A water fairy tells the mermaids a sad love story: the legend of mermaid Aroona. But Jasmine doesn't believe the tale. So when she discovers a trail that leads to Aroona's lost treasure, she sets off to discover the truth.

Mermaid Bay's annual carnival is here, and the best performance at the parade will win a pretty pearl necklace. For the mermaids' act, Rosa plans to perform amazing tricks on the back of a magical water pony. But the pony is stolen. Is someone trying to ruin the friends' chance of winning?