior to the first anniversary of the Issue Date for the
Convertible Notes; or the Maturity Date of the Convertibles Notes, or
such other period as agreed in writing between the Company and the
Noteholder. If the Noteholder exercised its conversion right.

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

32.

FINANCIAL RISK MANAGEMENT (CONTINUED...)

the Company had to comply by redeeming all of the convertibles notes referred to in the Conversion Notice at their Face Value; and applying the
Conversion Amount as subscription funds for the Conversion Shares which are to be issued to the Noteholder at a price per Conversion Share
equal to the lower of: 5 cents or 90% of the 10 day volume weighted average. If the Noteholder did not exercise its conversion right the face value
was redeemable in cash at the date of expiry.

The fair value of bank loans equals their carrying amount, as the impact of discounting is not significant. The fair value of convertible notes is
reviewed half-yearly to determine the fair value of the derivative liability component.

Maturities of financial liabilities

The table below analyses the Group’s financial liabilities, net and gross settled derivative financial instruments into relevant maturity groupings
based on their remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cashflows.

Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

30 June 2015

30 June 2014

CONSOLIDATED ENTITY

Less than
6 Months

6-12
months

Between 1
& 2 years

Between 2
& 5 years

Total
contractual
cash flows

Carrying
amount
(asset)/
Liabilities

Less than 6
Months

6-12
months

Between 1
& 2 years

Between 2
& 5 years

Total
contractual
cash flows

Carrying
amount
(asset)/
Liabilities

Non-Derivatives

Trade payables

Borrowings

759,971

67,883

3,886,644

130,208

Total non-derivatives

827,854

3,886,644

130,208

Derivatives

Net settled
( Non deliverable forwards)

Gross settled

-(inflow)

-outflow

33,443

(19,198)

4,200,000

600,000

(4,166,557)

(619,198)

Total Derivatives

33,443

(19,198)

759,971

2,313,694

4,084,735

4,047,184

1,142,848

4,844,706

6,360,878

1,142,848

56,955

2,313,694

55,668

5,302,655

5,154,959

55,668

7,616,349

7,468,653

14,245

4,546

21,793

4,800,000

1,400,000

2,100,000

(4,785,755)

(1,395,454)

(2,078,207)

14,245

4,546

21,793

26,339

3,500,000

(3,473,661)

26,339

Borrowings, includes the loan to the Commonwealth Bank (CBA), and is classified as an amount due between 6-12 months. This loan is drawn as a
bank bill facility which has a maturity date of 30 June 2016.

(a) Fair value hierarchy

AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The following table presents the group’s financial assets and financial liabilities measured and recognised at fair value at 30 June 2015 and 30 June
2014 on a recurring basis:

30 June 2015

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

Liabilities

Derivative financial instruments

Forward foreign exchange contracts

Total Liabilities

14,245

30 June 2014

LEVEL 1

LEVEL 2

LEVEL 3

TOTAL

Liabilities

Derivative financial instruments

Forward foreign exchange contracts

Total Liabilities

26,339

825,985

26,339

825,985

PAGE 63

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

FOR THE YEAR ENDED 30 JUNE 2015

(a) Details of the sale consideration, the net assets disposed of and
gain/ (loss) on sale are as follows:

Consideration received or receivable:

Cash

Fair value of contingent consideration

Total disposal consideration

Fair value of net assets sold

280,000

(525,234)

Loss on sale before income tax and reclassification of foreign currency
translation reserve

(245,234)

Reclassification of foreign currency reserve

Income tax expense on gain

Loss on sale after income tax

(245,234)

As a result of the sale of 50% of equity in EOT, it is deemed that Atlas
Pearls and Perfumes Ltd and Westwood Properties Pty Ltd jointly
control the entity, and as noted by AASB 11, the entity must thus be
equity accounted for as a Joint Venture in Atlas Pearls and Perfumes Ltd
group accounts.

The carrying amount of the assets and liabilities as at the date of sale at
20 April 2015 were:

32.

FINANCIAL RISK MANAGEMENT (CONTINUED...)

(b) Valuation techniques used to derive level 2 and level 3 fair
values

The fair value of financial instruments that are not traded in an active
market (for example, over–the– counter derivatives) is determined using
valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible
on entity specific estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable
market data, the instrument is included in level 3. This is the case for
unlisted equity securities. As at 30 June 2015 there are no level 3 related
instruments in place.

(i) Transfers between levels 2 and 3 and changes in valuation
techniques

There were no transfers between the levels of the fair value hierarchy in
the period ended 30 June 2015. There were also no changes made to
any of the valuation techniques applied as of 30 June 2014.

The group also has a number of financial instruments which are not
measured at fair value in the statement of financial position. These had
the following fair values as at 30 June 2015:

2015
$

2014
$

Non-current borrowings

Bank Loan

Other bank loan

Convertible note

Lease liabilities

125,036

89,665

994,518

1,142,214

1,863

125,036

1,086,046

1,233,742

Due to their short-term nature, the carrying amounts of the current
receivables, current payables and current borrowings are assumed to
approximate their fair value.

Carrying
amount

Fair value

Carrying
amount

Fair value

Biological assets

Cash

Trade receivables

Other current assets

Income tax receivable

Inventories

Plant and equipment

Joint venture

Trade payables

Intercompany loans

Borrowings

Deferred tax liability

Other liabilities

Net Assets

50% of Net Assets

Fair value

195,876

518,214

56,032

85,527

1,472,242

1,509,435

794,619

56,299

(513,085)

(1,672,643)

(866,321)

(303,323)

(282,404)

1,050,468

525,234

33.

DISPOSAL OF A BUSINESS

Sale of 50% of Essential Oils of Tasmania during year ended 30 June 2015

(b) Financial performance

On 20 April 2015 the parent entity sold 50% of the issued share capital
of Essential Oils of Tasmania Ltd (EOT) to Westwood Properties PTY
LTD (Westwood), a Tasmanian based private entity. Westwood have
purchased 50% of the shareholding for $280,000. In addition Westwood
has committed to providing loan funding to EOT of $1.12m to repay
Atlas intercompany loan balances. $720,000 of funding has been
utilised to repay existing loans previously provided by Atlas Pearls and
Perfumes Ltd to EOT, whilst $400,000 will remain in EOT as working
capital, for a maximum period of 18 months.

The sale transaction has been undertaken to provide (a) the working
capital necessary to fund EOT’s crop growing and processing as well
as necessary capital expenditure, (b) a capable and resourced partner
with which to progress the EOT business; and (c) allows Atlas remains a
material investment in EOT and any future success that the investment
will realise.

PAGE 64

The financial performance presented is related to the period 1 July
2014 to 20 April 2015 when Essential Oils of Tasmania was a 100%
consolidated entity of Atlas Pearls and Perfumes Ltd:

Revenue

Expenses

Profit before Income tax

Income tax expense

Profit after Income tax

Loss on sale of investment (see (a) above)

Profit from operation

1,589,540

1,272,874

316,666

43,471

360,137

(245,234)

114,903

For personal use only
N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

N O T E S T O A N D F O R M I N G PA R T O F T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

FOR THE YEAR ENDED 30 JUNE 2015

34. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted
by the Group for the annual reporting period ending 30 June 2015 unless disclosed in Note 1. The Group’s and the parent entity’s assessment of
the impact of these new standards and interpretations is set out below. The initial application of the following Standards and Interpretations is not
expected to have any material impact on the financial report of the consolidated entity and the company.

AASB Amendment

Affected Standard(s)

Nature of Change to Accounting Policy

Application Date
of Standard*

Application
Date for Group

AASB 9

Financial Instruments

Changes to classification and measurement requirements of financial
instruments.

1 Jan 18

1 July 18

AASB 15

Revenue from Contracts with
Customers

Revenue will be recognised when control of the goods or services is transferred,
rather than on transfer of risks and rewards as is currently the case under IAS 18
Revenue.

1 Jan 17

1 July 17

Any other amendments are not applicable to the Group and therefore have no impact.

35. EVENTS OCCURRING AFTER THE REPORTING PERIOD

On the 1st of July 2015, Atlas Pearls and Perfumes Ltd announced the resignation of its Chief Financial Officer, Ms Danielle Brandenburg effective
as of 30 August 2015 and the appointment of Mr Trevor Harris as Chief Financial Officer effective 31 August 2015.

PAGE 65

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

D I R E C T O R S ’ D E C L A R A T I O N

The Directors of the Company declare that:

(a) the financial statements comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement
of cash flows, statement of changes in equity and accompanying notes are in accordance with the Corporations Act 2001 and :

(i) give a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of the performance for the period ended on that
date; and

(ii) comply with Accounting Standards, and the Corporations Regulations 2001 and other mandatory professional reporting requirements.

(b) the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International
Financial Reporting Standards.

(c) the Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A.

(d) in the Directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.

(e) the remuneration disclosures included in the Directors’ Report (as part of audited remuneration report) for the period ended 30 June 2015
comply with section 300A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors by:

Geoffrey Newman - Chairman
Perth, Western Australia
28 August 2015

PAGE 66

For personal use only
D I R E C T O R S ’ D E C L A R A T I O N

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

I N D E P E N D A N T A U D I T O R ’ S R E P O R T

PAGE 67

For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

I N D E P E N D A N T A U D I T O R ’ S R E P O R T

PAGE 68

For personal use onlyI N D E P E N D A N T A U D I T O R ’ S R E P O R T

A T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

A D D I T I O N A L A S X I N F O R M A T I O N

ADDITIONAL ASX INFORMATION

The following additional information is required by the Australian Securities Exchange. The information is current as at 21 September 2015.

(a) Distribution schedule and number of holders of equity securities as at 21 September 2015

1 – 1,000

1,001 – 5,000

5,001 – 10,000

Fully Paid Ordinary Shares (ATP)

128

428

334

Unlisted Options – 8.58c 31/12/16

Unlisted Options – 9.5c 31/12/16

Unlisted Options – 5.9c 31/12/18

10,001 –
100,000

883

100,001 – and
over

377

Total

2,150

The number of holders holding less than a marketable parcel of fully paid ordinary shares as at 21 September 2015 is 1,019.

(b) 20 Largest holders of quoted equity securities as at 21 September 2015

The names of the twenty largest holders of fully paid ordinary shares (ASX code: ATP) as at 21 September 2015 are:

Rank

Name

% of Total Shares

Boneyard Investments Pty Ltd

Chemco Superannuation Fund Pty Ltd

Raintree Pearls & Perfumes Pty Ltd

SP & K Birkbeck Holdings Pty Ltd

Jingie Investments Pty Ltd

Abermac Pty Ltd

Arrow Pearl Co Pty Ltd

Westwood Properties Pty Ltd

Atlas Pearl Employee Share Plan Pty Ltd

Farjoy Pty Ltd

Mr Nelson Michel Pierre Rocher

Five Talents Limited

Forsyth Barr Custodians Ltd

Mr Chris Carr + Mrs Betsy Carr

Coakley Pastoral Co Pty Ltd

Byron Bay Celebrant Pty Ltd

Mr Paul Michael Butcher

Miss Kristie Birkbeck

Queensridge Investments Pty Ltd

Ms Jennifer Michelle Roughan

TOTAL

53,048,882

32,400,000

23,367,228

20,529,202

17,880,240

17,833,333

13,809,707

8,000,000

7,154,976

7,099,412

6,712,185

5,620,000

5,141,636

5,000,000

4,744,717

4,129,589

4,118,992

3,818,536

3,649,072

3,360,000

12.47

5.27

5.49

4.83

4.20

4.19

3.25

1.88

1.68

1.67

1.58

1.32

1.21

1.18

1.12

0.97

0.90

0.86

0.79

247,417,707

55.83

Stock Exchange Listing – Listing has been granted for 425,398,600 ordinary fully paid shares of the Company on issue on the Australian Securities
Exchange.

The unquoted securities on issue as at 21 September 2015 are detailed below in part (d).

(c)

Substantial shareholders

Substantial shareholders in Atlas Pearls and Perfumes Limited and the number of equity securities over which the substantial shareholder has a
relevant interest as disclosed in substantial holding notices provided to the Company are listed below:

Name

Boneyard Investments Pty Ltd & Associates *

Raintree Pearls & Perfumes Pty Ltd & Associates **

112,345,667

43,896,430

Includes shares held by Boneyard Investments Pty Ltd, Chemco Superannuation Fund Pty Ltd, Jingie Investments Pty Ltd, T. Martin, T. & W.
Martin, J. Martin and J & B Martin.
Includes shares held by Raintree Pearls & Perfumes Pty Ltd and SP & K Birkbeck Holdings Pty Ltd .

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For personal use onlyA T L A S P E A R L S A N D P E R F U M E S L T D A N D I T S S U B S I D I A R I E S

A D D I T I O N A L A S X I N F O R M A T I O N

(d) Unquoted Securities
The number of unquoted securities on issue as at 21 September 2015:

Security

Unlisted options exercisable at 8.58 cents, on or before 31 December 2016.

Unlisted options exercisable at 9.5 cents, on or before 31 December 2016.

Unlisted options exercisable at 5.9 cents, on or before 31 December 2018.

Number on issue

20,000,000

8,500,000

5,500,000

(e) Holder Details of Unquoted Securities
All unquoted securities were issued under an employee incentive scheme. Therefore, no disclosure is required in relation to people that hold
more than 20% of a given class of unquoted securities as at 21 September 2015.

(f) Restricted Securities as at 21 September 2015
There were no restricted securities on issue as at 21 September 2015.

(g) Voting Rights
All fully paid ordinary shares carry one vote per ordinary share without restriction.
Unquoted options have no voting rights.

(h) Company Secretary
The Company Secretary is Ms Susan Hunter.

(i) Registered Office
The Company’s Registered Office is 47 - 49 Bay View Terrace, Claremont, Western Australia 6010.
Telephone: +61 8 9284 4249 Facsimile: +61 8 9284 3031

(j) Share Registry
The Company’s Share Registry is as follows –
Computershare Investor Services Pty Limited
Level 11
172 St Georges Terrace
Perth WA 6000
Enquiries (within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000

(k) On-Market Buy-back
The Company is not currently performing an on-market buy-back.

(l) Corporate Governance
The Board of Atlas Pearls and Perfumes Limited is committed to achieving and demonstrating the highest standards of Corporate Governance.
The Board is responsible to its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders.
The Board believes that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability. In
accordance with ASX Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance with them
on its website, rather than in the Annual Report. Accordingly information about the Company’s Corporate Governance practices is set out on the
Company’s website at www.atlaspearlsandperfumes.com.au.

PAGE 70

For personal use onlyA D D I T I O N A L A S X I N F O R M A T I O N

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.

PAGE 71

For personal use onlyTHIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.

PAGE 72

For personal use onlyPERTH SHOWROOM

SHOP: 1, 47-49 Bay View Terrace, Claremont 6010 Perth Western Australia.
EMAIL: Atlas@AtlasPearlsAndPerfumes.com.au TEL: (08) 9284 4249

BALI SHOWROOM

SHOP : Jalan Raya Seminyak No. 73, Seminyak, Bali. TEL : +62 361 732769

FARMS & SHOWROOM
EMAIL : Tours@AtlasPearlsAndPerfumes.com.au

NORTH BALI
FARM : Jl. Nelayan, Penyabangan Singaraja, Bali. TEL +62 8123877012

ALYUI
EMAIL: alyui.retail@cipindo.com TEL: +62 411 401 654

PUNGU
EMAIL: komodo.showroom@cipindo.com TEL: +62 811 384 8212

ALOR
EMAIL: alor.humas@cipindo.com TEL: +62 811 382 5658

CORPORATE: www.AtlasPearlsAndPerfumes.com.au
SHOP: www.ShopAtlas.com.au

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